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Item 7. Management’s Discussion and Analysis

2024-03-12 compared with 2023-03-23 · 77 added, 78 removed, 162 unchanged (49% of the section changed)

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Results of Operations

This section includes certain components of our results of operations for the years ended December 31, 2022 (or "2022"), December 31, 2021 (or "2021") and December 31, 2020 (or "2020").

We have derived this data, except key indicators for merchant bankcard processing dollar values and transaction volumes, from our audited Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

This section includes certain components of our results of operations for the years ended December 31, 2023 (or "2023"), December 31, 2022 (or "2022").

We have derived this data, except key indicators including merchant bankcard processing dollar values and transaction volumes (SMB Payments), issuing dollar volume and transaction count (B2B Payments), and average billed clients and new enrollments (Enterprise Payments), from our audited Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

For the year ended December 31, 2023, our consolidated revenue of $755.6 million increased by $92.0 million, or 13.9%, from $663.6 million for the year ended December 31, 2022.

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.

This overall increase was driven by increases in merchant card fee rates and equipment revenue, 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 dollar value due to diversification of merchant portfolio by one of the referral partners in our SMB Payments segment, an increase in new enrollments and higher interest income in our Enterprise Payments segment and an increase in revenue from the Plastiq business acquired during the year offset by a decrease in revenue in B2B Payments segment due to the wind down of certain managed services programs in Q4 2022.

Revenues by type for 2023 and 2022 were as follows:

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For the year ended December 31, 2023, our merchant card fees revenue of $595.2 million increased by $42.2 million, or 7.6%, from $553.0 million for the year ended December 31, 2022.

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

This increase was primarily driven by revenue from the Plastiq business that was acquired during the year and merchant card fee rate increases.

These increases were partially 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 dollar value due to the diversification of processor services by one of the referral partners.

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.

Money transmission services revenue of $98.1 million for the year ended December 31, 2023 increased by $26.6 million or 37.2%, from $71.5 million for the year ended December 31, 2022 and is primarily driven by an increase in customer enrollments.

Outsourced Services and Other Services

Outsourced services and other services revenue of $49.6 million for the year ended December 31, 2023 increased by $20.0 million, or 67.4%, from $29.6 million for the year ended December 31, 2022.

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.

This increase was primarily due to growth in interest income due to higher interest rates and deposit balances, and additional revenues generated by our Passport platform, offset by decreased managed services revenue due to wind down of certain programs in Q4 2022.

Equipment revenue of $12.7 million for the year ended December 31, 2023, increased by $3.3 million, or 34.2%, from $9.4 million for the year ended December 31, 2022.

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

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

Operating Expenses

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For the year ended December 31, 2023, costs of services (excluding depreciation and amortization) as a percentage of total revenues decreased to 63.6% as compared to 65.8% for the year ended December 31, 2022.

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.

This decrease was primarily due to the increase in interest and money transmission revenues which do not have significant cost of services.

Salary and employee benefits

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.

Salary and employee benefits expense of $80.0 million for the year ended December 31, 2023 increased by $14.9 million, or 22.9%, from $65.1 million for the year ended December 31, 2022, primarily due to higher wages, an increase in stock-based compensation and increased headcount from acquisitions and to support overall growth of the Company.

The Company's employee headcount increased to 983 in 2023 from 870 in 2022.

Depreciation and amortization expense

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.

Depreciation and amortization expense of $68.4 million for the year ended December 31, 2023 decreased by $2.3 million, or 3.2%, from $70.7 million for the year ended December 31, 2022, primarily due to full amortization of certain intangible assets partially offset by the depreciation of new assets placed in service.

Selling, general and administrative

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.

Selling, general and administrative expenses of $45.4 million for the year ended December 31, 2023 increased by $10.4 million, or 29.9%, from $35.0 million for the year ended December 31, 2022, primarily due to certain nonrecurring expenses and other expenses to support overall growth of the Company.

Nonrecurring expenses for the year primarily include PayRight restructuring costs of $3.5 million, expenses related to the acquisition of the Plastiq business of $1.7 million and certain legal and other costs of $3.0 million.

Other (Expenses) Income, net

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Interest expense $ (76,108) $ (53,554) $ (22,554)

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

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

Other income, net 1,736 589 1,147

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Interest expense

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

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 prior year.

Interest expense of $76.1 million for the year ended December 31, 2023 increased by $22.5 million, or 42.1%, from $53.6 million for the year ended December 31, 2022, due to increased interest rates and higher debt balances to fund the acquisition of Plastiq in the third fiscal quarter of 2023.

Other income, net of $1.7 million for the year ended December 31, 2023 increased by $1.1 million, or 194.7%, from $0.6 million for the year ended December 31, 2022, due to increased interest income from the Company's operating accounts.

Income tax expense

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Effective tax rate 118.3 % 167.2 %

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

The decrease in the effective tax rate from 2022 to 2023 is primarily due to a reduction in the amount of additional valuation allowance recorded 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.

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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.

government enacted the IRA 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 took effect for tax years beginning after December 31, 2022.

