Repay (US:RPAY)2022-03-01 21:16PART I Business Overview Repay Holdings Corporation is a leading payment technology company providing integrated solutions for specific vertical markets - Repay Holdings Corporation is a leading payment technology company providing integrated payment processing solutions for vertical markets such as personal loans, auto loans, accounts receivable management, and B2B2426387 - The company simplifies electronic payment processes through its proprietary technology platform and integrations with key software providers, aiming to expand market share and product portfolio through organic growth and strategic acquisitions242728 2021 Key Operational Metrics | Metric | 2021 Data | | :--- | :--- | | Total Card Payment Volume | Approx $20.5 billion | | Year-over-Year Growth Rate | Approx 35% | | Number of Clients (as of Dec 31) | Over 18,000 | | Number of Software Integration Partners (as of Dec 31) | Approx 222 | | Top 10 Clients' Contribution to Total Gross Profit | Approx 14% | | Average Relationship Length with Top 10 Clients | Approx 4 years | Organizational Structure and Corporate Information The company was incorporated in Delaware and its core business was founded in 2006 - Repay Holdings Corporation was incorporated in Delaware on July 11, 2019, through a business combination with Thunder Bridge Acquisition Ltd21377 - The company is headquartered in Atlanta, Georgia, and its core business, REPAY LLC, was founded in 2006 by John Morris and Shaler Alias23379 Business Overview The company offers integrated payment solutions focused on specific industry verticals - The company provides integrated payment processing solutions focusing on vertical markets such as personal loans, auto loans, accounts receivable management, and B2B2426387 - Through its proprietary integrated payment technology platform, the company simplifies electronic payment processes and aims to drive growth via customized solutions and embedded integrations24385 - Revenue is primarily derived from transaction volume-based payment processing fees, with card payment volume being a key metric for evaluating the business2425244385 Growth Strategies Future growth will be driven by market penetration, expansion, and innovation - The company plans to drive future growth by increasing penetration in existing vertical markets, expanding into new verticals and geographic regions, strengthening its solution portfolio through continuous innovation, and improving operational efficiency29303132 - The company expects to benefit from the ongoing shift from cash and checks to electronic payments within its serviced vertical markets2955 Solutions The company provides a comprehensive suite of electronic payment solutions across multiple channels - The company offers a comprehensive suite of electronic payment solutions, including credit and debit card processing, virtual credit card processing, ACH processing, instant funding, and various payment channels like web, virtual terminal, hosted payment pages, online customer portals, mobile apps, text-to-pay, IVR, and point of sale35 Sales and Distribution A dual strategy of direct sales and software integration partnerships drives customer acquisition - The company's sales strategy combines direct sales representatives organized by vertical market with integrated partnerships with key software providers, enabling the direct sales team to more effectively source new client opportunities363738 - As of December 31, 2021, the company was integrated with approximately 222 software partners, ensuring seamless delivery of its full suite of payment processing capabilities to clients38388 Operations The company maintains robust operational systems for client onboarding, compliance, and risk management - The company has established effective operational systems, including proprietary processes for client onboarding, compliance, and client oversight, to enhance platform performance and support clients39 - Through stringent underwriting policies and transaction management procedures, the company manages new account approvals and continuously monitors client accounts to identify low-risk clients and minimize fraud and chargeback losses40424344454647 - The company adheres to industry security standards, regularly updates network and operating system security, and utilizes third-party vendors for security education, compliance audits (PCI DSS, SOC1/2 Type II, HIPAA, ISO 27001), and penetration testing48 - The company partners with third-party processors and sponsor banks for authorization, clearing, and settlement services, and