What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-09 compared with 2023-08-10 · 95 added, 87 removed, 162 unchanged (53% of the section changed)

37 unchanged sentences

Results of Operations

This section includes certain components of our results of operations for the three and six months ended June 30, 2023, compared to the three and six months ended June 30, 2022.

This section includes certain components of our results of operations for the three and nine months ended September 30, 2023, compared to the three and nine months ended September 30, 2022.

We have derived this data, except the key indicators, from our Unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q and our Audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022.

For the three months ended June 30, 2023, our consolidated revenue of $182.3 million increased by $15.9 million, or 9.6%, from $166.4 million for the three months ended June 30, 2022.

This overall increase was mainly driven by increases in merchant card fee rates, offset by merchant bankcard volume decreases in our SMB Payments segment, an increase in new enrollments and higher interest income in our Enterprise Payments segment.

These increases were partially offset by a decrease in revenue in B2B Payments segment due to wind down of certain managed services programs.

For the six months ended June 30, 2023, our consolidated revenue of $367.3 million increased by $47.6 million, or 14.9%, from $319.7 million for the six months ended June 30, 2022.

The overall increase was driven by increases in merchant card fee rates, increased merchant bankcard volume, offset by a decrease in certain fee based revenue in our SMB Payments segment and an increase in new enrollments and higher interest income in our Enterprise Payments segment.

For the three months ended September 30, 2023, our consolidated revenue of $189.0 million increased by $22.6 million, or 13.6%, from $166.4 million for the three months ended September 30, 2022.

This overall increase was mainly driven by an increase in new enrollments and higher interest income in our Enterprise Payments segment and revenue from the Plastiq business acquired during the quarter in our B2B Payments segment.

For the nine months ended September 30, 2023, our consolidated revenue of $556.3 million increased by $70.2 million, or 14.4%, from $486.1 million for the nine months ended September 30, 2022.

The overall increase was driven by increases in merchant card fee rates, offset by a decrease in certain fee based revenue in our SMB Payments segment, an increase in new enrollments and higher interest income in our Enterprise Payments segment and revenue from the Plastiq business acquired during the quarter in our B2B Payments segment.

These increases were partially offset by a decrease in revenue in B2B Payments segment due to wind down of certain managed services programs.

The following table presents our revenues by type for the three and six months ended June 30, 2023 and 2022:

(in thousands) Three Months Ended June 30, Six Months Ended June 30,

The following table presents our revenues by type:

(in thousands) Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 $ Change 2023 2022 $ Change

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Merchant card fees

Merchant card fees revenue for the three months ended June 30, 2023 was $144.5 million an increase of $4.7 million, or 3.4%, from $139.8 million for the three months ended June 30, 2022.

This increase was primarily driven by an increase in the transaction count processed by the Company and rate increases, offset by merchant bankcard dollar volume decreases with certain partners.

Merchant card fees revenue for the six months ended June 30, 2023 was $294.2 million an increase of $26.5 million, or 9.9%, from $267.7 million for the six months ended June 30, 2022.

This increase was primarily driven by an increase in the merchant bankcard volume processed by the Company and rate increases.

Merchant card fees revenue for the three months ended September 30, 2023 was $147.0 million an increase of $9.3 million, or 6.8%, from $137.7 million for the three months ended September 30, 2022.

This increase was primarily driven by revenue from the Plastiq business that was acquired during the quarter and rate increases.

These increases were partially offset by a decrease in volume due to diversification of merchant portfolio by one of our referral partners.

Merchant card fees revenue for the nine months ended September 30, 2023 was $441.1 million an increase of $35.7 million, or 8.8%, from $405.4 million for the nine months ended September 30, 2022.

This increase was primarily driven by the Plastiq business that was acquired in the quarter ended September 30, 2023 and rate increases.

These increases were partially offset by a decrease in volume due to diversification of merchant portfolio by one of our referral partners.

Money transmission services

Money transmission services for the three months ended June 30, 2023 was $23.7 million an increase of $6.5 million, or 37.8%, from $17.2 million for the three months ended June 30, 2022.

