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Item 5. Market for Registrant’s Common Equity

2024-02-29 compared with 2023-03-01 · 9 added, 1836 removed, 29 unchanged (98% of the section changed)

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAR EHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our Class A common stock is traded on Nasdaq under the symbol “RPAY”.

As of February 22, 2024, the closing price for our Class A common stock was $8.33.

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We currently do not intend to pay cash dividends in the foreseeable future.

The following graph compares the total shareholder return from July 17, 2018, the date on which our Class A common shares commenced trading on the Nasdaq, through December 31, 2022 of (i) our Class A common stock, (ii) the Standard and Poor’s 500 Stock Index (“S&P 500 Index”) and (iii) the Standard and Poor’s 500 Information Technology Index (“S&P Information Technology Index”).

The stock performance graph and table assume an initial investment of $100 on July 17, 2018, and that all dividends of the S&P 500 Index and S&P Information Technology Index, were reinvested.

The following graph compares the total shareholder return from December 31, 2018 through December 31, 2023 of (i) our Class A common stock, (ii) the Standard and Poor’s 500 Stock Index (“S&P 500 Index”) and (iii) the Standard and Poor’s 500 Information Technology Index (“S&P Information Technology Index”).

The stock performance graph and table assume an initial investment of $100 on December 31, 2018 and that all dividends of the S&P 500 Index and S&P Information Technology Index, were reinvested.

The performance graph and table are not intended to be indicative of future performance.

The performance graph and table shall not be deemed “soliciting material”

or to be “filed”

with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933 or the Exchange Act.

The performance graph and table shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933 or the Exchange Act.

Repay Holdings Corporation

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S&P Information Technology Index

July 17, 2018

December 31, 2018

3 unchanged sentences

December 31, 2022

December 31, 2023

Recent Sales of Unregistered Securities

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table summarizes purchases of Class A common stock made by the Company or any “affiliated purchaser”

(as defined in Rule 10b-18(a)(3) of the Exchange Agent) in connection with tax withholdings, under the ESPP and pursuant to our share repurchase program for the three months ended December 31, 2022:

The following table summarizes purchases of Class A common stock made by the Company or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) of the Exchange Agent) in connection with tax withholdings, under the ESPP and pursuant to our share repurchase program for the three months ended December 31, 2023:

Total Number of Shares Purchased (1) (2)

5 unchanged sentences

December 1-31, 2023

(1) Includes 72,133 shares that we withheld pursuant to the Incentive Plan and the ESPP in order to satisfy employees’

tax withholding and payment obligations in connection with the vesting of awards of restricted stock under the Incentive Plan and share purchases under the ESPP, which, in each case, we withheld at fair market value on the applicable vesting date or purchase date.

(1) Includes 56,163 shares that we withheld pursuant to the Incentive Plan and the ESPP in order to satisfy employees’ tax withholding and payment obligations in connection with the vesting of awards of restricted stock under the

Incentive Plan and share purchases under the ESPP, which, in each case, we withheld at fair market value on the applicable vesting date or purchase date.

(2) Includes 338,369 shares purchased pursuant to the Share Repurchase Program.

2 unchanged sentences

Repurchases under the Share Repurchase Program may be made in the open market, in privately negotiated transactions or otherwise, with the amount and timing of repurchases depending on market conditions and corporate needs.

(3) Includes 15,000 shares purchased in the open market in November 2022 by a corporation controlled by John A.

Morris, our Chief Executive Officer, who could be deemed an affiliated purchaser.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of financial condition and results of operations should be read together with our audited consolidated financial statements and the related notes to those statements included under Item 8, hereof.

For purposes of this section, "Repay", the “Company", "we", or "our" refer to Repay Holdings Corporation and its subsidiaries, unless the context otherwise requires.

Certain figures have been rounded for ease of presentation and may not sum due to rounding.

Cautionary Note Regarding Forward-Looking Statements

Statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements.

Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors, including those set forth under Part I, Item 1A “Risk Factors”

in this Annual Report on Form 10-K.

We provide integrated payment processing solutions to industry-oriented markets in which clients have specific transaction processing needs.

We refer to these markets as “vertical markets”

or “verticals.”

Our proprietary, integrated payment technology platform reduces the complexity of the electronic payments process for businesses, while enhancing their consumers’

overall experience.

We are a payments innovator, differentiated by our proprietary, integrated payment technology platform and our ability to reduce the complexity of the electronic payments for businesses.

We intend to continue to strategically target verticals where we believe our ability to tailor payment solutions to our client 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 $25.6 billion of total card payment volume for the year ending December 31, 2022, and our year-over-year card payment volume growth was approximately 25%.

Starting from December 31, 2022, we report our financial results based on two reportable segments.

Consumer Payments –

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”).

RCS is our proprietary clearing and settlement platform through which we market customizable payment processing programs to other ISOs and payment facilitators.

BCS provides enterprise resource planning software solutions that are customized to propane and fuel oil dealers;

however, BCS was sold on February 15, 2023.

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.

Business Payments –

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.

Macroeconomic Conditions and COVID-19

We have been monitoring the current economic environment in the U.S.

and globally –

characterized by heightened inflation (including changes in wages), rising interest rates, supply chain issues and slower growth.

Such macroeconomic conditions may continue to evolve in ways that are difficult to fully anticipate and may also include increased levels of unemployment and/or a recession.

Some or all of these market factors have and could continue to adversely affect our payment volumes from the consumer loan market, the receivables management industry and consumer and commercial spending.

The effect of these events on our financial condition, results of operations and cash flows is uncertain and cannot be predicted at this time.

In addition, the ultimate impact of the COVID-19 pandemic on our results remains uncertain.

Although our operations have continued effectively despite social distancing and other measures taken in response to the pandemic, it is possible that we could be adversely affected if the COVID-19 pandemic (including the continued emergence of new variants) results in new or additional mitigation efforts (including actions which could cause or exacerbate economic conditions described in the preceding paragraph).

However, the acceleration in the use of online payment solutions and continued economic recovery from the effects from the COVID-19 pandemic may positively affect our financial results.

Finally, the impact of all of these various events on our results in 2022 may not be necessarily indicative of their impact on our results in 2023.

Business Combination

The Company was formed upon closing of the merger (the “Business Combination”) of Hawk Parent Holdings LLC (together with Repay Holdings, LLC and its other subsidiaries, “Hawk Parent”) with a subsidiary of Thunder Bridge Acquisition, Ltd., (“Thunder Bridge”), a special purpose acquisition company, on July 11, 2019.

On the closing of the Business Combination, Thunder Bridge changed its name to “Repay Holdings Corporation.”

Key Factors Affecting Our Business

Key factors that we believe impact our business, results of operations and financial condition include, but are not limited to, the following:

the dollar amount volume and the number of transactions that are processed by the clients that we currently serve;

our ability to attract new clients and onboard them as active processing clients;

our ability to (i) successfully integrate acquisitions and (ii) complete future acquisitions;

our ability to offer new and competitive payment technology solutions to our clients;

general economic conditions and consumer finance trends.

Key Components of Our Revenues and Expenses

As our clients process increased volumes of payments, our revenues increase as a result of the fees we charge for processing these payments.

Most of our revenues are derived from volume-based payment processing fees (“discount fees”) and other related fixed per transaction fees.

Discount fees represent a percentage of the dollar amount of each credit or debit transaction processed and include fees relating to processing and services that we provide.

The transaction price for such processing services is determined, based on the judgment of our management, considering factors such as margin objectives, pricing practices and controls, client segment pricing strategies, the product life cycle and the observable price of the service charged to similarly situated clients.

We believe our chargeback rate was less than 1% of our card payment volume, during the years ended December 31, 2022, 2021 and 2020.

Costs of services .

Costs of services primarily include commissions to our software integration partners and other third-party processing costs, such as front and back-end processing costs and sponsor bank fees.

Selling, general and administrative .

Selling, general and administrative expenses include salaries, share-based compensation and other employment costs, professional service fees, rent and utilities and other operating costs.

Depreciation and amortization .

Depreciation expense consists of depreciation on our investments in property, equipment and computer hardware.

Depreciation expense is recognized on a straight-line basis over the estimated useful life of the asset.

Amortization expense for software development costs and purchased software is recognized on the straight-line method over a three-year estimated useful life, between eight to ten years estimated useful life for client relationships and channel relationships, and between two to five years estimated useful life for non-compete agreements.

Interest expense.

Interest expense consists of interest in respect of our indebtedness under the Successor Credit Agreement, which was entered into in connection with the Business Combination and amended in February 2020, and the Amended Credit Agreement, which replaced the Successor Credit Agreement in February 2021.

Change in fair value of warrant liabilities.

This amount represents the change in fair value of the warrant liabilities.

The warrant liabilities are carried at fair value;

so, any change to the valuation of this liability is recognized through this line in other expense.

The change in fair value results from the change of underlying publicly listed trading price of our Class A common stock at each measurement date.

Change in fair value of tax receivable liability .

This amount represents the change in fair value of the tax receivable agreement liability.

The TRA liability is carried at fair value;

so, any change to the valuation of this liability is recognized through this line in other expense.

The change in fair value can result from the redemption or exchange of Post-Merger Repay Units for Class A common stock of Repay Holdings Corporation, or through accretion of the discounted fair value of the expected future cash payments.

Results of Operations

Year ended December 31,

($ in thousands)

Operating expenses

Costs of services (exclusive of depreciation and amortization shown separately below)

Selling, general and administrative

Depreciation and amortization

Change in fair value of contingent consideration

Impairment loss

Total operating expenses

Loss from operations

Interest expense

Loss on extinguishment of debt

Change in fair value of warrant liabilities

Change in fair value of tax receivable liability

Other (expense) income

Total other income (expense)

Income (loss) before income tax (expense) benefit

Income tax (expense) benefit

Net income (loss)

Net loss attributable to non-controlling interest

Net income (loss) attributable to the Company

Weighted-average shares of Class A common stock outstanding - basic

Weighted-average shares of Class A common stock outstanding - diluted

Income (loss) per Class A share - basic

Income (loss) per Class A share - diluted

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

Total revenue was $279.2 million for the year ended December 31, 2022 and $219.3 million for the year ended December 31, 2021, an increase of $60.0 million or 27.4%.

This increase was the result of newly signed clients, the growth of our existing clients, as well as the acquisitions of BillingTree, Kontrol and Payix.

For the year ended December 31, 2022, incremental revenues of approximately $37.9 million are attributable to BillingTree, Kontrol and Payix.

Costs of Services

Costs of services were $64.8 million for the year ended December 31, 2022 and $55.5 million for the year ended December 31, 2021, an increase of $9.3 million or 16.8%.

This increase was the result of newly signed clients, the growth of our existing clients, as well as the acquisitions of BillingTree, Kontrol and Payix.

For the year ended December 31, 2022, incremental costs of services of approximately $7.5 million are attributable to BillingTree, Kontrol and Payix.

Selling, General and Administrative

Selling, general and administrative expenses were $149.1 million for the year ended December 31, 2022 and $120.1 million for the year ended December 31, 2021, an increase of $29.0 million or 24.2%.

This increase was primarily due to a

$19.4 million increase in compensation expenses with general business growth and increased employees related to acquisitions, and a $7.0 million increase in software and technological services expenses related to the integration of acquired businesses.

Depreciation and Amortization

Depreciation and amortization expenses were $107.8 million for the year ended December 31, 2022 and $89.7 million for year ended December 31, 2021, an increase of $18.1 million or 20.1%.

The increase was primarily due to a $20.9 million increase in depreciation and amortization of fixed assets and intangibles from the acquisitions of BillingTree, Kontrol, and Payix.

Change in Fair Value of Contingent Consideration

Change in the fair value of contingent consideration was ($3.3) million for the year ended December 31, 2022, which consisted of fair value adjustments related to the contingent consideration for the acquisitions of CPS, Kontrol, and Payix.

Impairment Loss

We incurred an impairment loss of $8.1 million for the year ended December 31, 2022, due to trade names write-offs related to BillingTree, Kontrol and Payix.

We incurred an impairment loss of $2.2 million for the year ended December 31, 2021, due to trade names write-offs related to TriSource, APS, Ventanex, cPayPlus and CPS.

These trade names were strategically phased out, and service offerings are marketed under the REPAY name.

Interest Expense

Interest expense was $4.4 million for the year ended December 31, 2022 and $3.7 million for the year ended December 31, 2021, an increase of $0.7 million or 18.9%.

This increase was due to a higher average outstanding principal balance under our Amended Credit Agreement.

Loss on Extinguishment of Debt

We incurred a loss of $5.9 million on extinguishment of debt for the year ended December 31, 2021, due to the termination in full of all outstanding Delayed Draw Term Loan commitments under the Successor Credit Agreement.

Change in Fair Value of Tax Receivable Liability

We incurred a gain, related to accretion expense and fair value adjustment of the tax receivable liability of $66.9 million for the year ended December 31, 2022 compared to a net loss of $14.1 million for the year ended December 31, 2021, an increase of $81.0 million.

This increase was due to larger fair value adjustments related to the tax receivable liability, primarily as a result of changes to the discount rate, or Early Termination Rate, used to determine the fair value of the liability.

We incurred a loss of $0.2 million on termination of lease and disposal of fixed assets for the year ended December 31, 2022.

We incurred a loss of $9.1 million on the settlement of interest rate swaps and disposal of property and equipment for the year ended December 31, 2021.

Income Tax Expense and Benefit

The income tax expense was $6.2 million for the year ended December 31, 2022, reflecting the expected income tax expense on the income generated over the same period.

This was a result of the operating income incurred by the Company, primarily driven by the change in fair value of the tax receivable liability and contingent consideration, offset by stock-based compensation deductions and the amortization of assets acquired in the Business Combination and prior acquisitions.

The income tax benefit was $30.7 million for the year ended December 31, 2021, which reflected the expected income tax benefit to be received on the net earnings related to the Company’s economic interest in Hawk Parent.

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Total revenue was $219.3 million for the year ended December 31, 2021 and $155.0 million for the year ended December 31, 2020, an increase of $64.3 million or 41.4%.

This increase was the result of newly signed clients, the growth of

our existing clients, as well as the acquisitions of BillingTree and Kontrol.

For the year ended December 31, 2021, incremental revenues of approximately $42.7 million are attributable to BillingTree, Kontrol and Payix.

Costs of Services

Costs of services were $55.5 million for the year ended December 31, 2021 and $41.4 million for the year ended December 31, 2020, an increase of $14.1 million or 33.9%.

For the year ended December 31, 2021, incremental costs of services of approximately $8.4 million are attributable to BillingTree, Kontrol and Payix.

Selling, General and Administrative

Selling, general and administrative expenses were $120.1 million for the year ended December 31, 2021 and $87.3 million for the year ended December 31, 2020, an increase of $32.8 million or 37.5%.

This increase was primarily due to increased compensation expenses with general business growth and increased expenses relating to software and technological services.

Depreciation and Amortization

Depreciation and amortization expenses were $89.7 million for the year ended December 31, 2021 and $60.8 million for year ended December 31, 2020, an increase of $28.9 million or 47.5%.

The increase was primarily due to depreciation and amortization of fixed assets and intangibles from the acquisitions of BillingTree and Kontrol.

Change in Fair Value of Contingent Consideration

Change in the fair value of contingent consideration was $5.8 million for the year ended December 31, 2021, which consisted of fair value adjustments related to the contingent consideration for the acquisitions of Ventanex, CPS, BillingTree and Kontrol.

Impairment Loss

We incurred an impairment loss of $2.2 million for the year ended December 31, 2021, due to trade names write-offs related to TriSource, APS, Ventanex, cPayPlus and CPS as we strategically phased out these trade names and marketed service offerings under the REPAY name.

Interest Expense

Interest expense was $3.7 million for the year ended December 31, 2021 and $14.4 million for the year ended December 31, 2020, a decrease of $10.7 million or 74.5%.

This decrease was due to a lower average outstanding principal balance under our Amended Credit Agreement as compared to the average outstanding principal balance under the Successor Credit Agreement.

Loss on Extinguishment of Debt

Change in Fair Value of Warrant Liabilities

We incurred a change in the fair value of warrant liabilities of $70.8 million for the year ended December 31, 2020, which was due to the mark-to-market valuation adjustments related to the increase in the publicly listed trading price of our stock.

