Organizational Structure and Corporate Information
−Removed: Repay Holdings Corporation was incorporated as a Delaware corporation on July 11, 2019 in connection with the closing of a transaction (the “Business Combination”) pursuant to which Thunder Bridge Acquisition Ltd., a special purpose acquisition company organized under the laws of the Cayman Islands (“Thunder Bridge”), (a) domesticated into a Delaware corporation and changed its name to “Repay Holdings Corporation”
−Removed: and (b) consummated the merger of a wholly owned subsidiary with and into Hawk Parent Holdings, LLC, a Delaware limited liability company (“Hawk Parent”).
−Removed: Unless otherwise noted or unless the context otherwise requires, the terms “we”, “us”, “Repay”
−Removed: and the “Company”
−Removed: and similar references refer (1) before the Business Combination, to Hawk Parent and its consolidated subsidiaries and (2) from and after the Business Combination, to Repay Holdings Corporation and its consolidated subsidiaries.
−Removed: Unless otherwise noted or unless the context otherwise requires, “Thunder Bridge”
−Removed: refers to Thunder Bridge Acquisition.
+Added: Repay Holdings Corporation was incorporated as a Delaware corporation on July 11, 2019 in connection with the closing of a transaction (the “Business Combination”) pursuant to which Thunder Bridge Acquisition Ltd., a special purpose acquisition company organized under the laws of the Cayman Islands (“Thunder Bridge”), (a) domesticated into a Delaware corporation and changed its name to “Repay Holdings Corporation” and (b) consummated the merger of a wholly owned subsidiary with and into Hawk Parent Holdings, LLC, a Delaware limited liability company (“Hawk Parent”).
+Added: Unless otherwise noted or unless the context otherwise requires, the terms “we”, “us”, “Repay” and the “Company” and similar references refer (1) before the Business Combination, to Hawk Parent and its consolidated subsidiaries and (2) from and after the Business Combination, to Repay Holdings Corporation and its consolidated subsidiaries.
+Added: Unless otherwise noted or unless the context otherwise requires, “Thunder Bridge” refers to Thunder Bridge Acquisition.
prior to the consummation of the Business Combination.
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Our legacy business was founded as M & A Ventures, LLC, a Georgia limited liability company doing business as REPAY:
−Removed: Realtime Electronic Payments (“REPAY LLC”), in 2006 by current executives John Morris and Shaler Alias.
−Removed: Hawk Parent was formed in 2016 in connection with the acquisition of a majority interest in the successor entity of REPAY LLC and its subsidiaries by certain investment funds sponsored by, or affiliated with, Corsair Capital LLC (“Corsair”).
+Added: Realtime Electronic Payments (“REPAY LLC”), in 2006 by current executives John Morris and Shaler Alias.
+Added: Hawk Parent was formed in 2016 in connection with the acquisition of a majority interest in the successor entity of REPAY LLC and its subsidiaries by certain investment funds sponsored by, or affiliated with, Corsair Capital LLC (“Corsair”).
Business Overview
We are a leading payments technology company.
−Removed: We provide integrated payment processing solutions to industry-oriented vertical markets in which businesses have specific and bespoke transaction processing needs.
−Removed: We refer to these markets as “vertical markets”
−Removed: or “verticals.”
+Added: We provide integrated payment processing solutions to industry-oriented vertical markets in which businesses or other organizations have specific transaction processing needs.
+Added: We refer to these markets as “vertical markets” or “verticals.”
We are a payments innovator, differentiated by our proprietary, integrated payment technology platform and our ability to reduce the complexity of electronic payments for businesses.
−Removed: We intend to continue to strategically target verticals where we believe our ability to tailor payment solutions to our clients’
−Removed: needs and the embedded nature of our integrated payment solutions will drive strong growth by attracting new clients and fostering long-term client relationships.
+Added: We intend to continue to strategically target verticals where we believe our ability to tailor payment solutions to our clients’ needs, our deep knowledge of our vertical markets and the embedded nature of our integrated payment solutions will drive strong growth by attracting new clients and fostering long-term client relationships.
Since a significant portion of our revenue is derived from volume-based payment processing fees, card payment volume is a key operating metric that we use to evaluate our business.
We processed approximately $25.7 billion of total card payment volume in 2023.
−Removed: Our year-over-year card payment volume growth was approximately 25% in 2022 and 35% in 2021.
−Removed: As of December 31, 2022, we had over 23,000 clients.
−Removed: Our top 10 clients, with an average tenure of approximately seven years, contributed to approximately 15% and 14% of total gross profit during the year ended December 31, 2022 and the year ended December 31, 2021, respectively.
+Added: Our top 10 clients, with an average tenure of approximately seven years, contributed approximately 18% and 15% of total gross profit during the year ended December 31, 2023 and the year ended December 31, 2022, respectively.
Our leading competitive position and differentiated solutions have enabled us to realize unique advantages in fast-growing and strategically important segments of the payments market.
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The personal loans vertical is predominately characterized by installment loans, which are typically utilized by consumers to finance everyday expenses.
−Removed: The automotive loans vertical predominantly includes subprime automotive loans, automotive title loans and automotive buy-here-pay-here loans and also includes near-prime and prime automotive loans.
+Added: The automotive loans vertical includes a diversified client base across the entire credit spectrum.
Our receivables management vertical relates to consumer loan collections, which typically enter the receivables management process due to delinquency on credit card bills or as a result of major life events, such as job loss or major medical issues.
−Removed: The business-to-business vertical relates to transactions occurring between a wide variety of enterprise clients, many of which operate in the automotive, field services, healthcare, homeowner association (“HOA”) management and hospitality industries, as well as educational institutions and governments and municipalities.
+Added: The business-to-business vertical relates to transactions occurring between a wide variety of enterprise clients, many of which operate in the automotive, field services, healthcare, homeowner association (“HOA”) management and hospitality industries, as well as educational institutions and governments and municipalities.
Our go-to-market strategy combines direct sales with integrations with key software providers in our target verticals.
−Removed: The integration of our technology with key software providers in the verticals that we serve, including loan management
−Removed: systems, dealer management systems (“DMS”), collection management systems, and enterprise resource planning software systems, allows us to embed our omni-channel payment processing technology into our clients’
−Removed: critical workflow software and ensure seamless operation of our solutions within our clients’
−Removed: enterprise management systems.
−Removed: We refer to these software providers as our “software integration partners.”
−Removed: An integration allows our sales force to readily access new client opportunities or respond to inbound leads because, in many cases, a business will prefer, or in some cases only consider, a payments provider that has already integrated or is able to integrate its solutions with the business’
−Removed: primary enterprise management system.
+Added: The integration of our technology with key software providers in the verticals that we serve, including loan management systems, dealer management systems (“DMS”), collection management systems, and enterprise resource planning software
+Added: systems, allows us to embed our omni-channel payment processing technology into our clients’ critical workflow software and ensure seamless operation of our solutions within our clients’ enterprise management systems.
+Added: We refer to these software providers as our “software integration partners.” An integration allows our sales force to readily access new client opportunities or respond to inbound leads because, in many cases, a business will prefer, or in some cases only consider, a payments provider that has already integrated or is able to integrate its solutions with the business’ primary enterprise management system.
We have successfully integrated our technology solutions with numerous, widely-used enterprise management systems in the verticals that we serve, which makes our platform a more compelling choice for the businesses that use them.
−Removed: Moreover, our relationships with our partners help us to develop deep industry knowledge regarding trends in client needs.
+Added: Moreover, our relationships with our software integration partners help us to develop deep industry knowledge regarding trends in client needs.
Our integrated model fosters long-term relationships with our clients, which supports our volume retention rates that we believe are above industry averages.
As of December 31, 2023, we maintained approximately 262 integrations with various software providers.
−Removed: Starting from December 31, 2022, we report our financial results based on two reportable segments, Consumer Payments and Business Payments.
+Added: We report our financial results based on two reportable segments, Consumer Payments and Business Payments.
For additional information on our segments, see Note 15.
−Removed: Segments to our consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
+Added: Segments to our consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Consumer Payments
−Removed: Our Consumer Payments segment provides payment processing solutions (including debit and credit card processing, ACH processing and other electronic payment acceptance solutions, as well as our loan disbursement product) that enable our clients to collect payments and disburse funds to consumers and includes our clearing and settlement solutions (“RCS”) and Blue Cow Software business (“BCS”).
+Added: Our Consumer Payments segment provides payment processing solutions (including debit and credit card processing, Automated Clearing House (“ACH”) processing and other electronic payment acceptance solutions, as well as our loan disbursement product) that enable our clients to collect payments and disburse funds to consumers and includes our clearing and settlement solutions (“RCS”) offering.
RCS is our proprietary clearing and settlement platform through which we market customizable payment processing programs to other ISOs and payment facilitators.
−Removed: BCS provides enterprise resource planning software solutions that are customized to propane and fuel oil dealers.
−Removed: The strategic vertical markets served by our Consumer Payments segment primarily include personal loans, automotive loans, receivables management, credit unions, mortgage servicing, consumer healthcare, diversified retail and energy related software services.
−Removed: The BCS business was sold on February 15, 2023.
+Added: The strategic vertical markets served by our Consumer Payments segment primarily include personal loans, automotive loans, receivables management, credit unions, mortgage servicing, consumer healthcare and diversified retail.
+Added: Our Consumer Payments segment also previously included our Blue Cow Software business (“BCS”), which was sold on February 15, 2023.
Our Consumer Payments segment represented approximately 87% of our total revenue after any intersegment eliminations for the year ended December 31, 2023.
Business Payments
−Removed: Our Business Payments segment provides payment processing solutions (including accounts payable automation, debit and credit card processing, virtual credit card processing, Automated Clearing House (“ACH”) processing and other electronic payment acceptance solutions) that enable our clients to collect or send payments to other businesses.
+Added: Our Business Payments segment provides payment processing solutions (including accounts payable automation, debit and credit card processing, virtual credit card processing, ACH processing and other electronic payment acceptance solutions) that enable our clients to collect or send payments to other businesses.
The strategic vertical markets served within our Business Payments segment primarily include retail automotive, education, field services, governments and municipalities, healthcare, HOA management and hospitality.
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We expect to grow meaningfully by continuing to provide innovative payment solutions and client support to our existing clients as well as new clients in the verticals that we currently serve.
+Added: For new clients, we intend to continue to focus a significant portion of our sales efforts on large enterprise clients.
In addition, our business model allows us to benefit from the growth of our clients and software integration partners.
−Removed: As our clients’
−Removed: payment volumes and transactions increase, our revenues increase as a result of the fees we charge for processing these payments.
−Removed: Many of the vertical markets in which we compete are continuing to shift from legacy payment mediums —
−Removed: primarily cash and check —
−Removed: to electronic forms of payment.
+Added: As our clients’ payment volumes and transactions increase, our revenues increase as a result of the fees we charge for processing these payments.
+Added: Many of the vertical markets in which we compete are continuing to shift from legacy payment mediums — primarily cash and check — to electronic forms of payment.
We expect to benefit from this trend as our clients increasingly opt to process payments via the electronic forms of payment in which we specialize.
−Removed: New Vertical and Geographic Expansion
+Added: New Vertical Expansion
We also expect that we will find attractive growth potential in certain verticals in which we currently have limited operations or do not operate.
−Removed: Though we offer highly customized payment solutions to our clients, our core technology platform
−Removed: is comprehensive and can be utilized to penetrate other strategic vertical markets.
−Removed: Additionally, we envision growing our geographic footprint, as new territories continue to present new business opportunities.
−Removed: For example, we are focused on expanding our Canadian operations, as the demand for our solutions among existing and prospective Canadian clients remains strong.
+Added: Though we offer highly customized payment solutions to our clients, our core technology platform is comprehensive and can be utilized to penetrate other strategic vertical markets.
Strengthen and Extend Our Solution Portfolio through Continued Innovation
−Removed: As we further integrate our solution into our clients’
−Removed: workflows, we will look to continue to innovate on our solution set and broaden our suite of services.
−Removed: Our acquisition of TriSource Solutions, LLC (“TriSource”) and our continued investment in our technology capabilities position us to provide value-added services that will address the evolving needs of our clients as they seek to best serve their customers.
+Added: As we further integrate our solution into our clients’ workflows, we will look to continue to innovate on our solution set and broaden our suite of services.
+Added: Our continued investment in our technology capabilities (including our RCS platform) positions us to provide value-added services and emerging payment solutions that will address the evolving needs of our clients as they seek to best serve their customers.
The ability to serve clients across verticals and to be integrated across various software platforms enables us to better understand the needs of clients across verticals and to scale our innovative solutions to a broad segment of the market.
Continue to Drive Operational Efficiencies
−Removed: As we continue to grow, we expect to become a more significant partner to our sponsor banks, third party processors and software integration partners, which we expect will give us greater leverage as we expand our contractual relationships with them.
−Removed: We plan to continue to drive operating leverage in our non-technology personnel expenditures, as we believe that, in general we can process larger payment volumes without significant increases to our personnel and operating expenses.
+Added: As we continue to grow, we expect to become a more significant partner to our sponsor banks, third party processors and other key vendor relationships, which we expect will give us greater leverage as we expand our contractual relationships with them.
+Added: We plan to continue to drive operating leverage in our personnel expenditures, as we believe that, in general, we can process larger payment volumes without significant increases to our personnel and operating expenses.
Strategic Acquisitions
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• Payment Acceptance
−Removed: o Debit and Credit Card Processing —
−Removed: Allows our clients to accept card payments.
+Added: o Debit and Credit Card Processing — Allows our clients to accept card payments.
These payments can be made using any of our payment channels, as further described below.
−Removed: o ACH Processing —
−Removed: Our ACH processing capabilities allow our clients to send and accept traditional and same-day ACH transactions.
−Removed: o ECash –
−Removed: Through third party relationships, we can facilitate customers who want to make payments with cash by converting it into digital payments that are deposited with our clients.
−Removed: o Digital Wallet Services –
−Removed: Enables customers to quickly and easily pay using payment data securely stored in the digital wallets of their mobile devices.
+Added: o ACH Processing — Our ACH processing capabilities allow our clients to send and accept traditional and same-day ACH transactions.
+Added: o ECash — Through third party relationships, we can facilitate customers who want to make payments with cash by converting it into digital payments that are deposited with our clients.
+Added: o Digital Wallet Services — Enables consumers to quickly and easily pay using payment data securely stored in the digital wallets of their mobile devices.
• Accounts Payable Automation
−Removed: o Virtual Credit Card Processing —
−Removed: Our virtual credit card product offering enables our clients to automate their payables transactions by sending single-use virtual credit cards to their suppliers.
−Removed: o Enhanced ACH Processing —
−Removed: Provides the same functionality as our standard ACH processing capability, but with the added benefit of incremental transaction and reconciliation data.
−Removed: Clearing and Settlement –
−Removed: Our RCS business offers ISOs and payment facilitators clearing and settlement solutions for all major card brands
−Removed: Instant Funding —
−Removed: Our instant funding capabilities allow our clients to transfer funds directly to a consumer’s debit or prepaid card.
+Added: o Virtual Credit Card Processing — Our virtual credit card product offering enables our clients to automate their payables transactions by sending single-use virtual credit cards to their suppliers.
+Added: o Enhanced ACH Processing — Provides the same functionality as our standard ACH processing capability, but with the added benefit of incremental transaction and reconciliation data.
+Added: • Clearing and Settlement – Our RCS platform offers ISOs and payment facilitators clearing and settlement solutions for all major card brands.
+Added: • Instant Funding — Our instant funding capabilities allow our clients to transfer funds directly to a consumer’s debit or prepaid card.
We have created a proprietary process that decreases processing delays typically associated with traditional fund disbursements.
+Added: • Communication Solutions — As an ancillary offering to our payment processing solutions, we provide clients document processing and mailing services, including document printing, billing statements, image printing, and check printing.
The above payment acceptance and funding methods are processed through our proprietary payment channels:
−Removed: o Virtual Terminal —
−Removed: A terminal that provides virtual payment access for processing of ACH or card transactions.
−Removed: o Hosted Payment Page —
−Removed: A client-branded terminal that enables ACH and card transaction processing.
−Removed: o Online Client Portal —
−Removed: A consumer-facing, client-specific website that gives a client’s customer the ability to pay online and view account information anywhere, anytime.
+Added: o Virtual Terminal — A terminal that provides virtual payment access for processing of ACH or card transactions.
+Added: o Hosted Payment Page — A client-branded terminal that enables ACH and card transaction processing.
+Added: o Online Client Portal — A consumer-facing, client-specific website that gives a client’s customer the ability to pay online and view account information anywhere, anytime.
A Repay hosted website may be stand alone or integrated with any other software application.
−Removed: Mobile Application —
−Removed: We provide clients the ability to accept payments via a mobile application on a customized, white-label basis.
−Removed: Text-to-Pay —
−Removed: Allows a business’
−Removed: customer to pay with a simple text message after receiving an SMS alert that reminds such customer when payments are due.
−Removed: Interactive Voice Response (“IVR”) —
−Removed: A secure and flexible option to pay over the phone, 24 hours a day, 7 days a week, via a 1-800 number with bilingual capabilities.
−Removed: Point of Sale (“POS”) —
−Removed: We provide payment acceptance at brick-and-mortar locations through POS equipment that requires a client’s customer to provide a card.
+Added: • Mobile Application — We provide clients the ability to accept payments via a mobile application on a customized, white-label basis.
+Added: • Text-to-Pay — Allows a business’ customer to pay with a simple text message after receiving an SMS alert that reminds such customer when payments are due.
+Added: • Interactive Voice Response (“IVR”) — A secure and flexible option to pay over the phone, 24 hours a day, 7 days a week, via a 1-800 number with bilingual capabilities.
+Added: • Point of Sale (“POS”) — We provide payment acceptance at brick-and-mortar locations through POS equipment that requires a client’s customer to provide a card.
Sales and Distribution
Our sales effort primarily consists of two strategies:
−Removed: first, our direct sales representatives, who focus on each of our core verticals, and second, our software integration partners, which enable the direct salesforce to more effectively access new client opportunities and respond to inbound leads.
+Added: first, our direct sales representatives, who focus on each of our core verticals, and second, our software integration partners, which enable the direct sales force to more effectively access new client opportunities and respond to inbound leads.
Direct Sales Representatives
−Removed: Our sales representatives are organized by vertical market and account size.
−Removed: Direct sales representatives work with our clients and software integration partners to understand our clients’
−Removed: desired payment solutions and then communicate those desires to our product and technology teams, who build a customized suite of products and payment channels tailored to our clients’
−Removed: specific needs.
+Added: Our sales representatives are generally organized by vertical market and account size.
+Added: Direct sales representatives work with our clients and software integration partners to understand our clients’ desired payment solutions and then communicate those desires to our product and technology teams, who build a customized suite of products and payment channels tailored to our clients’ specific needs.
We also maintain a sales support team that supports the onboarding process.
Software Integration Partners
−Removed: As of December 31, 2022, we were integrated with approximately 240 software partners that are providers of our clients’
−Removed: primary enterprise management systems.
−Removed: Our integrations ensure seamless delivery of our full suite of payment processing capabilities to our clients.
−Removed: These integrations are also a critical part of our marketing strategy, as many clients would prefer to award their payments business to payments processors who have worked to integrate their solutions into the client’s enterprise management systems.
+Added: As of December 31, 2023, we were integrated with approximately 262 software partners that are providers of our clients’ primary enterprise management systems.
+Added: Our integrations are intended to ensure seamless delivery of our full suite of payment processing capabilities to our clients.
+Added: These integrations are also a critical part of our marketing strategy, as many clients would prefer to award their payments business to payments processors who have worked to integrate their solutions into the client’s enterprise management systems.
We believe that we have developed an effective operations system, including our proprietary onboarding, compliance and client oversight processes, which is structured to enhance the performance of our platform and support our clients.
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Proprietary Compliance Management System .
−Removed: We have developed proprietary onboarding, compliance, and client oversight processes, of which our Compliance Management System (“CMS”) is a part.
−Removed: Our CMS, developed in conjunction
−Removed: with the Third Party Payment Processors Association, focuses on four main components —
−Removed: board and management oversight, a compliance program with written policies and procedures and employee training and monitoring, responsiveness to consumer complaints and annual compliance audits from an independent third party —
−Removed: and is inclusive of the Electronic Transaction Association guidelines on underwriting and risk.
+Added: We have developed proprietary onboarding, compliance, and client oversight processes, of which our Compliance Management System (“CMS”) is a part.
+Added: Our CMS, developed in conjunction with the Third Party Payment Processors Association, focuses on four main components — board and management oversight, a compliance program with written policies and procedures and employee training and monitoring, responsiveness to consumer complaints and annual compliance audits from an independent third party — and is inclusive of the Electronic Transaction Association guidelines on underwriting and risk.
Client Onboarding .
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Client Monitoring .
−Removed: Each client’s file is assigned one of three risk levels (low, medium or high) corresponding to several client behaviors.
+Added: Each client’s file is assigned one of three risk levels (low, medium or high) corresponding to several client behaviors.
We review and adjust these risk levels on a monthly basis and additionally subject them to more in-depth quarterly reviews.
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We then review the incident to determine the actions taken or that we can take to reduce our exposure to loss and the exposure of our client to liability.
−Removed: As a part of this process, we may request additional transaction information, withhold or divert funds, verify delivery of merchandise or, in some circumstances, deactivate the client account, include the client on the Network Match List to notify our industry of the client’s behavior or take legal action against the client.
+Added: As a part of this process, we may request additional transaction information, withhold or divert funds, verify delivery of merchandise or, in some circumstances, deactivate the client account, include the client on the Network Match List to notify our industry of the client’s behavior or take legal action against the client.
We require some of our clients to establish cash or non-cash collateral reserves, which may include certificates of deposit, letters of credit, rolling merchant reserves or upfront cash.
This collateral is utilized in order to offset potential credit or fraud risk liability that we may incur.
−Removed: We attempt to hold such collateral reserves for as long as we are exposed to a loss resulting from a client’s payment processing activity.
+Added: We attempt to hold such collateral reserves for as long as we are exposed to a loss resulting from a client’s payment processing activity.
Chargebacks .
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Every employee and contractor is required to successfully complete annual security awareness training.
−Removed: We routinely retain external parties to audit our systems’
−Removed: compliance with current security standards as established by the Payment Card Industry Data Security Standards (“PCI DSS”), Service Organization Control ("SOC1 Type II,”
−Removed: “SOC2 Type II”), Health Insurance Portability and Accountability Act (“HIPAA”) and International Organization for Standardization (“ISO 27001”) and to test our systems against vulnerability to unauthorized access.
+Added: We routinely retain external parties to audit our systems’ compliance with current security standards as established by the Payment Card Industry Data Security Standards (“PCI DSS”), Service Organization Control ("SOC1 Type II,” “SOC2 Type II”), Health Insurance Portability and Accountability Act (“HIPAA”) and International Organization for Standardization (“ISO 27001”) and to test our systems against vulnerability to unauthorized access.
We utilize third party vendors for internal and external penetration testing.
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Additionally, we have a dedicated team responsible for continuous monitoring and security incident response.
−Removed: This team also develops, maintains, tests and verifies our incident response plan.
+Added: This team also develops, maintains, tests and verifies our incident
+Added: response plan.
Disaster recovery is built into our primary payment gateway through redundant hardware and software applications hosted in two distinct cloud regions.
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Third Party Processors and Sponsor Banks
−Removed: We partner with institutions in the payment chain to provide authorization, settlement and funding services in connection with our clients’
−Removed: transactions.
−Removed: These institutions include third party processors and sponsor banks, who sit between us, acting as the merchant acquirer or payment processor, and the payment networks, such as Visa, MasterCard and Discover.
+Added: We partner with institutions in the payment chain to provide authorization, settlement and funding services in connection with our clients’ transactions.
+Added: These institutions include third party processors and sponsor banks, who sit between us, acting as the merchant acquirer or payment processor, and the payment networks, such as Visa and MasterCard.
These processors and vendors in turn have agreements with the payment networks, which permit them to route transaction information through their networks in exchange for fees.
−Removed: When we facilitate a transaction as a merchant acquirer, we utilize third party processors such as Global Payments, Inc.
+Added: When we facilitate a transaction as a merchant acquirer, we utilize third party processors primarily for authorization such as Global Payments, Inc.
Under such processing arrangements, the third-party processors and vendors receive processing fees, which are typically based on the number of transactions processed.
In order for us to process and settle transactions for our clients, we have entered into sponsorship agreements with banks that are members of the payment networks.
−Removed: We are required to register with the payment networks through these bank partners because we, as a payment processor, are not a “member bank”
−Removed: as defined by the major payment networks.
−Removed: Our member bank partners sponsor our adherence to the rules and standards of the payment networks and enable us to route transactions under the sponsor banks’
−Removed: control and identification numbers (for example, known as BIN for Visa and ICA for MasterCard) across the card and ACH networks to authorize and clear transactions.
+Added: We are required to register with the payment networks through these bank partners because we, as a payment processor, are not a “member bank” as defined by the major payment networks.
+Added: Our member bank partners sponsor our adherence to the rules and standards of the payment networks and enable us to route transactions under the sponsor banks’ control and identification numbers (for example, known as BIN for Visa and ICA for MasterCard) across the card and ACH networks to authorize and clear transactions.
Our relationships with multiple sponsor banks give us the flexibility to shift payment volumes between them, which is designed to help us to secure more competitive pricing for our clients and to maintain redundancy.
−Removed: When we facilitate a client’s payment to its suppliers or vendors, we typically utilize the services of third party program managers, such as Wex Inc.
−Removed: and Comdata Inc.
−Removed: (a subsidiary of FleetCor Technologies, Inc.), who have arrangements with banks to operate card issuance programs.
+Added: When we facilitate a client’s payment to its suppliers or vendors, we typically utilize the services of third party program managers, such as Wex Inc., who have arrangements with banks to operate card issuance programs.
Under such arrangements, the program manager and issuing bank retain a portion of the interchange generated by each transaction.
Under the applicable contractual arrangements, our clients are generally required to prefund these payments.
−Removed: Because we are not a licensed money transmitter, we have entered into custodial agreements with banks or other financial institutions who will hold our clients’
−Removed: funds in trust.
−Removed: See “Risk Factors—Risks Related to Our Business –
−Removed: We rely on other service and technology providers.
−Removed: If such providers fail in or discontinue providing their services or technology to us, our ability to provide services to clients may be interrupted, and, as a result, our business, financial condition and results of operations could be adversely impacted.”
−Removed: in Part I, Item 1A of this Annual Report on Form 10-K.for further discussion of our arrangements with certain service providers.
+Added: Because we are not a licensed money transmitter, we have entered into custodial agreements with banks or other financial institutions who will hold our clients’ funds in trust.
+Added: See “Risk Factors—Risks Related to Our Business – We rely on other service and technology providers.
+Added: If such providers fail in or discontinue providing their services or technology to us, our ability to provide services to clients may be interrupted, and, as a result, our business, financial condition and results of operations could be adversely impacted.” in Part I, Item 1A of this Annual Report on Form 10-K for further discussion of our arrangements with certain service providers.
Competitive Conditions and Market Trends
We compete with a variety of payment processing companies that have different business models, go-to-market strategies and technical capabilities.
−Removed: In our Consumer Payments segment, our primary competitors include ACI Worldwide, Paymentus, PayNearMe, and PayScout.
−Removed: We also compete in our Consumer Payments segment against many traditional merchant acquirers, such as financial institutions, affiliates of financial institutions and payment processing companies in the payment processing industry, including Bank of America Merchant Services, Elavon (a subsidiary of U.S.
−Removed: Bancorp), Wells Fargo Merchant Services, Global Payments, WorldPay (a subsidiary of Fidelity National Information Services) and Fiserv.
−Removed: In our Business Payments segment, our primary competitors include AvidXchange, Corporate Spending Innovations (a division of Edenred), Nvoicepay (a division of FleetCor Technologies), Paya and Zelis.
+Added: In our Consumer Payments segment, our primary competitors include ACI Worldwide, Paymentus, PayNearMe, PayScout and TabaPay.
+Added: We also compete in our Consumer Payments segment against many traditional merchant acquirers, such as financial institutions, affiliates of financial institutions and payment processing companies, including Bank of America Merchant Services, Elavon (a subsidiary of U.S.
+Added: Bancorp), Wells Fargo Merchant Services, Global Payments, WorldPay and Fiserv.
+Added: In our Business Payments segment, our primary competitors include AvidXchange, Edenred Pay (a division of Edenred), Corpay (a division of FleetCor Technologies), Paya (a division of Nuvei Corporation) and Fortis.
We believe the most significant competitive factors in the markets in which we compete are:
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We believe there is a significant digital shift in our industry.
−Removed: Many of the vertical markets in which we compete are continuing to shift from legacy payment mediums —
−Removed: primarily cash and check —
−Removed: to electronic forms of payment.
−Removed: In addition, the COVID-19 pandemic and the resulting changes in consumer behavior has led to an accelerated shift to electronic payments.
+Added: Many of the vertical markets in which we compete are continuing to shift from legacy payment mediums — primarily cash and check — to electronic forms of payment.
+Added: the COVID-19 pandemic and the resulting changes in consumer behavior has led to an accelerated shift to electronic payments.
