Repay (US:RPAY)2021-11-09 21:16PART I – FINANCIAL INFORMATION Consolidated Financial Statements The consolidated financial statements present the company's financial position and performance, highlighting asset growth and a reduced net loss Consolidated Balance Sheet Highlights (Unaudited) | Account | Sep 30, 2021 ($ million) | Dec 31, 2020 ($ million) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $116.5 million | $91.1 million | | Goodwill | $751.5 million | $459.0 million | | Customer and channel relationships, net | $461.1 million | $280.9 million | | Total Assets | $1,645.4 million | $1,110.0 million | | Liabilities & Equity | | | | Long-term debt, net | $428.6 million | $250.0 million | | Tax receivable agreement | $231.5 million | $229.2 million | | Total Liabilities | $722.6 million | $553.8 million | | Total Stockholders' Equity | $882.2 million | $509.3 million | Consolidated Statement of Operations Highlights (Unaudited) | Metric | Three Months Ended Sep 30, 2021 ($ million) | Three Months Ended Sep 30, 2020 ($ million) | Nine Months Ended Sep 30, 2021 ($ million) | Nine Months Ended Sep 30, 2020 ($ million) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $61.1 million | $37.6 million | $157.1 million | $113.6 million | | Loss from operations | ($12.2 million) | ($13.1 million) | ($33.3 million) | ($23.2 million) | | Net Loss | ($7.3 million) | ($12.1 million) | ($38.6 million) | ($108.4 million) | | Net loss attributable to the Company | ($6.3 million) | ($6.8 million) | ($34.3 million) | ($96.4 million) | | Loss per Class A share (Basic & Diluted) | ($0.07) | ($0.12) | ($0.42) | ($2.10) | - The financial statements for the three and nine months ended September 30, 2020 have been restated to reflect a change in the accounting treatment of warrants, which were reclassified from equity to liability. This restatement significantly impacted the 2020 net loss due to the change in fair value of warrant liabilities3435 Notes to the Unaudited Consolidated Financial Statements The notes detail significant corporate events and accounting policies, including major acquisitions, capital raises, and goodwill changes - On June 15, 2021, the Company acquired BillingTree for approximately $506.6 million, comprising ~$278.3 million in cash and ~10 million shares of Class A common stock3171 - On June 22, 2021, the Company acquired substantially all assets of Kontrol LLC for up to $11.0 million, with $7.5 million paid at closing3276 - In January 2021, the Company issued $440.0 million of 0.00% Convertible Senior Notes due 2026 and completed an equity offering of 6.24 million shares at $24.00 per share2930119 Goodwill Changes (Nine Months Ended Sep 30, 2021) | Description | Amount ($) | | :--- | :--- | | Balance at December 31, 2020 | $458,970,255 | | Acquisitions | $294,075,364 | | Measurement period adjustment | ($1,510,778) | | Balance at September 30, 2021 | $751,534,841 | - The Tax Receivable Agreement (TRA) liability was $231.5 million as of September 30, 2021, an increase of $2.3 million from year-end 2020, primarily due to exchanges of Post-Merger Repay Units146 Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes strong revenue growth to organic expansion and acquisitions, with Q3 2021 revenue up 62.4% and robust non-GAAP performance - Total card payment volume processed was approximately $5.6 billion for Q3 2021 and $14.8 billion for the nine months ended September 30, 2021, representing growth of 48% and 32% over the same periods in 2020, respectively152 Revenue and Expense Analysis (Q3 2021 vs Q3 2020) | Item | Q3 2021 ($ million) | Q3 2020 ($ million) | Change ($ million) | Change % | | :--- | :--- | :--- | :--- | :--- | | Revenue | $61.1 million | $37.6 million | +$23.5 million | +62.4% | | Other Costs of Services | $15.3 million | $10.5 million | +$4.8 million | +45.7% | | SG&A Expenses | $33.7 million | $28.6 million | +$5.1 million | +17.9% | | Depreciation & Amortization | $25.9 million | $15.4 million | +$10.5 million | +68.0% | - For Q3 2021, incremental revenues of approximately $17.8 million are attributable to the acquisitions of cPayPlus, CPS, BillingTree, and Kontrol165 Non-GAAP Performance (YoY Growth) | Metric | Q3 2021 ($ million) | Q3 2020 ($ million) | YoY Growth | | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $27.0 million | $15.6 million | 73.2% | | Adjusted Net Income | $19.0 million | $10.8 million | 76.5% | Liquidity and Capital Resources The company maintained strong liquidity with substantial cash and credit, supported by significant financing activities and positive operating cash flow - As of September 30, 2021, the company had $116.5 million of cash and cash equivalents and an available borrowing capacity of $125.0 million under the Amended Credit Agreement210 Cash Flow Summary (Nine Months Ended Sep 30) | Cash Flow Activity | 2021 ($ million) | 2020 ($ million) | | :--- | :--- | :--- | | Net cash provided by operating activities | $31.5 million | $6.7 million | | Net cash used in investing activities | ($296.6 million) | ($55.2 million) | | Net cash provided by financing activities | $295.7 million | $203.2 million | - Net cash used in investing activities of $296.6 million was primarily for the acquisitions of BillingTree and Kontrol and software development216 - Net cash from financing activities of $295.7 million was driven by proceeds from the Equity Offering and the 2026 Notes issuance, offset by debt repayments217 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate exposure on its debt, with LIBOR phase-out being monitored - The company is exposed to interest rate risk on its debt. As of September 30, 2021, it had $430.3 million in convertible senior debt and no borrowings under its $125 million revolving credit facility234 - Two interest rate swaps, which previously hedged $205.0 million of variable-rate debt, were settled in January 2021235236 - The company is monitoring the planned phase-out of LIBOR by the end of 2021, which may impact future interest payment obligations237 Controls and Procedures Management concluded that disclosure controls were effective, with a previously identified material weakness in warrant accounting remediated - The Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2021, the company's disclosure controls and procedures were effective240 - A material weakness identified in Q1 2021 concerning the accounting for warrants has been remediated as of September 30, 2021241242 - Remediation steps included expanding the review process for complex securities, enhancing access to accounting literature, and consulting with third-party professionals241242 PART II – OTHER INFORMATION Legal Proceedings The company is involved in various legal actions, but none are expected to have a material adverse effect on its financial condition - The company does not expect any currently pending legal proceedings to have a material adverse effect on its business, financial condition, or results of operations244 Risk Factors There have been no material changes to the risk factors previously disclosed in the company's 2020 Annual Report on Form 10-K - No material changes have occurred with respect to the risk factors disclosed in the company's amended 2020 Form 10-K245 Unregistered Sales of Equity Securities and Use of Proceeds During Q3 2021, the company withheld 17,452 shares of Class A common stock for employee tax withholding obligations Share Withholding for Tax Obligations (Q3 2021) | Period | Total Shares Purchased | Average Price Paid per Share ($ per share) | | :--- | :--- | :--- | | July 1-31, 2021 | 8,757 | $24.78 | | August 1-31, 2021 | 4,732 | $22.80 | | September 1-30, 2021 | 3,963 | $22.68 | | Total | 17,452 | $23.77 | Other Information The 2022 Annual Meeting of Stockholders is scheduled for June 8, 2022, with new deadlines for stockholder proposals - The 2022 Annual Meeting of Stockholders is scheduled for on or about June 8, 2022250 - The deadline for stockholder proposals to be included in the proxy statement is February 15, 2022250 Exhibits This section lists the exhibits filed with the Form 10-Q, including officer certifications and financial statements