Money transmission services for the three months ended September 30, 2023 was $25.8 million an increase of $7.5 million, or 41.0%, from $18.3 million for the three months ended September 30, 2022.

This increase was primarily driven by an increase in customer enrollments.

Money transmission services for the six months ended June 30, 2023 was $45.1 million an increase of $11.6 million, or 34.6%, from $33.5 million for the six months ended June 30, 2022.

Money transmission services for the nine months ended September 30, 2023 was $71.0 million an increase of $19.2 million, or 37.1%, from $51.8 million for the nine months ended September 30, 2022.

This increase was primarily driven by an increase in customer enrollments.

Outsourced services and other services revenue

Outsourced services and other services revenue of $10.6 million for the three months ended June 30, 2023 increased by $3.7 million, or 53.6%, from $6.9 million for the three months ended June 30, 2022, primarily due to growth in interest income due to higher interest rates and deposit balances offset by decreased managed services revenue due to wind down of certain programs.

Outsourced services and other services revenue of $21.6 million for the six months ended June 30, 2023 increased by $7.6 million, or 54.3%, from $14.0 million for the six months ended June 30, 2022, primarily due to growth in interest income due to higher interest rates and deposit balances offset by decreased managed services revenue due to wind down of certain programs.

Equipment revenue of $3.5 million for the three months ended June 30, 2023 increased by $0.9 million, or 34.6%, from $2.6 million for the three months ended June 30, 2022.

Outsourced services and other services revenue of $13.2 million for the three months ended September 30, 2023 increased by $5.3 million, or 67.1%, from $7.9 million for the three months ended September 30, 2022, primarily due to growth in interest income due to higher interest rates and deposit balances offset by decreased managed services revenue due to wind down of certain programs.

Outsourced services and other services revenue of $34.8 million for the nine months ended September 30, 2023 increased by $12.9 million, or 58.9%, from $21.9 million for the nine months ended September 30, 2022, primarily due to growth in interest income due to higher interest rates and deposit balances offset by decreased managed services revenue due to wind down of certain programs.

Equipment revenue of $3.0 million for the three months ended September 30, 2023 increased by $0.5 million, or 20.0%, from $2.5 million for the three months ended September 30, 2022.

The increase was primarily due to increased sales of point of sale equipment.

Equipment revenue of $6.4 million for the six months ended June 30, 2023 increased by $1.9 million, or 42.2%, from $4.5 million for the six months ended June 30, 2022.

Equipment revenue of $9.5 million for the nine months ended September 30, 2023 increased by $2.5 million, or 35.7%, from $7.0 million for the nine months ended September 30, 2022.

The increase was primarily due to increased sales of point of sale equipment.

Operating expenses for three and six months ended June 30, 2023 and 2022 were as follows:

(in thousands) Three Months Ended June 30, Six Months Ended June 30,

Operating expenses were as follows:

(in thousands) Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 $ Change 2023 2022 $ Change

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Cost of services (excludes depreciation and amortization)

Cost of services (excludes depreciation and amortization) of $115.3 million for the three months ended June 30, 2023 increased by $4.6 million, or 4.2%, from $110.7 million for the three months ended June 30, 2022, primarily due to corresponding increase in revenues.

Cost of services (excludes depreciation and amortization) of $237.2 million for the six months ended June 30, 2023, increased by $25.0 million, or 11.8%, from $212.2 million for the six months ended June 30, 2022, primarily due to the corresponding increase in revenues.

Cost of services (excludes depreciation and amortization) of $116.7 million for the three months ended September 30, 2023 increased by $8.7 million, or 8.1%, from $108.0 million for the three months ended September 30, 2022, primarily due to corresponding increase in revenues.

Cost of services (excludes depreciation and amortization) of $353.9 million for the nine months ended September 30, 2023, increased by $33.7 million, or 10.5%, from $320.2 million for the nine months ended September 30, 2022, primarily due to the corresponding increase in revenues.

Salary and employee benefits

Salary and employee benefits expense of $19.1 million for the three months ended June 30, 2023 increased by $3.3 million, or 20.9%, from $15.8 million for the three months ended June 30, 2022, primarily due to merit increases, an increase in stock-based compensation and increased headcount to support overall growth of the Company.

