Paymentus Holdings, Inc. (Form: 10-Q, Received: 05/08/2023 17:04:36)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


☐	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: 001-40429

Paymentus Holdings, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware	45-3188251
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
11605 North Community House Road, Suite 300 Charlotte, NC	28277
(Address of principal executive offices)	(Zip Code)

(888) 440-4826

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.0001 per share

PAY

New York Stock Exchange

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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


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 Exchange Act). Yes ☐ No ☒

As of May 1, 2023, the registrant had 20,045,782 shares of Class A Common Stock, $0.0001 par value per share and 103,306,842 shares of Class B Common Stock, $0.0001 par value per share, outstanding.

Table of Contents


		Page
	Special Note Regarding Forward-Looking Statements	3

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations and Comprehensive Income	6
	Condensed Consolidated Statements of Stockholders' Equity	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	26
Item 6.	Exhibits	27
Signatures		29

Special Note Regarding Forward-Looking Statements

This quarterly report on Form 10-Q for the quarterly period ended March 31, 2023 ("Quarterly Report") contains forward-looking statements within the meaning of the federal securities laws, such as those under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," which statements involve substantial risks and uncertainties. Forward-looking statements may involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from historical results or from any future results or projections expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this report include statements about:

•

our ability to effectively manage our growth and expand our operations;

•

our ability to further attract, retain and expand our biller, financial institutions, partner and consumer base;

•

our ability to timely implement and recognize revenue from new customers;

•

our expectations regarding our revenue, expenses and other operating results;

•

the impact of widespread health issues or pandemics on our operating results, liquidity and financial condition and on our employees, billers, financial institutions, partners, consumers and other key stakeholders;

•

our market opportunity and anticipated trends in our business and industry;

•

our ability to remain competitive as we continue to scale our business;

•

our ability to develop new product features and enhance our platform;

•

our ability to hire and retain experienced and talented employees as we grow our business;

•

general economic conditions, including inflation, and their impact on us, consumer demand, average bill amounts and interchange fees;

•

our ability to realize the anticipated benefits of past or future acquisitions or strategic investments in complementary companies, products or technologies and our ability to manage the potential business disruption and diversion of management attention caused by such acquisitions;

•

our ability to maintain and enhance our brand;

•

our ability to integrate, manage and keep our information systems secure;

•

our plan to expand into new channels and industry verticals across different markets;

•

our international expansion plans and ability to expand internationally; and

•

those factors described in the sections titled “Risk Factors" and “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022 and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this report.

You should not place undue reliance on our forward-looking statements as predictions of future events. We have based the forward-looking statements primarily on our current expectations and projections about future events and trends that we believe may affect our business, operating results, financial condition and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this report. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

Neither we nor any other person assumes responsibility for the ultimate outcome of any of these forward-looking statements. Moreover, the forward-looking statements made in this report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this report to reflect events or circumstances after the date of this report or to reflect new information or the occurrence of unanticipated events, except as required by law.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

Certain Definitions

In this report, unless the context requires otherwise, all references to “we,” “our,” “us,” “Paymentus,” and the “Company” refer to Paymentus Holdings, Inc., and where appropriate its consolidated subsidiaries.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

PAYMENTUS HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)



	March 31,			December 31,
	2023			2022
Assets
Current assets
Cash and cash equivalents	$	143,637		$	147,334
Restricted cash and cash equivalents		1,386			2,351
Accounts and other receivables, net of allowance for expected credit losses of $117 and $370, respectively		76,381			67,789
Income tax receivable		2,141			1,493
Prepaid expenses and other current assets		9,082			9,994
Total current assets		232,627			228,961
Property and equipment, net		1,668			1,823
Capitalized internal-use software development costs, net		49,482			46,032
Intangible assets, net		33,808			36,017
Goodwill		131,854			131,851
Operating lease right-of-use assets		10,453			9,561
Deferred tax asset		117			116
Other long-term assets		6,533			7,178
Total assets	$	466,542		$	461,539
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	32,573		$	29,232
Accrued liabilities		12,288			15,809
Current portion of operating lease liabilities		1,643			1,462
Contract liabilities		4,639			4,358
Income tax payable		268			635
Total current liabilities		51,411			51,496
Deferred tax liability		772			680
Operating lease liabilities, less current portion		9,313			8,608
Contract liabilities, less current portion		4,606			2,826
Finance leases and other finance obligations, net of current portion		400			750
Total liabilities		66,502			64,360
Stockholders’ equity
Preferred stock, $0.0001 par value per share, 5,000,000 shares authorized as of March 31, 2023 and December 31, 2022, respectively; none issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		—			—
Class A common stock, $0.0001 par value per share, 883,950,000 shares authorized as of March 31, 2023 and December 31, 2022, respectively; 20,039,322 and 19,934,331 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		2			2
Class B common stock, $0.0001 par value per share, 111,050,000 shares authorized as of March 31, 2023 and December 31, 2022, respectively; 103,306,842 shares issued and outstanding as of March 31, 2023 and December 31, 2022		10			10
Additional paid-in capital		369,931			367,767
Accumulated other comprehensive loss		(29	)		(22	)
Retained earnings		30,126			29,422
Total stockholders’ equity		400,040			397,179
Total liabilities and stockholders' equity	$	466,542		$	461,539

The accompanying notes are an integral part of these condensed consolidated financial statements.

PAYMENTUS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except share and per share data)

(Unaudited)


	Three Months Ended March 31,
	2023			2022
Revenue	$	148,328		$	116,704
Cost of revenue		108,250			81,850
Gross profit		40,078			34,854
Operating expenses
Research and development		11,653			10,390
Sales and marketing		20,264			16,190
General and administrative		9,145			9,645
Total operating expenses		41,062			36,225
Loss from operations		(984	)		(1,371	)
Other income (loss)
Interest income (expense), net		1,440			(8	)
Foreign exchange (loss) gain		(8	)		26
Income (loss) before income taxes		448			(1,353	)
Benefit from income taxes		256			3,071
Net income	$	704		$	1,718
Net income per share
Basic	$	0.01		$	0.01
Diluted	$	0.01		$	0.01
Weighted-average number of shares used to compute net income per share
Basic		123,289,584			120,897,576
Diluted		123,792,741			125,986,510
Comprehensive income
Net income		704			1,718
Foreign currency translation adjustments, net of tax		(7	)		(45	)
Comprehensive income	$	697		$	1,673

The accompanying notes are an integral part of these condensed consolidated financial statements.

PAYMENTUS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited)


					Additional				Other			Total
	Common Stock				Paid-In		Retained		Comprehensive			Stockholders’
	Shares		Amount		Capital		Earnings		Loss			Equity
Balances at December 31, 2022		123,241,173	$	12		367,767	$	29,422	$	(22	)	$	397,179
Stock-based compensation		—		—		2,159		—		—			2,159
Issuance of Class A common stock for stock-based awards		104,991		—		5		—		—			5
Other comprehensive loss		—		—		—		—		(7	)		(7	)
Net income		—		—		—		704		—			704
Balances at March 31, 2023		123,346,164	$	12		369,931	$	30,126	$	(29	)	$	400,040


					Additional				Other			Total
	Common Stock				Paid-In		Retained		Comprehensive			Stockholders’
	Shares		Amount		Capital		Earnings		Income (loss)			Equity
Balances at December 31, 2021		120,639,161	$	12	$	356,017	$	29,935	$	168		$	386,132
Stock-based compensation		—		—		1,276		—		—			1,276
Issuance of Class A common stock for stock-based awards		412,222		—		13		—		—			13
Other comprehensive loss		—		—		—		—		(45	)		(45	)
Net income		—		—		—		1,718		—			1,718
Balances at March 31, 2022		121,051,383	$	12	$	357,306	$	31,653	$	123		$	389,094

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

PAYMENTUS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2023			2022
Cash flows from operating activities
Net income	$	704		$	1,718
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		7,239			5,474
Deferred income taxes		92			1,406
Stock-based compensation		2,159			1,276
Non-cash lease expense		462			755
Amortization of contract asset		696			467
Provision for expected credit losses		(239	)		95
Change in operating assets and liabilities
Accounts and other receivables		(8,333	)		(8,082	)
Prepaid expenses and other current and long-term assets		861			(161	)
Accounts payable		3,297			4,916
Accrued liabilities		(2,749	)		862
Operating lease liabilities		(469	)		(770	)
Contract liabilities		2,061			(57	)
Income taxes receivable, net of payable		(1,018	)		(4,651	)
Net cash provided by operating activities		4,763			3,248
Cash flows from investing activities
Other intangible assets acquired		—			(23	)
Purchases of property and equipment		(67	)		(530	)
Capitalized internal-use software development costs		(8,219	)		(6,731	)
Net cash used in investing activities		(8,286	)		(7,284	)
Cash flows from financing activities
Proceeds from exercise of stock-based awards		5			13
Financial institution funds in-transit		—			3,339
Payments on other financing obligations		(1,025	)		(915	)
Payments on finance leases		(102	)		(74	)
Net cash (used in) provided by financing activities		(1,122	)		2,363
Effect of exchange rate changes on Cash and cash equivalents and Restricted cash		(17	)		10
Net decrease in cash, cash equivalents and Restricted cash		(4,662	)		(1,663	)
Cash and cash equivalents and Restricted cash beginning of period		149,685			201,829
Cash and cash equivalents and Restricted cash end of period		145,023		$	200,166
Reconciliation of Cash and cash equivalents and Restricted Cash:
Cash and cash equivalents at beginning of period		147,334			168,386
Restricted cash at beginning of period		2,351			—
Restricted funds held for financial institutions at beginning of period		—			33,443
Cash and cash equivalents and Restricted cash at beginning of period	$	149,685		$	201,829
Cash and cash equivalents at end of period		143,637			163,384
Restricted cash at end of period		1,386			—
Restricted funds held for financial institutions at end of period		—			36,782
Cash and cash equivalents and Restricted cash at end of period	$	145,023		$	200,166
Supplemental disclosure of cash flow information:
Cash paid for income taxes, net of refunds	$	616		$	173
Non-cash investing activities:
Property and equipment purchases in accounts payable	$	119		$	123
Right-of-use assets obtained in exchange of operating lease obligations	$	1,356		$	297

The accompanying notes are an integral part of these condensed consolidated financial statements.

PAYMENTUS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Description of Business

Description of Business

Paymentus Holdings, Inc. and its wholly owned subsidiaries (“Paymentus” or the "Company”) provides electronic bill presentment and payment services, enterprise customer communication and self-service revenue management to billers through a Software-as-a-Service (“SaaS”), secure, omni-channel technology platform. The platform seamlessly integrates into a biller’s core financial and operating systems to provide flexible and secure access to payment processing of credit cards, debit cards, eChecks and digital wallets across a significant number of channels including online, mobile, IVR, call center, chatbot and voice-based assistants. Paymentus was incorporated in the state of Delaware on September 2, 2011 with office locations in Charlotte, North Carolina, Richmond Hill, Ontario (Canada), and Delhi and Bangalore (India). The Company is currently headquartered in Charlotte, North Carolina and continues to evaluate reestablishing its headquarters in or around the Seattle, Washington area in 2023.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the United States Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, they do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with GAAP. Therefore, these unaudited condensed consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements and the related notes included in the Company's Form 10-K for the year ended December 31, 2022 filed with the SEC on March 3, 2023 (the "2022 Form 10-K").

These unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position, results of operations, comprehensive income, changes in stockholders' equity and cash flows for the periods presented. The results of operations for the three months ended March 31, 2023 and 2022 are not necessarily indicative of the results to be expected for the full year or any other future interim or annual period.

Principles of Consolidation

The unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and balances have been eliminated upon consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Such estimates include revenue recognition, the allowance for credit losses, the lives of tangible and intangible assets, the valuation of acquired intangible assets and the recoverability or impairment of intangible assets, including goodwill, internal-use software development costs, valuation of stock warrants issued, stock-based compensation, and accounting for income taxes. The Company bases its estimates on historical experience and also on assumptions that management considers reasonable. The Company assesses these estimates on a regular basis; however, actual results could differ from these estimates.

Custodial Accounts

The Company has established a relationship with its merchant processors to act as collection and paying agents, whereby a merchant processor receives funds from customers and forwards such funds to the respective Paymentus client, based on the instructions received from the Company. These merchant processors act as custodians of the cash received, and the Company has no legal ownership rights to the funds held in such custodial accounts and does not control the use of these funds. As the Company does not take ownership of the funds, these custodial accounts are not included in the Company’s consolidated balance sheets. The balance of cash in the custodial accounts held by these merchant processors was $94.1 million and $353.9 million as of March 31, 2023 and December 31, 2022, respectively.

Restricted Funds Held for Financial Institutions and Financial Institution Funds In-Transit

Restricted funds held for financial institutions and the corresponding liability of financial institution funds in-transit represent the timing differences arising between the amounts the Company's sponsor bank receives from the sending financial institutions and the amounts disbursed to the recipient financial institutions. The restricted funds held for financial institutions' account is a transaction account maintained at the Company’s sponsor bank for clearing payments from financial institutions (as defined by the U.S. Treasury’s Financial Crimes Enforcement Network) to other financial institutions. Restricted funds held for financial institutions represent restricted cash that, based upon the Company's intent, are restricted solely for satisfying the corresponding obligations to send funds to the various financial institutions. During the fourth quarter 2022, the Company entered into an agreement with a financial institution whereby the financial institution would take over the legal ownership of these funds and operate as the custodial service provider. Once these funds were moved to custodial accounts, the Company no longer had legal ownership or control over these funds, and as such the Company no longer has Restricted Funds held for Financial Institutions and Financial Institution Funds In-Transit on the consolidated balance sheet as of March 31, 2023 and December 31, 2022.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to credit risk primarily consist of cash, cash equivalents, and accounts receivable. The Company maintains its cash and cash equivalents with high-quality financial institutions with investment-grade ratings. For accounts receivable, the Company is exposed to credit risk in the event of nonpayment by customers to the extent of the amounts recorded in the consolidated balance sheets. No customer accounted for more than 10% of revenue for either of the three months ended March 31, 2023 and 2022. As of March 31, 2023 and December 31, 2022 one customer accounted for more than 10% of accounts receivable.

Segment Information

Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to make operating decisions, allocate resources and assess performance. The Company has three operating segments based on geography. The United States segment represents the vast majority of the Company’s consolidated net sales and gross profit. The additional two operating segments, Canada and India, do not meet the quantitative thresholds for separate reporting, either individually or in the aggregate. None of the operating segments qualified for aggregation. The Company’s CODM is its chief executive officer. The CODM evaluates the performance of the Company’s operating segments based on revenue and gross profit. The Company does not analyze discrete segment balance sheet information related to long-term assets. All other financial information is presented on a consolidated basis. For information regarding the Company’s long-lived assets and revenue by geographic area, see Note 5 and Note 3, respectively.

Summary of Significant Accounting Policies

The Company’s significant accounting policies are discussed in Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements as of December 31, 2022 and 2021 and for the years ended December 31, 2022, 2021 and 2020 included in the 2022 Form 10-K. There have been no significant changes to these policies during the three months ended March 31, 2023.

Recently Adopted Accounting Standards

The Company is provided the option to adopt new or revised accounting guidance as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 either (1) within the same periods as those otherwise applicable to public business entities, or (2) within the same time periods as non-public business entities, including early adoption when permissible. With the exception of standards the Company elected to early adopt, when permissible, the Company has elected to adopt new or revised accounting guidance within the same time period as non-public business entities, as indicated below.

ASUs not listed below were assessed and determined to be either not applicable or are not expected to have a material impact on the consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers" ("ASU 2021-08"). ASU 2021-08 will require companies to apply the definition of a performance obligation under ASU 2014-09, Revenue from contracts with customers (“Topic 606”) to recognize and measure contract assets and contract liabilities relating to contracts with customers that are acquired in a business combination. Under current U.S. GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date. ASU 2021-08 will result in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASU Topic 606. The Company adopted this ASU on January 1, 2023, and its adoption did not have a material impact on its condensed consolidated financial statements.

3. Revenue, Performance Obligations and Contract Balances

Disaggregation of Revenue

The following table presents a disaggregation of revenue from contracts with customers (in thousands):


	Three Months Ended March 31,
	2023		2022
Payment transaction processing revenue	$	146,388	$	114,962
Other		1,940		1,742
Total revenue	$	148,328	$	116,704

Revenue by geographic area, based on the location of the Company’s users, was as follows (in thousands):


	Three Months Ended March 31,
	2023		2022
United States	$	145,557	$	113,960
Other		2,771		2,744
Total	$	148,328	$	116,704

Remaining Performance Obligations

As of March 31, 2023, the aggregate amount of transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied was $9.2 million, of which the Company expects to recognize over 80% within the next two years, 17% between two to four years and the remainder thereafter. The timing of revenue recognition within the next four years is largely dependent upon the go-live dates of the Company's customers under the Company’s contracts.

As of March 31, 2023, the Company has contractual rights under its commercial agreements to receive $53.5 million of fixed consideration related to the future minimum guarantees through 2026. As permitted, the Company has elected to exclude from this disclosure any variable consideration that meets specified criteria. Accordingly, the total unsatisfied or partially unsatisfied performance obligations related to processing services is significantly higher than the amount disclosed.

Contract Balances

Contract balances consist of the following:


	March 31,		December 31,
	2023		2022
Contract Assets
Costs to fulfill (prepaid expenses and other current assets)	$	2,742	$	2,732
Costs to fulfill (other long-term assets)		6,283		6,929
Total contract assets	$	9,025	$	9,661
Contract Liabilities
Contract liabilities	$	4,639	$	4,358
Contract liabilities, less current portion		4,606		2,826
Total contract liabilities	$	9,245	$	7,184

During the three months ended March 31, 2023 and 2022, the Company reduced revenue and the related contract assets by $0.7 million and $0.5 million, respectively.

Revenue recognized during the three months ended March 31, 2023 and 2022 that was included in the contract liabilities balance at the beginning of each of the periods was $0.7 million in each period.

4. Business Combinations

PROFIT Financial, Inc.

On December 19, 2022, the Company completed its acquisition of PROFIT Financial, Inc. ("PROFIT") by acquiring all outstanding shares of PROFIT for a total purchase price of approximately $4.3 million, net of cash acquired, comprised of $3.3 million cash of which $0.1 million is included as a short term payable at December 31, 2022 and $0.6 million is being held back by the Company for a period of twelve to twenty-four months following the transaction close date and is recorded in finance leases and other finance obligations, net of current portion in the consolidated balance sheets. PROFIT is a financial and accounting software company with offerings to small business. The acquisition of PROFIT is expected to increase market opportunities for the Company's existing solutions while enhancing the PROFIT platform.

The Company will record adjustments to the fair value of net assets acquired and goodwill within 12 months of the measurement period, if necessary. There were no measurement period adjustments to the purchase price allocation during the three months ended March 31, 2023.

The revenue and expenses of PROFIT have been included in the Company's consolidated financial results since the acquisition date. Pro forma results of operations related to the acquisition have not been presented for the three months ended March 31, 2023 and 2022 because the effects of this acquisition were not material to the Company's overall operations.

5. Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):


	March 31,			December 31,
	2023			2022
Computer equipment	$	5,529		$	5,476
Furniture and fixtures		1,663			1,672
Leasehold improvements		389			419
Total property and equipment		7,581			7,567
Less: Accumulated depreciation and amortization		(5,913	)		(5,744	)
Property and equipment, net	$	1,668		$	1,823

Depreciation and amortization expense recorded for property and equipment was $0.3 million for each of the three months ended March 31, 2023 and 2022, respectively.

Long-lived assets include property and equipment, net. The geographic locations of the Company’s long-lived assets, net, based on physical location of the assets were as follows (in thousands):


	March 31,		December 31,
	2023		2022
United States	$	658	$	706
Other		1,010		1,117
Total	$	1,668	$	1,823

6. Goodwill, Internal-use Software Development Costs and Intangible Assets

Goodwill

The changes in the carrying amount of goodwill by reporting unit were as follows (in thousands):


	United States		Other		Total
Balance as of December 31, 2022	$	131,028	$	823	$	131,851
Foreign currency translation adjustments		—		3		3
Balance as of March 31, 2023	$	131,028	$	826	$	131,854

Internal-use Software Development Costs

During the three months ended March 31, 2023 and 2022, the Company capitalized $8.1 million and $6.7 million in software development and implementation costs, respectively.

During the three months ended March 31, 2023 and 2022, the Company recorded $2.7 million and $1.7 million of amortization expense in cost of revenue, and $2.0 million and $1.4 million of amortization expense in operating expenses, respectively.

Intangible Assets

Intangible assets, net consisted of the following (in thousands):


	March 31, 2023
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Technology	$	21,831	$	(12,197	)	$	9,634
License		2,501		(2,501	)		—
Customer relationship		31,987		(10,823	)		21,164
Software		1,253		(695	)		558
Trademark		4,033		(1,581	)		2,452
Total	$	61,605	$	(27,797	)	$	33,808


	December 31, 2022
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Technology	$	22,631	$	(11,965	)	$	10,666
License		2,503		(2,503	)		—
Customer relationship		33,788		(11,695	)		22,093
Software		1,212		(661	)		551
Trademark		4,238		(1,531	)		2,707
Total	$	64,372	$	(28,355	)	$	36,017

Amortization expense of intangible assets was $2.2 million and $2.1 million for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, future expected amortization expense is as follows (in thousands):


Years Ending December 31,
2023 (remaining nine months)	$	6,337
2024		8,249
2025		6,756
2026		3,748
2027		3,269
Thereafter		5,449
Total future amortization expense	$	33,808

There were no impairments of goodwill, internal-use software development costs or intangible assets in the three months ended March 31, 2023 and 2022.

7. Accrued Liabilities

The composition of accrued liabilities is as follows (in thousands):


	March 31,		December 31,
	2023		2022
Payroll and employee-related expenses	$	6,591	$	9,214
Finance leases and other financing obligations		685		1,813
Other accrued liabilities		5,012		4,782
Total	$	12,288	$	15,809

As of December 31, 2022, finance leases and other financing obligations includes the current portion of finance leases related to the acquisition of computer equipment and short-term insurance premium financing arrangements. As of March 31, 2023 the Company no longer has any finance leases.

8. Commitments and Contingencies

Other Commitments

The Company has entered into certain non-cancellable agreements for software and marketing services that specify all significant terms, including fixed or minimum services to be used, pricing provisions and the approximate timing of the transaction. Obligations under contracts that are cancellable or with remaining terms of 12 months or less are not included. There have been no material changes to the Company's contractual obligations or commitments outside of the ordinary course of business as compared to those described in the 2022 Form 10-K.

