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Item 2. Management’s Discussion and Analysis

2025-05-06 compared with 2024-11-07 · 81 added, 129 removed, 139 unchanged (60% of the section changed)

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

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.

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, 2024.

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.

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.

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Results of Operations

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.

This section includes certain components of our results of operations for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

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, 2024.

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.

For the three months ended March 31, 2025, our consolidated revenue of $224.6 million increased by $18.9 million, or 9.2%, from $205.7 million for the three months ended March 31, 2024.

This overall increase was mainly driven by increase in merchant bankcard dollar value and total card dollar value processed 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 in our B2B Payments Segment.

The following table presents our revenues by type:

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

2024 2023 $ Change 2024 2023 $ Change

(in thousands) Three Months Ended March 31,

2025 2024 $ Change

Revenue Type:

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Merchant card fees

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.

Merchant card fees revenue for the three months ended March 31, 2025 was $167.1 million an increase of $9.1 million or 5.8%, from $157.9 million for the three months ended March 31, 2024.

The increase was primarily driven by an increase in merchant bankcard value, total card value, and the transaction count processed by the Company.

Money transmission services

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.

Money transmission services for the three months ended March 31, 2025 was $37.4 million, an increase of $8.3 million, or 28.5%, from $29.1 million for the three months ended March 31, 2024.

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 $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.

Outsourced services and other services revenue of $17.0 million for the three months ended March 31, 2025 increased by $1.3 million, or 8.5%, from $15.7 million for the three months ended March 31, 2024, primarily due to growth in interest income due to higher balances of permissible investments offset by reduction in interest rates.

Equipment revenue of $3.1 million for the three months ended March 31, 2025 increased by $0.1 million, or 4.6% from $3.0 million for the three months ended March 31, 2024.

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 September 30, Nine Months Ended September 30,

2024 2023 $ Change 2024 2023 $ Change

(in thousands) Three Months Ended March 31,

2025 2024 $ Change

Operating expenses

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Cost of revenue (excludes depreciation and amortization)

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.

Cost of revenue (excludes depreciation and amortization) of $137.4 million for the three months ended March 31, 2025 increased by $8.1 million, or 6.2%, from $129.3 million for the three months ended March 31, 2024, primarily due to the corresponding increase in revenues offset by recovery of certain bad debts.

Salary and employee benefits

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.

Salary and employee benefits expense of $25.8 million for the three months ended March 31, 2025 increased by $3.6 million, or 16.4%, from $22.2 million for the three months ended March 31, 2024, primarily due to merit increases and increased headcount to support the overall growth of the Company.

Depreciation and amortization expense

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.

Depreciation and amortization expense of $13.8 million for the three months ended March 31, 2025 decreased by $1.5 million, or 9.7%, from $15.3 million for the three months ended March 31, 2024, primarily due to full amortization of certain intangible assets.

Selling, general and administrative

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.

Selling, general and administrative expenses of $15.1 million for the three months ended March 31, 2025 increased by $4.1 million, or 37.3%, from $11.0 million for the three months ended March 31, 2024, primarily due to increase in professional charges related to SOX compliance, increased marketing and software expenses to support overall growth, and legal expenses related to the Company's secondary offering of common shares.

Other Expense, net

Other expense, net were as follows:

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

2024 2023 $ Change 2024 2023 $ Change

(in thousands) Three Months Ended March 31,

2025 2024 $ Change

Other (expense) income

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Interest expense

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 $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.

Interest expense of $23.2 million for the three months ended March 31, 2025 increased by $2.3 million, or 11.0%, from $20.9 million for the three months ended March 31, 2024, due to increased outstanding balance of the term loan facility used for the redemption of redeemable senior preferred stock, offset by decrease in interest rates.

Income tax (benefit) expense

Income tax expense was as follows:

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

2024 2023 $ Change 2024 2023 $ Change

(in thousands) Three Months Ended March 31,

2025 2024 $ Change

Income before income taxes $ 10,518 $ 7,775 $ 2,743

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

The EAETR for 2024 is 36.0% and includes the income tax provision on pre-tax income and a tax provision related to establishment of a valuation allowance for deferred income tax on the future portion of the Section 163(j) limitation created by additional 2024 interest expense.

The EAETR for 2025 is 28.0% and includes the income tax provision on pre-tax income and a tax provision related to the establishment of a valuation allowance for deferred income tax on the future portion of the Section 163(j) limitation created by additional 2025 interest expense.

The effective tax rate for 2025 changed primarily due to an increase in the valuation allowance against certain business interest carryover deferred tax assets.

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The CODM's review of segment performance and allocation of resources are based on the Adjusted EBITDA (a non-GAAP financial measure).

