REPAY HOLDINGS CORPORATION For purposes of this section, "Repay", the "Company", "we", or "our" refer to (i)Hawk Parent Holdings, LLC and its subsidiaries ("Predecessor") for the three month period endedMarch 31, 2019 and (ii)Repay Holdings Corporation and its subsidiaries (the "Successor ") for the three month period endedMarch 31, 2020 (the "Successor Period") after the consummation of the Business Combination, unless the context otherwise requires. Certain figures have been rounded for ease of presentation and may not sum due to rounding.
Cautionary Note Regarding Forward-Looking Statements
Statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors, including those set forth under Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K and under Part II, Item 1A "Risk Factors" in this Form 10-Q.
Overview
We are leading payments technology company. We provide integrated payment processing solutions to industry-oriented vertical markets in which businesses have specific and bespoke transaction processing needs. We refer to these markets as "vertical markets" or "verticals."
We are a payments innovator, differentiated by our proprietary, integrated payment technology platform and our ability to reduce the complexity of the electronic payments for businesses. We intend to continue to strategically target verticals where we believe our ability to tailor payment solutions to our customers' needs and the embedded nature of our integrated payment solutions will drive strong growth by attracting new customers and fostering long-term customer relationships. Since a significant portion of our revenue is derived from volume-based payment processing fees, card payment volume is a key operating metric that we use to evaluate our business. We processed approximately$3.8 billion of total card payment volume in the three months endedMarch 31, 2020 , and our quarter-over-quarter card payment volume growth was approximately 58%. The impacts of the COVID-19 pandemic and related economic conditions on the Company's results are highly uncertain. The scope, duration and magnitude of the direct and indirect effects of the COVID-19 pandemic are evolving rapidly and in ways that are difficult to fully anticipate. At this time we cannot reasonably estimate the full impact of the pandemic on the Company, given the uncertainty over the duration and severity of the economic crisis. In addition, because COVID-19 did not begin to affect the Company's financial results until late in the first quarter of 2020, its impact on the Company's results in the first quarter of 2020 may not be not indicative of its impact on the Company's results for the remainder of 2020. Business Combination The Company was formed upon closing of the merger (the "Business Combination") ofHawk Parent Holdings LLC (together withRepay Holdings, LLC and its other subsidiaries, "Hawk Parent") with a subsidiary of Thunder Bridge Acquisition, Ltd, ("Thunder Bridge"), a special purpose acquisition company, onJuly 11, 2019 (the "Closing Date"). On the Closing Date, Thunder Bridge changed its name to "Repay Holdings Corporation ." As a result of the Business Combination, the Company was identified as the acquirer for accounting purposes, and Hawk Parent, which is the business conducted prior to the closing of the Business Combination, is the acquiree and accounting Predecessor. The acquisition was accounted for as a business combination using the acquisition method of accounting, and the Successor's financial statements reflect a new basis of accounting that is based on the fair value of net assets acquired. As a result of the application of the acquisition method of accounting as of the effective time of the Business Combination, the financial statements for the Predecessor period and for the Successor period are presented on different bases. The historical financial information of Thunder Bridge prior to the Business Combination has not been reflected in the Predecessor period financial statements. 25 --------------------------------------------------------------------------------
Key Factors Affecting Our Business
Key factors that we believe impact our business, results of operations and financial condition include, but are not limited to, the following:
? the dollar amount volume and the number of transactions that are processed
by the customers that we currently serve;
? our ability to attract new merchants and onboard them as active processing
customers;
? our ability to successfully integrate recent acquisitions and complete
future acquisitions;
? our ability to offer new and competitive payment technology solutions to our
customers; and
? general economic conditions and consumer finance trends.
Recent Acquisition
OnFebruary 10, 2020 , we announced the acquisition ofCDT Technologies, LTD d/b/a Ventanex ("Ventanex") for up to$50.0 million , which includes a$14.0 million performance-based earnout. The closing of the acquisition was financed with a combination of cash on hand and new borrowings under our existing credit facility. See Note 5 to the unaudited interim consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Key Components of Our Revenues and Expenses
Revenues
Revenue. As our customers process increased volumes of payments, our revenues
increase as a result of the fees we charge for processing these payments. Most
of our revenues are derived from volume-based payment processing fees ("discount
fees") and other related fixed per transaction fees. Discount fees represent a
percentage of the dollar amount of each credit or debit transaction processed
and include fees relating to processing and services that we provide. The
transaction price for such processing services are determined, based on the
judgment of the Company's management, considering factors such as margin
objectives, pricing practices and controls, customer segment pricing strategies,
the product life cycle and the observable price of the service charged to
similarly situated customers. During the three months ended March 31, 2020 and
2019, we believe our chargeback rate was less than 1% of our card payment
volume.
Expenses
Other costs of services. Other costs of services primarily include commissions to our software integration partners and other third-party processing costs, such as front and back-end processing costs and sponsor bank fees.
Selling, general and administrative. Selling, general and administrative expenses include salaries, share-based compensation and other employment costs, professional service fees, rent and utilities, and other operating costs.
Depreciation and amortization. Depreciation expense consists of depreciation on our investments in property, equipment and computer hardware. Depreciation expense is recognized on a straight-line basis over the estimated useful life of the asset. Amortization expense for software development costs and purchased software is recognized on the straight-line method over a three-year estimated useful life, over a ten-year estimated useful life for customer relationships and channel relationships, and over a two-year estimated useful life for non-compete agreements. Interest expense. Prior to the closing of the Business Combination, interest expense consisted of interest in respect of our indebtedness under our Prior Credit Agreement (as defined below), which was terminated in connection with the closing of the Business Combination. In periods after the closing of the Business Combination, interest expense consists of interest in respect of our indebtedness under the New Credit Agreement, which was entered into in connection with the Business Combination and amended inFebruary 2020 .
Change in fair value of tax receivable liability. This amount represents the change in fair value of the tax receivable agreement liability. The TRA liability is carried at fair value; so, any change to the valuation of this liability
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is recognized through this line in other expense. The change in fair value can
result from the exchange of Post-Merger Repay Units for Class A common stock of
Repay Holdings Corporation , or through accretion of the discounted fair value of
the expected future cash payments.
Results of Operations
Successor Predecessor
Three Months Three Months ended
ended March 31, March 31, 2019
(in $ thousands) 2020
Revenue $ 39,463 $ 23,023
Operating expenses
Other costs of services $ 10,771 $ 5,119
Selling, general and administrative 18,166 8,677
Depreciation and amortization 13,904 2,914
Total operating expenses $ 42,842 $ 16,710
Income (loss) from operations $ (3,379 ) $ 6,313
Other expenses
Interest expenses (3,518 ) (1,449 )
Change in fair value of tax receivable
liability (542 ) -
Other income 39 0
Total other (expenses) income (4,021 ) (1,449 )
Income (loss) before income tax expense (7,400 ) 4,864
Income tax benefit 1,116 -
Net income (loss) $ (6,284 ) $ 4,864
Net income (loss) attributable to
non-controlling interest (2,852 ) -
Net income (loss) attributable to the Company $ (3,432 ) $
4,864
Weighted-average shares of Class A common stock outstanding - basic and diluted 37,624,829
Loss per Class A share - basic and diluted $ (0.09 )
Three Months Ended
Revenue
Total revenue was$39.5 million for the three months endedMarch 31, 2020 and$23.0 million in the three-month period endedMarch 31, 2019 , an increase of$16.4 million or 71.4%. This increase was the result of newly signed customers, the growth of our existing customers, as well as the acquisitions of TriSource, APS, and Ventanex. For the three months endedMarch 31, 2020 , incremental revenues of approximately$12.5 million are attributable to TriSource, APS, and Ventanex. Other Costs of Services Other costs of services were$10.8 million for the three months endedMarch 31, 2020 and$5.1 million in the three-month period endedMarch 31, 2019 , an increase of$5.7 million or 110.4%. Other costs of services generally increase in proportion to card processing volume. For the three months endedMarch 31, 2020 , incremental costs of services of approximately$5.2 million are attributable to TriSource, APS, and Ventanex.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were$18.2 million for the three months endedMarch 31, 2020 and$8.7 million in the three-month period endedMarch 31, 2019 , an increase of$9.5 million or 109.4%. This increase was primarily due to one-time expenses associated with the APS and Ventanex acquisitions, general business growth, and increases in expenses relating to software and technological services, rent, telecommunication costs, advertising and marketing.
Depreciation and Amortization Expenses
Depreciation and amortization expenses were$13.9 million for the three months endedMarch 31, 2020 and$2.9 million in the three month period endedMarch 31, 2019 , an increase of$11.0 million or 377.1%. The increase was primarily due to fair value adjustments to intangibles resulting from the Business Combination, as well as additional depreciation and amortization of fixed assets and intangibles from the acquisitions of TriSource, APS, and Ventanex. 27 --------------------------------------------------------------------------------
Interest Expense
Interest expense was$3.5 million for the three months endedMarch 31, 2020 and$1.4 million in the three month period endedMarch 31, 2019 , an increase of$2.1 million or 142.8%. This increase was due to a higher average outstanding principal balance under our New Credit Agreement as compared to the average outstanding principal balance under the Prior Credit Agreement.
Change in Fair Value of Assets and Liabilities
Change in fair value of assets and liabilities were$0.5 million for the three months endedMarch 31, 2020 which consisted of fair value adjustments related to the tax receivable liability. Income Tax Prior to the Business Combination, the Company was not subject to corporate income taxation and, thus, did not have any corporate income tax expense for the three months endedMarch 31, 2019 . Therefore, comparison of the three months endedMarch 31, 2020 and the three months endedMarch 31, 2019 are not meaningful. The income tax benefit recorded for the three months endedMarch 31, 2020 of$1.1 million reflected the expected income tax benefit to be received on the net earnings related to the Company's economic interest in Hawk Parent. This was a result of the operating loss incurred by the Company, primarily driven by stock-based compensation deductions as well as the amortization of assets acquired in Business Combination and acquisitions of TriSource, APS and Ventanex. Non-GAAP Financial Measures
This report includes certain non-GAAP financial measures that management uses to evaluate our operating business, measure our performance and make strategic decisions.
Adjusted EBITDA is a non-GAAP financial measure that represents net income prior to interest expense, tax expense, depreciation and amortization, as adjusted to add back certain non-cash and non-recurring charges, such as loss on extinguishment of debt, non-cash change in fair value of contingent consideration, non-cash change in fair value of assets and liabilities, share-based compensation charges, transaction expenses, management fees, legacy commission related charges, employee recruiting costs, loss on disposition of property and equipment, other taxes, strategic initiative related costs and other non-recurring charges. Adjusted Net Income is a non-GAAP financial measure that represents net income prior to amortization of acquisition-related intangibles, as adjusted to add back certain non-cash and non-recurring charges, such as loss on extinguishment of debt, non-cash change in fair value of contingent consideration, transaction expenses, share-based compensation expense, management fees, legacy commission related charges, employee recruiting costs, loss on disposition of property and equipment, strategic initiative related costs and other non-recurring charges, net of tax effect associated with these adjustments. Adjusted Net Income is adjusted to exclude amortization of all acquisition-related intangibles as such amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions. Management believes that the adjustment of acquisition-related intangible amortization supplements GAAP financial measures because it allows for greater comparability of operating performance. Although we exclude amortization from acquisition-related intangibles from our non-GAAP expenses, management believes that it is important for investors to understand that such intangibles were recorded as part of purchase accounting and contribute to revenue generation. Adjusted Net Income per share is a non-GAAP financial measure that represents Adjusted Net Income divided by the weighted average number of shares of Class A common stock outstanding (on as-converted basis) for the three months endedMarch 31, 2020 (excluding certain shares that were subject to forfeiture). Organic gross profit growth is a non-GAAP financial measure that represents the year-over-year gross profit growth that excludes gross profit attributed to acquisitions. We believe that Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per share and organic gross profit growth provide useful information to investors and others in understanding and evaluating its operating results in 28 -------------------------------------------------------------------------------- the same manner as management. However, Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per share and organic gross profit growth are not financial measures calculated in accordance with GAAP and should not be considered as a substitute for net income, operating profit, or any other operating performance measure calculated in accordance with GAAP. Using these non-GAAP financial measures to analyze our business has material limitations because the calculations are based on the subjective determination of management regarding the nature and classification of events and circumstances that investors may find significant. In addition, although other companies in our industry may report measures titled Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per share, organic gross profit growth or similar measures, such non-GAAP financial measures may be calculated differently from how we calculate our non-GAAP financial measures, which reduces their overall usefulness as comparative measures. Because of these limitations, you should consider Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per share and organic gross profit growth alongside other financial performance measures, including net income and our other financial results presented in accordance with GAAP. You should be aware of additional limitations with respect to Adjusted Net Income per share because the GAAP presentation of net loss per share is only reflected for the three months endedMarch 31, 2020 .
The following tables set forth a reconciliation of Repay's results of operations
for the three-month periods ended
REPAY HOLDINGS CORPORATION
Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA
For the three months ended March 31, 2020 and 2019
Successor Predecessor
Pro Forma
Three Months Adjustments(l) Three Months Three months
Ended March 31, Ended March ended March 31,
(in $ thousands) 2020 31, 2020 2019
Revenue $ 39,463 $ 39,463 $ 23,023
Operating expenses
Other costs of services $ 10,771 $ 10,771 $ 5,119
Selling, general and
administrative 18,166 18,166 8,677
Depreciation and amortization 13,904 (8,159 ) 5,746 2,914
Total operating expenses $ 42,842 $ 34,683 $ 16,710
Income (loss) from operations $ (3,379 ) $ 4,779 $ 6,313
Other expenses
Interest expenses (3,518 ) (3,518 ) (1,449 )
Change in fair value of tax
receivable liability (542 ) (542 ) -
Other income 39 39 0
Total other (expenses) income (4,021 ) (4,021 ) (1,449 )
Income (loss) before income tax
expense (7,400 ) 758 4,864
Income tax benefit 1,116 1,116 -
Net income (loss) $ (6,284 ) $ 1,874 $ 4,864
Add:
Interest expense 3,518 1,449
Depreciation and amortization(a) 5,746 2,914
Income tax (benefit) (1,116 ) -
EBITDA $ 10,022 $ 9,227
Non-cash change in fair value of
assets and liabilities(b) 542 -
Share-based compensation
expense(c) 3,523 127
Transaction expenses(d) 2,869 1,686
Management Fees(e) - 100
Employee recruiting costs(f) - 15
Other taxes(g) 186 59
Strategic initiative costs(h) 78 124
Other non-recurring charges(i) 130 -
Adjusted EBITDA $ 17,350 $ 11,338
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REPAY HOLDINGS CORPORATION
Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income
For the three months ended March 31, 2020 and 2019
Successor Predecessor
Pro Forma Three months
Three Months Adjustments(l) Three Months ended March 31,
Ended March 31, Ended March 2019
(in $ thousands) 2020 31, 2020
Revenue $ 39,463 $ 39,463 $ 23,023
Operating expenses
Other costs of services $ 10,771 $ 10,771 $ 5,119
Selling, general and
administrative 18,166 18,166 8,677
Depreciation and amortization 13,904 (8,159 ) 5,746 2,914
Total operating expenses $ 42,842 $ 34,683 $ 16,710
Income (loss) from operations $ (3,379 ) $ 4,779 $ 6,313
Other expenses
Interest expenses (3,518 ) (3,518 ) (1,449 )
Change in fair value of tax
receivable liability (542 ) (542 ) -
Other income 39 39 0
Total other (expenses) income (4,021 ) (4,021 ) (1,449 )
Income (loss) before income tax
expense (7,400 ) 758 4,864
Income tax benefit 1,116 1,116 -
Net income (loss) $ (6,284 ) $ 1,874 $ 4,864
Add:
Amortization of
Acquisition-Related
Intangibles(j) 4,113 1,980
Non-cash change in fair value of
assets and liabilities(b) 542 -
Share-based compensation
expense(c) 3,523 127
Transaction expenses(d) 2,869 1,686
Management Fees(e) - 100
Employee recruiting costs(f) - 15
Strategic initiative costs(h) 78 124
Other non-recurring charges(i) 130 -
Pro forma taxes at effective
rate(m) (1,697 ) -
Adjusted Net Income $ 11,432 $ 8,896
Shares of Class A common stock
outstanding (on an as-converted
basis)(k) 67,130,452
Adjusted Net income per share $ 0.17
(a) See footnote (j) for details on our amortization and depreciation expenses.
(b) Reflects the changes in management's estimates of the fair value of the
liability relating to the Tax Receivable Agreement.
(c) Represents compensation expense associated with Hawk Parent's equity
compensation plans, totaling $127,195 in the Predecessor period and
$3,522,731 as a result of new grants made in the Successor period.
(d) Primarily consists of (i) during the three months ended March 31, 2020 ,professional service fees and other costs incurred in connection with the
acquisition of Ventanex, and additional transaction expenses incurred in
connection with the Business Combination and the acquisitions of TriSource
Solutions and APS Payments, which transactions closed in 2019 and (ii)
during the three months ended March 31, 2019 , professional service feesand other costs incurred in connection with the Business Combination.
(e) Reflects management fees paid to
management agreement, which terminated upon the completion of the Business
Combination.
(f) Represents payments made to third-party recruiters in connection with a
significant expansion of our personnel, which REPAY expects will become
more moderate in subsequent periods.
(g) Reflects franchise taxes and other non-income based taxes.
(h) Represents consulting fees relating to our processing services and other
operational improvements that were not in the ordinary course.
(i) For the three months ended
related to one-time accounting system and compensation plan implementation
related to becoming a public company, as well as extraordinary refunds to
customers and other payments related to COVID-19.
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(j) For the three months ended
customer relationships intangibles acquired through Hawk Parent's
acquisitions of PaidSuite and
2017 and the recapitalization transaction in 2016, through which Hawk
Parent was formed in connection with the acquisition of a majority
interest in
or affiliated with,
31, 2020 reflects amortization of the customer relationships intangibles
described previously, as well as customer relationships, non-compete
agreement, software, and channel relationship intangibles acquired through
the Business Combination, and customer relationships, non-compete
agreement, and software intangibles acquired through
acquisitions of TriSource Solutions, APS Payments, and Ventanex. This
adjustment excludes the amortization of other intangible assets which were
acquired in the regular course of business, such as capitalized internally
developed software and purchased software. See additional information
below for an analysis of our amortization expenses:
Three months ended March 31,
2020 2019
(in $ thousands) (Successor) (Predecessor)
Acquisition-related intangibles
1,379 790
Reseller buyouts 15 15
Amortization $ 5,507 $ 2,785
Depreciation 239 130
Total Depreciation and amortization1
(1) Adjusted Net Income is adjusted to exclude amortization of all
acquisition-related intangibles as such amounts are inconsistent in
amount and frequency and are significantly impacted by the timing and/orsize of acquisitions (see corresponding adjustments in the reconciliation
of net income to Adjusted Net Income presented above). Management
believes that the adjustment of acquisition-related intangible
amortization supplements GAAP financial measures because it allows forgreater comparability of operating performance. Although we exclude
amortization from acquisition-related intangibles from our non-GAAP
expenses, management believes that it is important for investors to
understand that such intangibles were recorded as part of purchase
accounting and contribute to revenue generation. Amortization ofintangibles that relate to past acquisitions will recur in future periods
until such intangibles have been fully amortized. Any future acquisitions
may result in the amortization of additional intangibles.
(k) Represents the weighted average number of shares of Class A common stock
outstanding (on as-converted basis) for the three months ended March 31,
2020 (excluding shares that were subject to forfeiture).
(l) Adjustment for incremental depreciation and amortization recorded due to
fair-value adjustments under ASC 805 in the Successor period.
(m) Represents pro forma income tax adjustment effect associated with items
adjusted above. As Hawk Parent, as the accounting Predecessor, was not
subject to income taxes, the tax effect above was calculated on the
adjustments related to the Successor period only.
Adjusted EBITDA for the three months ended March 31, 2020 and 2019 was $17.4
million and $11.3 million , respectively, representing a 53.0% year-over-year
increase. Adjusted Net Income for the three months ended March 31, 2020 and 2019
was $11.4 million and $8.9 million , respectively, representing a 28.5%
year-over-year increase. Our net income (loss) attributable to the Company for
the three months ended March 31, 2020 and 2019 was $(3.4) million and $4.9
million , respectively, representing a 170.6% year-over-year decrease.
These increases in Adjusted EBITDA and Adjusted Net Income, in the three months
ended March 31, 2020 are the result of the growing card payment volume and
revenue figures described above, new customers, and same store sales growth from
existing customers as well as the acquisitions of TriSource, APS, and Ventanex.
The decrease in net income in the three months ended March 31, 2020 , is
primarily the result of one-time expenses incurred in connection with the
acquisitions of Ventanex and APS as well as stock compensation expense.
Seasonality
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We have experienced in the past, and may continue to experience, seasonal
fluctuations in our volumes and revenues as a result of consumer spending
patterns. Volumes and revenues, per each customer store, during the first
quarter of the calendar year tend to increase in comparison to the remaining
three quarters of the calendar year. This increase is due to consumers' receipt
of tax refunds and the increases in repayment activity levels that follow.
Operating expenses show less seasonal fluctuation, with the result that net
income is subject to the similar seasonal factors as our volumes and revenues.
Liquidity and Capital Resources
We have historically financed our operations and working capital through net cash from operating activities. As ofMarch 31, 2020 , we had$32.7 million of cash and cash equivalents and available borrowing capacity of$90.0 million under the New Credit Agreement. This balance does not include restricted cash, which reflects cash accounts holding reserves for potential losses and customer settlement funds of$11.7 million atMarch 31, 2020 . Our primary cash needs are to fund working capital requirements, invest in technology development, fund acquisitions and related contingent consideration, make scheduled principal payments and interest payments on our outstanding indebtedness and pay tax distributions to members of Hawk Parent. We expect that our cash flow from operations, current cash and cash equivalents and available borrowing capacity under the New Credit Agreement will be sufficient to fund our operations and planned capital expenditures and to service our debt obligations for the next twelve months. However, the COVID-19 pandemic could continue to create uncertainty and volatility in the financial markets which may impact our ability to access capital and liquidity, and the terms under which we can do so. As the impact of the COVID-19 pandemic on the economy and our operations is fluid and evolves, we will continue to assess our liquidity needs. We are a holding company with no operations and depend on our subsidiaries for cash to fund all of our consolidated operations, including future dividend payments, if any. We depend on the payment of distributions by our current subsidiaries, including Hawk Parent, which distributions may be restricted by law or contractual agreements, including agreements governing their indebtedness. For a discussion of those considerations and restrictions, refer to Part II, Item 1A "Risk Factors - Risks Related to Our Class A Common Stock" in our Annual Report on Form 10-K.
Cash Flows
The following table present a summary of cash flows from operating, investing and financing activities for the periods indicated:
Successor Predecessor
Three Months Three Months
Ended March Ended March 31,
(in $ thousands) 31, 2020 2019
Net cash provided by (used in) operating activities
(343 )
Net cash used in investing activities (38,297 ) (2,041 )
Net cash provided by (used in) financing activities 36,216 (1,377 )
Cash Flow from Operating Activities
Net cash provided by operating activities was
Net cash used by operating activities was
Cash provided by operating activities for the three months endedMarch 31, 2020 and 2019 reflects net income as adjusted for non-cash operating items including depreciation and amortization, share-based compensation, and changes in working capital accounts.
Cash Flow from Investing Activities
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Net cash used in investing activities was
Net cash used in investing activities was
Cash Flow from Financing Activities
Net cash provided by financing activities was$36.2 million in the three months endedMarch 31, 2020 , due to new borrowings related to the acquisition of Ventanex under the New Credit Agreement, as well as funds received related to the exercise of warrants, offset by repayment of the outstanding revolver balance related to the New Credit Agreement in connection with its amendment and the acquisition of Ventanex, and repayments of the term loan principal balance under the New Credit Agreement.
Net cash used in financing activities was
Indebtedness
Prior Credit Agreement
Hawk Parent was previously party to the Revolving Credit and Term Loan Agreement, dated as ofSeptember 28, 2017 , and amended as ofDecember 15, 2017 (the "Prior Credit Agreement"), withSunTrust Bank , as administrative agent and lender, and the other lenders party thereto. In connection with the completion of the Business Combination, all outstanding loans were repaid and the Prior Credit Agreement was terminated.
New Credit Agreement
In connection with the Business Combination, onJuly 11, 2019 ,TB Acquisition Merger Sub LLC , Hawk Parent and certain subsidiaries of Hawk Parent, as guarantors, entered into a Revolving Credit and Term Loan Agreement (as amended, the "New Credit Agreement") with certain financial institutions, as lenders, andTruist Bank (formerlySunTrust Bank ), as the administrative agent. OnFebruary 10, 2020 , we announced the acquisition of Ventanex. The closing of the acquisition was financed partially from new borrowings under our existing credit facility. As part of the financing for the transaction, we entered into an agreement withTruist Bank and other members of its existing bank group to amend and upsize the New Credit Agreement. As ofMarch 31, 2020 , the New Credit Agreement provides for a senior secured term loan facility of$255.0 million , a delayed draw term loan of$60.0 million , and a revolving credit facility of$30.0 million . As ofMarch 31, 2020 , we had$0.0 million drawn against the revolving credit facility. We paid$42,361 in fees related to unused commitments in the three month period endedMarch 31, 2020 .
As of
Tax Receivable Agreement
Upon the completion of the Business Combination, we entered into that certain
Tax Receivable Agreement (the "Tax Receivable Agreement" or "TRA") with holders
of limited liability company interests of Hawk Parent (the "Post-Merger Repay
Units"). As a result of the TRA, we established a liability in our consolidated
financial statements. Such liability, which will increase upon the exchanges of
Post-Merger Repay Units for the Class A common stock of the Company, generally
represents 100% of the estimated future tax benefits, if any, relating to the
increase in tax basis that will result from exchanges of the Post-Merger Repay
Units for shares of Class A common stock pursuant to the
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--------------------------------------------------------------------------------Exchange Agreement and certain other tax attributes of the Company and tax benefits of entering into the TRA, including tax benefits attributable to payments under the TRA.
Under the terms of the TRA, we may elect to terminate the TRA early but will be required to make an immediate payment equal to the present value of the anticipated future cash tax savings. As a result, the associated liability reported on our consolidated financial statements may be increased. We expect that the payment obligations of the Company required under the TRA will be substantial. The actual increase in tax basis, as well as the amount and timing of any payments under the TRA, will vary depending upon a number of factors, including the timing of redemptions or exchanges by the holders of Post-Merger Repay Units, the price of the Class A common stock of the Company at the time of the redemption or exchange, whether such redemptions or exchanges are taxable, the amount and timing of the taxable income we generate in the future, the tax rate then applicable and the portion of our payments under the TRA constituting imputed interest. We expect to fund the payment of the amounts due under the TRA out of the cash savings that we actually realize in respect of the attributes to which TRA relates. However, the payments required to be made could be in excess of the actual tax benefits that we realize and there can be no assurance that we will be able to finance our obligations under the TRA.
Critical Accounting Policies and Recently Issued Accounting Pronouncements
See Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2019 for a complete discussion of critical accounting policies.
Off-Balance Sheet Arrangements
We did not have any material off-balance sheet arrangements as of
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