Legal Matters

The Company is involved from time to time in various claims and legal proceedings arising in the ordinary course of business. While it is not feasible to predict or determine the ultimate outcome of these matters, the Company believes that none of its current claims and legal proceedings will have a material adverse effect on its financial position, results of operations, or cash flows as of and for the three months ended March 31, 2023.

Indemnification

The Company enters into indemnification provisions under agreements with other parties in the ordinary course of business, including business partners, investors, contractors, customers, and the Company’s officers, directors, and certain employees. The Company has agreed to indemnify and defend the indemnified party claims and related losses suffered or incurred by the indemnified party from actual or threatened third-party claims due to the Company’s activities or non-compliance with obligations or representations made by the Company. The Company seeks to limit, or cap, its indemnification exposure in its commercial and other contracts. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision.

9. Stock-Based Compensation

In May 2021, the Company’s board of directors adopted, and its stockholders approved, the 2021 Equity Incentive Plan (the “2021 Plan”), which became effective in connection with the IPO. The 2021 Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, to the Company’s employees and any of its parent or subsidiary corporations’ employees, and for the grant of non-statutory stock options, restricted stock, restricted stock units, stock appreciation rights, and performance awards to the Company’s employees, directors and consultants and any of its parent or subsidiary corporations’ employees and consultants. A total of 10,459,000 shares of the Company’s Class A common stock have been reserved for issuance under the 2021 Plan in addition to (i) an annual increase of 4% of the outstanding shares of the Company's common stock, with Class A and Class B common stock taken together, on the first day of each fiscal year, subject to the Compensation Committee of the Board exercising discretion to increase or decrease such amount (the "Evergreen Addition"), and (ii) upon the expiration, forfeiture, cancellation, or reacquisition of any shares of Class B common stock underlying outstanding stock awards granted under the 2012 Equity Incentive Plan, an equal number of shares of Class A common stock, such number of shares not to exceed 7,563,990. On January 1, 2023, pursuant to the Evergreen Addition, 4,929,646 shares of Class A common stock were added to the 2021 Plan issuance reserve. At March 31, 2023, there were 18,105,922 remaining shares available for the Company to grant under the 2021 Plan.

Stock Options

A summary of the Company’s option activity during the three months ended March 31, 2023 was as follows (in thousands, except share and per share amounts):


						Weighted-
				Weighted-		Average
				Average		Remaining		Aggregate
	Options			Exercise Price		Contractual		Intrinsic
	Outstanding			per Share		Life (years)		Value
Outstanding at December 31, 2022		4,155,640		$	7.52		5.87	$	4,420
Options granted		—			—
Options exercised		(64,500	)		0.08
Options forfeited		(26,084	)		8.66
Options expired		(84,660	)		0.03
Outstanding at March 31, 2023		3,980,396		$	7.79		5.80	$	4,283
Exercisable at March 31, 2023		3,313,134		$	7.62		5.72	$	4,134

There were no options granted during the three months ended March 31, 2023 and 2022. Aggregate intrinsic value represents the difference between the exercise price of the options and the fair value of the Company’s common stock.

Restricted Stock Units (“RSUs”)

A summary of the Company’s RSU activity during the three months ended March 31, 2023 was as follows:


				Weighted-
				Average
	Number of			Grant Date
	RSUs Outstanding			Fair Value
Awarded and unvested at December 31, 2022		1,362,420		$	18.03
Awards granted		655,959			8.45
Awards vested		(40,491	)		26.62
Awards forfeited		(31,585	)		17.03
Awarded and unvested at March 31, 2023		1,946,303		$	14.64

The fair value of RSU grants is determined based upon the market closing price of the Company’s Class A common stock on the date of grant. RSUs vest over the requisite service period, which generally ranges between four years and five years from the date of grant, subject to continued employment for employees and provision of services for nonemployees.

Stock-based compensation expense included in the condensed consolidated statements of operations was as follows (in thousands):


	Three Months Ended March 31,
	2023		2022
Cost of revenue	$	45	$	—
Operating expenses
Research and development		546		285
Sales and marketing		716		223
General and administrative		852		768
Total stock-based compensation	$	2,159	$	1,276

At March 31, 2023, there was $1.7 million of total unrecognized compensation cost related to unvested stock options granted under the 2012 Equity Incentive Plan, which is expected to be recognized over a remaining weighted-average period of 1.1 years.

At March 31, 2023, there was $25.5 million of total unrecognized compensation cost related to unvested RSUs granted under the 2021 Plan, which is expected to be recognized over a remaining weighted-average period of 3.5 years.

10. Income Taxes

The Company computes its tax provision for the quarter ended March 31, 2023 by applying the year-to-date actual effective tax rate from recurring operations as the best estimate of its annual effective tax rate. The Company continues to record a valuation allowance against its net deferred tax assets ("DTA") in the US as it is not more likely than not to be realized given near break-even operations and prior year significant tax deductions for stock-based compensation.

The Company’s effective tax rate for the three months ended March 31, 2023 and 2022 is (57.9%) and 226.4%, respectively. In the quarter ended March 31, 2023, the Company recorded a benefit from a return to provision adjustment in connection with a change in estimate of costs required to be capitalized under IRC Section 174. Excluding the return to provision benefit, the Company's effective tax rate in quarter ended March 31, 2023 was 102%. The difference between the Company’s effective tax rate and the U.S. federal statutory rate of 21% was primarily the result of near break-even pre-tax income from operations, state taxes and the impact of the full valuation allowance and other permanent adjustments. In 2022, the difference between the Company’s effective tax rate and the U.S. federal statutory rate of 21% was primarily the result of tax benefits from stock-based compensation.

11. Net Income per Share Attributable to Common Stock

Basic earnings per share attributable to common stock is computed by dividing net income for the period by the weighted average number of common shares outstanding during the period.

Diluted net income per share attributable to common stock is computed by giving effect to all potentially dilutive common stock equivalents to the extent they are dilutive. The dilutive effect of outstanding options, RSUs and warrants is reflected in diluted net income per share attributable to common stock by application of the treasury stock method. The calculation of diluted net income per share attributable to common stock excludes all anti-dilutive common shares.

The rights of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis to each class of common stock and the resulting basic and diluted net income per share attributable to common stockholders are, therefore, the same for both Class A and Class B common stock on both an individual and combined basis.

The following table sets forth the computation of basic and diluted net income per share attributable to common stock (in thousands except share and per share data):


	Three Months Ended March 31,
	2023		2022
Numerator:
Net income	$	704	$	1,718
Denominator:
Weighted-average shares of common stock — basic		123,289,584		120,897,576
Dilutive effect of stock options to purchase common stock		486,286		4,976,726
Dilutive effect of RSUs		16,871		26,347
Dilutive effect of warrants		—		85,861
Weighted-average shares of common stock — diluted		123,792,741		125,986,510
Net income per share
Basic	$	0.01	$	0.01
Diluted	$	0.01	$	0.01

The following table summarizes the weighted average securities that were excluded from the computation of diluted net income per share attributable to common stock as their inclusion would have been antidilutive:


	Three Months Ended March 31,
	2023		2022
Stock options to purchase common stock		3,594,345		—
RSUs		1,319,253		7,748
Warrants		588,173		—

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

We are a leading provider of cloud-based bill payment technology and solutions. We deliver our next-generation product suite through a modern technology stack to more than 1,900 biller business and financial institution clients. Our platform was used by approximately 27 million consumers and businesses in North America in December 2022 to pay their bills, make money movements and engage with our clients. We serve billers of all sizes that primarily provide non-discretionary services across a variety of industry verticals, including utilities, financial services, insurance, government, telecommunications and healthcare. We also serve financial institutions by providing them with a modern platform that their customers use for bill payment, account-to-account transfers and person-to-person transfers. By powering this comprehensive network of billers and financial institutions, each with their own set of bill payment requirements, we believe we have created an enviable feedback loop that enables us to continuously drive innovation, grow our business and uniquely improve the electronic bill payment experience for participants in the bill payment ecosystem.

Our platform provides our clients with easy-to-use, flexible and secure electronic bill payment experiences powered by an omni-channel payment infrastructure that allows consumers to pay their bills using their preferred payment type and channel. Because our biller platform is developed on a single code base and leverages a SaaS infrastructure, we can rapidly deploy new features and tools to our entire biller base simultaneously. Through a single point of integration to our billers’ core financial and operating systems, our mission-critical solutions provide our billers with a payments operating system that helps them collect revenue faster and more profitably and empower their consumers with the information and transparency needed to control their finances.

We generate substantially all of our revenue from payment transaction fees and have achieved significant growth through our capital efficient model. We rely on a diversified go-to-market strategy to reach new billers. We acquire new billers through direct sales channels, software and strategic partnerships and our Instant Payment Network, or IPN, which together promote rapid adoption of our platform through partnerships with leading business networks. Through these channels, our platform reaches millions of consumers, driving transaction growth.

We believe our revenue is highly visible. We derive the majority of our revenue from a fee paid per transaction by the consumer, the biller or a combination of both. Our usage-based monetization strategy aligns our economic success with the success of our billers and partners. Since we benefit from increased transactional volume, we do not charge separate license fees or implementation fees. In addition, our modern platform architecture generally allows us to provide integration, implementation, maintenance and system upgrades at no additional cost to billers.

Initiatives to Drive Results of Operations

Acquiring New and Maintaining Existing Billers and Financial Institutions

Our future growth depends on the continued adoption of our platform by new billers and financial institutions, as well as maintaining our existing billers and financial institutions. We intend to continue investing in our efficient go-to-market strategies, increasing brand awareness and driving adoption of our platform and products. We had more than 1,900 billers and financial institution clients as of December 31, 2022, including billers of all sizes and across numerous vertical markets and financial institutions of all sizes. Our ability to attract new, and maintain existing, billers and financial institutions and drive adoption of our platform will depend on a number of factors, including the effectiveness and pricing of our products, offerings of our competitors and the effectiveness of our marketing efforts. Our growth and performance also depends on our ability to promptly implement and begin recognizing revenues from our new billers and financial institutions.

Expanding Usage of Our Platform with Existing Billers and Financial Institutions

We believe our large base of existing billers and financial institutions represents a significant opportunity for further consumption of our platform. We believe our solutions create a superior experience for consumers and accelerate revenue realization for billers, which drives increased usage of our platform. We intend to continue investing in this value proposition. Leveraging our platform to capture more transactions from our existing biller and financial institution base is expected to organically drive transaction growth at lower cost.

Growing Our Partner Base

We believe there is a significant opportunity to increase the transactions on our platform through expanding our base of software, strategic and IPN partners. While revenue derived from or through our IPN partnerships has not been significant historically, we expect that the revenue contribution from our IPN will grow over time. As our IPN partner base expands, and new partners use our platform to power bill payment experiences within their ecosystems, we expect to organically expand the reach of our platform to millions of new consumers and thereby drive new, revenue-generating transactions to our platform. We intend to invest in the expansion of our partner base, including the addition of new IPN partners, because our ability to secure new partners will have a direct impact on our transaction growth.

Investing in Sales and Marketing

We will continue to expand efforts to market our platform through our diversified sales and marketing strategy. We intend to invest in sales and marketing strategies that we believe will drive further brand awareness and preference among our billers, financial institutions, partners and consumers. Given the nature of our biller, financial institution and partner base, our investment in sales and marketing in a given period may not impact results until subsequent periods. We approach sales and marketing spend strategically to maintain efficient biller and partner acquisition.

