You need to learn this part at the side of the Condensed Consolidated
Monetary Statements and associated Notes to Condensed Consolidated Monetary
Statements included in Half I. Merchandise 1 of this Quarterly Report on Type 10-Q, and
our Annual Report on Type 10-Ok. Until in any other case acknowledged or because the context
in any other case requires, references to “the Firm,” “we,” “us,” “our,” “it,” and
related references consult with BTRS Holdings Inc., a Delaware company, and its
consolidated subsidiaries. References to the “Merger” have the that means outlined
in Be aware 1 – Group and Nature of Enterprise in our Notes to Condensed
Consolidated Monetary Statements.
Sure figures, akin to rates of interest and different percentages, on this part
have been rounded for ease of presentation. Proportion figures included on this
part haven’t in all instances been calculated on the premise of such rounded
figures however on the premise of such quantities previous to rounding. Because of this,
proportion quantities on this part could range barely from these obtained by
performing the identical calculations utilizing the figures in our Condensed Consolidated
Monetary Statements or Notes to Condensed Consolidated Monetary Statements.
Sure different quantities that seem on this part could equally not sum because of
rounding.
Ahead Wanting Statements
This dialogue accommodates forward-looking statements inside the that means of
Part 27A of the Securities Act of 1933, as amended and Part 21E of the
Securities Change Act of 1934, as amended (the “Change Act”).
Ahead-looking statements are recognized by phrases akin to “consider,” “could,”
“may,” “will,” “estimate,” “proceed,” “anticipate,” “intend,” “search,” “plan,”
“anticipate,” “ought to,” “would,” “probably,” or the unfavorable of those phrases or
related expressions on this Quarterly Report on Type 10-Q. You need to learn these
statements rigorously as a result of they focus on future expectations, include
projections of future outcomes of operations or monetary situation, or state
different “forward-looking” info. These statements relate to our future
plans, goals, expectations, intentions, and monetary efficiency and the
assumptions that underlie these statements, and our skill to safe the
required regulatory and stockholder approvals for the Merger and meet the
relevant closing situations of the Merger and the time therefor, if in any respect.
These forward-looking statements are topic to sure dangers and uncertainties
that would trigger a distinction embrace, however usually are not restricted to, these mentioned
underneath the caption “Threat Elements” in Half I. Merchandise 1A of our Annual Report on Type
10-Ok and this Quarterly Report on Type 10-Q. Ahead-looking statements are
based mostly on administration’s present beliefs and assumptions and based mostly on info
presently obtainable. These statements, like all statements on this Quarterly
Report on Type 10-Q, communicate solely as of their date, and we undertake no obligation
to replace or revise these statements in mild of future developments, besides as
required by legislation.
Enterprise Overview
We’re a number one supplier of cloud-based software program and built-in fee
processing options that simplify and automate business-to-business (“B2B”)
commerce. For companies around the globe, there’s a excessive diploma of value, danger,
and complexity in well timed receiving money and recognizing income; We resolve these
issues by addressing either side of the fee equation, delivering an
order-to-cash platform that spans credit-to-cash utility and assortment,
built-in with an open community connecting the B2B funds ecosystem.
Our answer is on the forefront of the continuing digital transformation of
accounts receivable (“AR”), offering mission-critical options that span
credit score decisioning and monitoring, on-line ordering, invoicing, money utility,
and collections. Our Enterprise Funds Community (“BPN”) connects B2B consumers and
sellers to a group of banks, FinTechs, and card manufacturers. Billtrust automates
funds from digital lockbox to last posting in an ERP, bridging receivables
with consumers’ fee processes so sellers can handle money circulation extra
strategically and make it simpler for patrons to do enterprise with them.
Prospects use our software program as a service (“SaaS”) platform to transition from
costly paper invoicing and examine acceptance to environment friendly digital billing
and funds, simplifying and accelerating transactions. Our scalable platform
lets our clients maximize straight-through processing of invoicing, funds,
and money utility whereas additionally lowering headcount. The machine studying
capabilities and guidelines engine inside our SaaS platform repeatedly evolve to
resolve order-to-cash challenges and ship the next fee of touchless
transactions. We work with industry-leading safety companions and take proactive
steps to maintain information safe from threats. Collectively our platform reduces the
complexity of B2B commerce for our clients.
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Our safe, proprietary platform presents clients a number of methods to current
invoices (on-line, e mail, AP portal, and print/mail) and obtain funds (credit score
card, automated clearing home (“ACH”), e mail, cellphone and paper examine). Our
digital options (“eSolutions”) group works carefully with our clients to
transition their customers from paper invoices and funds to digital, which
leads to accelerated financial savings, quicker realization of money, a lowered
environmental footprint, and a greater person expertise. In flip, we profit from
margin enlargement and incremental income by the monetization of digital
funds. We assist clients prioritize which issues to unravel, usually assess
ROI, optimize the affect of digitization throughout processes, and drive extra worth
for his or her corporations, permitting AR groups to play a extra strategic position in transferring a
enterprise ahead.
Now we have expanded our product attain and buyer base over the previous years and
scaled our enterprise operations in latest durations. Our whole revenues have been $146.3
million and $123.5 million for the 9 months ended September 30, 2022 and
2021, respectively. On account of our deal with product improvement and gross sales
and advertising, we now have generated web losses of $65.Four million and $44.7 million
for the 9 months ended September 30, 2022 and 2021, respectively.
Proposed Merger
On September 28, 2022, we entered into an Settlement and Plan of Merger (the
“Merger Settlement”) with Bullseye FinCo, Inc., a Delaware company
(“Mum or dad”), and Bullseye Merger Sub, Inc., a Delaware company and a direct,
wholly owned subsidiary of Mum or dad (“Merger Sub” and, along with Mum or dad, the
“Buying Events”), pursuant to which Merger Sub will, upon the phrases and
topic to the situations set forth within the Merger Settlement, merge with and into
us, and we are going to survive such merger as a wholly-owned subsidiary of Mum or dad (the
“Merger”) Mum or dad and Merger Sub are every affiliated with the EQT X Fund.
Topic to the phrases and situations set forth within the Merger Settlement, on the
efficient time of the Merger (the “Efficient Time”), every share of our Class 1
frequent inventory, $0.0001 par worth, and Class 2 frequent inventory, $0.0001 par worth
(aside from shares rolled over in accordance with the Merger Settlement, and
shares of our frequent inventory held by us as treasury inventory), issued and excellent
instantly previous to the Efficient Time (aside from dissenting shares) can be
cancelled and instantly transformed into the best to obtain $9.50 in money,
with out curiosity and fewer any relevant withholding taxes.
The completion of the Merger is topic to a number of situations past our management
which will stop, delay or in any other case adversely have an effect on its completion in a
materials manner, together with the approval of our stockholders, the expiration or
termination of relevant ready durations and the receipt of relevant
approvals or consents underneath antitrust and competitors legal guidelines and international
funding legal guidelines of sure jurisdictions. Assuming the satisfaction of the
remaining excellent situations set forth within the Merger Settlement, the Merger
is presently anticipated to shut within the fourth quarter of 2022 or first quarter of
2023. Nevertheless, we can’t guarantee completion of the Merger by any specific date,
if in any respect or that, if accomplished, it is going to be accomplished on the phrases set forth in
the Merger Settlement.
If the Merger is consummated, our securities can be de-listed from the Nasdaq
International Choose Market and de-registered underneath the Securities Change Act of 1934
as quickly as practicable following the Efficient Time.
Below the phrases of the Merger Settlement, we could also be required to pay Mum or dad a
termination price of $50.2 million if the Merger Settlement is terminated underneath
sure specified circumstances, together with us terminating the Merger Settlement
to enter right into a definitive written settlement with respect to a superior proposal
that didn’t outcome from a breach of the non-solicitation provisions. The Merger
Settlement moreover gives that Mum or dad pay us a termination price of
$100.5 million underneath sure specified circumstances.