maintains relationships with multiple sponsor banks to ensure flexibility and competitiveness4951 Competitive Conditions and Market Trends The company operates in a highly competitive industry undergoing significant digital transformation - The payment processing industry is highly competitive, with the company facing competition from small integrated payment solutions companies, large financial services and payment systems companies, and traditional merchant acquirers54107108 - The company observes a significant digital transformation in the industry, with many vertical markets shifting from cash and checks to electronic payments, a trend accelerated by the COVID-19 pandemic55 - The company's business is subject to seasonal fluctuations, with transaction volumes and revenues typically increasing in the first calendar quarter due to consumers receiving tax refunds56291 Acquisitions Strategic acquisitions are a key component of the company's growth strategy - From January 1, 2016, to December 31, 2021, the company successfully completed 11 acquisitions to enter new markets, acquire industry talent, broaden its product portfolio, and supplement organic growth3457 - In 2021, the company completed the acquisitions of BillingTree, Kontrol, and Payix, further expanding its presence in the healthcare, credit union, accounts receivable management, and auto finance markets, and enhancing its B2B automated payment capabilities666768247248249382383384 Government Regulation The company operates within a complex and evolving regulatory landscape - The company and its clients are subject to extensive regulation under federal, state, and local laws, as well as payment network rules, in an increasingly complex and evolving regulatory environment6970163 - The Dodd-Frank Act has had a significant impact on the financial services industry, including electronic payments, by regulating debit card interchange fees through the Federal Reserve and establishing the Consumer Financial Protection Bureau (CFPB)7172164 - The company must also comply with privacy and information security regulations (e g , GLBA, FCRA, CCPA, CPRA), HIPAA, anti-money laundering and counter-terrorist financing regulations, and laws prohibiting unfair or deceptive practices737475777879175177 - Payment networks (e g , Visa, MasterCard) establish their own rules and standards, including PCI DSS, which can change at any time and impose additional costs or restrictions on participants8385123 Intellectual Property Proprietary technology is protected through a combination of legal and contractual measures - The company relies on copyright, trademark, trade secret laws, and contractual arrangements to protect its proprietary technology and related payment system solutions, and owns registered service marks such as REPAY®8890152 Human Capital The company fosters an empowering and inclusive culture to attract and retain talent - As of December 31, 2021, the company had approximately 552 full-time employees across the United States and Canada, none of whom are represented by a union91 - The company is committed to fostering an empowering, performance-driven, collaborative, and transparent corporate culture, attracting and retaining talent through annual employee engagement surveys, flexible work arrangements, competitive compensation and benefits, and career development opportunities92939496 - The company values diversity and inclusion and has implemented employee resource groups and diverse recruiting initiatives95 Available Information SEC filings are available on the company's website but are not part of this report - The company's website, www repay com, provides public access to its SEC filings, but the information on the website does not constitute part of this annual report98 Risk Factors The company faces significant risks from competition, data security, technological change, and its financial structure - The COVID-19 pandemic and related mitigation measures have adversely affected, and may continue to adversely affect, the company's business, results of operations, and financial condition101102103 - The payment processing industry is highly competitive, which could affect the fees the company charges, its profit margins, and its operating results107108 - Unauthorized disclosure of client or consumer data could expose the company to liability, litigation, and reputational damage109111112 - Failure to keep pace with rapid industry and technological changes could result in decreased use of the company's products and services, leading to reduced revenue117118119 - The company's dependence on