paya-20220930
Q32022False000181988112/3100018198812022-01-012022-09-3000018198812022-11-01xbrli:shares00018198812022-07-012022-09-30iso4217:USD00018198812021-07-012021-09-3000018198812021-01-012021-09-30iso4217:USDxbrli:shares00018198812022-09-3000018198812021-12-310001819881us-gaap:CommonStockMember2020-12-310001819881us-gaap:AdditionalPaidInCapitalMember2020-12-310001819881us-gaap:RetainedEarningsMember2020-12-3100018198812020-12-310001819881us-gaap:RetainedEarningsMember2021-01-012021-03-3100018198812021-01-012021-03-310001819881paya:ClassCIncentiveUnitsMemberus-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001819881paya:ClassCIncentiveUnitsMember2021-01-012021-03-310001819881us-gaap:AdditionalPaidInCapitalMemberus-gaap:CommonStockMember2021-01-012021-03-310001819881us-gaap:CommonStockMember2021-01-012021-03-310001819881us-gaap:CommonStockMember2021-01-012021-03-310001819881us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001819881us-gaap:RetainedEarningsMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2020-12-310001819881srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2020-12-310001819881us-gaap:CommonStockMemberpaya:WarrantExerciseMember2021-01-012021-03-310001819881us-gaap:AdditionalPaidInCapitalMemberpaya:WarrantExerciseMember2021-01-012021-03-310001819881paya:WarrantExerciseMember2021-01-012021-03-310001819881us-gaap:CommonStockMember2021-03-310001819881us-gaap:AdditionalPaidInCapitalMember2021-03-310001819881us-gaap:RetainedEarningsMember2021-03-3100018198812021-03-310001819881us-gaap:RetainedEarningsMember2021-04-012021-06-3000018198812021-04-012021-06-300001819881paya:ClassCIncentiveUnitsMemberus-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-300001819881paya:ClassCIncentiveUnitsMember2021-04-012021-06-300001819881us-gaap:AdditionalPaidInCapitalMemberus-gaap:CommonStockMember2021-04-012021-06-300001819881us-gaap:CommonStockMember2021-04-012021-06-300001819881us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-300001819881us-gaap:CommonStockMembersrt:RevisionOfPriorPeriodReclassificationAdjustmentMember2021-03-310001819881us-gaap:AdditionalPaidInCapitalMembersrt:RevisionOfPriorPeriodReclassificationAdjustmentMember2021-03-310001819881srt:RevisionOfPriorPeriodReclassificationAdjustmentMember2021-03-310001819881us-gaap:CommonStockMember2021-04-012021-06-300001819881us-gaap:CommonStockMember2021-06-300001819881us-gaap:AdditionalPaidInCapitalMember2021-06-300001819881us-gaap:RetainedEarningsMember2021-06-3000018198812021-06-300001819881us-gaap:RetainedEarningsMember2021-07-012021-09-300001819881paya:ClassCIncentiveUnitsMemberus-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300001819881paya:ClassCIncentiveUnitsMember2021-07-012021-09-300001819881us-gaap:CommonClassAMemberus-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300001819881us-gaap:CommonClassAMember2021-07-012021-09-300001819881us-gaap:CommonStockMemberpaya:WarrantExchangeMember2021-07-012021-09-300001819881us-gaap:AdditionalPaidInCapitalMemberpaya:WarrantExchangeMember2021-07-012021-09-300001819881paya:WarrantExchangeMember2021-07-012021-09-300001819881us-gaap:CommonStockMember2021-07-012021-09-300001819881us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300001819881us-gaap:CommonStockMemberpaya:WarrantExerciseMember2021-07-012021-09-300001819881paya:WarrantExerciseMember2021-07-012021-09-300001819881us-gaap:CommonStockMember2021-09-300001819881us-gaap:AdditionalPaidInCapitalMember2021-09-300001819881us-gaap:RetainedEarningsMember2021-09-3000018198812021-09-300001819881us-gaap:CommonStockMember2021-12-310001819881us-gaap:AdditionalPaidInCapitalMember2021-12-310001819881us-gaap:RetainedEarningsMember2021-12-310001819881us-gaap:RetainedEarningsMember2022-01-012022-03-3100018198812022-01-012022-03-310001819881paya:ClassCIncentiveUnitsMemberus-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-310001819881paya:ClassCIncentiveUnitsMember2022-01-012022-03-310001819881us-gaap:AdditionalPaidInCapitalMemberus-gaap:CommonStockMember2022-01-012022-03-310001819881us-gaap:CommonStockMember2022-01-012022-03-310001819881us-gaap:CommonStockMember2022-01-012022-03-310001819881us-gaap:CommonStockMember2022-03-310001819881us-gaap:AdditionalPaidInCapitalMember2022-03-310001819881us-gaap:RetainedEarningsMember2022-03-3100018198812022-03-310001819881us-gaap:RetainedEarningsMember2022-04-012022-06-3000018198812022-04-012022-06-300001819881paya:ClassCIncentiveUnitsMemberus-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-300001819881paya:ClassCIncentiveUnitsMember2022-04-012022-06-300001819881us-gaap:AdditionalPaidInCapitalMemberus-gaap:CommonStockMember2022-04-012022-06-300001819881us-gaap:CommonStockMember2022-04-012022-06-300001819881us-gaap:CommonStockMember2022-04-012022-06-300001819881us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-300001819881us-gaap:CommonStockMember2022-06-300001819881us-gaap:AdditionalPaidInCapitalMember2022-06-300001819881us-gaap:RetainedEarningsMember2022-06-3000018198812022-06-300001819881us-gaap:RetainedEarningsMember2022-07-012022-09-300001819881paya:ClassCIncentiveUnitsMemberus-gaap:AdditionalPaidInCapitalMember2022-07-012022-09-300001819881paya:ClassCIncentiveUnitsMember2022-07-012022-09-300001819881us-gaap:AdditionalPaidInCapitalMemberus-gaap:CommonStockMember2022-07-012022-09-300001819881us-gaap:CommonStockMember2022-07-012022-09-300001819881us-gaap:CommonStockMember2022-07-012022-09-300001819881us-gaap:AdditionalPaidInCapitalMember2022-07-012022-09-300001819881us-gaap:CommonStockMember2022-09-300001819881us-gaap:AdditionalPaidInCapitalMember2022-09-300001819881us-gaap:RetainedEarningsMember2022-09-300001819881us-gaap:CashAndCashEquivalentsMember2022-09-300001819881us-gaap:CashAndCashEquivalentsMember2021-12-310001819881us-gaap:AccountsReceivableMember2022-09-300001819881us-gaap:AccountsReceivableMember2021-12-310001819881paya:ComputersAndEquipmentMember2022-01-012022-09-300001819881us-gaap:FurnitureAndFixturesMember2022-01-012022-09-300001819881us-gaap:SoftwareDevelopmentMembersrt:MinimumMember2022-01-012022-09-300001819881us-gaap:SoftwareDevelopmentMembersrt:MaximumMember2022-01-012022-09-300001819881us-gaap:CustomerRelationshipsMember2022-01-012022-09-300001819881us-gaap:CustomerRelationshipsMembersrt:MinimumMember2022-01-012022-09-300001819881us-gaap:CustomerRelationshipsMembersrt:MaximumMember2022-01-012022-09-300001819881us-gaap:DevelopedTechnologyRightsMembersrt:MinimumMember2022-01-012022-09-300001819881us-gaap:DevelopedTechnologyRightsMembersrt:MaximumMember2022-01-012022-09-300001819881us-gaap:TradeNamesMembersrt:MinimumMember2022-01-012022-09-300001819881us-gaap:TradeNamesMembersrt:MaximumMember2022-01-012022-09-300001819881paya:TransactionBasedRevenueMember2022-07-012022-09-300001819881paya:TransactionBasedRevenueMember2022-01-012022-09-300001819881paya:TransactionBasedRevenueMember2021-07-012021-09-300001819881paya:TransactionBasedRevenueMember2021-01-012021-09-30paya:segment0001819881paya:IntegratedSolutionsSegmentMemberpaya:TransactionBasedRevenueMember2022-07-012022-09-300001819881paya:IntegratedSolutionsSegmentMemberpaya:TransactionBasedRevenueMember2021-07-012021-09-300001819881paya:IntegratedSolutionsSegmentMemberpaya:TransactionBasedRevenueMember2022-01-012022-09-300001819881paya:IntegratedSolutionsSegmentMemberpaya:TransactionBasedRevenueMember2021-01-012021-09-300001819881paya:IntegratedSolutionsSegmentMemberpaya:ServiceBasedRevenueMember2022-07-012022-09-300001819881paya:IntegratedSolutionsSegmentMemberpaya:ServiceBasedRevenueMember2021-07-012021-09-300001819881paya:IntegratedSolutionsSegmentMemberpaya:ServiceBasedRevenueMember2022-01-012022-09-300001819881paya:IntegratedSolutionsSegmentMemberpaya:ServiceBasedRevenueMember2021-01-012021-09-300001819881paya:IntegratedSolutionsSegmentMemberpaya:EquipmentRevenueMember2022-07-012022-09-300001819881paya:IntegratedSolutionsSegmentMemberpaya:EquipmentRevenueMember2021-07-012021-09-300001819881paya:IntegratedSolutionsSegmentMemberpaya:EquipmentRevenueMember2022-01-012022-09-300001819881paya:IntegratedSolutionsSegmentMemberpaya:EquipmentRevenueMember2021-01-012021-09-300001819881paya:IntegratedSolutionsSegmentMember2022-07-012022-09-300001819881paya:IntegratedSolutionsSegmentMember2021-07-012021-09-300001819881paya:IntegratedSolutionsSegmentMember2022-01-012022-09-300001819881paya:IntegratedSolutionsSegmentMember2021-01-012021-09-300001819881paya:PaymentServicesSegmentMemberpaya:TransactionBasedRevenueMember2022-07-012022-09-300001819881paya:PaymentServicesSegmentMemberpaya:TransactionBasedRevenueMember2021-07-012021-09-300001819881paya:PaymentServicesSegmentMemberpaya:TransactionBasedRevenueMember2022-01-012022-09-300001819881paya:PaymentServicesSegmentMemberpaya:TransactionBasedRevenueMember2021-01-012021-09-300001819881paya:PaymentServicesSegmentMemberpaya:ServiceBasedRevenueMember2022-07-012022-09-300001819881paya:PaymentServicesSegmentMemberpaya:ServiceBasedRevenueMember2021-07-012021-09-300001819881paya:PaymentServicesSegmentMemberpaya:ServiceBasedRevenueMember2022-01-012022-09-300001819881paya:PaymentServicesSegmentMemberpaya:ServiceBasedRevenueMember2021-01-012021-09-300001819881paya:PaymentServicesSegmentMemberpaya:EquipmentRevenueMember2022-07-012022-09-300001819881paya:PaymentServicesSegmentMemberpaya:EquipmentRevenueMember2021-07-012021-09-300001819881paya:PaymentServicesSegmentMemberpaya:EquipmentRevenueMember2022-01-012022-09-300001819881paya:PaymentServicesSegmentMemberpaya:EquipmentRevenueMember2021-01-012021-09-300001819881paya:PaymentServicesSegmentMember2022-07-012022-09-300001819881paya:PaymentServicesSegmentMember2021-07-012021-09-300001819881paya:PaymentServicesSegmentMember2022-01-012022-09-300001819881paya:PaymentServicesSegmentMember2021-01-012021-09-300001819881paya:JSInnovationsLLCMember2022-01-192022-01-190001819881srt:ScenarioForecastMemberpaya:JSInnovationsLLCMember2023-01-012023-01-310001819881paya:JSInnovationsLLCMember2022-01-190001819881paya:JSInnovationsLLCMember2022-09-300001819881paya:ParagonPaymentSolutionsAcquisitionMember2021-04-232021-04-230001819881paya:ParagonPaymentSolutionsAcquisitionMember2022-09-300001819881paya:ComputersAndEquipmentMember2022-09-300001819881paya:ComputersAndEquipmentMember2021-12-310001819881us-gaap:SoftwareDevelopmentMember2022-09-300001819881us-gaap:SoftwareDevelopmentMember2021-12-310001819881us-gaap:OfficeEquipmentMember2022-09-300001819881us-gaap:OfficeEquipmentMember2021-12-310001819881us-gaap:FurnitureAndFixturesMember2022-09-300001819881us-gaap:FurnitureAndFixturesMember2021-12-310001819881us-gaap:LeaseholdImprovementsMember2022-09-300001819881us-gaap:LeaseholdImprovementsMember2021-12-310001819881us-gaap:OtherMachineryAndEquipmentMember2022-09-300001819881us-gaap:OtherMachineryAndEquipmentMember2021-12-310001819881paya:IntegratedSolutionsSegmentMember2021-12-310001819881paya:PaymentServicesSegmentMember2021-12-310001819881paya:IntegratedSolutionsSegmentMember2022-01-012022-09-300001819881paya:PaymentServicesSegmentMember2022-01-012022-09-300001819881paya:IntegratedSolutionsSegmentMember2022-09-300001819881paya:PaymentServicesSegmentMember2022-09-300001819881us-gaap:CustomerRelationshipsMembersrt:WeightedAverageMember2022-01-012022-09-300001819881us-gaap:CustomerRelationshipsMember2022-09-300001819881srt:WeightedAverageMemberus-gaap:DevelopedTechnologyRightsMember2022-01-012022-09-300001819881us-gaap:DevelopedTechnologyRightsMember2022-09-300001819881srt:WeightedAverageMemberus-gaap:TradeNamesMember2022-01-012022-09-300001819881us-gaap:TradeNamesMember2022-09-300001819881srt:WeightedAverageMember2022-01-012022-09-300001819881us-gaap:CustomerRelationshipsMembersrt:WeightedAverageMember2021-01-012021-12-310001819881us-gaap:CustomerRelationshipsMembersrt:MinimumMember2021-01-012021-12-310001819881us-gaap:CustomerRelationshipsMembersrt:MaximumMember2021-01-012021-12-310001819881us-gaap:CustomerRelationshipsMember2021-12-310001819881srt:WeightedAverageMemberus-gaap:DevelopedTechnologyRightsMember2021-01-012021-12-310001819881us-gaap:DevelopedTechnologyRightsMembersrt:MinimumMember2021-01-012021-12-310001819881us-gaap:DevelopedTechnologyRightsMembersrt:MaximumMember2021-01-012021-12-310001819881us-gaap:DevelopedTechnologyRightsMember2021-12-310001819881srt:WeightedAverageMemberus-gaap:TradeNamesMember2021-01-012021-12-310001819881us-gaap:TradeNamesMembersrt:MinimumMember2021-01-012021-12-310001819881us-gaap:TradeNamesMembersrt:MaximumMember2021-01-012021-12-310001819881us-gaap:TradeNamesMember2021-12-310001819881srt:WeightedAverageMember2021-01-012021-12-310001819881paya:CreditAgreementMemberus-gaap:SecuredDebtMember2021-06-250001819881us-gaap:LineOfCreditMemberpaya:CreditAgreementMemberus-gaap:RevolvingCreditFacilityMember2022-09-300001819881us-gaap:LineOfCreditMemberpaya:CreditAgreementMemberus-gaap:RevolvingCreditFacilityMember2021-12-310001819881us-gaap:LineOfCreditMemberpaya:CreditAgreementMemberus-gaap:RevolvingCreditFacilityMemberpaya:DebtInstrumentInterestRatePeriodOneMemberus-gaap:BaseRateMember2021-06-252021-06-25xbrli:pure0001819881us-gaap:LineOfCreditMemberpaya:CreditAgreementMemberus-gaap:RevolvingCreditFacilityMember2021-06-252021-06-250001819881us-gaap:LineOfCreditMemberpaya:CreditAgreementMemberpaya:DebtInstrumentInterestRatePeriodTwoMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:BaseRateMember2021-06-252021-06-250001819881paya:CreditAgreementMemberus-gaap:EurodollarMemberus-gaap:SecuredDebtMembersrt:MinimumMember2021-06-252021-06-250001819881us-gaap:LineOfCreditMemberpaya:DebtInstrumentInterestRatePeriodThreeMemberpaya:CreditAgreementMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:BaseRateMember2021-06-252021-06-250001819881us-gaap:InterestRateCapMemberus-gaap:NondesignatedMember2021-02-030001819881us-gaap:InterestRateCapMemberus-gaap:NondesignatedMember2022-09-300001819881us-gaap:InterestRateCapMember2022-07-012022-09-300001819881us-gaap:InterestRateCapMember2022-01-012022-09-300001819881us-gaap:InterestRateCapMember2021-07-012021-09-300001819881us-gaap:InterestRateCapMember2021-01-012021-09-300001819881paya:ReverseRecapitalizationPeriodOneMember2022-01-012022-09-300001819881paya:ReverseRecapitalizationPeriodOneMember2022-09-30paya:tranche0001819881paya:ReverseRecapitalizationTrancheOneMemberpaya:ReverseRecapitalizationPeriodOneMember2022-09-300001819881paya:ReverseRecapitalizationPeriodOneMemberpaya:ReverseRecapitalizationTrancheTwoMember2022-09-30paya:tradingDay0001819881paya:ReverseRecapitalizationPeriodTwoMember2022-01-012022-09-300001819881paya:ReverseRecapitalizationPeriodTwoMember2022-09-300001819881paya:ReverseRecapitalizationPeriodTwoMemberpaya:ReverseRecapitalizationTrancheOneMember2022-09-300001819881paya:ReverseRecapitalizationPeriodTwoMemberpaya:ReverseRecapitalizationTrancheTwoMember2022-09-300001819881paya:OmnibusIncentivePlanMember2022-05-310001819881paya:OmnibusIncentivePlanMember2022-07-012022-09-300001819881paya:OmnibusIncentivePlanMember2022-01-012022-09-300001819881paya:OmnibusIncentivePlanMember2021-07-012021-09-300001819881paya:OmnibusIncentivePlanMember2021-01-012021-09-30paya:awardType0001819881us-gaap:RestrictedStockUnitsRSUMembersrt:MinimumMember2022-01-012022-09-300001819881us-gaap:RestrictedStockUnitsRSUMembersrt:MaximumMember2022-01-012022-09-300001819881us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-09-300001819881paya:OmnibusIncentivePlanMemberus-gaap:RestrictedStockUnitsRSUMembersrt:MinimumMember2022-01-012022-09-300001819881paya:OmnibusIncentivePlanMemberus-gaap:RestrictedStockUnitsRSUMembersrt:MaximumMember2022-01-012022-09-300001819881us-gaap:EmployeeStockOptionMember2022-01-012022-09-300001819881us-gaap:EmployeeStockOptionMembersrt:MinimumMember2022-01-012022-09-300001819881us-gaap:EmployeeStockOptionMembersrt:MaximumMember2022-01-012022-09-300001819881paya:OmnibusIncentivePlanMemberus-gaap:EmployeeStockOptionMember2022-01-012022-09-3000018198812021-01-012021-12-310001819881us-gaap:RestrictedStockUnitsRSUMember2022-06-300001819881us-gaap:RestrictedStockUnitsRSUMember2022-07-012022-09-300001819881us-gaap:RestrictedStockUnitsRSUMember2022-09-300001819881us-gaap:RestrictedStockUnitsRSUMember2021-12-310001819881paya:TimeVestingClassCIncentiveUnitsMember2020-12-310001819881paya:TimeVestingClassCIncentiveUnitsMember2021-01-012021-09-300001819881paya:TimeVestingClassCIncentiveUnitsMember2021-09-300001819881paya:TimeVestingClassCIncentiveUnitsMember2021-12-310001819881paya:TimeVestingClassCIncentiveUnitsMember2022-01-012022-09-300001819881paya:TimeVestingClassCIncentiveUnitsMember2022-09-300001819881paya:ClassCIncentiveUnitsMember2022-09-300001819881paya:ClassCIncentiveUnitsMemberus-gaap:ShareBasedCompensationAwardTrancheOneMember2022-09-300001819881paya:ClassCIncentiveUnitsMemberus-gaap:ShareBasedCompensationAwardTrancheOneMember2021-09-300001819881paya:ClassCIncentiveUnitsMemberus-gaap:ShareBasedCompensationAwardTrancheTwoMember2022-09-300001819881paya:ClassCIncentiveUnitsMemberus-gaap:ShareBasedCompensationAwardTrancheTwoMember2021-09-300001819881paya:ClassCIncentiveUnitsMember2021-09-300001819881paya:ClassCIncentiveUnitsMemberus-gaap:AdditionalPaidInCapitalMember2022-01-012022-09-300001819881paya:ClassCIncentiveUnitsMemberus-gaap:AdditionalPaidInCapitalMember2021-01-012021-09-300001819881paya:WarrantAmendmentMember2021-09-150001819881paya:WarrantAmendmentMember2021-09-152021-09-150001819881paya:WarrantAmendmentMember2021-12-310001819881paya:WarrantAmendmentMember2022-09-300001819881us-gaap:EmployeeStockOptionMember2022-07-012022-09-300001819881paya:EarnoutSharesMember2022-07-012022-09-300001819881paya:EarnoutSharesMember2022-01-012022-09-300001819881us-gaap:RestrictedStockUnitsRSUMember2021-07-012021-09-300001819881us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-09-300001819881paya:EarnoutSharesMember2021-07-012021-09-300001819881paya:EarnoutSharesMember2021-01-012021-09-300001819881us-gaap:FairValueInputsLevel1Memberus-gaap:InterestRateCapMember2021-12-310001819881us-gaap:FairValueInputsLevel2Memberus-gaap:InterestRateCapMember2021-12-310001819881us-gaap:FairValueInputsLevel3Memberus-gaap:InterestRateCapMember2021-12-310001819881us-gaap:FairValueInputsLevel1Member2021-12-310001819881us-gaap:FairValueInputsLevel2Member2021-12-310001819881us-gaap:FairValueInputsLevel3Member2021-12-310001819881us-gaap:FairValueInputsLevel1Memberus-gaap:InterestRateCapMember2022-09-300001819881us-gaap:FairValueInputsLevel2Memberus-gaap:InterestRateCapMember2022-09-300001819881us-gaap:FairValueInputsLevel3Memberus-gaap:InterestRateCapMember2022-09-300001819881us-gaap:FairValueInputsLevel1Member2022-09-300001819881us-gaap:FairValueInputsLevel2Member2022-09-300001819881us-gaap:FairValueInputsLevel3Member2022-09-300001819881us-gaap:InvestorMember2021-07-012021-09-300001819881us-gaap:InvestorMember2022-07-012022-09-300001819881us-gaap:InvestorMember2022-01-012022-09-300001819881us-gaap:InvestorMember2021-01-012021-09-30
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __ to __

Commission file number 001-39627
Paya Holdings Inc.
(Exact Name of Registrant as Specified in Charter)
Delaware85-2199433
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
303 Perimeter Center North, Suite 600, Atlanta, Georgia 30346
(Address, including zip code, of principal executive offices)
(800) 261-0240
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.001 per share
PAYA
The Nasdaq Capital Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
There were 132,214,528 shares of Common Stock, par value $0.001 per share, issued and outstanding as of November 1, 2022.


Table of Contents
Paya Holdings Inc.
TABLE OF CONTENTS
Quarterly Report on FORM 10-Q
September 30, 2022


Table of Contents
Part I


Table of Contents
Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for the Company. Specifically, forward-looking statements may include statements relating to:

operational, economic, political and regulatory risks, including those related to the war in Ukraine, heightened inflation, slower growth or recession, changes to fiscal and monetary policy, higher interest rates, currency fluctuations and challenges in the supply chain;
natural disasters and other business disruptions including outbreaks of epidemic or pandemic disease;
changes in demand within a number of key industry end-markets and geographic regions;
failure to retain key personnel;
our inability to recognize deferred tax assets and tax loss carry forwards;
our future operating results fluctuating, failing to match performance or to meet expectations;
unanticipated changes in our tax obligations;
our obligations under various laws and regulations;
the effect of litigation, judgments, orders or regulatory proceedings on our business;
our ability to successfully acquire and integrate new operations;
global or local economic and political movements;
our ability to effectively manage our credit risk and collect on our accounts receivable;
our ability to fulfill our public company obligations;
any failure of our management information systems and data security;
our ability to meet our debt service requirements and obligations;
changes in the payment processing market in which Paya competes;
changes in the vertical markets that Paya targets;
risks relating to Paya’s relationships within the payment ecosystem;
risk that Paya may not be able to execute its growth strategies;
risks relating to data security
changes in accounting policies applicable to Paya;

the risk that Paya may not be able to remediate the existing material weakness related to the income tax provision or develop and maintain effective internal controls; and

other risks and uncertainties discussed in the section titled “Risk Factors,” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021, Part II, Item 1A of this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission.



Table of Contents
These forward-looking statements are based on information available as of the date of this Quarterly Report on Form 10-Q and our management’s current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. We undertake no obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
Item 1. Unaudited Consolidated Financial Statements
Paya Holdings Inc.
Consolidated Statements of Income and Other Comprehensive Income
(In thousands except per share data)
(Unaudited)

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Revenue
$71,366 $63,058 $209,851 $182,297 
Cost of services exclusive of depreciation and amortization
(35,486)(30,504)(102,470)(86,840)
Selling, general & administrative expenses
(21,067)(18,718)(66,414)(56,478)
Depreciation and amortization
(8,353)(7,891)(24,041)(22,442)
Income from operations
6,460 5,945 16,926 16,537 
Other income (expense)
Interest expense
(3,487)(3,137)(9,664)(11,002)
Other income (expense)
(189)(67)1,422 (8,042)
Total other expense
(3,676)(3,204)(8,242)(19,044)
Income (loss) before income taxes
2,784 2,741 8,684 (2,507)
Income tax expense
(1,434)(5,702)(3,476)(2,563)
Net income (loss)
$1,350 $(2,961)$5,208 $(5,070)
Weighted average shares outstanding of common stock126,417,577 128,429,090126,397,360 124,523,217
Basic net income (loss) per share$0.01 $(0.02)$0.04 $(0.04)
Weighted average diluted shares outstanding of common stock127,023,562 128,429,090126,697,871 124,523,217
Diluted net income (loss) per share$0.01 $(0.02)$0.04 $(0.04)
See accompanying notes to the unaudited consolidated financial statements.








Table of Contents

Paya Holdings Inc.
Consolidated Balance Sheets
(In thousands except share data)
(Unaudited)
September 30,December 31,
20222021
Assets
Current assets:
Cash and cash equivalents
$155,958 $146,799 
Trade receivables, net
26,965 23,163 
Prepaid expenses
3,042 2,407 
Income taxes receivable
1,580 460 
Other current assets
3,761 922 
Total current assets before funds held for clients
191,306 173,751 
Funds held for clients
105,570 99,815 
Total current assets
$296,876 $273,566 
Non-current assets:
Property and equipment, net
14,432 14,011 
Goodwill
223,181 221,117 
Intangible assets, net
126,769 136,708 
Operating lease ROU assets, net of amortization3,099 4,495 
Other non-current assets
928 1,149 
Total Assets
$665,285 $651,046 
Liabilities and stockholders’ equity
Current liabilities:
Trade payables
1,474 3,127 
Accrued liabilities
16,355 13,686 
Accrued revenue share
12,797 11,002 
Current operating lease liabilities
1,236 1,302 
Other current liabilities
4,090 3,422 
Total current liabilities before client funds obligations
35,952 32,539 
Client funds obligations
104,569 99,125 
Total current liabilities
$140,521 $131,664 
Non-current liabilities:
Deferred tax liability, net
9,222 11,723 
Long-term debt
240,562 241,872 
Tax receivable agreement liability19,166 19,502 
Non-current lease liabilities2,830 3,941 
Other non-current liabilities
418 419 
Total liabilities
$412,719 $409,121 
Stockholders’ Equity:
Common stock, $0.001 par value; 500,000,000 authorized; 132,113,603 and 132,059,879 issued and outstanding as of September 30, 2022 and December 31, 2021, respectively
132 132 
Additional Paid-in-Capital
261,419 255,986 
Accumulated deficit
(8,985)(14,193)


Table of Contents
Total stockholders’ equity
252,566 241,925 
Total liabilities and stockholders’ equity
$665,285 $651,046 
See accompanying notes to the unaudited consolidated financial statements.


Table of Contents
Paya Holdings Inc.
Consolidated Statements of Changes in Stockholders’ Equity
(In thousands except share data)
(Unaudited)
Common stock
SharesAmountAdditional
paid-in-capital
Accumulated deficitTotal stockholders’ equity
Balance at December 31, 2020116,697,441 $12 $129,453 $(13,433)$116,032 
Net income— — — 1,045 1,045 
Stock-based compensation - Class C incentive units— — 259 — 259 
Stock-based compensation - Common stock— — 451 — 451 
    Equity offering10,000,000 1 116,970 — 116,971 
    Cumulative effect of adoption of new accounting standard— — 51 51 
    Warrant exercise51 — 1 — 1 
Balance at March 31, 2021126,697,492 $13 $247,134 $(12,337)$234,810 
Net loss— — — (3,154)(3,154)
Stock based compensation - Class C incentive units— — 74 — 74 
Stock based compensation - Common stock— — 790 — 790 
Equity offering— — (206)— (206)
Par value of common stock adjustment— 113 (113)—  
Shares issued for acquisition682,892 1 7,499 — 7,500 
Balance at June 30, 2021127,380,384 $127 $255,178 $(15,491)$239,814 
Net loss— — (2,961)(2,961)
Stock based compensation - Class C incentive units— 247 — 247 
Stock based compensation - Common stock— 675 — 675 
Warrant exchange4,597,8485 (1,732)— (1,727)
Shares issued under equity compensation plan29,136— (199)— (199)
Warrant exercise2,450— — —  
Recapitalization transaction— 743 — 743 
Balance at September 30, 2021132,009,818$132 $254,912 $(18,452)236,592


Table of Contents
Common stock
SharesAmountAdditional
paid-in-capital
Accumulated deficitTotal stockholders’ equity
Balance at December 31, 2021132,059,879 $132 $255,986 $(14,193)$241,925 
Net income— — — 2,212 2,212 
Stock-based compensation - Class C incentive units— — 231 — 231 
Stock-based compensation - Common stock— — 1,271 — 1,271 
Shares issued under equity compensation plan7,234 — — — — 
Balance at March 31, 2022132,067,113 $132 $257,488 $(11,981)$245,639 
Net income— — — 1,646 1,646 
Stock-based compensation - Class C incentive units— — 193 — 193 
Stock-based compensation - Common stock4,812 — 1,786 — 1,786 
Shares issued under equity compensation plan — (14)— (14)
Balance at June 30, 2022132,071,925 $132 $259,453 $(10,335)$249,250 
Net income— — — 1,350 1,350 
Stock-based compensation - Class C incentive units— — 186 — 186 
Stock-based compensation - Common stock — 1,957 — 1,957 
Shares issued under equity compensation plan41,678 — (177)— (177)
Balance at September 30, 2022132,113,603$132 $261,419 $(8,985)$252,566 
See accompanying notes to the unaudited consolidated financial statements.


Table of Contents
Paya Holdings Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended September 30,
20222021
Cash flows from operating activities:
Net income$5,208 $(5,070)
Depreciation & amortization expense24,041 22,442 
Deferred taxes(2,501)(500)
Bad debt expense1,325 899 
Stock-based compensation5,624 2,496 
Non-cash change in tax receivable agreement liability257 (286)
Change in fair value of derivative(2,543) 
Non-cash lease expense1,332 1,091 
Gain on contingent consideration (180)
Amortization of debt issuance costs726 687 
Loss on debt extinguishment 6,187 
Changes in assets and liabilities, net of impact of business acquisitions:
Trade receivables(5,042)(5,881)
Prepaid expenses(607)165 
Other current assets(294)29 
Other non-current assets76 (76)
Trade payables(1,654)(4,104)
Accrued liabilities1,647 720 
Accrued revenue share1,774 2,638 
Income tax payable/receivable, net(1,121)(455)
Other current liabilities658 1,124 
Lease liabilities(1,120)(1,084)
Other non-current liabilities(2)9 
Net cash provided by operating activities$27,784 $20,851 
Cash flows from investing activities:
Purchases of property and equipment(4,236)(4,955)
Purchases of customer lists(5,387)(15,951)
Acquisition of business, net of cash received(6,034)(18,309)
Net cash (used in) investing activities$(15,657)$(39,215)
Cash flows from financing activities:
Payments on non-current debt(1,875)(228,677)
Borrowings under non-current debt 250,000 
Payment of debt issuance costs (6,390)
Proceeds from equity offering 116,764 
Repurchase of restricted stock to satisfy tax withholding obligations(191)(199)
Warrant exchange (1,431)
Payment on tax receivable agreement liability(592) 
Movements in cash held on behalf of customers, net4,657 4,949 
Net cash provided by financing activities$1,999 $135,016 
Effect of foreign currency exchange rates on cash and cash equivalents
1  
Net change in cash and cash equivalents14,126 116,652 
Cash and cash equivalents, beginning of period198,391 63,408 
Cash and cash equivalents, end of period$212,518 $180,060 


Table of Contents
Reconciliation of cash, cash equivalents, and restricted cash
Cash and cash equivalents155,958 133,144 
Restricted cash included in funds held for clients56,560 46,916 
Total cash, cash equivalents, and restricted cash$212,518 $180,060 
Supplemental disclosures:
Cash interest paid$9,342 $10,105 
Cash taxes paid, including estimated payments$7,102 $3,242 
Non-cash investing activity:
Non-cash primary stock issuance related to Paragon acquisition$ $7,500 
See accompanying notes to the unaudited consolidated financial statements.


Table of Contents
Notes to Unaudited Consolidated Financial Statements
(In Thousands, unless otherwise noted)
1.Organization, basis of presentation and summary of accounting policies
Organization

Paya Holdings Inc. (“we,” “us,” “Paya” or the “Company”), a Delaware corporation, conducts operations through its wholly-owned subsidiaries. These operating subsidiaries are comprised of Paya, Inc., Paya EFT, Inc., Stewardship Technology, Inc., First Mobile Trust, LLC, The Payment Group, LLC, Blue Parasol Group, LLC (Paragon Payment Solutions), and JS Innovations LLC (VelocIT).

The Company is an independent integrated payments platform providing card, ACH, and check payment processing solutions via software to middle-market businesses in the United States. Paya’s solutions integrate with customers’ core business software to enable payments acceptance, reconcile invoice detail, and post payment information to their core accounting system.

The Company is headquartered in Atlanta, Georgia and also has operations in Reston, VA, Fort Walton Beach, FL, Mount Vernon, OH, and Dallas, TX.

Basis of presentation

The Company’s unaudited consolidated financial statements have been prepared in accordance with the requirements of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information. As permitted under accounting principles generally accepted in the United States of America (“U.S. GAAP”), certain notes and other information have been omitted from the interim unaudited consolidated financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC.

In management’s opinion, the consolidated financial statements include all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position, results of operations and cash flows. The results of operations for any interim period are not necessarily indicative of the operating results that may be expected for the full fiscal year ending December 31, 2022 or any future period.
Use of estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. These estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future. The more significant estimates made by management relate to the determination of the fair value of intangible assets acquired in a business combination, allowance for credit losses, income taxes, tax receivable agreement liability, and impairment of intangibles and long-lived assets.
Principles of Consolidation

These consolidated financial statements include the accounts of the Company and its subsidiary companies. All significant intercompany accounts and transactions have been eliminated in consolidation.

Upon acquisition of a company, we determine if the transaction is a business combination defined by ASC 805, which is accounted for using the acquisition method of accounting. Under the acquisition method, once control is obtained of a business, the assets acquired, and liabilities assumed, including amounts attributed to noncontrolling interests, are recorded at fair value. We use our best estimates and assumptions to assign fair value to the tangible


Table of Contents

and intangible assets acquired and liabilities assumed at the acquisition date. One of the most significant estimates relates to the determination of the fair value of these assets and liabilities, specifically intangible assets such as internal use software, tradenames and trademarks, and customer relationships. The determination of the fair values is based on estimates and judgments made by management with the assistance of a third-party valuation firm. Significant assumptions for intangible assets include the discount rate, projected revenue growth rates and margin, customer retention factors, obsolescence rates and royalty rate used to calculate the expected future cash flows. Our estimates of fair value are based upon assumptions we believe to be reasonable, but which are inherently uncertain and unpredictable. Measurement period adjustments are reflected at the time identified, up through the conclusion of the measurement period, which is the time at which all information for determination of the values of assets acquired and liabilities assumed is received and is not to exceed one year from the acquisition date. We may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets.

Additionally, uncertain tax positions and tax-related valuation allowances are initially recorded in connection with a business combination as of the acquisition date. We continue to collect information and reevaluate these estimates and assumptions periodically and record any adjustments to preliminary estimates to goodwill, provided we are within the measurement period. If outside of the measurement period, any subsequent adjustments are recorded to the consolidated statement of income and other comprehensive income.
Cash and cash equivalents

Cash and cash equivalents are short-term, highly liquid investments with a maturity of ninety days or less at the time of purchase. The fair value of our cash and cash equivalents approximates carrying value. At times, cash and cash equivalents exceed the amount insured by the Federal Deposit Insurance Corporation.
Concentration of credit risk
Our cash, cash equivalents, trade receivables, funds receivable and customer accounts are potentially subject to concentration of credit risk. The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral from its customers. No individual customers represented more than 10% of the Company’s revenue. Generally, these deposits may be redeemed upon demand, and therefore, bear minimal default risk.
Trade receivables, net
Trade receivables are recorded at net realizable value, which includes allowances for credit losses. The Company estimates an allowance for credit losses related to balances that it estimates it cannot collect from merchants. These uncollectible amounts relate to chargebacks, uncollectible merchant fees, and ACH transactions that have been rejected subsequent to the payout date. The Company uses a loss-rate method, which utilizes historical write-off data, to estimate expected credit losses relating to uncollectible accounts. The allowance for credit losses was $1,470 and $1,449 at September 30, 2022 and December 31, 2021, respectively.
Prepaid expenses

Prepaid expenses primarily consist of insurance, software licenses and other prepaid supplier invoices.
Other current assets

Other current assets primarily consist of current deferred debt issuance costs related to the line of credit, other receivables, and equipment inventory.



Table of Contents

Funds held for clients and client funds obligation

Funds held for clients and client funds obligations result from the Company’s processing services and associated settlement activities, including settlement of payment transactions. Funds held for clients represent assets that are restricted for use solely for the purposes of satisfying the obligations to remit funds relating to the Company’s processing services, which are classified as client funds obligations on our consolidated balance sheets. Funds held for clients are generated principally from merchant services transactions and are comprised of both settlements’ receivable and cash as of period end. Certain merchant settlement assets that relate to settlement obligations accrued by the Company are held by partner banks. The Company classified funds held for clients as a current asset since these funds are held solely for the purpose of satisfying the client funds obligations.

The Company records corresponding settlement obligations for amounts payable to merchants and for payment instruments not yet presented for settlement as client funds obligations. Client funds obligations represent the Company's contractual obligations to remit funds to satisfy clients' settlement obligations. The client funds obligations represent liabilities that will be repaid within one year of the balance sheet date. Differences in the funds held for clients and client funds obligation are due to timing differences between when transactions are settled and when payment instruments are presented for settlement and are considered to be immaterial. The changes in settlement assets and obligations are presented on a net basis within financing activities in the consolidated statements of cash flows.

The composition of funds held for clients was as follows:

September 30,December 31,
20222021
Funds held for clients
Cash held to satisfy client funds obligations$56,560 $51,592 
Receivables held to satisfy client funds obligations49,010 48,223 
Total$105,570 $99,815 
Property and equipment, net

Property and equipment, is stated at cost less accumulated depreciation. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the assets. These lives are 3 years for computers and equipment, 5 years for furniture, fixtures, and office equipment, and the lesser of the asset useful life or remaining lease term for leasehold improvements. Also, the Company capitalizes software development costs and website development costs incurred in accordance with ASC 350-40, Internal Use Software. The useful lives are 3 to 5 years for internal-use software. Repair and maintenance costs are expensed as incurred and included in selling, general and administrative expenses on the consolidated statements of income and other comprehensive income.
Leases
On January 1, 2021, the Company adopted Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842) using the modified retrospective transition approach. We applied the new standard to all material leases existing at the date of initial application. Refer to the discussion under Note 11 Commitments and Contingencies.

We determine if a contract is a leasing arrangement at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Right-of-use (ROU) assets and lease liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. The Company calculates the present value of future payments by using an estimated incremental borrowing rate, which approximates the rate at which the Company would borrow, on a secured basis and over a similar term. ROU assets represent our right to control the use of an identified asset for the lease term and lease liabilities represent our


Table of Contents

obligation to make lease payments arising from the lease. We use the incremental borrowing rate on the commencement date in determining the present value of our lease payments. We recognize operating lease expense for our operating leases on a straight-line basis over the lease term.

The Company’s lease agreements may contain variable costs such as common area maintenance, insurance, real estate taxes, or other costs. Variable lease costs are expensed as incurred on the consolidated statements of income and other comprehensive income.
Impairment of long-lived assets

The Company evaluates the recoverability of its long-lived assets in accordance with the provisions of ASC 360, Property, Plant and Equipment (“ASC 360”). ASC 360 requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets is measured by comparing the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. There was no impairment of long-lived assets recognized in any period presented in the consolidated financial statements.
Goodwill and other intangible assets, net

Goodwill represents the premium paid over the fair value of the net tangible and identifiable intangible assets acquired in the Company’s business combinations. The Company evaluates goodwill and intangible assets in accordance with ASC 350, Goodwill and Other Intangible Assets (“ASC 350”). ASC 350 requires goodwill to be either qualitatively or quantitatively assessed for impairment annually (or more frequently if impairment indicators arise) for each reporting unit. The Company tests goodwill and intangible assets annually for impairment, and at interim periods, using a qualitative approach. Our annual evaluation assesses qualitative factors to determine whether it is more likely than not the fair value is less than the carrying value of the asset. If the Company is unable to conclude that goodwill and intangible assets, net are not impaired during its qualitative assessment, the Company will perform a quantitative assessment by estimating the fair value of the assets and comparing the fair value to the carrying value. As of September 30, 2022 and 2021, it was more likely than not that the fair value of goodwill and intangible assets, net exceeded their carrying value and as such, there was no goodwill impairment recognized in either period presented in the consolidated financial statements.

Intangible assets with finite lives consist of internal use software, trade names, customer lists and customer relationships and are amortized on a straight-line basis over their estimated useful lives. From time to time, the Company acquires customer lists from sales agents in exchange for an upfront cash payment. The purchase of customer lists are treated as asset acquisitions, resulting in recording an intangible asset at cost on the date of acquisition. The acquired customer lists intangible assets have a useful life of 5 years. Factors that could trigger an impairment review include significant under-performance relative to expected historical or projected future operating results, significant changes in the manner of our use of the acquired assets or the strategy for our overall business or significant negative industry or economic trends. If this evaluation indicates that the value of the intangible asset may be impaired, the Company makes an assessment of the recoverability of the net book value of the asset over its remaining useful life. If this assessment indicates that the intangible asset is not recoverable, based on the estimated undiscounted future cash flows of the asset over the remaining amortization period, the Company reduces the net book value of the related intangible asset to fair value and may adjust the remaining amortization period.

The Company evaluates its intangible assets with finite lives for indications of impairment whenever events or changes in circumstances indicate that the net book value may not be recoverable. There were no indicators of impairment identified nor was impairment recognized in intangible assets in any period presented in the consolidated financial statements.
Long-term debt and issuance costs

Eligible debt issuance costs associated with the Company's credit facilities are deferred and amortized to interest expense over the term of the related debt using the effective interest method. Debt issuance costs associated with


Table of Contents

Company's term debt are presented on the Company's consolidated balance sheets as a direct reduction in the carrying value of the associated debt liability.
Revenue

The Company’s business model provides payment services, card processing, and ACH, to merchants through enterprise or vertically focused software partners, direct sales, reseller partners, other referral partners, and a limited number of financial institutions. The Company recognizes processing revenues on bankcard merchant accounts and ACH merchant accounts at the time merchant transactions are processed, and periodic fees over the period the service is performed. See Note 2, Revenue recognition for more information on the Company's revenue recognition policy.
Cost of services exclusive of depreciation and amortization

Cost of services includes card processing costs, ACH costs, and other fees paid to card networks, and equipment expenses directly attributable to payment processing and related services to merchants. These costs are recognized as incurred. Cost of services also includes revenue share amounts paid to reseller and referral partners. These expenses are recognized as transactions are processed. Accrued revenue share represent amounts earned during the period but not yet paid at the end of the period.
Selling, general and administrative expenses

Selling, general and administrative expenses consist primarily of salaries, wages, commissions, marketing costs, professional services costs, technology costs, occupancy costs of leased space, and bad debt expense. Stock-based compensation expense is also included in this category.
Depreciation & Amortization

Depreciation and amortization consist primarily of amortization of intangible assets, mainly including customer relationships, internal-use software, customer lists, trade names and to a lesser extent depreciation on our investments in property, equipment, and software. We depreciate and amortize our assets on a straight-line basis in accordance with our accounting policies. These lives are 3 years for computers and equipment and acquired internal-use software, 5 years for furniture, fixtures, and office equipment, and the lesser of the asset useful life or remaining lease term for leasehold improvements. Repair and maintenance costs are expensed as incurred and included in selling, general and administrative expenses on the consolidated statements of income and other comprehensive income. Customer lists and customer relationships are amortized over a period of 5-15 years, developed technology 5-10 years, and trade names 5-25 years.
Derivative financial instruments

The Company accounts for its derivative instruments in accordance with ASC 815, Derivatives and Hedging. ASC 815 establishes accounting and reporting standards for derivative instruments requiring the recognition of all derivative instruments as assets or liabilities in the Company’s consolidated balance sheets at fair value. The Company records its derivative instruments as assets or liabilities, depending on its rights or obligations under the applicable derivative contract. Changes in fair value are recognized in earnings in the affected period.

The Company uses an interest rate cap contract to manage risk from fluctuations in interest rates on its Term Loan. Interest rate caps involve the receipt of variable-rate amounts beyond a specified strike price over the life of the agreement without exchange of the underlying principal amount. The interest rate cap is not designated as a hedging instrument. Changes in the fair value of the interest rate cap are recorded through other income (expense) in the consolidated statement of income and other comprehensive income, other current assets and other current liabilities on the consolidated balance sheets, and in changes in other current assets in the consolidated statement of cash flows.



Table of Contents

Income taxes

The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized principally for the expected tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts, using currently enacted tax rates. The measurement of a deferred tax asset is reduced, if necessary, by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

The Company recognizes a tax benefit for uncertain tax positions if the Company believes it is more likely than not that the position will be upheld on audit based solely on the technical merits of the tax position. The Company evaluates uncertain tax positions after the consideration of all available information. Such tax positions must initially and subsequently be estimated as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authorities, assuming full knowledge of the position and relevant facts. The Company's policy is to recognize any interest and penalties related to income taxes as income tax expense in the relevant period.
Fair-Value Measurements

The Company follows ASC 820, Fair Value Measurements, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The determination of fair value is based on the principal or most advantageous market in which the Company could participate and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. Also, determination of fair value assumes that market participants will consider the highest and best use of the asset.

The Company uses the hierarchy prescribed in ASC 820 for fair value measurements, based on the available inputs to the valuation and the degree to which they are observable or not observable in the market.

The three levels of the hierarchy are as follows:

Level 1 Inputs—Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date;

Level 2 Inputs—Inputs are quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; inputs other than quoted prices, but that are observable for the asset or liability (e.g., interest rates; yield curves); and inputs that are derived principally from or corroborated by observable market data by correlation or by other means (i.e., market corroborated inputs); and

Level 3 Inputs—Unobservable inputs for the asset or liability used to measure fair value. These inputs reflect the Company’s own assumptions about what other market participants would use in pricing the asset or liability. These are based on the best information available and can include the Company's own data.

Recently Issued Pronouncements Not Yet Adopted

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU are effective for all entities as of March 12, 2020 through December 31, 2022. An entity may elect to apply the amendments for contract modifications by Topic or Industry Subtopic as of any date from the beginning an interim period that includes or is subsequent to March 12, 2020, or prospectively from the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic, the amendments must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. The Company may apply ASU 2020-04 as its contracts referenced in London Interbank Offered Rate (“LIBOR”) are impacted by


Table of Contents

reference rate reform. The Company is currently evaluating the effect of ASU 2020-04 on its consolidated financial statements.

2. Revenue recognition

The Company follows ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”) and performs a five-step analysis of transactions to determine when and how revenue is recognized, based upon the core principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

At contract inception, the Company assesses the goods and services promised in its contracts with customers and identifies performance obligations for each promise to transfer to the customer a good or service that is distinct. The Company’s performance obligation relating to its payment processing services revenue is to provide continuous access to the Company’s system to process as much as its customers require. Since the number or volume of transactions to be processed is not determinable at contract inception, the Company’s payment processing services consist of variable consideration under a stand-ready service of distinct days of service that are substantially the same with the same pattern of transfer to the customer. As such, the stand-ready obligation is accounted for as a single-series performance obligation whereby the variability of the transaction value is satisfied daily as the performance obligation is performed. In addition, the Company applies the right to invoice practical expedient to payment processing services as each performance obligation is recognized over time and the amounts invoiced are reflective of the value transferred to the customer.

The Company uses each day as a time-based measure of progress toward satisfaction of the single performance obligation of each contract. This method most accurately depicts the pattern by which services are transferred to the merchant, as performance depends on the extent of transactions processed for that merchant on a given day. Likewise, consideration to which the Company expects to be entitled is determined according to our efforts to provide service each day.

ASC 606 requires disclosure of the aggregate amount of the transaction price allocated to unsatisfied performance obligations; however, as permitted by the standard, the Company has elected to exclude from this disclosure any contracts with an original duration of one year or less and any variable consideration that meets specified criteria. As discussed above, the Company’s core performance obligation is a stand-ready obligation comprised of a series of distinct days of service, and revenue related to this performance obligation is generally billed and recognized as the services are performed. The variable consideration allocated to this performance obligation meets the specified criteria for disclosure exclusion. The aggregate fixed consideration portion of customer contracts with an initial contract duration greater than one year is not material.

We do not have any material contract assets or liabilities for any period presented and we did not recognize any impairments of any contract assets or liabilities for the three and nine months ended September 30, 2022 and 2021, respectively.

The Company generates its revenue from three revenue sources which include Transaction based revenue, Service based fee revenue and Equipment revenue and are defined below:

Transaction based revenue

Transaction based revenue represents revenue generated from transaction fees based on volume, including interchange fees and convenience based fees. The Company generates transaction based revenue from fees charged to merchants for card-based processing volume and ACH transactions. Transaction based revenues are recognized on a net basis equal to the full amount billed to the bankcard merchant, net of interchange fees and assessments. Interchange fees are fees paid to card-issuing banks and assessments paid to payment card networks. Interchange fees are set, and collected, by credit card networks based on various factors, including the type of bank card, card brand, merchant transaction processing volume, the merchant’s industry and the merchant’s risk profile and are recognized at the time merchant transactions are processed. Transaction based revenue was recorded net of interchange fees and assessments of $133,308 and $391,256 for the three and nine months ended September 30,


Table of Contents

2022, respectively. Transaction based revenue was recorded net of interchange fees and assessments of $124,157 and $351,920 for the three and nine months ended September 30, 2021 respectively.

Service based fee revenue

Service based fee revenue represents revenue generated from recurring and periodic service fees. The Company generates service based fee revenue from charging a service fee, a fee charged to the client for facilitating bankcard processing, which is recognized on a gross basis. The Company also generates service based fees related to ACH inclusive of monthly support fees and monthly statement fees.

Equipment revenue

Equipment revenue comprises sales of equipment which primarily consists of payment terminals.

The Company generates its revenue from two segments which are Integrated Solutions and Payment Services and are defined below:

Integrated Solutions

Our Integrated Solutions segment represents the delivery of our credit and debit card payment solutions, and to a lesser extent, ACH processing solutions to customers via integrations with software partners across our strategic vertical markets. Our Integrated Solutions partners include vertical focused front-end Customer Relationship Management software providers as well as back-end Enterprise Resource Planning and accounting solutions.

Payment Services

Our Payment Services segment represents the delivery of card payment processing solutions to our customers through resellers, as well as ACH, check, and gift card processing. Card payment processing solutions in this segment do not originate via a software integration but still utilize Paya’s core technology infrastructure. ACH, check, and gift card processing may or may not be integrated with third-party software.

The following table presents the Company's revenue disaggregated by segment and by source as follows:
Integrated Solutions
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Revenue from contracts with customers
Transaction based revenue
$42,698 $36,955 $124,863 $104,180 
Service based fee revenue
2,966 2,568 8,672 7,684 
Equipment revenue
54 117 245 232 
Total revenue
$45,718 $39,640 $133,780 $112,096 


Table of Contents

Payment Services
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Revenue from contracts with customers
Transaction based revenue
$21,124 $19,061 $62,411 $57,270 
Service based fee revenue
4,506 4,306 13,561 12,830 
Equipment revenue
18 51 99 101 
Total revenue
$25,648 $23,418 $76,071 $70,201 
3. Business combinations
JS Innovations LLC transaction overview

On January 19, 2022, the Company closed on the acquisition of JS Innovations LLC (VelocIT) which provides fully integrated, omnichannel payment solutions to accounting and ERP partners. The acquisition was accounted for as a business combination as defined by ASC 805, and the aggregate purchase price was $7,079 consisting of $6,079 cash paid at closing and $1,000 cash to be paid in January 2023, which is recorded in accrued liabilities on the consolidated balance sheets. Transaction costs related to the acquisition of VelocIT totaled $397 and are recorded in selling, general and administrative expenses on the consolidated statement of income and other comprehensive income for 2022.
Goodwill of $2,064 resulted from the acquisition and is deductible for tax purposes. The measurement period remains open as of September 30, 2022.
The following table summarizes the fair value of the assets acquired and liabilities assumed by the Company and resulting goodwill as of September 30, 2022:
Assets
Current Assets:
Cash and cash equivalents
$45 
Trade receivables, net85 
Prepaid expenses
28 
Total current assets
$158 
Other assets:
Goodwill
2,064 
Intangible assets, net4,900 
Total assets
$7,122 
Liabilities
Current liabilities:
Accrued liabilities21 
Accrued revenue share22 
Total current liabilities
$43 
Total liabilities
$43 
Net assets
$7,079 


Table of Contents

Paragon Payment Solutions transaction overview
On April 23, 2021, the Company closed the acquisition of Paragon Payment Solutions (“Paragon”), which was accounted for as a business combination as defined by ASC 805. The aggregate purchase price was $26,624, consisting of $19,124 in cash and $7,500 of common stock.
Goodwill of $14,780 resulted from the acquisition and is partially deductible for tax purposes. Intangible assets not recognized apart from goodwill consist primarily of the expected revenue synergies. The measurement period was closed as of March 31, 2022.
The following table summarizes the acquisition date fair value of the assets acquired and liabilities assumed by the Company and resulting goodwill as of September 30, 2022:
Assets
Current Assets:
Cash and cash equivalents
$816 
Trade receivables, net2,653 
Prepaid expenses
174 
Other current assets
199 
Funds held for clients3,846 
Total current assets
$7,688 
Other assets:
Property and equipment, net
$52 
Goodwill
14,780 
Intangible assets
12,510 
Other non-current assets
60 
Total assets
$35,090 
Liabilities
Current liabilities:
Trade payables
1,407 
Accrued liabilities2,118 
Accrued revenue share80 
Other current liabilities58 
Client funds obligations
4,266 
Total current liabilities
$7,929 
Non-current liabilities:
Deferred tax liability, net390 
Other non-current liabilities147 
Total liabilities
$8,466 
Net assets
$26,624 




Table of Contents

4. Property and equipment, net
Property and equipment, net consists of the following:
September 30, 2022December 31, 2021
Computers and equipment
$8,896 $8,528 
Internal-use software
18,927 14,949 
Office equipment
141 141 
Furniture and fixtures
1,165 1,357 
Leasehold improvements
1,135 1,396 
Other equipment
26 26 
Total property and equipment
30,290 26,397 
Less: accumulated depreciation
(15,858)(12,386)
Total property and equipment, net
$14,432 $14,011 
Depreciation and amortization expense, including internal-use software, totaled $1,312 and $3,815 for the three and nine months ended September 30, 2022, respectively. Depreciation and amortization expense, including internal-use software, totaled $1,282 and $3,395 for the three and nine months ended September 30, 2021, respectively.
5. Goodwill and other intangible assets, net
Goodwill recorded in the consolidated financial statements was $223,181 and $221,117 as of September 30, 2022 and December 31, 2021, respectively. There were no indicators of impairment noted in the periods presented.
The following table presents changes to goodwill for the nine months ended September 30, 2022:
Integrated SolutionsPayments ServicesTotal
Balance at December 31, 2021
$162,783 $58,334 $221,117 
Acquisition - VelocIT (Note 3)2,064  2,064 
Balance at September 30, 2022
$164,847 $58,334 $223,181 
Intangible assets other than goodwill at September 30, 2022 included the following:
Weighted
Average
Useful
Life (Years)
Useful
Lives
Gross Carrying Amount at September 30, 2022
Accumulated
Amortization
Net Carrying Value as of September 30, 2022
Customer Relationships
8.8
5-15 years
$189,931 $(86,359)$103,572 
Developed Technology
5.8
5-10 years
41,520 (22,646)18,874 
Trade name
13.8
 5-25 years
5,260 (937)4,323 
8.3$236,711 $(109,942)$126,769 


Table of Contents

Intangible assets other than goodwill at December 31, 2021 included the following:
Weighted
Average
Useful
Life (Years)
Useful
Lives
Gross Carrying Amount at December 31, 2021
Accumulated
Amortization
Net Carrying Value as of December 31, 2021
Customer Relationships
10.4
5-16 years
$184,544 $(70,222)$114,322 
Developed Technology
5.1
3-7 years
36,620 (18,843)17,777 
Trade name
15.8
5-25 years
5,260 (651)4,609 
8.4$226,424 $(89,716)$136,708 
Amortization expense totaled $7,040 and $20,226 for the three and nine months ended September 30, 2022, respectively, and $6,609 and $19,047 for the three and nine months ended September 30, 2021, respectively.
The following table shows the expected future amortization expense for intangible assets at September 30, 2022:
Expected Future Amortization Expense
2022 - remaining$6,780 
202326,924 
202425,304 
202524,341 
202619,534 
Thereafter23,886 
Total expected future amortization expense$126,769 

6. Long-term debt

As disclosed in Note 7 under Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, on June 25, 2021, the Company entered into a new credit agreement which governs new senior secured credit facilities, consisting of a $250 million senior secured term loan facility (the “Term Loan”). The Company repaid its prior credit agreement (the “Prior Credit Agreement”) with Antares Capital LP, as administrative agent, in full.

The Company’s long-term debt consisted of the following for the nine months ended September 30, 2022 and year ended December 31, 2021:
September 30, 2022December 31, 2021
Term loan$247,500 $249,375 
Debt issuance costs, net(4,438)(5,018)
Total debt243,062 244,357 
Less: current portion of debt(2,500)(2,485)
Total long-term debt$240,562 $241,872 

There were no borrowings outstanding under the senior secured revolving credit facility (the “Revolver”) as of September 30, 2022 and December 31, 2021, respectively.

The current portion of debt was included within other current liabilities on the consolidated balance sheets.


Table of Contents


The Company had $4,438 and $5,018 of unamortized Term Loan debt issuance costs that were netted against the outstanding loan balance and $728 and $875 of unamortized costs associated with the Revolver as of September 30, 2022 and December 31, 2021, respectively. The Revolver debt issuance costs are recorded in other current and other long term assets and are amortized over the life of the Revolver. Amortization of the debt issuance costs are included in interest expense in the consolidated statement of income and other comprehensive income.
Borrowings under the Senior Secured Credit Facilities bear interest, equal to (i) an alternative base rate equal to the greater of (a) the prime rate announced by the Agent or the highest interest rate published by the Federal Reserve Board as the “bank prime loan” rate, (b) the Federal Reserve Bank of New York rate plus 0.5% per annum, and (c) the Eurodollar rate for an interest period of one-month beginning on such day plus 100 basis points, plus 2.25% (provided that the Eurodollar rate applicable to the Term Loan shall not be less than 0.75% per annum); or (ii) the Eurodollar rate (provided that the Eurodollar rate applicable to the Term Loan shall not be less than 0.75% per annum), plus 3.25% .
Interest expense on the long-term debt was $2,905 and $8,074 for the three and nine months ended September 30, 2022, respectively, and $3,137 and $11,002 for the three and nine months ended September 30, 2021, respectively. Amortization of debt issuance costs were $242 and $726 for the three and nine months ended September 30, 2022, respectively, and $242 and $687 for the three and nine months ended September 30, 2021, respectively.
Annual principal payments on the Term Loan for the remainder of 2022 and the following years is as follows:
Future Principal
Payments
2022 - remaining
$625 
20232,500 
20242,500 
20252,500 
20262,500 
Thereafter236,875 
Total future principal payments$247,500 
7. Derivatives

The Company has historically utilized derivative instruments to manage risk from fluctuations in interest rates on its Term Loan. On February 3, 2021, the Company entered into an interest rate cap agreement with a notional amount of $171,525. The effective date is March 31, 2021 and terminates on March 31, 2023. The Company paid a premium of $67 for the right to receive payments if LIBOR rises above the cap rate of 1.00%. The premium is recorded in other current assets on the consolidated balance sheets. The interest rate cap agreement was a derivative not designated as a hedging instrument for accounting purposes. There were no changes to the interest rate cap in connection with the entry into the new Term Loan. The fair value of the interest rate cap agreement was $2,737 at September 30, 2022. The Company recognized $60 and $2,543 in other income (expense) for the three and nine months ended September 30, 2022, respectively, and $22 and $48 for the three and nine months ended September 30, 2021, respectively, from the interest rate cap agreement. The Company received cash payments of $548 for the three and nine months ended September 30, 2022 and $0 for the three and nine months ended September 30, 2021 from the interest rate cap agreement.





Table of Contents

8. Equity
Common Stock

The holders of the Company's common stock are entitled to one vote for each share of common stock held. Of the 132,113,603 shares of common stock outstanding at September 30, 2022, a total of 5,681,812 are considered contingently issuable in two equal tranches if the closing price of our common stock exceeds certain price thresholds ($15.00 and $17.50, respectively) for 20 out of any 30 consecutive trading days through October 16, 2025. In addition, 14,018,188 shares are contingently issuable in two equal tranches if the closing price of our common stock exceeds certain price thresholds ($15.00 and $17.50, respectively) for 20 out of any 30 consecutive trading days through October 16, 2025. Total contingently issuable shares are 19,700,000.

Paya Holdings Inc. Omnibus Incentive Plan

On October 16, 2020, the Company adopted the Paya Holdings Inc. Omnibus Incentive Plan, which, as amended on May 31, 2022, allows for issuance of up to 18,800,000 shares of its common stock. The purpose of the plan is to enhance the profitability and value of the Company for the benefit of its stockholders by enabling the Company to offer eligible individual stock and cash-based incentives in order to attract, retain, and reward such individuals and strengthen the mutuality of interest between such individuals and the stockholders. Under the Omnibus Incentive Plan, the Company may grant stock options, stock appreciation rights, restricted shares, performance awards, and other stock-based and cash-based awards to eligible employees, consultants or non-employee directors of the Company. The Company recognized $1,957 and $5,014 of share-based compensation for the three and nine months ended September 30, 2022 and $675 and $1,916 for the three and nine months ended September 30, 2021, respectively, in selling, general & administrative expenses on the consolidated statement of income and other comprehensive income on a straight-line basis over the vesting periods. As of September 30, 2022, the Company had two stock-based compensation award types granted and outstanding: restricted stock units (RSUs) and stock options.

RSUs represent the right to receive shares of the Company's common stock at a specified date in the future. RSUs issued under the Omnibus Incentive Plan vest over 3 or 5 year periods. RSUs granted under the Omnibus Incentive Plan were as follows:

Nine Months Ended September 30, 2022
RSUs granted2,119,608
Fair value of common stock
$5.12 - $