The IRA did not have a material effect on our reported results, cash flows, or financial position during 2023.

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

Earnings Attributable to Common Shareholders

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Dividends and accretion attributable to redeemable senior preferred stockholders (47,744) (36,880) (10,864)

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

Net loss attributable to common stockholders $ (49,055) $ (39,030) $ (10,025)

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.

Dividends and accretion attributable to redeemable senior preferred stockholders was $47.7 million for the year ended December 31, 2023, and was comprised of $18.0 million of accumulated dividends accrued as part of the carrying value of the redeemable senior preferred stock, $26.4 million of cash dividends, and $3.3 million related to accretion of discounts and issuance costs.

The increase in dividends and accretion from 2022 to 2023 is due to an increase in the dividend rate for 2023 resulting from an increase in variable interest rates during the year and increase in carrying value of redeemable senior preferred stocks (as a result of accumulated accrued dividend).

Segment Results

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Revenue from our SMB Payments segment was $582.9 million for the year ended December 31, 2023, compared to $562.2 million for the year ended December 31, 2022.

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.

The increase of $20.6 million, or 3.7%, was primarily driven by merchant card fee rate increases, equipment revenue, 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 the diversification of processor services by one of its referral partners.

The Company's merchant card fee revenue from the SMB Payments segment ($563.9 million for 2023 and $549.6 million for 2022) as a percentage of merchant bankcard processing dollar value during 2023 increased to 0.95% from 0.92% during 2022.

The increase was primarily driven by an increase in incentive revenue and changes in the merchant mix.

Operating Income

Operating income from our SMB Payments segment was $46.5 million for the year ended December 31, 2023, compared to $54.9 million for the year ended December 31, 2022.

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.

The decrease of $8.4 million, or 15.3%, is due to a higher mix of volume growth from larger reseller partners with higher commissions of $3.2 million and an increase in other operating expenses.

Increase in other operating expenses include a $5.7 million increase in salary and employee benefits due to higher headcount and stock-based compensation and a $2.3 million increase in selling, general and administrative expenses driven by higher travel and other operating costs which was offset by a decrease of $2.8 million in depreciation and amortization for assets fully depreciated and amortized in the prior year.

Depreciation and Amortization

Depreciation and amortization expense of our SMB Payments segment was $41.0 million for the year ended December 31, 2023, compared to $43.9 million for the year ended December 31, 2022.

The decrease of $2.9 million or 6.6% is due to full amortization of certain intangible assets.

(in thousands) Years Ended December 31, 2023 vs 2022

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Operating expenses 43,261 18,682 24,579

Operating income $ 208 $ 135 $ 73

Operating (loss) income $ (2,535) $ 208 $ (2,743)

Operating margin (6.2) % 1.1 %

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Key Indicators:

Merchant bankcard processing dollar value $ 526,812 $ 323,502 $ 203,310

Merchant bankcard transaction volume 304 220 84

B2B issuing dollar volume $ 851,948 $ 814,964 $ 36,984

B2B issuing transaction count 1,087 933 154

Revenue from our B2B Payments segment was $40.7 million for the year ended December 31, 2023, compared to $18.9 million for the year ended December 31, 2022.

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.

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.

The increase of $21.8 million, or 115.6%, was primarily driven by an increase of $27.4 million in the Plastiq business and an increase of $1.7 million in the CPX business due to increased volumes.

This increase was offset by a decrease of $7.3 million driven by the wind down of certain customer programs in the managed services business during Q4 2022.

Operating Loss

Operating loss from our B2B Payments segment was $2.5 million for the year ended December 31, 2023, compared to operating income of $0.2 million for the year ended December 31, 2022.

This is primarily due to certain provisions for doubtful accounts in the CPX business, transaction bonuses in the Plastiq business, and loss of operating income from the managed services business.

Depreciation and Amortization

Depreciation and amortization from our B2B Payments segment was $2.2 million for the year ended December 31, 2023, compared to $0.7 million depreciation and amortization expense for the year ended December 31, 2022.

The increase in depreciation and amortization expense is primarily due to assets acquired from the acquisition of the Plastiq business in the 3rd quarter of 2023.

Enterprise Payments

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Key Indicators:

Merchant bankcard processing dollar value $ 1,760,518 $ 52,376 $ 1,708,142

Merchant bankcard transaction volume 2,779 549 2,230

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

Average billed clients $ 556,526 $ 379,725 $ 176,801

Average monthly new enrollments 51,059 32,013 19,046

Revenue from our Enterprise Payments segment was $132.0 million for the year ended December 31, 2023, compared to $82.5 million for the year ended December 31, 2022.

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.

The increase of $49.5 million, or 60.0%, was primarily driven by an increase in customer enrollments, additional revenues generated by our Passport BaaS platform, and growth in interest income due to higher deposit balances and higher returns on the permissible investments related to our money transmission licenses.

Operating Income

Operating income from our Enterprise Payments segment was $74.0 million for the year ended December 31, 2023, compared to $30.9 million for the year ended December 31, 2022.

