Priority Technology Holdings, Inc. · NASDAQ:PRTH
Priority Technology — M I Acquisitions — SPAC Merger (May 2018)
39 slides from Priority Technology's SPAC merger presentation, May 2, 2018
Slide 1: Investor Presentation May 2018 - Technology Holdings
Investor Presentation May 2018 Technology Holdings
Slide 2: Disclaimer: Forward-Looking Statements and Non-GAAP Measures
Disclaimer Important Notice Regarding Forward-Looking Statements and Non-GAAP Measures This presentation contains certain “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, both as amended by the Private Securities Litigation Reform
Slide 3: Disclaimer (Cont'd): Additional Information and Where to Find It
Disclaimer (Cont’d) Additional Information and Where to Find It In connection with the transaction described herein, M I has filed a preliminary proxy statement and Schedule 14A with the Securities and Exchange Commission (the “SEC”). Promptly after filing its definitive proxy statement with the SEC
Slide 4: Table of Contents
TABLE OF CONTENTS 1. INTRODUCTION 3 2. COMPANY OVERVIEW 5 3. INDUSTRY OVERVIEW 18 4. TRANSACTION OVERVIEW 21 5. FINANCIAL OVERVIEW 25 6. APPENDIX 28 2
Slide 5: 1. Introduction
Technology Holdings 1. INTRODUCTION
Slide 6: Transaction Overview
INTRODUCTION Transaction Overview Background M I Acquisitions, Inc. (NASDAQ: “MACQ”; “M I”) has entered into a definitive agreement to combine via the acquisition of 100% of the equity interests of Priority Holdings, LLC (“Priority”) The combined company will apply to be listed on the NASDAQ as Prio
Slide 7: Investment Highlights
INTRODUCTION Investment Highlights Large Market Opportunity Coupled with Strong Secular Tailwinds (1,2) Electronic consumer payment volume in the U.S. is projected to increase from $7.5tn in 2016 to $10.0tn by 2021, representing a 5.9% compound annual growth rate (“CAGR”) The larger B2B market is so
Slide 8: 2. Company Overview
Technology Holdings 2. COMPANY OVERVIEW
Slide 9: Company Overview
COMPANY OVERVIEW Company Overview PRIORITY IS A LEADING PROVIDER OF MERCHANT ACQUIRING AND COMMERCIAL PAYMENT SOLUTIONS, OFFERING UNIQUE PRODUCT CAPABILITIES TO ITS MERCHANT AND DISTRIBUTION PARTNERS Priority operates two main business segments: Consumer Payments and Commercial Payments & Managed Se
Slide 10: Company Evolution
COMPANY OVERVIEW Company Evolution FORWARD THINKING AND EXECUTION HAVE TRANSFORMED PRIORITY INTO A LEADING PAYMENT SERVICES PROVIDER IN THE U.S. 2005 Founded by experienced payments executives 2006 Launched MX ISO/Agent ISO/Agent 2008 SaaS version launched AMEX commercial payments programs launched
Slide 11: Experienced Management Team Led by Industry Veterans
COMPANY OVERVIEW Experienced Management Team Led by Industry Veterans PRIORITY’S LEADERSHIP TEAM HAS OVER 150 YEARS OF INDUSTRY EXPERIENCE Name Tom John Bruce Sean Afshin Cindy David Priore Priore Mattox Kiewiet Yazdian O’Neill McMiller Chief Chief Chief President of President of President of Execut
Slide 12: Vortex Infrastructure: Foundation for Growth
COMPANY OVERVIEW Vortex Infrastructure: Foundation for Growth CURATED CLOUD AND API DRIVEN OPERATING SYSTEM BUILT FOR SCALE AND AGILITY Vortex Cloud Layer Audit VDI Telephony VSI Custom Dev Vortex OS Layer Payments Security (Crypto) Data Eventing Neural (AI) Storage Vortex UI Layer MX Connect ACH.co
Slide 13: Differentiated Technology Platform for Merchants and Distribution Partners
COMPANY OVERVIEW Differentiated Technology Platform for Merchants and Distribution Partners PRIORITY’S PURPOSE-BUILT VORTEX INFRASTRUCTURE SUPPORTS DISCRETE APPLICATIONS AND DELIVERS DIFFERENTIATED CUSTOMER EXPERIENCES MX Product Platform CPX Product Platform Merchant Portal Electronic payment proce
Slide 14: Consumer Payments Overview
