Repay Holdings Corp

Condensed Consolidated Balance Sheets

Condensed Consolidated Statem ents of Operations

Condensed Consolidated Statements of Changes in Equity

Condensed Consolidated Statements of Changes in Equity

(Unaudited) (Continued)

Condensed Consolidated Statem ents of Cash Flows

1. Organizational Structure and Corporate Information

Repay Holdings Corporation was incorporated as a Delaware corporation on July 11, 2019 in connection with the closing of a transaction (the “Business Combination”) pursuant to which Thunder Bridge Acquisition Ltd., a special purpose acquisition company organized under the laws of the Cayman Islands (“Thunder Bridge”), (a) domesticated into a Delaware corporation and changed its name to “Repay Holdings Corporation” and (b) consummated the merger of a wholly owned subsidiary of Thunder Bridge with and into Hawk Parent Holdings, LLC, a Delaware limited liability company (“Hawk Parent”).

Throughout this section, unless otherwise noted or unless the context otherwise requires, the terms “we”, “us”, “Repay” and the “Company” and similar references refer to Repay Holdings Corporation and its consolidated subsidiaries.

The Company is headquartered in Atlanta, Georgia.

2. Basis of Presentation and Summary of Significant Accounting Policies

Unaudited Interim Condensed Consolidated Financial Statements

These unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited condensed consolidated financial statements and accompanying notes, which are included in the Annual Report on Form 10-K for the year ended December 31, 2024.

The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and with instructions to Form 10-Q and Rule 10-01 of SEC Regulation S-X as they apply to interim financial information. Accordingly, the interim condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements, although the Company believes that the disclosures made are adequate to make the information not misleading. The Company uses the accrual basis of accounting whereby revenues are recognized when earned, usually upon the date services are rendered, and expenses are recognized at the date services are rendered or goods are received.

The interim condensed consolidated financial statements are unaudited, but in the Company’s opinion include all adjustments of a normal recurring nature or a description of the nature and amount of any adjustments other than normal recurring adjustments, operations and cash flows as of and for the periods presented. The interim financial results are not necessarily indicative of results that may be expected for any other interim period or the fiscal year.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Repay Holdings Corporation and its majority-owned subsidiary, Hawk Parent Holdings LLC, along with Hawk Parent Holdings LLC’s wholly owned subsidiaries: Hawk Intermediate Holdings, LLC, Hawk Buyer Holdings, LLC, Repay Holdings, LLC, M&A Ventures, LLC, Repay Management Holdco Inc., Repay Management Services LLC, Sigma Acquisition, LLC, Wildcat Acquisition, LLC, Marlin Acquirer, LLC, REPAY International LLC, REPAY Canada Solutions ULC, TriSource Solutions, LLC (“TriSource”), Mesa Acquirer, LLC, CDT Technologies LTD (“Ventanex”), Viking GP Holdings, LLC, cPayPlus, LLC (“cPayPlus”), CPS Payment Services, LLC, Media Payments, LLC, Custom Payment Systems, LLC, Electronic Payment Providers, LLC, Internet Payment Exchange, LLC, Stratus Payment Solutions, LLC, Clear Payment Solutions, LLC, Harbor Acquisition LLC, Payix Holdings Incorporated and Payix Incorporated. All significant intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications

The Company changed its presentation for Interest income (expense), net to Interest income and Interest expense within the Consolidated Statements of Operations. Prior period amounts have been revised to conform to the current presentation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported Condensed Consolidated Statements of Operations during the reporting period. Actual results could differ materially from those estimates.

Segment Reporting

The Company reports operating results throughtwo reportable segments: (1) Consumer Payments and (2) Business Payments, as further discussed in Note 13. Segments.

Recently Issued Accounting Pronouncements not yet Adopted

Income Taxes

In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires public business entities on an annual basis to (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently in the process of evaluating the effects of ASU No. 2023-09 on its Consolidated Financial Statements.

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued Accounting Standards Update No. 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40)” (“ASU 2024-03”). ASU 2024-03 requires an entity to disclose specified information about certain costs and expenses in the notes to financial statements at each interim and annual reporting period. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, with early adoption permitted. The Company is currently in the process of evaluating the effects of ASU 2024-03 on its Consolidated Financial Statements.

Induced Conversions of Convertible Debt Instruments

In November 2024, the FASB issued Accounting Standards Update No. 2024-04, “Debt - Debt with Conversion and Other Options (Subtopic 470-20)” (“ASU 2024-04”). ASU 2024-04 clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. ASU 2024-04 is effective for annual periods beginning after December 15, 2025, with early adoption permitted for all entities that have adopted the amendments in Accounting Standards Update No. 2020-06. The Company is currently in the process of evaluating the effects of ASU 2024-04 on its Consolidated Financial Statements.

3. Revenue

Disaggregation of revenue

The Company’s revenue is from two types of relationships: (i) direct relationships and (ii) indirect relationships. The following table presents the Company’s revenue disaggregated by segment and by the type of relationship for the periods indicated.

When the Company’s right to consideration for performance is contingent upon a future event or satisfaction of additional performance obligations, the amount of revenues the Company has recognized in excess of the amount the Company has billed to the client is recognized as a contract asset. The contract asset balance was $2.5 million and $1.7 million as of June 30, 2025 and December 31, 2024, respectively, and is included within Prepaid expenses and other in the Condensed Consolidated Balance Sheets.

As of June 30, 2025 and December 31, 2024, the Company recorded deferred commissions of $2.4 million and $0, net of amortization, respectively, within Other assets in the Condensed Consolidated Balance Sheets. The amortization of deferred commissions is recorded within Selling, general and administrative in the Condensed Consolidated Statements of Operations.

4. Earnings Per Share

During the three and six months ended June 30, 2025 and 2024, basic and diluted net loss per common share are the same since the inclusion of the assumed exchange of all limited liability company interests of Hawk Parent (“Post-Merger Repay Units”), unvested share-based awards, outstanding stock options, outstanding employee stock purchase plan (“ESPP”) purchase rights and the Company’s convertible senior notes would have been anti-dilutive. During the three and six months ended June 30, 2025, the aggregate principal amount of the 2029 Notes is not included in the computation of senior notes convertible into Class A common stock as the Company is required to settle such amount in cash. The Company may elect to settle the remainder, if any, of the Company’s conversion obligation in excess of the aggregate principal amount of the 2029 Notes being converted in cash, shares of the Company’s Class A common stock, or a combination of cash and shares. Because the average market price of the Company’s Class A common stock for the period was less than the conversion price, there are no incremental shares to be considered in the computation of senior notes convertible into Class A common stock.

The following table summarizes net income (loss) attributable to the Company and the weighted average basic and diluted shares outstanding:

For the three and six months ended June 30, 2025 and 2024, the following common stock equivalent shares were excluded from the computation of the diluted loss per share, since their inclusion would have been anti-dilutive:

Shares of the Company’s Class V common stock do not participate in the earnings or losses of the Company and, therefore, are not participating securities. As such, separate presentation of basic and diluted earnings per share of Class V common stock under the two-class method has not been presented. Each share of the Company’s Class V common stock gives the holder the right to vote the number of shares corresponding to the number of Post-Merger Repay Units held by that holder, but shares of Class V common stock have no economic rights.

5. Fair Value

The following table summarizes, by level within the fair value hierarchy, estimated fair values of the Company’s assets and liabilities measured at fair value on a recurring or nonrecurring basis or disclosed, but not carried, at fair value in the Condensed Consolidated Balance Sheets as of the dates presented. There were no transfers into, out of, or between levels within the fair value hierarchy during any of the periods presented.

Cash and cash equivalents

Cash and cash equivalents contains cash on hand, demand deposit accounts, money market accounts and short term investments with original maturities of three months or less. They are classified within Level 1 of the fair value hierarchy, under Accounting Standard Codification (“ASC”) 820, Fair Value Measurements (“ASC 820”), as the price is obtained from quoted market prices in an active market. The carrying amounts of the Company’s cash and cash equivalents approximate their fair values due to the short maturities and highly liquid nature of these accounts.

Restricted Cash

Restricted cash is classified within Level 1 of the fair value hierarchy under ASC 820, as the primary component is cash that is used as collateral for debts. The carrying amounts of the Company’s restricted cash approximate their fair values due to the highly liquid nature.

Other assets

Other assets contain a minority equity investment in a privately-held company. The Company elected a measurement alternative for measuring this investment under ASC 321, Investments – Equity Securities, in which the carrying amount is adjusted based on any observable price changes in orderly transactions. The investment is classified as Level 2 as observable adjustments to value are infrequent and occur in an inactive market.

Borrowings

The revolving credit facility and convertible senior notes are measured at amortized cost, which the carrying value is unpaid principal net of unamortized debt discount and debt issuance costs (“DDIC”). The estimated fair value of the revolving credit facility approximates the unpaid principal because its interest rate approximates market interest rates. The estimated fair value of convertible senior notes is determined using the quoted prices from over-the-counter markets. The estimated fair value of the Company’s borrowings is classified within Level 2 of the fair value hierarchy, as the market interest rates and quoted prices are generally observable and do not contain a high level of subjectivity. As of June 30, 2025 and December 31, 2024, the Company had $0 drawn against the revolving credit facility.

The following table provides the carrying value and estimated fair value of borrowings. See Note 8. Borrowings for further discussion on borrowings.

Tax Receivable Agreement

Upon the completion of the Business Combination, the Company entered into the TRA with holders of Post-Merger Repay Units. As a result of the TRA, the Company established a liability in its consolidated financial statements. The Company elected to measure TRA at fair value under ASC 825, Financial Instruments - Fair Value Option, to better align its economic value with the Company’s risk management strategies. The fair value of TRA is based on estimates of discounted future cash flows associated with the estimated payments to the Post-Merger Repay Unit holders. These inputs are not observable in the market; thus, the TRA is classified within Level 3 of the fair value hierarchy, under ASC 820. The change in fair value is re-measured at each reporting period with the change in fair value being recognized in accordance with ASC 805, Business Combinations, which is recorded within Change in fair value of tax receivable liability in the Company’s Condensed Consolidated Statements of Operations.

The Company used a discount rate, also referred to as the Early Termination Rate, as defined in the TRA, to determine the present value, based on arisk-free rate plus a spread, pursuant to the TRA. A rate of 6.17% was applied to the forecasted TRA payments at June 30, 2025, in order to determine the fair value. A significant increase or decrease in the discount rate could have resulted in a lower or higher balance, respectively, as of the measurement date. During the six months ended June 30, 2025, the TRA balance was adjusted by $10.7 million through an exchange, a payment, accretion expense and a valuation adjustment, related to a change in the discount rate, which was 6.21% as of December 31, 2024.

The following table provides a rollforward of the TRA related to the acquisition and exchanges of Post-Merger Repay Units. See Note 12. Taxation for further discussion on the TRA.

6. Intangible Assets

The Company holds definite and indefinite-lived intangible assets. As of June 30, 2025 and December 31, 2024, the indefinite-lived intangible assets consist ofone trade name, arising from the acquisition of Hawk Parent.

Intangible assets consisted of the following:

The Company’s amortization expense for intangible assets was $25.3 million and $50.1 million for the three and six months ended June 30, 2025, respectively. The Company’s amortization expense for intangible assets was $26.6 millionand $53.0 million for the three and six months ended June 30, 2024, respectively.

The estimated amortization expense for the next five years and thereafter in the aggregate is as follows:

7. Goodwill

The following table presents changes to goodwill by segment for thesix months ended June 30, 2025.

