UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 June 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: 001-40429

Paymentus Holdings, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	45-3188251
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
18390 NE 68th St. Redmond, WA	98052
(Address of principal executive offices)	(Zip Code)

(888) 440-4826

(Registrant’s telephone number, including area code)

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	PAY	New York Stock Exchange

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 August 6, 2021, the registrant had 13,880,950 shares of Class A Common Stock, $0.0001 par value per share and 103,479,239 shares of Class B Common Stock, $0.0001 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	7
	Condensed Consolidated Statements of Operations	8
	Condensed Consolidated Statements of Comprehensive Income (Loss)	9
	Condensed Consolidated Statements of Stockholders' Equity	10
	Condensed Consolidated Statements of Cash Flows	11
	Notes to Unaudited Condensed Consolidated Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	35
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	69
Item 3.	Defaults Upon Senior Securities	70
Item 4.	Mine Safety Disclosures	70
Item 5.	Other Information	70
Item 6.	Exhibits	70
Signatures		72

iv

Summary of Risk Factors

Our business is subject to numerous risks and uncertainties, including those highlighted in the section of this report titled “Risk Factors.” 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.

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

5

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 our stockholders agreement have the effect of concentrating voting control with Accel-KKR, or AKKR, and our founder and chief executive officer, which limits or precludes 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.

6

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

PAYMENTUS HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands, except share and per share data)

	June 30,		December 31,
	2021		2020
Assets
Current assets
Cash and cash equivalents	$	266,390	$	46,666
Accounts and other receivables, net of allowance of $95 and $100		32,967		28,034
Income tax receivable		263		2,011
Prepaid expenses and other current assets		7,234		3,117
Total current assets		306,854		79,828
Property and equipment, net of accumulated depreciation and    amortization of $4,347 and $3,760		2,056		1,772
Capitalized internal-use software development costs, net		25,366		20,963
Intangible assets, net		195		296
Goodwill		13,216		13,205
Operating lease right-of-use assets		9,506		8,322
Deferred tax asset		144		270
Other long-term assets		3,463		218
Total assets	$	360,800	$	124,874
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	21,705	$	16,825
Accrued liabilities		12,185		10,201
Operating lease liabilities		2,311		3,010
Contract liabilities		913		612
Income tax payable		—		463
Total current liabilities		37,114		31,111
Deferred tax liability		5,775		3,499
Operating leases, net of current portion		7,440		5,476
Finance leases and other finance obligations, net of current portion		279		412
Total liabilities		50,608		40,498
Commitments and contingencies (Note 8)
Stockholders’ equity
Preferred stock, $0.0001 par value per share, 5,000,000 and zero shares authorized at June 30, 2021 and December 31, 2020, respectively, none issued and outstanding at June 30, 2021 and December 31, 2020, respectively.		—		—
Class A common stock, $0.0001 par value per share, 883,950,000 and zero shares authorized as of June 30, 2021 and December 31, 2020, respectively; 13,880,950 and zero shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively		1		—
Class B common stock, $0.0001 par value per share, 111,050,000 and zero shares authorized as of June 30, 2021 and December 31, 2020, respectively; 103,479,239 and zero shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively		11		—
Series A preferred stock, par value $0.01 per share; zero and 50,000 shares authorized as of June 30, 2021 and December 31, 2020, respectively; zero and 23,333 shares issued as of June 30, 2021 and December 31, 2020, respectively; zero and 23,013 shares outstanding as of June 30, 2021 and December 31, 2020, respectively		—		—
Common stock, $0.005 par value per share; zero and 150,000,000 shares authorized as of June 30, 2021 and December 31, 2020, respectively; zero and 104,785,651 shares issued as of June 30, 2021 and December 31, 2020, respectively; and zero and 103,479,239 shares outstanding as of June 30, 2021 and December 31, 2020, respectively		—		517
Treasury stock at cost, zero and 320 Series A preferred shares; and zero and    1,306,412 common shares as of June 30, 2021 and December 31, 2020, respectively		—		(579	)
Additional paid-in capital		285,164		29,175
Accumulated other comprehensive income		168		216
Retained earnings		24,848		55,047
Total stockholders’ equity		310,192		84,376
Total liabilities and stockholders' equity	$	360,800	$	124,874

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

PAYMENTUS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except share and per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Revenue	$	93,495		$	71,734		$	185,717		$	141,327
Cost of revenue		64,567			48,332			129,242			97,148
Gross profit		28,928			23,402			56,475			44,179
Operating expenses
Research and development		7,921			5,981			15,651			11,749
Sales and marketing		9,505			7,632			17,727			15,244
General and administrative		7,421			3,469			14,163			7,157
Total operating expenses		24,847			17,082			47,541			34,150
Income from operations		4,081			6,320			8,934			10,029
Other income (loss)
Interest income (expense), net		(4	)		3			(7	)		45
Foreign exchange (loss) gain		(1	)		(24	)		8			(90	)
Income before income taxes		4,076			6,299			8,935			9,984
Provision for income taxes		(3,501	)		(1,614	)		(4,722	)		(2,520	)
Net income	$	575		$	4,685		$	4,213		$	7,464
Undeclared dividends on Series A preferred stock		(898	)		(1,273	)		(2,258	)		(2,515	)
Net income (loss) attributable to common stock	$	(323	)	$	3,412		$	1,955		$	4,949
Net income (loss) per share attributable to common stock
Basic	$	—		$	0.03		$	0.02		$	0.05
Diluted	$	—		$	0.03		$	0.02		$	0.05
Weighted-average number of shares used to compute net income per share attributable to common stock
Basic		108,970,604			103,479,239			106,240,091			103,479,239
Diluted		108,970,604			106,151,678			112,244,054			106,135,251

The accompanying notes are an integral part of these condensed consolidated financial statements.

8

PAYMENTUS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(In thousands)

	Three Months Ended June 30,					Six Months Ended June 30,
	2021			2020		2021			2020
Net income	$	575		$	4,685	$	4,213		$	7,464
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustments, net of tax of $0 and $0		(69	)		11		(48	)		(12	)
Comprehensive income	$	506		$	4,696	$	4,165		$	7,452

The accompanying notes are an integral part of these condensed consolidated financial statements.

9

PAYMENTUS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

(In thousands, except share amounts)

																				Accumulated
	Series A										Additional									Other			Total
	Preferred Stock					Common Stock					Paid-In			Treasury			Retained			Comprehensive			Stockholders’
	Shares			Amount		Shares		Amount			Capital			Stock			Earnings			Income			Equity
Balances at December 31, 2020		23,013		$	—		103,479,239	$	517		$	29,175		$	(579	)	$	55,047		$	216		$	84,376
Stock-based compensation		—			—		—		—			563			—			—			—			563
Repayment of related party loan    receivable		—			—		—		—			813			—			—			—			813
Other comprehensive income		—			—		—		—			—			—			—			21			21
Net income		—			—		—		—			—			—			3,638			—			3,638
Balances at March 31, 2021		23,013		$	—		103,479,239	$	517		$	30,551		$	(579	)	$	58,685		$	237		$	89,411
Issuance of Class A common stock in connection with initial public offering and private placement, net of offering costs, underwriting discounts and commissions		—			—		13,880,950		1			272,633			—			—			—			272,634
Conversion of common stock to Class B common stock in connection with initial public offering		—			—		—		(506	)		506			—			—			—			—
Redemption of Series A preferred stock in connection with initial public offering		(23,013	)		—		—		—			(23,013	)		—			—			—			(23,013	)
Payment of dividends on Series A preferred stock in connection with redemption upon initial public offering		—			—		—		—			—			—			(34,412	)		—			(34,412	)
Issuance of warrant		—			—		—		—			4,498			—			—			—			4,498
Retirement of treasury stock in connection with initial public offering		—			—		—		—			(579	)		579			—			—			—
Stock-based compensation		—			—		—		—			568			—			—			—			568
Other comprehensive loss		—			—		—		—			—			—			—			(69	)		(69	)
Net income		—			—		—		—			—			—			575			—			575
Balances at June 30, 2021		—		$	—		117,360,189	$	12		$	285,164		$	—		$	24,848		$	168		$	310,192
																				Accumulated
	Series A										Additional									Other			Total
	Preferred Stock					Common Stock					Paid-In			Treasury			Retained			Comprehensive			Stockholders’
	Shares			Amount		Shares		Amount			Capital			Stock			Earnings			Income			Equity
Balances at December 31, 2019		23,013		$	—		103,479,239	$	517		$	27,181		$	(579	)	$	41,336		$	149		$	68,604
Issuance of shares		—			—		--		—			—			—			—			—			—
Stock-based compensation		—			—		—		—			475			—			—			—			475
Related party loan receivable		—			—		—		—			—			—			—			—			—
Other comprehensive loss		—			—		—		—			—			—			—			(23	)		(23	)
Net income		—			—		—		—			—			—			2,779			—			2,779
Balances at March 31, 2020		23,013		$	—		103,479,239	$	517		$	27,656		$	(579	)	$	44,115		$	126		$	71,835
Stock-based compensation		—			—		—		—			462			—			—			—			462
Related party loan receivable		—			—		—		—			—			—			—			—			—
Other comprehensive income		—			—		—		—			—			—			—			11			11
Net income		—			—		—		—			—			—			4,685			—			4,685
Balances at June 30, 2020		23,013		$	—		103,479,239	$	517		$	28,118		$	(579	)	$	48,800		$	137		$	76,993

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

10

PAYMENTUS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

	Six Months Ended June 30,
	2021		2020
Cash flows from operating activities
Net income	$	4,213	$	7,464
Adjustments to reconcile net income to net cash provided by operating    activities
Depreciation and amortization