REPAY Reports Fourth Quarter and Full Year 2023 Financial Results

Gross Profit Growth of 2% in Q4 and 6% Full Year 2023

Normalized Organic Gross Profit Growth1 of 13% in Q4 and 13% for Full Year 2023

Provides 2024 Outlook for Acceleration in Free Cash Flow Conversion

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 December 31, 2023.

Fourth Quarter 2023 Financial Highlights

($ in millions)

Q4 2022

Q1 2023

Q2 2023

Q3 2023

Q4 2023

YoY Change

Card payment volume

6,611.8

6,591.3

6,254.4

6,401.3

6,421.0

(3%)

Revenue

72.7

74.5

71.8

74.3

76.0

Gross profit (1)

57.8

56.6

54.9

56.7

58.7

Net loss (2)

(8.2

)

(27.9

)

(5.3

)

(6.5

)

(77.7

)

Adjusted EBITDA (3)

36.0

31.2

30.3

31.9

33.5

(7%)

(1)

Gross profit represents revenue less costs of services (exclusive of depreciation and amortization).

(2)

During the fourth quarter of 2023, Net loss was impacted by a $75.7 million goodwill impairment loss. Further information about this non-cash impairment loss can be found in our Annual Report on Form 10-K for the year ended December 31, 2023.

(3)

Adjusted EBITDA is a non-GAAP financial measure. See “Non-GAAP Financial Measures” and the reconciliation of Adjusted EBITDA to its most comparable GAAP measure provided below for additional information.

“We closed out the year seeing the continued demand from existing clients adopting more payment capabilities, and new clients demonstrating the need for our powerful payment technology. REPAY delivered solid performance in the fourth quarter, with normalized organic revenue and gross profit growth1 of 14% and 13%, respectively,” said John Morris, CEO of REPAY. We have become a one-stop platform to optimize payment streams and are consistently working to capture new payment flows while enhancing client relationships with many value-added services.”

Fourth Quarter 2023 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.

13% year-over-year normalized organic gross profit growth1 in Q4
Consumer Payments organic gross profit growth1 of approximately 13% year-over-year
Business Payments normalized organic gross profit growth1 of approximately 25% year-over-year
Accelerated AP supplier network to over 261,000, an increase of over 60% year-over-year
Added five new integrated software partners to bring the total to 262 software relationships as of the end of the full year
Increased instant funding transactions by approximately 45% year-over-year in Q4 and 50% for the full year
The Company now serves over 276 Credit Unions, an increase of approximately 15% year-over-year

1 Normalized organic revenue growth, organic gross profit growth and normalized organic gross profit growth are non-GAAP financial measures. See “Non-GAAP Financial Measures” and the reconciliation to their most comparable GAAP measure provided below for additional information.

Segments

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”). RCS is REPAY’s proprietary clearing and settlement platform through which it markets customizable payment processing programs to other ISOs and payment facilitators. The strategic vertical markets served by the Consumer Payments segment primarily include personal loans, automotive loans, receivables management, credit unions, mortgage servicing, consumer healthcare and diversified retail.

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, media, 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)

2023 (Unaudited)

2022 (Unaudited)

% Change

2023

2022

% Change

Card payment volume

Consumer Payments

5,361,683

5,009,527

21,419,047

20,156,495

Business Payments

1,059,276

1,602,295

(34%)

4,248,916

5,482,359

(22%)

Total card payment volume

6,420,959

6,611,822

(3%)

25,667,963

25,638,854

Revenue

Consumer Payments

71,124

64,300

11%

275,708

248,191

11%

Business Payments

9,850

12,334

(20%)

38,058

42,600

(11%)

Elimination of intersegment revenues

(4,987

)

(3,961

)

(17,139

)

(11,564

)

Total revenue

75,987

72,673

296,627

279,227

Gross profit (1)

Consumer Payments

56,168

53,090

216,096

195,542

11%

Business Payments

7,545

8,648

(13%)

27,967

30,423

(8%)

Elimination of intersegment revenues

(4,987

)

(3,961

)

(17,139

)

(11,564

)

Total gross profit

58,726

57,777

226,924

214,401

Total gross profit margin (2)

(1)

Gross profit represents revenue less costs of services (exclusive of depreciation and amortization).

(2)

Gross profit margin represents total gross profit / total revenue.

2024 Outlook

“In 2024, we expect Adjusted EBITDA to grow faster than gross profit, and we also expect to reduce capital expenditures, leading to an acceleration of cash conversion,” said Tim Murphy, CFO of REPAY. “We expect Free Cash Flow Conversion to improve throughout 2024 as we realize the benefits from investments we’ve made in sales, product, and technology over the past several years. We have always focused on profitable growth, refining processes across the business where we can scale through automation while also maintaining investments towards innovation.”

REPAY expects the following financial results for full year 2024.

Full Year 2024 Outlook

Revenue

$314 - 320 million

Gross Profit

$245 - 250 million

Adjusted EBITDA

$139 - 142 million

Free Cash Flow Conversion

~ 60%

REPAY does not provide quantitative reconciliation of forward-looking, non-GAAP financial measures, such as forecasted 2024 Adjusted EBITDA and Free Cash Flow Conversion, 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 2023 financial results today, February 29, 2024 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 13743368. 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 business disposition, non-cash change in fair value of contingent consideration, non-cash impairment loss, 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, loss on business disposition, non-cash charges and/or non-recurring charges, such as non-cash change in fair value of contingent consideration, non-cash impairment loss, 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 December 31, 2023 and 2022 (excluding shares subject to forfeiture). Normalized organic revenue growth is a non-GAAP financial measure that represents year-on-year revenue growth that excludes incremental revenue attributable to acquisitions, dispositions and REPAY’s media payments business related to the cyclical political media spending in the applicable prior period or any subsequent period. 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 and divestitures made in the applicable prior period or any subsequent period. Normalized organic gross profit growth is a non-GAAP financial measure that represents year-on-year organic gross profit growth that excludes incremental gross profit attributable to REPAY’s media payments business related to the cyclical political media spending in the applicable prior period or any subsequent period. Free Cash Flow is a non-GAAP financial measure that represents net cash flow provided by operating activities less total capital expenditures. Free Cash Flow Conversion represents Free Cash Flow divided by Adjusted EBITDA. REPAY believes that Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per share, normalized organic revenue growth, organic gross profit growth, normalized organic gross profit growth, Free Cash Flow and Free Cash Flow Conversion provide useful information to investors and others in understanding and evaluating its operating results in the same manner as management. However, these non-GAAP financial measures 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 as the same 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 REPAY’s non-GAAP financial measures 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 2024 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 December 31, 2023, 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 bank failures or other adverse events affecting financial institutions, 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 Statements of Operations

Three Months ended December 31,

Year ended December 31,

($ in thousands, except per share data)

2023 (Unaudited)

2022 (Unaudited)

2023

2022

Revenue

75,987

72,673

296,627

279,227

Operating expenses

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

17,261

14,896

69,703

64,826

Selling, general and administrative

36,679

41,682

148,653

149,061

Depreciation and amortization

24,711

25,309

103,857

107,751

Change in fair value of contingent consideration

—

990

—

(3,300

)

Loss on business disposition

—

10,027

—

Impairment loss

75,750

8,090

75,800

8,090

Total operating expenses

154,401

90,967

408,040

326,428

Loss from operations

(78,414

)

(18,294

)

(111,413

)

(47,201

)

Interest (expense) income, net

365

(1,117

)

(1,048

)

(4,245

)

Change in fair value of tax receivable liability

(2,903

)

11,390

(6,619

)

66,871

Other (loss) income

(145

)

(384

)

(455

)

(510

)

Total other income (expense)

(2,683

)

9,889

(8,122

)

62,116

Income (loss) before income tax benefit (expense)

(81,097

)

(8,405

)

(119,535

)

14,915

Income tax benefit (expense)

3,423

240

2,115

(6,174

)

Net income (loss)

(77,674

)

(8,165

)

(117,420

)

8,741

Net loss attributable to non-controlling interest

(4,387

)

(1,493

)

(6,930

)

(4,095

)

Net income (loss) attributable to the Company

(73,287

)

(6,672

)

(110,490

)

12,836

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

91,206,870

88,519,236

90,048,638

88,792,453

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

91,206,870

88,519,236

90,048,638

110,671,731

Income (loss) per Class A share - basic

(0.80

)

(0.08

)

(1.23

)

0.14

Income (loss) per Class A share - diluted

(0.80

)

(0.08

)

(1.23

)

0.12

Consolidated Balance Sheets

($ in thousands)

December 31, 2023

December 31, 2022

Assets

Cash and cash equivalents

118,096

64,895

Accounts receivable

36,017

33,544

Prepaid expenses and other

15,209

18,213

Total current assets

169,322

116,652

Property, plant and equipment, net

3,133

4,375

Restricted cash

26,049

28,668

Intangible assets, net

447,141

500,575

Goodwill

716,793

827,813

Operating lease right-of-use assets, net

8,023

9,847

Deferred tax assets

146,872

136,370

Other assets

2,500

Total noncurrent assets

1,350,511

1,510,148

Total assets

1,519,833

1,626,800

Liabilities

Accounts payable

22,030

21,781

Related party payable

—

1,000

Accrued expenses

32,906

29,016

Current operating lease liabilities

1,629

2,263

Current tax receivable agreement

580

24,454

Other current liabilities

318

3,593

Total current liabilities

57,463

82,107

Long-term debt

434,166

451,319

Noncurrent operating lease liabilities

7,247

8,295

Tax receivable agreement, net of current portion

188,331

154,673

Other liabilities

1,838

2,113

Total noncurrent liabilities

631,582

616,400

Total liabilities

689,045

698,507

Commitments and contingencies

Stockholders' equity

Class A common stock, $0.0001 par value; 2,000,000,000 shares authorized, 92,220,494 issued and 90,803,984 outstanding as of December 31, 2023; 89,354,754 issued and 88,276,613 outstanding as of December 31, 2022

Class V common stock, $0.0001 par value; 1,000 shares authorized and 100 shares issued and outstanding as of December 31, 2023 and 2022

—

Treasury stock, 1,416,510 and 1,078,141 shares as of December 31, 2023 and December 31, 2022, respectively

(12,528

)

(10,000

)

Additional paid-in capital

1,151,327

1,117,736

Accumulated other comprehensive loss

)

Accumulated deficit

(323,670

)

(213,180

)

Total Repay stockholders’ equity

815,135

894,562

Non-controlling interests

15,653

33,731

Total equity

830,788

928,293

Total liabilities and equity

1,519,833

1,626,800

Consolidated Statements of Cash Flows

Year Ended December 31,

($ in thousands)

2023

2022

Cash flows from operating activities

Net income (loss)

(117,420

)

8,741

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

Depreciation and amortization

103,857

107,751

Stock based compensation

22,156

20,255

Amortization of debt issuance costs

2,847

2,834

Loss on business disposition

10,027

—

Other loss

238

245

Fair value change in tax receivable agreement liability

6,619

(66,871

)

Fair value change in contingent consideration

—

(3,300

)

Impairment loss

75,800

8,090

Payments of contingent consideration in excess of acquisition date fair value

—

(8,896

)

Deferred tax expense (benefit)

(3,594

)

4,192

Change in accounts receivable

(3,986

)

696

Change in prepaid expenses and other

2,936

(5,786

)

Change in operating lease ROU assets

1,328

653

Change in accounts payable

(189

)

1,698

Change in related party payable

—

(347

)

Change in accrued expenses and other

3,890

2,197

Change in operating lease liabilities

(1,388

)

(523

)

Change in other liabilities

493

2,594

Net cash provided by operating activities

103,614

74,223

Cash flows from investing activities

Purchases of property and equipment

(733

)

(3,176

)

Purchases of intangible assets

(13,545

)

(2,750

)

Capitalized software development costs

(50,083

)

(33,615

)

Proceeds from sale of business, net of cash retained

40,273

—

Net cash used in investing activities

(24,088

)

(39,541

)

Cash flows from financing activities

Payments on long-term debt

(20,000

)

—

Shares repurchased under Incentive Plan and ESPP

(1,891

)

(2,657

)

Treasury shares repurchased

(2,528

)

(10,000

)

Distributions to Members

(3,525

)

(951

)

Payments of contingent consideration up to acquisition date fair value

(1,000

)

(3,851

)

Net cash provided by (used in) financing activities

(28,944

)

(17,459

)

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

50,582

17,223

Cash, cash equivalents and restricted cash at beginning of period

93,563

76,340

Cash, cash equivalents and restricted cash at end of period

144,145

93,563

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the year for:

Interest

1,024

1,540

Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA For the Three Months Ended December 31, 2023 and 2022 (Unaudited)

Three Months Ended December 31,

($ in thousands)

2023

2022

Revenue

75,987

72,673

Operating expenses

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

17,261

14,896

Selling, general and administrative

36,679

41,682

Depreciation and amortization

24,711

25,309

Change in fair value of contingent consideration

—

990

Impairment loss

75,750

8,090

Total operating expenses

154,401

90,967

Loss from operations

(78,414

)

(18,294

)

Other (expense) income

Interest (expense) income, net

365

(1,117

)

Change in fair value of tax receivable liability

(2,903

)

11,390

Other (loss) income

(145

)

(384

)

Total other income (expense)

(2,683

)

9,889

Income (loss) before income tax benefit (expense)

(81,097

)

(8,405

)

Income tax benefit (expense)

3,423

240

Net income (loss)

(77,674

)

(8,165

)

Add:

Interest expense (income), net

(365

)

1,117

Depreciation and amortization (a)

24,711

25,309

Income tax (benefit) expense

(3,423

)

(240

)

EBITDA

(56,751

)

18,021

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

—

990

Non-cash impairment loss (c)

75,750

8,090

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

3,778

(11,390

)

Share-based compensation expense (e)

5,899

5,990

Transaction expenses (f)

921

2,877

Restructuring and other strategic initiative costs (g)

3,372

3,705

Other non-recurring charges (h)

520

7,599

Adjusted EBITDA

33,489

35,882

Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA For the Years Ended December 31, 2023 and 2022 (Unaudited)

Year Ended December 31,

($ in thousands)

2023

2022

Revenue

296,627

279,227

Operating expenses

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

69,703

64,826

Selling, general and administrative

148,653

149,061

Depreciation and amortization

103,857

107,751

Change in fair value of contingent consideration

—

(3,300

)

Loss on business disposition

10,027

—

Impairment loss

75,800

8,090

Total operating expenses

408,040

326,428

Loss from operations

(111,413

)

(47,201

)

Interest (expense) income, net

(1,048

)

(4,245

)

Change in fair value of tax receivable liability

(6,619

)

66,871

Other (loss) income

(455

)

(510

)

Total other income (expense)

(8,122

)

62,116

Income (loss) before income tax benefit (expense)

(119,535

)

14,915

Income tax benefit (expense)

2,115

(6,174

)

Net income (loss)

(117,420

)

8,741

Add:

Interest expense (income), net

1,048

4,245

Depreciation and amortization (a)

103,857

107,751

Income tax (benefit) expense

(2,115

)

6,174

EBITDA

(14,630

)

126,911

Loss on business disposition (i)

10,027

—

Loss on extinguishment of debt (j)

—

Loss on termination of interest rate hedge (k)

—

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

—

(3,300

)

Non-cash impairment loss (c)

75,800

8,090

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

7,494

(66,871

)

Share-based compensation expense (e)

22,156

20,532

Transaction expenses (f)

8,523

18,993

Restructuring and other strategic initiative costs (g)

11,908

7,870

Other non-recurring charges (h)

5,528

12,294

Adjusted EBITDA

126,806

124,519

Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income For the Three Months Ended December 31, 2023 and 2022 (Unaudited)

Three Months Ended December 31,

($ in thousands)

2023

2022

Revenue

75,987

72,673

Operating expenses

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

17,261

14,896

Selling, general and administrative

36,679

41,682

Depreciation and amortization

24,711

25,309

Change in fair value of contingent consideration

—

990

Impairment loss

75,750

8,090

Total operating expenses

154,401

90,967

Loss from operations

(78,414

)

(18,294

)

Interest (expense) income, net

365

(1,117

)

Change in fair value of tax receivable liability

(2,903

)

11,390

Other (loss) income

(145

)

(384

)

Total other income (expense)

(2,683

)

9,889

Income (loss) before income tax benefit (expense)

(81,097

)

(8,405

)

Income tax benefit (expense)

3,423

240

Net income (loss)

(77,674

)

(8,165

)

Add:

Amortization of acquisition-related intangibles (l)

20,969

19,549

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

—

990

Non-cash impairment loss (c)

75,750

8,090

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

3,778

(11,390

)

Share-based compensation expense (e)

5,899

5,990

Transaction expenses (f)

921

2,877

Restructuring and other strategic initiative costs (g)

3,372

3,705

Other non-recurring charges (h)

520

7,599

Non-cash interest expense (m)

712

Pro forma taxes at effective rate (n)

(7,906

)

(8,157

)

Adjusted Net Income

26,341

21,800

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

97,063,687

96,388,127

Adjusted Net Income per share

0.27

0.23

Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income For the Years Ended December 31, 2023 and 2022 (Unaudited)

Year Ended December 31,

($ in thousands)

2023

2022

Revenue

296,627

279,227

Operating expenses

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

69,703

64,826

Selling, general and administrative

148,653

149,061

Depreciation and amortization

103,857

107,751

Change in fair value of contingent consideration

—

(3,300

)

Loss on business disposition

10,027

—

Impairment loss

75,800

8,090

Total operating expenses

408,040

326,428

Loss from operations

(111,413

)

(47,201

)

Interest (expense) income, net

(1,048

)

(4,245

)

Change in fair value of tax receivable liability

(6,619

)

66,871

Other (loss) income

(455

)

(510

)

Total other income (expense)

(8,122

)

62,116

Income (loss) before income tax benefit (expense)

(119,535

)

14,915

Income tax benefit (expense)

2,115

(6,174

)

Net income (loss)

(117,420

)

8,741

Add:

Amortization of acquisition-related intangibles (l)

81,642

89,473

Loss on business disposition (i)

10,027

—

Loss on extinguishment of debt (j)

—

Loss on extinguishment of interest rate hedge (k)

—

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

—

(3,300

)

Non-cash impairment loss (c)

75,800

8,090

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

7,494

(66,871

)

Share-based compensation expense (e)

22,156

20,532

Transaction expenses (f)

8,523

18,993

Restructuring and other strategic initiative costs (g)

11,908

7,870

Other non-recurring charges (h)

5,528

12,294

Non-cash interest expense (m)

2,848

2,835

Pro forma taxes at effective rate (n)

(23,564

)

(18,871

)

Adjusted Net Income

84,942

79,786

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

96,850,559

96,684,629

Adjusted Net Income per share

0.88

0.83

Reconciliation of Operating Cash Flow to Free Cash Flow For the Three Months and Years Ended December 31, 2023 and 2022 (Unaudited)

Three Months ended December 31,

Year Ended December 31,

($ in thousands)

2023

2022

2023

2022

Net cash provided by operating activities

34,863

21,831

103,614

74,223

Capital expenditures

Cash paid for property and equipment

(183

)

(553

)

(733

)

(3,176

)

Capitalized software development costs

(12,893

)

(7,383

)

(50,083

)

(33,615

)

Total capital expenditures

(13,076

)

(7,936

)

(50,816

)

(36,791

)

Free cash flow

21,787

13,895

52,798

37,432

Free cash flow conversion (p)

Reconciliation of Revenue Growth to Organic Revenue Growth and Normalized Organic Revenue Growth For the Year-over-Year Change Between the Three Months Ended December 31, 2023 and 2022 (Unaudited)

Q4 YoY Change

Total Revenue growth

Less: Growth from acquisitions and dispositions

Organic revenue growth (q)

Less: Growth from contributions related to political media

Normalized organic revenue growth (r)

Reconciliation of Gross Profit Growth to Organic Gross Profit Growth and Normalized Organic Gross Profit Growth by Segment For the Year-over-Year Change Between the Three Months Ended December 31, 2023 and 2022 (Unaudited)

Consumer Payments

Business Payments

Total

Gross profit growth

(13

Less: Growth from acquisitions and dispositions

—

Organic gross profit growth (s)

(13

Less: Growth from contributions related to political media

—

(38

Normalized organic gross profit growth (t)

Reconciliation of Gross Profit Growth to Organic Gross Profit Growth and Normalized Organic Gross Profit Growth For the Year-over-Year Change Between the Years Ended December 31, 2023 and 2022 (Unaudited)

FY 2023 YoY Change

Gross profit growth

Less: Growth from acquisitions and dispositions

Organic gross profit growth (s)

Less: Growth from contributions related to political media

Normalized organic gross profit growth (t)

(a)

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

(b)

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

(c)

For the three months ended December 31, 2023, reflects non-cash goodwill impairment loss related to the Business Payments segment. In addition, for the year ended December 31, 2023, reflects non-cash impairment loss related to a trade name write-off of Media Payments. For the three months and the year ended December 31, 2022, reflects non-cash impairment loss related to trade names write-offs of BillingTree and Kontrol.

(d)

For the three months and year ended December 31, 2023, reflects the changes in management’s estimates of (i) the fair value of the liability relating to the Tax Receivable Agreement, and (ii) non-cash insurance reserve. For the three months and year ended December 31, 2022, reflects the changes in management’s estimates of the fair value of the liability relating to the Tax Receivable Agreement.

(e)

Represents compensation expense associated with equity compensation plans.

(f)

Primarily consists of (i) during the three months and year ended December 31, 2023, professional service fees and other costs incurred in connection with the disposition of Blue Cow Software, and (ii) during the three months and year ended December 31, 2022, professional service fees and other costs incurred in connection with the acquisitions of BillingTree, Kontrol Payables and Payix.

(g)

Reflects costs associated with reorganization of operations, consulting fees related to processing services and other operational improvements, including restructuring and integration activities related to acquired businesses, that were not in the ordinary course during the three months and years ended December 31, 2023 and 2022.

(h)

For the three months and year ended December 31, 2023, reflects payments made to third-parties in connection with an expansion of our personnel, franchise taxes and other non-income based taxes and one-time payments to certain partners. For the three months and year ended December 31, 2022, reflects one-time payments to certain clients and partners, payments made to third-parties in connection with a significant expansion of our personnel, franchise taxes and other non-income based taxes, other payments related to COVID-19 and non-cash rent expense. Beginning in the period ended December 31, 2023, no longer reflects non-cash rent expense.

(i)

Reflects the loss recognized related to the disposition of Blue Cow.

(j)

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

(k)

Reflects realized loss of REPAY's interest rate hedging arrangement which terminated in conjunction with the repayment of Hawk Parent’s term loans.

(l)

For the three months and years ended December 31, 2023 and 2022, reflects amortization of client relationships, non-compete agreement, software, and channel relationship intangibles acquired through the business combination with Thunder Bridge, and client relationships, non-compete agreement, and software intangibles acquired through REPAY's acquisitions of TriSource Solutions, APS Payments, Ventanex, cPayPlus, CPS Payments, BillingTree, Kontrol Payables and Payix. 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 amortization expenses:

Three months ended December 31,

Year ended December 31,

($ in thousands)

2023

2022

2023

2022

Acquisition-related intangibles

20,969

19,549

81,642

89,473

Software

3,150

5,067

19,789

15,921

Amortization

24,119

24,616

101,431

105,394

Depreciation

592

693

2,426

2,357

Total Depreciation and amortization (1)

24,711

25,309

103,857

107,751

(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 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. Amortization of intangibles that relate to past acquisitions will recur in future periods until such intangibles have been fully amortized. Any future acquisitions may result in the amortization of additional intangibles.

(m)

Represents amortization of non-cash deferred debt issuance costs.

(n)

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

(o)

Represents the weighted average number of shares of Class A common stock outstanding (on an as-converted basis assuming conversion of outstanding Post-Merger Repay Units) for the three months and year ended December 31, 2023 and 2022. These numbers do not include any shares issuable upon conversion of the Company’s convertible senior notes due 2026. See the reconciliation of basic weighted average shares outstanding to the non-GAAP Class A common stock outstanding on an as-converted basis for each respective period below:

Three Months Ended December 31,

Year Ended December 31,

2023

2022

2023

2022

Weighted average shares of Class A common stock outstanding - basic

91,206,870

88,519,236

90,048,638

88,792,453

Add: Non-controlling interests Weighted average Post-Merger Repay Units exchangeable for Class A common stock

5,856,817

7,868,891

6,801,921

7,892,176

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

97,063,687

96,388,127

96,850,559

96,684,629

(p)

Represents Free Cash Flow divided by Adjusted EBITDA.

(q)

Represents year-on-year revenue growth that excludes incremental revenue attributable to acquisitions and dispositions made in the applicable prior period or any subsequent period.

(r)

Represents year-on-year organic revenue growth that excludes incremental revenue attributable to REPAY’s media payments business related to the cyclical political media spending associated with the 2022 mid-term elections in the applicable prior period or any subsequent period.

(s)

Represents year-on-year gross profit growth that excludes incremental gross profit attributable to acquisitions and dispositions made in the applicable prior period or any subsequent period.

(t)

Represents year-on-year organic gross profit growth that excludes incremental gross profit attributable to REPAY’s media payments business related to the cyclical political media spending associated with the 2022 mid-term elections in the applicable prior period or any subsequent period.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240228027217/en/

Investor Relations Contact for REPAY: ir@repay.com Media Relations Contact for REPAY: Kristen Hoyman (404) 637-1665 khoyman@repay.com

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