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.

The increase of $43.1 million, or 139.1%, was primarily driven by the increase in revenue.

Depreciation and Amortization

Depreciation and amortization expense from our Enterprise Payments segment was $23.8 million for the year ended December 31, 2023, compared to $24.9 million for the year ended December 31, 2022.

The increase of $17.7 million, or 245.8%, was primarily driven by the amortization of intangibles resulting from the Finxera acquisition in September 2021.

The decrease of $1.1 million, or 4.6%, was primarily driven by full amortization of certain intangible assets in the prior year offset by depreciation expense on assets placed in service during the year.

Liquidity and Capital Resources

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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.

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.

This is based upon management's estimates and assumptions regarding effects of micro and macro factors impacting the economic environment in which the Company operates 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.

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As of December 31, 2023, we had cash and cash equivalents with a balance of $39.6 million compared to $18.5 million at December 31, 2022.

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.

These cash and cash equivalent balances do not include restricted cash of $11.9 million and $10.6 million at December 31, 2023 and December 31, 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 $6.7 million and $6.2 million at December 31, 2023 and 2022, respectively.

At December 31, 2023, we had availability of approximately $65.0 million under our revolving credit arrangement.

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Net cash provided by operating activities was $81.3 million and $70.5 million for the years ended December 31, 2023 and December 31, 2022, respectively.

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.

The $10.8 million, or 15.2% increase in 2023 was driven by changes in the operating assets and liabilities.

Cash Used in Investing Activities

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Additions to property, equipment and software was $21.3 million for 2023 compared to $18.9 million in 2022 and acquisitions of intangible assets was $6.6 million compared to $8.0 million in 2022.

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.

Net payments received of $0.4 million on loans to ISOs for the year ended December 31, 2023, compared to $4.7 million related to the funding of new loans to ISOs in 2022.

Cash Provided by Financing Activities

Net cash provided by financing activities was $210.1 million for the year ended December 31, 2023, compared to $8.5 million for the year ended December 31, 2022.

The net cash provided by for 2023 included changes in the net obligations for funds held on the behalf of customers of $211.1 million, $49.8 million related to proceeds from the increase of the Term Facility and $44.0 million related to additional borrowings under the revolving credit facility.

This was offset by $56.5 million of cash used for the repayment of borrowings under the revolving credit facility, $6.3 million of cash used for the repayment of the Term Facility, $24.7 million of cash dividends paid to redeemable senior preferred stockholders, $1.3 million of cash used for shares withheld for taxes, $4.7 million of payments of contingent consideration for business combinations and $1.2 million for debt issuance and modification costs paid related to the modification of the Term Facility and the revolving credit facility.

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

These cash inflows were offset by cash used for the repayment of debt of $38.2 million, cash used for the repurchase of Common Stock of $7.5 million, dividends paid to redeemable senior preferred stockholders of $11.5 million and $7.0 million of payments of contingent consideration for business combinations.

Long-Term Debt

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

Outstanding borrowings under the Credit Agreement accrue interest using either a base rate or a LIBOR rate plus an applicable margin per year, subject to a LIBOR rate floor of 1.00% per year.

Accrued interest is payable on each interest payment date (as defined in the Credit Agreement).

The revolving credit facility incurs an unused commitment fee on any undrawn amount in an amount equal to 0.50% per year of the unused portion.

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, 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.

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

For the year ended December 31, 2023, we had outstanding debt obligations, including the current portion and net of unamortized debt discount of $638.7 million, compared to $605.1 million for the year ended December 31, 2022, resulting in an increase of $33.6 million.

The debt balance for the year ended December 31, 2023 consisted of funds outstanding under the term facility, offset by $15.7 million of unamortized debt discounts and issuance costs.

There were no funds outstanding under the revolving credit facility as of December 31, 2023.

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.

The term facility matures in April 2027 and the revolving credit facility expires in April 2026.

On June 30, 2023, the Credit Agreement of the Company was amended to incorporate the following:

• Reference rate :

The reference rate for the calculation of interest on the Company’s term loan and revolving credit facility was amended from LIBOR to SOFR effective June 30, 2023.

Per the amended terms, the outstanding borrowings under the Credit Agreement interest will accrue using the SOFR rate plus a term SOFR adjustment plus an applicable margin per year, subject to a SOFR floor of 1.00% per year.

The applicable interest rate as of December 31, 2023, for the revolving credit facility based on one-month SOFR was 10.20% and for the term facility based on one-month SOFR was 11.21%.

• Increase in the revolving credit facility:

The amendments also resulted in an increase in the Company’s revolving credit facility from $40.0 million to $65.0 million.

On October 2, 2023, the Company modified its existing Term Facility Credit agreement with Truist.

The agreement increased the principal balance by $50.0 million and increased the quarterly principal amortization payment from $1.6 million to $1.7 million.

There were no other significant modifications to the Credit Agreement.

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.

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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 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.

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

As of December 31, 2023, the Company was in compliance with the covenants in the Credit Agreement.

Critical Accounting Estimates

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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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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