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, 2022

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 2, 2022, the registrant had 19,288,807 shares of Class A Common Stock, $0.0001 par value per share and 103,336,337 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 (Loss) Income	6
	Condensed Consolidated Statements of Stockholders' Equity	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Unaudited Condensed Consolidated Financial Statements	10
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	36
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	37
Item 6.	Exhibits	37
Signatures		38

i

Special Note Regarding Forward-Looking Statements

This quarterly report on Form 10-Q for the quarterly period ended June 30, 2022 ("Quarterly Report") contains forward-looking statements within the meaning of the federal securities laws, such as those under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," which statements involve substantial risks and uncertainties. Forward-looking statements may involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from historical results or from any future results or projections expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this report include statements about:

•our ability to effectively manage our growth and expand our operations;

•our ability to further attract, retain and expand our biller, financial institutions, partner and consumer base;

•our ability to timely implement and recognize revenue from new customers;

•our expectations regarding our revenue, expenses and other operating results;

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

•our market opportunity and anticipated trends in our business and industry;

•our ability to remain competitive as we continue to scale our business;

•our ability to develop new product features and enhance our platform;

•our ability to hire and retain experienced and talented employees as we grow our business;

•general economic conditions, including inflation, and their impact on us and consumer demand;

•the expected impact of our recent acquisitions of PayVeris LLC, or Payveris, and Finovera, Inc., or Finovera;

•our future acquisitions or strategic investments in complementary companies, products or technologies;

•our ability to maintain and enhance our brand;

•our plan to expand into new channels and industry verticals across different markets;

•our international expansion plans and ability to expand internationally; and

•those factors described in the sections titled “Risk Factors" and “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021 and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this report.

You should not place undue reliance on our forward-looking statements as predictions of future events. We have based the forward-looking statements primarily on our current expectations and projections about future events and trends that we believe may affect our business, operating results, financial condition and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this report. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

Neither we nor any other person assumes responsibility for the ultimate outcome of any of these forward-looking statements. Moreover, the forward-looking statements made in this report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this report to reflect events or circumstances after the date of this report or to reflect new information or the occurrence of unanticipated events, except as required by law.

ii

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

Certain Definitions

In this report, unless the context requires otherwise, all references to “we,” “our,” “us,” “Paymentus,” and the “Company” refer to Paymentus Holdings, Inc., and where appropriate its consolidated subsidiaries.

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)

	June 30,		December 31,
	2022		2021
Assets
Current assets
Cash and cash equivalents	$	158,335	$	168,386
Restricted funds held for financial institutions		59,325		33,443
Accounts and other receivables, net of allowance of $284 and $102		52,908		43,935
Income tax receivable		2,661		2,488
Prepaid expenses and other current assets		8,611		8,184
Total current assets		281,840		256,436
Property and equipment, net of accumulated depreciation and    amortization of $5,353 and $4,791		2,048		2,044
Capitalized internal-use software development costs, net		38,725		30,888
Intangible assets, net		38,108		42,088
Goodwill		129,387		129,413
Operating lease right-of-use assets		10,711		7,703
Deferred tax asset		167		163
Other long-term assets		5,176		4,207
Total assets	$	506,162	$	472,942
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	27,789	$	24,748
Accrued liabilities		14,564		12,491
Financial institution funds in-transit		59,325		33,443
Operating lease liabilities		1,559		1,456
Contract liabilities		1,323		2,173
Income tax payable		494		122
Total current liabilities		105,054		74,433
Deferred tax liability		—		3,318
Operating leases, net of current portion		9,546		6,463
Contract liabilities, net of current portion		2,640		1,713
Finance leases and other finance obligations, net of current portion		750		883
Total liabilities		117,990		86,810
Commitments and contingencies (Note 9)
Stockholders’ equity
Preferred stock, $0.0001 par value per share, 5,000,000 shares authorized as of June 30, 2022 and December 31, 2021, respectively; none issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		—		—
Class A common stock, $0.0001 par value per share, 883,950,000 shares authorized as of June 30, 2022 and December 31, 2021, respectively; 19,283,807 and 17,251,079 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		2		1
Class B common stock, $0.0001 par value per share, 111,050,000 shares authorized as of June 30, 2022 and December 31, 2021, respectively; 103,336,337 and 103,388,082 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		10		11
Additional paid-in capital		358,939		356,017
Accumulated other comprehensive income		19		168
Retained earnings		29,202		29,935
Total stockholders’ equity		388,172		386,132
Total liabilities and stockholders' equity	$	506,162	$	472,942

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

4

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,
	2022			2021			2022			2021
Revenue	$	119,969		$	93,495		$	236,673		$	185,717
Cost of revenue		84,141			64,567			165,991			129,242
Gross profit		35,828			28,928			70,682			56,475
Operating expenses
Research and development		10,185			7,921			20,575			15,651
Sales and marketing		17,851			9,505			34,041			17,727
General and administrative		10,017			7,421			19,662			14,163
Total operating expenses		38,053			24,847			74,278			47,541
(Loss) income from operations		(2,225	)		4,081			(3,596	)		8,934
Other income (loss)
Interest income (expense), net		98			(4	)		90			(7	)
Foreign exchange gain (loss)		54			(1	)		80			8
(Loss) income before income taxes		(2,073	)		4,076			(3,426	)		8,935
(Provision for) benefit from income taxes		(378	)		(3,501	)		2,693			(4,722	)
Net (loss) income	$	(2,451	)	$	575		$	(733	)	$	4,213
Undeclared dividends on Series A preferred stock		—			(898	)		--			(2,258	)
Net (loss) income attributable to common stock	$	(2,451	)	$	(323	)	$	(733	)	$	1,955
Net (loss) income per share attributable to common stock
Basic	$	(0.02	)	$	—		$	(0.01	)	$	0.02
Diluted	$	(0.02	)	$	—		$	(0.01	)	$	0.02
Weighted-average number of shares used to compute net (loss) income per share attributable to common stock
Basic		121,637,711			108,970,604			121,269,688			106,240,091
Diluted		121,637,711			108,970,604			121,269,688			112,244,054

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

5

PAYMENTUS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)

(In thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Net (loss) income	$	(2,451	)	$	575		$	(733	)	$	4,213
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments, net of tax		(104	)		(69	)		(149	)		(48	)
Comprehensive (loss) income	$	(2,555	)	$	506		$	(882	)	$	4,165

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

6

PAYMENTUS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

(In thousands, except share amounts)

					Additional					Other			Total
	Common Stock				Paid-In		Retained			Comprehensive			Stockholders’
	Shares		Amount		Capital		Earnings			Income			Equity
Balances at December 31, 2021		120,639,161	$	12	$	356,017	$	29,935		$	168		$	386,132
Stock-based compensation		—		—		1,276		—			—			1,276
Issuance of Class A common stock for stock option exercises		412,222		—		13		—			—			13
Other comprehensive loss		—		—		—		—			(45	)		(45	)
Net income		—		—		—		1,718			—			1,718
Balances at March 31, 2022		121,051,383	$	12	$	357,306	$	31,653		$	123		$	389,094
Stock-based compensation		—		—		1,344		—			—			1,344
Issuance of Class A common stock for stock-based awards		1,568,761		—		289		—			—			289
Other comprehensive loss		—		—		—		—			(104	)		(104	)
Net loss		—		—		—		(2,451	)		—			(2,451	)
Balances at June 30, 2022		122,620,144	$	12	$	358,939	$	29,202		$	19		$	388,172

	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		—			—		—