Innovation and Enhancement of Our Platform

We will continue to invest in our platform and IPN to maintain our position as a leading provider of biller communication and payments. To drive adoption and increase penetration of our platform, we intend to continue to introduce new products and features. We believe that investment in research and development will contribute to our long-term growth, but may also negatively impact our short-term profitability. We will continue to leverage emerging technologies and invest in the development of more features and better functionality for consumers.

Increased Adoption of Electronic Bill Payment Solutions

As the number of financial transactions online continues to increase, electronic bill payment is becoming a greater share of the bill payment market. We have observed that consumers demand a frictionless electronic bill payment experience and increasingly prefer more flexible and innovative digital payment options. We expect this trend to continue, providing us with a greater opportunity to provide next-generation bill and digital payment technology and power more transactions, further fueling our growth.

Transactions Processed


	Three Months Ended March 31,
	2023		2022		% Growth
	(in millions)
Transactions processed		108.5		87.9		23.4	%

We define transactions processed as the number of revenue generating payment transactions, such as checks, credit card and debit card transactions, automated clearing house, or ACH, items and emerging payment types, which are initiated and generally processed through our platform during a period. The number of transactions also includes account-to-account and person-to-person transfers. The number of transactions processed during the three months ended March 31, 2023 increased approximately 23.4% as compared to the same period in 2022. The increase was primarily driven by the addition of new billers and financial institutions and increased transactions from our existing billers and financial institutions.

Other Key Factors and Trends Affecting Our Operating Results

The discussion below includes a number of forward-looking statements regarding our future performance. For a discussion of important factors, including the continuing development of our business and other factors which could cause actual results to differ materially from matters referred to below, see the discussions under “Risk Factors” and “Special Note Regarding Forward-Looking Statements” herein and in our Form 10-K for the year ended December 31, 2022 or the “2022 Form 10-K”.

Impact of Economic and Inflationary Trends

In 2022 and continuing into 2023, the United States economy has experienced inflationary conditions, increased interest rates and consecutive quarters of decreased gross domestic product. While we believe our business is resilient and can generally weather unusual levels of inflation, the economic uncertainty and continuing inflationary pressures, which has been particularly acute in the utility sector, impacted our fiscal 2022 and first quarter 2023 financial performance and is expected to impact our 2023 financial performance. For example, some of our clients have deferred anticipated 2022 implementations into 2023 or are reevaluating the development of technology resources, which will delay expected revenue recognition. Furthermore, inflationary pressure is resulting in higher average bills, particularly in the utility sector, and increased interchange fees. While we are seeking to adjust our prices to address the inflationary pressures, our ability to do so typically lags behind the impact of inflation on our clients, the increase in average bill amounts and increased interchange fees. We intend to continue to manage through this uncertain economic environment by working closely with clients on implementations and price adjustments. In addition, although we are focused on prudent expense management, we are seeing ongoing wage pressure in our current workforce due to the levels of inflation, which is also putting some short-term pressure on our EBITDA margins.

Non-GAAP Measures

We use supplemental measures of our performance that are derived from our consolidated financial information but which are not presented in our consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles, or GAAP. These supplemental non-GAAP measures include contribution profit, adjusted gross profit, adjusted EBITDA and free cash flow.

Contribution Profit

We calculate contribution profit as gross profit plus other cost of revenue. Other cost of revenue equals cost of revenue less interchange and assessment fees paid by us to our payment processors.

Adjusted Gross Profit

We calculate adjusted gross profit as gross profit adjusted for non-cash items, primarily stock-based compensation and amortization.

Adjusted EBITDA

We calculate adjusted EBITDA as net income before other income (expense) (which consists of interest income (expense), net and foreign exchange gain (loss)), depreciation and amortization, income taxes, adjusted to exclude the effects of stock-based compensation expense and certain nonrecurring expenses that management believes are not indicative of ongoing operations.

Free Cash Flow

We calculate free cash flow as net cash provided by (used in) operating activities less capital expenditures and software and capitalized internal-use software development costs.

How we use Non-GAAP Measures

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

We also urge you to review the reconciliation of these non-GAAP financial measures included below. To properly and prudently evaluate our business, we encourage you to review the condensed consolidated financial statements and related notes included elsewhere in this report and to not rely on any single financial measure to evaluate our business.

Contribution Profit


	Three Months Ended
	March 31, 2023		March 31, 2022
	(in thousands)
Gross Profit	$	40,078	$	34,854
Plus: other cost of revenue		13,453		12,531
Contribution Profit	$	53,531	$	47,385

In general, contribution profit is driven by the number of transactions we process offset by network fees associated with processing those transactions. The amount of contribution profit per transaction may vary due to a variety of factors including client size, type and industry as well as whether the client is a biller, financial institution or other partner. Contribution profit for the three months ended March 31, 2023 increased approximately 13.0% as compared to the same period in 2022. The increase was primarily driven by adjusted pricing for certain existing customers related to our inflation management, and growth in transaction count and volume driven by the addition of new billers and financial institutions and increased transactions from our existing billers and financial institutions.

Adjusted Gross Profit


	Three Months Ended
	March 31, 2023		March 31, 2022
	(in thousands)
Gross profit	$	40,078	$	34,854
Stock-based compensation		45		—
Amortization		3,567		2,510
Adjusted gross profit	$	43,690	$	37,364

Adjusted gross profit for the three months ended March 31, 2023 increased 16.9% as compared to the same period in 2022. Adjusted gross profit is driven primarily by the same factors that impact gross profit with the exception of excluding the amortization in cost of revenue. The increase in amortization was driven by additional capitalization of software costs.

Adjusted EBITDA


	Three Months Ended
	March 31, 2023			March 31, 2022
	(in thousands)
Net income — GAAP	$	704		$	1,718
Interest (income) expense, net		(1,440	)		8
Benefit from income taxes		(256	)		(3,071	)
Depreciation and amortization		7,239			5,474
EBITDA	$	6,247		$	4,129

Adjustments
Foreign exchange loss (gain)		8			(26	)
Stock-based compensation		2,159			1,276
Adjusted EBITDA	$	8,414		$	5,379

Adjusted EBITDA is a measure of profitability and generally is expected to move in line with revenue, contribution profit, gross profit and adjusted gross profit. Adjusted EBITDA increased 56.4% in the three months ended March 31, 2023 as compared to the same period in 2022.

Free Cash Flow


	Three Months Ended
	March 31, 2023			March 31, 2022
	(in thousands)
Net cash provided by operating activities	$	4,763		$	3,248
Purchases of property and equipment and software		(67	)		(530	)
Other intangible assets acquired		—			(23	)
Capitalized internal-use software development costs		(8,219	)		(6,731	)
Free cash flow	$	(3,523	)	$	(4,036	)
Net cash used in investing activities	$	(8,286	)	$	(7,284	)
Net cash (used in) provided by financing activities	$	(1,122	)	$	2,363

Results of Operations

The following table sets forth our condensed consolidated statements of operations for the periods presented:


	Three Months Ended March 31,						Change
	2023			2022			$			%
	(Dollars in thousands)
Revenue	$	148,328		$	116,704		$	31,624			27.1	%
Cost of revenue		108,250			81,850			26,400			32.3	%
Gross profit		40,078			34,854			5,224			15.0	%
Gross margin (1)		27.0	%		29.9	%
Operating expenses
Research and development		11,653			10,390			1,263			12.2	%
Sales and marketing		20,264			16,190			4,074			25.2	%
General and administrative		9,145			9,645			(500	)		-5.2	%
Total operating expenses		41,062			36,225			4,837			13.4	%
Loss from operations		(984	)		(1,371	)		387			-28.2	%
Other income (expense)
Interest income (expense), net		1,440			(8	)		1,448		n/m
Foreign exchange (loss) gain		(8	)		26			(34	)	n/m
Income (loss) before income taxes		448			(1,353	)		1,801		n/m
Benefit from income taxes		256			3,071			(2,815	)	n/m
Net income	$	704		$	1,718		$	(1,014	)	n/m

____________

n/m - not meaningful

(1) Gross margin is calculated as gross profit divided by revenue.

The following table presents the components of our condensed consolidated statements of operations for the periods presented as a percentage of revenue:


	Three Months Ended March 31,
	2023			2022

Revenue		100.0	%		100.0	%
Cost of revenue		73.0			70.1
Gross profit		27.0			29.9
Operating expenses
Research and development		7.9			8.9
Sales and marketing		13.7			13.9
General and administrative		6.1			8.3
Total operating expenses		27.7			31.1
Loss from operations		(0.6	)		(1.2	)
Other income (expense)
Interest income (expense), net		1.0			—
Foreign exchange (loss) gain		—			—
Income (loss) before income taxes		0.3			(1.2	)
Benefit from income taxes		0.2			2.6
Net income		0.5	%		1.4	%

Comparison of the Three Months Ended March 31, 2023 and 2022

Revenue

The increase in revenue was primarily driven by adjusted pricing for certain existing customers related to our inflation management, increases in the number of transactions processed, which was driven by the implementation of new billers and increased transactions from our existing billers, and by an increase in revenue we received per transaction on a blended basis.

Cost of Revenue, Gross Profit and Gross Margin

The increase in cost of revenue was driven by the increase in revenue and transactions processed as it consists primarily of interchange fees and processor costs, driven by higher average bill amounts due primarily to inflation, as well as other direct costs associated with making our platform available to our billers.

Gross margin decreased for the three months ended March 31, 2023 due to increases in cost of revenues for other direct costs associated with making our platform available to our billers.

Research and Development Expenses

The increase in research and development expenses was primarily due to an increase in employee-related costs, including benefits due to an increase in headcount as we continued to invest in building and adding additional features and functionality to our platform. Additionally, we incurred increased stock-based compensation expense associated with routine and new hire grants.

Sales and Marketing Expenses

The increase in sales and marketing expenses was primarily due to an increase in employee-related costs, including benefits, as we continued to expand our sales and marketing efforts with additional headcount in order to continue to drive our growth. In addition, we incurred higher agency commissions and increased stock-based compensation associated with routine and new hire grants.

General and Administrative Expenses

The decrease in general and administrative expenses was primarily due to lower costs for our directors and officers insurance and corporate premiums, a reduction in lease costs and reversals of certain bad debts.

Other Income (Expense)

The changes in other income (expense) was primarily due to the increase in interest income, net as a result of increases in the federal reserve rates which increased interest income on our government issued securities, which are included in cash and cash equivalents on the balance sheet.

Income Taxes

The change in provision for income taxes for the three months ended March 31, 2023 as compared to the same period in the prior year, was primarily due to the near break-even pre-tax income from operations, state taxes and the impact of the full valuation allowance and other permanent adjustments in addition to a return to provision benefit recorded in connection with a change in estimate of costs required to be capitalized under IRC Section 174, as compared to prior year discrete excess tax benefits on stock-based compensation recognized in the quarter.

Liquidity and Capital Resources

Sources and Uses of Funds

As of March 31, 2023, we had $143.6 million of unrestricted cash and cash equivalents. We believe that existing unrestricted cash and cash equivalents will be sufficient to support our working capital and capital expenditure requirements for at least the next 12 months. Since inception, we have financed operations primarily through the sale of equity securities and revenue from payment transaction fees and subscriptions. Our principal uses of cash are funding operations and capital expenditures.

