(cid:6)(cid:3)(cid:5)(cid:1)(cid:7)(cid:19) (cid:4)(cid:14)(cid:12)(cid:9)(cid:11)(cid:13)(cid:10)(cid:17)(cid:19)
(cid:2)(cid:14)(cid:16)(cid:15)(cid:14)(cid:16)(cid:8)(cid:18)(cid:11)(cid:14)(cid:13)(cid:19)
(cid:2)(cid:1)(cid:2)(cid:17)(cid:14)(cid:3)(cid:8)(cid:8)(cid:13)(cid:5)(cid:7)(cid:14) (cid:4)(cid:6)(cid:10)(cid:9)(cid:11)(cid:12)(cid:14)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(cid:2)(cid:2) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
OR
(cid:3)(cid:3) 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
(State or other jurisdiction of
incorporation or organization)
3 West Paces Ferry Road,
Suite 200
Atlanta, GA
(Address of principal executive offices)
98-1496050
(I.R.S. Employer
Identification No.)
30305
(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
Class A Common Stock, par value $0.0001 per share
Trading
Symbol(s)
RPAY
Name of each exchange on which registered
The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES (cid:3) NO (cid:2)
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES (cid:3) NO (cid:2)
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 (cid:2) NO (cid:3)
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 (cid:2)
NO (cid:3)
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
(cid:2)(cid:4)
Non-accelerated filer
Emerging growth company
(cid:3)
(cid:3)
Smaller reporting 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. (cid:3)(cid:4)
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. (cid:2)
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES (cid:3) NO (cid:2)
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of
common stock on The NASDAQ Stock Market on June 30, 2021, was $2,120,867,217.
As of February 22, 2022, there were 90,455,315 shares of the registrant’s Class A common stock, par value $0.0001 per share, outstanding (which number
includes 1,904,617 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 February 22, 2021, the holders of such outstanding shares of Class V common stock also hold 7,926,576 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.
The registrant has incorporated by reference into Part III of this report certain portions of either an amendment to this Form 10-K or its proxy statement for
its 2022 Annual Meeting of Shareholders, which are expected to be filed within 120 days after the end of the registrant’s fiscal year ended December 31, 2021.
Auditor Firm ID: 248
Auditor Name: Grant Thornton LLP
Auditor Location: Philadelphia, Pennsylvania
DOCUMENTS INCORPORATED BY REFERENCE
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Table of Contents
PART I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4. Mine Safety Disclosures
Properties
Legal Proceedings
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
[Reserved]
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Financial Statements and Supplementary Data
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
PART IV
Item 15. Exhibits, Financial Statement Schedules
Item 16 Form 10-K Summary
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This 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 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 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 II, Item 7 “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, those risks described under Part I, Item 1A “Risk Factors” of this Form 10-K. 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.
1
RISK FACTOR SUMMARY
Our business involves significant risks and uncertainties that make an investment in us speculative and risky. The
following is a summary list of the principal risk factors that could materially adversely affect our business, financial
condition, liquidity and results of operations. These are not the only risks and uncertainties we face, and you should carefully
review and consider the full discussion of our risk factors in the section titled “Risk Factors”, together with the other
information in this Annual Report on Form 10-K.
Risks Related to Our Business
(cid:2) The impact of the COVID-19 pandemic outbreak and the measures implemented to mitigate the spread of the
virus.
(cid:2) The payment processing industry is highly competitive.
(cid:2) Unauthorized disclosure of client or consumer data.
(cid:2)
(cid:2)
If we cannot keep pace with rapid developments and changes in our industry.
If our vertical markets do not increase their acceptance of electronic payments or if there are adverse
developments in the electronic payment industry in general.
(cid:2) Potential clients or software integration partners may be reluctant to switch to, or develop a relationship with, a
(cid:2)
new payment processor.
If we fail to comply with the applicable requirements of payment networks and industry self-regulatory
organizations, those payment networks or organizations could seek to fine us, suspend us or terminate our
registrations through our sponsor banks.
(cid:2) We rely on sponsor banks in order to process electronic payment transactions, and such sponsor banks have
substantial discretion with respect to certain elements of our business practices. If these sponsorships are
terminated and we are not able to secure new sponsor banks, we will not be able to conduct our business.
(cid:2) To acquire and retain clients, we depend on our software integration partners that integrate our services and
solutions into software used by our clients.
(cid:2) Failure to effectively manage risk and prevent fraud could increase our chargeback liability and other liability.
(cid:2) Our processes to reduce fraud losses depend in part on our ability to restrict the deposit of processing funds
while we investigate suspicious transactions.
(cid:2) To the extent we cannot maintain savings related to favorable pricing or incentives on interchange and other
payment network fees and cannot pass along any corresponding increases in such fees to our clients, our
operating results and financial condition may be materially adversely affected.
(cid:2) Our systems and those of our third-party providers may fail due to factors beyond our control.
(cid:2) We rely on other service and technology providers. If such providers fail in or discontinue providing their
services or technology to us, our ability to provide services to clients may be interrupted.
(cid:2) We are subject to economic and political risk, the business cycles of our clients and software integration
partners and the overall level of consumer and commercial spending.
(cid:2) Our risk management policies and procedures may not be fully effective in mitigating our risk exposure in all
market environments or against all types of risks associated with providing payment processing solutions.
(cid:2) We may not be able to continue to expand our share in our existing vertical markets or continue to expand into
new vertical markets.
(cid:2) We may not be able to successfully manage our intellectual property and may be subject to infringement claims.
(cid:2) The loss of key personnel or the loss of our ability to attract, recruit, retain and develop qualified employees.
(cid:2) We have been the subject of various claims and legal proceedings and may become the subject of claims,
litigation or investigations.
(cid:2) We may not be able to successfully execute our strategy of growth through acquisitions.
(cid:2) Our acquisitions subject us to a variety of risks that could harm our business and the anticipated benefits from
our acquisitions may not be realized on the expected timeline or at all.
Risks Related to Regulation
(cid:2) We and our clients are subject to extensive government regulation, and any new laws and regulations, industry
standards or revisions made to existing laws, regulations or industry standards affecting our business, our
clients’ businesses or the electronic payments industry, or our or our clients’ actual or perceived failure to
comply with such obligations.
2
(cid:2) The businesses of many of our clients are strictly regulated in every jurisdiction in which they operate, and such
regulations, and our clients’ failure to comply with them.
(cid:2) We may be required to become licensed under state money transmission statutes.
(cid:2) We must comply with laws and regulations prohibiting unfair or deceptive acts or practices.
(cid:2) Governmental regulations designed to protect or limit access to or use of consumer information could adversely
affect our ability to effectively provide our products and services.
(cid:2) Changes in tax laws or their judicial or administrative interpretations, or becoming subject to additional U.S.,
state or local taxes that cannot be passed through to our clients.
(cid:2) We must maintain effective internal controls and our failure to maintain such controls could lead to litigations.
(cid:2) We may face litigation and other risks as a result of the material weakness in our internal control over financial
reporting.
Risks Related to Our Indebtedness
(cid:2) Our level of indebtedness could adversely affect our ability to meet our obligations under our indebtedness,
react to changes in the economy or our industry and to raise additional capital to fund operations.
(cid:2) Future operating flexibility is limited by the restrictive covenants in the Amended Credit Agreement, and we
may be unable to comply with all covenants in the future.
(cid:2) We may not have the ability to raise the funds necessary to settle conversions of the 2026 Notes, or to
repurchase the 2026 Notes upon a fundamental change, and our future debt may contain, limitations on our
ability to pay cash upon conversion or repurchase of the 2026 Notes.
(cid:2) The conditional conversion feature of the 2026 Notes, if triggered, may adversely affect our financial condition
and operating results.
(cid:2) The accounting method for convertible debt securities that may be settled in cash, such as the 2026 Notes, could
have a material effect on our reported financial results.
(cid:2) Provisions in the indenture could delay or prevent an otherwise beneficial takeover of the Company.
Risks Related to Our Ownership Structure
(cid:2) We are a holding company and our only material asset is our interest in Hawk Parent, and we are accordingly
dependent upon distributions made by our subsidiaries to pay taxes, make payments under the Tax Receivable
Agreement, meet our financial obligations under the 2026 Notes and pay dividends.
(cid:2) Under the Tax Receivable Agreement, we will be required to pay 100% of the tax benefits relating to tax
depreciation or amortization deductions as a result of the tax basis step-up we receive in connection with the
exchanges (including an exchange in a sale for cash) of Post-Merger Repay Units into our Class A common
stock and related transactions, and those payments may be substantial.
In certain cases, payments under the Tax Receivable Agreement may exceed the actual tax benefits we realize
or be accelerated.
(cid:2)
Risks Related to Our Class A Common Stock
(cid:2) Future issuances or sales of substantial amounts of our Class A common stock in the public market, or the
perception that such issuances or sales may occur, could cause the market price for our Class A common stock
to decline.
(cid:2) Our stock price may be volatile, which could negatively affect our business and operations.
(cid:2) Because we do not currently intend to pay dividends, holders of our Class A common stock will benefit from an
investment in our Class A common stock only if it appreciates in value.
(cid:2) Delaware law and our governing documents contain certain provisions that limit the ability of stockholders to
take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
(cid:2) Our certificate of incorporation designates a state or federal court located within the State of Delaware as the
exclusive forum for substantially all disputes between us and our stockholders.
3
ITEM 1. BUSINESS
Organizational Structure and Corporate Information
PART I
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 with and into Hawk Parent Holdings, LLC, a Delaware limited liability company (“Hawk Parent”).
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. 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.
We are headquartered in Atlanta, Georgia. Our legacy business was founded as M & A Ventures, LLC, a Georgia
limited liability company doing business as REPAY: Realtime Electronic Payments (“REPAY LLC”), in 2006 by current
executives John Morris and Shaler Alias. Hawk Parent was formed in 2016 in connection with the acquisition of a majority
interest in the successor entity of REPAY LLC and its subsidiaries (the “2016 Recapitalization”) by certain investment funds
sponsored by, or affiliated with, Corsair Capital LLC (“Corsair”).
Business Overview
Since a significant portion of our revenue is derived from volume-based payment processing fees on card
transactions, card payment volume is a key operating metric that we use to evaluate our business. We are a leading payments
technology company. We provide integrated payment processing solutions to industry-oriented vertical markets in which
businesses have specific and bespoke transaction processing needs. We refer to these markets as “vertical markets” or
“verticals.”
We are a payments innovator, differentiated by our proprietary, integrated payment technology platform and our
ability to reduce the complexity of electronic payments for businesses. We intend to continue to strategically target verticals
where we believe our ability to tailor payment solutions to our clients’ needs and the embedded nature of our integrated
payment solutions will drive strong growth by attracting new clients and fostering long-term client relationships.
Since a significant portion of our revenue is derived from volume-based payment processing fees, card payment
volume is a key operating metric that we use to evaluate our business. We processed approximately $20.5 billion of total card
payment volume in 2021. Our year-over-year card payment volume growth was approximately 35% in 2021 and 42% in
2020. As of December 31, 2021, we had over 18,000 clients. Our top 10 clients, with an average tenure of approximately four
years, contributed to approximately 14% and 18% of total gross profit during the year ended December 31, 2021 and the year
ended December 31, 2020, respectively.
Our leading competitive position and differentiated solutions have enabled us to realize unique advantages in fast-
growing and strategically-important segments of the payments market. We provide payment processing solutions to clients
primarily operating in the personal loans, automotive loans, receivables management, and business-to-business verticals. Our
payment processing solutions enable consumers and businesses in these verticals to make payments using electronic payment
methods, rather than cash or check, which have historically been the primary methods of payment in these verticals. We
believe that a growing number of consumers and businesses prefer the convenience and efficiency of paying with cards and
other electronic methods and that we are poised to benefit as these verticals continue to shift from cash and check to
electronic payments. The personal loans vertical is predominately characterized by installment loans, which are typically
utilized by consumers to finance everyday expenses. The automotive loans vertical predominantly includes subprime
automotive loans, automotive title loans and automotive buy-here-pay-here loans and also includes near-prime and prime
automotive loans. Our receivables management vertical relates to consumer loan collections, which typically enter the
receivables management process due to delinquency on credit card bills or as a result of major life events, such as job loss or
major medical issues. The business-to-business vertical relates to transactions occurring between a wide variety of enterprise
clients, many of which operate in the manufacturing, wholesale, distribution, healthcare and education industries.
4
Our go-to-market strategy combines direct sales with integrations with key software providers in our target verticals.
The integration of our technology with key software providers in the verticals that we serve, including loan management
systems, dealer management systems (“DMS”), collection management systems, and enterprise resource planning software
systems, allows us to embed our omni-channel payment processing technology into our clients’ critical workflow software
and ensure seamless operation of our solutions within our clients’ enterprise management systems. We refer to these software
providers as our “software integration partners.” An integration allows our sales force to readily access new client
opportunities or respond to inbound leads because, in many cases, a business will prefer, or in some cases only consider, a
payments provider that has already integrated or is able to integrate its solutions with the business’ primary enterprise
management system. We have successfully integrated our technology solutions with numerous, widely-used enterprise
management systems in the verticals that we serve, which makes our platform a more compelling choice for the businesses
that use them. Moreover, our relationships with our partners help us to develop deep industry knowledge regarding trends in
client needs. Our integrated model fosters long-term relationships with our clients, which supports our volume retention rates
that we believe are above industry averages. As of December 31, 2021, we maintained approximately 222 integrations with
various software providers.
Strategic acquisitions are another important part of our long-term strategy. Our acquisitions have enabled us to
further penetrate existing vertical markets, access new strategic vertical markets, broaden our technology and solutions suite,
and expand our client base. We continue to focus on identifying strategic acquisition candidates in an effort to drive accretive
growth. Our growth strategy is to continue to build our company through a disciplined combination of organic and
acquisitive growth.
Growth Strategies
We intend to drive future growth in the following ways:
Increase Penetration in Existing Verticals
We expect to grow meaningfully by continuing to provide innovative payment solutions and client support to our
existing clients as well as new clients in the verticals that we currently serve. In addition, our business model allows us to
benefit from the growth of our clients and software integration partners. As our clients’ payment volumes and transactions
increase, our revenues increase as a result of the fees we charge for processing these payments. Many of the vertical markets
in which we compete are continuing to shift from legacy payment mediums — primarily cash and check — to electronic
forms of payment. We expect to benefit from this trend as our clients increasingly opt to process payments via the electronic
forms of payment in which we specialize.
New Vertical and Geographic Expansion
We also expect that we will find attractive growth potential in certain verticals in which we currently have limited
operations or do not operate. Though we offer highly customized payment solutions to our clients, our core technology
platform is comprehensive and can be utilized to penetrate other strategic vertical markets. Additionally, we envision
growing our geographic footprint, as new territories continue to present new business opportunities. For example, we are
focused on expanding our Canadian operations, as the demand for our solutions among existing and prospective Canadian
clients remains strong.
Strengthen and Extend Our Solution Portfolio through Continued Innovation.
As we further integrate our solution into our clients’ workflows, we will look to continue to innovate on our solution
set and broaden our suite of services. Our acquisition of TriSource Solutions, LLC (“TriSource”) and our continued
investment in our technology capabilities position us to provide value-added services that will address the evolving needs of
our clients as they seek to best serve their customers. The ability to serve clients across verticals and to be integrated across
various software platforms enables us to better understand the needs of clients across verticals and to scale our innovative
solutions to a broad segment of the market.
Continue to Drive Operational Efficiencies
As we continue to grow, we expect to become a more significant partner to our sponsor banks, third party processors
and software integration partners, which we expect will give us greater leverage as we expand our contractual relationships
with them. We plan to continue to drive operating leverage in our non-technology personnel expenditures, as we believe that
we can process larger payment volumes without significant increases to our personnel and operating expenses.
5
Strategic Acquisitions
From January 1, 2016 through December 31, 2021, we have successfully acquired eleven businesses. Given the
large size and attractive growth trends of our current addressable market, we are primarily focused on growing our business
organically. However, we may selectively pursue strategic acquisitions as opportunities arise that meet our internal
requirements for the use of capital and return on investment. Some of these opportunities may include those that enable us to
acquire new capabilities that may be harder to develop in-house, gain entrance into new segments of the market, enter new
markets, or consolidate our existing market.
Solutions
We provide our clients with comprehensive solutions relating to the following methods of electronic payment:
• Credit and Debit Processing — Allows our clients to accept card payments. These payments can be made
using any of our payment channels, as further described below.
• Virtual Credit Card Processing — Our virtual credit card product offering enables our clients to automate their
payables transactions by sending single-use virtual credit cards to their suppliers.
• Automated Clearing House (“ACH”) Processing — Our ACH processing capabilities allow our clients to send
and accept traditional and same-day ACH transactions.
• Enhanced ACH Processing — Provides the same functionality as our standard ACH processing capability, but
with the added benefit of incremental transaction and reconciliation data.
•
Instant Funding — Our instant funding capabilities allow our clients to transfer funds directly to a consumer’s
debit or prepaid card. We have created a proprietary process that decreases processing delays typically
associated with traditional fund disbursements.
The above payment and funding methods are processed through our proprietary payment channels:
• Web-based
•
Virtual Terminal — A terminal that provides virtual payment access for processing of ACH or card
transactions.
• Hosted Payment Page — A client-branded terminal that enables ACH and card transaction processing.
• Online Client Portal — A consumer-facing, client-specific website that gives a client’s customer the
ability to pay online and view account information anywhere, anytime. A Repay hosted website may be
stand alone or integrated with any other software application.
• Mobile Application — We provide clients the ability to accept payments via a mobile application on a
customized, white-label basis.
•
•
Text-to-Pay — Allows a business’ customer to pay with a simple text message after receiving an SMS alert
that reminds such customer when payments are due.
Interactive Voice Response (“IVR”) — A secure and flexible option to pay over the phone, 24 hours a day, 7
days a week, via a 1-800 number with bilingual capabilities.
• Point of Sale (“POS”) — We provide payment acceptance at brick-and-mortar locations through POS
equipment that requires a client’s customer to provide a card.
6
Sales and Distribution
Our sales effort primarily consists of two strategies: first, our direct sales representatives, who focus on each of our
core verticals, and second, our software integration partners, which enable the direct salesforce to more effectively access
new client opportunities and respond to inbound leads.
Direct Sales Representatives
Our sales representatives are organized by vertical market and account size. Direct sales representatives work with
our clients and software integration partners to understand our clients’ desired payment solutions and then communicate
those desires to our product and technology teams, who build a customized suite of products and payment channels tailored
to our clients’ specific needs. We also maintain a sales support team that supports the onboarding process.
Software Integration Partners
As of December 31, 2021, we were integrated with approximately 222 software partners that are providers of our
clients’ primary enterprise management systems. Our integrations ensure seamless delivery of our full suite of payment
processing capabilities to our clients. These integrations are also a critical part of our marketing strategy, as many clients will
prefer to award their payments business to payments processors who have worked to integrate their solutions into the client’s
enterprise management systems.
Operations
We believe that we have developed an effective operations system, including our proprietary onboarding,
compliance and client oversight processes, which is structured to enhance the performance of our platform and support our
clients.
Client and Transaction Risk Management
We target clients that we identify as low-risk through the development of underwriting policies and transaction
management procedures to manage approval of new accounts and to establish ongoing monitoring of client accounts.
Effective risk management aids us in minimizing client losses, such as those relating to chargebacks or similar rejected
transactions, and avoiding fraud for the mutual benefit of our clients, our sponsor banks and ourselves.
Proprietary Compliance Management System. We have developed proprietary onboarding, compliance, and client
oversight processes, of which our Compliance Management System (“CMS”) is a part. Our CMS, developed in conjunction
with the Third Party Payment Processors Association, is based on four main components — board and management
oversight, a compliance program with written policies and procedures and employee training and monitoring, responsiveness
to consumer complaints and annual compliance audits from an independent third party — and is inclusive of the Electronic
Transaction Association guidelines on underwriting and risk.
Client Onboarding. We believe we maintain rigorous underwriting standards. Prospective clients submit
applications to our credit underwriting department, which performs verification and credit-related checks on all applicants.
Each client is assigned a risk profile based on sponsor bank requirements, as well as additional criteria specified by us. Our
sponsor banks periodically review and approve of our underwriting policies to ensure compliance with applicable law,
regulations and payment network rules. Upon approval, the ongoing risk level of a client is monitored and adjusted on a
monthly basis based on additional data relating to such client.
Client Monitoring. Each client’s file is assigned one of three risk levels (low, medium or high) corresponding to
several client behaviors. We review and adjust these risk levels on a monthly basis and additionally subject them to more in-
depth quarterly reviews. We also engage third parties and rely on internal reporting to identify and monitor credit/fraud risk.
We generate client-specific reports that compile daily and historical transactions, which may include average ticket,
transaction volume, refund and chargeback levels and authorization history, which we utilize in order to identify suspicious
processing activity. We review these reports on a daily basis and suspend any irregular processing activity, which is subject
to review, remediation and, as appropriate, suspension of either an individual or batch of transactions or a particular client, as
applicable.
Investigation and Loss Prevention. If a client exceeds the parameters established by our underwriting and/or risk
management team or we determine that a client has violated the payment network rules or the terms of its service agreement
with us, one of our team members will identify and document the incident. We then review the incident to determine the
7
actions taken or that we can take to reduce our exposure to loss and the exposure of our client to liability. As a part of this
process, we may request additional transaction information, withhold or divert funds, verify delivery of merchandise or, in
some circumstances, deactivate the client account, include the client on the Network Match List to notify our industry of the
client’s behavior or take legal action against the client.
Collateral. We require some of our clients to establish cash or non-cash collateral reserves, which may include
certificates of deposit, letters of credit, rolling merchant reserves or upfront cash. This collateral is utilized in order to offset
potential credit or fraud risk liability that we may incur. We attempt to hold such collateral reserves for as long as we are
exposed to a loss resulting from a client’s payment processing activity.
Chargebacks. The payment networks permit the reversal of a money transfer, a chargeback, up to six months (or in
rare cases, a longer time frame) after the later of the date the transaction is processed or the delivery of the product or service
to the cardholder. If the client incurring the chargeback is unable to fund the refund to the card-issuing bank, we are required
to do so by the rules of the payment networks and our contractual arrangements with our sponsor banks. During the year
ended December 31, 2021, we believe our chargeback rate was under 1% of our payment volume.
Security, Disaster Recovery, and Back-up Systems
We adhere to industry security standards to protect the payment information that we process. We regularly update
our network and apply operating system security releases and malware defenses. We use a third party vendor solution for
security education materials. Every employee and contractor is required to successfully complete annual security awareness
training. We routinely retain external parties to audit our systems’ compliance with current security standards as established
by the Payment Card Industry Data Security Standards (“PCI DSS”), Service Organization Control ("SOC1 Type II,” “SOC2
Type II”), Health Insurance Portability and Accountability Act (“HIPAA”) and International Organization for
Standardization (“ISO 27001”) and to test our systems against vulnerability to unauthorized access. We utilize third party
vendors for internal and external penetration testing. Further, we use one of the most advanced commercially available
technologies to encrypt the cardholder numbers and client data that we store in our databases. Additionally, we have a
dedicated team responsible for continuous monitoring and security incident response. This team also develops, maintains,
tests and verifies our incident response plan. Disaster recovery is built into our infrastructure through redundant hardware and
software applications hosted in two distinct cloud regions. Our primary cloud region is set up to be replicated, substantially
on a real time basis, by our secondary cloud region such that if our primary cloud region becomes impaired or unavailable,
operations are redirected to the secondary cloud region. Our incident response team tests these systems each quarter to assess
the effectiveness of our disaster recovery plan, including staff readiness and operational capability.
Third Party Processors and Sponsor Banks
We partner with institutions in the payment chain to provide authorization, settlement and funding services in
connection with our clients’ transactions. These institutions include third party processors and sponsor banks, who sit
between us, acting as the merchant acquirer or payment processor, and the payment networks, such as Visa, MasterCard and
Discover. These processors and vendors in turn have agreements with the payment networks, which permit them to route
transaction information through their networks in exchange for fees.
When we facilitate a transaction as a merchant acquirer, we utilize third party processors such as Total Systems
Services, Inc. (a subsidiary of Global Payments, Inc.). Under such processing arrangements, the third-party processors and
vendors receive processing fees based on a percentage of the payment volume they process.
In order for us to process and settle transactions for our clients, we have entered into sponsorship agreements with
banks that are members of the payment networks. We are required to register with the payment networks through these bank
partners because we, as a payment processor, are not a “member bank” as defined by the major payment networks. Our
member bank partners sponsor our adherence to the rules and standards of the payment networks and enable us to route
transactions under the sponsor banks’ control and identification numbers (for example, known as BIN for Visa and ICA for
MasterCard) across the card and ACH networks to authorize and clear transactions. Our relationships with multiple sponsor
banks give us the flexibility to shift payment volumes between them, which helps us to secure more competitive pricing for
our clients and to maintain redundancy.
When we facilitate a client’s payment to its suppliers or vendors, we typically utilize the services of third party
program managers, such as Wex Inc. and Comdata Inc. (a subsidiary of FleetCor Technologies, Inc.), who have arrangements
with banks to operate card issuance programs. Under such arrangements, the program manager and issuing bank retain a
portion of the interchange generated by each transaction. Under the applicable contractual arrangements, our clients are
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generally required to prefund these payments. Because we are not a licensed money transmitter, we have entered into
custodial agreements with banks or other financial institutions who will hold our clients’ funds in trust.
Competitive Conditions and Market Trends
We compete with a variety of payment processing companies that have different business models, go-to-market
strategies and technical capabilities. We compete with a large number of small payments processing companies that provide
integrated payments solutions and/or related hardware to clients within our existing verticals. More broadly in the overall
payments industry, our payment and software solutions compete against many forms of financial services and payment
systems, including Open Edge (a division of Global Payments), ACI Worldwide, Inc., Paya, Inc., Paymentus Corporation,
AvidXchange, Corporate Spending Innovations (a division of Edenred), Nvoicepay (a division of FleetCor Technologies,
Inc.) and Zelis. We also compete against many traditional merchant acquirers, such as financial institutions, affiliates of
financial institutions and payment processing companies in the payment processing industry, including Bank of America
Merchant Services, Elavon, Inc. (a subsidiary of U.S. Bancorp), Wells Fargo Merchant Services, Global Payments, Inc.,
WorldPay, Inc. (a subsidiary of Fidelity National Information Services, Inc.) and Total Systems Services, Inc. (a subsidiary
of Global Payments, Inc.). We believe the most significant competitive factors in the markets in which we compete are: (1)
economics, including fees charged to merchants and commission payouts to software integration partners; (2) product
offering, including emerging technologies and development by other participants in the payments ecosystem; (3) service,
including product functionality, value-added solutions and strong client support for both clients and software integration
partners; and (4) reliability, including a strong reputation for quality service and trusted software integration partners. Our
competitors include large and well-established companies, including banks, credit card providers, technology and ecommerce
companies and traditional retailers, many of which are larger than we are, have a dominant and secure position in the markets
in which they operate or offer other products and services to consumers and clients which we do not offer. Moreover, we
compete against all forms of payments, including credit cards, bank transfers, and traditional payment methods, such as cash
and check.
We believe there is a significant digital shift in our industry. Many of the vertical markets in which we compete are
continuing to shift from legacy payment mediums — primarily cash and check — to electronic forms of payment. In
addition, the COVID-19 pandemic and the resulting changes in consumer behavior has led to an accelerated shift to
electronic payments. We expect to benefit from this trend as our clients increasingly opt to process payments via the
electronic forms of payment in which we specialize.
We have experienced in the past, and may continue to experience, seasonal fluctuations in our volumes and revenues
as a result of consumer spending patterns. Volumes and revenues during the first quarter of the calendar year tend to increase
in comparison to the remaining three quarters of the calendar year on a same store basis. This increase is due to consumers’
receipt of tax refunds and the increases in repayment activity levels that follow.
Acquisitions
Our historical acquisition activity has allowed us to access new markets, acquire industry talent, broaden our product
suite, and supplement organic growth. Our current acquisition strategy focuses on integrated payments companies serving
attractive vertical markets and opportunities to broaden our product offerings. From January 1, 2016 through December 31,
2021, we have completed eleven acquisitions, which are described below. These acquisitions were of payment companies and
are representative of the acquisitions we envision consummating in the future.
Sigma Acquisition
Effective as of January 1, 2016, we acquired substantially all of the assets of Sigma Payment Solutions, Inc.
(“Sigma”). Sigma was an electronic payment solutions provider to the automotive finance industry. The transaction marked
our expansion into the automotive finance space. We have benefitted greatly from Sigma’s deep integrations with automotive
finance software platforms, or DMS.
PaidSuite Acquisition
On September 28, 2017, we acquired substantially all of the assets of PaidSuite, Inc. and PaidMD, LLC
(collectively, “PaidSuite”). PaidSuite was an electronic payment solutions provider to the accounts receivable management
industry. The transaction accelerated our growth into the accounts receivable management space via client and software
integration partner relationships.
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Paymaxx Acquisition
On December 15, 2017, we acquired substantially all of the assets of Paymaxx Pro, LLC (“Paymaxx”). The
acquisition of Paymaxx has been highly complementary to our earlier acquisition of Sigma and has bolstered our position in
the niche automotive finance market. As part of the acquisition, we acquired increased distribution capabilities in the form of
an internal sales force and numerous DMS integrations.
TriSource Acquisition
On August 14, 2019, we acquired all of the equity interests of TriSource. Since 2012, we have used TriSource as
one of our primary third-party processors for settlement solutions when we facilitate transactions as a merchant acquirer. The
acquisition of TriSource has provided further control over our transaction processing ecosystem and accelerated product
delivery capabilities.
APS Acquisition
On October 14, 2019, we acquired substantially all of the assets of American Payment Services of Coeur D’Alene,
LLC, North American Payment Solutions LLC, and North American Payment Solutions Inc. (collectively, “APS”). The
acquisition of APS meaningfully expanded our addressable market by enabling us to access the business-to-business vertical.
Ventanex Acquisition
On February 10, 2020, we acquired all of the equity interests of CDT Technologies, LTD. d/b/a Ventanex
(“Ventanex”). The acquisition of Ventanex accelerated our entry into the healthcare payments vertical.
cPayPlus Acquisition
On July 23, 2020, we acquired all of the equity interest of cPayPlus, LLC (“cPayPlus”). The acquisition of cPayPlus
further expanded our business-to-business automation and payment offering to include accounts payable automation and
payment solutions for both existing and prospective clients across all business lines.
CPS Acquisition
On November 2, 2020, we acquired all of the equity interests of CPS Payment Services, LLC, Media Payments,
LLC, and Custom Payment Systems, LLC (collectively, “CPS”). The acquisition of CPS enhanced our business-to-business
accounts payable automation offerings and introduced our solutions to new verticals including education, government, and
media sectors.
BillingTree Acquisition
On June 15, 2021, we acquired all of the equity interests of BT Intermediate, LLC (together with its subsidiaries,
“BillingTree”). The acquisition of BillingTree further expanded our position in the healthcare, credit union, and accounts
receivable management industries and significantly enhanced our scale and our client diversification.
Kontrol Acquisition
On June 22, 2021, we acquired substantially all of the assets of Kontrol LLC (“Kontrol”). The acquisition of Kontrol
grew our accounts payable automation business and enabled us to leverage our existing B2B technology infrastructure to
increase our virtual card volume.
Payix Acquisition
On December 29, 2021, we acquired Payix Holdings Incorporated (together with its subsidiary, “Payix”). The
acquisition of Payix expanded our position in the large and growing automotive finance market and provided further access
to software integrations with leading loan management system and DMS integrations.
Government Regulation
We operate in an increasingly complex and ever evolving legal and regulatory environment. Our and our clients’
businesses are subject to a variety of federal, state and local laws and regulations, as well as the rules and standards of the
payment networks that we utilize to provide our electronic payment services. While in some cases payment processors such
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as Repay are not directly regulated by governmental agencies, because of the rules and regulations enacted at the state and
federal level that affect our clients and sponsor banks, we have developed and continually evaluate and update our
compliance models to keep up with the rapid evolution of the legal and regulatory regime our clients and sponsor banks face.
We are also subject to legal and regulatory requirements which govern the use, storage and distribution of the information we
collect from our clients and cardholders while processing transactions.
Dodd-Frank Act
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and its related
rules and regulations have resulted in significant changes to the regulation of the financial services industry, including the
electronic payment industry. Under the Dodd-Frank Act, debit interchange transaction fees that a card issuer receives and are
established by a payment card network for an electronic debit transaction are regulated by the Board of Governors of the
Federal Reserve System (the “Federal Reserve”). The Dodd-Frank Act and the Federal Reserve’s implementing regulations
require that such interchange fees be “reasonable and proportional” to the cost incurred by the issuer in processing the
transactions. Federal Reserve regulations implementing this “reasonable and proportional” requirement have capped debit
interchange rates for card issuers operating in the United States with assets of $10 billion or more. In addition, the regulations
contain certain prohibitions on card brand network exclusivity and merchant routing restrictions of debit card transactions.
As a result of the Dodd-Frank Act, merchants are also allowed to set minimum dollar amounts (within certain parameters) for
the acceptance of a credit card, and they are allowed to provide discounts or incentives to entice consumers to pay with an
alternative payment method, such as cash, checks or debit cards.
The Dodd-Frank Act also created the Consumer Financial Protection Bureau (the “CFPB”), which has rulemaking
authority over consumer protection laws, including the authority to regulate consumer financial products in the United States,
including consumer credit, deposit, payment, and similar products. The CFPB may also have authority over us as a provider
of services to regulated financial institutions in connection with consumer financial products. Any new rules or regulations
implemented by the CFPB, and other similar regulatory agencies in other jurisdictions, or pursuant to the Dodd-Frank Act
that are applicable to us or our clients’ businesses, or any adverse changes thereto, could increase our cost of doing business
or limit our current offerings of integrated payment solutions.
Privacy and Information Security Regulations
We provide services that may be subject to various state and federal privacy laws and regulations. Relevant federal
privacy laws include the Gramm-Leach-Bliley Act of 1999, which (along with its implementing regulations) restricts certain
collection, processing, storage, use and disclosure of personal information, requires notice to individuals of privacy practices
and provides individuals with certain rights to prevent the use and disclosure of certain nonpublic or otherwise legally
protected information. These rules also impose requirements for the safeguarding and proper destruction of personal
information through the issuance of data security standards or guidelines. Our business may also be subject to the Fair Credit
Reporting Act of 1970, as amended by the Fair and Accurate Credit Transactions Act of 2003, which regulates the use and
reporting of consumer credit information and imposes disclosure requirements on entities who take adverse action based on
information obtained from credit reporting agencies. In addition, there are state laws governing the collection of personal
information, including those restricting the ability to collect and utilize certain types of information such as Social Security
and driver’s license numbers. Certain state laws impose similar privacy obligations as well as obligations to provide
notification of security breaches of computer databases that contain personal information to affected individuals, state
officers and others. For example, the California Consumer Privacy Act (“CCPA”) of 2018, which became effective January
1, 2020, imposes more stringent requirements with respect to California data privacy. The CCPA includes provisions that
give California residents expanded rights to access and delete certain personal information, opt out of certain personal
information sharing, and receive detailed information about how certain personal information is used.
Health Insurance Portability and Accountability Act & Health Information Technology for Economic and Clinical Health
Act
HIPAA and its related rules and regulations establish policies and procedures for maintaining the privacy and
security of individually identifiable health information (“Protected Health Information”). The Health Information
Technology for Economic and Clinical Health Act and its related rules and regulations extended the privacy and security
provisions of HIPAA to “Business Associates” of “Covered Entities” (each as defined by HIPAA).
Some of our clients are Covered Entities. In providing certain services for our Covered Entity clients, we may
receive, maintain, and transmit Protected Health Information on their behalf, and we may be a Business Associate. To the
extent we are a Business Associate, we are subject to HIPAA rules and regulations regarding privacy and security of
Protected Health Information. In connection with certain services, we may enter into Business Associate Agreements with
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our Covered Entity clients, requiring compliance with HIPAA rules and regulations, and defining permissible uses and
disclosures of Protected Health Information.
Anti-Money Laundering and Counter-Terrorism Regulation
Our business is subject to U.S. federal anti-money laundering laws and regulations. We are also subject to certain
economic and trade sanctions programs that are administered by OFAC that prohibit or restrict transactions to or from (or
transactions dealing with) narcotics traffickers, terrorists, terrorist organizations, certain individuals, specified countries, their
governments and, in certain circumstances, their nationals. Similar anti-money laundering, counter-terrorist financing and
proceeds of crime laws apply to movements of currency and payments through electronic transactions and to dealings with
persons specified on lists maintained by organizations similar to OFAC in several other countries and which may impose
specific data retention obligations or prohibitions on intermediaries in the payment process. We have developed and continue
to enhance compliance programs and policies to monitor and address related legal and regulatory requirements and
developments.
Unfair or Deceptive Acts or Practices
We and many of our clients are subject to Section 5 of the Federal Trade Commission Act prohibiting unfair or
deceptive acts or practices and various state laws similar in scope and subject matter thereto. In addition, laws prohibiting
these activities and other laws, rules and or regulations, including the Telemarketing Sales Rule, may directly impact the
activities of certain of our clients, and in some cases may subject us, as the client’s payment processor or provider of certain
services, to investigations, fees, fines and disgorgement of funds if we are deemed to have aided and abetted or otherwise
provided the means and instrumentalities to facilitate the illegal or improper activities of a client through our services.
Various federal and state regulatory enforcement agencies, including the Federal Trade Commission (“FTC”) and the states
attorneys general, have authority to take action against payment processors who violate such laws, rules and regulations. To
the extent we are processing payments or providing services for a client suspected of violating such laws, rules and
regulations, we may face enforcement actions and, as a result, incur losses and liabilities that may adversely affect our
business.
In addition, the Dodd-Frank Act gave the CFPB broad authority to prohibit “unfair, deceptive or abusive acts or
practices” (“UDAAP”) in connection with the provision of consumer financial products and services. The CFPB has
extended certain UDAAP-related provisions of the Dodd-Frank Act to directly apply to payment processors.
Indirect Regulatory Requirements
Certain of our clients and our sponsor banks are financial institutions that are directly subject to various regulations
and compliance obligations issued by the CFPB, the Federal Reserve, the Office of the Comptroller of the Currency, the
Federal Deposit Insurance Corporation, the National Credit Union Administration and other agencies responsible for
regulating financial institutions, which includes state financial institution regulators. While these regulatory requirements and
compliance obligations do not apply directly to us, many of these requirements materially affect the services we provide to
our clients and us overall. The financial institution regulators have imposed requirements on regulated financial institutions to
manage their third-party service providers. Among other things, these requirements include performing appropriate due
diligence when selecting third-party service providers; evaluating the risk management, information security, and information
management systems of third-party service providers; imposing contractual protections in agreements with third-party service
providers (such as performance measures, audit and remediation rights, indemnification, compliance requirements,
confidentiality and information security obligations, insurance requirements and limits on liability); and conducting ongoing
monitoring, diligence and audit of the performance of third-party service providers. Accommodating these requirements
applicable to our clients impose additional costs and risks in connection with our relationships with financial institutions. We
expect to expend significant resources on an ongoing basis in an effort to assist our clients in meeting their legal
requirements.
Additionally, our clients, particularly those in the personal loans, automotive loans and receivables management
verticals, are subject to various federal, state and local laws and regulations that impose restrictions and requirements on their
businesses. For personal lenders and automotive lenders, these laws and regulations could include limitations on interest
rates and fees, maximum loan amounts and the number of simultaneous or consecutive loans, imposition of required waiting
periods between loans, loan extensions and refinancing, requiring payment schedules (including maximum and minimum
loan durations) or repayment plans for borrowers claiming inability to repay loans, mandating disclosures, security for loans,
licensing requirements and, in certain jurisdictions, database reporting and loan utilization information. For receivables
management companies, these laws and regulations could include laws and regulations (including the federal Fair Debt
Collection Practices Act (“FDCPA”) and comparable state laws) regarding the time, place and manner of communications
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with consumers regarding debt collection and prohibitions or limitations on certain debt collection practices. Lastly, some of
our clients are subject to various state laws and regulations that prohibit or limit the imposition of a surcharge or convenience
fee in connection with their customers use of a payment card or other form of electronic payment.