In July 2020, we completed the redemption of all of our outstanding warrants.

Change in Fair Value of Tax Receivable Liability

We incurred a change in the fair value of the tax receivable liability of $14.1 million for the year ended December 31, 2021 compared to $12.4 million for the year ended December 31, 2020, an increase of $1.7 million.

This increase was due to lower fair value adjustments related to the tax receivable liability, primarily as a result of changes to the discount rate used to determine the fair value of the liability, as well as final adjustments related to the value of the 2020 exchanges of Post-Merger Repay Units.

We incurred a loss of $9.1 million on the settlement of interest rate swaps and disposal of property and equipment for the year ended December 31, 2021.

Income Tax Benefit

The income tax benefit was $30.7 million for the year ended December 31, 2021 and $12.4 million for year ended December 31, 2020, which reflected the expected income tax benefit to be received on the net earnings related to the Company’s economic interest in Hawk Parent.

This was a result of the operating loss incurred by the Company, primarily driven by stock-based compensation deductions, the amortization of assets acquired in the Business Combination and prior acquisitions, the write-off of deferred debt issuance costs and the loss recognized as part of the settlement of interest rate swaps, in addition to, the state rate change impact on deferred taxes.

We provided our services through two reportable segments:

(1) Consumer Payments and (2) Business Payments.

The following table presents our segment revenue and selected performance measures.

Year Ended December 31,

($ in thousand)

Consumer Payments

Business Payments

Elimination of intersegment revenues

Total revenue

Gross profit (1)

Consumer Payments

Business Payments

Elimination of intersegment revenues

Total gross profit

Total gross profit margin (2)

Year Ended December 31,

($ in thousand)

Consumer Payments

Business Payments

Elimination of intersegment revenues

Total revenue

Gross profit (1)

Consumer Payments

Business Payments

Elimination of intersegment revenues

Total gross profit

Total gross profit margin (2)

(1) Gross profit represents revenue less cost of services.

(2) Gross profit margin represents total gross profit / total revenue.

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

Consumer Payments

Revenue for the Consumer Payments segment was $248.2 million for the year ended December 31, 2022 and $194.0 million for the year ended December 31, 2021, representing a $54.2 million or 27.9%year-over-year increase.

This increase was the result of newly signed clients, the growth of existing clients, as well as the acquisitions of BillingTree and Payix.

For the year ended December 31, 2022, incremental revenues of approximately $34.3 million are attributable to BillingTree and Payix.

Gross profit for the Consumer Payments segment was $195.5 million for the year ended December 31, 2022 and $148.6 million for the year ended December 31, 2021, representing a $46.9 million or 31.6% year-over-year increase.

This increase was the result of newly signed clients, the growth of existing clients, as well as the acquisitions of BillingTree and Payix.

For the year ended December 31, 2022, incremental gross profit of approximately $27.9 million is attributable to BillingTree and Payix.

Business Payments

Revenue for the Business Payments segment was $42.6 million for the year ended December 31, 2022 and $33.8 million for the year ended December 31, 2021, representing a $8.8 million or 26.0% year-over-year increase.

This increase was primarily driven by newly signed clients and growth of existing clients.

For the year ended December 31, 2022, incremental revenues of approximately $1.1 million are attributable to the acquisition of Kontrol.

Gross profit for the Business Payments segment was $30.4 million for the year ended December 31, 2022 and $23.8 million for the year ended December 31, 2021, representing a $6.6 million or 28.0% year-over-year increase.

This increase was primarily driven by newly signed clients and growth of existing clients.

For the year ended December 31, 2022, incremental gross profit of approximately $0.5 million is attributable to the acquisition of Kontrol.

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Consumer Payments

Revenue for the Consumer Payments segment was $194.0 million for the year ended December 31, 2021 and $140.8 million for the year ended December 31, 2020, representing a $53.2 million or 37.8% year-over-year increase.

This increase was the result of newly signed clients, the growth of existing clients, as well as the acquisitions of BillingTree, Ventanex and Payix.

For the year ended December 31, 2021, incremental revenues of approximately $32.0 million are attributable to BillingTree, Ventanex and Payix.

Gross profit for the Consumer Payments segment was $148.6 million for the year ended December 31, 2021 and $106.0 million for the year ended December 31, 2020, representing a $42.6 million or 40.2% year-over-year increase.

This increase was the result of newly signed clients, the growth of existing clients, as well as the acquisitions of BillingTree, Ventanex and Payix.

For the year ended December 31, 2021, incremental gross profit of approximately $27.3 million is attributable to BillingTree, Ventanex and Payix.

Business Payments

Revenue for the Business Payments segment was $33.8 million for the year ended December 31, 2021 and $20.6 million for the year ended December 31, 2020, representing a $13.2 million or 64.0% year-over-year increase.

This increase was the result of newly signed clients, the growth of existing clients, as well as the acquisitions of Ventanex, CPS, cPayPlus and Kontrol.

For the year ended December 31, 2021, incremental revenues of approximately $9.2 million are attributable to Ventanex, CPS, cPayPlus and Kontrol.

Gross profit for the Business Payments segment was $23.8 million for the year ended December 31, 2021 and $14.0 million for the year ended December 31, 2020, representing a $9.8 million or 69.7% year-over-year increase.

This increase was the result of newly signed clients, the growth of existing clients, as well as the acquisitions of Ventanex, CPS, cPayPlus and Kontrol.

For the year ended December 31, 2021, incremental gross profit of approximately $6.0 million is attributable to Ventanex, CPS, cPayPlus and Kontrol.

Non-GAAP Financial Measures

This report includes certain non-GAAP financial measures that our management uses to evaluate our operating business, measure our performance and make strategic decisions.

Adjusted EBITDA is a non-GAAP financial measure that represents net income prior to interest expense, tax expense, depreciation and amortization, as adjusted to add back certain charges deemed to not be part of normal operating expenses, non-cash charges and/or non-recurring charges, such as loss on extinguishment of debt, loss on termination of interest rate hedge, non-cash change in fair value of contingent consideration, non-cash change in fair value of assets and liabilities, share-based compensation charges, transaction expenses, restructuring and other strategic initiative costs and other non-recurring charges.

Adjusted Net Income is a non-GAAP financial measure that represents net income prior to amortization of acquisition-related intangibles, as adjusted to add back certain charges deemed to not be part of normal operating expenses, non-cash charges and/or non-recurring charges, such as loss on extinguishment of debt, loss on termination of interest rate hedge, non-cash change in fair value of contingent consideration, non-cash change in fair value of assets and liabilities, share-based compensation expense, transaction expenses, restructuring and other strategic initiative costs, other non-recurring charges, non-cash interest expense and net of tax effect associated with these adjustments.

Adjusted Net Income is adjusted to exclude amortization of all acquisition-related intangibles as such amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions.

Management believes that the adjustment of acquisition-related intangible amortization supplements GAAP financial measures because it allows for greater comparability of operating performance.

Although we exclude amortization from acquisition-related intangibles from our non-GAAP expenses, management believes that it is important for investors to understand that such intangibles were recorded as part of purchase accounting and contribute to revenue generation.

Adjusted Net Income per share is a non-GAAP financial measure that represents Adjusted Net Income divided by the weighted average number of shares of Class A common stock outstanding (on an as-converted basis assuming conversion of the outstanding Post-Merger Repay Units) for the years ended December 31, 2022, 2021 and 2020 (excluding certain shares that were subject to forfeiture).

We believe that Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share provide useful information to investors and others in understanding and evaluating its operating results in the same manner as management.

However, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share are not financial measures calculated in accordance with GAAP and should not be considered as a substitute for net income, operating profit, or any other operating performance measure calculated in accordance with GAAP.

Using these non-GAAP financial measures to analyze our business has material limitations because the calculations are based on the subjective determination of management regarding the nature and classification of events and circumstances that investors may find significant.

In addition, although other companies in our industry may report measures titled Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per share or similar measures, such non-GAAP financial measures may be calculated differently from how we calculate our non-GAAP financial measures, which reduces their overall usefulness as comparative measures.

Because of these limitations, you should consider Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share alongside other financial performance measures, including net income and our other financial results presented in accordance with GAAP.

The following tables set forth a reconciliation of our results of operations for the years ended December 31, 2022, 2021 and 2020 .

REPAY HOLDINGS CORPORATION

Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA

Year Ended December 31,

($ in thousands)

Operating expenses

Costs of services (exclusive of depreciation and amortization shown separately below)

Selling, general and administrative

Depreciation and amortization

Change in fair value of contingent consideration

Impairment loss

Total operating expenses

Loss from operations

Interest expense

Loss on extinguishment of debt

Change in fair value of warrant liabilities

Change in fair value of tax receivable liability

Other (expense) income

Total other income (expense)

Income (loss) before income tax (expense) benefit

Income tax (expense) benefit

Net income (loss)

Interest expense

Depreciation and amortization (a)

Income tax expense (benefit)

Loss on extinguishment of debt (i)

Loss on termination of interest rate hedge (j)

Non-cash change in fair value of warrant liabilities (k)

Non-cash change in fair value of contingent consideration (b)

Non-cash impairment loss (c)

Non-cash change in fair value of assets and liabilities (d)

Share-based compensation expense (e)

Transaction expenses (f)

Restructuring and other strategic initiative costs (g)

Other non-recurring charges (h)

Adjusted EBITDA

REPAY HOLDINGS CORPORATION

Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income

Year Ended December 31,

($ in thousands)

Operating expenses

Costs of services (exclusive of depreciation and amortization shown separately below)

Selling, general and administrative

Depreciation and amortization

Change in fair value of contingent consideration

Impairment loss

Total operating expenses

Loss from operations

Interest expense

Loss on extinguishment of debt

Change in fair value of warrant liabilities

Change in fair value of tax receivable liability

Other (expense) income

Total other income (expense)

Income (loss) before income tax (expense) benefit

Income tax (expense) benefit

Net income (loss)

Amortization of acquisition-related intangibles (l)

Loss on extinguishment of debt (i)

Loss on extinguishment of interest rate hedge (j)

Non-cash change in fair value of warrant liabilities (k)

Non-cash change in fair value of contingent consideration (b)

Non-cash goodwill impairment loss (c)

Non-cash change in fair value of assets and liabilities (d)

Share-based compensation expense (e)

Transaction expenses (f)

Restructuring and other strategic initiative costs (g)

Other non-recurring charges (h)

Non-cash interest expense (m)

Pro forma taxes at effective rate (n)

Adjusted Net Income

Shares of Class A common stock outstanding (on an as-converted basis) (o)

Adjusted Net Income per share

(a) See footnote (l) for details on our amortization and depreciation expenses.

(b) Reflects the changes in management’s estimates of future cash consideration to be paid in connection with prior acquisitions from the amount estimated as of the most recent balance sheet date.

(c) For the year ended December 31, 2022, reflects impairment loss related to trade names write-offs of BillingTree and Kontrol.

For the year ended December 31, 2021, reflects impairment loss related to trade names write-offs of TriSource, APS, Ventanex, cPayPlus and CPS.

(d) Reflects the changes in management’s estimates of the fair value of the liability relating to TRA.

(e) Represents compensation expense associated with equity compensation plans, totaling $20.5 million, $22.3 million and $19.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.

(f) Primarily consists of (i) during the year ended December 31, 2022, professional service fees and other costs incurred in connection with the acquisitions of BillingTree, Kontrol and Payix, (ii) during the year ended December 31, 2021, professional service fees and other costs incurred in connection with the acquisitions of Ventanex, cPayPlus, CPS, BillingTree, Kontrol and Payix, as well as professional service expenses related to the January 2021 equity and convertible notes offerings and (iii) during the year ended December 31, 2020, professional service fees and other costs incurred in connection with the acquisition of CPS, and additional transaction expenses incurred in connection with the Business Combination and the acquisitions of TriSource,

APS, Ventanex and cPayPlus, as well as professional service expenses related to the June and September 2020 equity offerings.

(g) Reflects costs associated with reorganization of operations, consulting fees related to our processing services and other operational improvements, including restructuring and integration activities related to our acquired businesses, that were not in the ordinary course during the years ended December 31, 2022, 2021 and 2020.

Additionally, for the year ended December 31, 2022, reflects one-time severance payments.

(h) For the year ended December 31, 2022, reflects one-time settlement payments to certain clients and partners, payments made to third-parties in connection with expansion of our personnel, non-recurring performance incentives to employees, franchise taxes and other non-income based taxes, other payments related to COVID-19, non-cash rent expense, loss on termination of lease and loss on disposal of fixed assets.

For the year ended December 31, 2021, reflects one-time payments to certain clients and partners, other payments related to COVID-19, non-cash rent expense and loss on disposal of fixed assets.

For the year ended December 31, 2020, reflects expenses incurred related to one-time accounting system and compensation plan implementation related to becoming a public company, one-time payments to certain clients and other payments related to COVID-19.

Additionally, to be consistent with the current year presentation, for the year ended December 31, 2021 and 2020, reflects payments made to third-parties in connection with expansion of our personnel, franchise taxes and other non-income based taxes.

(i) Reflects write-offs of debt issuance costs relating to Term Loans.

(j) Reflects realized loss of our interest rate hedging arrangement which terminated in conjunction with the repayment of Term Loans.

(k) Reflects the mark-to-market fair value adjustments of the warrant liabilities.

(l) For the years ended December 31, 2022 and 2021, reflects amortization of client relationships, non-compete agreement, software, and channel relationship intangibles acquired through the Business Combination, and client relationships, non-compete agreement, and software intangibles acquired through our acquisitions of TriSource, APS, Ventanex, cPayPlus, CPS, BillingTree, Kontrol and Payix.

For the year ended December 31, 2020 reflects (i) amortization of the client relationships intangibles acquired through Hawk Parent’s acquisitions of PaidSuite and Paymaxx during the year ended December 31, 2017 and the recapitalization transaction in 2016, through which Hawk Parent was formed in connection with the acquisition of a majority interest in Repay Holdings, LLC by certain investment funds sponsored by, or affiliated with, Corsair, (ii) client relationships, non-compete agreement, software, and channel relationship intangibles acquired through the Business Combination, and (iii) client relationships, non-compete agreement, and software intangibles acquired through Repay Holdings, LLC’s acquisitions of TriSource, APS, Ventanex, cPayPlus and CPS.

This adjustment excludes the amortization of other intangible assets which were acquired in the regular course of business, such as capitalized internally developed software and purchased software.

See additional information below for an analysis of our amortization expenses:

Year ended December 31,

($ in thousands)

Acquisition-related intangibles

Reseller buyouts

Total Depreciation and amortization (1)

(1) Adjusted Net Income is adjusted to exclude amortization of all acquisition-related intangibles as such amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions (see corresponding adjustments in the reconciliation of net income to Adjusted Net Income presented above).

Management believes that the adjustment of acquisition-related intangible amortization supplements GAAP financial measures because it allows for greater comparability of operating performance.

Amortization of intangibles that relate to past acquisitions will recur in future periods until such intangibles have been fully amortized.

Any future acquisitions may result in the amortization of additional intangibles.

(m) Represents amortization of non-cash deferred debt issuance costs.

(n) Represents pro forma income tax adjustment effect associated with items adjusted above.

(o) Represents the weighted average number of shares of Class A common stock outstanding (on an as-converted basis assuming conversion of outstanding Post-Merger Repay Units) for the years ended December 31, 2022, 2021 and

These numbers do not include any shares issuable upon conversion of our 2026 Notes.

See the reconciliation of basic weighted average shares outstanding to the non-GAAP Class A common stock outstanding on an as-converted basis for each respective period below:

Year Ended December 31,

Weighted average shares of Class A common stock outstanding - basic

Non-controlling interests

Weighted average Post-Merger Repay Units exchangeable for Class A common stock

Shares of Class A common stock outstanding (on an as-converted basis)

Adjusted EBITDA for the years ended December 31, 2022 and 2021 was $124.6 million and $93.2 million, respectively, representing a 33.7% year-over-year increase.

Adjusted Net Income for the years ended December 31, 2022 and 2021 was $79.8 million and $73.8 million, respectively, representing a 8.2% year-over-year increase.

Our net income (loss) attributable to the Company for the years ended December 31, 2022 and 2021 was $12.8 million and ($50.1) million, respectively, representing a 125.6% year-over-year increase.

These increases in Adjusted EBITDA, Adjusted Net Income and net income (loss) attributable to the Company for the year ended December 31, 2022 are primarily due to the organic growth of our business, along with contributions from acquisitions.

