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Item 7. Management’s Discussion and Analysis

2023-03-23 compared with 2022-03-17 · 105 added, 136 removed, 135 unchanged (64% of the section changed)

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Certain amounts in this section may not add mathematically due to rounding.

The abbreviation "nm" used the the following sections indicates the metric is not meaningful.

For a description and additional information about our three reportable segments, see Note 20, Segment Information , contained in " Item 8 - Financial Statements and Supplementary Data " of this Annual Report on Form 10-K.

Impact of COVID-19 on Results and Trends

The outbreak of COVID-19 in the U.S., which was declared a pandemic by the World Health Organization on March 11, 2020, adversely affected commercial activity and contributed to a significant decline in economic activity in 2020, particularly in the second quarter of 2020.

Starting in mid-March 2020 through April 2020, COVID-19 had a significant negative effect on our results.

This impact was evident in a decline in merchant bankcard volume and our revenues particularly during the period of restrictive shelter-in-place requirements instituted across the U.S.

toward the end of March 2020 through April 2020.

In May 2020, as shelter-in-place restrictions began to be lifted and regional economies started to reopen, our processing volumes began to return, and revenue growth was supplemented by the acceleration of certain specialized product offerings and e-commerce payment transactions.

This recovery momentum continued through the second half of 2020 and the year 2021.

While there continues to be uncertainty regarding the future economic impacts of COVID-19 variants, our operating results reflect a significant recovery from the pandemic's negative effects during the first half of 2020.

The pandemic's impact on the overall economy and on our comparative historical and future results are beyond our ability to predict or control.

For a description and additional information about our three reportable segments, see Note 20.

Segment Information , contained in " Item 8 - Financial Statements and Supplementary Data " of this Annual Report on Form 10-K.

Results of Operations

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For the year ended December 31, 2022, our consolidated revenue of $663.6 million increased by $148.7 million, or 28.9%, from $514.9 million for the year ended December 31, 2021.

This overall increase was driven by an increase in bankcard volumes fueled by:

1) increased consumer spending resulting from post-pandemic recovery in the economy;

and 2) acquisitions made by the Company.

The following table shows our revenues by type for 2021, 2020 and 2019:

(in thousands) Years Ended December 31, 2021 vs 2020 2020 vs 2019

2021 2020 2019 $ Change % Change $ Change % Change

This overall increase was driven by an increase in payment volumes fueled by:

1) increased consumer spending and 2) the full-year impact of businesses acquired during the prior year.

Revenues by type for 2022 and 2021 were as follows:

(in thousands) Years Ended December 31, 2022 vs 2021

2022 2021 $ Change

Revenue Type:

Merchant card fees $ 553,037 $ 468,764 $ 84,273

Money transmission services 71,536 19,415 52,121

Outsourced services and other services 29,627 21,033 8,594

Money transmission services revenue 19,415 — — 19,415 nm — nm

Equipment 9,441 5,689 3,752

Total revenues $ 663,641 $ 514,901 $ 148,740

Merchant Card Fees

For the year ended December 31, 2022, our merchant card fees revenue of $553.0 million increased by $84.2 million, or 18.0%, from $468.8 million for the year ended December 31, 2021.

This increase was driven by an increase in the merchant bankcard volume processed by the Company.

Outsourced services and other services revenue of $21.0 million for the year ended December 31, 2021 decreased by $2.1 million, or 9.1%, from $23.1 million for the year ended December 31, 2020, primarily due to the wind down of certain customer programs due to the impact of the COVID-19 pandemic.

Money transmission services revenue of $19.4 million for the year ended December 31, 2021 is related to the acquisition of Finxera Holdings, Inc.

("Finxera") in September 2021.

Money Transmission Services

Money transmission services revenue of $71.5 million for the year ended December 31, 2022 increased by $52.1 million or 268.6%, from $19.4 million for the year ended December 31, 2021 and is primarily related to the full-year impact of the Finxera acquisition in September 2021 and continued growth in the customers and markets it serves.

Outsourced Services and Other Services

Outsourced services and other services revenue of $29.6 million for the year ended December 31, 2022 increased by $8.6 million, or 41.0%, from $21.0 million for the year ended December 31, 2021.

This increase was primarily driven by growth in revenue from AP automation solutions and increased volumes in the card issuing business.