Salary and employee benefits expense of $38.2 million for the six months ended June 30, 2023 increased by $6.4 million, or 20.1%, from $31.8 million for the six months ended June 30, 2022, primarily due to merit increases, an increase in stock-based compensation and increased headcount to support overall growth of the Company.

Salary and employee benefits expense of $20.1 million for the three months ended September 30, 2023 increased by $3.7 million, or 22.6%, from $16.4 million for the three months ended September 30, 2022, primarily due to merit increases, an increase in stock-based compensation and increased headcount from the acquisition of the Plastiq business and to support overall growth of the Company.

Salary and employee benefits expense of $58.3 million for the nine months ended September 30, 2023 increased by $10.1 million, or 21.0%, from $48.2 million for the nine months ended September 30, 2022, primarily due to merit increases, an increase in stock-based compensation and increased headcount from the acquisition of the Plastiq business and to support overall growth of the Company.

Depreciation and amortization expense

Depreciation and amortization expense of $18.0 million for the three months ended June 30, 2023 increased by $0.5 million, or 2.9%, from $17.5 million for the three months ended June 30, 2022, primarily due to the depreciation of new assets placed in service.

Depreciation and amortization expense of $36.0 million for the six months ended June 30, 2023 increased by $1.1 million, or 3.2%, from $34.9 million for the six months ended June 30, 2022, primarily due to the depreciation of new assets placed in service.

Depreciation and amortization expense of $17.3 million for the three months ended September 30, 2023 decreased by $0.5 million, or 2.8%, from $17.8 million for the three months ended September 30, 2022, primarily due to full amortization of certain intangible assets, partially offset by the depreciation of new assets placed in service.

Depreciation and amortization expense of $53.3 million for the nine months ended September 30, 2023 increased by $0.6 million, or 1.1%, from $52.7 million for the nine months ended September 30, 2022, primarily due to the depreciation of new assets placed in service, partially offset by full amortization of certain intangible assets.

Selling, general and administrative

Selling, general and administrative expenses of $10.8 million for the three months ended June 30, 2023 increased by $1.5 million, or 16.1%, from $9.3 million for the three months ended June 30, 2022, primarily due to certain nonrecurring expenses related to an upcoming business combination and other expenses to support overall growth of the Company.

Selling, general and administrative expenses of $19.9 million for the six months ended June 30, 2023 increased by $3.1 million, or 18.5%, from $16.8 million for the six months ended June 30, 2022, primarily due to certain nonrecurring expenses related to an upcoming business combination and other expenses to support overall growth of the Company.

Selling, general and administrative expenses of $11.4 million for the three months ended September 30, 2023 increased by $1.2 million, or 11.8%, from $10.2 million for the three months ended September 30, 2022, primarily due to certain nonrecurring expenses related to the acquisition of the Plastiq business and other expenses to support overall growth of the Company.

Selling, general and administrative expenses of $31.3 million for the nine months ended September 30, 2023 increased by $4.3 million, or 15.9%, from $27.0 million for the nine months ended September 30, 2022, primarily due to certain nonrecurring expenses related to the acquisition of the Plastiq business and other expenses to support overall growth of the Company.

Other Expense, net

Other expenses, net for three and six months ended June 30, 2023 and 2022 were as follows:

(in thousands) Three Months Ended June 30, Six Months Ended June 30,

Other expenses, net were as follows:

(in thousands) Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 $ Change 2023 2022 $ Change

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Interest expense

Interest expense of $17.8 million for the three months ended June 30, 2023 increased by $5.5 million, or 44.7%, from $12.3 million for the three months ended June 30, 2022, due to increased interest rates in the three months ended June 30, 2023.

Interest expense of $35.5 million for the six months ended June 30, 2023 increased by $11.6 million, or 48.5%, from $23.9 million for the six months ended June 30, 2022, due to increased interest rates in the six months ended June 30, 2023.

Interest expense of $20.0 million for the three months ended September 30, 2023 increased by $6.6 million, or 49.3%, from $13.4 million for the three months ended September 30, 2022, due to increased interest rates and increased outstanding balance in the revolving credit facility used for the acquisition of the Plastiq business in the three months ended September 30, 2023.

