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Item 2. Management’s Discussion and Analysis

2024-11-07 compared with 2024-08-08 · 85 added, 86 removed, 183 unchanged (48% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Audited Consolidated Financial Statements and related Notes and the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

Analysis of Financial Condition and Results of Operations," included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

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

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We cannot assure you that future developments affecting us will be those that we have anticipated.

These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions, including the risk factors set forth in the " Item 1A - Risk Factors " section of this Quarterly Report on Form 10-Q or our Annual Report on Form 10-K, that may cause our actual results or performance to

be materially different from those expressed or implied by these forward-looking statements.

Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.

10 unchanged sentences

Results of Operations

This section includes certain components of our results of operations for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023.

This section includes certain components of our results of operations for the three and nine months ended September 30, 2024, compared to the three and nine months ended September 30, 2023.

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, 2023.

For the three months ended June 30, 2024, our consolidated revenue of $219.9 million increased by $37.6 million, or 20.6%, from $182.3 million for the three months ended June 30, 2023.

This overall increase was mainly driven by increase in merchant bankcard volume in our SMB Payments segment, an increase in new enrollments and higher interest income in our Enterprise Payments segment, and acquisition of the Plastiq business during Q3 2023 in our B2B Payments Segment.

For the six months ended June 30, 2024, our consolidated revenue of $425.6 million increased by $58.3 million, or 15.9%, from $367.3 million for the six months ended June 30, 2023.

For the three months ended September 30, 2024, our consolidated revenue of $227.0 million increased by $38.0 million, or 20.1%, from $189.0 million for the three months ended September 30, 2023.

This overall increase was mainly driven by increase in merchant bankcard volume in our SMB Payments segment, an increase in new enrollments and higher interest income in our Enterprise Payments segment and, an increase in issuing volume and acquisition of the Plastiq business on July 31, 2023, in our B2B Payments Segment.

For the nine months ended September 30, 2024, our consolidated revenue of $652.6 million increased by $96.3 million, or 17.3%, from $556.3 million for the nine months ended September 30, 2023.

This overall increase was mainly driven by increase in merchant bankcard volume in our SMB Payments segment, an increase in new enrollments and higher interest income in our Enterprise Payments segment and, an increase in issuing volume and acquisition of the Plastiq business on July 31, 2023 in our B2B Payments Segment.

The following table presents our revenues by type:

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

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

2024 2023 $ Change 2024 2023 $ Change

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Merchant card fees

Merchant card fees revenue for the three months ended June 30, 2024 was $169.2 million, an increase of $24.7 million, or 17.1%, from $144.5 million for the three months ended June 30, 2023.

This increase was primarily driven by an increase in the transaction count processed by the Company, rate increases, and the acquisition of the Plastiq business during Q3 2023.

Merchant card fees revenue for the six months ended June 30, 2024 was $327.2 million an increase of $33.0 million or 11.2%, from $294.2 million for the six months ended June 30, 2023.

The increase was primarily driven by an increase in the transaction count processed by the Company, rate increases, and the acquisition of the Plastiq business during Q3 2023.

Merchant card fees revenue for the three months ended September 30, 2024 was $171.8 million, an increase of $24.8 million, or 16.9%, from $147.0 million for the three months ended September 30, 2023.

This increase was primarily driven by an increase in merchant bankcard volume and the transaction count processed by the Company, rate increases, and the acquisition of the Plastiq business on July 31, 2023.

Merchant card fees revenue for the nine months ended September 30, 2024 was $499.0 million an increase of $57.9 million or 13.1%, from $441.1 million for the nine months ended September 30, 2023.

The increase was primarily driven by an increase in merchant bankcard volume and the transaction count processed by the Company, rate increases, and the acquisition of the Plastiq business on July 31, 2023.

Money transmission services

Money transmission services for the three months ended June 30, 2024 was $31.3 million, an increase of $7.6 million, or 32.1%, from $23.7 million for the three months ended June 30, 2023.