The increase was offset by a decrease of $1.7 million driven by the wind down of certain customer programs in the managed services business.

Equipment revenue of $9.4 million for the year ended December 31, 2022, increased by $3.7 million, or 64.9%, from $5.7 million for the year ended December 31, 2021.

The increase was primarily due to the sale of equipment to new merchants added during the year.

The increase was primarily due to increased sales of mobile card reader equipment and other equipment from our MX product line.

Operating Expenses

Operating expenses for 2022 and 2021 were as follows:

(in thousands) Years Ended December 31, 2021 vs 2020 2020 vs 2019

2021 2020 2019 $ Change % Change $ Change % Change

(in thousands) Years Ended December 31, 2022 vs 2021

2022 2021 $ Change

Operating expenses

Costs of services $ 359,885 $ 277,374 $ 252,569 $ 82,511 29.7 % $ 24,805 9.8 %

Cost of services (excludes depreciation and amortization) $ 436,753 $ 359,885 $ 76,868

Salary and employee benefits 65,077 43,818 21,259

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Total operating expenses $ 607,476 $ 481,808 $ 125,668

Costs of Services

Costs of services of $359.9 million for the year ended December 31, 2021 increased by $82.5 million, or 29.7%, from $277.4 million for the year ended December 31, 2020, primarily due to the corresponding increase in revenues.

For the year ended December 31, 2021, costs of services as a percentage of total revenues increased to 69.9% as compared to 68.6% for the year ended December 31, 2020.

This increase was primarily due to bankcard volume growth from larger partners with higher commissions.

Costs of Services (excludes depreciation and amortization)

Costs of services (excludes depreciation and amortization) of $436.8 million for the year ended December 31, 2022 increased by $76.9 million, or 21.4%, from $359.9 million for the year ended December 31, 2021, primarily due to the corresponding increase in revenues.

For the year ended December 31, 2022, costs of services (excluding depreciation and amortization) as a percentage of total revenues decreased to 65.8% as compared to 69.9% for the year ended December 31, 2021.

This decrease was primarily due the full-year impact of the Finxera acquisition in September 2021, partially offset by a mix of bankcard volume growth from larger reseller partners with higher commissions.

Salary and employee benefits

Salary and employee benefits expense of $43.8 million for the year ended December 31, 2021 increased by $4.3 million, or 10.9%, from $39.5 million for the year ended December 31, 2020, primarily due to an increase in headcount related to our acquisition of Finxera in September 2021.

Salary and employee benefits expense of $65.1 million for the year ended December 31, 2022 increased by $21.3 million, or 48.6%, from $43.8 million for the year ended December 31, 2021, primarily due to pay raises, full-year impact of the Finxera business acquired in September 2021, an increase in stock-based compensation and overall growth of the Company.

The Company's employee headcount increased to 870 in 2022 from 790 in 2021.

Depreciation and amortization expense

Depreciation and amortization expense of $49.7 million for the year ended December 31, 2021 increased by $8.9 million, or 21.8%, from $40.8 million for the year ended December 31, 2020, primarily due to the recognition of finite lived intangible assets from the business combinations completed during the year, offset by a decrease related to the sale of certain assets from Priority Real Estate Technology, LLC's (" PRET") real estate services business in 2020.

Depreciation and amortization expense of $70.7 million for the year ended December 31, 2022 increased by $21.0 million, or 42.3%, from $49.7 million for the year ended December 31, 2021, primarily due to the full-year amortization of finite-lived intangible assets from acquired businesses.

Selling, general and administrative

Selling, general and administrative expenses of $28.4 million for the year ended December 31, 2021 increased by $2.6 million, or 10.1%, from $25.8 million for the year ended December 31, 2020, primarily due to expenses from acquired businesses as well as one-time transaction expenses.

Selling, general and administrative expenses of $35.0 million for the year ended December 31, 2022 increased by $6.6 million, or 23.2%, from $28.4 million for the year ended December 31, 2021, primarily due to full-year impact of acquired businesses and certain non-recurring projects.

