What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-09 compared with 2021-05-10 · 229 added, 89 removed, 204 unchanged (61% of the section changed)

11 unchanged sentences

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 $4.6 billion of total card payment volume in the three months ended March 31, 2021, and our card payment volume growth over the same period in 2020 was approximately 20%.

We processed approximately $4.6 billion and $9.2 million of total card payment volume for the three and six months ended June 30, 2021, respectively, and our card payment volume growth over the same periods in 2020 was approximately 28% and 24%, respectively.

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

1 unchanged sentence

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

In addition, the impact of COVID-19 on the Company’s results in 2020 and in the first quarter of 2021 may not be necessarily indicative of its impact on the Company’s results in the remainder of 2021.

In addition, the impact of COVID-19 on the Company’s results in 2020 and in the first half of 2021 may not be necessarily indicative of its impact on the Company’s results in the remainder of 2021.

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, as amended, we restated our previously issued consolidated financial statements for periods following the Business Combination through December 31, 2020 to make accounting corrections related to warrant accounting.

This Quarterly Report on Form 10-Q reflects the restated consolidated financial statements as of December 31, 2020 and for the quarter ended March 31, 2020.

This Quarterly Report on Form 10-Q reflects the restated consolidated financial statements as of December 31, 2020 and for the three and six months ended June 30, 2020.

Business Combination

8 unchanged sentences

general economic conditions and consumer finance trends.

Recent Acquisitions

On June 15, 2021, we completed the acquisition of BillingTree for approximately $506.6 million, consisting of approximately $278.3 million in cash from our balance sheet and approximately 10 million shares of newly issued Class A common stock, representing approximately 10% of the voting power of our outstanding shares of common stock.

On June 22, 2021, we completed the acquisition of Kontrol LLC (“Kontrol”) for up to $11.0 million, of which approximately $7.5 million was paid at closing.

The acquisition was financed with cash on hand.

Key Components of Our Revenues and Expenses

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

During the three months ended March 31, 2021 and 2020, we believe our chargeback rate was less than 1% of our card payment volume.

During the three and six months ended June 30, 2021 and 2020, we believe our chargeback rate was less than 1% of our card payment volume.

In addition, our software revenue consists of term license fees related to software products and software maintenance and support.

Other costs of services .

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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, over a ten-year estimated useful life for customer relationships and channel relationships, and over a five-year estimated useful life for non-compete agreements.

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 customer relationships and channel relationships, and between two to five years estimated useful life for non-compete agreements.

Interest expense.

11 unchanged sentences

Results of Operations

Three Months ended March 31

Three Months ended June 30,

Six Months ended June 30,

(in $ thousands)

6 unchanged sentences

Income (loss) from operations

Interest expenses

Interest expense

Loss on extinguishment of debt

9 unchanged sentences

Loss per Class A share - basic and diluted

Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020

Total revenue was $47.5 million for the three months ended March 31, 2021 and $39.5 million for the three months ended March 31, 2020, an increase of $8.1 million or 20.4%.

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

For the three months ended March 31, 2021, incremental revenues of approximately $4.9 million are attributable to Ventanex, cPayPlus and CPS.

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

Total revenue was $48.4 million for the three months ended June 30, 2021 and $36.5 million for the three months ended June 30, 2020, an increase of $11.9 million or 32.6%.

This increase was the result of newly signed customers, the growth of our existing customers, as well as the acquisitions of cPayPlus, CPS, BillingTree and Kontrol.

For the three months ended June 30, 2021, incremental revenues of approximately $6.0 million are attributable to cPayPlus, CPS, BillingTree and Kontrol.

Other Costs of Services

Other costs of services were $12.5 million for the three months ended March 31, 2021 and $10.8 million for the three months ended March 31, 2020, an increase of $1.7 million or 15.8%.

For the three months ended March 31, 2021, incremental costs of services of approximately $1.7 million are attributable to Ventanex, cPayPlus and CPS.

Other costs of services were $12.7 million for the three months ended June 30, 2021 and $8.7 million for the three months ended June 30, 2020, an increase of $4.0 million or 45.8%.

For the three months ended June 30, 2021, incremental costs of services of approximately $1.6 million are attributable to cPayPlus, CPS, BillingTree and Kontrol.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $23.3 million for the three months ended March 31, 2021 and $18.2 million for the three months ended March 31, 2020, an increase of $5.1 million or 28.0%.

Selling, general and administrative expenses were $29.5 million for the three months ended June 30, 2021 and $19.0 million for the three months ended June 30, 2020, an increase of $10.5 million or 55.3%.

This increase was primarily due to general business growth and increases in expenses relating to software and technological services.

Depreciation and Amortization Expenses

Depreciation and amortization expenses were $17.8 million for the three months ended March 31, 2021 and $13.9 million for the three months ended March 31, 2020, an increase of $3.9 million or 28.8%.

The increase was primarily due to fair value adjustments to intangibles resulting from the Business Combination, as well as additional depreciation and amortization of fixed assets and intangibles from the acquisitions of Ventanex, cPayPlus and CPS.

Depreciation and amortization expenses were $19.7 million for the three months ended June 30, 2021 and $14.7 million for the three months ended June 30, 2020, an increase of $5.0 million or 33.8%.

The increase was primarily due

to fair value adjustments to intangibles resulting from the Business Combination, as well as additional depreciation and amortization of fixed assets and intangibles from the acquisitions of cPayPlus , CPS , BillingTree and Kontrol .

Change in the Fair Value of Contingent Consideration

Change in the fair value of contingent consideration was $2.6 million for the three months ended March 31, 2021, which consisted of fair value adjustments related to the contingent consideration for the acquisitions of Ventanex, cPayPlus and CPS.

Change in the fair value of contingent consideration was $(1.2) million for the three months ended June 30, 2021, which consisted of fair value adjustments related to the contingent consideration for the acquisitions of Ventanex, cPayPlus and CPS.

Interest Expense

Interest expense was $1.2 million for the three months ended March 31, 2021 and $3.5 million for the three months ended March 31, 2020, a decrease of $2.3 million or 66.4%.

Interest expense was $0.1 million for the three months ended June 30, 2021 and $3.7 million for the three months ended June 30, 2020, a decrease of $2.9 million or 77.9%.

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.

Change in Fair Value of Warrant Liabilities

We incurred a change in the fair value of warrant liabilities of $66.7 million for the three months ended June 30, 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 loss, related to accretion expense and fair value adjustment of the tax receivable liability of $4.4 million for the three months ended June 30, 2021 compared to $10.0 million for the three months ended June 30, 2020, a decrease of $5.7 million or 56.6%.

This decrease 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.

The income tax benefit was $4.1 million for the three months ended June 30, 2021 and the income tax benefit was $3.9 million for the three months ended June 30, 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 and the amortization of assets acquired in the Business Combination and prior acquisitions.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Total revenue was $95.9 million for the six months ended June 30, 2021 and $76.0 million for the six months ended June 30, 2020, an increase of $20.0 million or 26.3%.

This increase was the result of newly signed customers, the growth of our existing customers, as well as the acquisitions of cPayPlus, CPS, BillingTree and Kontrol.

For the six months ended June 30, 2021, incremental revenues of approximately $9.0 million are attributable to cPayPlus, CPS, BillingTree and Kontrol.

Other Costs of Services

Other costs of services were $25.2 million for the six months ended June 30, 2021 and $19.5 million for the six months ended June 30, 2020, an increase of $5.7 million or 29.2%.

For the six months ended June 30, 2021, incremental costs of services of approximately $2.7 million are attributable to cPayPlus, CPS, BillingTree and Kontrol.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $52.9 million for the six months ended June 30, 2021 and $37.2 million for the six months ended June 30, 2020, an increase of $15.8 million or 42.4%.

This increase was primarily due to general business growth and increases in expenses relating to software and technological services.

Depreciation and Amortization Expenses

Depreciation and amortization expenses were $37.5 million for the six months ended June 30, 2021 and $28.6 million for the six months ended June 30, 2020, an increase of $8.9 million or 31.0%.

Change in the Fair Value of Contingent Consideration

Change in the fair value of contingent consideration was $1.4 million for the six months ended June 30, 2021, which consisted of fair value adjustments related to the contingent consideration for the acquisitions of Ventanex, cPayPlus and CPS.

Interest Expense

Interest expense was $2.0 million for the six months ended June 30, 2021 and $7.2 million for the six months ended June 30, 2020, a decrease of $5.2 million or 72.3%.

Loss on Extinguishment of Debt

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

We incurred a loss of $5.9 million on extinguishment of debt for the six months ended June 30, 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 Warrant Liabilities

We incurred a change in the fair value of warrant liabilities of $6.9 million for the three months ended March 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.

We incurred a change in the fair value of warrant liabilities of $73.6 million for the six months ended June 30, 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 loss, related to accretion expense and fair value adjustment of the tax receivable liability of $1.0 million for the three months ended March 31, 2021 compared to $0.5 million for the three months ended March 31, 2020, an increase of $1.5 million.

This increase was due to higher 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.

We incurred a loss of $9.1 million on the settlement of interest rate swaps for the three months ended March 31, 2021.

The income tax benefit was $5.9 million for the three months ended March 31, 2021 and the income tax benefit was $1.1 million for the three months ended March 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.

We incurred a loss, related to accretion expense and fair value adjustment of the tax receivable liability of $3.3 million for the six months ended June 30, 2021 compared to $10.6 million for the six months ended June 30, 2020, a decrease of $7.3 million or 68.7%.

This decrease 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.

We incurred a loss of $9.1 million on the settlement of interest rate swaps for the six months ended June 30, 2021.

The income tax benefit was $10.1 million for the six months ended June 30, 2021 and the income tax benefit was $5.0 million for the six months ended June 30, 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.

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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 as-converted basis) for the three and ended March 31, 2021 and 2020 (excluding shares subject to forfeiture).

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) for the three and six months ended June 30, 2021 and 2020 (excluding shares 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.

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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 three months ended March 31, 2021 and 2020.

The following tables set forth a reconciliation of our results of operations for the three and six months ended June 30, 2021 and 2020.

REPAY HOLDINGS CORPORATION

Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA

For the three months ended March 31, 2021 and 2020

Three Months ended March 31, 2021

For the three months ended June 30, 2021 and 2020

Three Months ended June 30,

(in $ thousands)

6 unchanged sentences

Income (loss) from operations

Interest expenses

Interest expense

Loss on extinguishment of debt

8 unchanged sentences

Income tax (benefit)

Loss on extinguishment of debt (b)

Loss on termination of interest rate hedge (c)

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

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

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

Share-based compensation expense (g)

Transaction expenses (h)

Employee recruiting costs ( i )

Other taxes (j)

Restructuring and other strategic initiative costs (k)

Other non-recurring charges (l)

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

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

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

Share-based compensation expense (e)

Transaction expenses (f)

Employee recruiting costs (g)

Other taxes (h)

Restructuring and other strategic initiative costs (i)

Other non-recurring charges (j)

Adjusted EBITDA

REPAY HOLDINGS CORPORATION

Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA

For the six months ended June 30, 2021 and 2020

Six Months ended June 30,

(in $ thousands)

Operating expenses

Other costs of services

Selling, general and administrative

Depreciation and amortization

Change in fair value of contingent consideration

Total operating expenses

Income (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

Total other (expenses) income

Income (loss) before income tax expense

Income tax benefit

Net income (loss)

Interest expense

Depreciation and amortization (a)

Income tax (benefit)

Loss on extinguishment of debt (l)

Loss on termination of interest rate hedge (m)

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

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

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

Share-based compensation expense (e)

Transaction expenses (f)

Employee recruiting costs (g)

Other taxes (h)

Restructuring and other strategic initiative costs (i)

Other non-recurring charges (j)

Adjusted EBITDA

REPAY HOLDINGS CORPORATION

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

For the three months ended March 31, 2021 and 2020

Three Months ended March 31, 2021

For the three months ended June 30, 2021 and 2020

Three Months ended June 30,

(in $ thousands)

6 unchanged sentences

Income (loss) from operations

Interest expenses

Interest expense

Loss on extinguishment of debt

6 unchanged sentences

Amortization of Acquisition-Related Intangibles (n)

Loss on extinguishment of debt (b)

Loss on termination of interest rate hedge (c)

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

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

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

Share-based compensation expense (g)

Transaction expenses (h)

Employee recruiting costs ( i )

Restructuring and other strategic initiative costs (k)

Other non-recurring charges (l)

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

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

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

Share-based compensation expense (e)

Transaction expenses (f)

Employee recruiting costs (g)

Restructuring and other strategic initiative costs (i)

Other non-recurring charges (j)

Non-cash interest expense (o)

3 unchanged sentences

Adjusted Net income per share

REPAY HOLDINGS CORPORATION

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

For the six months ended June 30, 2021 and 2020

Six Months ended June 30,

(in $ thousands)

Operating expenses

Other costs of services

Selling, general and administrative

Depreciation and amortization

Change in fair value of contingent consideration

Total operating expenses

Income (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

Total other (expenses) income

Income (loss) before income tax expense

Income tax benefit

Net income (loss)

Amortization of Acquisition-Related Intangibles (n)

Loss on extinguishment of debt (l)

Loss on termination of interest rate hedge (m)

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

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

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

Share-based compensation expense (e)

Transaction expenses (f)

Employee recruiting costs (g)

Restructuring and other strategic initiative costs (i)

Other non-recurring charges (j)

Non-cash interest expense (o)

Pro forma taxes at effective rate (p)

Adjusted Net Income

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

Adjusted Net income per share

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

Reflects write-offs of debt issuance costs relating to Hawk Parent’s term loans.

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

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

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Reflects the changes in management’s estimates of the fair value of the liability relating to the Tax Receivable Agreement.

Represents compensation expense associated with equity compensation plans, totaling $5,150,598 and $3,522,731 in the three months ended March 31, 2021 and 2020, respectively.

Primarily consists of (i) during the three months ended March 31, 2021, professional service fees and other costs incurred in connection with the acquisition of Ventanex, cPayPlus and CPS, as well as professional service expenses related to the January 2021 equity and convertible notes offerings, and (ii) during the three months ended March 31, 2020, professional service fees and other costs incurred in connection with the

acquisition of Ventanex , and additional transaction expenses incurred in connection with the Business Combination and the acquisitions of TriSource and APS.

Represents compensation expense associated with equity compensation plans, totaling $5,505,490 and $10,656,088 in the three and six months ended June 30, 2021, respectively, and totaling $5,475,449 and $8,998,180 in the three and six months ended June 30, 2020 respectively.

Primarily consists of (i) during the three and six months ended June 30, 2021, professional service fees and other costs incurred in connection with the acquisitions of Ventanex, cPayPlus, CPS, BillingTree and Kontrol, as well as professional service expenses related to the January 2021 equity and convertible notes offerings, and (ii) during the three and six months ended June 30, 2020, professional service fees and other costs incurred in connection with the acquisition of Ventanex, and additional transaction expenses incurred in connection with the Business Combination and the acquisitions of TriSource and APS.

Represents payments made to third-party recruiters in connection with a significant expansion of our personnel, which we expect will become more moderate in subsequent periods.

Reflects franchise taxes and other non-income based taxes.

Reflects 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 three months ended March 31, 2021 and 2020.

For the three months ended March 31, 2021 and 2020 reflects extraordinary refunds to customers and other payments related to COVID-19.

Additionally, in the three months ended March 31, 2021 reflects non-cash rent expense, and in the three months ended March 31, 2021, reflects expenses incurred related to one-time accounting system and compensation plan implementation related to becoming a public company.

For the three and six months ended June 30, 2021 and the three and six months ended June 30, 2020 reflects extraordinary refunds to customers and other payments related to COVID-19.

Additionally, in the three months ended June 30, 2021 reflects non-cash rent expense, and in the three and six months ended June 30, 2020, reflects expenses incurred related to one-time accounting system and compensation plan implementation related to becoming a public company.

Does not include adjustment for incremental depreciation and amortization recorded due to fair-value adjustments under ASC 805.

For the three months ended March 31, 2021, reflects amortization of customer relationships, non-compete agreement, software, and channel relationship intangibles acquired through the Business Combination, and customer relationships, non-compete agreement, and software intangibles acquired through Repay Holdings, LLC’s acquisitions of TriSource, APS, Ventanex, cPayPlus, and CPS.

For the three months ended March 31, 2020 reflects amortization of customer relationships, non-compete agreement, software, and channel relationship intangibles acquired through the Business Combination, and customer relationships, non-compete agreement, and software intangibles acquired through our acquisitions of TriSource, APS, and Ventanex.

Reflects write-offs of debt issuance costs relating to Hawk Parent’s term loans.

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

For the three and six months ended June 30, 2021, reflects amortization of customer relationships, non-compete agreement, software, and channel relationship intangibles acquired through the Business Combination, and customer relationships, non-compete agreement, and software intangibles acquired through our acquisitions of TriSource, APS, Ventanex, cPayPlus, CPS, BillingTree and Kontrol.

For the three and six months ended June 30, 2020 reflects amortization of customer relationships, non-compete agreement, software, and channel relationship intangibles acquired through the Business Combination, and customer relationships, non-compete agreement, and software intangibles acquired through our acquisitions of TriSource, APS, and Ventanex.

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:

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

(in $ thousands)

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

Represents non-cash interest expense (deferred debt issuance costs).

Represents non-cash deferred debt issuance costs.

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

Represents the weighted average number of shares of Class A common stock outstanding (on as-converted basis) for the three months ended March 31, 2021, and the three months ended March 31, 2020.

Adjusted EBITDA for the three months ended March 31, 2021 and 2020 was $20.5 million and $17.4 million, respectively, representing a 17.9% year-over-year increase.

Adjusted Net Income for the three months ended March 31, 2021 and 2020 was $15.1 million and $12.4 million, respectively, representing an 22.4% year-over-year decrease.

Our net loss attributable to the Company for the three months ended March 31, 2021 and 2020 was $15.8 million and $10.3 million, respectively, representing a 52.9% year-over-year increase.

These increases in Adjusted EBITDA , Adjusted Net Income, and net income (loss) attributable to the Company for the three months ended March 31, 2021 are primarily due to the loss on extinguishment of debt and loss on termination of interest rate hedge.

Represents the weighted average number of shares of Class A common stock outstanding (on an as-converted basis) for the three and six months ended June 30, 2021, and the three and six months ended June 30, 2020.

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

Adjusted EBITDA for the three months ended June 30, 2021 and 2020 was $20.4 million and $16.2 million, respectively, representing a 25.8% year-over-year increase.

Adjusted EBITDA for the six months ended June 30, 2021 and 2020 was $40.9 million and $33.6 million, respectively, representing a 21.7% year-over-year increase.

Adjusted Net Income for the three months ended June 30 , 2021 and 2020 was $ 1 4 .

0 million and $ 1 1 .

1 million, respectively, representing a n 2 6 .

2 % year-over-year in crease .

Adjusted Net Income for the six months ended June 30, 2021 and 2020 was $ 29.

1 million and $ 23 .4 million, respectively, representing an 2 4 .

0 % year -over-year in crease.

Our net loss attributable to the Company for the three months ended June 30, 2021 and 2020 was $12.3 million and $79.3 million, respectively, representing an 84.5% year-over-year decrease.

Our net loss attributable to the Company for the six months ended June 30, 2021 and 2020 was $28.1 million and $89.6 million, respectively, representing a 68.7% year-over-year decrease.

These increases in Adjusted EBITDA and Adjusted Net Income for the three and six months ended June 30, 2021 are primarily due to the organic growth of our business, along with contributions from acquisitions.

The decreases in net income (loss) attributable to the Company for the three and six months ended June 30, 2021 are primarily due to the change in fair value of warrant liabilities which occurred in 2020.

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.

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

As of March 31, 2021, we had $390.9 million of cash and cash equivalents and available borrowing capacity of $125.0 million under the Amended Credit Agreement.

This balance does not include restricted cash, which reflects cash accounts holding reserves for potential losses and customer settlement funds of $19.5 million at March 31, 2021.

As of June 30, 2021, we had $120.4 million of cash and cash equivalents and available borrowing capacity of $125.0 million under the Amended Credit Agreement.

This balance does not include restricted cash, which reflects cash accounts holding reserves for potential losses and customer settlement funds of $20.1 million at June 30, 2021.

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.

3 unchanged sentences

For a discussion of those considerations and restrictions, refer to Part I, Item 1A "Risk Factors - Risks Related to Our Class A Common Stock" in our Annual Report on Form 10-K, as amended.

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

Three Months ended March 31,

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

Six Months ended June 30,

(in $ thousands)

1 unchanged sentence

Net cash used in investing activities

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Cash Flow from Operating Activities

Net cash provided by operating activities was $4.8 million for the three months ended March 31, 2021.

Net cash provided by operating activities was $8.6 million in the three months ended March 31, 2020.

Cash provided by operating activities for the three months ended March 31, 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.

Net cash provided by operating activities was $16.9 million for the six months ended June 30, 2021.

Net cash provided by operating activities was $ 9 .

4 million for the six months ended June 30 , 2020.

Cash provided by operating activities for the six months ended June 30, 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 $5.2 million for the three months ended March 31, 2021, due to the capitalization of software development activities.

Net cash used in investing activities was $38.3 million in the three months ended March 31, 2020, due to the acquisition of Ventanex, and capitalization of software development activities.

Net cash used in investing activities was $286.5 million for the six months ended June 30, 2021, due to the acquisitions of BillingTree and Kontrol, as well as the capitalization of software development activities.

Net cash used in investing activities was $43.7 million for the six months ended June 30, 2020, due to the acquisition of Ventanex, and capitalization of software development activities.

Cash Flow from Financing Activities

Net cash provided by financing activities was $304.4 million for the three months ended March 31, 2021, due to proceeds from the issuance of new shares in the Equity Offerings, and proceeds from the 2026 Notes, 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.

Net cash provided by financing activities was $36.2 million in the three months ended March 31, 2020, due to 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.

Net cash provided by financing activities was $303.7 million for the six months ended June 30, 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, and repayments of the Term Loan principal balance under the Successor Credit Agreement.

Net cash provided by financing activities was $176.1 million for the six months ended June 30, 2020, due to proceeds from the issuance of new shares of Class A common stock in the 2020 June underwritten offering, 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

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

As of March 31, 2021, the Amended Credit Agreement provides for a revolving credit facility of $125.0 million.

As of March 31, 2021, we had $0.0 million drawn against the revolving credit facility.

We paid $97,222 and $42,361 in fees related to unused commitments for the three months ended March 31, 2021 and 2020, respectively.

As of June 30, 2021, the Amended Credit Agreement provides for a revolving credit facility of $125.0 million.

As of June 30, 2021, we had $0.0 million drawn against the revolving credit facility.

We paid $119,792 and $217,014 in fees related to unused commitments for the three and six months ended June 30, 2021, respectively.

We paid $92,240 and $134,601 in fees related to unused commitments for the three and six months ended June 30, 2020, respectively.

Convertible Senior Debt

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$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.

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 March 31, 2021, we had convertible senior debt of $427.3 million, net of deferred issuance costs, under the 2026 Notes, and we were in compliance with the related restrictive financial covenants.

As of June 30, 2021, we had convertible senior debt of $428.0 million, net of deferred issuance costs, under the 2026 Notes, and 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 of the 2026 Notes, prospectively.

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Off-Balance Sheet Arrangements

We did not have any material off-balance sheet arrangements as of March 31, 2021 or December 31, 2020.

We did not have any material off-balance sheet arrangements as of June 30, 2021 or December 31, 2020.

QUANTITATIVE AND QUALITAT IVE DISCLOSURE 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 June 30, 2021, we had convertible senior debt of $428.0 million and revolver borrowings of $0.0 million outstanding under the respective credit agreements.

As of December 31, 2020, we had term loan borrowings of $256.7 million, and revolver borrowings of $0.0 million outstanding under the respective credit agreements.

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

A 1.0% increase or decrease in the interest rate applicable to borrowings under the Successor Credit Agreement during the year ended December 31, 2020 would have increased or decreased cash interest expense on our indebtedness by approximately $1.0 million per annum and $1.0 million per annum, respectively.

As of June 30, 2021, both interest rate swaps were settled.

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.

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.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis