What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-03-06 compared with 2024-03-12 · 108 added, 104 removed, 135 unchanged (61% of the section changed)

7 unchanged sentences

Results of Operations

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.

This section includes certain components of our results of operations for the years ended December 31, 2024 (or "2024"), and December 31, 2023 (or "2023").

We have derived this data, except key indicators including merchant bankcard processing dollar values and transaction count (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, 2024, our consolidated revenue of $879.7 million increased by $124.1 million, or 16.4%, from $755.6 million for the year ended December 31, 2023.

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.

This overall increase was driven by increases in merchant bankcard processing dollar value and transaction count in our SMB Payments segment, an increase in new enrollments and higher interest income on permissible investments in our Enterprise Payments segment and an increase in revenue from CPX due to increase in volumes and Plastiq business acquired during the third quarter of 2023 in B2B Payments segment.

Revenues by type for 2024 and 2023 were as follows:

9 unchanged sentences

For the year ended December 31, 2024, our merchant card fees revenue of $670.4 million increased by $75.2 million, or 12.6%, from $595.2 million for the year ended December 31, 2023.

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.

This increase was primarily driven by revenue from the Plastiq business that was acquired during the third quarter of 2023 and increased bankcard processing dollar values and transaction counts in SMB payments.

Money Transmission Services

2 unchanged sentences

Outsourced services and other services revenue of $67.0 million for the year ended December 31, 2024 increased by $17.4 million, or 35.1%, from $49.6 million for the year ended December 31, 2023.

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 point-of-sale equipment.

This increase was primarily due to growth in interest income on permissible investments due to higher interest rates and deposit balances and additional revenues generated by our B2B Payments segment.

Equipment revenue of $12.2 million for the year ended December 31, 2024, decreased by $0.5 million, or 4.1%, from $12.7 million for the year ended December 31, 2023.

The decrease was primarily due to a decrease in point-of-sale equipment sales volume.

Operating Expenses

11 unchanged sentences

For the year ended December 31, 2024, costs of services (excluding depreciation and amortization) as a percentage of total revenues decreased to 62.7% as compared to 63.6% for the year ended December 31, 2023.

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

This decrease was primarily due to the increase in interest income on permissible investments and money transmission revenues which do not have significant cost of services offset by certain credit losses, obsolete inventory write offs and, mix related margin compression.

Salary and employee benefits

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.

Salary and employee benefits expense of $89.2 million for the year ended December 31, 2024 increased by $9.2 million, or 11.6%, from $80.0 million for the year ended December 31, 2023, primarily due to higher wages, and increased headcount from acquisitions to support overall growth of the Company.

The Company's employee headcount increased to 1,019 in 2024 from 977 in 2023.

2 unchanged sentences

Selling, general and administrative

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

Selling, general and administrative expenses of $47.4 million for the year ended December 31, 2024 increased by $2.0 million, or 4.4%, from $45.4 million for the year ended December 31, 2023, primarily due to increase of $8.5 million in marketing, software, management fee, bad debt write offs and other operating expenses offset by decrease in restructuring expenses ($3.5 million), legal and professional expenses ($1.5 million) primarily related to acquisitions, and gain from changes in fair value of contingent consideration ($1.5 million).

Other Expenses, net

(in thousands) Years Ended December 31, 2024 vs 2023

2024 2023 $ Change

Other (expense) income

Other expense

Interest expense $ (88,948) $ (76,108) $ (12,840)

Debt extinguishment and modification costs (10,369) — (10,369)

Other income, net 3,177 1,736 1,441

1 unchanged sentence

Interest expense

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.

Interest expense of $88.9 million for the year ended December 31, 2024 increased by $12.8 million, or 16.9%, from $76.1 million for the year ended December 31, 2023, due to higher debt balances to fund the redemption of the redeemable senior preferred stock partially offset by a decrease in interest rates during the fourth quarter of 2024.

Debt extinguishment and modification costs

Debt extinguishment and modification costs for the year ended December 31, 2024 increased by $10.4 million or 100%, from the year ended December 31, 2023, due to debt refinancings (see Note 10.

Debt Obligations ).

Other income, net of $3.2 million for the year ended December 31, 2024 increased by $1.4 million, or 83.0%, from $1.7 million for the year ended December 31, 2023, due to increased interest income from the Company's operating accounts.