After considering the decline in the Company’s stock price during the second quarter of 2025, the Company considered goodwill impairment triggering events and determined that goodwill was more likely than not impaired. The Company performed a quantitative analysis using both a discounted cash flow method and a market comparable method of estimating fair value and concluded that goodwill associated with the Consumer Payments reporting unit was impaired as of June 30, 2025. The fair value of the Consumer Payments reporting unit was primarily impacted by a change in the discount rate and the decrease to comparable company multiples. The Company recognized an impairment loss of $103.2 million on goodwill related to the Consumer Payments segment and an impairment loss of $0.6 million related to the Business Payments segment within the Impairment loss in the Company’s Consolidated Statements of Operations for thethree and six months ended June 30, 2025. As of June 30, 2025, accumulated impairment losses were $103.2 millionfor the Consumer Payments segment and $76.3 million for the Business Payments segment. As of December 31, 2024, accumulated impairment losses were $75.7 million for the Business Payments segment andno accumulated impairment losses for the Consumer Payments segment.

8. Borrowings

Second Amended Credit Agreement

On July 10, 2024, the Company entered into a Second Amended and Restated Revolving Credit Agreement (the “Second Amended Credit Agreement”) with certain financial institutions, as lenders, and Truist Bank, as administrative agent. The Second Amended Credit Agreement establishes a $250.0 million senior secured revolving credit facility. The borrowings accrue interest at either base rate plus a margin of 0.75% to 1.75% or at an adjusted SOFR rate plus a margin of 1.75% to 2.75%, in each case depending on the total net leverage ratio, as defined in the Second Amended Credit Agreement. The unused commitment fees accrue at 0.25% on the daily amount of unused commitment. This facility matures on the earlier of (a)July 10, 2029, (b) the date that is 91 days prior to the maturity date of the 2026 Notes (defined below) (subject to certain exceptions for adequate liquidity) and (c) the date that is 91 days prior to the maturity date of the 2029 Notes (defined below) (subject to certain exceptions for adequate liquidity). The maturity date may be extended, subject to certain terms and conditions.

As of June 30, 2025, the Company had $0 drawn against the revolving credit facility. The Company paid $0.2 million and $0.3 million in fees related to unused commitments for the three and six months ended June 30, 2025, respectively. The Company paid $0.1 million and $0.2 million in fees related to unused commitments for thethree and six months ended June 30, 2024, respectively.

Convertible Senior Notes

On January 19, 2021, the Company issued $440.0 million in aggregate principal amount of 0.00% Convertible Senior Notes due 2026 (the “2026 Notes”) in a private placement. The initial conversion rate of any 2026 Notes was 29.7619 shares of Class A common stock per $1,000 principal amount of 2026 Notes (equivalent to an initial conversion price of approximately $33.60 per share of Class A common stock). Upon conversion of the 2026 Notes, the Company may choose to pay or deliver cash, shares of the Company’s Class A common stock, or a combination of cash and shares of the Company’s Class A common stock. The 2026 Notes will mature on February 1, 2026, unless earlier converted, repurchased or redeemed. Subject to Nasdaq requirements, the Company controls the conversion rights prior to November 3, 2025, unless a fundamental change or an event of default occurs. On July 8, 2024, the Company repurchased $220.0 million in aggregate principal amount of the 2026 Notes at a discount based on the quoted prices from over-the-counter markets, with a cash payment of $205.2 million. The repurchase of the 2026 Notes resulted in a gain of $13.1 million, net of a write-off of debt issuance costs relating to the repurchased principal during the year ended December 31, 2024, and was recorded within Gain on debt extinguishment in the Company’s Condensed Consolidated Statements of Operations.

On July 8, 2024, the Company issued $287.5 million aggregate principal amount of 2.875% Convertible Senior Notes due 2029 (the “2029 Notes”) in a private placement to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. $27.5 million aggregate principal amount of the 2029 Notes were sold in connection with the full exercise of the initial purchasers’ option to purchase such additional 2029 Notes offering pursuant to the purchase agreement. The net proceeds of the 2029 Notes were $279.2 million after fees and expenses incurred. The 2029 Notes bear interest at a fixed rate of 2.875% per year, payable semiannually in arrears on January 15 and July 15 of each year, beginning on January 15, 2025. The initial conversion rate of the 2029 Notes was 76.8182 of the Class A common stock per $1,000 principal amount of the 2029 Notes (equivalent to an initial conversion price of approximately $13.02 pershare of Class A common stock). The conversion rate is subject to customary adjustments upon the occurrence of certain events. Prior to April 15, 2029, the 2029 Notes are convertible at the option of the holders, only under certain circumstances, into cash up to the aggregate principal amount of the 2029 Notes to be converted and cash, shares of the Company’s Class A common stock, or a combination of cash and shares, at the Company’s election, in respect of the remainder, if any, of the Company’s conversion obligation in excess of the aggregate principal amount of the 2029 Notes being converted. On or after April 15, 2029 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert the 2029 Notes at any time, regardless of the foregoing circumstances. The 2029 Notes will mature on July 15, 2029, unless earlier repurchased, redeemed, or converted in accordance with their terms.