Interest expense of $55.5 million for the nine months ended September 30, 2023 increased by $18.2 million, or 48.8%, from $37.3 million for the nine months ended September 30, 2022, due to increased interest rates and increased outstanding balance in the revolving credit facility used for the acquisition of the Plastiq business in the nine months ended September 30, 2023.

Income tax (benefit) expense

Income tax benefit for three and six months ended June 30, 2023 and 2022 was as follows:

(in thousands) Three Months Ended June 30, Six Months Ended June 30,

Income tax expense was as follows:

(in thousands) Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 $ Change 2023 2022 $ Change

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We compute our interim period income tax expense or benefit by using a forecasted EAETR and adjust for any discrete items arising during the interim period and any changes in our projected full-year business interest expense and taxable income.

EAETR for 2023 is 174.5% and includes the income tax provision on pre-tax income and a tax provision related to establishment of a valuation allowance for deferred income tax on the future portion of the Section 163(j) limitation created by additional 2023 interest expense.

The EAETR for 2023 is 117.6% and includes the income tax provision on pre-tax income and a tax provision related to establishment of a valuation allowance for deferred income tax on the future portion of the Section 163(j) limitation created by additional 2023 interest expense.

The effective tax rate for 2023 changed primarily due to an increase in the valuation allowance against certain business interest carryover deferred tax assets.

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Segment Results

(in thousands) Three Months Ended June 30, Six Months Ended June 30,

(in thousands) Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 $ Change 2023 2022 $ Change

7 unchanged sentences

Merchant bankcard transaction count 178,721 165,796 12,925 522,470 476,084 46,386

Revenue from our SMB Payments segment was $147.9 million for the three months ended June 30, 2023, compared to $142.5 million for the three months ended June 30, 2022.

The increase of $5.4 million, or 3.8%, was primarily driven by increases in transaction count and merchant card fee rate increases, offset by merchant bankcard volume decreases and a true up of an invoice from one of the partner banks for certain services provided in Q1 2022.

The Company's revenue from the SMB Payments segment as a percentage of merchant bankcard processing dollar value during 2023 increased to 0.98% from 0.93% during 2022.

Revenue from our SMB Payments segment of $140.1 million for the three months ended September 30, 2023, remained consistent to $139.9 million for the three months ended September 30, 2022.

The Company experienced a decline in its processed merchant bankcard volume due to diversification of merchant portfolio by one of its referral partners.

The decrease in revenue due to decline in volume was partially offset by increased transaction count and merchant card fee rate increases.

The Company's revenue from the SMB Payments segment as a percentage of merchant bankcard processing dollar value during

2023 increased to 0.98% from 0.93% during 2022.

The increase was primarily driven by a rate increase and changes in the merchant mix.

Revenue from our SMB Payments segment was $302.8 million for the six months ended June 30, 2023, compared to $272.5 million for the six months ended June 30, 2022.

The increase of $30.3 million, or 11.1%, was primarily driven by increased merchant bankcard volume, increased transaction count, merchant card fee rate increases and accrual of certain incentives, offset by a decrease in certain fee-based revenue and a true up of an invoice from one of the partner banks for certain services provided in Q1 2022.

Revenue from our SMB Payments segment was $442.9 million for the nine months ended September 30, 2023, compared to $412.4 million for the nine months ended September 30, 2022.

The increase of $30.5 million, or 7.4%, was primarily driven by increased transaction count, merchant card fee rate increases and accrual of certain incentives, offset by a decrease in certain fee-based revenue, a true up of an invoice from one of the partner banks for certain services provided in Q1 2022 and a decline in processed merchant bankcard volume due to diversification of merchant portfolio by one of its referral partners.

The Company's revenue from the SMB Payments segment as a percentage of merchant bankcard processing dollar value during 2023 increased to 1.0% from 0.92% during 2022.

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Operating Income

Operating income from our SMB Payments segment was $11.5 million for the three months ended June 30, 2023, compared to $14.0 million for the three months ended June 30, 2022.

The decrease of $2.5 million, or 17.9%, was primarily driven by mix related margin compression, a $1.7 million increase in salary and employee benefits due to higher headcount, higher stock-based compensation and annual pay raises, and a $0.6 million increase in selling, general and administrative expenses driven by higher software and travel and other operating costs.

Operating income from our SMB Payments segment was $11.8 million for the three months ended September 30, 2023, compared to $13.4 million for the three months ended September 30, 2022.

The decrease of $1.6 million, or 11.9%, was primarily driven by the timing of certain billing adjustments in the three months ended September 30, 2022, the mix related margin compression, a $1.3 million increase in salary and employee benefits due to higher headcount, higher stock-based compensation and annual pay raises, and a $0.3 million increase in selling, general and administrative expenses driven by higher software and travel and other operating costs.

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

Operating income from our SMB Payments segment was $23.6 million for the six months ended June 30, 2023, compared to $26.5 million for the six months ended June 30, 2022.

The decrease of $2.9 million, or 10.9%, was primarily driven by mix related margin compression, a $3.7 million increase in salary and employee benefits due to higher headcount, higher stock-based compensation and annual pay raises, and a $1.6 million increase in selling, general and administrative expenses driven by higher software and travel and other operating costs.

Operating income from our SMB Payments segment was $35.4 million for the nine months ended September 30, 2023, compared to $39.9 million for the nine months ended September 30, 2022.

The decrease of $4.5 million, or 11.3%, was primarily driven by the timing of certain billing adjustments in the three months ended September 30, 2022, the mix related margin compression, a $4.9 million increase in salary and employee benefits due to higher headcount, higher stock-based compensation and annual pay raises, and a $2.2 million increase in selling, general and administrative expenses driven by higher software and travel and other operating costs.

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

Depreciation and Amortization

Depreciation and amortization expense of our SMB Payments segment was $10.8 million for the three months ended June 30, 2023, which is consistent with $11.0 million for the three months ended June 30, 2022.

Depreciation and amortization expense of our SMB Payments segment was $21.6 million for the six months ended June 30, 2023, which is consistent with $21.8 million for the six months ended June 30, 2022.

(in thousands) Three Months Ended June 30, Six Months Ended June 30,

Depreciation and amortization expense of our SMB Payments segment was $9.9 million for the three months ended September 30, 2023, compared to $11.0 million for the three months ended September 30, 2022.

The decrease of $1.1 million is due to full amortization of certain intangible assets.

Depreciation and amortization expense of our SMB Payments segment was $31.5 million for the nine months ended September 30, 2023, compared to $32.8 million for the nine months ended September 30, 2022.

The decrease of $1.3 million is due to full amortization of certain intangible assets.

(in thousands) Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 $ Change 2023 2022 $ Change

1 unchanged sentence

Operating expenses 13,670 4,651 9,019 20,295 14,799 5,496

Operating (loss) income $ (19) $ 663 $ (682) $ (868) $ 1,072 $ (1,940)

Operating income (loss) $ 78 $ 217 $ (139) $ (790) $ 1,289 $ (2,079)

Operating margin 0.6 % 4.5 % (4.1) % 8.0 %

3 unchanged sentences

B2B issuing transaction count 267 247 20 829 683 146

Revenue from our B2B Payments segment was $3.0 million for the three months ended June 30, 2023, compared to $5.3 million for the three months ended June 30, 2022.

The decrease of $2.3 million, or 43.4%, was primarily driven by a decrease in managed services business due to wind down of certain programs and recognition of certain revenues during 2022 related to a contract termination.

Revenue from our B2B Payments segment was $5.8 million for the six months ended June 30, 2023, compared to $11.2 million for the six months ended June 30, 2022.

The decrease of $5.4 million, or 48.2%, was primarily driven by a decrease in managed services business due to wind down of certain programs and recognition of certain revenues during 2022 related to a contract termination.

This decrease was partially offset by certain nonrecurring items.

Revenue from our B2B Payments segment was $13.7 million for the three months ended September 30, 2023, compared to $4.9 million for the three months ended September 30, 2022.

The increase of $8.8 million, or 179.6%, was primarily driven by revenue from the Plastiq business that was acquired during the quarter.

Revenue from our B2B Payments segment was $19.5 million for the nine months ended September 30, 2023, compared to $16.1 million for the nine months ended September 30, 2022.

The increase of $3.4 million, or 21.1%, was primarily driven by revenue from the Plastiq business that was acquired during the quarter, partially offset by a decrease in managed services business due to wind down of certain programs and recognition of certain revenues during 2022 related to a contract termination.

Operating Income (Loss)

Operating loss from our B2B Payments segment was $0.0 million for the three months ended June 30, 2023 compared to an operating income of $0.7 million for the three months ended June 30, 2022.

The decrease of $0.7 million was primarily attributable to decreases in revenue.

Operating loss from our B2B Payments segment was $0.9 million for the six months ended June 30, 2023 compared to an operating income of $1.1 million for the six months ended June 30, 2022.

The decrease of $2.0 million was primarily attributable to decreases in revenue.

Operating income from our B2B Payments segment was $0.1 million for the three months ended September 30, 2023 compared to an operating income of $0.2 million for the three months ended September 30, 2022.

The decrease of $0.1 million was primarily attributable to the Plastiq business that was acquired during the quarter and currently being stabilized.

Operating loss from our B2B Payments segment was $0.8 million for the nine months ended September 30, 2023 compared to an operating income of $1.3 million for the nine months ended September 30, 2022.

The decrease of $2.1 million was primarily attributable to decreases in revenue from managed services business business and the Plastiq business that was acquired during the quarter and currently being stabilized.

Depreciation and Amortization

Depreciation and amortization from our B2B Payments segment was $0.8 million for the three months ended September 30, 2023, compared to $0.3 million depreciation and amortization expense for the three months ended September 30, 2022.

Depreciation and amortization from our B2B Payments segment was $1.0 million for the three months ended September 30, 2023, compared to $0.4 million depreciation and amortization expense for the three months ended September 30, 2022.

Enterprise Payments

(in thousands) Three Months Ended June 30, Six Months Ended June 30,

(in thousands) Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 $ Change 2023 2022 $ Change

7 unchanged sentences

Average new enrollments 56,269 37,746 18,523 51,864 29,813 22,051

Revenue from our Enterprise Payments segment was $31.4 million for the three months ended June 30, 2023, compared to $18.6 million for the three months ended June 30, 2022.

Revenue from our Enterprise Payments segment was $35.2 million for the three months ended September 30, 2023, compared to $21.7 million for the three months ended September 30, 2022.

The increase of $13.5 million or 62.2%, was primarily driven by an increase in billed clients and customer enrollments, and growth in interest income due to higher interest rates and deposit balances.

Revenue from our Enterprise Payments segment was $58.7 million for the six months ended June 30, 2023, compared to $36.0 million for the six months ended June 30, 2022.

Revenue from our Enterprise Payments segment was $93.9 million for the nine months ended September 30, 2023, compared to $57.6 million for the nine months ended September 30, 2022.

The increase of $36.3 million or 63.0%, was primarily driven by an increase in billed clients and customer enrollments, and growth in interest income due to higher interest rates and deposit balances.

Operating Income

Operating income from our Enterprise Payments segment was $16.1 million for the three months ended June 30, 2023, compared to $5.7 million for the three months ended June 30, 2022.

Operating income from our Enterprise Payments segment was $21.3 million for the three months ended September 30, 2023, compared to $9.3 million for the three months ended September 30, 2022.

The increase of $12.0 million or 129.0%, was primarily driven by increases in revenues.

Operating income from our Enterprise Payments segment was $28.7 million for the six months ended June 30, 2023, compared to $10.2 million for the six months ended June 30, 2022.

Operating income from our Enterprise Payments segment was $50.1 million for the nine months ended September 30, 2023, compared to $19.5 million for the nine months ended September 30, 2022.

The increase of $30.6 million or 156.9%, was primarily driven by increases in revenues.

Depreciation and Amortization

Depreciation and amortization from our Enterprise Payments segment was $6.7 million for the three months ended June 30, 2023, compared to $6.2 million depreciation and amortization expense for the three months ended June 30, 2022.

The increase of $0.5 million or 8.1%, was primarily driven by the amortization of additional capitalized internal use software and acquired intangibles.

Depreciation and amortization from our Enterprise Payments segment was $13.4 million for the six months ended June 30, 2023, compared to $12.4 million depreciation and amortization expense for the six months ended June 30, 2022.

of $1.0 million or 8.1%, was primarily driven by the amortization of additional capitalized internal use software and acquired intangibles.

Depreciation and amortization from our Enterprise Payments segment was $6.2 million for the three months ended September 30, 2023, which was consistent with $6.2 million depreciation and amortization expense for the three months ended September 30, 2022.

Depreciation and amortization from our Enterprise Payments segment was $19.6 million for the nine months ended September 30, 2023, compared to $18.6 million depreciation and amortization expense for the nine months ended September 30, 2022.

The increase of $1.0 million or 5.4%, was primarily driven by the amortization of additional capitalized internal use software.

Critical Accounting Policies and Estimates

Our Unaudited Consolidated Financial Statements have been prepared in accordance with GAAP for interim periods, which often require the judgment of management in the selection and application of certain accounting principles and methods.

Our critical accounting policies and estimates are discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022.

There have been no material changes to these critical accounting policies and estimates as of June 30, 2023.

Our critical accounting policies and estimates are discussed in "Management's Discussion and Analysis of Financial Condition and

Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022.

There have been no material changes to these critical accounting policies and estimates as of September 30, 2023.

Liquidity and Capital Resources

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Under the terms of this plan, the Company may purchase shares through open market purchases, unsolicited or solicited privately negotiated transactions, or in another manner so long as it complies with applicable rules and regulations.

The Company had repurchased shares of $5.7 million during the year ended December 31, 2022 and has not repurchased any shares under the share repurchase program for the six months ended June 30, 2023.

The Company had repurchased shares of $5.7 million during the year ended December 31, 2022.

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

Our working capital, defined as current assets less current liabilities, was $3.4 million at June 30, 2023 and $22.5 million at June 30, 2022.

As of June 30, 2023, we had cash totaling $17.6 million compared to $18.5 million at June 30, 2022.

These cash balances do not include restricted cash of $12.4 million and $10.6 million at June 30, 2023 and June 30, 2022, 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 June 30, 2023 and June 30, 2022.

At June 30, 2023, we had availability of approximately $49.5 million under our revolving credit facility.

The following table and discussion reflect our changes in cash flows for the comparative six month periods.

Six Months Ended June 30,

Our working capital, defined as current assets less current liabilities, was $16.6 million at September 30, 2023 and $18.6 million at September 30, 2022.

As of September 30, 2023, we had cash totaling $24.6 million compared to $12.7 million at September 30, 2022.

These cash balances do not include restricted cash of $13.9 million and $11.6 million at September 30, 2023 and September 30, 2022, 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 September 30, 2023 and September 30, 2022.

At September 30, 2023, we had availability of approximately $32.0 million under our revolving credit facility.

The following table and discussion reflect our changes in cash flows for the comparative nine month periods.

Nine Months Ended September 30,

(in thousands) 2023 2022

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Cash Provided by Operating Activities

Net cash provided by operating activities was $46.9 million for the six months ended June 30, 2023 compared to $30.3 million of net cash used in operating activities for the six months ended June 30, 2022.

Net cash provided by operating activities was $72.7 million for the nine months ended September 30, 2023 compared to $50.6 million for the nine months ended September 30, 2022.

The $22.1 million increase in 2023 was primarily driven by changes in the operating assets and liabilities.

Cash Used in Investing Activities

Net cash used in investing activities was $13.1 million and $12.7 million for the six months ended June 30, 2023 and 2022, respectively.

For the six months ended June 30, 2023, net cash used in investing activities included additions to property, equipment and software of $9.9 million, acquisitions of intangible assets of $2.7 million, and $0.5 million related to the net payments received on loans to ISOs.

For the six months ended June 30, 2022, net cash used in investing activities included $4.0 million of cash used to fund acquisitions of intangible assets, $2.8 million related to the funding of new loans to ISOs and $6.0 million of cash used to acquire property, equipment and software.

