10-Q

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 September 30, 2021


☐	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 November 5, 2021, the registrant had 16,536,202 shares of Class A Common Stock, $0.0001 par value per share and 103,486,739 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	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive Income (Loss)	6
	Condensed Consolidated Statements of Stockholders' Equity	7
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Unaudited Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	72
Item 3.	Defaults Upon Senior Securities	73
Item 4.	Mine Safety Disclosures	73
Item 5.	Other Information	73
Item 6.	Exhibits	74
Signatures		75

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

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.

iii

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

PAYMENTUS HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands, except share and per share data)


	September 30,		December 31,
	2021		2020
Assets
Current assets
Cash and cash equivalents	$	177,506	$	46,666
Restricted funds held for financial institutions		38,071		—
Accounts and other receivables, net of allowance of $96 and $100		37,130		28,034
Income tax receivable		1,185		2,011
Prepaid expenses and other current assets		9,737		3,117
Total current assets		263,629		79,828
Property and equipment, net of accumulated depreciation and amortization of $5,479 and $3,760		2,295		1,772
Capitalized internal-use software development costs, net		27,687		20,963
Intangible assets, net		52,026		296
Goodwill		120,934		13,205
Operating lease right-of-use assets		8,261		8,322
Deferred tax asset		10		270
Other long-term assets		3,931		218
Total assets	$	478,773	$	124,874
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	25,091	$	16,825
Accrued liabilities		17,381		10,201
Financial institution funds in-transit		38,071		—
Operating lease liabilities		1,687		3,010
Contract liabilities		1,912		612
Income tax payable		—		463
Total current liabilities		84,142		31,111
Deferred tax liability		6,455		3,499
Operating leases, net of current portion		6,798		5,476
Contract liabilities, net of current portion		1,888		—
Finance leases and other finance obligations, net of current portion		955		412
Total liabilities		100,238		40,498
Commitments and contingencies (Note 9)
Stockholders’ equity
Preferred stock, $0.0001 par value per share, 5,000,000 and zero shares authorized at September 30, 2021 and December 31, 2020, respectively, none issued and outstanding at September 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 September 30, 2021 and December 31, 2020, respectively; 16,482,529 and zero shares issued and outstanding as of September 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 September 30, 2021 and December 31, 2020, respectively; 103,486,739 and zero shares issued and outstanding as of September 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 September 30, 2021 and December 31, 2020, respectively; zero and 23,333 shares issued as of September 30, 2021 and December 31, 2020, respectively; zero and 23,013 shares outstanding as of September 30, 2021 and December 31, 2020, respectively		—		—
Common stock, $0.005 par value per share; zero and 150,000,000 shares authorized as of September 30, 2021 and December 31, 2020, respectively; zero and 104,785,651 shares issued as of September 30, 2021 and December 31, 2020, respectively; and zero and 103,479,239 shares outstanding as of September 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 September 30, 2021 and December 31, 2020, respectively		—		(579	)
Additional paid-in capital		353,079		29,175
Accumulated other comprehensive income		174		216
Retained earnings		25,270		55,047
Total stockholders’ equity		378,535		84,376
Total liabilities and stockholders' equity	$	478,773	$	124,874

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

PAYMENTUS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except share and per share data)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Revenue	$	101,676		$	78,018		$	287,393		$	219,345
Cost of revenue		70,512			55,365			199,754			152,513
Gross profit		31,164			22,653			87,639			66,832
Operating expenses
Research and development		8,818			6,221			24,469			17,970
Sales and marketing		11,314			8,002			29,041			23,246
General and administrative		9,904			4,959			24,067			12,116
Total operating expenses		30,036			19,182			77,577			53,332
Income from operations		1,128			3,471			10,062			13,500
Other income (loss)
Interest income, net		11			3			4			48
Foreign exchange loss		(16	)		(19	)		(8	)		(109	)
Income before income taxes		1,123			3,455			10,058			13,439
Provision for income taxes		(701	)		(841	)		(5,423	)		(3,361	)
Net income	$	422		$	2,614		$	4,635		$	10,078
Undeclared dividends on Series A preferred stock		—			(1,319	)		(2,258	)		(3,834	)
Net income attributable to common stock	$	422		$	1,295		$	2,377		$	6,244
Net income per share attributable to common stock
Basic	$	—		$	0.01		$	0.02		$	0.06
Diluted	$	—		$	0.01		$	0.02		$	0.06
Weighted-average number of shares used to compute net income per share attributable to common stock
Basic		118,206,073			103,479,239			110,272,583			103,479,239
Diluted		124,427,777			106,088,898			116,419,674			106,109,507

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

PAYMENTUS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(In thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021			2020
Net income	$	422	$	2,614	$	4,635		$	10,078
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments, net of tax		6		49		(42	)		37
Comprehensive income	$	428	$	2,663	$	4,593		$	10,115

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

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
Issuance of Class A common stock for acquisitions		—			—		2,601,579		—			66,857			—			—			—			66,857
Change in estimate of warrants expected to vest		—			—		—		—			304			—			—			—			304
Stock-based compensation		—			—		—		—			754			—			—			—			754
Issuance of Class B common stock for stock option exercises		—			—		7,500		—			—			—			—			—			—
Other comprehensive income		—			—		—		—			—			—			—			6			6
Net income		—			—		—		—		$	—			—			422			—			422
Balances at September 30, 2021		—		$	—		119,969,268	$	12		$	353,079		$	—		$	25,270		$	174		$	378,535

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

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’

Amount