Paymentus (PAY) - 2025 Q2 - Quarterly Report

Special Note Regarding Forward-Looking Statements This section warns that forward-looking statements involve risks and uncertainties, and actual results may differ materially from projections - This report contains forward-looking statements that involve substantial risks and uncertainties, which may cause actual results to differ materially from historical results or future projections. Investors should not place undue reliance on these statements as predictions of future events[6][8][10] - Key areas covered by forward-looking statements include the company's ability to manage growth, attract and retain customers, implement new customers, expectations for revenue and operating results, cybersecurity impact, market opportunity, competitiveness, product development, employee retention, general economic conditions (inflation, trade policies), financial services industry stability, benefits of acquisitions, brand maintenance, international expansion, and factors described in 'Risk Factors' and 'Management's Discussion and Analysis'[9] PART I. FINANCIAL INFORMATION This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Paymentus Holdings, Inc., including the Balance Sheets, Statements of Operations and Comprehensive Income, Statements of Stockholders' Equity, and Statements of Cash Flows, along with their accompanying notes. These statements provide a snapshot of the company's financial position, performance, and cash flows for the periods ended June 30, 2025, and December 31, 2024 (for balance sheet), and for the three and six months ended June 30, 2025 and 2024 (for income and cash flow statements) Condensed Consolidated Balance Sheets | (In thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Assets | | | | Cash and cash equivalents | $266,422 | $205,900 | | Total current assets | $380,926 | $345,641 | | Capitalized internal-use software development costs, net | $69,053 | $67,375 | | Intangible assets, net | $14,809 | $19,076 | | Goodwill | $131,836 | $131,815 | | Total assets | $609,523 | $576,247 | | Liabilities | | | | Total current liabilities | $83,479 | $81,550 | | Total liabilities | $92,824 | $90,651 | | Stockholders' Equity | | | | Total stockholders' equity | $516,699 | $485,596 | | Total liabilities and stockholders' equity | $609,523 | $576,247 | Condensed Consolidated Statements of Operations and Comprehensive Income | (In thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $280,077 | $197,422 | $555,312 | $382,297 | | Cost of revenue | $208,600 | $138,671 | $417,811 | $270,821 | | Gross profit | $71,477 | $58,751 | $137,501 | $111,476 | | Total operating expenses | $55,555 | $48,515 | $105,890 | $92,897 | | Income from operations | $15,922 | $10,236 | $31,611 | $18,579 | | Net income | $14,707 | $9,364 | $28,520 | $16,590 | | Net income per share - Basic | $0.12 | $0.08 | $0.23 | $0.13 | | Net income per share - Diluted | $0.11 | $0.07 | $0.22 | $0.13 | | Comprehensive income | $14,770 | $9,324 | $28,529 | $16,508 | Condensed Consolidated Statements of Stockholders' Equity | (In thousands) | Dec 31, 2024 | Mar 31, 2025 | June 30, 2025 | | :------------------------------------ | :----------- | :----------- | :------------ | | Total Stockholders' Equity | $485,596 | $500,395 | $516,699 | | Changes (Q1 2025): | | | | | Stock-based compensation | | $2,932 | | | Net income | | $13,813 | | | Changes (Q2 2025): | | | | | Stock-based compensation | | | $3,315 | | Net income | | | $14,707 | | (In thousands) | Dec 31, 2023 | Mar 31, 2024 | June 30, 2024 | | :------------------------------------ | :----------- | :----------- | :------------ | | Total Stockholders' Equity | $429,616 | $439,384 | $451,627 | | Changes (Q1 2024): | | | | | Stock-based compensation | | $2,484 | | | Net income | | $7,226 | | | Changes (Q2 2024): | | | | | Stock-based compensation | | | $2,882 | | Net income | | | $9,364 | Condensed Consolidated Statements of Cash Flows | (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $81,920 | $28,984 | | Net cash used in investing activities | $(17,708) | $(18,789) | | Net cash used in financing activities | $(3,673) | $(369) | | Effect of exchange rate changes on Cash and cash equivalents and Restricted cash | $95 | $(141) | | Net increase in cash, cash equivalents and Restricted cash | $60,634 | $9,685 | | Cash and cash equivalents and Restricted