Repay Holdings Corporation — FY2023 Form 10-K Summary
Business Context and Reporting Period
Repay is a payments technology company providing integrated card, ACH, virtual card, accounts-payable automation, clearing and settlement, instant funding, and related payment solutions. Its principal verticals include personal lending, automotive lending, receivables management, healthcare, education, government, field services, HOA management, hospitality, and other business-to-business markets.
This Form 10-K covers the fiscal year ended December 31, 2023. The filing does not provide a separate, clearly stated fourth-quarter income statement or cash flow presentation. Repay reported approximately $25.7 billion of card payment volume in 2023, up approximately 0.1% year over year, and maintained approximately 262 software integrations.
Financial Performance and Position
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | $296.6 million | $279.2 million | +6.2% |
| Gross profit | $226.9 million | $214.4 million | +5.8% |
| Gross margin | 77% | 77% | Stable |
| Loss from operations | $(111.4) million | $(47.2) million | Worsened |
| Net income (loss) | $(117.4) million | $8.7 million | Declined |
| Net loss attributable to Repay | $(110.5) million | $12.8 million | Declined |
| Adjusted EBITDA | $126.8 million | $124.5 million | +1.8% |
| Adjusted net income | $84.9 million | $79.8 million | +6.5% |
| Adjusted net income per share | $0.88 | $0.83 | +6.0% |
Reported gross margin was approximately 77%, while operating margin was approximately negative 37.6% and net margin was approximately negative 39.6%. The substantial GAAP loss primarily reflected a $75.8 million impairment charge, including a $75.7 million goodwill impairment in Business Payments, a $10.0 million loss on the sale of Blue Cow Software, and a $6.6 million loss from the change in fair value of the tax receivable agreement liability.
- Consumer Payments revenue increased 11.1% to $275.7 million and gross profit increased 10.5% to $216.1 million.
- Business Payments revenue declined 10.6% to $38.1 million and gross profit declined 8.1% to $28.0 million, primarily due to lower media payments activity following the 2022 mid-term elections.
- Net cash provided by operating activities was $103.6 million, compared with $74.2 million in 2022.
- Net cash used in investing activities was $24.1 million, including $50.1 million of capitalized software development costs, partially offset by $40.3 million of net proceeds from the BCS disposition.
- Net cash used in financing activities was $28.9 million, primarily reflecting repayment of the revolving credit facility, share repurchases, and an earnout payment.
- Cash and cash equivalents were $118.1 million at December 31, 2023, compared with $64.9 million at December 31, 2022. Restricted cash was $26.0 million.
- Outstanding debt consisted of $440.0 million principal amount of 0.00% convertible notes due February 2026, carried at $434.2 million net of issuance costs. The $185.0 million revolving facility was undrawn at year-end.
- The tax receivable agreement liability was $188.9 million, including $0.6 million classified as current.
Material Changes Versus the Prior Comparable Period
- Revenue grew despite essentially flat card payment volume, supported by newly signed clients and growth from existing clients.
- Consumer Payments growth more than offset weakness in Business Payments and the loss of BCS revenue following its February 2023 sale.
- BCS was sold for approximately $41.9 million in cash and generated only $1.2 million of 2023 Consumer Payments revenue before disposition, versus $9.8 million in 2022.
- Operating expenses increased substantially because of the goodwill impairment and BCS disposition loss, although selling, general and administrative expense decreased slightly and depreciation and amortization declined 3.6%.
- Adjusted EBITDA and adjusted net income improved modestly, but GAAP results reversed from profit to a significant loss because of impairment, disposition, and tax receivable agreement valuation items.
- Repay repurchased 338,369 shares for approximately $2.5 million under its $50 million share repurchase program during 2023. The program had approximately $37.5 million of remaining capacity at December 31, 2023.
Guidance, Outlook, Commentary, Risks, and Unusual Items
The filing does not provide formal quantitative revenue or earnings guidance. Management stated that operating cash flow, cash on hand, and available revolving-credit capacity are expected to be sufficient to fund operations, planned capital expenditures, and debt service for the next twelve months. Management also stated that it currently expects to remain in compliance with the credit agreement’s restrictive covenants.
Management’s strategy emphasizes organic growth in existing verticals, expansion into new verticals, continued product and technology development, operating leverage, and selective acquisitions. The company expects continued migration from cash and checks to electronic payments to support long-term demand, but noted uncertainty from inflation, higher interest rates, slower growth, banking-system volatility, consumer finance trends, and potential recessionary conditions.
- The $75.7 million Business Payments goodwill impairment was primarily driven by a higher discount rate and is sensitive to assumptions regarding projected cash flows, terminal value, valuation multiples, and market conditions.
- The $188.9 million tax receivable agreement liability represents estimated future payments generally equal to 100% of specified tax benefits. Payments may exceed realized tax savings or accelerate upon certain events, including some changes of control or early termination.
- The $440.0 million convertible notes mature in February 2026. Conversion, repurchase, or refinancing requirements could create material liquidity needs.
- Repay relies on sponsor banks, third-party processors, software integration partners, payment networks, and other vendors. Loss or disruption of these relationships could impair transaction processing.
- Key operating risks include cybersecurity and data breaches, fraud and chargebacks, payment-network rule changes, regulatory requirements, shifts from card to lower-fee ACH payments, economic weakness, competition, and client concentration within regulated consumer-finance verticals.
- Repay reported no cybersecurity incidents that materially affected its strategy, results, or financial condition during the period. Grant Thornton issued unqualified opinions on the financial statements and internal control over financial reporting.
- The filing states that no current legal proceedings are expected to have a material adverse effect, but the company remains subject to ordinary-course claims and litigation.
Most Important Facts for Investors to Verify
- Whether Business Payments stabilizes following the goodwill impairment and the decline in media-related activity.
- The sustainability and quality of the $126.8 million Adjusted EBITDA, including the recurring nature of its add-backs and the reconciliation to GAAP losses.
- Repay’s ability to refinance or otherwise settle the $440.0 million convertible notes due in 2026 without materially reducing liquidity or diluting shareholders.
- The timing, amount, and cash funding requirements of tax receivable agreement payments, including potential acceleration provisions.
- Trends in card payment volume, payment mix, pricing, gross margin, chargebacks, and software-integration-partner economics.
- Whether the company can maintain operating cash flow while continuing to invest in software development and meet regulatory, cybersecurity, and vendor obligations.
- The effect of future impairment testing assumptions, interest rates, macroeconomic conditions, and valuation changes on reported earnings and equity.
- Potential dilution from approximately 5.8 million exchangeable Post-Merger Repay Units, the convertible notes, and outstanding equity awards.