We expect to benefit from this trend as our clients increasingly opt to process payments via the electronic forms of payment in which we specialize.
We have experienced in the past, and may continue to experience, seasonal fluctuations in our volumes and revenues as a result of consumer spending patterns.
−Removed: Volumes and revenues during the first quarter of the calendar year tend to increase
−Removed: in comparison to the remaining three quarters of the calendar year on a same store basis.
−Removed: This increase is due to consumers’
−Removed: receipt of tax refunds and the increases in repayment activity levels that follow.
−Removed: Our historical acquisition activity has allowed us to access new markets, acquire industry talent, broaden our product suite, and supplement organic growth.
+Added: Volumes and revenues during the first quarter of the calendar year tend to increase in comparison to the remaining three quarters of the calendar year on a same store basis.
+Added: This increase is due to consumers’ receipt of tax refunds and the increases in repayment activity levels that follow.
+Added: Our historical acquisition activity has allowed us to access new markets, expand our presence in existing markets, acquire industry talent, broaden our product suite, and supplement organic growth.
Our current acquisition strategy focuses on integrated payments companies serving attractive vertical markets and opportunities to broaden our product offerings.
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Effective as of January 1, 2016, we acquired substantially all of the assets of Sigma Payment Solutions, Inc.
−Removed: (“Sigma”).
Sigma was an electronic payment solutions provider to the automotive finance industry.
The transaction marked our expansion into the automotive finance space.
−Removed: We have benefited greatly from Sigma’s deep integrations with automotive finance software platforms, or DMS.
+Added: We have benefited greatly from Sigma’s deep integrations with automotive finance software platforms, or DMS.
PaidSuite Acquisition
On September 28, 2017, we acquired substantially all of the assets of PaidSuite, Inc.
−Removed: and PaidMD, LLC (collectively, “PaidSuite”).
−Removed: PaidSuite was an electronic payment solutions provider to the accounts receivable management industry.
−Removed: The transaction accelerated our growth into the accounts receivable management space via client and software integration partner relationships.
+Added: and PaidMD, LLC (collectively, “PaidSuite”).
+Added: PaidSuite was an electronic payment solutions provider to the receivable management industry.
+Added: The transaction accelerated our growth into the receivable management space via client and software integration partner relationships.
Paymaxx Acquisition
−Removed: On December 15, 2017, we acquired substantially all of the assets of Paymaxx Pro, LLC (“Paymaxx”).
−Removed: The acquisition of Paymaxx has been highly complementary to our earlier acquisition of Sigma and has bolstered our position in the niche automotive finance market.
+Added: On December 15, 2017, we acquired substantially all of the assets of Paymaxx Pro, LLC (“Paymaxx”).
+Added: The acquisition of Paymaxx has been highly complementary to our earlier acquisition of Sigma and has bolstered our position in the automotive finance market.
As part of the acquisition, we acquired increased distribution capabilities in the form of an internal sales force and numerous DMS integrations.
TriSource Acquisition
−Removed: On August 14, 2019, we acquired all of the equity interests of TriSource.
+Added: On August 14, 2019, we acquired all of the equity interests of TriSource Solutions, LLC (“TriSource”).
Since 2012, we have used TriSource as one of our primary third-party processors for settlement solutions when we facilitate transactions as a merchant acquirer.
The acquisition of TriSource has provided further control over our transaction processing ecosystem and accelerated product delivery capabilities.
+Added: We now generally refer to our clearing and settlement product offerings as RCS.
APS Acquisition
−Removed: On October 14, 2019, we acquired substantially all of the assets of American Payment Services of Coeur D’Alene, LLC, North American Payment Solutions LLC, and North American Payment Solutions Inc.
−Removed: (collectively, “APS”) .
+Added: On October 14, 2019, we acquired substantially all of the assets of American Payment Services of Coeur D’Alene, LLC, North American Payment Solutions LLC, and North American Payment Solutions Inc.
+Added: (collectively, “APS”) .
The acquisition of APS meaningfully expanded our addressable market by enabling us to access the business-to-business vertical.
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On February 10, 2020, we acquired all of the equity interests of CDT Technologies, LTD.
−Removed: d/b/a Ventanex (“Ventanex”).
−Removed: The acquisition of Ventanex accelerated our entry into the healthcare payments vertical.
+Added: d/b/a Ventanex (“Ventanex”).
+Added: The acquisition of Ventanex accelerated our entry into the mortgage and healthcare payments verticals.
cPayPlus Acquisition
−Removed: On July 23, 2020, we acquired all of the equity interest of cPayPlus, LLC (“cPayPlus”).
+Added: On July 23, 2020, we acquired all of the equity interest of cPayPlus, LLC (“cPayPlus”).
The acquisition of cPayPlus further expanded our business-to-business automation and payment offering to include accounts payable automation and payment solutions for both existing and prospective clients across all business lines.
CPS Acquisition
−Removed: On November 2, 2020, we acquired all of the equity interests of CPS Payment Services , LLC, Media Payments, LLC, and Custom Payment Systems, LLC (collectively, “CPS”).
+Added: On November 2, 2020, we acquired all of the equity interests of CPS Payment Services , LLC, Media Payments, LLC, and Custom Payment Systems, LLC (collectively, “CPS”).
The acquisition of CPS enhanced our business-to-business accounts payable automation offerings and introduced our solutions to new verticals including education, government, and media sectors.
BillingTree Acquisition
−Removed: On June 15, 2021, we acquired all of the equity interests of BT Intermediate, LLC (together with its subsidiaries, “BillingTree”).
−Removed: The acquisition of BillingTree further expanded our position in the healthcare, credit union, and accounts receivable management industries and significantly enhanced our scale and our client diversification.
+Added: On June 15, 2021, we acquired all of the equity interests of BT Intermediate, LLC (together with its subsidiaries, “BillingTree”).
+Added: The acquisition of BillingTree further expanded our position in the healthcare, credit union, and receivable management industries and significantly enhanced our scale and our client diversification.
Kontrol Acquisition
−Removed: On June 22, 2021, we acquired substantially all of the assets of Kontrol LLC (“Kontrol”).
−Removed: The acquisition of Kontrol grew our accounts payable automation business and enabled us to leverage our existing B2B technology infrastructure to increase our virtual card volume.
+Added: On June 22, 2021, we acquired substantially all of the assets of Kontrol LLC (“Kontrol”).
+Added: The acquisition of Kontrol grew our accounts payable automation business and enabled us to leverage our existing B2B technology infrastructure to optimize processing costs.
Payix Acquisition
−Removed: On December 29, 2021, we acquired Payix Holdings Incorporated (together with its subsidiary, “Payix”).
−Removed: The acquisition of Payix expanded our position in the large and growing automotive finance market and provided further access to software integrations with leading loan management system and DMS integrations.
+Added: On December 29, 2021, we acquired Payix Holdings Incorporated (together with its subsidiary, “Payix”).
+Added: The acquisition of Payix expanded our position in the personal and automotive finance markets, as well as accelerated our expansion in the buy now, pay later (“BNPL”) market, and provided further access to software integrations with leading loan management systems and DMS integrations.
Government Regulation
We operate in an increasingly complex and ever evolving legal and regulatory environment.
−Removed: Our and our clients’
−Removed: businesses are subject to a variety of federal, state and local laws and regulations, as well as the rules and standards of the payment networks that we utilize to provide our electronic payment services.
+Added: Our and our clients’ businesses are subject to a variety of federal, state and local laws and regulations, as well as the rules and standards of the payment networks that we utilize to provide our electronic payment services.
While in some cases payment processors such as Repay are not directly regulated by governmental agencies, because of the rules and regulations enacted at the state and federal level that affect our clients and sponsor banks, we have developed and continually evaluate and update our compliance models to keep up with the rapid evolution of the legal and regulatory regime our clients and sponsor banks face.
−Removed: We are also subject to legal and regulatory requirements which govern the use, storage and distribution of the information we collect from our clients and cardholders while processing transactions.
+Added: We are also subject to legal and regulatory requirements which govern the use, storage and distribution of the information we collect from our clients and accountholders while processing transactions.
Dodd-Frank Act
−Removed: The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and its related rules and regulations have resulted in significant changes to the regulation of the financial services industry, including the electronic payment industry.
−Removed: Under the Dodd-Frank Act, debit interchange transaction fees that a card issuer receives and are established by a payment card network for an electronic debit transaction are regulated by the Board of Governors of the Federal Reserve System (the “Federal Reserve”).
−Removed: The Dodd-Frank Act and the Federal Reserve’s implementing regulations require that such interchange fees be “reasonable and proportional”
−Removed: to the cost incurred by the issuer in processing the transactions.
−Removed: Federal Reserve regulations implementing this “reasonable and proportional”
−Removed: requirement have capped debit interchange rates for card issuers operating in the United States with assets of $10 billion or more.
+Added: The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and its related rules and regulations have resulted in significant changes to the regulation of the financial services industry, including the electronic payment industry.
+Added: Under the Dodd-Frank Act, debit interchange transaction fees that a card issuer receives and are established by a payment card network for an electronic debit transaction are regulated by the Board of Governors of the Federal Reserve System (the “Federal Reserve”).
+Added: The Dodd-Frank Act and the Federal Reserve’s implementing regulations require that such interchange fees be “reasonable and proportional” to the cost incurred by the issuer in processing the transactions.
+Added: Federal Reserve regulations implementing this “reasonable and proportional” requirement have capped debit interchange rates for card issuers operating in the United States with assets of $10 billion or more.
In addition, the regulations contain certain prohibitions on card brand network exclusivity and merchant routing restrictions of debit card transactions.
As a result of the Dodd-Frank Act, merchants are also allowed to set minimum dollar amounts (within certain parameters) for the acceptance of a credit card, and they are allowed to provide discounts or incentives to entice consumers to pay with an alternative payment method, such as cash, checks or debit cards.
−Removed: The Dodd-Frank Act also created the Consumer Financial Protection Bureau (the “CFPB”), which has rulemaking authority over consumer protection laws, including the authority to regulate consumer financial products in the United States, including consumer credit, deposit, payment, and similar products.
+Added: The Dodd-Frank Act also created the Consumer Financial Protection Bureau (the “CFPB”), which has rulemaking authority over consumer protection laws, including the authority to regulate consumer financial products in the United States, including consumer credit, deposit, payment, and similar products.
The CFPB may also have authority over us as a provider of services to regulated financial institutions in connection with consumer financial products.
−Removed: Any new rules or regulations implemented by the CFPB, and other similar regulatory agencies in other jurisdictions, or pursuant to the Dodd-Frank Act that are applicable to us or our clients’
−Removed: businesses, or any adverse changes thereto, could increase our cost of doing business or limit our current offerings of integrated payment solutions.
+Added: Any new rules or regulations implemented by the CFPB, and other similar regulatory agencies in other jurisdictions, or pursuant to the Dodd-Frank Act that
+Added: are applicable to us or our clients’ businesses, or any adverse changes thereto, could increase our cost of doing business or limit our current offerings of integrated payment solutions.
Privacy and Information Security Regulations
−Removed: We provide services that may be subject to various state and federal privacy laws and regulations.
−Removed: Relevant federal privacy laws include the Gramm-Leach-Bliley Act of 1999, which (along with its implementing regulations) restricts certain collection, processing, storage, use and disclosure of personal information, requires notice to individuals of privacy practices and provides individuals with certain rights to prevent the use and disclosure of certain nonpublic or otherwise legally protected information.
+Added: We provide services that may be subject to various state and federal data privacy and information security laws and regulations.
+Added: Relevant federal data privacy and information security laws include the Gramm-Leach-Bliley Act of 1999, which (along with its implementing regulations) restricts certain collection, processing, storage, use and disclosure of personal information, requires notice to individuals of privacy practices and provides individuals with certain rights to prevent the use and disclosure of certain nonpublic or otherwise legally protected information.
These rules also impose requirements for the safeguarding and proper destruction of personal information through the issuance of data security standards or guidelines.
−Removed: Our business may also be subject to the Fair Credit Reporting Act of 1970,
−Removed: as amended by the Fair and Accurate Credit Transactions Act of 2003, which regulates the use and reporting of consumer credit information and imposes disclosure requirements on entities who take adverse action based on information obtained from credit reporting agencies.
+Added: Our business may also be subject to the Fair Credit Reporting Act of 1970, as amended by the Fair and Accurate Credit Transactions Act of 2003, which regulates the use and reporting of consumer credit information and imposes disclosure requirements on entities who take adverse action based on information obtained from credit reporting agencies.
All fifty states have enacted data breach notification laws requiring businesses that experience a security breach of their computer databases that contain personal information to notify affected individuals, consumer reporting agencies and governmental agencies.
−Removed: In addition, there are state laws that restrict the ability to collect and utilize certain types of personal information, such as Social Security and driver’s license numbers, and impose secure disposal requirements for personal data.
+Added: In addition, there are state laws that restrict the ability to collect and utilize certain types of personal information, such as Social Security and driver’s license numbers, and impose secure disposal requirements for personal data.
Certain state laws mandate businesses to implement reasonable data security measures.
−Removed: In addition, various states, including California, Colorado, Connecticut, Utah and Virginia, have recently enacted laws concerning privacy, data protection and information security.
−Removed: For example, the California Consumer Privacy Act of 2018 (the “CCPA”), which went into effect on January 1, 2020 and was amended by the California Privacy Rights Act of 2020 (the “CRPA”), for which most provisions were effective on January 1, 2023, requires companies that process personal information of California residents to make certain disclosures to consumers about data practices, grants consumers specific access rights to their data, allows consumers to opt out of certain data sharing activities and creates a private right of action for data breaches.
+Added: In addition, various states have recently enacted laws concerning privacy, data protection and information security.
+Added: For example, the California Consumer Privacy Act of 2018 (the “CCPA”), which went into effect on January 1, 2020 and was amended by the California Privacy Rights Act of 2020 (the “CRPA”), for which most provisions were effective on January 1, 2023, requires companies that process personal information of California residents to make certain disclosures to consumers about data practices, grants consumers specific access rights to their data, allows consumers to opt out of certain data sharing activities and creates a private right of action for data breaches.
The CPRA also establishes a privacy enforcement agency known as the California Privacy Protection Agency.
−Removed: Other states are expected to enact in new similar laws and regulations in the near future.
+Added: At least 12 other states have enacted similar laws and regulations, and other states are expected to enact new similar laws and regulations in the near future.
Health Insurance Portability and Accountability Act & Health Information Technology for Economic and Clinical Health Act
−Removed: HIPAA and its related rules and regulations establish policies and procedures for maintaining the privacy and security of individually identifiable health information (“Protected Health Information”).
−Removed: The Health Information Technology for Economic and Clinical Health Act and its related rules and regulations extended the privacy and security provisions of HIPAA to “Business Associates”
−Removed: of “Covered Entities”
−Removed: (each as defined by HIPAA).
+Added: HIPAA and its related rules and regulations establish policies and procedures for maintaining the privacy and security of individually identifiable health information (“Protected Health Information”).
+Added: The Health Information Technology for Economic and Clinical Health Act and its related rules and regulations extended the privacy and security provisions of HIPAA to “Business Associates” of “Covered Entities” (each as defined by HIPAA).
Some of our clients are Covered Entities.
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federal anti-money laundering laws and regulations.
−Removed: We are also subject to certain economic and trade sanctions programs that are administered by OFAC that prohibit or restrict transactions to or from (or transactions dealing with) narcotics traffickers, terrorists, terrorist organizations, certain individuals, specified countries, their governments and, in certain circumstances, their nationals.
+Added: We are also subject to certain economic and trade sanctions programs that are administered by Office of Foreign Assets Control (“OFAC”) that prohibit or restrict transactions to or from (or transactions dealing with) narcotics traffickers, terrorists, terrorist organizations, certain individuals, specified countries, their governments and, in certain circumstances, their nationals.
Similar anti-money laundering, counter-terrorist financing and proceeds of crime laws apply to movements of currency and payments through electronic transactions and to dealings with persons specified on lists maintained by organizations similar to OFAC in several other countries and which may impose specific data retention obligations or prohibitions on intermediaries in the payment process.
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We and many of our clients are subject to Section 5 of the Federal Trade Commission Act prohibiting unfair or deceptive acts or practices and various state laws similar in scope and subject matter thereto.
−Removed: In addition, laws prohibiting these activities and other laws, rules and or regulations, including the Telemarketing Sales Rule, may directly impact the activities of certain of our clients, and in some cases may subject us, as the client’s payment processor or provider of certain services, to investigations, fees, fines and disgorgement of funds if we are deemed to have aided and abetted or otherwise provided the means and instrumentalities to facilitate the illegal or improper activities of a client through our services.
−Removed: Various federal and state regulatory enforcement agencies, including the Federal Trade Commission (“FTC”) and the states attorneys general, have authority to take action against payment processors who violate such laws, rules and regulations.
−Removed: To the extent we are
−Removed: processing payments or providing services for a client suspected of violating such laws, rules and regulations, we may face enforcement actions and, as a result, incur losses and liabilities that may adversely affect our business.
−Removed: In addition, the Dodd-Frank Act gave the CFPB broad authority to prohibit “unfair, deceptive or abusive acts or practices”
−Removed: (“UDAAP”) in connection with the provision of consumer financial products and services.
+Added: In addition, laws prohibiting these activities and other laws, rules and or regulations, including the Telemarketing Sales Rule, may directly impact the activities of certain of our clients, and in some cases may subject us, as the client’s payment processor or provider of certain services, to
+Added: investigations, fees, fines and disgorgement of funds if we are deemed to have aided and abetted or otherwise provided the means and instrumentalities to facilitate the illegal or improper activities of a client through our services.
+Added: Various federal and state regulatory enforcement agencies, including the Federal Trade Commission (“FTC”) and the states attorneys general, have authority to take action against payment processors who violate such laws, rules and regulations.
+Added: To the extent we are processing payments or providing services for a client suspected of violating such laws, rules and regulations, we may face enforcement actions and, as a result, incur losses and liabilities that may adversely affect our business.
+Added: In addition, the Dodd-Frank Act gave the CFPB broad authority to prohibit “unfair, deceptive or abusive acts or practices” (“UDAAP”) in connection with the provision of consumer financial products and services.
The CFPB has extended certain UDAAP-related provisions of the Dodd-Frank Act to directly apply to payment processors.
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For personal lenders and automotive lenders, these laws and regulations could include limitations on interest rates and fees, maximum loan amounts and the number of simultaneous or consecutive loans, imposition of required waiting periods between loans, loan extensions and refinancing, requiring payment schedules (including maximum and minimum loan durations) or repayment plans for borrowers claiming inability to repay loans, mandating disclosures, security for loans, licensing requirements and, in certain jurisdictions, database reporting and loan utilization information.
−Removed: For receivables management companies, these laws and regulations could include laws and regulations (including the federal Fair Debt Collection Practices Act (“FDCPA”) and comparable state laws) regarding the time, place and manner of communications with consumers regarding debt collection and prohibitions or limitations on certain debt collection practices.
+Added: For receivables management companies, these laws and regulations could include laws and regulations (including the federal Fair Debt Collection Practices Act (“FDCPA”) and comparable state laws) regarding the time, place and manner of communications with consumers regarding debt collection and prohibitions or limitations on certain debt collection practices.
Lastly, some of our clients are subject to various state laws and regulations that prohibit or limit the imposition of a surcharge or convenience fee in connection with their customers use of a payment card or other form of electronic payment.
Payment Network Rules and Standards
−Removed: Payment networks, such as Visa, MasterCard and American Express, establish their own rules and standards that allocate liabilities and responsibilities among the payment networks and their participants.
+Added: Payment networks, such as Visa, MasterCard, Discover and American Express, establish their own rules and standards that allocate liabilities and responsibilities among the payment networks and their participants.
These rules and standards, including the Payment Card Industry Data Security Standards, govern a variety of areas, including how consumers and customers may use their cards, whether (and the terms under which) convenience fees or surcharges may be imposed in connection with the use of their cards, the security features of cards, security standards for processing, data security and allocation of liability for certain acts or omissions, including liability in the event of a data breach.
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In order for us to process and settle transactions for our clients, we have entered into sponsorship agreements with banks that are members of the payment networks.
−Removed: We are required to register with the payment networks through these bank partners because we, as a payment processor, are not a “member bank”
−Removed: as defined by the major payment networks’
−Removed: rules and standards governing access to those networks.
−Removed: Our bank partners sponsor our adherence to the rules and standards of the payment networks and enable us to route transactions under the sponsor banks’
−Removed: control and identification numbers (known as BIN for Visa and ICA for MasterCard) across the card and ACH networks to authorize and clear transactions.
−Removed: Payment network rules restrict us from performing funds settlement and require that merchant settlement funds be in the possession of the member
−Removed: bank until the merchant is funded.
+Added: We are required to register with the payment networks through these bank
+Added: partners because we, as a payment processor, are not a “member bank” as defined by the major payment networks’ rules and standards governing access to those networks.
+Added: Our bank partners sponsor our adherence to the rules and standards of the payment networks and enable us to route transactions under the sponsor banks’ control and identification numbers (known as BIN for Visa and ICA for MasterCard) across the card and ACH networks to authorize and clear transactions.
+Added: Payment network rules restrict us from performing funds settlement and require that merchant settlement funds be in the possession of the member bank until the merchant is funded.
These restrictions place the settlement assets and liabilities under the control of the member bank.
Our sponsorship agreements give our sponsor banks substantial discretion in approving certain aspects of our business practices, including our solicitation, application and qualification procedures for clients and the terms of our agreements with clients, and provide them with the right to audit our compliance with the payment network rules and guidelines.
−Removed: We are also subject to network operating rules and guidelines promulgated by the National Automated Clearing House Association (“NACHA”) relating to payment transactions we process using the Automated Clearing House Network.
+Added: We are also subject to network operating rules and guidelines promulgated by the National Automated Clearing House Association (“NACHA”) relating to payment transactions we process using the Automated Clearing House Network.
Like the payment networks, NACHA may update its operating rules and guidelines at any time, which can require us to take more costly compliance measures or to develop more complex monitoring systems.
−Removed: Similarly, our ACH sponsor banks have the right to audit our compliance with NACHA’s rules and guidelines, and are given wide discretion to approve certain aspects of our business practices and terms of our agreements with ACH clients.
+Added: Similarly, our ACH sponsor banks have the right to audit our compliance with NACHA’s rules and guidelines, and are given wide discretion to approve certain aspects of our business practices and terms of our agreements with ACH clients.
Other Regulation
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The foregoing is not an exhaustive list of the laws and regulations to which we are subject and the regulatory framework governing our business is changing continuously.
−Removed: See “Risk Factors —
−Removed: Risks Related to Our Business”
−Removed: in Part I, Item 1A of this Annual Report on Form 10-K.
+Added: See “Risk Factors — Risks Related to Our Business” in Part I, Item 1A of this Annual Report on Form 10-K.
Intellectual Property
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We also own a number of domain names, including www.repay.com.
−Removed: For additional information regarding some of the risks relating to our intellectual property see “Risk Factors —
−Removed: Risks Related to Our Business —
−Removed: We may not be able to successfully manage our intellectual property and may be subject to infringement claims.”
−Removed: in Part I, Item 1A of this Annual Report on Form 10-K.
+Added: For additional information regarding some of the risks relating to our intellectual property see “Risk Factors — Risks Related to Our Business — We may not be able to successfully manage our intellectual property and are subject to infringement claims.” in Part I, Item 1A of this Annual Report on Form 10-K.
Human Capital
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As of December 31, 2023, we employed approximately 512 full-time employees throughout the U.S.
−Removed: We have 12 office locations in the U.S.
−Removed: and have a remote employee presence in 42 states.
+Added: We have 7 office locations with an employee presence and have a remote employee presence in 33 states.
None of our employees are represented by a labor union or covered by a collective bargaining agreement.
−Removed: We strive to create and maintain a special culture at REPAY that focuses on our values of excellence, passion, integrity, respect, and innovation.
+Added: We strive to create and maintain a special culture at REPAY that focuses on our values of excellence, passion, integrity, respect, innovation, and positive attitude.
Our strong emphasis on culture is intended to empower our employees to make decisions and develop themselves personally and professionally.
−Removed: One of our priorities is to maintain and enhance our culture as we grow in employee size and integrate new team members.
+Added: One of our priorities is to maintain and enhance our culture as we grow and integrate new team members.
We participate in an annual employee engagement and feedback survey which allows all full-time employees to anonymously give us feedback on our workplace culture, employee programs, and more.
In 2023, 83% of participants responded that REPAY is a great place to work.
−Removed: Our employees’
−Removed: feedback from the annual surveys have allowed us to be certified as a Great Place to Work® for the last seven consecutive years.
+Added: Our employees’ feedback from the annual surveys have allowed us to be
+Added: certified as a Great Place to Work® for the last seven consecutive years.
We take employee feedback seriously and share the results of the survey, along with an action plan of how we can continue to improve, with all employees.
Attracting, developing, and retaining top talent is a priority at REPAY and we have a dedicated human resources team that focuses on these initiatives.
−Removed: To ensure we stay competitive in the talent market, we strive to make it clear to our employees
−Removed: that we value and appreciate them, and reward high performance.
+Added: To ensure we stay competitive in the talent market, we strive to make it clear to our employees that we value and appreciate them, and reward high performance.
We foster a culture of rewards and recognition and incentivize our employees with opportunities for growth within the company.
−Removed: New employees are welcomed through our virtual new hire onboarding experience, which consists of at-home equipment, welcome gift packages, an onboarding plan with consistent communication, and human resources orientation, ensures our new hires have the support they need.
−Removed: Additionally, new hire spotlights are socialized in our monthly newsletters to ensure new team members are introduced to the Company and receive a warm welcome and every one of our new employees has the opportunity to meet with our CEO for a “coffee chat”
−Removed: within their first month of employment.
−Removed: REPAY’s leadership empowers each team member to make a difference and stretch to their fullest potential.
+Added: New employees are welcomed through our new hire onboarding experience, which consists of a comprehensive equipment package, welcome gift packages, an onboarding plan with consistent communication, human resources orientation, and formalized 30-60-90 day check-ins with their manager, ensures our new hires have the support they need.
+Added: Additionally, new hire spotlights are socialized in our monthly newsletters to ensure new team members are introduced to the Company and receive a warm welcome and every one of our new employees has the opportunity to meet with our CEO for a “coffee chat” within their first month of employment.
+Added: REPAY’s leadership empowers each team member to make a difference and stretch to their fullest potential.
Our dedication to frequent, transparent communication is shown with company-wide meetings where our leaders share Company vision and encourage employees to ask questions.
Several departments across the Company hold annual training summits where team members have an opportunity to collaborate with fellow colleagues, participate in department-specific training and further enhance their skillsets.
+Added: We also believe it is important to celebrate exceptional employees so we provide multiple opportunities for performance-based awards and peer-to-peer recognition.
+Added: We continue to develop formal career pathing, allowing us to create a roadmap for an individual’s career progression within the organization.
Our compensation strategy gives us competitive advantages by offering competitive salaries, bonus potential and employee ownership opportunities for a meaningful portion of our employees through equity incentive grants.
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We have also partnered with diverse organizations and higher education programs to identify a more diverse pool of qualified candidates for recruitment.
−Removed: We continue to evaluate our diversity and inclusion program and are in various phases of implementing several strategic initiatives, which we believe will help us cultivate a more diverse workforce and inclusive environments.
Our diversity and inclusion initiatives are periodically reviewed and discussed at the board level.
−Removed: We offer a comprehensive benefits package, which goes into effect on a person’s first day of employment, including 100% coverage of employee healthcare premiums and several benefits at no cost to our employees, including life insurance, telehealth, mental health and work-life balance resources.
+Added: We offer a comprehensive benefits package, which goes into effect on a person’s first day of employment, including 100% coverage of employee healthcare premiums and several benefits at no cost to our employees, including life insurance, telehealth, mental health and work-life balance resources.
We perform a thorough review of our benefits package annually.
−Removed: Among other benefits, we continue to offer an Employee Stock Purchase Plan (“ESPP”).
+Added: Among other benefits, we continue to offer an Employee Stock Purchase Plan (“ESPP”).
The ESPP is highly valued because it gives our employees the opportunity to become shareholders in REPAY at a discounted price.
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Available Information
−Removed: We maintain a website at www.repay.com, through which you may access our public filings free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”).
+Added: We maintain a website at www.repay.com, through which you may access our public filings free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”).
Information contained on our website is not a part of this Annual Report on Form 10-K and the inclusion of our website address in this report is an inactive textual reference only.
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Our business involves significant risks.
−Removed: In addition to the risks and uncertainties discussed above under “Cautionary Note Regarding Forward-Looking Statements,”
−Removed: you should carefully consider the specific risks set forth herein.
+Added: In addition to the risks and uncertainties discussed above under “Cautionary Note Regarding Forward-Looking Statements,” you should carefully consider the specific risks set forth herein.
If any of these risks actually occur, it may materially harm our business, financial condition, liquidity and results of operations.
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Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may become material and adversely affect our business.
−Removed: Unless the context requires otherwise, “we,”
−Removed: “us,”
−Removed: “our,”
−Removed: “Repay”
−Removed: and the “Company”
−Removed: refer to the business of Repay Holdings Corporation and its subsidiaries.
−Removed: In the sections of the Risk Factors entitled “Risks Related to Our Ownership Structure”
−Removed: and “Risks Related to Our Class A Common Stock,”
−Removed: “we,”
−Removed: and “our”
−Removed: refer only to Repay Holdings Corporation excluding, unless the context requires otherwise or as expressly stated, its subsidiaries.
+Added: Unless the context requires otherwise, “we,” “us,” “our,” “Repay” and the “Company” refer to the business of Repay Holdings Corporation and its subsidiaries.
+Added: In the sections of the Risk Factors entitled “Risks Related to Our Ownership Structure” and “Risks Related to Our Class A Common Stock,” “we,” us” and “our” refer only to Repay Holdings Corporation excluding, unless the context requires otherwise or as expressly stated, its subsidiaries.
Risks Related to Our Business
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Unauthorized disclosure of client or consumer data, whether through breach of our computer systems, computer viruses or otherwise, could expose us to liability and protracted and costly litigation and damage our reputation.
−Removed: We are responsible for data security for us and for third parties with whom we partner, including with respect to rules and regulations established by the payment networks, such as Visa, MasterCard and Discover, and debit card networks.
+Added: We are responsible for data security for us and for third parties with whom we partner, including with respect to rules and regulations established by the payment networks, such as Visa, MasterCard, Discover and American Express, and debit card networks.
These third parties include our clients, software integration partners and other third-party service providers and agents.
−Removed: We and other third parties collect, process, store and/or transmit sensitive data, such as names, addresses, social security numbers, credit or debit card numbers, expiration dates, driver’s license numbers, bank account numbers and protected health information.
+Added: We and other third parties collect, process, store and/or transmit sensitive data, such as names, addresses, social security numbers, credit or debit card numbers, expiration dates, driver’s license numbers, bank account numbers and protected health information.
We have ultimate liability to the payment networks and our sponsor banks that register us with the payment networks for our failure or the failure of other third parties with whom we contract to protect this data in accordance with payment network requirements.
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A systems breach may subject us to material losses or liability, including payment network fines, assessments and claims for unauthorized purchases with misappropriated credit, debit or card information, impersonation or other similar fraud claims.
−Removed: A misuse of such data or a cybersecurity breach (including a ransomware attack) could harm our reputation and deter clients from using electronic payments generally and our services specifically, thus reducing our revenue.
+Added: A misuse of such data or a
+Added: cybersecurity breach (including a ransomware attack) could harm our reputation and deter clients from using electronic payments generally and our services specifically, thus reducing our revenue.
In addition, any such misuse or breach could cause us to incur costs to correct the breaches or failures, expose us to uninsured liability, increase our risk of regulatory scrutiny, subject us to lawsuits and result in the imposition of material penalties and fines under state and federal laws or by the payment networks or limitations on our ability to process payment transactions on such payment networks.
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The costs to maintain or increase our cyber insurance coverage could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Any human error, fraud, malice, accidental technological failure or attacks against us or our contracted third parties could hurt our reputation, force us to incur significant expenses in remediating the resulting impacts, expose us to uninsured liability, result in the loss of our sponsor bank relationships or our ability to participate in the payment networks, subject us to
−Removed: lawsuits, fines or sanctions, distract our management, increase our costs of doing business and/or materially impede our ability to conduct business.
+Added: Any human error, fraud, malice, accidental technological failure or attacks against us or our contracted third parties could hurt our reputation, force us to incur significant expenses in remediating the resulting impacts, expose us to uninsured liability, result in the loss of our sponsor bank relationships or our ability to participate in the payment networks, subject us to lawsuits, fines or sanctions, distract our management, increase our costs of doing business and/or materially impede our ability to conduct business.
Although we generally require that our agreements with our software integration partners or service providers include confidentiality obligations that restrict these parties from using or disclosing any client or consumer data except as necessary to perform their services under the applicable agreements, we cannot guarantee that these contractual measures will prevent the unauthorized use, modification, destruction or disclosure of data or allow us to seek reimbursement from the contracted party.
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Any failure to adequately comply with these protective measures could result in fees, penalties, litigation or termination of our sponsor bank agreements.
+Added: Further, certain of our sponsor banks have experienced, and could in the future experience, cybersecurity incidents that could disrupt our operations, expose us to liability and protracted and costly litigation and damage our reputation.
Security breaches may be subject to scrutiny from governmental agencies such as the CFPB, the FTC and the U.S.
Department of Health and Human Services Office for Civil Rights.
−Removed: See “Risks Related to Regulation”
+Added: See “Risks Related to Regulation” below.
If we cannot keep pace with rapid developments and changes in our industry, the use of our products and services could decline, causing a reduction in our revenues.
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This market is characterized by rapid technological evolution, new product and service introductions, evolving industry standards, changing client needs and the entrance of new competitors, including products and services that enable card networks and banks to transact with consumers directly.
+Added: For example, in July 2023, the U.S.
+Added: Federal Reserve launched its FedNow Service that enables individuals and businesses to send instant payments through their depositary institution accounts.
To remain competitive, we continually pursue initiatives to develop new products and services to compete with these new market entrants.
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Our products and services are designed to process complex transactions and provide reports and other information on those transactions, all at very high volumes and processing speeds.
−Removed: Our technology offerings must also integrate with a variety of network, hardware, mobile and software platforms and technologies, and we need to continuously modify and enhance our products and services to adapt to changes and innovation in these technologies.
+Added: Our technology offerings must also integrate with a variety of network, hardware, mobile and software platforms and technologies, and we need to continuously modify and enhance our
+Added: products and services to adapt to changes and innovation in these technologies.
Any failure to deliver an effective, reliable and secure service or any performance issue that arises with a new product or service could result in significant processing or reporting errors or other losses.
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The vertical markets we primarily serve have not historically utilized electronic payments to the same extent as traditional markets such as retail and travel.
−Removed: If consumers and businesses in our primary vertical markets do not increase their
−Removed: use of cards as payment methods for their transactions or if the mix of payment methods changes in a way that is adverse to us, such developments may have a material adverse effect on our business, financial condition and results of operations.
+Added: If consumers and businesses in our primary vertical markets do not increase their use of cards as payment methods for their transactions or if the mix of payment methods changes in a way that is adverse to us, such developments may have a material adverse effect on our business, financial condition and results of operations.
Regulatory changes may also result in our clients seeking to charge their own clients additional fees for use of credit or debit cards which may result in such clients using other payment methods.
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There can be no assurance that our strategies for overcoming potential reluctance to change payment processing providers or to initiate a relationship with us will be successful, and this resistance may adversely affect our growth and our business overall.
+Added: Our sales efforts to large enterprises involve considerable time and expense with long and unpredictable sales cycles.
+Added: One of the factors affecting our growth and financial performance is the adoption of our solutions by large enterprise clients.
+Added: As part of our sales efforts, we invest considerable time and expense evaluating the specific organizational needs of potential clients and educating these potential clients about the technical capabilities and value of our solutions.
+Added: Because large enterprises tend to have more consumers impacted by a change in payment processing providers, they often evaluate our solutions and our technology platform at multiple levels within their organization, each of which often have specific requirements, and typically involve their senior management.
+Added: As a result, our sales efforts to large enterprises span over considerable time and require greater expense with long and unpredictable sales cycles, which may cause our results of operations to fluctuate.
+Added: Our revenue is sensitive to shifts in payment mix.
+Added: Most of our revenues are derived from volume-based payment processing fees and other related fixed per transaction fees.
+Added: In general, we receive more revenue for card-based payments than for ACH payments.
+Added: Accordingly, if more of our client’s customers start paying by ACH or other payment methods with lower transaction fees, it may have a material and adverse impact on our results of operations.
If we fail to comply with the applicable requirements of payment networks and industry self-regulatory organizations, those payment networks or organizations could seek to fine us, suspend us or terminate our registrations through our sponsor banks.
−Removed: We rely on sponsor banks and, in certain cases, third-party processors to access the payment card networks, such as Visa, MasterCard and Discover, that enable our ability to offer to our clients the acceptance of credit cards and debit cards, and we must pay fees for such services.
−Removed: To provide our merchant acquiring services, we are registered through our sponsor banks with the Visa, MasterCard and Discover networks as a service provider for member institutions.
−Removed: As such, we, our sponsor banks and many of our clients are subject to complex and evolving payment network rules.
−Removed: The payment networks routinely update and modify requirements applicable to merchant acquirers, including rules regulating data integrity, third-party relationships (such as those with respect to sponsor banks and independent sales organization (“ISOs”)), merchant chargeback standards and PCI DSS.
+Added: We rely on sponsor banks and, in certain cases, third-party processors to access the payment card networks, such as Visa and MasterCard, that enable our ability to offer to our clients the acceptance of credit cards and debit cards, and we must pay fees for such services.
+Added: To provide our merchant acquiring services, we are registered through our sponsor banks with the Visa and MasterCard networks as a service provider for member institutions.
+Added: As such, we, our sponsor banks and many of our
+Added: clients are subject to complex and evolving payment network rules.
+Added: The payment networks routinely update and modify requirements applicable to merchant acquirers, including rules regulating data integrity, third-party relationships (such as those with respect to sponsor banks and independent sales organization (“ISOs”)), merchant chargeback standards and PCI DSS.
The rules of the card networks are set by their boards, which may be influenced by card issuers, some of which offer competing transaction processing services.
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If these sponsorships are terminated and we are unable to secure a replacement sponsor bank within the applicable wind down period, we will not be able to process electronic payment transactions.
−Removed: While we maintain relationships with multiple sponsor banks for flexibility in the processing of payment volume and in the pricing of our clients’
−Removed: solutions, the loss of or termination of a relationship with a sponsor bank or a significant decrease in the amount of payment volume that a sponsor bank processes for us could reduce such flexibility and negatively affect our business.
+Added: While we maintain relationships with multiple sponsor banks for flexibility in the processing of payment volume and in the pricing of our clients’ solutions, the loss of or termination of a relationship with a sponsor bank or a significant decrease in the amount of payment volume that a sponsor bank processes for us could reduce such flexibility and negatively affect our business.
To the extent the number of our sponsor banks decreases, we will become increasingly reliant on our remaining sponsor banks, which would materially adversely affect our business should our relationship with any of such remaining banks be terminated or otherwise disrupted.
Furthermore, our agreements with our sponsor banks provide the sponsor banks with substantial discretion in approving certain elements of our business practices, including our solicitation, application and underwriting procedures for clients.
−Removed: Our sponsor banks’
−Removed: actions under these agreements could be detrimental to us.
+Added: Our sponsor banks’ actions under these agreements could be detrimental to us.
To acquire and retain clients, we depend on our software integration partners that integrate our services and solutions into software used by our clients.
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Generally, our agreements with software integration partners are not exclusive and these partners retain the right to refer potential clients to other payment processors.
−Removed: In addition, our agreements with software integration partners do not generally prohibit these partners from providing payment processing solutions to clients (including by acquiring a competing payment processing business).
−Removed: We may need to provide financial concessions to maintain relationships with current software integration partners or to attract potential software integration partners from our competitors.
−Removed: We have been required, and expect to be required in the future, to make concessions when renewing contracts with our software integration partners, and such concessions can have a material impact on our financial condition or operating performance.
+Added: In addition, our agreements with
+Added: software integration partners do not generally prohibit these partners from providing payment processing solutions to clients (including by acquiring a competing payment processing business).
+Added: We may need to provide financial concessions to maintain or enhance relationships with current software integration partners or to attract potential software integration partners from our competitors.
+Added: We have been required, and expect to be required in the future, to make concessions with our software integration partners (including when renewing contracts or when needed to incentivize the software integration partner to update or enhance the integration), and such concessions can have a material impact on our financial condition or operating performance.
If our software integration partners focus more heavily on working with other payment processors, acquire or develop their own payment processing capabilities, cease operations or become insolvent, we may be at risk of losing existing clients with whom these software integration partners have relationships.
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In addition, our efforts to form relationships with new software integration partners may be hindered to the extent they perceive that integrating with a new payment processor or switching to us from another payment processor is too costly or time-consuming.
−Removed: Many software providers choose to integrate with only a small number of payments processors due to the requisite time and cost of integrating their systems with a payment processor’s solutions.
+Added: Many software providers choose to integrate with only a small number of payments processors due to the requisite time and cost of integrating their systems with a payment processor’s solutions.
Failure to effectively manage risk and prevent fraud could increase our chargeback liability and other liability.
We are potentially liable for losses caused by fraudulent card transactions or business fraud.
−Removed: Card fraud occurs when a merchant’s customer uses a stolen card (or a stolen card number in a card-not-present transaction) to purchase merchandise or services.
+Added: Card fraud occurs when a merchant’s customer uses a stolen card (or a stolen card number in a card-not-present transaction) to purchase merchandise or services.
In a traditional card-present transaction, if the merchant swipes the card, receives authorization for the transaction from the card issuing bank and verifies the signature on the back of the card against the paper receipt signed by its customer, the card issuing bank remains liable for any loss.
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Business fraud occurs when a business or organization, rather than a cardholder, opens a fraudulent merchant account and conducts fraudulent transactions or when a business, rather than a consumer (though sometimes working together with a consumer engaged in fraudulent activities), knowingly uses a stolen or counterfeit card or card number to record a false sales transaction, intentionally fails to deliver the merchandise or services sold in an otherwise valid transaction, or provides services in violation of applicable law.
−Removed: Business fraud also occurs when employees of businesses change the business demand deposit accounts to their personal bank account numbers, so that payments are improperly credited to the employee’s personal account.
−Removed: Certain of these types of fraud present potential liability for chargebacks associated with our clients’
−Removed: processing transactions.
−Removed: If a billing dispute between a client and a consumer is not ultimately resolved in favor of our client, the disputed transaction is “charged back”
−Removed: to the client’s bank and credited to the consumer’s bank.
+Added: Business fraud also occurs when employees of businesses change the business demand deposit accounts to their personal bank account numbers, so that payments are improperly credited to the employee’s personal account.
+Added: Certain of these types of fraud present potential liability for chargebacks associated with our clients’ processing transactions.
+Added: If a billing dispute between a client and a consumer is not ultimately resolved in favor of our client, the disputed transaction is “charged back” to the client’s bank and credited to the consumer’s bank.
Anytime our client is unable to satisfy a chargeback, we are responsible for that chargeback.
−Removed: We have a number of contractual protections and other means of recourse
−Removed: to mitigate those risks, including collateral or reserve accounts that we may require our clients to maintain for these types of contingencies.
−Removed: Nonetheless, if we are unable to collect the chargeback from the clients’
−Removed: account or reserve account (if applicable), or if the client refuses or is financially unable due to bankruptcy or other reasons to reimburse us for the chargeback, we bear the loss for the amount of the refund paid to the cardholder’s bank.
+Added: We have a number of contractual protections and other means of recourse to mitigate those risks, including collateral or reserve accounts that we may require our clients to maintain for these types of contingencies.
+Added: Nonetheless, if we are unable to collect the chargeback from the clients’ account or reserve account (if applicable), or if the client refuses or is financially unable due to bankruptcy or other reasons to reimburse us for the chargeback, we bear the loss for the amount of the refund paid to the cardholder’s bank.
We have established systems and procedures to detect and reduce the impact of business fraud, but these measures may not be effective, and incidents of fraud could increase in the future.
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If we are unable to defend any such claim successfully, we could be required to restructure our anti-fraud processes in ways that could harm our business and to pay substantial fines.
−Removed: Even if we are able to defend a claim successfully, the litigation could damage our reputation, consume substantial amounts of our management’s time and attention, and require us to change our client service and operations in ways that could increase our costs and decrease the effectiveness of our anti-fraud program.
+Added: Even if we are able to
+Added: defend a claim successfully, the litigation could damage our reputation, consume substantial amounts of our management’s time and attention, and require us to change our client service and operations in ways that could increase our costs and decrease the effectiveness of our anti-fraud program.
In addition, if a client has filed for bankruptcy protection, then our normal processes may be limited by applicable bankruptcy laws.
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We are generally permitted under the contracts into which we enter with our clients, and in the past have been able to, pass these fee increases along to our clients through corresponding increases in our processing fees.
−Removed: However, if we are unable to pass through these and other fees in the future (which could be the result of the structure of “flat rate”
−Removed: or convenience fee pricing under certain contracts), or if the payment networks decline to offer us preferential rates or incentives on such fees as compared to those charged to other payment processors, our business, financial condition and results of operations could be materially adversely affected.
+Added: However, if we are unable to pass through these and other fees in the future (which could be the result of the structure of “flat rate” or convenience fee pricing under certain contracts), or if the payment networks decline to offer us preferential rates or incentives on such fees as compared to those charged to other payment processors, our business, financial condition and results of operations could be materially adversely affected.
Our systems and those of our third-party providers may fail due to factors beyond our control, which could interrupt our service, resulting in our inability to process payments or provide ancillary services, loss of business, increase in costs and exposure to liability.
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Our systems and operations, or those of our third-party providers, such as our provider of dial-up authorization services, or the payment networks themselves, could be exposed to damage or interruption from, among other things, hardware and software defects or malfunctions, telecommunications failure, computer denial-of-service and other cyberattacks, unauthorized entry, computer viruses or other malware, human error, natural disaster, power loss, acts of terrorism or sabotage, financial insolvency of such providers and similar events.
−Removed: These threats, and errors or delays in the processing of payment transactions, system outages or other difficulties, could result in failure to process transactions or provide ancillary services, additional operating and development costs, diversion of technical and other resources, loss of revenue, clients and software integration partners, loss of client and cardholder data, harm to our business or reputation, exposure to fraud losses or other liabilities and fines and other sanctions imposed by payment networks.
+Added: These threats, and errors or delays in the processing of payment transactions, system outages or other difficulties, could result in failure to process transactions or provide ancillary services, additional operating and development costs, diversion of technical and other resources, loss of revenue, clients and software integration partners, loss of client and accountholder data, harm to our business or reputation, exposure to fraud losses or other liabilities and fines and other sanctions imposed by payment networks.
Our property and business interruption insurance may not be adequate to compensate us for all losses or failures that may occur.
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We also rely on third parties for specific software and hardware used in providing our products and services.
−Removed: The termination by our service or technology providers of their arrangements with us or their failure to perform their services efficiently and effectively may adversely affect our relationships with our clients and, if we cannot find alternate providers quickly, may cause those clients to terminate their relationships with us.
+Added: The termination by our service or technology providers of their arrangements with us or their failure to perform their services efficiently and
+Added: effectively may adversely affect our relationships with our clients and, if we cannot find alternate providers quickly, may cause those clients to terminate their relationships with us.
Our third-party processors and third-party program managers, which provide us with front-end authorization services, card issuance program services and certain other services, compete with us or may compete with us in the future in the vertical markets that we serve.
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Failure by these third-party providers to devote an appropriate level of attention to our products and services could result in delays in introducing new products or services, or delays in resolving any issues with existing products or services for which third-party providers provide ongoing support.
−Removed: The COVID-19 pandemic and the measures implemented to mitigate the spread of the virus have had and may continue to have an adverse effect on our business, results of operations and financial condition.
−Removed: The COVID-19 pandemic and the mitigation efforts by governments and other parties to attempt to control the spread of the virus (including its variants) have adversely impacted the U.S.
−Removed: and global economy, leading to significant changes in consumer and business spending and economic activity and disruptions and volatility in the U.S.
−Removed: and global capital markets.
−Removed: We are diligently working to ensure that we can continue to operate with minimal disruption, mitigate the impact of the pandemic on our employees’
−Removed: health and safety and address potential business interruptions on ourselves and our clients.
−Removed: However, we cannot assure you that we will continue to be successful in these efforts.
−Removed: Although we have experienced increased demand for some of our service offerings as a result of an accelerated shift to electronic payments, we believe that the COVID-19 pandemic, the mitigation efforts and the resulting economic impact have had, and may continue to have, an overall adverse effect on our business, results of operations and financial condition.
−Removed: The actual further effect in any given future period is difficult to estimate, and it will depend on numerous evolving factors and future developments that we are not able to predict, including:
−Removed: the duration, spread and severity of the outbreak (including whether there are continued variants or other waves of infection);
−Removed: the nature, extent and effectiveness of mitigation measures;
−Removed: the administration of vaccines and the availability of therapeutic treatments;
−Removed: the extent and duration of the effect on the economy, unemployment, consumer confidence and consumer and business spending;
−Removed: and how quickly and to what extent normal economic and operating conditions can resume.
−Removed: The effects of the COVID-19 pandemic, the mitigation efforts and the resulting economic impact on our business, results of operations and financial condition have included and may continue to include the following with respect to the key industry-oriented “vertical”
−Removed: markets that we serve:
−Removed: A decrease in the origination of personal or automotive loans and a decrease in payments as a result of changes in consumer behavior following receipt of government stimulus, tax credits or extra unemployment benefits.
−Removed: A decrease in the amount of business-to-business payments as a result of the overall economic slowdown and reduction in business spending.
−Removed: The above effects have resulted in and are likely to continue to result in an adverse impact on the amount of fees we can earn for processing payments and other transactions on behalf of our clients.
−Removed: There may be a delay in the timing of when our business is impacted by these matters.
−Removed: As an example, we earned incremental fees from processing loan payments or payoffs that result from consumers’
−Removed: receipt of additional government stimulus or extra unemployment benefits, but our business, results of operations and financial condition in subsequent periods were and could continue to be adversely affected from reduced loan originations as result of such combination of government action and consumer behavior.
−Removed: To the extent the COVID-19 pandemic, the mitigation efforts and the resulting economic impact continues to adversely affect our business, results of operations and financial condition, such matters may also have the effect of heightening many of the other risks described in the risk factors disclosed herein, such as those relating to our responsibility for the prevention of unauthorized disclosure of consumer data and our ability to minimize losses relating to chargebacks, fraud and similar losses.
We are subject to economic and political risk, the business cycles of our clients and software integration partners and the overall level of consumer and commercial spending, which could negatively impact our business, financial condition and results of operations.
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We are exposed to general economic conditions that affect consumer confidence, consumer spending, consumer discretionary income and changes in consumer purchasing habits, including natural disasters and health emergencies, including earthquakes, fires, power outages, typhoons, floods, pandemics or epidemics (such as the COVID-19 pandemic) and manmade events such as civil unrest, labor disruption, international trade disputes, international conflicts, terrorism, wars and critical infrastructure attacks.
−Removed: A sustained deterioration in general economic conditions, particularly in the United States, continued uncertainty for an extended period of time, due to the COVID-19 pandemic or otherwise, persistent inflation or further increases in interest rates, could adversely affect our financial performance by reducing the number or aggregate volume of transactions made using electronic payments.
+Added: A sustained deterioration in general economic conditions, particularly in the United States, continued uncertainty for an extended period of time, persistent inflation or further increases in interest rates, could adversely affect our financial performance by reducing the number or aggregate volume of transactions made using electronic payments.
Our consumer finance and mortgage clients may be disproportionately impacted by further increased interest rates or a general economic downturn, which could result in a decrease to our revenue and profits.
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Smaller tax refunds to consumers, due to the absence of additional stimulus or similar impacts or otherwise, could also negatively impact our results of operations.
−Removed: and international markets are experiencing uncertain and volatile economic conditions, including from the impacts of the COVID-19 pandemic, sustained inflation, recession concerns and supply chain disruptions.
+Added: and international markets are experiencing uncertain and volatile economic conditions, including from the impacts of sustained inflation, recession concerns and supply chain disruptions.
These conditions make it extremely difficult for us to accurately forecast and plan future business activities.
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In some cases, that information may not be accurate, complete or up-to-date.
−Removed: Additionally, our risk detection system is subject to a high degree of “false positive”
−Removed: risks being detected, which makes it difficult for us to identify real risks in a timely manner.
+Added: Additionally, our risk detection system is subject to a high degree of “false positive” risks being detected, which makes it difficult for us to identify real risks in a timely manner.
If our policies and procedures are not fully effective or we are not always successful in capturing all risks to which we are or may be exposed, we may suffer harm to our reputation or be subject to litigation or regulatory actions that materially increase our costs and limit our ability to grow and may cause us to lose existing clients.
We may not be able to continue to expand our share in our existing vertical markets or continue to expand into new vertical markets, which would inhibit our ability to grow and increase our profitability.
−Removed: Our future growth and profitability depend, in part, upon our continued expansion within the vertical markets in which we currently operate, the emergence of other vertical markets for electronic payments and our integrated solutions, and our ability to penetrate new vertical markets and our current software integration partners’
−Removed: client bases.
+Added: Our future growth and profitability depend, in part, upon our continued expansion within the vertical markets in which we currently operate, the emergence of other vertical markets for electronic payments and our integrated solutions, and our ability to penetrate new vertical markets and our current software integration partners’ client bases.
As part of our strategy to expand into new vertical markets and increase our share in our existing vertical markets, we look for acquisition opportunities and partnerships with other businesses that will allow us to increase our market penetration, technological capabilities, product offerings and distribution capabilities.
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If we fail to expand into new vertical markets and increase our penetration into existing vertical markets, we may not be able to continue to grow our revenues and earnings.
−Removed: We may not be able to successfully manage our intellectual property and may be subject to infringement claims.
+Added: We may not be able to successfully manage our intellectual property and are subject to infringement claims.
We rely on a combination of contractual rights and copyright, trademark, patent and trade secret laws to establish and protect our proprietary technology, which is critical to our success, particularly in our strategic verticals where we may offer proprietary software solutions to our clients.
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The loss of intellectual property protection or the inability to license or otherwise use third-party intellectual property could harm our business and ability to compete.
−Removed: We may also be subject to costly litigation if our services and technology are alleged to infringe upon or otherwise violate a third party’s proprietary rights.
+Added: We are also subject to costly litigation if our services and technology are alleged to infringe upon or otherwise violate a third party’s proprietary rights.
Third parties may have, or may eventually be issued, patents that could be infringed by our products, services or technology.
−Removed: Any of these third parties could make a claim of infringement, breach or other violation of third-party intellectual property rights against us with respect to our products, services or technology.
+Added: Some of these third parties have made, and any of these third parties could make in the future, a claim of infringement, breach or other violation of third-party intellectual property rights against us with respect to our products, services or technology.
Any claim from third parties may result in a limitation on our ability to use the intellectual property subject to these claims.
−Removed: Additionally, in recent
−Removed: years, individuals and groups have been purchasing intellectual property assets for the sole purpose of making claims of infringement or other violations and attempting to extract settlements from companies like us.
+Added: Additionally, in recent years, individuals and groups have been purchasing intellectual property assets for the sole purpose of making claims of infringement or other violations and attempting to extract settlements from companies like us.
Even if we believe that intellectual property related claims are without merit, defending against such claims is time consuming and expensive and could result in the diversion of time and attention of our management and employees.
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Our success depends in part upon the reputation and influence within the industry of our senior managers who have, over the years, developed long standing and favorable relationships with our software integration partners, vendors, card associations, sponsor banks and other payment processing and service providers.
−Removed: We experienced senior management turnover in 2022 as a result of the departures of our chief operating officer and our chief revenue officer.
−Removed: It is possible that the loss of the services of these executives or other senior executives or key managers could have a material adverse effect on our business, financial condition and results of operations.
+Added: It is possible that the loss of the services of senior executives or key managers could have a material adverse effect on our business, financial condition and results of operations.
In addition, contractual obligations related to confidentiality assignment of intellectual property rights, non-solicitation and non-competition may be ineffective or unenforceable, and departing employees may share our proprietary information with competitors or seek to solicit our software integration partners or clients or recruit our key personnel to competing businesses in ways that could adversely impact us.
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We have been the subject of various claims and legal proceedings and may become the subject of claims, litigation or investigations which could have a material adverse effect on our business, financial condition or results of operations.
−Removed: In the ordinary course of business, we are the subject of various claims and legal proceedings and may become the subject of claims, litigation or investigations, including commercial disputes and employee claims, such as claims of age discrimination, sexual harassment, gender discrimination, immigration violations or other local, state and federal labor law violations, and from time to time may be involved in governmental or regulatory investigations or similar matters arising out of our current or future business.
+Added: In the ordinary course of business, we are the subject of various claims and legal proceedings and may become the subject of claims, litigation or investigations, including commercial disputes and employee claims, such as claims of age discrimination, sexual harassment, gender discrimination or local, state and federal labor law violations, and from time to time may be involved in governmental or regulatory investigations or similar matters arising out of our current or future business.
Any claims asserted against us or our management, regardless of merit or eventual outcome, could harm our reputation and have an adverse impact on our relationships with our clients, software integration partners and other third parties and could lead to additional related claims.
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These challenges and costs and expenses may adversely affect our business, financial condition and results of operations.
+Added: Actual or perceived adverse developments affecting financial institutions could have a material and adverse impact on our business, financial condition or results of operations.
+Added: In our business, we maintain relationships with financial institutions in various capacities.
+Added: Our cash and cash equivalents are held in accounts with banks or other financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”).
+Added: In most cases, the amounts held in these accounts exceed the FDIC insurance limits.
+Added: We also rely on financial institutions to act as our sponsor banks in order to enable us to process electronic payment transactions for our clients.
+Added: In this regard, we maintain relationships with multiple sponsor banks in an effort to secure competitive pricing for our clients and to maintain redundancy.
+Added: In addition, our clients include credit unions, banks and non-bank lenders who utilize our payment technology solutions in exchange for processing fees.
+Added: Since March 2023, Silicon Valley Bank, Signature Bank and First Republic Bank were each closed by their applicable regulators and the FDIC was appointed as receiver.
+Added: We did not use Silicon Valley Bank, Signature Bank or First Republic Bank for any of our depository or investment accounts nor did we have any payment processing relationships with these particular financial institutions.
+Added: However, we cannot guarantee that there will not be similar issues with any of the financial institutions with whom we maintain relationships.
+Added: The failure of or any other adverse development impacting one or more of our financial institution relationships (or rumors or concerns about such events) could adversely affect our liquidity, our ability to process transactions for our clients or our client relationships.
+Added: Similarly, our clients could be adversely affected by any bank failure or other adverse event involving
+Added: their financial institution relationships, which could result in a decrease in the amount of payment volume we receive from these clients.
Risks Related to Regulation
−Removed: We and our clients are subject to extensive government regulation, and any new laws and regulations, industry standards or revisions made to existing laws, regulations or industry standards affecting our business, our clients’
−Removed: businesses or the electronic payments industry, or our or our clients’
−Removed: actual or perceived failure to comply with such obligations, may have an unfavorable impact on our business, financial condition and results of operations.
+Added: We and our clients are subject to extensive government regulation, and any new laws and regulations, industry standards or revisions made to existing laws, regulations or industry standards affecting our business, our clients’ businesses or the electronic payments industry, or our or our clients’ actual or perceived failure to comply with such obligations, may have an unfavorable impact on our business, financial condition and results of operations.
We and the clients we serve are subject to numerous federal and state regulations that affect the electronic payments industry.
Regulation of our industry has increased significantly in recent years and is constantly evolving.
−Removed: Changes to statutes, regulations or industry standards, including interpretation and implementation of statutes, regulations or standards, could
−Removed: increase our cost of doing business or affect the competitive balance.
+Added: Changes to statutes, regulations or industry standards, including interpretation and implementation of statutes, regulations or standards, could increase our cost of doing business or affect the competitive balance.
Failure to comply with regulations may have an adverse effect on our business, including the limitation, suspension or termination of services provided to, or by, third parties, and the imposition of penalties or fines.
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and those regulations could directly or indirectly limit how much we can charge for our services.
−Removed: We may not be able to update our existing products and services, or develop new ones, to satisfy our client’
+Added: We may not be able to update our existing products and services, or develop new ones, to satisfy our client’ needs.
Any of these events, if realized, could have a material adverse effect on our business, results of operations and financial condition.
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These regulations (as well as any related modifications or changes in interpretation) could negatively affect the number of debit transactions, and prices charged per transaction, which would negatively affect our business.
−Removed: Many of our clients desire to impose a convenience fee or a surcharge in connection with their customers’
−Removed: use of a credit or debit card or other form of electronic payment.
+Added: Many of our clients desire to impose a convenience fee or a surcharge in connection with their customers’ use of a credit or debit card or other form of electronic payment.
Various state laws and regulations impose prohibitions or other limitations on those types of fees or charges, and interpretation of those state laws and regulations is constantly evolving.
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In addition, to the extent we decide to offer our products and services in additional jurisdictions (for example, our expansion into Canada), we may incur additional compliance-related costs with respect to operating in such jurisdictions.
−Removed: Additionally, as our products and services evolve, and as regulators continue to increase their scrutiny of compliance with these obligations, we may be subject to a variety of additional laws and regulations, or we may be required to further revise or expand our compliance management system, including the procedures we use to verify the identity of our clients and their end customers and to monitor transactions.
+Added: Additionally, as our products and services evolve, and as regulators continue to increase their scrutiny of compliance with these obligations, we may be subject to a variety of additional laws and regulations, or we may be
+Added: required to further revise or expand our compliance management system, including the procedures we use to verify the identity of our clients and their end customers and to monitor transactions.
If we are found to be in violation of any such legal or regulatory requirements, we may be subject to monetary fines or other penalties, such as a cease and desist order, or we may be required to alter the nature or packaging of our services and solutions, any of which could adversely affect our business or operating results.
−Removed: The businesses of many of our clients are strictly regulated in every jurisdiction in which they operate, and such regulations, and our clients’
−Removed: failure to comply with them, could have an adverse effect on our clients’
−Removed: businesses and, as a result, our results of operations.
+Added: The businesses of many of our clients are strictly regulated in every jurisdiction in which they operate, and such regulations, and our clients’ failure to comply with them, could have an adverse effect on our clients’ businesses and, as a result, our results of operations.
A meaningful portion of our clients are consumer lenders that provide personal loans and automotive loans to consumers that have varying degrees of credit risk.
−Removed: The regulatory environment that these clients operate in is very complex
−Removed: because applicable regulations are often enacted by multiple agencies in the state and federal governments.
−Removed: For example, the CFPB previously proposed new rules applicable to such loans that could have an adverse effect on our clients’
−Removed: businesses, and numerous state laws impose similar requirements.
+Added: The regulatory environment that these clients operate in is very complex because applicable regulations are often enacted by multiple agencies in the state and federal governments.
+Added: For example, the CFPB previously proposed new rules applicable to such loans that could have an adverse effect on our clients’ businesses, and numerous state laws impose similar requirements.
Such clients are also subject to negative public perceptions that their consumer lending activities constitute predatory or abusive lending to consumers, and concerns raised by consumer advocacy groups and government officials may lead to efforts to further regulate the industry in which many of our clients operate.
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Continued regulatory scrutiny by the CFPB and the FTC over debt collection practices may result in additional investigations and enforcement actions against our clients in the receivables management industry.
−Removed: The FDCPA also provides for private rights of action against debt collectors, and permits debtors to recover actual damages, statutory damages and attorneys’
−Removed: fees and costs for violations of its terms.
+Added: The FDCPA also provides for private rights of action against debt collectors, and permits debtors to recover actual damages, statutory damages and attorneys’ fees and costs for violations of its terms.
The combination of these factors, and in particular any changes implemented at the CFPB under the Biden administration, could materially adversely affect the business of our clients and may force our consumer lender or receivables management clients to change their business models.
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Various federal and state regulatory enforcement agencies, including the FTC and state attorneys general have authority to take action against non-banks that engage in UDAAP, or violate other laws, rules and regulations.
−Removed: To the extent we are processing payments or providing products and services for a client suspected of violating such laws, rules and regulations, we may face enforcement actions and incur losses and liabilities that may adversely affect our business.
+Added: To the extent we are processing payments or providing products and services for a client suspected of
+Added: violating such laws, rules and regulations, we may face enforcement actions and incur losses and liabilities that may adversely affect our business.
Governmental regulations designed to protect or limit access to or use of consumer information could adversely affect our ability to effectively provide our products and services.
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Applicable federal privacy laws may restrict our collection, processing, storage, use and disclosure of personal information, may require us to notify individuals of our privacy practices and provide individuals with certain rights to prevent the use and disclosure of protected information, and mandate certain procedures with respect to safeguarding and proper description of stored information.
−Removed: Certain state laws impose similar privacy obligations as well as
−Removed: obligations to provide notification of security breaches of personal information to affected individuals, state officers, consumer reporting agencies and businesses and governmental agencies.
+Added: Certain state laws impose similar privacy obligations as well as obligations to provide notification of security breaches of personal information to affected individuals, state officers, consumer reporting agencies and businesses and governmental agencies.
The applicable regulatory framework for privacy issues is evolving and is likely to continue doing so for the foreseeable future, which creates uncertainty.
−Removed: The state privacy law framework is described under “Privacy and Information Security Regulations”
+Added: The state privacy law framework is described under “Privacy and Information Security Regulations” in Item 1.
Business above.
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As part of our ongoing monitoring of internal control, we have discovered in the past and may discover in the future material weaknesses or significant deficiencies in internal control that require remediation.
−Removed: A “material weakness”
−Removed: is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.
+Added: A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.
We have in the past discovered, and may in the future discover, material weaknesses and other areas of our internal controls that need improvement.
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Our level of indebtedness could adversely affect our ability to meet our obligations under our indebtedness, react to changes in the economy or our industry and to raise additional capital to fund operations.
−Removed: On December 29, 2021, we increased our existing senior secured credit facilities to a $185.0 million revolving credit facility pursuant to an amendment to the revolving credit agreement with Truist Bank and certain other lenders (as amended, the “Amended Credit Agreement”).
−Removed: On January 19, 2021, we issued $440.0 million in aggregate principal amount of our 0.00% convertible senior notes due 2026 (the “2026 Notes”).
+Added: On December 29, 2021, we increased our existing senior secured credit facilities to a $185.0 million revolving credit facility pursuant to an amendment to the revolving credit agreement with Truist Bank and certain other lenders (as amended, the “Amended Credit Agreement”).
+Added: On January 19, 2021, we issued $440.0 million in aggregate principal amount of our 0.00% convertible senior notes due 2026 (the “2026 Notes”).
Our ability to service our obligations under our indebtedness, including the 2026 Notes and any indebtedness we may incur under the Amended Credit Agreement, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control.
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We may also incur future debt obligations that might subject us to additional restrictive covenants that could affect our financial and operational flexibility.
−Removed: Our indebtedness under the Amended Credit Agreement bears interest at a variable rate, which, as of December 31, 2022, was based on adjusted London Inter-bank Offer Rate (“LIBOR”).
−Removed: On February 9, 2023, we further amended the Amended Credit Agreement to replace LIBOR with term Secured Overnight Financing Rate (“SOFR”) as the interest rate benchmark.
−Removed: This benchmark replacement may be higher than the adjusted LIBOR previously available under the Amended Credit Agreement, which could in turn increase our interest expense.
−Removed: This benchmark replacement may also include administrative and operational changes that affect our borrowing practices under the Amended Credit Agreement.
Future operating flexibility is limited by the restrictive covenants in the Amended Credit Agreement, and we may be unable to comply with all covenants in the future.
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In addition, our ability to repurchase the 2026 Notes or to pay cash upon conversion of the 2026 Notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness.
−Removed: Our failure to repurchase the 2026 Notes at a time when the repurchase is required by the indenture governing the 2026 Notes (the “indenture”) or to pay any cash payable on future conversions of the 2026 Notes as required by the indenture, would constitute a default under the indenture.
+Added: Our failure to repurchase the 2026 Notes at a time when the repurchase is required by the indenture governing the 2026 Notes (the “indenture”) or to pay any cash payable on future conversions of the 2026 Notes as required by the indenture, would constitute a default under the indenture.
A default under the indenture, or the fundamental change itself, could also lead to a default under our Amended Credit Agreement and other agreements governing our existing or future indebtedness.
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We are a holding company and our only material asset is our interest in Hawk Parent, and we are accordingly dependent upon distributions made by our subsidiaries to pay taxes, make payments under the Tax Receivable Agreement, meet our financial obligations under the 2026 Notes and pay dividends.
−Removed: We are a holding company with no material assets other than our ownership of limited liability company interests of Hawk Parent (the “Post-Merger Repay Units”
−Removed: and holders of such Post-Merger Repay Units other than the Company, the “Repay Unitholders”) and our managing member interest in Hawk Parent, and we have no independent means of generating revenue or cash flow.
−Removed: Upon the completion of the Business Combination, we entered into that certain Tax Receivable Agreement (the “Tax Receivable Agreement”
−Removed: or “TRA”) with the Repay Unitholders.
+Added: We are a holding company with no material assets other than our ownership of limited liability company interests of Hawk Parent (the “Post-Merger Repay Units” and holders of such Post-Merger Repay Units other than the Company, the “Repay Unitholders”) and our managing member interest in Hawk Parent, and we have no independent means of generating revenue or cash flow.
+Added: Upon the completion of the Business Combination, we entered into that certain Tax Receivable Agreement (the “Tax Receivable Agreement” or “TRA”) with the Repay Unitholders.
Our ability to pay taxes, make payments under the Tax Receivable Agreement, meet our financial obligations under the 2026 Notes and pay dividends will depend on the financial results and cash flows of Hawk Parent and its subsidiaries and the distributions we receive from Hawk Parent.
−Removed: Deterioration in the financial condition, earnings or cash flow of Hawk Parent and its subsidiaries, including its operating subsidiaries, for any reason could limit or impair Hawk Parent’s ability to pay such distributions.
+Added: Deterioration in the financial condition, earnings or cash flow of Hawk Parent and its subsidiaries, including its operating subsidiaries, for any reason could limit or impair Hawk Parent’s ability to pay such distributions.
Additionally, to the extent that we need funds and Hawk Parent and/or any of its subsidiaries are restricted from making such distributions under applicable law or regulation or under the terms of any financing arrangements, or Hawk Parent is otherwise unable to provide such funds, it could materially adversely affect our liquidity and financial condition.
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Accordingly, we will be required to pay income taxes on our allocable share of any net taxable income of Hawk Parent.
−Removed: Under the terms of Hawk Parent’s Amended and Restated Operating Agreement, Hawk Parent is obligated to make tax distributions to Repay Unitholders (including us) calculated at certain assumed tax rates.
+Added: Under the terms of Hawk Parent’s Amended and Restated Operating Agreement, Hawk Parent is obligated to make tax distributions to Repay Unitholders (including us) calculated at certain assumed tax rates.
In addition to tax expenses, we will also incur expenses related to our operations, including payment obligations under the Tax Receivable Agreement (and the cost of administering such payment obligations), which could be significant.
We intend to cause Hawk Parent to make distributions to Repay Unitholders in amounts sufficient to cover all applicable taxes (calculated at assumed tax rates), relevant operating expenses, payments under the Tax Receivable Agreement and dividends, if any, declared by Hawk Parent.
−Removed: However, as discussed below,
−Removed: Hawk Parent’s ability to make such distributions may be subject to various limitations and restrictions including, but not limited to, restrictions on distributions that would either violate any contract or agreement to which Hawk Parent is then a party, including debt agreements, or any applicable law, or that would have the effect of rendering Hawk Parent insolvent.
+Added: However, as discussed below, Hawk Parent’s ability to make such distributions may be subject to various limitations and restrictions including, but not limited to, restrictions on distributions that would either violate any contract or agreement to which Hawk Parent is then a party, including debt agreements, or any applicable law, or that would have the effect of rendering Hawk Parent insolvent.
If our cash resources are insufficient to meet our obligations under the Tax Receivable Agreement and to fund our obligations, we may be required to incur additional indebtedness to provide the liquidity needed to make such payments, which could materially adversely affect our liquidity and financial condition and subject us to various restrictions imposed by any such lenders.
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federal income tax, it may be liable under recent federal tax legislation for adjustments to its tax return, absent an election to the contrary.
−Removed: In the event Hawk Parent’s calculations of taxable income are incorrect, its members, including us, in later years may be subject to material liabilities pursuant to this federal legislation and its related guidance.
+Added: In the event Hawk Parent’s calculations of taxable income are incorrect, its members, including us, in later years may be subject to material liabilities pursuant to this federal legislation and its related guidance.
We anticipate that the distributions we will receive from Hawk Parent may, in certain periods, exceed our actual tax liabilities and obligations to make payments under the Tax Receivable Agreement.
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In addition, Hawk Parent is generally prohibited under Delaware law from making a distribution to a member to the extent that, at the time of the distribution, after giving effect to the distribution, liabilities of Hawk Parent (with certain exceptions) exceed the fair value of its assets.
−Removed: Hawk Parent’s subsidiaries are generally subject to similar legal limitations on their ability to make distributions to Hawk Parent.
+Added: Hawk Parent’s subsidiaries are generally subject to similar legal limitations on their ability to make distributions to Hawk Parent.
If Hawk Parent does not have sufficient funds to make distributions, our ability to declare and pay cash dividends may also be restricted or impaired.
Under the Tax Receivable Agreement, we will be required to pay 100% of the tax benefits relating to tax depreciation or amortization deductions as a result of the tax basis step-up we receive in connection with the exchanges (including an exchange in a sale for cash) of Post-Merger Repay Units into our Class A common stock and related transactions, and those payments may be substantial.
−Removed: The Repay Unitholders may exchange their Post-Merger Repay Units for shares of Class A common stock pursuant to the Exchange Agreement, subject to certain conditions as set forth therein and in Hawk Parent’s Amended and Restated Operating Agreement, or in an exchange in a sale for cash.
+Added: The Repay Unitholders may exchange their Post-Merger Repay Units for shares of Class A common stock pursuant to the Exchange Agreement, subject to certain conditions as set forth therein and in Hawk Parent’s Amended and Restated Operating Agreement, or in an exchange in a sale for cash.
These exchanges are expected to result in increases in our allocable share of the tax basis of the tangible and intangible assets of Hawk Parent.
−Removed: These increases in tax basis may increase (for tax purposes) depreciation and amortization deductions and therefore reduce the amount of income or franchise tax that we would otherwise be required to pay in the future had such exchanges never occurred.
+Added: These increases in tax basis may increase (for tax
+Added: purposes) depreciation and amortization deductions and therefore reduce the amount of income or franchise tax that we would otherwise be required to pay in the future had such exchanges never occurred.
In connection with the Business Combination, we entered into the Tax Receivable Agreement, which generally provides for the payment to the Repay Unitholders by us of 100% of certain tax benefits, if any, that we realize (or in certain cases are deemed to realize) (a portion of which will be paid in turn to certain service providers on behalf of them in respect of certain transaction expenses) as a result of these increases in tax basis and certain other tax attributes of Hawk Parent and tax benefits related to entering into the Tax Receivable Agreement, including tax benefits attributable to payments under the Tax Receivable Agreement.
These payments are our obligation and not an obligation of Hawk Parent.
−Removed: The actual increase in our allocable share of Hawk Parent’s tax basis in its assets, as well as the amount and timing of any payments under the Tax
−Removed: Receivable Agreement, will vary depending upon a number of factors, including the timing of exchanges, the market price of the Class A common stock at the time of the exchange, the extent to which such exchanges are taxable and the amount and timing of the recognition of our income.
+Added: The actual increase in our allocable share of Hawk Parent’s tax basis in its assets, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors, including the timing of exchanges, the market price of the Class A common stock at the time of the exchange, the extent to which such exchanges are taxable and the amount and timing of the recognition of our income.
While many of the factors that will determine the amount of payments that we will make under the Tax Receivable Agreement are outside of our control, we expect that the payments we will make under the Tax Receivable Agreement will be substantial and could have a material adverse effect on our financial condition.
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However, Hawk Parent may elect to settle such exchange in cash in lieu of delivering shares of our Class A common stock pursuant to the terms of the Exchange Agreement.
−Removed: In addition, we have reserved a total of 13,826,728 shares of Class A common stock for issuance under our Repay Holdings Corporation Omnibus Incentive Plan (as amended, the “Incentive Plan.”).
−Removed: Of these shares, 7,305,413 shares of Class A common stock remain available for future issuance under the Incentive Plan as of February 22, 2023.
+Added: In addition, we have reserved a total of 13,826,728 shares of Class A common stock for issuance under our Repay Holdings Corporation Omnibus Incentive Plan (as amended, the “Incentive Plan.”).
To the extent such shares have vested or vest in the future (and settle into shares, in the case of restricted stock units), they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates.
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Volatility in the stock price of our common stock or other reasons may in the future cause us to become the target of securities litigation or shareholder activism.
−Removed: Securities litigation and shareholder activism, including potential proxy contests, could result in substantial costs and divert management’s and board of directors’
−Removed: attention and resources from our business.
+Added: Securities litigation and shareholder activism, including potential proxy contests, could result in substantial costs and divert management’s and board of directors’ attention and resources from our business.
Additionally, such securities litigation and shareholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with service providers and make it more difficult to attract and retain qualified personnel.
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Delaware law and our governing documents contain certain provisions, including anti-takeover provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
−Removed: Our certificate of incorporation, bylaws and Delaware General Corporation Law (“DGCL”) contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our board of directors and therefore depress the trading price of our Class A common stock.
+Added: Our certificate of incorporation, bylaws and Delaware General Corporation Law (“DGCL”) contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our board of directors and therefore depress the trading price of our Class A common stock.
These provisions could also make it difficult for stockholders to take certain actions, including electing directors who are not nominated by the current members of our board of directors or taking other corporate actions, including effecting changes in management.
Among other things, our certificate of incorporation and bylaws include provisions regarding:
−Removed: a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors (until our 2024 annual meeting of stockholders, at which time this provision will terminate);
−Removed: the ability of our board of directors to issue shares of preferred stock, including “blank check”
−Removed: preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
+Added: • the ability of our board of directors to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
• the right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;
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• the ability of our board of directors to amend our bylaws, which may allow our board of directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend our bylaws to facilitate an unsolicited takeover attempt;
−Removed: advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’
−Removed: meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our board of directors and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
+Added: • advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our board of directors and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
In addition, as a Delaware corporation, we are generally subject to provisions of Delaware law, including the DGCL.
−Removed: Although we have elected not to be governed by Section 203 of the DGCL, certain provisions of our certificate of incorporation, in a manner substantially similar to Section 203 of the DGCL, prohibit certain of our stockholders (other than those stockholders who are party to a stockholders’
−Removed: agreement with us) who hold 15% or more of our outstanding capital stock from engaging in certain business combination transactions with us for a specified period of time unless certain conditions are met.
−Removed: Our certificate of incorporation designates a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’
−Removed: ability to choose the judicial forum for disputes with us or our directors, officers, or employees.
−Removed: Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware, or if such court does not have subject matter jurisdiction, any other court located in the State of Delaware with subject matter jurisdiction, will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers, other employees or stockholders to us or our stockholders, (iii) any action asserting a claim against us or our officers or directors arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or (iv) any action asserting a claim against us or any of our directors or officers governed by the internal affairs doctrine of the law of the State of Delaware.
+Added: Although we have elected not to be governed by Section 203 of the DGCL, certain provisions of our certificate of incorporation, in a manner substantially similar to Section 203 of the DGCL, prohibit certain of our stockholders (other than those stockholders who are party to a stockholders’ agreement with us) who hold 15% or more of our outstanding capital stock from engaging in certain business combination transactions with us for a specified period of time unless certain conditions are met.
+Added: Our certificate of incorporation designates a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers, or employees.
+Added: Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware, or if such court does not have subject matter jurisdiction, any other court located in the State of Delaware with subject matter jurisdiction, will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers, other employees or stockholders to us or our stockholders, (iii) any action asserting a claim against us or our officers or directors arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or (iv) any action
+Added: asserting a claim against us or any of our directors or officers governed by the internal affairs doctrine of the law of the State of Delaware.
Any person or entity purchasing or otherwise acquiring any interest in any of our securities will be deemed to have notice of and consented to this provision.
−Removed: These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us or our directors, officers, and other employees.
+Added: These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us or our directors, officers, and other employees.
If a court were to find these exclusive-forum provisions to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm our results of operations.
UNRESOLVE D STAFF COMMENTS.
+Added: CYBERSECURITY.
+Added: We recognize the importance of developing, implementing and maintaining robust cybersecurity programs in order to mitigate risk and to safeguard the sensitive data collected, processed and stored by us.
+Added: Our cybersecurity programs are guided in part by certain regulatory requirements (including payment network rules) that require periodic testing and external reviews.
+Added: Cybersecurity is also one of the initiatives we have identified to guide our ongoing corporate sustainability efforts.
+Added: Our Chief Information Security Officer (“CISO”), who reports directly to our Chief Technology Officer (“CTO”), has day-to-day responsibility for our cybersecurity programs.
+Added: Due to the critical risks associated with cybersecurity incidents in the payment processing business, our cybersecurity programs are generally operated in a dedicated and independent manner.
+Added: Risk Management and Strategy
+Added: Risk Identification and Assessment
+Added: We have adopted processes and procedures, including those described below to identify cybersecurity risks and events.
+Added: Our CISO maintains a cybersecurity risk assessment program that includes, for each identified material risk, an evaluation of the applicable threat level for such risk and the current mitigation plan for such risk.
+Added: The cybersecurity risk assessment receives input from cross-functional teams across our organization.
+Added: We also engage various third parties (including penetration testers, auditing firms and managed security service providers) to assist in identifying and assessing material cybersecurity risks.
+Added: Risk Management
+Added: Our cybersecurity-related risks are managed using a combination of documented policies and procedures, management oversight and security systems and hardware.
+Added: Relevant policies are developed with the assistance of appropriate subject matter experts and are reviewed at least annually.
+Added: As part of these policies and procedures, we maintain a Security Incident Response Plan (the “SIRP”) that is intended to establish a structured and coordinated approach to handling cybersecurity incidents in our business.
+Added: We have implemented hiring, onboarding and termination procedures that are designed to ensure our employees and contractors assist us in meeting our cybersecurity compliance objectives.
+Added: All of our employees and contractors are required to complete security awareness training (which covers the policies and other information regarding our cybersecurity programs) both at the time of hire or engagement and then on annual basis.
+Added: We also routinely disseminate cybersecurity and physical security educational materials to all employees and contractors.
+Added: We have implemented a variety of physical security controls to protect our offices and assets from unauthorized access, tampering and environmental hazards.
+Added: We utilize a combination of third party logging, intrusion detection and penetration systems to monitor our information systems for anomalous and suspicious activity in support of our security objectives and incident management plans.
+Added: Third Parties
+Added: We regularly engage third party assessors and other firms to perform a variety of control testing and other reviews that are required by applicable regulatory requirements (including payment network rules) and industry standards.
+Added: We also rely on these third party firms for educational opportunities and materials intended to keep our team members, including our CISO, up to date on the latest industry developments and best practices.
+Added: As an important part of our cybersecurity programs, we perform defined due diligence procedures prior to engaging with new vendors.
+Added: The level of due diligence varies depending on the materiality, level of risk and complexity of the arrangements.
+Added: The vendors’ financial condition, information security programs and regulatory reporting are also typically reviewed and considered prior to entering into a vendor agreement.
+Added: Risks from Cybersecurity Threats
+Added: While we have not experienced any cybersecurity incidents that have materially affected our business strategy, results of operations or financial conditions, we do expend significant resources (including cyber insurance costs) to address the ongoing risks from cybersecurity threats.
+Added: We believe these risks could be material in light of the sensitive data that we collect, process and store in the operation of our business.
+Added: See “Risk Factors” above.
+Added: Board of Directors Oversight
+Added: Our board of directors established a technology committee (the “Technology Committee”) to oversee the risks from cybersecurity threats.
+Added: The Technology Committee is currently comprised of three independent directors and chaired by Maryann Goebel, who was awarded the CERT Certificate in Cybersecurity Oversight from the National Association of Corporate Directors (NACD).
+Added: Our CTO works closely with the Technology Committee to develop the meeting agenda and to prepare the relevant materials for each committee meeting.
+Added: The Technology Committee typically reviews an updated version of the cybersecurity risk assessment program (described above) at each meeting.
+Added: The Technology Committee receives and reviews cybersecurity incidents that are reported in accordance with the SIRP and our other procedures.
+Added: The Technology Committee typically meets on a quarterly basis.
+Added: The Chairperson of the Technology Committee makes a regular report to our board of directors following each meeting of the Technology Committee.
+Added: Our board of directors retains ultimate responsibility for the oversight of the major risks inherent in our business, including risks from cybersecurity threats.
+Added: Management’s Role
+Added: We have established a Security and Privacy Steering Committee to provide governance, oversight and leadership in matters relating to information security and privacy within our business.
+Added: The Security and Privacy Steering Committee’s responsibilities include policy development, risk management, compliance with relevant laws and regulations, incident response, ongoing monitoring and improvement of information security and privacy practices.
+Added: The Security and Privacy Steering Committee is chaired by the CISO and co-chaired by our Director of Compliance (who serves as our privacy officer).
+Added: The membership of the Security and Privacy Steering Committee is comprised of individuals from cross-functional teams with expertise and responsibilities in information security and privacy, including representatives from our legal department, our finance department and various units within our technology department.
+Added: Our CTO also currently serves as a member of the Security and Privacy Steering Committee.
+Added: Our CISO is responsible for managing any cybersecurity incidents under the SIRP and coordinating with our senior management.
+Added: The SIRP includes a process under which senior leaders from our information security, legal and accounting teams will assess the impact and significance of a cybersecurity incident to determine any necessary external notifications or filings.
+Added: The SIRP also contains parameters regarding the requirements and timing for notifications of certain cybersecurity incidents to our board of directors.
+Added: Our CISO has served in various roles in information security, information technology and engineering operations for over 25 years.
+Added: Our CISO holds an undergraduate degree in electronics and communications engineering, and he has attained a professional certification in leadership from a leading graduate school.
+Added: He also maintains a Certificate Information Systems Security Professional (CISSP) certification from the International Information System Security Certification Consortium (ISC2).
+Added: Our CTO holds an undergraduate degree in management and information systems, and he has served in various technology roles for over 30 years.
+Added: Our CTO’s prior experience includes serving as the Chief Information Officer and Chief Information Security Officer of a public company and as Chief Technology Officer of a separate public company.
The following table sets forth selected information concerning our principal facilities, as of December 31, 2023.
5 unchanged sentences
Bettendorf, IA
−Removed: Chattanooga, Tennessee
The Colony, Texas
East Moline, Illinois
−Removed: Middleton, Massachusetts
Tempe, Arizona
−Removed: Sarasota, Florida
−Removed: Scottsdale, Arizona
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.