For discussion on Adjusted EBITDA, Adjusted Net income, and net income (loss) attributable to the Company for the year ended December 31, 2021 compared to the year ended December 31, 2020, see Part II, Item 7 of the Company’s 2021 Form 10-K.

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.

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.

This increase is due to consumers’

receipt of tax refunds and the increases in repayment activity levels that follow.

Operating expenses show less seasonal fluctuation, with the result that net income is subject to the similar seasonal factors as our volumes and revenues.

Liquidity and Capital Resources

We have historically financed our operations and working capital through net cash from operating activities.

We also finance our operations through proceeds from the issuance of our Class A common stock in June 2020 and our January 2021 convertible notes offering.

As of December 31, 2022, we had $64.9 million of cash and cash equivalents and available borrowing capacity of $165.0 million under the Amended Credit Agreement.

This balance does not include restricted cash, which reflects cash accounts holding reserves for potential losses and client settlement funds of $28.7 million as of December 31, 2022.

In February 2021, we used a portion of the proceeds from the January 2021 convertible notes offering to prepay in full the entire principal amount of the term loans then outstanding under the Successor Credit Agreement and also terminated in full all delayed draw term loan commitments then outstanding.

At that time, we also amended and restated the Successor Credit Agreement and entered into the Amended Credit Agreement, which established a $125.0 million senior secured revolving credit facility in favor of Hawk Parent.

In December 2021, we increased our existing senior secured credit facilities by $60.0 million to a $185.0 million revolving credit facility pursuant to an amendment to the Amended Credit Agreement.

Our primary cash needs are to fund working capital requirements, invest in technology development, fund acquisitions and related contingent consideration, make scheduled principal payments and interest payments on our outstanding indebtedness and pay tax distributions to members of Hawk Parent.

We expect that our cash flow from operations, current cash and cash equivalents and available borrowing capacity under the Amended Credit Agreement will be sufficient to fund our operations and planned capital expenditures and to service our debt obligations for the next twelve months.

We may also from time to time depending on market conditions and prices, contractual restrictions, our financial liquidity and other factors, seek to prepay outstanding debt or repurchase our outstanding debt through open market purchases,

privately negotiated purchases, or otherwise.

The amounts involved in any such transactions, individually or in the aggregate, may be material and may be funded from available cash or from additional borrowings.

We are a holding company with no operations and depend on our subsidiaries for cash to fund all of our consolidated operations, including future dividend payments, if any.

We depend on the payment of distributions by our current subsidiaries, including Hawk Parent, which distributions may be restricted by law or contractual agreements, including agreements governing their indebtedness.

For a discussion of those considerations and restrictions, refer to Part II, Item 1A “Risk Factors - Risks Related to Our Class A Common Stock.”

As of December 31, 2022, our material contractual obligations primarily consist of operating leases liabilities and contingent considerations.

Business Combinations and Note 12.

Commitments and Contingencies to the financial statements in Item 8 of this Annual Report on Form 10-K for more information related to contingent considerations and operating leases liabilities, respectively.

Contingent considerations are associated with the acquisition of CPS, which include approximately $1.0 million due within the next twelve months.

Based on our current lease terms, $2.3 million of operating lease liabilities are due within the next twelve months, and the remaining lease liabilities of $8.3 million are due within the next six years.

We believe the cash flows from operations and available borrowing capacity from our existing revolving credit facility will be sufficient to satisfy our cash requirement for the next twelve months and the following five years.

On May 16, 2022, our board of directors approved a share repurchase program under which we may repurchase up to $50 million of our outstanding Class A common stock (the “Share Repurchase Program”).

The Share Repurchase Program has no expiration date but may be modified, suspended or discontinued at any time at our discretion.

During the year ended December 31, 2022, we repurchased 1,078,141 shares for a total of approximately $10.0 million under the Share Repurchase Program.

The following table presents a summary of cash flows from operating, investing and financing activities for the periods indicated:

Year Ended December 31,

($ in thousands)

Net cash provided by operating activities

Net cash used in investing activities

Net cash (used in) provided by financing activities

Cash Flow from Operating Activities

Net cash provided by operating activities was $74.2 million for the year ended December 31, 2022.

Net cash provided by operating activities was $53.3 million for the year ended December 31, 2021.

Net cash provided by operating activities was $28.5 million for the year ended December 31, 2020.

Cash provided by operating activities for the years ended December 31, 2022, 2021 and 2020, reflects net income as adjusted for non-cash operating items including depreciation and amortization, share-based compensation, and changes in working capital accounts.

Cash Flow from Investing Activities

Net cash used in investing activities was $39.5 million for the year ended December 31, 2022, due to the capitalization of software development activities.

Net cash used in investing activities was $397.3 million for the year ended December 31, 2021, due to the acquisitions of BillingTree, Kontrol and Payix, as well as the capitalization of software development activities.

Net cash used in investing activities was $146.0 million for the year ended December 31, 2020, due to the acquisition of Ventanex, cPayPlus, and CPS, as well as capitalization of software development activities.

Cash Flow from Financing Activities

Net cash used in financing activities was $17.5 million for the year ended December 31, 2022, due to the shares repurchased under the Incentive Plan, ESPP and Share Repurchase Program, as well as the Ventanex earnout payment.

Net cash provided by financing activities was $313.8 million for the year ended December 31, 2021, due to proceeds from the issuance of new shares in the Equity Offering, and proceeds from the 2026 Notes, offset by repayment of the outstanding revolver balance related to the Successor Credit Agreement, repayments of the Term Loan principal balance under the Successor Credit Agreement and the cPayPlus earnout payment.

Net cash provided by financing activities was $186.1 million for the year ended December 31, 2020, due to proceeds from the issuance of new shares in the June 2020 offering of Class A common stock, new borrowings related to the acquisition of Ventanex under the Successor Credit Agreement, as well as funds received related to the exercise of warrants, offset by repayment of the outstanding revolver balance related to the Successor Credit Agreement in connection with its amendment and the acquisition of Ventanex, and repayments of the term loan principal balance under the Successor Credit Agreement.

Successor Credit Agreement

In connection with the Business Combination, on July 11, 2019, TB Acquisition Merger Sub LLC, Hawk Parent and certain subsidiaries of Hawk Parent, as guarantors, entered into a Revolving Credit and Term Loan Agreement (the “Successor Credit Agreement”) with certain financial institutions, as lenders, and Truist Bank (formerly SunTrust Bank), as the administrative agent.

On February 10, 2020, we announced the acquisition of Ventanex.

The closing of the acquisition was financed partially from new borrowings under our existing credit facility.

As part of the financing for the transaction, we entered into an agreement with Truist Bank and other members of its existing bank group to amend and upsize the Successor Credit Agreement.

On January 20, 2021, we used a portion of the proceeds from the 2026 Notes to prepay in full the entire amount of the outstanding term loans under the Successor Credit Agreement.

We also terminated in full all outstanding delayed draw term loan commitments under such credit facilities.

Amended Credit Agreement

In February 2021, we also amended and restated the Successor Credit Agreement and entered into the Amended Credit Agreement, which establishes a $125.0 million senior secured revolving credit facility in favor of Hawk Parent.

In December 2021, we increased our existing senior secured credit facilities by $60.0 million to a $185.0 million revolving credit facility pursuant to an amendment to the Amended Credit Agreement.

We currently expect that we will remain in compliance with the restrictive financial covenants of the Amended Credit Agreement, prospectively.

In February 2023, we further amended the Amended Credit Agreement to replace LIBOR with term SOFR as the interest rate benchmark.

In February 2023, we repaid in full the entire amount of $20.0 million of the outstanding revolving credit facility.

The undrawn capacity of the existing revolving credit facility under the Amended Credit Agreement became $185.0 million after the repayment.

As of December 31, 2022, the Amended Credit Agreement provides for a revolving credit facility of $185.0 million.

As of December 31, 2022, we had $20.0 million drawn against the revolving credit facility at a variable interest rate of 2.25% plus 1-month LIBOR due 2026.

We paid $0.6 million and $0.4 million in fees related to unused commitments for the years ended December 31, 2022 and 2021, respectively.

Borrowings to the financial statements in Item 8 of this Annual Report on Form 10-K for more information.

Convertible Senior Debt

On January 19, 2021, we issued $440.0 million in aggregate principal amount of 0.00% Convertible Senior Notes due 2026 in a private placement (the “Notes Offering”) to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

$40.0 million in aggregate principal amount of such 2026 Notes were sold in the Notes Offering in connection with the full exercise of the initial purchasers’

option to purchase such additional 2026 Notes pursuant to the purchase agreement.

Upon conversion, the Company may choose to pay or deliver cash, shares of the Company’s Class A

Common Stock, or a combination of cash and shares of the Company’s Class A Common Stock.

The 2026 Notes will mature on February 1, 2026, unless earlier converted, repurchased or redeemed.

As of December 31, 2022, we had convertible senior debt outstanding of $433.1 million, net of deferred issuance costs, under the 2026 Notes, and revolving credit facility debt outstanding of $18.2 million, net of deferred issuance costs, under the Amended Credit Agreement.

We were in compliance with the related restrictive financial covenants.

Additionally, we currently expect that we will remain in compliance with the restrictive financial covenants prospectively.

Tax Receivable Agreement

Upon the completion of the Business Combination, we entered into that certain Tax Receivable Agreement (the “Tax Receivable Agreement”

or “TRA”) with holders (other than the Company) of limited liability company interests of Hawk Parent (the “Post-Merger Repay Units”).

As a result of the TRA, we established a liability in our consolidated financial statements.

Such liability, which will increase upon the exchanges of Post-Merger Repay Units for Class A common stock, generally represents 100% of the estimated future tax benefits, if any, relating to the increase in tax basis that will result from exchanges of the Post-Merger Repay Units for shares of Class A common stock pursuant to the Exchange Agreement and certain other tax attributes of the Company and tax benefits of entering into the TRA, including tax benefits attributable to payments under the TRA.

Under the terms of the TRA, we may elect to terminate the TRA early but will be required to make an immediate payment equal to the present value of the anticipated future cash tax savings.

As a result, the associated liability reported on our consolidated financial statements may be increased.

We expect that the payment obligations of the Company required under the TRA will be substantial.

The actual increase in tax basis, as well as the amount and timing of any payments under the TRA, will vary depending upon a number of factors, including the timing of redemptions or exchanges by the holders of Post-Merger Repay Units, the price of our Class A common stock at the time of the redemption or exchange, whether such redemptions or exchanges are taxable, the amount and timing of the taxable income we generate in the future, the tax rate then applicable and the portion of our payments under the TRA constituting imputed interest.

We expect to fund the payment of the amounts due under the TRA out of the cash savings that we actually realize in respect of the attributes to which the TRA relates.

However, the payments required to be made could be in excess of the actual tax benefits that we realize and there can be no assurance that we will be able to finance our obligations under the TRA.

Critical Accounting Policies and Estimates

Recently Issued Accounting Standards

For information related to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 2.

Basis of Presentation and Summary of Significant Accounting Policies, to our Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.

Critical Accounting Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported consolidated statements of operations during the reporting period.

We base our estimates and judgments on historical experience and available relevant information that we believe to be reasonable under the circumstances, and we continue to review and evaluate these estimates.

Actual results may materially differ from these estimates under different assumptions or conditions as new or additional information become available in future periods.

Accounting policies require numerous estimates or economic assumptions that may prove inaccurate or may be subject to variations which may significantly affect our reported results and financial condition for the period or in future periods.

Subsequent changes in economic or market conditions could have a material impact on these estimates and our financial condition and operating results in future periods.

There have been no significant changes in our application of accounting estimates during the year ended December 31, 2022.

Revenue Recognition

The consideration to be received in our contracts with clients consists of variable consideration where the timing and quantity of transactions to be processed is not determinable at contract inception.

Our performance obligation in our contracts with clients is the promise to stand-ready to provide front-end authorization and back-end settlement payment processing services ("processing services") for an unknown or unspecified quantity of transactions and the consideration received is contingent upon the client’s use (e.g., number of transactions submitted and processed) of the related processing services.

Accordingly, the total transaction price is variable.

These services are stand-ready obligations, as the timing and quantity of transactions to be processed is not determinable.

We follow the requirements of ASC 606-10-55-36 through -40, Revenue from Contracts with Customers, Principal Agent Considerations , in determining the gross versus net revenue recognition for performance obligation(s) in the contract with a client.

The principal versus agent evaluation is matter of judgment that depends on the facts and circumstances of the arrangement and is dependent on whether we control the good or service before it is transferred to the client or whether we are acting as an agent of a third party.

This evaluation is performed separately for each performance obligation identified.

Business Combinations

We account for business combinations using the acquisition method of accounting.

Under the acquisition method, the consolidated financial statements reflect the operations of an acquired business starting from the closing date of the acquisition.

All assets acquired and liabilities assumed are recorded at fair value as of the acquisition date.

We allocate the purchase price of an acquired business to the fair values of the tangible and identifiable intangible assets acquired and liabilities assumed, with any excess purchase price recorded as goodwill.

Contingent consideration, if any, is included within the purchase price and is recognized at its fair value on the acquisition date.

The application of the acquisition method of accounting for business combinations and determination of fair value requires management to make judgments and may involve the use of significant estimates, including assumptions related to estimated future revenues, growth rates, cash flows, and discount rates, among other items.

Management generally evaluates fair value at acquisition using three valuation techniques–the replacement cost, market and income methods–and weights the valuation methods based on what is most appropriate in the circumstances.

The process of assigning fair values, particularly to acquired intangible assets, is highly subjective.

Management also typically utilizes third party valuation specialists to assist in the determination of the fair value of assets acquired and liabilities assumed.

Fair value estimates are based on assumptions believed to be reasonable, but are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

If the actual results differ from the estimates and judgments used, the amounts recorded in the consolidated financial statements may be exposed to potential impairment of the intangible assets and goodwill as discussed in the “Impairment”

section below.

The determination of fair value is considered a critical accounting estimate because the valuation techniques mentioned use significant estimates and assumptions, including projected future revenues, the expected economic life of the asset, tax rates and a discount rate that reflects the level of risk associated with the future earnings attributable to the asset.

During the measurement period, which is up to one year from the acquisition date, adjustments to the assets acquired and liabilities assumed may be recorded, with the corresponding offset to goodwill.

We review goodwill and indefinite-lived intangible assets for impairment annually in the fourth quarter of our fiscal year, or more frequently as warranted by events or changes in circumstances which indicate that the carrying amount may not be recoverable.

We may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying amount.

If, based on the results of the qualitative assessment, it is concluded that it is not more likely than not that the fair value of a reporting unit or indefinite-lived asset exceeds its carrying value, a quantitative test is performed.

Under the quantitative test, we compare the carrying value of the reporting unit or indefinite-lived intangible asset to its fair value, which we estimate using a discounted cash flow analysis or by comparison to the market values of similar assets.

If the carrying value exceeds its fair value, we record an impairment charge equal to the excess of the carrying value over the related fair value.

The assumptions used in such valuations such as projected future cash flows, discount rates, growth rates, and determination of appropriate market comparables and recent transactions, are subject to volatility and may differ from actual results.

Under a qualitative assessment, we assess various factors including industry and market conditions, macroeconomic conditions and performance of our businesses.

We review other long-lived assets, including ROU assets, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or an asset group may not be recoverable.

In evaluating long-lived assets for recoverability, we estimate the future cash flows at the individual asset or asset group level.

Impairment losses are measured and recorded for the excess of an asset's carrying value over its fair value.

To determine the fair value of long-lived assets, included ROU assets, we utilize the valuation technique or techniques deemed most appropriate based on the nature of the asset or asset group, which may include the use of quoted market prices, prices for similar assets or other valuation techniques such as discounted future cash flows or earnings.

Under ASC 740, Income Taxes, deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to net operating losses, tax credits, and temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, which will result in taxable or deductible amounts in the future.

Our income tax expense/benefit, deferred tax assets and tax receivable liability reflect management’s best assessment of estimated current and future taxes.

Significant judgments and estimates are required in determining the consolidated income tax expense/benefits, deferred tax assets and tax receivable agreement liability.

In evaluating our ability to recover our deferred tax assets, we consider all available positive and negative evidence, including projected future taxable income and results of recent operations.