Adjusted EBITDA at each segment level includes revenues of the segment, less costs of revenue (excluding depreciation and amortization) and operating expenses that are directly related those revenues.

Adjusted EBITDA at each segment level includes revenues of the segment, less costs of revenue (excluding

depreciation and amortization) and operating expenses that are directly related those revenues.

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

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 September 30, Nine Months Ended September 30,

2024 2023 Change 2024 2023 Change

(in thousands) Three Months Ended March 31,

2025 2024 Change

Revenues $ 151,690 $ 144,005 $ 7,685

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Merchant bankcard transaction count 185,539 175,228 10,311

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 ($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.

Total card processing dollar value $ 17,685,491 $ 17,098,758 586,733

Revenue from our SMB Payments segment was $151.7 million for the three months ended March 31, 2025, compared to $144.0 million for the three months ended March 31, 2024.

The increase of $7.7 million, or 5.3%, was primarily driven by an increase in merchant card fee rate, increased card processing dollar value, and transaction count increases.

The Company's merchant card fee revenue from the SMB Payments segment ($147.5 million for the three months ended March 31 2025 and $139.8 million for the three months ended March 31, 2024) as a percentage of merchant bankcard processing dollar value during the three months ended March 31, 2025 increased to 0.96% from 0.94% as compared to the three months ended March 31, 2024.

Adjusted EBITDA

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

Adjusted EBITDA from our SMB Payments segment was $25.7 million for the three months ended March 31, 2025, compared to $25.0 million for the three months ended March 31, 2024.

The increase of $0.7 million, or 2.7% was primarily driven by an increase in revenue, and recovery of certain chargeback losses, offset by mix related margin compression and other operating expenses.

(in thousands) Three Months Ended March 31,

2025 2024 Change

Revenues $ 23,918 $ 21,344 $ 2,574

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B2B issuing transaction count 211 240 $ (29)

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 $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.

Revenue from our B2B Payments segment was $23.9 million for the three months ended March 31, 2025, compared to $21.3 million for the three months ended March 31, 2024.

The increase of $2.6 million, or 12.1% was primarily driven by increase in issuing dollar volume in the CPX business and total card volume processed by Plastiq business.

Adjusted EBITDA

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.

Adjusted EBITDA from our B2B Payments segment of $3.5 million for the three months ended March 31, 2025, compared to $1.7 million for the three months ended March 31, 2024.The increase in Adjusted EBITDA of $1.8 million or 101.3% was contributed by $0.5 million in the CPX business and $1.3 million in the Plastiq business.

Enterprise Payments

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

2024 2023 Change 2024 2023 Change

(in thousands) Three Months Ended March 31,

2025 2024 Change

Revenues $ 50,088 $ 40,990 $ 9,098

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Key Indicators:

Average billed clients 832,351 590,578 241,773 766,370 525,274 241,096

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

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.

Average CFTPay billed clients 940,463 703,887 236,576

Average CFTPay new enrollments 55,946 53,551 2,395

Revenue from our Enterprise Payments segment was $50.1 million for the three months ended March 31, 2025, compared to $41.0 million for the three months ended March 31, 2024.

The increase of $9.1 million, or 22.2%, was primarily driven by an increase in billed clients and new customer enrollments, the addition of new integrated partners and growth in interest income due to higher balances of permissible investments offset by reduction in interest rates.

Adjusted EBITDA

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 $112.9 million for the nine months ended September 30, 2024, compared to $77.9 million for the nine months ended September 30, 2023.

Adjusted EBITDA from our Enterprise Payments segment was $42.4 million for the three months ended March 31, 2025, compared to $34.7 million for the three months ended March 31, 2024.

The increase of $7.7 million, or 22.2%, was primarily driven by increases in revenues.

Three Months Ended September 30, 2024

(in thousands) SMB Payments B2B

Payments Enterprise Payments Corporate Total Consolidated

Reconciliation of Adjusted EBITDA to GAAP Measure

Adjusted EBITDA $ 28,644 $ 1,933 $ 40,940 $ (16,876) $ 54,641

Interest expense — (1,066) — (22,180) (23,246)

Depreciation and amortization (6,939) (1,261) (4,304) (1,229) (13,733)

Debt modification and extinguishment expenses — — — (43) (43)

Selling, general and administrative (non-recurring) — — — (696) (696)

Non-cash stock based compensation (4) (73) (33) (1,306) (1,416)

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

Three Months Ended September 30, 2023

(in thousands) SMB Payments B2B

Payments Enterprise Payments Corporate Total Consolidated

Reconciliation of Adjusted EBITDA to GAAP Measure

Adjusted EBITDA $ 27,613 $ 1,359 $ 29,757 $ (13,767) $ 44,962

Interest expense — (498) (62) (19,437) (19,997)

Depreciation and amortization (9,136) (719) (5,947) (1,473) (17,275)

Selling, general and administrative (non-recurring) — — — (2,114) (2,114)

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

Nine Months Ended September 30, 2024

(in thousands) SMB Payments B2B

Payments Enterprise Payments Corporate Total Consolidated

Three Months Ended March 31, 2025

SMB Payments B2B Payments Enterprise Payments Corporate Total Consolidated

Reconciliation of Adjusted EBITDA to GAAP Measure:

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Non-cash stock based compensation (4) (84) (32) (1,466) (1,586)

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

Nine Months Ended September 30, 2023

(in thousands) SMB Payments B2B

Payments Enterprise Payments Corporate Total Consolidated

Income before taxes $ 19,076 $ 1,165 $ 37,768 $ (47,491) $ 10,518

Income tax expense (2,250)

Net income $ 8,268

Three Months Ended March 31, 2024

SMB Payments B2B Payments Enterprise Payments Corporate Total Consolidated

Reconciliation of Adjusted EBITDA to GAAP Measure:

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Non-cash stock based compensation (4) (118) (32) (1,480) (1,634)

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

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

Income before taxes $ 16,432 $ (814) $ 30,656 $ (38,499) $ 7,775

Income tax expense (2,582)

Net income $ 5,193

Critical Accounting Policies and Estimates

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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, 2024.

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

There have been no material changes to these critical accounting policies and estimates as of March 31, 2025.

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 $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,

Our working capital, defined as current assets less current liabilities, was $61.9 million at March 31, 2025 and $32.4 million at March 31, 2024.

As of March 31, 2025, we had cash totaling $47.6 million compared to $34.3 million at March 31, 2024.

These cash balances do not include restricted cash of $11.5 million and $12.7 million at March 31, 2025 and March 31, 2024, 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 $1.9 million and $6.7 million at March 31, 2025 and March 31, 2024, respectively.

At March 31, 2025, 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 three month periods.

Three Months Ended March 31,

(in thousands) 2025 2024

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Financing activities 47,260 (10,279)

Net (decrease) increase in cash and cash equivalents and restricted cash $ 121,834 $ 178,485

Net increase (decrease) in cash and cash equivalents and restricted cash $ 47,501 $ (4,641)

Cash Provided by Operating Activities

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.

Net cash provided by operating activities was $10.0 million for the three months ended March 31, 2025 compared to $13.3 million for the three months ended March 31, 2024.

The $3.3 million decrease was primarily driven by changes in the operating assets and liabilities.

Cash Used in Investing Activities

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 $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.

Net cash used in investing activities was $9.7 million and $7.7 million for the three months ended March 31, 2025 and 2024, respectively.

For the three months ended March 31, 2025, investing activities included additions to property, equipment and software of $5.1 million, $0.1 million related to net funding of new loans to ISOs and $4.5 million related to the acquisition of a business.

For the three months ended March 31, 2024, net cash used in investing activities included additions to property, equipment and software of $6.6 million and $1.1 million related funding of new loans to ISOs.

Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities was $47.3 million for the three months ended March 31, 2025, compared to $10.3 million of cash used in financing activities for the three months ended March 31, 2024.

The net cash used in financing activities for the three months ended March 31, 2025 included changes in the net obligations for funds held on the behalf of customers of $59.1 million and proceeds from the exercise of stock options of $0.1 million offset by $10.0 million of cashed used for the unscheduled repayment of the term loan principal, $1.5 million of cash used for shares withheld for taxes and $0.4 million of payments of contingent consideration.

The net cash used in financing activities for the three months ended March 31, 2024 included changes in the net obligations for funds held on the behalf of customers of $1.9 million, offset by $1.7 million of cash used for the repayment of debt, $7.0 million of cash dividends paid to redeemable senior preferred stockholders, $0.4 million of cash used for shares withheld for taxes and $3.1 million of payments of contingent consideration.

Long-term Debt

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 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.

As of March 31, 2025, we had outstanding debt obligations, including the current portion and net of unamortized debt discount of $935.5 million, compared to $945.5 million at December 31, 2024, resulting in a decrease of $10.0 million .

The decrease is to an unscheduled principal payment.

The debt balance at March 31, 2025 consisted of $935.5 million outstanding under the term facility offset by $14.7 million of unamortized debt discounts and issuance costs.

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

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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 2024 Credit Agreement exceeds 35% of the total revolving credit facility thereunder, the loan parties are required to comply with certain restrictions on its Total Net Leverage Ratio.

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:

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

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

As of March 31, 2025, 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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis