Repay (RPAY) - 2021 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This part presents the unaudited consolidated financial statements, management's discussion and analysis, and disclosures on market risk and internal controls Item 1. Consolidated Financial Statements This section presents the unaudited consolidated financial statements, including a significant restatement due to warrant accounting reclassification - The Company re-evaluated its historical accounting for Warrants, concluding they should be classified as liabilities rather than equity, leading to a restatement of previously issued financial statements[32][33] - This change had no impact on the Company's liquidity or cash position[34] Consolidated Balance Sheet Highlights (June 30, 2021 vs. December 31, 2020) | Metric | June 30, 2021 | December 31, 2020 | Change | Change (%) | | :-------------------------- | :-------------- | :---------------- | :----- | :--------- | | Total Assets | $1,645,170,086 | $1,109,978,140 | $535,191,946 | 48.2% | | Total Liabilities | $734,195,638 | $553,796,069 | $180,399,569 | 32.6% | | Total Stockholders' Equity | $869,177,815 | $509,313,721 | $359,864,094 | 70.7% | | Cash and cash equivalents | $120,400,640 | $91,129,888 | $29,270,752 | 32.1% | | Goodwill | $751,193,501 | $458,970,255 | $292,223,246 | 63.7% | Consolidated Statements of Operations Highlights (Three Months Ended June 30) | Metric | 2021 | 2020 | Change | Change (%) | | :------------------------------------ | :----------- | :----------- | :----- | :--------- | | Revenue | $48,411,871 | $36,500,525 | $11,911,346 | 32.6% | | (Loss) Income from operations | $(12,329,954) | $(6,689,912) | $(5,640,042) | 84.3% | | Net (loss) income | $(13,349,895) | $(83,200,222) | $69,850,327 | -84.0% | | Net (loss) income attributable to the Company | $(12,269,097) | $(79,297,163) | $67,028,066 | -84.5% | | Loss per Class A share (Basic and diluted) | $(0.15) | $(1.90) | $1.75 | -92.1% | Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30) | Metric | 2021 | 2020 | Change | Change (%) | | :-------------------------------- | :----------- | :----------- | :----- | :--------- | | Net cash provided by operating activities | $16,867,291 | $9,417,759 | $7,449,532 | 79.1% | | Net cash used in investing activities | $(286,509,580) | $(43,728,473) | $(242,781,107) | 555.2% | | Net cash provided by financing activities | $303,676,428 | $176,118,827 | $127,557,601 | 72.4% | | Increase in cash, cash equivalents and restricted cash | $34,034,139 | $141,808,113 | $(107,773,974) | -76.0% | 1. Organizational Structure and Corporate Information The company completed a public offering of common shares and a private placement of convertible senior notes in January 2021 - Repay Holdings Corporation was incorporated in Delaware on July 11, 2019, following a business combination with Thunder Bridge Acquisition Ltd[25] - The Company completed an underwritten public offering of 6,244,500 Class A common shares at $24.00 per share on January 19, 2021[28] - On January 19, 2021, the Company issued $440.0 million in 0.00% Convertible Senior Notes due 2026 in a private placement[29] - Key acquisitions in June 2021 include BillingTree for approximately $506.6 million and Kontrol for up to $11.0 million[30][31] - The Company restated previously issued financial statements due to a re-evaluation of warrant accounting, reclassifying warrants from equity to liabilities[32][33] 2. Basis of Presentation and Summary of Significant Accounting Policies The financial statements are prepared in accordance with GAAP, and the company adopted new accounting standards for income taxes and convertible instruments - The unaudited interim consolidated financial statements are prepared in accordance with GAAP and SEC Regulation S-X, and include all adjustments of a normal recurring nature[35][36] - The Company adopted ASU 2019-12 (Income Taxes) as of January 1, 2021, with no material impact[42] - It also early adopted ASU 2020-06 (Convertible Instruments) as of January 1, 2021, which led to the recognition of $440.0 million in noncurrent long-term debt[43][45] 3. Revenue The company's revenue streams now include software revenue from term licenses and maintenance following the acquisition of BillingTree - Following the acquisition of BillingTree, the Company now includes software revenue, which consists of term license fees and software maintenance/support[47][49] - Revenue from term licenses is recognized at a point in time upon delivery, while PCS revenue is recognized over the contract term[50] Disaggregation of Revenue (Three and Six Months Ended June 30) | Revenue Source | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Direct relationships | $47,286,567 | $35,873,834 | $94,042,003 | $74,589,458 | | Indirect relationships | $1,125,304 | $626,691 | $1,890,364 | $1,373,604 | | Total Revenue | $48,411,871 | $36,500,525 | $95,932,367 | $75,963,062 | 4. Earnings Per Share Basic and diluted net loss per share are identical due to the anti-dilutive effect of potential common stock equivalents - Basic and diluted net loss per common share are the same due to anti-dilutive effects of potential common stock equivalents[53] - Common stock equivalents, including Post-Merger Repay Units, dilutive warrants (in 2020), unvested restricted share awards, and 2026 Notes, were excluded from diluted EPS calculation[54] Loss Per Class A Share and Weighted-Average Shares Outstanding (Three and Six Months Ended June 30) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss attributable to the Company | $(12,269,097) | $(79,297,163) | $(28,062,998) | $(89,627,302) | | Weighted average shares outstanding (Basic and diluted) | 79,781,185 | 41,775,128 | 78,200,752 | 39,699,841 | | Loss per Class A share (Basic and diluted) | $(0.15) | $(1.90) | $(0.36) | $(2.26) | 5. Business Combinations The company completed several strategic acquisitions, significantly increasing goodwill and intangible assets on its balance sheet - The Company completed several acquisitions: Ventanex, cPayPlus, CPS, BillingTree (for ~$506.6M), and Kontrol (for up to $11.0M)[55][59][63][67][71] - Goodwill recognized from these acquisitions includes $292.7M for BillingTree, representing the excess of consideration over fair value of net assets[58][62][66][69][73] - BillingTree contributed $2.4 million to revenue and Kontrol contributed $0.1 million to revenue in their respective partial periods in June 2021[70][74] Pro Forma Financial Information (Six Months Ended June 30) | Metric | Pro Forma Six Months Ended June 30, 2021 | Pro Forma Six Months Ended June 30, 2020 | | :------------------------------------ | :--------------------------------------- | :--------------------------------------- | | Revenue | $124,699,561 | $111,516,262 | | Net loss | $(28,023,722) | $(96,175,597) | | Net loss attributable to the Company | $(25,053,873) | $(89,339,975) | | Loss per Class A share - basic and diluted | $(0.32) | $(2.25) | 6. Fair Value The company's financial instruments are measured at fair value, with contingent consideration and tax receivable agreement liabilities classified as Level 3 - The Company's assets and liabilities measured at fair value include cash, restricted cash, contingent consideration, borrowings, and tax receivable agreement liability[78][79][80][81][82][86][87] - Contingent consideration and tax receivable agreement liabilities are classified as Level 3 due to unobservable inputs and are re-measured each period[82][87] - Both interest rate swaps were settled as of June 30, 2021[93] Fair Value of Liabilities (June 30, 2021 vs. December 31, 2020) | Liability | June 30, 2021 | December 31, 2020 | | :------------------------ | :-------------- | :---------------- | | Contingent consideration | $17,800,000 | $15,800,000 | | Borrowings | $427,950,300 | $256,713,396 | | Tax receivable agreement | $234,964,662 | $229,228,105 | | Interest rate swap | — | $9,312,332 | 7. Property and Equipment The company's net property and equipment increased, with depreciation expense remaining relatively stable year-over-year - Depreciation expense for property and equipment was $0.3 million for Q2 2021 (vs $0.3M in Q2 2020) and $0.6 million for H1 2021 (vs $0.5M in H1 2020)[94] Property and Equipment, Net (June 30, 2021 vs. December 31, 2020) | Category | June 30, 2021 | December 31, 2020 | | :-------------------------------- | :-------------- | :---------------- | | Furniture, fixtures, and office equipment | $2,084,797 | $1,112,702 | | Computers | $2,242,161 | $1,733,672 | | Leasehold improvements | $390,748 | $340,333 | | Total | $4,717,706 | $3,186,707 | | Less: Accumulated depreciation and amortization | $2,114,643 | $1,558,268 | | Net Property, plant and equipment | $2,603,063 | $1,628,439 | 8. Intangible Assets Intangible assets grew substantially due to acquisitions, with amortization expense increasing accordingly and no impairment recognized - Indefinite-lived intangible assets, primarily trade names from various acquisitions, increased to $30.1 million as of June 30, 2021, from $22.2 million at December 31, 2020[95] - Amortization expense for intangible assets was $19.1 million for Q2 2021 and $36.6 million for H1 2021[96] - The Company concluded that intangible assets were not impaired as of June 30, 2021[97] Definite-Lived Intangible Assets, Net (June 30, 2021 vs. December 31, 2020) | Category | Net Carrying Value (June 30, 2021) | Net Carrying Value (December 31, 2020) | | :---------------------- | :------------------------------- | :------------------------------- | | Customer relationships | $458,546,190 | $268,529,422 | | Channel relationships | $11,480,565 | $12,358,064 | | Software costs | $80,252,218 | $64,434,985 | | Non-compete agreements | $956,250 | $1,674,667 | | Total | $551,235,223 | $346,997,138 | 9. Goodwill Goodwill increased significantly due to the BillingTree and Kontrol acquisitions, with no impairment identified as of June 30, 2021 - Goodwill increased significantly due to acquisitions, primarily BillingTree and Kontrol[99] - The Company concluded that goodwill was not impaired as of June 30, 2021[99] Changes in Goodwill (Six Months Ended June 30, 2021) | Metric | Amount | | :------------------------ | :------------- | | Balance at December 31, 2020 | $458,970,255 | | Acquisitions | $293,734,024 | | Measurement period adjustment | $(1,510,778) | | Balance at June 30, 2021 | $751,193,501 | 10. Borrowings The company restructured its debt by issuing convertible notes to prepay term loans and establishing a new revolving credit facility - The Company prepaid its outstanding Term Loans using proceeds from the 2026 Notes in January 2021[102] - A new undrawn $125 million senior secured revolving credit facility replaced the Successor Credit Agreement in February 2021[103] - On January 19, 2021, the Company issued $440.0 million in 0.00% Convertible Senior Notes due 2026[105][106] - Interest expense decreased significantly due to the lower average outstanding principal balance under the Amended Credit Agreement[110] Total Borrowings (June 30, 2021 vs. December 31, 2020) | Indebtedness | June 30, 2021 | December 31, 2020 | | :------------------------------------------------- | :-------------- | :---------------- | | Term Loan | — | $262,653,996 | | Revolving Credit Facility | — | — | | Convertible Senior Debt | $440,000,000 | — | | Total borrowings under credit facility and convertible senior debt | $440,000,000 | $262,653,996 | | Less: Current maturities of long-term debt | — | $6,760,650 | | Less: Long-term loan debt issuance cost | $12,049,700 | $5,940,600 | | Total non-current borrowings | $427,950,300 | $249,952,746 | 11. Derivative Instruments The company settled its interest rate swaps used for hedging variable-rate debt, resulting in a realized loss of $9.3 million - The Company uses interest rate swaps to hedge exposure to interest rate movements on its variable-rate term loan[113] - Both interest rate swaps were settled as of June 30, 2021, resulting in a realized loss of $9.3 million recorded in Other loss for the six months ended June 30, 2021[114][116] 12. Commitments and Contingencies The company's primary commitments relate to operating leases for real estate, with total lease liabilities of $11.4 million - The Company has commitments under operating leases for real estate, with ROU assets of $10.9 million and total lease liabilities of $11.4 million as of June 30, 2021[117][119] - The weighted-average remaining lease term is 5.7 years with a weighted-average discount rate of 4.3%[119] Operating Lease Liabilities Maturity Analysis (June 30, 2021) | Year | Undiscounted Lease Payments | | :---------------------- | :-------------------------- | | 2021 | $1,164,049 | | 2022 | $2,261,605 | | 2023 | $2,311,391 | | 2024 | $2,124,176 | | 2025 | $1,936,698 | | Thereafter | $3,095,550 | | Total undiscounted lease payments | $12,893,469 | | Less: Imputed interest | $1,540,097 | | Total lease liabilities | $11,353,372 | 13. Related Party Transactions