cash at the beginning of period | $209,411 | $183,195 | | Cash and cash equivalents and Restricted cash at the end of period | $270,045 | $192,880 | Notes to Condensed Consolidated Financial Statements 1. Organization and Description of Business - Paymentus Holdings, Inc. provides electronic bill presentment and payment services, enterprise customer communication, and self-service revenue management through a SaaS, secure, omni-channel technology platform. The platform supports various payment types (credit/debit cards, eChecks, digital wallets) and channels (online, mobile, IVR, call center, chatbot, voice-based assistants)[25] 2. Basis of Presentation and Summary of Significant Accounting Policies - The unaudited interim condensed consolidated financial statements are prepared in accordance with GAAP and SEC rules for interim reporting, and should be read with the 2024 Form 10-K. Management's estimates are based on historical experience and reasonable assumptions, with actual results potentially differing[26][27][29] - The Company changed its reporting segment structure to a single operating and reportable segment effective January 1, 2025, based on the CODM's review of consolidated financial information for resource allocation and performance assessment. Previously, there were three operating segments with one reportable segment[32][33] - Custodial accounts, holding $128.9 million as of June 30, 2025, are not included in the Company's balance sheets as Paymentus has no legal ownership or control over these funds[30] - The Company is evaluating ASU 2024-03, 'Disaggregation of Income Statement Expenses,' effective for fiscal 2027, which requires additional disclosures of expenses by nature[40] 3. Revenue, Performance Obligations and Contract Balances | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Payment transaction processing revenue | $278,080 | $193,564 | $551,360 | $376,316 | | Other revenue | $1,997 | $3,858 | $3,952 | $5,981 | | Total revenue | $280,077 | $197,422 | $555,312 | $382,297 | | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue from United States | $275,417 | $193,483 | $546,096 | $374,784 | | Revenue from Other | $4,660 | $3,939 | $9,216 | $7,513 | | Total revenue | $280,077 | $197,422 | $555,312 | $382,297 | - As of June 30, 2025, the Company has $6.4 million in remaining performance obligations, with over 75% expected to be recognized within the next two years. Contractual rights for future minimum guarantees amount to $54.1 million through 2029[42][43] | (In thousands) | June 30, 2025 | December 31, 2024 | | :------------------- | :------------ | :---------------- | | Current | $3,771 | $2,937 | | Non-current | $2,666 | $2,783 | | Total contract liabilities | $6,437 | $5,720 | 4. Property and Equipment, Net | (In thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Computer equipment | $6,467 | $6,178 | | Furniture and fixtures | $1,832 | $1,724 | | Leasehold improvements | $387 | $375 | | Total property and equipment | $8,686 | $8,277 | | Less: Accumulated depreciation | $(7,646) | $(7,120) | | Property and equipment, net | $1,040 | $1,157 | | (In thousands) | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :---------------- | | United States | $361 | $450 | | Other | $679 | $707 | | Total | $1,040 | $1,157 | 5. Goodwill, Internal-use Software Development Costs and Intangible Assets - Goodwill reporting units were realigned into a single reporting unit, consistent with the change in segment structure. Changes in goodwill carrying amount during the three and six months ended June 30, 2025, were due to foreign currency translation adjustments[47] | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Capitalized internal-use software development costs | $8,900 | $9,100 | $18,300 | $18,400 | | Amortization expense (Cost of revenue) | $5,517 | $4,366 | $11,155 | $8,395 | | Amortization expense (Research and development) | $2,672 | $2,373 | $5,460 | $4,655 | | Total Amortization expense | $8,189 | $6,739 | $16,615 | $13,050 | | (In thousands) | June 30, 2025 Net Carrying Amount | December 31, 2024 Net Carrying Amount | | :-------------------- | :-------------------------------- | :------------------------------------ | | Technology | $1,009 | $3,123 | | Customer relationship | $13,622 | $15,257 | | Software and license | $0 | $8 | | Trademark | $178 | $688 | | Total | $14,809 | $19,076 | | Years Ending December 31, | Future Expected Amortization Expense (in thousands) | | :-------------------------- | :-------------------------------------------------- | | 2025 | $2,822 | | 2026 | $3,269 | | 2027 | $3,269 | | 2028 | $3,269 | | 2029 | $2,180 | | Total | $14,809 | 6. Prepaid expenses and other assets | (In thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Prepaid expenses | $5,362 | $6,584 | | Contract acquisition costs | $5,223 | $6,657 | | Other assets | $1,927 | $2,832 | | Total prepaid expenses and other assets | $12,512 | $16,073 | 7. Accrued and Other Liabilities | (In thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Payroll and employee-related expenses | $11,030 | $16,650 | | Other accrued expenses | $9,335 | $8,095 | | Other liabilities | $5,395 | $1,717 | | Total accrued and other liabilities | $25,760 | $26,462 | 8. Commitments and Contingencies - The Company is involved in various claims and legal proceedings in the ordinary course of business. As of June 30, 2025, no current claims or legal proceedings are expected to have a material adverse effect on financial position, results of operations, or cash flows, beyond estimated liabilities already recorded[54] - Paymentus enters into indemnification provisions with business partners, investors, contractors, customers, officers, directors, and employees, seeking to limit its exposure in commercial contracts[55] 9. Equity - As of June 30, 2025, all 509,370 warrant shares from the May 2021 agreement with JPMC (exercise price $18.38) were vested and exercisable. Additionally, 175,904 warrant shares from the August 2022 agreement (exercise price $10.10) were vested and exercisable, with the remaining 513,382 shares subject to commercial milestones through December 31, 2026[56][57][58] 10. Stock-Based Compensation - The 2021 Equity Incentive Plan had approximately 26.4 million shares available for grant as of June 30, 2025, following an annual increase of approximately 5.0 million shares on January 1, 2025[60] | (In thousands, except per share amounts) | Options Outstanding at Dec 31, 2024 | Options Exercised | Options Forfeited | Options Outstanding at June 30, 2025 | | :--------------------------------------- | :---------------------------------- | :---------------- | :---------------- | :--------------------------------- | | Options | 3,534,103 | (61,976) | (7,667) | 3,464,460 | | Weighted-Average Exercise Price per Share | $8.47 | $1.46 | $0.28 | $8.61 | | Weighted-Average Remaining Contractual Life (years) | 4.26 | | | 3.81 | | Aggregate Intrinsic Value | $85,525 | | | $83,620 | - Unrecognized compensation cost for unvested stock options was $0.1 million as of June 30, 2025, expected to be recognized over 0.5 years[62] | (In thousands, except per share amounts) | RSUs Awarded and Unvested at Dec 31, 2024 | Awards Granted | Awards Vested | Awards Forfeited | RSUs Awarded and Unvested at June 30, 2025 | | :--------------------------------------- | :---------------------------------------- | :------------- | :------------ | :--------------- | :----------------------------------------- | | RSUs | 2,096,168 | 605,306 | (486,019) | (40,967) | 2,174,488 | | Weighted Average Grant Date Fair Value | $16.01 | $29.39 | $16.56 | $17.17 | $19.59 | - Unrecognized compensation cost for unvested RSUs was $39.9 million as of June 30, 2025, expected to be recognized over 3.7 years[65] | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total stock-based compensation | $5,288 | $3,323 | $8,833 | $6,256 | 11. Income Taxes | Effective Tax Rate | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Effective Tax Rate | 19.9% | 24.9% | 21.2% | 28.6% | - The effective tax rate differences from the U.S. federal statutory rate of 21% are primarily due to permanent differences for disallowed stock-based compensation (IRC Section 162(m)), state taxes, and discrete benefits for excess tax benefits on stock-based compensation and prior year Canadian R&D credit claims[67] - The Company forecasts an estimated effective tax rate of 27% for 2025, excluding discrete benefits, mainly due to state taxes and non-deductible compensation[68] - The recently enacted H.R. 1, 'The One Big Beautiful Bill Act' (OBBBA), includes significant changes to corporate taxation, such as increased deductions for capital spending and expensing of domestic R&D costs. The Company is evaluating