Payment Network Rules and Standards
Payment networks, such as Visa, MasterCard and American Express, establish their own rules and standards that
allocate liabilities and responsibilities among the payment networks and their participants. These rules and standards,
including the Payment Card Industry Data Security Standards, govern a variety of areas, including how consumers and
customers may use their cards, whether (and the terms under which) convenience fees or surcharges may be imposed in
connection with the use of their cards, the security features of cards, security standards for processing, data security and
allocation of liability for certain acts or omissions, including liability in the event of a data breach. The payment networks
may change these rules and standards from time to time as they may determine in their sole discretion and with or without
advance notice to their participants. These changes may be made for any number of reasons, including as a result of changes
in the regulatory environment, to maintain or attract new participants, or to serve the strategic initiatives of the networks, and
may impose additional costs and expenses on or be disadvantageous to certain participants. Participants are subject to audit
by the payment networks to ensure compliance with applicable rules and standards. The networks may fine, penalize or
suspend the registration of participants for certain acts or omissions or the failure of the participants to comply with
applicable rules and standards.
In order for us to process and settle transactions for our clients, we have entered into sponsorship agreements with
banks that are members of the payment networks. We are required to register with the payment networks through these bank
partners because we, as a payment processor, are not a “member bank” as defined by the major payment networks’ rules and
standards governing access to those networks. Our bank partners sponsor our adherence to the rules and standards of the
payment networks and enable us to route transactions under the sponsor banks’ control and identification numbers (known as
BIN for Visa and ICA for MasterCard) across the card and ACH networks to authorize and clear transactions. Payment
network rules restrict us from performing funds settlement and require that merchant settlement funds be in the possession of
the member bank until the merchant is funded. These restrictions place the settlement assets and liabilities under the control
of the member bank.
Our sponsorship agreements give our sponsor banks substantial discretion in approving certain aspects of our
business practices, including our solicitation, application and qualification procedures for clients and the terms of our
agreements with clients, and provide them with the right to audit our compliance with the payment network rules and
guidelines. We are also subject to network operating rules and guidelines promulgated by the National Automated Clearing
House Association (“NACHA”) relating to payment transactions we process using the Automated Clearing House Network.
Like the payment networks, NACHA may update its operating rules and guidelines at any time, which can require us to take
more costly compliance measures or to develop more complex monitoring systems. Similarly, our ACH sponsor banks have
the right to audit our compliance with NACHA’s rules and guidelines, and are given wide discretion to approve certain
aspects of our business practices and terms of our agreements with ACH clients.
Other Regulation
We are subject to U.S. federal and state unclaimed or abandoned property (escheat) laws, which require us to turn
over to certain government authorities the property of others we hold that has been unclaimed for a specified period of time,
such as account balances that are due to a software integration partner or client following discontinuation of its relationship
with us. The Housing Assistance Tax Act of 2008 requires certain merchant acquiring entities and third-party settlement
organizations to provide information returns for each calendar year with respect to payments made in settlement of electronic
payment transactions and third-party payment network transactions occurring in that calendar year. Reportable transactions
are also subject to backup withholding requirements.
The foregoing is not an exhaustive list of the laws and regulations to which we are subject and the regulatory
framework governing our business is changing continuously. See “Risk Factors — Risks Related to Our Business” in Part I,
Item 1A of this Annual Report on Form 10-K.
Intellectual Property
Certain of our products and services are based on proprietary software and related payment systems solutions. We
rely on a combination of copyright, trademark, and trade secret laws, as well as employee and third-party non-disclosure,
confidentiality, and other contractual arrangements to establish, maintain, and enforce our intellectual property rights in our
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technology, including with respect to our proprietary rights related to our products and services. In addition, we license
technology from third parties that is integrated into some of our solutions.
We own a number of registered service marks, including REPAY® and REPAY REALTIME ELECTRONIC
PAYMENTS®, and we have other pending applications. We also own a number of domain names, including
www.repay.com. For additional information regarding some of the risks relating to our intellectual property see “Risk Factors
— Risks Related to Our Business — We may not be able to successfully manage our intellectual property and may be subject
to infringement claims.” in Part I, Item 1A of this Annual Report on Form 10-K.
Human Capital
Our employees are a critical component of our success. As of December 31, 2021, we employed approximately 552
full-time employees throughout the U.S. and Canada. We have 14 office locations in the U.S. and have a remote employee
presence in 37 states. During 2021, we added 266 new employees (including 161 through acquisitions). None of our
employees are represented by a labor union or covered by a collective bargaining agreement.
We strive to create and maintain a special culture at REPAY that focuses on empowerment, driving performance,
collaboration, and transparency. Our strong emphasis on culture is intended to empower our employees to make decisions
and develop themselves personally and professionally. Particularly in light of our acquisition strategy, one of our priorities is
to maintain and enhance our culture as we grow in employee size and integrate new team members.
We participate in an annual employee engagement and feedback survey which allows all full-time employees to
anonymously give us feedback on our workplace culture, employee programs, and more. In 2021, we had 90% of participants
say we are a great place to work. Our employees’ feedback from the annual surveys have allowed us to be certified as a Great
Place to Work® for the last five consecutive years. In 2021, we were recognized by Fortune® as a Best Workplace in
Financial Services and Insurance. We take employee feedback seriously and share the results of the survey, along with an
action plan of how we can continue to improve, to all employees.
Attracting, developing, and retaining top talent is a priority at REPAY and we have a dedicated human resources
team that focuses on these initiatives. To ensure we stay competitive in the current talent market, we strive to make it clear to
our people that we value and appreciate them. The majority of our workforce is offered flexible or fully remote work flexible
schedules. We foster a culture of rewards and recognition and incentivize our people with opportunities for growth within the
company. Our compensation strategy gives us competitive advantages by offering competitive salaries, bonus potential and
employee ownership opportunities for a meaningful portion of our employees through equity incentive grants. New
employees are welcomed through our virtual new hire onboarding experience, which consists of at-home equipment,
welcome gift packages, consistent communication, and human resources orientation, and ensures our new hires have the
support they need when starting with a new company. Additionally, every one of our new employees has the opportunity to
meet with our CEO for a “coffee chat” within their first month of employment.
We value diverse backgrounds, perspectives, and experiences, and we are committed to providing an inclusive
environment where all individuals are heard and respected. In 2021, we implemented an Employee Resource Group aimed at
connecting and creating a network for women at REPAY. This group meets several times throughout the year to discuss
relevant topics and connect with others at the Company. We have also partnered with diverse organizations and higher
education programs, to identify a more diverse pool of qualified candidates for recruitment.
We offer a comprehensive benefits package which includes 100% coverage of employee healthcare premiums and
several benefits at no cost to our employees, including life insurance, telehealth, mental health, and work-life balance
resources. We perform a thorough review of our benefits package annually. In 2021, we made changes to our benefits
package including offering lower insurance premiums for family coverage, offering a more generous time off policy, and
implementing an Employee Stock Purchase Plan (“ESPP”). The ESPP is highly valued because it gives our employees the
opportunity to become shareholders in REPAY at a discounted price. The financial future of our employees is important to
us, which is why we have a generous 401(k)-employer match and performance-based bonus program. To promote personal
and professional growth, we encourage our employees to pursue ongoing training and career development opportunities, and
we provide tuition assistance and reimbursement for certain pre-approved continuing education programs and professional
certifications.
As we continue to navigate the COVID-19 pandemic, our employees’ health and safety continue to remain a priority
for us. We understand the pandemic impacted all our employees’ personal lives in different ways. Because of this, we
provide flexible work schedules. We have also enhanced our employee benefits package to increase the quantity of free
mental health support and telehealth options.
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Available Information
We maintain a website at www.repay.com, through which you may access our public filings free of charge as soon
as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission
(“SEC”). Information contained on our website is not a part of this Annual Report on Form 10-K and the inclusion of our
website address in this report is an inactive textual reference only.
ITEM 1A. RISK FACTORS
Our business involves significant risks. In addition to the risks and uncertainties discussed above under
“Cautionary Note Regarding Forward-Looking Statements,” you should carefully consider the specific risks set forth herein.
If any of these risks actually occur, it may materially harm our business, financial condition, liquidity and results of
operations. As a result, the market price of our securities could decline, and you could lose all or part of your investment.
Additionally, the risks and uncertainties described in this Annual Report on Form 10-K or in any document incorporated by
reference herein are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known
to us or that we currently believe to be immaterial may become material and adversely affect our business.
Unless the context requires otherwise, “we,” “us,” “our,” “Repay” and the “Company” refer to the business of
Repay Holdings Corporation and its subsidiaries. In the sections of the Risk Factors entitled “Risks Related to Our
Ownership Structure” and “Risks Related to Our Class A Common Stock,” “we,” us” and “our” refer only to Repay
Holdings Corporation excluding, unless the context requires otherwise or as expressly stated, its subsidiaries.
Risks Related to Our Business
The COVID-19 pandemic and the measures implemented to mitigate the spread of the virus has had and may
continue to have an adverse effect on our business, results of operations and financial condition.
The COVID-19 pandemic and the mitigation efforts by governments and other parties to attempt to control the
spread of the virus (including its variants) have adversely impacted the U.S. and global economy, leading to significant
changes in consumer and business spending and economic activity and disruptions and volatility in the U.S. and global
capital markets. We are diligently working to ensure that we can continue to operate with minimal disruption, mitigate the
impact of the pandemic on our employees’ health and safety, and address potential business interruptions on ourselves and
our clients. However, we cannot assure you that we will continue to be successful in these efforts.
Although we have experienced increased demand for some of our service offerings as a result of an accelerated shift
to electronic payments, we believe that the COVID-19 pandemic, the mitigation efforts and the resulting economic impact
have had, and may continue to have, an overall adverse effect on our business, results of operations and financial condition.
The actual further effect in any given future period is difficult to estimate, and it will depend on numerous evolving factors
and future developments that we are not able to predict, including: the duration, spread and severity of the outbreak
(including whether there are continued variants or other waves of infection); the nature, extent and effectiveness of mitigation
measures; the administration of vaccines and the availability of therapeutic treatments; the extent and duration of the effect
on the economy, unemployment, consumer confidence and consumer and business spending; and how quickly and to what
extent normal economic and operating conditions can resume.
The effects of the COVID-19 pandemic, the mitigation efforts and the resulting economic impact on our business,
results of operations and financial condition have included and may continue to include the following with respect to the key
industry-oriented “vertical” markets that we serve:
(cid:2) A decrease in the origination of personal or automotive loans and a decrease in payments as a result of changes
in consumer behavior following receipt of government stimulus, tax credits or extra unemployment benefits.
(cid:2) A decrease in the amount of business-to-business payments as a result of the overall economic slowdown and
reduction in business spending.
(cid:2) A decrease in the amount of payments to healthcare providers from insurance companies and third-party health
administrators as a result of reductions in elective medical procedures or health provider visits.
The above effects have resulted in and are likely to continue to result in an adverse impact on the amount of fees we
can earn for processing payments and other transactions on behalf of our clients. There may be a delay in the timing of when
our business is impacted by these matters. As an example, we earned incremental fees from processing loan payments or
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payoffs that result from consumers’ receipt of additional government stimulus or extra unemployment benefits, but our
business, results of operations and financial condition in subsequent periods were and could continue to be adversely affected
from reduced loan originations as result of such combination of government action and consumer behavior.
In addition, the ongoing reduction or suspension of non-essential travel and cancellation or postponement of various
tradeshows has resulted in and is expected to continue to result in challenges in attracting new clients and growing
relationships with existing clients.
To the extent the COVID-19 pandemic, the mitigation efforts and the resulting economic impact continues to
adversely affect our business, results of operations and financial condition, such matters may also have the effect of
heightening many of the other risks described in the risk factors disclosed herein, such as those relating to our responsibility
for the prevention of unauthorized disclosure of consumer data and our ability to minimize losses relating to chargebacks,
fraud and similar losses.
The payment processing industry is highly competitive. Such competition could adversely affect the fees we receive, and as
a result, our margins, business, financial condition and results of operations.
The market for payment processing services is highly competitive. There are other payment processing service
providers that have established a sizable market share in the markets in which we compete and service more clients than we
do. Our growth will depend, in part, on a combination of the continued growth of the electronic payment market and our
ability to increase our market share.
Many of our competitors have substantially greater financial, technological, management and marketing resources
than we have. Accordingly, if these competitors target our business model and, in particular, the vertical markets that we
serve, they may be able to offer more attractive fees or payment terms and advances to our clients and more attractive
compensation to our software integration partners. They also may be able to offer and provide services and solutions that we
do not offer. There are also a large number of small providers of processing services, including emerging technology and
non-traditional payment processing companies, that provide various ranges of services to our existing and potential clients.
This competition may effectively limit the prices we can charge, cause us to increase the compensation we pay to our
software integration partners and require us to control costs aggressively in order to maintain acceptable profit margins.
Unauthorized disclosure of client or consumer data, whether through breach of our computer systems, computer viruses,
or otherwise, could expose us to liability and protracted and costly litigation, and damage our reputation.
We are responsible for data security for us and for third parties with whom we partner, including with respect to
rules and regulations established by the payment networks, such as Visa, MasterCard and Discover, and debit card networks.
These third parties include our clients, software integration partners and other third-party service providers and agents. We
and other third parties collect, process, store and/or transmit sensitive data, such as names, addresses, social security
numbers, credit or debit card numbers, expiration dates, driver’s license numbers, bank account numbers, and protected
health information. We have ultimate liability to the payment networks and our sponsor banks that register us with the
payment networks for our failure or the failure of other third parties with whom we contract to protect this data in accordance
with payment network requirements. The loss, destruction or unauthorized modification of client or consumer data by us or
our contracted third parties could result in significant fines, sanctions, proceedings or actions against us by the payment
networks, governmental bodies, consumers or others.
Threats may result from human error, fraud or malice on the part of employees or third parties, or from accidental
technological failure. For example, certain of our employees have access to sensitive data that could be used to commit
identity theft or fraud. Concerns about security increase when we transmit information electronically because such
transmissions can be subject to attack, interception or loss. Also, computer viruses can be distributed and spread rapidly over
the Internet and could infiltrate our systems or those of our contracted third parties. Denial of service or other attacks could
be launched against us for a variety of purposes, including interfering with our services or to create a diversion for other
malicious activities. These types of actions and attacks and others could disrupt our delivery of services or make them
unavailable.
We and our contracted third parties could be subject to breaches of security by hackers. Our encryption of data and
other protective measures may not prevent unauthorized access to or use of sensitive data. A systems breach may subject us
to material losses or liability, including payment network fines, assessments and claims for unauthorized purchases with
misappropriated credit, debit or card information, impersonation or other similar fraud claims. A misuse of such data or a
cybersecurity breach (including a ransomware attack) could harm our reputation and deter clients from using electronic
payments generally and our services specifically, thus reducing our revenue. In addition, any such misuse or breach could
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cause us to incur costs to correct the breaches or failures, expose us to uninsured liability, increase our risk of regulatory
scrutiny, subject us to lawsuits, and result in the imposition of material penalties and fines under state and federal laws or by
the payment networks or limitations on our ability to process payment transactions on such payment networks. While we
maintain cyber insurance coverage (which, in certain cases, is required pursuant to certain of our contractual commitments)
that may, subject to policy terms and conditions, cover certain aspects of these risks, our insurance coverage may be
insufficient to cover all losses. Additionally, we may be required to increase our cyber insurance coverage pursuant to our
contractual commitments entered into in the future. Our cyber insurance costs have increased significantly following well-
publicized ransomware attacks involving other organizations. The costs to maintain or increase our cyber insurance coverage
could have a material adverse effect on our business, financial condition and results of operations.
Any human error, fraud, malice, accidental technological failure or attacks against us or our contracted third parties
could hurt our reputation, force us to incur significant expenses in remediating the resulting impacts, expose us to uninsured
liability, result in the loss of our sponsor bank relationships or our ability to participate in the payment networks, subject us to
lawsuits, fines or sanctions, distract our management, increase our costs of doing business and/or materially impede our
ability to conduct business.
Although we generally require that our agreements with our software integration partners or service providers
include confidentiality obligations that restrict these parties from using or disclosing any client or consumer data except as
necessary to perform their services under the applicable agreements, we cannot guarantee that these contractual measures will
prevent the unauthorized use, modification, destruction or disclosure of data or allow us to seek reimbursement from the
contracted party. In addition, many of our clients are small and medium-sized businesses that may have limited competency
regarding data security and handling requirements and may thus experience data breaches. Any unauthorized use,
modification, destruction or disclosure of data could result in protracted and costly litigation, and the incurrence of significant
losses by us.
In addition, our agreements with our sponsor banks and our third-party payment processors (as well as payment
network requirements) require us to take certain protective measures to ensure the confidentiality of client and consumer
data. Any failure to adequately comply with these protective measures could result in fees, penalties, litigation or termination
of our sponsor bank agreements.
Security breaches may be subject to scrutiny from governmental agencies such as the CFPB, the FTC and the U.S.
Department of Health and Human Services Office for Civil Rights. See “Risks Related to Regulation” below.
If we cannot keep pace with rapid developments and changes in our industry, the use of our products and services could
decline, causing a reduction in our revenues.
The electronic payments market is subject to constant and significant changes. This market is characterized by rapid
technological evolution, new product and service introductions, evolving industry standards, changing client needs and the
entrance of new competitors, including products and services that enable card networks and banks to transact with consumers
directly. To remain competitive, we continually pursue initiatives to develop new products and services to compete with
these new market entrants. These projects carry risks, such as difficulty in determining market demand and timing for
delivery, cost overruns, delays in delivery, performance problems and lack of client acceptance, and some projects may
require investment in non-revenue generating products or services that our software integration partners and clients expect to
be included in our offerings. In addition, new products and offerings may not perform as intended or generate the business or
revenue growth expected.
The continued growth and development of our payment processing services and solutions will depend on our ability
to anticipate and adapt to changes in consumer and business behavior. Any failure to timely integrate emerging payment
methods into our software, to anticipate consumer or business behavior changes or to contract with processing partners that
support such emerging payment technologies could cause us to lose traction among our clients or referral sources, including
industry associations, resulting in a corresponding loss of revenue, if those methods become popular among end-users of their
services.
Our products and services are designed to process complex transactions and provide reports and other information
on those transactions, all at very high volumes and processing speeds. Our technology offerings must also integrate with a
variety of network, hardware, mobile and software platforms and technologies, and we need to continuously modify and
enhance our products and services to adapt to changes and innovation in these technologies. Any failure to deliver an
effective, reliable and secure service or any performance issue that arises with a new product or service could result in
significant processing or reporting errors or other losses. If we do not deliver a promised new product or service to our clients
or software integration partners in a timely manner or the product or service does not perform as anticipated, our
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development efforts could result in increased costs and a loss in business, reducing our earnings and causing a loss of
revenue. We also rely in part on third parties, including some of our competitors and potential competitors, for the
development of and access to, or production of, new technologies, including software and hardware. For example, we rely on
our software integration partners to integrate our services and products into the software platforms being used by our clients.
Our future success will depend in part on our ability to develop or adapt to technological changes and evolving industry
standards. If we are unable to develop, adapt to or access technological changes or evolving industry standards on a timely
and cost-effective basis, our business, financial condition and results of operations could be materially adversely affected.
If our vertical markets do not increase their acceptance of electronic payments or if there are adverse developments in the
electronic payment industry in general, our business, financial condition and results of operations may be adversely
affected.
The vertical markets we primarily serve have traditionally not utilized electronic payments. If consumers and
businesses in these vertical markets do not increase their use of cards as payment methods for their transactions or if the mix
of payment methods changes in a way that is adverse to us, such developments may have a material adverse effect on our
business, financial condition and results of operations. Regulatory changes may also result in our clients seeking to charge
their own clients additional fees for use of credit or debit cards which may result in such clients using other payment
methods. Additionally, in recent years, increased incidents of security breaches have caused some consumers to lose
confidence in the ability of businesses to protect their information, causing certain consumers to discontinue use of electronic
payment methods. Security breaches could result in financial institutions canceling large numbers of credit and debit cards, or
consumers or businesses electing to cancel their cards following such incidents.
Potential clients or software integration partners may be reluctant to switch to, or develop a relationship with, a new
payment processor, which may adversely affect our growth.
Many potential clients and software integration partners worry about potential disadvantages associated with
switching payment processing providers, such as a loss of accustomed functionality, increased costs and business disruption.
There can be no assurance that our strategies for overcoming potential reluctance to change payment processing providers or
to initiate a relationship with us will be successful, and this resistance may adversely affect our growth and our business
overall.
If we fail to comply with the applicable requirements of payment networks and industry self-regulatory organizations,
those payment networks or organizations could seek to fine us, suspend us or terminate our registrations through our
sponsor banks.
We rely on sponsor banks and, in certain cases, third-party processors to access the payment card networks, such as
Visa, MasterCard and Discover, that enable our ability to offer to our clients the acceptance of credit cards and debit cards,
and we must pay fees for such services. To provide our merchant acquiring services, we are registered through our sponsor
banks with the Visa, MasterCard and Discover networks as a service provider for member institutions. As such, we, our
sponsor banks and many of our clients are subject to complex and evolving payment network rules. The payment networks
routinely update and modify requirements applicable to merchant acquirers, including rules regulating data integrity, third-
party relationships (such as those with respect to sponsor banks and independent sales organization (“ISOs”)), merchant
chargeback standards and PCI DSS. The rules of the card networks are set by their boards, which may be influenced by card
issuers, some of which offer competing transaction processing services. Any changes in payment network rules or standards
may be imposed on highly compressed timelines and may have a negative impact on our results of operations.
If we or our sponsor banks fail to comply with the applicable rules and requirements of any of the payment
networks, such payment network could suspend or terminate our registration. Further, our transaction processing capabilities,
including with respect to settlement processes, could be delayed or otherwise disrupted, and recurring non-compliance could
result in the payment networks seeking to fine us or suspend or terminate our registrations that allow us to process
transactions on their networks, which would make it impossible for us to conduct our business on its current scale.
Under certain circumstances specified in the payment network rules, we may be required to submit to periodic
audits, self-assessments or other assessments with regard to our compliance with the PCI DSS. Such audits or assessments
may reveal that we have failed to comply with the PCI DSS. In addition, even if we comply with the PCI DSS, there is no
assurance that we will be protected from a security breach. The termination of our registrations with the payment networks,
or any changes in payment network or issuer rules that limit our ability to provide merchant acquiring services, could have an
adverse effect on our payment processing volumes, revenues and operating costs. If we are unable to comply with the
requirements applicable to our payment processing activities, the payment networks could no longer allow us to provide these
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solutions, which would render us unable to conduct our business. If we were precluded from processing Visa and MasterCard
electronic payments, we would lose a substantial portion of our revenues.
We are also subject to the operating rules of the NACHA. NACHA is a self-regulatory organization which
administers and facilitates private-sector operating rules for ACH payments and defines the roles and responsibilities of
financial institutions and other ACH network participants. The NACHA Rules and Operating Guidelines impose obligations
on us and our partner financial institutions. These obligations include audit and oversight by the financial institutions and the
imposition of mandatory corrective action, including termination, for serious violations. If an audit or self-assessment under
PCI DSS or NACHA identifies any deficiencies that we need to remediate, the remediation efforts may distract our
management team and be expensive and time consuming.
We rely on sponsor banks in order to process electronic payment transactions, and such sponsor banks have substantial
discretion with respect to certain elements of our business practices. If these sponsorships are terminated and we are not
able to secure new sponsor banks, we will not be able to conduct our business.
Because we are not a bank, we are not eligible for membership in the Visa, MasterCard and other payment
networks, and are, therefore, unable to directly access these payment networks, which are required to process transactions.
We are currently registered with payment networks through our sponsor banks.
If these sponsorships are terminated and we are unable to secure a replacement sponsor bank within the applicable
wind down period, we will not be able to process electronic payment transactions. While we maintain relationships with
multiple sponsor banks for flexibility in the processing of payment volume and in the pricing of our clients’ solutions, the
loss of or termination of a relationship with a sponsor bank or a significant decrease in the amount of payment volume that a
sponsor bank processes for us could reduce such flexibility and negatively affect our business. To the extent the number of
our sponsor banks decreases, we will become increasingly reliant on our remaining sponsor banks, which would materially
adversely affect our business should our relationship with any of such remaining banks be terminated or otherwise disrupted.
Furthermore, our agreements with our sponsor banks provide the sponsor banks with substantial discretion in approving
certain elements of our business practices, including our solicitation, application and underwriting procedures for clients. Our
sponsor banks’ actions under these agreements could be detrimental to us.
To acquire and retain clients, we depend on our software integration partners that integrate our services and solutions
into software used by our clients.
We rely heavily on the efforts of our software integration partners to ensure our services and solutions are properly
integrated into the software that our clients use. Generally, our agreements with software integration partners are not
exclusive and these partners retain the right to refer potential clients to other payment processors. In addition, our agreements
with software integration partners do not generally prohibit these partners from providing payment processing solutions to
clients (including by acquiring a competing payment processing business).
We may need to provide financial concessions to maintain relationships with current software integration partners or
to attract potential software integration partners from our competitors. We have been required, and expect to be required in
the future, to make concessions when renewing contracts with our software integration partners, and such concessions can
have a material impact on our financial condition or operating performance.
If our software integration partners focus more heavily on working with other payment processors, acquire or
develop their own payment processing capabilities, cease operations or become insolvent, we may be at risk of losing
existing clients with whom these software integration partners have relationships. If we are unable to maintain our existing
base of software integration partners or develop relationships with new software integration partners, our business, financial
condition and results of operations would be materially adversely affected. In addition, our efforts to form relationships with
new software integration partners may be hindered to the extent they perceive that integrating with a new payment processor
or switching to us from another payment processor is too costly or time-consuming. Many software providers choose to
integrate with only a small number of payments processors due to the requisite time and cost of integrating their systems with
a payment processor’s solutions.
Failure to effectively manage risk and prevent fraud could increase our chargeback liability and other liability.
We are potentially liable for losses caused by fraudulent card transactions or business fraud. Card fraud occurs when
a merchant’s customer uses a stolen card (or a stolen card number in a card-not-present transaction) to purchase merchandise
or services. In a traditional card-present transaction, if the merchant swipes the card, receives authorization for the transaction
from the card issuing bank and verifies the signature on the back of the card against the paper receipt signed by its customer,
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the card issuing bank remains liable for any loss. In a fraudulent card-not-present transaction, even if the merchant receives
authorization for the transaction, the merchant may be liable for any loss arising from the transaction. In addition, consumers
may dispute repayments on a loan by claiming it was unlawful under applicable law.
Business fraud occurs when a business or organization, rather than a cardholder, opens a fraudulent merchant
account and conducts fraudulent transactions or when a business, rather than a consumer (though sometimes working
together with a consumer engaged in fraudulent activities), knowingly uses a stolen or counterfeit card or card number to
record a false sales transaction, intentionally fails to deliver the merchandise or services sold in an otherwise valid
transaction, or provides services in violation of applicable law. Business fraud also occurs when employees of businesses
change the business demand deposit accounts to their personal bank account numbers, so that payments are improperly
credited to the employee’s personal account.
Certain of these types of fraud present potential liability for chargebacks associated with our clients’ processing
transactions. If a billing dispute between a client and a consumer is not ultimately resolved in favor of our client, the disputed
transaction is “charged back” to the client’s bank and credited to the consumer’s bank. Anytime our client is unable to satisfy
a chargeback, we are responsible for that chargeback. We have a number of contractual protections and other means of
recourse to mitigate those risks, including collateral or reserve accounts that we may require our clients to maintain for these
types of contingencies. Nonetheless, if we are unable to collect the chargeback from the clients’ account or reserve account
(if applicable), or if the client refuses or is financially unable due to bankruptcy or other reasons to reimburse us for the
chargeback, we bear the loss for the amount of the refund paid to the cardholder’s bank. We have established systems and
procedures to detect and reduce the impact of business fraud, but these measures may not be effective, and incidents of fraud
could increase in the future. During the year ended December 31, 2021, we believe our chargeback rate was less than 1% of
payment volume. Any increase in chargebacks not paid by our clients could have a material adverse effect on our business,
financial condition and results of operations.
Our processes to reduce fraud losses depend in part on our ability to restrict the deposit of processing funds while we
investigate suspicious transactions. We could be sued by parties alleging that our restriction and investigation processes
violate federal and state laws on consumer protection and unfair business practice. If we are unable to defend any such
claim successfully, we could be required to restructure our anti-fraud processes in ways that would harm our business or
pay substantial fines.
As part of our program to reduce fraud losses, we may temporarily restrict the ability of clients to access certain
processing deposits if those transactions or their account activity are identified by our anti-fraud models as suspicious. We
could be sued by parties alleging that our restriction and investigation processes violate federal and state laws on consumer
protection and unfair business practice. If we are unable to defend any such claim successfully, we could be required to
restructure our anti-fraud processes in ways that could harm our business, and to pay substantial fines. Even if we are able to
defend a claim successfully, the litigation could damage our reputation, consume substantial amounts of our management’s
time and attention, and require us to change our client service and operations in ways that could increase our costs and
decrease the effectiveness of our anti-fraud program.
We receive savings related to favorable pricing or incentives on certain interchange and other payment network fees. To
the extent we cannot maintain such savings and cannot pass along any corresponding increases in such fees to our
clients, our operating results and financial condition may be materially adversely affected.
We bear interchange, assessment, transaction and other fees set by the payment networks to the card issuing banks
and the payment networks for each transaction we process as a merchant acquirer. Under certain circumstances, the payment
networks afford us preferential rates or incentives with respect to such fees, which helps us to control our operating costs.
From time to time, the payment networks increase the interchange fees and other fees that they charge payment processors
and the sponsor banks. At their sole discretion, our sponsor banks have the right to pass any increases in interchange and
other fees on to us, and they have consistently done so in the past. We are generally permitted under the contracts into which
we enter with our clients, and in the past have been able to, pass these fee increases along to our clients through
corresponding increases in our processing fees. However, if we are unable to pass through these and other fees in the future,
or if the payment networks decline to offer us preferential rates or incentives on such fees as compared to those charged to
other payment processors, our business, financial condition and results of operations could be materially adversely affected.
Our systems and those of our third-party providers may fail due to factors beyond our control, which could interrupt our
service, resulting in our inability to process payments or provide ancillary services, loss of business, increase in costs and
exposure to liability.
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We depend on the efficient and uninterrupted operation of numerous systems, including our computer network
systems, software, data centers and telecommunication networks, as well as the systems and services of our sponsor banks,
the payment networks, third-party providers of processing services and other third parties. Our systems and operations, or
those of our third-party providers, such as our provider of dial-up authorization services, or the payment networks
themselves, could be exposed to damage or interruption from, among other things, hardware and software defects or
malfunctions, telecommunications failure, computer denial-of-service and other cyberattacks, unauthorized entry, computer
viruses or other malware, human error, natural disaster, power loss, acts of terrorism or sabotage, financial insolvency of such
providers and similar events. These threats, and errors or delays in the processing of payment transactions, system outages or
other difficulties, could result in failure to process transactions or provide ancillary services, additional operating and
development costs, diversion of technical and other resources, loss of revenue, clients and software integration partners, loss
of client and cardholder data, harm to our business or reputation, exposure to fraud losses or other liabilities and fines and
other sanctions imposed by payment networks. Our property and business interruption insurance may not be adequate to
compensate us for all losses or failures that may occur.
At present, our critical operational systems, such as our payment gateway, are fully redundant, while certain of our
less critical systems are not. Therefore, certain aspects of our operations may be subject to interruption. Also, while we have
disaster recovery policies and arrangements in place, they have not been tested under actual disasters or similar events.
Maintaining and upgrading our system is costly and time-consuming, involves significant technical risk and may divert our
resources from new features and products, and there can be no assurances that such systems will be effective. Frequent or
persistent site interruptions could lead to regulatory scrutiny, significant fines and penalties, and mandatory and costly
changes to our business practices.
In addition, we are continually improving and upgrading our information systems and technologies. Implementation
of new systems and technologies is complex, expensive and time-consuming. If we fail to timely and successfully implement
new information systems and technologies or improvements or upgrades to existing information systems and technologies, or
if such systems and technologies do not operate as intended, this could have an adverse impact on our business, internal
controls (including internal controls over financial reporting), results of operations and financial condition.
We rely on other service and technology providers. If such providers fail in or discontinue providing their services or
technology to us, our ability to provide services to clients may be interrupted, and, as a result, our business, financial
condition and results of operations could be adversely impacted.
We rely on third parties to provide or supplement card processing services and for infrastructure hosting services.
We also rely on third parties for specific software and hardware used in providing our products and services. The termination
by our service or technology providers of their arrangements with us or their failure to perform their services efficiently and
effectively may adversely affect our relationships with our clients and, if we cannot find alternate providers quickly, may
cause those clients to terminate their relationships with us.
Our third-party processors and third-party program managers, which provide us with front-end authorization
services, card issuance program services and certain other services, compete with us or may compete with us in the future in
the vertical markets that we serve. There can be no assurance that these processors will maintain their relationships with us in
the future or that they will refrain from competing directly with the solutions that we offer.
If we are unable to renew our existing contracts with our most significant vendors, we might not be able to replace
the related products or services at the same cost, which would negatively impact our profitability. Additionally, while we
believe we would be able to locate alternative vendors to provide substantially similar services at comparable rates, or
otherwise replicate such services internally, no assurance can be made that a change would not be disruptive to our business,
which could potentially lead to a material adverse impact on our revenue and profitability until resolved.
We also rely in part on third parties for the development of and access to new technologies, and updates to existing
products and services for which third parties provide ongoing support, which reliance increases the cost associated with new
and existing product and service offerings. Failure by these third-party providers to devote an appropriate level of attention to
our products and services could result in delays in introducing new products or services, or delays in resolving any issues
with existing products or services for which third-party providers provide ongoing support.
We are subject to economic and political risk, the business cycles of our clients and software integration partners and the
overall level of consumer and commercial spending, which could negatively impact our business, financial condition and
results of operations.
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The electronic payment industry depends heavily on the overall level of consumer and commercial spending. We are
exposed to general economic conditions that affect consumer confidence, consumer spending, consumer discretionary income
and changes in consumer purchasing habits, including natural disasters and health emergencies, including earthquakes, fires,
power outages, typhoons, floods, pandemics or epidemics (such as the COVID-19 pandemic) and manmade events such as
civil unrest, labor disruption, international trade disputes, international conflicts, terrorism, wars and critical infrastructure
attacks. A sustained deterioration in general economic conditions, particularly in the United States, continued uncertainty for
an extended period of time, due to the COVID-19 pandemic or otherwise, or increases in interest rates, could adversely affect
our financial performance by reducing the number or aggregate volume of transactions made using electronic payments. If
our clients make fewer sales of products and services using electronic payments, or consumers and businesses spend less
money through electronic payments, we will have fewer transactions to process at lower dollar amounts, resulting in lower
revenue.
The changes in the economy as a result of the COVID-19 pandemic has had and may continue to have various types
of impact on our business. See the risk factor entitled “The continued impact of the COVID-19 outbreak and the measures
implemented to mitigate the spread of the virus on our business, results of operations and financial condition will depend on
future developments, which are highly uncertain and largely without precedent.”
Our risk management policies and procedures may not be fully effective in mitigating our risk exposure in all market
environments or against all types of risks associated with providing payment processing solutions.
We operate in a rapidly changing industry. Accordingly, our risk management policies and procedures may not be
fully effective to identify, monitor, manage and remediate our risks associated with providing payment processing solutions.
Some of our risk evaluation methods depend upon information provided by others and public information regarding markets,
clients or other matters that are otherwise inaccessible by us. In some cases, that information may not be accurate, complete
or up-to-date. Additionally, our risk detection system is subject to a high degree of “false positive” risks being detected,
which makes it difficult for us to identify real risks in a timely manner. If our policies and procedures are not fully effective
or we are not always successful in capturing all risks to which we are or may be exposed, we may suffer harm to our
reputation or be subject to litigation or regulatory actions that materially increase our costs and limit our ability to grow and
may cause us to lose existing clients.
We may not be able to continue to expand our share in our existing vertical markets or continue to expand into new
vertical markets, which would inhibit our ability to grow and increase our profitability.
Our future growth and profitability depend, in part, upon our continued expansion within the vertical markets in
which we currently operate, the emergence of other vertical markets for electronic payments and our integrated solutions, and
our ability to penetrate new vertical markets and our current software integration partners’ client bases. As part of our
strategy to expand into new vertical markets and increase our share in our existing vertical markets, we look for acquisition
opportunities and partnerships with other businesses that will allow us to increase our market penetration, technological
capabilities, product offerings and distribution capabilities. We may not be able to successfully identify suitable acquisition
or partnership candidates in the future, and if we do identify them, they may not provide us with the benefits we anticipated.
In addition, our ability to continue to grow and profitably service clients in Canada is uncertain and will require additional
resources and controls, and we may encounter unanticipated challenges.
Our expansion into new vertical markets also depends on our ability to adapt our existing technology or to develop
new technologies to meet the particular needs of each new vertical market. We may not have adequate financial or
technological resources to develop effective and secure services or distribution channels that will satisfy the demands of these
new vertical markets. Penetrating these new vertical markets may also prove to be more challenging or costly or may take
longer than we may anticipate. If we fail to expand into new vertical markets and increase our penetration into existing
vertical markets, we may not be able to continue to grow our revenues and earnings.
We may not be able to successfully manage our intellectual property and may be subject to infringement claims.
We rely on a combination of contractual rights and copyright, trademark, patent and trade secret laws to establish
and protect our proprietary technology, which is critical to our success, particularly in our strategic verticals where we may
offer proprietary software solutions to our clients. Third parties have and in the future may challenge, circumvent, infringe or
misappropriate our intellectual property, or such intellectual property may not be sufficient to permit us to take advantage of
current market trends or otherwise to provide competitive advantages, which could result in costly redesign efforts,
discontinuance of service offerings or other competitive harm. Other parties, including our competitors, may independently
develop similar technology and duplicate our services or design around our intellectual property and, in such cases, we may
not be able to assert our intellectual property rights against such parties. Further, our contractual arrangements may be subject
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to termination or renegotiation with unfavorable terms to us, and our third-party licensors may be subject to bankruptcy,
insolvency and other adverse business dynamics, any of which might affect our ability to use and exploit the products
licensed to us by such third-party licensors. Additionally, our contractual arrangements may not effectively prevent
disclosure of our confidential information or provide an adequate remedy in the event of unauthorized disclosure of our
confidential information. We may have to litigate to enforce or determine the scope and enforceability of our intellectual
property rights and know-how, which is expensive, could cause a diversion of resources and may not prove successful. Also,
because of the rapid pace of technological change in our industry, aspects of our business and our services rely on
technologies developed or licensed by third parties, and we may not be able to obtain or retain licenses and technologies from
these third parties on reasonable terms or at all. The loss of intellectual property protection or the inability to license or
otherwise use third-party intellectual property could harm our business and ability to compete.
We may also be subject to costly litigation if our services and technology are alleged to infringe upon or otherwise
violate a third party’s proprietary rights. Third parties may have, or may eventually be issued, patents that could be infringed
by our products, services or technology. Any of these third parties could make a claim of infringement, breach or other
violation of third-party intellectual property rights against us with respect to our products, services or technology. Any claim
from third parties may result in a limitation on our ability to use the intellectual property subject to these claims.