From time to time, we may explore additional financing sources and means to lower our cost of capital, which could include equity, equity-linked and debt financing. We cannot assure you that any additional financing will be available to us on acceptable terms, or at all. The inability to raise capital would adversely affect our ability to achieve our business objectives. If we raise additional funds by issuing equity or equity-linked securities, the ownership of our existing stockholders will be diluted. If we raise additional financing by the incurrence of indebtedness, we may be subject to increased fixed payment obligations and could be subject to additional restrictive covenants, such as limitations on our ability to incur additional debt, and other operating restrictions that could adversely impact our ability to conduct our business or execute our growth strategy. Any future indebtedness we incur may result in terms that could be unfavorable to equity investors.

Historical Cash Flows

The following table summarizes our condensed consolidated cash flows.


	Three Months Ended March 31,
	2023			2022
	(in thousands)
Net cash provided by (used in)
Operating activities	$	4,763		$	3,248
Investing activities		(8,286	)		(7,284	)
Financing activities		(1,122	)		2,363
Effects of foreign exchange on cash		(17	)		10
Net decrease in cash, cash equivalents and restricted cash	$	(4,662	)	$	(1,663	)

Net Cash Provided by Operating Activities

Our primary source of operating cash is revenue from payment transaction fees. Our primary uses of operating cash are personnel-related costs, payments to third parties to fulfill our payment transactions and payments to sales and marketing partners. Net cash provided by operating activities for the three months ended March 31, 2023 was $4.8 million. Net income was $0.7 million, adjusted for non-cash charges of $10.4 million consisting primarily of depreciation and amortization, stock-based compensation, amortization of contract assets and non-cash lease expense, which contributed positively to operating activities. This was offset by net cash outflows of $6.4 million provided by changes in our operating assets and liabilities.

Net cash provided by operating activities for the three months ended March 31, 2022 was $3.2 million. Net income was $1.7 million, adjusted for non-cash charges of $9.6 million consisting primarily of depreciation and amortization, stock-based compensation, and non-cash lease expense, which contributed positively to operating activities. This was offset by net cash outflows of $8.1 million provided by changes in our operating assets and liabilities.

Net Cash Used in Investing Activities

Net cash used in investing activities for the three months ended March 31, 2023 consisted of $8.2 million of capitalized internal-use software development costs and $0.1 million of purchases of property and equipment.

Net cash used in investing activities for the three months ended March 31, 2022 consisted of $6.7 million of capitalized internal-use software development costs and $0.6 million for purchases of property and equipment and other intangible assets acquired.

Net Cash (Used in) Provided by Financing Activities

Net cash used in financing activities for the three months ended March 31, 2023 consisted of $1.0 million of payments on other financing obligations and $0.1 million of payments on finance leases.

Net cash provided by financing activities for the three months ended March 31, 2022 consisted of an increase in financial institution funds in-transit of $3.3 million offset by $1.0 million of payments on finance leases and other financing obligations.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosures of contingencies at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our significant accounting policies are described in Note 2, “Basis of Presentation and Summary of Significant Accounting Policies” to our consolidated financial statements included in our 2022 Form 10-K. There have been no material changes in our critical accounting policies and estimates since December 31, 2022.

Recent Accounting Pronouncements

See Note 2 "Basis of Presentation and Summary of Significant Accounting Policies" in the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for a full description of recent accounting pronouncements, including the respective dates of adoption or expected adoption and effects on our condensed consolidated financial statements contained in Item 1 of this Quarterly Report.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

There have been no material changes in our exposures to market risk since December 31, 2022. For details on the Company’s interest rate, foreign currency exchange, and inflation risks, see Part I, Item 7A. “Quantitative and Qualitative Information About Market Risk” in our 2022 Form 10-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act). Based on that evaluation, and as a result of the material weaknesses in internal control over financial reporting described below, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2023, our disclosure controls and procedures were not effective at the reasonable assurance level. In light of this fact, our management has performed additional analyses, reconciliations, and other post-closing procedures and has concluded that, notwithstanding the material weaknesses in our internal control over financial reporting, the unaudited condensed consolidated financial statements for the periods covered by and included in this Quarterly Report on Form 10-Q fairly state, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with GAAP.

Material Weaknesses in Internal Control over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. As of March 31, 2023, our material weaknesses were as follows:

•

We lacked a sufficient number of trained professionals with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters, including accounting for capitalized internal-use software development costs, identification of reporting units, translation of foreign currency in consolidation, accounting for deferred compensation, calculation of earnings per share and classification of accounts in the financial statements. Additionally, we did not design and maintain effective controls over verifying the appropriate review and approval of journal entries.

•

We did not design and maintain effective controls relevant to the preparation of our financial statements with respect to certain information technology, or IT, general controls for information systems. Specifically, we did not design and maintain (1) program change management controls to ensure that IT program and data changes affecting certain IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately; and (2) user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs and data to appropriate company personnel.

Remediation Plan

We believe we have made significant progress toward remediation of the material weaknesses described above. We have completed the following remediation measures:

•

updated the design of our general ledger accounting system to allow for effective restricted access and segregation of duties to govern the preparation and review of journal entries;

•

implemented management review controls over journal entries and the identification and review of complex transactions;

•

secured the general ledger accounting system by implementing Single Sign-On (SSO); and

•

implemented additional change management and access controls for our relevant IT applications to further restrict privileged access.

Additional remediation measures are ongoing and include the following:

•

implementing controls to review activities, which may materially affect our financial statements, for those users who have privileged access; and

•

continuing to hire additional personnel with public company experience for our accounting and finance function.

While we believe these efforts will remediate the material weaknesses, these material weaknesses cannot be considered fully remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be involved in claims, regulatory examinations or investigations and legal proceedings arising in the ordinary course of our business. The outcome of any such claims or proceedings, regardless of the merits, and the Company’s ultimate liability, if any, is inherently uncertain. Furthermore, we may become subject to stockholder inspection demands under Delaware law and derivative or other similar litigation. We are not currently party to any material legal proceedings, and we are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results, cash flows or financial condition.

Item 1A. Risk Factors.

Except as set forth below, there have been no material changes in the risk factors previously disclosed in Item 1A. of our 2022 Form 10-K.

Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect our business, financial condition or results of operations.

Events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. Recently, on March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. Similarly, on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each placed into receivership. Although we assess our banking and customer relationships as we believe necessary or appropriate, our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect us, the financial services industry or economy in general. These factors could include, among others, actual or perceived events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry, companies that do business with such companies or companies that have customers or partners that do business with such companies.

In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all. Any decline in available funding or access to our cash and liquidity resources could, among other risks, adversely impact our ability to meet our operating expenses, financial obligations or fulfill our other obligations, result in breaches of our contractual obligations or result in violations of federal or state wage and hour laws. Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors not described above, could have material adverse impacts on our liquidity and our business, financial condition or results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

(a) Exhibits

Incorporated by Reference

Exhibit
Number

Description

Form

File No.

Exhibit

Filing Date

Filed/
Furnished Herewith

3.1

Amended and Restated Certificate of Incorporation of Paymentus Holdings, Inc.

8-K

001-40429

3.1

May 28, 2021

3.2

Amended and Restated Bylaws of Paymentus Holdings, Inc.

8-K

001-40429

3.2

November 14, 2022

10.1+

Change in Control and Severance Agreement by and between Paymentus Holdings, Inc. and Paul Seamon

8-K

001-40429

10.1

February 14, 2023

10.2+

Outside Director Compensation Policy

8-K

001-40429

10.2

February 14, 2023

10.3+

Confirmatory Employment Letter by and between Paymentus Holdings, Inc. and Sanjay Kalra

8-K

001-40429

10.1

March 6, 2023

10.4+

Change in Control and Severance Agreement by and between Paymentus Holdings, Inc. and Sanjay Kalra

8-K

001-40429

10.2

March 6, 2023

10.5+

Confirmatory Employment Letter by and between Paymentus Holdings, Inc. and Andrew Gerber

X

10.6+

Change in Control and Severance Agreement by and between Paymentus Holdings, Inc. and Andrew Gerber

X

31.1

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

X

31.2

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

X

32.1*

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

X

32.2*

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 

X

101.INS

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

+ Indicates a management contract or compensatory plan or arrangement.

* The certifications attached as Exhibit 32.1 and 32.2 that accompany this report are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Paymentus Holdings, Inc. under the Securities

Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this report, irrespective of any general incorporation language contained in such filing.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	PAYMENTUS HOLDINGS, INC.

Date: May 8, 2023	By:	/s/ Dushyant Sharma
		Dushyant Sharma
		Chairman, President and Chief Executive Officer
		(Principal Executive Officer)

Date: May 8, 2023	By:	/s/ Sanjay Kalra
		Sanjay Kalra
		Senior Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

February 7, 2022

Andrew A. Gerber

Via email

Re: Confirmatory Employment Letter

Dear Andrew:

This confirmatory employment letter agreement (the “Agreement”) is entered into between Andrew A. Gerber (“you”) and Paymentus Holdings, Inc. (the “Company” or “we”), effective as of the date of this Agreement as first set forth above (the “Effective Date”), to confirm the terms and conditions of your employment with the Company as of the Effective Date.

Title and Position. You will continue to serve as the Company’s General Counsel and Secretary. You also will continue to report to the Company’s Chief Executive Officer (“CEO”) and will perform the duties and responsibilities customary for such position and such other related duties as are reasonably assigned by the CEO.

Base Salary. As of the Effective Date, your annual base salary will be $325,000 (“Salary”), which will be payable, less any applicable withholdings, in accordance with the Company’s normal payroll practices. Your base salary will be subject to review and adjustment from time to time by the Board of Directors of the Company (the “Board”) or its Compensation Committee (the “Committee”), as applicable, in its sole discretion.

Annual Bonus. For the Company’s 2022 fiscal year, you will be eligible for a target annual cash bonus opportunity equal to $200,000. Any annual bonus will be subject to performance and other criteria established by the Board or the Committee, as applicable, in its sole discretion, and your continued employment through the date that bonus is paid to you. The Board or the Committee, as applicable and in its sole discretion, may approve that the Company grant additional discretionary bonus amounts to you.

Equity Awards. You will be eligible to receive awards of stock options or other equity awards pursuant to any plans or arrangements the Company may have in effect from time to time, as determined by the Board or Committee, as applicable, in its sole discretion.

Employee Benefits. You will continue to be eligible to participate in the benefit plans and programs established by the Company for its employees from time to time, subject to their applicable terms and conditions, including without limitation any eligibility requirements. The Company reserves the right to modify, amend, suspend or terminate the benefit plans, programs, and arrangements it offers to its employees at any time.

Severance. You will be eligible to participate in the Company’s Change in Control and Severance Agreement (the “CIC Agreement”) established, and as may be in effect from time to time, for senior-level employees that is applicable to you consistent with your position within the Company.

Confidentiality Agreement. Your acceptance of this Agreement confirms that the terms of the Employment and Restrictive Covenants Agreement between you and the Company dated December 13, 2021, as may be amended or amended and restated from time to time (the “Confidentiality Agreement”) still apply.

At-Will Employment. This Agreement does not imply any right to your continued employment for any period with the Company or any of its affiliates. Your employment with the Company is for no specified period and will continue to constitute at‑will employment.

