What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-01 compared with 2021-03-01 · 566 added, 360 removed, 1058 unchanged (47% of the section changed)

1 unchanged sentence

Index to the Financial Statements

Reports of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2020 and 2019

Consolidated Statements of Operations for the year ended December 31, 2020, the periods ended December 31, 2019 and July 10, 2019, and the year ended December 31, 2018

Consolidated Statements of Comprehensive Income for the year ended December 31, 2020, the periods ended December 31, 2019 and July 10, 2019, and the year ended December 31, 2018

Consolidated Statements of Stockholders’ Equity for the year ended December 31, 2020, the periods ended December 31, 2019 and July 10, 2019, and the year ended December 31, 2018

Consolidated Statements of Cash Flows for the year ended December 31, 2020, the periods ended December 31, 2019 and July 10, 2019, and the year ended December 31, 2018

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

Consolidated Balance Sheets as of D ecember 31, 2021 and 2020

Consolidated Statements of Operations for the years ended December 31, 2021 and 2020, and the periods ended December 31, 2019 and July 10, 2019

Consolidated Statements of Comprehensive Income for the years ended December 31, 2021 and 2020, and the periods ended December 31, 2019 and July 10, 2019

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021, 2020, the periods ended December 31, 2019 and July 10, 2019

Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020, and the periods ended December 31, 2019 and July 10, 2019

Notes to Consolidated Financial Statements

3 unchanged sentences

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Repay Holdings Corporation (a Delaware corporation) and subsidiaries (the “Company” or “Successor”) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows of the Successor and Hawk Parent Holdings LLC (“Predecessor”) for the year ended December 31, 2020 (Successor), the periods from July 11, 2019 to December 31, 2019 (Successor) and January 1, 2019 to July 10, 2019 (Predecessor), and the year ended December 31, 2018 (Predecessor), 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, 2020 and 2019, and the results of its operations and its cash flows for the year ended December 31, 2020 (Successor), the periods from July 11, 2019 to December 31, 2019 (Successor) and January 1, 2019 to July 10, 2019 (Predecessor), and the year ended December 31, 2018 (Predecessor), in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of Repay Holdings Corporation (a Delaware corporation) and subsidiaries (the “Company” or “Successor”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows of the Successor and Hawk Parent Holdings LLC (“Predecessor”) for the years ended December 31, 2021 and 2020 (Successor), and the periods from July 11, 2019 to December 31, 2019 (Successor) and January 1, 2019 to July 10, 2019 (Predecessor), 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, 2021 and 2020, and the results of its operations and its cash flows for the years ended December 31, 2021 and 2020 (Successor), and the periods from July 11, 2019 to December 31, 2019 (Successor) and January 1, 2019 to July 10, 2019 (Predecessor), 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, 2021, 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, 2022 expressed an unqualified opinion.

Change in accounting principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases in 2020 due to the adoption of Accounting Standards Update 2016-02, Leases (Accounting Standards Codification Topic 842).

Basis for opinion

10 unchanged sentences

Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The valuation of acquired intangible assets relating to business combinations

As described further in Note 5 to the consolidated financial statements, the Company completed several acquisitions during 2020 for an aggregate purchase price of $711 million and recognized identifiable intangible assets totaling $380 million.

These intangible assets, which consist of non-compete agreements, trade names, developed technology, merchant relationships, and channel relationships were measured at fair value upon acquisition using valuation models sensitive to significant assumptions such as future growth rates, discount rates, and weighted average cost of capital.

We identified the fair value measurement of acquired intangible assets relating to the business combinations completed during the year ended December 31, 2020 as a critical audit matter.

The principal considerations for our determination that auditing the valuation of intangible assets acquired in connection with business combinations is a critical audit matter are that there was significant judgment and estimation required by management, with assistance from a third-party valuation specialist, when determining the fair values of these intangible assets, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to the significant assumptions used, including future growth rates, discount rates, and weighted average cost of capital.

Changes in these significant assumptions could have a significant effect on the fair value of the intangible assets.

Our audit procedures relating to the fair value determination of intangible assets acquired in business combinations completed during the year ended December 31, 2020 included the following, among others:

We tested controls relating to the acquisition accounting in connection with business combinations, including controls over management’s identification of the intangible assets, the development of the significant assumptions related to the valuation of these intangible assets, and the completeness and accuracy of data used in the measurements.

These procedures also included reading the purchase agreements and testing the fair values of the acquired intangible assets as determined by management, which included (i) evaluating the appropriateness of the valuation techniques, (ii) testing the completeness, mathematical accuracy and relevance of the underlying data in management’s cash flow projections, and (iii) evaluating the significant assumptions, including future growth rates, discount rates, and weighted average cost of capital.

Evaluating the reasonableness of the future growth rates for the forecast period involved considering the past performance of the acquired businesses as well as economic and industry forecasts.

The weighted average cost of capital was evaluated by considering the cost of capital of comparable businesses and other industry factors.

Professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of the discount rate and the weighted average cost of capital used by management.

The fair value determination of the Tax Receivable Agreement

As described further in Note 15 to the consolidated financial statements, the Company has a tax receivable agreement (TRA) obligation that requires the Company to pay to exchanging holders of Post-Merger Repay Units 100% of the estimated future tax benefits, if any, relating to the increase in tax basis resulting 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.

We identified the fair value determination of the TRA as a critical audit matter.

The principal considerations for our determination that the fair value determination of the TRA is a critical audit matter are that management, with assistance from a third-party specialist, made significant judgements to estimate the TRA obligation and performing audit procedures to evaluate the reasonableness of management’s estimate and assumptions related to the estimated future taxable income required a high degree of auditor judgement and an increased extent of effort, including the need to involve our income tax specialists.

Our audit procedures relating to the fair value determination of the fair value of the TRA included the following, among others:

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process for determining the measurement of the Company’s TRA obligation.

This included management review controls over the computation of the TRA liability, which is based on several inputs including the estimate of future qualified taxable income over the term of the TRA.

We, with the assistance of our income tax specialists, tested management’s process for evaluating the appropriateness of the TRA model and tested the completeness, accuracy, and relevance of the underlying data used in the TRA model.

To test the Company’s position that there is sufficient future taxable income to realize the tax benefits related to the exchanges discussed above, we evaluated the assumptions used by management to develop the projections of future taxable income.

For example, we compared the projections of future taxable income with the actual results of prior periods, as well as management’s consideration of current industry and economic trends.

We also recalculated the TRA liability and verified the calculation of the TRA liability was in accordance with the terms set out in the TRA.

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 relating to revenue recognized during the year ended December 31, 2021 included the following, among others:

With the assistance of our IT professionals, we:

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.

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.

Philadelphia, Pennsylvania

Atlanta, Georgia

March 1, 2022

7 unchanged sentences

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.

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

5 unchanged sentences

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

Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of BT Intermediate, LLC (“BillingTree”), Kontrol LLC (“Kontrol”) and Payix Holdings Incorporated (“Payix”), wholly-owned subsidiaries, which constituted 4.0 percent of total assets (excluding goodwill and intangible assets related to the acquisitions which are a part of the Company’s existing control environment) and 15.2 percent of revenues of the related consolidated financial statement amounts as of and for the year ended December 31, 2021.

As indicated in Management’s Report, BillingTree, Kontrol and Payix were each acquired during 2021.

Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of BillingTree, Kontrol and Payix.

Definition and limitations of internal control over financial reporting

6 unchanged sentences

/s/ GRANT THORNTON LLP

Philadelphia, Pennsylvania

Atlanta, Georgia

March 1, 2022

5 unchanged sentences

Accounts receivable

Related party receivable

Prepaid expenses and other

2 unchanged sentences

Restricted cash

Customer relationships, net of amortization

Software, net of amortization

Other intangible assets, net of amortization

Operating lease ROU assets, net of amortization

Intangible assets, net

Operating lease right-of-use assets, net

Deferred tax assets

2 unchanged sentences

$ 1,685,839,066

$ 1,109,978,140

Accounts payable

4 unchanged sentences

Current tax receivable agreement

Other current liabilities

Total current liabilities

Long-term debt, net of current maturities

Line of credit

Noncurrent operating lease liabilities

Tax receivable agreement, net of current portion

Deferred tax liability

Other liabilities

6 unchanged sentences

Class A common stock, $ 0.0001 par value;

2,000,000,000 shares authorized and 71,244,682 issued and outstanding as of December 31, 2020;

2,000,000,000 shares authorized and 37,530,568 issued and outstanding as of December 31, 2019

2,000,000,000 shares authorized, and 88,502,621 and 71,244,682 issued and outstanding as of December 31, 2021 and 2020, respectively

Class V common stock, $ 0.0001 par value;

1 unchanged sentence

Additional paid-in capital

Accumulated other comprehensive (loss) income

1,100,012,082

Accumulated other comprehensive loss

( 6,436,763 )

Accumulated deficit

1 unchanged sentence

( 175,931,713 )

Total stockholders' equity

Total Repay stockholders' equity

Non-controlling interests

$ 913,035,791

$ 556,182,071

Equity attributable to non-controlling interests

Total liabilities and stockholders' equity and members' equity

Total liabilities and equity

$ 1,685,839,066

4 unchanged sentences

December 31, 2021

December 31, 2020

From July 11, 2019 to December 31, 2019

1 unchanged sentence

to July 10, 2019

December 31, 2018

(Predecessor)

Processing and service fees

$ 219,258,038

Interchange and network fees

Total Revenue

$ 155,035,943

Operating Expenses

Interchange and network fees

Other costs of services

Costs of services

Selling, general and administrative

2 unchanged sentences

( 2,510,000 )

( 1,103,012 )

Impairment loss

Total operating expenses

(Loss) Income from operations

Loss from operations

( 53,995,994 )

1 unchanged sentence

( 27,611,483 )

( 20,597,401 )

Other (expense) income

4 unchanged sentences

( 3,145,167 )

Loss on extinguishment of debt

( 5,940,600 )

Change in fair value of warrant liabilities

( 70,827,214 )

( 15,258,497 )

Change in fair value of tax receivable liability

1 unchanged sentence

( 12,439,485 )

Other (expenses) income

( 1,638,465 )

Total other (expense) income

Other income (expense)

( 1,379,824 )

( 9,099,451 )

Total other expense

( 32,731,725 )

( 97,714,684 )

(Loss) income before income tax expense

( 24,198,679 )

( 3,145,129 )

Loss before income tax benefit

( 86,727,719 )

( 129,724,270 )

( 51,810,162 )

( 23,742,530 )

Income tax benefit

Net (loss) income

$( 56,036,563 )

1 unchanged sentence

$( 46,819,173 )

Net (loss) income attributable to

$( 23,742,530 )

Net loss attributable to

non-controlling interests

1 unchanged sentence

( 11,769,683 )

Net (loss) income attributable to the Company

( 15,271,043 )

Net loss attributable to the Company

$( 50,084,173 )

$( 105,596,562 )

Loss per Class A share:

$( 31,548,130 )

$( 23,742,530 )

Loss per Class A share attributable to the Company:

Basic and diluted

5 unchanged sentences

December 31, 2021

December 31, 2020

From July 11, 2019 to December 31, 2019

1 unchanged sentence

to July 10, 2019

December 31, 2018

(Predecessor)

Net (loss) income

$( 56,036,563 )

1 unchanged sentence

$( 46,819,173 )

$( 23,742,530 )

Other comprehensive (loss) income, before tax

Change in fair value of designated cash flow hedges

Change in fair value of cash flow hedges

( 9,867,782 )

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

Foreign currency translation adjustments

Total other comprehensive (loss) income, before tax

1 unchanged sentence

Income tax related to items of other comprehensive income:

Tax benefit (expense) on change in fair value of designated cash flow hedges

Tax benefit (expense) on change in fair value of cash flow hedges

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

( 1,672,742 )

Tax benefit on foreign currency translation adjustments

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

( 1,671,927 )

Total other comprehensive (loss) income, net of tax

( 8,195,040 )

Total comprehensive (loss) income

Total comprehensive loss

$( 48,394,266 )

1 unchanged sentence

$( 46,318,027 )

$( 23,742,530 )

Comprehensive loss attributable to non-controlling interests

1 unchanged sentence

( 14,668,288 )

Comprehensive (loss) income attributable to the Company

( 15,027,371 )

Comprehensive loss attributable to the Company

$( 43,649,616 )

$( 110,892,997 )

$( 31,290,656 )

$( 23,742,530 )

See accompanying notes to consolidated financial statements.

4 unchanged sentences

$ 109,078,357

Contributions by members

Stock based compensation

Distribution to members

( 23,742,530 )

Balance at December 31, 2018

$ 109,078,357

( 23,742,530 )

Contributions by members

3 unchanged sentences

Balance at July 10, 2019

Repay Stockholders

Class A Common

1 unchanged sentence

Accumulated Other Comprehensive

Stockholders'

Non-controlling

(Loss) Income

Income (Loss)

Balance at July 11, 2019

11 unchanged sentences

Tax distribution from Hawk Parent

Reclassification to warrant liabilities

( 24,359,228 )

1 unchanged sentence

( 25,557,422 )

Accumulated other comprehensive income

Balance at December 31, 2019 (Successor)

( 31,548,130 )

1 unchanged sentence

( 46,819,173 )

Other comprehensive income

Balance at December 31, 2019

$ 283,555,118

$( 70,335,151 )

$ 206,162,035

$ 419,699,152

Issuance of new shares

17 unchanged sentences

( 1,496,213 )

Valuation allowance on Ceiling Rule DTA

1 unchanged sentence

( 27,537,597 )

Reclassification to warrant liabilities

( 105,596,562 )

1 unchanged sentence

( 117,366,245 )

Accumulated other comprehensive income

Other comprehensive loss

( 3,670,893 )

1 unchanged sentence

( 8,195,040 )

Balance at December 31, 2020 (Successor)

Balance at December 31, 2020

$ 691,675,072

2 unchanged sentences

$ 556,182,071

Issuance of new shares

Exchange of Post-Merger Repay Units

( 2,331,486 )

( 2,497,895 )

Release of share awards vested under Incentive Plan

Treasury shares repurchased

( 4,074,937 )

( 4,041,923 )

Stock-based compensation

Tax distribution from Hawk Parent

Valuation allowance on Ceiling Rule DTA

( 50,084,173 )

( 5,952,390 )

( 56,036,563 )

Other comprehensive income

Balance at December 31, 2021

$ 1,100,012,082

$( 226,015,886 )

$ 913,035,791

See accompanying notes to consolidated financial statements.

2 unchanged sentences

December 31, 2021

December 31, 2020

From July 11, 2019 to December 31, 2019

From January 1, 2019 to July 10, 2019

December 31, 2018

(Predecessor)

Cash flows from operating activities

Net (loss) income

$( 56,036,563 )

1 unchanged sentence

$( 46,819,173 )

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

$( 23,742,530 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

2 unchanged sentences

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

1 unchanged sentence

( 2,509,840 )

( 1,103,012 )

Impairment loss

Payments of contingent consideration in excess of acquisition date fair value

( 1,500,000 )

( 4,070,549 )

Deferred tax benefit

1 unchanged sentence

( 12,358,025 )

( 4,990,989 )

Change in accounts receivable

5 unchanged sentences

( 3,800,600 )

( 3,579,300 )

Change in operating lease ROU assets

5 unchanged sentences

Change in operating lease liabilities

( 1,322,592 )

Change in other liabilities

( 7,470,178 )

Net cash provided by operating activities

1 unchanged sentence

Purchases of property and equipment

Purchases of software

( 2,862,903 )

Purchases of intangible assets

( 20,642,675 )

1 unchanged sentence

( 3,375,751 )

Purchases of other intangible assets

( 3,842,744 )

Purchases of equity investment

( 2,499,996 )

Acquisition of Hawk Parent, net of cash and restricted cash acquired

2 unchanged sentences

( 59,160,005 )

Acquisition of APS Payments, net of cash and restricted cash acquired

Acquisition of APS, net of cash and restricted cash acquired

( 29,450,022 )

5 unchanged sentences

( 78,086,739 )

Acquisition of BillingTree, net of cash and restricted cash acquired

( 269,002,616 )

Acquisition of Kontrol, net of cash and restricted cash acquired

( 7,439,373 )

Acquisition of Payix, net of cash and restricted cash acquired

( 94,898,220 )

Net cash used in investing activities

4 unchanged sentences

Cash flows from financing activities

Change in line of credit

Payment on line of credit

( 10,000,000 )

11 unchanged sentences

( 1,414,732 )

( 4,507,544 )

Issuance of warrants

Exercise of warrants

Conversion of Thunder Bridge Class A ordinary shares to Class A Common Stock

Transfer of cash from trust upon conversion of Thunder Bridge Class A ordinary shares

Redemption of Post-Merger Repay Units

3 unchanged sentences

( 6,904,991 )

( 6,307,935 )

Payment of loan costs

1 unchanged sentence

( 1,861,817 )

( 6,065,465 )

Payments of contingent consideration up to acquisition date fair value

( 7,448,786 )

Net cash provided by (used in) financing activities

( 14,250,000 )

Net cash provided by (used in) financing activities

( 9,354,991 )

1 unchanged sentence

( 30,164,808 )

( 5,050,546 )

Cash, cash equivalents and restricted cash at beginning of period

$ 106,504,734

Cash, cash equivalents and restricted cash at end of period

$ 106,504,734

See accompanying notes to consolidated financial statements.

REPAY HOLDINGS CORPORATION

1 unchanged sentence

December 31, 2021

December 31, 2020

From July 11, 2019 to December 31, 2019

From January 1, 2019 to July 10, 2019

December 31, 2018

(Predecessor)

6 unchanged sentences

Acquisition of Hawk Parent in exchange for amounts payable under Tax Receivable Agreement

$ 229,228,105

Acquisition of Hawk Parent in exchange for contingent consideration

4 unchanged sentences

Acquisition of CPS in exchange for contingent consideration

Acquisition of BillingTree in exchange for Class A Common Stock

$ 228,250,000

Acquisition of Kontrol in exchange for contingent consideration

Acquisition of Payix in exchange for contingent consideration

See accompanying notes to consolidated financial statements.

6 unchanged sentences

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.

2 unchanged sentences

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”).

On February 10, 2020, the Company acquired all of the equity interests of CDT Technologies, LTD.

d/b/a Ventanex (“Ventanex”) for $ 36 .0 million in cash.

In addition to the $ 36 .0 million cash consideration, the Ventanex selling equity holders may be entitled to up to a total of $ 14.0 million in two separate cash earnout payments, dependent on the achievement of certain growth targets.

On June 2, 2020, the Company completed an underwritten offering of 9,200,000 shares of its Class A common stock (the “June Follow-on Offering”) pursuant to the terms of an Underwriting Agreement (the “June Underwriting Agreement”), dated May 28, 2020, with Morgan Stanley & Co.

LLC, Credit Suisse Securities (USA) LLC and Barclays Capital Inc., as representatives of the several underwriters named therein .

1,200,000 shares of such Class A common stock were sold in the offering in connection with the full exercise of the underwriters’ option to purchase additional shares pursuant to the Underwriting Agreement.

The shares of Class A common stock issued by the Company were sold at a price to the public of $ 20.00 per share ($ 19.00 per share net of underwriting discounts and commissions).

In connection with the June Follow-on Offering, the Company entered into a unit purchase agreement, dated May 28, 2020 (the “June Unit Purchase Agreement”), with CC Payment Holdings, L.L.C., an entity controlled by Corsair, pursuant to which the Company acquired 5,200,000 units representing limited liability company interests of Hawk Parent (“Post-Merger Repay Units”) at a purchase price of $ 19.00 per Post-Merger Repay Unit, which was equal to the purchase price per share of Class A common stock paid to the Company by the underwriters for shares of Class A common stock in connection with the June Follow-on Offering.

On July 23, 2020 , the Company acquired all of the equity interests of cPayPlus, LLC (“cPayPlus”) for $ 8.0 million in cash.

In addition to the $ 8.0 million cash consideration, the cPayPlus selling equity holders may be entitled up to a total of $ 8.0 million cash earnout payment, dependent upon the achievement of certain growth targets.

On September 14, 2020, the Company completed an underwritten offering of 13,000,000 shares of its Class A common stock (the “September Follow-on Offering” and together with the June Follow-on Offering, the “Follow-on Offerings”) pursuant to the terms of an Underwriting Agreement (the “September Underwriting Agreement”), dated September 9, 2020, with Morgan Stanley & Co.

LLC, as underwriter.

Pursuant to the September Underwriting Agreement, the Company granted the underwriter a 30 -day option to purchase up to an aggregate of 1,364,816 additional shares of Class A common stock solely to cover over-allotments.

On September 22, 2020 the underwriter exercised the option to purchase 1,364,816 shares of the Company’s Class A common stock.

The shares of Class A common stock issued by the Company were sold at a price to the public of $ 24.00 per share ($ 23.425 per share net of underwriting discounts and commissions).

In connection with the September Follow-on Offering, the Company entered into a unit purchase agreement, dated September 9, 2020 (the “September Unit Purchase Agreement” and, together with the June Unit Purchase Agreement, the “ Unit Purchase Agreements ” ), with CC Payment Holdings, L.L.C., an entity controlled by Corsair, pursuant to which the Company acquired 14,364,816 Post-Merger Repay Units at a purchase price of $ 23.425 per Post-Merger Repay Unit, which was equal to the purchase price per share of Class A common stock paid to the Company by the underwriters for shares of Class A common stock in connection with the September Follow-on Offering.

On November 2, 2020, the Company acquired all of the equity interests of CPS Payment Services, LLC Media Payments, LLC (“MPI”), and Custom Payment Systems, LLC (collectively, “CPS”) for $ 78.0 million in cash.

In addition to the $ 78.0 million cash consideration, the CPS selling equity holders may be entitled to up to a total of $ 15.0 million in two separate cash earnout payments, dependent upon the achievement of certain growth targets.

During the year ended December 31, 2020, warrant holders of the Company exercised warrants in exchange for 8.0 million shares of Class A common stock.

The Company received $ 86.8 million upon the exercise of the warrants.

On July 27, 2020, the Company completed the redemption of all of its outstanding warrants to purchase shares of the Company’s Class A common stock.

On January 19, 2021, the Company completed an underwritten public offering (the “Equity Offering”) of 6,244,500 shares of its Class A common stock at a public offering price of $ 24.00 per share.

814,500 shares of such Class A common stock were sold in the Equity Offering in connection with the full exercise of the underwriters’ option to purchase additional shares of Class A common stock pursuant to the underwriting agreement.

On January 19, 2021, the Company also completed an offering of $ 440.0 million in aggregate principal amount of 0.00 % Convertible Senior Notes due 2026 (the “2026 Notes”) 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.

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

On June 15, 2021, the Company acquired all of the equity interests of BT Intermediate, LLC (together with its subsidiaries, “BillingTree”) for approximately $ 505.8 million, consisting of approximately $ 277.5 million in cash from the Company’s balance sheet and approximately 10 million shares of newly issued Class A common stock, representing approximately 10 % of the voting power of the Company’s outstanding shares of common stock.

On June 22, 2021, the Company acquired substantially all of the assets of Kontrol LLC (“Kontrol”) for up to $ 10.5 million, of which approximately $ 7.4 million was paid at closing.

The acquisition was financed with cash on hand.

On December 29, 2021, the Company acquired Payix Holdings Incorporated (together with its subsidiary, “Payix”) for up to $ 115.0 million, which includes $ 95.6 million paid at closing and up to $ 20.0 million in performance-based earnouts.

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

Business Overview

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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 customers 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 customers’ 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 customers and fostering long-term customer relationships.

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

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 client s 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.

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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 customers, many of which operate in the manufacturing, wholesale, distribution, healthcare, and education industries.

The business-to-business vertical relates to transactions occurring between a wide variety of enterprise clients, many of which operate in the manufacturing, wholesale, distribution, healthcare, and education industries.

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, dealer management systems, collection management systems, and enterprise resource planning software systems, allows the Company to embed its omni-channel payment processing technology into its customers’ critical workflow software and ensure seamless operation of the Company’s solutions within its customers’ 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 customer opportunities or respond to inbound leads because, in many cases, a business will prefer, or in some cases only consider, a payments provider that has already integrated or is able to integrate its solutions with the business’ primary enterprise management system.

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 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 customer needs.

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

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, 2021, the Company maintained approximately 222 integrations with various software providers.

In March 2020, the World Health Organization declared the outbreak of the COVID-19 virus a global pandemic.

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.

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

This Annual Report on Form 10-K reflects the restated consolidated financial statements as of December 31, 2020 and 2019, for the period from July 11, 2019 to December 31, 2019, for the year ended December 31, 2020 and the quarterly periods therein.

Basis of Presentation and Summary of Significant Accounting Policies

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The consolidated financial statements include the accounts of Repay Holdings Corporation, the majority-owned Hawk Parent Holdings LLC and its 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 (“PaidSuite”), Marlin Acquirer, LLC (“Paymaxx”), REPAY International LLC, REPAY Canada Solutions ULC, TriSource Solutions (“TriSource”), LLC, Mesa Acquirer, LLC, CDT Technologies LTD, Viking GP Holdings, LLC, cPayPlus, LLC, CPS Payment Services, LLC, Media Payments, LLC, Custom Payment Systems, LLC, BT Intermediate, LLC, Electronic Payment Providers, LLC, Blue Cow Software, LLC, Hoot Payment Solutions, LLC, Internet Payment Exchange, LLC, Stratus Payment Solutions, LLC, Clear Payment Solutions, LLC, Harbor Acquisition LLC, and Payix Holdings Incorporated.

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

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Merchant services.

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

Cash and Cash Equivalents

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Accounts Receivable

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

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 Company uses Provision Matrix methodology to estimate the allowance for credit losses on accounts receivable, which estimated credit loss is calculated based on how long a receivable has been outstanding (e.g., under 30 days, 30–60 days, etc.).

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.

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Concentration of Credit Risk

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

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 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, adjusted for the assumed exchange of all Post-Merger Repay Units, by the weighted average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive elements.

Basic earnings per share of Class A common stock is computed by dividing net 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 loss 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.

The Predecessor’s LLC membership structure included several different types of LLC interests including ownership interests and profits interests.

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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, 2021 and 2020.

Intangible Assets

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

The Company is amortizing 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 customer relationships, and an estimated useful life for non-compete agreements equal to the term of the agreement.

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 whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable.

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.

No indicators of impairment were identified in the periods ending December 31, 2020 and 2019.

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

No indicators of impairment were identified 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.

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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 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, 2021.

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

The Company contracts with its customers 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.

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 customers 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 customers 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 customer’s use (e.g., number of transactions submitted and processed) of the related processing services.

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.

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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 customer, 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 merchants’ transactions are processed.

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.

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

The transaction price for such processing services are determined, based on the judgment of the Company’s 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.

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

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

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 customer or whether the Company is acting as an agent of a third party.

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.

Interchange and network fees

Within its contracts with customers, the Company incurs interchange and network pass-through charges from the third-party card issuers and payment networks, respectively, related to the provision of payment authorization and routing services.

The Company has determined that it is acting as an agent with respect to these payment authorization and routing services, based the fact that the Company has no discretion over which card-issuing bank or payment network will be used to process a transaction and is unable to direct the activity of the merchant to another card-issuing bank or payment network.

As such, the Company views the card-issuing bank and the payment network as the principal for these performance obligations, as these parties are primarily responsible for fulfilling these promises to the merchant.

Therefore, revenue allocated to the payment authorization performance obligation is presented net of interchange and card network fees paid to the card issuing banks and card networks, respectively, for the years ended December 31, 2020 and 2019, in connection with the adoption of ASC 606.

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.

Indirect relationships

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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, fulfilment 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.

Transaction Costs

The Company expenses all transactions costs as incurred and are included in selling, general, and administrative expenses in the consolidated statements of operations.

For the year ended December 31, 2020, the Company incurred $ 9.9 million transaction costs.

The Company expenses all transactions 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, 2021 and 2020, the Company incurred $ 9.3 million and $ 4.2 million transaction costs, respectively.

For the period from July 11, 2019 to December 31, 2019, the Successor incurred $ 3.9 million of transaction costs for closed and pending transactions.

The Predecessor incurred transaction costs of $ 34.9 million and $ 4.0 million for the period from January 1, 2019 to July 10, 2019 and the year ended December 31, 2018, respectively.

The Predecessor incurred transaction costs of $ 16.2 million for the period from January 1, 2019 to July 10, 2019.

Equity Units Awarded

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

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

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, 2021, there were 7,326,728 shares of Class A common stock reserved for issuance under the Incentive Plan.

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The Predecessor accounted for profit units awarded to management based on the fair value of the awards on the date of the grant and recognized compensation expense for those awards over the requisite service period.

The profit interests granted under the profit unit plan of the Predecessor were estimated on the grant date using the Black‑Scholes option valuation model.

The profits units were fully vested as of the Closing.

The fair value of the RSAs and RSUs granted under the Incentive Plan and the profit interests granted under the profit unit plan of the Predecessor is estimated on the grant date using the Black‑Scholes option valuation model.

The Black‑Scholes option valuation model incorporates assumptions as to dividend yield, expected volatility, an appropriate risk‑free interest rate, and the expected life of the option.

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.

Forfeitures are accounted for as they occur.

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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 and processing assets and liabilities approximated their fair values as of December 31, 20 20 and 201 9 , because of the relatively short maturity dates on these instruments.

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, 2021, and 2020, because of the relatively short maturity dates on these instruments.

The carrying amount of debt approximates fair value as of December 31, 2021 and 2020, because interest rates on these instruments approximate market interest rates.

The Company adopted ASC Topic 842, Leases, using a modified retrospective transition approach as of January 1, 2020 .

The Company adopted ASC 842, Leases, using a modified retrospective transition approach as of January 1, 2020 .

The Company has elected to adopt the package of transition practical expedients and, therefore, has not reassessed (1) whether existing or expired contracts contain a lease, (2) lease classification for existing or expired leases or (3) the accounting for initial direct costs that were previously capitalized.

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As of December 31, 2021, the Company held an 91.9 % interest in Hawk Parent.

The noncontrolling interest, for the year ended December 31, 2020, in the net loss of subsidiaries was $ 11.8 million.

As of July 11, 2019, the Company held a

55.9 % interest in Hawk Parent .

The noncontrolling interest , for the period from July 11, 2019 to December 31, 2019 , in the net loss of subsidiaries was $ 15.3 million .

F or the year ended December 31, 2021, the noncontrolling interest in the net loss of subsidiaries was $ 6.0 million.

As of December 31, 2020, the Company held an 89.8 % interest in Hawk Parent.

For the year ended December 31, 2020, the noncontrolling interest in the net loss of subsidiaries was $ 11.8 million.

As of July 11, 2019, the Company held a 55.9 % interest in Hawk Parent.

For the period from July 11, 2019 to December 31, 2019, the noncontrolling interest in the net loss of subsidiaries was $ 15.3 million.

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 income statements.

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 earn-out 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.

Emerging Growth Company

Prior to December 31, 2020, the Company was an “emerging growth company” (“EGC”) as defined in the Jumpstart Our Business Startups Act, (JOBS Act), and elected to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies until the Company is no longer an EGC, including using the extended transition period for complying with new or revised accounting standards.

As of December 31, 2020, the Company has become a large accelerated filer under the rules of the SEC and is no longer classified as an EGC.

Recently Adopted Accounting Pronouncements

Fair Value Measurement

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements in Topic 820.

After the adoption of ASU 2018-13, an entity will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy;

the policy for timing of transfers between levels;

the valuation processes for Level 3 fair value measurements.

ASU 2018-13 is effective for the Company’s annual period beginning after December 15, 2019.

The amendments on changes in unrealized gains and losses should be applied prospectively for only the most recent period presented in the initial fiscal year of adoption.

All other amendments should be applied retrospectively to all periods presented on their effective date.

After adopting ASU 2018-13, there was no material effect on the Company’s consolidated financial statements.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016‑02, Leases (Subtopic 842) .

The purpose of this ASU is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.

The amendments in this ASU require that lessees recognize the rights and obligations resulting from leases as assets and liabilities on their balance sheets, initially measured at the present value of the lease payments over the term of the lease, including payments to be made in optional periods to extend the lease and payments to purchase the underlying assets if the lessee is reasonably certain of exercising those options.

The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP.

The effective date of this ASU for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.

As a result of the Company ceasing to be an EGC as of December 31, 2020, the Company adopted ASU 2016-02 and subsequent related ASUs, using a modified retrospective transition approach as of January 1, 2020, which resulted in the recognition of $ 10.1 million and $ 10.4 million in ROU assets and associated lease liabilities, respectively, arising from operating leases in which the Company is the lessee, on the Company’s consolidated balance sheets.

The amount of the ROU assets and associated lease liabilities recorded upon adoption was based primarily on the present value of unpaid future minimum lease payments, the amount of which was based on the population of leases in effect as of January 1, 2020.

The adoption did not have a significant impact on the Company’s consolidated statements of operations or consolidated statements of cash flows.

For additional information and required disclosures elated to ASC 842, see Note 12.

Commitments and Contingencies.

Credit Losses

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments which significantly changes the way entities recognize impairment of many financial assets by requiring immediate recognition of estimated credit losses expected to occur over their remaining life, instead of when incurred.

The changes (as amended) are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

As a result of the Company ceasing to be an EGC as of December 31, 2020, the Company adopted ASU 2016-13 as of January 1, 2020 .

The adoption of this ASU does not have a material impact on the Company’s consolidated financial statements or related disclosures.

Recently Issued Accounting Pronouncements not yet Adopted

Accounting for Income Taxes

In December 2019, the FASB issued ASU No.

2019-12, " Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes ("ASU No.

2019-12 simplifies the accounting for income taxes, eliminates certain exceptions within Income Taxes (Topic 740) , and clarifies certain aspects of the current guidance to promote consistency among reporting entities, and is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted.

Most amendments within ASU No.

2019-12 are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis.

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

ASU 2019-12 simplifies the accounting for income taxes, eliminates certain exceptions within Income Taxes (Topic 740) , and clarifies certain aspects of the current guidance to promote consistency among reporting entities, and is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted.

Most amendments within ASU 2019-12 are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis.

The Company adopted ASU 2019-12 as of January 1, 2021, using a modified retrospective transition approach.

The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements or related disclosures.

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity, which made targeted improvements to an issuer’s accounting for convertible instruments under ASC Topic No.

470 Debt , and the derivative scope exception for contracts in an entity’s own equity under ASC Topic No.

815 Derivatives and Hedging .

Specifically, ASU 2020-06 reduces the number of accounting models that exist under GAAP as well as the number of settlement conditions which will likely result in more convertible instruments being accounted for as a single unit of account, a reduction in the amount of interest expense recognized for convertible debt, and more embedded derivatives meeting the derivative scope exception.

In addition, ASU 2020-06 amends ASC Topic No.

260 Earnings Per Share , which will result in more dilutive earnings per share results.

ASU 2020-06 is effective for public companies beginning January 1, 2022, including interim periods within the fiscal years after the adoption date.

Early adoption is also permitted beginning January 1, 2021, including interim periods within those fiscal years.

The Company early adopted ASU 2020-06 as of January 1, 2021.

The Company issued the 2026 Notes in January 2021, which resulted in recognition of $ 440.0 million in noncurrent long-term debt and $ 11.4 million in debt issuance costs.

In determining the impact of the 2026 Notes on the Company’s diluted earnings per share calculations, the Company applies the if-converted method.

For additional information and required disclosures related to 2026 Notes, see Note 10.

Recently Issued Accounting Pronouncements not yet Adopted

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.

2021-18 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.

The Company is currently in the process of evaluating the effects of ASU No.

2021-08 on its consolidated financial statements.

Reclassification

Certain amounts in the consolidated financial statements have been reclassified from their original presentation to conform to current year presentation.

These reclassifications had no material impact on the consolidated financial statements as previously reported.

Disaggregation of Revenue

1 unchanged sentence

December 31, 2021

December 31, 2020

From July 11, 2019 to December 31, 2019

4 unchanged sentences

$ 213,251,782

$ 152,247,190

Indirect relationships

1 unchanged sentence

$ 219,258,038

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 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 customer 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 customers either give rise to an asset or are expensed as incurred.

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

Practical Expedients

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

The Company has also utilized the practical expedient for immaterial goods and services per Topic 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.

$ 155,035,943

Earnings Per Share

During the year ended December 31, 2020 and the period from July 11, 2019 to December 31, 2019, basic and diluted net loss per common share are the same since the inclusion of the assumed exchange of all Post-Merger Repay Units, unvested restricted share awards and all warrants would have been anti-dilutive.

During the years ended December 31, 2021 and 2020, and the period from July 11, 2019 to December 31, 2019, 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, Warrants and 2026 Notes would have been anti-dilutive.

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

December 31, 2021

December 31, 2020

From July 11, 2019 to December 31, 2019

2 unchanged sentences

$( 129,724,270 )

$( 51,810,162 )

Net loss attributable to non-controlling interests

1 unchanged sentence

( 11,769,683 )

( 15,271,043 )

Income tax benefit

2 unchanged sentences

$( 105,596,562 )

$( 31,548,130 )

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

Loss per share of Class A common stock outstanding - basic and diluted

For the Successor periods, 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:

For the years ended December 31, 2021 and 2020, and the period from July 11, 2019 to December 31, 2019, 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:

December 31, 2021

December 31, 2020

From July 11, 2019 to December 31, 2019

Post-Merger Repay Units exchangeable for Class A common stock

2 unchanged sentences

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

14 unchanged sentences

Hawk Parent constitutes a business, with inputs, processes, and outputs.

Accordingly, the Business Combination constitutes the acquisition of a business for purposes of ASC 805 and, due to the changes in control from the Business

Combination, is accounted for using the acquisition method.

Accordingly, the Business Combination constitutes the acquisition of a business for purposes of ASC 805 and, due to the changes in control from the Business Combination, is accounted for using the acquisition method.

Under the acquisition method, the acquisition date fair value of the gross consideration paid by Thunder Bridge to close the Business Combination was allocated to the assets acquired and the liabilities assumed based on their estimated fair values.

44 unchanged sentences

Channel relationships

Goodwill, $ 339.9 million, represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired.

Goodwill recognized of $ 339.9 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 $ 279.2 million is expected to be deductible for tax purposes.

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 Hawk Parent.

TriSource Solutions, LLC

On August 13, 2019, the Company acquired all of the ownership interests of TriSource.

9 unchanged sentences

The selling members of TriSource had the contingent earnout right to receive a payment of up to $ 5.0 million dependent upon the Gross Profit, as defined in the TriSource purchase agreement, for the period commencing on July 1, 2019 and ending on June 30, 2020.

In October 2020, the Company paid the TriSource earnout payment of $ 4.0 million.

The Company recorded an allocation of the purchase price to TriSource’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the August 13, 2019 closing date.

19 unchanged sentences

Merchant relationships

Goodwill, $ 30.9 million, represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired.

Goodwill recognized of $ 30.9 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 $ 32.2 million is expected to be deductible for tax purposes.

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 TriSource.

From August 14, 2019 to December 31, 2019, TriSource contributed $ 9.2 million to revenue and $ 1.1 million in net income to the Company’s consolidated statement of operations.

On October 14, 2019, the Company acquired substantially all of the assets of APS for $ 30.5 million in cash.

In addition to the $ 30 .0 million cash consideration, the APS selling equity holders may be entitled to a total of $ 30.0 million in three separate cash earnout payments, dependent on the achievement of certain growth targets.

In addition to the cash consideration, the APS selling equity holders may be entitled to a total of $ 30.0 million in three separate cash earnout payments, dependent on the achievement of certain growth targets.

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

25 unchanged sentences

Merchant relationships

Goodwill, $ 25.9 million, represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired.

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

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

From October 15, 2019 to December 31, 2019, APS Payments contributed $ 3.2 million to revenue and $ 0.8 million in net income to the Company’s consolidated statements of operations.

On February 10, 2020, the Company acquired all of the ownership interests of CDT Technologies, LTD d/b/a Ventanex (“Ventanex”).

Goodwill recognized of $ 25.9 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 $ 21.7 million is expected to be deductible for tax purposes.

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 APS.

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.

9 unchanged sentences

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.

As of December 31, 2020, the remaining Ventanex Earnout was $ 4.8 million.

In February 2021, the Company paid the sellers of Ventanex $ 0.9 million, pursuant to the terms of the Ventanex Purchase Agreement.

As of December 31, 2021, the fair value of Ventanex earnout was $ 12.7 million, which resulted in a $ 7.9 million adjustment included in the change in fair value of contingent consideration in the Consolidated Statements of Operations for the year ended December 31, 2021.

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.

18 unchanged sentences

Merchant relationships

Goodwill 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.

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 .

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.

From February 11, 2020 to December 31, 2020, Ventanex contributed $ 11.1 million to revenue and $ 1.3 million in net income to the Company’s consolidated statement of operations.

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

3 unchanged sentences

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 preliminary purchase consideration paid to the selling members of cPayPlus:

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

Cash consideration

3 unchanged sentences

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.

The Company recorded a preliminary 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 preliminary purchase price allocation is as follows:

On September 17, 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:

Cash and cash equivalents

9 unchanged sentences

Total purchase price

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

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

Identifiable intangible assets

3 unchanged sentences

Merchant relationships

Goodwill 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.

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.

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.

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.

From July 24, 2020 to December 31, 2020, cPayPlus contributed $ 1.0 million to revenue and ($ 1.1 ) million in net income to the Company’s consolidated statements of operations.

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

4 unchanged sentences

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 preliminary purchase consideration paid to the selling members of CPS:

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

Cash consideration

3 unchanged sentences

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.

The Company recorded a preliminary 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 preliminary purchase price allocation is as follows:

As of December 31, 2021, the fair value of the CPS earnout was $ 0.6 million, which resulted in a ($ 3.9 ) million adjustment included in the change in fair value of contingent consideration in the Consolidated Statements of Operations for the year ended December 31, 2021.

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:

Cash and cash equivalents

13 unchanged sentences

Total purchase price

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

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

(in millions)

3 unchanged sentences

Merchant relationships

Goodwill 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.

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.

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.

From November 3, 2020 to December 31, 2020, CPS has contributed $ 2.3 million to revenue and $ 0.0 million in net income to the Company’s consolidated statements of operations.

The Company incurred transaction expenses of $ 4.2 million for the year ended December 31, 2020, related to the APS, Ventanex, cPayPlus, and CPS acquisitions.

The Company incurred transaction expenses of $ 3.9 million from July 11, 2019 to December 31, 2019, related to the Business Combination, TriSource, and APS acquisitions.

The Predecessor incurred $ 34.7 million of transaction expenses from January 1 to July 10, 2019.

Thunder Bridge incurred $ 16.2 million of transaction expenses, not reported in the Predecessor consolidated statements of operations, directly related to the Business Combination for the period from January 1, 2019 to July 10, 2019.

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 preliminary purchase consideration paid to the seller of BillingTree:

Cash consideration

$ 277,521,139

Class A common stock issued

Total purchase price

$ 505,771,139

The Company recorded a preliminary 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 preliminary purchase price allocation is as follows:

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

( 2,552,251 )

Accrued expenses and other liabilities

( 6,982,919 )

Deferred tax liability

( 31,371,590 )

Net identifiable assets acquired

Total purchase price

$ 505,771,140

The preliminary 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 $ 293.8 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 $ 47.7 million is expected to be deductible for tax purposes.

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.

BillingTree contributed $ 31.3 million to revenue and $( 0.0 ) million in net income to the Company’s Consolidated Statements of Operations, from June 15, 2021 through December 31, 2021.

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 preliminary purchase consideration paid to the owner of Kontrol:

Cash consideration

Contingent consideration (1)

Total purchase price

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 Kontrol Purchase Agreement.

As of December 31, 2021, the fair value of the Kontrol earnout was $ 0.9 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, 2021.

The Company recorded a preliminary 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 preliminary purchase price allocation is as follows:

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 preliminary 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.

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.

Kontrol contributed $ 1.7 million to revenue and $ 0.6 million in net income to the Company’s Consolidated Statements of Operations, from June 22, 2021 through December 31, 2021.

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 preliminary purchase consideration paid to the sellers of Payix:

Cash consideration

Contingent consideration (1)

Total purchase price

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, 2021, the fair value of the Payix earnout was $ 2.9 million.

The Company recorded a preliminary 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 preliminary purchase price allocation is as follows:

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

( 2,022,846 )

Deferred tax liability

( 6,943,998 )

Net identifiable assets acquired

Total purchase price

The preliminary 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.

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.

Payix contributed $ 0.1 million to revenue and $ ( 0.0 ) million in net income to the Company’s Consolidated Statements of Operations, from December 29, 2021 through December 31, 2021 .

Measurement Period

The preliminary purchase price allocations for the acquisitions of BillingTree, Kontrol, and Payix are based on initial estimates and provisional amounts.

For the acquisitions completed during the year ended December 31, 2021, the Company continues to refine its inputs and estimates inherent in the valuation of intangible assets, deferred income taxes, realization of tangible assets and the accuracy and completeness of liabilities within the measurement period.

Pro Forma Financial Information (Unaudited)

The supplemental condensed consolidated results of the Company on an unaudited pro forma basis give effect to the Business Combination as well as the TriSource, APS, Ventanex, cPayPlus, and CPS acquisitions as if the transactions had occurred on January 1, 2018.

The supplemental condensed 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.

18 unchanged sentences

December 31, 2021

Cash and cash equivalents

Restricted cash

$ 106,504,734

Contingent consideration

Tax receivable agreement

Interest rate swap

Total liabilities

3 unchanged sentences

December 31, 2020

Cash and cash equivalents

Restricted cash

Interest rate swap

Contingent consideration

Tax receivable agreement

Interest rate swap

Total liabilities

1 unchanged sentence

$ 245,028,105

Cash and cash equivalents

Cash and cash equivalents are classified within Level 1 of the fair value hierarchy, as the primary component of the price is obtained from quoted market prices in an active market.

The carrying amounts of the Company’s cash and cash equivalents approximate their fair values due to the short maturities and highly liquid nature of these accounts.

$ 511,053,833

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

10 unchanged sentences

December 31, 2021

December 31, 2020

From July 11, 2019 to December 31, 2019

6 unchanged sentences

( 18,320,549 )

Accretion expense

( 1,816,988 )

Valuation adjustment

1 unchanged sentence

Balance at end of period

The carrying value of our term loan is net of unamortized debt discount and debt issuance costs.

The fair value of our term loan was determined using a discounted cash flow model based on observable market factors, such as changes in credit spreads for comparable benchmark companies and credit factors specific to us.

The fair value of our term loan is classified within Level 2 of the fair value hierarchy, as the inputs to the discounted cash flow model are generally observable and do not contain a high level of subjectivity.

The carrying value of the Company’s 2026 Notes, revolving credit facility and term loan is net of unamortized debt discount and debt issuance costs.

The carrying amount of the Company’s borrowings approximates fair value because interest rates on these instruments approximate market interest rates.

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

See Note 10 for further discussion on borrowings.

Tax Receivable Agreement

9 unchanged sentences

The TRA balance increased as a result of exchanges of Post-Merger Repay Units for Class A common stock pursuant to the Exchange Agreement.

In addition, the TRA balance increased $ 12.4 million through accretion expense and a valuation adjustment, related to a decrease in the discount rate, which was 3.00 %, as of December 31, 2019.

In addition, the TRA balance increased $ 14.1 million through accretion expense and a valuation adjustment, related to a decrease in the discount rate, which was 1.34 %, as of December 31, 2020, and the finalization of the various components related to the 2020 exchanges of Post-Merger Repay Units.

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.

1 unchanged sentence

December 31, 2021

December 31, 2020

From July 11, 2019 to December 31, 2019

3 unchanged sentences

Balance at beginning of period

$ 229,228,105

Accretion expense

2 unchanged sentences

$ 245,828,419

$ 229,228,105

Interest Rate Swap

4 unchanged sentences

The fair value was determined based on the present value of the estimated future net cash flows using implied rates in the applicable yield curve as of the valuation date.

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.

Property and Equipment

3 unchanged sentences

Accumulated depreciation and amortization

Depreciation expense for property and equipment was $ 1.2 million and $ 0.4 million for the year ended December 31, 2020 and the period from July 11, 2019 to December 31, 2019, respectively.

Depreciation expense was $ 0.2 million and $ 0.4 million for the Predecessor period from January 1, 2019 to July 10, 2019 and the year ended December 31, 2018, respectively.

Depreciation expense for property and equipment was $ 1.3 million, $ 1.2 million and $ 0.4 million for the years ended December 31, 2021 and 2020, and the period from July 11, 2019 to December 31, 2019, respectively.

Depreciation expense was $ 0.2 million for the Predecessor period from January 1, 2019 to July 10, 2019.

Intangible Assets

The Company holds definite and indefinite-lived intangible assets.

As of December 31, 2020, the indefinite-lived intangible assets consist of trade names of $ 22.2 million, and this balance consists of six trade names, arising from the acquisitions of Hawk Parent, TriSource, APS, Ventanex, cPayPlus, and CPS in the Successor period from July 11, 2019 to December 31, 2020.

As of December 31, 2019, the indefinite-lived intangible assets consist of trade names, of $ 21.2 million.

This balance consists of three trade names, arising from the acquisitions of Hawk Parent, TriSource and APS Payments in the Successor period from July 11, 2019 to December 31, 2019.

Definite-lived intangible assets consisted of the following:

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.

As of December 31, 2020, the indefinite-lived intangible assets consist of six trade names, arising from the acquisitions of Hawk Parent, TriSource, APS, Ventanex, cPayPlus, and CPS.

Intangible assets consisted of the following:

Gross Carrying Value

2 unchanged sentences

Weighted Average Useful Life (Years)

Customer relationships

Client relationships

$ 539,850,000

6 unchanged sentences

$ 171,383,658

Customer relationships

$ 577,693,902

Client relationships

$ 308,450,000

$ 268,529,422

Channel relationships

4 unchanged sentences

$ 369,227,138

The Company’s amortization expense for intangible assets was $ 59.7 million and $ 23.3 million for the year ended December 31, 2020 and the period from July 11, 2019 to December 31, 2019, respectively.

Amortization expense for intangible assets was $ 5.9 million and $ 10.0 million for the Predecessor period from January 1, 2019 to July 10, 2019 and the year ended December 31, 2018, respectively.

The Company’s amortization expense for intangible assets was $ 88.4 million, $ 59.7 million and $ 23.3 million for the years ended December 31, 2021 and 2020, and the period from July 11, 2019 to December 31, 2019, respectively.

Amortization expense for intangible assets was $ 5.9 million for the Predecessor period from January 1, 2019 to July 10, 2019.

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

Year Ending December 31,

Estimated Future Amortization Expense

The following table presents changes to goodwill for the years ended December 31, 2021, 2020 and 2019:

12 unchanged sentences

Balance at December 31, 2020

Impairment Loss

Measurement period adjustment

( 1,500,000 )

Balance at December 31, 2021

$ 824,081,632

During the year ended December 31, 2020, the Company recognized a $ 7.0 million measurement period adjustment in accordance with APS acquisition, of which $ 6.6 million was due to a valuation adjustment on contingent consideration.

The Company has only one operating segment and, based on the criteria outlined in ASC 350, Intangibles – Goodwill and Other (“ASC 350”), only one reporting unit that needs to be tested for goodwill impairment.

Accordingly, goodwill was reviewed for impairment at the consolidated entity level.

The Company concluded that goodwill was no t impaired as of December 31, 2021.

As of December 31, 2021 and 2020, there were no accumulated impairment losses on the Company’s goodwill.

Predecessor Credit Agreement

12 unchanged sentences

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 include d restrictive qualitative and quantitative covenants, as defined in the Successor Credit Agreement.

The Company was in compliance with its restrictive covenants under the Successor Credit Agreement a s of December 31, 20 20 .

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.

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.

The Company paid $ 231,168 in fees related to unused commitments for the year ended December 31, 2020.

The Company’s interest expense on the line of credit totaled $ 62,008 and $ 0.1 million for the year ended December 31, 2020 and the period from July 11, 2019 to December 31, 2019, respectively.

As of December 31, 2020 and December 31, 2019, total borrowings under the Successor Credit Agreement consisted of the following, respectively:

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.

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, 2021.

As of December 31, 2021, 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 $ 0.4 million and $ 0.2 million in fees related to unused commitments for the years ended December 31, 2021 and 2020, respectively.

The Company’s interest expense on the line of credit totaled $ 0 , $ 0.1 million and $ 0.1 million for the years ended December 31, 2021 and 2020, and the period from July 11, 2019 to December 31, 2019 respectively .

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, 2021, the conversion contingencies of the 2026 Notes were not met, and the conversion terms of the 2026 Notes were not significantly changed.

The shares issuable upon conversion of the 2026 Notes were excluded from the computation of the diluted loss per share, since their inclusion would have been anti-dilutive.

As of December 31, 2021 and 2020, total borrowings under the Successor Credit Agreement, Amended Credit Agreement, and 2026 Notes consisted of the following, respectively:

December 31, 2021

1 unchanged sentence

Non-current indebtedness:

$ 262,653,996

Term Loan (1)

$ 262,653,996

Revolving Credit Facility (2)

Convertible Senior Debt

Total borrowings under credit facility

4 unchanged sentences

$ 249,952,746

The Term Loan, Delayed Draw Term Loan and Revolving Credit Facility bear interest, at variable rates, which were 3.65 % and 5.26 % as of December 31, 2020 and December 31, 2019, respectively

Pursuant to the terms of the Successor Credit Agreement, the Successor was required to make quarterly principal payments equal to 0.625 % of the initial principal amount of the Term Loan and Delayed Draw Term Loan (collectively the “Term Loans”).

The Company incurred $ 1.4 million and $ 0.6 million of interest expense for the amortization of deferred debt issuance costs for the year ended December 31, 2020, and the period from July 11, 2020 to December 31, 2019, respectively.

The Term Loan bears interest at a variable rate, which was 3.65 % as of December 31, 2020.

The Revolving Credit Facility bears interest at a variable rate, which was 2.35 % as of December 31, 2021.

Pursuant to the terms of the Amended Credit Agreement, the Company was required to make quarterly principal payments equal to 0.625 % of the initial principal amount of the Term Loan and Delayed Draw Term Loan (collectively the “Term Loans”).

The Company incurred $ 2.5 million, $ 1.4 million and $ 0.6 million of interest expense for the amortization of deferred debt issuance costs for the years ended December 31, 2021 and 2020, and the period from July 11, 2020 to December 31, 2019, respectively.

The Predecessor incurred $ 0.2 million for the period from January 1, 2019 to July 10, 2019.

The Company incurred interest expense on the Term Loans of $ 11.5 million and $ 5.3 million for the year ended December 31, 2020 and the period from July 11, 2019 to December 31, 2019, respectively.

The Predecessor incurred interest expense of $ 2.8 million and $ 5.5 million and $ 4.4 million for the period from January 1, 2019 to July 10, 2019.

Following is a summary of principal maturities of the Term Loans outstanding as of December 31, 2021 for each of the next five years ending December 31 and in the aggregate:

$ 460,000,000

The Company incurred interest expense on the Term Loans of $ 11.5 million and $ 5.3 million for the year ended December 31, 2020 and the period from July 11, 2019 to December 31, 2019, respectively.

The Predecessor incurred interest expense of $ 2.8 million and $ 5.5 million and $ 4.4 million for the period from January 1, 2019 to July 10, 2019 and the year ended December 31, 2018, respectively.

Derivative Instruments

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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 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.

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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.

All interest rate swaps are considered an effective hedge, as of December 31, 2020.

Changes in fair value are included in other comprehensive income (loss).

As of December 31, 2020, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk.

Notional Amount

Fixed Interest Rate

Termination Date

Interest rate swap

July 11, 2024

Interest rate swap

February 10, 2025

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.

A ROU asset and lease liability is recorded on the consolidated balance sheet for all leases except those with an original lease term of twelve months or less.

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 .

3 unchanged sentences

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

Year Ended December 31, 2020

December 31, 2021

December 31, 2020

Components of total lease costs:

3 unchanged sentences

Total lease cost

As of December 31, 2020, amounts reported in the Consolidated Balance Sheets were as follows:

Amounts reported in the Consolidated Balance Sheets were as follows:

December 31, 2021

December 31, 2020

Operating Leases:

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Weighted-average remaining lease term (in years)

Weighted-average discount rate (annual)

Weighted-average discount rate (annualized)

Other information related to leases are as follows:

Year Ended December 31, 2020

December 31, 2021

December 31, 2020

Cash paid for amounts included in the measurement of lease liabilities:

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Related party payables consisted of the following:

TriSource accrued earnout liability

APS Payments accrued earnout liability

Ventanex accrued earnout liability

1 unchanged sentence

CPS accrued earnout liability

Kontrol accrued earnout liability

Payix accrued earnout liability

Other payables to related parties

The Predecessor paid management fees to Corsair, a related party having common ownership in the amount of $ 210,753 from January 1, 2019 to July 10, 2019.

The Predecessor paid management fees of $ 0.4 million for the year ended December 31, 2018, which are included in selling, general, and administrative expenses in the consolidated statements of operations.

The Company incurred transaction costs on behalf of related parties of $ 3.1 million and $ 1.3 million for the year ended December 31, 2020 and the period from July 11, 2019 to December 31, 2019, respectively.

The Company incurred transaction costs on behalf of related parties of $ 8.2 million, $ 3.1 million and $ 1.3 million for the years ended December 31, 2021 and 2020, and the period from July 11, 2019 to December 31, 2019, respectively.

These costs consist of retention bonuses and other compensation to employees, associated with the costs resulting from the integration of new businesses.

The Predecessor incurred transaction costs on behalf of related parties of $ 6.8 million and $ 1.6 million for the period from January 1, 2019 to July 10, 2019 and the year ended December 31, 2018, respectively.

The Predecessor incurred transaction costs on behalf of related parties of $ 6.8 million for the period from January 1, 2019 to July 10, 2019.

The Company held receivables from related parties of $ 0.3 million and $ 0.1 million as of December 31, 2021 and 2020, respectively.

1 unchanged sentence

Share based compensation for more detail on these restricted share awards.

The Company owed $ 15.8 million and $ 14.3 million to related parties, in the form of contingent consideration payable to the sellers of TriSource , APS , V e nt a nex, cPayPlus, and CPS who were employees of REPAY, a s of December 31, 2020 and 2019 , respectively .

Further, the Company owed employees $ 0.0 million and $ 0.3 million for amounts paid on behalf of the Company a s of December 31, 2020 and 2019, respectively .

The Company owed $ 17.4 million and $ 15.8 million to related parties, in the form of contingent consideration payable to the sellers of Ventanex, CPS, BillingTree, Kontrol and Payix, who were employees of REPAY, as of December 31, 2021 and 2020, respectively.

Further, the Company owed employees $ 0.0 million and $ 0.0 million for amounts paid on behalf of the Company as of December 31, 2021 and 2020, respectively.

Share Based Compensation

3 unchanged sentences

Under this plan, the Company currently has three types of share-based compensation awards outstanding:

restricted stock awards (RSAs), restricted stock units (RSUs) and performance stock units (PSUs).

Activities for the year ended December 31, 2020 and the period from July 11, 2019 through December 31, 2019 were as follows:

PSUs, RSAs and RSUs.

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 straight-line basis over the applicable performance or service period.

The performance or service period for awards granted generally range from one to three years.

RSAs and RSUs vest in equal annual installments over a three-year period.

Restricted shares cannot be sold or transferred until they have vested.

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 straight-line basis over the vesting period.

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,

From July 11, 2019 to

($ in millions)

December 31, 2019

Share-based compensation expense

Income tax benefit

Activity for the years ended December 31, 2021 and 2020, and the period from July 11, 2019 to December 31, 2019 were as follows:

Class A Common Stock

Weighted Average Grant Date Fair Value

Unvested at July 11, 2019

3 unchanged sentences

Unvested at December 31, 2020

Forfeited (1) (2)

Unvested at December 31, 2021

Upon vesting, award-holders elected to sell shares to the Company in order to satisfy the associated tax obligations.

1 unchanged sentence

further, these forfeited shares are added back to the amount of shares available for grant under the Incentive Plan.

The forfeited shares include employee terminations for the year ended December 31, 2020;

The forfeited shares include employee terminations during the years ended December 31, 2021 and 2020;

further, these forfeited shares are added back to the amount of shares available for grant under the Incentive Plan.

Unrecognized compensation expense related to unvested RSAs and RSUs was $ 23.7 million as of December 31, 2020, which is expected to be recognized as expense over the weighted-average period of 2.61 years.

Unrecognized compensation expense related to unvested PSUs, RSAs and RSUs was $ 22.7 million as of December 31, 2021, which is expected to be recognized as expense over the weighted-average period of 2.45 years.

Unrecognized compensation expense related to unvested PSUs, RSAs, and RSUs was $ 23.7 million as of December 31, 2020, which is expected to be recognized as expense over the weighted-average period of 2.61 years.

Unrecognized compensation expense related to unvested RSAs, RSUs and PSUs was $ 17.5 million as of December 31, 2019, which is expected to be recognized as expense over the weighted-average period of 2.26 years.

The Company incurred $ 19.4 million and $ 22.0 million of share-based compensation expense for the year ended December 31, 2020 and the period from July 11, 2019 to December 31, 2019, respectively.

Original Equity Incentives

4 unchanged sentences

Non-vested units at July 10, 2019

During the period from January 1, 2019 to July 10, 2019 and the year ended December 31, 2018, the Predecessor incurred $ 0.9 million and $ 0.8 million of share-based compensation expense, respectively, included in selling, general and administrative costs in the consolidated statements of operations.

During the period from January 1, 2019 to July 10, 2019, the Predecessor incurred $ 0.9 million of share-based compensation expense, respectively, included in Selling, general and administrative costs in the Consolidated Statements of Operations.

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.

4 unchanged sentences

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 income before income taxes are as follows:

Year ended December 31, 2020

The components of loss before income taxes are as follows:

December 31, 2021

December 31, 2020

July 11, 2019 to December 31, 2019

January 1, 2019 to July 10, 2019

Year ended December 31, 2018

(Predecessor)

2 unchanged sentences

$( 51,540,441 )

Income (loss) before income tax expense

$( 23,668,078 )

Loss before income tax benefit

$( 86,727,719 )

$( 129,724,270 )

$( 51,810,162 )

$( 23,742,530 )

The Company recorded a provision for income tax as follows:

Year ended December 31, 2020

December 31, 2021

December 31, 2020

July 11, 2019 to December 31, 2019

January 1, 2019 to July 10, 2019

Year ended December 31, 2018

(Predecessor)

Current expense

Total current expense (benefit)

Total current expense

Deferred expense

2 unchanged sentences

$( 4,343,013 )

( 12,799,753 )

( 1,708,969 )

Total deferred benefit

1 unchanged sentence

( 12,358,025 )

( 4,990,989 )

Income tax benefit

1 unchanged sentence

$( 12,358,025 )

$( 4,990,989 )

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, 2020

December 31, 2021

December 31, 2020

July 11, 2019 to December 31, 2019

January 1, 2019 to July 10, 2019

Year ended December 31, 2018

(Predecessor)

3 unchanged sentences

Excess tax benefit related to share-based compensation

Change in fair value of warrant liabilities

State rate change impact on deferred taxes

Total deferred benefit

The Company’s effective tax rate was 21.0 % and 13.7 % for the year ended December 31, 2020 and the period from July 11, 2019 to December 31, 2019, respectively.

The Company’s effective tax rate was 35.4 %, 9.5 % and 9.6 % for the years ended December 31, 2021 and 2020, and the period from July 11, 2019 to December 31, 2019, 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.

The results for the Predecessor do not reflect income tax expense because, prior to the closing of the Business Combination, the consolidated Hawk Parent was treated as a partnership for U.S.

2 unchanged sentences

Details of the Company's deferred tax assets and liabilities are as follows:

December 31, 2021

December 31, 2020

Deferred tax assets

11 unchanged sentences

Deferred tax liabilities

Partnership basis tax differences

Other Intangibles - Payix

( 7,711,856 )

Total deferred tax liabilities

Net deferred tax liabilities

( 7,711,856 )

As a result of the Follow-on Offerings, warrant exercises and Post-Merger Repay Unit exchanges during the year ended December 31, 2020, the Company recognized an additional deferred tax asset (“DTA”) and offsetting deferred tax liability (“DTL”) in the amount of $ 27.5 million, compared to $ 5.8 million as a result of the Merger during the year ended December 31, 2019, 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.

Net deferred tax assets

$ 145,259,883

$ 135,337,229

As a result of the equity offering by the Company, BillingTree acquisition, finalization of 2020 income tax returns and Post-Merger Repay Unit exchanges during the year ended December 31, 2021, the Company recognized a reduction of the deferred tax asset (“DTA”) and offsetting deferred tax liability (“DTL”) in the amount of $ 19.2 million, compared to an increase of $ 27.5 million as a result of equity offerings by the Company, warrant exercises and Post-Merger Repay unit exchanges during the year ended December 31, 2020, 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.

1 unchanged sentence

As such, a 100 % valuation allowance was recognized.

As of December 31, 2020, the Company has a tax effected federal net operating loss carryforward of approximately $ 8.8 million, state net operating loss carryforwards of approximately $ 1.3 million, and a tax effected foreign net operating loss carryforwards of approximately $ 0.2 million, which will be available to offset future income taxes.

The federal and foreign net operating loss carryforwards have an indefinite life.

The state net operating loss carryforwards will begin to expire between 2031 and 2035 .

Based on the weight of all positive and negative evidence, the Company expects that it its more likely than not going to utilize the net operating loss against earnings in future years.

On December 27, 2020, Congress passed, and President Trump signed into law, the Consolidated Appropriations Act, 2021 (the “Act”), which includes certain business tax provisions.

The Company does not expect the Act to have a material impact on the Company’s effective tax rate or income tax expense for the year ending December 31, 2021.

As of December 31, 2021, the Company had net tax effected federal and state (net of federal benefit) net operating losses (“NOLs”) of $ 30.2 million, of which approximately $ 25.8 million have an indefinite life.

NOLs of approximately $ 4.4 million will begin to expire in 2030 .

As of December 31, 2021, the Company had federal and state tax credit carryforwards of $ 1.1 million and $ 0.4 million, respectively, which will begin to expire in 2037 and 2034 , respectively.

The Company believes as of December 31, 2021, 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, 2021.

8 unchanged sentences

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 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, 2020, the Company had a liability of $ 229.2 million related to its projected obligations under the TRA, which is captioned as the tax receivable agreement liability in the Company’s consolidated balance sheet.

The increase in the TRA liability for the year ended December 31, 2020, was primarily a result of the Unit Purchase Agreements entered into with CC Payment Holdings, L.L.C., an entity controlled by Corsair, pursuant to which the Company acquired 19,564,816 Post-Merger Repay Units held by Corsair.

Additionally, other selling members of Hawk Parent exchanged 1,606,647 Post-Merger Repay Units during the year ended December 31, 2020.

The timing and amount of aggregate payments due under the TRA

may vary based on a 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, 2021, the Company had a liability of $ 245.8 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 increase in the TRA liability for the year ended December 31, 2021, was primarily a result of the change in the Early Termination Rate, as defined in the TRA, selling members of Hawk Parent exchanging 407,584 Post-Merger Repay Units during the year ended December 31, 2021 in accordance with the Exchange Agreement, the finalization of the various components related to the 2020 exchanges of Post-Merger Repay Units, and the impact of the remeasurement of the state tax rate.

This resulted in an increase to the Company’s share of the tax basis in the net assets of Hawk Parent.

Segment Reporting

The Company conducts its operations through a single operating segment and, therefore, one reportable segment.

Operating segments are revenue-generating components of a company for which separate financial information is internally produced for regular use by the Chief Operating Decision Maker (“CODM”) to allocate resources and assess the performance of the business.

Our CODM uses a variety of measures to assess the performance of the business;

however, detailed profitability information of the nature that could be used to allocate resources and assess the performance of the business are managed and reviewed for the Company as a whole.

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

Subsequent Events

Management has evaluated subsequent events and their potential effects on these consolidated financial statements through March 1, 2021, which is the date the consolidated financial statements were available to be issued.

On January 19, 2021, the Company completed the previously announced underwritten public offering (the “Equity Offering”) of 6,244,500 shares of its Class A common stock at a public offering price of $ 24.00 per share.

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

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

On January 20, 2021, the Company used a portion of the proceeds from the Notes Offering 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 the Successor Credit Agreement.

On February 3, 2021, the Company announced the closing of a new undrawn $ 125 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 million revolving credit facility.

Management has evaluated subsequent events and their potential effects on these consolidated financial statements.

Based upon the review, management did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS 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 8. Financial Statements and Supplementary Data