Additionally, in recent years, individuals and groups have been purchasing intellectual property assets for the sole purpose of
making claims of infringement or other violations and attempting to extract settlements from companies like us. Even if we
believe that intellectual property related claims are without merit, defending against such claims is time consuming and
expensive and could result in the diversion of time and attention of our management and employees. Claims of intellectual
property infringement or violation also may require us to redesign affected products or services, enter into costly settlement
or license agreements, pay costly damage awards, or face a temporary or permanent injunction prohibiting us from marketing
or selling certain of our products or services. Even if we have an agreement for indemnification against such costs, the
indemnifying party, if any in such circumstance, may be unable to uphold its contractual obligations. If we cannot or do not
license the infringed technology on reasonable terms or substitute similar technology from another source, our revenue and
earnings could be adversely impacted.
The loss of key personnel or the loss of our ability to attract, recruit, retain and develop qualified employees, could
adversely affect our business, financial condition and results of operations.
We depend on the ability and experience of a number of our key personnel who have substantial experience with our
operations, the rapidly changing payment processing industry and the vertical markets in which we offer our products and
services. Many of our key personnel have worked for us for a significant amount of time or were recruited by us specifically
due to their experience. Our success depends in part upon the reputation and influence within the industry of our senior
managers who have, over the years, developed long standing and favorable relationships with our software integration
partners, vendors, card associations, sponsor banks and other payment processing and service providers. It is possible that the
loss of the services of one or a combination of our senior executives or key managers could have a material adverse effect on
our business, financial condition and results of operations. In addition, contractual obligations related to confidentiality
assignment of intellectual property rights, non-solicitation and non-competition may be ineffective or unenforceable, and
departing employees may share our proprietary information with competitors or seek to solicit our software integration
partners or clients or recruit our key personnel to competing businesses in ways that could adversely impact us.
Further, in order for us to continue to successfully compete and grow, we must attract, recruit, develop and retain
personnel who will provide us with the expertise we need. Our success also depends on the skill and experience of our sales
force, which we must continuously work to maintain. While we have a number of key personnel who have substantial
experience with our operations, we must also develop our personnel so that our personnel are capable of maintaining the
continuity of our operations, supporting the development of new services and solutions, and expanding our client base. The
market for qualified personnel is highly competitive, and we may not succeed in recruiting additional personnel or may fail to
effectively replace current personnel who depart with qualified or effective successors. Our efforts to retain and develop
personnel may also result in significant additional expenses, which could adversely affect our profitability.
We have been the subject of various claims and legal proceedings and may become the subject of claims, litigation or
investigations which could have a material adverse effect on our business, financial condition or results of operations.
In the ordinary course of business, we are the subject of various claims and legal proceedings and may become the
subject of claims, litigation or investigations, including commercial disputes and employee claims, such as claims of age
discrimination, sexual harassment, gender discrimination, immigration violations or other local, state and federal labor law
violations, and from time to time may be involved in governmental or regulatory investigations or similar matters arising out
of our current or future business. Any claims asserted against us or our management, regardless of merit or eventual outcome,
23
could harm our reputation and have an adverse impact on our relationships with our clients, software integration partners and
other third parties and could lead to additional related claims. In light of the potential cost and uncertainty involved in
litigation, we have in the past and may in the future settle matters even when we believe we have a meritorious defense.
Certain claims may seek injunctive relief, which could disrupt the ordinary conduct of our business and operations or
increase our costs of doing business. Our insurance or indemnities may not cover all claims that may be asserted against us.
Furthermore, there is no guarantee that we will be successful in defending pending or future litigation or similar matters
under various laws. Any judgments or settlements in any pending or future claims, litigation or investigations could have a
material adverse effect on our business, financial condition and results of operations.
We may not be able to successfully execute our strategy of growth through acquisitions.
A significant part of our growth strategy is to enter into new vertical markets through platform acquisitions of
vertically-focused integrated payment and software solutions providers, to expand within our existing vertical markets
through selective tuck-in acquisitions and to otherwise increase our presence in the payments processing market.
Although we expect to continue to execute our acquisition strategy:
(cid:2) we may not be able to identify suitable acquisition candidates or acquire additional assets on favorable terms;
(cid:2) we may compete with others to acquire assets, which competition may increase, and any level of competition
could result in decreased availability or increased prices for acquisition candidates;
(cid:2)
competing bidders for such acquisitions may be larger, better-funded organizations with more resources and
easier access to capital;
(cid:2) we may experience difficulty in anticipating the timing and availability of acquisition candidates;
(cid:2) we may not be able to obtain the necessary financing, on favorable terms or at all, to finance any of our
potential acquisitions;
(cid:2)
potential acquisitions may be subject to regulatory approvals, which may cause delays and uncertainties; and
(cid:2) we may not be able to generate cash necessary to execute our acquisition strategy.
The occurrence of any of these factors could adversely affect our growth strategy.
Our acquisitions subject us to a variety of risks that could harm our business and the anticipated benefits from our
acquisitions may not be realized on the expected timeline or at all.
We may experience various challenges associated with our acquired businesses, such as:
(cid:2) we may need to allocate substantial operational, financial and management resources in integrating new
businesses, technologies and products, and management may encounter difficulties in integrating the operations,
personnel or systems of the acquired business;
(cid:2)
the acquisition may have a material adverse effect on our business relationships with existing or future clients or
software integration partners;
(cid:2) we may assume substantial actual or contingent liabilities, known and unknown;
(cid:2)
the acquisition may not meet our expectations of future financial performance on our expected timeline or at all;
(cid:2) we may experience delays or reductions in realizing expected synergies or benefits;
(cid:2) we may incur substantial unanticipated costs or encounter other problems associated with the acquired business,
including challenges associated with transfer of various data processing functions and connections to our
systems and those of our third-party service providers;
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(cid:2) we may be required to take write-downs or write-offs, restructuring and impairment or other charges;
(cid:2) we may be unable to achieve our intended objectives for the transaction; and
(cid:2) we may not be able to retain the key personnel, clients and suppliers of the acquired business.
These challenges and costs and expenses may adversely affect our business, financial condition and results of
operations.
Risks Related to Regulation
We and our clients are subject to extensive government regulation, and any new laws and regulations, industry standards
or revisions made to existing laws, regulations or industry standards affecting our business, our clients’ businesses or the
electronic payments industry, or our or our clients’ actual or perceived failure to comply with such obligations, may have
an unfavorable impact on our business, financial condition and results of operations.
We and the clients we serve are subject to numerous federal and state regulations that affect the electronic payments
industry. Regulation of our industry has increased significantly in recent years and is constantly evolving. Changes to
statutes, regulations or industry standards, including interpretation and implementation of statutes, regulations or standards,
could increase our cost of doing business or affect the competitive balance. Failure to comply with regulations may have an
adverse effect on our business, including the limitation, suspension or termination of services provided to, or by, third parties,
and the imposition of penalties or fines. To the extent these regulations negatively impact the business, operations or financial
condition of our clients, our business and results of operations could be materially and adversely affected because, among
other matters, our clients could have less capacity to purchase products and services from us, could decide to avoid or
abandon certain lines of business, or could seek to pass on increased costs to us by negotiating price reductions. We could be
required to invest a significant amount of time and resources to comply with additional regulations or oversight or to modify
the manner in which we contract with or provide products and services to our clients; and those regulations could directly or
indirectly limit how much we can charge for our services. We may not be able to update our existing products and services,
or develop new ones, to satisfy our client’ needs. Any of these events, if realized, could have a material adverse effect on our
business, results of operations and financial condition.
Interchange fees, which are typically paid to the card issuer in connection with credit and debit card transactions, are
subject to increasingly intense legal, regulatory and legislative scrutiny. In particular, the Dodd-Frank Act significantly
changed the U.S. financial regulatory system by regulating and limiting debit card fees charged by certain issuers, allowing
merchants to set minimum dollar amounts for the acceptance of credit cards and allowing merchants to offer discounts or
other incentives for different payment methods. These regulations (as well as any related modifications or changes in
interpretation) could negatively affect the number of debit transactions, and prices charged per transaction, which would
negatively affect our business.
Many of our clients desire to impose a convenience fee or a surcharge in connection with their customers’ use of a
credit or debit card or other form of electronic payment. Various state laws and regulations impose prohibitions or other
limitations on those types of fees or charges, and interpretation of those state laws and regulations is constantly evolving.
State laws and regulations (as well as any related modifications or changes in interpretation in the payment network rules
related to those fees and costs) could negatively the willingness of some of our clients to accept credit or debit card or other
electronic payment or result in less favorable terms to us in exchange for our clients to absorb those fees and costs, all of
which would negatively affect our business.
Laws and regulations, even if not directed at us, may require us to take significant efforts to change our services and
solutions and may require that we incur additional compliance costs and change how we price our products and services to
our clients and software integration partners. Implementing new compliance efforts is difficult because of the complexity of
new regulatory requirements, and we are devoting and will continue to devote significant resources to ensure compliance.
Furthermore, regulatory actions may precipitate changes in business practices by us and other industry participants which
could affect how we market, price and distribute our products and services, and which could materially adversely affect our
business, financial condition and results of operations. In addition, even an inadvertent failure to comply with laws and
regulations or evolving public perceptions of our business could damage our business or our reputation.
Depending on how our products and services evolve, we may be subject to a variety of additional laws and
regulations, including those governing money transmission, gift cards and other prepaid access instruments, electronic funds
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transfers, anti-money laundering, counter-terrorist financing, restrictions on foreign assets, gambling, banking and lending,
and import and export restrictions.
Our efforts to comply with these laws and regulations could be costly and result in diversion of management time
and effort and may still not guarantee compliance. In addition, to the extent we decide to offer our products and services in
additional jurisdictions (for example, our expansion into Canada), we may incur additional compliance-related costs with
respect to operating in such jurisdictions. Additionally, as our products and services evolve, and as regulators continue to
increase their scrutiny of compliance with these obligations, we may be subject to a variety of additional laws and
regulations, or we may be required to further revise or expand our compliance management system, including the procedures
we use to verify the identity of our clients, their end customers, and to monitor transactions. If we are found to be in violation
of any such legal or regulatory requirements, we may be subject to monetary fines or other penalties, such as a cease and
desist order, or we may be required to alter the nature or packaging of our services and solutions, any of which could
adversely affect our business or operating results.
The businesses of many of our clients are strictly regulated in every jurisdiction in which they operate, and such
regulations, and our clients’ failure to comply with them, could have an adverse effect on our clients’ businesses and, as a
result, our results of operations.
A meaningful portion of our clients are consumer lenders that provide personal loans and automotive loans to
consumers that have varying degrees of credit risk. The regulatory environment that these clients operate in is very complex
because applicable regulations are often enacted by multiple agencies in the state and federal governments. For example, the
CFPB previously proposed new rules applicable to such loans that could have an adverse effect on our clients’ businesses,
and numerous state laws impose similar requirements. Such clients are also subject to negative public perceptions that their
consumer lending activities constitute predatory or abusive lending to consumers, and concerns raised by consumer advocacy
groups and government officials may lead to efforts to further regulate the industry in which many of our clients operate.
Similarly, our clients in the receivables management industry are typically subject to federal and state rules and
regulations that establish specific requirements and procedures that debt collectors must follow when collecting consumer
accounts. The CFPB and the FTC devote substantial attention to debt collection activities, and, as a result, the CFPB and the
FTC have brought multiple investigations and enforcement actions against debt collectors for violations of the FDCPA and
other applicable laws. Continued regulatory scrutiny by the CFPB and the FTC over debt collection practices may result in
additional investigations and enforcement actions against our clients in the receivables management industry. The FDCPA
also provides for private rights of action against debt collectors, and permits debtors to recover actual damages, statutory
damages and attorneys’ fees and costs for violations of its terms.
The combination of these factors, and in particular any changes implemented at the CFPB under the Biden
administration, could materially adversely affect the business of our clients and may force our consumer lender or receivables
management clients to change their business models. As a result, we may need to be nimble and quickly respond to the
evolving needs of the vertical markets that we serve.
If the business of our clients is materially adversely affected by the uncertainties described above and if we or our
clients fail to respond to such changes in the industry in a timely manner, or if there are significant changes in such vertical
markets that we do not anticipate, our business, financial condition and results of operations would be materially adversely
affected.
We may be required to become licensed under state money transmission statutes.
We provide payment processing services through our various operating subsidiaries. We, along with our third party
service providers, use structural arrangements designed to remove our activities from the scope of money transmitter
regulation. There can be no assurance that these structural arrangements will remain effective as money transmitter laws
continue to evolve or that the applicable regulatory bodies, particularly state agencies, will view our payment processing
activities as compliant. Any determination that we are in fact required to be licensed under the state money transmission
statutes may require substantial expenditures of time and money and could lead to liability in the nature of penalties or fines,
which would have a materially adverse effect on our business and our financial results.
We must comply with laws and regulations prohibiting unfair or deceptive acts or practices, and any failure to do so could
materially and adversely affect our business.
We and many of our clients are subject to Section 5 of the Federal Trade Commission Act prohibiting unfair or
deceptive acts or practices and various state laws that are similar in scope and subject matter. In addition, provisions of the
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Dodd-Frank Act that prohibit unfair, deceptive or abusive acts or practices, the Telemarketing Sales Act and other laws, rules
and/or regulations, may directly impact the activities of certain of our clients, and in some cases may subject us, as the
electronic payment processor or provider of payment settlement services, to investigations, fees, fines and disgorgement of
funds if we are found to have improperly aided and abetted or otherwise provided the means and instrumentalities to facilitate
the illegal or improper activities of a client through our services. Various federal and state regulatory enforcement agencies,
including the FTC and state attorneys general have authority to take action against non-banks that engage in UDAAP, or
violate other laws, rules and regulations. To the extent we are processing payments or providing products and services for a
client suspected of violating such laws, rules and regulations, we may face enforcement actions and incur losses and
liabilities that may adversely affect our business.
Governmental regulations designed to protect or limit access to or use of consumer information could adversely affect our
ability to effectively provide our products and services.
In addition to those regulations discussed previously that are imposed by the card networks and NACHA,
governmental bodies in the United States have adopted, or are considering the adoption of, laws and regulations restricting
the use, collection, storage, transfer and disposal of, and requiring safeguarding of, non-public personal information. Our
operations are subject to certain provisions of these laws. Applicable federal privacy laws may restrict our collection,
processing, storage, use and disclosure of personal information, may require us to notify individuals of our privacy practices
and provide individuals with certain rights to prevent the use and disclosure of protected information, and mandate certain
procedures with respect to safeguarding and proper description of stored information. Certain state laws impose similar
privacy obligations as well as obligations to provide notification of security breaches of personal information to affected
individuals, state officers, consumer reporting agencies and businesses and governmental agencies. The applicable regulatory
framework for privacy issues is evolving and is likely to continue doing so for the foreseeable future, which creates
uncertainty. For example, the California Consumer Privacy Act (“CCPA”) of 2018, which became effective January 1, 2020,
imposes more stringent requirements with respect to California data privacy. The CCPA includes provisions that give
California residents expanded rights to access and delete certain personal information, opt out of certain personal information
sharing, and receive detailed information about how certain personal information is used. On November 2, 2020, California
voters passed Proposition 24, enacting the California Privacy Rights Act (“CPRA”), which will become effective on January
1, 2023. CPRA amends and expands the CCPA to create additional consumer privacy rights, such as the right of correction
and the right to limit the use and disclosure of sensitive personal information.
Further, we are obligated by our clients, sponsor banks and software integration partners to maintain the
confidentiality and security of non-public consumer information that our clients and their end customers share with us. Our
contracts may require periodic audits by independent parties regarding our compliance with applicable standards, and may
permit our counterparties to audit our compliance with best practices established by regulatory guidelines with respect to
confidentiality and security of non-public personal information. Our ability to maintain compliance with these standards and
satisfy these audits will affect our ability to attract, grow and maintain business in the future, and any failure to do so could
subject us to contractual liability, each of which could have a material effect on our business and results of operations.
If we fail to comply with these laws, regulations or contractual terms, or if we experience security breaches, we
could face regulatory enforcement proceedings, suits for breach of contract and monetary liabilities. Additionally, any such
failure could harm the relationships and reputation we depend on to retain existing clients and software integration partners
and obtain new clients and software integration partners. If federal and state governmental bodies adopt more restrictive
privacy laws in the future, our compliance costs could increase, and it could make our due diligence reviews and monitoring
regarding the risk of our clients more difficult, complex and expensive. As our business grows, we may also be required to
invest in a more substantive and complex compliance management system than the one we currently employ.
Changes in tax laws or their judicial or administrative interpretations, or becoming subject to additional U.S., state or
local taxes that cannot be passed through to our clients, could negatively affect our business, financial condition and
results of operations.
Our operations are subject to extensive tax liabilities, including federal and state and transactional taxes such as
excise, sales/use, payroll, franchise, withholding, and ad valorem taxes. Changes in tax laws or their judicial or administrative
interpretations could decrease the amount of revenues we receive, the value of any tax loss carryforwards and tax credits
recorded on our balance sheet and the amount of our cash flow, and may have a material adverse impact on our business,
financial condition and results of operations. Some of our tax liabilities are subject to periodic audits by the applicable taxing
authority which could increase our tax liabilities. Furthermore, companies in the payment processing industry, including us,
may become subject to incremental taxation in various taxing jurisdictions. Taxing jurisdictions have not yet adopted uniform
positions on this topic. If we are required to pay additional taxes and are unable to pass the tax expense through to our clients,
27
our costs would increase and our net income would be reduced, which could have a material adverse effect on our business,
financial condition and results of operations.
Failure to maintain effective systems of internal and disclosure control could have a material adverse effect on our results
of operation and financial condition.
Following the issuance of SEC guidance relating to warrant accounting, on April 30, 2021, our management and our
audit committee concluded that, it was appropriate to restate certain of our previously issued financial statements. As part of
such process, we identified a material weakness in our internal controls over financial reporting, which has since been
remediated. Effective internal and disclosure controls are necessary for us to provide reliable financial reports and effectively
prevent fraud, and to operate successfully as a public company. If we cannot provide reliable financial reports or prevent
fraud, our reputation and operating results would be harmed. As part of our ongoing monitoring of internal control, we have
discovered in the past and may discover in the future material weaknesses or significant deficiencies in internal control that
require remediation. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over
financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim
financial statements will not be prevented or detected on a timely basis.
In addition to the material weakness relating to the restatement, we have in the past discovered, and may in the
future discover, other areas of our internal controls that need improvement. We continue to work to improve our internal
controls. We cannot be certain that these measures will ensure that we implement and maintain adequate controls over our
financial processes and reporting in the future. Any failure to maintain effective controls or to timely implement any
necessary improvement of our internal and disclosure controls could, among other things, result in losses from fraud or error,
harm our reputation, or cause investors to lose confidence in the reported financial information, all of which could have a
material adverse effect on our results of operation and financial condition.
We may face litigation and other risks as a result of the material weakness in our internal control over financial
reporting.
As part of our review of accounting and internal controls we undertook in connection with the restatement, we
identified a material weakness in our internal controls over financial reporting.
As a result of such material weakness, the restatement described above, the change in accounting for warrants, and
other matters raised or that may in the future be raised by the SEC, we face potential for litigation or other disputes which
may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising
from the restatement and material weaknesses in our internal controls over financial reporting and the preparation of our
financial statements. As of the date of this Form 10-K, we have no knowledge of any such litigation or dispute arising due to
restatement or material weakness of our internal controls over financial reporting. However, we can provide no assurance that
such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have a
material adverse effect on our business, results of operations and financial condition.
Risks Related to Our Indebtedness
Our level of indebtedness could adversely affect our ability to meet our obligations under our indebtedness, react to
changes in the economy or our industry and to raise additional capital to fund operations.
On December 29, 2021, we increased our existing senior secured credit facilities to a $185.0 million revolving credit
facility pursuant to an amendment to the revolving credit agreement with Truist Bank and certain other lenders (as amended,
the “Amended Credit Agreement”). On January 19, 2021, we issued $440.0 million in aggregate principal amount of our
0.00% convertible senior notes due 2026 (the “2026 Notes”). Our ability to service our obligations under our indebtedness,
including the 2026 Notes and any indebtedness we may incur under the Amended Credit Agreement, depends on our future
performance, which is subject to economic, financial, competitive and other factors beyond our control. If we are unable to
generate the necessary cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring
debt or obtaining additional debt financing or equity capital on terms that may be onerous or highly dilutive.
Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time.
We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in
a default on our debt obligations. and such level of indebtedness could have important consequences to our stockholders.
We may also incur future debt obligations that might subject us to additional restrictive covenants that could affect
our financial and operational flexibility.
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Our indebtedness under the Amended Credit Agreement bears interest at a variable rate, currently based on adjusted
LIBOR. LIBOR is expected to be eliminated as a benchmark rate for commercial loans, and the Amended Credit Agreement
provides for the replacement of LIBOR with an alternative benchmark rate, which may include term Secured Overnight
Financing Rate (“SOFR”). The benchmark replacement may be higher than the adjusted LIBOR currently available under the
Amended Credit Agreement, which could in turn increase our interest expense. Any benchmark replacement may also
include administrative and operational changes that affect our borrowing practices under the Amended Credit Agreement.
Future operating flexibility is limited by the restrictive covenants in the Amended Credit Agreement, and we may be
unable to comply with all covenants in the future.
The Amended Credit Agreement imposes restrictions that could impede our ability to enter into certain corporate
transactions, as well as increases our vulnerability to adverse economic and industry conditions, by limiting our flexibility in
planning for, and reacting to, changes in our business and industry. These restrictions will limit our ability to, among other
things:
(cid:2)
(cid:2)
incur or guarantee additional debt;
pay dividends on capital stock or redeem, repurchase, retire or otherwise acquire any capital stock;
(cid:2) make certain payments, dividends, distributions or investments; and
(cid:2) merge or consolidate with other companies or transfer all or substantially all of our assets.
In addition, the Amended Credit Agreement contains certain negative covenants that restrict the incurrence of
indebtedness unless certain incurrence-based financial covenant requirements are met. The restrictions may prevent us from
taking actions that we believe would be in the best interests of the business and may make it difficult for us to successfully
execute our business strategy or effectively compete with companies that are not similarly restricted. Our ability to comply
with these restrictive covenants in future periods will largely depend on our ability to successfully implement our overall
business strategy. The breach of any of these covenants or restrictions could result in a default, which could result in the
acceleration of our debt. In the event of an acceleration of our indebtedness, we could be forced to apply all available cash
flows to repay such debt, which would reduce or eliminate distributions to us, which could also force us into bankruptcy or
liquidation.
We may not have the ability to raise the funds necessary to settle conversions of the 2026 Notes, or to repurchase the 2026
Notes upon a fundamental change, and our future debt may contain, limitations on our ability to pay cash upon
conversion or repurchase of the 2026 Notes.
Holders of the 2026 Notes have the right to require us to repurchase their 2026 Notes upon the occurrence of a
fundamental change at a repurchase price equal to 100% of their principal amount, plus accrued and unpaid interest, if any. In
addition, upon conversion of the 2026 Notes, unless we elect to cause to be delivered solely shares of our Class A common
stock to settle such conversion, we will be required to make cash payments in respect of the 2026 Notes being converted.
However, we may not have enough available cash or be able to obtain financing at the time we are required to make
repurchases of the 2026 Notes surrendered therefor or to pay cash with respect to the 2026 Notes being converted.
In addition, our ability to repurchase the 2026 Notes or to pay cash upon conversion of the 2026 Notes may be
limited by law, by regulatory authority or by agreements governing our future indebtedness. Our failure to repurchase the
2026 Notes at a time when the repurchase is required by the indenture governing the 2026 Notes (the “indenture”) or to pay
any cash payable on future conversions of the 2026 Notes as required by the indenture, would constitute a default under the
indenture. A default under the indenture, or the fundamental change itself, could also lead to a default under our Amended
Credit Agreement and other agreements governing our existing or future indebtedness. If the repayment of the related
indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay
the indebtedness, repurchase, make interest payments on or make cash payments upon conversion of the 2026 Notes.
The conditional conversion feature of the 2026 Notes, if triggered, may adversely affect our financial condition and
operating results.
In the event the conditional conversion feature of the 2026 Notes is triggered, holders of the 2026 Notes will be
entitled to convert their 2026 Notes at any time during specified periods at their option. If one or more holders elect to
convert their 2026 Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our Class A
common stock, we would be required to settle a portion or all of our conversion obligation through the payment of cash,
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which could adversely affect our liquidity. In addition, even if holders do not elect to convert their 2026 Notes, we could be
required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the 2026 Notes as a
current rather than long-term liability, which would result in a material reduction of our net working capital.
The accounting method for convertible debt securities that may be settled in cash, such as the 2026 Notes, could have a
material effect on our reported financial results.
In May 2008, the Financial Accounting Standards Board, which we refer to as FASB, issued FASB Staff Position
No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including
Partial Cash Settlement), which has subsequently been codified as Accounting Standards Codification 470-20, Debt with
Conversion and Other Options, which we refer to as Accounting Standards Codification (“ASC”) 470-20. Under ASC 470-
20, an entity must separately account for the liability and equity components of the convertible debt instruments (such as the
notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest
cost. The effect of ASC 470-20 on the accounting for the 2026 Notes is that the equity component is required to be included
in the additional paid-in capital section of shareholders’ equity on our consolidated balance sheet, and the value of the equity
component would be treated as original issue discount for purposes of accounting for the debt component of the 2026 Notes.
As a result, we will be required to record a greater amount of non-cash interest expense in current periods presented as a
result of the amortization of the discounted carrying value of the notes to their face amount over the term of the notes. We
will report lower net income (or larger net losses) in our financial results because ASC 470-20 will require interest to include
both the current period’s amortization of the debt discount and the instrument’s coupon interest, which could adversely affect
our reported or future financial results, the trading price of our common stock and the trading price of the notes. In August
2020, FASB published an Accounting Standards Update 2020-06, which we refer to as ASU 2020-06, eliminating the
separate accounting for the debt and equity components as described above. ASU 2020-06 will be effective for us for the
fiscal year 2022, including interim periods within fiscal years. When effective, we expect the elimination of the separate
accounting described above to reduce the interest expense that we expect to recognize for the 2026 Notes under current
accounting principles.
In addition, under certain circumstances, convertible debt instruments (such as the 2026 Notes) that may be settled
entirely or partly in cash are currently accounted for utilizing the treasury stock method, the effect of which is that the shares
issuable upon conversion of the 2026 Notes are not included in the calculation of diluted earnings per share except to the
extent that the conversion value of the notes exceeds their principal amount. Under the treasury stock method, for diluted
earnings per share purposes, the transaction is accounted for as if the number of shares of common stock that would be
necessary to settle such excess, if we elected to settle such excess in shares, are issued. ASU 2020-06 described above
amends these accounting standards, effective as of the date referred to above, to instead require entities to apply the “if-
converted” method under which diluted earnings per share are generally calculated assuming that all the 2026 Notes were
converted solely into shares of common stock at the beginning of the reporting period, unless the result would be anti-
dilutive. The application of the if-converted method may result in a reduction of our reported diluted earnings per share.
Provisions in the indenture could delay or prevent an otherwise beneficial takeover of the Company
Certain provisions of the 2026 Notes and the indenture could make a third party attempt to acquire us more difficult
or expensive. For example, if a takeover constitutes a fundamental change, then we will be required to make an offer to the
holders of the 2026 Notes to repurchase for cash all or part of their outstanding 2026 Notes. In addition, if a takeover
constitutes a make-whole fundamental change, then we may be required to increase the conversion rate temporarily. In either
case, and in other cases, our obligations under the 2026 Notes could increase the cost of acquiring us or otherwise discourage
a third party from acquiring us or removing incumbent management, including in a transaction that you may view as
favorable.
Risks Related to Our Ownership Structure
We are a holding company and our only material asset is our interest in Hawk Parent, and we are accordingly dependent
upon distributions made by our subsidiaries to pay taxes, make payments under the Tax Receivable Agreement, meet our
financial obligations under the 2026 Notes and pay dividends.
We are a holding company with no material assets other than our ownership of limited liability company interests of
Hawk Parent (the “Post-Merger Repay Units” and holders of such Post-Merger Repay Units other than the Company, the
“Repay Unitholders”) and our managing member interest in Hawk Parent, and we have no independent means of generating
revenue or cash flow. Upon the completion of the Business Combination, we entered into that certain Tax Receivable
Agreement (the “Tax Receivable Agreement” or “TRA”) with the Repay Unitholders. Our ability to pay taxes, make
payments under the Tax Receivable Agreement, meet our financial obligations under the 2026 Notes and pay dividends will
30
depend on the financial results and cash flows of Hawk Parent and its subsidiaries and the distributions we receive from
Hawk Parent. Deterioration in the financial condition, earnings or cash flow of Hawk Parent and its subsidiaries, including its
operating subsidiaries, for any reason could limit or impair Hawk Parent’s ability to pay such distributions. Additionally, to
the extent that we need funds and Hawk Parent and/or any of its subsidiaries are restricted from making such distributions
under applicable law or regulation or under the terms of any financing arrangements, or Hawk Parent is otherwise unable to
provide such funds, it could materially adversely affect our liquidity and financial condition.
Hawk Parent is treated as a partnership for U.S. federal income tax purposes and, as such, generally is not subject to
any entity-level U.S. federal income tax. Instead, taxable income is allocated to Repay Unitholders (including us).
Accordingly, we will be required to pay income taxes on our allocable share of any net taxable income of Hawk Parent.
Under the terms of Hawk Parent’s Amended and Restated Operating Agreement, Hawk Parent is obligated to make tax
distributions to Repay Unitholders (including us) calculated at certain assumed tax rates. In addition to tax expenses, we will
also incur expenses related to our operations, including payment obligations under the Tax Receivable Agreement (and the
cost of administering such payment obligations), which could be significant. We intend to cause Hawk Parent to make
distributions to Repay Unitholders in amounts sufficient to cover all applicable taxes (calculated at assumed tax rates),
relevant operating expenses, payments under the Tax Receivable Agreement and dividends, if any, declared by Hawk Parent.
However, as discussed below, Hawk Parent’s ability to make such distributions may be subject to various limitations and
restrictions including, but not limited to, restrictions on distributions that would either violate any contract or agreement to
which Hawk Parent is then a party, including debt agreements, or any applicable law, or that would have the effect of
rendering Hawk Parent insolvent. If our cash resources are insufficient to meet our obligations under the Tax Receivable
Agreement and to fund our obligations, we may be required to incur additional indebtedness to provide the liquidity needed
to make such payments, which could materially adversely affect our liquidity and financial condition and subject us to
various restrictions imposed by any such lenders. To the extent that we are unable to make payments under the Tax
Receivable Agreement for any reason, such payments will be deferred and will accrue interest until paid; provided, however,
that nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivable
Agreement and therefore accelerate payments due under the Tax Receivable Agreement.
Additionally, although Hawk Parent generally is not subject to any entity-level U.S. federal income tax, it may be
liable under recent federal tax legislation for adjustments to its tax return, absent an election to the contrary. In the event
Hawk Parent’s calculations of taxable income are incorrect, its members, including us, in later years may be subject to
material liabilities pursuant to this federal legislation and its related guidance.
We anticipate that the distributions we will receive from Hawk Parent may, in certain periods, exceed our actual tax
liabilities and obligations to make payments under the Tax Receivable Agreement. Our board of the directors, in its sole
discretion, will make any determination from time to time with respect to the use of any such excess cash so accumulated,
which may include, among other uses, to acquire additional newly issued Post-Merger Repay Units from Hawk Parent at a
per unit price determined by reference to the market value of the Class A common stock; to pay dividends, which may
include special dividends, on our Class A common stock; to fund repurchases of Class A common stock; or any combination
of the foregoing. We will have no obligation to distribute such cash (or other available cash other than any declared dividend)
to our stockholders. To the extent that we do not distribute such excess cash as dividends on Class A common stock or
otherwise undertake ameliorative actions between Post-Merger Repay Units and shares of Class A common stock and
instead, for example, hold such cash balances, Repay Unitholders that hold interests in Hawk Parent pre-Business
Combination may benefit from any value attributable to such cash balances as a result of their ownership of Class A common
stock following an exchange of their Post-Merger Repay Units, notwithstanding that such holders may previously have
participated as holders of Post-Merger Repay Units in distributions by Hawk Parent that resulted in such excess cash balances
being held by us.
Dividends on our common stock, if any, will be paid at the discretion of our board of directors, which will consider,
among other things, our business, operating results, financial condition, current and expected cash needs, plans for expansion
and any legal or contractual limitations on our ability to pay such dividends. Financing arrangements may include restrictive
covenants that restrict our ability to pay dividends or make other distributions to our stockholders. In addition, Hawk Parent
is generally prohibited under Delaware law from making a distribution to a member to the extent that, at the time of the
distribution, after giving effect to the distribution, liabilities of Hawk Parent (with certain exceptions) exceed the fair value of
its assets. Hawk Parent’s subsidiaries are generally subject to similar legal limitations on their ability to make distributions to
Hawk Parent. If Hawk Parent does not have sufficient funds to make distributions, our ability to declare and pay cash
dividends may also be restricted or impaired.
Under the Tax Receivable Agreement, we will be required to pay 100% of the tax benefits relating to tax depreciation or
amortization deductions as a result of the tax basis step-up we receive in connection with the exchanges (including an
31
exchange in a sale for cash) of Post-Merger Repay Units into our Class A common stock and related transactions, and
those payments may be substantial.
The Repay Unitholders may exchange their Post-Merger Repay Units for shares of Class A common stock pursuant
to the Exchange Agreement, subject to certain conditions as set forth therein and in Hawk Parent’s Amended and Restated
Operating Agreement, or in an exchange in a sale for cash. These exchanges are expected to result in increases in our
allocable share of the tax basis of the tangible and intangible assets of Hawk Parent. These increases in tax basis may increase
(for tax purposes) depreciation and amortization deductions and therefore reduce the amount of income or franchise tax that
we would otherwise be required to pay in the future had such exchanges never occurred.
In connection with the Business Combination, we entered into the Tax Receivable Agreement, which generally
provides for the payment to the Repay Unitholders by us of 100% of certain tax benefits, if any, that we realize (or in certain
cases are deemed to realize) (a portion of which will be paid in turn to certain service providers on behalf of them in respect
of certain transaction expenses) as a result of these increases in tax basis and certain other tax attributes of Hawk Parent and
tax benefits related to entering into the Tax Receivable Agreement, including tax benefits attributable to payments under the
Tax Receivable Agreement. These payments are our obligation and not an obligation of Hawk Parent. The actual increase in
our allocable share of Hawk Parent’s tax basis in its assets, as well as the amount and timing of any payments under the Tax
Receivable Agreement, will vary depending upon a number of factors, including the timing of exchanges, the market price of
the Class A common stock at the time of the exchange, the extent to which such exchanges are taxable and the amount and
timing of the recognition of our income. While many of the factors that will determine the amount of payments that we will
make under the Tax Receivable Agreement are outside of our control, we expect that the payments we will make under the
Tax Receivable Agreement will be substantial and could have a material adverse effect on our financial condition. Any
payments made by us under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might
have otherwise been available to us. To the extent that we are unable to make timely payments under the Tax Receivable
Agreement for any reason, the unpaid amounts will be deferred and will accrue interest until paid. Furthermore, our future
obligation to make payments under the Tax Receivable Agreement could make us a less attractive target for an acquisition,
particularly in the case of an acquirer that cannot use some or all of the tax benefits that may be deemed realized under the
Tax Receivable Agreement.
In certain cases, payments under the Tax Receivable Agreement may exceed the actual tax benefits we realize or be
accelerated.
Payments under the Tax Receivable Agreement will be based on the tax reporting positions that we determine, and
the Internal Revenue Service or another taxing authority may challenge all or any part of the tax basis increases, as well as
other tax positions that we take, and a court may sustain such a challenge. In the event any tax benefits initially claimed by us
are disallowed, the current Repay Unitholders will not be required to reimburse us for any excess payments that may
previously have been made under the Tax Receivable Agreement, for example, due to adjustments resulting from
examinations by taxing authorities. Rather, excess payments made to such holders will be netted against any future cash
payments otherwise required to be made by us, if any, after the determination of such excess. However, a challenge to any tax
benefits initially claimed by us may not arise for a number of years following the initial time of such payment or, even if
challenged early, such excess cash payment may be greater than the amount of future cash payments that we might otherwise
be required to make under the terms of the Tax Receivable Agreement and, as a result, there might not be future cash
payments from which to net against. As a result, in certain circumstances, we could make payments under the Tax Receivable
Agreement in excess of our actual income or franchise tax savings, which could materially impair our financial condition.
Moreover, the Tax Receivable Agreement provides that, in the event that (i) we exercise our early termination rights
under the Tax Receivable Agreement, (ii) we become bankrupt or undergo a similar insolvency event, (iii) certain changes of
control of us occur (as described in the Tax Receivable Agreement) or (iv) we are more than three months late in making of a
payment due under the Tax Receivable Agreement (unless we in good faith determine that we have insufficient funds to
make such payment), our obligations under the Tax Receivable Agreement will accelerate and we will be required to make an
immediate lump-sum cash payment to the Repay Unitholders equal to the present value of all forecasted future payments that
would have otherwise been made under the Tax Receivable Agreement, which lump-sum payment would be based on certain
assumptions, including those relating to our future taxable income. The lump-sum payment to the Repay Unitholders could
be substantial and could exceed the actual tax benefits that we realize subsequent to such payment because such payment
would be calculated assuming, among other things, that we would be able to use the assumed potential tax benefits in future
years, and that tax rates applicable to us would be the same as they were in the year of the termination.
There may be a material negative effect on our liquidity if the payments under the Tax Receivable Agreement
exceed the actual income or franchise tax savings that we realize. Furthermore, our obligations to make payments under the
32
Tax Receivable Agreement could also have the effect of delaying, deferring or preventing certain mergers, asset sales, other
forms of business combinations or other changes of control. We may need to incur additional indebtedness to finance
payments under the Tax Receivable Agreement to the extent our cash resources are insufficient to meet our obligations under
the Tax Receivable Agreement as a result of timing discrepancies or otherwise. Such indebtedness may have a material
adverse effect on our financial condition.
Risks Related to our Class A Common Stock
Future issuances or sales of substantial amounts of our Class A common stock in the public market, or the perception that
such issuances or sales may occur, could cause the market price for our Class A common stock to decline.
Hawk Parent has outstanding an aggregate of 7,926,576 Post-Merger Repay Units as of February 22, 2022. Pursuant
to the Exchange Agreement, Repay Unitholders have the right to elect to exchange such Post-Merger Repay Units into shares
of our Class A common stock on a one-for-one basis, subject to the terms of the Exchange Agreement. However, Hawk
Parent may elect to settle such exchange in cash in lieu of delivering shares of our Class A common stock pursuant to the
terms of the Exchange Agreement.
In addition, we have reserved a total of 7,326,728 shares of Class A common stock for issuance under our Repay
Holdings Corporation Omnibus Incentive Plan (as amended, the “Incentive Plan.”). Of these shares, 1,948,253 shares of
Class A common stock remain available for future issuance under the Incentive Plan as of February 22, 2022. To the extent
such shares have vested or vest in the future (and settle into shares, in the case of restricted stock units), they can be freely
sold in the public market upon issuance, subject to volume limitations applicable to affiliates.
If these stockholders exercise their sale or exchange rights and sell shares or are perceived by the market as
intending to sell shares, the market price of our shares of Class A common stock could drop significantly. These factors could
also make it more difficult for us to raise additional funds through offerings of our shares of Class A common stock or other
securities at a time and at a price that we deem appropriate.