sponsor banks and software integration partners, and failure to effectively manage risk and prevent fraud, could increase chargebacks and other liabilities128130133136 - The company's level of indebtedness could adversely affect its ability to meet its debt obligations, react to economic changes, and raise additional capital186187 - Under the Tax Receivable Agreement, the company is required to pay 100% of the tax benefits from increases in tax basis, and these payments could be substantial and may exceed the actual tax benefits realized204206207 - Substantial future issuances or sales of Class A common stock, or the perception that such events could occur, may cause the stock price to decline211213 Risks Related to Our Business Risks Related to Regulation Risks Related to Our Indebtedness Risks Related to Our Ownership Structure Risks Related to Our Class A Common Stock Unresolved Staff Comments As of the filing date of this report, the company has no unresolved staff comments - The company has no unresolved staff comments225 Properties The company leases its corporate headquarters and 15 additional facilities across the United States Principal Facilities Information (as of December 31, 2021) | Location | Ownership/Lease | Approx Area (sq ft) | | :--- | :--- | :--- | | Corporate HQ: Atlanta, GA | Leased | 8,700 | | Additional Facility: Atlanta, GA | Leased | 13,300 | | Bedford, TX | Leased | 3,200 | | Bettendorf, IA | Leased | 12,900 | | Chattanooga, TN | Leased | 1,000 | | Chicago, IL | Leased | 1,700 | | The Colony, TX | Leased | 14,100 | | East Moline, IL | Leased | 7,500 | | Fort Worth, TX | Leased | 6,300 | | Mesa, AZ | Leased | 12,900 | | Middleton, MA | Leased | 3,600 | | Tempe, AZ | Leased | 7,500 | | Sandy, UT | Leased | 5,200 | | Sarasota, FL | Leased | 8,900 | | Scottsdale, AZ | Leased | 9,800 | | Toledo, OH | Leased | 6,900 | Legal Proceedings The company is not currently involved in any material legal proceedings - The company is not currently a party to any legal proceedings that are expected to have a material adverse effect on its business or financial condition228531 Mine Safety Disclosures This item is not applicable - Mine safety disclosures are not applicable229 PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's Class A common stock trades on Nasdaq, and the company does not currently pay dividends - The company's Class A common stock is traded on Nasdaq under the symbol "RPAY"3231 - The company has never declared or paid cash dividends on its Class A common stock and does not currently intend to do so in the foreseeable future218219233 Class A Common Stock Market Information | Metric | Data | | :--- | :--- | | Closing Price as of Feb 22, 2022 | $17 22 | | Number of Record Holders of Class A Common Stock as of Feb 22, 2022 | 12 | | Number of Record Holders of Class V Common Stock as of Feb 22, 2022 | 24 | | Number of Record Holders of Post-Merger Repay Units as of Feb 22, 2022 | 24 | Issuer Purchases of Equity in Q4 2021 | Period | Total Shares Purchased | Average Price Per Share | | :--- | :--- | :--- | | Oct 1-31, 2021 | 10,245 | $21 57 | | Nov 1-30, 2021 | 40,940 | $19 29 | | Dec 1-31, 2021 | 3,188 | $17 51 | | Total | 54,373 | $19 61 | Market Information Holders Dividends Performance Comparison of Total Shareholder Return (July 17, 2018 - December 31, 2021) | Date | Repay Holdings Corporation | S&P 500 Index | S&P Information Technology Index | | :--- | :--- | :--- | :--- | | Jul 17, 2018 | $100 00 | $100 00 | $100 00 | | Sep 30, 2018 | 100 62 | 103 72 | 103 16 | | Dec 31, 2018 | 102 59 | 89 23 | 84 92 | | Mar 31, 2019 | 105 70 | 100 88 | 101 37 | | Jun 30, 2019 | 108 08 | 104 71 | 107 10 | | Sep 30, 2019 | 138 13 | 105 95 | 110 28 | | Dec 31, 2019 | 151 81 | 114 99 | 125 72 | | Mar 31, 2020 | 148 70 | 91 99 | 110 36 | | Jun 30, 2020 | 255 23 | 110 35 | 143 58 | | Sep 30, 2020 | 243 52 | 119 70 | 160 32 | | Dec 31, 2020 | 282 38 | 133 69 | 178 79 | | Mar 31, 2021 | 243 32 | 141 41 | 181 89 | | Jun 30, 2021 | 258 13 | 152 96 | 202 45 | | Sep 30, 2021 | 238 65 | 153 32 | 204 74 | | Dec 31, 2021 | 194 51 | 169 64 | 238 42 | Recent Sales of Unregistered Securities - No recent sales of unregistered securities238 Purchases of Equity Securities by the Issuer and Affiliated Purchasers Summary of Class A Common Stock Purchases in Q4 2021 | Period | Total Shares Purchased | Average Price Per Share | | :--- | :--- | :--- | | Oct 1-31, 2021 | 10,245 | $21 57 | | Nov 1-30, 2021 | 40,940 | $19 29 | | Dec 1-31, 2021 | 3,188 | $17 51 | | Total | 54,373 | $19 61 | - These purchases were made under an incentive plan to