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, 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.)
11605 North Community House Road, Suite 300 Charlotte, NC	28277
(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 8, 2022, the registrant had 19,653,961 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	9
	Notes to Unaudited Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	36
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	38
Item 6.	Exhibits	38
Signatures		39

i

Special Note Regarding Forward-Looking Statements

This quarterly report on Form 10-Q for the quarterly period ended September 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, consumer demand, average bill amounts and interchange fees;

•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)

	September 30,			December 31,
	2022			2021
Assets
Current assets
Cash and cash equivalents	$	148,314		$	168,386
Restricted funds held for financial institutions		77,601			33,443
Accounts and other receivables, net of allowance of $332 and $102		62,758			43,935
Income tax receivable		2,650			2,488
Prepaid expenses and other current assets		12,318			8,184
Total current assets		303,641			256,436
Property and equipment, net of accumulated depreciation and    amortization of $5,448 and $4,791		1,996			2,044
Capitalized internal-use software development costs, net		42,711			30,888
Intangible assets, net		36,113			42,088
Goodwill		129,344			129,413
Operating lease right-of-use assets		9,582			7,703
Deferred tax asset		165			163
Other long-term assets		7,677			4,207
Total assets	$	531,229		$	472,942
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	27,394		$	24,748
Accrued liabilities		16,665			12,491
Financial institution funds in-transit		77,601			33,443
Operating lease liabilities		1,389			1,456
Contract liabilities		1,328			2,173
Income tax payable		720			122
Total current liabilities		125,097			74,433
Deferred tax liability		—			3,318
Operating leases, net of current portion		8,703			6,463
Contract liabilities, net of current portion		2,637			1,713
Finance leases and other finance obligations, net of current portion		750			883
Total liabilities		137,187			86,810
Commitments and contingencies (Note 9)
Stockholders’ equity
Preferred stock, $0.0001 par value per share, 5,000,000 shares authorized as of September 30, 2022 and December 31, 2021, respectively; none issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		—			—
Class A common stock, $0.0001 par value per share, 883,950,000 shares authorized as of September 30, 2022 and December 31, 2021, respectively;19,653,565 and 17,251,079 shares issued and outstanding as of September 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 September 30, 2022 and December 31, 2021, respectively; 103,336,337 and 103,388,082 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		10			11
Additional paid-in capital		365,632			356,017
Accumulated other comprehensive income		(67	)		168
Retained earnings		28,465			29,935
Total stockholders’ equity		394,042			386,132
Total liabilities and stockholders' equity	$	531,229		$	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 September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Revenue	$	128,152		$	101,676		$	364,825		$	287,393
Cost of revenue		90,295			70,512			256,286			199,754
Gross profit		37,857			31,164			108,539			87,639
Operating expenses
Research and development		10,350			8,818			30,925			24,469
Sales and marketing		19,048			11,314			53,089			29,041
General and administrative		9,376			9,904			29,038			24,067
Total operating expenses		38,774			30,036			113,052			77,577
(Loss) income from operations		(917	)		1,128			(4,513	)		10,062
Other income (loss)
Interest income, net		504			11			594			4
Foreign exchange gain (loss)		(28	)		(16	)		52			(8	)
(Loss) income before income taxes		(441	)		1,123			(3,867	)		10,058
(Provision for) benefit from income taxes		(296	)		(701	)		2,397			(5,423	)
Net (loss) income	$	(737	)	$	422		$	(1,470	)	$	4,635
Undeclared dividends on Series A preferred stock		—			--			--			(2,258	)
Net (loss) income attributable to common stock	$	(737	)	$	422		$	(1,470	)	$	2,377
Net (loss) income per share attributable to common stock
Basic	$	(0.01	)	$	—		$	(0.01	)	$	0.02
Diluted	$	(0.01	)	$	—		$	(0.01	)	$	0.02
Weighted-average number of shares used to compute net (loss) income per share attributable to common stock
Basic		122,740,982			118,206,073			121,765,509			110,272,583
Diluted		122,740,982			124,427,777			121,765,509			116,419,674

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 September 30,					Nine Months Ended September 30,
	2022			2021		2022			2021
Net (loss) income	$	(737	)	$	422	$	(1,470	)	$	4,635
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments, net of tax		(86	)		6		(235	)		(42	)
Comprehensive (loss) income	$	(823	)	$	428	$	(1,705	)	$	4,593

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-based awards		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
Issuance of warrant		—		—		3,478		—			—			3,478
Change in estimate of warrants expected to vest		—		—		46		—			—			46
Stock-based compensation		—		—		2,002		—			—			2,002
Issuance of Class A common stock for stock-based awards		369,758		—		1,167		—			—			1,167
Other comprehensive loss		—		—		—		—			(86	)		(86	)
Net loss		—		—		—		(737	)		—			(737	)
Balances at September 30, 2022		122,989,902	$	12	$	365,632	$	28,465		$	(67	)	$	394,042

7

	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	<