Estimating future taxable income is inherently uncertain, requires judgment and is consistent with estimates we are using to manage our business.

If we determine in the future that we will not be able to fully utilize all or part of the deferred tax assets, we would record a valuation allowance through earnings in the period the determination was made.

We record the TRA liability at fair value based on estimates of discounted future cash flows associated with the estimated payments to the Post-Merger Repay Unit holders.

These inputs are not observable in the market.

Therefore, in estimating fair value, management uses a discount rate, also referred to as the early termination rate, to determine the present value based on a risk-free rate plus a spread pursuant to the TRA.

A significant increase or decrease in the discount rate could result in a lower or higher balance, respectively, as of the measurement date.

QUANTITATIVE AND QUALITATI VE DISCLOSURES ABOUT MARKET RISK.

Effects of Inflation

While inflation may impact our revenues and cost of services, we believe the effects of inflation, if any, on our results of operations and financial condition have not been significant.

However, there can be no assurance that our results of operations and financial condition will not be materially impacted by inflation in the future.

Interest Rate Risk

Interest rates are highly sensitive to many factors, including U.S.

fiscal and monetary policies and domestic and international economic and political considerations, as well as other factors beyond our control.

Interest rate risk is the exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates.

We are exposed to market risk from changes in interest rates on debt, which bears interest at variable rates.

Our debt has floating interest rates.

We are exposed to changes in the level of interest rates and to changes in the relationship or spread between interest rates for its floating rate debt.

Our floating rate debt requires payments based on variable interest rates such as the federal funds rate, prime rate, eurocurrency rate, and LIBOR.

Therefore, increases in interest rates may reduce our net income or loss by increasing the cost of debt.

As of December 31, 2022, we had convertible senior debt of $433.1 million, net of deferred issuance costs, and revolver borrowings of $18.2 million, net of deferred issuance costs, outstanding under the respective credit agreements.

As of December 31, 2021, we had convertible senior debt of $429.3 million, net of deferred issuance costs, and revolving credit facility borrowings of $19.2 million, net of deferred issuance costs, outstanding.

The borrowings accrue interest at either base rate, described above under “

Liquidity and Capital Resources —

Indebtedness ,”

plus a margin of 1.50% to 2.50% or at an adjusted LIBOR rate plus a margin of 2.50% to 3.50% under the Amended Credit Agreement, in each case depending on the total net leverage ratio, as defined in the respective agreements governing the Amended Credit Agreement.

In October 2019, we entered into a $140.0 million notional interest rate swap agreement, and in February 2020, we entered into a $30.0 million notional interest rate swap agreement, then a revised notional amount of $65.0 million beginning on September 30, 2020.

These interest rate swap agreements reduce a portion of our exposure to market interest rate risk on certain of our variable-rate debt as discussed in Item II, Part 8, Note 11, “Derivatives.

These interest rate swaps effectively converted $205.0 million of the outstanding term loan into to fixed rate payments for 57 months and 60 months, respectively.

Both interest rate swaps were settled in January 2021.

We may incur additional borrowings from time to time for general corporate purposes, including working capital and capital expenditures.

In July 2017, the U.K.

Financial Conduct Authority announced its intention to phase out LIBOR rates by the end of 2021.

The deadline has been mostly extended and most U.S.

dollar-denominated LIBOR maturity tenors will continue to be published until June 30, 2023.

It is not possible to predict the effect of any changes in the methods by which the LIBOR is determined, or any other reforms to LIBOR that may be enacted in the United Kingdom or elsewhere.

Such developments may cause LIBOR to perform differently than in the past, including sudden or prolonged increases or decreases in LIBOR, or cease to exist, resulting in the application of a successor base rate under the Amended Credit Agreement, which in turn could have unpredictable effects on our interest payment obligations under the Amended Credit Agreement.

Foreign Currency Exchange Rate Risk

Invoices for our services are denominated in U.S.

dollars and Canadian dollars.

We do not expect our future operating results to be significantly affected by foreign currency transaction risk.

FINANCIAL STATEMENT S AND SUPPLEMENTARY DATA.

Index to the Financial Statements

Reports of Independent Registered Public Accounting Firm (PCAOB ID Number 248)

Consolidated Balance Sheets as of December 31, 2022 and 2021

Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020

Consolidated Statements of Comprehensive Income for the years ended December 31, 2022, 2021 and 2020

Consolidated Statements of Stockholders’

Equity for the years ended December 31, 2022, 2021, 2020

Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGIST ERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Repay Holdings Corporation

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Repay Holdings Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 1, 2023 expressed an unqualified opinion.

Basis for opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue recognition

As described further in Note 2 to the consolidated financial statements, the Company’s revenue primarily consists of transaction-based fees from payment processing services that are made up of a significant volume of low-dollar transactions, sourced from multiple systems, platforms, and applications.

The processing of such transactions and recording of revenue is system-driven and based on contractual terms with merchants, financial institutions, payment networks, and other parties.

Because of the nature of the payment processing services, the Company relies on automated systems and third parties to process and record its revenue transactions.

The principal consideration for our determination that the complexity of revenue recognition is a critical audit matter is the increased extent of effort and involvement of professionals with specialized skills in information technology (IT) to identify, test, and evaluate the Company’s systems and automated controls.

Our audit procedures related to the revenue recognized during the year ended December 31, 2022 included the following, among others:

With the assistance of our IT professionals, we:

o Identified the significant systems used to process revenue transactions and tested the general IT controls over each of these systems, including testing of user access controls, change management controls, and IT operations controls.

o Tested system interface controls and automated controls within the relevant revenue streams, as well as the controls designed to ensure the accuracy and completeness of revenue.

We tested internal controls within the relevant revenue business processes, including those in place to reconcile the various reports extracted from the IT systems to the Company’s general ledger.

For a sample of revenue transactions, we tested selected transactions by agreeing the inputs to the calculation of revenue recognized to source documents, including merchant contracts and processor reports and testing the mathematical accuracy of the recorded revenue.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2018.

Atlanta, Georgia

March 1, 2023

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Repay Holdings Corporation

Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of Repay Holdings Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2022, and our report dated March 1, 2023 expressed an unqualified opinion on those financial statements.

Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting (“Management’s Report”).

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ GRANT THORNTON LLP

Atlanta, Georgia

March 1, 2023

REPAY HOLDINGS CORPORATION

Consolidated Ba lance Sheets

($ in thousands)

December 31, 2022

December 31, 2021

Cash and cash equivalents

Accounts receivable

Prepaid expenses and other

Total current assets

Property, plant and equipment, net

Restricted cash

Intangible assets, net

Operating lease right-of-use assets, net

Deferred tax assets

Total noncurrent assets

Accounts payable

Related party payable

Accrued expenses

Current operating lease liabilities

Current tax receivable agreement

Other current liabilities

Total current liabilities

Long-term debt

Noncurrent operating lease liabilities

Tax receivable agreement, net of current portion

Other liabilities

Total noncurrent liabilities

Total liabilities

Commitments and contingencies (Note 12)

Stockholders' equity

Class A common stock, $ 0.0001 par value;

2,000,000,000 shares authorized, 89,354,754 issued and 88,276,613 outstanding as of December 31, 2022;

88,502,621 issued and outstanding as of December 31, 2021

Class V common stock, $ 0.0001 par value;

1,000 shares authorized and 100 shares issued and outstanding as of December 31, 2022 and 2021

Treasury stock, 1,078,141 and 0 shares as of December 31, 2022 and December 31, 2021, respectively

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

Total Repay stockholders' equity

Non-controlling interests

Total liabilities and equity

See accompanying notes to consolidated financial statements.

REPAY HOLDINGS CORPORATION

Consolidated Statem ents of Operations

Year Ended December 31,

($ in thousands, except per share data)

Operating Expenses

Costs of services (exclusive of depreciation and amortization shown separately below)

Selling, general and administrative

Depreciation and amortization

Change in fair value of contingent consideration

Impairment loss

Total operating expenses

Loss from operations

Other (expense) income

Interest expense

Loss on extinguishment of debt

Change in fair value of warrant liabilities

Change in fair value of tax receivable liability

Other income (expense)

Total other income (expense)

Income (loss) before income tax (expense) benefit

Income tax (expense) benefit

Net income (loss)

Net loss attributable to

non-controlling interests

Net income (loss) attributable to the Company

Income (loss) per Class A share attributable to the Company:

Weighted-average shares outstanding:

See accompanying notes to consolidated financial statements.

REPAY HOLDINGS CORPORATION

Consolidated Statements of Comprehensive Income

Year Ended December 31,

($ in thousands)

Net income (loss)

Other comprehensive (loss) income, before tax

Change in fair value of cash flow hedges

Reclassification of net unrealized loss on cash flow hedges to other loss

Foreign currency translation adjustments

Total other comprehensive (loss) income, before tax

Income tax related to items of other comprehensive income:

Tax benefit on change in fair value of cash flow hedges

Tax expense on reclassification of net unrealized loss on cash flow hedges to other loss

Tax benefit on foreign currency translation adjustments

Total income tax benefit (expense) related to items of other comprehensive income

Total other comprehensive income (loss), net of tax

Total comprehensive income (loss)

Comprehensive loss attributable to non-controlling interests

Comprehensive income (loss) attributable to the Company

See accompanying notes to consolidated financial statements.

REPAY HOLDINGS CORPORATION

Consolidated Statements of Changes in Equity

Repay Stockholders

Class A Common

Class V Common

Accumulated Other Comprehensive

Non-controlling

($ in thousands)

Income (Loss)

Balance at December 31, 2019

Issuance of new shares

Exchange of Post-Merger Repay Units

Redemption of Post-Merger Repay Units

Release of share awards vested under Incentive Plan

Shares repurchased under Incentive Plan

Stock-based compensation

Warrant exercise

Tax distribution from Hawk Parent

Valuation allowance on Ceiling Rule DTA

Reclassification to warrant liabilities

Other comprehensive loss

Balance at December 31, 2020

Issuance of new shares

Exchange of Post-Merger Repay Units

Release of share awards vested under Incentive Plan

Shares repurchased under Incentive Plan

Stock-based compensation

Tax distribution from Hawk Parent

Valuation allowance on Ceiling Rule DTA

Other comprehensive income

Balance at December 31, 2021

Exchange of Post-Merger Repay Units

Release of share awards vested under Incentive Plan and shares purchased under ESPP

Shares repurchased under Incentive Plan and ESPP

Treasury shares repurchased

Stock-based compensation

Tax distribution from Hawk Parent

Valuation allowance on Ceiling Rule DTA

Net income (loss)

Other comprehensive loss

Balance at December 31, 2022

See accompanying notes to consolidated financial statements.

REPAY HOLDINGS CORPORATION

Consolidated Statem ents of Cash Flows

Year Ended December 31,

($ in thousands)

Cash flows from operating activities

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

Stock based compensation

Amortization of debt issuance costs

Loss on disposal of property and equipment

Loss on extinguishment of debt

Loss on sale of interest rate swaps

Fair value change in warrant liability

Fair value change in tax receivable agreement liability

Fair value change in contingent consideration

Impairment loss

Payments of contingent consideration in excess of acquisition date fair value

Deferred tax expense (benefit)

Change in accounts receivable

Change in related party receivable

Change in prepaid expenses and other

Change in operating lease ROU assets

Change in accounts payable

Change in related party payable

Change in accrued expenses and other

Change in operating lease liabilities

Change in other liabilities

Net cash provided by operating activities

Cash flows from investing activities

Purchases of property and equipment

Purchases of intangible assets

Purchases of equity investment

Acquisition of APS, net of cash and restricted cash acquired

Acquisition of Ventanex, net of cash and restricted cash acquired

Acquisition of cPayPlus, net of cash and restricted cash acquired

Acquisition of CPS, net of cash and restricted cash acquired

Acquisition of BillingTree, net of cash and restricted cash acquired

Acquisition of Kontrol, net of cash and restricted cash acquired

Acquisition of Payix, net of cash and restricted cash acquired

Net cash used in investing activities

Cash flows from financing activities

Payment on line of credit

Issuance of long-term debt

Payments on long-term debt

Public issuance of Class A Common Stock

Shares repurchased under Incentive Plan and ESPP

Treasury shares repurchased

Exercise of warrants

Redemption of Post-Merger Repay Units

Distributions to Members

Payment of loan costs

Payments of contingent consideration up to acquisition date fair value

Net cash (used in) provided by financing activities

Increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

REPAY HOLDINGS CORPORATION

Consolidated Statements of Cash Flows (Continued)

Year Ended December 31,

($ in thousands)

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the year for:

SUPPLEMENTAL SCHEDULE OF NONCASH

INVESTING AND FINANCING ACTIVITIES

Acquisition of TriSource in exchange for contingent consideration

Acquisition of APS in exchange for contingent consideration

Acquisition of Ventanex in exchange for contingent consideration

Acquisition of cPayPlus in exchange for contingent consideration

Acquisition of CPS in exchange for contingent consideration

Acquisition of BillingTree in exchange for Class A Common Stock

Acquisition of Kontrol in exchange for contingent consideration

Acquisition of Payix in exchange for contingent consideration

See accompanying notes to consolidated financial statements.

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

Organizational Structure and Corporate Information

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 of Thunder Bridge with and into Hawk Parent Holdings, LLC, a Delaware limited liability company (“Hawk Parent”).

Throughout this section, 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.

Throughout this section, unless otherwise noted or unless the context otherwise requires, “Thunder Bridge”

refers to Thunder Bridge Acquisition.

prior to the consummation of the Business Combination.

Thunder Bridge issued public warrants and private placement warrants (collectively, the “Warrants”), which were outstanding and recorded on the Company’s consolidated financial statements at the time of the Business Combination.

On July 27, 2020, the Company completed the redemption of all outstanding Warrants.

The Company is headquartered in Atlanta, Georgia.

The Company’s legacy business was founded as M & A Ventures, LLC, a Georgia limited liability company doing business as REPAY:

Realtime Electronic Payments (“REPAY LLC”), in 2006 by current executives John Morris and Shaler Alias.

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

The Company provides integrated payment processing solutions to industry-oriented markets in which businesses have specific transaction processing needs.

The Company refers to these markets as “vertical markets”

or “verticals.”

The Company’s proprietary, integrated payment technology platform reduces the complexity of the electronic payments process for business.

The Company charges its clients processing fees based on the volume of payment transactions processed and other transaction or service fees.

The Company intends to continue to strategically target verticals where the Company believes its ability to tailor payment solutions to its clients’

needs, its deep knowledge of the Company’s vertical markets and the embedded nature of its integrated payment solutions will drive strong growth by attracting new clients and fostering long-term client relationships.

The Company provides payment processing solutions to clients primarily operating in the personal loans, automotive loans, receivables management, and business-to-business verticals.

The Company’s payment processing solutions enable consumers and businesses in these verticals to make payments using electronic payment methods, rather than cash or check, which have historically been the primary methods of payment in these verticals.

The Company believes that a growing number of consumers and businesses prefer the convenience and efficiency of paying with cards and other electronic methods and that the Company is poised to benefit from the significant growth opportunity of electronic payment processing as these verticals continue to shift from cash and check to electronic payments.

The personal loans vertical is predominately characterized by installment loans, which are typically utilized by consumers to finance everyday expenses.

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.

The Company’s 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.

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, HOA management and hospitality industries, as well as educational institutions and governments and municipalities.

The Company’s go-to-market strategy combines direct sales with integrations with key software providers in its target verticals.

The integration of the Company’s technology with key software providers in the verticals that the Company serves, including loan management systems, DMS, collection management systems, and enterprise resource planning software systems, allows the Company to embed its omni-channel payment processing technology into its clients’

critical workflow software and ensure seamless operation of the Company’s solutions within its clients’

enterprise management systems.

The Company refers to these software providers as its “software integration partners.”

This integration allows the Company’s sales force to readily access new client opportunities or respond to inbound leads because, in many cases, a business will prefer, or

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

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.

The Company has successfully integrated its technology solutions with numerous, widely-used enterprise management systems in the verticals that it serves, which makes its platform a more compelling choice for the businesses that use them.

Moreover, the Company’s relationships with its partners help it to develop deep industry knowledge regarding trends in client needs.

The Company’s integrated model fosters long-term relationships with its clients, which supports its volume retention rates that the Company believes are above industry averages.

As of December 31, 2022, the Company maintained approximately 240 integrations with various software providers.

The Company has two reportable segments:

Consumer Payments and Business Payments.

For additional information on segments, see Note 16.

Segments to our consolidated financial statements.

Consumer Payments

The 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 the Company’s clients to collect payments and disburse funds to consumers and includes the Company’s clearing and settlement solutions (“RCS”) and Blue Cow Software business (“BCS”).

RCS is the Company’s proprietary clearing and settlement platform through which the Company markets customizable payment processing programs to other ISOs and payment facilitators.

BCS provides enterprise resource planning software solutions that are customized to propane and fuel oil dealers.

BCS was sold for $ 41.0 million in cash on February 15, 2023.

The strategic vertical markets served by the Consumer Payments segment primarily include personal loans, automotive loans, receivables management, credit unions, mortgage servicing, consumer healthcare, diversified retail and energy related software services.

The Consumer Payments segment represented approximately 85 % of the Company’s total revenue after any intersegment eliminations for the year ended December 31, 2022.

Business Payments

The 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 the Company’s clients to collect or send payments to other businesses.

The strategic vertical markets served within the Business Payments segment primarily include retail automotive, education, field services, governments and municipalities, healthcare, HOA management and hospitality.

The Business Payments segment represented approximately 15 % of the Company’s total revenue after any intersegment eliminations for the year ended December 31, 2022.

The Company continues to closely monitor developments related to COVID-19 pandemic and macroeconomic conditions.

The ultimate impacts of the COVID-19 pandemic and related economic conditions on the Company’s results remain uncertain.

The scope, duration and magnitude of the direct and indirect effects of the COVID-19 pandemic continue to evolve and in ways that are difficult to fully anticipate.

At this time, the Company cannot reasonably estimate the full impact of the pandemic on the Company, given the uncertainty over the duration and severity of the economic crisis.

Basis of Presentation and Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Repay Holdings Corporation and its (i) wholly owned subsidiary, BT Intermediate, LLC, and (ii) majority-owned subsidiary, Hawk Parent Holdings LLC, along with Hawk Parent Holdings LLC’s wholly owned subsidiaries:

Hawk Intermediate Holdings, LLC, Hawk Buyer Holdings, LLC, Repay Holdings, LLC, M&A Ventures, LLC, Repay Management Holdco Inc., Repay Management Services LLC, Sigma Acquisition, LLC, Wildcat Acquisition, LLC, Marlin Acquirer, LLC, REPAY International LLC, REPAY Canada Solutions ULC, TriSource Solutions, LLC (“TriSource”), Mesa Acquirer, LLC, CDT Technologies LTD (“Ventanex”), Viking GP Holdings, LLC, cPayPlus, LLC (“cPayPlus”), CPS Payment Services, LLC, Media Payments, LLC (“MPI”), Custom Payment Systems, LLC, Electronic Payment Providers, LLC, Blue Cow Software, LLC (“Blue Cow”), Hoot Payment Solutions, LLC, Internet Payment Exchange, LLC, Stratus Payment Solutions, LLC, Clear Payment Solutions, LLC, Harbor Acquisition LLC, Payix Holdings Incorporated and Payix Incorporated.

All significant intercompany accounts and transactions have been eliminated in consolidation.

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

Basis of Financial Statement Presentation

The accompanying consolidated financial statements of the Company were prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

The Company uses the accrual basis of accounting whereby revenues are recognized when earned, usually upon the date services are rendered, and expenses are recognized at the date services are rendered or goods are received.

Use of Estimates

Actual results could differ materially from those estimates.

Segment Reporting

Effective December 31, 2022, the Company revised the presentation of segment information to reflect changes in the way the Company manages and evaluates the business.

Therefore, the Company now reports operating results through two reportable segments:

(1) Consumer Payments and (2) Business Payments, as further discussed in Note 16.

Accordingly, segment information for the comparable prior year periods has been revised.

There are no significant concentrations by state or geographical location, nor are there any significant individual client concentrations by balance.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, demand deposit accounts, and short‑term investments with original maturities of three months or less.

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits.

Restricted Cash

Restricted cash consists of funds required to serve as security for services rendered by a service provider under a service provider agreement.

Accounts Receivable

Accounts receivable represent amounts due from clients and payment processors for services rendered.

The Company has an established process for aging, provisioning and writing-off its uncollectible accounts receivable.

Within this process the Company aggregates accounts receivable to the pools of receivables of similar risk characteristics.

The allowance for credit losses on accounts receivables is estimated based on how long a receivable has been outstanding (e.g., under 30 days, 30–60 days, etc.).

For accounts receivable outstanding more than 90 days, the Company evaluates and assesses whether the loss reserve percentage requires adjustment for reasonable and supportable forecast of relevant economic factors.

As of December 31, 2022 , the Company’s estimated credit losses on accounts receivable was immaterial.

Concentration of Credit Risk

The Company is highly diversified, and no single client represents greater than 10 % of the business on a volume or profit basis.

Earnings per Share

Basic earnings per share of Class A common stock is computed by dividing net income (loss) attributable to the Company by the weighted average number of shares of Class A common stock outstanding during the period.

Diluted earnings per share of Class A common stock is computed by dividing net income attributable to the Company, by the weighted average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive elements, including the assumed exchange of all limited liability company interests of Hawk Parent (“Post-Merger Repay Units”), unvested restricted share awards, outstanding ESPP (“Employee Stock Purchase Program”) purchase rights, and the Company’s Convertible Senior Notes due 2026 (“2026 Notes”).

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

Property and Equipment

Property and equipment is carried at cost less accumulated depreciation and includes expenditures which substantially increase the useful lives of existing property and equipment.

Maintenance, repairs, and minor renovations are charged to operations as incurred.

When property and equipment is retired or otherwise disposed of, the related costs and accumulated depreciation are removed from their respective accounts, and any gain or loss on the disposition is credited or charged to operations.

The Company provides for depreciation of property and equipment using the straight-line method designed to amortize costs over estimated useful lives as follows:

Estimated Useful Life

Furniture, fixtures, and office equipment

Leasehold improvements

The Company evaluates the recoverability of property and equipment at least annually or whenever events or changes in circumstances indicate that the carrying amount of property and equipment may not be recoverable.

The evaluation of asset impairment requires the Company to make assumptions about future cash flows over the life of the asset being evaluated.

These assumptions require significant judgment, and actual results may differ from assumed and estimated amounts.

If the carrying amount of property and equipment is determined not to be recoverable, a write-down to fair value is recorded.

No impairments were recognized for the years ended December 31, 2022, 2021 and 2020 .

Intangible Assets

Intangible assets consist of internal-use software development costs, purchased software, channel relationships, client relationships, certain key personnel non-compete agreements, and trade names.

The Company capitalizes internal-use software development costs when the Company has completed the preliminary project stage, management authorizes the project, management commits to funding the project, it is probable the project will be completed and the project will be used to perform the function intended.

The Company is amortizing internal-use software development costs and purchased software on the straight‑line method over a three-year estimated useful life, a ten-year estimated useful life for channel and client relationships, and an estimated useful life for non-compete agreements equal to the term of the agreement.

Trade names are determined to have an indefinite useful life.

The Company evaluates the recoverability of intangible assets at least annually or whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable.

The evaluation of asset impairment requires the Company to make assumptions about future cash flows over the life of the asset being evaluated.

These assumptions require significant judgment, and actual results may differ from assumed and estimated amounts.

During the year ended December 31, 2022 , the Company recognized impairments of $ 8.1 million related to write-offs of certain trade names, as the Company strategically phased out the trade names of several acquired business, which included BillingTree, Kontrol and Payix.

During the year ended December 31, 2021, the Company recognized impairments of $ 2.2 million related to write-offs of certain trade names, as the Company strategically phased out the trade names of several acquired business, which included TriSource, APS, Ventanex, cPayPlus and CPS.

No impairments were recognized for the year ended December 31, 2020 .

Goodwill represents the excess of purchase price over tangible and intangible assets acquired less liabilities assumed arising from business combinations.

Goodwill is generally allocated to reporting units based upon relative fair value (taking into consideration other factors such as synergies) when an acquired business is integrated into multiple reporting units.

The Company’s reporting units are at the operating segment level or one level below the operating segment level for which discrete financial information is prepared and regularly reviewed by management.

When a business within a reporting unit is disposed of, goodwill is allocated to the disposed business using the relative fair value method.

Relative fair value is estimated using a discounted cash flow analysis.

The Company performs a qualitative goodwill assessment at the reporting unit level at least annually, or more frequently as events occur or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount.

Factors considered in the Company’s qualitative assessment include financial performance, financial forecasts, macroeconomic conditions, industry and market conditions, cost factors, market capitalization, carrying value, and events affecting the reporting units.

If, after considering all relevant events and circumstances, the Company determines it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, then it is necessary to perform a

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

quantitative impairment test.

If the Company elects to bypass the qualitative analysis, or concludes from the Company’s qualitative analysis that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, a quantitative impairment test is performed by comparing the fair value of each reporting unit with its carrying amount.

If the fair value is greater than the carrying amount, then the reporting unit’s goodwill is deemed not to be impaired.

If the fair value is less than the carrying amount, an impairment loss is recognized for the amount by which a reporting unit’s carrying amount exceeds its fair value, without exceeding the total amount of goodwill allocated to that reporting unit.

The Company determined that no impairment of goodwill existed as of the last testing date, December 31, 2022.

Future impairment reviews may require write downs in the Company’s goodwill and could have a material adverse impact on the Company’s operating results for the periods in which such write downs occur.

Repay provides integrated payment processing solutions to niche markets that have specific transaction processing needs;

for example, personal loans, automotive loans, and receivables management.

The Company contracts with its clients through contractual agreements that set forth the general terms and conditions of the service relationship, including rights of obligations of each party, line item pricing, payment terms and contract duration.

Most of our revenues are derived from volume-based payment processing fees (“discount fees”) and other related fixed per transaction fees.

Discount fees represent a percentage of the dollar amount of each credit or debit transaction processed and include fees relating to processing and services that we provide.

As our clients process increased volumes of payments, our revenues increase as a result of the fees we charge for processing these payments.

The Company’s performance obligation in its contracts with clients is the promise to stand-ready to provide front-end authorization and back-end settlement payment processing services ("processing services") for an unknown or unspecified quantity of transactions and the consideration received is contingent upon the client’s use (e.g., number of transactions submitted and processed) of the related processing services.

Accordingly, the total transaction price is variable.

These services are stand-ready obligations, as the timing and quantity of transactions to be processed is not determinable.

Under a stand-ready obligation, the Company’s performance obligation is satisfied over time throughout the contract term rather than at a point in time.

Because the service of standing ready to perform processing services is substantially the same each day and has the same pattern of transfer to the client, the Company has determined that its stand-ready performance obligation comprises a series of distinct days of service.

Discount fees and other fixed per transaction fees are recognized each day using a time-elapsed output method based on the volume or transaction count at the time the clients’

transactions are processed.

Revenues are also derived from transaction or service fees (e.g.

chargebacks, gateway) as well as other miscellaneous service fees.

These services are considered immaterial in the overall context of our contractual arrangements and, as such, do not represent distinct performance obligations.

Instead, the fees associated with these services are bundled with the processing services performance obligation identified.

The transaction price for such processing services is determined, based on the judgment of the Company’s management, considering factors such as margin objectives, pricing practices and controls, client segment pricing strategies, the product life cycle and the observable price of the service charged to similarly situated clients.

The Company follows the requirements of ASC 606-10-55-36 through -40, Revenue from Contracts with Customers, Principal Agent Considerations , in determining the gross versus net revenue presentation for each performance obligation in the contract with a client.

Revenue recorded by the Company in the capacity as a principal is reported on a gross basis equal to the full amount of consideration to which the Company expects in exchange for the good or service transferred.

Revenue recorded with the Company acting in the capacity of an agent is reported on a net basis, exclusive of any consideration provided to the principal party in the transaction.

The principal versus agent evaluation is matter of judgment that depends on the facts and circumstances of the arrangement and is dependent on whether the Company controls the good or service before it is transferred to the client or whether the Company is acting as an agent of a third party.

This evaluation is performed separately for each performance obligation identified.

When the Company acts as an agent, the fees collected from clients on behalf of the payment networks and card issuer is netted with the gross fees collected so that the net revenue is presented within Revenue in the Consolidated Statements of Operations.

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

Indirect relationships

As a result of its past acquisitions, the Company has legacy relationships with Independent Sales Organizations (each an “ISO”), whereby the Company acts as the merchant acquirer for the ISO.

The ISO maintains a direct relationship with the sponsor bank and the transaction processor, rather than the Company.

Consequently, the Company recognizes revenue for these relationships net of the residual amount remitted to the ISO, based on the fact that the ISO is primarily responsible for providing the transaction processing services to the merchant.

The Company is not focused on this sales model, and this relationship will represent an increasingly smaller portion of the business over time.

Software Revenue

As a result of the acquisition of BillingTree, the Company has acquired a software revenue stream.

Software revenue is presented within Revenue in the Consolidated Statements of Operations.

Software revenue consists of term license fees related to software products, and software maintenance and support (“PCS”).

Clients typically enter into software contracts for contractual terms of three to twelve months.

The term license and PCS are each distinct performance obligations.

The total consideration in the contract is allocated based on management’s assessment of the relative standalone selling price for each performance obligation.

The Company determines the standalone selling price based on the price at which the performance obligation is sold separately.

If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price by making use of all reasonably available data such as market conditions, type of deliverable, information about the client, current and historical pricing practices and entity-specific factors such as labor hours and standard rates per labor hour.

Revenue is recognized when the related performance obligations are satisfied.

Revenue from the term license is recognized at a point in time, upon delivery to the client.

Revenue from PCS is recognized over the term of the contract.

When the Company receives an up-front deposit, the revenue is deferred until such a time that the term license or PCS is provided to the client.

Deferred revenue is expected to be recognized as revenue within one year and is classified within Other current liabilities in the Consolidated Balance Sheets.

Contract Costs

The incremental costs of obtaining a contract are recognized as an asset if the cost is incremental to obtaining a contract, and whether the costs are recoverable from the client.

If both criteria are not met, costs are expensed as incurred.

If the amortization period of the capitalized commission cost asset is less than one year, the Company may elect a practical expedient per ASC 340-40-25-4 to expense commissions as incurred.

The amortization period is consistent with the concept of useful life under other accounting guidance, which is defined as the period over which an asset is expected to contribute directly or indirectly to future cash flows.

The Company currently incurs costs to obtain a contract through payments made to external referral partners.

Commission payments are made to the external referral partner on a monthly basis based on a percentage of the profit on the contract, for as long as the client and the external referral partner have agreements with the Company.

Any capitalized commission cost assets have an amortization period of one year or less, therefore the Company utilizes the practical expedient to expense commissions as incurred.

Costs to fulfill contracts with clients either give rise to an asset or are expensed as incurred.

If the cost is not already covered by other applicable accounting literature, fulfillment costs are capitalized to the extent they directly relate to a specific contract, are used to generate or enhance resources used in satisfying performance obligations and are expected to be recovered.

The Company does not have any costs incurred to fulfill a contract.

Practical Expedients

The Company has utilized the portfolio approach practical expedient per ASC 606-10-10-4, which allows the application of ASC 606 to a portfolio of contracts with similar characteristics provided the accounting does not differ materially to application of ASC 606 to the individual contract.

The Company has also utilized the practical expedient for immaterial goods and services per ASC 606-10-25-16A, which permits the Company not to recognize a promised good or service as a performance obligation if it is considered an immaterial promise in the context of the contract.

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

Transaction Costs

The Company expenses all transaction costs associated with a business combination as incurred and such expenses are included in Selling, general, and administrative expenses in the Consolidated Statements of Operations.

For the years ended December 31, 2022, 2021 and 2020 , the Company incurred $ 13.7 million, $ 9.3 million and $ 4.2 million transaction costs, respectively.

Equity Units Awarded

The Repay Holdings Corporation 2019 Omnibus Incentive Plan (as amended, the “Incentive Plan”) provides for the grant of various equity-based incentive awards to employees, directors, consultants and advisors to the Company.

The types of equity-based awards that may be granted under the Incentive Plan include:

stock options, stock appreciation rights (“SARs”), performance stock units (“PSUs”), restricted stock awards (“RSAs”), restricted stock units (“RSUs”), and other stock-based awards.

As of December 31, 2022 , there were 13,826,728 shares of Class A common stock reserved for issuance under the Incentive Plan.

The Company accounts for stock-based compensation for employees and directors in accordance with ASC 718, Compensation (“ASC 718”).

ASC 718 requires all share-based payments to employees to be recognized in the statement of operations based on their fair values.

Under the provisions of ASC 718, stock-based compensation costs are measured at the grant date, based on the fair value of the award, and are recognized as expense over the employee’s requisite or derived service period.

PSUs, RSAs and RSUs granted under the Incentive Plan are measured based on the fair value of the awards on the date of the grant.

Compensation expense is recognized for those awards over the requisite service period within Selling, general, and administrative in the Consolidated Statements of Operations.

Forfeitures are accounted for as they occur.

Debt Issuance Costs

The Company accounts for debt issuance costs according to the Financial Accounting Standards Board Accounting Standards Update 2015-03, Simplifying the Presentation of Debt Issuance Costs , to present debt issuance costs as a reduction of the carrying amount of the debt.

Fair Value of Financial Instruments

The Company accounts for fair value measurements in accordance with ASC 820, Fair Value Measurements and Disclosures , which defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements.

Fair value is the price that would be received to sell an asset or the price paid to transfer a liability as of the measurement date.

A three-tier, fair-value reporting hierarchy exists for disclosure of fair value measurements based on the observability of the inputs to the valuation of financial assets and liabilities.

The three levels are:

Level 1 —

Quoted prices for identical instruments in active markets.

Level 2 —

Quoted prices for similar instruments in active markets;

quoted prices for identical or similar instruments in markets that are not active;

and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3 —

Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable in active exchange markets.

The carrying value of the Company’s financial instruments, including cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximated their fair values as of December 31, 2022, and 2021 , because of the relatively short maturity dates on these instruments.

Fair Value of Assets and Liabilities for further discussion.

The Company evaluates each of its lease and service arrangements at inception to determine if the arrangement is, or contains, a lease and the appropriate classification of each identified lease.

A lease exists if the Company obtains substantially all of the economic benefits of, and has the right to control the use of, an asset for a period of time.

The Company has operating leases for real estate.

Operating leases with an original lease term in excess of twelve months are included in Other assets and Other liabilities in the Consolidated Balance Sheets.

Right-of-use (“ROU”) assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease.

Operating lease

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.

The Company uses its incremental borrowing rate to calculate the present value of lease payments.

Lease terms consider options to extend or terminate based on the determination of whether such renewal or termination options are deemed reasonably certain.

Lease agreements that contain non-lease components are generally accounted for as a single lease component.

Operating lease costs are recorded in Selling, general and administrative in the Consolidated Statements of Operations based on the underlying asset.

Variable costs, such as maintenance expenses, property and sales taxes, association dues and index-based rate increases, are expensed as they are incurred.

Variable lease payments associated with the Company’s leases are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs.

Variable lease payments are presented as operating expenses in Selling, general and administrative in the Consolidated Statements of Operations.

The Company has elected not to recognize ROU assets and lease liabilities for short-term leases of all applicable class of underlying assets that have a lease term of twelve months or less.

The Company recognizes the lease payments associated with its short-term leases as an expense on a straight-line basis over the lease term.

Variable lease payments associated with these leases are recognized and presented in the same manner as for all other Company leases.

ROU assets for operating leases are periodically reduced by impairment losses.

As of December 31, 2022 , the Company has not encountered any impairment losses.

The Company monitors for events or changes in circumstances that require a reassessment of a lease.

When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero.

In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in gain or loss in the Consolidated Statements of Operations.

Income taxes are provided for in accordance with ASC 740.

Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to net operating losses, tax credits, and temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period of the enactment date.

Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company reports a liability or a reduction of deferred tax assets for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return.

When applicable, the Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense.

Noncontrolling Interest

As of December 31, 2022, 2021, and 2020 the Company held an interest of 92.0 %, 91.9 %, and 89.8 % in Hawk Parent, respectively.

For the years ended December 31, 2022, 2021, and 2020, the noncontrolling interest in the net loss of subsidiaries was $ 4.1 million , $ 6.0 million, and $ 11.8 million, respectively.

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

Contingent Consideration

The Company estimates and records the acquisition date estimated fair value of contingent consideration as part of purchase price consideration for acquisitions.

Additionally, each reporting period, the Company estimates changes in the fair value of contingent consideration, and any change in fair value is recognized in the Consolidated Statements of Operations.

An increase in the contingent consideration expected to be paid will result in a charge to operations in the period that the anticipated fair value of contingent consideration increases, while a decrease in the contingent consideration expected to be paid will result in a credit to operations in the period that the anticipated fair value of contingent consideration decreases.

The estimate of the fair value of contingent consideration requires subjective assumptions to be made of future operating results, discount rates, and probabilities assigned to various potential operating result scenarios.

Recently Issued Accounting Pronouncements not yet Adopted

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, “

Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU No.

2020-04”)”, which provides optional expedients and exceptions to contracts, hedging relationships, and other transactions affected by the transition away from LIBOR to alternative reference rates.

In January 2021, the FASB issued ASU 2021-01, “

Reference Rate Reform (Topic 848):

Scope ”, to expand the scope of this guidance to include derivatives.

The guidance was effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into on or before December 31, 2022.

In December 2022, the FASB issued ASU 2022-06, “

Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848 ”, which extends the period of time entities can utilize the reference rate reform relief guidance under ASU 2020-04 from December 31, 2022, to December 31, 2024.

The Company will apply the guidance to impacted transactions during the transition period.

The adoption of this standard does not have a material impact on the Company’s Consolidated Financial Statements.

Business Combinations

In August 2021, the FASB issued ASU No.

2021-08, “

Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU No.

2021-08”)”.

2021-08 requires an entity (acquirer) to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Revenue (Topic 606) , and is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted.

Amendments within ASU No.

2021-08 are required to be applied prospectively to business combinations occurring on or after the effective date of the amendments.

Disaggregation of Revenue

The Company’s revenue is from two types of relationships:

(i) direct relationships and (ii) indirect relationships.

The following table presents the Company’s revenue disaggregated by segment and by the type of relationship for the years ended December 31, 2022, 2021, and 2020.

Year Ended December 31, 2022

($ in thousands)

Consumer Payments

Business Payments

Elimination of intersegment revenues

Direct relationships

Indirect relationships

Total Revenue

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

Year Ended December 31, 2021

($ in thousands)

Consumer Payments

Business Payments

Elimination of intersegment revenues

Direct relationships

Indirect relationships

Total Revenue

Year Ended December 31, 2020

($ in thousands)

Consumer Payments

Business Payments

Elimination of intersegment revenues

Direct relationships

Indirect relationships

Total Revenue

Earnings Per Share

During the years ended December 31, 2021 and 2020, basic and diluted net loss per common share is the same since the inclusion of the assumed exchange of all Post-Merger Repay Units, unvested restricted share awards, and 2026 Notes would have been anti-dilutive.

The following table summarizes net loss attributable to the Company and the weighted average basic and diluted shares outstanding:

Year Ended December 31,

($ in thousands, except per share data)

Income (loss) before income tax expense

Net loss attributable to non-controlling interests

Income tax (expense) benefit

Net income (loss) attributable to the Company

Weighted average shares of Class A common stock outstanding - basic

Add weighted average effect of dilutive common stock equivalent shares:

Post-Merger Repay Units exchangeable for Class A common stock

Unvested restricted share awards of Class A common stock

Outstanding ESPP purchase rights for Class A common stock

2026 Notes convertible into Class A common stock

Weighted average shares of Class A common stock outstanding - diluted

Income (loss) per share of Class A common stock outstanding - basic

Income (loss) per share of Class A common stock outstanding - diluted

For the years ended December 31, 2021 and 2020, the following common stock equivalent shares were excluded from the computation of the diluted loss per share, since their inclusion would have been anti-dilutive:

Year Ended December 31,

Post-Merger Repay Units exchangeable for Class A common stock

Unvested restricted share awards of Class A common stock

2026 Notes convertible for Class A common stock

Share equivalents excluded from earnings (loss) per share

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

Shares of the Company’s Class V common stock do not participate in the earnings or losses of the Company and, therefore, are not participating securities.

As such, separate presentation of basic and diluted earnings per share of Class V common stock under the two-class method has not been presented.

Business Combinations

On February 10, 2020, the Company acquired all of the ownership interests of Ventanex.

Under the terms of the securities purchase agreement between Repay Holdings, LLC and the direct and indirect owners of CDT Technologies, LTD.

(“Ventanex Purchase Agreement”), the aggregate consideration paid at closing by the Company was approximately $ 36.0 million in cash.

In addition to the closing consideration, the Ventanex Purchase Agreement contains a performance-based earnout (the “Ventanex Earnout Payment”), which was based on future results of the acquired business and could result in an additional payment to the former owners of Ventanex of up to $ 14.0 million.

The Ventanex acquisition was financed with a combination of cash on hand and committed borrowing capacity under the Company’s existing credit facility.

The Ventanex Purchase Agreement contains customary representations, warranties and covenants by Repay and the former owners of Ventanex, as well as a customary post-closing adjustment provision relating to working capital and similar items.

The following summarizes the purchase consideration paid to the selling members of Ventanex:

($ in thousands)

Cash consideration

Contingent consideration (1)

Total purchase price

(1) Reflects the fair value of the Ventanex Earnout Payment, the contingent consideration to be paid to the selling members of Ventanex, pursuant to the Ventanex Purchase Agreement as of February 10, 2020.

The selling partners of Ventanex will have the contingent earnout right to receive a payment of up to $ 14.0 million dependent upon the Gross Profit, as defined in the Ventanex Purchase Agreement, for the years ended December 31, 2020 and 2021.

In February 2021 and April 2022, the Company paid the Ventanex Earnout Payment of $ 0.9 million and $ 12.7 million, respectively.

The Company recorded an allocation of the purchase price to Ventanex’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the February 10, 2020 closing date.

The purchase price allocation is as follows:

($ in thousands)

Cash and cash equivalents

Accounts receivable

Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net

Restricted cash

Identifiable intangible assets

Total identifiable assets acquired

Accounts payable

Accrued expenses

Net identifiable assets acquired

Total purchase price

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

The values allocated to identifiable intangible assets and their estimated useful lives are as follows:

Identifiable intangible assets

(in millions)

Non-compete agreements

Developed technology

Merchant relationships

Goodwill recognized of $ 12.2 million represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired, of which $ 8.3 million is expected to be deductible for tax purposes.

Goodwill was allocated 64 % and 36 % to the Company’s Consumer Payments segment and Business Payments segment, respectively, based on the relative fair value of the Company’s reporting units as of December 31, 2022.

Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill.

Intangible assets not recognized apart from goodwill consist primarily of the strong market position and the assembled workforce of Ventanex.

On July 23, 2020, the Company acquired all of the ownership interests of cPayPlus.

Under the terms of the securities purchase agreement between Repay Holdings, LLC and the direct and indirect owners of cPayPlus (“cPayPlus Purchase Agreement”), the aggregate consideration paid at closing by the Company was approximately $ 8.0 million in cash.

In addition to the closing consideration, the cPayPlus Purchase Agreement contains a performance-based earnout (the “cPayPlus Earnout Payment”), which was based on future results of the acquired business and could result in an additional payment to the former owners of cPayPlus of up to $ 8.0 million.

The cPayPlus acquisition was financed with cash on hand.

The cPayPlus Purchase Agreement contains customary representations, warranties and covenants by Repay and the former owners of cPayPlus, as well as a customary post-closing adjustment provision relating to working capital and similar items.

The following summarizes the purchase consideration paid to the selling members of cPayPlus:

($ in thousands)

Cash consideration

Contingent consideration (1)

Total purchase price

(1) Reflects the fair value of the cPayPlus Earnout Payment, the contingent consideration to be paid to the selling members of cPayPlus, pursuant to the cPayPlus Purchase Agreement as of July 23, 2020.

The selling partners of cPayPlus will have the contingent earnout right to receive a payment of up to $ 8.0 million dependent upon the Gross Profit, as defined in the cPayPlus Purchase Agreement, in the third quarter of 2021.

In September, 2021, the Company paid the cPayPlus Earnout Payment of $ 8.0 million.

The Company recorded an allocation of the purchase price to cPayPlus’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the July 23, 2020 closing date.

The purchase price allocation is as follows:

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

($ in thousands)

Cash and cash equivalents

Accounts receivable

Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net

Identifiable intangible assets

Total identifiable assets acquired

Accounts payable

Accrued expenses

Net identifiable assets acquired

Total purchase price

The values allocated to identifiable intangible assets and their estimated useful lives are as follows:

Identifiable intangible assets

(in millions)

Non-compete agreements

Developed technology

Merchant relationships

Goodwill recognized of $ 6.7 million represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired, of which $ 8.2 million is expected to be deductible for tax purposes.

Goodwill was allocated 100 % to the Company’s Business Payments segment.

Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill.

Intangible assets not recognized apart from goodwill consist primarily of the strong market position and the assembled workforce of cPayPlus.

On November 2, 2020, the Company acquired all of the ownership interests of CPS.

Under the terms of the securities purchase agreement between Repay Holdings, LLC and the direct and indirect owners of CPS.

(“CPS Purchase Agreement”), the aggregate consideration paid at closing by the Company was approximately $ 83.9 million in cash.

In addition to the closing consideration, the CPS Purchase Agreement contains a performance-based earnout (the “CPS Earnout Payment”), which was based on future results of the acquired business and could result in an additional payment to the former owners of CPS of up to $ 15.0 million in two separate earnouts.

The CPS acquisition was financed with cash on hand.

The CPS Purchase Agreement contains customary representations, warranties and covenants by Repay and the former owners of CPS, as well as a customary post-closing adjustment provision relating to working capital and similar items.

The following summarizes the purchase consideration paid to the selling members of CPS:

($ in thousands)

Cash consideration

Contingent consideration (1)

Total purchase price

(1) Reflects the fair value of the CPS Earnout Payment, the contingent consideration to be paid to the selling members of CPS, pursuant to the CPS Purchase Agreement as of November 2, 2020.

The selling partners of CPS will have the contingent earnout right to receive a payment of up to $ 15.0 million in two separate earnouts, dependent upon the Gross Profit, as defined in the CPS Purchase Agreement.

As of December 31, 2022, the fair value of the CPS earnout was $ 1.0 million, which resulted in a $ 0.4 million adjustment included in the change in fair value of contingent consideration in the Consolidated Statements of Operations for the year ended December 31, 2022 .

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

The Company recorded an allocation of the purchase price to CPS’

and MPI’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the November 2, 2020 closing date.

The purchase price allocation is as follows:

($ in thousands)

Cash and cash equivalents

Accounts receivable

Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net

Restricted cash

Identifiable intangible assets

Total identifiable assets acquired

Accounts payable

Accrued expenses

Net identifiable assets acquired

Total purchase price

The values allocated to identifiable intangible assets and their estimated useful lives are as follows:

(in millions)

Identifiable intangible assets

Non-compete agreements

Developed technology

Merchant relationships

Goodwill recognized of $ 43.3 million represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired, of which $ 38.8 million is expected to be deductible for tax purposes.

Goodwill was allocated 100 % to the Company’s Business Payments segment.

Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill.

Intangible assets not recognized apart from goodwill consist primarily of the strong market position and the assembled workforce of CPS.

On June 15, 2021, the Company acquired BillingTree.

Under the terms of the agreement and plan of merger between BT Intermediate, LLC, the Company, two newly formed subsidiaries of the Company and the owner of BT Intermediate, LLC (“BillingTree Merger Agreement”), the aggregate consideration paid at closing by the Company was approximately $ 505.8 million, consisting of approximately $ 277.5 million in cash and approximately 10 million shares of Class A common stock.

The BillingTree Merger Agreement contains customary representations, warranties and covenants by Repay and the former owner of BillingTree, as well as a customary post-closing adjustment provision relating to working capital and similar items.

The following summarizes the purchase consideration paid to the seller of BillingTree:

($ in thousands)

Cash consideration

Class A common stock issued

Total purchase price

The Company recorded an allocation of the purchase price to BillingTree’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the June 15, 2021 closing date.

The purchase price allocation is as follows:

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

($ in thousands)

Cash and cash equivalents

Accounts receivable

Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net

Restricted cash

Identifiable intangible assets

Total identifiable assets acquired

Accounts payable

Accrued expenses and other liabilities

Deferred tax liability

Net identifiable assets acquired

Total purchase price

The values allocated to identifiable intangible assets and their estimated useful lives are as follows:

Identifiable intangible assets

(in millions)

Non-compete agreements

Developed technology

Merchant relationships

Goodwill recognized of $ 297.5 million represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired, of which $ 66.5 million is expected to be deductible for tax purposes.

Goodwill was allocated 100 % to the Company’s Consumer Payments segment.

Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill.

Intangible assets not recognized apart from goodwill consist primarily of the strong market position and the assembled workforce of BillingTree.

On June 22, 2021, the Company acquired substantially all of the assets of Kontrol LLC (“Kontrol”).

Under the terms of the asset purchase agreement between a newly formed subsidiary of Repay Holdings, LLC and the owner of Kontrol (“Kontrol Purchase Agreement”), the aggregate consideration to be paid by the Company was up to $ 10.5 million, of which $ 7.4 million was paid at closing.

The Kontrol Purchase Agreement contains customary representations, warranties and covenants by Repay and the former owner of Kontrol, as well as a customary post-closing adjustment provision relating to working capital and similar items.

The following summarizes the purchase consideration paid to the owner of Kontrol:

($ in thousands)

Cash consideration

Contingent consideration (1)

Total purchase price

(1) Reflects the fair value of the Kontrol earnout payment, the contingent consideration to be paid to the selling members of Kontrol, pursuant to the Kontrol Purchase Agreement as of June 22, 2021.

The selling partners of Kontrol will have the contingent earnout right to receive a payment of up to $ 3.0 million, dependent upon the Gross Profit, as defined in the Kontr ol Purchase Agreement.

As of December 31, 2022 , the fair value of the Kontrol earnout was $ 0 , which resulted in a

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

($ 0.9 ) million a djustment included in the change in fair value of contingent consideration in the Consolidated Statements of Operations for the year ended December 31, 2022 .

The Company recorded an allocation of the purchase price to Kontrol’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the June 22, 2021 closing date.

The purchase price allocation is as follows:

($ in thousands)

Accounts receivable

Prepaid expenses and other current assets

Total current assets

Identifiable intangible assets

Total identifiable assets acquired

Accounts payable

Net identifiable assets acquired

Total purchase price

The values allocated to identifiable intangible assets and their estimated useful lives are as follows:

Identifiable intangible assets

(in millions)

Merchant relationships

Goodwill of $ 1.6 million represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired, of which $ 1.1 million on a gross basis is expected to be deductible for tax purposes.

Goodwill was allocated 100 % to the Company’s Business Payments segment.

Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill.

Intangible assets not recognized apart from goodwill consist primarily of the strong market position and the assembled workforce of Kontrol.

On December 29, 2021, the Company acquired Payix.

Under the terms of the merger agreement with Payix.

(“Payix Purchase Agreement”), the aggregate consideration paid at closing by the Company was approximately $ 95.6 million in cash.

In addition to the closing consideration, the Payix Purchase Agreement contains a performance-based earnout (the “Payix Earnout Payment”), which was based on future results of the acquired business and could result in an additional payment to the former owners of Payix of up to $ 20.0 million.

The Payix acquisition was financed with cash on hand and available revolver capacity.

The Payix Purchase Agreement contains customary representations, warranties and covenants by Repay and the former owners of Payix, as well as a customary post-closing adjustment provision relating to working capital and similar items.

The following summarizes the purchase consideration paid to the sellers of Payix:

($ in thousands)

Cash consideration

Contingent consideration (1)

Total purchase price

(1) Reflects the fair value of the Payix earnout payment, the contingent consideration to be paid to the former owners of Payix, pursuant to the Payix Purchase Agreement as of December 31, 2021.

The former owners of Payix will have the contingent earnout right to receive a payment of up to $ 20.0 million, dependent upon the Gross Profit, as defined in the Payix Purchase Agreement.

As of December 31, 2022 , the fair value of the Payix earnout was $ 0 , which resulted in a ($ 2.9 ) million ad justment included in the change in fair value of contingent consideration in the Consolidated Statements of Operations for the year ended December 31, 2022 .

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

The Company recorded an allocation of the purchase price to Payix’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the December 29, 2021 closing date.

The purchase price allocation is as follows:

($ in thousands)

Cash and cash equivalents

Accounts receivable

Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net

Restricted cash

Identifiable intangible assets

Total identifiable assets acquired

Accounts payable

Accrued expenses and other liabilities

Deferred tax liability

Net identifiable assets acquired

Total purchase price

The values allocated to identifiable intangible assets and their estimated useful lives are as follows:

Identifiable intangible assets

(in millions)

Developed technology

Merchant relationships

Goodwill recognized of $ 71.2 million represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired, no ne of which is expected to be deductible for tax purposes.

Goodwill was allocated 100 % to the Company’s Consumer Payments segment.

Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill.

Intangible assets not recognized apart from goodwill consist primarily of the strong market position and the assembled workforce of Payix.

Pro Forma Financial Information (Unaudited)

The supplemental consolidated results of the Company on an unaudited pro forma basis give effect to Ventanex, cPayPlus, CPS, BillingTree, Kontrol and Payix acquisitions as if the transactions had occurred on January 1, 2020.

The unaudited pro forma information reflects adjustments for the issuance of the Company’s common stock, debt incurred in connection with the transactions, the impact of the fair value of intangible assets acquired and related amortization and other adjustments the Company believes are reasonable for the pro forma presentation.

In addition, the pro forma earnings exclude acquisition-related costs.

($ in thousands, except per share data)

Pro Forma Year Ended December 31, 2021

Pro Forma Year Ended December 31, 2020

Net loss attributable to non-controlling interests

Net loss attributable to the Company

Loss per Class A share - basic

Loss per Class A share - diluted

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

Fair Value of Assets and Liabilities

The following table summarizes, by level within the fair value hierarchy, the estimated fair values of our assets and liabilities measured at fair value on a recurring or nonrecurring basis or disclosed, but not carried, at fair value in the Consolidated Balance Sheets as of the dates presented.

There were no transfers into, out of, or between levels within the fair value hierarchy during any of the periods presented.

December 31, 2022

($ in thousands)

Contingent consideration

Tax receivable agreement

Total liabilities

December 31, 2021

Contingent consideration

Tax receivable agreement

Total liabilities

Other assets contain a minority equity investment in a privately-held company.

The Company elected a measurement alternative for measuring this investment, in which the carrying amount is adjusted based on any observable price changes in orderly transactions.

The investment is classified as Level 2 as observable adjustments to value are infrequent and occur in an inactive market.

Contingent Consideration

Contingent consideration relates to potential payments that the Company may be required to make associated with acquisitions.

The contingent consideration is recorded at fair value based on actuals or estimates of discounted future cash flows associated with the acquired businesses.

To the extent that the valuation of these liabilities is based on inputs that are less observable or not observable in the market, the determination of fair value requires more judgment.

Accordingly, the fair value of contingent consideration is classified within Level 3 of the fair value hierarchy, under ASC 820.

The change in fair value is re-measured at each reporting period with the change in fair value being recognized in accordance with ASC 805, Business Combinations (“ASC 805”).

As of December 31, 2022, the present value of contingent consideration reflects the actual anticipated payments.

As of December 31, 2021, the Company used a discount rate to determine the present value, based on a risk-free rate adjusted for a credit spread, of the contingent consideration in the simulation approach.

The following table provides a rollforward of the contingent consideration related to previous business acquisitions.

Refer to Note 5.

Business Combinations for more details.

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

Year Ended December 31,

($ in thousands)

Balance at beginning of period

Measurement period adjustment

Valuation adjustment

Balance at end of period

The revolving credit facility, 2026 Notes and term loan are measured at amortized cost, which the carrying value is unpaid principal net of unamortized debt discount and debt issuance costs.

The estimated fair value of the 2026 Notes is determined using the quoted prices from over-the-counter markets.

The estimated fair value of the Company’s borrowings is classified within Level 2 of the fair value hierarchy, as the market interest rates and quoted prices are generally observable and do not contain a high level of subjectivity.

The following table provides the carrying value and estimated fair value of borrowings.

Borrowings for further discussion.

December 31, 2022

December 31, 2021

($ in thousands)

Carrying value

Revolving credit facility

Tax Receivable Agreement

Upon the completion of the Business Combination, the Company entered into the TRA with holders of Post-Merger Repay Units.

As a result of the TRA, the Company established a liability in its consolidated financial statements.

The TRA is recorded at fair value based on estimates of discounted future cash flows associated with the estimated payments to the Post-Merger Repay Unit holders.

These inputs are not observable in the market;

thus, the TRA is classified within Level 3 of the fair value hierarchy, under ASC 820.

The change in fair value is re-measured at each reporting period with the change in fair value being recognized in accordance with ASC 805.

The Company used a discount rate, also referred to as the early termination rate, to determine the present value, based on a risk-free rate plus a spread , pursuant to the TRA.

A rate of 6.48 % w as applied to the forecasted TRA payments as of December 31, 2022 , in order to determine the fair value.

A significant increase or decrease in the discount rate could have resulted in a lower or higher balance, respectively, as of the measurement date.

The TRA balance was adjusted by $ 66.9 million t hrough accretion expense and a valuation adjustment, related to an increase in the discount rate, which was 1.58 % as of December 31, 2021.

The following table provides a rollforward of the TRA related to the Business Combination and subsequent acquisition of Post-Merger Repay Units held by Corsair, pursuant to the Unit Purchase Agreements.

Taxation for further discussion on the TRA.

Year Ended December 31,

($ in thousands)

Balance at beginning of period

Accretion expense

Valuation adjustment

Balance at end of period

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

Property and Equipment

Property and equipment consisted of the following:

($ in thousands)

Furniture, fixtures, and office equipment

Leasehold improvements

Accumulated depreciation and amortization

Depreciation expense for property and equipment was $ 2.4 million, $ 1.3 million and $ 1.2 million for the years ended December 31, 2022, 2021 and 2020 , respectively.

Intangible Assets

The Company holds definite and indefinite-lived intangible assets.

As of December 31, 2022 , the indefinite-lived intangible assets consist of two trade names, arising from the acquisitions of Hawk Parent and MPI.

As of December 31, 2021 , the indefinite-lived intangible assets consist of five trade names, arising from the acquisitions of Hawk Parent, MPI, BillingTree, Kontrol and Payix.

During the year ended December 31, 2022 , the Company recorded an impairment loss of $ 8.1 million related to the write-offs of certain trade names, of which $ 8.1 million and $ 0.0 million of the impairment loss related to the Consumer Payments and Business Payments segments, respectively.

The impairment loss was recognized within Impairment loss in the Company’s Consolidated Statements of Operations.

During the year ended December 31, 2021 , the Company recorded an impairment loss of $ 2.2 million related to the write-offs of certain trade names, of which $ 1.0 million and $ 1.2 million of the impairment loss related to the Consumer Payments and Business Payments segments, respectively.

The impairment loss was recognized within Impairment loss in the Company’s Consolidated Statements of Operations.

Intangible assets consisted of the following:

($ in thousands)

Gross Carrying Value

Accumulated Amortization

Net Carrying Value

Weighted Average Useful Life (Years)

Client relationships

Channel relationships

Software costs

Non-compete agreements

Balance as of December 31, 2022

Client relationships

Channel relationships

Software costs

Non-compete agreements

Balance as of December 31, 2021

The Company’s amortization expense for intangible assets was $ 105.4 million, $ 88.4 million and $ 59.7 million for the years ended December 31, 2022, 2021 and 2020, respectively.

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

The estimated amortization expense for the next five years and thereafter in the aggregate is as follows:

($ in thousands)

Estimated Future

Year Ending December 31,

Amortization Expense

As discussed in Note 16.

Segments, management adjusted the Company’s segment reporting to reflect the Company’s new organizational structure effective December 31, 2022.

The Company’s reporting units for goodwill impairment evaluation purposes are the same as its reportable segments.

As of the December 31, 2022 change in reporting units, the Company performed a quantitative impairment assessment of the Company’s former reporting unit structure and the new reporting unit structure.

The Company allocated goodwill to its reporting units using a relative fair value approach.

The Company completed an assessment of any potential goodwill impairment for all reporting units immediately prior and subsequent to the reallocation and determined that no impairment existed as of December 31, 2022.

The following table presents changes to goodwill by business segment, for the years ended December 31, 2022 and 2021:

($ in thousands)

Consumer Payments

Business Payments

Balance at December 31, 2020

Measurement period adjustment

Balance at December 31, 2021

Measurement period adjustment

Balance at December 31, 2022

During the year ended December 31, 2022 , the Company recognized a $ 3.7 million measurement period adjustment in accordance with the BillingTree acquisition, primarily related to a $ 4.7 million increase in deferred tax liability as a result of the finalization of the tax basis balance sheet.

An increase in accounts receivable of $ 1.0 million was also recognized related to updated collection information on the acquired receivables.

The goodwill reallocation of $ 138.2 million between the Consumer Payments and Business Payments segments resulted from the relative fair value allocation of the new reporting units structure as of December 31, 2022 .

Successor Credit Agreement

The Company entered into a Revolving Credit and Term Loan Agreement (the “Successor Credit Agreement”) on July 11, 2019, with Truist Bank (formerly SunTrust Bank) and the other lenders party thereto, which provided a revolving credit facility (the “Revolving Credit Facility”), a term loan A (the “Term Loan”), and a delayed draw term loan at a variable interest rate (the “Delayed Draw Term Loan”).

The Successor Credit Agreement provided for an aggregate revolving commitment of $ 20.0 million at a variable interest rate.

On February 10, 2020, as part of the financing for the acquisition of Ventanex, Repay entered into an agreement with Truist Bank and other members of its existing bank group to amend and upsize its previous credit agreement from $ 230.0 million to $ 346.0 million.

The Successor Credit Agreement was collateralized by substantially all of the Company’s assets, and included qualitative and quantitative covenants, as defined in the Successor Credit Agreement.

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

The Successor Credit Agreement provided for a Term Loan of $ 256.0 million, a Delayed Draw Term Loan of $ 60.0 million, and a Revolving Credit Facility of $ 30.0 million.

As of December 31, 2020, the Company had $ 14.4 million drawn against the Delayed Draw Term Loan and had $ 0.0 million drawn against the Revolving Credit Facility.

On January 20, 2021, the Company used a portion of the proceeds from the 2026 Notes to prepay in full the entire amount of the outstanding Term Loans under the Successor Credit Agreement.

The Company also terminated in full all outstanding Delayed Draw Term Loan commitments under such credit facilities.

The Company’s interest expense on the Term Loan totaled $ 11.5 million for the year ended December 31, 2020 .

The Company’s interest expense on the line of credit totaled $ 0 and $ 0.1 million for the years ended December 31, 2021 and 2020, respectively.

Amended Credit Agreement

On February 3, 2021, the Company announced the closing of a new undrawn $ 125.0 million senior secured revolving credit facility through Truist Bank.

The Amended Credit Agreement replaces the Company’s Successor Credit Agreement, which included an undrawn $ 30.0 million Revolving Credit Facility.

On December 29, 2021, the Company increased its existing senior secured credit facilities by $ 60.0 million to a $ 185.0 million revolving credit facility pursuant to an amendment to the Amended Credit Agreement.

The Company was in compliance with its restrictive covenants under the Amended Credit Agreement at December 31, 2022.

As of December 31, 2022 , the Company had $ 20.0 million drawn against the revolving credit facility at a variable interest rate of 2.25 % plus 1-month LIBOR due 2026.

The Company paid $ 0.6 million a nd $ 0.4 million in fees related to unused commitments for the years ended December 31, 2022 and 2021, respectively.

The Company’s interest expense on the revolving credit facility total ed $ 0.8 million for the year ended December 31, 2022.

Convertible Senior Debt

On January 19, 2021, the Company issued $ 440.0 million in aggregate principal amount of 0.00 % Convertible Senior Notes due 2026 in a private placement.

The initial conversion rate of the 2026 Notes was 29.7619 shares of Class A common stock per $1,000 principal amount of 2026 Notes (equivalent to an initial conversion price of approximately $ 33.60 per share of Class A common stock).

Upon conversion of the 2026 Notes, the Company may choose to pay or deliver cash, shares of the Company’s Class A common stock, or a combination of cash and shares of the Company’s Class A common stock.

The 2026 Notes will mature on February 1, 2026 , unless earlier converted, repurchased or redeemed.

Subject to Nasdaq requirements, the Company controls the conversion rights prior to November 3, 2025, unless a fundamental change or an event of default occurs.

During the year ended December 31, 2022, the conversion contingencies of the 2026 Notes were not met, and the conversion terms of the 2026 Notes were not significantly changed.

The following table summarizes the total borrowings under the Amended Credit Agreement and 2026 Notes:

($ in thousands)

December 31, 2022

December 31, 2021

Non-current indebtedness:

Revolving Credit Facility (1)

Convertible Senior Debt

Total borrowings

Long-term loan debt issuance cost (2)

Total non-current borrowings

(1) The revolving credit facility bears interest at variable rates, which were 6.63 % and 2.35 % as of December 31, 2022 and December 31, 2021 , respectively.

(2) The Company incurred $ 2.8 million, $ 2.5 million and $ 1.4 million of interest expense for the amortization of deferred debt issuance costs for the years ended December 31, 2022, 2021 and 2020 , respectively.

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

Following is a summary of principal maturities of the Term Loans outstanding as of December 31, 2022 for each of the next five years ending December 31 and in the aggregate:

($ in thousands)

Derivative Instruments

The Company does not hold or use derivative instruments for trading purposes.

Derivative Instruments Designated as Hedges

Interest rate fluctuations expose the Company’s variable-rate term loan to changes in interest expense and cash flows.

As part of its risk management strategy, the Company may use interest rate derivatives, such as interest rate swaps, to manage its exposure to interest rate movements.

In October 2019, the Company entered into a $ 140.0 million notional, five-year interest rate swap agreement to hedge changes in cash flows attributable to interest rate risk on $ 140.0 million of its variable-rate term loan.

This agreement involves the receipt of variable-rate amounts in exchange for fixed interest rate payments over the life of the agreement without an exchange of the underlying notional amount.

This interest rate swap was designated for accounting purposes as a cash flow hedge.

As such, changes in the interest rate swap’s fair value are deferred in accumulated other comprehensive income (loss) in the Consolidated Balance Sheets and are subsequently reclassified into interest expense in each period that a hedged interest payment is made on the Company’s variable-rate term loan.

Pre-tax gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense was $ 1.4 million for the year ended December 31, 2020.

On February 21, 2020, the Company entered into a swap transaction with Regions Bank.

On a quarterly basis, commencing on March 31, 2020 up to and including the termination date of February 10, 2025, the Company will make fixed payments on a beginning notional amount of $ 30.0 million, then a revised notional amount of $ 65.0 million beginning on September 30, 2020.

On a quarterly basis, commencing on February 21, 2020 up to and including the termination date of February 10, 2025, the counterparty will make floating rate payments based on the 3-month LIBOR on the beginning notional amount of $ 30.0 million, then a revised notional amount of $ 65.0 million beginning on September 30, 2020.

Both interest rate swaps were settled in January 2021, with $ 6.4 million, net of taxes of $ 1.7 million reclassified from Accumulated other comprehensive loss into Other loss in the Consolidated Statements of Operations for the year ended December 31, 2021.

Commitments and Contingencies

Legal Matters

The Company is a party to various claims and lawsuits incidental to its business.

In the Company’s opinion, the liabilities, if any, which may ultimately result from the outcome of such matters, individually or in the aggregate, are not expected to have a material adverse effect on its financial position, liquidity, results of operations or cash flows.

The Company has commitments under operating leases for real estate leased from third parties under non-cancelable operating leases.

The Company’s leases typically have lease terms between three years and ten years , with the longest lease term having an expiration date in 2029 .

Most of these leases include one or more renewal options for six years or less , and certain leases also include lessee termination options .

At lease commencement, the Company assesses whether it is reasonably certain to exercise a renewal option, or reasonably certain not to exercise a termination option, by considering various economic factors.

Options that are reasonably certain of being exercised are factored into the determination of the lease term, and related payments are included in the calculation of the right-of-use asset and lease liability.

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

The components of lease costs are presented in the following table:

Year Ended December 31,

($ in thousands)

Components of total lease costs:

Operating lease costs

Short-term lease costs

Variable lease costs

Total lease costs

Amounts reported in the Consolidated Balance Sheets were as follows:

($ in thousands)

December 31, 2022

December 31, 2021

Operating Leases:

Right-of-use assets

Lease liability, current

Lease liability, long-term

Total lease liabilities

Weighted-average remaining lease term (in years)

Weighted-average discount rate (annualized)

Other information related to leases are as follows:

Year Ended December 31,

($ in thousands)

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

Right-of-use assets obtained in exchange for lease liabilities:

Operating leases

The following table presents a maturity analysis of the Company’s operating leases liabilities as of December 31, 2022:

($ in thousands)

Total undiscounted lease payments

Imputed interest

Total lease liabilities

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

Related Party Transactions

Related party payables consisted of the following:

($ in thousands)

Ventanex accrued earnout liability

CPS accrued earnout liability

Kontrol accrued earnout liability

Payix accrued earnout liability

Other payables to related parties

The Company incurred transaction costs on behalf of related parties of $ 10.6 million, $ 8.2 million and $ 3.1 million for the years ended December 31, 2022, 2021 and 2020, respectively.

These costs consist of retention bonuses and other compensation to employees, associated with the costs resulting from the integration of new businesses.

The Company held receivables from related parties of $ 0.3 million as of both December 31, 2022 and 2021.

These amounts were due from employees, related to tax withholding on vesting of equity compensation.

Share Based Compensation for more detail on these restricted share awards.

Further, the Company owed employees $ 0.0 million for amounts paid on behalf of the Company as of both December 31, 2022 and 2021.

The Company owed $ 1.0 million and $ 17.4 million to related parties, in the form of contingent consideration payable to the sellers of Ventanex, CPS, Kontrol and Payix, who were employees of Repay, as of December 31, 2022 and 2021 , respectively.

Share Based Compensation

Omnibus Incentive Plan

In connection with the Business Combination, Thunder Bridge shareholders considered and approved the Incentive Plan which resulted in the reservation of 7,326,728 shares of common stock for issuance thereunder.

The Incentive Plan became effective immediately upon the closing of the Business Combination.

On June 8, 2022, the Company’s shareholders approved an amendment and restatement of the Incentive Plan, which, among other modifications, increased the number of shares available for awards by 6,500,000 , so that the total reserved shares for issuance under the Incentive Plan is 13,826,728 .

Under this plan, the Company currently has three types of share-based compensation awards outstanding:

PSUs, RSAs and RSUs.

RSAs and RSUs

The grant date fair value of RSAs and RSUs, which is based on the quoted market value of the Company’s Class A common stock on the grant date, is recognized as share-based compensation expense on a graded vesting basis over the requisite service period.

Most RSAs vest in equal annual installments over the requisite service period (which is typically a four-year period).

In limited cases, RSAs may vest on the grant date with a one-year holding period.

RSUs vest at the first anniversary of the grant date.

Restricted shares cannot be sold or transferred until they have vested.

Activity for RSAs for the year ended December 31, 2022 is as follows:

Class A Common Stock

Weighted Average Grant Date Fair Value

Unvested at December 31, 2021

Forfeited (1)(2)

Unvested at December 31, 2022

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

Activity for RSUs for the year ended December 31, 2022 is as follows:

Class A Common Stock

Weighted Average Grant Date Fair Value

Unvested at December 31, 2021

Unvested at December 31, 2022

(1) The forfeited shares include employee terminations during the year ended December 31, 2022 ;

further, these forfeited shares are added back to the number of shares available for grant under the Incentive Plan.

(2) Upon vesting, award-holders elected to sell shares to the Company in order to satisfy the associated tax obligations.

The grant date fair value of a PSU, which is based on quoted market value of the Company’s Class A common stock on the grant date and the number of shares expected to be earned according to the level of achievement of performance measures, is recognized on a graded vesting basis over the applicable performance or service period.

The performance or service period for awards granted is three years.

Activity for PSUs for the year ended December 31, 2022 is as follows:

Class A Common Stock (1)

Weighted Average Grant Date Fair Value

Unvested at December 31, 2021

Unvested at December 31, 2022

(1) Represent shares to be paid out at target level.

The following table summarized share-based compensation expense and the related income tax benefit recognized for the Company’s share-based compensation awards:

Year Ended December 31,

($ in millions)

Share-based compensation expense

Income tax benefit

Unrecognized compensation expense related to unvested PSUs, RSAs and RSUs was $ 21.0 million as of December 31, 2022 , which is expected to be recognized as expense over the weighted-average period of 1.58 years.

Repay Holdings Corporation is taxed as a corporation and is subject to paying corporate federal, state and local taxes on the income allocated to it from Hawk Parent, based upon Repay Holding Corporation’s economic interest held in Hawk Parent, as well as any stand-alone income or loss it generates.

Hawk Parent is treated as a partnership for U.S.

federal and most applicable state and local income tax purposes.

As a partnership, Hawk Parent is not subject to U.S.

federal and certain state and local income taxes.

Hawk Parent’s members, including Repay Holdings Corporation, are liable for federal, state and local income taxes based on their allocable share of Hawk Parent’s pass-through taxable income.

The components of loss before income taxes are as follows:

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

Year Ended December 31,

($ in thousands)

Income (loss) before income tax expense (benefit)

The Company recorded a provision for income tax as follows:

Year Ended December 31,

($ in thousands)

Current expense

Total current expense

Deferred expense

Total deferred expense (benefit)

Income tax expense (benefit)

A reconciliation of the United States statutory income tax rate to the Company’s effective income tax rate is as follows for the years indicated:

Year Ended December 31,

Federal income tax expense

State taxes, net of federal benefit

Income attributable to noncontrolling interest

Excess tax benefit related to share-based compensation

Change in fair value of warrant liabilities

Change in fair value of contingent consideration

Foreign rate differential

R&D credit - Federal

Provision to return - Federal

State rate change impact on deferred taxes

Effective tax rate

The Company’s effective tax rate was 41.4 %, 35.4 % and 9.5 % for the years ended December 31, 2022, 2021 and 2020, respectively.

The comparison of the Company’s effective tax rate to the U.S.

statutory tax rate of 21 % was primarily influenced by the fact that the Company is not liable for the income taxes on the portion of Hawk Parent’s earnings that are attributable to noncontrolling interests.

Further, the comparison is reflective of the effect of remeasuring net deferred tax assets for state tax rate changes.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Details of the Company’s deferred tax assets and liabilities are as follows:

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

($ in thousands)

December 31, 2022

December 31, 2021

Deferred tax assets

Section 163(j) Limitation Carryover

Acquisition Costs

Federal Net Operating Losses

State Net Operating Losses

Foreign Net Operating Losses

Partnership basis tax differences

Total deferred tax asset

Valuation allowance

Total deferred tax asset, net of valuation allowance

Deferred tax liabilities

Other intangibles - Payix

Other liabilities

Total deferred tax liabilities

Net deferred tax assets

As a result of the finalization of 2021 income tax returns and Post-Merger Repay Unit exchanges during the year ended December 31, 2022 , the Company recognized a reduction of the deferred tax asset (“DTA”) and offsetting deferred tax liability (“DTL”) in the amount of $ 0.9 million, compared to a reduction of $ 19.2 million as a result of equity offerings by the Company, BillingTree acquisition and Post-Merger Repay unit exchanges during the year ended December 31, 2021, to account for the portion of the Company’s outside basis in the partnership interest that it will not recover through tax deductions, a ceiling rule limitation arising under Internal Revenue Code (the “Code”) sec.

As the ceiling rule causes taxable income allocations to be in excess of 704(b) book allocations the DTL will unwind, leaving only the DTA, which may only be recovered through the sale of the partnership interest in Hawk Parent.

The Company has concluded, based on the weight of all positive and negative evidence, that all of the DTA associated with the ceiling rule limitation is not likely to be realized as of December 31, 2022 .

As such, a 100 % valuation allowance was recognized.

As of December 31, 2022 , the Company had net tax effected federal and state (net of federal benefit) net operating losses (“NOLs”) of $ 37.5 million, of which approximately $ 32.8 million have an indefinite life.

NOLs of approximately $ 4.5 million and $ 0.2 million will begin to expire in 2034 and 2028 , respectively.

As of December 31, 2022 , the Company had federal and state tax credit carryforwards of $ 2.2 million and $ 0.9 million, respectively, which will begin to expire in 2037 and 2034 .

The Company believes as of December 31, 2022 , based on the weight of all positive and negative evidence, it is more likely than not that the results of future operations will generate sufficient taxable income to realize the NOLs and tax credits and, as such, no valuation allowance was recorded.

No uncertain tax positions existed as of December 31, 2022.

Tax Receivable Agreement Liability

Pursuant to our election under Section 754 of the Code, we expect to obtain an increase in our share of the tax basis in the net assets of Hawk Parent when Post-Merger Repay Units are redeemed or exchanged for Class A common stock of Repay Holdings Corporation.

The Company intends to treat any redemptions and exchanges of Post-Merger Repay Units as direct purchases for U.S.

federal income tax purposes.

These increases in tax basis may reduce the amounts that the Company would otherwise pay in the future to various tax authorities.

They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.

On July 11, 2019, the Company entered into a TRA that provides for the payment by the Company of 100 % of the amount of any tax benefits realized, or in some cases are deemed to realize, as a result of (i) increases in our share of the tax basis in the net assets of Hawk Parent resulting from any redemptions or exchanges of Post-Merger Repay Units and from our acquisition of the equity of the selling Hawk Parent members, (ii) tax basis increases attributable to payments made under the TRA, and (iii) deductions attributable to imputed interest pursuant to the TRA (the "TRA Payments").

The TRA Payments are not conditioned upon any continued ownership interest in Hawk Parent or Repay.

The rights of each party under the TRA other than the Company are assignable.

The timing and amount of aggregate payments due under the TRA may vary based on a

REPAY HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

number of factors, including the timing and amount of taxable income generated by the Company each year, as well as the tax rate then applicable, among other factors.

As of December 31, 2022, the Company had a liability of $ 179.1 million related to its projected obligations under the TRA, which is captioned as the tax receivable agreement liability in the Company’s Consolidated Balance Sheets.

The decrease of $ 66.7 million in the TRA liability for the year ended December 31, 2022 , was primarily a result of the change in the Early Termination Rate.

Effective on December 31, 2022, the Company reorganized its business structure around two operating segments based on review of discrete financial results for each of the operating segments by the Company’s chief operating decision maker (“CODM”), for performance assessment and resource allocation purposes.

Each of the Company’s operating segments represents a reportable segment based on ASC 280, Segment Reporting .

The Company’s two reportable segments are as follows:

(1) Consumer Payments and (2) Business Payments.

Prior year amounts have been reclassified to conform to the current presentation.

The following table presents revenue and gross profit for each reportable segment.

Year Ended December 31,

($ in thousand)

Consumer Payments

Business Payments

Elimination of intersegment revenues (1)

Total revenue

Gross profit (2)

Consumer Payments

Business Payments

Elimination of intersegment revenues

Total gross profit

Total other operating expenses (3)

Total other income (expense)

Income (loss) before income tax (expense) benefit

Income tax (expense) benefit

Net income (loss)

(1) Represents intercompany eliminations between segments for consolidation purpose.

(2) Represents revenue less costs of services.

(3) Represents total operating expenses less costs of services.

Revenue and costs of services are attributed directly to each segment.

There is no significant concentration of revenue or assets in foreign countries as of December 31, 2022.

The CODM reporting package does not include discrete asset details of the operating segments as this information is not considered by the CODM for resource allocation or other segment analysis purposes.

Subsequent Events

Management has evaluated subsequent events and their potential effects on these consolidated financial statements.

On February 15, 2023, the Company sold Blue Cow Software, LLC for a sale price of $ 41.0 million.

On February 28, 2023, the Company repaid in full the entire amount of $ 20.0 million of the outstanding revolving credit facility.

The undrawn capacity of the existing revolving credit facility under the Amended Credit Agreement became $ 185.0 million after the repayment.

CHANGES IN AND DISAGREEMENTS WITH ACCO UNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

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

What changed 10-K

Item 5. Market for Registrant’s Common Equity