Net cash used in investing activities was $51.2 million and $21.1 million for the nine months ended September 30, 2023 and 2022, respectively.

For the nine months ended September 30, 2023, net cash used in investing activities included the acquisition of business of $28.2 million, additions to property, equipment and software of $15.3 million, and, acquisitions of intangible assets of $7.9 million, which was offset by $0.2 million related to the net payments received on loans to ISOs.

For the nine months ended September 30, 2022, net cash used in investing activities included $6.5 million of cash used to fund acquisitions

of intangible assets, $3.3 million related to the funding of new loans to ISOs and $11.4 million of cash used to acquire property, equipment and software.

Cash Provided by Financing Activities

Net cash provided by financing activities was $144.1 million for the six months ended June 30, 2023, compared to $0.6 million of cash provided by financing activities for the six months ended June 30, 2022.

The net cash provided by financing activities for the six months ended June 30, 2023 included changes in the net obligations for funds held on the behalf of customers of $175.5 million and $5.0 million in borrowings under the revolving credit facility, offset by $15.5 million of cash used for the repayment of debt, $17.9 million of cash dividends paid to redeemable senior preferred stockholders, $1.0 million of cash used for shares withheld for taxes, and $2.0 million of payments of contingent consideration for business combinations.

The net cash provided by financing activities for the six months ended June 30, 2022 included $15.6 million of cash used for the repayment of debt, $7.1 million of cash dividends paid to redeemable senior preferred stockholders and $2.1 million of cash used for shares withheld for taxes and share repurchases, and $1.9 million of payments of contingent consideration for business combinations, offset by changes in the net obligations for funds held on the behalf of customers of $15.2 million and borrowings under the revolving credit facility of $12.0 million.

Net cash provided by financing activities was $157.0 million for the nine months ended September 30, 2023, compared to $8.1 million of cash used in financing activities for the nine months ended September 30, 2022.

The net cash provided by financing activities for the nine months ended September 30, 2023 included changes in the net obligations for funds held on the behalf of customers of $165.6 million and $44.0 million in borrowings under the revolving credit facility, offset by $28.2 million of cash used for the repayment of debt, $17.9 million of cash dividends paid to redeemable senior preferred stockholders, $1.0 million of cash used for shares withheld for taxes, $4.7 million of payments of contingent consideration for business combinations and $0.9 million of debt modification costs .

The net cash used in financing activities for the nine months ended September 30, 2022 included $36.7 million of cash used for the repayment of debt, $11.5 million of cash dividends paid to redeemable senior preferred stockholders and $4.7 million of cash used for shares withheld for taxes and share repurchases, and $4.0 million of payments of contingent consideration for business combinations, offset by changes in the net obligations for funds held on the behalf of customers of $25.7 million and borrowings under the revolving credit facility of $23.0 million.

Long-term Debt

As of June 30, 2023, we had outstanding debt obligations, including the current portion and net of unamortized debt discount of $596.1 million, compared to $605.1 million at December 31, 2022, resulting in a decrease of $9.0 million.

The debt balance at June 30, 2023 consisted of $607.2 million outstanding under the term facility and $5.5 million outstanding under the revolving credit facility, offset by $16.5 million of unamortized debt discounts and issuance costs.

As of September 30, 2023, we had outstanding debt obligations, including the current portion and net of unamortized debt discount of $623.0 million, compared to $605.1 million at December 31, 2022, resulting in a increase of $17.9 million.

The debt balance at September 30, 2023 consisted of $606.1 million outstanding under the term facility and $33.0 million outstanding under the revolving credit facility, offset by $16.1 million of unamortized debt discounts and issuance costs.

Minimum amortization of the term facility are equal quarterly installments in aggregate annual amounts equal to 1.0% of the original principal, with the balance paid upon maturity.

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

As of June 30, 2023, the Total Net Leverage Ratio was not applicable and the Company was in compliance with the covenants in the Credit Agreement.

As of September 30, 2023, the Company was in compliance with the covenants in the Credit Agreement.

Effect of New Accounting Pronouncements and Recently Issued Accounting Pronouncements Not Yet Adopted

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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-Q

Item 2. Management’s Discussion and Analysis