We also have outstanding $440.0 million aggregate principal amount of our 2026 Notes which are convertible into
shares of our Class A common stock in certain circumstances. Investors will incur further dilution upon the conversion of any
of our 2026 Notes if we elect to deliver shares of Class A common stock upon such conversion. In the future, we may also
issue additional securities in connection with investments, acquisitions or capital raising activities, which could constitute a
material portion of our then-outstanding shares of our Class A common stock and may result in additional dilution to
investors or adversely impact the price of our Class A common stock.
Our stock price may be volatile, which could negatively affect our business and operations.
Historically, our Class A common stock has experienced substantial price volatility. For example, the closing price
per share of our Class A common stock on The Nasdaq Capital Market ranged from a low of $16.05 to a high of $26.93
during the period from January 4, 2021 to December 31, 2021. This volatility could be the result of changes in our volumes,
revenue, earnings and margins or general market and economic factors. If our future operating results or margins are below
the expectations of stock market analysts or our investors, our stock price will likely decline.
Speculation and opinions in the press or investment community about our strategic position, financial condition,
results of operations or significant transactions can also cause changes in our stock price. In particular, speculation on our go-
forward strategy, competition in some of the markets we address and the effect of COVID-19 on our business, may have a
dramatic effect on our stock price.
Volatility in the stock price of our common stock or other reasons may in the future cause us to become the target of
securities litigation or shareholder activism. Securities litigation and shareholder activism, including potential proxy contests,
could result in substantial costs and divert management’s and board of directors’ attention and resources from our business.
Additionally, such securities litigation and shareholder activism could give rise to perceived uncertainties as to our future,
adversely affect our relationships with service providers and make it more difficult to attract and retain qualified personnel.
Also, we may be required to incur significant legal fees and other expenses related to any securities litigation and activist
shareholder matters.
Because we do not currently intend to pay dividends, holders of our Class A common stock will benefit from an investment
in our Class A common stock only if it appreciates in value.
33
We have never declared or paid any dividends on our Class A common stock, and do not expect to pay cash
dividends in the foreseeable future. As a result, the success of an investment in our common stock will depend entirely upon
future appreciation in its value. There is no guarantee that our Class A common stock will maintain its value or appreciate in
value.
Delaware law and our governing documents contain certain provisions, including anti-takeover provisions that limit the
ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may
consider favorable.
Our certificate of incorporation, bylaws and Delaware General Corporation Law (“DGCL”) contain provisions that
could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our board of
directors and therefore depress the trading price of our Class A common stock. These provisions could also make it difficult
for stockholders to take certain actions, including electing directors who are not nominated by the current members of our
board of directors or taking other corporate actions, including effecting changes in management. Among other things, our
certificate of incorporation and bylaws include provisions regarding:
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to
change the membership of a majority of our board of directors;
the ability of our board of directors to issue shares of preferred stock, including “blank check” preferred stock
and to determine the price and other terms of those shares, including preferences and voting rights, without
stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
the right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of
directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill
vacancies on our board of directors;
the requirement that directors may only be removed from the board of directors for cause;
a prohibition on stockholder action by written consent (except in limited circumstances), which forces
stockholder action to be taken at an annual or special meeting of stockholders and could delay the ability of
stockholders to force consideration of a stockholder proposal or to take action, including the removal of
directors;
the requirement that a special meeting of stockholders may be called only by our board of directors, the
chairman of our board of directors or our chief executive officer, which could delay the ability of stockholders
to force consideration of a proposal or to take action, including the removal of directors;
controlling the procedures for the conduct and scheduling of our board of directors and stockholder meetings;
the requirement for the affirmative vote of the holders of a supermajority of our voting stock to amend, alter,
change or repeal any provision of our bylaws and certain provisions in our certificate of incorporation,
respectively, which could preclude stockholders from bringing matters before annual or special meetings of
stockholders and delay changes in our board of directors and also may inhibit the ability of an acquirer to effect
such amendments to facilitate an unsolicited takeover attempt;
the ability of our board of directors to amend our bylaws, which may allow our board of directors to take
additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend our bylaws
to facilitate an unsolicited takeover attempt; and
advance notice procedures with which stockholders must comply to nominate candidates to our board of
directors or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders
from bringing matters before annual or special meetings of stockholders and delay changes in our board of
directors and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect
the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
In addition, as a Delaware corporation, we are generally subject to provisions of Delaware law, including the DGCL.
Although we have elected not to be governed by Section 203 of the DGCL, certain provisions of our certificate of
34
incorporation, in a manner substantially similar to Section 203 of the DGCL, prohibit certain of our stockholders (other than
those stockholders who are party to a stockholders’ agreement with us) who hold 15% or more of our outstanding capital
stock from engaging in certain business combination transactions with us for a specified period of time unless certain
conditions are met.
Our certificate of incorporation designates a state or federal court located within the State of Delaware as the exclusive
forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to choose
the judicial forum for disputes with us or our directors, officers, or employees.
Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum,
the Court of Chancery of the State of Delaware, or if such court does not have subject matter jurisdiction, any other court
located in the State of Delaware with subject matter jurisdiction, will be the sole and exclusive forum for (i) any derivative
action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of
our current or former directors, officers, other employees or stockholders to us or our stockholders, (iii) any action asserting a
claim against us or our officers or directors arising pursuant to any provision of the DGCL or our certificate of incorporation
or bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or (iv) any action
asserting a claim against us or any of our directors or officers governed by the internal affairs doctrine of the law of the State
of Delaware.
Any person or entity purchasing or otherwise acquiring any interest in any of our securities will be deemed to have
notice of and consented to this provision. These exclusive-forum provisions may limit a stockholder’s ability to bring a claim
in a judicial forum of its choosing for disputes with us or our directors, officers, or other employees, which may discourage
lawsuits against us or our directors, officers, and other employees. If a court were to find these exclusive-forum provisions to
be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other
jurisdictions, which could harm our results of operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. PROPERTIES.
The following table sets forth selected information concerning our principal facilities, as of December 31, 2021.
Location
Corporate Headquarters:
Atlanta, Georgia
Additional Facilities:
Atlanta, Georgia
Bedford, Texas
Bettendorf, IA
Chattanooga, Tennessee
Chicago, Illinois
The Colony, Texas
East Moline, Illinois
Ft. Worth, Texas
Mesa, Arizona
Middleton, Massachusetts
Tempe, Arizona
Sandy, Utah
Sarasota, Florida
Scottdale, Arizona
Toledo, Ohio
Owned/Leased
Approximate Square Footage
8,700
13,300
3,200
12,900
1,000
1,700
14,100
7,500
6,300
12,900
3,600
7,500
5,200
8,900
9,800
6,900
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
35
ITEM 3. LEGAL PROCEEDINGS.
We are currently not a party to any legal proceedings that would be expected to have a material adverse effect on our
business or financial condition. From time to time, we may be subject to litigation incidental to our business, as well as other
litigation of a non-material nature in the ordinary course of business.
ITEM 4. MINE SAFETY DISCLOSURE.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our Class A common stock is traded on Nasdaq under the symbol “RPAY”. As of February 22, 2022, the closing
price for our Class A common stock was $17.22.
Market price information regarding our Class V common stock and Post-Merger Repay Units is not provided
because there is no public market for our Class V common stock or our Post-Merger Repay Units.
Holders
As of February 22, 2022, there were 12 holders of record of our Class A common stock, 24 holders of record of our
Class V common stock and 24 holders of record of Post-Merger Repay Units (not including the Company). The number of
record holders does not include beneficial owners of our securities whose shares are held in the names of various security
brokers, dealers, and registered clearing agencies.
Dividends
We have never declared or paid cash dividends on our Class A common stock. We currently do not intend to pay
cash dividends in the foreseeable future.
Performance
The following graph compares the total shareholder return from July 17, 2018, the date on which our Class A
common shares commenced trading on the Nasdaq, through December 31, 2021 of (i) our Class A common stock, (ii) the
Standard and Poor’s 500 Stock Index (“S&P 500 Index”) and (iii) the Standard and Poor’s 500 Information Technology
Index (“S&P Information Technology Index”). The stock performance graph and table assume an initial investment of $100
on July 17, 2018, and that all dividends of the S&P 500 Index and S&P Information Technology Index, were reinvested.
The performance graph and table are not intended to be indicative of future performance. The performance graph
and table shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section, and shall not be deemed to be
incorporated by reference into any of our filings under the Securities Act of 1933 or the Exchange Act.
36
Comparison of Cumulative Total Return Since IPO
$300.00
$250.00
$200.00
$150.00
$100.00
$50.00
$-
7/17/18 9/30/18 12/31/18 3/31/19 6/30/19 9/30/19 12/31/19 3/31/20 6/30/20 9/30/20 12/31/20 3/31/21 6/30/21 9/30/21 12/31/21
Repay Holdings Corporation
S&P 500 Index
S&P Information Technology Index
Repay Holdings
Corporation
S&P 500 Index
S&P Information
Technology Index
July 17, 2018
September 30, 2018
December 31, 2018
March 31, 2019
June 30, 2019
September 30, 2019
December 31, 2019
March 31, 2020
June 30, 2020
September 30, 2020
December 31, 2020
March 31, 2021
June 30, 2021
September 30, 2021
December 31, 2021
Recent Sales of Unregistered Securities
None.
$100.00
100.62
102.59
105.70
108.08
138.13
151.81
148.70
255.23
243.52
282.38
243.32
258.13
238.65
194.51
37
$100.00
103.72
89.23
100.88
104.71
105.95
114.99
91.99
110.35
119.70
133.69
141.41
152.96
153.32
169.64
$100.00
103.16
84.92
101.37
107.10
110.28
125.72
110.36
143.58
160.32
178.79
181.89
202.45
204.74
238.42
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
In connection with the vesting of restricted stock awards, shares of Class A common stock are delivered to the
Company by employees to satisfy tax withholding obligations. The following table summarizes such purchases of Class A
common stock for the three months ended December 31, 2021:
Total Number
of Shares
Purchased (1)
10,245
40,940
3,188
54,373
Average Price
Paid per
Share
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
Approximate Dollar
Value of Shares that May
yet be Purchased Under
the Plans or Programs
$21.57
19.29
17.51
$19.61
— $ —
—
—
—
—
— $ —
October 1-31, 2021
November 1-30, 2021
December 1-31, 2021
Total
(1) During the three months ended December 31, 2021, pursuant to the Incentive Plan, we withheld 54,373 shares at an
average price per share of $19.61 in order to satisfy employees' tax withholding and payment obligations in
connection with the vesting of awards of restricted stock, which we withheld at fair market value on the vesting date.
ITEM 6. [Reserved].
38
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The following discussion and analysis of financial condition and results of operations should be read together with
our audited consolidated financial statements and the related notes to those statements included under Item 8, hereof. For
purposes of this section, "Repay", the “Company", "we", or "our" refer to (i) Hawk Parent Holdings, LLC and its
subsidiaries ("Predecessor") for the period from January 1, 2019 through July 10, 2019 (each referred to herein as a
"Predecessor Period") prior to the consummation of the Business Combination and (ii) Repay Holdings Corporation and its
subsidiaries (the "Successor ") for the period from July 11, 2019 through December 31, 2019 (the "Successor Period"), the
year ended December 31, 2020, and the year ended December 31, 2021 after the consummation of the Business
Combination, unless the context otherwise requires. Certain figures have been rounded for ease of presentation and may not
sum due to rounding. The combined year ended December 31, 2019 represents the aggregated total of the Predecessor
Period and Successor Period.
Cautionary Note Regarding Forward-Looking Statements
Statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
regarding our financial position, business strategy and the plans and objectives of management for future operations, are
forward-looking statements. Actual results could differ materially from those contemplated by the forward-looking
statements as a result of certain factors, including those set forth under Part I, Item 1A “Risk Factors” in this Annual Report
on Form 10-K.
Overview
We provide integrated payment processing solutions to industry-oriented markets in which clients have specific
transaction processing needs. We refer to these markets as “vertical markets” or “verticals.” Our proprietary, integrated
payment technology platform reduces the complexity of the electronic payments process for businesses, while enhancing
their consumers’ overall experience. We are a payments innovator, differentiated by our proprietary, integrated payment
technology platform and our ability to reduce the complexity of the electronic payments for businesses. We intend to
continue to strategically target verticals where we believe our ability to tailor payment solutions to our client needs, our deep
knowledge of our vertical markets and the embedded nature of our integrated payment solutions will drive strong growth by
attracting new clients and fostering long-term client relationships.
Since a significant portion of our revenue is derived from volume-based payment processing fees, card payment
volume is a key operating metric that we use to evaluate our business. We processed approximately $20.5 billion of total card
payment volume for the year ending December 31, 2021, and our year-over-year card payment volume growth was
approximately 35%.
The ultimate impacts of the COVID-19 pandemic and related economic conditions on our results remain uncertain.
The scope, duration and magnitude of the direct and indirect effects of the COVID-19 pandemic continue to evolve and in
ways that are difficult to fully anticipate. At this time, we cannot reasonably estimate the full impact of the pandemic on the
Company, given the uncertainty over the duration and severity of the economic crisis. In addition, the impact of COVID-19
on our results in 2021 may not be necessarily indicative of its impact on our results in 2022.
Business Combination
The Company was formed upon closing of the merger (the “Business Combination”) of Hawk Parent Holdings LLC
(together with Repay Holdings, LLC and its other subsidiaries, “Hawk Parent”) with a subsidiary of Thunder Bridge
Acquisition, Ltd., (“Thunder Bridge”), a special purpose acquisition company, on July 11, 2019. On the closing of the
Business Combination, Thunder Bridge changed its name to “Repay Holdings Corporation.”
As a result of the Business Combination, Thunder Bridge was identified as the acquirer for accounting purposes, and
Hawk Parent, which is the business conducted prior to the closing of the Business Combination, is the acquiree and
accounting Predecessor. The acquisition was accounted for as a business combination using the acquisition method of
accounting, and the Successor’s financial statements reflect a new basis of accounting that is based on the fair value of net
assets acquired. As a result of the application of the acquisition method of accounting as of the effective time of the Business
Combination, the financial statements for the Predecessor period and for the Successor period are presented on different
bases. The historical financial information of Thunder Bridge prior to the Business Combination has not been reflected in the
Predecessor period financial statements.
39
Key Factors Affecting Our Business
Key factors that we believe impact our business, results of operations and financial condition include, but are not
limited to, the following:
●
●
●
●
●
the dollar amount volume and the number of transactions that are processed by the clients that we currently
serve;
our ability to attract new clients and onboard them as active processing clients;
our ability to (i) successfully integrate recent acquisitions and (ii) complete future acquisitions;
our ability to offer new and competitive payment technology solutions to our clients; and
general economic conditions and consumer finance trends.
Recent Acquisitions
On June 15, 2021, we completed the acquisition of BillingTree for approximately $505.8 million, consisting of
approximately $277.5 million in cash from our balance sheet and approximately 10 million shares of newly issued Class A
common stock, representing approximately 10% of the voting power of our outstanding shares of common stock at that time.
See Note 5 to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
On June 22, 2021, we completed the acquisition of Kontrol LLC (“Kontrol”) for up to $10.5 million, of which
approximately $7.4 million was paid at closing. The acquisition was financed with cash on hand. See Note 5 to the audited
consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
On December 29, 2021, we completed the acquisition of Payix for up to $115.0 million, which includes $95.6
million paid at closing and up to $20.0 million in performance-based earnouts. The acquisition was financed with cash on
hand and available revolver capacity.
Key Components of Our Revenues and Expenses
Revenues
Revenue. As our clients process increased volumes of payments, our revenues increase as a result of the fees we
charge for processing these payments. Most of our revenues are derived from volume-based payment processing fees
(“discount fees”) and other related fixed per transaction fees. Discount fees represent a percentage of the dollar amount of
each credit or debit transaction processed and include fees relating to processing and services that we provide. The
transaction price for such processing services are determined, based on the judgment of our management, considering factors
such as margin objectives, pricing practices and controls, client segment pricing strategies, the product life cycle and the
observable price of the service charged to similarly situated clients. We believe our chargeback rate was less than 1% of our
card payment volume, during the years ended December 31, 2021, 2020 and 2019.
Expenses
Other costs of services. Other costs of services primarily include commissions to our software integration partners
and other third-party processing costs, such as front and back-end processing costs and sponsor bank fees.
Selling, general and administrative. Selling, general and administrative expenses include salaries, share-based
compensation and other employment costs, professional service fees, rent and utilities, and other operating costs.
Depreciation and amortization. Depreciation expense consists of depreciation on our investments in property,
equipment and computer hardware. Depreciation expense is recognized on a straight-line basis over the estimated useful life
of the asset. Amortization expense for software development costs and purchased software is recognized on the straight-line
method over a three-year estimated useful life, between eight to ten years estimated useful life for client relationships and
channel relationships, and between two to five years estimated useful life for non-compete agreements.
Interest expense. Prior to the closing of the Business Combination, interest expense consisted of interest in respect of
our indebtedness under our Predecessor Credit Agreement (as defined below), which was terminated in connection with the
40
closing of the Business Combination. In periods after the closing of the Business Combination, interest expense consists of
interest in respect of our indebtedness under the Successor Credit Agreement (as defined below), which was entered into in
connection with the Business Combination, and the Amended Credit Agreement, which replaced the Successor Credit
Agreement in February 2021.
Change in fair value of warrant liabilities. This amount represents the change in fair value of the warrant liabilities.
The warrant liabilities are carried at fair value; so, any change to the valuation of this liability is recognized through this line
in other expense. The change in fair value results from the change of underlying publicly listed trading price of our Class A
common stock at each measurement date.
Change in fair value of tax receivable liability. This amount represents the change in fair value of the tax receivable
agreement liability. The TRA liability is carried at fair value; so, any change to the valuation of this liability is recognized
through this line in other expense. The change in fair value can result from the redemption or exchange of Post-Merger Repay
Units for Class A common stock of Repay Holdings Corporation, or through accretion of the discounted fair value of the
expected future cash payments.
Results of Operations
($ in thousands)
Revenue
Operating expenses
Costs of services
Selling, general and administrative
Depreciation and amortization
Change in fair value of contingent consideration
Impairment loss
Total operating expenses
Loss from operations
Interest expense
Loss on extinguishment of debt
Change in fair value of warrant liabilities
Change in fair value of tax receivable liability
Other income (expense)
Other loss
Total other expense
Loss before income tax benefit
Income tax benefit
Net loss
Net loss attributable to non-controlling interests
Net loss attributable to the Company
Weighted-average shares of Class A common stock outstanding
- basic and diluted
Loss per Class A share - basic and diluted
Successor
Year ended
December 31,
2021
Year ended
December 31,
2020
July 11, 2019
through December
31, 2019
Predecessor
January 1,
2019
through
July 10,
2019
$219,258
$155,036
$57,560
$47,043
$55,484
120,053
89,692
5,846
2,180
$273,255
$(53,997)
(3,679)
(5,941)
—
(14,109)
97
(9,099)
(32,731)
(86,728)
30,691
$(56,037)
(5,952)
$(50,085)
41,447
87,302
60,807
(2,510)
—
$187,046
$(32,010)
(14,445)
—
(70,827)
(12,439)
(3)
—
(97,714)
(129,724)
12,358
$(117,366)
(11,770)
$(105,596)
15,657
45,758
23,757
—
—
$85,172
$(27,612)
(5,922)
—
(15,258)
(1,638)
(1,380)
—
(24,198)
(51,810)
4,991
$(46,819)
(15,271)
$(31,548)
10,216
51,201
6,223
—
—
$67,640
$(20,597)
(3,145)
—
—
—
—
—
(3,145)
(23,742)
—
$(23,742)
—
$(23,742)
83,318,189
($0.60)
52,180,911
($2.02)
35,731,220
($0.88)
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020
Revenue
Total revenue was $219.3 million for the year ended December 31, 2021 and $155.0 million for the year ended
December 31, 2020, an increase of $64.3 million or 41.4%. This increase was the result of newly signed clients, the growth
of our existing clients, as well as the acquisitions of BillingTree and Kontrol. For the year ended December 31, 2021,
incremental revenues of approximately $42.7 million are attributable to BillingTree, Kontrol and Payix.
41
Costs of Services
Costs of services were $55.5 million for the year ended December 31, 2021 and $41.4 million for the year ended
December 31, 2020, an increase of $14.1 million or 33.9%. For the year ended December 31, 2020, incremental costs of
services of approximately $8.4 million are attributable to BillingTree, Kontrol and Payix.
Selling, General and Administrative
Selling, general and administrative expenses were $120.1 million for the year ended December 31, 2021 and $87.3
million for the year ended December 31, 2020, an increase of $32.8 million or 37.5%. This increase was primarily due to
increased compensation expenses with general business growth and increased expenses relating to software and technological
services.
Depreciation and Amortization
Depreciation and amortization expenses were $89.7 million for the year ended December 31, 2021 and $60.8 million
for year ended December 31, 2020, an increase of $28.9 million or 47.5%. The increase was primarily due to depreciation
and amortization of fixed assets and intangibles from the acquisitions of BillingTree and Kontrol.
Change in Fair Value of Contingent Consideration
Change in the fair value of contingent consideration was $5.8 million for the year ended December 31, 2021, which
consisted of fair value adjustments related to the contingent consideration for the acquisitions of Ventanex, CPS, BillingTree
and Kontrol.
Impairment Loss
We incurred an impairment loss of $2.2 million for the year ended December 31, 2021, due to trade names write-
offs related to TriSource, APS, Ventanex, cPayPlus and CPS.
Interest Expense
Interest expense was $3.7 million for the year ended December 31, 2021 and $14.4 million for the year ended
December 31, 2020, a decrease of $10.7 million or 74.5%. This decrease was due to a lower average outstanding principal
balance under our Amended Credit Agreement as compared to the average outstanding principal balance under the Successor
Credit Agreement.
Loss on Extinguishment of Debt
We incurred a loss of $5.9 million on extinguishment of debt for the year ended December 31, 2021, due to the
termination in full of all outstanding Delayed Draw Term Loan commitments under the Successor Credit Agreement.
Change in Fair Value of Warrant Liabilities
We incurred a change in the fair value of warrant liabilities of $70.8 million for the year ended December 31, 2020,
which was due to the mark-to-market valuation adjustments related to the increase in the publicly listed trading price of our
stock. In July 2020, we completed the redemption of all of our outstanding warrants.
Change in Fair Value of Tax Receivable Liability
We incurred a change in the fair value of the tax receivable liability of $14.1 million for the year ended December
31, 2021 compared to $12.4 million for the year ended December 31, 2020, an increase of $1.7 million. This increase was
due to lower fair value adjustments related to the tax receivable liability, primarily as a result of changes to the discount rate
used to determine the fair value of the liability, as well as final adjustments related to the value of the 2020 exchanges of
Post-Merger Repay Units.
Other Loss
We incurred a loss of $9.1 million on the settlement of interest rate swaps and disposal of property and equipment
for the year ended December 31, 2021.
42
Income Tax Benefit
The income tax benefit was $30.7 million for the year ended December 31, 2021 and $12.4 million for year ended
December 31, 2020, which reflected the expected income tax benefit to be received on the net earnings related to the
Company’s economic interest in Hawk Parent. This was a result of the operating loss incurred by the Company, primarily
driven by stock-based compensation deductions, the amortization of assets acquired in the Business Combination and prior
acquisitions, the write-off of deferred debt issuance costs and the loss recognized as part of the settlement of interest rate
swaps, in addition to, the state rate change impact on deferred taxes.
For results of operations for the year ended December 31, 2020 compared to the year ended December 31, 2019, see
Part II, Item 7 of our 2020 Form 10-K, as amended, which is incorporated herein by reference.
43
Non-GAAP Financial Measures
This report includes certain non-GAAP financial measures that our management uses to evaluate our operating
business, measure our performance and make strategic decisions.
Adjusted EBITDA is a non-GAAP financial measure that represents net income prior to interest expense, tax
expense, depreciation and amortization, as adjusted to add back certain charges deemed to not be part of normal operating
expenses, non-cash charges and/or non-recurring charges, such as loss on extinguishment of debt, loss on termination of
interest rate hedge, non-cash change in fair value of warrant liabilities, non-cash change in fair value of contingent
consideration, non-cash change in fair value of assets and liabilities, share-based compensation charges, transaction expenses,
management fees, employee recruiting costs, other taxes, restructuring and other strategic initiative costs and other non-
recurring charges.
Adjusted Net Income is a non-GAAP financial measure that represents net income prior to amortization of
acquisition-related intangibles, as adjusted to add back certain charges deemed to not be part of normal operating expenses,
non-cash charges and/or non-recurring charges, such as loss on extinguishment of debt, loss on termination of interest rate
hedge, non-cash change in fair value of warrant liabilities, non-cash change in fair value of contingent consideration, non-
cash change in fair value of assets and liabilities, share-based compensation expense, transaction expenses, management fees,
employee recruiting costs, restructuring and other strategic initiative costs, other non-recurring charges, non-cash interest
expense and net of tax effect associated with these adjustments. Adjusted Net Income is adjusted to exclude amortization of
all acquisition-related intangibles as such amounts are inconsistent in amount and frequency and are significantly impacted
by the timing and/or size of acquisitions. Management believes that the adjustment of acquisition-related intangible
amortization supplements GAAP financial measures because it allows for greater comparability of operating performance.
Although we exclude amortization from acquisition-related intangibles from our non-GAAP expenses, management believes
that it is important for investors to understand that such intangibles were recorded as part of purchase accounting and
contribute to revenue generation.
Adjusted Net Income per share is a non-GAAP financial measure that represents Adjusted Net Income divided by
the weighted average number of shares of Class A common stock outstanding (on an as-converted basis assuming conversion
of the outstanding Post-Merger Repay Units) for the Successor Period from July 11, 2019 to December 31, 2019, the year
ended December 31, 2020, and the year ended December 31, 2021 (excluding certain shares that were subject to forfeiture).
We believe that Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per share provide useful
information to investors and others in understanding and evaluating its operating results in the same manner as management.
However, Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per share are not financial measures calculated
in accordance with GAAP and should not be considered as a substitute for net income, operating profit, or any other
operating performance measure calculated in accordance with GAAP. Using these non-GAAP financial measures to analyze
our business has material limitations because the calculations are based on the subjective determination of management
regarding the nature and classification of events and circumstances that investors may find significant. In addition, although
other companies in our industry may report measures titled Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income
per share, or similar measures, such non-GAAP financial measures may be calculated differently from how we calculate our
non-GAAP financial measures, which reduces their overall usefulness as comparative measures. Because of these limitations,
you should consider Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per share alongside other financial
performance measures, including net income and our other financial results presented in accordance with GAAP.
The following tables set forth a reconciliation of our results of operations for the years ended December 31, 2021,
2020, and 2019. Due to the Predecessor and Successor periods, for the convenience of readers, we have presented the year
ended December 31, 2019 on both a Predecessor and Successor basis and a combined basis (reflecting simple arithmetic
combination of the GAAP Predecessor and Successor periods with adjustments) in order to present a meaningful comparison
against the corresponding periods.
Beginning with the quarter ended December 31, 2021, we changed our method of calculating Adjusted EBITDA and
Adjusted Net Income by removing the adjustment related to legacy commission restructuring charges and their tax effects.
Our Adjusted EBITDA and Adjusted Net Income for the years ended December 31, 2020 and 2019 were also adjusted to
conform to the current presentation, resulting in reductions in the Adjusted EBITDA and Adjusted Net Income. The
presentation for Adjusted EBITDA and Adjusted Net Income for all periods presented have been recast to reflect these
changes and a reconciliation between the revised and previous definitions of Adjusted EBITDA and Adjusted Net Income
have been provided within the tables below.
44
REPAY HOLDINGS CORPORATION
Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA
Successor
Successor
Year Ended
December 31,
2021
Year Ended
December 31,
2020 (k)
Successor
July 11, 2019
through
December 31,
2019
Predecessor
January 1, 2019
through July 10,
2019
Combined (k)
$219,258
$155,036
$57,560
$47,043
$104,603
($ in thousands)
Revenue
Operating expenses
Costs of services
Selling, general and administrative
Depreciation and amortization
Change in fair value of contingent consideration
Impairment loss
Total operating expenses
Loss from operations
Other (expense) income
Interest expense
Loss on extinguishment of debt
Change in fair value of warrant liabilities
Change in fair value of tax receivable liability
Other income (expense)
Other loss
Total other expense
Loss before income tax benefit
Income tax benefit
Net loss
Add:
Interest expense
Depreciation and amortization (a)
Income tax benefit
EBITDA
Loss on extinguishment of debt (l)
Loss on termination of interest rate hedge (m)
Non-cash change in fair value of warrant liabilities (n)
Non-cash change in fair value of contingent
consideration (b)
Non-cash change in fair value of assets and liabilities (c)
Share-based compensation expense (d)
Transaction expenses (e)
Management fees (t)
Employee recruiting costs (f)
Other taxes (g)
Restructuring and other strategic initiative costs (h)
Other non-recurring charges (i)
Adjusted EBITDA, revised definition
15,657
45,758
23,757
—
—
$85,172
$(27,612)
(5,922)
—
(15,258)
(1,638)
(1,380)
—
(24,198)
(51,810)
4,991
$(46,819)
10,216
51,201
6,223
—
—
$67,640
$(20,597)
(3,145)
—
—
—
—
—
(3,145)
(23,742)
—
$(23,742)
55,484
120,053
89,692
5,846
2,180
$273,255
$(53,997)
(3,679)
(5,941)
—
(14,109)
97
(9,099)
(32,731)
(86,728)
30,691
$(56,037)
3,679
89,692
(30,691)
$6,643
5,941
9,080
—
5,846
14,109
22,311
19,250
—
612
977
4,578
3,853
$93,200
41,447
87,302
60,807
(2,510)
—
$187,046
$(32,010)
(14,445)
—
(70,827)
(12,439)
(3)
—
(97,714)
(129,724)
12,358
$(117,366)
14,445
60,807
(12,358)
$(54,472)
—
—
70,827
(2,510)
12,439
19,446
10,924
—
214
426
1,103
1,154
$59,551
25,873
96,959
29,980
—
—
$152,812
$(48,209)
(9,067)
—
(15,258)
(1,638)
(1,380)
—
(27,343)
(75,552)
4,991
$(70,561)
9,067
29,980
(4,991)
$(36,505)
1,380
—
15,258
—
1,638
22,922
40,126
211
51
226
352
215
$45,875
2,557
$48,432
Revised definition no longer adjusts for:
Commission restructuring charges (j)
Adjusted EBITDA, previous definition
2,527
$95,727
8,614
$68,165
45
REPAY HOLDINGS CORPORATION
Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income
Successor
Successor
Year Ended
December 31,
2021
Year Ended
December 31,
2020 (k)
Successor
July 11, 2019
through
December 31,
2019
Predecessor
January 1, 2019
through July 10,
2019
Combined (k)
$219,258
$155,036
$57,560
$47,043
$104,603
($ in thousands)
Revenue
Operating expenses
Costs of services
Selling, general and administrative
Depreciation and amortization
Change in fair value of contingent consideration
Impairment loss
Total operating expenses
Loss from operations
Other (expense) income
Interest expense
Loss on extinguishment of debt
Change in fair value of warrant liabilities
Change in fair value of tax receivable liability
Other income (expense)
Other loss
Total other expense
Loss before income tax benefit
Income tax benefit
Net loss
Add:
Amortization of acquisition-related intangibles (o)
Loss on extinguishment of debt (l)
Loss on extinguishment of interest rate hedge (m)
Non-cash change in fair value of warrant liabilities (n)
Non-cash change in fair value of contingent
consideration (b)
Non-cash change in fair value of assets and liabilities (c)
Share-based compensation expense (d)
Transaction expenses (e)
Management fees (t)
Employee recruiting costs (f)
Restructuring and other strategic initiative costs (h)
Other non-recurring charges(i)
Non-cash interest expense (p)
Pro forma taxes at effective rate (q)
Adjusted Net Income, revised definition
15,657
45,758
23,757
—
—
$85,172
$(27,612)
(5,922)
—
(15,258)
(1,638)
(1,380)
—
(24,198)
(51,810)
4,991
$(46,819)
10,216
51,201
6,223
—
—
$67,640
$(20,597)
(3,145)
—
—
—
—
—
(3,145)
(23,742)
—
$(23,742)
55,484
120,053
89,692
5,846
2,180
$273,255
$(53,997)
(3,679)
(5,941)
—
(14,109)
97
(9,099)
(32,731)
(86,728)
30,691
$(56,037)
79,932
5,941
9,080
—
5,846
14,109
22,311
19,250
—
612
4,578
3,853
2,536
(38,998)
$73,013
41,447
87,302
60,807
(2,510)
—
$187,046
$(32,010)
(14,445)
—
(70,827)
(12,439)
(3)
—
(97,714)
(129,724)
12,358
$(117,366)
52,126
—
—
70,827
(2,510)
12,439
19,446
10,924
—
214
1,103
1,154
—
(11,813)
$36,544
Shares of Class A common stock outstanding (on an
as-converted basis) (r)
Adjusted Net Income per share, revised definition
91,264,512
$0.80
73,373,106
$0.50
Revised definition no longer adjusts for:
Commission restructuring charges (j)
Change in tax effect of adjustment (s)
Adjusted Net Income, previous definition
Adjusted Net Income per share, previous definition
2,527
(571)
$74,969
$0.82
8,614
(1,413)
$43,745
$0.60
25,873
96,959
29,980
—
—
$152,812
$(48,209)
(9,067)
—
(15,258)
(1,638)
(1,380)
—
(27,343)
(75,552)
4,991
$(70,561)
25,329
1,380
—
15,258
—
1,638
22,922
40,126
211
51
352
215
—
(1,602)
$35,319
59,721,429
$0.59
2,557
(88)
$37,788
$0.63
(a) See footnote (p) for details on our amortization and depreciation expenses.
(b) Reflects the changes in management’s estimates of future cash consideration to be paid in connection with prior
acquisitions from the amount estimated as of the most recent balance sheet date.
(c) Reflects the changes in management’s estimates of the fair value of the liability relating to TRA.
(d) Represents compensation expense associated with equity compensation plans, totaling $22,311,251 for the year
ended December 31, 2021, $19,445,800 for the year ended December 31, 2020, $22,013,287 as a result of new
grants made in the Successor Period from July 11, 2019 to December 31, 2019, and $908,978 for the period
from January 1, 2019 to July 10, 2019.
46
(e) Primarily consists of (i) during the year ended December 31, 2021, professional service fees and other costs
incurred in connection with the acquisitions of Ventanex, cPayPlus, CPS, BillingTree, Kontrol and Payix, as
well as professional service expenses related to the January 2021 equity and convertible notes offerings, (ii)
during the year ended December 31, 2020, professional service fees and other costs incurred in connection with
the acquisition of CPS, and additional transaction expenses incurred in connection with the Business
Combination and the acquisitions of TriSource, APS, Ventanex and cPayPlus, as well as professional service
expenses related to the June and September 2020 equity offerings, (iii) during the period from July 11 2019 to
December 31, 2019, professional service fees and other costs in connection with the Business Combination, the
acquisitions of TriSource and APS, and (iv) during the period from January 1, 2019 to July 10, 2019,
professional service fees and other costs in connection with the Business Combination.
(f) Represents payments made to third-party recruiters in connection with a significant expansion of our personnel,
which Repay expects will become more moderate in subsequent periods.
(g) Reflects franchise taxes and other non-income based taxes.
(h) Reflects consulting fees related to our processing services and other operational improvements, including
restructuring and integration activities related to our acquired businesses, that were not in the ordinary course
during the years ended December 31, 2021, 2020, and 2019. Additionally, one-time expenses related to the
creation of a new entity in connection with equity arrangements for the members of Hawk Parent in connection
with the Business Combination are reflected in the year ended December 31, 2019.
(i) For the year ended December 31, 2021, reflects extraordinary refunds to clients and other payments related to
COVID-19, trade names impairment, non-cash rent expense and loss on disposal of fixed assets. For the year
ended December 31, 2020, reflects expenses incurred related to one-time accounting system and compensation
plan implementation related to becoming a public company, as well as extraordinary refunds to clients and other
payments related to COVID-19. For the year ended December 31, 2019, reflects expenses incurred related to
other one-time legal and compliance matters, as well as a one-time credit issued to a client which was not in the
ordinary course of business.
(j) Represents fully discretionary charges incurred to restructure certain sales representatives’ commission
arrangements, by making a one-time payment to the representative to buy out the right to receive future monthly
commission payments associated with a portfolio of client contracts. Beginning the quarter ended December 31,
2021, we changed our method of calculating Adjusted EBITDA and Adjusted Net Income by removing the
adjustment related to legacy commission restructuring charges.
(k) Does not include adjustments of $32.6 million and $15.4 million for the year ended December 31, 2020 and
2019, respectively, which were presented as pro forma adjustments in previously filed annual reports, for
incremental depreciation and amortization recorded due to fair-value adjustments for Hawk Parent under ASC
805 as a result of Business Combination.
(l) Reflects write-offs of debt issuance costs relating to Hawk Parent’s term loans.
(m) Reflects realized loss of our interest rate hedging arrangement which terminated in conjunction with the
repayment of Term Loans.
(n) Reflects the mark-to-market fair value adjustments of the warrant liabilities.
(o) For the year ended December 31, 2021, reflects amortization of client relationships, non-compete agreement,
software, and channel relationship intangibles acquired through the Business Combination, and client
relationships, non-compete agreement, and software intangibles acquired through our acquisitions of TriSource,
APS, Ventanex, cPayPlus, CPS, BillingTree, Kontrol and Payix. For the year ended December 31, 2020 reflects
(i) amortization of the client relationships intangibles acquired through Hawk Parent’s acquisitions of PaidSuite
and Paymaxx during the year ended December 31, 2017 and the recapitalization transaction in 2016, through
which Hawk Parent was formed in connection with the acquisition of a majority interest in Repay Holdings,
LLC by certain investment funds sponsored by, or affiliated with, Corsair, (ii) client relationships, non-compete
agreement, software, and channel relationship intangibles acquired through the Business Combination, and (iii)
client relationships, non-compete agreement, and software intangibles acquired through Repay Holdings, LLC’s
acquisitions of TriSource, APS, Ventanex, cPayPlus and CPS. For the year ended December 31, 2019, reflects
amortization of client relationships intangibles acquired through Hawk Parent’s acquisitions and the 2016
Recapitalization transaction and the acquisition of TriSource and APS. This adjustment excludes the
amortization of other intangible assets which were acquired in the regular course of business, such as
capitalized internally developed software and purchased software. See additional information below for an
analysis of our amortization expenses:
47
($ in thousands)
Acquisition-related intangibles
Software
Reseller buyouts
Amortization
Depreciation
Total Depreciation and amortization (1)
Year ended December 31,
2020
2019
2021
$79,932
8,464
—
$88,396
1,296
$89,692
$52,126
7,467
58
$59,651
1,156
$60,807
$25,329
3,895
58
$29,282
698
$29,980
(1) Adjusted Net Income is adjusted to exclude amortization of all acquisition-related intangibles as such
amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size
of acquisitions (see corresponding adjustments in the reconciliation of net income to Adjusted Net Income
presented above). Management believes that the adjustment of acquisition-related intangible amortization
supplements GAAP financial measures because it allows for greater comparability of operating
performance. Although we exclude amortization from acquisition-related intangibles from our non-GAAP
expenses, management believes that it is important for investors to understand that such intangibles were
recorded as part of purchase accounting and may contribute to revenue generation. Amortization of
intangibles that relate to past acquisitions will recur in future periods until such intangibles have been fully
amortized. Any future acquisitions may result in the amortization of additional intangibles.
(p) Represents non-cash deferred debt issuance costs.
(q) Represents pro forma income tax adjustment effect associated with items adjusted above and the tax effect
adjustment of removing legacy commission restructuring charges for the years ended December 31, 2021 and
2020, and the period from July 11, 2019 to December 31, 2019 (reflected in the “Combined” 2019 column
above). Beginning the quarter ended December 31, 2021, we changed our method of calculating Adjusted
EBITDA and Adjusted Net Income by removing the adjustment related to legacy commission restructuring
charges and their tax effects.