2 unchanged sentences

2024 2023 $ Change

Income (loss) before income taxes $ 7,152 $ 3,200 $ 3,952

Income before income taxes $ 37,281 $ 7,152 $ 30,129

Income tax expense $ 13,266 $ 8,463 $ 4,803

3 unchanged sentences

The consolidated effective income tax rate for 2024 may not be indicative of our effective tax rate for future periods.

On August 16, 2022, the U.S.

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

2 unchanged sentences

Net income (loss) $ 24,015 $ (1,311) $ 25,326

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

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

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).

Dividends, accretion and related excise tax attributable to redeemable senior preferred stockholders (47,336) (47,744) 408

NCI preferred unit redemptions, net of deferred tax benefit (639) — (639)

Net loss attributable to common shareholders $ (23,960) $ (49,055) $ 25,095

Dividends, accretion and related excise tax attributable to redeemable senior preferred stockholders consists of $27.7 million of dividends, $16.9 million of accretion and $2.7 million of excise tax related to redemption of redeemable senior preferred stock and redeemable NCI for the year ended December 31, 2024.

The balance remained consistent as compared to 2023 due to redemption of redeemable senior preferred stock during 2024.

Segment Results

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

The Company's chief operating decision makers ("CODM") are our CEO and CFO.

The CODM uses adjusted earnings before interest expense, income tax and depreciation and amortization expenses ("Adjusted EBITDA") as measures of segment profit and loss to allocate resources.

Adjusted EBITDA represents, EBITDA, adjusted for certain non-cash costs, such as stock-based compensation and the write-off of the carrying value of investments or other assets, as well as debt extinguishment and modification expenses and other expenses and income items considered non-recurring, such as acquisition integration expenses, certain professional fees, and litigation settlements.

Adjusted EBITDA is a non-GAAP measure and therefore, a reconciliation to net income (loss) (a GAAP measure) is included herein.

Operating overhead and shared costs are managed centrally and included in corporate.

This non-GAAP financial measure helps to understand 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) Year Ended December 31,

2024 2023 Change

Revenue $ 582,870 $ 562,237 $ 20,633

Operating expenses 536,388 507,371 29,017

Operating income $ 46,482 $ 54,866 $ (8,384)

Operating margin 8.0 % 9.8 %

Depreciation and amortization $ 41,036 $ 43,925 $ (2,889)

Revenues $ 613,547 $ 583,251 $ 30,296

Adjusted EBITDA 108,913 109,485 $ (572)

Key Indicators:

Merchant bankcard processing dollar value $ 61,703,021 $ 59,054,039 $ 2,648,982

Merchant bankcard transaction volume 696,203 636,576 59,627

Merchant bankcard transaction count 755,989 696,203 59,786

Total card processing dollar value $ 71,566,091 $ 68,489,886 $ 3,076,205

Revenue from our SMB Payments segment was $613.5 million for the year ended December 31, 2024, compared to $583.3 million for the year ended December 31, 2023.

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 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

The increase of $30.3 million, or 5.2%, was primarily driven by merchant card fee rate and bankcard processing dollar value and transaction count increases.

The Company's merchant card fee revenue from the SMB Payments segment ($595.0 million for 2024 and $564.3 million for 2023) as a percentage of merchant bankcard

processing dollar value during 2024 increased to 0.96% from 0.95% during 2023.

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

Adjusted EBITDA

Adjusted EBITDA from our SMB Payments segment was $108.9 million for the year ended December 31, 2024, compared to $109.5 million for the year ended December 31, 2024.

The decrease of $0.6 million or 0.6% was primarily due to certain credit losses, mix-related margin compression and increase in salary expenses partially offset by increased revenue and gain from changes in the fair value of contingent consideration from a past acquisition.

(in thousands) Year Ended December 31,

2024 2023 Change

Revenue $ 40,726 $ 18,890 $ 21,836

Operating expenses 43,261 18,682 24,579

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

Operating margin (6.2) % 1.1 %

Depreciation and amortization $ 2,221 $ 744 $ 1,477

Revenues $ 89,103 $ 41,156 $ 47,947

Adjusted EBITDA 7,605 2,250 5,355

Key Indicators:

B2B issuing dollar volume $ 977,278 $ 851,948 $ 125,330

B2B issuing transaction count 1,087 933 154

B2B issuing transaction 974 1,087 (113)

Revenue from our B2B Payments segment was $89.1 million for the year ended December 31, 2024, compared to $41.2 million for the year ended December 31, 2023.

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.

The increase of $47.9 million, or 116.5%, was primarily driven by an increase of $44.4 million in the Plastiq business which was acquired during the third quarter of 2023 and an increase of $4.1 million in the CPX business due to increased interest revenue and volumes.

This increase was offset by a decrease of $0.6 million driven by the wind down of certain customer programs in the managed services business during the fourth quarter of 2023.

Adjusted EBITDA

Adjusted EBITDA from our B2B Payments segment was $7.6 million for the year December 31, 2024, compared to $2.2 million for the year ended December 31, 2023.

The increase of $5.4 million was primarily driven by increase in revenues offset by increase in operating expenses.

Enterprise Payments

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

(in thousands) Year Ended December 31,

2024 2023 Change

Revenue $ 132,016 $ 82,514 $ 49,502

Operating expenses 58,052 51,577 6,475

Operating income $ 73,964 $ 30,937 $ 43,027

Operating margin 56.0 % 37.5 %

Depreciation and amortization $ 23,753 $ 24,892 $ (1,139)

Revenues $ 180,448 $ 132,186 $ 48,262

Adjusted EBITDA 154,936 110,893 $ 44,043

Key Indicators:

Average billed clients $ 797,567 $ 556,526 $ 241,041

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

Average new enrollments 56,072 51,059 5,013

Revenue from our Enterprise Payments segment was $180.4 million for the year ended December 31, 2024, compared to $132.2 million for the year ended December 31, 2023.

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

The increase of $48.3 million, or 36.6%, was primarily driven by an increase in customer enrollments, additional revenues generated by our Passport platform, and growth in interest income due to higher deposit balances and higher returns on the permissible investments related to our money transmission licenses.

Adjusted EBITDA

Adjusted EBITDA from our Enterprise Payments segment was $154.9 million for the year ended December 31, 2024, compared to $110.9 million for the year ended December 31, 2023.

The increase of $44.0 million or 39.8% was primarily due to increase in revenue offset by increased salaries.

Year Ended December 31, 2024

SMB Payments B2B Payments Enterprise Payments Corporate Total Consolidated

Reconciliation of Adjusted EBITDA to GAAP Measure:

Adjusted EBITDA $ 108,913 $ 7,605 $ 154,936 $ (67,187) $ 204,267

Interest expense (1) (4,340) — (84,607) (88,948)

Depreciation and amortization (30,865) (5,258) (16,928) (4,990) (58,041)

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 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.

Debt modification and extinguishment expenses — — — (10,369) (10,369)

Selling, general and administrative (non-recurring) — — — (3,510) (3,510)

Non-cash stock based compensation (16) (220) (131) (5,751) (6,118)

Income (loss) before taxes $ 78,031 $ (2,213) $ 137,877 $ (176,414) $ 37,281

Income tax expense (13,266)

Net income $ 24,015

Year Ended December 31, 2023

SMB Payments B2B Payments Enterprise Payments Corporate Total Consolidated

Reconciliation of Adjusted EBITDA to GAAP Measure:

Adjusted EBITDA $ 109,485 $ 2,250 $ 110,893 $ (54,296) $ 168,332

Interest expense — (1,302) (357) (74,449) (76,108)

Depreciation and amortization (36,715) (1,831) (22,426) (7,423) (68,395)

Selling, general and administrative (non-recurring) — — — (9,825) (9,825)

Non-cash stock based compensation (539) (549) (261) (5,419) (6,768)

Non-cash other losses — — — (84) (84)

Income (loss) before taxes $ 72,231 $ (1,432) $ 87,849 $ (151,496) $ 7,152

Income tax expense (8,463)

Net loss $ (1,311)

Liquidity and Capital Resources

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

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

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

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

We anticipate that cash on hand, funds generated from operations and available borrowings under our revolving credit agreement are sufficient to meet our working

capital requirements for at least the next twelve months.

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.

3 unchanged sentences

As of December 31, 2024, we had cash and cash equivalents with a balance of $58.6 million compared to $39.6 million at December 31, 2023.

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.

These cash and cash equivalent balances do not include restricted cash of $11.1 million and $11.9 million at December 31, 2024 and 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 $9.5 million and $6.7 million at December 31, 2024 and 2023, respectively.

9 unchanged sentences

Cash Provided by Operating Activities

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

Net cash provided by operating activities was $85.6 million and $81.3 million for the years ended December 31, 2024 and 2023, respectively.

The $4.3 million or 5.3% increase in 2024 was driven by net income increase, offset by changes in non-cash items and, operating assets and liabilities.

Cash Used in Investing Activities

Net cash used in investing activities was $35.5 million compared to cash used investing activities of $55.7 million for the years ended December 31, 2024 and 2023, respectively.

Net cash used to acquire businesses in 2023 was $28.2 million compared to net cash used of $5.0 million in 2022.

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.

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.

The Company had no business acquisitions for the year ended December 31, 2024, compared to net cash used of $28.2 million in 2023 to acquire Plastiq business.

Additions to property, equipment and software was $21.7 million for the year ended December 31, 2024 compared to $21.3 million in 2023 and acquisitions of intangible assets was $10.5 million for the year ended December 31, 2024, compared to $6.6 million in 2023.

Net amount of $3.4 million was advanced for loans to ISOs for the year ended December 31, 2024, compared to $0.4 million related to payments received against loans to ISOs in 2023.

Cash Provided by Financing Activities

Net cash provided by financing activities was $147.6 million for the year ended December 31, 2024, compared to $210.1 million for the year ended December 31, 2023.

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.

The net cash provided by for the year ended December 31, 2024 included changes in the net obligations for funds held on the behalf of customers of $179.6 million, borrowings under the 2024 Credit Agreement (including the First Amendment) net of issue discounts of $945.1 million, and proceeds for the exercise of stock options of $1.8 million.

This was offset by repayment of the principal of the 2021 Credit Agreement and debt issuance and modification costs related to the refinancing of $666.5 million, redemption of the redeemable senior preferred stock including dividends of $303.2 million, redemption of non-controlling interest in subsidiary of $2.1 million, $1.5 million of cash used for shares withheld for taxes, and $5.6 million of payment of contingent consideration for business combinations.

For the year ended December 31, 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 under the 2021 Credit Agreement 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 2021 Credit Agreement's 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 2021 Credit Agreement.

Long-Term Debt

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.

For the year ended December 31, 2024, the Company had outstanding debt obligations, including the current portion and net of unamortized debt discount of $945.5 million, compared to $654.4 million for the year ended December 31, 2023, resulting in an increase of $291.1 million.

The debt balance for the year ended December 31, 2024 consisted of funds outstanding under the term facility, offset by $15.1 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.

There were no funds outstanding under the revolving credit facility as of December 31, 2024 and 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.

On May 16, 2024, the Company entered in to the 2024 Credit Agreement, which provided a $835.0 million term facility and a revolving credit facility of $70.0 million.

The term facility was was further increased by $115.0 million (First Amendment to the 2024 Credit Agreement) effective November 21, 2024.

The outstanding borrowings will accrue using the SOFR rate plus an applicable margin per year subject to a SOFR floor of 0.50%.

The term facility matures in May 2031 and the revolving credit facility expires in May 2029.

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

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

If the aggregate principal amount of outstanding revolving loans and letters of credit under the 2024 Credit Agreement exceeds 35% of the total revolving credit facility thereunder, the Company is required to comply with certain restrictions on its Total Net Leverage Ratio.

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

1) 6.50:1.00 at each fiscal quarter ended September 30, 2021 through June 30, 2022;

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

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

1) 6.90:1.00 at each fiscal quarter ended September 30, 2024 through December 31, 2025;

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

As of December 31, 2024, the Company was in compliance with the covenants in the 2024 Credit Agreement.

6 unchanged sentences

Realization of deferred tax assets is dependent upon future taxable income.

A valuation allowance is recognized if it is more likely than not that some portion or all of a deferred tax asset will not be realized based on the weight of available evidence, including expected future earnings.

A valuation allowance is recognized if it is more

likely than not that some portion or all of a deferred tax asset will not be realized based on the weight of available evidence, including expected future earnings.

We recognize an uncertain tax position in our financial statements when we conclude that a tax position is more likely than not to be sustained upon examination based solely on its technical merits.

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.

21 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-K

Item 7. Management’s Discussion and Analysis