Paymentus Holdings, Inc.

Previous wording

We define transactions processed as the number of revenue generating payment transactions, such as checks, credit card and debit card transactions, automated clearing house (ACH) items and emerging payment types, which are initiated and generally processed through our platform during a period. The number of transactions also includes account-to-account and person-to-person transfers. The increase in number of transactions processed during the three months ended March 31, 2026 as compared to the same period in 2025 was primarily driven by the addition of new billers and increased transactions from both new and existing billers.

Current wording

We define transactions processed as the number of revenue generating payment transactions, such as checks, credit card and debit card transactions, automated clearing house (ACH) items and emerging payment types, which are initiated and generally processed through our platform during a period. The number of transactions also includes account-to-account and person-to-person transfers. The increase in number of transactions processed during the three and six months ended June 30, 2026 as compared to the same periods in 2025 was primarily driven by new biller implementations and increased transactions from both new and existing billers.

Previous wording

We continued to operate in an environment of elevated macroeconomic uncertainty during the first quarter of 2026. Although inflation has moderated from prior periods, consumer spending patterns and our cost structure remain affected by persistent pricing pressures, impending tariffs, and trade policy developments. Furthermore, heightened geopolitical instability stemming from the ongoing Iran war has exacerbated volatility in energy markets. Broader uncertainty relating to interest rates and these geopolitical tensions also continues to affect the operating environment.

Current wording

We continued to operate in an environment of elevated macroeconomic uncertainty during the second quarter of 2026. Although inflation has moderated from prior periods, our cost structure and consumer spending patterns remain impacted by persistent pricing pressures, impending tariffs, and evolving trade policies. Furthermore, heightened geopolitical instability, particularly the ongoing conflict in Iran, has exacerbated volatility in global energy markets. Broader uncertainties relating to interest rate trajectories and these geopolitical tensions continue to affect our overall operating environment.

Previous wording

Inflationary conditions and volatility in energy markets could indirectly affect our business by increasing customer bills, particularly in the utility sector, while also contributing to higher operating costs throughout the economy. Rapid increases in energy prices may place added pressure on household budgets, increase delinquencies, or alter payment timing patterns, which could adversely affect transaction mix and collections activity.

Current wording

Inflationary conditions and energy market volatility could indirectly affect our business by driving up customer bills, particularly within the utility sector, while also contributing to higher operating costs across the broader economy. Rapid increases in energy prices may place additional pressure on household budgets, potentially increasing delinquency rates or altering historical payment timing patterns.

Previous wording

These conditions could affect consumer payment behavior in countervailing ways. Consumers experiencing financial strain may defer payments, shift to lower-cost payment methods, or make partial and more frequent payments. While deferrals and lower-cost methods could reduce our average revenue per transaction and overall payment volume, an increase in partial payment activity might increase overall transaction counts.

Current wording

These conditions may influence consumer payment behaviors in countervailing ways. Consumers experiencing financial strain may elect to defer payments, shift to lower-cost payment methods, or make partial, more frequent payments. While payment deferrals and the adoption of lower-cost methods could reduce our average revenue per transaction and overall payment volume, an increase in partial payment activity could simultaneously drive higher aggregate transaction counts.

Previous wording

However, this dynamic may create a compounding effect on our unit economics. Any such increase in transaction volumes could trigger a proportional rise in our interchange, network, and processing fees. Because these elevated costs of revenue might offset the potential gains from higher transaction counts, this cycle could frequently yield flat net revenue growth. We may be unable to fully offset these interrelated pressures through pricing actions, as any such adjustments typically lag behind the impact of rising costs. As a result, an inability to fully offset these pressures in real-time might continue to adversely affect our margins, operating results, and financial condition.

Current wording

This shifting dynamic may create a compounding effect on our unit economics. Any corresponding increase in transaction volumes driven by partial payments could trigger a proportional rise in our interchange, network, and processing fees. Because these elevated costs of revenue may offset the potential top-line gains from higher transaction counts, this cycle could frequently result in flat net revenue growth. We may be unable to fully offset these interrelated pressures through pricing actions, as such adjustments typically lag behind the immediate impact of rising network and operating costs. Consequently, an inability to mitigate these pressures in real-time may continue to adversely affect our margins, operating results, and overall financial condition.

Previous wording

Additionally, beyond these external economic pressures, our ability to scale efficiently depends on our capacity to quickly hire, train, and retain a high-performing workforce. We offer competitive wages and invest in employee well-being to meet our customers’ increasing needs and support our long-term growth. While employee-related costs naturally fluctuate, they have trended upward alongside our business expansion, and we expect this trajectory to continue as we scale.

Current wording

Beyond external economic pressures, our ability to scale efficiently depends on our capacity to quickly recruit, train and retain a high-performing workforce. We continue to offer competitive compensation and invest in employee well-being to attract and retain a high-performing workforce that enables us to meet the expanding needs of our customers and support our long-term growth objectives. While employee-related costs naturally fluctuate, they have trended upward in tandem with our business expansion, and we expect this trajectory to continue as we scale our operations.

Previous wording

We use non-GAAP measures to supplement financial information presented on a GAAP basis. We believe that excluding certain items from our GAAP results allows management and our board of directors to more fully understand our consolidated financial performance from period to period and helps management project our future consolidated financial performance as forecasts are developed at a level of detail different from that used to prepare GAAP-based financial measures. Moreover, we believe these non-GAAP measures provide our investors with useful information to help them evaluate our operating results by facilitating an enhanced understanding of our operating performance and enabling them to make more meaningful period-to-period comparisons. In particular, we exclude interchange, assessment and other network fees in the presentation of contribution profit because we believe inclusion is less directly reflective of our operating performance as we do not control the payment channel used by consumers, which is the primary determinant of the amount of interchange, assessment and other network fees. We use contribution profit to measure the amount available to fund our operations after interchange and assessment fees, which are directly linked to the number of transactions we process and thus our revenue and gross profit. There are limitations to the use of the non-GAAP measures presented in this report. Our non-GAAP measures may not be comparable to similarly titled measures of other companies; other companies, including companies in our industry, may calculate non-GAAP measures differently than we do, limiting the usefulness of those measures for comparative purposes. These non-GAAP measures should not be considered in isolation from or as a substitute for financial measures prepared in accordance with GAAP.

Current wording

We use non-GAAP measures to supplement financial information presented on a GAAP basis. We believe that excluding certain items from our GAAP results allows management and our board of directors to more fully understand our consolidated financial performance from period to period and helps management project our future consolidated financial performance as forecasts are developed at a level of detail different from that used to prepare GAAP-based financial measures. Moreover, we believe these non-GAAP measures provide our investors with useful information to help them evaluate our operating results by facilitating an enhanced understanding of our operating performance and enabling them to make more meaningful period-to-period comparisons. In particular, we exclude interchange, assessment and other network fees in the presentation of contribution profit because we believe inclusion is less directly reflective of our operating performance as we do not control the payment channel used by consumers, which is the primary determinant of the amount of interchange, assessment and other network fees. We use contribution profit to measure the amount available to fund our operations after interchange, assessment and other network fees, which are directly linked to the number of transactions we process and thus our revenue and gross profit. There are limitations to the use of the non-GAAP measures presented in this report. Our non-GAAP measures may not be comparable to similarly titled measures of other companies; other companies, including companies in our industry, may calculate non-GAAP measures differently than we do, limiting the usefulness of those measures for comparative purposes. These non-GAAP measures should not be considered in isolation from or as a substitute for financial measures prepared in accordance with GAAP.

Previous wording

In general, contribution profit is driven by the number of transactions we process offset by network fees associated with processing those transactions. The amount of contribution profit per transaction may vary due to a variety of factors substantially outside of our control, including client size, type and industry as well as whether the client is a biller, financial institution or other partner. Contribution profit for the three months ended March 31, 2026 increased approximately 25.2%, as compared to the same period in 2025. The increase was driven by growth in transaction count and volume driven from both new and existing billers and financial institutions.

Current wording

In general, contribution profit is driven by the number of transactions we process, offset by network fees associated with processing those transactions. The amount of contribution profit per transaction may vary due to a variety of factors substantially outside of our control, including client size, type and industry as well as whether the client is a biller, financial institution or other partner. Contribution profit for the three and six months ended June 30, 2026 increased approximately 26.3% and 25.7%, as compared to the same periods in 2025. The increase was driven by growth in transaction count and volume driven from both new and existing billers and financial institutions.

Previous wording

Adjusted gross profit for the three months ended March 31, 2026 increased 27.3%, as compared to the same period in 2025. Adjusted gross profit is driven primarily by the same factors that impact gross profit with the exception of excluding the amortization and stock-based compensation recorded in cost of revenue. Adjusted gross profit improved in line with contribution profit. Adjusted gross profit as a percentage of contribution profit increased due to realization of economies of scale.

Current wording

Adjusted gross profit for the three and six months ended June 30, 2026 increased 28.6% and 28.0%, as compared to the same periods in 2025. Adjusted gross profit is driven primarily by the same factors that impact gross profit with the exception of excluding the amortization and stock-based compensation recorded in cost of revenue. Adjusted gross profit improved in line with contribution profit. Adjusted gross profit as a percentage of contribution profit increased due to realization of economies of scale.

Previous wording

Adjusted EBITDA is a measure of profitability and generally is expected to move in line with revenue, contribution profit, gross profit and adjusted gross profit. Adjusted EBITDA increased 41.5% in the three months ended March 31, 2026, as compared to the same period in 2025. The increase was primarily attributable to higher revenues driven by growth in transaction volumes from both new and existing billers and financial institutions. The rate of growth in Adjusted EBITDA exceeded the rate of growth in both contribution profit and adjusted gross profit, reflecting the operating leverage inherent in our business, as certain operating expenses are largely fixed and did not increase in proportion to the growth in revenue.

Current wording

Adjusted EBITDA is a measure of profitability and generally is expected to move in line with revenue, contribution profit, gross profit and adjusted gross profit. Adjusted EBITDA increased 54.0% and 47.9% in the three and six months ended June 30, 2026, as compared to the same periods in 2025. The increase was primarily attributable to higher revenues driven by growth in transaction volumes from both new and existing billers and financial institutions. The rate of growth in Adjusted EBITDA exceeded the rate of growth in both contribution profit and adjusted gross profit, reflecting the operating leverage inherent in our business, as certain operating expenses are largely fixed and did not increase in proportion to the growth in revenue.

Previous wording

The decrease in free cash flow for the three months ended March 31, 2026, as compared to the same period in 2025, was primarily driven by lower cash generated from operations, driven mainly by investment in working capital.

Current wording

The increase in free cash flow for the three months ended June 30, 2026, as compared to the same period in 2025, was primarily driven by higher cash generated from operations, reflecting stronger operating performance and improved conversion of working capital into cash, partially offset by higher capitalized internal-use software development costs.

Previous wording

The increase in sales and marketing expenses was primarily driven by higher reseller commissions and employee-related costs.

Current wording

The increase in sales and marketing expenses was primarily driven by higher agency and sales commission costs and higher employee-related costs, including stock-based compensation, partially offset by lower amortization expense.

Previous wording

The increase in general and administrative expenses was primarily driven by higher stock-based compensation, elevated employee compensation and related costs, and greater professional and legal fees and insurance premiums related to certain business policies.

Current wording

The increase in general and administrative expenses was primarily driven by higher stock-based compensation and employee-related costs, as well as higher lease expense and insurance premiums. These increases were partially offset by lower professional and legal fees.

Previous wording

The change in provision for income taxes as well as the increase in the Company's effective tax rate, which was 28.2% for the three months ended March 31, 2026, as compared to 22.4% for the same period in the prior year, were primarily due to higher pre-tax income, increased forecasted executive stock-based compensation in 2026 and more significant excess tax benefits on stock-based compensation in 2025.

Current wording

The change in provision for income taxes as well as the increase in the Company's effective tax rate, which was 28.3% for the three months ended June 30, 2026, as compared to 19.9% for the same period in the prior year, were primarily due to increased executive stock-based compensation in 2026 and more significant excess tax benefits on stock-based compensation in 2025.

Previous wording

While gross profit increased in tandem with revenue growth, gross margin remained flat, as a shift in customer mix towards high-volume enterprise billers with lower margins was offset by improved economies of scale.

Current wording

While gross profit increased in tandem with revenue growth, gross margin increased slightly, as a shift in customer mix towards high-volume enterprise billers with lower margins was offset by improved economies of scale.

Previous wording

Research and development expenses increased primarily due to higher employee-related costs, including benefits, driven by headcount growth and annual compensation adjustments. The remaining variance was driven by a rise in cloud computing services expenses, reflecting greater utilization of our cloud-based infrastructure and expanded data processing demands, as well as higher amortization of capitalized internal-use software development costs.

Current wording

Research and development expenses increased primarily due to higher employee-related costs, including benefits, driven by headcount growth and annual compensation adjustments, as well as higher cloud computing services expense. These increases were partially offset by lower amortization expense.

Previous wording

As of March 31, 2026, we had $338.8 million of unrestricted cash and cash equivalents. We believe that existing unrestricted cash and cash equivalents will be sufficient to support our working capital, capital expenditure requirements, and other commitments described in Note 8, for at least the next 12 months. Since inception, we have financed operations primarily through the sale of equity securities and revenue from payment transaction fees. Our principal uses of cash are funding operations, which primarily consist of employee-related costs, payments to third parties to fulfill our payment transactions and payments to sales and marketing partners. Although this is subject to change based on market opportunities or changing priorities, we currently do not have any material planned capital expenditures or acquisitions in the next 12 months.

Current wording

As of June 30, 2026, we had $377.7 million of unrestricted cash and cash equivalents. We believe that existing unrestricted cash and cash equivalents will be sufficient to support our working capital, capital expenditure requirements, and other commitments described in Note 8, for at least the next 12 months. Since inception, we have financed operations primarily through the sale of equity securities and revenue from payment transaction fees. Our principal uses of cash are funding operations, which primarily consist of employee-related costs, payments to third parties to fulfill our payment transactions and payments to sales and marketing partners. Although this is subject to change based on market opportunities or changing priorities, we currently do not have any material planned capital expenditures or acquisitions in the next 12 months.

Previous wording

Our primary source of operating cash is revenue from payment transaction fees. Our primary uses of operating cash are personnel-related costs, payments to third parties to fulfill our payment transactions and payments to sales and marketing partners. Net cash provided by operating activities for the three months ended March 31, 2026 was $30.5 million. Net income was $20.9 million, adjusted for non-cash charges of $16.9 million, consisting primarily of depreciation and amortization, stock-based compensation, amortization of capitalized contract acquisition costs and warrant cost, non-cash lease expense and provision for expected credit losses, which contributed positively to cash provided from operating activities. This was offset by net cash outflows of $7.3 million due to changes in our operating assets and liabilities.

Current wording

Our primary source of operating cash is revenue from payment transaction fees. Our primary uses of operating cash are personnel-related costs, payments to third parties to fulfill our payment transactions and payments to sales and marketing partners. Net cash provided by operating activities for the six months ended June 30, 2026 was $79.3 million. Net income was $46.4 million, adjusted for non-cash charges of $34.1 million, consisting primarily of depreciation and amortization, stock-based compensation, amortization of capitalized contract acquisition costs and warrant cost, non-cash lease expense and provision for expected credit losses. These amounts were offset by $1.2 million of net cash outflows resulting from changes in our operating assets and liabilities.

Previous wording

Net cash provided by operating activities for the three months ended March 31, 2025 was $50.4 million. Net income was $13.8 million, adjusted for non-cash charges of $14.2 million consisting primarily of depreciation and amortization, stock-based compensation, amortization of capitalized contract acquisition costs and warrant cost, non-cash lease expense and provision for expected credit losses, which contributed positively to cash provided from operating activities. This was additionally supported by net cash inflows of $22.4 million provided by changes in our operating assets and liabilities.

Current wording

Net cash provided by operating activities for the six months ended June 30, 2025 was $81.9 million. Net income was $28.5 million, adjusted for non-cash charges of $30.0 million consisting primarily of depreciation and amortization, stock-based compensation, amortization of capitalized contract acquisition costs and warrant cost, non-cash lease expense and provision for expected credit losses. Changes in our operating assets and liabilities provided an additional $23.4 million of cash.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2026 consisted of $9.5 million of capitalized internal-use software development costs and $0.1 million of purchases of property and equipment, which was offset by $0.1 million cash inflow from net change in interest-bearing deposits.

Current wording

Net cash used in investing activities for the six months ended June 30, 2026 consisted of $19.2 million of capitalized internal-use software development costs and $0.2 million of purchases of property and equipment, partially offset by a $0.9 million cash inflow from net change in interest-bearing deposits.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2025 consisted of $9.3 million of capitalized internal-use software development costs and $0.1 million of purchases of property and equipment, which was offset by $1.1 million cash inflow from net change in interest-bearing deposits.

Current wording

Net cash used in investing activities for the six months ended June 30, 2025 consisted of $18.2 million of capitalized internal-use software development costs and $0.2 million of purchases of property and equipment, partially offset by a $0.6 million cash inflow from net change in interest-bearing deposits.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2026 consisted primarily of $3.3 million of payments of taxes withheld on net settled vesting of restricted stock units.

Current wording

Net cash used in financing activities for the six months ended June 30, 2026 consisted primarily of $5.4 million of payments of taxes withheld on net settled vesting of restricted stock units.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2025 consisted primarily of $1.9 million of payments of taxes withheld on net settled vesting of restricted stock units, which was offset by $0.1 million of proceeds from the exercise of stock-based awards by employees.

Current wording

Net cash used in financing activities for the six months ended June 30, 2025 consisted primarily of $3.8 million of payments of taxes withheld on net settled vesting of restricted stock units, which was offset by $0.1 million of proceeds from the exercise of stock-based awards by employees.