Other (Expenses) Income, net

(in thousands) Years Ended December 31, 2021 vs 2020 2020 vs 2019

2021 2020 2019 $ Change % Change $ Change % Change

Other (expenses) income

(in thousands) Years Ended December 31, 2022 vs 2021

2022 2021 $ Change

Other (expense) income

Interest expense $ (53,554) $ (36,485) $ (17,069)

Debt extinguishment and modification costs (8,322) (1,899) — (6,423) 338.2 % (1,899) nm

Gain on sale of business and investment 7,643 107,239 — (99,596) (92.9) % 107,239 nm

Debt extinguishment and modification costs — (8,322) 8,322

Gain on sale of business and investment — 7,643 (7,643)

Other income, net 589 202 387

Total other (expenses) income, net $ (36,962) $ 61,097 $ (39,943) $ (98,059) (160.5) % $ 101,040 (253.0) %

Total other expenses, net $ (52,965) $ (36,962) $ (16,003)

Interest expense

Interest expense of $36.5 million for the year ended December 31, 2021 decreased by $8.3 million, or 18.5%, from $44.8 million for the year ended December 31, 2020, primarily due to the lower rate of interest on the new loans secured by the Company in connection with the refinancing of its credit facilities in April 2021.

The new term facility and revolving credit facility carry interest rates of 6.75% and 5.75% at December 31, 2021, respectively, as compared to the old term facility and subordinated term loan facility, which carried interest rates of 7.50% and 12.50% at December 31, 2020, respectively.

The decrease in interest expense in 2021 was also driven by the timing of additional borrowings.

The Company borrowed $320.0 million to fund the acquisition of Finxera in September 2021, which was only outstanding during part of the year.

Interest expense of $53.6 million for the year ended December 31, 2022 increased by $17.1 million, or 46.8%, from $36.5 million for the year ended December 31, 2021, primarily due to full-year impact of additional borrowings to fund acquisitions in 2021 and an increase in variable interest rates in 2022.

Debt extinguishment and modification Costs

Debt extinguishment and modification costs for the year ended December 31, 2021 were $8.3 million, an increase of $6.4 million, or 336.8%, from $1.9 million for the year ended December 31, 2020.

The Company refinanced its credit facilities in April 2021.

As a result the Company expensed unamortized deferred costs and discounts of $3.0 million associated with the retirement of its subordinated debt facility and expensed $5.3 million of third-party costs incurred in connection with the refinancing.

During 2020, the Company expensed unamortized deferred costs and discounts of $1.5 million associated with the $106.5 million principal prepayment for the term facility under our Senior Credit Facility and expensed $0.4 million of third-party costs incurred in connection with the amendment of its credit facilities.

The Company refinanced its credit facilities in April 2021 and expensed unamortized deferred costs and discounts of $3.0 million associated with the retirement of its subordinated debt facility and expensed $5.3 million of third-party costs incurred in connection with the refinancing.

Gain on sale of business and investment

Gain on sale of business and investment for the year ended December 31, 2021 was $7.6 million, which resulted from consideration received by the Company in connection with the termination of certain warrants held in the common stock of an entity that was sold during the year.

Th e amount of consideration received may be subject to certain adjustments in the future related to a potential earn out that is contingent on 2022 performance.

Any remaining payments made or received by the Company will be recorded in the period in which such amounts are finalized.

For the year ended December 31, 2020, gain on sale of business and investment was $107.2 million, which was related to the sale of PRET's real estate services business in September 2020, as discussed in Note 6, Disposal of Business .

Gain on sale of business and investment for the year ended December 31, 2021 was $7.6 million, which resulted from consideration received by the Company in connection with the termination of certain warrants held in the Common Stock of an entity that was sold during the prior year.

Income tax expense

(in thousands) Years Ended December 31, 2021 vs 2020 2020 vs 2019

2021 2020 2019 $ Change % Change $ Change % Change

(Loss) income before income taxes $ (3,869) $ 81,958 $ (32,759) $ (85,827) (104.7) % $ 114,717 (350.2) %

(in thousands) Years Ended December 31, 2022 vs 2021

2022 2021 $ Change

Income (loss) before income taxes $ 3,200 $ (3,869) $ 7,069

Income tax expense $ 5,350 $ (5,258) $ 10,608

Effective tax rate 167.2 % 135.9 %

The effective tax rate for 2021 increased primarily due to:

1) an increase in the valuation allowance against certain business interest carryover deferred tax assets;

2) non-deductible transaction costs incurred in the acquisition of Finxera;

3) the finalization of prior estimates on the sale of PRET's real estate services business impacting amounts attributable to noncontrolling partners;

and 4) an increase in the tax basis of certain intangible assets resulting from a change in a subsidiary's entity status.

Our consolidated effective income tax rates differ from the statutory rate due to timing and permanent differences between amounts calculated under accounting principles GAAP and the U.S.

The effective tax rate for 2022 increased primarily due to an increase in the valuation allowance against certain business interest carryover deferred tax assets.

Our consolidated effective income tax rates differ from the statutory rate due to timing and permanent differences between amounts calculated under GAAP and the U.S.

The consolidated effective income tax rate for 2022 may not be indicative of our effective tax rate for future periods.

On August 16, 2022, the U.S.

government enacted the Inflation Reduction Act into law.

The IRA, among other provisions, implements a 15% corporate alternative minimum tax based on global adjusted financial statement income and a 1% excise tax on share repurchases, which shall take effect in tax years beginning after December 31, 2022.

We are in the process of evaluating the provisions of the IRA, but we do not currently believe the IRA will have a material effect on our reported results, cash flows, or financial position when it becomes effective.

If applicable, we expect to reflect the excise tax within equity as part of the repurchase price of Common Stock.

Earnings Attributable to Common Shareholders

(in thousands) Years Ended December 31, 2021 vs 2020 2020 vs 2019

2021 2020 2019 $ Change % Change $ Change % Change

(in thousands) Years Ended December 31, 2022 vs 2021

2022 2021 $ Change

Net income (loss) $ (2,150) $ 1,389 $ (3,539)

Dividends and accretion attributable to redeemable senior preferred stockholders (18,009) — — (18,009) nm — nm

Non-controlling interests ("NCI") preferred unit redemptions, net of deferred tax benefit (8,021) — — (8,021) nm — nm

Net income attributable to redeemable and redeemed NCIs — (45,398) — 45,398 (100.0) % (45,398) nm

Net (loss) income attributable to common stockholders $ (24,641) $ 25,661 $ (33,589) $ (50,302) (196.0) % $ 59,250 (176.4) %

Dividends and accretion attributable to redeemable senior preferred stockholders was $18.0 million for the year ended December 31, 2021, and was comprised of $8.7 million of accumulated dividends accrued as part of the carrying value of the redeemable senior preferred stock, $7.5 million of dividends that were paid in cash and $1.8 million related to the accretion of discounts and issuance cost for the redeemable senior preferred stock.

NCI preferred unit redemptions was $(8.0) million for the year ended December 31, 2021, and was related to the redemption of the PHOT preferred units, as discussed in Note 15, Related Party Transactions .

Net income attributable to redeemable and redeemed NCIs for the year ended December 31, 2020 was $(45.4) million, which was related to the portion of the gain on the sale of PRET's real estate services business in 2020 that was due to the NCIs.

Dividends and accretion attributable to redeemable senior preferred stockholders (36,880) (18,009) (18,871)

NCI preferred unit redemptions, net of deferred tax benefit — (8,021) 8,021

Net loss attributable to common stockholders $ (39,030) $ (24,641) $ (14,389)

Dividends and accretion attributable to redeemable senior preferred stockholders was $36.9 million for the year ended December 31, 2022, and was comprised of $22.1 million of accumulated dividends accrued as part of the carrying value of the redeemable senior preferred stock and the cash dividend payable at year end, $11.5 million of dividends that were paid in cash, and $3.3 million related to accretion of discounts and issuance costs for the redeemable senior preferred stock.

The increase in dividends and accretion attributable to redeemable senior preferred stockholders from 2021 to 2022 is due to a full-year impact of dividends and accretion, as well as an increase in the dividend rate for 2022 resulting from an increase in variable interest rates during the year.

Segment Results

The Company reorganized its business segments as of December 31, 2021, resulting in three segments:

Small and medium-sized businesses ("SMB") Payments, business-to-business ("B2B") Payments and Enterprise Payments.

Segment results included in the discussion below were restated in accordance with the new segment structure for comparison purposes.

The impact of the restatement of the prior period results is as follows:

SMB Payments (1)

B2B Payments (2)

Enterprise Payments (3)

2020 2019 2020 2019 2020 2019

Restated $ 370,521 $ 334,180 $ 20,922 $ 25,980 $ 12,899 $ 11,694

Historically reported 367,816 330,599 20,922 25,980 15,604 15,275

Difference $ 2,705 $ 3,581 $ — $ — $ (2,705) (3,581)

Operating Income:

Restated $ 37,897 $ 30,936 $ 923 $ (891) $ 1,899 $ 2,027

Historically reported 38,392 32,237 923 (891) 1,404 725

Difference $ (495) $ (1,301) $ — $ — $ 495 $ 1,302

Depreciation and Amortization:

Restated $ 35,627 $ 33,194 $ 306 $ 323 $ 3,674 $ 4,046

Historically reported 35,002 32,842 306 323 4,299 4,398

Difference $ 625 $ 352 $ — $ — $ (625) $ (352)

(1) Compared to the Company's legacy Consumer Payments segment.

(2) Compared to the Company's legacy Commercial Payments segment.

(3) Compared to the Company's legacy Integrated Partners segment.

(in thousands) Years Ended December 31, 2021 vs 2020 2020 vs 2019

2021 2020 2019 $ Change % Change $ Change % Change

(in thousands) Years Ended December 31, 2022 vs 2021

2022 2021 $ Change

Revenue $ 562,237 $ 475,630 $ 86,607

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Revenue from our SMB Payments segment was $562.2 million for the year ended December 31, 2022, compared to $475.6 million for the year ended December 31, 2021.

The increase of $105.1 million, or 28.4%, was primarily driven by increased merchant bankcard volume.

The Company's revenue from the SMB Payments segment as a percentage of merchant bankcard processing dollar value during 2021 remained consistent with 2020 at 0.9%.

The increase of $86.6 million, or 18.2%, was primarily driven by increased merchant bankcard volume and certain fee revenues.

The Company's revenue from the SMB Payments segment as a percentage of merchant bankcard processing dollar value during 2022 increased to 0.95% from 0.89% during 2021.

The increase was primarily driven by increased volume (transaction count) related fee revenues and changes in the merchant mix.

Operating Income

Operating income from our SMB Payments segment was $54.9 million for the year ended December 31, 2022, compared to $52.9 million for the year ended December 31, 2021.

The increase of $15.0 million, or 39.6%, was primarily driven by the increase in sales and the cost benefit tied to purchased residuals from an acquired portfolio.

(in thousands) Years Ended December 31, 2021 vs 2020 2020 vs 2019

2021 2020 2019 $ Change % Change $ Change % Change

The increase of $2.0 million, or 3.8%, is due to increased revenue and was offset by a mix of volume growth from larger reseller partners with higher commissions and an increase in other operating expenses.

Increase in other operating expenses include a $6.3 million increase in salary and employee benefits due to higher headcount, a $2.2 million increase in selling, general and administrative expenses driven by higher travel and other operating costs, a $2.8 million increase in depreciation and amortization, and higher stock-based compensation and pay raises.

The increase in headcount and selling, general and administrative expenses are mainly attributable to growth initiatives.

Increase in other operating expenses were offset by an increase in operating income from higher revenue.

(in thousands) Years Ended December 31, 2022 vs 2021

2022 2021 $ Change

Revenue $ 18,890 $ 17,138 $ 1,752

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Revenue from our B2B Payments segment was $18.9 million for the year ended December 31, 2022, compared to $17.1 million for the year ended December 31, 2021.

The decrease of $3.8 million, or 18.2%, was primarily driven by the wind down of certain programs in the Managed Services business due to scaled back operations as a result of the COVID-19 pandemic.

The increase of $1.8 million, or 10.5%, was primarily driven by an increase of $3.5 million in the CPX business, of which $2.5 million is related to volume growth, and the remaining increase of $1.0 million is from the recognition of certain revenues for which recovery became probable during the current year.

This increase was offset by a decrease of $1.7 million driven by the wind down of certain customer programs in the managed services business.

Operating Income

Operating income from our B2B Payments segment was $0.2 million for the year ended December 31, 2022, compared to $0.1 million for the year ended December 31, 2021.

The decrease of $0.8 million, or 88.9%, was primarily attributable to the decrease in revenue from the Managed Services business due to scaled back operations as a result of the COVID-19 pandemic.

This is due to the increase in revenue from the CPX business was offset by a decrease in revenue from the managed services business due to the wind down of certain customer programs.

Enterprise Payments

(in thousands) Years Ended December 31, 2021 vs 2020 2020 vs 2019

2021 2020 2019 $ Change % Change $ Change % Change

(in thousands) Years Ended December 31, 2022 vs 2021

2022 2021 $ Change

Revenue $ 82,514 $ 22,133 $ 60,381

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Merchant bankcard transaction volume 2,779 549 2,230

Average number of billed clients 380,233 345,828 34,405

Revenue from our Enterprise Payments segment was $82.5 million for the year ended December 31, 2022, compared to $22.1 million for the year ended December 31, 2021.

The increase of $9.2 million, or 71.3%, was primarily driven by revenues contributed by the Finxera business since its acquisition in September 2021, offset by decreases due to the sale of PRET's real estate services business in 2020.

The increase of $60.4 million, or 273.3%, was primarily driven by full-year impact of Finxera business acquired in September 2021 and continued growth in the customers and markets it serves.

Operating Income

Operating income from our Enterprise Payments segment was $30.9 million for the year ended December 31, 2022, compared to $6.8 million for the year ended December 31, 2021.

The increase of $4.9 million, or 257.9%, was primarily driven by operating income contributed by the Finxera business since its acquisition in September 2021.

The increase of $24.1 million, or 354.4%, was primarily driven by full-year impact of Finxera business acquired in September 2021 and continued growth in the customers and markets it serves.

Depreciation and Amortization

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Liquidity and capital resource management is a process focused on providing the funding we need to meet our short-term and long-term cash and working capital needs.

We have used our funding sources to build our merchant portfolio, technology solutions, and to make acquisitions with the expectation that such investments will generate cash flows sufficient to cover our working capital needs and other anticipated needs, including for our acquisition strategy.

We have used our funding sources to build our merchant portfolio, for technology solutions and to make acquisitions with the expectation that such investments will generate cash flows sufficient to cover our working capital needs and other anticipated needs, including for our acquisition strategy.

We anticipate that cash on hand, funds generated from operations and available borrowings under our revolving credit agreement are sufficient to meet our working capital requirements for at least the next twelve months.

Our principal uses of cash are to fund business operations, administrative costs and debt service.

This is based upon management's estimates and assumptions, including utilizing the most currently available information regarding the effects of the COVID-19 pandemic on our financial results.

Actual future results could differ materially, as the magnitude, duration and effects of changes in economic, political and market conditions are difficult to predict, and ultimately could negatively impact our liquidity and capital resources.

Our principal uses of cash are to fund business operations (including capital expenditures and strategic investments) and administrative costs, and to service our debt.

Our working capital, defined as current assets less current liabilities, was $22.5 million at December 31, 2022 and $19.6 million at December 31, 2021.

As of December 31, 2021, we had cash totaling $20.3 million compared to $9.2 million at December 31, 2020.

These cash balances do not include restricted cash of $28.9 million and $78.9 million at December 31, 2021 and December 31, 2020, respectively, which reflects cash accounts holding customer settlement funds and cash reserves

for potential losses.

The current portion of long-term debt included in current liabilities was $6.2 million at December 31, 2021 compared with $19.4 million at December 31, 2020.

As of December 31, 2022, we had cash and cash equivalents with a balance of $18.5 million compared to $20.3 million at December 31, 2021.

These cash and cash equivalent balances do not include restricted cash of $10.6 million and $28.9 million at December 31, 2022 and December 31, 2021, respectively, which reflects cash accounts holding customer settlement funds and cash reserves for potential losses.

The current portion of long-term debt included in current liabilities was $6.2 million at December 31, 2022 and 2021.

At December 31, 2022, we had availability of approximately $27.5 million under our revolving credit arrangement.

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Net cash provided by operating activities was $70.5 million and $9.4 million for the years ended December 31, 2022 and December 31, 2021, respectively.

The $2.8 million, or 23.0% decrease in 2021 was primarily driven by the payment of payment-in-kind ("PIK") interest upon the refinancing of our credit facilities in April 2021 and changes in operating assets and liabilities offset by cash generated from the operations of the Company.

Cash (Used in) Provided by Investing Activities

Net cash used in investing activities was $451.0 million compared to cash provided by investing activities of $166.4 million for the years ended December 31, 2021 and 2020, respectively.

For 2021, net cash used in investing activities included cash purchase consideration of $407.1 million for the acquisition of businesses, additions to property, equipment and software of $9.7 million, and acquisitions of intangible assets of $49.5 million, offset by proceeds from the sale of an investment of $15.3 million.

