Le Lézard
Classified in: Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

REPAY Reports Second Quarter 2022 Financial Results


Repay Holdings Corporation (NASDAQ: RPAY) ("REPAY" or the "Company"), a leading provider of vertically-integrated payment solutions, today reported financial results for its second quarter ended June 30, 2022.

"In the second quarter, we experienced card payment volume and gross profit growth of 34% and 42%, respectively, compared to the second quarter of 2021," said John Morris, CEO of REPAY. "We continue to see growth across many areas of our business, especially our B2B payments business where our supplier network has reached 135,000, and this growth is aided by strong secular tailwinds and the digitization of business payments. While we continue to believe there is a large and underserved consumer lending opportunity, our clients are experiencing varying degrees of loan growth on the personal loan side. Therefore, we expect that the recovery for this business will take longer than we originally anticipated. In the second half of the year, we will remain focused on executing our strategy by increasing card penetration across our verticals, optimizing our processing infrastructure, developing the best software and payments solutions and practicing thoughtful capital allocation. This approach will help us continue to deliver sustainable, durable growth with strong unit economics."

Three Months Ended June 30, 2022 Highlights

Gross profit represents total revenue less cost of services. Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per share are non-GAAP financial measures. See "Non-GAAP Financial Measures" and the reconciliations of Adjusted EBITDA and Adjusted Net Income to their most comparable GAAP measures provided below for additional information.

2022 Outlook Update

REPAY now expects the following financial results for full year 2022, which replaces previously provided guidance.

 

Full Year 2022 Outlook

Card Payment Volume

$25.0 - 26.3 billion

Total Revenue

$268 - 286 million

Gross Profit

$204 - 216 million

Adjusted EBITDA

$118 - 126 million

This range assumes no further unforeseen COVID-related impacts, which could create substantial economic duress in the remainder of 2022. REPAY does not provide quantitative reconciliation of forward-looking, non-GAAP financial measures, such as forecasted 2022 Adjusted EBITDA, to the most directly comparable GAAP financial measure, because it is difficult to reliably predict or estimate the relevant components without unreasonable effort due to future uncertainties that may potentially have significant impact on such calculations, and providing them may imply a degree of precision that would be confusing or potentially misleading.

Conference Call

REPAY will host a conference call to discuss second quarter 2022 financial results today, August 9, 2022 at 5:00 pm ET. Hosting the call will be John Morris, CEO, and Tim Murphy, CFO. The call will be webcast live from REPAY's investor relations website at https://investors.repay.com/investor-relations. The conference call can also be accessed live over the phone by dialing (877) 407-3982, or for international callers (201) 493-6780. A replay will be available one hour after the call and can be accessed by dialing (844) 512-2921 or (412) 317-6671 for international callers; the conference ID is 13730957. The replay will be available at https://investors.repay.com/investor-relations.

Non-GAAP Financial Measures

This report includes certain non-GAAP financial measures that management uses to evaluate the Company's operating business, measure performance, and make strategic decisions. Adjusted EBITDA is a non-GAAP financial measure that represents net income prior to interest expense, tax expense, depreciation and amortization, as adjusted to add back certain charges deemed to not be part of normal operating expenses, non-cash charges and/or non-recurring charges, such as loss on extinguishment of debt, loss on termination of interest rate hedge, non-cash change in fair value of contingent consideration, non-cash change in fair value of assets and liabilities, share-based compensation charges, transaction expenses, employee recruiting costs, other taxes, restructuring and other strategic initiative costs and other non-recurring charges. Adjusted Net Income is a non-GAAP financial measure that represents net income prior to amortization of acquisition-related intangibles, as adjusted to add back certain charges deemed to not be part of normal operating expenses, non-cash charges and/or non-recurring charges, such as loss on extinguishment of debt, loss on termination of interest rate hedge, non-cash change in fair value of contingent consideration, non-cash change in fair value of assets and liabilities, share-based compensation expense, transaction expenses, employee recruiting costs, restructuring and other strategic initiative costs, other non-recurring charges, non-cash interest expense and net of tax effect associated with these adjustments. Adjusted Net Income is adjusted to exclude amortization of all acquisition-related intangibles as such amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions. Management believes that the adjustment of acquisition-related intangible amortization supplements GAAP financial measures because it allows for greater comparability of operating performance. Although REPAY excludes amortization from acquisition-related intangibles from its non-GAAP expenses, management believes that it is important for investors to understand that such intangibles were recorded as part of purchase accounting and contribute to revenue generation. Adjusted Net Income per share is a non-GAAP financial measure that represents Adjusted Net Income divided by the weighted average number of shares of Class A common stock outstanding (on an as-converted basis assuming conversion of the outstanding units exchangeable for shares of Class A common stock) for the three and six months ended June 30, 2022 and 2021 (excluding shares subject to forfeiture). REPAY believes that Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per share provide useful information to investors and others in understanding and evaluating its operating results in the same manner as management. However, Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per share are not financial measures calculated in accordance with GAAP and should not be considered as a substitute for net income, operating profit, or any other operating performance measure calculated in accordance with GAAP. Using these non-GAAP financial measures to analyze REPAY's business has material limitations because the calculations are based on the subjective determination of management regarding the nature and classification of events and circumstances that investors may find significant. In addition, although other companies in REPAY's industry may report measures titled Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per share, or similar measures, such non-GAAP financial measures may be calculated differently from how REPAY calculates its non-GAAP financial measures, which reduces their overall usefulness as comparative measures. Because of these limitations, you should consider Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per share alongside other financial performance measures, including net income and REPAY's other financial results presented in accordance with GAAP.

Forward-Looking Statements

This communication contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about future financial and operating results, REPAY's plans, objectives, expectations and intentions with respect to future operations, products and services; and other statements identified by words such as "guidance," "will likely result," "are expected to," "will continue," "should," "is anticipated," "estimated," "believe," "intend," "plan," "projection," "outlook" or words of similar meaning. These forward-looking statements include, but are not limited to, REPAY's 2022 revised outlook and other financial guidance, expected demand on REPAY's product offering, including further implementation of electronic payment options and statements regarding REPAY's market and growth opportunities, and REPAY's business strategy and the plans and objectives of management for future operations. Such forward-looking statements are based upon the current beliefs and expectations of REPAY's management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond REPAY's control.

In addition to factors disclosed in REPAY's reports filed with the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2021, and those identified elsewhere in this communication, the following factors, among others, could cause actual results and the timing of events to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: exposure to economic conditions and political risk affecting the consumer loan market, the receivables management industry and consumer and commercial spending, including inflationary pressures, general economic slowdown or recession; the impacts of the ongoing COVID-19 pandemic, including the continued emergence of new variants, and the actions taken to control or mitigate its spread; a delay or failure to integrate and/or realize the benefits of the Company's recent acquisitions; changes in the payment processing market in which REPAY competes, including with respect to its competitive landscape, technology evolution or regulatory changes; changes in the vertical markets that REPAY targets, including the regulatory environment applicable to REPAY's clients; the ability to retain, develop and hire key personnel; risks relating to REPAY's relationships within the payment ecosystem; risk that REPAY may not be able to execute its growth strategies, including identifying and executing acquisitions; risks relating to data security; changes in accounting policies applicable to REPAY; and the risk that REPAY may not be able to maintain effective internal controls.

Actual results, performance or achievements may differ materially, and potentially adversely, from any projections and forward-looking statements and the assumptions on which those forward-looking statements are based. There can be no assurance that the data contained herein is reflective of future performance to any degree. You are cautioned not to place undue reliance on forward-looking statements as a predictor of future performance. All information set forth herein speaks only as of the date hereof in the case of information about REPAY or the date of such information in the case of information from persons other than REPAY, and REPAY disclaims any intention or obligation to update any forward looking statements as a result of developments occurring after the date of this communication. Forecasts and estimates regarding REPAY's industry and end markets are based on sources it believes to be reliable, however there can be no assurance these forecasts and estimates will prove accurate in whole or in part. Pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results.