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

Money transmission services for the six months ended June 30, 2024 was $60.5 million, an increase of $15.4 million, or 34.0%, from $45.1 million for the six months ended June 30, 2023.

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

Money transmission services for the three months ended September 30, 2024 was $33.9 million, an increase of $8.0 million, or 31.1%, from $25.8 million for the three months ended September 30, 2023.

This increase was primarily driven by an increase in new customer enrollments and average billed clients.

Money transmission services for the nine months ended September 30, 2024 was $94.4 million, an increase of $23.4 million, or 33.0%, from $71.0 million for the nine months ended September 30, 2023.

This increase was primarily driven by an increase in new customer enrollments and average billed clients.

Outsourced services and other services revenue

Outsourced services and other services revenue of $16.3 million for the three months ended June 30, 2024 increased by $5.7 million, or 53.6%, from $10.6 million for the three months ended June 30, 2023, primarily due to growth in interest income due to higher interest rates and deposit balances.

Outsourced services and other services revenue of $31.9 million for the six months ended June 30, 2024 increased by $10.3 million, or 47.9%, from $21.6 million for the six months ended June 30, 2023, primarily due to growth in interest income due to higher interest rates and deposit balances.

Equipment revenue of $3.0 million for the three months ended June 30, 2024 decreased by $0.4 million, or 12.7%, from $3.5 million for the three months ended June 30, 2023.

The decrease was primarily due to decreased sales of point-of-sale equipment.

Equipment revenue of $6.0 million for the six months ended June 30, 2024 decreased by $0.5 million, or 7.0% from $6.4 million for the six months ended June 30, 2023.

The decrease was primarily due to decreased sales of point-of-sale equipment.

Outsourced services and other services revenue of $18.1 million for the three months ended September 30, 2024 increased by $4.9 million, or 37.0%, from $13.2 million for the three months ended September 30, 2023, primarily due to growth in interest income due to higher balances of permissible investments.

Outsourced services and other services revenue of $50.0 million for the nine months ended September 30, 2024 increased by $15.2 million, or 43.8%, from $34.8 million for the nine months ended September 30, 2023, primarily due to growth in interest income due to higher balances of permissible investments.

Equipment revenue of $3.3 million for the three months ended September 30, 2024 increased by $0.3 million, or 9.1%, from $3.0 million for the three months ended September 30, 2023.

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

Equipment revenue of $9.3 million for the nine months ended September 30, 2024 decreased by $0.2 million, or 1.9% from $9.5 million for the nine months ended September 30, 2023.

The decrease was primarily due to decreased sales of point-of-sale equipment during the first half of the year.

Operating expenses were as follows:

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

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

2024 2023 $ Change 2024 2023 $ Change

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Cost of revenue (excludes depreciation and amortization)

Cost of revenue (excludes depreciation and amortization) of $138.1 million for the three months ended June 30, 2024 increased by $22.8 million, or 19.8%, from $115.3 million for the three months ended June 30, 2023, primarily due to corresponding increase in revenues.

Cost of revenue (excludes depreciation and amortization) of $267.4 million for the six months ended June 30, 2024 increased by $30.2 million, or 12.7%, from $237.2 million for the six months ended June 30, 2023, primarily due to the corresponding increase in revenues.

Cost of revenue (excludes depreciation and amortization) of $141.1 million for the three months ended September 30, 2024 increased by $24.4 million, or 20.9%, from $116.7 million for the three months ended September 30, 2023, primarily due to corresponding increase in revenues.

Cost of revenue (excludes depreciation and amortization) of $408.5 million for the nine months ended September 30, 2024 increased by $54.6 million, or 15.4%, from $353.9 million for the nine months ended September 30, 2023, primarily due to the corresponding increase in revenues.

Salary and employee benefits

Salary and employee benefits expense of $22.1 million for the three months ended June 30, 2024 increased by $3.0 million, or 15.8%, from $19.1 million for the three months ended June 30, 2023, primarily due to merit increases, certain performance based non-recurring bonuses and increased headcount from the acquisition of the Plastiq business during Q3 2023.