its potential impact[69] 12. Net Income per Share Attributable to Common Stock - Basic net income per share is calculated by dividing net income by the weighted-average common shares outstanding. Diluted net income per share includes the dilutive effect of stock options, RSUs, and warrants using the treasury stock method, excluding anti-dilutive shares[70][71] | (In thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $14,707 | $9,364 | $28,520 | $16,590 | | Weighted-average shares of common stock — basic | 125,077,964 | 124,264,789 | 125,066,334 | 124,106,046 | | Dilutive effect of stock options | 2,584,773 | 2,167,559 | 2,551,462 | 2,157,147 | | Dilutive effect of RSUs | 1,016,437 | 709,580 | 1,018,724 | 721,860 | | Dilutive effect of warrants | 351,365 | 110,438 | 331,287 | 89,868 | | Weighted-average shares of common stock — diluted | 129,030,539 | 127,252,366 | 128,967,807 | 127,074,921 | | Net income per share - Basic | $0.12 | $0.08 | $0.23 | $0.13 | | Net income per share - Diluted | $0.11 | $0.07 | $0.22 | $0.13 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Paymentus's financial condition and results of operations for the three and six months ended June 30, 2025, compared to the same periods in 2024. It covers the company's business overview, transaction volumes, key factors affecting operating results (including economic trends and non-GAAP measures), detailed analysis of revenue and expenses, liquidity, and critical accounting policies Overview - Paymentus is a leading provider of cloud-based bill payment technology and solutions, serving over 2,500 biller businesses and financial institution clients. Its platform was used by approximately 46 million consumers and businesses globally in December 2024 for bill payments and money movements[74] - The company's SaaS platform, built on a single code base, offers easy-to-use, flexible, and secure electronic bill payment experiences across omni-channels, enabling rapid deployment of new features and helping billers collect revenue faster and more profitably[75] Transactions Processed | (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Growth | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Growth | | :---------------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Transactions processed | 175.8 | 140.4 | 25.2% | 349.0 | 275.7 | 26.6% | - The increase in transactions processed was primarily driven by the addition of new billers and increased transactions from existing billers[76] Other Key Factors and Trends Affecting Our Operating Results Impact of Economic and Inflationary Trends - Economic uncertainty, driven by trade policies, geopolitical tensions, inflation, and interest rates, is expected to persist through 2025. An economic slowdown could reduce revenue per transaction and overall volume if consumers switch to lower-cost payment methods or defer payments[78] - Conversely, a higher frequency of partial payments could increase total transaction count, potentially offsetting negative impacts. Elevated inflation could negatively affect results due to the lag in adjusting pricing strategies[78][79] Non-GAAP Measures - Paymentus uses non-GAAP measures like contribution profit, adjusted gross profit, adjusted EBITDA, and free cash flow to supplement GAAP results, providing management and investors with a clearer understanding of consolidated financial performance and facilitating period-to-period comparisons[80][85] - Interchange and assessment fees are excluded from contribution profit as they are less reflective of operating performance and are largely outside the company's control[85] Contribution Profit - Contribution profit is calculated as gross profit plus other cost of revenue (cost of revenue less interchange and assessment fees). It measures the amount available to fund operations after network fees[81][85] | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gross profit | $71,477 | $58,751 | $137,501 | $111,476 | | Plus: other cost of revenue | $22,051 | $17,730 | $43,669 | $34,372 | | Contribution profit | $93,528 | $76,481 | $181,170 | $145,848 | - Contribution profit increased by approximately 22.3% for the three months and 24.2% for the six months ended June 30, 2025, driven by growth in transaction count and volume from new and existing billers and financial institutions[87] Adjusted Gross Profit - Adjusted gross profit is gross profit adjusted for non-cash items, primarily stock-based compensation and amortization of acquisition-related intangible assets and capitalized software development costs[82] | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gross profit | $71,477 | $58,751 | $137,501 | $111,476 | | Stock-based compensation | $83 | $66 | $149 | $117 | | Amortization of capitalized software development costs | $5,517 | $4,366 | $11,155 | $8,395 | | Amortization of acquisition-related intangibles | $829 | $827 | $1,657 | $1,657 | | Adjusted gross profit | $77,906 | $64,010 | $150,462 | $121,645 | - Adjusted gross profit increased by 21.7% for the three months and 23.7% for the six months ended June 30, 2025. The percentage decreased modestly due to a shift in customer mix towards large, high-volume enterprise billers with lower margins, partially offset by economies of scale[88] Adjusted EBITDA - Adjusted EBITDA is calculated as net income before interest, other income/expense, depreciation, amortization of acquisition-related intangibles and capitalized software, and income taxes, further adjusted for foreign exchange gains/losses, stock-based compensation, and certain nonrecurring expenses[83] | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income — GAAP | $14,707 | $9,364 | $28,520 | $16,590 | | EBITDA | $26,516 | $19,244 | $52,995 | $36,142 | | Adjustments (Foreign exchange gain, Stock-based compensation) | $5,177 | $3,284 | $8,672 | $6,199 | | Adjusted EBITDA | $31,693 | $22,528 | $61,667 | $42,341 | - Adjusted EBITDA increased by 40.7% for the three months and 45.6% for the six months ended June 30, 2025, primarily due to higher revenues from transaction volume growth and operating leverage[90] Free Cash Flow - Free cash flow is calculated as net cash provided by (used in) operating activities less capital expenditures, other intangible assets acquired, and capitalized internal-use software development costs[84] | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $31,479 | $18,030 | $81,920 | $28,984 | | Purchases of property and equipment | $(116) | $(188) | $(176) | $(304) | | Capitalized internal-use software development costs | $(8,888) | $(9,086) | $(18,166) | $(18,362) | | Free cash flow | $22,475 | $8,756 | $63,578 | $10,318 | - Free cash flow increased significantly for both the three and six months ended June 30, 2025, primarily driven by higher cash generated from operations[91] Results of Operations Comparison of the Three Months Ended June 30, 2025 and 2024 | (In thousands) | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :-------------------------- | :------------ | :------------ | :--------- | :--------- | | Revenue | $280,077 | $197,422 | $82,655 | 41.9% | | Cost of revenue | $208,600 | $138,671 | $69,929 | 50.4% | | Gross profit | $71,477 | $58,751 | $12,726 | 21.7% | | Gross margin | 25.5% | 29.8% | | | | Research and development | $15,231 | $12,535 | $2,696 | 21.5% | | Sales and marketing | $29,610 | $26,766 | $2,844 | 10.6% | | General and administrative | $10,714 | $9,214 | $1,500 | 16.3% | | Total operating expenses | $55,555 | $48,515 | $7,040 | 14.5% | | Income from operations | $15,922 | $10,236 | $5,686 | 55.5% | | Interest income, net | $2,336 | $2,194 | $142 | 6.5% | | Other income | $111 | $39 | $72 | n/m | | Income before income taxes | $18,369 | $12,469 | $5,900 | 47.3% | | Provision for income taxes | $(3,662) | $(3,105) | $(557) | 17.9% | | Net income | $14,707 | $9,364 | $5,343 | 57.1% | - Revenue increased by 41.9% due to higher transaction volumes from new and existing billers. Cost of revenue rose by 50.4% in line with revenue and transaction volumes, primarily due to variable interchange fees and processor costs[95][96] - Gross margin decreased from 29.8% to 25.5% due to a customer mix shift towards new, high-volume enterprise billers with lower margins, partially offset by economies of scale[96] - Operating expenses increased across R&D (employee costs, cloud services, software amortization), Sales & Marketing (reseller commissions, warrant amortization), and G&A (professional fees, legal fees, insurance premiums)[97][98][99] - Net income increased by 57.1% to $14.7 million, and the effective tax rate decreased to 19.9% from 24.9%, influenced by permanent differences for disallowed compensation, state taxes, and discrete benefits[92][101] Comparison of the Six Months Ended June 30, 2025 and 2024 | (In thousands) | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :-------------------------- | :------------ | :------------ | :--------- | :--------- | | Revenue | $555,312 | $382,297 | $173,015 | 45.3% | | Cost of revenue | $417,811 | $270,821 | $146,990 | 54.3% | | Gross profit | $137,501 | $111,476 | $26,025 | 23.3% | | Gross margin | 24.8% | 29.2% | | | | Research and development | $30,332 | $24,586 | $5,746 | 23.4% | | Sales and marketing | $55,661 | $50,005 | $5,656 | 11.3% | | General and administrative | $19,897 | $18,306 | $1,591 | 8.7% | | Total operating expenses | $105,890 | $92,897 | $12,993 | 14.0% | | Income from operations | $31,611 | $18,579 | $13,032 | 70.1% | | Interest income, net | $4,398 | $4,380 | $18 | 0.4% | | Other income | $161 | $270 | $(109) | (40.4)% | | Income before income taxes | $36,170 | $23,229 | $12,941 | 55.7% | | Provision for income taxes | $(7,650) | $(6,639) | $(1,011) | 15.2% | | Net income | $28,520 | $16,590 | $11,930 | 71.9% | - Revenue increased by 45.3% due to new biller implementations and increased transactions from existing billers. Cost of revenue increased by 54.3% due to higher transaction volumes and variable fees[103][104] - Gross margin decreased from 29.2% to 24.8% due to a customer mix shift towards lower-margin, high-volume enterprise billers, partially offset by economies of scale[104] - Operating expenses increased across R&D (employee costs, cloud services, software amortization), Sales & Marketing (reseller commissions, warrant amortization), and G&A (professional and legal fees, offset by lower insurance premiums)[105][106][107] - Net income increased by 71.9% to $28.5 million, and the effective tax rate decreased to 21.2% from 28.6%, influenced by similar factors as the three-month period[92][109] Liquidity and Capital Resources Sources and Uses of Funds - As of June 30, 2025, Paymentus had $266.4 million in unrestricted cash and cash equivalents, which management believes is sufficient for working capital and capital expenditure requirements for at least the next 12 months[110] - Historically, operations have been financed through equity sales and revenue from payment transaction fees and subscriptions. Principal uses of cash are funding operations and capital expenditures[110] - The company may explore additional financing, but there is no assurance of availability on acceptable terms. Inability to raise capital could adversely affect business objectives, and new financing could dilute existing stockholders or impose restrictive covenants[111][112] Historical Cash Flows | (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by (used in) Operating activities | $81,920 | $28,984 | | Net cash used in Investing activities | $(17,708) | $(18,789) | | Net cash used in Financing activities | $(3,673) | $(369) | | Effects of foreign exchange on cash | $95 | $(141) | | Net increase in cash, cash equivalents and restricted cash | $60,634 | $9,685 | Net Cash Provided by Operating Activities - Net cash provided by operating activities for the six months ended June 30, 2025, was $81.9 million, driven by $28.5 million net income, $33.2 million in non-cash charges, and $20.2 million in net cash inflows from changes in operating assets and liabilities[115] - For the six months ended June 30, 2024, net cash provided by operating activities was $29.0 million, from $16.6 million net income and $27.5 million in non-cash charges, offset by $15.1 million net cash outflows from changes in operating assets and liabilities[116] Net Cash Used in Investing Activities - Net cash used in investing activities for the six months ended June 30, 2025, was $17.7 million, primarily due to $18.2 million in capitalized internal-use software development costs and $0.2 million in property and equipment purchases, partially offset by $0.6 million from interest-bearing deposits[117] - For the six months ended June 30, 2024, net cash used was $18.8 million, mainly from $18.4 million in capitalized internal-use software development costs and $0.3 million in property and equipment purchases[118] Net Cash Used in Financing Activities - Net cash used in financing activities for the six months ended June 30, 2025, was $3.7 million, primarily due to $3.8 million in tax payments withheld on net settled restricted stock units, partially offset by $0.1 million from stock-based award exercises[119] - For the six months ended June 30, 2024, net cash used was $0.4 million, mainly from $0.5 million in settlement of holdback liability related to a prior acquisition, partially offset by $0.1 million from stock-based award exercises[120] Critical Accounting Policies and Estimates - The preparation of financial statements requires management to make estimates and assumptions affecting reported amounts. No material changes to critical accounting policies and estimates have occurred since December 31, 2024, except for those disclosed in Note 2[121] Recent Accounting Pronouncements - Refer to Note 2, 'Basis of Presentation and Summary of Significant Accounting Policies,' for a full description of recent accounting pronouncements, including adoption dates and effects on condensed consolidated financial statements[122] Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in Paymentus's exposure to market risk since December 31, 2024. Details on interest rate, foreign currency exchange, and inflation risks are available in the 2024 Form 10-K - No material changes in market risk exposure since December 31, 2024. For details on interest rate, foreign currency exchange, and inflation risks, refer to the 2024 Form 10-K[123] Item 4. Controls and Procedures This section details the evaluation of Paymentus's disclosure controls and procedures and internal control over financial reporting. Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2025, and there were no material changes in internal control over financial reporting during the quarter Evaluation of Disclosure Controls and Procedures - Management, with CEO and CFO participation, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2025, concluding they were effective at a reasonable assurance level[125] Changes in Internal Control over Financial Reporting - There were no material changes in internal control over financial reporting during the three months ended June 30, 2025[126] Inherent Limitations on Effectiveness of Controls - Management acknowledges that no control system can prevent or detect all errors and fraud, providing only reasonable, not absolute, assurance. Controls may become inadequate over time due to changing conditions or deteriorating compliance[127] PART II. OTHER INFORMATION This part covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings Paymentus is not currently party to any material legal proceedings and is unaware of any pending or threatened legal actions that could have a material adverse effect on its business, operating results, cash flows, or financial condition, beyond those referred to in Note 8 of the condensed consolidated financial statements - The Company is not currently involved in any material legal proceedings and is unaware of any pending or threatened legal actions that could materially adversely affect its business, operating results, cash flows, or financial condition, except as noted in Note 8[129] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in Item 1A of the Company's 2024 Form 10-K - No material changes to risk factors previously disclosed in the 2024 Form 10-K[130] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds during the reporting period - None[131] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the reporting period - None[132] Item 4. Mine Safety Disclosures This item is not applicable to Paymentus Holdings, Inc. - Not Applicable[133] Item 5. Other Information During the quarter ended June 30, 2025, none of the Company's directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement - No directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025[134] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including organizational documents, equity incentive plan agreements, insider trading policy, and certifications from the principal executive and financial officers - Exhibits include Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, Form of Restricted Stock Unit Agreement, Insider Trading Policy, and Certifications of Principal Executive and Financial Officers (31.1, 31.2, 32.1, 32.2)[135] Signatures This section provides the official signatures certifying the accuracy and completeness of the report - The report was signed on August 4, 2025, by Dushyant Sharma, Chairman, President and Chief Executive Officer, and Sanjay Kalra, Senior Vice President and Chief Financial Officer[140]