About REPAY

REPAY provides integrated payment processing solutions to verticals that have specific transaction processing needs. REPAY's proprietary, integrated payment technology platform reduces the complexity of electronic payments for clients, while enhancing the overall experience for consumers and businesses.

Consolidated Statement of Operations (Unaudited)

 

 

 

Three Months ended June 30,

 

 

Six Months ended June 30,

 

(in $ thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue

 

$

67,435

 

 

$

48,412

 

 

$

134,999

 

 

$

95,932

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Costs of services (exclusive of depreciation and amortization shown separately below)

 

 

16,731

 

 

 

12,721

 

 

 

33,296

 

 

 

25,196

 

Selling, general and administrative

 

 

39,130

 

 

 

29,542

 

 

 

71,348

 

 

 

52,935

 

Depreciation and amortization

 

 

29,191

 

 

 

19,679

 

 

 

57,780

 

 

 

37,472

 

Change in fair value of contingent consideration

 

 

(1,050

)

 

 

(1,200

)

 

 

(3,950

)

 

 

1,449

 

Total operating expenses

 

$

84,002

 

 

$

60,742

 

 

$

158,474

 

 

$

117,052

 

Loss from operations

 

$

(16,567

)

 

$

(12,330

)

 

$

(23,475

)

 

$

(21,120

)

Interest expense

 

 

(1,051

)

 

 

(817

)

 

 

(2,040

)

 

 

(2,000

)

Loss on extinguishment of debt

 

 

?

 

 

 

?

 

 

 

?

 

 

 

(5,941

)

Change in fair value of tax receivable liability

 

 

19,450

 

 

 

(4,355

)

 

 

44,070

 

 

 

(3,312

)

Other income

 

 

10

 

 

 

34

 

 

 

17

 

 

 

63

 

Other loss

 

 

(150

)

 

 

?

 

 

 

(150

)

 

 

(9,080

)

Total other income (expense)

 

 

18,259

 

 

 

(5,138

)

 

 

41,897

 

 

 

(20,270

)

Income (loss) before income tax (expense) benefit

 

 

1,692

 

 

 

(17,468

)

 

 

18,422

 

 

 

(41,390

)

Income tax (expense) benefit

 

 

(3,045

)

 

 

4,117

 

 

 

(6,888

)

 

 

10,059

 

Net income (loss)

 

$

(1,353

)

 

$

(13,351

)

 

$

11,534

 

 

$

(31,331

)

Net loss attributable to non-controlling interest

 

 

(1,362

)

 

 

(1,081

)

 

 

(2,129

)

 

 

(3,268

)

Net income (loss) attributable to the Company

 

$

9

 

 

$

(12,270

)

 

$

13,663

 

 

$

(28,063

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares of Class A common stock outstanding - basic

 

 

88,903,674

 

 

 

79,781,185

 

 

 

88,756,482

 

 

 

78,200,752

 

Weighted-average shares of Class A common stock outstanding - diluted

 

 

113,250,564

 

 

 

79,781,185

 

 

 

112,866,991

 

 

 

78,200,752

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) per Class A share - basic

 

$

0.00

 

 

$

(0.15

)

 

$

0.15

 

 

$

(0.36

)

Income (loss) per Class A share - diluted

 

$

0.00

 

 

$

(0.15

)

 

$

0.12

 

 

$

(0.36

)

Consolidated Balance Sheets

 

(in $ thousands)

 

June 30, 2022
(Unaudited)

 

 

December 31,
2021

 

Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

60,375

 

 

$

50,049

 

Accounts receivable

 

 

32,401

 

 

 

33,236

 

Prepaid expenses and other

 

 

13,599

 

 

 

12,427

 

Total current assets

 

 

106,375

 

 

 

95,712

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

4,514

 

 

 

3,801

 

Restricted cash

 

 

19,154

 

 

 

26,291

 

Intangible assets, net

 

 

535,796

 

 

 

577,694

 

Goodwill

 

 

827,802

 

 

 

824,082

 

Operating lease right-of-use assets, net

 

 

11,327

 

 

 

10,500

 

Deferred tax assets

 

