UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM                                                           TO

Commission File Number 001-38531

Repay Holdings Corporation

(Exact name of Registrant as specified in its Charter)

Delaware	98-1496050
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3 West Paces Ferry Road, Suite 200 Atlanta, GA	30305
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (404) 504-7472

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share	RPAY	The NASDAQ Stock Market LLC

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).  Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No ☒

As of November 4, 2021, there are 90,553,868 shares of the registrant’s Class A Common Stock, par value $0.0001 per share, outstanding (which number includes 2,126,602 shares of unvested restricted stock that have voting rights) and 100 shares of the registrant’s Class V Common Stock, par value of $0.0001 per share, outstanding. As of November 4, 2021, the holders of such outstanding shares of Class V common stock also hold 7,926,576 units in a subsidiary of the registrant and such units are exchangeable into shares of the registrant’s Class A common stock on a one-for-one basis. 

REPAY HOLDINGS CORPORATION

Quarterly Report on Form 10‑Q

For the quarter ended September 30, 2021

TABLE OF CONTENTS

		Page
	PART I – FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	46
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3.	Defaults Upon Senior Securities	47
Item 4.	Mine Safety Disclosures	47
Item 5.	Other Information	48
Item 6.	Exhibits	49
	Signatures	50

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements reflect our current views with respect to, among other things, anticipated benefits from our recent acquisitions, the effects of the COVID-19 pandemic, expected demand on our product offering, including further implementation of electronic payment options and statements regarding our market and growth opportunities, and our business strategy and the plans and objectives of management for future operations. You generally can identify these statements by the use of words such as “outlook,” “potential,” “continue,” “may,” “seek,” “approximately,” “predict,” “believe,” “expect,” “plan,” “intend,” “estimate” or “anticipate” and similar expressions or the negative versions of these words or comparable words, as well as future or conditional verbs such as “will,” “should,” “would,” “likely” and “could.” These statements may be found under Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere, and are subject to certain risks and uncertainties that could cause actual results to differ materially from those included in the forward-looking statements. These risks and uncertainties include, but are not limited to: exposure to economic conditions and political risk affecting the consumer loan market, the receivables management industry and consumer and commercial spending; the impacts of the ongoing COVID-19 coronavirus pandemic and the actions taken to control or mitigate its spread; a delay or failure to integrate and/or realize the benefits of our recent acquisitions; changes in the payment processing market in which we compete, including with respect to its competitive landscape, technology evolution or regulatory changes; changes in the vertical markets that we target, including the regulatory environment applicable to our customers; risks relating to our relationships within the payment ecosystem; risk that we may not be able to execute our growth strategies, including identifying and executing acquisitions; risks relating to data security; changes in accounting policies applicable to us; the risk that we may not be able to maintain effective internal controls; and those risks described under Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020, as amended. The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we disclaim any obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In light of these risks and uncertainties, there is no assurance that the events or results suggested by the forward-looking statements will in fact occur, and you should not place undue reliance on these forward-looking statements.

PART I

FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

REPAY HOLDINGS CORPORATION

Consolidated Balance Sheets

	September 30, 2021 (Unaudited)			December 31, 2020
Assets
Cash and cash equivalents	$	116,486,111		$	91,129,888
Accounts receivable		30,510,431			21,310,724
Prepaid expenses and other		10,071,770			6,925,115
Total current assets		157,068,312			119,365,727
Property, plant and equipment, net		3,160,008			1,628,439
Restricted cash		20,595,849			15,374,846
Customer and channel relationships, net of amortization		461,131,685			280,887,486
Software, net of amortization		75,017,159			64,434,985
Other intangible assets, net of amortization		30,768,286			23,904,667
Goodwill		751,534,841			458,970,255
Operating lease right-of-use assets, net of amortization		10,369,453			10,074,506
Deferred tax assets		133,258,928			135,337,229
Other assets		2,499,997			—
Total noncurrent assets		1,488,336,206			990,612,413
Total assets	$	1,645,404,518		$	1,109,978,140
Liabilities
Accounts payable	$	17,760,390		$	11,879,638
Related party payable		8,578,588			15,811,597
Accrued expenses		22,350,134			19,216,258
Current maturities of long-term debt		—			6,760,650
Current operating lease liabilities		1,869,813			1,527,224
Current tax receivable agreement		10,440,762			10,240,310
Other current liabilities		1,660,318			—
Total current liabilities		62,660,005			65,435,677
Long-term debt, net of current maturities		428,612,681			249,952,746
Noncurrent operating lease liabilities		9,058,364			8,836,655
Tax receivable agreement, net of current portion		221,044,018			218,987,795
Other liabilities		1,182,408			10,583,196
Total noncurrent liabilities		659,897,471			488,360,392
Total liabilities	$	722,557,476		$	553,796,069
Commitment and contingencies (Note 12)
Stockholders' equity
Class A common stock, $0.0001 par value; 2,000,000,000 shares authorized and 88,323,068 issued and outstanding as of September 30, 2021; 2,000,000,000 shares authorized and 71,244,682 issued and outstanding as of December 31, 2020		8,832			7,125
Class V common stock, $0.0001 par value; 1,000 shares authorized and 100 shares issued and outstanding as of September 30, 2021 and December 31, 2020		—			—
Additional paid-in capital		1,092,446,820			691,675,072
Accumulated other comprehensive (loss) income		—			(6,436,763	)
Accumulated deficit		(210,260,747	)		(175,931,713	)
Total stockholders' equity	$	882,194,905		$	509,313,721
Equity attributable to non-controlling interests		40,652,137			46,868,350
Total liabilities and stockholders' equity and members' equity	$	1,645,404,518		$	1,109,978,140

See accompanying notes to consolidated financial statements.

1

REPAY HOLDINGS CORPORATION

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Revenue	$	61,125,384		$	37,634,537		$	157,057,751		$	113,597,599
Operating expenses
Other costs of services		15,287,720			10,492,011			40,483,326			29,989,935
Selling, general and administrative		33,696,220			28,580,764			86,631,634			65,765,167
Depreciation and amortization		25,907,374			15,421,129			63,379,348			44,031,111
Change in fair value of contingent consideration		(1,550,000	)		(3,750,000	)		(101,214	)		(3,010,000	)
Total operating expenses		73,341,314			50,743,904			190,393,094			136,776,213
Loss from operations		(12,215,930	)		(13,109,367	)		(33,335,343	)		(23,178,614	)
Other (expense) income
Interest expense		(763,614	)		(3,624,499	)		(2,763,592	)		(10,846,639	)
Loss on extinguishment of debt		—			—			(5,940,600	)		—
Change in fair value of warrant liabilities		—			2,740,403			—			(70,827,214	)
Change in fair value of tax receivable liability		3,410,955			(1,475,376	)		98,505			(12,055,797	)
Other income		18,816			25,379			81,352			69,826
Other loss		(19,041	)		—			(9,099,451	)		—
Total other (expense) income		2,647,116			(2,334,093	)		(17,623,786	)		(93,659,824	)
Loss before income tax expense		(9,568,814	)		(15,443,460	)		(50,959,129	)		(116,838,438	)
Income tax benefit		2,260,704			3,382,859			12,319,951			8,395,077
Net loss	$	(7,308,110	)	$	(12,060,601	)	$	(38,639,178	)	$	(108,443,361	)
Less: Net loss attributable to    non-controlling interests		(1,042,074	)		(5,297,782	)		(4,310,144	)		(12,053,241	)
Net loss attributable to the Company	$	(6,266,036	)	$	(6,762,819	)	$	(34,329,034	)	$	(96,390,120	)
Loss per Class A share:
Basic and diluted	$	(0.07	)	$	(0.12	)	$	(0.42	)	$	(2.10	)
Weighted-average shares outstanding:
Basic and diluted		88,273,194			57,913,089			81,595,128			45,806,225

See accompanying notes to consolidated financial statements.

2

REPAY HOLDINGS CORPORATION

Consolidated Statements of Comprehensive Income

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Net loss	$	(7,308,110	)	$	(12,060,601	)	$	(38,639,178	)	$	(108,443,361	)
Other comprehensive loss, before tax
Change in fair value of designated cash flow hedges		—			560,800			—			(10,687,184	)
Total other comprehensive income (loss), before tax		—			560,800			—			(10,687,184	)
Income tax related to items of other comprehensive income:
Tax benefit on change in fair value of designated cash flow hedges		—			47,122			—			1,598,492
Total income tax benefit on related to items of other comprehensive income		—			47,122			—			1,598,492
Total other comprehensive loss, net of tax		—			607,922			—			(9,088,692	)
Total comprehensive loss	$	(7,308,110	)	$	(11,452,679	)	$	(38,639,178	)	$	(117,532,053	)
Less: Comprehensive loss attributable to non-controlling interests		(1,042,074	)		(4,534,744	)		(4,310,144	)		(15,879,944	)
Comprehensive loss attributable to the Company	$	(6,266,036	)	$	(6,917,935	)	$	(34,329,034	)	$	(101,652,109	)

See accompanying notes to consolidated financial statements.

3

REPAY HOLDINGS CORPORATION

Consolidated Statements of Changes in Equity

(Unaudited)

	Class A Common Stock				Class V Common Stock				Additional Paid-In			Accumulated			Accumulated Other Comprehensive			Total Stockholders'			Non-controlling
	Shares		Amount		Shares		Amount		Capital			Deficit			(Loss) Income			Equity			Interests
Balance at June 30, 2020		52,018,330	$	5,202		100	$	-	$	526,569,801		$	(159,962,453	)	$	(6,882,240	)	$	359,730,310		$	159,844,542
Issuance of new shares		14,364,816		1,436				-		336,373,074			-			-			336,374,510			-
Exchange of Post-Merger Repay Units		1,579,330		158				-		13,796,879			-			(340,358	)		13,456,679			(13,456,679	)
Redemption of Post-Merger Repay Units		-		-				-		(236,701,453	)		-			(2,458,401	)		(239,159,854	)		(97,335,959	)
Release of share awards vested under Equity Plan		387,022		39				-		(39	)		-						-			-
Treasury shares repurchased		-		-				-		(701,374	)		-						(701,374	)		-
Stock-based compensation		-		-				-		5,768,220			-			-			5,768,220			-
Warrant exercise		2,738,491		274				-		31,471,057			-			-			31,471,331			-
Tax distribution from Hawk Parent		-		-				-		-			-						-			(1,496,336	)
Valuation allowance on Ceiling Rule DTA		-		-				-		(14,700,093	)		-			-			(14,700,093	)		-
Reclassification to warrant liabilities		-		-				-		35,322,527			-			-			35,322,527			-
Net loss		-		-				-		-			(6,762,819	)		-			(6,762,819	)		(5,297,782	)
Other comprehensive income		-		-				-		-			-			415,451			415,451			145,349
Balance at September 30, 2020		71,087,989	$	7,109		100	$	-	$	697,198,599		$	(166,725,271	)	$	(9,265,548	)	$	521,214,889		$	42,403,135
Balance at December 31, 2019		37,530,568	$	3,753		100	$	-	$	283,555,118		$	(70,335,151	)	$	313,397		$	213,537,117		$	206,162,035
Issuance of new shares		23,564,816		2,356				-		510,364,462			-			-			510,366,818			-
Exchange of Post-Merger Repay Units		1,579,330		158				-		13,796,879						(340,358	)		13,456,679			(13,456,679	)
Redemption of Post-Merger Repay Units		-		-				-