Taxes. The Company (or its affiliate, as applicable) will have the right and authority to deduct from any payments or benefits under this Agreement or require you to remit to the Company (prior to providing any such payments or benefits), all applicable federal, state, and local taxes or other required withholdings and payroll deductions (“Withholdings”). The payments and benefits under this Agreement are intended to be exempt from, or otherwise to comply with, Section 409A of the Internal Revenue Code of 1986, as amended, and any regulations and other formal guidance promulgated thereunder (“Section 409A”) so that none of the payments and benefits under this Agreement will be subject to the additional tax imposed under Section 409A, and any ambiguities and ambiguous terms herein will be interpreted to be exempt or to so comply. Notwithstanding any contrary Agreement provision, the Company reserves the right to amend the Agreement as it deems necessary or advisable, in its sole discretion and without your consent or the consent of any other person or entity, to comply with Section 409A or to avoid income recognition under Section 409A or to otherwise avoid the imposition of additional tax under Section 409A prior to the actual payment or provision of any payments or benefits under this Agreement. In no event will the Company, or any parent, subsidiary or other affiliate of the Company have any responsibility, liability or obligation to reimburse or indemnify you or hold you harmless for any taxes imposed, or other costs incurred, as a result of Section 409A.

10.

Protected Activity Not Prohibited. Notwithstanding any contrary provision of the Agreement or the Confidentiality Agreement, nothing in this Agreement, or the Confidentiality Agreement will prohibit or impede you from engaging in any Protected Activity. For purposes of this Agreement, “Protected Activity” will mean communicating, cooperating or filing a complaint with any U.S. federal, state or local governmental or law enforcement branch, agency or entity, including, but not limited to, the Securities and Exchange Commission, the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, and the National Labor Relations Board (collectively, a “Governmental Entity”) with respect to possible violations of any U.S. federal, state or local law or regulation, or otherwise making disclosures to any Governmental Entity, in each case, that are protected under the whistleblower provisions of any such law or regulation; provided that, in each case, such communications and disclosures are consistent with applicable law. Notwithstanding the foregoing, you agree to take all reasonable precautions to prevent any unauthorized use or disclosure of any information that may constitute Company confidential information (as defined in the Confidentiality Agreement or any other agreement between you and the Company or any parent, subsidiary or other affiliate of the

Company relating to the protection of confidential information) in a manner not protected by applicable law (each, a “Confidential Information Agreement”) to any parties other than the Governmental Entities. You further understand that Protected Activity does not include disclosure of any Company attorney-client privileged communications or attorney work product. Any language in the Confidentiality Agreement or any Confidential Information Agreement that conflicts with, or is contrary to, this paragraph is superseded by this Agreement. You understand and acknowledge that pursuant to the Defend Trade Secrets Act of 2016 (a) an individual will not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made (i) in confidence to a Federal, state, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal and (b) an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal, and does not disclose the trade secret, except pursuant to court order.

11.

Miscellaneous. This Agreement, together with the Confidentiality Agreement, your CIC Agreement dated on or about the date hereof, and 2021 Equity Incentive Plan and award agreements governing the equity awards granted to you by the Company, constitute the entire agreement between you and the Company regarding the material terms and conditions of your employment, and they supersede and replace all prior representations or agreements between you and the Company. This Agreement will be governed by the laws of the State of North Carolina but without regard to the conflicts of law provision. This Agreement may be modified only by a written agreement signed by a duly authorized officer of the Company (other than yourself) and you.

[Signature page follows]

To confirm the terms and conditions of your employment with the Company, please sign and date in the spaces indicated and return this Agreement to me.

Sincerely,

PAYMENTUS HOLDINGS, INC.

By: /s/ Dushyant Sharma

Dushyant Sharma

President and Chief Executive Officer

Agreed to and accepted:

/s/ Andrew A. Gerber

Andrew A. Gerber

Dated: February 7, 2022

[Signature page to Confirmatory Employment Letter]

PAYMENTUS HOLDINGS, INC.

CHANGE IN CONTROL AND SEVERANCE AGREEMENT

This Change in Control and Severance Agreement (the “Agreement”) is made by and between Paymentus Holdings, Inc., a Delaware corporation (the “Company”), and Andrew A. Gerber (“Executive”), effective as of February 7, 2022 (the “Effective Date”).

This Agreement provides certain protections to Executive in connection with an involuntary termination of Executive’s employment with the Company under the circumstances described in this Agreement, including in connection with a change in control of the Company. Certain capitalized terms used in this Agreement are defined in Section 7 below.

The Company and Executive agree as follows:

Term of Agreement. This Agreement will continue indefinitely until terminated by written consent of the parties hereto, or if earlier, upon the date that all of the obligations of the parties hereto with respect to this Agreement have been satisfied.

At-Will Employment. The Company and Executive acknowledge that Executive’s employment is and will continue to be at-will, as defined under applicable law. No payments, benefits, or provisions under this Agreement will confer upon Executive any right to continue Executive’s employment with the Company, nor will they interfere with or limit in any way the right of the Company or Executive to terminate such relationship at any time, with or without cause, to the extent permitted by applicable laws.

Severance Benefits.

3.1.

Qualifying Termination Outside of the Change in Control Period. In the event of a Qualifying Termination that occurs other than during the Change in Control Period, Executive will receive the following payments and benefits from the Company, subject to the requirements of this Agreement:

3.1.1.

Salary Severance. Continued payments of Monthly Salary, payable in accordance with the Company’s standard payroll procedures, for a period of six (6) months following the date of the Qualifying Termination.

3.1.2.

COBRA Severance. Subject to Executive timely electing continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) and further subject to Section 5.3, the Company will pay the premiums required for continued coverage pursuant to COBRA under the Company’s group health, dental and vision care plans for Executive and any of Executive’s eligible dependents, as applicable, following the Qualifying Termination until the earliest of: (a) six (6) months following the date of the Qualifying Termination, (b) the date on which Executive and Executive’s eligible dependents (as applicable) become covered under similar plans, or (c) the expiration of Executive’s (and any of Executive’s eligible dependents’, as applicable) eligibility for continuation coverage under COBRA.

3.2.

Qualifying Termination During the Change in Control Period. In the event of a Qualifying Termination that occurs during the Change in Control Period, Executive will receive the following payments and benefits from the Company, subject to the requirements of this Agreement:

3.2.1.

Salary Severance. A single, lump sum, cash payment equal to seventy‑five percent (75%) of Executive’s Salary.

3.2.2.

Prorated Bonus Severance. A single, lump sum, cash payment equal to Executive’s Target Bonus, prorated by multiplying such amount by a fraction, (x) the numerator of which is the number of days during which Executive was employed with the Employer in the calendar year that the Qualifying Termination occurs, and (y) the denominator of which is the total number of days in such calendar year.

3.2.3.

COBRA Severance. Subject to Executive timely electing continuation coverage under COBRA and further subject to Section 5.3, the Company will pay the premiums required for continued coverage pursuant to COBRA under the Company’s group health, dental and vision care plans for Executive and any of Executive’s eligible dependents, as applicable, following the Qualifying Termination until the earliest of: (a) nine (9) months following the date of the Qualifying Termination, (b) the date on which Executive and Executive’s eligible dependents (as applicable) become covered under similar plans, or (c) the expiration of Executive’s (and any of Executive’s eligible dependents, as applicable) eligibility for continuation coverage under COBRA.

3.2.4.

Vesting Acceleration of Time-Based Awards. Vesting acceleration of one hundred percent (100%) of any Time‑Based Awards that are outstanding and unvested as of the date of the Qualifying Termination. For the avoidance of doubt, in the event of Executive’s Qualifying Termination that occurs prior to a Change in Control, any then outstanding and unvested portion of Executive’s Awards will remain outstanding (and unvested) until the earlier of (x) three (3) months following the Qualifying Termination, or (y) a Change in Control that occurs within three (3) months following the Qualifying Termination, solely so that any benefits due on a Qualifying Termination can be provided if the Qualifying Termination occurs during the Change in Control Period (provided that in no event will Executive’s stock option Awards or similar Awards remain outstanding beyond the Award’s maximum term to expiration). If no Change in Control occurs within three (3) months following a Qualifying Termination, any unvested portion of Executive’s Awards automatically and permanently will be forfeited on the date three (3) months following the date of the Qualifying Termination without having vested.

3.3.

Termination Other Than a Qualifying Termination. If the termination of Executive’s employment does not constitute a Qualifying Termination, then Executive will not be entitled to receive any severance or other benefits in connection with such termination except for those, if any, as may then be established under the Company’s then existing severance and benefits plans or programs.

3.4.

Non-duplication of Payment or Benefits. For purposes of clarity, in the event of a Qualifying Termination that occurs during the period within three (3) months prior to a Change in Control, any severance payments and benefits to be provided to Executive under Section 3.2 will be reduced by any amounts that already were provided to Executive under Section 3.1. Notwithstanding any provision of this Agreement to the contrary, if Executive is entitled to any cash severance, continued health coverage benefits, vesting acceleration of any Awards, or other severance or separation benefits similar to those

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provided under this Agreement, by operation of applicable law or under a plan, policy, contract, or arrangement sponsored by the Company or to which the Company is a party other than this Agreement (“Other Benefits”), then the corresponding severance payments and benefits under this Agreement will be reduced by the amount of Other Benefits paid or provided to Executive.

3.5.

Death of Executive. In the event of Executive’s death before all payments or benefits Executive is entitled to receive under this Agreement have been provided, the unpaid amounts will be provided to Executive’s designated beneficiary, if living (and if properly designated in accordance with such procedures as established by the Company from time to time), or otherwise to Executive’s personal representative in accordance with the terms of this Agreement.

Accrued Compensation. On any termination of Executive’s employment with the Company, Executive will be entitled to receive all accrued but unpaid vacation, expense reimbursements, wages, and other benefits due to Executive under any Company-provided plans, policies, and arrangements.

Conditions to Receipt of Severance.

5.1.

Separation Agreement and Release of Claims. Executive’s receipt of any severance payments or benefits upon a Qualifying Termination under Section 3 is subject to Executive signing and not revoking the Company’s then standard separation agreement and release of claims with the Company (the “Release”), which must become effective and irrevocable no later than the sixtieth (60th) day following the date of the Qualifying Termination (the “Release Deadline Date”). If the Release does not become effective and irrevocable by the Release Deadline Date, Executive will forfeit any right to the severance payments or benefits under Section 3.

5.2.

Payment Timing. Subject to any delay required by Section 5.4 below, any lump sum cash severance payments under Section 3 relating to salary severance and any bonus severance will be provided, or in the case of installments of any such severance will commence, on the first regularly scheduled payroll date of the Company following the date the Release becomes effective and irrevocable (or with respect to such payments under Section 3.2, if later, on the date of the Change in Control) (the “Payment Date”), and any such severance otherwise payable to Executive during the period immediately following the date of the Qualifying Termination through the Payment Date will be paid in a lump sum to Executive on the Payment Date with any remaining payments to be made as provided in the Agreement. Any Time‑Based Awards that are restricted stock units, performance shares, performance units, and/or similar full value awards (“Full Value Awards”) that accelerate vesting under Section 3.2.4 will be settled, subject to any delay required by Section 5.4 below (or the terms of the Full Value Award agreement or other Company plan, policy, or arrangement governing the settlement timing of the Full Value Award to the extent such terms specifically require any such delay in order to comply with the requirements of Section 409A (as defined below), as applicable), (a) on a date within ten (10) days following the date the Release becomes effective and irrevocable, or (b) if later, in the event of a Qualifying Termination that occurs prior to a Change in Control, on a date on or before the date of completion of the Change in Control.