COMPANY OVERVIEW Consumer Payments Overview PRIORITY’S CONSUMER PAYMENTS SEGMENT PROVIDES FULL-SERVICE PAYMENT PROCESSING SOLUTIONS FOR B2C TRANSACTIONS Overview (1) Priority enables merchants to accept electronic payments (e.g. credit, debit) at the point-of-sale (“POS”), online and via mobile paym
Slide 15: Priority's Purpose-Built Payment Cloud: Monetizing Merchant Networks
COMPANY OVERVIEW Priority’s Purpose-Built Payment Cloud: Monetizing Merchant Networks MX Merchant: virtual payment processing terminal and business management tool that creates an integrated merchant experience Fully customizable platform through proprietary & 3 rd party add-on applications MX Conne
Slide 16: Illustrative Consumer Payments Transaction
COMPANY OVERVIEW Illustrative Consumer Payments Transaction ILLUSTRATIVE $100 TRANSACTION, WITH 2.5% MERCHANT DISCOUNT RATE Merchant Acquiring / Payment Processing $0.40 $0.28 $0.01 Sponsor Bank Resellers / Merchant Acquirer ISVs <$0.05 Processor $1.60 Card Issuing Bank $0.16 Payment Network $97.50
Slide 17: Commercial Payments & Managed Services Overview
COMPANY OVERVIEW Commercial Payments & Managed Services Overview PRIORITY’S COMMERCIAL PAYMENTS & MANAGED SERVICES SEGMENT PROVIDES FULL-SERVICE B2B PAYMENT PROCESSING Overview Provides account automation solutions and curated managed services to industry leading financial institutions and networks
Slide 18: Commercial Payments Priority CPX
COMPANY OVERVIEW Commercial Payments Priority CPX DELIVERING SUBSTANTIAL VALUE TO THE FAST GROWING, MASSIVE B2B PAYMENTS MARKET CPX Overview CPX Payments leverages a complete suite of traditional and transitional payment solutions to fully automate B2B AP files Supports one-time virtual cards, P-Car
Slide 19: Detailed CPX Process Flow
COMPANY OVERVIEW Detailed CPX Process Flow CPX CAN BE DELIVERED AS A COMPLETE SOLUTION OR AN ENHANCEMENT TO AN EXISTING PAYMENT PROCESS Buyer ERP System Consolidated Payment File CPX Gateway Virtual Card Supplier Initiated Buyer Initiated (Networks) CPX Direct ACH / Dynamic Discounting Check VISA /
Slide 20: Multi-Faceted Growth Opportunities
COMPANY OVERVIEW Multi-Faceted Growth Opportunities PRIORITY INTENDS TO CONTINUE TO EXECUTE A MULTI-PRONGED GROWTH STRATEGY, WITH MULTIPLE ORGANIC INITIATIVES SUPPLEMENTED BY M&A Accretive Acquisitions Expand Electronic Payments Share of B2B Transactions with CPX Deploy Industry Specific Payment Tec
Slide 21: Accretive Acquisition Strategy
COMPANY OVERVIEW Accretive Acquisition Strategy PRIORITY INTENDS TO SELECTIVELY PURSUE STRATEGIC AND TACTICAL ACQUISITIONS THAT MEET CERTAIN CRITERIA, WITH A CONSISTENT, LONG-TERM GOAL OF MAXIMIZING SHAREHOLDER VALUE; THE VORTEX.CLOUD INFRASTRUCTURE WAS PURPOSE BUILT TO RAPIDLY AND SEAMLESSLY CONSOL
Slide 22: 3. Industry Overview
Technology Holdings 3. INDUSTRY OVERVIEW
Slide 23: Strong Industry Tailwinds Drive Continued Growth for Consumer Payments
INDUSTRY OVERVIEW Strong Industry Tailwinds Drive Continued Growth for Consumer Payments WE BELIEVE THE SHIFTING PAYMENT LANDSCAPE FROM CASH AND CHECKS TO CARD-BASED PAYMENTS COUPLED WITH GROWTH OF THE SMALL AND MID-SIZE MERCHANT SEGMENT PROVIDES STRONG TAILWINDS FOR PRIORITY Continued Shift from Ca
Slide 24: Demand for SaaS-Based Solutions Provides an Opportunity for iPOS
INDUSTRY OVERVIEW Demand for SaaS-Based Solutions Provides an Opportunity for iPOS WHILE NOT A HARDWARE PROVIDER, WE BELIEVE PRIORITY IS WELL POSITIONED TO BENEFIT FROM MERCHANTS’ DEMAND FOR INTEGRATED PAYMENTS SOLUTIONS AND THE EARLY STAGES OF AN UPGRADE CYCLE SMB Spending on SaaS Expected to Incre
Slide 25: B2B Payments Presents a Significant Revenue Opportunity
INDUSTRY OVERVIEW B2B Payments Presents a Significant Revenue Opportunity B2B PAYMENTS IS THE LARGEST PAYMENT MARKET IN THE U.S. AND PRESENT A SIGNIFICANT REVENUE OPPORTUNITY FOR PROVIDERS TO CONVERT CHECK TO ELECTRONIC PAYMENTS, INCLUDING CARD-BASED B2B Leads Total Payment Volume. .. . U.S. Payment
Slide 26: 4. Transaction Overview
Technology Holdings 4. TRANSACTION OVERVIEW
Slide 27: Sources & Uses
TRANSACTION OVERVIEW Sources & Uses Transaction Detail ($mm) (1,2,3,4,5,6) Pro Forma Enterprise Value of $1.0bn and EV / 2018 Earnout Adj. EBITDA of 12.5x Priority equityholders will roll 100% of their equity Share Price $10.30 (x) Total Shares Outstanding 66.7 Equity Value $687.5 (+) Priority Exisi
Slide 28: Valuation Benchmarking
Valuation Benchmarking EV / 2018E Earnout Adj. EBITDA EV / 2018E Adj. EBITDA Priority’s 12.5x multiple represents a ~17% discount to the peer median of 15.1x 12.5x 10.8x 16.8x 16.1x 14.2x Valuation Highlights Attractive Growth Profile Estimates 2015-2019E Pro Forma Net Revenue and Earnout Adj. EBITD
Slide 29: Operational Benchmarking
TRANSACTION OVERVIEW Operational Benchmarking 2017A 2018E Net Revenue Growth (1,2) 2017A 2018E Net Revenue Organic & Inorganic Growth (1,2) 15.0% Includes anticipated full-year impact of $9m of identified acquisitions 6.0% 8.9% 12.2% 10.9% 3.7% 3.9% 6.9% 5.8% 1.4% 8.5% 7.0% 4.4% 2017A 2018E Adj. EBI
Slide 30: Operational Benchmarking (Cont'd)
TRANSACTION OVERVIEW Operational Benchmarking (Cont’d) 2018E Earnout Adj. EBITDA Margin (1,2) 2018E Adj. EBITDA Margin 46.8% 48.6% 37.6% Peer Median 34.5% 35.6% 38.9% 2018E Free Cash Flow Conversion (1,2,3) 91.6% 2018E Free Cash Flow Conversion 86.0% 86.5% 85.6% Peer Median 85.8% 81.8% Source: Capit
Slide 31: 5. Financial Overview
Tecnology Holdings 5. FINANCIAL OVERVIEW
Slide 32: Historical & Forecasted Financials
FINANCIAL OVERVIEW Historical & Forecasted Financials - Consolidated Net Revenue & Pro Forma Net Revenue (1) ($ millions) 12% CAGR $116.7 $6.0 $110.7 2015A $136.8 $9.0 $127.7 2016A $152.6 $3.5 $149.2 2017A $171.5 $9.0 $162.5 2018E Includes anticipated full-year impact of $9m of identified acquisitio
Slide 33: Historical & Forecasted KPIs
FINANCIAL OVERVIEW Historical & Forecasted KPIs Consumer Processing Volume (1) ($ billions) 12% CAGR $43.1 $39.0 $34.5 $30.3 $27.1 2015A 2016A 2017A 2018E 2019E Organic Inorganic Gross Profit and Gross Margin ($ millions) 12% CAGR $120.0 $111.0 150% $104.3 $97.4 $100.0 $80.3 $80.0 $70.5 100% $60.0 $
Slide 34: Historical & Forecasted KPIs: Commercial & Managed Services
FINANCIAL OVERVIEW Historical & Forecasted KPIs Commercial & Managed Services Cumulative AMEX Funded Loan Count & BIP Volume ($ millions) $6,000 50,000 $5,098 40,000 $3,802 42,099 $4,000 30,000 $2,702 28,943 20,000 $2,000 17,790 10,000 $- 0 2015A 2016A 2017A AMEX BIP $ Volume AMEX Funded Loan Count
Slide 35: 6. Appendix
Technology Holdings 6. APPENDIX
Slide 36: Equity Capitalization and Earnout Structure Summary
APPENDIX Equity Capitalization and Earnout Structure Summary Earnout Structure (1) Additional consideration to Priority equityholders in the event business performance and stock price exceed certain thresholds If the 2018 earnout threshold is not met, contingent shares rollover and are available if
Slide 37: Earnout Adj. EBITDA Bridge
APPENDIX Earnout Adj. EBITDA Bridge 2017A 2018E Earnout Adj. EBITDA Bridge ($ millions) $9.0 $80.2 $9.9 $3.3 $61.3 $12.1 $58.0 $45.9 29
Slide 38: GAAP Net Income to Earnout Adj. EBITDA Reconciliation
APPENDIX GAAP Net Income to Earnout Adj. EBITDA Reconciliation (in $ millions) 2015A 2016A 2017A Net Income (GAAP) $9.27 $20.19 $4.59 Interest Expense $4.05 $4.78 $26.68 Depreciation and Amortization $15.63 $14.73 $14.67 EBITDA (non-GAAP) $28.95 $39.70 $45.94 Non-cash and certain other expense $2.22
Slide 39: Q & A
Q & A