satisfy employee tax withholding obligations related to the vesting of restricted stock awards239 [Reserved] This item is reserved - This item is reserved240 Management's Discussion and Analysis of Financial Condition and Results of Operations Revenue grew significantly in 2021 due to organic growth and acquisitions, with strong liquidity maintained Comparison of Financial Performance for 2021 and 2020 | Metric | 2021 (in millions of USD) | 2020 (in millions of USD) | Change (in millions of USD) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | 219 3 | 155 0 | 64 3 | 41 4% | | Cost of services | 55 5 | 41 4 | 14 1 | 33 9% | | Selling, general and administrative expenses | 120 1 | 87 3 | 32 8 | 37 5% | | Depreciation and amortization | 89 7 | 60 8 | 28 9 | 47 5% | | Loss from operations | (54 0) | (32 0) | (22 0) | 68 8% | | Interest expense | (3 7) | (14 4) | 10 7 | -74 5% | | Net loss | (56 0) | (117 4) | 61 4 | -52 3% | | Net loss attributable to the Company | (50 1) | (105 6) | 55 5 | -52 6% | | Loss per share - basic and diluted | (0 60) | (2 02) | 1 42 | -70 3% | | Adjusted EBITDA (as revised) | 93 2 | 59 6 | 33 6 | 56 5% | | Adjusted Net Income (as revised) | 73 0 | 36 5 | 36 5 | 100 0% | - Revenue growth in 2021 was primarily driven by new clients, growth from existing clients, and the acquisitions of BillingTree, Kontrol, and Payix, with acquisitions contributing approximately $42.7 million in incremental revenue258 - The company maintains strong liquidity, with $50.0 million in cash and cash equivalents and $165.0 million of available borrowing capacity under its revolving credit facility as of December 31, 2021292 - The company's primary cash needs include working capital, investments in technology development, acquisitions and related contingent consideration, repayment of debt principal and interest, and tax distributions to members of Hawk Parent293 Overview The company provides integrated payment solutions for specific industry verticals - The company provides integrated payment processing solutions, focusing on industry verticals with specific transaction processing needs, and reduces the complexity of electronic payments with its proprietary technology platform243 - Card payment volume is a key operational metric for evaluating the business; total card payment volume in 2021 was approximately $20.5 billion, a year-over-year increase of about 35%244 - The ultimate impact of the COVID-19 pandemic and related economic conditions on the company's performance remains uncertain, and the effects in 2021 are not necessarily indicative of those in 2022245 Business Combination The company was formed through a 2019 merger accounted for as an acquisition - The company was formed on July 11, 2019, through the merger of Hawk Parent Holdings LLC and Thunder Bridge Acquisition, Ltd246 - Thunder Bridge was identified as the acquirer for accounting purposes, with Hawk Parent as the acquiree and accounting predecessor; the merger was accounted for under the acquisition method, resulting in a different basis of accounting for pre- and post-merger periods246 Key Factors Affecting Our Business Business performance is influenced by client growth, acquisitions, and economic trends - Key factors affecting the business include the volume and number of transactions processed by existing clients, the ability to attract new clients, successful integration of recent and future acquisitions, the ability to offer new competitive payment technology solutions, and overall economic conditions and consumer finance trends253 - In 2021, the company completed the acquisitions of BillingTree, Kontrol, and Payix, which had a significant impact on the business247248249 Key Components of Our Revenues and Expenses Revenue is primarily transaction-based, while expenses include service costs, SG&A, and amortization - Revenue is primarily derived from transaction volume-based payment processing fees (discount fees) and other related fixed per-transaction fees, which are charged based on transaction volume and processing services250 - Cost of services mainly consists of commissions paid to software integration partners and other third-party processing costs, such as front-end and back-end processing costs and sponsor bank fees251 - Selling, general and administrative expenses include operating costs such as salaries, stock-based compensation, professional service fees, rent, and utilities251 - Depreciation and amortization expenses include depreciation of property, equipment, and computer hardware, as well as amortization of software development costs, purchased software, customer relationships, and non-compete agreements252 - Interest expense is primarily related to the company's debt, while changes in the fair value of warrant liabilities and the tax receivable agreement liability reflect valuation adjustments of these liabilities254255256 Results of Operations Comparison of Operating Results for 2021 and 2020 | Metric | 2021 (in thousands of USD) | 2020 (in thousands of USD) | Change (in thousands of USD) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | 219,258 | 155,036 | 64,222 | 41 4% | | Cost of services | 55,484 | 41,447 | 14,037 | 33 9% | | Selling, general and administrative expenses | 120,053 | 87,302 | 32,751 | 37 5% | | Depreciation and amortization | 89,692 | 60,807 | 28,885 | 47 5% | | Change in fair value of contingent consideration | 5,846 | (2,510) | 8,356 | -332 9% | | Impairment loss | 2,180 | — | 2,180 | — | | Loss from operations | (53,997) | (32,010) | (21,987) | 68 7% | | Interest expense | (3,679) | (14,445) | 10,766 | -74 5% | | Loss on extinguishment of debt | (5,941) | — | (5,941) | — | | Change in fair value of warrant liability | — | (70,827) | 70,827 | -100 0% | | Change in fair value of tax receivable liability | (14,109) | (12,439) | (1,670) | 13 4% | | Other loss | (9,099) | — | (9,099) | — | | Income tax benefit | 30,691 | 12,358 | 18,333 | 148 3% | | Net loss | (56,037) | (117,366) | 61,329 | -52 3% | | Net loss attributable to non-controlling interests | (5,952) | (11,770) | 5,818 | -49 4% | | Net loss attributable to the Company | (50,085) | (105,596) | 55,511 | -52 6% | | Loss per share of Class A stock - basic and diluted | (0 60) | (2 02) | 1 42 | -70 3% | Non-GAAP Financial Measures The company uses non-GAAP metrics to evaluate performance and make strategic decisions - The company uses non-GAAP financial measures such as Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income Per Share to evaluate its operating business, measure performance, and make strategic decisions272273274275276 - The calculation methodology for Adjusted EBITDA and Adjusted Net Income was changed in the fourth quarter of 2021 to no longer adjust for items related to legacy commission buyout expenses and their tax effects278 - Adjusted EBITDA (as revised) was $93.2 million in 2021, a 56.5% increase year-over-year; Adjusted Net Income (as revised) was $73.0 million, a 100.0% increase year-over-year287 Reconciliation of GAAP Net Loss to Non-GAAP Adjusted EBITDA | Metric (in thousands of USD) | 2021 | 2020 | 2019 (Combined) | | :--- | :--- | :--- | :--- | | Net loss | (56,037) | (117,366) | (70,561) | | Add: Interest expense | 3,679 | 14,445 | 9,067 | | Add: Depreciation and amortization | 89,692 | 60,807 | 29,980 | | Less: Income tax benefit | (30,691) | (12,358) | (4,991) | | EBITDA | 6,643 | (54,472) | (36,505) | | Add: Loss on extinguishment of debt | 5,941 | — | 1,380 | | Add: Loss on termination of interest rate hedge | 9,080 | — | — | | Add: Non-cash change in fair value of warrant liability | — | 70,827 | 15,258 | | Add: Non-cash change in fair value of contingent consideration | 5,846 | (2,510) | — | | Add: Non-cash change in fair value of assets and liabilities | 14,109 | 12,439 | 1,638 | | Add: Stock-based compensation expense | 22,311 | 19,446 | 22,922 | | Add: Transaction expenses | 19,250 | 10,924 | 40,126 | | Add: Management fees | — | — | 211 | | Add: Employee recruiting costs | 612 | 214 | 51 | | Add: Other taxes | 977 | 426 | 226 | | Add: Restructuring and other strategic initiative costs | 4,578 | 1,103 | 352 | | Add: Other non-recurring expenses | 3,853 | 1,154 | 215 | | Adjusted EBITDA (as revised) | 93,200 | 59,551 | 45,875 | | Commission buyout expense (no longer adjusted) | 2,527 | 8,614 | 2,557 | | Adjusted EBITDA (as previously defined) | 95,727 | 68,165 | 48,432 | Reconciliation of GAAP Net Loss to Non-GAAP Adjusted Net Income | Metric (in thousands of USD) | 2021 | 2020 | 2019 (Combined) | | :--- | :--- | :--- | :--- | | Net loss | (56,037) | (117,366) | (70,561) | | Add: Amortization of acquisition-related intangible assets | 79,932 | 52,126 | 25,329 | | Add: Loss on extinguishment of debt | 5,941 | — | 1,380 | | Add: Loss on termination of interest rate hedge | 9,080 | — | — | | Add: Non-cash change in fair value of warrant liability | — | 70,827 | 15,258 | | Add: Non-cash change in fair value of contingent consideration | 5,846 | (2,510) | — | | Add: Non-cash change in fair value of assets and liabilities | 14,109 | 12,439 | 1,638 | | Add: Stock-based compensation expense | 22,311 | 19,446 | 22,922 | | Add: Transaction expenses | 19,250 | 10,924 | 40,126 | | Add: Management fees | — | — | 211 | | Add: Employee recruiting costs | 612 | 214 | 51 | | Add: Restructuring and other strategic initiative costs | 4,578 | 1,103 | 352 | | Add: Other non-recurring expenses | 3,853 | 1,154 | 215 | | Add: Non-cash interest expense | 2,536 | — | — | | Less: Proforma tax expense at effective tax rate | (38,998) | (11,813) | (1,602) | | Adjusted Net Income (as revised) | 73,013 | 36,544 | 35,319 | | Class A common shares outstanding (proforma) | 91,264,512 | 73,373,106 | 59,721,429 | | Adjusted Net Income Per Share (as revised) | $0 80 | $0 50 | $0 59 | | Commission buyout expense (no longer adjusted) | 2,527 | 8,614 | 2,557 | | Change in tax effect adjustment (no longer adjusted) | (571) | (1,413) | (88) | | Adjusted Net Income (as previously defined) | 74,969 | 43,745 | 37,788 | | Adjusted Net Income Per Share (as previously defined) | $0 82 | $0 60 | $0 63 | Seasonality Business is subject to seasonality, with higher volumes typically in the first quarter - The company's business is subject to seasonal fluctuations, with transaction volumes and revenues typically increasing in the first calendar quarter due to consumers receiving tax refunds, while operating expenses have less seasonal variation291 Liquidity and Capital Resources Operations are funded through cash flow, equity offerings, and convertible notes - The company funds its operations and working capital through net cash generated from operating activities, issuances of Class A common stock, and the issuance of convertible notes in January 2021292 - The company believes its operating cash flow, existing cash and cash equivalents, and available borrowing capacity under its revolving credit facility will be sufficient to meet its operational, capital expenditure, and debt obligations for the next 12 months293 - As a holding company, the company relies on distributions from its subsidiaries (including Hawk Parent) to meet the cash needs of all consolidated operations, and these distributions may be subject to legal or contractual restrictions294 - As of December 31, 2021, the company's primary contractual obligations include operating lease liabilities and contingent consideration, with approximately $17.0 million of contingent consideration due within the next 12 months294 Liquidity Position (as of December 31, 2021) | Metric | Amount (in millions of USD) | | :--- | :--- | | Cash and cash equivalents | 50 0 | | Available revolving credit facility | 165 0 | | Restricted cash | 26 3 | Cash Flows Operating cash flow increased, while investing and financing activities were significant in 2021 - Net cash provided by operating activities in 2021 was $53.3 million, primarily reflecting the net loss adjusted for non-cash items and changes in working capital297300 - Net cash used in investing activities in 2021 was $397.3 million, primarily for the acquisitions of BillingTree, Kontrol, and Payix, and capitalized software development301 - Net cash provided by financing activities in 2021 was $313.8 million, primarily from equity offerings and the issuance of the 2026 Convertible Notes, partially offset by repayments on the revolving credit facility and term loan principal303 Summary of Cash Flows (in thousands of USD) | Cash Flow Activity | 2021 | 2020 | Jul 11 - Dec 31, 2019 (Successor) | Jan 1 - Jul 10, 2019 (Predecessor) | | :--- | :--- | :--- | :--- | :--- | | Net cash from operating activities | 53,330 | 28,487 | 12,936 | 8,350 | | Net cash from investing activities | (397,335) | (145,980) | (335,084) | (4,046) | | Net cash from financing activities | 313,840 | 186,097 | 360,049 | (9,355) | Indebtedness The company issued convertible notes in 2021 and maintains a revolving credit facility - In January 2021, the company issued $440.0 million of 0 00% Convertible Senior Notes due 2026 and used a portion of the proceeds to fully repay the term loans under the Successor Credit Agreement310314 - In February 2021, the company amended and restated its Successor Credit Agreement, establishing a $125.0 million senior secured revolving credit facility, which was increased to $185.0 million in December 2021311312 - The company expects to remain in compliance with the restrictive financial covenants of the amended credit agreement312316 Debt Composition (as of December 31, 2021) | Debt Type | Amount (in millions of USD) | | :--- | :--- | | Convertible Senior Notes (due 2026) | 440 0 | | Revolving Credit Facility (drawn) | 20 0 | | Total borrowings | 460 0 | | Less: Debt issuance costs on long-term loan | 11 5 | | Total non-current borrowings | 448 5 | Tax Receivable Agreement The company has a significant liability under its Tax Receivable Agreement - Upon completion of the business combination, the company entered into a Tax Receivable Agreement (TRA), which requires it to pay holders of Post-Merger Repay Units 100% of the tax benefits realized from increases in tax basis resulting from the conversion of their units into Class A common stock317555 - The TRA liability is recorded at fair value based on discounted estimates of future cash flows; the payment obligations are expected to be substantial and may exceed the tax benefits the company actually realizes318556 - As of December 31, 2021, the company's TRA liability was $245.8 million, an increase from 2020 primarily due to changes in the discount rate, exchanges of Post-Merger Repay Units, and re-measurement of state tax rates499557 Critical Accounting Policies and Estimates Key accounting policies include revenue recognition, business combinations, and impairment testing - The company early adopted ASU 2020-06 on January 1, 2021, eliminating separate accounting for debt and equity components of convertible instruments and using the "if-converted" method for calculating diluted EPS445 - For revenue recognition, the company treats payment processing services as a "stand-ready" obligation, recognizing revenue over time using an output method and determining whether to report revenue on a gross or net basis per ASC 606-10-55-36 through -40321324410413 - Business combinations are accounted for using the acquisition method, allocating the purchase price to the fair value of tangible and identifiable intangible assets acquired and liabilities assumed, with any excess recorded as goodwill326327 - Goodwill and indefinite-lived intangible assets are tested for impairment annually, while other long-lived assets are tested when impairment indicators are present; an impairment loss is recognized for the amount by which an asset's carrying value exceeds its fair value329330 - Income taxes are accounted for under ASC 740, with deferred tax assets and liabilities recognized for future tax consequences, and the tax receivable liability is estimated at fair value332333 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks relate to interest rates and foreign currency exchange - The company believes the impact of inflation on its operating results and financial condition has not been significant, but there is no assurance this will continue in the future334 - The company is exposed to interest rate risk as its floating-rate debt (such as the revolving credit facility) is affected by interest rate changes, but it has hedged a portion of its variable-rate term loans with interest rate swap agreements335337 - The phase-out of LIBOR may lead to the use of alternative benchmark rates, which could potentially increase the company's interest expense339 - The company's services are denominated in U S dollars and Canadian dollars, and it does not expect future operating results to be significantly affected by foreign currency exchange risk340 Financial Statements and Supplementary Data This section contains the company's audited consolidated financial statements and related notes - The independent registered public accounting firm, Grant Thornton LLP, issued an unqualified opinion on the company's consolidated financial statements as of December 31, 2021, and 2020343 - Grant Thornton LLP also issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2021344351 Summary of Consolidated Balance Sheets (in thousands of USD) | Assets/Liabilities | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $50,049 | $91,130 | | Restricted cash | 26,291 | 15,375 | | Intangible assets, net | 577,694 | 369,227 | | Goodwill | 824,082 | 458,970 | | Deferred tax assets | 145,260 | 135,337 | | Total assets | $1,685,839 | $1,109,978 | | Liabilities | | | | Accounts payable | $20,083 | $11,880 | | Due to related parties | 17,394 | 15,812 | | Long-term debt, net | 448,485 | 249,953 | | Tax receivable agreement liability | 221,333 | 218,988 | | Total liabilities | $772,803 | $553,796 | | Total equity | $913,036 | $556,182 | Summary of Consolidated Statements of Operations (in thousands of USD) | Metric | 2021 | 2020 | Jul 11 - Dec 31, 2019 (Successor) | Jan 1 - Jul 10, 2019 (Predecessor) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $219,258 | $155,036 | $57,560 | $47,043 | | Loss from operations | (53,996) | (32,010) | (27,611) | (20,597) | | Net loss | (56,037) | (117,366) | (46,819) | (23,743) | | Net loss attributable to the Company | (50,084) | (105,597) | (31,548) | (23,743) | | Loss per share of Class A stock - basic and diluted | (0 60) | (2 02) | (0 88) | — | Summary of Consolidated Statements of Cash Flows (in thousands of USD) | Cash Flow Activity | 2021 | 2020 | Jul 11 - Dec 31, 2019 (Successor) | Jan 1 - Jul 10, 2019 (Predecessor) | | :--- | :--- | :--- | :--- | :--- | | Net cash from operating activities | $53,330 | $28,487 | $12,936 | $8,350 | | Net cash from investing activities | (397,335) | (145,980) | (335,084) | (4,046) | | Net cash from financing activities | 313,840 | 186,097 | 360,049 | (9,355) | | Cash, cash equivalents and restricted cash at end of period | $76,340 | $106,505 | $37,901 | $18,212 | Reports of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Comprehensive Income Consolidated Statements of Stockholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company has had no changes in or disagreements with its accountants - The company has had no changes in or disagreements with its accountants on accounting and financial disclosure559 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of year-end 2021 - As of December 31, 2021, company management concluded that its disclosure controls and procedures were effective560 - The company previously identified a material weakness in internal control related to the accounting for warrants, which led to a restatement of financial statements, but this weakness was remediated as of September 30, 2021562 - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2021, but excluded the 2021 acquisitions of BillingTree, Kontrol, and Payix from its assessment564565 Disclosure Controls and Procedures Management Report on Internal Control over Financial Reporting Changes in Internal Control Over Financial Reporting - There were no changes in internal control over financial reporting during the quarter ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, internal controls567 Other Information There is no other information to report - No other information568 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable - Disclosure regarding foreign jurisdictions that prevent inspections is not applicable569 PART III Directors, Executive Officers and Corporate Governance Information required by this item is incorporated by reference from the company's proxy statement - The information required by this item will be included in the company's definitive proxy statement for its 2022 Annual Meeting of Stockholders or in an amendment to this Form 10-K and is incorporated herein by reference572573 - The company has adopted a Code of Business Conduct and Ethics applicable to all directors and employees, including the CEO, CFO, and Chief Accounting Officer, which is available on the Investor Relations section of the company's website574 Executive Compensation Information required by this item is incorporated by reference from the company's proxy statement - The information required by this item will be included in the company's definitive proxy statement for its 2022 Annual Meeting of Stockholders or in an amendment to this Form 10-K and is incorporated herein by reference572575 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information required by this item is incorporated by reference from the company's proxy statement - The information required by this item will be included in the company's definitive proxy statement for its 2022 Annual Meeting of Stockholders or in an amendment to this Form 10-K and is incorporated herein by reference572576 Certain Relationships and Related Transactions, and Director Independence Information required by this item is incorporated by reference from the company's proxy statement - The information required by this item will be included in the company's definitive proxy statement for its 2022 Annual Meeting of Stockholders or in an amendment to this Form 10-K and is incorporated herein by reference572577 Principal Accounting Fees and Services Information required by this item is incorporated by reference from the company's proxy statement - The information required by this item will be included in the company's definitive proxy statement for its 2022 Annual Meeting of Stockholders or in an amendment to this Form 10-K and is incorporated herein by reference572578 PART IV Exhibits, Financial Statement Schedules This item lists the financial statements, supplementary data, and all filed exhibits - This item contains the company's filed consolidated financial statements and supplementary data, as well as a list of all exhibits581582584585589 Form 10-K Summary No Form 10-K summary is provided - No Form 10-K summary587