Enterprise Mixture with South Mountain
On October 18, 2020, as amended on December 13, 2020, South Mountain, BT Merger
Sub I, Inc., a Delaware company and a direct, wholly owned subsidiary of
South Mountain (“First Merger Sub”), BT Merger Sub II, LLC, a Delaware restricted
legal responsibility firm and a direct, wholly owned subsidiary of South Mountain
(“Second Merger Sub”) and Issue Techniques, Inc (“Legacy Billtrust”), entered into
a Enterprise Mixture Settlement (the “BCA”), pursuant to which (i) First Merger
Sub was merged with and into Legacy Billtrust (the “First BCA Merger”), with
Legacy Billtrust surviving the First Merger as an entirely owned subsidiary of
South Mountain (“Surviving Company”) and (ii) the Surviving Company
merged with and into Second Merger Sub (the “Second BCA Merger”, and collectively
with the First BCA Merger, the “BCA Mergers”), with Second Merger Sub surviving
the Second Merger as an entirely owned subsidiary of South Mountain, (such BCA
Mergers, collectively with the opposite transactions described within the BCA, the
“Enterprise Mixture”).
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In reference to the execution of the Enterprise Mixture, on October 18,
2020, South Mountain entered into separate subscription agreements
(“Subscription Agreements”) with a variety of traders (“PIPE Traders”),
pursuant to which the PIPE Traders agreed to buy, and South Mountain bought
to the PIPE Traders, an combination of 20.Zero million shares of South Mountain
Class A typical inventory, for a purchase order value of $10.00 per share and at an
combination buy value of $200.Zero million, in a personal placement (“PIPE
Financing”).
The Enterprise Mixture and PIPE Financing closed on January 12, 2021 (the “BCA
Closing Date”). The Enterprise Mixture was accounted for as a reverse
recapitalization in accordance with the widely accepted accounting ideas
in the US of America (“U.S. GAAP”). Below this technique of accounting,
South Mountain was handled because the “acquired” firm for monetary reporting
functions. For accounting functions, we have been the accounting acquirer within the
transaction and, consequently, the transaction was handled as a recapitalization
of Billtrust (i.e., a capital transaction involving the issuance of inventory by
South Mountain for the inventory of Legacy Billtrust). Accordingly, the property,
liabilities, and outcomes of operations of Legacy Billtrust grew to become the historic
monetary statements of “New Billtrust,” which was renamed BTRS Holdings Inc.,
and South Mountain’s property, liabilities, and outcomes of operations have been
consolidated with Legacy Billtrust starting on the BCA Closing Date. All
quantities of BTRS Holdings Inc. mirror the historic quantities of Legacy Billtrust
carried over at e book worth with no step up in foundation to truthful worth. After the
Enterprise Mixture, our Class 1 frequent inventory (“Frequent Inventory”) started buying and selling on
the Nasdaq International Choose Market underneath the ticker image “BTRS”.
Latest Developments
Acquisition of Order2Cash
On February 14, 2022, we acquired 100% of the excellent shares of Anachron
Beheer BV and subsidiaries, d/b/a Order2Cash (“Order2Cash”), a privately-held
firm headquartered in Amsterdam, the Netherlands. Order2Cash is a European
B2B order-to-cash platform supplier. Their enterprise buyer base, world
interoperability capabilities, and established connections to over 70 B2B and
business-to-government (“B2G”) e-invoicing networks broaden the BPN’s attain to
ship totally compliant and safe e-invoicing throughout a number of markets. The
acquisition is a part of our strategic plan to proceed increasing our bodily
presence within the European market whereas additionally enhancing our world invoicing and
funds capabilities. Pursuant to the phrases of the acquisition settlement, we paid
$59.5 million, web of $0.Four million of acquired money.
Impairment of Proper of Use Belongings and Restructuring Fees
In the course of the first quarter of 2022, we permitted a strategic plan to optimize our
construction and prices associated to our leased services and print operations. As
a part of the plan, we permitted a proper work from wherever coverage for our
workers because of excessive curiosity in permitting workers to work remotely and
investments in our working environments and expertise enabling seamless
day-to-day execution and elevated productiveness throughout a distributed workforce.
Moreover, we closed one among our print places because of the continued decline
in buyer print volumes and efficiencies gained by streamlining our print
operations. The general plan included vacating some or all of a number of of our
leased workplace services and one among our leased print operations services and
making them obtainable for sublease. We ceased utilizing the entire facility house
outlined within the plan by March 31, 2022. Because of this, throughout the three months
ended March 31, 2022, we incurred $10.Zero million of proper of use (“ROU”) asset
impairments and $3.6 million of leasehold enchancment and stuck asset
impairments
Subsequently, we permitted an enlargement of the strategic plan to additional vacate
an extra portion of our leased workplace house. By September 30, 2022, we
ceased utilizing the leased facility house underneath the expanded plan. Because of this,
throughout the three months ended September 30, 2022, we incurred $3.Three million of
ROU asset impairments and $1.Three million of leasehold enchancment and stuck asset
impairments.
In calculating the impairment quantity, the truthful worth of every asset was
decided utilizing an earnings strategy based mostly on the current worth of future money
flows from precise or estimated sublease earnings. In instances the place a sublease has
not but been entered into, this strategy required the usage of sure estimates,
together with a reduction fee, sublease rental charges, interval of emptiness, and
sublease incentives, which have been based mostly partially by native actual property {industry}
information. For these subjective estimates based mostly on unobservable inputs, the truthful
worth of the property have been categorised in Degree Three of the truthful worth hierarchy
(consult with Be aware 13 – Truthful Worth Measurements within the Notes to Condensed
Consolidated Monetary Statements). All impairment quantities have been recorded in
impairment and restructuring on the Condensed Consolidated Statements of
Operations.
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Moreover, in accordance with ASC 420, Exit or Disposal Price Obligations, we
acknowledged exit obligation prices associated to closing the print operations
facility, together with one-time worker severance advantages, contract termination
prices, and different prices related to exiting the power. These prices have been
recorded in impairment and restructuring on the Condensed Consolidated
Statements of Operations, and are allotted to our Print section. Complete prices
acknowledged throughout the 9 months ended September 30, 2022 weren’t materials.
Sooner or later if we decide we now not intend to make the most of some or all of our
remaining leased facility house, we could also be required to document further
impairment or restructuring prices.
Impression of COVID-19 and Different Macroeconomic Occasions
Throughout 2021 and 9 months ended September 30, 2022, the COVID-19 pandemic did
not adversely affect us, as evidenced by the continued progress in our
subscription and transaction revenues. Our focus stays on investing in our
merchandise and supporting our long-term progress, together with world enlargement. Since
the beginning of the pandemic, we now have continued to function regardless of the disruption
to a few of our buyer’s operations. The pandemic has served to extend
consciousness and urgency round accelerating the digital transformation of accounts
receivable by our platform and choices which has helped keep away from important
enterprise, bookings, or income disruptions so far. Moreover, shifts from
in-person shopping for and conventional fee strategies (akin to money or examine) in direction of
e-commerce and digital funds, and the associated enhance in client and B2B
demand for safer fee and supply options, have benefited us because it has
additional ingrained our platform in our clients’ vital day-to-day
order-to-cash operations. In response to the pandemic, we now have modified a few of
our enterprise practices, akin to enabling and inspiring our workers to work
from wherever and establishing well being and security protocols in our workplaces. We
proceed to observe the scenario and should take additional actions as could also be
required by authorities authorities or that we decide are in the most effective
pursuits of our workers, clients, and companions.
As well as, the unfold of COVID-19 and its variants has contributed to a worldwide
slowdown of financial exercise, elevated unemployment, provide chain disruptions,
larger charges of inflation, larger rates of interest, elevated volatility in
international foreign money change charges, and elevated volatility within the world capital
markets, amongst different macroeconomic occasions. We’re unable to foretell the affect
the COVID-19 pandemic or different macroeconomic occasions may have on our future
outcomes of operations, liquidity, monetary situation, skill to entry capital
markets, and enterprise practices because of quite a few uncertainties, together with the
length, severity, and unfold of the virus and its variants, actions which will
be taken by authorities authorities, the affect to our workers, clients, and
companions, extended macroeconomic uncertainty, volatility, and disruption, and
varied different components past our information or management. We proceed to observe
these conditions and should take additional actions as could also be required by authorities
authorities or that we decide are in the most effective pursuits of our workers,
clients, and companions.
Key Elements Affecting Our Efficiency
We consider our efficiency and future progress will depend on a variety of components that
current important alternatives, but additionally pose dangers and challenges, together with
these mentioned under and Half I. Merchandise 1A. “Threat Elements” in our Annual Report
on Type 10-Ok and this Quarterly Report on Type 10-Q. For added info
associated to key efficiency metrics we use to guage the well being of our
enterprise, establish tendencies affecting our progress, formulate objectives and goals,
and make strategic selections, please see the part inside this Quarterly
Report on Type 10-Q titled “Key Efficiency Metrics”. We consider probably the most
important components affecting our outcomes of operations embrace:
Funding in Know-how
Our objective is to rework the way in which companies ship and seize funds so as
to be the chief within the order-to-cash course of by digitizing areas together with
credit score decisioning, ordering, invoicing, funds, money utility, and
collections. We proceed to put money into expertise and the digitizing of our
platforms. Additional, we proceed to put money into sure inside initiatives
focused at bettering inside processes and enhancing the effectivity, safety,
and scalability of our platforms. Our funding in expertise is predicted to
have a optimistic affect on our long-term profitability and operations. We additionally
intend to proceed to guage strategic acquisitions and investments in
companies and applied sciences to drive product and market enlargement. Our future
success relies on our skill to efficiently develop, market, and promote
present and new merchandise.
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Acquisition of New Prospects
We attain new clients by our confirmed go-to-market methods, which embrace
digital advertising campaigns, our direct gross sales power, and partnerships with
monetary establishments and different complementary corporations. Our progress relies upon in
half on our skill to accumulate new clients.
As of September 30, 2022, we had clients throughout all kinds of industries
and geographies, together with distributors of constructing supplies, electrical,
plumbing and expertise gear, healthcare, development, and client
merchandise, primarily positioned in North America. We proceed to put money into our
gross sales, advertising, and go-to-market methods as a way to purchase clients in
our goal markets. Our advertising efforts are marketing campaign and content material pushed and
focused relying on the scale and {industry} of the client. Advertising
initiatives deal with demand era and embrace promotional exercise and with
an emphasis on on-line digital advertising applications (e.g., webinars, digital
occasions). We consider there’s a long-term alternative to broaden into massive, new
markets with appropriate tendencies.
Our skill to draw new clients will depend on a variety of components, together with
the effectiveness and pricing of our merchandise, our opponents’ choices, and
efficiently executing our advertising efforts. Our monetary efficiency relies upon
largely on the general demand for our platforms, and acquisition of recent
clients is predicted to have a optimistic affect on our long-term profitability
and operations.
Enlargement of Relationships with Current Prospects
Our income progress will depend on our clients’ utilization of our vary of merchandise. Our
skill to monetize transactions and funds is a vital a part of our
enterprise mannequin. As we resolve clients’ issues and grow to be extra built-in into
their each day companies, we see an elevated alternative to cross-sell to those
present clients. This technique is achieved by driving adoption of an present
answer throughout completely different divisions and/or subsidiaries of an present buyer
after which increasing the scope of service with further options. Our skill
to affect clients to course of extra transactions and funds on our
platforms may have a direct affect on our income.
Our income from present clients is usually dependable because of each the
pricing construction and the business-critical nature of the capabilities our merchandise
assist for patrons. We broaden inside our present buyer base by promoting
further modules on our platform, including divisions, rising transactions
per buyer by confirmed e-solutions, in addition to by efficient pricing
and packaging our companies. Our skill to extend gross sales to present clients
will depend on a variety of components, together with our clients’ satisfaction with our
options, competitors, pricing, and general adjustments in our clients’ spending
ranges with us.
Key Efficiency Metrics
We monitor the next key metric to assist us consider the well being of our
enterprise, establish tendencies affecting our progress, formulate objectives and goals,
and make strategic selections.
Complete Cost Quantity
Complete Cost Quantity (“TPV”) is the greenback worth of buyer fee
transactions that we course of on our platform throughout a specific interval. TPV is
made up of the 2 fee classes:
•TPV – ACH/Wire – funds made through our software program, portals, gateways, and our
Enterprise Funds Community which are processed through ACH or wire transfers.
•TPV – Card – funds by our software program, portals, gateways, and third-party
processors, and consists of our fee facilitator (“PayFac”) clients.
To develop funds income from clients, we should ship software program platforms that
each simplify the method of accepting digital funds and streamline the
reconciliation of remittance information. Moreover, as we enhance the digital
supply of invoices, the likelihood will increase that digitally delivered
invoices can be paid electronically by our clients’ finish clients. The extra
clients use our software program platforms, the extra funds transactions they’re
more likely to course of by our varied merchandise. TPV gives an vital
indication of the greenback worth of transactions that clients are finishing on
our platform and is useful to traders as an indicator of our skill to
generate income from our clients.
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Three Months Ended 9 Months Ended
September 30, September 30,
2022 2021 2022 2021
(in billions)
Complete Cost Quantity $ 28.3 $ 21.0 $ 76.5 $ 54.9
TPV – ACH/Wire 18.6 13.5 50.2 35.4
TPV – Card $ 9.7 $ 7.5 $ 26.3 $ 19.5
The rise in TPV for the three and 9 months ended September 30, 2022
in comparison with the prior 12 months durations was primarily because of the addition of recent
clients on our PayFac platform, in addition to a rise in present buyer
transactions on each our card and ACH/Wire platforms (together with an enlargement of
our product platforms for ACH transactions).
Elements of Outcomes of Operations
Revenues
We generate income from the next sources: (1) Subscription, (2)
Transaction, (3) Skilled Providers, and (4) Reimbursable Prices.
Subscription Income
Subscription income primarily consists of contractually agreed upon charges to
present entry to our cloud-based SaaS platform and modules that automate
processes throughout the accounts receivable perform (together with digital bill
presentment, funds options, credit score decisioning and monitoring, money
utility, collections automation, and e-commerce).
Our subscription agreements don’t present a buyer with the best to take
possession of the software program, are usually non-cancellable, and don’t include
common rights of returns. Subscription agreements have an preliminary time period of 1
to a few years and are usually invoiced in annual installments upfront of
every year. After the preliminary time period, subscription agreements renew yearly and
are usually invoiced upfront of every renewal 12 months. In some instances,
subscriptions could also be billed on a quarterly or month-to-month foundation upfront.
Subscription companies are acknowledged ratably over the contractual time period of the
association, starting on the date the service is made obtainable to the
buyer.
Transaction Income
Transaction income consists of per-item processing charges charged at contracted
charges based mostly on the variety of envelopes, invoices delivered, funds processed,
or foundation factors on the quantity of bank card funds processed. Our transaction
charges are billed month-to-month based mostly on the quantity of things processed every month, at
the contractual fee per merchandise processed. Transaction income is acknowledged at
the identical time because the transactions are processed.
Skilled Providers Income
Skilled companies income consists of implementation companies for brand spanking new
clients, or implementations of recent merchandise for present clients. It additionally
consists of individually contracted venture companies offered to clients after
implementation.
Implementation companies are usually bought on a time and supplies foundation and
billed month-to-month based mostly on precise hours incurred. When our implementation companies
usually are not able to being distinct from the associated subscription service, they
are mixed with the subscription service and acknowledged over the time period of the
settlement. In these instances, for the reason that preliminary contract with a buyer consists of
each the subscription and implementation charges, and is subsequently larger than
subscription renewal charges in subsequent years, the contract conveys a ‘materials
proper’ to the client (i.e., an choice for the client to resume the contract
at a cheaper price in relation to the preliminary contract value). Materials rights are
handled individually and are acknowledged over the interval which the best is
anticipated to be exercised by a buyer.
Venture companies are thought-about separate and distinct from different merchandise or
companies bought and are acknowledged similtaneously the companies are
offered.
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Reimbursable Prices
Reimbursable prices income consists primarily of quantities charged to our
clients for postage on printed and mailed invoices to their finish clients. The
associated revenues are recorded on a gross foundation, with an offsetting quantity
recorded as a value of income.
Price of Revenues
Prices of Subscription, Transaction, and Providers
Price of subscription, transaction, and companies consists primarily of
personnel-related prices, together with stock-based compensation expense, for our
buyer success, skilled companies, file, and fee operations groups,
print operations gear prices, prices instantly attributed to processing
clients’ transactions (akin to the price of printing and mailing invoices,
excluding postage), bills for processing funds (ACH and bank card),
direct and amortized prices for implementing and integrating our cloud-based
platforms with clients’ methods, cloud internet hosting and associated prices for the
infrastructure instantly related to manufacturing platforms, hire and utilities
expense for our leased print operations services, and allotted overhead
prices. Price of subscription, transaction, and companies excludes depreciation and
amortization. We anticipate that value of subscription, transaction, and companies
will enhance in absolute {dollars}, however could fluctuate as a proportion of whole
revenues from interval to interval as we proceed to put money into rising our enterprise.
Price of Reimbursable Prices
Price of reimbursable prices consists of charges for postage associated prices, primarily
paid to the US Postal Service or third events related to
printed and mailed bill deliveries for our clients, and are recorded at no
incremental margin on reimbursable prices revenues.
Working Bills
Analysis and Improvement
Analysis and improvement expense consists primarily of personnel-related
bills, together with stock-based compensation expense, incurred in growing and
engineering new merchandise or enhancing present merchandise, high quality assurance and
testing of recent and present product expertise, upkeep, and enhancement of
our present expertise and infrastructure, and allotted overhead prices. We
capitalize sure software program improvement prices which are attributable to
growing new merchandise and including incremental performance to our platforms,
and amortize such prices over the estimated lifetime of the brand new product or
incremental performance, which is often 4 years.
In accordance with U.S. GAAP, we expense a considerable portion of analysis and
improvement bills as incurred. We anticipate our analysis and improvement
bills to extend in absolute {dollars}, however they might fluctuate as a proportion
of whole revenues from interval to interval as we proceed to broaden our analysis
and improvement group to develop new merchandise and product enhancements, as nicely
as to assist our rising infrastructure.
Gross sales and Advertising
Gross sales and advertising expense consists primarily of personnel-related bills,
together with stock-based compensation expense, gross sales commissions, advertising program
bills, travel-related bills, and prices to market and promote our platforms
by ads, advertising occasions, partnership preparations, direct
buyer acquisition, and allotted overhead prices. Gross sales commissions which are
incremental to acquiring buyer contracts are deferred and amortized on a
straight-line foundation over the estimated interval of the client relationship,
which is estimated to be 4 to 5 years.
Our gross sales and advertising efforts are centered on rising income from the
acquisition of recent clients, the enlargement of subscription income from
present clients, and from facilitating elevated digital adoption and
ensuing digital processing exercise between our clients and their finish
clients. Gross sales and advertising bills could fluctuate from interval to interval
based mostly on a wide range of components, together with adjustments within the broader financial
surroundings and our return on this spend.
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Normal and Administrative
Normal and administrative expense consists of personnel-related bills,
together with stock-based compensation expense, for our govt group, expertise
(human sources), finance, procurement, authorized and compliance, and different
administrative groups, facility prices (together with hire and utilities expense for
our leased workplace house, excluding these utilized in our print operations),
contingent consideration from acquisitions acknowledged as compensation expense,
and allotted overhead prices.
To assist the expansion in our enterprise, our common and administrative bills
will enhance over time. We anticipate to incur further common and
administrative bills because of working as a public firm, together with
bills to adjust to the principles and laws relevant to corporations listed
on a nationwide securities change, bills associated to compliance, and reporting
obligations pursuant to the principles and laws of the SEC, in addition to larger
bills for director and officer insurance coverage, investor relations, and
skilled companies. We additionally anticipate to incur important prices, bills and
charges for skilled companies and different transaction prices in reference to
the Merger. A cloth portion of those bills are payable by us whether or not or
not the Merger is accomplished. Because of this, we anticipate that our common and
administrative bills will enhance in absolute {dollars}, however could fluctuate as
a proportion of whole revenues from interval to interval.
Depreciation and Amortization
Depreciation and amortization expense consists of the prices related to
depreciating our owned furnishings and fixtures, laptop gear, software program, and
expertise property, in addition to amortization of leasehold enhancements,
capitalized software program, and finite-lived intangible property.
Impairment and Restructuring
Impairment and restructuring expense consists of asset impairments, together with
these associated to ceasing use of leased services, prices related to
involuntary termination advantages offered to workers, sure contract
termination prices, and different prices related to exit or disposal actions.
Different Revenue (Expense)
Change in Truthful Worth of Monetary Devices
Change in truthful worth of economic devices consists of adjustments within the truthful
worth of fairness devices that don’t meet the standards to be categorised as
fairness and contingent consideration from acquisitions (excluding preparations
acknowledged as compensation expense).
Curiosity Expense and Loss on Extinguishment of Debt
Curiosity expense and loss on extinguishment of debt consists of curiosity on any
excellent debt, amortization of related debt issuance prices, fee of
early termination charges, writing off unamortized debt reductions related to
repaying our excellent debt services previous to maturity, and curiosity expense
on finance leases.
Different Non-Working Revenue (Expense)
Different non-operating earnings (expense) consists of curiosity earnings earned on our
money, money equivalents, and marketable securities, international change positive factors
(losses), and different non-operating earnings (expense).
Revenue Taxes
Revenue taxes consist primarily of earnings taxes associated to federal, state, and
international jurisdictions during which we conduct enterprise. We keep a full valuation
allowance on web deferred tax property for our U.S. federal taxes and sure
international and state taxes as we now have concluded that it’s not extra seemingly than not
that the deferred property can be utilized.
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Segments
Our operations are grouped into two reportable segments: (1) Software program and
Funds, and (2) Print. Our Chief Working Determination Maker (“CODM”) is the
chief govt officer, who opinions discrete monetary and different info
offered for print companies and software program and fee companies for functions of
allocating sources and evaluating our monetary efficiency. The accounting
insurance policies utilized by the reportable segments are the identical as these utilized in our
Condensed Consolidated Monetary Statements.
•Software program and Funds – The Software program and Funds section primarily operates
utilizing software program and cloud based mostly companies, optimizes digital bill
presentment, digital funds, credit score decisioning, collections automation,
money utility and deduction administration, and e-commerce of B2B clients.
•Print – The Print section is primarily chargeable for printing buyer
invoices and optimizing the period of time and prices related to billing
clients through mail.
We consider section efficiency and allocate sources based mostly on revenues, value
of revenues, and gross revenue. The entire revenues proven within the reportable
segments is income from exterior clients; there is no such thing as a income from
transactions with different working segments. Phase bills embrace the direct
bills of every section’s operations and exclude gross sales and advertising bills,
analysis and improvement bills, common and administrative bills,
depreciation and amortization, impairment and restructuring expense, stock-based
compensation expense, different earnings (expense), and sure different recognized prices
that we don’t allocate to the segments for functions of evaluating their
operational efficiency.
Given the character of our enterprise, the quantity of property doesn’t present
significant perception into our working efficiency. Because of this, we don’t
establish or allocate property by reportable section and whole property usually are not
included in our section monetary info.
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Outcomes of Operations
The next tables set forth choose Condensed Consolidated Statements of
Operations information, and such information as a proportion of whole revenues, for every of
the durations indicated (in hundreds, besides percentages):
Three Months Ended 9 Months Ended
September 30, September 30,
2022 2021 2022 2021
Revenues:
Subscription, transaction, and
companies $ 42,508 83 % $ 32,732 79 % $ 120,157 82 % $ 97,440 79 %
Reimbursable prices 8,854 17 8,625 21 26,112 18 26,085 21
Complete revenues 51,362 100 41,357 100 146,269 100 123,525 100
Price of revenues:
Price of subscription,
transaction, and companies 11,255 22 9,368 23 32,729 22 27,981
23
Price of reimbursable prices 8,854 17 8,625 21 26,112 18 26,085
21
Complete value of revenues,
excluding depreciation and
amortization 20,109 39 17,993 44 58,841 40 54,066 44
Working bills:
Analysis and improvement 15,943 31 13,453 33 46,922 32 35,716 29
Gross sales and advertising 11,591 23 10,310 25 34,030 23 29,226 24
Normal and administrative 19,613 38 9,838 24 49,426 34 32,766
27
Depreciation and amortization 2,191 4 1,205 3 6,218 4 3,924
3
Impairment and restructuring 4,636 9 – – 18,520 13 –
–
Complete working bills 53,974 105 34,806 84 155,116 106 101,632 82
Loss from operations (22,721) (44) (11,442) (28) (67,688) (46) (32,173) (26)
Different earnings (expense):
Change in truthful worth of
monetary devices 360 1 – – 122 – (9,995) (8)
Curiosity expense and loss on
extinguishment of debt (15) – (2) – (22) – (2,947) (2)
Different non-operating earnings 916 2 277 1 1,171 1 521
–
Complete different earnings (expense) 1,261 2 275 1 1,271 1 (12,421) (10)
Loss earlier than earnings taxes (21,460) (42) (11,167) (27) (66,417) (45) (44,594) (36)
Revenue tax expense (profit) (251) – 27
– (970) (1) 130 –
Web loss $ (21,209) (41) % $ (11,194) (27) % $ (65,447) (45) % $ (44,724) (36) %
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Comparability of Outcomes of Operations for the Three Months Ended September 30,
2022 and 2021
Complete Revenues
Three Months Ended
September 30, Change
2022 2021 Quantity %
(in hundreds)
Subscription and transaction charges $ 39,259 $ 30,376
$ 8,883 29 %
Providers and different 3,249 2,356
893 38
Subscription, transaction, and companies 42,508 32,732
9,776 30
Reimbursable prices 8,854 8,625 229 3
Complete revenues $ 51,362 $ 41,357 $ 10,005 24 %
The rise in whole revenues throughout the three months ended September 30, 2022
in comparison with the prior 12 months interval was primarily because of a $9.1 million enhance
in subscription and transaction charges within the Software program and Funds section as a
results of contracting with new clients, present clients buying
further merchandise, the acquisitions of iController BV (“iController”) and
Order2Cash, and elevated transaction volumes, primarily from funds. The
progress in transaction volumes was primarily associated to the expansion in variable
transactional price income related to card funds on our digital
funds processing platforms. Moreover, whole revenues elevated $0.9
million from companies and different revenues because of will increase in consulting
engagements supporting the expansion in new and present clients, in addition to
further companies income from the acquisition of Order2Cash.
Price of Revenues
Three Months Ended
September 30, Change
2022 2021 Quantity %
(in hundreds)
Price of subscription, transaction, and
companies $ 11,255 $ 9,368 $ 1,887 20 %
Price of reimbursable prices 8,854 8,625 229 3
Complete value of revenues, excluding
depreciation and amortization $ 20,109 $ 17,993 $ 2,116 12 %
The rise in whole value of revenues throughout the three months ended September
30, 2022 in comparison with the prior 12 months interval was primarily because of (1) a $0.6
million enhance in compensation, advantages, and different personnel-related prices
because of elevated headcount and (2) a $1.Four million enhance from the acquisitions
of iController and Order2Cash.
Analysis and Improvement
Three Months Ended
September 30, Change
2022 2021 Quantity %
(in hundreds)
Analysis and improvement $ 15,943 $ 13,453 $ 2,490 19 %
The rise in analysis and improvement bills throughout the three months ended
September 30, 2022 in comparison with the prior 12 months interval was primarily because of (1) a
$0.Eight million enhance in compensation, advantages, and different personnel-related
prices, and elevated headcount, (2) a $0.Three million enhance in stock-based
compensation expense, (3) a $0.Three million enhance in software program bills instantly
associated to product improvement actions, and (4) a $0.6 million enhance due
to the acquisitions of iController and Order2Cash.
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Gross sales and Advertising
Three Months Ended
September 30, Change
2022 2021 Quantity %
(in hundreds)
Gross sales and advertising $ 11,591 $ 10,310 $ 1,281 12 %
The rise in gross sales and advertising bills throughout the three months ended
September 30, 2022 in comparison with the prior 12 months interval was primarily because of (1) a
$0.5 million enhance in compensation, advantages, and different personnel-related
prices, and elevated headcount, (2) a $0.Four million enhance in gross sales and
advertising initiatives spend associated to selling our merchandise and product
enhancements, together with consulting {and professional} charges, and (3) a $0.5 million
enhance because of the acquisitions of iController and Order2Cash. These will increase
have been partially offset by a $0.Three million lower in stock-based compensation
expense associated to forfeitures.
Normal and Administrative
Three Months Ended
September 30, Change
2022 2021 Quantity %
(in hundreds)
Normal and administrative $ 19,613 $ 9,838 $ 9,775 99 %
The rise generally and administrative bills throughout the three months
ended September 30, 2022 in comparison with the prior 12 months interval was primarily because of
(1) a $5.Eight million enhance in Merger associated prices, primarily consisting of
funding banking, authorized, accounting, and different skilled advisory charges,
submitting charges, regulatory charges, and different associated prices, (2) a $1.Zero million
enhance in stock-based compensation expense, (3) a $0.9 million enhance
compensation, advantages, and different personnel-related prices, and elevated
headcount, (4) a $0.7 million enhance in acquisition and integration bills,
and (5) a $1.2 million enhance because of the acquisitions of iController and
Order2Cash.
Depreciation and Amortization
Three Months Ended
September 30, Change
2022 2021 Quantity %
(in hundreds)
Depreciation and amortization $ 2,191 $ 1,205 $ 986 82 %
The rise in depreciation and amortization throughout the three months ended
September 30, 2022 in comparison with the prior 12 months interval was primarily because of the
amortization of intangible property from the acquisitions of iController and
Order2Cash.
Impairment and Restructuring
Three Months Ended
September 30, Change
2022 2021 Quantity %
(in hundreds)
Impairment and restructuring $ 4,636 $ –
$ 4,636 100 %
The rise in impairment and restructuring expense throughout the three months
ended September 30, 2022 in comparison with the prior 12 months interval was because of
impairments of working lease ROU property, leasehold enhancements, and stuck
property incurred because of vacating a number of leased workplace and print
services.
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Complete Different Revenue (Expense)
Three Months Ended
September 30, Change
2022 2021 Quantity %
(in hundreds)
Complete different earnings (expense) $ 1,261 $ 275 $ 986 (359) %
The rise in different earnings (expense) throughout the three months ended September
30, 2022 in comparison with the prior 12 months interval was primarily because of (1) a $0.6
million enhance in curiosity earnings, and (2) a $0.Four million lower within the truthful
worth of the contingent consideration associated to the iController acquisition.
Revenue Tax Expense (Profit)
Three Months Ended
September 30, Change
2022 2021 Quantity %
(in hundreds)
Revenue tax expense (profit) $ (251) $ 27
$ (278) 1030 %
The change from earnings tax expense to earnings tax profit throughout the three months
ended September 30, 2022 was primarily because of a lower within the deferred tax
legal responsibility associated to international acquisitions and the power to make the most of sure tax
losses sooner or later. Total, our efficient tax fee is low because of our U.S. web
working loss place. We keep a valuation allowance on our U.S. deferred
taxes.
Comparability of Outcomes of Operations for the 9 Months Ended September 30, 2022
and 2021
Complete Revenues
9 Months Ended
September 30, Change
2022 2021 Quantity %
(in hundreds)
Subscription and transaction charges $ 110,978 $ 89,631
$ 21,347 24 %
Providers and different 9,179 7,809
1,370 18 %
Subscription, transaction, and companies 120,157 97,440
22,717 23 %
Reimbursable prices 26,112 26,085 27 – %
Complete revenues $ 146,269 $ 123,525 $ 22,744 18 %
The rise in whole revenues throughout the 9 months ended September 30, 2022
in comparison with the prior 12 months interval was primarily because of (1) a $22.Zero million
enhance in subscription and transaction charges within the Software program and Funds
section because of contracting with new clients, present clients
buying further merchandise, the acquisitions of iController and Order2Cash,
and elevated transaction volumes, primarily from funds. The expansion in
transaction volumes was primarily associated to the expansion in variable
transactional price income related to card funds on our digital
funds processing platforms. Moreover, whole revenues elevated $1.4
million from companies and different revenues because of will increase in consulting
engagements supporting the expansion in new and present clients, in addition to
further companies income from the acquisition of Order2Cash.
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Price of Revenues
9 Months Ended
September 30, Change
2022 2021 Quantity %
(in hundreds)
Price of subscription, transaction, and
companies $ 32,729 $ 27,981 $ 4,748 17 %
Price of reimbursable prices 26,112 26,085 27 – %
Complete value of revenues, excluding
depreciation and amortization $ 58,841 $ 54,066 $ 4,775 9 %
The rise in whole value of revenues throughout the 9 months ended September
30, 2022 in comparison with the prior 12 months interval was primarily because of (1) a $1.2
million enhance in compensation, advantages, and different personnel-related prices,
and elevated headcount and (2) a $4.Zero million enhance because of the acquisitions
of iController and Order2Cash. These will increase have been partially offset by a $0.4
million lower in print associated prices ensuing from efficiencies in our
operations and decrease print transactional volumes because of changing
present clients to digital invoicing.
Analysis and Improvement
9 Months Ended
September 30, Change
2022 2021 Quantity %
(in hundreds)
Analysis and improvement $ 46,922 $ 35,716 $ 11,206 31 %
The rise in analysis and improvement bills throughout the 9 months ended
September 30, 2022 in comparison with the prior 12 months interval was primarily because of (1) a
$6.Three million enhance in compensation, advantages, and different personnel-related
prices, and elevated headcount, (2) a $0.9 million enhance in software program bills
instantly associated to product improvement actions, (3) a $0.7 million enhance
in stock-based compensation expense, (4) a $0.6 million enhance in amortized
software program improvement prices, (5) a $0.Four million enhance in integration bills,
and (6) a $2.1 million enhance because of the acquisitions of iController and
Order2Cash.
Gross sales and Advertising
9 Months Ended
September 30, Change
2022 2021 Quantity %
(in hundreds)
Gross sales and advertising $ 34,030 $ 29,226 $ 4,804 16 %
The rise in gross sales and advertising bills throughout the 9 months ended
September 30, 2022 in comparison with the prior 12 months interval was primarily because of (1) a
$2.Zero million enhance in compensation, advantages, and different personnel-related
prices, and elevated headcount, (2) a $0.9 million enhance in gross sales and
advertising initiatives spend associated to selling our merchandise and product
enhancements, together with consulting {and professional} charges, (3) a $0.6 million
enhance in journey and leisure bills because of elevated journey as a
results of loosening COVID-19 restrictions, and (4) a $2.Zero million enhance due
to the acquisitions of iController and Order2Cash. These will increase have been
partially offset by a $0.9 million lower in stock-based compensation expense
associated to forfeitures.
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Normal and Administrative
9 Months Ended
September 30, Change
2022 2021 Quantity %
(in hundreds)
Normal and administrative $ 49,426 $ 32,766 $ 16,660 51 %
The rise generally and administrative bills throughout the 9 months ended
September 30, 2022 in comparison with the prior 12 months interval was primarily because of (1) a
$5.Eight million enhance in Merger associated prices, primarily consisting of
funding banking, authorized, accounting, and different skilled advisory charges,
submitting charges, regulatory charges, and different associated prices, (2) a $3.5 million
enhance in compensation, advantages, and different personnel-related prices, and
elevated headcount, (3) a $2.Three million enhance in insurance coverage, skilled, and
consulting charges for reporting, compliance, and different associated necessities
supporting public firm working necessities and because of turning into a
massive accelerated filer for fiscal 12 months 2022, (4) a $1.6 million enhance in
acquisition and integration prices, (5) a $1.2 million enhance associated to
contingent consideration payable pursuant to the Order2Cash acquisition
settlement, and (6) a $2.6 million enhance because of the acquisitions of
iController and Order2Cash. These will increase have been partially offset by a $0.3
million lower in stock-based compensation expense associated to forfeitures.
Depreciation and Amortization
9 Months Ended
September 30, Change
2022 2021 Quantity %
(in hundreds)
Depreciation and amortization $ 6,218 $ 3,924 $ 2,294 58 %
The rise in depreciation and amortization throughout the 9 months ended
September 30, 2022 in comparison with the prior 12 months interval was primarily because of the
amortization of intangible property from the acquisitions of iController and
Order2Cash.
Impairment and Restructuring
9 Months Ended
September 30, Change
2022 2021 Quantity %
(in hundreds)
Impairment and restructuring $ 18,520 $ –
$ 18,520 100 %
The rise in impairment and restructuring expense throughout the 9 months
ended September 30, 2022 in comparison with the prior 12 months interval was primarily because of
impairments of working lease ROU property, leasehold enhancements, and stuck
property incurred because of vacating a number of leased workplace and print
services.
Complete Different Revenue (Expense)
9 Months Ended
September 30, Change
2022 2021 Quantity %
(in hundreds)
Complete different earnings (expense) $ 1,271 $ (12,421) $ 13,692 (110) %
The lower in different bills throughout the 9 months ended September 30, 2022
in comparison with the prior 12 months interval was primarily because of the following one-time
prices recorded within the first quarter of 2021 associated to the Enterprise Mixture:
(1) a $10.Zero million truthful worth adjustment from the rise in worth of the
Earnout Shares and, (2) a $2.9 million loss on extinguishment of debt related
with the early fee of all our excellent borrowings. The rest of the
lower was primarily because of $0.7 million of further curiosity earnings.
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Revenue Tax Expense (Profit)
9 Months Ended
September 30, Change
2022 2021 Quantity %
(in hundreds)
Revenue tax expense (profit) $ (970) $ 130 $
(1,100) (846) %
The change from earnings tax expense to earnings tax profit throughout the 9 months
ended September 30, 2022 was primarily because of a lower within the deferred tax
legal responsibility associated to international acquisitions and the power to make the most of sure tax
losses sooner or later. Total, our efficient tax fee is low because of our U.S. web
working loss place. We keep a valuation allowance on our U.S. deferred
taxes.
Liquidity and Capital Sources
Our principal sources of liquidity are money, money equivalents, and money flows
from financing actions together with by a public providing of our fairness
securities. As of September 30, 2022, we had money and money equivalents of $145.9
million. Our major makes use of of liquidity are working bills, capital
expenditures, and buying companies. The acquisitions of iController and
Order2Cash have been each funded completely with money available. Pursuant to the Merger
Settlement, whereas the Merger is pending, we’re restricted or prohibited from
sure capital expenditures with out the consent of the Mum or dad. Moreover,
throughout that very same time, we’re topic to numerous restrictions underneath the Merger
Settlement on elevating further capital, issuing further fairness or debt, and
pursuing sure actions that would use important quantities of our liquidity,
together with assuming or incurring further debt, repurchasing fairness, paying
dividends, and getting into into sure acquisition and disposition transactions,
amongst different restrictions.
We consider our present money, money equivalents, and money flows from financing
actions, together with further consideration payable inside the subsequent 12 months, if
any, associated to our latest acquisitions, and incremental money outlays for
transaction prices associated to the proposed Merger anticipated to be incurred whether or not
or not the Merger is accomplished, are adequate to fulfill our working capital and
capital expenditure necessities for a interval of at the very least 12 months from the
date of this Quarterly Report on Type 10-Q. Nevertheless, our anticipated outcomes are
topic to important uncertainty and could also be affected by occasions past our
management, together with the prevailing financial, monetary, and {industry} situations,
together with from the COVID-19 pandemic and continued volatility and disruption in
the worldwide monetary markets.
The next desk summarizes our money flows for the durations offered (in
hundreds, besides percentages):
9 Months Ended
September 30, Change
2022 2021 Quantity %
Web money utilized in working actions $ (28,367) $ (9,809) $ (18,558)
(189) %
Web money utilized in investing actions (15,703) (46,647) 30,944 66
Web money offered by (utilized in)
financing actions (3,144) 282,945 (286,089) (101)
Impact of change fee adjustments on
money, money equivalents, and restricted
money (125) – (125) –
Web enhance (lower) in money, money
equivalents, and restricted money $ (47,339) $ 226,489 $ (273,828) (121) %
Working Actions
Money flows from operations have traditionally been unfavorable as we proceed to
put money into our product options and platform, develop new merchandise, enhance our
gross sales and advertising efforts to signal contracts with new clients, and broaden the
product breadth inside present clients. We don’t anticipate this pattern to vary
on an annual foundation, though we do see quarterly shifts the place money flows from
operations could also be optimistic, primarily related to invoicing and accumulating
subscription charges from clients that are usually payable upfront.
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For the 9 months ended September 30, 2022, money utilized in working actions
was $28.Four million in comparison with $9.Eight million throughout the prior 12 months interval. The
enhance was primarily because of larger web loss from continued investments in
gross sales and advertising and product improvement, acquisition and integration prices,
and a rise in the usage of money for working capital.
Investing Actions
In the course of the 9 months ended September 30, 2022 money utilized in investing
actions was $15.7 million, which consisted primarily of $59.5 million for the
buy of Order2Cash, web of acquired money, and was partially offset by $45.2
million of proceeds from the sale of marketable securities and $1.Four million for
purchases of property and gear.
In the course of the 9 months ended September 30, 2021 money utilized in investing
actions was $46.6 million, which consisted primarily of $45.1 million of
purchases of marketable securities and $1.6 million for purchases of property
and gear.
Financing Actions
In the course of the 9 months ended September 30, 2022 money utilized in financing
actions was $3.1 million, which consisted primarily of a $5.6 million
enhance in buyer funds payable, and was partially offset by $3.Three million in
proceeds from frequent inventory issued.
In the course of the 9 months ended September 30, 2021 money offered by financing
actions was $282.9 million, which consisted primarily of $329.7 million of
proceeds from the Enterprise Mixture and PIPE Financing, web of providing
prices. These proceeds have been offset by $46.2 million used to totally repay our
excellent borrowings, together with debt extinguishment prices, pursuant to the
Enterprise Mixture, and $1.Three million in proceeds from frequent inventory issued.
Future Money Obligations
Along with the long run money obligations described under, we now have different
payables and liabilities which may be legally enforceable however usually are not thought-about
contractual commitments. Discuss with Be aware 15 – Accrued Bills and Different Present
Liabilities within the Notes to Condensed Consolidated Monetary Statements for extra
info on our payables and liabilities.
Leases
We lease workplace house for our workers and services for our print operations
underneath non-cancellable working lease agreements (consult with Be aware 9 – Leases in
the Notes to Condensed Consolidated Monetary Statements, together with a dialogue
of the impairment of sure facility leases now not in use). The remaining
length of non-cancellable working leases ranges from lower than 1 12 months to 13
years. As of September 30, 2022, remaining non-cancellable lease funds are
due as follows: $1.Three million in 2022, $5.Three million in 2023, $4.9 million in
2024, $4.6 million in 2025, $4.Three million in 2026, and $24.7 million thereafter.
For sure leased facility house that we now have ceased occupying, we now have entered
into subleases underneath non-cancellable working lease agreements. The remaining
length of those non-cancellable subleases ranges from 2 years to eight years. As
of September 30, 2022, remaining non-cancellable sublease funds to be
acquired are as follows: $0.Three million in 2022, $1.Three million in 2023, $1.1
million in 2024, $1.Zero million in 2025, $1.1 million in 2026, and $1.6 million
thereafter.
Buy Obligations
We enter into buy commitments with sure distributors to safe pricing for
supplies obligatory for our print operations. As of September 30, 2022, we had
roughly $0.Four million remaining underneath such buy commitments.
Contingent Consideration
Our acquisitions of Order2Cash and iController embrace contingent consideration
preparations with estimated truthful values of $3.1 million and $4.5 million,
respectively at September 30, 2022. These quantities are to be paid to the sellers
based mostly on the quantity and timing of every acquired firm’s achievement of sure
recurring income progress targets and different sure situations over a 3 12 months
interval subsequent to every acquisition date.
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Deferred Buy Worth
Our acquisition of Order2Cash features a deferred buy with an estimated
truthful worth at September 30, 2022 of $0.5 million. This quantity is payable inside
4 years of the time limit upon achievement of sure situations.
Letters of Credit score
Now we have commitments underneath letters of credit score for $2.5 million which are maintained
pursuant to sure of our lease preparations. $2.Four million of the letters of
credit score expire in 2024, and the rest expire in better than 5 years from
September 30, 2022.
Non-GAAP Monetary Measures
Along with our outcomes decided in accordance with U.S. GAAP, we consider
the next non-GAAP monetary measures are helpful in evaluating our working
efficiency. We current these non-GAAP measures to help traders in
understanding our monetary efficiency from the attitude of administration. We
consider these measures present an extra instrument for traders to make use of in
evaluating our monetary efficiency over a number of durations with different corporations
in our {industry}. Whereas we consider the usage of these non-GAAP measures gives
helpful info to traders and administration in analyzing our monetary
efficiency, non-GAAP measures have inherent limitations in that they don’t
mirror the entire quantities and transactions which are included in our monetary
statements ready in accordance with U.S. GAAP. Non-GAAP measures don’t serve
as a substitute for U.S. GAAP, nor will we contemplate our non-GAAP measures in
isolation. Accordingly, we current non-GAAP monetary measures solely in
reference to U.S. GAAP outcomes. We urge traders to think about non-GAAP
measures solely at the side of our U.S. GAAP financials and to evaluation the
reconciliation of our non-GAAP monetary measures to probably the most comparable U.S.
GAAP monetary measures, as described under, included on this Quarterly Report
on Type 10-Q.
Web Income (non-GAAP)
Web income (non-GAAP) is outlined as whole revenues much less reimbursable prices
income. Reimbursable prices income consists primarily of quantities charged to
clients for postage (with an offsetting quantity recorded as a value of income)
which we don’t contemplate internally when monitoring working efficiency.
We consider web income (non-GAAP) permits traders to guage comparability
with our previous monetary efficiency and facilitates period-to-period comparisons
of core operations. Probably the most instantly comparable U.S. GAAP measure to web
income (non-GAAP) is whole revenues on our Condensed Consolidated Statements of
Operations.
Adjusted Gross Revenue (non-GAAP) & Adjusted Gross Margin (non-GAAP)
Adjusted gross revenue (non-GAAP) is outlined as whole revenues much less whole value of
revenues, excluding depreciation and amortization, plus stock-based compensation
expense included in whole value of revenues. Adjusted gross margin (non-GAAP) is
outlined as adjusted gross revenue (non-GAAP) divided by whole revenues much less
reimbursable prices income, or web income (non-GAAP).
We consider adjusted gross revenue (non-GAAP) and adjusted gross margin (non-GAAP)
are helpful monetary measures to traders as they eradicate the affect of
sure non-cash bills and permit a extra direct comparability of our money
operations and ongoing working efficiency between durations. We anticipate adjusted
gross margin (non-GAAP) to proceed to enhance over time to the extent that we
are capable of enhance our scale by efficiently rising revenues, each from
cross-selling present clients and upselling present and future choices.
Nevertheless, our skill to enhance adjusted gross margin (non-GAAP) over time is
not assured and can be impacted by the components affecting our efficiency
outlined within the Half I, Merchandise 1a. “Threat Elements” of our Annual Report on Type
10-Ok and on this Quarterly Report on Type 10-Q. Probably the most instantly comparable
U.S. GAAP measure to adjusted gross revenue (non-GAAP) and adjusted gross margin
(non-GAAP) is whole revenues on our Condensed Consolidated Statements of
Operations.
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The next desk presents a reconciliation of our web income (non-GAAP),
adjusted gross revenue (non-GAAP), and adjusted gross margin (non-GAAP) to their
most instantly comparable U.S. GAAP monetary measures (in hundreds, besides
percentages):
Reconciliation of Complete Revenues to Web Income (non-GAAP), Adjusted Gross
Revenue (non-GAAP), and Adjusted Gross Margin (Non-GAAP)
Three Months Ended 9 Months Ended
September 30, September 30,
2022 2021 2022 2021
Complete revenues $ 51,362 $ 41,357 $ 146,269 $ 123,525
Much less: Reimbursable prices income 8,854 8,625 26,112 26,085
Web income (non-GAAP) $ 42,508 $ 32,732
$ 120,157 $ 97,440
Complete revenues $ 51,362 $ 41,357 $ 146,269 $ 123,525
Much less: Price of income, excluding
depreciation and amortization 20,109 17,993 58,841 54,066
Gross revenue, excluding depreciation
and amortization 31,253 23,364 87,428 69,459
Add: Inventory-based compensation expense 587 436 1,646 1,284
Adjusted gross revenue (non-GAAP) $ 31,840 $ 23,800
$ 89,074 $ 70,743
Gross margin, excluding depreciation
and amortization 60.8 % 56.5 % 59.8 % 56.2 %
Adjusted gross margin (non-GAAP) 74.9 % 72.7 % 74.1 % 72.6 %
Adjusted EBITDA (non-GAAP) & Adjusted EBITDA Margin (non-GAAP)
Adjusted EBITDA (non-GAAP) is outlined as web loss, plus (1) earnings tax expense
(profit), (2) adjustments within the truthful worth of economic devices that don’t
meet the standards to be categorised as fairness, (3) curiosity expense and loss on
extinguishment of debt, (4) depreciation and amortization, (5) stock-based
compensation expense, (6) impairment, restructuring, and associated facility prices,
(7) acquisition and integration prices, (8) different capital construction transaction
prices, and (9) different non-operating expense (earnings). Adjusted EBITDA margin
(non-GAAP) is outlined as adjusted EBITDA (non-GAAP) divided by whole revenues
much less reimbursable prices income, or web income (non-GAAP).
We consider adjusted EBITDA (non-GAAP) and adjusted EBITDA margin (non-GAAP) are
key measures for us to know and consider our working efficiency, to
set up budgets, and to develop operational and strategic objectives. Adjusted
EBITDA (non-GAAP) and adjusted EBITDA margin (non-GAAP) can present a helpful
measure for period-to-period comparisons of our core working efficiency and
assist establish underlying tendencies for the reason that bills we exclude could indirectly
correlate to our major working efficiency in any particular interval. Excluded
bills are:
•Sure non-cash prices, akin to stock-based compensation expense,
depreciation and amortization, and adjustments in truthful worth of economic
devices;
•Sure gadgets not associated to our major enterprise actions, akin to:
•Impairment, restructuring, and associated facility prices related to
realigning our group or value construction, impairments of ROU property and
different long-lived property from ceasing use of leased facility areas, involuntary
termination advantages, ongoing lease expense and associated sublease earnings from
facility areas we now have ceased utilizing, and different associated prices; and
•Different non-operating earnings.
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•Non-recurring gadgets that aren’t anticipated to recur inside the subsequent two years or
haven’t occurred inside the prior two years, akin to:
•Acquisition and integration bills associated to third-party prices related
with buying corporations, inside direct prices related to integrating
acquired corporations, workers, and their clients, and adjustments within the truthful
worth of contingent compensation consideration payable to workers of acquired
corporations;
•Curiosity expense and loss on extinguishment of debt ensuing from the
prepayment penalty and related prices of repaying all excellent debt
services as a part of the Enterprise Mixture; and
•Different capital construction transaction prices associated to third-party charges,
together with funding banking, authorized, accounting, and different skilled advisory
charges related to financing transactions, such because the proposed Merger (and
one-time transaction to grow to be a personal firm), the secondary providing of our
Class 1 frequent inventory accomplished in July 2021 (a one-time transaction between
present and new shareholders, with no new shares issued or supplied by us), and
the Warrant Change Supply (a one-time transaction to transform all excellent
warrants to Frequent Inventory).
Probably the most instantly comparable U.S. GAAP measure to adjusted EBITDA (non-GAAP) and
adjusted EBITDA margin (non-GAAP) is web loss on the Condensed Consolidated
Statements of Operations.
The next desk presents a reconciliation of our adjusted EBITDA (non-GAAP)
and adjusted EBITDA margin (non-GAAP) to its most instantly comparable GAAP
monetary measure (in hundreds):
Reconciliation of Web Loss to Adjusted EBITDA (non-GAAP) and Adjusted EBITDA
Margin (non-GAAP)
Three Months Ended 9 Months Ended
September 30, September 30,
2022 2021 2022 2021
(in hundreds)
Web loss $ (21,209) $ (11,194) $ (65,447) $ (44,724)
Revenue tax expense (profit) (251) 27 (970) 130
Change in truthful worth of economic
devices (360) – (122) 9,995
Curiosity expense and loss on
extinguishment of debt 15 2 22 2,947
Depreciation and amortization 2,191 1,205 6,218 3,924
Inventory-based compensation expense 6,940 5,914 20,293 20,446
Impairment, restructuring, and associated
facility prices 5,383 35 20,262 358
Acquisition and integration prices 702 257 3,900 257
Different capital construction transaction
prices 5,802 – 5,802 498
Different non-operating earnings (726) (277) (982) (521)
Adjusted EBITDA (non-GAAP) $ (1,513) $ (4,031) $ (11,024) $ (6,690)
Adjusted EBITDA margin (non-GAAP) (3.6) % (12.3) % (9.2) % (6.9) %
For the three months ended September 30, 2022, adjusted EBITDA (non-GAAP)
elevated $2.5 million in comparison with the prior 12 months interval primarily because of progress
in whole revenues and better bills which are excluded from adjusted EBITDA
(non-GAAP), together with (1) $5.Eight million of different capital construction transaction
prices associated to the proposed Merger, (2) $5.Four million in impairment prices
from ceasing use of further leased services within the third quarter of 2022,
(3) a $1.Zero million enhance in stock-based compensation expense because of elevated
headcount, and (4) a $1.Zero million elevated depreciation and amortization
primarily because of the amortization of intangible property from the acquisitions of
iController and Order2Cash. These will increase have been partially offset by larger
working bills.
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For the 9 months ended September 30, 2022, adjusted EBITDA (non-GAAP)
decreased $4.Three million in comparison with the prior 12 months interval primarily because of larger
working bills, offset by bills which are excluded from adjusted EBITDA
(non-GAAP), together with (1) $20.Three million in impairment prices from ceasing use
of a number of leased services in 2022, (2) $5.Eight million of different capital
construction transaction prices associated to the proposed Merger, (3) $3.9 million in
acquisition and integration prices from the acquisitions of Order2Cash and
iController, and (4) a $2.Three million enhance in depreciation and amortization
primarily because of the amortization of intangible property from the acquisitions of
iController and Order2Cash. These will increase in bills, which led to a lower
in adjusted EBITDA (non-GAAP), have been partially offset by progress in whole revenues
and reduces to one-time prices recorded within the prior 12 months associated to the
Enterprise Mixture: (1) a $10.Zero million truthful worth adjustment from the
enhance in worth of the Earnout Shares and (2) a $2.9 million loss on
extinguishment of debt related to the early fee of all our excellent
borrowings.
Direct Card Income (non-GAAP)
Direct card income (non-GAAP) is a subset of our software program and funds section
revenues and accommodates variable transactional price income related to card
funds on our digital funds processing platforms and associated charges.
Direct card income (non-GAAP) is outlined as subscription, transaction, and
companies revenues, much less revenues generated from segments aside from software program and
funds (i.e., software program and funds section income), much less software program and
funds section transaction income unrelated to card processing and all
subscription income.
We consider direct card income (non-GAAP) permits traders to know the
income we earn from processing card funds and higher comprehend underlying
tendencies in our funds enterprise. Probably the most instantly comparable U.S. GAAP measure
to direct card income (non-GAAP) is subscription, transaction, and companies
income on the Condensed Consolidated Monetary Statements.
The next desk presents a reconciliation of our direct card income
(non-GAAP) to its most instantly comparable U.S. GAAP monetary measure (in
hundreds):
Reconciliation of Subscription, Transaction, and Providers Revenues to Direct
Card Income (non-GAAP)
Three Months Ended 9 Months Ended
September 30, September 30,
2022 2021 2022 2021
Subscription, transaction, and companies revenues $ 42,508 $ 32,732 $ 120,157 $ 97,440
Much less: Non-software and funds section income 7,355
6,723 21,859 21,164
Software program and funds section income 35,153 26,009 98,298 76,276
Much less: Software program and funds section income
excluding direct card income (non-GAAP) 28,659 21,784 81,079 65,431
Direct card income (non-GAAP) $ 6,494 $ 4,225 $ 17,219 $ 10,845
Free Money Stream (non-GAAP)
Free money circulation (non-GAAP) is outlined as web money utilized in working actions,
much less purchases of property and gear (which incorporates capitalized
internal-use software program prices).
We consider free money circulation (non-GAAP) is a vital liquidity measure of the
money obtainable for our operational bills and funding in enterprise progress.
It’s helpful to traders as a liquidity measure of our skill to generate, or
use money to keep up, a robust steadiness sheet, and put money into future progress. The
most instantly comparable GAAP measure to free money circulation (non-GAAP) is web money
utilized in working actions on the Condensed Consolidated Statements of Money
Flows.
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The next desk presents a reconciliation of free money circulation to probably the most
instantly comparable GAAP measure (in hundreds):
Reconciliation of Web Money Utilized in Working Actions to Free Money Stream
(non-GAAP)
Three Months Ended 9 Months Ended
September 30, September 30,
2022 2021 2022 2021
(in hundreds)
Web money utilized in working actions $ (2,606) $ 1,012 $ (28,367) $ (9,809)
Purchases of property and gear (442) (450) (1,364) (1,570)
Free money circulation (non-GAAP) $ (3,048) $ 562 $ (29,731) $ (11,379)
Vital Accounting Insurance policies and Procedures
There have been no materials adjustments to the vital accounting insurance policies,
important judgments, or estimates included in our Annual Report on Type 10-Ok.
Latest Accounting Pronouncements
Discuss with Be aware 1 – Group and Nature of Enterprise within the Notes to Condensed
Consolidated Monetary Statements for a full description of latest accounting
pronouncements, together with the anticipated dates of adoption and results on our
Condensed Consolidated Monetary Statements.
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