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REPAY Reports Fourth Quarter and Full Year 2022 Financial Results

1 Marzo 2023

Q4 2022 Gross Profit Growth of 22% Year-over-Year with Strong Margins

Provides 2023 Outlook for Continued Solid Organic Gross Profit Growth

New Segment Disclosure of Consumer Payments and Business Payments

ATLANTA–(BUSINESS WIRE)–Repay Holdings Corporation (NASDAQ: RPAY) (“REPAY” or the “Company”), a leading provider of vertically-integrated payment solutions, today reported financial results for its fourth quarter and full year ended 31 Dicembre 2022.

Fourth Quarter 2022 Financial Highlights

($ in millions)	Q4 2021			Q1 2022		Q2 2022			Q3 2022		Q4 2022			YoY Change
Card payment volume	$	5,643.1		$	6,414.0	$	6,196.3		$	6,416.8	$	6,611.8		17	%
Revenue		62.2			67.6		67.4			71.6		72.7		17	%
Gross profit ⁽¹⁾		47.2			51.0		50.7			54.9		57.8		22	%
Net (loss) income		(17.4	)		12.9		(1.4	)		5.4		(8.2	)	53	%
Adjusted EBITDA ⁽²⁾		27.8			29.3		27.6			31.7		36.0		29	%
Adjusted Net Income ⁽²⁾		27.2			18.6		16.6			22.8		21.8		(20	%)

(1)		Gross profit represents revenue less costs of services.
(2)		Adjusted EBITDA and Adjusted Net Income are non-GAAP financial measures. See “Non-GAAP Financial Measures” and the reconciliations of Adjusted EBITDA and Adjusted Net Income to their most comparable GAAP measures provided below for additional information.

“REPAY delivered strong performance across all key metrics in the fourth quarter, with Revenue and Gross Profit growth of 17% and 22%, respectively. These results capped off a productive year at REPAY, as we invested in sales, marketing and product to position the Company for long term growth,” said John Morris, CEO of REPAY. “Our new business segments – Consumer Payments and Business Payments – demonstrate our areas of focus, investment and opportunity as we move through 2023 and beyond. We believe that we have the right team and technology in place to further penetrate the large, growing addressable market across our target verticals.”

Fourth Quarter 2022 Business Highlights

The Company’s achievements in the quarter, including those highlighted below, reinforce management’s belief in the ability of the Company to drive durable and sustained growth across REPAY’s diversified business model.

17% year-over-year organic gross profit growth¹
Business Payments volumes grew approximately 36% year-over-year
Expanded AP supplier network to 160,000, an increase of approximately 45% year-over-year
Added four new integrated software partners to bring the total to 240 software relationships as of the end of the fourth quarter
Increased instant funding volume by 50% year-over-year
The Company now serves over 240 Credit Unions, an increase of approximately 20% year-over-year

¹ Organic gross profit growth is a non-GAAP financial measure. See “Non-GAAP Financial Measures” and the reconciliation to its most comparable GAAP measure provided below for additional information.

Segments

Starting from 31 Dicembre 2022, the Company reports its financial results based on two reportable segments.

Consumer Payments – The Consumer Payments segment provides payment processing solutions (including debit and credit card processing, Automated Clearing House (“ACH”) processing and other electronic payment acceptance solutions, as well as REPAY’s loan disbursement product) that enable its clients to collect payments and disburse funds to consumers and includes its clearing and settlement solutions (“RCS”) and Blue Cow Software business (“BCS”). RCS is REPAY’s proprietary clearing and settlement platform through which it markets customizable payment processing programs to other ISOs and payment facilitators. BCS provides enterprise resource planning software solutions that are customized to propane and fuel oil dealers. The strategic vertical markets served by the Consumer Payments segment primarily include personal loans, automotive loans, receivables management, credit unions, mortgage servicing, consumer healthcare, diversified retail and energy related software services. With the divestiture of BCS on 15 Febbraio 2023, BCS is no longer included in the Consumer Payments segment as of the sale date.

Business Payments – The Business Payments segment provides payment processing solutions (including accounts payable automation, debit and credit card processing, virtual credit card processing, ACH processing and other electronic payment acceptance solutions) that enable REPAY’s clients to collect or send payments to other businesses. The strategic vertical markets served within the Business Payments segment primarily include retail automotive, education, field services, governments and municipalities, healthcare, homeowner association management and hospitality.

Segment Card Payment Volume, Revenue, Gross Profit, and Gross Profit Margin

	Three Months Ended December 31,								Year Ended December 31,
($ in thousand)	2022 (Unaudited)			2021 (Unaudited)			% Change		2022			2021			% Change
Card payment volume
Consumer Payments	$	5,008,929		$	4,465,705		12	%	$	20,154,657		$	16,109,941		25	%
Business Payments		1,602,893			1,177,441		36	%		5,484,197			4,353,869		26	%
Total card payment volume	$	6,611,822		$	5,643,146		17	%	$	25,638,854		$	20,463,810		25	%
Revenue
Consumer Payments	$	64,300		$	55,206		16	%	$	248,191		$	194,044		28	%
Business Payments		12,334			9,333		32	%		42,600			33,818		26	%
Elimination of intersegment revenues		(3,961	)		(2,339	)				(11,564	)		(8,604	)
Total revenue	$	72,673		$	62,200		17	%	$	279,227		$	219,258		27	%
Gross profit ⁽¹⁾
Consumer Payments	$	53,075		$	42,916		24	%	$	195,542		$	148,614		32	%
Business Payments		8,663			6,623		31	%		30,423			23,764		28	%
Elimination of intersegment revenues		(3,961	)		(2,339	)				(11,564	)		(8,604	)
Total gross profit	$	57,777		$	47,200		22	%	$	214,401		$	163,774		31	%

Total gross profit margin ⁽²⁾	80		%	76		%			77		%	75		%

(1)		Gross profit represents revenue less costs of services.
(2)		Gross profit margin represents total gross profit / total revenue.

2023 Outlook

“In 2023, we will continue to invest in growth opportunities across our Consumer and Business Payments segments,” said Tim Murphy, CFO of REPAY. “We aim to achieve double digit organic gross profit growth, which excludes contributions of the Blue Cow divestiture following the closing date. We expect Adjusted Free Cash Flow conversion to remain strong in 2023, accelerating throughout the year into 2024, as we realize the benefits from the investments we have been making in sales, product, and technology over the past several years.”

REPAY expects the following financial results for full year 2023:

	Full Year 2023 Outlook
Card Payment Volume	$26.0 – 27.2 billion
Revenue	$272 – 288 million
Gross Profit	$216 – 228 million
Adjusted EBITDA	$122 – 130 million

REPAY does not provide quantitative reconciliation of forward-looking, non-GAAP financial measures, such as forecasted 2023 Adjusted EBITDA, to the most directly comparable GAAP financial measure, because it is difficult to reliably predict or estimate the relevant components without unreasonable effort due to future uncertainties that may potentially have a significant impact on such calculations, and providing them may imply a degree of precision that would be confusing or potentially misleading.

Conference Call

REPAY will host a conference call to discuss fourth quarter and full year 2022 financial results today, 1 Marzo 2023 at 5:00 pm ET. Hosting the call will be John Morris, CEO, and Tim Murphy, CFO. The call will be webcast live from REPAY’s investor relations website at https://investors.repay.com/investor-relations. The conference call can also be accessed live over the phone by dialing (877) 407-3982, or for international callers (201) 493-6780. A replay will be available one hour after the call and can be accessed by dialing (844) 512-2921 or (412) 317-6671 for international callers; the conference ID is 13735158. The replay will be available at https://investors.repay.com/investor-relations.

Non-GAAP Financial Measures

This report includes certain non-GAAP financial measures that management uses to evaluate the Company’s operating business, measure performance, and make strategic decisions. Adjusted EBITDA is a non-GAAP financial measure that represents net income prior to interest expense, tax expense, depreciation and amortization, as adjusted to add back certain charges deemed to not be part of normal operating expenses, non-cash charges and/or non-recurring charges, such as loss on extinguishment of debt, loss on termination of interest rate hedge, non-cash change in fair value of contingent consideration, non-cash change in fair value of assets and liabilities, share-based compensation charges, transaction expenses, restructuring and other strategic initiative costs and other non-recurring charges. Adjusted Net Income is a non-GAAP financial measure that represents net income prior to amortization of acquisition-related intangibles, as adjusted to add back certain charges deemed to not be part of normal operating expenses, non-cash charges and/or non-recurring charges, such as loss on extinguishment of debt, loss on termination of interest rate hedge, non-cash change in fair value of contingent consideration, non-cash change in fair value of assets and liabilities, share-based compensation expense, transaction expenses, restructuring and other strategic initiative costs, other non-recurring charges, non-cash interest expense and net of tax effect associated with these adjustments. Adjusted Net Income is adjusted to exclude amortization of all acquisition-related intangibles as such amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions. Management believes that the adjustment of acquisition-related intangible amortization supplements GAAP financial measures because it allows for greater comparability of operating performance. Although REPAY excludes amortization from acquisition-related intangibles from its non-GAAP expenses, management believes that it is important for investors to understand that such intangibles were recorded as part of purchase accounting and contribute to revenue generation. Adjusted Net Income per share is a non-GAAP financial measure that represents Adjusted Net Income divided by the weighted average number of shares of Class A common stock outstanding (on an as-converted basis assuming conversion of the outstanding units exchangeable for shares of Class A common stock) for the three months and years ended 31 Dicembre 2022 and 2021 (excluding shares subject to forfeiture). Organic gross profit growth is a non-GAAP financial measure that represents year-on-year gross profit growth that excludes incremental gross profit attributable to acquisitions made in the applicable prior period or any subsequent period. Adjusted Free Cash Flow is a non-GAAP financial measure that represents net cash flow provided by operating activities less total capital expenditures, as adjusted to add back certain charges deemed to not be part of normal operating expenses and/or non-recurring charges, such as transaction expenses, restructuring and other strategic initiative costs and other non-recurring charges. REPAY believes that Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per share, organic gross profit growth and Adjusted Free Cash Flow provide useful information to investors and others in understanding and evaluating its operating results in the same manner as management. However, Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per share, organic gross profit growth and Adjusted Free Cash Flow are not financial measures calculated in accordance with GAAP and should not be considered as a substitute for net income, operating profit, net cash provided by operating activities, or any other operating performance measure calculated in accordance with GAAP. Using these non-GAAP financial measures to analyze REPAY’s business has material limitations because the calculations are based on the subjective determination of management regarding the nature and classification of events and circumstances that investors may find significant. In addition, although other companies in REPAY’s industry may report measures titled Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per share, organic gross profit growth, Adjusted Free Cash Flow, or similar measures, such non-GAAP financial measures may be calculated differently from how REPAY calculates its non-GAAP financial measures, which reduces their overall usefulness as comparative measures. Because of these limitations, you should consider Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per share, organic gross profit growth, and Adjusted Free Cash Flow alongside other financial performance measures, including net income, net cash provided by operating activities and REPAY’s other financial results presented in accordance with GAAP.

Forward-Looking Statements

This communication contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about future financial and operating results, REPAY’s plans, objectives, expectations and intentions with respect to future operations, products and services; and other statements identified by words such as “guidance,” “will likely result,” “are expected to,” “will continue,” “should,” “is anticipated,” “estimated,” “believe,” “intend,” “plan,” “projection,” “outlook” or words of similar meaning. These forward-looking statements include, but are not limited to, REPAY’s 2023 outlook and other financial guidance, expected demand on REPAY’s product offering, including further implementation of electronic payment options and statements regarding REPAY’s market and growth opportunities, and REPAY’s business strategy and the plans and objectives of management for future operations. Such forward-looking statements are based upon the current beliefs and expectations of REPAY’s management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond REPAY’s control.

In addition to factors disclosed in REPAY’s reports filed with the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended 31 Dicembre 2022, and those identified elsewhere in this communication, the following factors, among others, could cause actual results and the timing of events to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: exposure to economic conditions and political risk affecting the consumer loan market, the receivables management industry and consumer and commercial spending, including inflationary pressures, general economic slowdown or recession; changes in the payment processing market in which REPAY competes, including with respect to its competitive landscape, technology evolution or regulatory changes; changes in the vertical markets that REPAY targets, including the regulatory environment applicable to REPAY’s clients; the ability to retain, develop and hire key personnel; risks relating to REPAY’s relationships within the payment ecosystem; risk that REPAY may not be able to execute its growth strategies, including identifying and executing acquisitions; risks relating to data security; changes in accounting policies applicable to REPAY; and the risk that REPAY may not be able to maintain effective internal controls.

Actual results, performance or achievements may differ materially, and potentially adversely, from any projections and forward-looking statements and the assumptions on which those forward-looking statements are based. There can be no assurance that the data contained herein is reflective of future performance to any degree. You are cautioned not to place undue reliance on forward-looking statements as a predictor of future performance. All information set forth herein speaks only as of the date hereof in the case of information about REPAY or the date of such information in the case of information from persons other than REPAY, and REPAY disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this communication. Forecasts and estimates regarding REPAY’s industry and end markets are based on sources it believes to be reliable, however there can be no assurance these forecasts and estimates will prove accurate in whole or in part. Pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results.

About REPAY

REPAY provides integrated payment processing solutions to verticals that have specific transaction processing needs. REPAY’s proprietary, integrated payment technology platform reduces the complexity of electronic payments for clients, while enhancing the overall experience for consumers and businesses.

Consolidated Statement of Operations

	Three Months ended December 31,						Year ended December 31,
($ in thousands)	2022 (Unaudited)			2021 (Unaudited)			2022			2021
Revenue	$	72,673		$	62,200		$	279,227		$	219,258
Operating expenses
Costs of services (exclusive of depreciation and amortization shown separately below)	$	14,896			15,000		$	64,826		$	55,484
Selling, general and administrative		41,682			33,421			149,061			120,053
Depreciation and amortization		25,309			26,312			107,751			89,692
Change in fair value of contingent consideration		990			5,947			(3,300	)		5,846
Impairment loss		8,090			2,180			8,090			2,180
Total operating expenses	$	90,967		$	82,860		$	326,428		$	273,255
Loss from operations	$	(18,294	)	$	(20,660	)	$	(47,201	)	$	(53,997	)
Interest expense		(1,205	)		(916	)		(4,375	)		(3,679	)
Loss on extinguishment of debt		—			—			—			(5,941	)
Change in fair value of tax receivable liability		11,390			(14,208	)		66,871			(14,109	)
Other (expense) income		(205	)		15			(135	)		97
Other loss		(91	)		—			(245	)		(9,099	)
Total other income (expense)		9,889			(15,109	)		62,116			(32,731	)
Income (loss) before income tax (expense) benefit		(8,405	)		(35,769	)		14,915			(86,728	)
Income tax (expense) benefit		240			18,371			(6,174	)		30,691
Net income (loss)	$	(8,165	)	$	(17,398	)	$	8,741		$	(56,037	)
Net loss attributable to non-controlling interest		(1,493	)		(1,642	)		(4,095	)		(5,953	)
Net income (loss) attributable to the Company	$	(6,672	)	$	(15,756	)	$	12,836		$	(50,084	)

Weighted-average shares of Class A common stock outstanding – basic		88,519,236			88,431,186			88,792,453			83,318,189
Weighted-average shares of Class A common stock outstanding – diluted		88,519,236			88,431,186			110,671,731			83,318,189

Income (loss) per Class A share – basic	$	(0.08	)	$	(0.18	)	$	0.14		$	(0.60	)
Income (loss) per Class A share – diluted	$	(0.08	)	$	(0.18	)	$	0.12		$	(0.60	)

Consolidated Balance Sheets

($ in thousands)	December 31, 2022			December 31, 2021
Assets
Cash and cash equivalents	$	64,895		$	50,049
Accounts receivable		33,544			33,236
Prepaid expenses and other		18,213			12,427
Total current assets		116,652			95,712

Property, plant and equipment, net		4,375			3,801
Restricted cash		28,668			26,291
Intangible assets, net		500,575			577,694
Goodwill		827,813			824,081
Operating lease right-of-use assets, net		9,847			10,500
Deferred tax assets		136,370			145,260
Other assets		2,500			2,500
Total noncurrent assets		1,510,148			1,590,127
Total assets	$	1,626,800		$	1,685,839

Liabilities
Accounts payable	$	21,781		$	20,083
Related party payable		1,000			17,394
Accrued expenses		29,016			26,819
Current operating lease liabilities		2,263			1,990
Current tax receivable agreement		24,454			24,495
Other current liabilities		3,593			1,566
Total current liabilities		82,107			92,347

Long-term debt		451,319			448,485
Noncurrent operating lease liabilities		8,295			9,091
Tax receivable agreement, net of current portion		154,673			221,333
Other liabilities		2,113			1,547
Total noncurrent liabilities		616,400			680,456
Total liabilities	$	698,507		$	772,803

Commitments and contingencies

Stockholders’ equity
Class A common stock, $0.0001 par value; 2,000,000,000 shares authorized, 89,354,754 issued and 88,276,613 outstanding as of 31 Dicembre 2022; 88,502,621 issued and outstanding as of 31 Dicembre 2021		9			9
Class V common stock, $0.0001 par value; 1,000 shares authorized and 100 shares issued and outstanding as of 31 Dicembre 2022 and 2021		—			—
Treasury stock, 680,548 and 0 shares as of 31 Dicembre 2022 and 31 Dicembre 2021, respectively		(10,000	)		—
Additional paid-in capital		1,117,736			1,100,012
Accumulated other comprehensive loss		(3	)		(2	)
Accumulated deficit		(213,180	)		(226,016	)
Total Repay stockholders’ equity		894,562			874,003
Non-controlling interests		33,731			39,033
Total equity	$	928,293		$	913,036
Total liabilities and equity	$	1,626,800		$	1,685,839

Consolidated Statements of Cash Flows

	Year Ended December 31,
($ in thousands)	2022			2021
Cash flows from operating activities
Net income (loss)	$	8,741		$	(56,037	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		107,751			89,692
Stock based compensation		20,255			22,311
Amortization of debt issuance costs		2,834			2,536
Loss on disposal of property and equipment		245			19
Loss on extinguishment of debt		—			5,941
Loss on sale of interest rate swaps		—			9,316
Fair value change in tax receivable agreement liability		(66,871	)		14,109
Fair value change in contingent consideration		(3,300	)		5,846
Impairment loss		8,090			2,180
Payments of contingent consideration in excess of acquisition date fair value		(8,896	)		(1,500	)
Deferred tax expense (benefit)		4,192			(30,728	)
Change in accounts receivable		696			(6,518	)
Change in prepaid expenses and other		(5,786	)		(3,801	)
Change in operating lease ROU assets		653			2,013
Change in accounts payable		1,698			4,771
Change in related party payable		(347	)		1,336
Change in accrued expenses and other		2,197			637
Change in operating lease liabilities		(523	)		(1,323	)
Change in other liabilities		2,594			(7,470	)
Net cash provided by operating activities		74,223			53,330

Cash flows from investing activities
Purchases of property and equipment		(3,176	)		(2,863	)
Purchases of intangible assets		(36,365	)		(20,643	)
Purchases of equity investment		—			(2,500	)
Acquisition of CPS, net of cash and restricted cash acquired		—			11
Acquisition of BillingTree, net of cash and restricted cash acquired		—			(269,003	)
Acquisition of Kontrol, net of cash and restricted cash acquired		—			(7,439	)
Acquisition of Payix, net of cash and restricted cash acquired		—			(94,898	)
Net cash used in investing activities		(39,541	)		(397,335	)

Cash flows from financing activities
Issuance of long-term debt		—			460,000
Payments on long-term debt		—			(262,654	)
Public issuance of Class A Common Stock		—			142,098
Shares repurchased under Incentive Plan and ESPP		(2,657	)		(4,042	)
Treasury shares repurchased		(10,000	)		—
Distributions to Members		(951	)		(62	)
Payment of loan costs		—			(14,051	)
Payments of contingent consideration up to acquisition date fair value		(3,851	)		(7,449	)
Net cash provided by (used in) financing activities		(17,459	)		313,840

Increase (decrease) in cash, cash equivalents and restricted cash		17,223			(30,165	)
Cash, cash equivalents and restricted cash at beginning of period	$	76,340		$	106,505
Cash, cash equivalents and restricted cash at end of period	$	93,563		$	76,340

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest	$	1,540		$	1,143

SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Acquisition of BillingTree in exchange for Class A Common Stock	$	—		$	228,250
Acquisition of Kontrol in exchange for contingent consideration	$	—		$	500
Acquisition of Payix in exchange for contingent consideration	$	—		$	2,850