For 2020, net cash provided by investing activities included proceeds from the sale of a business of $179.4 million, offset by additions to property, equipment and software of $7.5 million, and acquisitions of intangible assets of $5.6 million.

Cash Provided by (Used in) Financing Activities

The $61.1 million, or 650.0% increase in 2022 was driven by cash generated from the operations of the Company.

Additionally, 2021 included the non-recurring payment of PIK interest of $23.7 million upon the refinancing of our credit facilities in April 2021 which decreased operating cash flows for the year ended December 31, 2021.

Cash Used in Investing Activities

Net cash used in investing activities was $36.5 million compared to cash used investing activities of $451.0 million for the years ended December 31, 2022 and 2021, respectively.

Net cash used to acquire businesses in 2022 was $5.0 million compared to net cash used of $407.1 million in 2021.

Additions to property, equipment and software was $18.9 million for 2022 compared to $9.7 million in 2021 and acquisitions of intangible assets was $8.0 million compared to $49.5 million in 2021.

Additionally, grants of certain loans to our partners was $4.7 million for the year ended December 31, 2022.

For the year ended December 31, 2021, the Company received proceeds from the sale of an investment of $15.3 million.

Cash (Used in) Provided by Financing Activities

Net cash provided by financing activities was $8.5 million for the year ended December 31, 2022, compared to $871.6 million of cash used in financing activities in the year ended December 31, 2021.

The net cash provided by financing activities for 2022 included changes in the net obligations for funds held on the behalf of customers of $43.1 million and $29.5 million related to additional borrowings under the revolving credit facility.

This was offset by $38.2 million of cash used for the repayment of debt including borrowings under the revolving credit facility, $11.5 million of cash dividends paid to redeemable senior preferred stockholders, $7.5 million of cash used for stock repurchases, including a portion related to shares withheld for taxes, and $7.0 million of payments of contingent consideration for business combinations.

The net cash provided by financing activities for 2021 included proceeds from the issuance of new debt of $598.2 million, net borrowings from the revolving credit facility of $15.0 million, proceeds from the issuance of the redeemable senior preferred stock of $211.0 million, proceeds from the exercise of stock options of $1.2 million and changes in the net obligations for funds held on the behalf of customers of $417.6 million.

These cash inflows were offset by cash used for the repayment of debt of $361.4 million, cash used for the repurchase of Common Stock of $1.7 million, dividends paid to redeemable senior preferred stockholders of $7.5 million and distribution to NCIs in subsidiaries of $0.8 million.

The net cash used in financing activities for 2020 included changes in the net obligations for funds held on the behalf of customers of $34.9 million.

This cash inflow was offset by cash used for the repayment of debt of $113.3 million, net repayment under the revolving credit facility of $11.5 million, redemption of NCI interest in subsidiary of $5.7 million, and distribution to NCIs in subsidiaries of $45.4 million.

Long-Term Debt

On April 27, 2021, the Company entered into a Credit and Guaranty Agreement with Truist Bank ("Truist") (the "Credit Agreement") which provides for:

1) a $300.0 million senior secured term loan facility (the "initial term loan");

2) a $290.0 million senior secured delayed draw term loan facility (the "delayed draw term loan") (together, the "term facility");

On April 27, 2021, the Company entered into a Credit Agreement with Truist which provides for:

1) a $300.0 million Initial Term Loan;

2) a $290.0 million Delayed Draw Term Loan;

and 3) a $40.0 million senior secured revolving credit facility.

The Credit Agreement was amended on September 17, 2021 to

increase the amount of the delayed draw term loan facility by $30.0 million to $320.0 million.

The Credit Agreement was amended on September 17, 2021 to increase the amount of the Delayed Draw Term Loan facility by $30.0 million to $320.0 million.

The additional Delayed Draw Term Loan is part of the same class of term loans made pursuant to the original commitments under the Credit Agreement.

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The future applicable interest rate margins may vary based on the Company's Total Net Leverage Ratio in addition to future changes in the underlying market rates for LIBOR and the rate used for base-rate borrowings.

As of December 31, 2021, we had outstanding debt obligations, including the current portion and net of unamortized debt discount of $610.3 million, compared to $377.3 million at December 31, 2020, resulting in an increase of $233.0 million.