 

133,813

 

 

 

145,260

 

Other assets

 

 

2,500

 

 

 

2,500

 

Total noncurrent assets

 

 

1,534,906

 

 

 

1,590,128

 

Total assets

 

$

1,641,281

 

 

$

1,685,840

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Accounts payable

 

$

21,573

 

 

$

20,083

 

Related party payable

 

 

775

 

 

 

17,394

 

Accrued expenses

 

 

21,568

 

 

 

26,819

 

Current operating lease liabilities

 

 

2,207

 

 

 

1,990

 

Current tax receivable agreement

 

 

24,454

 

 

 

24,496

 

Other current liabilities

 

 

91

 

 

 

1,566

 

Total current liabilities

 

 

70,668

 

 

 

92,348

 

 

 

 

 

 

 

 

Long-term debt

 

 

449,896

 

 

 

448,485

 

Noncurrent operating lease liabilities

 

 

9,766

 

 

 

9,091

 

Tax receivable agreement, net of current portion

 

 

177,470

 

 

 

221,333

 

Other liabilities

 

 

3,266

 

 

 

1,547

 

Total noncurrent liabilities

 

 

640,398

 

 

 

680,456

 

Total liabilities

 

$

711,066

 

 

$

772,804

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Class A common stock, $0.0001 par value; 2,000,000,000 shares authorized, 88,993,722 issued and 88,892,919 outstanding as of June 30, 2022; 2,000,000,000 shares authorized, and 88,502,621 issued and outstanding as of December 31, 2021

 

 

9

 

 

 

9

 

Class V common stock, $0.0001 par value; 1,000 shares authorized and 100 shares issued and outstanding as of June 30, 2022 and December 31, 2021

 

 

?

 

 

 

?

 

Additional paid-in capital

 

 

1,107,432

 

 

 

1,100,012

 

Treasury stock, 100,803 and 0 shares as of June 30, 2022 and December 31, 2021, respectively

 

 

(1,152

)

 

 

?

 

Accumulated other comprehensive loss

 

 

(2

)

 

 

(2

)

Accumulated deficit

 

 

(212,353

)

 

 

(226,016

)

Total Repay stockholders' equity

 

$

893,934

 

 

$

874,003

 

Non-controlling interests

 

 

36,281

 

 

 

39,033

 

Total equity

 

 

930,215

 

 

 

913,036

 

Total liabilities and equity

 

$

1,641,281

 

 

$

1,685,840

 

Key Operating and Non-GAAP Financial Data

Unless otherwise stated, all results compare three and six month 2022 results to three and six month 2021 results from continuing operations for the period ended June 30, respectively.

The following tables and related notes reconcile these non-GAAP measures to GAAP information for the three and six months ended June 30, 2022 and 2021:

 

 

Three months ended June 30,

 

 

 

 

 

Six months ended June 30,

 

 

 

 

(in $ thousands)

 

2022

 

 

2021

 

 

%
Change

 

 

2022

 

 

2021

 

 

%
Change

 

Card payment volume

 

$

6,196,253

 

 

$

4,623,964

 

 

 

34

%

 

$

12,610,205

 

 

$

9,237,966

 

 

 

37

%

Gross profit1

 

 

50,704

 

 

 

35,691

 

 

 

42

%

 

 

101,703

 

 

 

70,736

 

 

 

44

%

Adjusted EBITDA2

 

 

27,636

 

 

 

20,403

 

 

 

35

%

 

 

56,965

 

 

 

40,864

 

 

 

39

%

(1)

Gross profit represents total revenue less other costs of services.

(2)

Adjusted EBITDA is a non-GAAP financial measure that represents net income adjusted for interest expense, depreciation and amortization and certain other charges deemed to not be part of normal operating expenses, non-cash charges and/or non-recurring items. See "Non-GAAP Financial Measures" above and the reconciliation of Adjusted EBITDA to its most comparable GAAP measure below.

Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA

 

For the Three Months Ended June 30, 2022 and 2021

(Unaudited)

 

 

Three Months ended June 30,

 

 

(in $ thousands)

2022

 

 

2021

 

 

Revenue

$

67,435

 

 

$

48,412

 

 

Operating expenses

 

 

 

 

 

 

Costs of services (exclusive of depreciation and amortization shown separately below)

$

16,731

 

 

$

12,721

 

 

Selling, general and administrative

 

39,130

 

 

 

29,542

 

 

Depreciation and amortization

 

29,191

 

 

 

19,679

 

 

Change in fair value of contingent consideration

 

(1,050

)

 

 

(1,200

)

 

Total operating expenses

$

84,002

 

 

$

60,742

 

 

Loss from operations

$

(16,567

)

 

$

(12,330

)

 

Interest expense

 

(1,051

)

 

 

(817

)

 

Change in fair value of tax receivable liability

 

19,450

 

 

 

(4,355

)

 

Other income

 

10

 

 

 

34

 

 

Other loss

 

(150

)

 

 

?

 

 

Total other income (expense)

 

18,259

 

 

 

(5,138

)

 

Income (loss) before income tax (expense) benefit

 

1,692

 

 

 

(17,468

)

 

Income tax (expense) benefit

 

(3,045

)

 

 

4,117

 

 

Net income (loss)

$

(1,353

)

 

$

(13,351

)

 

 

 

 

 

 

 

 

Add:

 

 

 

 

 

 

Interest expense

 

1,051

 

 

 

817

 

 

Depreciation and amortization (a)

 

29,191

 

 

 

19,679

 

 

Income tax expense (benefit)

 

3,045

 

 

 

(4,117

)

 

EBITDA

$

31,934

 

 

$

3,028

 

 

 

 

 

 

 

 

 

Non-cash change in fair value of contingent consideration (b)

 

(1,050

)

 

 

(1,200

)

 

Non-cash change in fair value of assets and liabilities (c)

 

(19,450

)

 

 

4,355

 

 

Share-based compensation expense (d)

 

5,934

 

 

 

5,505

 

 

Transaction expenses (e)

 

7,069

 

 

 

6,978

 

 

Employee recruiting costs (f)

 

259

 

 

 

38

 

 

Other taxes (g)

 

548

 

 

 

420

 

 

Restructuring and other strategic initiative costs (h)

 

1,435

 

 

 

945

 

 

Other non-recurring charges (i)

 

957

 

 

 

334

 

 

Adjusted EBITDA

$

27,636

 

 

$

20,403

 

 

Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA

For the Six Months Ended June 30, 2022 and 2021

(Unaudited)

 

 

Six Months ended June 30,

 

 

(in $ thousands)

2022

 

 

2021

 

 

Revenue

$

134,999

 

 

$

95,932

 

 

Operating expenses

 

 

 

 

 

 

Costs of services (exclusive of depreciation and amortization shown separately below)

$

33,296

 

 

$

25,196

 

 

Selling, general and administrative

 

71,348

 

 

 

52,935

 

 

Depreciation and amortization

 

57,780

 

 

 

37,472

 

 

Change in fair value of contingent consideration

 

(3,950

)

 

 

1,449

 

 

Total operating expenses

$

158,474

 

 

$

117,052

 

 

Loss from operations

$

(23,475

)

 

$

(21,120

)

 

Interest expense

 

(2,040

)

 

 

(2,000

)

 

Loss on extinguishment of debt

 

?

 

 

 

(5,941

)

 

Change in fair value of tax receivable liability

 

44,070

 

 

 

(3,312

)

 

Other income

 

17

 

 

 

63

 

 

Other loss

 

(150

)

 

 

(9,080

)

 

Total other income (expense)

 

41,897

 

 

 

(20,270

)

 

Income (loss) before income tax (expense) benefit

 

18,422

 

 

 

(41,390

)

 

Income tax (expense) benefit

 

(6,888

)

 

 

10,059

 

 

Net income (loss)

$

11,534

 

 

$

(31,331

)

 

 

 

 

 

 

 

 

Add:

 

 

 

 

 

 

Interest expense

 

2,040

 

 

 

2,000

 

 

Depreciation and amortization (a)

 

57,780

 

 

 

37,472

 

 

Income tax expense (benefit)

 

6,888

 

 

 

(10,059

)

 

EBITDA

$

78,242

 

 

$

(1,918

)

 

 

 

 

 

 

 

 

Loss on extinguishment of debt (j)

 

?