During the six months ended June 30, 2025, the conversion contingencies of the convertible senior notes were not met, and the conversion terms of the 2026 Notes and 2029 Notes were not significantly changed. The Company’s interest expense on the convertible senior notes was$2.1 million and $4.1 million for the three and six months ended June 30, 2025, respectively. The Company’s interest expense on the convertible senior notes was $0 for both the three and six months ended June 30, 2024.

The following table summarizes the total borrowings under the credit agreements and convertible senior notes:

(1)

The Company incurred $0.8 million and $1.6 millionof interest expense for the amortization of deferred debt issuance costs for the three and six months ended June 30, 2025, respectively. The Company incurred $0.7 million and $1.4 million of interest expense for the amortization of deferred debt issuance costs for the three and six months ended June 30, 2024, respectively.

The following is a summary of principal maturities of long‑term debt for each of the next five years ending December 31 and in the aggregate:

9. Commitments and Contingencies

Legal Matters

The Company is a party to various claims and lawsuits incidental to its business. In the Company’s opinion, the liabilities, if any, which may ultimately result from the outcome of such matters, individually or in the aggregate, are not expected to have a material adverse effect on its financial position, liquidity, results of operations or cash flows.

Leases

The Company has commitments under operating leases for real estate leased from third parties under non-cancelable operating leases. The Company’s leases typically have lease terms between three years andten years, with the longest lease term having an expiration date in 2035. Most of these leases include one or more renewal options forfive years or less, andcertain leases also include lessee termination options. At lease commencement, the Company assesses whether it is reasonably certain to exercise a renewal option, or reasonably certain not to exercise a termination option, by considering various economic factors. Options that are reasonably certain of being exercised are factored into the determination of the lease term, and related payments are included in the calculation of the ROU asset and lease liability.

During both the three and six months ended June 30, 2025, the Company recognized sublease income of $0.1 million. During both three and six months ended June 30, 2024, the Company recognized sublease incomeof $0.1 million. Sublease income is recorded within Other (loss) income in the Company’s Consolidated Statements of Operations.

The components of lease cost are presented in the following table:

Amounts reported in the Condensed Consolidated Balance Sheets were as follows:

Other information related to leases are as follows:

The following table presents a maturity analysis of the Company’s operating leases liabilities as of June 30, 2025:

10. Related Party Transactions

The Company held TRA payables for related parties of $25.9 million and $27.5 million as of June 30, 2025 and December 31, 2024, respectively. These amounts were owed to holders of the Post-Merger Repay Units.

11. Share Based Compensation

Omnibus Incentive Plan

At the 2019 Annual Shareholders Meeting of Thunder Bridge, the shareholders considered and approved the 2019 Omnibus Incentive Plan (the “Incentive Plan”) which resulted in the reservation of 7,326,728 shares of Class A common stock for issuance thereunder. The Incentive Plan initially became effective immediately upon the closing of the Business Combination. In June 2022, the Incentive Plan was amended and restated to reserve an additional 6,500,000 shares of Class A common stock for issuance thereunder. In May 2024, the Incentive Plan was again amended and restated to reserve an additional 8,400,000 shares of Class A common stock for issuance thereunder.

Under this plan, the Company currently has four types of share-based compensation awards outstanding: performance stock units (“PSUs”), restricted stock awards (“RSAs”), restricted stock units (“RSUs”) and performance-based stock options (“PSOs”).

Share-Based Awards

The following table summarizes share-based compensation expense and the related income tax benefit recognized for the Company’s share-based compensation awards. Share-based compensation expenses are recorded within Selling, general and administrative in the Company’s Condensed Consolidated Statement of Operations.

Activity for RSAs for thesix months ended June 30, 2025 was as follows:

(1)

The forfeited shares include shares forfeited as a result of employee terminations and shares withheld to satisfy employees’ tax withholding and payment obligations in connection with the vesting of restricted stock awards under the Incentive Plan during thesix months ended June 30, 2025; further, these forfeited shares are added back to the amount of shares available for grant under the Incentive Plan.

Activity for RSUs for the six months ended June 30, 2025 was as follows:

Activity for PSUs for thesix months ended June 30, 2025 was as follows:

(1)

Represent shares to be paid out at 100% target level.

For PSUs, RSAs, and RSUs vested during the six months ended June 30, 2025, the total fair value, based upon the Company’s Class A common stock price at the date vested, was $9.9 million. Unrecognized compensation expense related to unvested PSUs, RSAs and RSUswas $33.6 million at June 30, 2025, which is expected to be recognized as expense over the weighted-average period of 1.9 years.

Stock Options

Activity for PSOs for thesix months ended June 30, 2025 was as follows:

The Company recognized compensation expense for PSOs of $0.1 million and $0.3 million during the three and six months ended June 30, 2025, respectively. The Company recognized compensation expense for PSOs of $0.2 million and $0.6 million during the three and six months ended June 30, 2024, respectively. Unrecognized compensation expense related to outstanding PSOs was $0.2 million at June 30, 2025, which is expected to be recognized as expense over the weighted-average period of 0.7 years.

Employee Stock Purchase Plan

On August 18, 2021, the Company’s stockholders approved the Repay Holdings Corporation 2021 Employee Stock Purchase Plan. The purpose of the ESPP is to provide eligible employees with the opportunity to purchase the Company’s Class A common stock through accumulated payroll deductions. A total of 1,000,000 shares of the Company’s Class A common stock are available for issuance under the ESPP. Under the ESPP, participants are offered the right to purchase shares of the Company’s Class A common stock at a discount during a series of offering periods. The length of the offering periods under the ESPP will be determined by the administrator and may be up to twenty-seven months long.

12. Taxation

Repay Holdings Corporation is taxed as a corporation and is subject to paying corporate federal, state and local taxes on the income allocated to it from Hawk Parent, based upon Repay Holding Corporation’s economic interest held in Hawk Parent, as well as any stand-alone income or loss it generates. Hawk Parent is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Hawk Parent is not subject to U.S. federal and certain state and local income taxes. Hawk Parent’s members, including Repay Holdings Corporation, are liable for federal, state and local income taxes based on their allocable share of Hawk Parent’s pass-through taxable income.

The Company’s effective tax rate was 1.2% and 1.5% for thethree and six months ended June 30, 2025, respectively. The Company recorded an income tax benefit of$1.3 million and$1.7 million for the three and six months ended June 30, 2025, respectively. The effective tax rate for the three and six months ended June 30, 2025 includes a stock-based compensation adjustments net tax shortfall of $2.0 million related to restricted stock awards vesting, which is required to be recorded discretely in the interim period in which it occurs. In addition, the effective tax rate includes a net tax impact of $27.6 million related to the impact of the goodwill impairment recorded for financial accounting purposes which is required to be recorded discretely in the interim period in which it occurs due to it being a significant, infrequently occurring item. The effective tax rate of the Company differs from the federal statutory rate of 21% primarily due to the tax structure of the Company, the relative weighting of the noncontrolling interest, lower income from operations over the current relevant period, as well as the aforementioned items required to be reported discretely in the interim period. The Company’s effective tax rate was 31.8% and 14.8% for thethree and six months ended June 30, 2024, respectively. The Company recorded an income tax benefit of $2.0 million and $1.7 million for thethree and six months ended June 30, 2024, respectively. The effective tax rate for the three and six months ended June 30, 2024 includes a stock-based compensation adjustments net tax shortfall of $1.6 million related to restricted stock awards vesting and a $0.4 million state rate change impact on deferred taxes, which are required to be recorded discretely in the interim period in which they occur.

The Company recognized adjustments of$1.3 million and$1.7 million for the three and six months ended June 30, 2025, respectively, of deferred tax assets related to the income tax benefit, derived from the net operating loss generated over the same period. The Company recognized adjustments of $2.0 million and $1.7 million for thethree and six months ended June 30, 2024, respectively, of deferred tax assets related to the income tax benefit, derived from the net operating loss generated over the same period.

Deferred tax assets, net of$165.1 million as of June 30, 2025, relates primarily to the basis difference in the Company’s investment in Hawk Parent. The basis difference arose primarily as a result of the subsequent exchanges of Post-Merger Repay Units by the Company. In addition, as a result of the merger with BillingTree on June 15, 2021, an estimated opening deferred tax liability net of $36.1 million, as adjusted, was recorded. The merger was recognized as a Qualified Stock Purchase within the meaning of Internal Revenue Code (the “Code”) Section 338(d)(3). As such, no step up in the tax asset basis was permitted creating an estimated net deferred tax liability related to the tax asset basis difference in the investment in Hawk Parent on the opening balance sheet date. Furthermore, as part of the 2029 Notes issuance on July 8, 2024, the Company incurred $39.2 million of costs for privately negotiated capped call transactions with certain financial institutions to cover the number of shares of Class A common stock underlying the 2029 Notes. The capped call had an initial strike price of $13.02 per share and a cap price of $20.42 per share, which is subject to certain adjustments. For tax purposes, this is considered a tax-efficient capped call (i.e., the capped call is integrated with the 2029 Notes in accordance with Section 1.1275-6 of the Code). As such, the total $39.2 million incurred to acquire the capped call is treated as original issue discount (“OID”) on synthetic debt and eligible for a deduction as interest expense over the life of the instrument, subject to certain limitations under 163(j). As a result of the capped call being booked as equity for GAAP purposes instead of OID on synthetic debt, the Company is required to set up a tax effected deferred tax asset of $9.9 million for the equivalent amount of the capped call. This temporary difference created as a result of the OID Interest Expense deduction is expected to be realized over the term of the instrument.

The Company did not recognize any adjustment to the deferred tax asset (“DTA”) and offsetting deferred tax liability (“DTL”) recorded as a result of the ceiling rule limitation arising under Code Sec. 704(c) for the three and six months ended June 30, 2025, to account for the portion of the Company’s outside basis in the partnership interest that it will not recover through tax deductions. As the ceiling rule causes taxable income allocations to be in excess of 704(b) book allocations the DTL will unwind, leaving only the DTA, which may only be recovered through the sale of the partnership interest in Hawk Parent. The Company has concluded, based on the weight of all positive and negative evidence, that all of the DTA associated with the ceiling rule limitation is not likely to be realized. As such, a 100% valuation allowance was recognized.

On July 4, 2025, the United States enacted tax reform legislation through the One Big Beautiful Bill Act (“OBBBA”). Included in this legislation are provisions that allow for the immediate expensing of domestic United States research and development expenses, immediate expensing of certain capital expenditures, and other changes to the United

States taxation of profits derived from foreign operations. As the legislation was signed into law after the close of our second quarter, the impacts are not included in our operating results for the six months ended June 30, 2025. The Company continues to evaluate the impact of OBBBA but currently does not expect it to have a material impact on our estimated annual effective tax rate in 2025.

No uncertain tax positions existed as of June 30, 2025.

Tax Receivable Agreement Liability

Pursuant to the Company’s election under Section 754 of the Code, the Company expects to obtain an increase in its share of the tax basis in the net assets of Hawk Parent when Post-Merger Repay Units are redeemed or exchanged for Class A common stock of Repay Holdings Corporation. The Company intends to treat any redemptions and exchanges of Post-Merger Repay Units as direct purchases for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that the Company would otherwise pay in the future to various tax authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.

On July 11, 2019, the Company entered into a TRA that provides for the payment by the Company of 100% of the amount of any tax benefits realized, or in some cases are deemed to realize, as a result of (i) increases in its share of the tax basis in the net assets of Hawk Parent resulting from any redemptions or exchanges of Post-Merger Repay Units and from its acquisition of the equity of the selling Hawk Parent members, (ii) tax basis increases attributable to payments made under the TRA, and (iii) deductions attributable to imputed interest pursuant to the TRA (the “TRA Payments”). The TRA Payments are not conditioned upon any continued ownership interest in Hawk Parent or the Company. The rights of each party under the TRA other than the Company are assignable. The timing and amount of aggregate payments due under the TRA may vary based on a number of factors, including the timing and amount of taxable income generated by the Company each year, as well as the tax rate then applicable, among other factors.

As of June 30, 2025, the Company had a liability of$193.0 million related to its projected obligations under the TRA, which is captioned as tax receivable agreement liability in the Company’s Unaudited Condensed Consolidated Balance Sheet. The decrease of$10.7 million in the TRA liability for the six months ended June 30, 2025 was primarily a result of the payment of $16.3 million on the current balance of the TRA, partially offset by accretion and a small decrease in the Early Termination Rate, as reported at December 31, 2024, over the same period.

13. Segments

The Company organizes its business structure aroundtwo operating segments based on review of discrete financial results for each of the operating segments by the Company’s chief operating decision maker (“CODM”), for performance assessment and resource allocation purposes. Each of the Company’s operating segments represents a reportable segment based on ASC 280, Segment Reporting. The Company’stwo reportable segments are as follows: (1) Consumer Payments and (2) Business Payments. The Company’s CODM is the Chief Executive Officer. For both segments, the CODM uses the segment gross profit to allocate resources (including employees, property, and financial or capital resources) and assess performance of each segment predominantly in the annual budget and forecasting process. The CODM considers budget-to-actual variances on a monthly basis for the gross profit measure when making decisions about allocating capital and personnel to the segments.

The Consumer Payments segment provides payment processing solutions (including debit and credit card processing, ACH processing and other electronic payment acceptance solutions, as well as our loan disbursement product) that enable the Company’s clients to collect payments and disburse funds to consumers and includes the Company’s clearing and settlement solutions (“RCS”) offering. RCS is the Company’s proprietary clearing and settlement platform through which the Company markets customizable payment processing programs to other Independent Sales Organizations (“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. The Consumer Payments segment represented approximately 86% of the Company’s total revenue after any intersegment eliminations for both the three and six months ended June 30, 2025. The Consumer Payments segment represented approximately 86% and 87% of the Company’s total revenue after any intersegment eliminations for thethree and six months ended June 30, 2024, respectively.

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 the Company’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, HOA management and hospitality. The Business Payments segment represented approximately 14% of the Company’s total revenue after any intersegment eliminations for both the three and six months ended June 30, 2025. The Business Payments segment represented approximately 14% and 13% of the Company’s total revenue after any intersegment eliminations for thethree and six months ended June 30, 2024, respectively.

The following table presents revenue, cost of services and gross profit for each reportable segment.

(1)

Represents revenue eliminations between business units within the Consumer Payments segment and eliminations of intersegment revenues for consolidation purpose.

(2)

Represents revenue less costs of services (exclusive of depreciation and amortization).

(3)

Represents total operating expenses less costs of services (exclusive of depreciation and amortization).

Revenue and costs of services are attributed directly to each segment. There is no significant concentration of revenue or assets in foreign countries as of June 30, 2025. The CODM reporting package does not include interest income (expense), net, depreciation and amortization, income tax benefit (expense) and discrete asset details of the operating segments as this information is not considered by the CODM for resource allocation or other segment analysis purposes.

14. Subsequent Events

Management has evaluated subsequent events and their potential effects on these unaudited condensed consolidated financial statements.

Subsequent to June 30, 2025, the Company repurchased 3.1 million additional shares under the Share Repurchase Program through August 7, 2025. As of August 7, 2025, the Company has $23.0 million remaining capacity under the Share Repurchase Program.