Related party transactions primarily consist of accrued earnout liabilities from acquisitions and transaction costs for new businesses - The Company incurred transaction costs on behalf of related parties of $1.7 million for Q2 2021 and $2.9 million for H1 2021, primarily for retention bonuses and integration costs[121] Related Party Payables (June 30, 2021 vs. December 31, 2020) | Liability | June 30, 2021 | December 31, 2020 | | :-------------------------- | :-------------- | :---------------- | | Ventanex accrued earnout liability | $3,800,000 | $4,800,000 | | cPayPlus accrued earnout liability | $8,000,000 | $6,500,000 | | CPS accrued earnout liability | $4,500,000 | $4,500,000 | | BillingTree accrued earnout liability | $1,000,000 | — | | Kontrol accrued earnout liability | $500,000 | — | | Other payables to related parties | $300,515 | $11,597 | | Total | $18,100,515 | $15,811,597 | 14. Share Based Compensation The company recorded share-based compensation expense and has a significant amount of unrecognized expense related to unvested awards - The Company's Incentive Plan includes PSUs, RSAs, and RSUs[122] - Unrecognized compensation expense related to unvested awards was $29.9 million at June 30, 2021, expected to be recognized over a weighted-average period of 2.74 years[125] - Share-based compensation expense was $5.5 million for Q2 2021 and $10.7 million for H1 2021[125] Share-Based Compensation Activity (Six Months Ended June 30, 2021) | Metric | Class A Common Stock | | :------------------------ | :------------------- | | Unvested at December 31, 2020 | 2,523,431 | | Granted | 748,428 | | Forfeited | 129,235 | | Vested | 281,679 | | Unvested at June 30, 2021 | 2,860,945 | 15. Taxation The company's effective tax rate and income tax benefit increased significantly, influenced by acquisitions and the Tax Receivable Agreement - The Company's effective tax rate was 23.6% for Q2 2021 (vs 4.5% in Q2 2020) and 24.3% for H1 2021 (vs 4.9% in H1 2020)[127][129] - A deferred tax asset of $118.0 million was recognized for H1 2021, primarily due to basis differences in Hawk Parent investment and Post-Merger Repay Unit exchanges[131] - The Tax Receivable Agreement (TRA) liability increased by $5.7 million to $235.0 million for H1 2021[137] 16. Subsequent events No subsequent events requiring adjustment or disclosure in the financial statements were identified after the reporting period - Management evaluated subsequent events through August 9, 2021, and did not identify any events requiring adjustment or disclosure in the financial statements[138] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, key business factors, non-GAAP measures, and liquidity, including the impact of recent acquisitions - Repay is a leading payments technology company providing integrated payment processing solutions to industry-oriented vertical markets[142] - Card payment volume is a key operating metric, growing approximately 28% for Q2 2021 and 24% for H1 2021[143] - Recent acquisitions of BillingTree (June 2021 for ~$506.6M) and Kontrol (June 2021 for up to $11.0M) are key factors affecting the business[147][148] Key Financial Results (Three Months Ended June 30) | Metric | 2021 | 2020 | Change | Change (%) | | :------------------------------------ | :----------- | :----------- | :----- | :--------- | | Revenue | $48,412 | $36,501 | $11,911 | 32.6% | | Operating expenses | $60,742 | $43,191 | $17,551 | 40.6% | | Net income (loss) | $(13,351) | $(83,200) | $69,849 | -84.0% | | Adjusted EBITDA | $20,403 | $16,221 | $4,182 | 25.8% | | Adjusted Net Income | $13,983 | $11,082 | $2,901 | 26.2% | Key Financial Results (Six Months Ended June 30) | Metric | 2021 | 2020 | Change | Change (%) | | :------------------------------------ | :----------- | :----------- | :----- | :--------- | | Revenue | $95,932 | $75,963 | $19,969 | 26.3% | | Operating expenses | $117,052 | $86,032 | $31,020 | 36.1% | | Net income (loss) | $(31,331) | $(96,383) | $65,052 | -67.5% | | Adjusted EBITDA | $40,864 | $33,571 | $7,293 | 21.7% | | Adjusted Net Income | $29,066 | $23,445 | $5,621 | 24.0% | Overview The company provides integrated payment solutions in specialized vertical markets, focusing on tailored services and strategic growth - Repay Holdings Corporation is a leading payments technology company providing integrated payment processing solutions to specialized vertical markets[142] - Card payment volume was approximately $4.6 billion for Q2 2021 and $9.2 billion for H1 2021, with year-over-year growth of approximately 28% and 24%, respectively[143] - The Company restated previously issued consolidated financial statements for periods following the Business Combination through December 31, 2020, due to warrant accounting corrections[145] Key Factors Affecting Our Business Business performance is driven by payment volume, merchant acquisition, successful integrations, and new technology solutions - Key factors impacting the business include card payment volume, ability to attract new merchants, successful integration of acquisitions, and offering new payment technology solutions[146] - Recent acquisitions include BillingTree (June 15, 2021, for ~$506.6 million) and Kontrol LLC (June 22, 2021, for up to $11.0 million)[147][148] Key Components of Our Revenues and Expenses Revenue is primarily from payment processing fees, while key expenses include service costs, SG&A, and amortization - Revenues are primarily derived from volume-based payment processing fees (discount fees) and fixed per-transaction fees[149] - Key expenses include other costs of services, selling, general and administrative, depreciation and amortization, interest expense, and changes in fair value of liabilities[150][151][152][153][154] Results of Operations This section compares operational results for the three and six months ended June 30, 2021, against the prior year Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020 Revenue grew 32.6% year-over-year, driven by acquisitions and customer growth, though operating expenses also increased significantly - Revenue increase was driven by new and existing customers, and acquisitions contributing approximately $6.0 million[156] - Operating expenses increased due to business growth and acquisition-related costs[157][158][160] - Interest expense decreased significantly due to a lower average outstanding principal balance under the Amended Credit Agreement[162] - The change in fair value of warrant liabilities was $0 in 2021 as all warrants were redeemed in July 2020[163] Financial Performance (Three Months Ended June 30) | Metric | 2021 (in $ thousands) | 2020 (in $ thousands) | Change (in $ thousands) | Change (%) | | :------------------------------------ | :-------------------- | :-------------------- | :---------------------- | :--------- | | Revenue | $48,412 | $36,501 | $11,911 | 32.6% | | Other Costs of Services | $12,721 | $8,727 | $3,994 | 45.8% | | Selling, General and Administrative | $29,542 | $19,018 | $10,524 | 55.3% | | Depreciation and Amortization | $19,679 | $14,706 | $4,973 | 33.8% | | Change in Fair Value of Contingent Consideration | $(1,200) | $740 | $(1,940) | -262.2% | | Interest Expense | $817 | $3,704 | $(2,887) | -77.9% | | Change in Fair Value of Warrant Liabilities | — | $(66,670) | $66,670 | -100.0% | | Change in Fair Value of Tax Receivable Liability | $(4,355) | $(10,038) | $5,683 | -56.6% | | Income Tax Benefit | $4,117 | $3,897 | $220 | 5.6% | Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020 Revenue increased 26.3% year-over-year, supported by acquisitions, while net loss was impacted by debt extinguishment and swap settlement costs - Revenue growth was supported by acquisitions contributing approximately $9.0 million[166] - A $5.9 million loss on extinguishment of debt was recorded due to termination of Delayed Draw Term Loan commitments[172][173] - A $9.1 million loss was incurred on the settlement of interest rate swaps[176] - Income tax benefit increased due to operating losses driven by stock-based compensation, asset amortization, and debt write-offs[178] Financial Performance (Six Months Ended June 30) | Metric | 2021 (in $ thousands) | 2020 (in $ thousands) | Change (in $ thousands) | Change (%) | | :------------------------------------ | :-------------------- | :-------------------- | :---------------------- | :--------- | | Revenue | $95,932 | $75,963 | $19,969 | 26.3% | | Other Costs of Services | $25,196 | $19,498 | $5,698 | 29.2% | | Selling, General and Administrative | $52,935 | $37,184 | $15,751 | 42.4% | | Depreciation and Amortization | $37,472 | $28,610 | $8,862 | 31.0% | | Change in Fair Value of Contingent Consideration | $1,449 | $740 | $709 | 95.8% | | Interest Expense | $2,000 | $7,222 | $(5,222) | -72.3% | | Loss on Extinguishment of Debt | $(5,941) | — | $(5,941) | -100.0% | | Change in Fair Value of Warrant Liabilities | — | $(73,568) | $73,568 | -100.0% | | Change in Fair Value of Tax Receivable Liability | $(3,312) | $(10,580) | $7,268 | -68.7% | | Other Loss (Interest Rate Swaps) | $(9,080) | — | $(9,080) | -100.0% | | Income Tax Benefit | $10,059 | $5,012 | $5,047 | 100.7% | Non-GAAP Financial Measures Management utilizes Adjusted EBITDA and Adjusted Net Income to evaluate core operating performance, excluding non-recurring items - Adjusted EBITDA and Adjusted Net Income are non-GAAP measures used by management to evaluate operating performance, excluding non-cash and non-recurring charges[179][180][181] - Adjusted EBITDA increased by 25.8% YoY for Q2 2021 and 21.7% YoY for H1 2021[196][198] - Adjusted Net Income increased by 26.2% YoY for Q2 2021 and 24.0% YoY for H1 2021, primarily due to organic growth and acquisitions[200] Adjusted EBITDA Reconciliation (Three and Six Months Ended June 30) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $(13,351) | $(83,200) | $(31,331) | $(96,383) | | Add: Interest expense | $817 | $3,704 | $2,000 | $7,222 | | Add: Depreciation and amortization | $19,679 | $14,706 | $37,472 | $28,610 | | Add: Income tax (benefit) | $(4,117) | $(3,897) | $(10,059) | $(5,012) | | EBITDA | $3,028 | $(68,687) | $(1,918) | $(65,563) | | Add: Non-cash adjustments & non-recurring charges | $17,375 | $84,908 | $42,782 | $99,134 | | Adjusted EBITDA | $20,403 | $16,221 | $40,864 | $33,571 | Adjusted Net Income Reconciliation (Three and Six Months Ended June 30) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $(13,351) | $(83,200) | $(31,331) | $(96,383) | | Add: Non-GAAP adjustments | $34,927 | $98,622 | $76,869 | $125,952 | | Adjusted Net Income | $13,983 | $11,082 | $29,066 | $23,445 | | Adjusted Net income per share | $0.16 | $0.16 | $0.34 | $0.34 | Seasonality The business experiences seasonality with higher volumes in the first quarter, impacting revenue and net income patterns - The Company experiences seasonal fluctuations, with volumes and revenues typically increasing in the first quarter due to consumer tax refunds and increased repayment activity[201] Liquidity and Capital Resources The company maintains liquidity through cash reserves, borrowing capacity, and cash flows from operations to fund growth and obligations Cash Flows Operating cash flow increased, while investing activities surged due to acquisitions and financing activities were driven by new share and note issuances - As of June 30, 2021, the Company had $120.4 million in cash and cash equivalents and $125.0 million in available borrowing capacity[202] - Net cash used in investing activities significantly increased to $286.5 million in H1 2021, primarily due to the acquisitions of BillingTree and Kontrol[208] - Net cash provided by financing activities increased to $303.7 million, driven by new share issuance and convertible notes, offset by debt repayments[209] Summary of Cash Flows (Six Months Ended June 30) | Activity | 2021 (in $ thousands) | 2020 (in $ thousands) | | :-------------------------------- | :-------------------- | :-------------------- | | Net cash provided by operating activities | $16,867 | $9,418 | | Net cash used in investing activities | $(286,510) | $(43,728) | | Net cash provided by financing activities | $303,676 | $176,119 | Indebtedness The company refinanced its debt, prepaying term loans with proceeds from new convertible senior notes and securing a new revolving credit facility - The Company prepaid all outstanding Term Loans in January 2021 using proceeds from the 2026 Notes[213] - A new undrawn $125 million senior secured revolving credit facility was closed in February 2021, replacing the previous facility[214] - As of June 30, 2021, the Company had $0.0 million drawn against the revolving credit facility and $428.0 million in convertible senior debt (2026 Notes), net of deferred issuance costs[215][216] Tax Receivable Agreement The company has significant future payment obligations under the TRA, funded by expected cash tax savings from basis step-ups - The Tax Receivable Agreement (TRA) liability represents 100% of estimated future tax benefits from increases in tax basis due to redemptions or exchanges of Post-Merger Repay Units[218][219] Critical Accounting Policies and Recently Issued Accounting Pronouncements Details on critical accounting policies and recent pronouncements are referenced in the Annual Report and other notes - For critical accounting policies and recent accounting pronouncements, refer to the Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and Note 2 of this Form 10-Q[220][221] Off-Balance Sheet Arrangements The company reports no material off-balance sheet arrangements for the periods presented - The Company did not have any material off-balance sheet arrangements as of June 30, 2021, or December 31, 2020[222] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks include interest rate fluctuations on its variable-rate debt and the upcoming LIBOR transition - The Company believes the effects of inflation on its results of operations and financial condition have not been significant to date[224] - The Company is exposed to interest rate risk on its variable-rate debt; a 1.0% change in interest rates would have impacted cash interest expense by approximately $1.0 million per annum in 2020[225][226] - The phase-out of LIBOR rates by the end of 2021 could unpredictably affect interest payment obligations under the Amended Credit Agreement[228] Item 4. Controls and Procedures A material weakness in internal control related to warrant accounting was identified, and remediation efforts are underway - As of June 30, 2021, the Company's disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting related to warrant accounting[232] - The material weakness stemmed from insufficient review controls over complex, non-routine transactions, specifically the accounting for public and private placement warrants[233] - Remediation steps include expanding the review process for complex securities, enhancing access to accounting literature, and consulting with third-party professionals[233] PART II – OTHER INFORMATION This part covers legal proceedings, risk factors, equity sales, and other required disclosures Item 1. Legal Proceedings The company is not involved in any legal proceedings expected to have a material adverse effect on its business - The Company is a defendant in legal actions from normal business activities but does not anticipate any material adverse effect from currently pending proceedings[236] Item 1A. Risk Factors No material changes to the risk factors disclosed in the company's 2020 Annual Report on Form 10-K have occurred - No material changes have occurred with respect to the risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2020[237] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased shares from employees to satisfy tax withholding obligations on vested restricted stock awards - The Company withheld 30,121 shares of Class A common stock at an average price of $23.35 per share to cover employees' tax withholding obligations[238] Purchases of Class A Common Stock to Satisfy Tax Obligations (Three Months Ended June 30, 2021) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--------------- | :------------------------------- | :--------------------------- | | April 1-30, 2021 | 10,033 | $24.08 | | May 1-31, 2021 | 10,030 | $21.98 | | June 1-30, 2021 | 10,058 | $23.99 | | Total | 30,121 | $23.35 | Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[239] Item 4. Mine Safety Disclosures This section is not applicable as the company has no mining operations - There were no mine safety disclosures[240] Item 5. Other Information No other material information was required to be disclosed during the period - There was no other information to report[241] Item 6. Exhibits This section lists all exhibits filed with the report, including agreements, certificates, and officer certifications - Exhibits include the Agreement and Plan of Merger for BT Intermediate, LLC, Certificate of Corporate Domestication, By-Laws, and Registration Rights Agreement[245] - Certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are filed herewith[245] Signatures The report is duly signed by the Chief Executive Officer and Chief Financial Officer on behalf of the company - The report was signed by John Morris, Chief Executive Officer, and Timothy J. Murphy, Chief Financial Officer, on August 9, 2021[249]