As of December 31, 2022, the Company had outstanding debt obligations, including the current portion and net of unamortized debt discount of $605.1 million, compared to $610.3 million at December 31, 2021, resulting in a decrease of $5.2 million.

The debt balance at December 31, 2022 consisted of $610.7 million outstanding under the term facility and $12.5 million outstanding under the revolving credit facility, offset by $18.1 million of unamortized debt discounts and issuance costs.

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The Credit Agreement contains representations and warranties, financial and collateral requirements, mandatory payment events, events of default and affirmative and negative covenants, including without limitation, covenants that restrict among other things, the ability to create liens, pay dividends or distribute assets from the loan parties to the Company, merge or consolidate, dispose of assets, incur additional indebtedness, make certain investments or acquisitions, enter into certain transactions (including with affiliates) and to enter into certain leases.

If the aggregate principal amount of outstanding revolving loans and letters of credit under the Credit Agreement exceeds 35% of the total revolving facility thereunder, the loan parties are required to comply with certain restrictions on its Total Net Leverage Ratio, which is defined in the Credit Agreement as the ratio of consolidated total debt to the Consolidated Adjusted EBITDA (as defined in the Credit Agreement).

If the aggregate principal amount of outstanding revolving loans and letters of credit under the Credit Agreement exceeds 35% of the total revolving facility thereunder, the loan parties are required to comply with certain restrictions on its Total Net Leverage Ratio, which is defined in the Credit Agreement as the ratio of consolidated total debt less unrestricted cash to consolidated adjusted EBITDA (as defined in the Credit Agreement).

If applicable, the maximum permitted Total Net Leverage Ratio is:

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2) 6.00:1.00 at each fiscal quarter ended September 30, 2022 through June 30, 2023;

and 3) 5.50:1.00 at each fiscal quarter ended September 30, 2023 each fiscal quarter thereafter.

As of December 31, 2021, the Company was in compliance with our financial covenants.

Critical Accounting Policies and Estimates

Our accounting policies are more fully described in Note 1, Nature of Business and Accounting Policies .

and 3) 5.50:1.00 at each fiscal quarter ended September 30, 2023 and thereafter.

As of December 31, 2022, the Company was in compliance with the covenants in the Credit Agreement and the Total Net Leverage Ratio was not applicable.

Critical Accounting Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes.

Actual results could differ significantly from those estimates.

We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require management's most difficult, subjective, and complex judgments.

We believe that the following discussion addresses our most critical accounting estimates, which are those that are most important to the portrayal of our financial condition and results of operations and require management's most difficult, subjective, and complex judgments.

We account for income taxes under the asset and liability method.

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Only after a tax position passes the first step of recognition will measurement be required.

Under the measurement step, the tax benefit is measured as the largest amount of

benefit that is more likely than not to be realized upon effective settlement.

Under the measurement step, the tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon effective settlement.

This is determined on a cumulative probability basis.

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Goodwill and Long-lived Assets

We test goodwill for impairment for each of our reporting units on an annual basis on annual assessment date of October 1 or when events occur, or circumstances indicate the fair value of a reporting unit may be below its carrying value.

We may perform a quantitative assessment that uses market data and discounted cash flow analysis, which involve estimates of future revenues and operating cash flows.

Where deemed appropriate, we may perform the annual assessment using the optional qualitative method.

By using the October 1 annual assessment date, we believe that we will be able to utilize more readily available data from both internal and external sources and have additional time to evaluate the data prior to finalizing our year-end Consolidated Financial Statements and disclosures.

This annual impairment assessment for goodwill does not change our requirements to assess goodwill on an interim date between scheduled annual testing dates if triggering events are present.

We test goodwill for impairment for each of our reporting units on an annual basis on October 1 or when events occur, or circumstances indicate the fair value of a reporting unit may be below its carrying value.

We perform the annual assessment using the qualitative method.

Where deemed appropriate, we may perform a quantitative assessment that uses market data and discounted cash flow analysis, which involve estimates of future revenues and operating cash flows.

Changes in these estimates and assumptions or a significant decrease in earnings, could materially affect the fair value of goodwill and could result in a goodwill impairment charge.

The annual impairment assessment for goodwill does not change our requirements to assess goodwill on an interim date between scheduled annual testing dates if triggering events are present.

We review our long-lived assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis