Repay Holdings Corporation (NASDAQ:RPAY), a leading provider of
vertically-integrated payment solutions, today reported financial
results for its second quarter of 2019.
“We are pleased with our results in the second quarter, which
included year-over-year organic growth in card payment volume and
gross profit of 27% and 33%, respectively. In addition, we expanded
our integrated payment processing services into Canada, which was a
strategic next step for the Company,” said John Morris, CEO of
REPAY. “We have an excellent opportunity to modernize the large,
fast growing and underserved verticals we currently address by
delivering high quality payment technology.”
“We are thrilled to have completed our business combination with
Thunder Bridge last month and secured a new credit facility, which
provides us liquidity for growth, including future market
expansions as well as strategic M&A, including the acquisition
of TriSource Solutions, which we announced today,” continued
Morris. “In addition, we are excited to work with our new Board and
benefit from their deep experience in the payments space. We look
forward to their guidance and support as we position our business
for continued growth.”
Three Months Ended June 30, 2019 Highlights
- Card payment volume was $2.2 billion, an increase of 27% over
the second quarter of 2018
- Total revenue was $36.2 million, an increase of 17% over the
second quarter of 2018
- Gross profit was $17.1 million, an increase of 33% over the
second quarter of 2018
- Net income was $4.2 million, a decrease of 7% over the second
quarter of 2018
- Adjusted EBITDA was $10.4 million, an increase of 24% over the
second quarter of 2018
- Adjusted Net Income was $7.8 million, an increase of 23% over
the second quarter of 2018
Six Months Ended June 30, 2019 Highlights
- Card payment volume was $4.7 billion, an increase of 30% over
the first half of 2018
- Total revenue was $75.5 million, an increase of 18% over the
first half of 2018
- Gross profit was $35.0 million, an increase of 32% over the
first half of 2018
- Net income was $9.0 million, an increase of 93% over the first
half of 2018
- Adjusted EBITDA was $21.8 million, an increase of 22% over the
first half of 2018
- Adjusted Net Income was $16.7 million, an increase of 22% over
the first half of 2018
The financial information for the three and six months ended
June 30, 2019 and the three and six months ended June 30, 2018
included in this press release reflects, and is based upon,
information of REPAY prior to giving effect to the business
combination with Thunder Bridge Acquisition Ltd. completed on July
11, 2019 (as further discussed below).
Adjusted EBITDA is a non-GAAP financial measure that represents
net income adjusted for interest expense, depreciation and
amortization and certain other non-cash charges and non-recurring
items. Adjusted Net Income is a non-GAAP financial measure that
represents net income adjusted for amortization of
acquisition-related intangibles and certain other non-cash charges
and non-recurring items. See “Non-GAAP Financial Measures” and the
reconciliations of Adjusted EBITDA and Adjusted Net Income to their
most comparable GAAP measure provided below. Gross profit
represents total revenue less interchange and network fees as well
as other costs of services.
Subsequent Events
On July 11, 2019, Repay Holdings, LLC, together with its parent,
Hawk Parent Holdings, LLC (together, “Hawk Parent”), and Thunder
Bridge Acquisition, Ltd. (“Thunder Bridge”), a special purpose
acquisition company, announced that they completed their previously
announced business combination under which Thunder Bridge acquired
Hawk Parent for approximately $580.7 million in total
consideration. Upon completion of the business combination, Thunder
Bridge changed its name to Repay Holdings Corporation, and its
Class A common stock began trading on the Nasdaq Stock Market under
the ticker symbol “RPAY” on July 12, 2019.
On August 14, 2019 the Company announced the acquisition of
TriSource Solutions for up to $65 million, which included a
performance based earnout. The acquisition was financed with a
combination of cash on hand and proceeds from borrowings under
REPAY’s existing credit facility.
2019 Outlook
The addition of TriSource Solutions is expected to contribute
between $8.0 million and $10.0 million in total revenue and between
$2.25 million and $2.75 million in Adjusted EBITDA to the remainder
of 2019.
REPAY now expects the following financial results for full year
2019, which reflects expected contributions from TriSource:
Full Year 2019 Outlook
Previous Guidance
Updated Guidance
Card Payment Volume
$9.2 billion
$9.6 - 9.75 billion
Total Revenue
$159.2 million
$157.0 - 162.0 million
Gross Profit
$71.6 million
$74.0 - 76.0 million
Adjusted EBITDA
$44.0 million
$45.3 - 46.8 million
Revenue information for the full year 2019 outlook is presented
in accordance with Accounting Standards Codification (“ASC”) 605.
REPAY expects to adopt a new standard, ASC 606, when financial
results for the full year ended December 31, 2019 are reported. In
addition, REPAY does not provide quantitative reconciliation of
forward-looking, non-GAAP financial measures such as forecasted
2019 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 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 second quarter 2019
financial results today at 5:00 pm ET. Hosting the call will be
John Morris, CEO, and Tim Murphy, CFO. The conference call can 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
13692995. The call will be webcast live from REPAY’s investor
relations website and the replay will be available at
https://investors.repay.com/investor-relations.
Non-GAAP Financial Measures
This communication includes certain non-GAAP financial measures
that REPAY’s management uses to evaluate its operating business,
measure its performance and make strategic decisions. Adjusted
EBITDA is a non-GAAP financial measure that represents net income
prior to interest expense, depreciation and amortization, as
adjusted to add back certain non-cash and non-recurring charges,
such as loss on extinguishment of debt, non-cash change in fair
value of contingent consideration, share-based compensation
charges, transaction expenses, management fees, legacy commission
related charges, employee recruiting costs, loss on disposition of
property and equipment, other taxes, strategic initiative related
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 non-cash and non-recurring charges, such as loss on
extinguishment of debt, non-cash change in fair value of contingent
consideration, transaction expenses, share-based compensation
expense, management fees, legacy commission related charges,
employee recruiting costs, loss on disposition of property and
equipment, strategic initiative related costs and other
non-recurring charges. Adjusted Net Income is adjusted to exclude
amortization of all acquisition-related intangibles as such amounts
are inconsistent in amount and frequency and are significantly
impacted by the timing and/or size of acquisitions. Management
believes that the adjustment of acquisition-related intangible
amortization supplements GAAP financial measures because it allows
for greater comparability of operating performance. Although we
exclude amortization from acquisition-related intangibles from our
non-GAAP expenses, management believes that it is important for
investors to understand that such intangibles were recorded as part
of purchase accounting and contribute to revenue generation. REPAY
believes that Adjusted EBITDA and Adjusted Net Income provide
useful information to investors and others in understanding and
evaluating its operating results in the same manner as management.
However, Adjusted EBITDA and Adjusted Net Income are not financial
measures calculated in accordance with GAAP and should not be
considered as a substitute for net income, operating profit, or any
other operating performance measure calculated in accordance with
GAAP. Using these non-GAAP financial measures to analyze 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 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 and Adjusted Net
Income alongside other financial performance measures, including
net income 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, our 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,” “is anticipated,” “estimated,” “believe,”
“intend,” “plan,” “projection,” “outlook” or words of similar
meaning. These forward-looking statements include, but are not
limited to, statements regarding REPAY’s industry and market sizes,
future opportunities for REPAY and REPAY’s estimated future
results, including the full year 2019 outlook. Such forward-looking
statements are based upon the current beliefs and expectations of
our management and are inherently subject to significant business,
economic and competitive uncertainties and contingencies, many of
which are difficult to predict and generally beyond our control.
Actual results and the timing of events may differ materially from
the results anticipated in these forward-looking statements.
In addition to factors previously disclosed in prior reports
filed with the SEC 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: a delay or failure to realize the
expected benefits from the business combination; a delay or failure
to integrate and realize the benefits of the TriSource acquisition
and any difficulties associated with operating in the back-end
processing markets in which REPAY does not have any experience;
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; 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 develop and 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 as
projected financial information and other information are based on
estimates and assumptions that are inherently subject to various
significant risks, uncertainties and other factors, many of which
are beyond our control. 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 we disclaim 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 we believe to be reliable, however there can
be no assurance these forecasts and estimates will prove accurate
in whole or in part. Annualized, 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 lenders, while enhancing the
overall experience for consumers.
The financial updates included in this press release for the
historical periods indicated below reflect, and are based upon, the
information of REPAY prior to giving effect to the business
combination with Thunder Bridge Acquisition Ltd.
Consolidated Statement of
Operations
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
(in $ thousands)
2019
2018
% Change
2019
2018
% Change
Revenue
Processing and service fees
$
22,649
$
19,605
16
%
$
46,970
$
40,469
16
%
Interchange and network fees
13,585
11,461
19
%
28,513
23,394
22
%
Total Revenue
36,234
31,066
17
%
75,483
63,863
18
%
Operating expenses
Interchange and network fees
13,585
11,461
19
%
28,513
23,394
22
%
Other costs of services
5,592
6,776
-17
%
12,009
13,970
-14
%
Selling general and administrative
8,456
5,312
59
%
17,132
14,906
15
%
Depreciation and amortization
2,975
2,522
18
%
5,890
4,914
20
%
Change in fair value of contingent
consideration
—
(1,000
)
-100
%
—
(1,000
)
-100
%
Total operating expenses
30,608
25,071
22
%
63,544
56,184
13
%
Income from operations
5,626
5,995
-6
%
11,939
7,679
55
%
Other Expenses
Interest expense
(1,470
)
(1,510
)
-3
%
(2,919
)
(3,013
)
-3
%
Other expenses
—
(10
)
-100
%
—
(1
)
-100
%
Total other expenses
(1,470
)
(1,511
)
-3
%
(2,919
)
(3,014
)
-3
%
Net Income
$
4,156
$
4,484
-7
%
$
9,020
$
4,665
93
%
Key Operating and Non-GAAP
Financial Data
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
(in $ thousands)
2019
2018
% Change
2019
2018
% Change
Card payment volume
$
2,216,671
$
1,747,314
27
%
$
4,656,018
$
3,589,380
30
%
Gross profit (1)
17,057
12,829
33
%
34,961
26,499
32
%
Adjusted EBITDA (2)
10,446
8,437
24
%
21,783
17,883
22
%
(1)
Gross profit is a non-GAAP
financial measure that represents total revenue less interchange
and network fees and other costs of services.
(2)
Adjusted EBITDA is a non-GAAP financial
measure that represents net income adjusted for interest expense,
depreciation and amortization and certain other non-cash charges
and non-recurring items. See “Non-GAAP Financial Measures” above
and the reconciliation of Adjusted EBITDA to its most comparable
GAAP measure below.
Reconciliations of GAAP Net
Income to Non-GAAP Adjusted EBITDA
and Non-GAAP Adjusted Net
Income
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
(in thousands)
Net income (loss)
$
4,156
$
4,484
$
9,020
$
4,665
Plus:
Interest expense
1,470
1,510
2,919
3,013
Depreciation and amortization(a)
2,975
2,522
5,890
4,914
EBITDA
8,601
8,516
17,828
12,592
Loss on extinguishment of debt(b)
—
1
—
1
Non-cash change in fair value of
contingent consideration(c)
—
(1,000
)
—
(1,000
)
Share-based compensation expense(d)
124
213
251
432
Transaction expenses(e)
810
643
2,496
1,156
Management fees(f)
100
100
200
200
Legacy commission related charges(g)
550
—
550
4,168
Employee recruiting costs(h)
—
69
15
146
Loss on disposition of property and
equipment
—
—
—
—
Other taxes(i)
168
22
227
195
Strategic initiatives related costs(j)
93
—
216
72
Other non-recurring charges(k)
—
(127
)
—
(79
)
Adjusted EBITDA
$
10,446
$
8,437
$
21,783
$
17,883
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
(in thousands)
Net income (loss)
$
4,156
$
4,484
$
9,020
$
4,665
Plus:
Loss on extinguishment of debt(b)
—
1
—
1
Amortization of acquisition-related
intangibles(l)
1,980
1,980
3,959
3,959
Non-cash change in fair value of
contingent consideration(c)
—
(1,000
)
—
(1,000
)
Share-based compensation expense(d)
124
213
251
432
Transaction expenses(e)
810
643
2,496
1,156
Management fees(f)
100
100
200
200
Legacy commission related charges(g)
550
—
550
4,168
Employee recruiting costs(h)
—
69
15
146
Loss on disposition of property and
equipment
—
—
—
—
Strategic initiative costs(j)
93
—
216
72
Other non-recurring charges(k)
—
(127
)
—
(79
)
Adjusted Net Income
$
7,812
$
6,362
$
16,707
$
13,720
___________
(a)
See footnote (l) for details on our
amortization and depreciation expenses.
(b)
Reflects write-offs of debt issuance costs
relating to Hawk Parent’s term loans and prepayment penalties
relating to its previous debt facilities.
(c)
Reflects the changes in management’s
estimates of future cash consideration to be paid in connection
with prior acquisitions from the amount estimated as of the most
recent balance sheet date.
(d)
Represents compensation expense associated
with Hawk Parent’s equity compensation plans.
(e)
Primarily consists of (i) during the three
and six months ended June 30, 2019, professional service fees and
other costs in connection with the Business Combination, and (ii)
during the three and six months ended June 30, 2018, additional
transaction related expenses in connection with the acquisitions of
PaidSuite, Inc. and PaidMD, LLC (together, “PaidSuite”) and Paymaxx
Pro, LLC (“Paymaxx”), which transactions closed in 2017.
(f)
Reflects management fees paid to Corsair
Investments, L.P. pursuant to the management agreement, which
terminated upon the completion of the Business Combination.
(g)
Represents payments made to certain
employees in connection with significant restructuring of their
commission structures. These payments represented commission
structure changes which are not in the ordinary course of
business.
(h)
Represents payments made to third-party
recruiters in connection with a significant expansion of our
personnel, which we expect will become more moderate in subsequent
periods.
(i)
Reflects franchise taxes and other
non-income based taxes.
(j)
Consulting fees relating to our processing
services and other operational improvements that were not in the
ordinary course, in the aggregate amount of $124,000, and $55,000
are reflected in the six months ended June 30, 2019 and 2018,
respectively. Additionally, one-time fees relating to special
projects for new market expansion that are not anticipated to
continue in the ordinary course of business are reflected in the
six months ended June 30, 2018, and one-time expenses related to
the creation of a new entity in connection with equity arrangements
for the members of Hawk Parent in connection with the Business
Combination are reflected in the three months ended June 30,
2019.
(k)
Reflects reversal of adjustments over the
prior and current periods made for legal expenses incurred related
to a dispute with a former customer, for which we were reimbursed
in the current period as a result of its settlement.
(l)
Reflects amortization of customer
relationship intangibles acquired through Hawk Parent’s
acquisitions of PaidSuite and Paymaxx during the year ended
December 31, 2017 and the recapitalization transaction in 2016,
through which Hawk Parent was formed in connection with the
acquisition of a majority interest in Repay Holdings, LLC by
certain investment funds sponsored by, or affiliated with, Corsair
Capital LLC. This adjustment excludes the amortization of other
intangible assets which were acquired in the regular course of
business, such as capitalized internally developed software and
purchased software. See additional information below for an
analysis of our amortization expenses:
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
(in thousands)
Acquisition-related intangibles
$
1,980
$
1,980
$
3,959
$
3,959
Software
844
438
1,634
764
Reseller buyouts
15
15
29
29
Amortization
$
2,838
$
2,432
$
5,622
$
4,752
Depreciation
137
90
267
162
Depreciation and
amortization(1)
$
2,975
$
2,522
$
5,890
$
4,914
___________
(1)
Adjusted Net Income is adjusted to exclude
amortization of all acquisition-related intangibles as such amounts
are inconsistent in amount and frequency and are significantly
impacted by the timing and/or size of acquisitions (see
corresponding adjustments in the reconciliation of net income to
Adjusted Net Income presented above). Management believes that the
adjustment of acquisition-related intangible amortization
supplements GAAP financial measures because it allows for greater
comparability of operating performance. Although we exclude
amortization from acquisition-related intangibles from our non-GAAP
expenses, management believes that it is important for investors to
understand that such intangibles were recorded as part of purchase
accounting and contribute to revenue generation. Amortization of
intangibles that relate to past acquisitions will recur in future
periods until such intangibles have been fully amortized. Any
future acquisitions may result in the amortization of additional
intangibles.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190814005701/en/
Investor Relations Contact for REPAY: repayIR@icrinc.com
Media Relations Contact for REPAY: Kristen Hoyman
khoyman@repay.com
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