(r) Represents the weighted average number of shares of Class A common stock outstanding (on an as-converted
basis assuming conversion of outstanding Post-Merger Repay Units) for the years ended December 31, 2021
and 2020, and the period from July 11, 2019 to December 31, 2019. These numbers do not include any shares
issuable upon conversion of our 2026 Notes. See the reconciliation of basic weighted average shares
outstanding to the non-GAAP Class A common stock outstanding on an as-converted basis for each respective
period below:
Weighted average shares of Class A common stock
outstanding - basic
Add: Non-controlling interests
Weighted average Post-Merger Repay Units
exchangeable for Class A common stock
Shares of Class A common stock outstanding (on an as-
converted basis)
Year Ended December 31,
2021
2020
July 11, 2019 through
December 31, 2019
83,318,189
52,180,911
35,731,220
7,946,323
21,192,195
23,990,209
91,264,512
73,373,106
59,721,429
(s) Represents tax effect adjustment of legacy commission restructuring charges. Beginning the quarter ended
December 31, 2021, we changed our method of calculating Adjusted EBITDA and Adjusted Net Income by
removing the adjustment related to legacy commission restructuring charges and their tax effects.
(t) Reflects management fees paid to Corsair Investments, L.P. pursuant to the management agreement, which
terminated upon the completion of the Business Combination.
Adjusted EBITDA, revised definition for the years ended December 31, 2021 and 2020 was $93.2 million and $59.6
million, respectively, representing a 56.5% year-over-year increase. Adjusted Net Income, revised definition for the years
ended December 31, 2021 and 2020 was $73.0 million and $36.5 million, respectively, representing a 100.0% year-over-year
increase. Our net loss attributable to the Company for the years ended December 31, 2021 and 2020 was $50.1 million and
$105.6 million, respectively, representing a 52.6% year-over-year decrease.
These increases in Adjusted EBITDA, revised definition and Adjusted Net Income, revised definition for the year
ended December 31, 2021 were primarily due to the organic growth of our business, along with contributions from
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acquisitions. The decreases in net loss attributable to the Company for the year ended December 31, 2021 were primarily due
to the change in fair value of warrant liabilities which occurred in 2020.
For discussion on Adjusted EBITDA, Adjusted Net income, and net income (loss) attributable to the Company for
the year ended December 31, 2020 compared to the year ended December 31, 2019, see Part II, Item 7 of the Company’s
2020 Form 10-K, as amended.
Seasonality
We have experienced in the past, and may continue to experience, seasonal fluctuations in our volumes and revenues
as a result of consumer spending patterns. Volumes and revenues during the first quarter of the calendar year tend to increase
in comparison to the remaining three quarters of the calendar year on a same store basis. This increase is due to consumers’
receipt of tax refunds and the increases in repayment activity levels that follow. Operating expenses show less seasonal
fluctuation, with the result that net income is subject to the similar seasonal factors as our volumes and revenues.
Liquidity and Capital Resources
We have historically financed our operations and working capital through net cash from operating activities. We
also finance our operations through proceeds from the issuance of our Class A common stock in June 2020 and our January
2021 convertible notes offering. As of December 31, 2021, we had $50.0 million of cash and cash equivalents and available
borrowing capacity of $165.0 million under the Amended Credit Agreement. This balance does not include restricted cash,
which reflects cash accounts holding reserves for potential losses and client settlement funds of $26.3 million as of December
31, 2021. In February 2021, we used a portion of the proceeds from the January 2021 convertible notes offering to prepay in
full the entire principal amount of the term loans then outstanding under the Successor Credit Agreement and also terminated
in full all delayed draw term loan commitments then outstanding. At that time, we also amended and restated the Successor
Credit Agreement and entered into the Amended Credit Agreement, which established a $125.0 million senior secured
revolving credit facility in favor of Hawk Parent. In December 2021, we increased our existing senior secured credit facilities
by $60.0 million to a $185.0 million revolving credit facility pursuant to an amendment to the Amended Credit Agreement.
Our primary cash needs are to fund working capital requirements, invest in technology development, fund
acquisitions and related contingent consideration, make scheduled principal payments and interest payments on our
outstanding indebtedness and pay tax distributions to members of Hawk Parent. We expect that our cash flow from
operations, current cash and cash equivalents and available borrowing capacity under the Amended Credit Agreement will be
sufficient to fund our operations and planned capital expenditures and to service our debt obligations for the next twelve
months.
We are a holding company with no operations and depend on our subsidiaries for cash to fund all of our
consolidated operations, including future dividend payments, if any. We depend on the payment of distributions by our
current subsidiaries, including Hawk Parent, which distributions may be restricted by law or contractual agreements,
including agreements governing their indebtedness. For a discussion of those considerations and restrictions, refer to Part II,
Item 1A “Risk Factors - Risks Related to Our Class A Common Stock.”
As of December 31, 2021, our material contractual obligations primarily consist of operating leases liabilities and
contingent considerations. See Note 5. Business Combinations and Note 12. Commitments and Contingencies to the financial
statements in Item 8 of this Annual Report on Form 10-K for more information related to contingent considerations and
operating leases liabilities, respectively. Contingent considerations are associated with the acquisitions of Ventanex, CPS,
Kontrol, and Payix, which include approximately $17.0 million due within the next twelve months. Based on our current
lease terms, $2.4 million of operating lease liabilities are due within the next twelve months, and the remaining lease
liabilities are due within the next 7 years. We believe the cash flows from operations and available borrowing capacity from
our existing revolving credit facility will be sufficient to satisfy our cash requirement for the next twelve months.
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Cash Flows
The following table presents a summary of cash flows from operating, investing and financing activities for the
periods indicated:
($ in thousands)
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Cash Flow from Operating Activities
Successor
Year Ended
December
31, 2021
Year Ended
December
31, 2020
July 11, 2019
through
December
31, 2019
Predecessor
January 1,
2019
through July
10, 2019
$53,330
(397,335)
313,840
$28,487
(145,980)
186,097
$12,936
(335,084)
360,049
$8,350
(4,046)
(9,355)
Net cash provided by operating activities was $53.3 million for the year ended December 31, 2021.
Net cash provided by operating activities was $28.5 million for the year ended December 31, 2020.
Net cash provided by operating activities was $12.9 million from July 11, 2019 to December 31, 2019.
Net cash provided by operating activities was $8.4 million from January 1, 2019 to July 10, 2019.
Cash provided by operating activities for the years ended December 31, 2021 and 2020, the period from July 11,
2019 to December 31, 2019, and the period from January 1, 2019 to July 10, 2019, reflects net income as adjusted for non-
cash operating items including depreciation and amortization, share-based compensation, and changes in working capital
accounts.
Cash Flow from Investing Activities
Net cash used in investing activities was $397.3 million for the year ended December 31, 2021, due to the
acquisitions of BillingTree, Kontrol and Payix, as well as the capitalization of software development activities.
Net cash used in investing activities was $146.0 million for the year ended December 31, 2020, due to the
acquisition of Ventanex, cPayPlus, and CPS, as well as capitalization of software development activities.
Net cash used in investing activities was $335.1 million from July 11, 2019 to December 31, 2019, due to the
Business Combination, the acquisitions of TriSource and APS, and capitalization of software development activities.
Net cash used in investing activities was $4.0 million from January 1, 2019 to July 10, 2019 due to capitalization of
software development activities and fixed asset additions.
Cash Flow from Financing Activities
Net cash provided by financing activities was $313.8 million for the year ended December 31, 2021, due to proceeds
from the issuance of new shares in the Equity Offering, and proceeds from the 2026 Notes, offset by repayment of the
outstanding revolver balance related to the Successor Credit Agreement, repayments of the Term Loan principal balance
under the Successor Credit Agreement and the cPayPlus earnout payment.
Net cash provided by financing activities was $186.1 million for the year ended December 31, 2020, due to proceeds
from the issuance of new shares in the June 2020 offering of Class A common stock, new borrowings related to the
acquisition of Ventanex under the Successor Credit Agreement, as well as funds received related to the exercise of warrants,
offset by repayment of the outstanding revolver balance related to the Successor Credit Agreement in connection with its
amendment and the acquisition of Ventanex, and repayments of the term loan principal balance under the Successor Credit
Agreement.
Net cash provided by financing activities was $360.0 million from July 11, 2019 to December 31, 2019, due to
borrowings under our Successor Credit Agreement of $220.0 million, offset by debt issuance costs of $6.1 million. The
Company received proceeds from the Business Combination of $148.9 million and a private placement offering of $135.0
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million, offset by payments of $93.3 million to settle our Predecessor Credit Agreement and $38.7 million to repurchase
outstanding warrants.
Net cash used in financing activities was $9.4 million from January 1, 2019 to July 11, 2019 due to $2.5 million of
principal payments related to our Predecessor Credit Agreement and tax distributions of $6.9 million to Hawk Parent’s
members.
Indebtedness
Predecessor Credit Agreement
Hawk Parent was previously party to the Revolving Credit and Term Loan Agreement, dated as of September 28,
2017, and amended at December 15, 2017 (the “Predecessor Credit Agreement”), with SunTrust Bank, as administrative
agent and lender, and the other lenders party thereto. In connection with the completion of the Business Combination, all
outstanding loans were repaid and the Predecessor Credit Agreement was terminated.
Successor Credit Agreement
In connection with the Business Combination, on July 11, 2019, TB Acquisition Merger Sub LLC, Hawk Parent and
certain subsidiaries of Hawk Parent, as guarantors, entered into a Revolving Credit and Term Loan Agreement (the
“Successor Credit Agreement”) with certain financial institutions, as lenders, and Truist Bank (formerly SunTrust Bank), as
the administrative agent.
On February 10, 2020, we announced the acquisition of Ventanex. The closing of the acquisition was financed
partially from new borrowings under our existing credit facility. As part of the financing for the transaction, we entered into
an agreement with Truist Bank and other members of its existing bank group to amend and upsize the Successor Credit
Agreement.
On January 20, 2021, we used a portion of the proceeds from the 2026 Notes to prepay in full the entire amount of
the outstanding term loans under the Successor Credit Agreement. We also terminated in full all outstanding delayed draw
term loan commitments under such credit facilities.
Amended Credit Agreement
In February 2021, we also amended and restated the Successor Credit Agreement and entered into the Amended
Credit Agreement, which establishes a $125.0 million senior secured revolving credit facility in favor of Hawk Parent.
In December 2021, we increased our existing senior secured credit facilities by $60.0 million to a $185.0 million
revolving credit facility pursuant to an amendment to the Amended Credit Agreement. We currently expect that we will
remain in compliance with the restrictive financial covenants of the Amended Credit Agreement, prospectively.
As of December 31, 2021, the Amended Credit Agreement provides for a revolving credit facility of $185.0 million.
As of December 31, 2021, we had $20.0 million drawn against the revolving credit facility at a variable interest rate of 2.25%
plus 1-month LIBOR due 2026. We paid $0.4 million and $0.2 million in fees related to unused commitments for the years
ended December 31, 2021 and 2020, respectively. See Note 10. Borrowings to the financial statements in Item 8 of this
Annual Report on Form 10-K for more information.
Convertible Senior Debt
On January 19, 2021, we issued $440.0 million in aggregate principal amount of 0.00% Convertible Senior Notes
due 2026 in a private placement (the “Notes Offering”) to qualified institutional buyers pursuant to Rule 144A under the
Securities Act of 1933, as amended. $40.0 million in aggregate principal amount of such 2026 Notes were sold in the Notes
Offering in connection with the full exercise of the initial purchasers’ option to purchase such additional 2026 Notes pursuant
to the purchase agreement. Upon conversion, the Company may choose to pay or deliver cash, shares of the Company’s Class
A Common Stock, or a combination of cash and shares of the Company’s Class A Common Stock. The 2026 Notes will
mature on February 1, 2026, unless earlier converted, repurchased or redeemed.
As of December 31, 2021, we had convertible senior debt outstanding of $429.3 million, net of deferred issuance
costs, under the 2026 Notes, and revolving credit facility debt outstanding of $19.2 million, net of deferred issuance costs,
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under the Amended Credit Agreement. We were in compliance with the related restrictive financial covenants. Additionally,
we currently expect that we will remain in compliance with the restrictive financial covenants prospectively.
Tax Receivable Agreement
Upon the completion of the Business Combination, we entered into that certain Tax Receivable Agreement (the
“Tax Receivable Agreement” or “TRA”) with holders (other than the Company) of limited liability company interests of
Hawk Parent (the “Post-Merger Repay Units”). As a result of the TRA, we established a liability in our consolidated financial
statements. Such liability, which will increase upon the exchanges of Post-Merger Repay Units for Class A common stock,
generally represents 100% of the estimated future tax benefits, if any, relating to the increase in tax basis that will result from
exchanges of the Post-Merger Repay Units for shares of Class A common stock pursuant to the Exchange Agreement and
certain other tax attributes of the Company and tax benefits of entering into the TRA, including tax benefits attributable to
payments under the TRA.
Under the terms of the TRA, we may elect to terminate the TRA early but will be required to make an immediate
payment equal to the present value of the anticipated future cash tax savings. As a result, the associated liability reported on
our consolidated financial statements may be increased. We expect that the payment obligations of the Company required
under the TRA will be substantial. The actual increase in tax basis, as well as the amount and timing of any payments under
the TRA, will vary depending upon a number of factors, including the timing of redemptions or exchanges by the holders of
Post-Merger Repay Units, the price of our Class A common stock at the time of the redemption or exchange, whether such
redemptions or exchanges are taxable, the amount and timing of the taxable income we generate in the future, the tax rate
then applicable and the portion of our payments under the TRA constituting imputed interest. We expect to fund the payment
of the amounts due under the TRA out of the cash savings that we actually realize in respect of the attributes to which the
TRA relates. However, the payments required to be made could be in excess of the actual tax benefits that we realize and
there can be no assurance that we will be able to finance our obligations under the TRA.
Critical Accounting Policies and Estimates
Recently Issued Accounting Standards
For information related to recent accounting pronouncements and the impact of these pronouncements on our
consolidated financial statements, see Note 2. Basis of Presentation and Summary of Significant Accounting Policies, to our
Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.
Critical Accounting 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. We base
our estimates and judgments on historical experience and available relevant information that we believe to be reasonable
under the circumstances, and we continue to review and evaluate these estimates. Actual results may materially differ from
these estimates under different assumptions or conditions as new or additional information become available in future
periods. Accounting policies require numerous estimates or economic assumptions that may prove inaccurate or may be
subject to variations which may significantly affect our reported results and financial condition for the period or in future
periods. Subsequent changes in economic or market conditions could have a material impact on these estimates and our
financial condition and operating results in future periods. There have been no significant changes in our application of
accounting estimates during the year ended December 31, 2021.
Revenue Recognition
The consideration to be received in our contracts with clients consists of variable consideration where the timing and
quantity of transactions to be processed is not determinable at contract inception. Our performance obligation in our contracts
with clients is the promise to stand-ready to provide front-end authorization and back-end settlement payment processing
services ("processing services") for an unknown or unspecified quantity of transactions and the consideration received is
contingent upon the client’s use (e.g., number of transactions submitted and processed) of the related processing services.
Accordingly, the total transaction price is variable. These services are stand-ready obligations, as the timing and quantity of
transactions to be processed is not determinable.
52
The transaction price for such processing services are determined, based on the judgment of our management,
considering factors such as margin objectives, pricing practices and controls, client segment pricing strategies, the product
life cycle and the observable price of the service charged to similarly situated clients.
We follow the requirements of ASC 606-10-55-36 through -40, Revenue from Contracts with Customers, Principal
Agent Considerations, in determining the gross versus net revenue recognition for performance obligation(s) in the contract
with a client.
The principal versus agent evaluation is matter of judgment that depends on the facts and circumstances of the
arrangement and is dependent on whether we control the good or service before it is transferred to the client or whether we
are acting as an agent of a third party. This evaluation is performed separately for each performance obligation identified.
Business Combinations
We account for business combinations using the acquisition method of accounting. Under the acquisition method,
the consolidated financial statements reflect the operations of an acquired business starting from the closing date of the
acquisition.
All assets acquired and liabilities assumed are recorded at fair value as of the acquisition date. We allocate the
purchase price of an acquired business to the fair values of the tangible and identifiable intangible assets acquired and
liabilities assumed, with any excess purchase price recorded as goodwill. Contingent consideration, if any, is included within
the purchase price and is recognized at its fair value on the acquisition date. The application of the acquisition method of
accounting for business combinations and determination of fair value requires management to make judgments and may
involve the use of significant estimates, including assumptions related to estimated future revenues, growth rates, cash flows,
and discount rates, among other items. Management generally evaluates fair value at acquisition using three valuation
techniques - the replacement cost, market and income methods - and weights the valuation methods based on what is most
appropriate in the circumstances. The process of assigning fair values, particularly to acquired intangible assets, is highly
subjective. Management also typically utilizes third party valuation specialists to assist in the determination of the fair value
of assets acquired and liabilities assumed. Fair value estimates are based on assumptions believed to be reasonable, but are
inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. If the actual results differ
from the estimates and judgments used, the amounts recorded in the consolidated financial statements may be exposed to
potential impairment of the intangible assets and goodwill as discussed in the “Impairment” section below. The determination
of fair value is considered a critical accounting estimate because the valuation techniques mentioned use significant estimates
and assumptions, including projected future revenues, the expected economic life of the asset, tax rates and a discount rate
that reflects the level of risk associated with the future earnings attributable to the asset.
During the measurement period, which is up to one year from the acquisition date, adjustments to the assets acquired
and liabilities assumed may be recorded, with the corresponding offset to goodwill.
Impairment
We review goodwill and indefinite-lived intangible assets for impairment annually in the fourth quarter of our fiscal
year, or more frequently as warranted by events or changes in circumstances which indicate that the carrying amount may not
be recoverable. We may first assess qualitative factors to determine whether it is more likely than not that the fair value of a
reporting unit or indefinite-lived intangible asset is less than its carrying amount. If, based on the results of the qualitative
assessment, it is concluded that it is not more likely than not that the fair value of a reporting unit or indefinite-lived asset
exceeds its carrying value, a quantitative test is performed. Under the quantitative test, we compare the carrying value of the
reporting unit or indefinite-lived intangible asset to its fair value, which we estimate using a discounted cash flow analysis or
by comparison to the market values of similar assets. If the carrying value exceeds its fair value, we record an impairment
charge equal to the excess of the carrying value over the related fair value. The assumptions used in such valuations such as
projected future cash flows, discount rates, growth rates, and determination of appropriate market comparables and recent
transactions, are subject to volatility and may differ from actual results. Under a qualitative assessment, we assess various
factors including industry and market conditions, macroeconomic conditions and performance of our businesses.
We review other long-lived assets, including ROU assets, for impairment whenever events or changes in
circumstances indicate the carrying amount of an asset or an asset group may not be recoverable. In evaluating long-lived
assets for recoverability, we estimate the future cash flows at the individual asset or asset group level. Impairment losses are
measured and recorded for the excess of an asset's carrying value over its fair value. To determine the fair value of long-lived
assets, included ROU assets, we utilize the valuation technique or techniques deemed most appropriate based on the nature of
53
the asset or asset group, which may include the use of quoted market prices, prices for similar assets or other valuation
techniques such as discounted future cash flows or earnings.
The determination of fair value is considered a critical accounting estimate because the valuation techniques
mentioned use significant estimates and assumptions, including projected future cash flows, discount rates and growth rates.
Income Taxes
Under ASC 740, Income Taxes, deferred tax assets and liabilities are recognized for the expected future tax
consequences attributable to net operating losses, tax credits, and temporary differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases, which will result in taxable or deductible
amounts in the future. Our income tax expense/benefit, deferred tax assets and tax receivable liability reflect management’s
best assessment of estimated current and future taxes. Significant judgments and estimates are required in determining the
consolidated income tax expense/benefits, deferred tax assets and tax receivable agreement liability. In evaluating our ability
to recover our deferred tax assets, we consider all available positive and negative evidence, including projected future taxable
income and results of recent operations. Estimating future taxable income is inherently uncertain, requires judgment and is
consistent with estimates we are using to manage our business. If we determine in the future that we will not be able to fully
utilize all or part of the deferred tax assets, we would record a valuation allowance through earnings in the period the
determination was made.
We record the TRA liability at fair value based on estimates of discounted future cash flows associated with the
estimated payments to the Post-Merger Repay Unit holders. These inputs are not observable in the market. Therefore, in
estimating fair value, management uses a discount rate, also referred to as the early termination rate, to determine the present
value based on a risk-free rate plus a spread pursuant to the TRA. A significant increase or decrease in the discount rate could
result in a lower or higher balance, respectively, as of the measurement date.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Effects of Inflation
While inflation may impact our revenues and cost of services, we believe the effects of inflation, if any, on our
results of operations and financial condition have not been significant. However, there can be no assurance that our results of
operations and financial condition will not be materially impacted by inflation in the future.
Interest Rate Risk
Interest rates are highly sensitive to many factors, including U.S. fiscal and monetary policies and domestic and
international economic and political considerations, as well as other factors beyond our control. Interest rate risk is the
exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates. We are
exposed to market risk from changes in interest rates on debt, which bears interest at variable rates. Our debt has floating
interest rates. We are exposed to changes in the level of interest rates and to changes in the relationship or spread between
interest rates for its floating rate debt. Our floating rate debt requires payments based on variable interest rates such as the
federal funds rate, prime rate, eurocurrency rate, and LIBOR. Therefore, increases in interest rates may reduce our net income
or loss by increasing the cost of debt.
As of December 31, 2021, we had convertible senior debt of $429.3 million, net of deferred issuance costs, and
revolver borrowings of $19.2 million, net of deferred issuance costs, outstanding under the respective credit agreements. As
of December 31, 2020, we had term loan borrowings of $256.7 million, and revolver borrowings of $0.0 million outstanding
under the respective credit agreements. The borrowings accrue interest at either base rate, described above under “Liquidity
and Capital Resources — Indebtedness,” plus a margin of 1.50% to 2.50% or at an adjusted LIBOR rate plus a margin of
2.50% to 3.50% under the Amended Credit Agreement, in each case depending on the total net leverage ratio, as defined in
the respective agreements governing the Amended Credit Agreement.
In October 2019, we entered into a $140.0 million notional interest rate swap agreement, and in February 2020, we
entered into a $30.0 million notional interest rate swap agreement, then a revised notional amount of $65.0 million beginning
on September 30, 2020. These interest rate swap agreements reduce a portion of our exposure to market interest rate risk on
certain of our variable-rate debt as discussed in Item II, Part 8, Note 11, “Derivatives." These interest rate swaps effectively
converted $205.0 million of the outstanding term loan into to fixed rate payments for 57 months and 60 months, respectively.
A 1.0% increase or decrease in the interest rate applicable to such borrowings under the Successor Credit Agreement would
have increased or decreased cash interest expense on our indebtedness by approximately $1.0 million per annum and $1.0
54
million per annum, for the year ended December 31, 2020, respectively. Both interest rate swaps were settled in January
2021.
We may incur additional borrowings from time to time for general corporate purposes, including working capital
and capital expenditures.
In July 2017, the U.K. Financial Conduct Authority announced its intention to phase out LIBOR rates by the end of
2021. The deadline has been mostly extended and most U.S. dollar-denominated LIBOR maturity tenors will continue to be
published until June 30, 2023. It is not possible to predict the effect of any changes in the methods by which the LIBOR is
determined, or any other reforms to LIBOR that may be enacted in the United Kingdom or elsewhere. Such developments
may cause LIBOR to perform differently than in the past, including sudden or prolonged increases or decreases in LIBOR, or
cease to exist, resulting in the application of a successor base rate under the Amended Credit Agreement, which in turn could
have unpredictable effects on our interest payment obligations under the Amended Credit Agreement.
Foreign Currency Exchange Rate Risk
Invoices for our services are denominated in U.S. dollars and Canadian dollars. We do not expect our future
operating results to be significantly affected by foreign currency transaction risk.
55
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Index to the Financial Statements
Reports of Independent Registered Public Accounting Firm (PCAOB ID Number 248)
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Operations for the years ended December 31, 2021 and 2020, and the periods ended
December 31, 2019 and July 10, 2019
Consolidated Statements of Comprehensive Income for the years ended December 31, 2021 and 2020, and the
periods ended December 31, 2019 and July 10, 2019
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021, 2020, the periods ended
December 31, 2019 and July 10, 2019
Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020, and the periods ended
December 31, 2019 and July 10, 2019
Notes to Consolidated Financial Statements
57
61
62
63
64
65
67
56
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Repay Holdings Corporation
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Repay Holdings Corporation (a Delaware corporation)
and subsidiaries (the “Company” or “Successor”) as of December 31, 2021 and 2020, the related consolidated statements of
operations, comprehensive income, changes in equity, and cash flows of the Successor and Hawk Parent Holdings LLC
(“Predecessor”) for the years ended December 31, 2021 and 2020 (Successor), and the periods from July 11, 2019 to
December 31, 2019 (Successor) and January 1, 2019 to July 10, 2019 (Predecessor), and the related notes (collectively
referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for
the years ended December 31, 2021 and 2020 (Successor), and the periods from July 11, 2019 to December 31, 2019
(Successor) and January 1, 2019 to July 10, 2019 (Predecessor), in conformity with accounting principles generally accepted
in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established
in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”), and our report dated March 1, 2022 expressed an unqualified opinion.
Basis for opinion
These financial statements are the responsibility of the Company’s and Predecessor’s management. Our responsibility is to
express an opinion on the Company’s and Predecessor’s financial statements based on our audits. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due
to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole,
and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or
on the accounts or disclosures to which it relates.
Revenue Recognition
As described further in Note 2 to the consolidated financial statements, the Company’s revenue primarily consists of
transaction-based fees from payment processing services that are made up of a significant volume of low-dollar transactions,
sourced from multiple systems, platforms, and applications. The processing of such transactions and recording of revenue is
system-driven and based on contractual terms with merchants, financial institutions, payment networks, and other parties.
Because of the nature of the payment processing services, the Company relies on automated systems and third parties to
process and record its revenue transactions.
The principal consideration for our determination that the complexity of revenue recognition is a critical audit matter is the
increased extent of effort and involvement of professionals with specialized skills in information technology (IT) to identify,
test, and evaluate the Company’s systems and automated controls.
57
Our audit procedures relating to revenue recognized during the year ended December 31, 2021 included the following, among
others:
(cid:2) With the assistance of our IT professionals, we:
o Identified the significant systems used to process revenue transactions and tested the general IT controls over
each of these systems, including testing of user access controls, change management controls, and IT operations
controls.
o Tested system interface controls and automated controls within the relevant revenue streams, as well as the
controls designed to ensure the accuracy and completeness of revenue.
(cid:2) We tested internal controls within the relevant revenue business processes, including those in place to reconcile the
various reports extracted from the IT systems to the Company’s general ledger.
(cid:2) For a sample of revenue transactions, we tested selected transactions by agreeing the inputs to the calculation of revenue
recognized to source documents, including merchant contracts and processor reports and testing the mathematical
accuracy of the recorded revenue.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2018.
Atlanta, Georgia
March 1, 2022
58
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Repay Holdings Corporation
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Repay Holdings Corporation (a Delaware corporation) and
subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in the 2013 Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2021, and our
report dated March 1, 2022 expressed an unqualified opinion on those financial statements.
Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management
Report on Internal Control over Financial Reporting (“Management’s Report”). Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control
over financial reporting of BT Intermediate, LLC (“BillingTree”), Kontrol LLC (“Kontrol”) and Payix Holdings Incorporated
(“Payix”), wholly-owned subsidiaries, which constituted 4.0 percent of total assets (excluding goodwill and intangible assets
related to the acquisitions which are a part of the Company’s existing control environment) and 15.2 percent of revenues of
the related consolidated financial statement amounts as of and for the year ended December 31, 2021. As indicated in
Management’s Report, BillingTree, Kontrol and Payix were each acquired during 2021. Management’s assertion on the
effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of
BillingTree, Kontrol and Payix.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
59
/s/ GRANT THORNTON LLP
Atlanta, Georgia
March 1, 2022
60
REPAY HOLDINGS CORPORATION
Consolidated Balance Sheets
Assets
Cash and cash equivalents
Accounts receivable
Prepaid expenses and other
Total current assets
Property, plant and equipment, net
Restricted cash
Intangible assets, net
Goodwill
Operating lease right-of-use assets, net
Deferred tax assets
Other assets
Total noncurrent assets
Total assets
Liabilities
Accounts payable
Related party payable
Accrued expenses
Current maturities of long-term debt
Current operating lease liabilities
Current tax receivable agreement
Other current liabilities
Total current liabilities
Long-term debt, net of current maturities
Noncurrent operating lease liabilities
Tax receivable agreement, net of current portion
Other liabilities
Total noncurrent liabilities
Total liabilities
Commitments and contingencies (Note 12)
December 31, 2021 December 31, 2020
$50,048,657
33,235,745
12,427,032
95,711,434
3,801,199
26,291,269
577,693,902
824,081,632
10,499,751
145,259,883
2,499,996
1,590,127,632
$1,685,839,066
$20,082,651
17,394,125
26,819,083
—
1,990,416
24,495,556
1,565,931
92,347,762
448,484,696
9,090,867
221,332,863
1,547,087
680,455,513
$772,803,275
$91,129,888
21,310,724
6,925,115
119,365,727
1,628,439
15,374,846
369,227,138
458,970,255
10,074,506
135,337,229
—
990,612,413
$1,109,978,140
$11,879,638
15,811,597
19,216,258
6,760,650
1,527,224
10,240,310
—
65,435,677
249,952,746
8,836,655
218,987,795
10,583,196
488,360,392
$553,796,069
Stockholders' equity
Class A common stock, $0.0001 par value; 2,000,000,000 shares authorized, and 88,502,621
and 71,244,682 issued and outstanding as of December 31, 2021 and 2020, respectively
Class V common stock, $0.0001 par value; 1,000 shares authorized and 100 shares issued and
outstanding as of December 31, 2021 and 2020
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total Repay stockholders' equity
Non-controlling interests
Total equity
Total liabilities and equity
8,850
7,125
—
1,100,012,082
(2,205)
(226,015,886)
874,002,841
39,032,950
$913,035,791
$1,685,839,066
—
691,675,072
(6,436,763)
(175,931,713)
509,313,721
46,868,350
$556,182,071
$1,109,978,140
See accompanying notes to consolidated financial statements.
61
REPAY HOLDINGS CORPORATION
Consolidated Statements of Operations
Year Ended
December 31,
2021
$219,258,038
Year Ended
December 31,
2020
(Successor)
$155,035,943
From July 11,
2019 to
December 31,
2019
$57,560,470
From
January 1,
2019
to July 10,
2019
(Predecessor)
$47,042,917
55,483,804
120,052,895
89,691,707
41,447,056
87,301,814
60,806,659
15,656,730
45,758,335
23,756,888
10,216,079
51,201,322
6,222,917
5,845,626
2,180,000
273,254,032
(53,995,994)
(2,510,000)
—
187,045,529
(32,009,586)
—
—
85,171,953
(27,611,483)
—
—
67,640,318
(20,597,401)
(3,679,116)
(5,940,600)
—
(14,109,063)
96,505
(9,099,451)
(32,731,725)
(86,727,719)
30,691,156
(14,445,000)
—
(70,827,214)
(12,439,485)
(2,985)
—
(97,714,684)
(129,724,270)
12,358,025
$(56,036,563) $(117,366,245)
(5,921,893)
—
(15,258,497)
(1,638,465)
(1,379,824)
—
(24,198,679)
(51,810,162)
4,990,989
(3,145,167)
—
—
—
38
—
(3,145,129)
(23,742,530)
—
$(46,819,173) $(23,742,530)
(5,952,390)
(11,769,683)
$(50,084,173) $(105,596,562)
(15,271,043)
—
$(31,548,130) $(23,742,530)
$(0.60)
$(2.02)
$(0.88)
83,318,189
52,180,911
35,731,220
Revenue
Operating Expenses
Costs of services
Selling, general and administrative
Depreciation and amortization
Change in fair value of contingent
consideration
Impairment loss
Total operating expenses
Loss from operations
Other (expense) income
Interest expense
Loss on extinguishment of debt
Change in fair value of warrant liabilities
Change in fair value of tax receivable liability
Other income (expense)
Other loss
Total other expense
Loss before income tax benefit
Income tax benefit
Net loss
Less: Net loss attributable to
non-controlling interests
Net loss attributable to the Company
Loss per Class A share attributable to the
Company:
Basic and diluted
Weighted-average shares outstanding:
Basic and diluted
See accompanying notes to consolidated financial statements.
62
REPAY HOLDINGS CORPORATION
Consolidated Statements of Comprehensive Income
Net loss
Other comprehensive (loss) income, before tax
Change in fair value of cash flow hedges
Reclassification of net unrealized loss on cash flow hedges
to other loss
Foreign currency translation adjustments
Total other comprehensive (loss) income, before tax
Income tax related to items of other comprehensive
income:
Tax benefit (expense) on change in fair value of cash flow
hedges
Tax expense on reclassification of net unrealized loss on
cash flow hedges to other loss
Tax benefit on foreign currency translation adjustments
Total income tax benefit (expense) on related to items
of other comprehensive income
Total other comprehensive (loss) income, net of tax
Total comprehensive loss
Less: Comprehensive loss attributable to non-controlling
interests
Comprehensive loss attributable to the Company
Year Ended
December 31,
2021
From
January 1,
2019
to July 10,
2019
(Predecessor)
$(56,036,563) $(117,366,245) $(46,819,173) $(23,742,530)
Year Ended
December 31,
2020
(Successor)
From July
11, 2019 to
December
31, 2019
—
(9,867,782)
555,449
9,317,244
(3,020)
9,314,224
—
—
(9,867,782)
—
—
555,449
—
1,672,742
(54,303)
(1,672,742)
815
—
—
—
—
—
—
—
—
—
—
—
(1,671,927)
7,642,297
—
—
$(48,394,266) $(125,561,285) $(46,318,027) $(23,742,530)
1,672,742
(8,195,040)
(54,303)
501,146
(4,744,651)
—
$(43,649,616) $(110,892,997) $(31,290,656) $(23,742,530)
(14,668,288) (15,027,371)
See accompanying notes to consolidated financial statements.
63
REPAY HOLDINGS CORPORATION
Consolidated Statements of Changes in Equity
Balance at December 31, 2018
Net loss
Contributions by members
Stock based compensation
Distribution to members
Balance at July 10, 2019
Repay Stockholders
Total Equity
(Predecessor)
$109,078,357
(23,742,530)
—
908,978
(6,904,991)
$79,339,814
Class A Common
Stock
Class V
Common
Stock
Amount Shares Amount
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Non-
controlling
Interests
Total
Equity
Balance at July 11, 2019
Release of Founder Shares
Release of share awards vested
under Incentive Plan
Treasury shares repurchased
Stock-based compensation
Warrant exercise
Tax distribution from Hawk
Parent
Reclassification to warrant
liabilities
Net loss
Other comprehensive income
Balance at December 31, 2019
Issuance of new shares
Exchange of Post-Merger Repay
Units
Redemption of Post-Merger
Repay Units
Release of share awards vested
under Incentive Plan
Treasury shares repurchased
Stock-based compensation
Warrant exercise
Tax distribution from Hawk
Parent
Valuation allowance on Ceiling
Rule DTA
Reclassification to warrant
liabilities
Net loss
Other comprehensive loss
Balance at December 31, 2020
Issuance of new shares
Exchange of Post-Merger Repay
Units
Release of share awards vested
under Incentive Plan
Treasury shares repurchased
Stock-based compensation
Tax distribution from Hawk
Parent
Valuation allowance on Ceiling
Rule DTA
Net loss
Other comprehensive income
Balance at December 31, 2021
Shares
33,430,259 $3,343
297
2,965,000
1,135,291
—
18
—
113
—
—
—
—
—
—
—
—
—
—
37,530,568 $3,753
2,356
23,564,816
516,398
—
—
8,026,253
—
—
52
—
—
803
—
—
—
—
—
—
—
—
71,244,682 $7,125
1,629
16,295,802
407,584
554,553
—
—
—
41
55
—
—
—
—
—
—
—
—
—
88,502,621 $8,850
100 $ — $290,408,807 $(37,588,827) $ — $221,375,364 $474,198,687
—
(297)
—
—
—
—
—
—
—
—
—
(113)
(4,507,544)
22,013,286
207
—
—
—
—
—
—
—
—
—
—
—
—
(4,507,544)
22,013,286
207
—
(185,957)
(185,957)
—
—
—
(24,359,228)
—
—
(1,198,194)
(31,548,130)
—
100 $ — $283,555,118 $(70,335,151)
—
514,451,331
—
1,606,647
161
—
10,065,244
—
—
— (311,736,352)
—
—
—
—
—
—
—
—
—
— (25,557,422)
— (15,271,043) (46,819,173)
313,397
557,068
243,671
$313,397 $206,162,035 $419,699,152
(4,454,472) 509,900,193
(99,022)
(228,090)
(9,837,154)
161
(2,614,996) (120,944,910) (435,296,258)
—
376
(15,759)
(124,570)
—
16,064
(1,027,739)
(5,255,431)
—
(1,414,732)
19,445,800
86,799,717
—
(1,496,213)
(1,496,213)
2,794
— (27,537,597)
—
— 111,643,133
— (11,769,683) (117,366,245)
(8,195,040)
(4,524,147)
(3,670,893)
$(6,436,763) $46,868,350 $556,182,071
(701,599) 370,348,361
—
—
—
—
—
(52)
(1,431,172)
20,489,298
92,178,915
—
—
(27,540,391)
—
—
—
111,643,133
—
— (105,596,562)
—
—
100 $ — $691,675,072 $(175,931,713)
—
371,048,331
—
—
—
—
—
(166,450)
(55)
(4,074,937)
22,339,602
—
—
—
—
—
—
—
(2,331,486)
(2,497,895)
—
—
—
—
—
33,014
(28,351)
—
(4,041,923)
22,311,251
(62,327)
(62,327)
—
(50,084,173)
—
100 $ — $1,100,012,082 $(226,015,886)
19,190,519
—
—
—
—
—
—
—
—
6,434,558
19,190,519
(5,952,390) (56,036,563)
7,642,297
1,207,739
$(2,205) $39,032,950 $913,035,791
See accompanying notes to consolidated financial statements.
64
REPAY HOLDINGS CORPORATION
Consolidated Statements of Cash Flows
Year Ended
December 31,
2021
Year Ended
December 31,
2020
(Successor)
From July 11,
2019 to
December 31,
2019
From January 1,
2019 to July 10,
2019
(Predecessor)
Cash flows from operating activities
Net loss
Adjustments to reconcile net loss to net cash provided by operating activities:
$(56,036,563) $(117,366,245)
$(46,819,173)
$(23,742,530)
Depreciation and amortization
Stock based compensation
Amortization of debt issuance costs
Loss on disposal of property and equipment
Loss on extinguishment of debt
Loss on sale of interest rate swaps
Fair value change in warrant liability
Fair value change in tax receivable agreement liability
Fair value change in other assets and liabilities
Impairment loss
Payments of contingent consideration in excess of acquisition date fair
value
Deferred tax benefit
Change in accounts receivable
Change in related party receivable
Change in prepaid expenses and other
Change in operating lease ROU assets
Change in accounts payable
Change in related party 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
Purchases of intangible assets
Purchases of equity investment
Acquisition of Hawk Parent, net of cash and restricted cash acquired
Acquisition of TriSource, net of cash and restricted cash acquired
Acquisition of APS, net of cash and restricted cash acquired
Acquisition of Ventanex, net of cash and restricted cash acquired
Acquisition of cPayPlus, net of cash and restricted cash acquired
Acquisition of CPS, net of cash and restricted cash acquired
Acquisition of BillingTree, net of cash and restricted cash acquired
Acquisition of Kontrol, net of cash and restricted cash acquired
Acquisition of Payix, net of cash and restricted cash acquired
Net cash used in investing activities
Cash flows from financing activities
Payment on line of credit
Issuance of long-term debt
Payments on long-term debt
Public issuance of Class A Common Stock
Repurchase of outstanding warrants
Repurchase of treasury shares
Issuance of warrants
Exercise of warrants
Transfer of cash from trust upon conversion of Thunder Bridge Class A
ordinary shares
Redemption of Post-Merger Repay Units
Distributions to Members
Payment of loan costs
Payments of contingent consideration up to acquisition date fair value
Net cash provided by (used in) financing activities
Increase (decrease) 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
89,691,707
22,311,251
2,536,075
19,039
5,940,600
9,315,854
—
14,109,063
5,845,626
2,180,000
60,806,659
19,445,800
1,416,012
—
—
—
70,827,214
12,439,485
(2,509,840)
—
(1,500,000)
(30,727,924)
(6,518,325)
—
(3,800,600)
2,012,832
4,771,635
1,335,688
637,056
(1,322,592)
(7,470,178)
53,330,244
(4,070,549)
(12,358,025)
(2,890,762)
563,084
541,639
(10,074,506)
38,185
(309,669)
370,343
10,363,879
1,254,000
28,486,704
(2,862,903)
(20,642,675)
(2,499,996)
—
—
—
—
—
10,779
(269,002,616)
(7,439,373)
(94,898,220)
(994,147)
(23,279,349)
—
—
—
(465,454)
(35,460,153)
(7,694,632)
(78,086,739)
—
—
—
(397,335,004) (145,980,474)
—
460,000,000
(262,653,996)
142,098,364
—
(4,041,923)
—
—
(10,000,000)
60,425,983
(6,709,486)
509,900,193
—
(1,414,732)
—
86,799,717
—
—
— (435,296,258)
(1,496,213)
(1,861,817)
(14,250,000)
186,097,387
68,603,617
$37,901,117
$76,339,926 $106,504,734
(62,327)
(14,051,380)
(7,448,786)
313,839,952
(30,164,808)
$106,504,734
23,756,888
22,013,287
570,671
—
—
—
15,258,497
1,638,465
—
—
—
(4,990,989)
779,008
(563,084)
(3,579,300)
—
2,656,630
14,571,266
(12,356,519)
—
—
12,935,647
(498,513)
(3,375,751)
—
(242,599,551)
(59,160,005)
(29,450,022)
—
—
—
—
—
—
(335,083,842)
6,500,000
210,000,000
(90,862,500)
135,000,000
(38,700,000)
(4,507,544)
207
—
148,870,571
—
(185,957)
(6,065,465)
—
360,049,312
37,901,117
$ —
$37,901,117
6,222,917
908,978
215,658
—
—
—
—
—
—
—
—
—
(4,614,620)
—
(73,533)
—
1,297,035
—
28,136,310
—
—
8,350,215
(203,026)
(3,842,744)
—
—
—
—
—
—
—
—
—
—
(4,045,770)
—
—
(2,450,000)
—
—
—
—
—
—
—
(6,904,991)
—
—
(9,354,991)
(5,050,546)
$23,262,058
$18,211,512
65
REPAY HOLDINGS CORPORATION
Consolidated Statements of Cash Flows (Continued)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Acquisition of Hawk Parent in exchange for Class A Common Stock
Acquisition of Hawk Parent in exchange for amounts payable under Tax
Receivable Agreement
Year Ended
December 31,
2021
Year Ended
December 31,
2020
(Successor)
From July 11,
2019 to
December 31,
2019
From January
1, 2019 to July
10, 2019
(Predecessor)
$1,143,040 $11,486,760
$5,351,222
$2,929,509
$ —
$ —
$220,056,226
$ —
$ —
$229,228,105
Acquisition of Hawk Parent in exchange for contingent consideration
Acquisition of TriSource in exchange for contingent consideration
Acquisition of APS in exchange for contingent consideration
Acquisition of Ventanex in exchange for contingent consideration
$ —
$ —
$ —
$ —
Acquisition of cPayPlus in exchange for contingent consideration
Acquisition of CPS in exchange for contingent consideration
Acquisition of BillingTree in exchange for Class A Common Stock
$ —
$ —
$228,250,000
Acquisition of Kontrol in exchange for contingent consideration
Acquisition of Payix in exchange for contingent consideration
$500,000
$2,850,000
$ —
$1,750,000
$6,580,549
$4,800,000
$6,500,000
$4,500,000
$ —
$ —
$12,300,000
$2,250,000
$12,000,000
See accompanying notes to consolidated financial statements.
66
1. Organizational Structure and Corporate Information
REPAY HOLDINGS CORPORATION
Notes to Consolidated Financial Statements
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. Thunder Bridge
issued public warrants and private placement warrants (collectively, the “Warrants”), which were outstanding and recorded
on the Company’s consolidated financial statements at the time of the Business Combination. On July 27, 2020, the
Company completed the redemption of all outstanding Warrants.
The Company is headquartered in Atlanta, Georgia. The Company’s legacy business was founded as M & A
Ventures, LLC, a Georgia limited liability company doing business as REPAY: Realtime Electronic Payments (“REPAY
LLC”), in 2006 by current executives John Morris and Shaler Alias. Hawk Parent was formed in 2016 in connection with the
acquisition of a majority interest in the successor entity of REPAY LLC and its subsidiaries by certain investment funds
sponsored by, or affiliated with, Corsair Capital LLC (“Corsair”).
On January 19, 2021, the Company completed an underwritten public offering (the “Equity Offering”) of 6,244,500
shares of its Class A common stock at a public offering price of $24.00 per share. 814,500 shares of such Class A common
stock were sold in the Equity Offering in connection with the full exercise of the underwriters’ option to purchase additional
shares of Class A common stock pursuant to the underwriting agreement.
On January 19, 2021, the Company also completed an offering of $440.0 million in aggregate principal amount of
0.00% Convertible Senior Notes due 2026 (the “2026 Notes”) in a private placement (the “Notes Offering”) to qualified
institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. $40.0 million in aggregate
principal amount of such 2026 Notes were sold in the Notes Offering in connection with the full exercise of the initial
purchasers’ option to purchase such additional 2026 Notes pursuant to the purchase agreement. The Notes will mature on
February 1, 2026, unless earlier converted, repurchased or redeemed.
On June 15, 2021, the Company acquired all of the equity interests of BT Intermediate, LLC (together with its
subsidiaries, “BillingTree”) for approximately $505.8 million, consisting of approximately $277.5 million in cash from the
Company’s balance sheet and approximately 10 million shares of newly issued Class A common stock, representing
approximately 10% of the voting power of the Company’s outstanding shares of common stock.
On June 22, 2021, the Company acquired substantially all of the assets of Kontrol LLC (“Kontrol”) for up to $10.5
million, of which approximately $7.4 million was paid at closing. The acquisition was financed with cash on hand.
On December 29, 2021, the Company acquired Payix Holdings Incorporated (together with its subsidiary, “Payix”)
for up to $115.0 million, which includes $95.6 million paid at closing and up to $20.0 million in performance-based earnouts.
The acquisition was financed with cash on hand and available revolver capacity.
Business Overview
The Company provides integrated payment processing solutions to industry-oriented markets in which businesses
have specific transaction processing needs. The Company refers to these markets as “vertical markets” or “verticals.” The
Company’s proprietary, integrated payment technology platform reduces the complexity of the electronic payments process
for business. The Company charges its clients processing fees based on the volume of payment transactions processed and
other transaction or service fees. The Company intends to continue to strategically target verticals where the Company
believes its ability to tailor payment solutions to its clients’ needs, its deep knowledge of the Company’s vertical markets and
67
the embedded nature of its integrated payment solutions will drive strong growth by attracting new clients and fostering long-
term client relationships.
The Company provides payment processing solutions to clients primarily operating in the personal loans,
automotive loans, receivables management, and business-to-business verticals. The Company’s payment processing solutions
enable consumers and businesses in these verticals to make payments using electronic payment methods, rather than cash or
check, which have historically been the primary methods of payment in these verticals. The Company believes that a growing
number of consumers and businesses prefer the convenience and efficiency of paying with cards and other electronic methods
and that the Company is poised to benefit from the significant growth opportunity of electronic payment processing as these
verticals continue to shift from cash and check to electronic payments. The personal loans vertical is predominately
characterized by installment loans, which are typically utilized by consumers to finance everyday expenses. The automotive
loans vertical predominantly includes subprime automotive loans, automotive title loans and automotive buy-here-pay-here
loans and also includes near-prime and prime automotive loans. The Company’s receivables management vertical relates to
consumer loan collections, which typically enter the receivables management process due to delinquency on credit card bills
or as a result of major life events, such as job loss or major medical issues. The business-to-business vertical relates to
transactions occurring between a wide variety of enterprise clients, many of which operate in the manufacturing, wholesale,
distribution, healthcare, and education industries.
The Company’s go-to-market strategy combines direct sales with integrations with key software providers in its
target verticals. The integration of the Company’s technology with key software providers in the verticals that the Company
serves, including loan management systems, DMS, collection management systems, and enterprise resource planning
software systems, allows the Company to embed its omni-channel payment processing technology into its clients’ critical
workflow software and ensure seamless operation of the Company’s solutions within its clients’ enterprise management
systems. The Company refers to these software providers as its “software integration partners.” This integration allows the
Company’s sales force to readily access new client opportunities or respond to inbound leads because, in many cases, a
business will prefer, or in some cases only consider, a payments provider that has already integrated or is able to integrate its
solutions with the business’ primary enterprise management system. The Company has successfully integrated its technology
solutions with numerous, widely-used enterprise management systems in the verticals that it serves, which makes its platform
a more compelling choice for the businesses that use them. Moreover, the Company’s relationships with its partners help it to
develop deep industry knowledge regarding trends in client needs. The Company’s integrated model fosters long-term
relationships with its clients, which supports its volume retention rates that the Company believes are above industry
averages. As of December 31, 2021, the Company maintained approximately 222 integrations with various software
providers.
In March 2020, the World Health Organization declared the outbreak of the COVID-19 virus a global pandemic.
The ultimate impacts of the COVID-19 pandemic and related economic conditions on the Company’s results remain
uncertain. The scope, duration and magnitude of the direct and indirect effects of the COVID-19 pandemic continue to evolve
and in ways that are difficult to fully anticipate. At this time, the Company cannot reasonably estimate the full impact of the
pandemic on the Company, given the uncertainty over the duration and severity of the economic crisis.
As previously disclosed in Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as
amended, the Company restated its previously issued consolidated financial statements for periods following the Business
Combination through December 31, 2020 to make accounting corrections related to Warrant accounting. This Annual Report
on Form 10-K reflects the restated consolidated financial statements as of December 31, 2020 and 2019, for the period from
July 11, 2019 to December 31, 2019, for the year ended December 31, 2020 and the quarterly periods therein.
2. Basis of Presentation and Summary of Significant Accounting Policies
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 (“PaidSuite”), Marlin Acquirer, LLC (“Paymaxx”), REPAY
International LLC, REPAY Canada Solutions ULC, TriSource Solutions (“TriSource”), LLC, Mesa Acquirer, LLC, CDT
Technologies LTD, Viking GP Holdings, LLC, cPayPlus, LLC, CPS Payment Services, LLC, Media Payments, LLC,
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, and Payix Holdings Incorporated. All significant intercompany accounts and transactions
have been eliminated in consolidation.
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Basis of Financial Statement Presentation
The accompanying consolidated financial statements of the Company were prepared in accordance with generally
accepted accounting principles in the United States of America (“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.
Segment Reporting
Operating segments are defined as components of an enterprise about which discrete financial information is available
that is evaluated regularly by the chief operating decision maker, or decision-making group, in making decisions on how to
allocate resources and assess performance for the organization. The Company’s chief decision maker is the Chief Executive
Officer. The Company’s chief decision maker reviews consolidated operating results to make decisions about allocating
resources and assessing performance for the entire Company. Accordingly, the Company has determined that it has one
operating segment: Merchant services.
There are no significant concentrations by state or geographical location, nor are there any significant individual client
concentrations by balance.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, demand deposit accounts, and short-term investments with original
maturities of three months or less. The Company maintains its cash in bank deposit accounts which, at times, may exceed
federally insured limits.
Restricted Cash
Restricted cash consists of funds required to serve as security for services rendered by a service provider under a
service provider agreement.
Accounts Receivable
Accounts receivable represent amounts due from clients and payment processors for services rendered. The Company
has an established process for aging, provisioning and writing-off its uncollectible accounts receivable. Within this process
the Company aggregates accounts receivable to the pools of receivables of similar risk characteristics. The allowance for
credit losses on accounts receivables is estimated based on how long a receivable has been outstanding (e.g., under 30 days,
30–60 days, etc.). For accounts receivable outstanding more than 90 days, the Company evaluates and assesses whether the
loss reserve percentage requires adjustment for reasonable and supportable forecast of relevant economic factors. As of
December 31, 2021, the Company’s estimated credit losses on accounts receivable was immaterial.
Concentration of Credit Risk
The Company is highly diversified, and no single client represents greater than 10% of the business on a volume or
profit basis.
Earnings per Share
Basic earnings per share of Class A common stock is computed by dividing net loss attributable to the Company by
the weighted average number of shares of Class A common stock outstanding during the period. Diluted earnings per share of
Class A common stock is computed by dividing net loss attributable to the Company, by the weighted average number of
shares of Class A common stock outstanding adjusted to give effect to potentially dilutive elements.
The Predecessor’s LLC membership structure included several different types of LLC interests including ownership
interests and profits interests. The Company analyzed the calculation of earnings per unit by using the two-class method and
69
determined that it resulted in values that would not be meaningful to the users of these consolidated financial statements.
Therefore, the Predecessor’s earnings per share information has not been presented for any period.
Property and Equipment
Property and equipment is carried at cost less accumulated depreciation and includes expenditures which
substantially increase the useful lives of existing property and equipment. Maintenance, repairs, and minor renovations are
charged to operations as incurred. When property and equipment is retired or otherwise disposed of, the related costs and
accumulated depreciation are removed from their respective accounts, and any gain or loss on the disposition is credited or
charged to operations.
The Company provides for depreciation of property and equipment using the straight-line method designed to
amortize costs over estimated useful lives as follows:
Furniture, fixtures, and office equipment
Computers
Leasehold improvements
Estimated
Useful Life
5 years
3 years
5 years
The Company evaluates the recoverability of property and equipment at least annually or whenever events or
changes in circumstances indicate that the carrying amount of property and equipment may not be recoverable. The
evaluation of asset impairment requires the Company to make assumptions about future cash flows over the life of the asset
being evaluated. These assumptions require significant judgment, and actual results may differ from assumed and estimated
amounts. If the carrying amount of property and equipment is determined not to be recoverable, a write-down to fair value is
recorded. No impairments were recognized for the years ended December 31, 2021 and 2020.
Intangible Assets
Intangible assets consist of internal-use software development costs, purchased software, channel relationships,
client relationships, certain key personnel non-compete agreements, and trade names. The Company capitalizes internal-use
software development costs when the Company has completed the preliminary project stage, management authorizes the
project, management commits to funding the project, it is probable the project will be completed and the project will be used
to perform the function intended. The Company is amortizing internal-use software development costs and purchased
software on the straight-line method over a three-year estimated useful life, a ten-year estimated useful life for channel and
client relationships, and an estimated useful life for non-compete agreements equal to the term of the agreement. Trade names
are determined to have an indefinite useful life. The Company evaluates the recoverability of intangible assets at least
annually or whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be
recoverable. The evaluation of asset impairment requires the Company to make assumptions about future cash flows over the
life of the asset being evaluated. These assumptions require significant judgment, and actual results may differ from assumed
and estimated amounts. During the year ended December 31, 2021, the Company recognized impairments of $2.2 million
related to a trade names write-off, as the Company strategically phased out the trade names of several acquired business,
which included TriSource, APS, Ventanex, cPayPlus and CPS. No indicators of impairment were identified for the year
ended December 31, 2020.
Goodwill
Goodwill represents the excess of purchase price over tangible and intangible assets acquired less liabilities assumed
arising from business combinations. Goodwill is generally allocated to reporting units based upon relative fair value (taking
into consideration other factors such as synergies) when an acquired business is integrated into multiple reporting units. The
Company’s reporting units are at the operating segment level or one level below the operating segment level for which
discrete financial information is prepared and regularly reviewed by management. When a business within a reporting unit is
disposed of, goodwill is allocated to the disposed business using the relative fair value method. Relative fair value is
estimated using a discounted cash flow analysis.
The Company performs a qualitative goodwill assessment at the reporting unit level at least annually, or more
frequently as events occur or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit
below its carrying amount. Factors considered in the Company’s qualitative assessment include financial performance,
financial forecasts, macroeconomic conditions, industry and market conditions, cost factors, market capitalization, carrying
70
value, and events affecting the reporting units. If, after considering all relevant events and circumstances, the Company
determines it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, then it is necessary
to perform a quantitative impairment test. If the Company elects to bypass the qualitative analysis, or concludes from the
Company’s qualitative analysis that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying
amount, a quantitative impairment test is performed by comparing the fair value of each reporting unit with its carrying
amount. If the fair value is greater than the carrying amount, then the reporting unit’s goodwill is deemed not to be impaired.
If the fair value is less than the carrying amount, an impairment loss is recognized for the amount by which a reporting unit’s
carrying amount exceeds its fair value, without exceeding the total amount of goodwill allocated to that reporting unit.
The Company determined that no impairment of goodwill existed as of the last testing date, December 31, 2021.
Future impairment reviews may require write-downs in the Company’s goodwill and could have a material adverse impact on
the Company’s operating results for the periods in which such write-downs occur.
Revenue
Repay provides integrated payment processing solutions to niche markets that have specific transaction processing
needs; for example, personal loans, automotive loans, and receivables management. The Company contracts with its clients
through contractual agreements that set forth the general terms and conditions of the service relationship, including rights of
obligations of each party, line item pricing, payment terms and contract duration. Most of our revenues are derived from
volume-based payment processing fees (“discount fees”) and other related fixed per transaction fees. Discount fees represent
a percentage of the dollar amount of each credit or debit transaction processed and include fees relating to processing and
services that we provide. As our clients process increased volumes of payments, our revenues increase as a result of the fees
we charge for processing these payments.
The Company’s performance obligation in its contracts with clients is the promise to stand-ready to provide front-
end authorization and back-end settlement payment processing services ("processing services") for an unknown or
unspecified quantity of transactions and the consideration received is contingent upon the client’s use (e.g., number of
transactions submitted and processed) of the related processing services. Accordingly, the total transaction price is variable.
These services are stand-ready obligations, as the timing and quantity of transactions to be processed is not determinable.
Under a stand-ready obligation, the Company’s performance obligation is satisfied over time throughout the contract term
rather than at a point in time. Because the service of standing ready to perform processing services is substantially the same
each day and has the same pattern of transfer to the client, the Company has determined that its stand-ready performance
obligation comprises a series of distinct days of service. Discount fees and other fixed per transaction fees are recognized
each day using a time-elapsed output method based on the volume or transaction count at the time the clients’ transactions are
processed.
Revenues are also derived from transaction or service fees (e.g. chargebacks, gateway) as well as other
miscellaneous service fees. These services are considered immaterial in the overall context of our contractual arrangements
and, as such, do not represent distinct performance obligations. Instead, the fees associated with these services are bundled
with the processing services performance obligation identified.
The transaction price for such processing services is determined, based on the judgment of the Company’s
management, considering factors such as margin objectives, pricing practices and controls, client segment pricing strategies,
the product life cycle and the observable price of the service charged to similarly situated clients.
The Company follows the requirements of ASC 606-10-55-36 through -40, Revenue from Contracts with
Customers, Principal Agent Considerations, in determining the gross versus net revenue presentation for each performance
obligation in the contract with a client. Revenue recorded by the Company in the capacity as a principal is reported on a gross
basis equal to the full amount of consideration to which the Company expects in exchange for the good or service transferred.
Revenue recorded with the Company acting in the capacity of an agent is reported on a net basis, exclusive of any
consideration provided to the principal party in the transaction.
The principal versus agent evaluation is matter of judgment that depends on the facts and circumstances of the
arrangement and is dependent on whether the Company controls the good or service before it is transferred to the client or
whether the Company is acting as an agent of a third party. This evaluation is performed separately for each performance
obligation identified. When the Company acts as an agent, the fees collected from clients on behalf of the payment networks
and card issuer is netted with the gross fees collected so that the net revenue is presented within Revenue in the Consolidated
Statements of Operations.
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Indirect relationships
As a result of its past acquisitions, the Company has legacy relationships with Independent Sales Organizations
(each an “ISO”), whereby the Company acts as the merchant acquirer for the ISO. The ISO maintains a direct relationship
with the sponsor bank and the transaction processor, rather than the Company. Consequently, the Company recognizes
revenue for these relationships net of the residual amount remitted to the ISO, based on the fact that the ISO is primarily
responsible for providing the transaction processing services to the merchant. The Company is not focused on this sales
model, and this relationship will represent an increasingly smaller portion of the business over time.
Software Revenue
As a result of the acquisition of BillingTree, the Company has acquired a software revenue stream. Software revenue
is presented within Revenue in the Consolidated Statements of Operations.
Software revenue consists of term license fees related to software products, and software maintenance and support
(“PCS”). Clients typically enter into software contracts for contractual terms of three to twelve months. The term license and
PCS are each distinct performance obligations. The total consideration in the contract is allocated based on management’s
assessment of the relative standalone selling price for each performance obligation. The Company determines the standalone
selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not
observable through past transactions, the Company estimates the standalone selling price by making use of all reasonably
available data such as market conditions, type of deliverable, information about the client, current and historical pricing
practices and entity-specific factors such as labor hours and standard rates per labor hour.
Revenue is recognized when the related performance obligations are satisfied. Revenue from the term license is
recognized at a point in time, upon delivery to the client. Revenue from PCS is recognized over the term of the contract.
When the Company receives an up-front deposit, the revenue is deferred until such a time that the term license or PCS is
provided to the client. Deferred revenue is expected to be recognized as revenue within one year and is classified within
Other current liabilities in the Consolidated Balance Sheets.
Contract Costs
The incremental costs of obtaining a contract are recognized as an asset if the cost is incremental to obtaining a
contract, and whether the costs are recoverable from the client. If both criteria are not met, costs are expensed as incurred. If
the amortization period of the capitalized commission cost asset is less than one year, the Company may elect a practical
expedient per ASC 340-40-25-4 to expense commissions as incurred. The amortization period is consistent with the concept
of useful life under other accounting guidance, which is defined as the period over which an asset is expected to contribute
directly or indirectly to future cash flows.
The Company currently incurs costs to obtain a contract through payments made to external referral partners.
Commission payments are made to the external referral partner on a monthly basis based on a percentage of the profit on the
contract, for as long as the client and the external referral partner have agreements with the Company. Any capitalized
commission cost assets have an amortization period of one year or less, therefore the Company utilizes the practical
expedient to expense commissions as incurred.
Costs to fulfill contracts with clients either give rise to an asset or are expensed as incurred. If the cost is not already
covered by other applicable accounting literature, fulfilment costs are capitalized to the extent they directly relate to a specific
contract, are used to generate or enhance resources used in satisfying performance obligations and are expected to be
recovered. The Company does not have any costs incurred to fulfill a contract.
Practical Expedients
The Company has utilized the portfolio approach practical expedient per ASC 606-10-10-4, which allows the
application of ASC 606 to a portfolio of contracts with similar characteristics provided the accounting does not differ
materially to application of ASC 606 to the individual contract.
The Company has also utilized the practical expedient for immaterial goods and services per ASC 606-10-25-16A,
which permits the Company not to recognize a promised good or service as a performance obligation if it is considered an
immaterial promise in the context of the contract.
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Transaction Costs
The Company expenses all transactions costs associated with a business combination as incurred and such expenses
are included in Selling, general, and administrative expenses in the Consolidated Statements of Operations. For the years
ended December 31, 2021 and 2020, the Company incurred $9.3 million and $4.2 million transaction costs, respectively. For
the period from July 11, 2019 to December 31, 2019, the Successor incurred $3.9 million of transaction costs for closed and
pending transactions. The Predecessor incurred transaction costs of $16.2 million for the period from January 1, 2019 to July
10, 2019.
Equity Units Awarded
The Repay Holdings Corporation 2019 Omnibus Incentive Plan (the “Incentive Plan”) provides for the grant of
various equity-based incentive awards to employees, directors, consultants and advisors to the Company. The types of equity-
based awards that may be granted under the Incentive Plan include: stock options, stock appreciation rights (“SARs”),
performance stock units (“PSUs”), restricted stock awards (“RSAs”), restricted stock units (“RSUs”), and other stock-based
awards. As of December 31, 2021, there were 7,326,728 shares of Class A common stock reserved for issuance under the
Incentive Plan.
The Company accounts for stock-based compensation for employees and directors in accordance with ASC 718,
Compensation (“ASC 718”). ASC 718 requires all share-based payments to employees to be recognized in the statement of
operations based on their fair values. Under the provisions of ASC 718, stock-based compensation costs are measured at the
grant date, based on the fair value of the award, and are recognized as expense over the employee’s requisite or derived
service period.
The Predecessor accounted for profit units awarded to management based on the fair value of the awards on the date
of the grant and recognized compensation expense for those awards over the requisite service period. The profit interests
granted under the profit unit plan of the Predecessor were estimated on the grant date using the Black-Scholes option
valuation model. The profits units were fully vested as of the Closing.
PSUs, RSAs and RSUs granted under the Incentive Plan are measured based on the fair value of the awards on the
date of the grant. Compensation expense is recognized for those awards over the requisite service period. Forfeitures are
accounted for as they occur.
Debt Issuance Costs
The Company accounts for debt issuance costs according to the Financial Accounting Standards Board Accounting
Standards Update 2015-03, Simplifying the Presentation of Debt Issuance Costs, to present debt issuance costs as a reduction
of the carrying amount of the debt.
Fair Value of Financial Instruments
The Company accounts for fair value measurements in accordance with ASC 820, Fair Value Measurements and
Disclosures, which defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures
about fair value measurements. Fair value is the price that would be received to sell an asset or the price paid to transfer a
liability as of the measurement date. A three-tier, fair-value reporting hierarchy exists for disclosure of fair value
measurements based on the observability of the inputs to the valuation of financial assets and liabilities. The three levels are:
• Level 1 — Quoted prices for identical instruments in active markets.
• Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar
instruments in markets that are not active; and model-derived valuations in which all significant inputs and
significant value drivers are observable in active markets.
• Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant
value drivers are unobservable in active exchange markets.
The carrying value of the Company’s financial instruments, including cash and cash equivalents, restricted cash,
accounts receivable and accounts payable approximated their fair values as of December 31, 2021, and 2020, because of the
relatively short maturity dates on these instruments. The carrying amount of debt approximates fair value as of December 31,
2021 and 2020, because interest rates on these instruments approximate market interest rates.
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Leases
The Company adopted ASC 842, Leases, using a modified retrospective transition approach as of January 1, 2020.
The Company has elected to adopt the package of transition practical expedients and, therefore, has not reassessed (1)
whether existing or expired contracts contain a lease, (2) lease classification for existing or expired leases or (3) the
accounting for initial direct costs that were previously capitalized. The Company also elected the practical expedient to use
hindsight for leases existing as of January 1, 2020.
The Company evaluates each of its lease and service arrangements at inception to determine if the arrangement is, or
contains, a lease and the appropriate classification of each identified lease. A lease exists if the Company obtains
substantially all of the economic benefits of, and has the right to control the use of, an asset for a period of time. The
Company has operating leases for real estate. Operating leases with an original lease term in excess of twelve months are
included in Other assets and Other liabilities in the Consolidated Balance Sheets. Right-of-use (“ROU”) assets represent the
right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising
from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of
lease payments over the lease term. The Company uses its incremental borrowing rate to calculate the present value of lease
payments. Lease terms consider options to extend or terminate based on the determination of whether such renewal or
termination options are deemed reasonably certain. Lease agreements that contain non-lease components are generally
accounted for as a single lease component.
Operating lease costs are recorded in Selling, general and administrative in the Consolidated Statements of
Operations based on the underlying asset. Variable costs, such as maintenance expenses, property and sales taxes, association
dues and index-based rate increases, are expensed as they are incurred. Variable lease payments associated with the
Company’s leases are recognized when the event, activity, or circumstance in the lease agreement on which those payments
are assessed occurs. Variable lease payments are presented as operating expenses in Selling, general and administrative in the
Consolidated Statements of Operations.
The Company has elected not to recognize ROU assets and lease liabilities for short-term leases of all applicable
class of underlying assets that have a lease term of twelve months or less. The Company recognizes the lease payments
associated with its short-term leases as an expense on a straight-line basis over the lease term. Variable lease payments
associated with these leases are recognized and presented in the same manner as for all other Company leases.
ROU assets for operating leases are periodically reduced by impairment losses. As of December 31, 2021, the
Company has not encountered any impairment losses. The Company monitors for events or changes in circumstances that
require a reassessment of a lease. When a reassessment results in the remeasurement of a lease liability, a corresponding
adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying
amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a
negative ROU asset balance is recorded in gain or loss in the Consolidated Statements of Operations.
Taxation
Income taxes are provided for in accordance with ASC 740. Deferred tax assets and liabilities are recognized for the
expected future tax consequences attributable to net operating losses, tax credits, and temporary differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period of the enactment date. Valuation allowances are established when it is more likely than
not that some or all of the deferred tax assets will not be realized.
The Company reports a liability or a reduction of deferred tax assets for unrecognized tax benefits resulting from
uncertain tax positions taken or expected to be taken in a tax return. When applicable, the Company recognizes accrued
interest and penalties related to unrecognized tax benefits as income tax expense.
Noncontrolling Interest
As of December 31, 2021, the Company held an 91.9% interest in Hawk Parent. For the year ended December 31,
2021, the noncontrolling interest in the net loss of subsidiaries was $6.0 million. As of December 31, 2020, the Company
held an 89.8% interest in Hawk Parent. For the year ended December 31, 2020, the noncontrolling interest in the net loss of
subsidiaries was $11.8 million. As of July 11, 2019, the Company held a 55.9% interest in Hawk Parent. For the period from
July 11, 2019 to December 31, 2019, the noncontrolling interest in the net loss of subsidiaries was $15.3 million.
74
Contingent Consideration
The Company estimates and records the acquisition date estimated fair value of contingent consideration as part of
purchase price consideration for acquisitions. Additionally, each reporting period, the Company estimates changes in the fair
value of contingent consideration, and any change in fair value is recognized in the Consolidated Statements of Operations.
An increase in the contingent consideration expected to be paid will result in a charge to operations in the period that the
anticipated fair value of contingent consideration increases, while a decrease in the earn-out expected to be paid will result in
a credit to operations in the period that the anticipated fair value of contingent consideration decreases. The estimate of the
fair value of contingent consideration requires subjective assumptions to be made of future operating results, discount rates,
and probabilities assigned to various potential operating result scenarios.
Recently Adopted Accounting Pronouncements
Accounting for Income Taxes
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies the
accounting for income taxes, eliminates certain exceptions within Income Taxes (Topic 740), and clarifies certain aspects of
the current guidance to promote consistency among reporting entities, and is effective for fiscal years, and for interim periods
within those fiscal years, beginning after December 15, 2020, with early adoption permitted. Most amendments within ASU
2019-12 are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or
modified retrospective basis.
The Company adopted ASU 2019-12 as of January 1, 2021, using a modified retrospective transition approach. The
adoption of this ASU did not have a material impact on the Company’s consolidated financial statements or related
disclosures.
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20)
and Derivatives and Hedging—Contracts in Entity’s Own Equity, which made targeted improvements to an issuer’s
accounting for convertible instruments under ASC Topic No. 470 Debt, and the derivative scope exception for contracts in an
entity’s own equity under ASC Topic No. 815 Derivatives and Hedging. Specifically, ASU 2020-06 reduces the number of
accounting models that exist under GAAP as well as the number of settlement conditions which will likely result in more
convertible instruments being accounted for as a single unit of account, a reduction in the amount of interest expense
recognized for convertible debt, and more embedded derivatives meeting the derivative scope exception. In addition, ASU
2020-06 amends ASC Topic No. 260 Earnings Per Share, which will result in more dilutive earnings per share results.
ASU 2020-06 is effective for public companies beginning January 1, 2022, including interim periods within the
fiscal years after the adoption date. Early adoption is also permitted beginning January 1, 2021, including interim periods
within those fiscal years.
The Company early adopted ASU 2020-06 as of January 1, 2021. The Company issued the 2026 Notes in January
2021, which resulted in recognition of $440.0 million in noncurrent long-term debt and $11.4 million in debt issuance costs.
In determining the impact of the 2026 Notes on the Company’s diluted earnings per share calculations, the Company applies
the if-converted method. For additional information and required disclosures related to 2026 Notes, see Note 10. Borrowings.
Recently Issued Accounting Pronouncements not yet Adopted
Business Combinations
In August 2021, the FASB issued ASU No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract
Assets and Contract Liabilities from Contracts with Customers (“ASU No. 2021-08”). ASU No. 2021-18 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. The Company is currently
in the process of evaluating the effects of ASU No. 2021-08 on its consolidated financial statements.
75
3. Revenue
Disaggregation of Revenue
The table below presents a disaggregation of revenue by direct and indirect relationships.
Year Ended
December 31,
2021
Year Ended
December 31,
2020
(Successor)
From July 11,
2019 to
December 31,
2019
From
January 1, 2019
to July 10, 2019
(Predecessor)
$213,251,782
6,006,256
$219,258,038
$152,247,190
2,788,753
$155,035,943
$56,370,030
1,190,440
$57,560,470
$45,693,961
1,348,956
$47,042,917
Revenue
Direct relationships
Indirect relationships
Total Revenue
4. Earnings Per Share
During the years ended December 31, 2021 and 2020, and the period from July 11, 2019 to December 31, 2019,
basic and diluted net loss per common share is the same since the inclusion of the assumed exchange of all Post-Merger
Repay Units, unvested restricted share awards, Warrants and 2026 Notes would have been anti-dilutive.
The following table summarizes net loss attributable to the Company and the weighted average basic and basic and
diluted shares outstanding:
Loss before income tax expense
Less: Net loss attributable to non-controlling interests
Income tax benefit
Net loss attributable to the Company
From July 11,
2019 to
December 31,
2019
Year Ended
December 31,
2021
Year Ended
December 31,
2020
$(86,727,719) $(129,724,270) $(51,810,162)
(15,271,043)
4,990,989
$(50,084,173) $(105,596,562) $(31,548,130)
(11,769,683)
12,358,025
(5,952,390)
30,691,156
Weighted average shares of Class A common stock outstanding - basic
and diluted
83,318,189
52,180,911
35,731,220
Loss per share of Class A common stock outstanding - basic and diluted
$(0.60)
$(2.02)
$(0.88)
For the years ended December 31, 2021 and 2020, and the period from July 11, 2019 to December 31, 2019, the
following common stock equivalent shares were excluded from the computation of the diluted loss per share, since their
inclusion would have been anti-dilutive:
Post-Merger Repay Units exchangeable for Class A common stock
Earnout Post-Merger Repay Units exchangeable for Class A common stock
Dilutive warrants exercisable for Class A common stock
Unvested restricted share awards of Class A common stock
2026 Notes convertible for Class A common stock
Share equivalents excluded from earnings (loss) per share
76
Year Ended
December 31,
2021
Year Ended
December 31,
2020
7,926,576
—
—
2,515,634
13,095,238
23,537,448
8,334,160
—
—
2,209,551
—
10,543,711
From July 11,
2019 to
December 31,
2019
21,985,297
7,500,000
1,816,890
1,731,560
—
33,033,747
Shares of the Company’s Class V common stock do not participate in the earnings or losses of the Company and,
therefore, are not participating securities. As such, separate presentation of basic and diluted earnings per share of Class V
common stock under the two-class method has not been presented.
5. Business Combinations
Hawk Parent Holdings LLC
Thunder Bridge and Hawk Parent entered into the Merger Agreement effective as of January 21, 2019 and
announced consummation of the transactions contemplated by the Merger Agreement on July 11, 2019. Pursuant to the terms
and subject to the conditions set forth in the Merger Agreement, at the closing of the Business Combination, (a) Thunder
Bridge effected the domestication to become a Delaware corporation and (b) a wholly-owned subsidiary of Thunder Bridge
merged with and into Hawk Parent, with Hawk Parent continuing as the surviving entity and becoming a subsidiary of the
Company (with Thunder Bridge receiving membership interests in Hawk Parent as the surviving entity and becoming the
managing member of the surviving entity). At the effective time of the Business Combination, Thunder Bridge changed its
corporate name to “Repay Holdings Corporation” and all outstanding securities of Hawk Parent converted into the right to
receive the consideration specified in the Merger Agreement.
Each member of Hawk Parent received in exchange for their limited liability interests (i) one share of Class V
common stock of the Company and (ii) a pro rata share of (A) non-voting limited liability units of Hawk Parent as the
surviving entity, referred to as Post-Merger Repay Units, (B) certain cash consideration, and (C) the contingent right to
receive certain additional Post-Merger Repay Units issued as an earn-out under the Merger Agreement after the closing of the
Business Combination (“Earnout Units”). Shares of Class A common stock of the Company will provide the holder with
voting and economic rights with respect to the Company as a holder of common stock. Each share of Class V common stock
of the Company entitles the holder to vote as a stockholder of the Company, with the number of votes equal to the number of
Post-Merger Repay Units held by the holder but provides no economic rights to the holder. At any time after the six month
anniversary of the closing of the Business Combination, pursuant to the terms of the Exchange Agreement, each holder of a
Post-Merger Repay Unit will be entitled to exchange such unit for one share of Class A common stock of the Company.
The amount of cash consideration paid to selling Hawk Parent members at the closing of the Business Combination
was equal to the following: (i) the total cash and cash equivalents of Thunder Bridge (including funds in its trust account after
the redemption of its public stockholders and the proceeds of any debt or equity financing), minus (ii) the amount of Thunder
Bridge’s unpaid expenses and obligations, plus (iii) the cash and cash equivalents of Hawk Parent as of immediately prior to
the effective time of the Business Combination (excluding restricted cash), minus (iv) the amount of unpaid transaction
expenses of Hawk Parent as of the closing of the Business Combination, minus (v) the amount of the indebtedness and other
debt-like items of Hawk Parent and its subsidiaries as of the closing of the Business Combination, minus (vi) the amount of
change of control and similar payments payable to employees of Hawk Parent in connection with the Business
Combination, minus (vii) an amount of cash
to $10,000,000, minus (viii) a cash escrow of
$150,000, minus (ix) an amount equal to $2,000,000 to be held by a representative of the selling Hawk Parent
members, minus (x) the cash payment required in connection with the Warrant Amendment, minus (xi) an amount required to
be deposited on the balance sheet of Hawk Parent in connection with the Business Combination.
reserves equal
Pursuant to a Tax Receivable Agreement (“Tax Receivable Agreement” or “TRA”) between the Company and the
selling Hawk Parent members, the Company will pay to exchanging holders of Post-Merger Repay Units 100% of the tax
savings that the Company realizes as a result of increases in tax basis in the Company’s assets as a result of the exchange of
the Post-Merger Repay Units for shares of Class A common stock pursuant to the Exchange Agreement between the
Company and the Class A unit holders of Hawk Parent Holdings LLC, excluding the Company, dated as of July 11, 2019,
and certain other tax attributes of Repay and tax benefits related to entering into the TRA, including tax benefits attributable
to payments under the TRA.
Hawk Parent constitutes a business, with inputs, processes, and outputs. Accordingly, the Business Combination
constitutes the acquisition of a business for purposes of ASC 805 and, due to the changes in control from the Business
Combination, is accounted for using the acquisition method. Under the acquisition method, the acquisition date fair value of
the gross consideration paid by Thunder Bridge to close the Business Combination was allocated to the assets acquired and
the liabilities assumed based on their estimated fair values.
77
The following summarizes the purchase consideration paid to the selling members of Hawk Parent:
Cash Consideration
Unit Consideration (1)
Contingent consideration (2)
Tax receivable agreement liability (3)
Net working capital adjustment
Total purchase price
$260,811,062
220,452,964
12,300,000
65,537,761
(396,737)
$558,705,050
(1) The Company issued 22,045,297 shares of Post-Merger Repay Units valued at $10.00 per share as of July 11, 2019.
(2) Reflects the fair value of Earnout Units, the contingent consideration paid to the selling members of Hawk Parent,
pursuant to the Merger Agreement. The Company reflected this as noncontrolling interests on its balance sheet. The
Repay Unitholders received 7,500,000 Earnout Units based on the stock price of the Company.
(3) Represents liability with an estimated fair value of $65.5 million as a result of the TRA. If all the Post-Merger Repay
Units are ultimately exchanged, the liability will significantly increase based on a variety of factors present at the time of
exchange including, but not limited to, the market price at the time of the exchange. If the Company were to elect to
terminate the Tax Receivable Agreement early, the Company would be required to make an immediate cash payment
equal to the present value of the anticipated future tax benefits that are the subject of the Tax Receivable Agreement,
which payment may be made significantly in advance of the actual realization, if any, of such future tax benefits.
The Company recorded an allocation of the purchase price to Hawk Parent’s tangible and identifiable intangible
assets acquired and liabilities assumed based on their fair values as of the July 11, 2019 closing date. The final purchase price
allocation is as follows:
Cash and cash equivalents
Accounts receivable
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Restricted cash
Identifiable intangible assets
Total identifiable assets acquired
Accounts payable
Accrued expenses
Accrued employee payments
Other liabilities
Repay debt assumed
Net identifiable assets acquired
Goodwill
Total purchase price
$11,281,078
10,593,867
890,745
22,765,690
1,167,872
6,930,434
301,000,000
331,863,996
(4,206,413)
(8,831,363)
(6,501,123)
(16,864)
(93,514,583)
218,793,650
339,911,400
$558,705,050
The values allocated to identifiable intangible assets and their estimated useful lives are as follows:
Identifiable intangible assets
Non-compete agreements
Trade names
Developed technology
Merchant relationships
Channel relationships
Fair Value
(in millions)
$3.0
20.0
65.0
210.0
3.0
$301.0
Useful life
(in years)
2
Indefinite
3
10
10
Goodwill recognized of $339.9 million represents the excess of the gross consideration transferred over the fair
value of the underlying net tangible and identifiable intangible assets acquired, of which $279.2 million is expected to be
deductible for tax purposes. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets
that are not recognized as separate identifiable intangible assets apart from goodwill.
78
TriSource
On August 13, 2019, the Company acquired all of the ownership interests of TriSource. Under the terms of the
securities purchase agreement, between Repay Holdings, LLC and the direct and indirect owners of TriSource, as of August
13, 2019, the aggregate consideration paid at closing by Repay was approximately $60.2 million in cash. In addition to the
closing consideration, the TriSource purchase agreement contains a performance based earnout based on future results of the
acquired business, which could result in an additional payment to the former owners of TriSource of up to $5.0 million. The
TriSource acquisition was financed with a combination of cash on hand and committed borrowing capacity under the
Company’s existing credit facility. The TriSource purchase agreement contains customary representations, warranties and
covenants by the Company and the former owners of TriSource, as well as a customary post-closing adjustment provision
relating to working capital and similar items.
The following summarizes the purchase consideration paid to the selling members of TriSource:
Cash Consideration
Contingent consideration (1)
Total purchase price
$60,235,090
2,250,000
$62,485,090
(1) Reflects the fair value of TriSource earnout payment, the contingent consideration to be paid to the selling members of
TriSource, pursuant to the TriSource purchase agreement. The selling members of TriSource had the contingent earnout
right to receive a payment of up to $5.0 million dependent upon the Gross Profit, as defined in the TriSource purchase
agreement, for the period commencing on July 1, 2019 and ending on June 30, 2020. In October 2020, the Company paid
the TriSource earnout payment of $4.0 million.
The Company recorded an allocation of the purchase price to TriSource’s tangible and identifiable intangible assets
acquired and liabilities assumed based on their fair values as of the August 13, 2019 closing date. The final purchase price
allocation is as follows:
Cash and cash equivalents
Accounts receivable
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Restricted cash
Identifiable intangible assets
Total identifiable assets acquired
Accounts payable
Accrued expenses
Net identifiable assets acquired
Goodwill
Total purchase price
$383,236
2,290,441
95,763
2,769,440
215,739
509,019
30,500,000
33,994,198
(1,621,252)
(756,117)
31,616,829
30,868,261
$62,485,090
The values allocated to identifiable intangible assets and their estimated useful lives are as follows:
Identifiable intangible assets
Non-compete agreements
Trade names
Developed technology
Merchant relationships
Fair Value
(in millions)
$0.4
0.7
3.9
25.5
$30.5
Useful life
(in years)
5
Indefinite
3
10
Goodwill recognized of $30.9 million represents the excess of the gross consideration transferred over the fair value
of the underlying net tangible and identifiable intangible assets acquired, of which $32.2 million is expected to be deductible
for tax purposes. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not
recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart from
goodwill consist primarily of the strong market position and the assembled workforce of TriSource.
79
APS
On October 14, 2019, the Company acquired substantially all of the assets of APS for $30.5 million in cash. In
addition to the cash consideration, the APS selling equity holders may be entitled to a total of $30.0 million in three separate
cash earnout payments, dependent on the achievement of certain growth targets.
The following summarizes the purchase consideration paid to the selling members of APS:
Cash consideration
Contingent consideration (1)
Total purchase price
$30,465,454
18,580,549
$49,046,003
(1) Reflects the fair value of APS earnout payment, the contingent consideration to be paid to the selling members of APS,
pursuant to the APS purchase agreement. On April 6, 2020, the Company paid the first APS earnout payment of $14.3
million. As of December 31, 2020, the remaining APS earnout was adjusted to $0, net of the first payment, which
resulted in a $4.3 million adjustment included in the change in fair value of contingent consideration in the Consolidated
Statements of Operations for the year ended December 31, 2020.
The Company recorded an allocation of the purchase price to APS’ tangible and identifiable intangible assets
acquired and liabilities assumed based on their fair values as of the October 11, 2019 closing date. The final purchase price
allocation is as follows:
Cash and cash equivalents
Accounts receivable
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Restricted cash
Identifiable intangible assets
Total identifiable assets acquired
Accounts payable
Accrued expenses
Net identifiable assets acquired
Goodwill
Total purchase price
$ —
1,963,177
67,158
2,030,335
159,553
549,978
21,500,000
24,239,866
(1,101,706)
(19,018)
23,119,142
25,926,861
$49,046,003
The values allocated to identifiable intangible assets and their estimated useful lives are as follows:
Identifiable intangible assets
Non-compete agreements
Trade names
Merchant relationships
Fair Value
(in millions)
$0.5
0.5
20.5
21.5
Useful life
(in years)
5
Indefinite
9
Goodwill recognized of $25.9 million represents the excess of the gross consideration transferred over the fair value
of the underlying net tangible and identifiable intangible assets acquired, of which $21.7 million is expected to be deductible
for tax purposes. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not
recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart from
goodwill consist primarily of the strong market position and the assembled workforce of APS.
80
Ventanex
On February 10, 2020, the Company acquired all of the ownership interests of Ventanex. Under the terms of the
securities purchase agreement between Repay Holdings, LLC and the direct and indirect owners of CDT Technologies, LTD.
(“Ventanex Purchase Agreement”), the aggregate consideration paid at closing by the Company was approximately $36.0
million in cash. In addition to the closing consideration, the Ventanex Purchase Agreement contains a performance-based
earnout (the “Ventanex Earnout Payment”), which was based on future results of the acquired business and could result in an
additional payment to the former owners of Ventanex of up to $14.0 million. The Ventanex acquisition was financed with a
combination of cash on hand and committed borrowing capacity under the Company’s existing credit facility. The Ventanex
Purchase Agreement contains customary representations, warranties and covenants by Repay and the former owners of
Ventanex, as well as a customary post-closing adjustment provision relating to working capital and similar items.
The following summarizes the purchase consideration paid to the selling members of Ventanex:
Cash consideration
Contingent consideration (1)
Total purchase price
$35,939,129
4,800,000
$40,739,129
(1) Reflects the fair value of the Ventanex Earnout Payment, the contingent consideration to be paid to the selling members
of Ventanex, pursuant to the Ventanex Purchase Agreement as of February 10, 2020. The selling partners of Ventanex
will have the contingent earnout right to receive a payment of up to $14.0 million dependent upon the Gross Profit, as
defined in the Ventanex Purchase Agreement, for the years ended December 31, 2020 and 2021. In February 2021, the
Company paid the sellers of Ventanex $0.9 million, pursuant to the terms of the Ventanex Purchase Agreement. As of
December 31, 2021, the fair value of Ventanex earnout was $12.7 million, which resulted in a $7.9 million adjustment
included in the change in fair value of contingent consideration in the Consolidated Statements of Operations for the year
ended December 31, 2021.
The Company recorded an allocation of the purchase price to Ventanex’s tangible and identifiable intangible assets
acquired and liabilities assumed based on their fair values as of the February 10, 2020 closing date. The purchase price
allocation is as follows:
Cash and cash equivalents
Accounts receivable
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Restricted cash
Identifiable intangible assets
Total identifiable assets acquired
Accounts payable
Accrued expenses
Net identifiable assets acquired
Goodwill
Total purchase price
$50,663
1,376,539
180,514
1,607,716
137,833
428,313
26,890,000
29,063,862
(152,035)
(373,159)
28,538,668
12,200,461
$40,739,129
The values allocated to identifiable intangible assets and their estimated useful lives are as follows:
Identifiable intangible assets
Non-compete agreements
Trade names
Developed technology
Merchant relationships
Fair Value
(in millions)
$0.1
0.4
4.1
22.3
$26.9
Useful life
(in years)
5
Indefinite
3
10
Goodwill recognized of $12.2 million represents the excess of the gross consideration transferred over the fair value
of the underlying net tangible and identifiable intangible assets acquired, of which $8.3 million is expected to be deductible
81
for tax purposes. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not
recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart from
goodwill consist primarily of the strong market position and the assembled workforce of Ventanex.
cPayPlus
On July 23, 2020, the Company acquired all of the ownership interests of cPayPlus. Under the terms of the securities
purchase agreement between Repay Holdings, LLC and the direct and indirect owners of cPayPlus (“cPayPlus Purchase
Agreement”), the aggregate consideration paid at closing by the Company was approximately $8.0 million in cash. In
addition to the closing consideration, the cPayPlus Purchase Agreement contains a performance-based earnout (the “cPayPlus
Earnout Payment”), which was based on future results of the acquired business and could result in an additional payment to
the former owners of cPayPlus of up to $8.0 million. The cPayPlus acquisition was financed with cash on hand. The
cPayPlus Purchase Agreement contains customary representations, warranties and covenants by Repay and the former
owners of cPayPlus, as well as a customary post-closing adjustment provision relating to working capital and similar items.
The following summarizes the purchase consideration paid to the selling members of cPayPlus:
Cash consideration
Contingent consideration (1)
Total purchase price
$7,956,963
6,500,000
$14,456,963
(1) Reflects the fair value of the cPayPlus Earnout Payment, the contingent consideration to be paid to the selling members
of cPayPlus, pursuant to the cPayPlus Purchase Agreement as of July 23, 2020. The selling partners of cPayPlus will
have the contingent earnout right to receive a payment of up to $8.0 million dependent upon the Gross Profit, as defined
in the cPayPlus Purchase Agreement, in the third quarter of 2021. On September 17, 2021, the Company paid the
cPayPlus Earnout Payment of $8.0 million.
The Company recorded an allocation of the purchase price to cPayPlus’s tangible and identifiable intangible assets
acquired and liabilities assumed based on their fair values as of the July 23, 2020 closing date. The purchase price allocation
is as follows:
Cash and cash equivalents
Accounts receivable
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Identifiable intangible assets
Total identifiable assets acquired
Accounts payable
Accrued expenses
Net identifiable assets acquired
Goodwill
Total purchase price
$262,331
164,789
37,660
464,780
20,976
7,720,000
8,205,756
(99,046)
(363,393)
7,743,317
6,713,646
$14,456,963
The values allocated to identifiable intangible assets and their estimated useful lives are as follows:
Identifiable intangible assets
Non-compete agreements
Trade names
Developed technology
Merchant relationships
Fair Value
(in millions)
$0.1
0.1
6.7
0.8
$7.7
Useful life
(in years)
5
Indefinite
3
10
Goodwill recognized of $6.7 million represents the excess of the gross consideration transferred over the fair value
of the underlying net tangible and identifiable intangible assets acquired, of which $8.2 million is expected to be deductible
for tax purposes. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not
82
recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart from
goodwill consist primarily of the strong market position and the assembled workforce of cPayPlus.
CPS
On November 2, 2020, the Company acquired all of the ownership interests of CPS. Under the terms of the
securities purchase agreement between Repay Holdings, LLC and the direct and indirect owners of CPS. (“CPS Purchase
Agreement”), the aggregate consideration paid at closing by the Company was approximately $83.9 million in cash. In
addition to the closing consideration, the CPS Purchase Agreement contains a performance-based earnout (the “CPS Earnout
Payment”), which was based on future results of the acquired business and could result in an additional payment to the
former owners of CPS of up to $15.0 million in two separate earnouts. The CPS acquisition was financed with cash on hand.
The CPS Purchase Agreement contains customary representations, warranties and covenants by Repay and the former owners
of CPS, as well as a customary post-closing adjustment provision relating to working capital and similar items.
The following summarizes the purchase consideration paid to the selling members of CPS:
Cash consideration
Contingent consideration (1)
Total purchase price
$83,886,556
4,500,000
$88,386,556
(1) Reflects the fair value of the CPS Earnout Payment, the contingent consideration to be paid to the selling members of
CPS, pursuant to the CPS Purchase Agreement as of November 2, 2020. The selling partners of CPS will have the
contingent earnout right to receive a payment of up to $15.0 million in two separate earnouts, dependent upon the Gross
Profit, as defined in the CPS Purchase Agreement. As of December 31, 2021, the fair value of the CPS earnout was $0.6
million, which resulted in a ($3.9) million adjustment included in the change in fair value of contingent consideration in
the Consolidated Statements of Operations for the year ended December 31, 2021.
The Company recorded an allocation of the purchase price to CPS’ and MPI’s tangible and identifiable intangible
assets acquired and liabilities assumed based on their fair values as of the November 2, 2020 closing date. The purchase price
allocation is as follows:
Cash and cash equivalents
Accounts receivable
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Restricted cash
Identifiable intangible assets
Total identifiable assets acquired
Accounts payable
Accrued expenses
Net identifiable assets acquired
Goodwill
Total purchase price
CPS
$1,667,066
2,810,158
2,615,615
7,092,839
19,391
407
30,830,000
37,942,637
(2,004,371)
(2,143,680)
33,794,586
40,747,939
$74,542,525
MPI
$2,097,921
5,556,958
934,751
8,589,630
2,995
35,318
7,110,000
15,737,943
(4,495,599)
—
11,242,344
2,601,687
$13,844,031
The values allocated to identifiable intangible assets and their estimated useful lives are as follows:
Identifiable intangible assets
Non-compete agreements
Trade names
Developed technology
Merchant relationships
Fair Value
(in millions)
CPS
MPI
Useful life
(in years)
4
Indefinite
3
10
$0.1
0.1
0.7
6.3
$7.2
$0.1
0.5
7.2
23.0
$30.8
83
Goodwill recognized of $43.3 million represents the excess of the gross consideration transferred over the fair value
of the underlying net tangible and identifiable intangible assets acquired, of which $38.8 million is expected to be deductible
for tax purposes. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not
recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart from
goodwill consist primarily of the strong market position and the assembled workforce of CPS.
BillingTree
On June 15, 2021, the Company acquired BillingTree. Under the terms of the agreement and plan of merger between
BT Intermediate, LLC, the Company, two newly formed subsidiaries of the Company and the owner of BT Intermediate,
LLC (“BillingTree Merger Agreement”), the aggregate consideration paid at closing by the Company was approximately
$505.8 million, consisting of approximately $277.5 million in cash and approximately 10 million shares of Class A common
stock. The BillingTree Merger Agreement contains customary representations, warranties and covenants by Repay and the
former owner of BillingTree, as well as a customary post-closing adjustment provision relating to working capital and similar
items.
The following summarizes the preliminary purchase consideration paid to the seller of BillingTree:
Cash consideration
Class A common stock issued
Total purchase price
$277,521,139
228,250,000
$505,771,139
The Company recorded a preliminary allocation of the purchase price to BillingTree’s tangible and identifiable
intangible assets acquired and liabilities assumed based on their fair values as of the June 15, 2021 closing date. The
preliminary purchase price allocation is as follows:
Cash and cash equivalents
Accounts receivable
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Restricted cash
Other assets
Identifiable intangible assets
Total identifiable assets acquired
Accounts payable
Accrued expenses and other liabilities
Deferred tax liability
Net identifiable assets acquired
Goodwill
Total purchase price
$8,243,570
3,623,894
1,601,854
13,469,318
541,244
274,954
1,782,489
236,810,000
252,878,005
(2,552,251)
(6,982,919)
(31,371,590)
211,971,245
293,799,895
$505,771,140
The preliminary values allocated to identifiable intangible assets and their estimated useful lives are as follows:
Identifiable intangible assets
Non-compete agreements
Trade names
Developed technology
Merchant relationships
Fair Value
(in millions)
$0.3
7.8
26.2
202.5
$236.8
Useful life
(in years)
2
Indefinite
3
10
Goodwill recognized of $293.8 million represents the excess of the gross consideration transferred over the fair
value of the underlying net tangible and identifiable intangible assets acquired, of which $47.7 million is expected to be
deductible for tax purposes. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets
84
that are not recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart
from goodwill consist primarily of the strong market position and the assembled workforce of BillingTree.
BillingTree contributed $31.3 million to revenue and $(0.0) million in net income to the Company’s Consolidated
Statements of Operations, from June 15, 2021 through December 31, 2021.
Kontrol
On June 22, 2021, the Company acquired substantially all of the assets of Kontrol LLC (“Kontrol”). Under the terms
of the asset purchase agreement between a newly formed subsidiary of Repay Holdings, LLC and the owner of Kontrol
(“Kontrol Purchase Agreement”), the aggregate consideration to be paid by the Company was up to $10.5 million, of which
$7.4 million was paid at closing. The Kontrol Purchase Agreement contains customary representations, warranties and
covenants by Repay and the former owner of Kontrol, as well as a customary post-closing adjustment provision relating to
working capital and similar items.
The following summarizes the preliminary purchase consideration paid to the owner of Kontrol:
Cash consideration
Contingent consideration (1)
Total purchase price
$7,439,373
500,000
$7,939,373
(1) Reflects the fair value of the Kontrol earnout payment, the contingent consideration to be paid to the selling members of
Kontrol, pursuant to the Kontrol Purchase Agreement as of June 22, 2021. The selling partners of Kontrol will have the
contingent earnout right to receive a payment of up to $3.0 million, dependent upon the Gross Profit, as defined in the
Kontrol Purchase Agreement. As of December 31, 2021, the fair value of the Kontrol earnout was $0.9 million, which
resulted in a $0.4 million adjustment included in the change in fair value of contingent consideration in the Consolidated
Statements of Operations for the year ended December 31, 2021.
The Company recorded a preliminary allocation of the purchase price to Kontrol’s tangible and identifiable
intangible assets acquired and liabilities assumed based on their fair values as of the June 22, 2021 closing date. The
preliminary purchase price allocation is as follows:
Accounts receivable
Prepaid expenses and other current assets
Total current assets
Identifiable intangible assets
Total identifiable assets acquired
Accounts payable
Net identifiable assets acquired
Goodwill
Total purchase price
$67,510
5,572
73,082
6,940,000
7,013,082
(664,932)
6,348,150
1,591,223
$7,939,373
The preliminary values allocated to identifiable intangible assets and their estimated useful lives are as follows:
Identifiable intangible assets
Trade names
Merchant relationships
Fair Value
(in millions)
$0.0
6.9
$6.9
Useful life
(in years)
Indefinite
8
Goodwill of $1.6 million represents the excess of the gross consideration transferred over the fair value of the
underlying net tangible and identifiable intangible assets acquired, of which $1.1 million on a gross basis is expected to be
deductible for tax purposes. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets
that are not recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart
from goodwill consist primarily of the strong market position and the assembled workforce of Kontrol.
Kontrol contributed $1.7 million to revenue and $0.6 million in net income to the Company’s Consolidated
Statements of Operations, from June 22, 2021 through December 31, 2021.
85
Payix
On December 29, 2021, the Company acquired Payix. Under the terms of the merger agreement with Payix. (“Payix
Purchase Agreement”), the aggregate consideration paid at closing by the Company was approximately $95.6 million in cash.
In addition to the closing consideration, the Payix Purchase Agreement contains a performance-based earnout (the “Payix
Earnout Payment”), which was based on future results of the acquired business and could result in an additional payment to
the former owners of Payix of up to $20.0 million. The Payix acquisition was financed with cash on hand and available
revolver capacity. The Payix Purchase Agreement contains customary representations, warranties and covenants by Repay
and the former owners of Payix, as well as a customary post-closing adjustment provision relating to working capital and
similar items.
The following summarizes the preliminary purchase consideration paid to the sellers of Payix:
Cash consideration
Contingent consideration (1)
Total purchase price
$95,627,972
2,850,000
$98,477,972
(1) Reflects the fair value of the Payix earnout payment, the contingent consideration to be paid to the former owners of
Payix, pursuant to the Payix Purchase Agreement as of December 31, 2021. The former owners of Payix will have the
contingent earnout right to receive a payment of up to $20.0 million, dependent upon the Gross Profit, as defined in the
Payix Purchase Agreement. As of December 31, 2021, the fair value of the Payix earnout was $2.9 million.
The Company recorded a preliminary allocation of the purchase price to Payix’s tangible and identifiable intangible
assets acquired and liabilities assumed based on their fair values as of the December 29, 2021 closing date. The preliminary
purchase price allocation is as follows:
Cash and cash equivalents
Accounts receivable
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Restricted cash
Other assets
Identifiable intangible assets
Total identifiable assets acquired
Accounts payable
Accrued expenses and other liabilities
Deferred tax liability
Net identifiable assets acquired
Goodwill
Total purchase price
$702,575
1,715,292
93,891
2,511,758
83,449
27,177
655,588
33,150,000
36,427,972
(214,195)
(2,022,846)
(6,943,998)
27,246,933
71,231,039
$98,477,972
The preliminary values allocated to identifiable intangible assets and their estimated useful lives are as follows:
Identifiable intangible assets
Trade names
Developed technology
Merchant relationships
Fair Value
(in millions)
$0.3
12.4
20.5
$33.2
Useful life
(in years)
Indefinite
3
10
Goodwill recognized of $71.2 million represents the excess of the gross consideration transferred over the fair value
of the underlying net tangible and identifiable intangible assets acquired, none of which is expected to be deductible for tax
purposes. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not
recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart from
goodwill consist primarily of the strong market position and the assembled workforce of Payix.
86
Payix contributed $0.1 million to revenue and $(0.0) million in net income to the Company’s Consolidated
Statements of Operations, from December 29, 2021 through December 31, 2021.
Measurement Period
The preliminary purchase price allocations for the acquisitions of BillingTree, Kontrol, and Payix are based on
initial estimates and provisional amounts. For the acquisitions completed during the year ended December 31, 2021, the
Company continues to refine its inputs and estimates inherent in the valuation of intangible assets, deferred income taxes,
realization of tangible assets and the accuracy and completeness of liabilities within the measurement period.
Pro Forma Financial Information (Unaudited)
The supplemental condensed consolidated results of the Company on an unaudited pro forma basis give effect to
Ventanex, cPayPlus, CPS, BillingTree, Kontrol and Payix acquisitions as if the transactions had occurred on January 1, 2020.
The unaudited pro forma information reflects adjustments for the issuance of the Company’s common stock, debt incurred in
connection with the transactions, the impact of the fair value of intangible assets acquired and related amortization and other
adjustments the Company believes are reasonable for the pro forma presentation. In addition, the pro forma earnings exclude
acquisition-related costs.
Revenue
Net loss
Net loss attributable to non-controlling interests
Net loss attributable to the Company
Loss per Class A share - basic and diluted
Pro Forma Year
Ended December 31,
2021
$257,014,219
(54,626,915)
(5,813,388)
(48,813,527)
Pro Forma Year
Ended December 31,
2020
$234,656,115
(120,849,273)
(12,792,802)
(108,056,471)
$(0.56)
$(1.74)
87
6. Fair Value of Assets and Liabilities
The following table summarizes, by level within the fair value hierarchy, the carrying amounts and estimated fair
values of our assets and liabilities measured at fair value on a recurring or nonrecurring basis or disclosed, but not carried, at
fair value in the Consolidated Balance Sheets as of the dates presented. There were no transfers into, out of, or between levels
within the fair value hierarchy during any of the periods presented. Refer to Note 5, Note 9 and Note 10 for additional
information on these assets and liabilities.
Assets:
Other assets
Total assets
Liabilities:
Level 1
Level 2
Level 3
Total
December 31, 2021
—
$ —
2,499,996
—
$2,499,996 $ —
2,499,996
$2,499,996
Contingent consideration
Borrowings
Tax receivable agreement
Total liabilities
$ — $ —
448,484,696
—
$448,484,696
—
—
$ —
$17,046,840
—
245,828,419
$262,875,259
$17,046,840
448,484,696
245,828,419
$711,359,955
Liabilities:
Contingent consideration
Borrowings
Tax receivable agreement
Interest rate swap
Total liabilities
Other Assets
Level 1
Level 2
Level 3
Total
December 31, 2020
$ — $ —
256,713,396
—
9,312,332
$266,025,728
—
—
—
$ —
$15,800,000
—
229,228,105
—
$245,028,105
$15,800,000
256,713,396
229,228,105
9,312,332
$511,053,833
Other assets contain a minority equity investment in a privately-held company. The Company elected a
measurement alternative for measuring this investment, in which the carrying amount is adjusted based on any observable
price changes in orderly transactions. The investment is classified as Level 2 as observable adjustments to value are
infrequent and occur in an inactive market.
Contingent Consideration
Contingent consideration relates to potential payments that the Company may be required to make associated with
acquisitions. The contingent consideration is recorded at fair value based on estimates of discounted future cash flows
associated with the acquired businesses. To the extent that the valuation of these liabilities is based on inputs that are less
observable or not observable in the market, the determination of fair value requires more judgment. Accordingly, the fair
value of contingent consideration is classified within Level 3 of the fair value hierarchy, under ASC 820. The change in fair
value is re-measured at each reporting period with the change in fair value being recognized in accordance with ASC 805,
Business Combinations (“ASC 805”).
The Company used a discount rate to determine the present value, based on a risk-free rate adjusted for a credit
spread, of the contingent consideration in the simulation approach. A range of 3.4% to 3.5% and weighted average of 3.4%
was applied to the simulated contingent consideration payments, in order to determine the fair value. A significant increase or
decrease in the discount rate could have resulted in a lower or higher balance, respectively, as of the measurement date.
The following table provides a rollforward of the contingent consideration related to previous business acquisitions.
Refer to Note 5 for more details.
88
Year Ended
December 31,
2021
Year Ended
December 31,
2020
(Successor)
From July 11,
2019 to
December 31,
2019
From
January 1, 2019
to July 10, 2019
(Predecessor)
Balance at beginning of period
Measurement period adjustment
Purchases
Payments
Valuation adjustment
Balance at end of period
Borrowings
$15,800,000
—
4,350,000
(8,948,786)
5,845,626
$17,046,840
$14,250,000 $ —
—
14,250,000
—
—
$1,816,988
—
—
(1,816,988)
—
$14,250,000 $ —
6,580,549
15,800,000
(18,320,549)
(2,510,000)
$15,800,000
The carrying value of the Company’s 2026 Notes, revolving credit facility and term loan is net of unamortized debt
discount and debt issuance costs. The carrying amount of the Company’s borrowings approximates fair value because interest
rates on these instruments approximate market interest rates. The fair value of Company’s borrowings is classified within
Level 2 of the fair value hierarchy, as the market interest rates are generally observable and do not contain a high level of
subjectivity. See Note 10 for further discussion on borrowings.
Tax Receivable Agreement
Upon the completion of the Business Combination, the Company entered into the TRA with holders of Post-Merger
Repay Units. As a result of the TRA, the Company established a liability in its consolidated financial statements. The TRA is
recorded at fair value based on estimates of discounted future cash flows associated with the estimated payments to the Post-
Merger Repay Unit holders. These inputs are not observable in the market; thus, the TRA is classified within Level 3 of the
fair value hierarchy, under ASC 820. The change in fair value is re-measured at each reporting period with the change in fair
value being recognized in accordance with ASC 805.
The Company used a discount rate, also referred to as the early termination rate, to determine the present value,
based on a risk-free rate plus a spread, pursuant to the TRA. A rate of 1.58% was applied to the forecasted TRA payments as
of December 31, 2021, in order to determine the fair value. A significant increase or decrease in the discount rate could have
resulted in a lower or higher balance, respectively, as of the measurement date. The TRA balance increased as a result of
exchanges of Post-Merger Repay Units for Class A common stock pursuant to the Exchange Agreement. In addition, the
TRA balance increased $14.1 million through accretion expense and a valuation adjustment, related to a decrease in the
discount rate, which was 1.34%, as of December 31, 2020, and the finalization of the various components related to the 2020
exchanges of Post-Merger Repay Units.
The following table provides a rollforward of the TRA related to the Business Combination and subsequent
acquisition of Post-Merger Repay Units held by Corsair, pursuant to the Unit Purchase Agreements. See Note 15 for further
discussion on the TRA.
Balance at beginning of period
Purchases
Payments
Accretion expense
Valuation adjustment
Balance at end of period
Year Ended
December 31,
2021
Year Ended
December 31,
2020
(Successor)
From July 11,
2019 to
December 31,
2019
From
January 1, 2019
to July 10, 2019
(Predecessor)
$229,228,105
2,491,251
—
5,065,507
9,043,556
$245,828,419
$67,176,226 $ — $ —
—
67,176,226
149,612,393
—
—
—
—
—
2,955,148
—
—
9,484,338
$67,176,226 $ —
$229,228,105
89
Interest Rate Swap
In October 2019, the Company entered into a $140.0 million notional, fifty-seven month interest rate swap
agreement, and in February 2020, the Company entered into a $30.0 million notional, sixty month interest rate swap
agreement, then a revised notional amount of $65.0 million beginning on September 30, 2020. These interest rate swap
agreements are to hedge changes in its cash flows attributable to interest rate risk on a combined $205.0 million of
Company’s variable-rate term loan to a fixed-rate basis, thus reducing the impact of interest rate changes on future interest
expense.
These swaps involve the receipt of variable-rate amounts in exchange for fixed interest rate payments over the life of
the agreement without an exchange of the underlying notional amount and was designated for accounting purposes as a cash
flow hedge. The interest rate swap is carried at fair value on a recurring basis in the Consolidated Balance Sheets and is
classified within Level 2 of the fair value hierarchy, as the inputs to the derivative pricing model are generally observable and
do not contain a high level of subjectivity. The fair value was determined based on the present value of the estimated future
net cash flows using implied rates in the applicable yield curve as of the valuation date.
Both interest rate swaps were settled in January 2021, with $6.4 million, net of taxes of $1.7 million reclassified
from Accumulated other comprehensive loss into Other loss in the Consolidated Statements of Operations for the year ended
December 31, 2021.
7. Property and Equipment
Property and equipment consisted of the following:
Furniture, fixtures, and office equipment
Computers
Leasehold improvements
Total
Less: Accumulated depreciation and amortization
December 31,
December 31,
2021
$2,763,380
3,408,336
430,894
6,602,610
2,801,411
$3,801,199
2020
$1,112,702
1,733,672
340,333
3,186,707
1,558,268
$1,628,439
Depreciation expense for property and equipment was $1.3 million, $1.2 million and $0.4 million for the years
ended December 31, 2021 and 2020, and the period from July 11, 2019 to December 31, 2019, respectively. Depreciation
expense was $0.2 million for the Predecessor period from January 1, 2019 to July 10, 2019.
8. Intangible Assets
The Company holds definite and indefinite-lived intangible assets. As of December 31, 2021, the indefinite-lived
intangible assets consist of five trade names, arising from the acquisitions of Hawk Parent, MPI, BillingTree, Kontrol, and
Payix. As of December 31, 2020, the indefinite-lived intangible assets consist of six trade names, arising from the
acquisitions of Hawk Parent, TriSource, APS, Ventanex, cPayPlus, and CPS.
90
Intangible assets consisted of the following:
Client relationships
Channel relationships
Software costs
Non-compete agreements
Trade name
Balance as of December 31, 2021
Client relationships
Channel relationships
Software costs
Non-compete agreements
Trade name
Balance as of December 31, 2020
Gross Carrying
Value
$539,850,000
12,550,000
163,957,560
4,580,000
28,140,000
$749,077,560
Accumulated
Amortization
$83,014,231
1,146,935
83,162,612
4,059,880
—
$171,383,658
Net Carrying
Value
$456,835,769
11,403,065
80,794,948
520,120
28,140,000
$577,693,902
$308,450,000
12,550,000
104,715,101
4,270,000
22,230,000
$452,215,101
$39,920,578
191,936
40,280,116
2,595,333
—
$82,987,963
$268,529,422
12,358,064
64,434,985
1,674,667
22,230,000
$369,227,138
Weighted
Average Useful
Life (Years)
8.40
8.65
1.48
0.88
—
6.79
8.64
9.65
1.85
1.52
—
6.94
The Company’s amortization expense for intangible assets was $88.4 million, $59.7 million and $23.3 million for
the years ended December 31, 2021 and 2020, and the period from July 11, 2019 to December 31, 2019, respectively.
Amortization expense for intangible assets was $5.9 million for the Predecessor period from January 1, 2019 to July 10,
2019.
The estimated amortization expense for the next five years and thereafter in the aggregate is as follows:
Year Ending December 31,
2022
2023
2024
2025
2026
Thereafter
Estimated Future Amortization
Expense
$99,941,015
81,630,840
67,608,133
55,288,759
55,571,944
189,513,211
91
9. Goodwill
The following table presents changes to goodwill for the years ended December 31, 2021, 2020 and 2019:
Balance at December 31, 2018 (Predecessor)
Acquisitions
Dispositions
Impairment Loss
Balance at July 10, 2019 (Predecessor)
Balance at July 11, 2019 (Successor)
Acquisitions
Dispositions
Impairment Loss
Balance at December 31, 2019 (Successor)
Acquisitions
Dispositions
Impairment Loss
Measurement period adjustment
Balance at December 31, 2020
Acquisitions
Dispositions
Impairment Loss
Measurement period adjustment
Other
Balance at December 31, 2021
Total
$119,529,202
—
—
—
$119,529,202
$339,911,400
49,749,119
—
—
$389,660,519
62,263,733
—
—
7,046,003
458,970,255
366,622,156
—
—
(10,779)
(1,500,000)
$824,081,632
During the year ended December 31, 2020, the Company recognized a $7.0 million measurement period adjustment
in accordance with APS acquisition, of which $6.6 million was due to a valuation adjustment on contingent consideration.
The Company has only one operating segment and, based on the criteria outlined in ASC 350, Intangibles –
Goodwill and Other (“ASC 350”), only one reporting unit that needs to be tested for goodwill impairment. Accordingly,
goodwill was reviewed for impairment at the consolidated entity level. The Company concluded that goodwill was not
impaired as of December 31, 2021. As of December 31, 2021 and 2020, there were no accumulated impairment losses on the
Company’s goodwill.
10. Borrowings
Predecessor Credit Agreement
The Predecessor entered into a Revolving Credit and Term Loan Agreement (the “Predecessor Credit Agreement”),
with SunTrust Bank and the other lenders party thereto on September 28, 2017, and amended December 15, 2017, which
included a revolving loan component, the term loan and a delayed draw term loan. The Predecessor Credit Agreement was
collateralized by substantially all assets of the Predecessor, based on the Predecessor Credit Agreement’s collateral
documents, and it included restrictive qualitative and quantitative covenants, as defined in the Predecessor Credit Agreement.
The Predecessor was in compliance with its restrictive covenants under the Predecessor Credit Agreement as of December
31, 2018.
The Predecessor Credit Agreement provided for a maximum $10.0 million revolving loan at a variable interest rate.
This facility was terminated upon the closing of the Business Combination and execution of the Successor Credit Agreement
(defined below). At the closing of the Business Combination and December 31, 2018, the outstanding balance on the
revolving loan was $3.5 million. This balance was settled upon the closing of the Business Combination. Interest expense on
the line of credit totaled $0.1 million for the period from January 1, 2019 to July 10, 2019. Interest expense on the line of
credit totaled $0.2 million for the year ended December 31, 2018.
92
Successor Credit Agreement
The Company entered into a Revolving Credit and Term Loan Agreement (the “Successor Credit Agreement”) on
July 11, 2019, with Truist Bank (formerly SunTrust Bank) and the other lenders party thereto, which provided a revolving
credit facility (the “Revolving Credit Facility”), a term loan A (the “Term Loan”), and a delayed draw term loan at a variable
interest rate (3.65% as of December 31, 2020) (the “Delayed Draw Term Loan”). The Successor Credit Agreement provided
for an aggregate revolving commitment of $20.0 million at a variable interest rate.
On February 10, 2020, as part of the financing for the acquisition of Ventanex, Repay entered into an agreement
with Truist Bank and other members of its existing bank group to amend and upsize its previous credit agreement from
$230.0 million to $346.0 million. The Successor Credit Agreement was collateralized by substantially all of the Company’s
assets, and included qualitative and quantitative covenants, as defined in the Successor Credit Agreement.
The Successor Credit Agreement provided for a Term Loan of $256.0 million, a Delayed Draw Term Loan of $60.0
million, and a Revolving Credit Facility of $30.0 million. As of December 31, 2020, the Company had $14.4 million drawn
against the Delayed Draw Term Loan and had $0.0 million drawn against the Revolving Credit Facility.
On January 20, 2021, the Company used a portion of the proceeds from the 2026 Notes to prepay in full the entire
amount of the outstanding Term Loans under the Successor Credit Agreement. The Company also terminated in full all
outstanding Delayed Draw Term Loan commitments under such credit facilities.
Amended Credit Agreement
On February 3, 2021, the Company announced the closing of a new undrawn $125.0 million senior secured
revolving credit facility through Truist Bank. The Amended Credit Agreement replaces the Company’s Successor Credit
Agreement, which included an undrawn $30.0 million Revolving Credit Facility.
On December 29, 2021, the Company increased its existing senior secured credit facilities by $60.0 million to a
$185.0 million revolving credit facility pursuant to an amendment to the Amended Credit Agreement. The Company was in
compliance with its restrictive covenants under the Amended Credit Agreement at December 31, 2021.
As of December 31, 2021, the Company had $20.0 million drawn against the revolving credit facility at a variable
interest rate of 2.25% plus 1-month LIBOR due 2026. The Company paid $0.4 million and $0.2 million in fees related to
unused commitments for the years ended December 31, 2021 and 2020, respectively. The Company’s interest expense on the
line of credit totaled $0, $0.1 million and $0.1 million for the years ended December 31, 2021 and 2020, and the period from
July 11, 2019 to December 31, 2019 respectively.
Convertible Senior Debt
On January 19, 2021, the Company issued $440.0 million in aggregate principal amount of 0.00% Convertible
Senior Notes due 2026 in a private placement. The initial conversion rate of the 2026 Notes was 29.7619 shares of Class A
common stock per $1,000 principal amount of 2026 Notes (equivalent to an initial conversion price of approximately $33.60
per share of Class A common stock). Upon conversion of the 2026 Notes, the Company may choose to pay or deliver cash,
shares of the Company’s Class A common stock, or a combination of cash and shares of the Company’s Class A common
stock. The 2026 Notes will mature on February 1, 2026, unless earlier converted, repurchased or redeemed. Subject to
Nasdaq requirements, the Company controls the conversion rights prior to November 3, 2025, unless a fundamental change
or an event of default occurs.
During the year ended December 31, 2021, the conversion contingencies of the 2026 Notes were not met, and the
conversion terms of the 2026 Notes were not significantly changed. The shares issuable upon conversion of the 2026 Notes
were excluded from the computation of the diluted loss per share, since their inclusion would have been anti-dilutive.
93
As of December 31, 2021 and 2020, total borrowings under the Successor Credit Agreement, Amended Credit
Agreement, and 2026 Notes consisted of the following, respectively:
Non-current indebtedness:
Term Loan (1)
Revolving Credit Facility (2)
Convertible Senior Debt
Total borrowings under credit facility
Less: Current maturities of long-term debt (3)
Less: Long-term loan debt issuance cost (4)
Total non-current borrowings
December 31,
2021
December 31,
2020
$ —
20,000,000
440,000,000
460,000,000
—
11,515,304
$448,484,696
$262,653,996
—
—
262,653,996
6,760,650
5,940,600
$249,952,746
(1) The Term Loan bears interest at a variable rate, which was 3.65 % as of December 31, 2020.
(2) The Revolving Credit Facility bears interest at a variable rate, which was 2.35% as of December 31, 2021.
(3) Pursuant to the terms of the Amended Credit Agreement, the Company was required to make quarterly principal
payments equal to 0.625% of the initial principal amount of the Term Loan and Delayed Draw Term Loan (collectively
the “Term Loans”).
(4) The Company incurred $2.5 million, $1.4 million and $0.6 million of interest expense for the amortization of deferred
debt issuance costs for the years ended December 31, 2021 and 2020, and the period from July 11, 2020 to December 31,
2019, respectively. The Predecessor incurred $0.2 million for the period from January 1, 2019 to July 10, 2019.
The Company incurred interest expense on the Term Loans of $11.5 million and $5.3 million for the year ended
December 31, 2020 and the period from July 11, 2019 to December 31, 2019, respectively. The Predecessor incurred interest
expense of $2.8 million and $5.5 million and $4.4 million for the period from January 1, 2019 to July 10, 2019.
Following is a summary of principal maturities of the Term Loans outstanding as of December 31, 2021 for each of
the next five years ending December 31 and in the aggregate:
2022
2023
2024
2025
2026
2027
$ —
—
—
—
460,000,000
—
$460,000,000
11. Derivative Instruments
The Company does not hold or use derivative instruments for trading purposes.
Derivative Instruments Designated as Hedges
Interest rate fluctuations expose the Company’s variable-rate term loan to changes in interest expense and cash
flows. As part of its risk management strategy, the Company may use interest rate derivatives, such as interest rate swaps, to
manage its exposure to interest rate movements.
In October 2019, the Company entered into a $140.0 million notional, five-year interest rate swap agreement to
hedge changes in cash flows attributable to interest rate risk on $140.0 million of its variable-rate term loan. This agreement
involves the receipt of variable-rate amounts in exchange for fixed interest rate payments over the life of the agreement
without an exchange of the underlying notional amount. This interest rate swap was designated for accounting purposes as a
cash flow hedge. As such, changes in the interest rate swap’s fair value are deferred in accumulated other comprehensive
income (loss) in the Consolidated Balance Sheets and are subsequently reclassified into interest expense in each period that a
hedged interest payment is made on the Company’s variable-rate term loan. Pre-tax gain (loss) reclassified from accumulated
other comprehensive income (loss) into interest expense was $1.4 million and ($0.1) million for the year ended December 31,
2020 and 2019, respectively.
94
On February 21, 2020, the Company entered into a swap transaction with Regions Bank. On a quarterly basis,
commencing on March 31, 2020 up to and including the termination date of February 10, 2025, the Company will make fixed
payments on a beginning notional amount of $30.0 million, then a revised notional amount of $65.0 million beginning on
September 30, 2020. On a quarterly basis, commencing on February 21, 2020 up to and including the termination date of
February 10, 2025, the counterparty will make floating rate payments based on the 3-month LIBOR on the beginning
notional amount of $30.0 million, then a revised notional amount of $65.0 million beginning on September 30, 2020.
Both interest rate swaps were settled in January 2021, with $6.4 million, net of taxes of $1.7 million reclassified
from Accumulated other comprehensive loss into Other loss in the Consolidated Statements of Operations for the year ended
December 31, 2021.
12. Commitments and Contingencies
Legal Matters
The Company is a party to various claims and lawsuits incidental to its business. In the Company’s opinion, the
liabilities, if any, which may ultimately result from the outcome of such matters, individually or in the aggregate, are not
expected to have a material adverse effect on its financial position, liquidity, results of operations or cash flows.
Leases
The Company has commitments under operating leases for real estate leased from third parties under non-cancelable
operating leases. The Company’s leases typically have lease terms between three years and ten years, with the longest lease
term having an expiration date in 2029. Most of these leases include one or more renewal options for six years or less, and
certain leases also include lessee termination options. At lease commencement, the Company assesses whether it is
reasonably certain to exercise a renewal option, or reasonably certain not to exercise a termination option, by considering
various economic factors. Options that are reasonably certain of being exercised are factored into the determination of the
lease term, and related payments are included in the calculation of the right-of-use asset and lease liability.
The components of lease cost are presented in the following table:
Components of total lease costs:
Operating lease cost
Short-term lease cost
Variable lease cost
Total lease cost
Amounts reported in the Consolidated Balance Sheets were as follows:
Operating Leases:
Right-of-use assets
Lease liability, current
Lease liability, long-term
Total lease liabilities
Weighted-average remaining lease term (in years)
Weighted-average discount rate (annualized)
Year Ended
December 31,
2021
Year Ended
December 31,
2020
$2,370,643
100,607
—
$2,471,250
$1,745,575
48,150
—
$1,793,725
December 31,
2021
December 31,
2020
$10,499,751
1,990,416
9,090,867
$11,081,283
$10,074,506
1,527,224
8,836,655
$10,363,879
5.2
4.3%
6.2
4.6%
95
Other information related to leases are as follows:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases
Year Ended
December 31,
2021
Year Ended
December 31,
2020
$2,168,767
$1,504,352
2,438,075
11,430,120
The following table presents a maturity analysis of the Company’s operating leases liabilities as of December 31,
2021:
2022
2023
2024
2025
2026
Thereafter
Total undiscounted lease payments
Less: Imputed interest
Total lease liabilities
13. Related Party Transactions
Related party payables consisted of the following:
Ventanex accrued earnout liability
cPayPlus accrued earnout liability
CPS accrued earnout liability
Kontrol accrued earnout liability
Payix accrued earnout liability
Other payables to related parties
$2,423,447
2,481,751
2,303,054
2,124,094
1,835,155
1,260,395
12,427,896
1,346,613
$11,081,283
December 31,
December 31,
2021
$12,746,840
—
600,000
850,000
2,850,000
347,285
$17,394,125
2020
$4,800,000
6,500,000
4,500,000
—
—
11,597
$15,811,597
The Company incurred transaction costs on behalf of related parties of $8.2 million, $3.1 million and $1.3 million
for the years ended December 31, 2021 and 2020, and the period from July 11, 2019 to December 31, 2019, respectively.
These costs consist of retention bonuses and other compensation to employees, associated with the costs resulting from the
integration of new businesses. The Predecessor incurred transaction costs on behalf of related parties of $6.8 million for the
period from January 1, 2019 to July 10, 2019.
The Company held receivables from related parties of $0.3 million and $0.1 million as of December 31, 2021 and
2020, respectively. These amounts were due from employees, related to tax withholding on vesting of equity compensation.
See Note 14. Share based compensation for more detail on these restricted share awards.
The Company owed $17.4 million and $15.8 million to related parties, in the form of contingent consideration
payable to the sellers of Ventanex, CPS, BillingTree, Kontrol and Payix, who were employees of REPAY, as of December
31, 2021 and 2020, respectively. Further, the Company owed employees $0.0 million and $0.0 million for amounts paid on
behalf of the Company as of December 31, 2021 and 2020, respectively.
96
14. Share Based Compensation
Omnibus Incentive Plan
At the Shareholders Meeting, Thunder Bridge shareholders considered and approved the Incentive Plan which
resulted in the reservation of 7,326,728 shares of common stock for issuance thereunder. The Incentive Plan became effective
immediately upon the closing of the Business Combination.
Under this plan, the Company currently has three types of share-based compensation awards outstanding: PSUs,
RSAs and RSUs.
PSU
The grant date fair value of a PSU, which is based on quoted market value of the Company’s Class A common stock
on the grant date and the number of shares expected to be earned according to the level of achievement of performance
measures, is recognized on a straight-line basis over the applicable performance or service period. The performance or
service period for awards granted generally range from one to three years.
RSA and RSU
RSAs and RSUs vest in equal annual installments over a three-year period. Restricted shares cannot be sold or
transferred until they have vested. The grant date fair value of RSAs and RSUs, which is based on the quoted market value of
the Company’s Class A common stock on the grant date, is recognized as share-based compensation expense on a straight-
line basis over the vesting period.
The following table summarized share-based compensation expense and the related income tax benefit recognized
for the Company’s share-based compensation awards:
($ in millions)
Share-based compensation expense
Income tax benefit
Year Ended December 31, From July 11, 2019 to
2021
2020
December 31, 2019
$22.3
3.4
$19.4
0.5
$22.0
1.1
Activity for the years ended December 31, 2021 and 2020, and the period from July 11, 2019 to December 31, 2019
were as follows:
Unvested at July 11, 2019
Granted
Forfeited (1)
Vested
Unvested at December 31, 2019
Granted
Forfeited (1) (2)
Vested
Unvested at December 31, 2020
Granted
Forfeited (1) (2)
Vested
Unvested at December 31, 2021
Class A
Common Stock
—
3,275,229
321,263
1,135,291
1,818,675
1,389,063
80,794
603,513
2,523,431
994,287
418,330
583,754
2,515,634
Weighted
Average Grant
Date Fair Value
$ —
12.07
11.81
11.68
12.39
18.40
13.40
12.10
15.71
22.68
16.46
15.63
$18.30
(1) Upon vesting, award-holders elected to sell shares to the Company in order to satisfy the associated tax obligations. The
awards are not deemed outstanding; further, these forfeited shares are added back to the amount of shares available for
grant under the Incentive Plan.
(2) The forfeited shares include employee terminations during the years ended December 31, 2021 and 2020; further, these
forfeited shares are added back to the amount of shares available for grant under the Incentive Plan.
97
Unrecognized compensation expense related to unvested PSUs, RSAs and RSUs was $22.7 million as of December
31, 2021, which is expected to be recognized as expense over the weighted-average period of 2.45 years. Unrecognized
compensation expense related to unvested PSUs, RSAs, and RSUs was $23.7 million as of December 31, 2020, which is
expected to be recognized as expense over the weighted-average period of 2.61 years. Unrecognized compensation expense
related to unvested RSAs, RSUs and PSUs was $17.5 million as of December 31, 2019, which is expected to be recognized
as expense over the weighted-average period of 2.26 years.
Original Equity Incentives
As a result of the change in ownership of Hawk Parent, 9,171 previously unvested profit interest units of the
Predecessor with a weighted average grant date fair value of $180.87 were automatically vested, upon the closing of the
Business Combination. A summary of the changes in non-vested units outstanding for the period from January 1, 2019 to
July 10, 2019 is presented below:
Non-vested units at January 1, 2019
Activity during the period:
Granted
Vested
Non-vested units at July 10, 2019
Weighted
average
fair value
per unit
Units
9,460
$182.83
—
(9,460)
—
(182.83)
— $ —
During the period from January 1, 2019 to July 10, 2019, the Predecessor incurred $0.9 million of share-based
compensation expense, respectively, included in Selling, general and administrative costs in the Consolidated Statements of
Operations.
15. Taxation
Repay Holdings Corporation is taxed as a corporation and is subject to paying corporate federal, state and local taxes
on the income allocated to it from Hawk Parent, based upon Repay Holding Corporation’s economic interest held in Hawk
Parent, as well as any stand-alone income or loss it generates. Hawk Parent is treated as a partnership for U.S. federal and
most applicable state and local income tax purposes. As a partnership, Hawk Parent is not subject to U.S. federal and certain
state and local income taxes. Hawk Parent’s members, including Repay Holdings Corporation, are liable for federal, state and
local income taxes based on their allocable share of Hawk Parent’s pass-through taxable income.
The components of loss before income taxes are as follows:
July 11, 2019
to December
31, 2019
January 1,
2019 to July
10, 2019
(Predecessor)
$(51,540,441) $(23,668,078)
(74,452)
$(51,810,162) $(23,742,530)
(269,721)
Domestic
Foreign
Loss before income tax benefit
Year Ended
December 31,
2021
$(87,352,396)
624,677
$(86,727,719)
Year Ended
December 31,
2020
(Successor)
$(129,267,523)
(456,747)
$(129,724,270)
98
The Company recorded a provision for income tax as follows:
Current expense
Federal
State
Foreign
Total current expense
Deferred expense
Federal
State
Foreign
Total deferred benefit
Income tax benefit
Year Ended
December 31,
2021
Year Ended
December 31,
2020
(Successor)
July 11, 2019
to December
31, 2019
January 1,
2019 to July
10, 2019
(Predecessor)
$34,401 $ —
—
—
$ —
2,367
—
$36,768
$ — $ —
—
—
$ — $ —
—
—
$(18,113,316)
(12,799,753)
185,145
(30,727,924)
$(30,691,156)
$(10,523,778)
(1,708,969)
(125,278)
(12,358,025)
$(12,358,025)
$(4,343,013) $ —
—
—
—
$(4,990,989) $ —
(575,152)
(72,824)
(4,990,989)
A reconciliation of the United States statutory income tax rate to the Company’s effective income tax rate is as
follows for the years indicated:
Year Ended
December 31,
2021
Year Ended
December 31,
2020
(Successor)
July 11, 2019
to December
31, 2019
Federal income tax expense
State taxes, net of federal benefit
Income attributable to noncontrolling interest
Excess tax benefit related to share-based
compensation
Change in fair value of warrant liabilities
State rate change impact on deferred taxes
Other, net
Total deferred benefit
21.0%
5.2%
(1.4%)
0.6%
0.0%
9.5%
0.5%
35.4%
21.0%
1.3%
(1.8%)
0.4%
(11.5%)
0.0%
0.1%
9.5%
January 1,
2019 to July
10, 2019
(Predecessor)
0.0%
0.0%
0.0%
21.0%
1.1%
(6.1%)
0.4%
(6.2%)
0.0%
(0.6%)
9.6%
0.0%
0.0%
0.0%
0.0%
0.0%
The Company’s effective tax rate was 35.4%, 9.5% and 9.6% for the years ended December 31, 2021 and 2020, and
the period from July 11, 2019 to December 31, 2019, respectively. The comparison of the Company’s effective tax rate to the
U.S. statutory tax rate of 21% was primarily influenced by the fact that the Company is not liable for the income taxes on the
portion of Hawk Parent’s earnings that are attributable to noncontrolling interests. Further, the comparison is reflective of the
effect of remeasuring net deferred tax assets for state tax rate changes. The results for the Predecessor do not reflect income
tax expense because, prior to the closing of the Business Combination, the consolidated Hawk Parent was treated as a
partnership for U.S. federal and most applicable state and local income tax purposes and was not subject to corporate tax.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for income tax purposes. Details of the Company's
deferred tax assets and liabilities are as follows:
99
Deferred tax assets
Tax Credits
Section 163(j) Limitation Carryover
Acquisition Costs
Federal Net Operating Losses
State Net Operating Losses
Foreign Net Operating Losses
Other Assets
Partnership basis tax differences
Total deferred tax asset
Valuation allowance
Total deferred tax asset, net of valuation allowance
Deferred tax liabilities
Other Intangibles - Payix
Total deferred tax liabilities
Net deferred tax assets
December 31,
2021
December 31,
2020
$1,547,569
26,800
348,158
25,283,737
4,907,835
16,556
6,794,593
130,440,236
169,365,484
(16,393,745)
152,971,739
$522,081
250,095
352,291
8,834,924
1,264,059
202,517
2,997,426
154,253,345
168,676,738
(33,339,509)
135,337,229
(7,711,856)
(7,711,856)
$145,259,883
—
—
$135,337,229
As a result of the equity offering by the Company, BillingTree acquisition, finalization of 2020 income tax returns
and Post-Merger Repay Unit exchanges during the year ended December 31, 2021, the Company recognized a reduction of
the deferred tax asset (“DTA”) and offsetting deferred tax liability (“DTL”) in the amount of $19.2 million, compared to an
increase of $27.5 million as a result of equity offerings by the Company, warrant exercises and Post-Merger Repay unit
exchanges during the year ended December 31, 2020, to account for the portion of the Company’s outside basis in the
partnership interest that it will not recover through tax deductions, a ceiling rule limitation arising under Internal Revenue
Code (the “Code”) sec. 704(c). As the ceiling rule causes taxable income allocations to be in excess of 704(b) book
allocations the DTL will unwind, leaving only the DTA, which may only be recovered through the sale of the partnership
interest in Hawk Parent. The Company has concluded, based on the weight of all positive and negative evidence, that all of
the DTA associated with the ceiling rule limitation is not likely to be realized as of December 31, 2021. As such, a 100%
valuation allowance was recognized.
As of December 31, 2021, the Company had net tax effected federal and state (net of federal benefit) net operating
losses (“NOLs”) of $30.2 million, of which approximately $25.8 million have an indefinite life. NOLs of approximately $4.4
million will begin to expire in 2030. As of December 31, 2021, the Company had federal and state tax credit carryforwards of
$1.1 million and $0.4 million, respectively, which will begin to expire in 2037 and 2034, respectively. The Company believes
as of December 31, 2021, based on the weight of all positive and negative evidence, it is more likely than not that the results
of future operations will generate sufficient taxable income to realize the NOLs and tax credits and, as such, no valuation
allowance was recorded.
No uncertain tax positions existed as of December 31, 2021.
Tax Receivable Agreement Liability
Pursuant to our election under Section 754 of the Code, we expect to obtain an increase in our share of the tax basis
in the net assets of Hawk Parent when Post-Merger Repay Units are redeemed or exchanged for Class A common stock of
Repay Holdings Corporation. The Company intends to treat any redemptions and exchanges of Post-Merger Repay Units as
direct purchases for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that the Company
would otherwise pay in the future to various tax authorities. They may also decrease gains (or increase losses) on future
dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.
On July 11, 2019, the Company entered into a TRA that provides for the payment by the Company of 100% of the
amount of any tax benefits realized, or in some cases are deemed to realize, as a result of (i) increases in our share of the tax
basis in the net assets of Hawk Parent resulting from any redemptions or exchanges of Post-Merger Repay Units and from
our acquisition of the equity of the selling Hawk Parent members, (ii) tax basis increases attributable to payments made under
the TRA, and (iii) deductions attributable to imputed interest pursuant to the TRA (the "TRA Payments"). The TRA
Payments are not conditioned upon any continued ownership interest in Hawk Parent or Repay. The rights of each party
under the TRA other than the Company are assignable. The timing and amount of aggregate payments due under the TRA
100
may vary based on a number of factors, including the timing and amount of taxable income generated by the Company each
year, as well as the tax rate then applicable, among other factors.
As of December 31, 2021, the Company had a liability of $245.8 million related to its projected obligations under
the TRA, which is captioned as the tax receivable agreement liability in the Company’s Consolidated Balance Sheets. The
increase in the TRA liability for the year ended December 31, 2021, was primarily a result of the change in the Early
Termination Rate, as defined in the TRA, selling members of Hawk Parent exchanging 407,584 Post-Merger Repay Units
during the year ended December 31, 2021 in accordance with the Exchange Agreement, the finalization of the various
components related to the 2020 exchanges of Post-Merger Repay Units, and the impact of the remeasurement of the state tax
rate. This resulted in an increase to the Company’s share of the tax basis in the net assets of Hawk Parent.
16. Subsequent Events
Management has evaluated subsequent events and their potential effects on these consolidated financial statements.
Based upon the review, management did not identify any subsequent events that would have required adjustment or
disclosure in the financial statements.
101
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, we carried out an evaluation, with the
participation of our management, including our Chief Executive Officer and Executive Vice President and Chief Financial
Officer, of the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) under the Securities
Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in ensuring that
information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, is
recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such
information is accumulated and communicated to our management, including our Chief Executive Officer and Executive
Vice President and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Management Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial
reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the
Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial and
accounting officers and effected by our board of directors, management and other personnel to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that:
•
•
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions
and dispositions of our assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in
accordance with authorizations of our management and directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of our assets that could have a material effect on our financial statements.
Our internal control over financial reporting, specifically the review controls over the evaluation of complex, non-
routine transactions, were previously determined to be insufficient to detect the proper accounting and reporting for the
public warrants and private placement Warrants previously issued by Thunder Bridge, which were outstanding and recorded
on our consolidated financial statements at the time of the Business Combination. Management identified this error when the
Securities and Exchange Commission issued a statement (the “Statement”) on the accounting and reporting considerations for
warrants issued by special purpose acquisition companies on April 12, 2021. The Statement addressed certain accounting and
reporting considerations related to warrants of a kind similar to the Warrants. This control deficiency resulted in the
Company having to restate certain of our audited consolidated financial statements contained in our Annual Report on Form
10-K for the year ended December 31, 2020 and the quarterly periods included therein, and if not remediated, could have
resulted in a material misstatement to future annual or interim consolidated financial statements that would not be prevented
or detected. Accordingly, management previously determined that this control deficiency constituted a material weakness
during the quarter ended March 31, 2021. Since the restatement, management has implemented remediation steps to address
that material weakness and to improve our internal control over financial reporting. Specifically, we expanded and improved
our review process for complex securities and related accounting standards. We have further improved this process by
enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex
accounting applications and consideration of additional staff with the requisite experience and training to supplement existing
accounting professionals. As of September 30, 2021, the control deficiency related to the restatement had been remediated.
Our management, with the participation of our principal executive and principal financial and accounting officers,
assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
102
Commission (“COSO”) in its 2013 Internal Control — Integrated Framework. Based on this assessment, our management
has concluded that, as of December 31, 2021, our internal control over financial reporting is effective based on those criteria.
Management excluded BillingTree, Kontrol and Payix from its assessment of the effectiveness of our internal
control over financial reporting as of December 31, 2021 because those entities were acquired in business combinations in
the past year. BillingTree’s total assets (excluding goodwill and intangible assets related to the acquisitions which are a part
of the Company’s existing control environment) and total revenue represented approximately 3.0% and 14.3%, respectively,
of our consolidated total assets and total revenues, as of and for the year ended December 31, 2021. Kontrol’s total assets
(excluding goodwill and intangible assets related to the acquisitions which are a part of the Company’s existing control
environment) and total revenue represented approximately 0.1% and 0.8%, respectively, of our consolidated total assets and
total revenues, as of and for the year ended December 31, 2021. Payix’s total assets (excluding goodwill and intangible assets
related to the acquisitions which are a part of the Company’s existing control environment) and total revenue represented
approximately 0.9% and 0.1%, respectively, of our consolidated total assets and total revenues, as of and for the year ended
December 31, 2021.
The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by Grant
Thornton LLP, an independent registered public accounting firm, as stated in their Report of Independent Registered
Certified Public Accounting Firm on Internal Control Over Financial Reporting which is included with the Financial
Statements in Part II, Item 8 of this Annual Report on Form 10-K and is incorporated herein by reference.
Changes in Internal Control Over Financial Reporting
During the quarter ended December 31, 2021, no change in our internal controls over financial reporting (as defined
in Rule 13a-15(f) under the Act) occurred that has materially affected, or is reasonably likely to materially affect, our internal
controls over financial reporting.
ITEM 9B. OTHER INFORMATION.
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not applicable.
103
PART III
Information called for by Part III (Items 10, 11, 12, 13 and 14) of this Annual Report on Form 10-K has been
omitted as we intend to file with the SEC not later than 120 days after the end of our fiscal year ended December 31, 2021, an
amendment to this Form 10-K or a definitive Proxy Statement pursuant to Regulation 14A promulgated under the Exchange
Act relating to the Company’s annual meeting of stockholders to be held in 2022 (as applicable, the “Part III Filing”). Such
information will be set forth in such Part III Filing and is incorporated herein by reference.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information required to be included by Item 10 of Form 10-K will be included in our Part III Filing and such
information is incorporated by reference herein.
We have a code of ethics that applies to each of our directors and employees, including our Chief Executive Officer,
Chief Financial Officer and principal accounting officer. Our code of ethics is available on our website at www.repay.com
under the Investor Relations section titled Corporate Governance. We intend to disclose any amendment to, or waiver from, a
provision of our code of ethics that applies to our Chief Executive Officer, Chief Financial Officer or principal accounting
officer by posting such information on the Investors section of our website.
ITEM 11. EXECUTIVE COMPENSATION.
The information required to be included by Item 11 of the Form10-K will be included in our Part III Filing and such
information is incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The information required to be included by Item 12 of Form 10-K will be included in our Part III Filing and such
information is incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information required to be included by Item 13 of Form 10-K will be included in our Part III Filing and such
information is incorporated by reference herein.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information required to be included by Item 14 of Form 10-K will be included in our Part III Filing and such
information is incorporated by reference herein.
104
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(1)
Financial Statements
The following Consolidated Financial Statements of Repay Holdings Corporation and the Report of the Independent
Registered Public Accounting Firm are included in Part II, Item 8 of this report.
Reports of Independent Registered Public Accounting Firm (PCAOB ID Number 248)
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Operations for the years ended December 31, 2021 and 2020, and the periods ended
December 31, 2019 and July 10, 2019
Consolidated Statements of Comprehensive Income for the years ended December 31, 2021 and 2020, and the
periods ended December 31, 2019 and July 10, 2019
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021 and 2020, and the periods
ended December 31, 2019 and July 10, 2019
Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020, and the periods ended
December 31, 2019 and July 10, 2019
Notes to Consolidated Financial Statements
(2)
Financial Statement Schedules
57
61
62
63
64
65
67
All financial statement schedules have been omitted as the information is not required under the related instruction
or is not applicable or because the information required is already included in the financial statements or the notes to those
financial statements.
105
(3)
Exhibits
Exhibit
Number
Description
2.1†
2.2†
2.3†
2.4†
2.5†
2.6†
2.7†
3.1
3.2
3.3
4.1
4.2*
10.1
10.2
10.3
10.4
10.5
Agreement and Plan of Merger, dated as of January 21, 2019, by and among Thunder Bridge, Merger Sub, Hawk
Parent, and the Repay Securityholder Representative named therein (incorporated by reference to Exhibit 2.1 of
Thunder Bridge’s Form 8-K (File No. 001-38531), filed with the SEC on January 22, 2019).
First Amendment to Agreement and Plan of Merger, dated February 11, 2019, by and among Thunder Bridge,
Merger Sub, Hawk Parent, and the Repay Securityholder Representative named therein (incorporated by
reference to Exhibit 2.1 of Thunder Bridge’s Form 8-K (File No. 001-38531), filed with the SEC on February 12,
2019).
Second Amendment to Agreement and Plan of Merger, dated May 9, 2019, by and among Thunder Bridge,
Merger Sub, Hawk Parent, and the Repay Securityholder Representative named therein (incorporated by
reference to Exhibit 2.1 of Thunder Bridge’s Form 8-K (File No. 001-38531), filed with the SEC on May 9,
2019).
Third Amendment to Agreement and Plan of Merger, dated June 19, 2019, by and among Thunder Bridge,
Merger Sub, Hawk Parent, and the Repay Securityholder Representative named therein (incorporated by
reference to Exhibit 2.1 of Thunder Bridge’s Form 8-K (File No. 001-38531), filed with the SEC on June 20,
2019).
Securities Purchase Agreement, dated as February 10, 2020, by and among Repay Holdings, LLC and the direct
and indirect owners of CDT Technologies, LTD. (incorporated by reference to Exhibit 2.1 of the Company’s
Form 8-K (File No. 001-38531), filed with the SEC on February 10, 2020).
Purchase Agreement, dated October 26, 2020, by and among Repay Holdings, LLC and CPS Holdings, LLC,
CPS Media, LLC, DB & AS Enterprises, Inc., and James F. Hughes, LLC (incorporated by reference to Exhibit
2.1 of the Company’s Form 8-K (File No. 001-38531), filed with the SEC on October 27, 2020).
Agreement and Plan of Merger, dated as of May 7, 2021, by and among BT Intermediate, LLC, Repay Holdings
Corporation, Beckham Acquisition LLC, Beckham Merger Sub LLC and BillingTree Parent, L.P. (incorporated
by reference to Exhibit 2.1 of the Company’s Form 8-K (File No. 001-38531), filed with the SEC on May 10,
2021).
Certificate of Corporate Domestication of Repay Holdings Corporation (incorporated by reference to Exhibit 3.1
to the Company’s Form 8-K (File No. 001-38531), filed with the SEC on July 17, 2019).
Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.2 of the Company’s Form 8-
K (File No. 001-38531), filed with the SEC on July 17, 2019).
Bylaws of the Company (incorporated by reference to Exhibit 3.3 of the Company’s Form 8-K (001-38531), filed
with the SEC on July 17, 2019).
Indenture, dated as of January 19, 2021 between Repay Holdings Corporation and U.S. Bank National
Association (incorporated by reference to Exhibit 4.1 of the Company’s Form 8-K (File No. 001-38531), filed
with the SEC on January 19, 2021).
Description of Registrant’s Securities.
Exchange Agreement, dated July 11, 2019, by and among the Company, Repay and the other holders of Class A
units of Repay (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K (File No. 001-38531), filed
with the SEC on July 17, 2019).
Tax Receivable Agreement, dated July 11, 2019, by and among the Company and the other Repay Unitholders
(incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K (File No. 001-38531), filed with the SEC
on July 17, 2019).
Founder Stockholders Agreement, dated as of July 11, 2019, between the Company, John A. Morris, Shaler V.
Alias, The JAM Family Charitable Trust dated March 1, 2018, JOSEH Holdings, LLC and Alias Holdings, LLC
(incorporated by reference to Exhibit 10.5 of the Company’s Form 8-K (File No. 001-38531), filed with the SEC
on July 17, 2019).
Registration Rights Agreement, dated July 11, 2019, by and among the Company, Repay, and the Repay
Unitholders (incorporated by reference to Exhibit 10.6 of the Company’s Form 8-K (File No. 001-38531), filed
with the SEC on July 17, 2019).
Registration Rights Agreement, dated June 18, 2018, by and between the Company, the Sponsor and the holders
party thereto (incorporated by reference to Exhibit 10.4 of Thunder Bridge’s Form 8-K (File No. 001-38531),
filed with the SEC on June 22, 2018).
106
10.6
10.7
10.8+
10.9+
10.10+
10.11+
10.12+
10.13+
10.14+
10.15+
10.16+
10.17+
10.18+
10.19+
10.20+
10.21+
10.22+
10.23+
First Amendment to Registration Rights Agreement, dated July 11, 2019, by and among Thunder Bridge
Acquisition Ltd. and Thunder Bridge Acquisition LLC (incorporated by reference to Exhibit 10.7 to the
Company’s Form 8-K (File No. 001-38531), filed with the SEC on July 17, 2019).
Registration Rights Agreement, dated as of May 7, 2021, by and among Repay Holdings Corporation and
BillingTree Parent, L.P. (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K (File No. 001-
38531), filed with the SEC on May 10, 2021).
Amended and Restated Revolving Credit Agreement, dated February 3, 2021, by and among Repay Holdings
Corporation, Hawk Parent Holdings LLC, Truist Bank, as Administrative Agent, and the other parties thereto
(incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K (File No. 001-38531), filed with the SEC
on February 5, 2021).
Limited Consent, Waiver and First Amendment to Amended and Restated Revolving Credit Agreement, dated
June 15, 2021, by and among Repay Holdings Corporation, Hawk Parent Holdings LLC, Truist Bank, as
administrative agent, and the other parties thereto (incorporated by reference to Exhibit 10.1 of the Company’s
Form 8-K (File No. 001-38531), filed with the SEC on January 3, 2022).
Second Amendment to Amended and Restated Revolving Credit Agreement, dated December 29, 2021, by and
among Repay Holdings Corporation, Hawk Parent Holdings LLC, Truist Bank, as Administrative Agent, and the
other parties thereto (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K (File No. 001-
38531), filed with the SEC on January 3, 2022).
Repay Holdings Corporation Omnibus Incentive Plan, effective as of July 11, 2019 (incorporated by reference to
Exhibit 10.10 to the Company’s Form 8-K (File No. 001-38531), filed with the SEC on July 17, 2019).
Amendment No. 1 to the Repay Holdings Corporation Omnibus Incentive Plan, effective as of September 20,
2019 (incorporated by reference to Exhibit 99.2 to the Company’s Form S-8 (Registration No. 233879), filed with
the SEC on September 20, 2019).
Employment Agreement, dated January 21, 2019, between M & A Ventures, LLC and John Morris (incorporated
by reference to Exhibit 10.24 of the Company’s Form S-4 (Registration No. 333-229616), filed with the SEC on
February 12, 2019).
Amendment No. 1 to Employment Agreement, dated March 1, 2021, between Repay Management Services LLC
(as assignee of M & A Ventures, LLC) and John Morris (incorporated by reference to Exhibit 10.11 to the
Company’s Form 10-K/A (File No. 001-38531), filed with the SEC on April 23, 2021).
Employment Agreement, dated January 21, 2019, between M & A Ventures, LLC and Shaler Alias (incorporated
by reference to Exhibit 10.25 of the Company’s Form S-4 (Registration No. 333-229616), filed with the SEC on
February 12, 2019).
Amendment No. 1 to Employment Agreement, dated March 1, 2021, between Repay Management Services LLC
(as assignee of M & A Ventures, LLC) and Shaler Alias (incorporated by reference to Exhibit 10.13 to the
Company’s Form 10-K/A (File No. 001-38531), filed with the SEC on April 23, 2021).
Employment Agreement, dated January 21, 2019, between M & A Ventures, LLC and Timothy J. Murphy
(incorporated by reference to Exhibit 10.26 of the Company’s Form S-4 (Registration No. 333-229616), filed
with the SEC on February 12, 2019).
Amendment No. 1 to Employment Agreement, dated March 1, 2021, between Repay Management Services LLC
(as assignee of M & A Ventures, LLC) and Timothy J. Murphy (incorporated by reference to Exhibit 10.15 to the
Company’s Form 10-K/A (File No. 001-38531), filed with the SEC on April 23, 2021).
Employment Agreement dated September 1, 2019, between Repay Management Services LLC and Tyler B.
Dempsey (incorporated by reference to Exhibit 10.16 to the Company’s Form 10-K/A (File No. 001-38531), filed
with the SEC on April 23, 2021).
Amendment No. 1 to Employment Agreement, dated March 1, 2021, between Repay Management Services LLC
and Tyler B. Dempsey (incorporated by reference to Exhibit 10.17 to the Company’s Form 10-K/A (File No. 001-
38531), filed with the SEC on April 23, 2021).
Employment Agreement, dated January 21, 2019, between M & A Ventures, LLC and Michael F. Jackson
(incorporated by reference to Exhibit 10.29 of the Company’s Form S-4 (Registration No. 333-229616), filed
with the SEC on February 12, 2019).
Amendment No. 1 to Employment Agreement, dated March 1, 2021, between Repay Management Services LLC
(as assignee of M & A Ventures, LLC) and Michael F. Jackson (incorporated by reference to Exhibit 10.19 to the
Company’s Form 10-K/A (File No. 001-38531), filed with the SEC on April 23, 2021).
Repay Holdings Corporation Form of Restricted Stock Award Agreement (Time Vested) (incorporated by
reference to Exhibit 10.17 to the Company’s Form 8-K (File No. 001-38531), filed with the SEC on July 17,
2019).
107
10.24+
10.25+
Repay Holdings Corporation Form of Restricted Stock Unit Agreement between the Company and the Grantee
named therein (incorporated by reference to Exhibit 10.13 of the Company’s Form 10-Q (File No. 001-38531),
filed with the SEC on November 14, 2019).
Repay Holdings Corporation Summary of Non-Employee Director Compensation, as of September 20, 2019
(incorporated by reference to Exhibit 10.14 of the Company’s Form 10-Q (File No. 001-38531), filed with the
SEC on November 14, 2019).
10.26+* Repay Holdings Corporation Summary of Non-Employee Director Compensation, as of April 1, 2022.
10.27+
Repay Holdings Corporation Form of Restricted Stock Award Agreement between the Company and the Grantee
named therein (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K (File No. 001-38531) filed
with the SEC on March 17, 2020).
Repay Holdings Corporation Form of Performance-Based Restricted Stock Units Award Agreement between the
Company and the Grantee named therein (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K
(File No. 001-38531) filed with the SEC on March 17, 2020).
Form of Indemnification Agreement between the Company and the Indemnitee named therein (incorporated by
reference to Exhibit 10.32 of the Company’s Form 10-K/A (File No. 001-38531) filed with the SEC on April 17,
2020).
10.28+
10.29+
10.30+* Repay Holdings Corporation Form of Restricted Stock Award Agreement (2022).
21.1*
23.1*
31.1*
Subsidiaries of the registrant
Consent of Grant Thornton LLP
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities
31.2*
32.1*
32.2*
Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities
Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
101*
Interactive Data File
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because
its XBRL tags are embedded within the Inline XBRL document. 101.SCH XBRL Taxonomy Extension Schema
Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy
Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document In accordance with Rule 406T of
Regulation S-T, the XBRL related information in Exhibit 101 to this Annual Report on Form 10-K shall not be
deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that
section and shall not be part of any registration or other document filed under the Securities Act or the Exchange
Act, except as shall be expressly set forth by specific reference in such filing.
104*
Cover Page Interactive Data File (Included in Exhibits 101)
* Filed herewith.
† Schedules to this exhibit have been omitted pursuant to Item 601(b)(2) of Registration S-K. The registrant hereby agrees
to furnish a copy of any omitted schedules to the Commission upon request.
+
Indicates a management or compensatory plan.
ITEM 16. FORM 10-K SUMMARY.
None.
108
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Repay Holdings Corporation
March 1, 2022
By:
/s/ John Morris
John Morris
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed
below by the following persons on behalf of the Registrant in the capacities as of March 1, 2022.
Name
/s/ John Morris
John Morris
/s/ Tim Murphy
Tim Murphy
/s/ Thomas Sullivan
Thomas Sullivan
/s/ Shaler Alias
Shaler Alias
/s/ Peter Kight
Peter Kight
/s/ Paul Garcia
Paul Garcia
Title
Chief Executive Officer, Director
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer)
Vice President, Corporate Controller
(Principal Accounting Officer)
President, Director
Chairman of the Board
Director
/s/ Maryann Goebel
Director
Maryann Goebel
/s/ Robert H. Hartheimer
Director
Robert H. Hartheimer
/s/ William Jacobs
Director
William Jacobs
/s/ Richard Thornburgh
Richard Thornburgh
/s/ Emnet Rios
Emnet Rios
Director
Director
109