5.3.

COBRA Severance Limitations. If the Company determines in its sole discretion that it cannot provide the COBRA-related benefits set forth in Section 3.1.3 or 3.2.3, as applicable (the “COBRA Severance”) without potentially violating, or being subject to an excise tax under, applicable law (including, without limitation, Section 2716 of the Public Health Service Act), then in lieu of such

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COBRA Severance, subject to any delay required by Section 5.4 below, the Company will provide to Executive a taxable monthly payment payable on the last day of a given month (except as provided by the last sentence in this Section 5.3), in an amount equal to the monthly COBRA premium that would be required to continue coverage under the Company’s group health, dental and vision care plans for Executive and Executive’s eligible dependents, as applicable, as in effect on the date of the Qualifying Termination, in each case, which amount will be based on the premium rates applicable for the first month of COBRA Severance for Executive and any eligible dependents of Executive (each, a “COBRA Replacement Payment”), and which COBRA Replacement Payments will be made regardless of whether Executive elects COBRA continuation coverage and will end on the earlier of (a) the date upon which Executive obtains other employment, or (b) the date the Company has paid an amount totaling the number of COBRA Replacement Payments equal to the number of months in the applicable COBRA Severance period set forth in clause (a) of Section 3.1.3 or Section 3.2.3, as applicable. For the avoidance of doubt, the COBRA Replacement Payments may be used for any purpose, including, but not limited to continuation coverage under COBRA, and will be subject to any applicable withholdings. Notwithstanding anything to the contrary under this Agreement, if the Company determines in its sole discretion at any time that it cannot provide the COBRA Replacement Payments without violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), Executive will not receive the COBRA Replacement Payments or any further COBRA Severance.

5.4.

Section 409A. The Company intends that all payments and benefits provided under this Agreement or otherwise are exempt from, or comply with, the requirements of Section 409A so that none of the payments or benefits will be subject to the additional tax imposed under Section 409A, and any ambiguities and ambiguous terms in this Agreement will be interpreted in accordance with this intent. No payments or benefits to be provided to Executive, if any, under this Agreement or otherwise, when considered together with any other severance payments or separation benefits that are considered deferred compensation under Section 409A (together, the “Deferred Payments”) will be paid or otherwise provided until Executive has a “separation from service” within the meaning of Section 409A. To the extent required to be exempt from or comply with Section 409A, references to the termination of Executive’s employment or similar phrases used in this Agreement will mean Executive’s “separation from service” within the meaning of Section 409A.

5.4.1.

Any payments or benefits paid or provided under this Agreement that satisfy the requirements of the “short-term deferral” rule under Treasury Regulations Section 1.409A‑1(b)(4), or that qualify as payments made as a result of an involuntary separation from service under Treasury Regulations Section 1.409A-1(b)(9)(iii) that is within the limit set forth thereunder, will not constitute Deferred Payments for purposes of this Section 5.4.

5.4.2.

Notwithstanding any provisions to the contrary in this Agreement, if Executive is a “specified employee” within the meaning of Section 409A at the time of Executive’s separation from service (other than due to death), then any payments or benefits under this Agreement that constitute Deferred Payments payable within the first six (6) months after Executive’s separation from service instead will be payable on the date six (6) months and one (1) day after Executive’s separation from service; provided that in the event of Executive’s death within such six (6) month period, any payments delayed by this Section 5.4.2 will be paid to Executive in a lump sum as soon as administratively practicable after the date of Executive’s death. Any subsequent Deferred Payment will be payable in accordance with the payment schedule applicable to such payment. To the extent that Executive is not a specified employee but Executive’s Qualifying Termination occurs at a time during the year whereby the

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Release Deadline Date will occur in the year immediately following the year in which the Qualifying Termination occurs, then any payments or benefits under this Agreement that constitute Deferred Payments that otherwise would be payable prior to the Release Deadline Date instead will be paid on the Release Deadline Date and any subsequent Deferred Payment will be payable in accordance with the payment schedule applicable to such payment.

5.4.3.

The Company reserves the right to amend this Agreement as it considers necessary or advisable, in its sole discretion and without the consent of Executive or any other individual, to comply with any provision required to avoid the imposition of the additional tax imposed under Section 409A or to otherwise avoid income recognition under Section 409A prior to the actual payment of any benefits or imposition of any additional tax. Each payment, installment, and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Treasury Regulations Section 1.409A-2(b)(2). In no event will Executive have any discretion to choose Executive’s taxable year in which any payments or benefits are provided under this Agreement. In no event will the Company or any parent, subsidiary or other affiliate of the Company have any responsibility, liability or obligation to reimburse, indemnify or hold harmless Executive for any taxes, penalties or interest that may be imposed, or other costs that may be incurred, as a result of Section 409A.

Section 280G; Limitation on Payments.

6.1.

Reduction of Severance Benefits. If any payment or benefit that Executive would receive from the Company or any other party whether in connection with the provisions in this Agreement or otherwise (the “Payments”) would (a) constitute a “parachute payment” within the meaning of Section 280G of the Code and (b) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Payments will be either delivered in full, or delivered as to such lesser extent that would result in no portion of the Payments being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in Executive’s receipt, on an after-tax basis, of the greatest amount of Payments, notwithstanding that all or some of the Payments may be subject to the Excise Tax. If a reduction in Payments is made in accordance with the immediately preceding sentence, the reduction will occur, with respect to the Payments considered parachute payments within the meaning of Code Section 280G, in the following order: (i) reduction of cash payments in reverse chronological order (that is, the cash payment owed on the latest date following the occurrence of the event triggering the Excise Tax will be the first cash payment to be reduced); (ii) cancellation of equity awards that were granted “contingent on a change in ownership or control” within the meaning of Section 280G of the Code in the reverse order of date of grant of the equity awards (that is, the most recently granted equity awards will be cancelled first); (iii) reduction of the accelerated vesting of equity awards in the reverse order of date of grant of the equity awards (that is, the vesting of the most recently granted equity awards will be cancelled first); and (iv) reduction of employee benefits in reverse chronological order (that is, the benefit owed on the latest date following the occurrence of the event triggering the Excise Tax will be the first benefit to be reduced). In no event will Executive have any discretion with respect to the ordering of Payment reductions. Executive will be solely responsible for the payment of all personal tax liability that is incurred as a result of the payments and benefits received under this Agreement, and neither the Company nor any parent, subsidiary or other affiliate of the Company have any responsibility, liability or obligation to reimburse, indemnify or hold harmless Executive for any of those payments of personal tax liability.

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6.2.

Determination of Excise Tax Liability. Unless the Company and Executive otherwise agree in writing, any determinations required under this Section 6 will be made in writing by a nationally recognized accounting or valuation firm (the “Firm”) selected by the Company, whose determinations will be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required by this Section 6, the Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Executive will furnish to the Firm such information and documents as the Firm reasonably may request in order to make determinations under this Section 6. The Company will bear the costs and make all payments required to be made to the Firm for the Firm’s services that are rendered in connection with any calculations contemplated by this Section 6. The Company will have no liability to Executive for the determinations of the Firm.

Definitions.

7.1.

“Award” means stock options and other equity awards covering shares of Company common stock granted to Executive.

7.2.

“Board” means the Company’s Board of Directors.

7.3.

“Cause” means the occurrence of one or more of the following: (a) the commission by Executive of a criminal offence (i) involving moral turpitude or (ii) involving dishonesty, theft or fraud with respect to the Company or any of its affiliates or any of their customers, suppliers, licensors, licensees, employees or other business relation, which has had or the Board reasonably believes could have a material negative effect upon the Company or any of its affiliates, (b) substantial and repeated failure to perform duties as reasonably directed by the CEO, (c) gross negligence or willful misconduct with respect to the Company or any of its affiliates or any of their customers, suppliers, licensors, licensees, employees or other business relation, (d) breach of fiduciary duty with respect to the Company or any of its affiliates or any of their customers, suppliers, licensors, licensees, employees or other business relation, which has had or the Board reasonably believes could have a material negative effect upon the Company or any of its affiliates, (e) repeated conduct causing the Company or any of its affiliates substantial public disgrace or disrepute or substantial economic harm, (f) any act or omission aiding or abetting a competitor, supplier or customer of the Company or any of its affiliates to the material disadvantage or detriment of the Company and its affiliates, (g) a material failure to observe the Company’s policies or standards regarding employment practices (including, without limitation, nondiscrimination and sexual harassment policies) as in effect from time to time, and/or (h) a failure by Executive to cooperate in good faith with a governmental or internal investigation of the Company or its directors, officers or employees if the Company or Board has requested Executive’s cooperation, provided that Executive’s failure to waive attorney-client privilege relating to communications with Executive’s own attorney in connection with an Investigation will not constitute “Cause”; provided, however, that the events described in the foregoing clauses (b), (f) and (g) shall not constitute Cause unless the Company shall have notified Executive in writing describing, in reasonable detail, the events which constitute Cause and, to the extent practicable, the conduct required to cure such Cause (if such Cause if capable of being cured) and then only if Executive shall have failed to cure such events within 30 days after Executive’s receipt of such written notice.

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7.4.

“Change in Control” means the first occurrence of any of the following events on or after the Effective Date:

7.4.1.

Change in Ownership of the Company. A change in the ownership of the Company which occurs on the date that any one person, or more than one person acting as a group (“Person”), acquires ownership of the stock of the Company that, together with the stock held by such Person, constitutes more than fifty percent (50%) of the total voting power of the stock of the Company; provided, however, that for purposes of this subsection, none of the following will be considered a Change in Control: (a) the acquisition of additional securities by any one Person, who prior to the acquisition thereof is considered to own more than fifty percent (50%) of the total voting power of the stock of the Company; (b) the acquisition of additional securities or voting power of the Company by any or some combination of the Specified Stockholders (as defined below), their Permitted Transferees (as defined in the Company’s certificate of incorporation, as it may be amended from time to time (“COI”)), or both; (c) any change in the Specified Stockholders’ voting power of the Company resulting from a repurchase, redemption, retirement or other similar acquisition of stock of the Company by the Company; (iv) any change in voting power as a result of a transfer by a Specified Stockholder to a Permitted Transferee or from any such Permitted Transferee back to such Specified Stockholder or any other Permitted Transferee, or both as of the time of each such transfer of such Specified Stockholder; and (v) any change in the Specified Stockholders’ voting power of the Company resulting from a conversion of shares of the stock of the Company reducing the number of shares or vote per share of stock outstanding. For the avoidance of doubt, no acquisition or disposition of Class B common stock of the Company by the Specified Stockholders or change in the total voting power of the Company solely as a result of (x) the conversion of any shares of stock of the Company into shares of Class B common stock of the Company, (y) the conversion of any shares of Class B common stock of the Company into shares of any other class of stock of the Company, or (z) any change in the voting power of the Class B common stock of the Company will constitute a Change in Control. Further, if the stockholders of the Company immediately before such change in ownership continue to retain immediately after the change in ownership, in substantially the same proportions as their ownership of shares of the Company’s voting stock immediately prior to the change in ownership, direct or indirect beneficial ownership of fifty percent (50%) or more of the total voting power of the stock of the Company or of the ultimate parent entity of the Company, such event shall not be considered a Change in Control under this Section 7.4.1. For this purpose, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company, as the case may be, either directly or through one or more subsidiary corporations or other business entities; or

7.4.2.

Change in Effective Control of the Company. If the Company has a class of securities registered pursuant to Section 12 of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), a change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election; provided that if any Person or any or some combination of the Specified Stockholders exercises more than fifty percent (50%) of the total voting power of the Company, the election of Directors by such party or parties will not be considered a Change in Control. For purposes of this Section 7.4.2, if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change in Control; or

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7.4.3.

Change in Ownership of a Substantial Portion of the Company’s Assets. A change in the ownership of a substantial portion of the Company’s assets which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such Person or Persons) assets from the Company that have a total gross fair market value equal to or more than fifty percent (50%) of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; provided, however, that for purposes of this Section 7.4.3, the following will not constitute a change in the ownership of a substantial portion of the Company’s assets: (a) a transfer to an entity that is controlled by the Company’s stockholders immediately after the transfer, or (b) a transfer of assets by the Company to: (i) a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Company’s stock, (ii) an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company, (iii) a Person, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding stock of the Company, or (iv) an entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, by a Person described in this Section 7.4.3(b)(iii). For purposes of this Section 7.4.3, gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

For purposes of this Change in Control definition under Section 7.4, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company.

Notwithstanding the foregoing, a transaction will not be deemed a Change in Control unless the transaction qualifies as a change in control event within the meaning of Section 409A. Further and for the avoidance of doubt, a transaction will not constitute a Change in Control if: (x) its sole purpose is to change the jurisdiction of the Company’s incorporation, or (y) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.

7.5.

“Change in Control Period” means the period beginning on the date three (3) months prior to a Change in Control and ending on (and inclusive of) the date that is the one (1) year anniversary of the Change in Control.

7.6.

“Code” means the Internal Revenue Code of 1986, as amended. Reference to a specific section of the Code or regulation thereunder will include such section or regulation, any valid regulation promulgated under such section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation.

7.7.

“Confidentiality Agreement” means Executive’s Employment and Restrictive Covenants Agreement entered into with the Company dated December 13, 2021.

7.8.

“Director” means a member of the Board.

7.9.

“Disability” means total and permanent disability as defined in Code Section 22(e)(3).

7.10.

Reserved.

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7.11.

“Good Reason” means Executive’s termination of Executive’s employment with the Company within ninety (90) days following the expiration of the Company’s Cure Period (as defined below) following the occurrence of any of the following without Executive’s written consent: (a) a material reduction in Executive’s base salary as in effect immediately prior to such reduction (in other words, a reduction of at least ten percent (10%)), provided that an across-the-board reduction in the salary level of all other similarly situated employees by the same percentage amount as part of a general salary level reduction will not constitute such a reduction under this clause; (b) a relocation by the Company (or subsidiary, parent, affiliate or successor thereto, as applicable) of Executive’s principal work location to a principal work location more than thirty-five (35) miles from Executive’s then present location; (c) the failure of the Company to obtain assumption of this Agreement by any successor of the Company in accordance with Section 8 below; or (d) a material breach by the Company, of this Agreement or any other written agreement between Executive and the Company, relating to any material terms of Executive’s employment with the Company. In order for an event to qualify as Good Reason, Executive must not terminate employment with the Company without first providing the Company with written notice of the acts or omissions constituting the grounds for “Good Reason” within ninety (90) days following the initial existence of the grounds for “Good Reason” and a cure period of thirty (30) days following the date of such notice (the “Cure Period”). To the extent Executive’s principal work location is not the Company’s corporate offices or facilities due to a shelter-in-place order, quarantine order, or similar work-from-home requirement that applies to Executive, Executive’s principal work location, from which a change in location under the foregoing clause (b) will be measured, will be considered the Company’s office or facility location where Executive’s employment with the Company primarily was based immediately prior to the commencement of such shelter-in-place order, quarantine order, or similar work-from-home requirement.

7.12.

“Monthly Salary” means Executive’s monthly rate of Salary.

7.13.

“Qualifying Termination” means a termination of Executive’s employment with the Company either (a) by the Company without Cause and other than due to Executive’s death or Disability, or (b) by Executive for Good Reason.

7.14.

“Salary” means Executive’s annual base salary in effect immediately prior to Executive’s Qualifying Termination or, if Executive’s Qualifying Termination occurs during the Change in Control Period and the amount is greater, Executive’s annual base salary in effect immediately prior to the Change in Control, in each case, if the Qualifying Termination is due to a resignation for Good Reason pursuant to clause (a) of the Good Reason definition, then as determined without giving effect to the material reduction in Executive’s base salary which triggered such Good Reason.

7.15.

“Section 409A” means Code Section 409A and the Treasury Regulations and guidance thereunder, and any applicable state law equivalent, as each may be promulgated, amended or modified from time to time.

7.16.

“Specified Stockholder” means individually or collectively (in any combination thereof), Dushyant Sharma, AKKR (as defined in the COI) or a Permitted Transferee of any such stockholder, provided that if a Specified Stockholder forms a “group” within the meaning of Rule 13d‑5(b)(1) of the Exchange Act with one or more Persons who are not Specified Stockholders, such group is not a Specified Stockholder.

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7.17.

“Target Bonus” means Executive’s annual (or annualized, as applicable) target bonus in effect immediately prior to Executive’s Qualifying Termination or, if Executive’s Qualifying Termination occurs during the Change in Control Period and the amount is greater, Executive’s annual (or annualized, if applicable) target bonus in effect immediately prior to the Change in Control.

7.18.

“Time-Based Awards” means Awards that, as of the date of the Qualifying Termination, or in the case of a Qualifying Termination during the Change in Control Period, the later of the date of the Qualifying Termination or immediately prior to the Change in Control, are held by Executive and subject to continued service-based vesting criteria, but not subject to the achievement of any performance-based or other similar vesting criteria.

Successors. This Agreement will be binding upon and inure to the benefit of (a) the heirs, executors, and legal representatives of Executive upon Executive’s death, and (b) any successor of the Company. Any such successor of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose, “successor” means any person, firm, corporation, or other business entity which at any time, whether by purchase, merger, or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company. None of the rights of Executive to receive any form of compensation payable pursuant to this Agreement may be assigned or transferred except by will or the laws of descent and distribution. Any other attempted assignment, transfer, conveyance, or other disposition of Executive’s right to compensation or other benefits will be null and void.

Notice.

9.1.

General. All notices and other communications required or permitted under this Agreement will be in writing and will be effectively given (a) upon actual delivery to the party to be notified, (b) upon transmission by email, (c) twenty-four (24) hours after confirmed facsimile transmission, (d) one (1) business day after deposit with a recognized overnight courier, or (e) three (3) business days after deposit with the U.S. Postal Service by first class certified or registered mail, return receipt requested, postage prepaid, addressed: (i) if to Executive, at the address Executive will have most recently furnished to the Company in writing, (ii) if to the Company, at the following address:

Paymentus Holdings, Inc.

18390 NE 68th St.

Redmond, WA 98052

Attention: Chief Executive Officer

9.2.

Notice of Termination. Any termination of Executive’s employment by the Company for Cause will be communicated by a notice of termination of Executive’s employment to Executive, and any termination by Executive for Good Reason will be communicated by a notice of termination to the Company, in each case given in accordance with Section 9.1. The notice will indicate the specific termination provision in this Agreement relied upon, will set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and will specify the termination date (which will be not more than thirty (30) days after the later of (i) the giving of the notice or (ii) the end of any applicable cure period, except as set forth in Section 7.11).

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10.

Resignation. The termination of Executive’s employment for any reason also will constitute, without any further required action by Executive, Executive’s voluntary resignation from all officer and/or director positions held at the Company or any of its subsidiaries or affiliates, and at the Board’s request, Executive will execute any documents reasonably necessary to reflect the resignations.

11.

Miscellaneous Provisions.

11.1.

No Duty to Mitigate. Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any payment be reduced by any earnings that Executive may receive from any other source except as specified in Sections 3.4, 5.3, 5.4.3, and 6.

11.2.

Waiver; Amendment. No provision of this Agreement will be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by an authorized officer of the Company (other than Executive) and by Executive. No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party will be considered a waiver of any other condition or provision or of the same condition or provision at another time.

11.3.

Headings. Headings are provided herein for convenience only, and will not serve as a basis for interpretation or construction of this Agreement.

11.4.

Entire Agreement. This Agreement, together with the Confidentiality Agreement, Executive’s confirmatory employment letter with the Company dated February 7, 2022, and the Company’s 2021 Equity Incentive Plan and award agreements thereunder governing Executive’s Awards, constitutes the entire agreement of the parties and supersedes in their entirety all prior representations, understandings, undertakings or agreements (whether oral or written and whether expressed or implied) of the parties with respect to the subject matter of this Agreement.

11.5.

Governing Law. This Agreement will be governed by the laws of the State of Delaware but without regard to the conflict of law provision. To the extent that any lawsuit is permitted with respect to any provisions under this Agreement, Executive hereby expressly consents to the personal and exclusive jurisdiction and venue of the state and federal courts located in the State of Delaware for any lawsuit filed against Executive by the Company.

11.6.

Severability. If any provision of this Agreement is or becomes or is deemed to be invalid, illegal, or unenforceable for any reason, such invalidity, illegality, or unenforceability will not affect the remaining parts of this Agreement, and this Agreement will be construed and enforced as if the invalid, illegal, or unenforceable provision had not been included.

11.7.

Withholding. The Company (and any parent, subsidiary or other affiliate of the Company, as applicable) will have the right and authority to deduct from any payments or benefits all applicable federal, state, local, and/or non‑U.S. taxes or other required withholdings and payroll deductions (“Withholdings”). Prior to the payment of any amounts or provision of any benefits under this Agreement, the Company (and any parent, subsidiary or other affiliate of the Company, as applicable) is permitted to deduct or withhold, or require Executive to remit to the Company, an amount sufficient to satisfy any applicable Withholdings with respect to such payments and benefits. Neither the Company nor any parent, subsidiary or other affiliate of the Company will have any responsibility, liability or

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obligation to pay Executive’s taxes arising from or relating to any payments or benefits under this Agreement.

11.8.

Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

By its signature below, each of the parties signifies its acceptance of the terms of this Agreement, in the case of the Company by its duly authorized officer.

[Signature page follows]

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COMPANY

PAYMENTUS HOLDINGS, INC.

By: /s/ Dushyant Sharma

Name: Dushyant Sharma

Title: President and Chief Executive Officer

Date: February 7, 2022

EXECUTIVE

/s/ Andrew A. Gerber

Andrew A. Gerber

Date: February 7, 2022

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Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002.

I, Dushyant Sharma, certify that:

I have reviewed this Quarterly Report on Form 10-Q of Paymentus Holdings, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 8, 2023	By:	/s/ Dushyant Sharma
		Dushyant Sharma
		Chairman, President and Chief Executive Officer
		(Principal Executive Officer)

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Sanjay Kalra, certify that:

I have reviewed this Quarterly Report on Form 10-Q of Paymentus Holdings, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 8, 2023	By:	/s/ Sanjay Kalra
		Sanjay Kalra
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Paymentus Holdings, Inc. (the “Company”) for the period ended March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:


(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


(2)		The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods presented in the Report.


Date: May 8, 2023	By:	/s/ Dushyant Sharma
		Dushyant Sharma
		Chairman, President and,
		Chief Executive Officer
		(Principal Executive Officer)

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


(2)		The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods presented in the Report.


Date: May 8, 2023	By:	/s/ Sanjay Kalra
		Sanjay Kalra
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)