424B4 1 ck7045120534-424b4.htm 424B4 ck7045120534-424b4.htm

Filed Pursuant to Rule 424(b)(4)

Registration No. 333-255683

 

10,000,000 Shares

 

Paymentus Holdings, Inc.

Class A Common Stock

 

 

This is an initial public offering of shares of Class A common stock of Paymentus Holdings, Inc.

Prior to this offering, there has been no public market for our Class A common stock. The initial public offering price is $21.00 per share. We have been approved to list our Class A common stock on the New York Stock Exchange under the symbol “PAY.”

Following this offering, we will have two classes of authorized common stock, Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock will be identical, except with respect to voting and conversion rights. Each share of Class A common stock will be entitled to one vote per share. Each share of Class B common stock will be entitled to ten votes per share and will be convertible at any time into one share of Class A common stock. Immediately following the completion of this offering and the concurrent private placement, shares of our Class B common stock beneficially owned by affiliates of Accel-KKR, or AKKR, and our founder and chief executive officer will collectively represent approximately 98.0% of the voting power of our outstanding common stock, assuming no exercise of the underwriters’ option to purchase additional shares. Following this offering and the concurrent private placement, we will be a “controlled company” within the meaning of the corporate governance rules of the New York Stock Exchange. See the section titled “Management—Controlled Company.”

We are an “emerging growth company” as defined under the federal securities laws and, as such, have elected to comply with certain reduced public company reporting requirements in this prospectus and may elect to do so in future filings.

 

 

See “Risk Factors” beginning on page 20 to read about factors you should consider before deciding to invest in shares of our Class A common stock.

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

 

 

Per Share

 

Total

Initial public offering price

 

$                  21.00

 

$      210,000,000

Underwriting discounts and commissions(1)

 

$                    1.47

 

$        14,700,000

Proceeds, before expenses, to Paymentus Holdings, Inc.

 

$                  19.53

 

$      195,300,000

 

(1)   See the section titled “Underwriting” for a description of the compensation payable to the underwriters.

We have granted the underwriters an option to purchase up to an additional 1,500,000 shares of Class A common stock from us at the initial public offering price, less the underwriting discounts and commissions.

At our request, the underwriters have reserved up to 500,000 shares of Class A common stock, or up to 5% of the shares offered by this prospectus, for sale at the initial public offering price through a directed share program to our senior executives and certain individuals associated with AKKR. See the section titled “Underwriting—Directed Share Program.”

Entities affiliated with AKKR have agreed to purchase an aggregate of 2,380,950 shares of our Class A common stock in a private placement at a price per share equal to the initial public offering price. This transaction is contingent upon, and is scheduled to close immediately following, the closing of this offering.

One or more funds advised by Capital World Investors and one or more funds managed by Franklin Advisers, Inc. have, severally but not jointly, indicated an interest in purchasing up to an aggregate of $30 million each ($60 million in the aggregate) in shares of our Class A common stock being offered in this offering at the initial public offering price. As these indications of interest are not binding agreements or commitments to purchase, one or more funds advised by Capital World Investors or one or more funds managed by Franklin Advisers, Inc. may determine to purchase more, fewer or no shares in this offering or the underwriters may determine to sell more, fewer or no shares to one or more funds advised by Capital World Investors or one or more funds managed by Franklin Advisers, Inc. The underwriters will receive the same discount on any shares of Class A common stock purchased by one or more funds advised by Capital World Investors or one or more funds managed by Franklin Advisers, Inc. as they will on any other shares of Class A common stock sold to the public in this offering.

The underwriters expect to deliver the shares of Class A common stock against payment in New York, New York on May 28, 2021.

 

 

Goldman Sachs & Co. LLC

 

J.P. Morgan

 

BofA Securities

 

Citigroup

 

Baird

 

Nomura

 

Raymond James

 

Wells Fargo Securities

 

Fifth Third Securities

 

PNC Capital Markets LLC

 

AmeriVet Securities

 

C.L. King & Associates

 

 

Prospectus dated May 25, 2021

 

 


 

 

Paymentus Powering the Next generation of Electronic Bill Payments

 


 

 

We enable the electronic bill payment value chain Billers Innovation User Experience Network Partners Flexible Implementation Technology Reduce Costs Single Vendor Relationship Consumers Paymentus

 


 

 

Disrupting electronic bill payments through an integrated, cloud-based platform that simplifies and promotes engagement between our billers and partners and their consumers

 


 

 

Paymentus Strong, Profitable Financial Profile $302M Revenue 2020 $13M Net Income 2020 28% Revenue Growth 2020 Year-over-Year Tremendous Scale >195M Transaction Processed 2020 >1,300 Billers As of December 31.2020 Extensive reach ~ 16M Monthly Consumers and business users in December 2020 Diversified Across industries

 

 


 

 

TABLE OF CONTENTS

 

 

Page

LETTER FROM DUSHYANT SHARMA, OUR FOUNDER AND CEO

ii

PROSPECTUS SUMMARY

1

RISK FACTORS

20

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

58

MARKET, INDUSTRY AND OTHER DATA

59

USE OF PROCEEDS

60

DIVIDEND POLICY

61

CAPITALIZATION

62

DILUTION

64

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

66

BUSINESS

86

MANAGEMENT

106

EXECUTIVE COMPENSATION

114

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

125

PRINCIPAL STOCKHOLDERS

127

DESCRIPTION OF CAPITAL STOCK

129

SHARES ELIGIBLE FOR FUTURE SALE

136

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF OUR CLASS A COMMON STOCK

138

UNDERWRITING

142

Concurrent Private Placement

151

LEGAL MATTERS

151

EXPERTS

151

CHANGES IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

152

WHERE YOU CAN FIND ADDITIONAL INFORMATION

153

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

F-1

 

 

Through and including June 19, 2021 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

Neither we nor any of the underwriters have authorized anyone to provide you with information that is different than the information contained in this prospectus and any free writing prospectus prepared by or on behalf of us or to which we have referred you. Neither we nor the underwriters take any responsibility for, and cannot provide any assurance as to the reliability of, any other information that others may give you. The information contained in this prospectus or in any applicable free writing prospectus is accurate only as of the date of this prospectus or such free writing prospectus, as applicable, regardless of the time of delivery of this prospectus or any such free writing prospectus or of any sale of the securities offered hereby. Our business, operating results, financial condition and prospects may have changed since that date.

This prospectus is an offer to sell only the securities offered hereby and only under circumstances and in jurisdictions where it is lawful to do so. Neither we nor any of the underwriters have taken any action that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons who have come into possession of this prospectus in a jurisdiction outside the United States are required to inform themselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.

 

 

i


 

 

 

Letter from Dushyant Sharma, our Founder and CEO

Seventeen years ago, I started Paymentus to solve a decades old problem – the complexity of bills and payments. Every year, billions of paper bills are paid by billions of paper checks, and there is an inherently flawed application of technology to the same paper paradigm. This problem touches consumers and businesses in the country and around the world.

Having spent my entire career in payments, I knew this massive challenge could be solved and have made it my life’s work to tackle it. In 2004, when I first attempted to obtain a patent for some of this technology, the application was denied, and it was suggested that electronic bill payments could be solved using a fax machine. I knew there was a better way. From the very beginning, my vision was to simplify how bills are paid through a next-generation platform that improves the experience of our billers and their consumers, both directly and through a broad network of partners that shifts the legacy paradigm toward modern channels and payment options that consumers demand.

When creating our initial strategy in 2004, we had to look far into the future of what the bill payments industry could become. This led us to design a strategy staggered over three expanding horizons, each of which continues to shape how we address the problem and remains a core part of our execution today. Horizon one began in 2004 with a focus on building a next-generation platform that targets mid-size billers, initially to prove to the market that our solutions worked. We have executed well and built a profitable and fast-growing business over this horizon. Horizon two started in 2011 when we brought on Accel-KKR as our investment partner to support a move up-market to serve larger billers. Over this horizon our growth has accelerated to over 1,300 billers, including many large national billers, and our reach has grown to approximately 16 million monthly users. We began executing on horizon three in 2019. We believe horizon three represents a unique growth opportunity for Paymentus, leveraging the growing biller and consumer footprint we have formed over horizons one and two, to build a more expansive global network – the Instant Payment Network, or IPN. The IPN combines the power of billers, consumers and global platforms to embed Paymentus as the heart of the bill payments ecosystem. We are proud that the founding partners of the IPN are PayPal and Walmart, and we are optimistic about our ability to continue to attract more IPN partners. I founded Paymentus to disrupt the bill payment ecosystem and I am more excited than ever about our ability to create value for our billers, partners, consumers, and now, public stockholders.

None of this would be possible without our team that works tirelessly to grow our business and create value for our stockholders. This team has built and operated large scale software and payment businesses and has the expertise to successfully execute the strategy I have designed. Together, we remain agile in the face of constantly evolving technology and consumer demands. Historically, we have focused on bill payments from consumers to businesses, but recently we have added business-to-business invoice payments as well as pay-out and disbursements capabilities. I am excited about these new offerings, and others that are in development, and am confident we have the talent and expertise to capture even more opportunities.

I remain humbled that the strategy developed during our formative years has come to fruition, and am even more energized about what the future has in store. I believe Paymentus is very well positioned for long-term, sustainable growth and to capitalize on this massive market opportunity with our:

 

next generation billing and payments platform;

 

fast growing and diverse customer base;

 

extensive reach of billers and users;

 

state of the art Instant Payment Network;

 

global consumer platforms as our IPN partners;

 

highly efficient distribution model; and

 

an amazing team with great experience to continue to lead the company on its successful path.

 

We are just getting started in our pursuit to modernize bill payments and look forward to having you join our journey to simplify how bills are paid!


Dushyant Sharma

Founder and CEO

 

 

ii


 

PROSPECTUS SUMMARY

The following summary highlights information contained elsewhere in this prospectus. It does not contain all the information you should consider before investing in our Class A common stock. You should read this entire prospectus carefully, including the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and related notes included elsewhere in this prospectus, before making an investment decision. In this prospectus, unless the context requires otherwise, all references to “we,” “our,” “us,” “Paymentus,” and the “Company” refer to Paymentus Holdings, Inc. and its consolidated subsidiaries.

Our Mission

Our mission is to simplify how bills are paid.

Our Company

Paymentus is a leading provider of cloud-based bill payment technology and solutions. We deliver our next-generation product suite through a modern technology stack to more than 1,300 business clients—our billers. Our platform was used by approximately 16 million consumers and businesses in North America in December 2020 to pay their bills and engage with our billers. We serve billers of all sizes that provide non-discretionary services across a variety of industry verticals, including utilities, financial services, insurance, government, telecommunications and healthcare. By powering this comprehensive network of billers, each with their own set of bill payment requirements, we have created an enviable feedback loop that enables us to continuously drive innovation, grow our business and uniquely improve the electronic bill payment experience for everyone in the bill payment ecosystem.

Our platform provides our billers with easy-to-use, flexible and secure electronic bill payment experiences powered by an omni-channel payment infrastructure that allows consumers to pay their bills using their preferred payment type and channel. Because our platform is developed on a single code base and leverages a SaaS infrastructure, we can rapidly deploy new features and tools to our entire biller base simultaneously. Through a single point of integration to our billers’ core financial and operating systems, our mission-critical solutions provide our billers with a payments operating system that helps them collect revenue faster and more profitably and empower their consumers with the information and transparency needed to control their financial destiny.

We extend our platform’s reach through our Instant Payment Network, or IPN. This is a proprietary network, consisting of tens of thousands of billers, that connects our integrated billing, payment and reconciliation capabilities with our IPN partners’ platforms. Our IPN enables our partners, which include leading consumer brands and financial institutions, to access our next-generation electronic bill payment technology using the same integrated platform we provide directly to our billers. By being connected to our IPN, our IPN partners provide their consumers with the full capabilities of our next-generation product suite, including the ability to engage with and make payments to our large and growing base of billers. Those partners in turn expand our platform’s reach to millions of additional consumers in the United States and globally.

Paying bills is a fundamental obligation for people around the world and a recurring relationship exists between consumers and billers for non-discretionary, essential services. There were approximately 128 million households in the United States as of December 31, 2020, paying an average of ten bills per month per household. Bill payments represented 58% of total monthly expenditures among U.S. adults in a recent survey by the Federal Reserve Banks, with total estimated bill payment spending exceeding $4.6 trillion in the United States in 2020. Despite its ubiquity, the bill payment industry suffers from under-investment in technology, which creates slow, often manual and error-prone experiences for billers and consumers.

Today, most billers rely on legacy bill payment systems from financial institutions or biller-direct solutions. Both of these systems create challenges for billers and their consumers. Financial institutions often lack the ability to view billing details or obtain payment confirmation and limit payment types to their own checking accounts. Similarly, billers traditionally rely on non-integrated, multi-vendor solutions, which force consumers into a decentralized and fragmented experience. These legacy solutions result in inefficiencies in consumer communication, electronic bill presentment and payment capture, which hinder a biller’s ability to create a holistic and accurate perspective on its cash flow.

1


 

We address these inefficiencies through our cloud-native, integrated single-vendor solution. Our platform supports omni-channel, electronic bill payments across multiple commerce channels, including online, mobile, interactive voice response, or IVR, call center, chatbot and voice-based assistants. As we do not charge development or implementation fees, there is no minimum investment necessary for billers to achieve efficiencies from the use of our platform to replace some or all of their legacy bill payment systems or biller-direct solutions. We simplify how bills are paid and help our billers collect revenue faster and more profitably because our platform is:

 

Scalable: Our mission-critical platform is designed to support high velocity throughput of daily, non-discretionary consumer bill payments.

 

Innovative: Our artificial intelligence, or AI, enabled SaaS architecture is the foundation of our unified platform. Our machine learning, or ML, algorithms continuously learn and self-improve from transaction activity on our platform.

 

Flexible: We support multiple integration modalities to enhance our billers’ ability to consume the full breadth of our platform.

 

Configurable: Our platform can rapidly and cost-effectively reconfigure our business logic to accommodate the specific requirements of the different end markets we serve.

 

Integrated: Our library of over 350 integrations to core accounting software systems, including customer information systems, or CIS (which are software systems used to efficiently manage customer processes and data and often include bill pay, customer service and forecasting and analytics tools), and enterprise resource planning, or ERP, systems (which are software systems used to collect, store, manage and interpret data from many business activities, typically including accounting systems), helps connect disparate systems across the electronic bill payment value chain.

 

Extensible: Our platform is designed to integrate with new payment and consumer engagement technologies as well as new software, strategic and IPN partners.

 

Secure: Our platform is compliant with the Payment Card Industry Data Security Standard, or PCI-DSS, and offers an intrusion detection and prevention system, multi-factor authentication and encryption and tokenization capabilities.

Our platform was built on more than ten years of data, investment, network scale and feedback from billers that used our platform on a daily basis. We leverage our next-generation platform and single code base to deploy new solutions across our entire biller base simultaneously. Our ability to rapidly and cost-effectively drive innovation requires a next generation platform powered by deep software integrations across the bill payment value chain, scale and data, which we believe makes our platform difficult to replicate.

Our ability to seamlessly serve billers, partners and consumers uniquely positions us at the center of a three-sided network and enables us to drive a powerful, and accelerating, flywheel effect. Our robust platform attracts billers and partners seeking to build stronger relationships with their consumers. Adding more billers and partners extends our platform’s reach to more consumers. These consumers drive more transactions to our platform, which strengthens biller and partner retention and in turn accelerates our organic growth. As we scale, we expect to drive increases in our operating leverage, which in turn enables higher profitability and more efficient biller and partner acquisition.

2


 

 

We captured over 15 billion unique transactional and behavioral data points from over 195 million transactions in 2020, across a network of more than 1,300 billers as of December 31, 2020 that had approximately 16 million consumers and business users in December 2020 alone. This rich data set continuously enhances our ML algorithms and AI capabilities, which power the network effects that attract billers, partners and consumers to our platform.

We rely on a diversified go-to-market strategy including direct sales, software and strategic partnerships and our IPN. While the direct sales channel is an important part of our business, we also rely on our software and strategic partners to deliver our solutions to our billers. Our software partners, such as Oracle, integrate our platform into their software products enabling us to power their bill payment capabilities. Our strategic partners, such as U.S. Bank, JPMorgan Chase and a major payroll solutions provider, refer new billers to our platform and in many cases we jointly sell to prospective customers with our strategic partners. Some of our strategic partners, particularly banks, also integrate our solutions into their platforms to provide an integrated bill presentment and omni-channel bill payment solution to their customers, and as such they are also IPN partners.

Our IPN promotes rapid adoption of our platform through partnerships with leading business networks, including:

 

Banking Partners: We modernize the bill payment infrastructure of some of the largest U.S. banks, empowering their digital banking consumers with fast, secure and omni-channel payment technology by seamlessly integrating our solution into their core platforms.

 

eCommerce Partner: We power electronic bill payments through the AI-assistant voice service of a leading global ecommerce retailer, enabling millions of its users to retrieve information about, and pay, their bills for all billers on our network.

 

PayPal: We enable PayPal’s U.S. consumers to pay their bills directly from PayPal apps.

 

Other Partners: Other partners benefit from our IPN in a variety of ways, such as enabling bill payment for consumers at more than 70,000 retail locations. For example, we enable Walmart’s consumers to pay their bills either in-store at retail locations or online via Walmart’s retail websites or mobile apps.

Our enterprise-grade platform creates a compelling value proposition for our more than 1,300 billers as of December 31, 2020, ranging from small and midsize to large businesses. In 2020, we processed over $37.9 billion in transaction volume across a variety of industry verticals. As billers experience the benefits of our platform, they typically expand their usage. In 2020, 57% of our total dollar volume processed was in utilities, 23% in financial institutions and 16% in insurance. In addition, our biller and partner bases are diversified; in 2020, no single biller represented, and no single software, strategic or IPN partner was associated with, more than 10% of the transactions processed.

We have achieved significant growth through our capital efficient model. We generated revenue of $235.8 million in 2019 and $301.8 million in 2020, representing a year-over-year increase of 28.0%. Gross profit was $74.4 million in 2019 and $92.6 million in 2020, contribution profit was $96.7 million in 2019 and $120.5 million in 2020 and adjusted gross profit was $77.1 million in 2019 and $96.1 million in 2020. We had net income of $13.7 million in both 2019 and 2020, and adjusted EBITDA was $26.0 million in 2019 and $28.5 million in 2020. Our net cash provided by operating activities was $17.5 million in 2019 and $35.6 million in 2020, and we generated free cash flow of $6.3 million in 2019 and $20.8 million in 2020.

For the three months ended March 31, 2020 and 2021, we generated revenue of $69.6 million and $92.2 million, respectively, representing a quarter-over-quarter increase of 32.5%. Gross profit was $20.8 million and $27.5 million, contribution profit was $27.6 million and $35.1 million and adjusted gross profit was $21.6 million and $28.6 million for the three months ended March 31, 2020 and 2021, respectively. We had net income of $2.8 million and $3.6 million and adjusted EBITDA of $6.2 million and $9.4 million for the three months ended March 31, 2020 and 2021, respectively. Our net cash provided by operating activities was $4.9 million and $7.2 million and we generated free cash flow of $1.3 million and $2.8 million for the three months ended March 31, 2020 and 2021, respectively.

See the section titled “—Summary Consolidated Financial and Other Data—Key Performance and Non-GAAP Measures” for a discussion of the limitations of contribution profit, adjusted gross profit, adjusted EBITDA and free cash flow and reconciliations of these non-GAAP measures to the most comparable GAAP measures for the periods presented.

3


 

Our Industry

The bill payment industry is undergoing technological transformation as consumers and billers demand a straightforward and streamlined approach to electronic bill presentment and payment and consumer engagement. The following key trends are currently defining the industry:

 

electronic bill payment requires an integrated, single-vendor solution;

 

billers and consumers are underserved by financial institutions;

 

emerging payment options through online and mobile channels are transforming the market; and

 

data is being underutilized.

Our Opportunity

The consumer bill payment market presents us with a significant opportunity. There were approximately 128 million households in the United States as of December 31, 2020, paying an average of ten bills per month per household.

According to Aite, U.S. consumers paid approximately 15.5 billion bills in 2020, which represents approximately $4.6 trillion. With less than 2% of those bills processed on our platform during the same period, we believe our platform and network positions us well to capture a meaningful portion of the market.

We believe we could address an even broader opportunity because the configurability and extensibility of our platform enables wider application of our software and solutions across different use cases and geographies. Over the long term, we intend to expand our offering to new and existing billers beyond traditional bill payments. According to the Nilson Report, global electronic payments totaled approximately $34.9 trillion in 2019.

Our Platform

Our platform is purpose-built to transform the way billers get paid and engage with their consumers. Our AI-driven SaaS platform provides a single-vendor solution that enhances the bill payment ecosystem with new functionality and added transparency. Our single code base architecture maximizes the inherent flexibility, extensibility and configurability of our solutions, which allows us to rapidly deploy our solutions to our billers.

4


 

 

Single Point of Access

APIs: Our easy-to-use application program interfaces, or APIs, enable billers and partners to seamlessly access the entirety of our network through a single connection.

iFrames: Enables our billers and partners to exercise more control over the user experience by customizing the business logic to meet their specific requirements.

Fully Hosted: We also provide a fully hosted alternative for our billers. In this option, our hosted platform provides our billers the full power of our platform without incurring the cost of using their own IT resources.

Technology Solutions

Engagement: We believe billers must regularly engage with their consumers using actionable and contextualized data. Our tools enable billers to provide billing details to their consumers and directly communicate with them over secure channels.

Presentment: Our solution offers electronic bill presentment across numerous channels. Our electronic bill presentment products help billers maximize their reach to accelerate revenue realization and engage consumers more efficiently.

Empowerment: Consumers can control communication preferences, multi-lingual capabilities, self-directed payment scheduling, multi-account management and dispute management. Billers are able to use automated case management and configurable reporting to quickly and comprehensively provide high-quality customer service.

Payment: Our secure and comprehensive omni-channel payment platform supports traditional and emerging payment technologies across multiple currencies and languages across a variety of payment channels. We support one-time payments, as well as future-dated, recurring and payment plan transactions.

Intelligence: Our AI-powered analytics engine produces data-driven insights on consumer preferences, channel usage, bill lifecycles, messaging effectiveness and paper suppression and can be used by billers to improve the consumer experience.

Technology Architecture

Single Code Base: Our extensible, cloud-based platform was built from the ground-up on a single code base with no versioning, which enables rapid deployment of new features and tools in part because there is no need to manage and reconcile separate versions of our software code.

AI / ML: Our platform uses AI and ML algorithms to increase efficiency and extract data-driven insights from transactions and interactions between consumers, billers, partners and our platform.

Our Network

Our innovative technology platform enables us to sit at the nexus of a powerful three-sided network of billers, partners and consumers. We use the power of this network to enhance the number of product features each biller uses to promote transaction growth. In 2020, our average biller used at least ten of 19 core platform features that enable billers to optimize their payment operations and user experience. Our portfolio data shows that payment adoption is highly correlated to feature utilization. By increasing feature usage, we believe we will realize an increase in transaction volume from our billers.

5


 

Our Billers

Our innovative technology platform empowers billers to offer electronic bill payment acceptance across multiple payment types, engage with their consumers and streamline their business operations efficiently and cost-effectively. We attract billers to our platform because our platform modernizes their payment infrastructure and helps them collect revenue faster and more profitably. Our platform is capable of posting payments directly to billers’ systems, which simplifies revenue operations and strengthens the relationship we have with billers.

Value Proposition to Billers

Flexible and Integrated Platform: Billers can offer their consumers a variety of traditional and emerging payment and engagement technologies that enable the billers to collect revenue faster and drive improved customer satisfaction, while reducing costs such as their PCI-DSS compliance burden. Billers have the flexibility to integrate directly to our platform through APIs, iFrames or a fully hosted solution, which allows them to cost-effectively select and customize our solutions to fit their specific requirements. Because our platform is flexible and scalable, and since we do not charge development or implementation fees, our value proposition applies to all billers whether they ultimately choose to use our platform for all of their bills or continue using legacy bill payment systems or biller-direct solutions together with our solutions.

Long-term Growth and Operating Leverage: The scalability of our platform allows billers to capitalize on growth opportunities for their business. While helping billers grow their revenue, we also help reduce costs by leveraging our integrated technology architecture to automate manual workflows, which reduces error-prone manual data entry and efficiently reconciles payments to backend financial and operating systems.

Our Partners

As our biller base expands, we attract market-leading software, strategic and IPN partners that use our platform to power bill payment experiences within their ecosystems. Our innovative platform facilitates a modern bill presentment, consumer engagement and bill payment experience for our partners’ customers, regardless of partner type.

Software Partners: Our software partners include large third-party technology providers, such as Oracle, which integrate our platform into their software suites to power bill payments for their customers and refer billers to us. For example, ERP providers integrate our platform into their own suite of solutions to offer a comprehensive solution set that enhances their ERP software with bill presentment, consumer engagement and bill payment capabilities. In certain cases, we have revenue sharing arrangements with our software partners based on our transaction fees. In other cases, rather than a revenue sharing arrangement, we and our software partner mutually benefit from the partnership as the software partner can offer a more comprehensive solution and stronger value proposition to its customers and we receive broader reach to potential billers and consumers, an efficient biller acquisition channel and stronger biller retention from an integrated solution.

Strategic Partners: Similar to our software providers, our strategic partners refer billers to us and, in many cases, integrate our solutions into their platforms. Our strategic partners, including U.S. Bank, JPMorgan Chase and a major payroll solutions provider, work with us to offer bill presentment, consumer engagement and bill payment capabilities to their customers, which are billers. For example, a large commercial bank has many business clients who seek to improve and streamline the bill presentment and bill payment experience for their consumers. In that case, the large commercial bank partners with us to sell a joint solution. In other cases, the

6


 

commercial bank may prefer to sell a white-labeled solution, which it obtains from us. Both co-sale and white-label arrangements typically involve revenue sharing agreements with the strategic partner based on the transaction fees we receive.

IPN Partners: Our IPN partners work with us to gain access to broader biller networks and provide their consumers with innovative technology to streamline bill payments. Our IPN partners include PayPal, for which we power bill payment capabilities, a leading global ecommerce retailer, through which we offer electronic bill presentment and payment via its AI-assistant voice service, and Walmart, for which we enhance in-person bill payment capability at Walmart Money Centers. Unlike software and strategic partners, IPN partners typically have direct interactions with consumers, and leverage our platform to connect to our biller network. Through this connection, consumers can initiate bill payments through our IPN partners, which we route to the billers. There are many types of IPN partners, including consumer networks, retailers, banks and financial institutions. We offer consumer networks and retailers increased engagement with consumers by enabling streamlined bill presentment payment experiences for an array of billers through their networks. We similarly offer banks and financial institutions increased engagement with their retail clients. For IPN partners, we will typically receive a fee per transaction processed through our platform and in some cases we pay a referral fee to IPN partners.

Multiple Roles for Partners: Notably, partners may fit into multiple categories, particularly banks and financial institutions. For example, a bank can be a biller, a strategic partner and an IPN partner. As a biller, the bank generates bills, such as mortgage and credit card statements. As a strategic partner, the same bank uses our platform to power an omni-channel bill payment experience for a commercial customer of the bank. In this way, that commercial customer becomes a new biller for our network. Finally, as an IPN partner, the same bank leverages our IPN network to enable a more robust bill payment experience for its business customers and consumers by, for example, enabling its business customers and those businesses’ consumers to pay bills using alternative payment channels, such as PayPal.

Value Proposition to Partners

Higher Consumer Satisfaction: Partners gain access to our network of billers and can provide turnkey electronic bill payment functionality to their consumers through flexible integration options. By integrating our platform into their ecosystems, partners can provide a more comprehensive solution and drive higher customer satisfaction.

Access to Innovative Technology Solutions: As consumers demand a more seamless and secure experience, partners require consumer engagement and payment technology that caters to the latest consumer trends. Our platform offers cutting edge technology that enables partners to grow mind and wallet share with their consumers.

Our Billers’ and Partners’ Consumers

As our platform reaches more consumers, we capture and monetize more payment transactions. In December 2020, approximately 16 million consumers and businesses used our platform to pay their bills. As consumers increasingly demand omni-channel bill payment solutions for more of their bills, we attract more billers and partners who look to our platform to meet that demand.

Value Proposition to Consumers

Next-Generation Electronic Bill Payment Tools: Consumers gain access to advanced payments functionality to streamline their omni-channel bill payment experience. Consumers can view and pay bills through a variety of payment channels and types, engage with their billers and retrieve actionable insights regarding their payments and billing history.

Control Over Financial Health: Consumers gain added control and visibility over their financial health on a daily basis through the advanced tools and features we provide. Our platform allows consumers to set the terms of their bill payments in a way that best suits their needs.

Our Revenue Model

Our revenue model is highly visible because of the mission-critical, embedded and recurring nature of the solutions we provide to billers. Our standard contract length with our billers is three to five years and we derive the majority of our revenue from a fee paid per transaction by the biller or the consumer or a combination of both. In some industries, billers pass on the transaction costs to consumers, while in other industries, the biller pays for the

7


 

transaction cost, providing the bill payment free of charge to the consumer. Additionally, some billers use a hybrid approach in which the consumer and biller share the cost of the transaction fee.

Our revenue model with respect to our strategic and IPN partners is generally similar to our biller revenue model. We typically receive a fee per payment transaction from our strategic and IPN partners similar to the fee we receive from our billers. We may also have a revenue sharing arrangement for referrals, which is based on transaction fees, with both strategic and IPN partners. Our partners may choose to pay the fee, may have a biller or consumer pay the fee or may use a hybrid approach where consumers and billers share the cost. While revenue derived from or through our IPN partnerships has not been significant historically, we expect that the revenue contribution from our IPN will grow over time. Our software partners may have no fees as an integration partner or may have a revenue sharing arrangement for referrals.

Our usage-based monetization strategy aligns our economic success with the success of our billers and partners. Since we benefit from increased transactional volume, we do not charge separate license fees or implementation fees. In addition, our modern platform architecture allows us to provide integration, implementation, maintenance and upgrades at no additional cost to billers.

Why We Win

We believe our platform provides us with a differentiated position in the market, built on a foundation of the following strengths:

We Integrate and Control the Most Important Components of the Electronic Bill Payment Value Chain into a Single Point of Access

Through a single integration, we provide an end-to-end electronic bill payment solution that eliminates key pain points across the entire bill payment value chain, including:

 

consumer communication and engagement;

 

electronic bill payment and presentment;

 

payment processing for numerous payment types;

 

accounting system integration;

 

security and risk management; and

 

reporting and analytical tools.

This end-to-end functionality is supported by over 350 integrations to core accounting software suites, including market-leading CIS and ERP systems. Additionally, for our key verticals, our solutions are deeply integrated into ERP and CIS systems and workflows of our billers and partners, which provides us with differentiated access to billers, partners and consumers and supports sustainable, long-term relationships.

We Benefit from Scale, Which Results in Powerful, and Accelerating, Network Effects

As billers issue, and consumers pay, bills on our platform, we accelerate connectivity that drives an organic expansion of our network. Leveraging the data we collect through transactional activity on our network, we continue to add in-demand features and functionality that facilitate frictionless and omni-channel consumer engagement and bill payment. These new tools attract more billers and partners to our network and drive further growth in transactions and unique data, which continues to enhance the value proposition of our network. The sheer size of our network attracts new billers who view our scale as validation of our value proposition. The acceleration of this network effect relies on our differentiated position in the bill payment ecosystem, which we believe is difficult to replicate. Through this network effect, we expand the reach of our network to more billers, partners and consumers, which drives our growth.

Our Next-generation Platform is Highly Configurable and Future-ready

We architected our technology stack to be flexible, configurable and extensible in order to simplify and streamline the electronic bill payment experience. Our platform uses an advanced AI engine supported by our intellectual property portfolio that enables rapid and continuous learning and improvement. We leverage behavioral

8


 

and transactional data to build next-generation tools that support the cutting edge of engagement and payment technology, including:

 

bill payment through next-generation payment channels such as social media and text;

 

AI-bots that can communicate with consumers and process payments; and

 

predictive payment alerts.

We Have a Large and Proprietary Data Asset

Our integrated platform, combined with our IPN, enables us to observe billing and payment interactions for thousands of billers and touches the everyday lives of millions of consumers. This provides us with a large and unique data asset. We use this data to enhance the ML algorithms that power our AI engine. We gain unique insight into the payment and behavioral patterns of consumers across their financial life as well as the manner in which billers and partners engage with consumers. Using this data to feed a continuous learning curve, our platform constantly evolves and adapts to these behavioral patterns, powering a network effect that drives higher customer satisfaction through data-driven insights, improves trust and safety and fuels further growth. For example, we use data to continuously improve the natural language processing in our chatbots and to detect and prevent fraud by identifying suspicious transaction patterns and as part of our payment authorization processes. We do not sell collected data to third parties and we only share individualized transaction data with the parties to the related transaction.

Our Growth Strategies

We intend to leverage our products and industry presence to establish our platform as the industry standard for electronic bill payments for billers and partners globally. Key elements of this strategy include:

 

continue to win new billers and partners;

 

grow with existing billers and partners;

 

expand into new channels and industry verticals;

 

build new products;

 

leverage our platform to expand internationally; and

 

pursue selective strategic acquisitions.

Our Principal Stockholders

We have a valuable relationship with our controlling stockholder, Accel-KKR. In September 2011, affiliates of Accel-KKR, or AKKR, acquired a controlling equity interest in our company. We refer to this transaction as the AKKR Investment. Dushyant Sharma, our founder, chairman, president and chief executive officer, has continued to retain a significant equity interest in our company since our inception and following the AKKR Investment.

AKKR is a technology-focused investment firm with over $10 billion in capital commitments. The firm focuses on investments in software and tech-enabled businesses. At the core of AKKR’s investment strategy is a commitment to developing strong partnerships with the management teams of its portfolio companies and a focus on building value alongside management by leveraging the significant resources available through the AKKR network.

See the sections titled “Risk Factors—Risks Related to Our Class A Common Stock and this Offering” and “Principal Stockholders” for additional information regarding our equity ownership and related risks you should consider before making an investment decision.

Risk Factors Summary

Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this prospectus summary. The following is a summary of the principal risks we face, any of which could adversely affect our business, operating results, financial condition or prospects:

 

Our rapid growth may not be sustainable or indicative of future growth, and our business could be harmed if we fail to manage our infrastructure to support future growth.

9


 

 

If we are unsuccessful in establishing, growing or maintaining partnerships, our ability to compete could be impaired, and our operating results may suffer.

 

If we are unable to increase our revenue at a rate sufficient to offset expected increases in our costs, or if the investments we make in our business fail to generate the expected benefits, our business, operating results and financial condition will be harmed and we may not be able to maintain profitability over the long term.

 

Our sales efforts to large enterprises involve considerable time and expense with long and unpredictable sales cycles.

 

The COVID-19 pandemic could have a material adverse impact on our employees, billers, partners, consumers and other key stakeholders, which could materially and adversely impact our business, operating results and financial condition.

 

We are subject to economic and geopolitical risk, the business cycles and credit risk of our billers and partners and their consumers, and the overall level of consumer, business and government spending, which could negatively affect our business, operating results and financial condition.

 

The markets in which we participate are competitive, and if we do not compete effectively, our business, operating results and financial condition could be harmed.

 

Our revenue is sensitive to shifts in payment mix and if more consumers start paying their bills by payment methods with lower transaction fees, it could materially impact our operating results.

 

We expect fluctuations in our operating results, making it difficult to project future results, and if we fail to meet the expectations of securities analysts or investors with respect to our operating results, the market price of our Class A common stock could decline.

 

We depend on third-party payment processors to process bill payments made on our platform and our business, operating results and reputation could be harmed if we experience service interruptions related to our payment processors.

 

We operate in an emerging and evolving market, which may develop more slowly or differently than we expect. If our market does not grow as we expect, or if we cannot expand our platform to meet the demands of this market, our revenue may decline or fail to grow.

 

Our risk management efforts may not be effective to prevent fraudulent activities, which could expose us to material financial losses and liability and otherwise harm our business.

 

If we fail to comply with extensive, complex, overlapping and frequently changing rules, regulations, standards and legal interpretations, including those related to payments, card network operations and other financial services, privacy, data protection and information security, our business could be materially harmed.

 

We identified material weaknesses in our internal control over financial reporting, and if we fail to remediate these material weaknesses or if we otherwise fail to establish and maintain effective internal control over financial reporting, our ability to accurately and timely report our financial results could be adversely affected.

 

We may experience software and technology defects, undetected errors, development delays or other performance problems in our software and other technology used as part of our platform, which could damage biller and partner relations, harm our reputation, result in significant costs to us, decrease our potential profitability and expose us to substantial liability.

 

If we fail to adequately obtain, maintain, protect or enforce our intellectual property and proprietary rights, our competitive position could be impaired, our reputation could be harmed and we may lose valuable assets, generate less revenue and incur costly litigation to protect our rights.

 

We and our billers and partners and their consumers and other third parties that use our platform obtain, provide and process a large amount of sensitive and personal data. Any real or perceived improper or unauthorized use of, disclosure of or access to such data could harm our reputation as a trusted brand, as well as have a material adverse effect on our business, operating results and financial condition.

 

The dual class structure of our common stock and the stockholders agreement that we have entered into in connection with this offering will have the effect of concentrating voting control with AKKR and our founder

10


 

 

and chief executive officer, which will limit or preclude your ability to influence corporate matters for the foreseeable future and may depress the market price of our Class A common stock.

 

AKKR controls us and its interests may conflict with ours or yours in the future.

 

Our certificate of incorporation contains provisions renouncing our interest and expectation to participate in certain corporate opportunities identified by, or presented to, AKKR or its affiliates, which could create conflicts of interest and have a material adverse effect on our business, results of operations, financial condition and prospects if attractive corporate opportunities are allocated by AKKR to itself, its affiliates or third parties instead of to us.

Channels for Disclosure of Information

Investors, the media and others should note that we intend to announce material information to the public through filings with the Securities and Exchange Commission, or SEC, the investor relations page on our website, press releases, public conference calls and webcasts.

The information disclosed by the foregoing channels could be deemed to be material information. However, information disclosed through these channels does not constitute part of this prospectus and is not incorporated by reference herein.

Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website.

Corporate Information

We were founded as Bizpective Technologies, Inc. in Ontario, Canada in 2004. In 2005 we changed our name to Paymentus Corporation. Paymentus Holdings, Inc. was incorporated in Delaware in 2011 in connection with the AKKR Investment and acquired all of the assets of Paymentus Corporation in September 2011. Our principal executive offices are located at 18390 NE 68th St., Redmond, WA 98052. Our telephone number is (888) 440-4826. Our website is www.paymentus.com. Information contained on, or that can be accessed through, our website is not a part of, and is not incorporated into, this prospectus, and the inclusion of our website address in this prospectus is an inactive textual reference only.

We use Paymentus and other marks as trademarks in the United States and other countries. This prospectus contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other entities’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other entity.

Implications of Being an Emerging Growth Company

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act. As such, we may take advantage of reduced disclosure and other requirements otherwise generally applicable to public companies, including:

 

presentation of only two years of audited financial statements and related financial disclosure;

 

exemption from the requirement to have our registered independent public accounting firm attest to management’s assessment of our internal control over financial reporting;

 

exemption from compliance with the requirement of the Public Company Accounting Oversight Board, or PCAOB, regarding the communication of critical audit matters in the auditor’s report on the financial statements; 

 

reduced disclosure about our executive compensation arrangements; and

 

exemption from the requirement to hold non-binding advisory votes on executive compensation or golden parachute arrangements.

11


 

We will remain an emerging growth company until the earliest to occur of: (1) the last day of the fiscal year in which we have at least $1.07 billion in annual revenue; (2) the date we qualify as a “large accelerated filer,” with at least $700.0 million of equity securities held by non-affiliates; (3) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period; and (4) the last day of the fiscal year ending after the fifth anniversary of our initial public offering.

As a result of this status, we have taken advantage of reduced reporting requirements in this prospectus and may elect to take advantage of other reduced reporting requirements in our future filings with the SEC. In particular, in this prospectus, we have provided only two years of audited financial statements and only two years of related management’s discussion and analysis of financial condition and results of operations, and we have not included all of the executive compensation-related information that would be required if we were not an emerging growth company. In addition, the JOBS Act provides that an emerging growth company may take advantage of an extended transition period for complying with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies unless it otherwise irrevocably elects not to avail itself of this exemption. We have elected to use this extended transition period until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of the extended transition period. As a result, our consolidated financial statements may not be comparable to the financial statements of companies that comply with new or revised accounting pronouncements as of public company effective dates.

12


 

THE OFFERING

 

Class A common stock offered by us

 

10,000,000 shares.

 

 

 

Underwriters’ option to purchase additional shares from us

 

1,500,000 shares.

 

 

 

Concurrent private placement of Class A common stock

 

Immediately following the closing of this offering, entities affiliated with AKKR will purchase from us in a private placement an aggregate of 2,380,950 shares of our Class A common stock at a price per share equal to the initial public offering price. We will receive the full proceeds of $50 million from this concurrent private placement and will not pay any underwriting discounts or commissions with respect to the shares that are sold in the concurrent private placement. The sale of the shares in the concurrent private placement is contingent upon the completion of this offering. The sale of these shares will not be registered in this offering and will be subject to lock-up agreements with the underwriters for a period of up to 180 days after the date of this prospectus. For additional details regarding the lock-up agreements, see the section titled “Underwriting.”

 

 

 

Class A common stock to be outstanding immediately after this offering and the concurrent private placement

 

12,380,950 shares (or 13,880,950 shares if the underwriters exercise their option to purchase additional shares in full).

 

 

 

Class B common stock to be outstanding immediately after this offering and the concurrent private placement

 

103,479,239 shares.

 

 

 

Total Class A common stock and Class B common stock to be outstanding immediately after this offering and the concurrent private placement

 

115,860,189 shares (or 117,360,189 shares if the underwriters exercise their option to purchase additional shares in full).

 

 

 

Indications of interest

 

One or more funds advised by Capital World Investors and one or more funds managed by Franklin Advisers, Inc. have, severally but not jointly, indicated an interest in purchasing up to an aggregate of $30 million each ($60 million in the aggregate) in shares of our Class A common stock being offered in this offering at the initial public offering price. As these indications of interest are not binding agreements or commitments to purchase, one or more funds advised by Capital World Investors or one or more funds managed by Franklin Advisers, Inc. may determine to purchase more, fewer or no shares in this offering or the underwriters may determine to sell more, fewer or no shares to one or more funds advised by Capital World Investors or one or more funds managed by Franklin Advisers, Inc. The underwriters will receive the same discount on any shares of Class A common stock purchased by one or more funds advised by Capital World Investors or one or more funds managed by Franklin Advisers, Inc. as they will on any other shares of Class A common stock sold to the public in this offering.

 

 

 

Use of proceeds

 

We estimate that the net proceeds from the sale of shares of our Class A common stock in this offering and the concurrent private placement will be approximately $241.1 million (or approximately $270.3 million if the underwriters exercise their option to purchase additional shares in full), based upon the initial public offering price of $21.00 per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

The principal purposes of this offering are to increase our capitalization and financial flexibility, create a public market for our Class A common stock and enable access to the public equity

markets for us and our stockholders. We intend to use approximately $57.4 million of the net proceeds from this offering to redeem all of our issued and outstanding shares of Series A preferred stock (including accrued dividends), substantially all of which are held by AKKR and our founder and chief executive officer. We intend to use the remainder of the net proceeds from this offering and the concurrent private placement for general corporate purposes, including working capital, operating expenses and capital expenditures. Additionally, we may use a portion of the net proceeds to acquire or invest in businesses, products, services or technologies. However, we do not have agreements or commitments for any material acquisitions or investments at this time. See the section titled “Use of Proceeds.”

 

13


 

 

 

 

Voting rights

 

Following this offering, we will have two classes of authorized common stock, Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock will be identical, except with respect to voting and conversion rights. Each share of Class A common stock will be entitled to one vote per share. Each share of Class B common stock will be entitled to ten votes per share and will be convertible at any time into one share of Class A common stock. Immediately following the completion of this offering and the concurrent private placement, shares of our Class B common stock beneficially owned by AKKR and our founder and chief executive officer will collectively represent approximately 98.0% of the voting power of our outstanding common stock. See the section titled “Description of Capital Stock.”

 

 

 

Risk factors

 

See the section titled Risk Factors and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our Class A common stock.

 

 

 

Directed share program

 

At our request, the underwriters have reserved up to 500,000 shares of Class A common stock, or up to 5% of the shares offered by this prospectus, for sale at the initial public offering price through a directed share program to our senior executives and certain individuals associated with AKKR. The sales will be made at our direction by Goldman Sachs & Co. LLC and its affiliates through a directed share program. The number of shares of our Class A common stock available for sale to the general public in this offering will be reduced to the extent that such persons purchase such reserved shares. Any reserved shares not so purchased will be offered by the underwriters to the general public on the same terms as the other shares of Class A common stock offered by this prospectus. Participants in this directed share program other than our executive officers will not be subject to lock-up agreements with the underwriters with respect to any shares purchased through the directed share program. Any shares purchased through the directed share program by our executive officers will be subject to the lock-up agreements with the underwriters described in the section titled “Underwriting.” For additional information, see the section titled “Underwriting—Directed Share Program.”

 

 

 

New York Stock Exchange trading symbol

 

“PAY”

 

The total number of shares of Class A common stock and Class B common stock that will be outstanding immediately after this offering and the concurrent private placement is based on 103,479,239 shares of our common stock outstanding as of March 31, 2021, and excludes:

 

7,566,155 shares of Class B common stock issuable upon the exercise of outstanding options as of March 31, 2021, with a weighted-average exercise price of $4.72 per share;

14


 

 

10,459,000 shares of Class A common stock reserved for future issuance under our 2021 Plan, which became effective on the business day immediately prior to the date of effectiveness of the registration statement of which this prospectus forms a part; and

 

up to 509,370 shares of Class A common stock underlying warrants issuable pursuant to a warrant agreement with an affiliate of J.P. Morgan Securities LLC, or the JPM warrant agreement, with an exercise price of $18.375 per share. The actual number of shares of Class A common stock issuable pursuant to the JPM warrant agreement is tied to the achievement of certain commercial milestones through December 31, 2025 pursuant to a related commercial agreement.

The 2021 Plan provides for an annual automatic increase in the number of shares of our Class A common stock reserved thereunder and also provides for increases in the number of shares of our Class A common stock that may be granted thereunder based on shares under the 2012 Plan that expire, are forfeited or are repurchased by us, as more fully described in the section titled “Executive Compensation—Employee Benefit and Stock Plans.”

Except as otherwise indicated, all information in this prospectus assumes or gives effect to the following:

 

no exercise of outstanding options described above;

 

the filing and effectiveness of our amended and restated certificate of incorporation, which will authorize the issuance of our Class A common stock and effect the reclassification of our outstanding common stock into Class B common stock, and the adoption of our amended and restated bylaws, both of which will occur immediately prior to the completion of this offering;

 

the redemption by us of all of our issued and outstanding shares of Series A preferred stock (including accrued dividends) using a portion of the net proceeds from this offering;

 

the issuance of 2,380,950 shares of our Class A common stock to entities affiliated with AKKR upon the closing of the concurrent private placement immediately following the closing of this offering;

 

a 5-for-1 forward stock split of our common stock effected on May 10, 2021, as if it had occurred on the date of such information; and

 

no exercise of the underwriters’ option to purchase additional shares.

15


 

 

SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA

The following summary consolidated statements of operations and cash flows data for the years ended December 31, 2019 and 2020 are derived from our audited consolidated financial statements and related notes included elsewhere in this prospectus. The summary consolidated statements of operations and cash flows data for the three months ended March 31, 2020 and 2021, and the summary consolidated balance sheet data as of March 31, 2021, are derived from our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. We have prepared the unaudited interim condensed consolidated financial statements on a basis substantially consistent with our audited consolidated financial statements as of and for the year ended December 31, 2020, and the unaudited interim condensed consolidated financial statements include all normal recurring adjustments necessary for a fair statement of the financial information set forth in those unaudited interim condensed consolidated financial statements. You should read this data together with our audited consolidated financial statements and unaudited interim condensed consolidated financial statements and related notes included elsewhere in this prospectus and the information in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our historical results are not necessarily indicative of our future results, and our results for the three-month period ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or any future year or period. The summary consolidated financial data in this section are not intended to replace, and are qualified in their entirety by, the consolidated financial statements and related notes included elsewhere in this prospectus.

Consolidated Statements of Operations Data:

 

 

Year Ended December 31,

 

 

Three Months Ended March 31,

 

 

 

 

2019

 

 

 

2020

 

 

 

2020

 

 

 

2021

 

 

 

(as restated)

 

 

 

 

 

 

(unaudited)

 

 

 

(in thousands, except share and per share data)

 

Revenue

 

$

235,778

 

 

$

301,767

 

 

$

69,593

 

 

$

92,222

 

Cost of revenue

 

 

161,344

 

 

 

209,140

 

 

 

48,816

 

 

 

64,675

 

Gross profit

 

 

74,434

 

 

 

92,627

 

 

 

20,777

 

 

 

27,547

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development(1)

 

 

17,864

 

 

 

24,510

 

 

 

5,768

 

 

 

7,730

 

Sales and marketing(1)

 

 

27,989

 

 

 

31,842

 

 

 

7,612

 

 

 

8,222

 

General and administrative(1)

 

 

10,210

 

 

 

17,847

 

 

 

3,688

 

 

 

6,742

 

Total operating expenses

 

 

56,063

 

 

 

74,199

 

 

 

17,068

 

 

 

22,694

 

Income from operations

 

 

18,371

 

 

 

18,428

 

 

 

3,709

 

 

 

4,853

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income (expense), net

 

 

106

 

 

 

52

 

 

 

42

 

 

 

(3

)

Foreign exchange gain (loss)

 

 

2

 

 

 

(116

)

 

 

(66

)

 

 

9

 

Income before income taxes

 

 

18,479

 

 

 

18,364

 

 

 

3,685

 

 

 

4,859

 

Provision for income taxes

 

 

(4,782

)

 

 

(4,653

)

 

 

(906

)

 

 

(1,221

)

Net income

 

$

13,697

 

 

$

13,711

 

 

$

2,779

 

 

$

3,638

 

Undeclared dividends on Series A preferred stock

 

 

(4,697

)

 

 

(5,186

)

 

 

(1,242

)

 

 

(1,360

)

Net income attributable to common stock

 

$

9,000

 

 

$

8,525

 

 

$

1,537

 

 

$

2,278

 

Net income per share attributable to common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.09

 

 

$

0.08

 

 

$

0.01

 

 

$

0.02

 

Diluted

 

$

0.08

 

 

$

0.08

 

 

$

0.01

 

 

$

0.02

 

Weighted-average number of shares used to compute basic and diluted net income per share attributable to common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

103,469,238

 

 

 

103,479,239

 

 

 

103,479,239

 

 

 

103,479,239

 

Diluted

 

 

106,350,473

 

 

 

106,207,883

 

 

 

106,129,442

 

 

 

106,303,894

 

 


16


 

 

 

(1)

Stock-based compensation expense was allocated in cost of revenue and operating expenses as follows:

 

 

 

Year Ended December 31,

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2020

 

 

 

2020

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

(unaudited)

 

 

 

(in thousands)

 

Cost of revenue

 

$

 

 

$

 

 

$

 

 

$

 

Research and development

 

 

7

 

 

 

27

 

 

 

4

 

 

 

16

 

Sales and marketing

 

 

12

 

 

 

34

 

 

 

8

 

 

 

17

 

General and administrative

 

 

1,566

 

 

 

1,933

 

 

 

463

 

 

 

530

 

Total stock-based compensation

 

$

1,585

 

 

$

1,994

 

 

$

475

 

 

$

563

 

 

Consolidated Balance Sheet Data:

 

 

As of March 31, 2021

 

 

Actual

 

 

Pro Forma(1)

 

Pro Forma as Adjusted(2)

 

 

(in thousands)

Cash and cash equivalents

 

$

49,369

 

 

$             49,369

 

$           232,994

Working capital(3)

 

 

52,956

 

 

52,956

 

236,581

Total assets

 

 

134,789

 

 

134,789

 

318,414

Total liabilities

 

 

45,378

 

 

45,378

 

45,378

Series A preferred stock

 

 

 

 

 

Treasury stock

 

 

(579

)

 

 

Total stockholders’ equity

 

 

89,411

 

 

89,411

 

273,036

 

(1)

The pro forma consolidated balance sheet data gives effect to (a) the filing of our amended and restated certificate of incorporation that will authorize the issuance of our Class A common stock and effect the reclassification of our outstanding common stock into Class B common stock, and (b) the retirement of all of our issued treasury stock, which consists of 320 shares of Series A preferred stock and 1,306,412 shares of common stock.

(2)

The pro forma as adjusted balance sheet data gives effect to (a) the pro forma adjustments described in footnote (1) above, (b) the issuance and sale by us of 12,380,950 shares of Class A common stock in this offering and the concurrent private placement at the initial public offering price of $21.00 per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, and (c) the application of $57.4 million of the net proceeds from this offering to redeem all of our 23,013 issued and outstanding shares of Series A preferred stock, including accrued dividends (of the $57.4 million of net proceeds to be used to redeem the outstanding shares of Series A preferred stock, $0.9 million is included in cash and cash equivalents (pro forma as adjusted) in respect of the dividends that have accrued or will accrue on these shares from April 1, 2021 through the estimated closing date of this offering, which is also the expected date of the redemption).

(3)

Working capital is defined as current assets less current liabilities.

Consolidated Statements of Cash Flows Data:

 

 

 

Year Ended December 31,

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2020

 

 

 

2020

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

(unaudited)

 

 

 

(in thousands)

 

Net cash provided by (used in)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating activities

 

$

17,511

 

 

$

35,620

 

 

$

4,901

 

 

$

7,177

 

Investing activities

 

 

(13,897

)

 

 

(15,137

)

 

 

(3,618

)

 

 

(4,412

)

Financing activities

 

 

(857

)

 

 

(1,358

)

 

 

(317

)

 

 

(95

)

 

Key Performance and Non-GAAP Measures:

In addition to the GAAP financial measures presented in our consolidated financial statements, we rely on the number of transactions processed and the non-GAAP measures included in the table below to help us evaluate our business, identify trends affecting our business, formulate business plans and make strategic decisions. There are limitations to contribution profit, adjusted gross profit, adjusted EBITDA and free cash flow, the non-GAAP measures presented in this prospectus. Our non-GAAP measures may not be comparable to similarly titled measures of other companies; other companies, including companies in our industry, may calculate non-GAAP measures differently than we do, limiting the usefulness of those measures for comparative purposes. These non-GAAP measures should not be considered in isolation from or as a substitute for GAAP financial measures.

17


 

 

Year Ended December 31,

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

 

2020

 

 

 

2020

 

 

 

2021

 

 

(as restated)

 

 

 

 

 

 

(unaudited)

 

 

(in thousands, except transaction data and percentages)

 

Transactions processed (in millions)(1)

 

146.2

 

 

 

195.0

 

 

 

45.9

 

 

 

62.4

 

Contribution profit(2)

$

96,664

 

 

$

120,503

 

 

$

27,628

 

 

$

35,109

 

Adjusted gross profit(3)

$

77,079

 

 

$

96,140

 

 

$

21,579

 

 

$

28,595

 

Adjusted EBITDA(4)

$

25,957

 

 

$

28,491

 

 

$

6,204

 

 

$

9,404

 

Free cash flow(5)

$

6,249

 

 

$

20,773

 

 

$

1,283

 

 

$

2,765

 

 

(1)

We define transactions processed as the number of accepted payment transactions, such as checks, credit card and debit card transactions, automated clearing house, or ACH, items and emerging payment types, which are initiated and processed through our platform during a period.

(2)

Contribution profit is a non-GAAP measure and should not be considered an alternative to gross profit as a measure of operating performance. We calculate contribution profit as gross profit plus other cost of revenue. Other cost of revenue equals cost of revenue less interchange and assessment fees paid by us to our payment processors. We exclude interchange and assessment fees because we believe inclusion is less directly reflective of our operating performance as we do not control the payment channel used by consumers, which is the primary determinant of the amount of interchange and assessment fees. We use contribution profit to measure the amount available to fund our operations after interchange and assessment fees, which are directly linked to the number of transactions we process and thus our revenue and gross profit. We present contribution profit because it is used by our management and board of directors to manage our operations and assess our performance. We therefore believe it provides investors with useful information to enhance their understanding of our operating performance and enable them to make more meaningful period-to-period comparisons. The following table provides a reconciliation of contribution profit to the GAAP measure of gross profit for the periods presented:

 

Year Ended December 31,

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

 

2020

 

 

 

2020

 

 

 

2021

 

 

(as restated)

 

 

 

 

 

 

(unaudited)

 

 

(in thousands)

 

Gross profit

$

74,434

 

 

$

92,627

 

 

$

20,777

 

 

$

27,547

 

Plus: other cost of revenue

 

22,230

 

 

 

27,876

 

 

 

6,851

 

 

 

7,562

 

Contribution profit

$

96,664

 

 

$

120,503

 

 

$

27,628

 

 

$

35,109

 

 

(3)

Adjusted gross profit is a non-GAAP measure and should not be considered an alternative to gross profit as a measure of operating performance. We calculate adjusted gross profit as gross profit adjusted for non-cash items, primarily stock-based compensation and amortization. The following table provides a reconciliation of adjusted gross profit to the GAAP measure of gross profit for the periods presented:

 

Year Ended December 31,

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

 

2020

 

 

 

2020

 

 

 

2021

 

 

(as restated)

 

 

 

 

 

 

(unaudited)

 

 

(in thousands)

 

Gross profit

$

74,434

 

 

$

92,627

 

 

$

20,777

 

 

$

27,547

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

Amortization

 

2,645

 

 

 

3,513

 

 

 

802

 

 

 

1,048

 

Adjusted gross profit

$

77,079

 

 

$

96,140

 

 

$

21,579

 

 

$

28,595

 

 

(4)

Adjusted EBITDA is a non-GAAP measure and should not be considered an alternative to net income as a measure of operating performance or as a measure of liquidity. We calculate adjusted EBITDA as net income before other income (expense) (which consists of interest income (expense), net and foreign exchange (gain) loss), amortization and depreciation and income taxes, adjusted to exclude the effects of stock-based compensation expense and certain nonrecurring expenses that management believes are not indicative of ongoing operations, consisting primarily of professional fees and other indirect charges associated with our preparation for an initial public offering.

 

We have included adjusted EBITDA in this prospectus because it is a key measure used by our management and board of directors to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, the exclusion of certain expenses in calculating adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis and, in the case of exclusion of the impact of stock-based compensation, excludes an item that we do not consider to be indicative of our core operating performance. Accordingly, we believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

 

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

 

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

 

Adjusted EBITDA does not reflect changes in interest (income) expense;

 

Adjusted EBITDA does not reflect changes in foreign exchange (gain) loss;

 

Adjusted EBITDA does not consider the potentially dilutive impact of stock-based compensation, which has been a significant recurring expense and will continue to constitute a significant recurring expense for the foreseeable future, as equity awards are expected to continue to be an important component of our compensation strategy;

 

Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us;

18


 

 

 

Adjusted EBITDA does not reflect certain nonrecurring expenses that may represent a reduction in cash available to us; and

 

other companies, including companies in our industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

Because of these limitations, you should consider adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net income and our other GAAP results.

The following table provides a reconciliation of adjusted EBITDA to the GAAP measure of net income for the periods presented:

 

Year Ended December 31,

 

 

Three Months Ended March 31,

 

 

 

 

2019

 

 

 

2020

 

 

 

2020

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

(unaudited)

 

 

 

(in thousands)

 

 

Net income

$

13,697

 

 

$

13,711

 

 

$

2,779

 

 

$

3,638

 

 

Excluding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest (income) expense, net

 

(106

)

 

 

(52

)

 

 

(42

)

 

 

3

 

 

Provision for income taxes

 

4,782

 

 

 

4,653

 

 

 

906

 

 

 

1,221

 

 

Depreciation and amortization

 

6,001

 

 

 

8,069

 

 

 

2,020

 

 

 

2,392

 

 

Foreign exchange (gain) loss

 

(2

)

 

 

116

 

 

 

66

 

 

 

(9

)

 

Stock-based compensation

 

1,585

 

 

 

1,994

 

 

 

475

 

 

 

563

 

 

Other nonrecurring expenses

 

 

 

 

 

 

 

 

 

 

1,596

 

 

Adjusted EBITDA

$

25,957

 

 

$

28,491

 

 

$

6,204

 

 

$

9,404

 

 

 

(5)

Free cash flow is a non-GAAP measure and should not be considered an alternative to net cash provided by (used in) operating activities as a measure of cash generated by operating activities. Free cash flow represents net cash provided by (used in) operating activities less capital expenditures and capitalized internal-use software development costs. We believe free cash flow is useful in evaluating liquidity and provides information to management and investors about our ability to fund future operating needs and strategic initiatives.

 

Free cash flow has limitations as an analytical tool and it should not be considered in isolation or as a substitute for analysis of other GAAP financial measures, such as net cash provided by (used in) operating activities. Additionally, the utility of free cash flow is further limited as it does not reflect our future capital commitments, and it does not represent the total increase or decrease in our cash balance for a given period. The following table provides a reconciliation of free cash flow to the GAAP measure of net cash provided by (used in) operating activities for the periods presented:

 

 

Year Ended December 31,

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

 

2020

 

 

 

2020

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

(unaudited)

 

 

(in thousands)

 

Net cash provided by operating activities

$

17,511

 

 

$

35,620

 

 

$

4,901

 

 

$

7,177

 

Purchases of property and equipment

 

(1,040

)

 

 

(458

)

 

 

(164

)

 

 

(156

)

Capitalized internal-use software development costs

 

(10,222

)

 

 

(14,389

)

 

 

(3,454

)

 

 

(4,256

)

Free cash flow

$

6,249

 

 

$

20,773

 

 

$

1,283

 

 

$

2,765

 

Net cash used in investing activities(6)

$

(13,897

)

 

$

(15,137

)

 

$

(3,618

)

 

$

(4,412

)

Net cash used in financing activities

$

(857

)

 

$

(1,358

)

 

$

(317

)

 

$

(95

)

(6)

Net cash used in investing activities includes payments for purchases of property and equipment and costs related to capitalized internal-use software development, which is also included in our calculation of free cash flow.

 

19


 

RISK FACTORS

Investing in our Class A common stock involves a high degree of risk. Before making an investment decision, you should consider carefully the risks and uncertainties described below, together with all of the other information in this prospectus, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes thereto included elsewhere in this prospectus. If any of the following risks actually occur, our business, operating results, financial condition and prospects could be adversely affected. In that event, the market price of our Class A common stock could decline, and you could lose part or all of your investment. Our business, operating results, financial condition or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material.

Risks Related to Our Business and Industry

Our rapid growth may not be sustainable or indicative of our future growth.

Our recent rapid growth, including in payment volumes, may not be sustainable or indicative of our future growth. Even though the number of billers and consumers who use our platform has grown rapidly in recent years, there can be no assurance that we will be able to attract new billers or retain existing billers. Our costs associated with retaining revenue from existing billers are substantially lower than costs associated with attracting and generating revenue from new billers or costs associated with generating increased adoption of our platform by existing billers. Therefore, if we are unable to retain revenue from existing billers, even if related losses are offset by an increase in new billers or increased adoption of our platform by existing billers, our operating results could be adversely impacted.

Our ability to attract new billers, retain revenue from existing billers or increase adoption of our platform by both new and existing billers is impacted by a number of factors, including:

 

our transaction fees and certain of our billers’ ability to pass them on to consumers;

 

our ability to timely expand the functionality and scope of our platform;

 

our ability to maintain the rates at which our billers pay us and continue to use our platform;

 

competitive factors, including the introduction of competing solutions, discount pricing and other strategies that may be implemented by our competitors;

 

our ability to maintain high-quality customer support for billers and consumers;

 

our ability to attract and retain strategic partners, software partners and IPN partners;

 

our ability to expand into new industries and market segments;

 

actual or perceived privacy or security breaches;

 

the frequency and severity of any system outages, technological changes or similar issues;

 

our ability to successfully identify and acquire or invest in businesses, products or technologies that we believe could complement or expand our platform;

 

our ability to increase awareness of our brand and successfully compete with other companies;

 

our ability to expand internationally; and

 

our focus on long-term value over short-term results, meaning that we may make strategic decisions that may not maximize our short-term revenue or profitability if we believe that the decisions are consistent with our mission and will improve our financial performance over the long-term.

Our business could be harmed if we fail to manage our infrastructure to support future growth.

The rapid growth we have experienced in our business places significant demands on our operational infrastructure. The scalability and flexibility of our platform depends on the functionality of our technology and network infrastructure and its ability to handle increased traffic and demand for bandwidth. The growth in the number of billers and partners using our platform and the number of bills processed through our platform has increased the amount of data that we process. Any problems with the transmission of increased data and bills could

20


 

result in harm to our brand or reputation. Moreover, as our business grows, we will need to devote additional resources to improving our operational infrastructure and continuing to enhance its scalability in order to maintain the performance of our platform, including customer support, risk and compliance operations and professional services. Any failure of or delay in these efforts could result in service interruptions, impaired system performance and reduced biller, partner and consumer satisfaction. If sustained or repeated, these performance issues could reduce the attractiveness of our platform to billers and partners and could result in lost biller and partner opportunities and higher attrition rates, any of which could hurt our revenue growth, biller and partner loyalty and our reputation. Even if our efforts to scale our business are successful, they will be expensive and complex, and require the dedication of significant management time and attention. We could also face inefficiencies or service disruptions as a result of our efforts to scale our internal infrastructure. We cannot be sure that the expansion and improvements to our internal infrastructure will be effectively implemented on a timely basis, if at all, and such failures could adversely affect our business, operating results and financial condition.

Moreover, our rapid growth has placed, and will likely continue to place, a significant strain on our managerial, administrative, operational, financial and other resources. We have grown from approximately 250 full-time employees as of December 31, 2018 to more than 900 full-time employees as of March 31, 2021. We intend to further expand our overall business, including headcount, with no assurance that our revenue will continue to grow or grow sufficiently to offset the costs associated with increased headcount. As we grow, we will be required to continue to improve our operational and financial controls and reporting procedures and we may not be able to do so effectively. Furthermore, some members of our management do not have significant experience managing a large public company, so our management may not be able to manage such growth effectively. In managing our growing operations, we are also subject to the risks of over-hiring and over-compensating our employees and over-expanding our operating infrastructure. As a result, we may be unable to manage our expenses effectively in the future, which may negatively impact our gross profit or operating expenses.

In addition, we believe that an important contributor to our success has been our corporate culture, which we believe fosters innovation, and is rooted in a philosophy of aligning our success with that of billers, partners and consumers. As a result of our rapid growth, a significant portion of our employees have been with us for fewer than three years. As we continue to grow and develop the infrastructure of a public company, we must effectively integrate, develop and motivate a growing number of new employees, who will be dispersed geographically, with our headquarters in Redmond, Washington and a large employee presence in Toronto, Canada, Charlotte, North Carolina and Delhi, India. Our geographically dispersed workforce may make it more difficult for our management to manage our growth effectively and preserve our corporate culture. In addition, we must preserve our ability to execute quickly in further developing our platform and implementing new features and tools. As a result, we may find it difficult to maintain our corporate culture, which could limit our ability to innovate and operate effectively. Any failure to preserve our culture could also negatively affect our ability to recruit and retain personnel, to continue to perform at current levels or to execute on our business strategy effectively and efficiently.

If we are unsuccessful in establishing, growing or maintaining partnerships, our ability to compete could be impaired, and our operating results may suffer.

We rely on integration of our end-to-end electronic bill payment solution into third-party software products, which enables us to power such software products’ bill payment capabilities. We also rely on strategic partners, such as U.S. Bank, JPMorgan Chase and a major payroll solutions provider, and industry-expert partners to refer new billers to our platform. Additionally, the IPN is our patented and proprietary network that enables partners, such as PayPal, Walmart, a leading global ecommerce retailer and banks, to embed our end-to-end electronic bill payment solution into their ecosystems through a single point of access. Collectively, our software, strategic and IPN partners drive increased transaction volume and adoption of our platform.

To grow our business, we will seek to expand our existing and establish additional relationships with strategic, software and IPN partners. Establishing such relationships, particularly with financial institutions and other large enterprises, entails extensive sales and marketing efforts with no guarantee of success. Sales and marketing to large organizations involve risks that may not be present, or that are present to a lesser extent, with sales and marketing to other, smaller organizations. We must invest significant time educating and selling to multiple management and technical decision-makers to obtain their support. In addition, we may be required to meet wide-ranging and detailed ancillary requirements. For example, financial institutions generally require us to submit to an exhaustive security audit, given the sensitivity and importance of storing consumer billing and payment data on our platform. Adoption is also frequently subject to budget constraints and unplanned administrative, processing and other delays, including considerable efforts to negotiate and document relationships. Further, platform deployment and integration with partners’ software and other solutions requires significant efforts. If we are unable to increase

21


 

adoption of our platform by partners and manage the costs associated with marketing our platform to potential partners and integrating with their systems, our business, operating results and financial condition may be adversely affected. In addition, if we are unsuccessful in establishing, growing or maintaining partnerships, our ability to compete could be impaired, and our operating results may suffer. If we lost one or more of our largest partnerships, we could also lose associated biller relationships or payment channels and our business, operating results and financial condition could be harmed.

If we are unable to increase our revenue at a rate sufficient to offset expected increases in our costs, or if the investments we make in our business fail to generate the expected benefits, our business, operating results and financial condition will be harmed and we may not be able to maintain profitability over the long term.

As we scale our business, we expect to continue to expend substantial financial and other resources on:

 

sales and marketing, including an expansion of our sales organization and new initiatives in order to drive further expansion of our IPN and partner ecosystem;

 

our technology infrastructure, including systems architecture, scalability, availability, performance and security;

 

product development, including investments in our product development team and the development of new products and new functionality for our AI-enabled platform;

 

regulatory compliance and risk management;

 

acquisitions or strategic investments;

 

expansion into new channels, verticals and international markets; and

 

general administration, including increased legal and accounting expenses associated with being a public company.

The increased costs associated with these and other investments we may make in our business may fail to generate the expected benefits. If we are unable to increase our revenue at a rate sufficient to offset the expected increase in our costs, our business, operating results and financial condition will be harmed, and we may not be able to maintain profitability over the long term. In particular, we expect net income and adjusted EBITDA may decline in the near-term as we make investments in our platform and incur increased operating costs associated with being a public company.

Additionally, we anticipate that our growth rate will decline over time to the extent that the number of billers using our platform increases and we achieve higher market penetration rates. As our growth rate declines, investors’ perception of our business may be adversely affected and the market price of our Class A common stock could decline as a result. To the extent our growth rate slows, our business performance will become increasingly dependent on our ability to retain revenue from existing billers and increase adoption of our platform by existing billers.

Our sales efforts to large enterprises involve considerable time and expense with long and unpredictable sales cycles.

One of the factors affecting our growth and financial performance is the adoption of our platform by large enterprise billers over legacy solutions and in-house proprietary technologies or our competitor’s products. To increase adoption within large enterprise billers and to attract new large enterprise billers, we primarily rely on our direct sales team. As part of our sales efforts, we invest considerable time and expense evaluating the specific organizational needs of potential billers and educating these potential billers about the technical capabilities and value of our platform. Because large enterprises tend to have more consumers impacted by a switch in billing services, they often evaluate our platform at multiple levels within their organization, each of which often have specific requirements, and typically involve their senior management. As a result, our sales efforts to large enterprises involve considerable time and expense with long and unpredictable sales cycles, which may cause our results of operations to fluctuate.

Large enterprise billers also make product purchasing and adoption decisions based in part or entirely on factors, or perceived factors, not directly related to the features of platforms, including, among others, a biller’s projections of business growth, uncertainty about economic conditions (including as a result of the recent COVID-

22


 

19 outbreak), capital budgets, anticipated cost savings from the implementation of our platform, potential preference for such biller’s internally-developed software and billing solutions, perceptions about our business and platform, more favorable terms offered by potential competitors and previous technology investments. In addition, certain decision-makers and other stakeholders within potential billers tend to have vested interests in the continued use of internally developed solutions or other existing electronic payment and billing solutions, which may make it more difficult for us to sell our products. As a result of these and other factors, our sales efforts to large enterprises typically require an extensive effort throughout the organization and a significant investment of human resources, expense and time, including by our senior management, and there can be no assurances that we will be successful in making a sale. If our sales efforts to a potential biller do not result in sufficient revenue to justify our investments, our business, operating results and financial condition could be adversely affected.

The COVID-19 pandemic could have a material adverse impact on our employees, billers, partners, consumers and other key stakeholders, which could materially and adversely impact our business, operating results and financial condition.

The COVID-19 pandemic and efforts to control its spread have significantly curtailed the movement of people, goods and services in the United States, where we generate substantially all of our revenue, and worldwide, where we are targeting future growth. It has also caused extreme societal, economic and financial market volatility, resulting in business shutdowns and a global economic downturn. The magnitude and duration of the COVID-19 pandemic and the magnitude and duration of its effect on business activity cannot be predicted with any certainty.

In light of the uncertainty relating to the spread of COVID-19, we have taken precautionary measures intended to reduce the risk of the virus spreading to our employees, billers and partners, and we may take further precautionary measures. In particular, governmental authorities have at times instituted, and in the future may institute, shelter-in-place policies and other restrictions in many jurisdictions in which we operate, including in Redmond, Washington, where our headquarters are located, and Toronto, Canada, Charlotte, North Carolina and Delhi, India, where we maintain significant operations, which policies and restrictions have at times required our employees to work remotely. Even as shelter-in-place policies or other governmental restrictions are lifted, we are taking, and expect to continue to take, a measured and careful approach to having employees return to offices and travel for business. These precautionary measures and policies could negatively impact employee productivity, training and collaboration or otherwise disrupt our business operations. In addition, such restrictions impact certain of our sales efforts, marketing efforts and implementations, adversely affecting the effectiveness of such efforts in some cases and potentially inhibiting future growth.

In addition, the COVID-19 pandemic has disrupted and may continue to disrupt the operations of our billers and partners for an indefinite period of time, which in turn could negatively impact our business and operating results. Widespread remote work arrangements may also negatively impact our billers’ and partners’ operations, and the operations of third-party service providers who perform critical services for us, and, by extension, our operations.

Further, the extent and duration of working remotely exposes us, billers, partners and others with whom we have business relationships to increased risks of security breaches or incidents. The increase in remote working may also result in privacy, data protection, data security, and fraud risks, and our understanding of applicable legal and regulatory requirements, as well as the latest guidance from regulatory authorities in connection with the COVID-19 pandemic, may be subject to legal or regulatory challenge, particularly as regulatory guidance evolves in response to pandemic-related developments. Furthermore, we may need to enhance the security of our platform, our data and our internal IT infrastructure, which may require us to expend additional resources and may not be successful.

More generally, the COVID-19 pandemic has adversely affected economies and financial markets globally, potentially leading to a prolonged economic downturn, which could decrease technology spending, lengthen sales and implementation cycles, and adversely affect demand for our products and harm our business and operating results. The COVID-19 pandemic may delay, or prevent us from making, collections, and disrupt our ability to develop or enhance offerings. As the COVID-19 pandemic persists, government authorities and companies may continue to implement or reimpose restrictions or policies that could adversely impact consumer spending and payment volumes, global capital markets, the global economy and the market price of our Class A common stock.


23


 

 

We are subject to economic and geopolitical risk, the business cycles and credit risk of our billers and partners and their consumers, and the overall level of consumer, business and government spending, which could negatively affect our business, operating results and financial condition.

The electronic bill presentment and payment services industry depends heavily on the overall level of consumer, business and government spending. We are exposed to general economic conditions that affect consumer confidence, consumer spending, consumer discretionary income and changes in consumer purchasing habits. A sustained deterioration in general economic conditions in the markets in which we operate or increases in interest rates may adversely affect our financial performance by reducing the number or average payment amount of transactions made using electronic bill payments on our platform. Relatedly, a reduction in the amount of consumer spending could result in a decrease in our revenue and profit. If our billers present fewer bills to consumers using electronic billing or consumers making electronic bill payments spend less per transaction, we will have fewer transactions to process or lower transaction amounts, each of which would contribute to lower revenue. These developments could have a material adverse impact on our business, operating results and financial condition.

Further, a downturn in the economy could force our billers or partners or their consumers to close or declare bankruptcy, resulting in lower revenue and earnings for us and greater exposure to potential credit losses and future transaction declines. We also have a certain amount of fixed and other costs, including rent and salaries, which could limit our ability to quickly adjust costs and respond to changes in our business and the economy. Changes in economic conditions could also adversely affect our future revenue and profit and cause a materially adverse effect on our business, operating results and financial condition.

The markets in which we participate are competitive, and if we do not compete effectively, our business, operating results and financial condition could be harmed.

The market for electronic bill presentment and payment services is fragmented, competitive and constantly evolving. Our primary competitors are legacy solution providers and financial institutions with internally developed solutions for bill presentment and payment services. With the introduction of new technologies and market entrants, we expect that the competitive environment will remain intense. Legacy solution providers, new market entrant solution providers and financial institutions may internally develop products, acquire existing, third-party products or enter into partnerships or other strategic relationships that would enable them to expand their product offerings to compete with our platform, provide more comprehensive offerings than they individually had offered or achieve greater economies of scale than us.

These legacy solution providers and financial institutions may have the operating flexibility to bundle competing solutions with other offerings, and may offer them at a lower price or for no additional cost to billers as part of a larger sale. Legacy solution providers offer solutions for in-person cash payments, check-based mail payments, prior-generation interactive voice response, or IVR, phone-based payments and web-based payments, as well as a variety of point solutions for various payment needs.

In addition, new entrants not currently considered to be competitors may enter the market through acquisitions, partnerships, or strategic relationships. New market entrants include a variety of payment processing vendors, particularly those focused on online and mobile payments, as well as mobile wallets and other offerings. Many of these new entrants are also potential partners of ours. As we look to market and sell our platform to potential billers or strategic partners with existing solutions, we must convince their internal stakeholders that our platform is superior to their current solutions.

We compete on several factors, including:

 

product features, quality and breadth and depth of functionality;

 

ease of deployment and implementation speed;

 

ease of integration with leading billing and enterprise software, customer information systems and banking technology infrastructures;

 

ability to automate processes;

 

cloud-based delivery architecture;

 

advanced security, reliability, customer service and control features;

24


 

 

 

data asset size and ability to leverage artificial intelligence, or AI, to grow faster and smarter;

 

regulatory compliance leadership;

 

brand awareness and reputation;

 

pricing, total cost of ownership and return on investment; and

 

consumer satisfaction.

Our competitors vary in size, breadth, and scope of the products and services offered. Many of our current and potential competitors have greater name recognition, longer operating histories, more established biller and consumer relationships, larger marketing budgets and greater resources than us. Our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards and requirements.

For these reasons, we may not be able to compete successfully or continue to achieve or maintain market acceptance for our platform, any of which would harm our business, operating results and financial condition.

Our revenue is sensitive to shifts in payment mix.

A substantial majority of our revenue is derived from transaction fees, either absorbed by billers or paid by consumers, and the majority of bills on our platform are paid via credit or debit cards. In general, we receive more revenue for card-based payments than for electronic check and automated clearing house, or ACH, payments. Accordingly, if more consumers start paying their bills by electronic check, ACH or other payment methods with lower transaction fees, it could materially impact our operating results.

We expect fluctuations in our operating results, making it difficult to project future results, and if we fail to meet the expectations of securities analysts or investors with respect to our operating results, the market price of our Class A common stock could decline.

Our rapid growth makes it difficult for us to forecast our future operating results. Our operating results have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, our past results may not be indicative of our future performance.

In addition to the other risks described herein, factors that may affect our operating results include the following:

 

fluctuations in demand for our platform;

 

our ability to attract new billers and retain and increase adoption by our existing billers;

 

our ability to expand our relationships with our partners and identify and attract new partners;

 

changes in payment method preferences and channels by consumers, which may affect our revenue and gross margin, particularly as a result of interchange fees;

 

variations across the industries of our billers, which may affect payment methods used by consumers and average payment amounts and, in turn, our revenue and gross margin, particularly as a result of interchange fees;

 

the continued impact of the COVID-19 pandemic on our operating results, liquidity and financial condition and on our employees, billers, partners, consumers and other key stakeholders;

 

changes in biller preference for cloud-based services as a result of security breaches in the industry or privacy concerns, or other security or reliability concerns regarding our products;

 

fluctuations or delays in purchasing decisions in anticipation of new products or product enhancements by us or our competitors;

 

changes in biller and consumer budgets and in the timing of their budget cycles and purchasing decisions;

 

potential and existing billers choosing our competitors’ products or developing their own solutions in-house;

 

the development or introduction of new platforms or services that are easier to use or more advanced than our current platform and suite of services;

25


 

 

our ability to adapt to new forms of payment that become widely accepted, including cryptocurrencies;

 

the adoption or retention of more entrenched or rival services in the international markets where we compete or plan to compete;

 

our ability to control costs, including our operating expenses;

 

the amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses, including commissions;

 

the amount and timing of non-cash expenses, including stock-based compensation, goodwill impairments and other non-cash charges;

 

the amount and timing of costs associated with recruiting, training and integrating new employees, and retaining and motivating existing employees;

 

the effects of acquisitions and their integration;

 

general economic conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our billers operate;

 

the impact of new accounting pronouncements;

 

changes in the competitive dynamics of our markets;

 

security breaches of, technical difficulties with, or interruptions to, the delivery and use of our platform; and

 

awareness of our brand and our reputation in our target markets.

Any of these and other factors, or the cumulative effect of some of these factors, may cause our operating results to vary significantly. In addition, we expect to incur significant additional expenses due to the increased costs of operating as a public company. If the assumptions used to plan our business are incorrect, our revenue may fail to meet our expectations and we may fail to meet profitability expectations. Further, if our quarterly operating results fall below the expectations of investors and securities analysts who follow our Class A common stock, the price of our Class A common stock could decline substantially, and we could face costly lawsuits, including securities class action lawsuits.

We depend on third-party payment processors to process bill payments made on our platform and our business, operating results and reputation could be harmed if we experience service interruptions related to our payment processors.

We depend on third-party payment processors, including PayPal’s Braintree service, to process bill payments made through various channels on our platform, including credit and debit cards, ACH transfers, eChecks and PayPal. The per-transaction settlement fees we pay under our agreements with payment processors collectively comprise a significant portion of our cost of revenue. We also rely on payment processors to collect and store payment card information and provide certain fraud detection services. Our multiyear agreements with payment processors contain industry-standard terms and conditions, including technical requirements for how we must process and settle transactions and chargebacks. These agreements also obligate us to comply with card networks’ security standards and guidelines, and to reimburse the payment processors for any fines they are assessed by payment networks as a result of any rule violations by us. See the section titled “—Risks Related to Regulation—We are required to comply with payment network operating rules and changes to such rules or payment network fees could harm our business.”

If any of our payment processors were to terminate its relationship with us, whether as a result of a failure by us to meet our contractual obligations or for other reasons, or if any of them were to refuse to renew its agreement with us on commercially reasonable terms, we would need to engage one or more alternate payment processors. In that case, we could experience service interruptions and incur significant expenses in arranging for replacement payment processing services. Such interruptions could also negatively impact our reputation and our relationships with existing or potential billers and partners, as well as cause us to become obligated to provide service credits or refunds under our service level commitments. Likewise, our payment processors have in the past and may in the future experience outages that have and may cause us to temporarily lose our ability to process transactions on our platform. If any of our payment processors fails to meet our standards and expectations, becomes compromised or suffers errors, outages or vulnerabilities, we could temporarily lose our ability to process transactions on our platform until such issues have been remedied or we have engaged one or more alternate payment processors.

26


 

We operate in an emerging and evolving market, which may develop more slowly or differently than we expect. If our market does not grow as we expect, or if we cannot expand our platform to meet the demands of this market, our revenue may decline or fail to grow.

Our primary competition remains the legacy processes that billers have relied on for many years, such as physical bills, physical checks and non-scalable legacy IVR and similar systems, as well as systems developed internally by financial institutions. Our success depends to a substantial extent on the widespread adoption of our cloud-based electronic billing and payment platform as an alternative to these existing solutions and adoption by billers that are not using any such solutions at all. Some organizations may be reluctant or unwilling to use our platform for several reasons, including concerns about additional costs, uncertainty regarding the reliability and security of cloud-based offerings or lack of awareness of the benefits of our platform. Our ability to expand sales of our platform depends on several factors, including prospective billers’ awareness of our platform; the timely completion, introduction and market acceptance of enhancements to our platform or new products that we may introduce; the effectiveness of our marketing programs; the costs of our platform and the ability of billers to pass on transaction costs to their consumers; and the success of competing solutions. If we are unsuccessful in developing and marketing our platform, or if organizations do not perceive or value the benefits of our platform as an alternative to legacy systems, the market for our platform may not continue to develop or may develop more slowly than we expect, either of which would harm our business, operating results and prospects.

Our risk management efforts may not be effective to prevent fraudulent activities, which could expose us to material financial losses and liability and otherwise harm our business.

We offer a software platform that automates the entire bill payment lifecycle, providing electronic bill presentment, consumer engagement and payment processing for a large number of billers and consumers. We are responsible for verifying the identity of our billers, and monitoring transactions for fraud. We and our billers have been in the past and will continue to be targeted by parties who seek to commit acts of financial fraud using techniques such as stolen identities and bank accounts, compromised business email accounts, employee or insider fraud, account takeover, false applications and check fraud. We may suffer losses from acts of financial fraud committed by or against our billers or partners or their consumers, our employees or other third-parties.

The techniques used to perpetrate fraud on our platform are continually evolving, and we expend considerable resources to continue to monitor and combat them. In addition, when we introduce new products and functionality, or expand existing products, we may not be able to identify all risks created by the new products or functionality. Our risk management policies, procedures, techniques and processes may not be sufficient to identify all of the risks to which we are exposed, to enable us to prevent or mitigate the risks we have identified or to identify additional risks to which we may become subject in the future. Furthermore, our risk management policies, procedures, techniques and processes may contain errors or our employees or agents may commit mistakes or errors in judgment as a result of which we may suffer large financial losses. The software-driven and highly automated nature of our platform could enable criminals and those committing fraud to cause significant losses to our business. As greater numbers of billers, partners and consumers use our platform, our exposure to material risk of losses from a single user, or from a small number of users, will increase.

Our current business and anticipated domestic and international growth will continue to place significant demands on our risk management efforts, and we will need to continue developing and improving our existing risk management infrastructure, policies, procedures, techniques and processes. As techniques used to perpetrate fraud on our platform evolve, we may need to modify our products or services to mitigate fraud risks. As our business grows and becomes more complex, we may be less able to forecast and carry appropriate reserves on our books for fraud related losses. Further, these types of fraudulent activities on our platform can also expose us to civil and criminal liability and governmental and regulatory sanctions as well as potentially cause us to be in breach of our contractual obligations to our third-party partners.

If we lose our founder and chief executive officer or other key members of our management team, or if we are unable to attract and retain executives and employees we need to support our operations and growth, our business may be harmed.

Our success and future growth depend upon the continued services of our management team and other key employees. Dushyant Sharma, our founder, chairman, president and chief executive officer, is critical to our overall management, as well as the continued development of our products, partnerships, culture and strategic direction. From time to time, there may be changes in our management team resulting from the hiring or departure of executives and key employees, which could disrupt our business. Our senior management and key employees are

27


 

employed on an at-will basis. We currently do not have “key person” insurance on any of our employees. Certain of our key employees have been with us for a long period of time and have fully vested stock options that may become valuable and will be publicly tradable upon completion of this offering, subject to lock-up restrictions described in the section titled “Underwriting” and Rule 144 limitations applicable to affiliates described in the section titled “Shares Eligible for Future Sale,” which reduces the incentive for each of these key employees to remain at our company. The loss of our founder and chief executive officer, or one or more of our other senior management members, or other key employees, including due to illness resulting from COVID-19, could harm our business, and we may not be able to find adequate replacements. We cannot ensure that we will be able to retain the services of any members of our senior management or other key employees or that we would be able to timely replace members of our senior management or other key employees should any of them depart.

Failure to attract and retain additional qualified personnel and any restrictions on the movement of personnel could prevent us from executing our business strategy and growth plans.

To execute our business strategy, we must attract and retain highly qualified personnel. Competition for executive officers, software developers, compliance and risk management personnel and other key employees in our industry and location is intense and increasing. We compete with many other companies for software developers with high levels of experience in designing, developing, and managing cloud-based software and payment systems, as well as for skilled legal and compliance and risk operations professionals. Many of the companies with which we compete for experienced personnel have greater resources than we do and can frequently offer such personnel substantially greater compensation than we can offer. In addition, a new or revised visa program, and in particular one that limits the availability of H1-B and other visas, may impact our ability to recruit, hire, retain or effectively collaborate with qualified skilled personnel, including in the areas of AI and ML, and payment systems and risk management, which could adversely impact our business, operating results and financial condition. If we fail to identify, attract, develop and integrate new personnel, or fail to retain and motivate our current personnel, our growth prospects would be adversely affected.

If we fail to offer high-quality customer support, if we experience complaints regarding our customer support or if our support is more expensive than anticipated, our business and reputation could suffer.

Billers and their consumers rely on our customer support services to resolve issues and realize the full benefits provided by our platform. High-quality support is also important to maintain and drive further adoption by our existing billers and their consumers. We primarily provide customer support to billers over email, with some additional support provided over chat and through our platform, and to consumers over the phone. If we do not help our billers and their consumers quickly resolve issues and provide effective ongoing support, or if our support personnel or methods of providing support are insufficient to meet the needs of our billers and their consumers, our ability to retain billers, increase adoption by our existing billers and acquire new billers could suffer, and our reputation with existing or potential billers could be harmed. In addition, biller and consumer complaints or negative publicity about our customer service could diminish confidence in and use of our products or services. Effective customer service requires significant expenses, which, if not managed properly, could negatively impact our profitability. If we are not able to meet the customer support needs of our billers and their consumers during the hours that we currently provide support, we may need to increase our support coverage and provide additional support by other means and methods, which may reduce our profitability.

If the fees we charge are unacceptable to our billers or their consumers, our business, operating results and financial condition could be harmed.

We generate substantially all of our revenue by charging billers fees on a per-transaction basis. As the market for our platform matures, or as new or existing competitors introduce new products or services that compete with ours, we may experience pricing pressure and be unable to renew our agreements with existing billers or attract new billers at fee levels that are consistent with our pricing model and operating budget. Our pricing strategy for new products we introduce may prove to be unappealing to our billers or consumers, and our competitors could choose to bundle certain products and services competitive with ours and offer them at lower prices. If this were to occur, it is possible that we would have to change our pricing strategies or reduce our prices, which could harm our business, operating results and growth prospects.

Further, a significant portion of our revenue is generated from billers that elect to pass on transaction fees to consumers in the form of convenience fees. In certain markets, such as utilities and municipalities, convenience fees are commonplace. Despite the fact that such fees are relatively standard, they are often met with negative consumer perception, which could lead to heightened regulatory scrutiny and further pricing pressure.

28


 

If we fail to meet our service level commitments, we could be obligated to provide credits or refunds or face contract terminations, which could adversely affect our business, operating results and financial condition.

Certain of our agreements with our billers and partners contain service level commitments, including commitments regarding the accuracy of information and data we provide and how quickly we will respond to support inquiries. If we are unable to meet the stated service level commitments or our platform suffers extended periods of unavailability or downtime, we may be contractually obligated to provide these parties with service credits or refunds. In addition, certain billers could shift to using a different solution such that we would no longer be their exclusive payment provider and we could also face contract terminations, either of which would adversely affect our future revenue. Further, any extended service outages could adversely affect our reputation, revenue and operating results.

If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations and changing business needs, requirements or preferences, our products may become less competitive and our growth rate could decline.

The market for electronic bill presentment and payment services is relatively new and subject to ongoing technological change, evolving industry standards, payment methods and changing regulations, and changing biller and consumer needs, requirements and preferences. The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on a timely basis, including launching new products and services. The success of any new product and service, or any enhancements or modifications to existing products and services, depends on several factors, including the timely completion, introduction and market acceptance of such products and services, enhancements and modifications. If we are unable to enhance our platform, add new payment methods or develop new products that keep pace with technological and regulatory change and achieve market acceptance, or if new technologies emerge that are able to deliver competitive products and services at lower prices, more efficiently, more conveniently or more securely than our products, our business, operating results and financial condition would be adversely affected. Moreover, we may experience delays in the development and introduction of new products due to the effects of the COVID-19 pandemic. Furthermore, modifications to our existing platform or technology will increase our research and development expenses. Any of the foregoing could reduce the demand for our services, result in biller, partner and consumer dissatisfaction and adversely affect our business.

Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to increase our biller base and achieve broader market acceptance of our products.

Our ability to increase our biller base and achieve broader market acceptance of our platform will depend to a significant extent on our ability to expand our sales and marketing organizations, and to deploy our sales and marketing resources efficiently. Although we will adjust our sales and marketing spend levels as needed in response to changes in the economic environment, we plan to continue expanding our direct sales team as well as our sales team focused on identifying partnerships. These efforts will require us to invest significant financial and other resources. We may not achieve anticipated revenue growth from expanding our sales team if we are unable to hire, develop, integrate and retain talented and effective sales personnel, if our new and existing sales personnel are unable to achieve desired productivity levels in a reasonable period of time or if our sales and marketing programs are not effective. Our business and operating results will be harmed if our sales and marketing efforts do not generate significant increases in revenue.

We plan to expand our operations internationally by targeting international billers and partners, and further expanding use of our platform internationally among our existing international billers and partners, which will create a variety of operational challenges.

A component of our growth strategy involves expanding our operations internationally. Although 98% of our 2020 revenue was generated in the United States, many of our largest billers have billable consumers in international geographies. We are continuing to adapt to and develop strategies to expand to international geographies. However, there is no guarantee that such efforts will have the desired effect or that we will be able to grow our international footprint without unexpected delay or expense when international expansion opportunities arise. If we invest substantial time and resources to further expand our operations internationally and are unable to do so successfully, cost-effectively and in a timely manner, our business and operating results may suffer.

29


 

Our international operations strategy involves a variety of risks, including:

 

changes in regulations and our ability to comply with and obtain any relevant licenses;

 

currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions;

 

reduction in cross-border trade and other adverse impacts resulting from trade sanctions or changes in trade relations, laws or regulations;

 

potential application of more stringent regulations relating to payments, privacy, data protection and information security, and the authorized use of, or access to, sensitive and personal data;

 

exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S. Foreign Corrupt Practices Act, or FCPA, U.S. domestic bribery laws and similar laws and regulations in other jurisdictions; and

 

unexpected changes in tax laws.

Future acquisitions and strategic investments could be difficult to identify and integrate, divert the attention of management, disrupt our business, dilute stockholder value and adversely affect our business, operating results and financial condition.

We may in the future seek to acquire or invest in businesses, products or technologies that we believe could further complement or expand our platform, enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of our management and cause us to incur various expenses in identifying, investigating and pursuing suitable acquisitions, whether or not such acquisitions are completed. In addition, we may not successfully identify desirable acquisition targets, or if we acquire additional businesses, we may not be able to integrate them effectively following the acquisition and we may not capture the benefits we hope to achieve from such acquisitions. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, as well as unfavorable accounting treatment and exposure to claims and disputes by third parties, including intellectual property claims. We also may not generate sufficient financial returns to offset the costs and expenses related to any acquisitions. In addition, if an acquired business fails to meet our expectations, our business, operating results and financial condition may suffer.

If we fail to maintain and enhance our brand, our ability to expand our business, operating results and financial condition could be adversely affected.

We believe that maintaining and enhancing the Paymentus brand is important to support the marketing and sale of our existing and future products to new billers and partners and to increase adoption of our platform by existing billers and partners. Successfully maintaining and enhancing our brand will depend largely on the effectiveness of our marketing and demand generation efforts, our ability to provide reliable products that continue to meet the needs of our billers and consumers at competitive prices, our ability to maintain our billers’ and consumers’ trust, our ability to continue to develop new functionality and products and our ability to successfully differentiate our products from competitive products and services. Our promotion activities may not generate brand awareness or yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incur in building our brand. Further, any negative publicity about our industry, our company, the quality and reliability of our products and services, our risk management processes, our privacy, data protection or information security practices, litigation, regulatory activity or the experience of billers and partners with our products or services could harm our reputation. If we fail to successfully promote and maintain our brand, our business, operating results and financial condition could be adversely affected.

We may require additional capital to support the growth of our business, and this capital might not be available on acceptable terms, if at all.

We have funded our operations since inception primarily through equity financings and cash from operations. We intend to continue to make investments to support our business, which may require us to engage in equity, equity-linked or debt financings to secure additional funds. Additional financing may not be available on terms favorable to us, if at all. The market prices for other technology companies have been highly volatile as a result of the COVID-19 pandemic and related governmental actions, which may also reduce our ability to access capital on favorable terms or at all and adversely impact the market price of our Class A common stock. If adequate funds are not available on acceptable terms, we may be unable to invest in future growth opportunities, which could harm our business, operating results, financial condition and prospects. If we incur debt, the debt holders would have rights

30


 

senior to holders of our Class A common stock to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our Class A common stock. Furthermore, if we issue additional equity securities, stockholders will experience dilution, and the new equity securities could have rights senior to those of our Class A common stock. Because our decision to issue securities in the future will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing or nature of any future issuances of debt or equity securities. As a result, our stockholders bear the risk of future issuances of debt or equity securities reducing the market price of our Class A common stock and diluting their interests.

Natural catastrophic events, pandemics and man-made problems such as power disruptions, computer viruses, security breaches and terrorism may disrupt our business.

Natural disasters, pandemics such as COVID-19 or other catastrophic events may cause damage or disruption to our operations, commerce in general and the global economy, and thus could harm our business. Our headquarters are located in Redmond, Washington and we have a large employee presence in Toronto, Canada, Charlotte, North Carolina, and Delhi, India. In the event of a major earthquake, hurricane or catastrophic event such as fire, power loss, telecommunications failure, vandalism, cyber-attack, war or terrorist attack affecting regions where we maintain operations or where our data centers are located, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our application development, lengthy interruptions in our services, breaches of data security and loss of critical data, any of which could harm our business, operating results and financial condition. In addition, the COVID-19 pandemic and widespread shelter-in-place and other governmental restrictions have caused most of our employees to work remotely. Given these widespread remote work arrangements, if a natural disaster, power outage, connectivity issue or other event occurs that impacts our employees’ ability to work remotely, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time.

Additionally, as computer malware, viruses, computer hacking, intrusions, ransomware attacks, denial-of-service attacks, social engineering attacks, fraudulent use attempts, phishing attacks and other security breaches have become more prevalent, we, and third parties upon which we rely, face increased risk in maintaining the performance, reliability, security and availability of our solutions and related services and technical infrastructure to the satisfaction of our billers, partners and consumers. Any computer malware, viruses, computer hacking, intrusions, ransomware attacks, denial-of-service attacks, social engineering attacks, fraudulent use attempts, phishing attacks or other security breaches related to our network infrastructure or information technology systems or to computer hardware we lease from third parties, could, among other things, harm our reputation and our ability to retain existing billers and partners and attract new billers and partners.

In addition, the insurance we maintain may be insufficient to cover our losses resulting from disasters, cyber-attacks or other business interruptions, and any incidents may result in loss of, or increased costs of, such insurance. The successful assertion of one or more large claims against us that exceed available insurance coverage, the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, or denials of coverage, could have a material adverse effect on our business, operating results, financial condition and reputation.

Any future litigation, investigations or similar matters, or adverse facts and developments related thereto, could adversely affect our business, operating results and financial condition.

We have in the past and may in the future become subject to legal proceedings, claims, investigations or similar matters that arise in the ordinary course of business, such as claims brought by our billers or their consumers in connection with commercial disputes, employment claims made by our current or former employees or claims regarding misappropriation of consumer data. Litigation, investigations or similar matters might result in substantial costs and may divert management’s attention and resources, which might seriously harm our business, operating results and financial condition. Insurance might not cover such matters, might not provide sufficient payments to cover all the costs to resolve one or more such matters and might not continue to be available on terms acceptable to us. A claim brought against us that is uninsured or underinsured could result in unanticipated costs, thereby reducing our operating results and leading analysts or potential investors to reduce their expectations of our performance, which could reduce the market price of our Class A common stock.

31


 

Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all.

Market opportunity estimates and growth forecasts included in this prospectus, including those we have prepared ourselves, are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The variables that go into the calculation of our market opportunity are subject to change over time, and there is no guarantee that any particular number or percentage of addressable billers or consumers covered by our market opportunity estimates will purchase our products at all or generate any particular level of revenue for us. Any expansion in our market depends on a number of factors, including the cost, performance and perceived value associated with our platform and those of our competitors. Even if the market in which we compete meets the size estimates and growth forecasted, our business could fail to grow at similar rates, if at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, the forecasts of market growth included in this prospectus should not be taken as indicative of our future growth. For more information regarding the estimates of market opportunity and the forecasts of market growth included in this prospectus, see the section titled “Market, Industry and Other Data.”

Risks Related to Regulation

Payments and other financial services-related regulations and oversight are material to our business and any failure by us to comply could materially harm our business.

The local, state and federal laws, rules, regulations, licensing schemes and industry standards that govern our business, both directly and through our relationships with banks, card networks and other financial services partners, include, or may in the future include, those relating to payments services, such as payment processing and settlement services, anti-money laundering, combating terrorist financing, escheatment, international sanctions regimes and compliance with the PCI-DSS, a set of requirements designed to ensure that all companies that process, store or transmit payment card information maintain a secure environment to protect cardholder data. We do not directly collect or store payment card information; instead, we rely on a third-party payment processor to do so. These laws, rules, regulations, licensing schemes and standards are enforced by multiple authorities and governing bodies in the United States, including the Department of the Treasury, self-regulatory organizations and numerous state and local agencies. Currently, we do not possess any permits or licenses from financial regulators. We believe the licensing requirements of federal and state agencies that regulate or monitor banks or other types of providers of electronic commerce services do not apply to us. While our business itself is not currently subject to financial services-related regulation, and we have received confirmation from multiple state regulators that we are not required to obtain money transmitter licenses in those states, the banks, payment networks and card networks that we partner with operate in a highly regulated landscape and there is a risk that those regulations could become directly applicable to us. As we expand into new jurisdictions, the number of foreign laws, rules, regulations, licensing schemes and standards governing our business will expand as well. In addition, as our business and products continue to develop and expand, we may become subject to additional laws, rules, regulations, licensing schemes and standards. We may not always be able to accurately predict the scope or applicability of certain laws, rules, regulations, licensing schemes or standards to our business, particularly as we expand into new areas of operations, which could have a significant negative effect on our existing business and our ability to pursue future plans.

In the future, as a result of the regulations that are or may become applicable to our business, we could be subject to investigations and resulting liability, including governmental fines, restrictions on our business or other sanctions, and we could be forced to cease conducting certain aspects of our business with residents of certain jurisdictions, be forced to change our business practices in certain jurisdictions or be required to obtain additional licenses, certifications or regulatory approvals. There can be no assurance that we will be able to successfully implement changes to our business practices or obtain or maintain any such licenses, certifications or regulatory approvals, and, even if we were able to do so, there could be substantial costs and potential product changes involved in obtaining, maintaining and renewing such licenses, certifications and approvals, which could have a material and adverse effect on our business. In addition, we could be subject to fines or other enforcement action if we are found to violate disclosure, reporting, anti-money laundering, capitalization, corporate governance or other requirements of such licenses, certifications or approvals. These factors could impose substantial additional costs, involve considerable delay to the development or provision of our products or services, require significant and costly operational changes or prevent us from providing our products or services in any given market.

32


 

We are required to comply with payment network operating rules and changes to such rules or payment network fees could harm our business.

Payment networks, such as Visa, Mastercard, American Express, NACHA and INTERAC, establish their own rules and standards that allocate liabilities and responsibilities among the payment networks and their participants. These rules and standards, including PCI-DSS, govern a variety of areas, including how consumers may use their cards, the security features of cards, security standards for processing, data protection and information security and allocation of liability for certain acts or omissions, including liability in the event of a data breach. Participants are subject to audits by the payment networks to ensure compliance with applicable rules and standards.

We are required to comply with card network operating rules and have agreed to reimburse our service providers for any fines they are assessed by payment networks as a result of any rule violations by us. We may also be directly liable to the payment networks for rule violations. The payment networks set and interpret the card operating rules. The payment networks could adopt new operating rules or interpret or reinterpret existing rules that we or our processors might find difficult or even impossible to follow or costly to implement. These changes may be made for any number of reasons, including as a result of changes in the regulatory environment, to maintain or attract new participants or to serve the strategic initiatives of the networks, and may impose additional costs and expenses on or be disadvantageous to certain participants. For example, changes in the payment network rules regarding chargebacks may affect our ability to dispute chargebacks and the amount of losses we incur from chargebacks. If we fail to make such changes or otherwise resolve the issue with the payment networks, the networks could pass on fines and assessments in respect of fraud or chargebacks related to our merchants or disqualify us from processing transactions if satisfactory controls are not maintained, which could have a material adverse effect on our business, operating results and financial condition. As a result of any violations of rules or new rules being implemented, the networks may fine, penalize or suspend the registration of participants for certain acts or omissions or the failure of the participants to comply with applicable rules and standards, existing billers, partners or other third parties may cease using or referring our services, prospective billers, partners or other third parties may choose to terminate negotiations with us, or delay or choose not to consider us for their processing needs, and the networks could refuse to allow us to process payments through their networks. Any of the foregoing could materially adversely impact our business, operating results and financial condition.

From time to time, these networks increase the fees that they charge payment processors. We could attempt to pass these increases along to our billers, but this strategy might result in the loss of billers to competing solutions. If competitive practices prevent us from passing along the higher fees to our billers in the future, we may have to absorb all or a portion of such increases, which may increase our operating costs and reduce our earnings. In addition, regulators are subjecting interchange and other fees to increased scrutiny, and new regulations could require greater pricing transparency of the breakdown in fees or fee limitations, which could lead to increased price-based competition, lower margins and higher rates of biller attrition and negatively affect our business, operating results and financial condition. As a result of any increased fees, such payments could become prohibitively expensive for us or for our billers.

We are subject to U.S. and foreign governmental laws, regulations, rules, standards, policies, contractual obligations and other legal obligations, particularly those related to privacy, data protection and information security, and our actual or perceived failure to comply with such obligations could harm our business, by resulting in litigation, fines, penalties, increased costs or adverse publicity and reputational damage that may negatively affect the value of our business and decrease the market price of our Class A common stock.

Our billers and consumers store personal and business information, financial information and other sensitive information on our platform. In addition, we receive, store, handle, transmit, use and otherwise process personal and business information and other data from and about actual and prospective billers, as well as our employees and service providers. As a result, we and our handling of data are subject to a variety of laws, rules and regulations relating to privacy, data protection and information security, including regulation by various governmental authorities, such as the U.S. Federal Trade Commission, or FTC, and various state, local and foreign agencies. Our data handling and processing activities are also subject to contractual obligations and industry standard requirements. The legislative and regulatory landscapes for privacy, data protection and information security continue to evolve in jurisdictions worldwide, with an increasing focus on privacy and data protection issues with the potential to affect our business. Failure to comply with any of these laws or regulations could result in litigation, enforcement actions, damages, fines, penalties or adverse publicity and reputational damage, any of which could have a material adverse effect on our business, operating results and financial condition.

33


 

The U.S. federal and various state and foreign governments have also adopted or proposed limitations on the collection, distribution, use and storage of data relating to individuals and businesses, including the use of contact information and other data for marketing, advertising and other communications with individuals and businesses. In the United States, various laws and regulations apply to the security, collection, processing, storage, use, disclosure and other processing of certain types of data, including the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, the Gramm Leach Bliley Act, and state and local laws relating to privacy and data security. Additionally, the FTC and many state attorneys general have interpreted and are continuing to interpret federal and state consumer protection laws to impose standards for the online collection, use, dissemination, processing and security of data.

In addition, many states in which we operate have laws that protect the privacy and security of sensitive and personal data. Certain U.S. state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to sensitive and personal information than international, federal, or other state laws, and such laws may differ from each other, which may complicate compliance efforts. For example, in June 2018, California enacted the California Consumer Privacy Act, or the CCPA, which became operative on January 1, 2020 and broadly defines personal information, gives California residents expanded privacy rights and protections, including the right to access and delete certain personal information, as well as the right to opt-out of certain sales of personal information, and provides for civil penalties for violations and a private right of action for data breaches. This private right of action may increase the likelihood of, and risks associated with, data breach litigation. Additionally, a new California ballot initiative, the California Privacy Rights Act, or the CPRA, was passed in November 2020. Effective beginning on January 1, 2023, the CPRA imposes additional obligations on companies covered by the legislation and will significantly modify the CCPA, including by expanding California residents’ rights with respect to certain sensitive personal information. The CPRA also creates a new state agency that will be vested with authority to implement and enforce the CCPA and the CPRA. The interpretation and enforcement of the CCPA and many aspects of the CPRA remain unclear, and the effects of the CCPA and the CPRA potentially are significant and may require us to modify our data collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply and increase our potential exposure to regulatory enforcement and sanctions and litigation.

Certain other state laws impose similar privacy obligations, and all 50 states have laws including obligations to provide notification of security breaches of computer databases that contain personal information to affected individuals, state officers and others. For example, the CCPA has prompted the enactment of several new state laws or amendments of existing state laws, such as in New York and Nevada. These laws could mark the beginning of a trend toward more stringent privacy legislation in other U.S. states and have prompted a number of proposals for new federal and state-level privacy legislation. This legislation, if passed, may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data and could result in increased compliance costs or changes in business practices and policies.

In addition, several foreign countries and governmental bodies, including the European Union, or EU, have established their own laws, rules and regulations addressing privacy, data protection and information security with regard to the handling and processing of sensitive and personal data obtained from their residents with which we or our billers or partners may need to comply. These laws and regulations are in certain cases more restrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security of various types of data, including data that identifies or may be used to identify an individual, such as names, email addresses and in some jurisdictions, IP addresses. The EU’s privacy, data protection and information security landscapes are currently evolving, resulting in possible significant operational costs for internal compliance and risk to our business. Within the EU, the General Data Protection Regulation, or GDPR, which went into effect in May 2018, contains numerous requirements and changes from previously existing EU law, including more robust, direct obligations on data processors in addition to data controllers, heavier documentation requirements for data protection compliance programs by companies and significantly increases the level of sanctions for non-compliance as compared to previous EU data protection law. In particular, under the GDPR, EU data protection authorities have the power to impose administrative fines for violations of the GDPR of up to a maximum of €20 million or 4% of the data controller’s or data processor’s total global turnover for the preceding fiscal year, whichever is higher, and violations of the GDPR may also lead to damages claims by data controllers and data subjects. Such penalties are in addition to any civil litigation claims by data controllers, customers and data subjects. Being subject to the GDPR, we may need to take steps to cause our processes to be compliant with applicable portions of the GDPR, but we cannot assure you that we will be able to implement changes in a timely manner or without significant disruption to our business, or that such steps will be effective, and we may face the risk of liability under the GDPR. The laws and regulations relating to privacy, data protection and

34


 

information security are evolving, can be subject to significant change, and may result in ever-increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions.

We are also subject to certain obligations under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, as well as certain state laws and related contractual obligations. HIPAA imposes obligations on certain covered entity healthcare providers, health plans and healthcare clearinghouses, as well as on business associates, like us, that perform certain services involving the use or disclosure of individually identifiable health information, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information.

The scope and interpretation of the laws and regulations relating to privacy, data protection and information security that are or may be applicable to us are often uncertain and may be conflicting, as a result of the rapidly evolving regulatory framework for privacy issues worldwide. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing data management practices, solutions or platform capabilities. For example, laws relating to the liability of providers of online services for activities of their users and other third parties are currently being tested by a number of claims, including actions based on invasion of privacy and other torts, unfair competition, copyright and trademark infringement, and other theories based on the nature and content of the materials searched, the ads posted or the content provided by users. As a result of the laws that are or may be applicable to us, and due to the sensitive nature of the information we collect, we have implemented policies and procedures to preserve and protect our data and our platform users’ data against loss, misuse, corruption, misappropriation caused by systems failures or unauthorized access. If our policies, procedures or measures relating to privacy, data protection, information security or the processing of data for marketing purposes or consumer communications fail to comply with laws, regulations, policies, legal obligations or industry standards, we may be subject to governmental enforcement actions, litigation, regulatory investigations, fines, penalties and negative publicity, and could cause our application providers, billers and partners to lose trust in us, and have an adverse effect on our business, operating results and financial condition.

In addition to government regulation, privacy advocates and industry groups may propose new and different self-regulatory standards that may apply to us. Because the interpretation and application of privacy, data protection and information security laws, regulations, rules and other standards are still uncertain, it is possible that these laws, rules, regulations and other actual or alleged legal obligations, such as contractual or self-regulatory obligations, may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the functionality of our platform. If so, in addition to the possibility of fines, lawsuits and other claims, we could be required to fundamentally change our business activities and practices or modify our software, which could have an adverse effect on our business.

Further, any failure or perceived failure by us, or any third parties with which we do business, to comply with laws, regulations, policies (including our publicly posted privacy policies), procedures, measures, legal or contractual obligations, industry standards or regulatory guidance relating to privacy, data protection or information security may result in governmental investigations and enforcement actions, litigation, fines and penalties, or adverse publicity, and could cause our billers and partners to lose trust in us, which could have an adverse effect on our reputation, business, operating results and financial condition. We expect that there will continue to be new proposed laws, regulations and industry standards relating to privacy, data protection, information security, marketing and consumer communications, and we cannot predict the impact such future laws, regulations and standards may have on our business. Future laws, regulations, standards and other obligations or any changed interpretation of existing laws or regulations may be inconsistent among jurisdictions and may conflict with our current or future practices, which could impair our ability to develop and market new functionality and maintain and grow our biller base and increase revenue. Additionally, our billers or partners may be subject to differing privacy laws, rules and legislation, which may mean that they require us to be bound by varying contractual requirements applicable to certain other jurisdictions. Future restrictions on the collection, use, processing, storage, sharing or disclosure of various types of data, including financial information and other personal data, or additional requirements for express or implied consent of our billers, partners or consumers for the collection, use, processing, storage, sharing and disclosure of such information could require us to incur additional costs or modify our platform, possibly in a material manner, and could limit our ability to develop new functionality. Complying with these requirements and changing our policies and practices may be onerous and costly, and we may not be able to respond quickly or effectively to regulatory, legislative and other developments.

35


 

If we are not able to comply with these laws or regulations, or if we become liable under these laws or regulations, we could be directly harmed, including through fines and litigation, and we may be forced to implement new measures to reduce our exposure to this liability. This may require us to expend substantial resources or to discontinue certain products, which would negatively affect our business, operating results and financial condition. In addition, the increased attention focused upon liability issues as a result of lawsuits and legislative proposals could harm our reputation or otherwise adversely affect the growth of our business. Furthermore, any costs incurred as a result of this potential liability could harm our operating results.

Our and our billers’ and partners’ communications with existing and potential consumers are subject to laws regulating telephone and email marketing practices, and our or their failure to comply with such communications laws could adversely affect our business, operating results and financial condition and significantly harm our reputation.

Our platform enables our billers and partners to communicate directly with their consumers, including via email, text messages and telephone calls. Our platform also enables recording and monitoring of calls between our billers and partners and their consumers for training and quality assurance purposes. On occasion we also send communications directly to consumers. These activities are subject to a variety of U.S. state and federal laws, rules and regulations, such as the Telephone Consumer Protection Act of 1991, or the TCPA, the CAN-SPAM Act of 2003, or the CAN-SPAM Act, and others related to telemarketing, recording and monitoring of communications. The TCPA prohibits companies from making telemarketing calls to numbers listed in the Federal Do-Not-Call Registry and imposes other obligations and limitations on making phone calls and sending text messages to consumers. The CAN-SPAM Act regulates commercial email messages and specifies penalties for the transmission of commercial email messages that do not comply with certain requirements, such as providing an opt-out mechanism for stopping future emails from senders. The TCPA, the CAN-SPAM Act and other communications laws, rules and regulations are subject to varying interpretations by courts and governmental authorities and often require subjective interpretation, making it difficult to predict their application and therefore making compliance efforts more challenging. We and our billers and partners may be required to comply with these and similar laws, rules and regulations. To comply with these laws, rules and regulations, in some cases we rely on our billers and partners to obtain legally required consents from their consumers to receive communications sent using our platform. We cannot, however, be certain that our or their efforts to comply will always be successful. Our business could be adversely affected by changes to the application or interpretation of existing laws, rules and regulations governing our platform’s communication capabilities, or the enactment of new laws, rules and regulations, and by our and our billers’ and partners’ failure to comply with such laws, rules and regulations in using our platform. If any of these laws, rules or regulations were to significantly restrict our or our billers’ or partners’ ability to use our platform to communicate with existing and potential consumers, we may not be able to develop adequate alternative communication modules for our platform. Further, our or our billers’ or partners’ non-compliance with these laws, rules and regulations could result in significant financial penalties, litigation, including class action litigation, consent decrees and injunctions, adverse publicity and other negative consequences, any of which could adversely affect our business, operating results and financial condition and significantly harm our reputation.

If we fail to comply with extensive, complex, overlapping and frequently changing rules, regulations and legal interpretations, our business could be materially harmed.

Our success and increased visibility, and that of the electronic and online billing and payments sector more generally, may result in increased regulatory oversight and enforcement and more restrictive rules and regulations that apply to our business. We are subject to a wide variety of local, state, federal and international laws, rules, regulations, licensing schemes and industry standards in the United States and in other countries in which we operate. These laws, rules, regulations, licensing schemes and standards govern numerous areas that are important to our business. In addition to the payments and financial services-related regulations, and the privacy, data protection and information security-related laws described elsewhere in this prospectus, our business is also subject to, without limitation, rules and regulations applicable to securities, labor and employment, immigration, competition and marketing and communications practices. Laws, rules, regulations, licensing schemes and standards applicable to our business are subject to change and evolving interpretations and application, including by means of legislative changes and executive orders, and it can be difficult to predict how they may be applied to our business and the way we conduct our operations, particularly as we introduce new products and services and expand into new jurisdictions. We may not be able to respond quickly or effectively to regulatory, legislative and other developments, and these changes may in turn impair our ability to offer our existing or planned features, products and services and increase our cost of doing business.

36


 

There can be no assurance that our employees or contractors will not violate laws, rules, regulations, licensing schemes and industry standards. Any failure or perceived failure by us or our employees or contractors to comply with existing or new laws, rules, regulations, licensing schemes, industry standards or orders of any governmental authority (including changes to or expansion of the interpretation of those laws, regulations, standards or orders), may, among other things:

 

subject us to significant fines, penalties, criminal and civil lawsuits, license suspension or revocation, forfeiture of significant assets, audits, inquiries, whistleblower complaints, adverse media coverage, investigations and enforcement actions in one or more jurisdictions levied by federal, state, local or foreign regulators, state attorneys general and private plaintiffs who may be acting as private attorneys general pursuant to various applicable federal, state and local laws;

 

result in additional compliance and licensure requirements;

 

increase regulatory scrutiny of our business;

 

restrict our operations, product features, quality and breadth and depth of functionality; and

 

f