 

 

 

5,941

 

 

Loss on termination of interest rate hedge (k)

 

?

 

 

 

9,080

 

 

Non-cash change in fair value of contingent consideration (b)

 

(3,950

)

 

 

1,449

 

 

Non-cash change in fair value of assets and liabilities (c)

 

(44,070

)

 

 

3,312

 

 

Share-based compensation expense (d)

 

9,292

 

 

 

10,656

 

 

Transaction expenses (e)

 

11,999

 

 

 

9,318

 

 

Employee recruiting costs (f)

 

459

 

 

 

174

 

 

Other taxes (g)

 

698

 

 

 

559

 

 

Restructuring and other strategic initiative costs (h)

 

2,681

 

 

 

1,573

 

 

Other non-recurring charges (i)

 

1,614

 

 

 

720

 

 

Adjusted EBITDA

$

56,965

 

 

$

40,864

 

 

Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income

For the Three Months Ended June 30, 2022 and 2021

(Unaudited)

 

 

Three Months ended June 30,

 

 

(in $ thousands)

2022

 

 

2021

 

 

Revenue

$

67,435

 

 

$

48,412

 

 

Operating expenses

 

 

 

 

 

 

Costs of services (exclusive of depreciation and amortization shown separately below)

$

16,731

 

 

$

12,721

 

 

Selling, general and administrative

 

39,130

 

 

 

29,542

 

 

Depreciation and amortization

 

29,191

 

 

 

19,679

 

 

Change in fair value of contingent consideration

 

(1,050

)

 

 

(1,200

)

 

Total operating expenses

$

84,002

 

 

$

60,742

 

 

Loss from operations

$

(16,567

)

 

$

(12,330

)

 

Interest expense

 

(1,051

)

 

 

(817

)

 

Change in fair value of tax receivable liability

 

19,450

 

 

 

(4,355

)

 

Other income

 

10

 

 

 

34

 

 

Other loss

 

(150

)

 

 

?

 

 

Total other income (expense)

 

18,259

 

 

 

(5,138

)

 

Income (loss) before income tax (expense) benefit

 

1,692

 

 

 

(17,468

)

 

Income tax (expense) benefit

 

(3,045

)

 

 

4,117

 

 

Net income (loss)

$

(1,353

)

 

$

(13,351

)

 

 

 

 

 

 

 

 

Add:

 

 

 

 

 

 

Amortization of acquisition-related intangibles (l)

 

25,941

 

 

 

17,270

 

 

Non-cash change in fair value of contingent consideration (b)

 

(1,050

)

 

 

(1,200

)

 

Non-cash change in fair value of assets and liabilities (c)

 

(19,450

)

 

 

4,355

 

 

Share-based compensation expense (d)

 

5,934

 

 

 

5,505

 

 

Transaction expenses (e)

 

7,069

 

 

 

6,978

 

 

Employee recruiting costs (f)

 

259

 

 

 

38

 

 

Restructuring and other strategic initiative costs (h)

 

1,435

 

 

 

945

 

 

Other non-recurring charges (i)

 

957

 

 

 

334

 

 

Non-cash interest expense (m)

 

709

 

 

 

802

 

 

Pro forma taxes at effective rate (n)

 

(4,368

)

 

 

(7,693

)

 

Adjusted Net Income

$

16,083

 

 

$

13,983

 

 

 

 

 

 

 

 

 

Shares of Class A common stock outstanding (on an as-converted basis) (o)

 

96,787,200

 

 

 

87,734,237

 

 

Adjusted Net income per share

$

0.17

 

 

$

0.16

 

 

Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income

For the Six Months Ended June 30, 2022 and 2021

(Unaudited)

 

 

Six Months ended June 30,

 

 

(in $ thousands)

2022

 

 

2021

 

 

Revenue

$

134,999

 

 

$

95,932

 

 

Operating expenses

 

 

 

 

 

 

Costs of services (exclusive of depreciation and amortization shown separately below)

$

33,296

 

 

$

25,196

 

 

Selling, general and administrative

 

71,348

 

 

 

52,935

 

 

Depreciation and amortization

 

57,780

 

 

 

37,472

 

 

Change in fair value of contingent consideration

 

(3,950

)

 

 

1,449

 

 

Total operating expenses

$

158,474

 

 

$

117,052

 

 

Loss from operations

$

(23,475

)

 

$

(21,120

)

 

Interest expense

 

(2,040

)

 

 

(2,000

)

 

Loss on extinguishment of debt

 

?

 

 

 

(5,941

)

 

Change in fair value of tax receivable liability

 

44,070

 

 

 

(3,312

)

 

Other income

 

17

 

 

 

63

 

 

Other loss

 

(150

)

 

 

(9,080

)

 

Total other income (expense)

 

41,897

 

 

 

(20,270

)

 

Income (loss) before income tax (expense) benefit

 

18,422

 

 

 

(41,390

)

 

Income tax (expense) benefit

 

(6,888

)

 

 

10,059

 

 

Net income (loss)

$

11,534

 

 

$

(31,331

)

 

 

 

 

 

 

 

 

Add:

 

 

 

 

 

 

Amortization of acquisition-related intangibles(l)

 

49,077

 

 

 

33,309

 

 

Loss on extinguishment of debt (j)

 

?

 

 

 

5,941

 

 

Loss on termination of interest rate hedge (k)

 

?

 

 

 

9,080

 

 

Non-cash change in fair value of contingent consideration (b)

 

(3,950

)

 

 

1,449

 

 

Non-cash change in fair value of assets and liabilities (c)

 

(44,070

)

 

 

3,312

 

 

Share-based compensation expense (d)

 

9,292

 

 

 

10,656

 

 

Transaction expenses (e)

 

11,999

 

 

 

9,318

 

 

Employee recruiting costs (f)

 

459

 

 

 

174

 

 

Restructuring and other strategic initiative costs (h)

 

2,681

 

 

 

1,573

 

 

Other non-recurring charges (i)

 

1,614

 

 

 

720

 

 

Non-cash interest expense (m)

 

1,411

 

 

 

1,338

 

 

Pro forma taxes at effective rate (n)

 

(5,562

)

 

 

(16,473

)

 

Adjusted Net Income

$

34,485

 

 

$

29,066

 

 

 

 

 

 

 

 

 

Shares of Class A common stock outstanding (on an as-converted basis) (o)

 

96,661,414

 

 

 

86,165,128

 

 

Adjusted Net income per share

$

0.36

 

 

$

0.34

 

 

(a)

See footnote (l) for details on our amortization and depreciation expenses.

 
(b)

Reflects the changes in management's estimates of future cash consideration to be paid in connection with prior acquisitions from the amount estimated as of the most recent balance sheet date.

(c)

Reflects the changes in management's estimates of the fair value of the liability relating to the Tax Receivable Agreement.

(d)

Represents compensation expense associated with equity compensation plans, totaling $5.9 million and $9.3 million for the three and six months ended June 30, 2022, respectively, and totaling $5.5 million and $10.7 million for the three and six months ended June 30, 2021, respectively.

(e)

Primarily consists of (i) during the three and six months ended June 30, 2022, professional service fees and other costs incurred in connection with the acquisitions of BillingTree, Kontrol Payables and Payix, and (ii) during the three and six months ended June 30, 2021, professional service fees and other costs incurred in connection with the acquisition of Ventanex, cPayPlus, CPS, BillingTree and Kontrol Payables, as well as professional service expenses related to the January 2021 equity and convertible notes offerings.

(f)

Represents payments made to third-party recruiters in connection with a significant expansion of personnel, which REPAY expects will become more moderate in subsequent periods.

(g)

Reflects franchise taxes and other non-income based taxes.

(h)

Reflects consulting fees related to processing services and other operational improvements, including restructuring and integration activities related to acquired businesses, that were not in the ordinary course during the three and six months ended June 30, 2022 and 2021.

(i)

For the three and six months ended June 30, 2022 and 2021, reflects extraordinary refunds to clients and other payments related to COVID-19 and non-cash rent expense. Additionally, for the three and six months ended June 30, 2022, reflects loss on termination of lease and loss on disposal of fixed assets.

(j)

Reflects write-offs of debt issuance costs relating to Hawk Parent's term loans.

(k)

Reflects realized loss of REPAY's interest rate hedging arrangement which terminated in conjunction with the repayment of Term Loans.

(l)

For the three and six months ended June 30, 2022, reflects amortization of client relationships, non-compete agreement, software, and channel relationship intangibles acquired through the Business Combination, and client relationships, non-compete agreement, and software intangibles acquired through REPAY's acquisitions of TriSource Solutions, APS Payments, Ventanex, cPayPlus, CPS Payments, BillingTree, Kontrol Payables and Payix. For the three and six months ended June 30, 2021 reflects amortization of client relationships, non-compete agreement, software, and channel relationship intangibles acquired through the Business Combination, and client relationships, non-compete agreement, and software intangibles acquired through REPAY's acquisitions of TriSource Solutions, APS Payments, Ventanex, cPayPlus, CPS, BillingTree, and Kontrol Payables. This adjustment excludes the amortization of other intangible assets which were acquired in the regular course of business, such as capitalized internally developed software and purchased software. See additional information below for an analysis of amortization expenses:

 

Three months ended June 30,

 

 

Six Months ended June 30,

 

(in $ thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Acquisition-related intangibles

 

$

25,941

 

 

$

17,270

 

 

$

49,077

 

 

$

33,309

 

Software

 

 

2,700

 

 

 

2,120

 

 

 

7,646

 

 

 

3,291

 

Amortization

 

$

28,641

 

 

$

19,390

 

 

$

56,723

 

 

$

36,600

 

Depreciation

 

 

550

 

 

 

289

 

 

 

1,057

 

 

 

872

 

Total Depreciation and amortization (1)

 

$

29,191

 

 

$

19,679

 

 

$

57,780

 

 

$

37,472

 

(1)

Adjusted Net Income is adjusted to exclude amortization of all acquisition-related intangibles as such amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions (see corresponding adjustments in the reconciliation of net income to Adjusted Net Income presented above). Management believes that the adjustment of acquisition-related intangible amortization supplements GAAP financial measures because it allows for greater comparability of operating performance. Although REPAY excludes amortization from acquisition-related intangibles from its non-GAAP expenses, management believes that it is important for investors to understand that such intangibles were recorded as part of purchase accounting and contribute to revenue generation. Amortization of intangibles that relate to past acquisitions will recur in future periods until such intangibles have been fully amortized. Any future acquisitions may result in the amortization of additional intangibles.

 

(m)

Represents non-cash deferred debt issuance costs.

(n)

Represents pro forma income tax adjustment effect associated with items adjusted above.

(o)

Represents the weighted average number of shares of Class A common stock outstanding (on an as-converted basis assuming conversion of outstanding Post-Merger Repay Units) for the three and six months ended June 30, 2022 and 2021. These numbers do not include any shares issuable upon conversion of the Company's convertible senior notes due 2026. See the reconciliation of basic weighted average shares outstanding to the non-GAAP Class A common stock outstanding on an as-converted basis for each respective period below:

 

Three months ended June 30,

 

Six Months ended June 30,

 

 

2022

 

2021

 

2022

 

2021

Weighted average shares of Class A common stock outstanding - basic

 

88,903,674

 

79,781,185

 

88,756,482

 

78,200,752

Add: Non-controlling interests
Weighted average Post-Merger Repay Units exchangeable for Class A common stock

 

7,883,526

 

7,953,052

 

7,904,932

 

7,964,376

Shares of Class A common stock outstanding (on an as-converted basis)

 

96,787,200

 

87,734,237

 

96,661,414

 

86,165,128

 


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