Business Wire | Aug 10, 2020 04:05PM EDT

REPAY Reports Second Quarter 2020 Financial Results

Aug. 10, 2020

ATLANTA--(BUSINESS WIRE)--Aug. 10, 2020--Repay Holdings Corporation (NASDAQ: RPAY) ("REPAY" or the "Company"), a leading provider of vertically-integrated payment solutions, today reported financial results for its second quarter of 2020.

"As the world continues to evolve throughout this pandemic, the value proposition of our business has become even more evident as digital payment solutions have proven increasingly necessary. This is reflected in our second quarter results, which show growth in card payment volume and gross profit of 63% and 63%, respectively, compared to the second quarter of 2019. We also reported organic gross profit growth of 21%, compared to the second quarter of 2019," said John Morris, CEO of REPAY. "This pandemic has augmented the unprecedented demand for comprehensive, technology-first B2B automation and payment solutions. We are thrilled to have recently completed the acquisition of cPayPlus to further address these highly attractive and unique market opportunities."

Three Months Ended June 30, 2020 Highlights

* Card payment volume was $3.6 billion, an increase of 63% over the second quarter of 2019 * Total revenue was $36.5 million, a 68% increase over the second quarter of 2019 * Gross profit was $27.8 million, an increase of 63% over the second quarter of 2019 * Pro forma net income1 was ($8.4) million, as compared to net income of $4.2 million in the second quarter 2019 * Adjusted EBITDA was $16.2 million, an increase of 55% over the second quarter of 2019 * Adjusted Net Income was $9.9 million, an increase of 27% over the second quarter of 2019 * Adjusted Net Income per share was $0.14

Gross profit represents total revenue less cost of services. Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per share and organic gross profit growth 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.

____________________________________________________

^1 Please refer to "Basis of Presentation" below for an explanation of the presentation of this information.

Business Combination

The Company was formed upon closing of the merger (the "Business Combination") of Hawk Parent Holdings LLC (together with Repay Holdings, LLC and its other subsidiaries, "Hawk Parent") with a subsidiary of Thunder Bridge Acquisition, Ltd. ("Thunder Bridge"), a special purpose acquisition company, on July 11, 2019 (the "Closing Date"). On the closing of the Business Combination, Thunder Bridge changed its name to Repay Holdings Corporation.

Basis of Presentation

As a result of the Business Combination, the Company was identified as the acquirer for accounting purposes, and Hawk Parent, which owned the business conducted prior to the closing of the Business Combination, is the acquiree and accounting "Predecessor." The Company is the "Successor" for periods after the Closing Date, which includes consolidation of the Hawk Parent business subsequent to the Closing Date. The Company's financial statement presentation reflects the Hawk Parent business as the "Predecessor" for any periods ended prior to the Closing Date. The acquisition was accounted for as a business combination using the acquisition method of accounting, and the Successor financial statements reflect a new basis of accounting that is based on the fair value of net assets acquired. As a result of the application of the acquisition method of accounting as of the effective time of the Business Combination, the financial statements for the Predecessor period and for the Successor period are presented on different bases. When information is noted as being "pro forma" in this press release, it means that the financial statements were adjusted to remove the effects of purchase accounting adjustments related to the Business Combination. The historical financial information of Thunder Bridge prior to the Business Combination has not been reflected in the Predecessor period financial statements.

Subsequent Events

On July 23, 2020, REPAY announced the acquisition of cPayPlus for up to $16.0 million, of which $8.0 million was paid at closing. The acquisition was financed with cash on hand and did not materially impact REPAY's net leverage.

On July 27, 2020, REPAY completed the redemption of all of its outstanding warrants to purchase shares of the Company's Class A common stock. A substantial majority of the warrants were exercised for cash prior to the redemption date. The Company's updated liquidity position and share count information resulting from the warrant redemption and warrant exercises is shown in a supplemental information deck which can be found on the Investor Relations section of the company's website: https://investors.repay.com/investor-relations.

2020 Outlook

REPAY expects the below financial results for full year 2020, which reflects expected contributions from cPayPlus and replaces previously provided guidance.