Salary and employee benefits expense of $44.3 million for the six months ended June 30, 2024 increased by $6.1 million, or 16.0%, from $38.2 million for the six months ended June 30, 2023, primarily due to merit increases, certain performance based non-recurring bonuses and increased headcount from the acquisition of the Plastiq business during Q3 2023.

Salary and employee benefits expense of $21.7 million for the three months ended September 30, 2024 increased by $1.6 million, or 8.0%, from $20.1 million for the three months ended September 30, 2023, primarily due to merit increases and increased headcount from the acquisition of the Plastiq business on July 31, 2023.

Salary and employee benefits expense of $66.0 million for the nine months ended September 30, 2024 increased by $7.7 million, or 13.3%, from $58.3 million for the nine months ended September 30, 2023, primarily due to merit increases, certain performance based non-recurring bonuses and increased headcount from the acquisition of the Plastiq business on July 31, 2023.

Depreciation and amortization expense

Depreciation and amortization expense of $15.2 million for the three months ended June 30, 2024 decreased by $2.7 million, or 15.2%, from $18.0 million for the three months ended June 30, 2023, primarily due to full amortization of certain intangible assets during 2023.

Depreciation and amortization expense of $30.5 million for the six months ended June 30, 2024 decreased by $5.5 million, or 15.4%, from $36.0 million for the six months ended June 30, 2023, primarily due to full amortization of certain intangible assets during 2023.

Depreciation and amortization expense of $13.7 million for the three months ended September 30, 2024 decreased by $3.5 million, or 20.5%, from $17.3 million for the three months ended September 30, 2023, primarily due to full amortization of certain intangible assets.

Depreciation and amortization expense of $44.2 million for the nine months ended September 30, 2024 decreased by $9.1 million, or 17.0%, from $53.3 million for the nine months ended September 30, 2023, primarily due to full amortization of certain intangible assets.

Selling, general and administrative

Selling, general and administrative expenses of $11.2 million for the three months ended June 30, 2024 increased by $0.4 million, or 3.9%, from $10.8 million for the three months ended June 30, 2023, primarily due to certain software and maintenance expenses and other expenses to support overall growth of the Company.

Selling, general and administrative expenses of $22.2 million for the six months ended June 30, 2024 increased by $2.3 million, or 11.6%, from $19.9 million for the six months ended June 30, 2023, primarily due to certain software and maintenance expenses and other expenses to support overall growth of the Company.

Selling, general and administrative expenses of $12.4 million for the three months ended September 30, 2024 increased by $1.0 million, or 8.7%, from $11.4 million for the three months ended September 30, 2023, primarily due to increase in professional charges related to SOX compliance, increased marketing and software expenses to support overall growth of the Company, offset by decrease in certain non-recurring professional charges related to business combination.

Selling, general and administrative expenses of $34.6 million for the nine months ended September 30, 2024 increased by $3.3 million, or 10.5%, from $31.3 million for the nine months ended September 30, 2023, primarily due to increase in professional charges related to SOX compliance, increased marketing and software expenses to support overall growth of the Company, offset by decrease in certain non-recurring professional charges related to business combination and legal expenses.

Other Expense, net

Other expense, net were as follows:

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

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

2024 2023 $ Change 2024 2023 $ Change

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Interest expense

Interest expense of $21.7 million for the three months ended June 30, 2024 increased by $3.9 million, or 22.2%, from $17.8 million for the three months ended June 30, 2023, due to increased interest rates and increased outstanding balance for the term loan facility used for the acquisition of the Plastiq business and redemption of redeemable senior preferred stock, offset by a decrease in the revolving credit facility.

Interest expense of $42.6 million for the six months ended June 30, 2024 increased by $7.1 million, or 20.1%, from $35.5 million for the six months ended June 30, 2023, due to increased interest rates and increased outstanding balance for the term loan facility used for the acquisition of the Plastiq business and redemption of redeemable senior preferred stock, offset by a decrease in the revolving credit facility.

Interest expense of $23.2 million for the three months ended September 30, 2024 increased by $3.2 million, or 16.2%, from $20.0 million for the three months ended September 30, 2023, due to increased outstanding balance of the term loan facility used for the acquisition of the Plastiq business and redemption of redeemable senior preferred stock, offset by a decrease in the revolving credit facility.

Interest expense of $65.8 million for the nine months ended September 30, 2024 increased by $10.4 million, or 18.7%, from $55.5 million for the nine months ended September 30, 2023, due to increased interest rates and increased outstanding balance of the term loan facility used for the acquisition of the Plastiq business and redemption of redeemable senior preferred stock, offset by a decrease in the revolving credit facility.

Debt extinguishment and modification costs

Debt extinguishment and modification costs of $8.6 million for the three months and six months ended June 30, 2024, relates to the refinancing of the Company's credit facilities on May 16, 2024.

Debt extinguishment and modification costs of $0.04 million for the three months ended September 30, 2024 and $8.7 million for the nine months ended September 30, 2024, relates to the refinancing of the Company's credit facilities on May 16, 2024.

Income tax (benefit) expense

Income tax expense was as follows:

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

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

2024 2023 $ Change 2024 2023 $ Change

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This non-GAAP financial measure helps to illustrate the underlying financial and business trends relating to results of operations of the Company and therefore used as a measure of segment profit or loss for the purposes of evaluation of segment performance and allocation of resources.

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

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

2024 2023 Change 2024 2023 Change

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Merchant bankcard transaction count 195,786 178,721 17,065 564,855 522,470 42,385

Revenue from our SMB Payments segment was $155.1 million for the three months ended June 30, 2024, compared to $147.9 million for the three months ended June 30, 2023.

Revenue from our SMB Payments segment was $158.8 million for the three months ended September 30, 2024, compared to $140.2 million for the three months ended September 30, 2023.

The increase of $18.5 million, or 13.2%, was primarily driven by increased transaction count and processed merchant bankcard dollar value.

The Company's merchant card fee revenue from the SMB Payments segment ($150.7 million for 2024 and $143.5 million for 2023) as a percentage of merchant bankcard processing dollar value during 2024 remained consistent at 0.95%.

Revenue from our SMB Payments segment was $299.1 million for the six months ended June 30, 2024, compared to $302.9 million for the six months ended June 30, 2023.

The decrease of $3.8 million, or 1.2%, was primarily driven by a decrease in certain incentives, decrease in rates as the Company's merchant card fee revenue from the SMB Payments segment ($290.5 million for 2024 and $292.2 million for 2023) as a percentage of merchant bankcard processing dollar value during 2024 decrease to 0.95% from 0.96% during 2023, mainly due to changes in merchant and card mix, and decrease in equipment revenue.

These decreases are partially offset by additional revenue from increases in transaction count and processed merchant bankcard dollar value.

The Company's merchant card fee revenue from the SMB Payments segment ($153.1 million for 2024 and $136.3 million for 2023) as a percentage of merchant bankcard processing dollar value during 2024 increased to 0.99% from 0.96% during 2023.

Revenue from our SMB Payments segment was $457.9 million for the nine months ended September 30, 2024, compared to $443.1 million for the nine months ended September 30, 2023.

The increase of $14.8 million, or 3.3%, was primarily driven by a decrease in certain incentives, decrease in rates as the Company's merchant card fee revenue from the SMB Payments segment ($443.6 million for 2024 and $428.5 million for 2023) as a percentage of merchant bankcard processing dollar value during 2024 remained consistent at 0.96% as compared to 2023.

Adjusted EBITDA

Adjusted EBITDA from our SMB Payments segment was $28.6 million for the three months ended June 30, 2024, compared to $28.4 million for the three months ended June 30, 2023.

The increase of $0.2 million or 0.6% was primarily driven by increased merchant card fee revenue and $0.3 million decrease in selling, general and administrative expenses, offset by mix related margin compression and a $0.5 million increase in salaries and benefit expenses.

Adjusted EBITDA from our SMB Payments segment was $53.6 million for the six months ended June 30, 2024, compared to $56.8 million for the six months ended June 30, 2023.

The decrease of $3.2 million or 5.7% was primarily driven by a decrease in certain incentive revenues and mix related margin compression.

Other operating expenses of the segment remained consistent.

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

Adjusted EBITDA from our SMB Payments segment was $28.6 million for the three months ended September 30, 2024, compared to $27.6 million for the three months ended September 30, 2023.

The increase of $1 million or 3.7% was primarily driven by the contribution margin from increased revenue offset by increased selling, general and administrative expenses and mix related margin compression.

Adjusted EBITDA from our SMB Payments segment was $82.3 million for the nine months ended September 30, 2024, compared to $84.4 million for the nine months ended September 30, 2023.

The decrease of $2.2 million or 2.6% was primarily driven by a decrease in certain incentive revenues, mix related margin compression and higher level of chargeback losses and other operating expenses.

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

2024 2023 Change 2024 2023 Change

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B2B issuing transaction count 256 267 $ (11) 738 829 $ (91)

Revenue from our B2B Payments segment was $21.9 million for the three months ended June 30, 2024, compared to $3.0 million for the three months ended June 30, 2023.

Revenue from our B2B Payments segment was $22.1 million for the three months ended September 30, 2024, compared to $14.0 million for the three months ended September 30, 2023.

The increase of $8.2 million was primarily driven by revenue from the Plastiq business and growth in CPX business.

Revenue from our B2B Payments segment was $43.2 million for the six months ended June 30, 2024, compared to $5.8 million for the six months ended June 30, 2023.

Revenue from our B2B Payments segment was $65.4 million for the nine months ended September 30, 2024, compared to $19.7 million for the nine months ended September 30, 2023.

The increase of $45.6 million was primarily driven by revenue from the Plastiq business and growth in CPX business.

Adjusted EBITDA

Adjusted EBITDA from our B2B Payments segment of $1.5 million for the three months ended June 30, 2024, compared to $0.6 million for the three months ended June 30, 2023.

The increase in Adjusted EBITDA of $0.9 million was contributed by both CPX business for $0.2 million and Plastiq business for $0.7 million.

The Plastiq business was acquired during Q3 2023.

Adjusted EBITDA from our B2B Payments segment of $3.3 million for the six months ended June 30, 2024, compared to $0.5 million for the six months ended June 30, 2023.The increase in Adjusted EBITDA of $2.8 million was contributed by both the CPX business for $1.6 million and the Plastiq business for $1.2 million.

The Plastiq business was acquired during Q3 2023.

Adjusted EBITDA from our B2B Payments segment of $1.9 million for the three months ended September 30, 2024, compared to $1.4 million for the three months ended September 30, 2023.

The increase in Adjusted EBITDA of $0.6 million was primarily driven by $1.3 million in the Plastiq business, offset by decrease of $0.7 million in the CPX business due to certain bad debt write-offs.

The Plastiq business was acquired on July 31, 2023.

Adjusted EBITDA from our B2B Payments segment of $5.2 million for the nine months ended September 30, 2024, compared to $1.9 million for the nine months ended September 30, 2023.The increase in Adjusted EBITDA of $3.3 million was contributed by $0.9 million in the CPX business and $2.4 million in the Plastiq business.

The Plastiq business was acquired on July 31, 2023.

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,

2024 2023 Change 2024 2023 Change

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Average new enrollments 62,875 56,269 6,606 57,281 51,864 5,417

Revenue from our Enterprise Payments segment was $43.7 million for the three months ended June 30, 2024, compared to $31.4 million for the three months ended June 30, 2023.

The increase of $12.2 million or 38.9%, 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 $84.7 million for the six months ended June 30, 2024, compared to $58.7 million for the six months ended June 30, 2023.

The increase of $25.9 million or 44.1%, 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 $47.1 million for the three months ended September 30, 2024, compared to $35.2 million for the three months ended September 30, 2023.

The increase of $11.9 million or 33.9%, was primarily driven by an increase in billed clients and new customer enrollments, and growth in interest income due to higher balances of permissible investments.

Revenue from our Enterprise Payments segment was $131.8 million for the nine months ended September 30, 2024, compared to $93.9 million for the nine months ended September 30, 2023.

The increase of $37.8 million or 40.3%, was primarily driven by an increase in billed clients and new customer enrollments, and growth in interest income due to higher balances of permissible investments.

Adjusted EBITDA

Adjusted EBITDA from our Enterprise Payments segment was $37.2 million for the three months ended June 30, 2024, compared to $25.7 million for the three months ended June 30, 2023.

Adjusted EBITDA from our Enterprise Payments segment was $40.9 million for the three months ended September 30, 2024, compared to $29.8 million for the three months ended September 30, 2023.

The increase of $11.2 million or 37.6%, was primarily driven by increases in revenues.

Adjusted EBITDA from our Enterprise Payments segment was $72.0 million for the six months ended June 30, 2024, compared to $48.1 million for the six months ended June 30, 2023.

Adjusted EBITDA from our Enterprise Payments segment was $112.9 million for the nine months ended September 30, 2024, compared to $77.9 million for the nine months ended September 30, 2023.

The increase of $35.1 million or 45.0%, was primarily driven by increases in revenues.

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

(in thousands) SMB Payments B2B

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Income (loss) before taxes $ 21,701 $ (467) $ 36,603 $ (42,330) $ 15,507

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

(in thousands) SMB Payments B2B

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Non-cash stock based compensation (114) (36) (66) (1,285) (1,501)

Other non-recurring gain, net — — — 166 166

Income (loss) before taxes $ 18,363 $ 106 $ 23,682 $ (37,910) $ 4,241

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

(in thousands) SMB Payments B2B

8 unchanged sentences

Income (loss) before taxes $ 58,187 $ (2,362) $ 100,382 $ (129,416) $ 26,791

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

(in thousands) SMB Payments B2B

6 unchanged sentences

Non-cash stock based compensation (408) (237) (195) (4,343) (5,183)

Other non-recurring loss, net — — — (159) $ (159)

Other non-recurring gain, net — — — 7 7

Income (loss) before taxes $ 56,488 $ 386 $ 58,794 $ (110,323) $ 5,345

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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, 2023.

There have been no material changes to these critical accounting policies and estimates as of June 30, 2024.

There have been no material changes to these critical accounting policies and estimates as of September 30, 2024.

Liquidity and Capital Resources

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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 $23.6 million at June 30, 2024 and $3.4 million at June 30, 2023.

As of June 30, 2024, we had cash totaling $34.6 million compared to $17.6 million at June 30, 2023.

These cash balances do not include restricted cash of $12.6 million and $12.4 million at June 30, 2024 and June 30, 2023, 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 $8.4 million and $6.2 million at June 30, 2024 and June 30, 2023, respectively.

At June 30, 2024, we had availability of approximately $70.0 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 $37.7 million at September 30, 2024 and $16.6 million at September 30, 2023.

As of September 30, 2024, we had cash totaling $41.1 million compared to $24.6 million at September 30, 2023.

These cash balances do not include restricted cash of $13.4 million and $13.9 million at September 30, 2024 and September 30, 2023, 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 $8.4 million and $6.2 million at September 30, 2024 and September 30, 2023, respectively.

At September 30, 2024, we had availability of approximately $70.0 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) 2024 2023

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Cash Provided by Operating Activities

Net cash provided by operating activities was $42.0 million for the six months ended June 30, 2024 compared to $46.9 million for the six months ended June 30, 2023.

Net cash provided by operating activities was $61.9 million for the nine months ended September 30, 2024 compared to $72.7 million for the nine months ended September 30, 2023.

The $10.8 million decrease in 2024 was primarily driven by changes in the operating assets and liabilities.

Cash Used in Investing Activities

Net cash used in investing activities was $20.6 million and $13.1 million for the six months ended June 30, 2024 and 2023, respectively.

For the six months ended June 30, 2024, investing activities included additions to property, equipment and software of $11.7 million, $1.4 million related to net payments received on loans to ISOs and $7.5 million related to the acquisition of intangible assets and an investment in an unconsolidated entity.

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

Net cash used in investing activities was $24.7 million and $51.2 million for the nine months ended September 30, 2024 and 2023, respectively.

For the nine months ended September 30, 2024, investing activities included additions to property, equipment and software of $17.0 million, $0.2 million related to net payments received on loans to ISOs and $7.5 million related to the acquisition of intangible assets and an investment in an unconsolidated entity.

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

Cash Provided by Financing Activities

Net cash used in financing activities was $18.1 million for the six months ended June 30, 2024, compared to $144.1 million of cash provided by financing activities for the six months ended June 30, 2023.

The net cash used in financing activities for the six months ended June 30, 2024 included changes in the net obligations for funds held on the behalf of customers of $40.9 million and borrowings under the 2024 Credit Agreement net of issue discounts of $830.2 million, offset by $661.9 million of cash used for the repayment of the principal of the 2021 Credit Agreement and debt issuance and modification costs related to the refinancing, $167.8 million related to the redemption of senior preferred stock and accumulated unpaid dividend, $2.1 million for the redemption of redeemable NCI in subsidiary, $16.4 million of cash dividends paid to redeemable senior preferred stockholders, $0.6 million of cash used for shares withheld for taxes and $4.2 million of payments of contingent consideration.

The net cash provided by financing activities for the six months ended June 30, 2023 included $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 share repurchases, and $2.0 million of payments of contingent consideration for business combinations, which was offset by 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.

Net cash used in financing activities was $84.7 million for the nine months ended September 30, 2024, compared to $157.0 million of cash provided by financing activities for the nine months ended September 30, 2023.

The net cash used in financing activities for the nine months ended September 30, 2024 included changes in the net obligations for funds held on the behalf of customers of $116.1 million and borrowings under the 2024 Credit Agreement net of issue discounts of $830.2 million, offset by $661.9 million of cash used for the repayment of the principal of the 2021 Credit Agreement and debt issuance and modification costs related to the refinancing, $167.8 million related to the redemption of senior preferred stock and accumulated unpaid dividend, $2.1 million for the redemption of redeemable NCI in subsidiary, $22.1 million of cash dividends paid to redeemable senior preferred stockholders, $1.2 million of cash used for shares withheld for taxes and $5.0 million of payments of contingent consideration.

The net cash provided by financing activities for the nine months ended September 30, 2023 included $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 and share repurchases, $4.7 million of payments of contingent consideration for business combinations and $0.9 million of debt modification costs, which was offset by 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.

Long-term Debt

As of June 30, 2024, we had outstanding debt obligations, including the current portion and net of unamortized debt discount of $817.4 million, compared to $638.7 million at December 31, 2023, resulting in an increase of $178.7 million.

As of September 30, 2024, we had outstanding debt obligations, including the current portion and net of unamortized debt discount of $816.4 million, compared to $638.7 million at December 31, 2023, resulting in an increase of $177.8 million.

The increase is due to the refinancing of the 2021 Credit Agreement on May 16, 2024.

The debt balance at June 30, 2024 consisted of $835.0 million outstanding under the term facility offset by $17.6 million of unamortized debt discounts and issuance costs.

The debt balance at September 30, 2024 consisted of $832.9 million outstanding under the term facility offset by $16.5 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.

5 unchanged sentences

2) 6.40:1.00 at each fiscal quarter ended March 31, 2026 and each fiscal quarter thereafter.

As of June 30, 2024, the Company was in compliance with the covenants in the 2024 Credit Agreement.

As of September 30, 2024, the Company was in compliance with the covenants in the 2024 Credit Agreement.

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

5 unchanged sentences

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