Full Year 2020 Outlook

Updated Guidance

Card Payment Volume $14.5 - 15.0 billion

Total Revenue $145.0 - 155.0 million

Gross Profit $110.0 - 115.0 million

Adjusted EBITDA $62.0 - 66.0 million

This range assumes no further unforeseen COVID-related impacts, which could create substantial economic duress in the second half of the year. REPAY does not provide quantitative reconciliation of forward-looking, non-GAAP financial measures such as forecasted 2020 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 2020 financial results today 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 13707222. 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, tax expense, depreciation and amortization, as adjusted to add back certain non-cash and non-recurring charges, such as 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, management fees, legacy commission related charges, employee recruiting costs, 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 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, management fees, legacy commission related charges, employee recruiting costs, strategic initiative related costs and other non-recurring charges, 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 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. 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 as-converted basis) for the three and six months ended June 30, 2020 (excluding shares subject to forfeiture). Organic gross profit growth is a non-GAAP financial measure that represents the year-on-year gross profit growth that excludes gross profit attributed to acquisitions made in 2019 and 2020. REPAY believes that Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per share and organic gross profit growth 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 and organic gross profit growth 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, Adjusted Net Income per share, organic gross profit growth 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 and organic gross profit growth 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, 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," "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 2020 outlook, the effects of the COVID-19 pandemic, expected demand on REPAY's product offering, including further implementation of electronic payment options and statements regarding REPAY's market and growth opportunities. 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 our 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, 2019 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, 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 and consumer and commercial spending; the impacts of the ongoing COVID-19 coronavirus pandemic and the actions taken to control or mitigate its spread (which impacts are highly uncertain and cannot be reasonably estimated or predicted at this time); a delay or failure to integrate and realize the benefits of the Company's recent acquisitions; 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. 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 merchants, while enhancing the overall experience for consumers and businesses.

Consolidated Statement of Operations

(Unaudited)

Successor Predecessor

Three Three Six Months Six Months Months Months(in $ thousands) ended June ended June ended June ended 30, 30, 30, June 2020 2020 2019 30, 2019

Revenue $36,501 $75,963 $21,686 $44,709

Operating expenses

Other costs of services $8,727 $19,498 $4,629 $9,748

Selling, general and 19,018 37,184 8,456 17,132administrative

Depreciation and 14,706 28,610 2,975 5,890amortization

Change in fair value of 740 740 - -contingent consideration

Total operating expenses $43,191 $86,032 $16,060 $32,770

Income (loss) from $(6,690) $(10,069) $5,626 $11,939operations

Other expenses

Interest expenses (3,704) (7,222) (1,470) (2,919)

Change in fair value of tax (10,038) (10,580) - -receivable liability

Other income 5 44 0 0

Total other (expenses) (13,737) (17,758) (1,470) (2,919)income

Income (loss) before income (20,428) (27,827) 4,156 9,020tax expense

Income tax benefit 3,897 5,012 - -

Net income (loss) $(16,531) $(22,815) $4,156 $9,020

Net income (loss)attributable to (3,903) (6,755) - -non-controlling interest

Net income (loss) $(12,628) $(16,060) $4,156 $9,020attributable to the Company

Weighted-average shares ofClass A common stock 41,775,128 39,699,841 outstanding - basic and diluted

Loss per Class A share - ($0.30) ($0.40) basic and diluted

Consolidated Balance Sheets

June 30, December 2020 31, (Unaudited) 2019

Assets

Cash and cash equivalents $165,914 $24,618

Accounts receivable 14,231 14,068

Related party receivable - 563

Prepaid expenses and other 4,635 4,633

Total current assets 184,780 43,882



Property, plant and equipment, net 1,789 1,611

Restricted cash 13,795 13,283

Customer relationships, net of amortization 258,135 247,589

Software, net of amortization 59,587 61,219

Other intangible assets, net of amortization 24,109 24,242

Goodwill 412,168 389,661

Deferred tax assets 25,767 -

Other assets - 555

Total noncurrent assets 795,350 738,160

Total assets $980,130 $782,042



Liabilities

Accounts payable $10,225 $9,586

Related party payable 18,224 14,571

Accrued expenses 15,881 15,966

Current maturities of long-term debt 7,176 5,500

Current tax receivable agreement 7,827 6,336

Total current liabilities 59,333 51,959



Long-term debt, net of current maturities 252,529 197,943

Line of credit - 10,000

Tax receivable agreement 99,752 60,840

Deferred tax liability - 768

Other liabilities 10,878 17

Total noncurrent liabilities 363,159 269,568

Total liabilities $422,492 $321,527



Commitment and contingencies (Note 12)



Stockholders' equity

Class A common stock, $0.0001 par value; 2,000,000,000shares authorized and 52,018,330 issued and 5 4outstanding as of June 30, 2020

Class V common stock, $0.0001 par value; 1,000 sharesauthorized and 100 shares issued and outstanding as of - -June 30, 2020

Additional paid-in capital 474,608 307,914

Accumulated other comprehensive (loss) income (6,882) 313

Accumulated deficit (69,938) (53,878)

Total stockholders' equity $397,793 $254,353



Equity attributable to non-controlling interests 159,845 206,162



Total liabilities and stockholders' equity and $980,130 $782,042members' equity

Key Operating and Non-GAAP Financial Data

We believe that adjusting the key operating and non-GAAP measures for comparability between the Predecessor, Successor and Pro Forma periods is useful to the user of our financial statements.

The unaudited non-GAAP pro forma results of operations data for the three and six months ended June 30, 2020 and 2019 included in the discussion below are based on our historical financial statements, adjusted to remove the effects of purchase accounting adjustments related to the Business Combination. The pro forma results included herein have not been prepared in accordance with Article 11 of Regulation S-X.

Unless otherwise stated, all results compare second quarter and six-month 2020 results to second quarter and six-month 2019 results from continuing operations for the period ended June 30, respectively.

The following tables and related notes reconcile these non-GAAP measures and the pro forma measures to GAAP information for the three month and six month periods ended June 30, 2020 and 2019:

Three months ended June 30, Six months ended June 30,

(in $ 2020 2019 % 2020 2019 %thousands) Change Change

Card payment 3,612,752 2,216,671 63% 7,473,852 4,656,018 61%volume

Gross profit^1 27,774 17,057 63% 56,465 34,961 62%

Adjusted EBITDA 16,221 10,446 55% 33,571 21,783 54%^2

(1) Gross profit represents total revenue less other costs of services.

Adjusted EBITDA is a non-GAAP financial measure that represents net income adjusted for interest expense, depreciation and amortization and certain(2) 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

For the Three Months Ended June 30, 2020 and 2019

(Unaudited)



Successor Predecessor

Pro Three Forma Three Months Adjustments Three months(in $ thousands) Ended ^(n) Months ended June June 30, Ended 30, 2020 June 30, 2019 2020

Revenue $36,501 $36,501 $21,686

Operating expenses

Other costs of services $8,727 $8,727 $4,629

Selling, general and 19,018 19,018 8,456administrative

Depreciation and 14,706 (8,159) 6,547 2,975amortization

Change in fair value of 740 740 -contingent consideration

Total operating expenses $43,191 $35,032 $16,060

Income (loss) from $(6,690) $1,468 $5,626operations

Other expenses

Interest expenses (3,704) (3,704) (1,470)

Change in fair value of tax (10,038) (10,038) -receivable liability

Other income 5 5 0

Total other (expenses) (13,737) (13,737) (1,470)income

Income (loss) before income (20,428) (12,269) 4,156tax expense

Income tax benefit 3,897 3,897 -

Net income (loss) $(16,531) $(8,373) $4,156



Add:

Interest expense 3,704 1,470

Depreciation and 6,547 2,975amortization^(a)

Income tax (benefit) (3,897) -

EBITDA $(2,018) $8,601



Non-cash change in fairvalue of contingent 740 -consideration^(b)

Non-cash change in fairvalue of assets and 10,038 -liabilities^(c)

Share-based compensation 5,475 124expense^(d)

Transaction expenses^(e) 1,575 810

Management Fees^(f) - 100

Legacy commission related - 550charges^(g)

Employee recruiting costs^ 56 -(h)

Other taxes^(i) 39 168

Strategic initiative costs^ 112 93(j)

Other non-recurring charges^ 202 -(k)

Adjusted EBITDA $16,221 $10,446

Reconciliations of GAAP Net Income to Non-GAAP Adjusted EBITDA

For the Six Months Ended June 30, 2020 and 2019

(Unaudited)

Successor Predecessor

Pro Six Forma Six months Months Adjustments Six ended June(in $ thousands) Ended ^(n) Months 30, June 30, Ended 2019 2020 June 30, 2020

Revenue $75,963 $75,963 $44,709

Operating expenses

Other costs of services $19,498 $19,498 $9,748

Selling, general and 37,184 37,184 17,132administrative

Depreciation and 28,610 (16,317) 12,293 5,890amortization

Change in fair value of 740 740 -contingent consideration

Total operating expenses $86,032 $69,715 $32,770

Income (loss) from $(10,069) $6,248 $11,939operations

Other expenses

Interest expenses (7,222) (7,222) (2,919)

Change in fair value of tax (10,580) (10,580) -receivable liability

Other income 44 44 0

Total other (expenses) (17,758) (17,758) (2,919)income

Income (loss) before income (27,827) (11,510) 9,020tax expense

Income tax benefit 5,012 5,012 -

Net income (loss) $(22,815) $(6,498) $9,020



Add:

Interest expense 7,222 2,919

Depreciation and 12,293 5,890amortization^(a)

Income tax (benefit) (5,012) -

EBITDA $8,005 $17,828



Non-cash change in fairvalue of contingent 740 -consideration^(b)

Non-cash change in fairvalue of assets and 10,580 -liabilities^(c)

Share-based compensation 8,998 251expense^(d)

Transaction expenses^(e) 4,444 2,496

Management Fees^(f) - 200

Legacy commission related - 550charges^(g)

Employee recruiting costs^ 56 15(h)

Other taxes^(i) 226 227

Strategic initiative costs^ 190 216(j)

Other non-recurring charges^ 332 -(k)

Adjusted EBITDA $33,571 $21,783

Reconciliations of GAAP Net Income to Non-GAAP Adjusted Net Income

For the Three Months Ended June 30, 2020 and 2019

(Unaudited)

Successor Predecessor

Three Pro Forma Three Months Three months(in $ thousands) Ended Adjustments Months ended June June 30, ^(n) Ended June 30, 2020 30, 2019 2020

Revenue $36,501 $36,501 $21,686

Operating expenses

Other costs of services $8,727 $8,727 $4,629

Selling, general and 19,018 19,018 8,456administrative

Depreciation and 14,706 (8,159) 6,547 2,975amortization

Change in fair value of 740 740 -contingent consideration

Total operating expenses $43,191 $35,032 $16,060

Income (loss) from $(6,690) $1,468 $5,626operations

Other expenses

Interest expenses (3,704) (3,704) (1,470)

Change in fair value of (10,038) (10,038) -tax receivable liability

Other income 5 5 0

Total other (expenses) (13,737) (13,738) (1,470)income

Income (loss) before (20,428) (12,270) 4,156income tax expense

Income tax benefit 3,897 3,897 -

Net income (loss) $(16,531) $(8,373) $4,156



Add:

Amortization ofAcquisition-Related 4,545 1,980Intangibles^(l)

Non-cash change in fairvalue of contingent 740 -consideration^(b)

Non-cash change in fairvalue of assets and 10,038 -liabilities^(c)

Share-based compensation 5,475 124expense^(d)

Transaction expenses^(e) 1,575 810

Management Fees^(f) - 100

Legacy commission related - 550charges^(g)

Employee recruiting costs^ 56 -(h)

Strategic initiative costs 112 93^(j)

Other non-recurring 202 -charges^(k)

Pro forma taxes at (4,427) -effective rate^(o)

Adjusted Net Income $9,944 $7,812



Shares of Class A commonstock outstanding (on an 69,623,608 as-converted basis)^(m)

Adjusted Net income per $0.14 share

Reconciliations of GAAP Net Income to Non-GAAP Adjusted Net Income

For the Six Months Ended June 30, 2020 and 2019

(Unaudited)

Successor Predecessor

Six Pro Forma Six months Months Adjustments Six Months ended June(in $ thousands) Ended ^(n) Ended June 30, June 30, 30, 2019 2020 2020

Revenue $75,963 $75,963 $44,709

Operating expenses

Other costs of services $19,498 $19,498 $9,748

Selling, general and 37,184 37,184 17,132administrative

Depreciation and 28,610 (16,317) 12,293 5,890amortization

Change in fair value of 740 740 -contingent consideration

Total operating expenses $86,032 $69,715 $32,770

Income (loss) from $(10,069) $6,248 $11,939operations

Other expenses

Interest expenses (7,222) (7,222) (2,919)

Change in fair value of (10,580) (10,580) -tax receivable liability

Other income 44 44 0

Total other (expenses) (17,758) (17,758) (2,919)income

Income (loss) before (27,827) (11,510) 9,020income tax expense

Income tax benefit 5,012 5,012 -

Net income (loss) $(22,815) $(6,498) $9,020



Add:

Amortization ofAcquisition-Related 8,659 3,959Intangibles^(l)

Non-cash change in fairvalue of contingent 740 -consideration^(b)

Non-cash change in fairvalue of assets and 10,580 -liabilities^(c)

Share-based compensation 8,998 251expense^(d)

Transaction expenses^(e) 4,444 2,496

Management Fees^(f) - 200

Legacy commission related - 550charges^(g)

Employee recruiting costs^ 56 15(h)

Strategic initiative costs 190 216^(j)

Other non-recurring 332 -charges^(k)

Pro forma taxes at (6,124) -effective rate^(o)

Adjusted Net Income $21,377 $16,707



Shares of Class A commonstock outstanding (on an 68,405,601 as-converted basis)^(m)

Adjusted Net income per $0.31 share

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

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

(c) Reflects the changes in management's estimates of the fair value of the liability relating to the Tax Receivable Agreement.

Represents compensation expense associated with Hawk Parent's equity compensation plans of $5,475,449 and $8,998,180 in the three and six(d) months ended June 30, 2020, respectively, as a result of new grants made in the Successor period, and $123,588 and $250,782 in the three and six months ended June 30, 2019, respectively.

Primarily consists of (i) during the three and six months ended June 30, 2020, professional service fees and other costs incurred in connection with the acquisition of cPayPlus which closed subsequent to the period, and additional transaction expenses incurred in connection with the Business Combination and the acquisitions of TriSource Solutions, APS Payments, and Ventanex, which closed in prior periods, as well as(e) professional service expenses related to the follow-on offering and (ii) during the three months ended June 30, 2019, professional service fees and other costs incurred in connection with the Business Combination, and during the six months ended June 30, 2019, the aforementioned expenses associated with the Business Combination, as well as 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.

Reflects management fees paid to Corsair Investments, L.P. pursuant to(f) the management agreement, which terminated upon the completion of the Business Combination.

Represents payments made to certain employees in connection with(g) significant restructuring of their commission structures. These payments represented commission structure changes which are not in the ordinary course of business.

Represents payments made to third-party recruiters in connection with a(h) significant expansion of our personnel, which REPAY expects will become more moderate in subsequent periods.

(i) Reflects franchise taxes and other non-income based taxes.

Reflects consulting fees related to our processing services and other operational improvements that were not in the ordinary course during the three and six months ended June 30, 2020 and 2019, and additionally(j) 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 in the three and six months ended June 30, 2019.

For the three and six months ended June 30, 2020, reflects expenses incurred related to one-time accounting system and compensation plan(k) implementation related to becoming a public company, as well as extraordinary refunds to customers and other payments related to COVID-19.

For the three and six months ended June 30, 2020 reflects (i) amortization of the customer relationships 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., (ii) customer relationships, non-compete agreement, software, and channel relationship intangibles acquired through the Business Combination, and (iii) customer(l) relationships, non compete agreement, and software intangibles acquired through Repay Holdings, LLC's acquisitions of TriSource Solutions, APS Payments, and Ventanex. For the three and six months ended June 30, 2019, reflects amortization of customer relationships intangibles acquired through Hawk Parent's acquisitions and the recapitalization transaction in 2016 described previously. 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 Six Three Six months months months months ended ended ended ended June June 30, June June 30, 30, 30,

2020 2019

(in $ thousands) (Successor) (Predecessor)

Acquisition-related intangibles $4,545 $8,659 $1,980 $3,959

Software 1,727 3,106 844 1,634

Reseller buyouts 15 29 15 29

Amortization $6,287 $11,794 $2,838 $5,623

Depreciation 260 499 137 267

Total Depreciation and $6,547 $12,293 $2,975 $5,890amortization^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(1) operating performance. Although REPAY excludes 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.

Represents the weighted average number of shares of Class A common stock(m) outstanding (on as-converted basis) for the three or six months ended June 30, 2020 (excluding shares that were subject to forfeiture).

(n) Adjustment for incremental depreciation and amortization recorded due to fair-value adjustments under ASC 805 in the Successor period.

Represents pro forma income tax adjustment effect associated with items(o) adjusted above. As Hawk Parent, as the accounting Predecessor, was not subject to income taxes, the tax effect above was calculated on the adjustments related to the Successor period only.

Reconciliation of Organic Gross Profit Growth

Three months ended June 30, 2020



Total gross profit growth 63%

less: growth from acquisitions 42%



Organic gross profit growth 21%

View source version on businesswire.com: https://www.businesswire.com/news/home/20200810005739/en/

CONTACT: Investor Relations Contact for REPAY: repayIR@icrinc.com

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