Priority Technology Holdings, Inc. Announces Second Quarter Financial Results

About this update from Priority Technology Holdings, Inc.

Strong Second Quarter Growth Driven by Performance Across Unified Commerce Platform ALPHARETTA, Ga. --(BUSINESS WIRE)-- Priority Technology Holdings, Inc. (NASDAQ: PRTH) ("Priority" or the "Company"), the platform for unified commerce that delivers integrated payments and banking services at scale, today announced its second quarter 2024 financial results including strong year-over-year diversified revenue growth. Highlights of Consolidated Results Second Quarter 2024 Compared with Second Quarter 2023 Financial highlights of the second quarter of 2024 compared with the second quarter of 2023, are as follows1: Revenue of $219.9 million increased 20.6% from $182.3 million Adjusted gross profit (a non-GAAP measure2) of $81.7 million increased 22.0% from $67.0 million Adjusted gross profit margin (a non-GAAP measure2) of 37.2% increased 40.0 basis points from 36.8% Operating income of $33.2 million increased 73.4% from $19.1 million Adjusted EBITDA (a non-GAAP measure2) of $51.6 million increased 25.4% from $41.1 million (1) Certain amounts/percentages may not add mathematically due to rounding. (2) See "Non-GAAP Financial Measures" and the reconciliations of Adjusted Gross Profit (non-GAAP), Adjusted Gross Profit Margin (non-GAAP), and Adjusted EBITDA, to their most comparable GAAP measures provided below for additional information. "We again reported record results in the second quarter by capitalizing on our leading unified commerce platform that delivers elegant product solutions across our segments and customer service that is committed to our partners' success," said Tom Priore , Chairman & CEO of Priority. "Priority’s technology and operations are built for the future and executing on our mission to deliver a thriving ecosystem of financial solutions that accelerate cash flow and optimize working capital for businesses." Full Year 2024 Financial Guidance Priority's outlook remains strong and our adjusted full year 2024 guidance is as follows: Revenue forecast to range between $875 million to $883 million , from $875 million to $890 million , a growth rate of 16% to 17%, compared to fiscal 2023 results Adjusted gross profit (a non-GAAP measure) forecast to range between $325 million to $330 million , from $325 million and $335 million , a growth rate of 18% to 20% compared to fiscal 2023 results Adjusted EBITDA (a non-GAAP measure) forecast to range between $196 million to $200 million , from $193 million to $198 million , a growth rate of 17% to 19% compared to fiscal 2023 results Conference Call Priority's leadership will host a conference call on Thursday, August 8, 2024 at 11:00 a.m. EDT to discuss its second quarter financial results. Participants can access the call by phone in the U.S. or Canada at (833) 636-1319 or internationally at (412) 902-4286. The Internet webcast link and accompanying slide presentation can be accessed at https://edge.media-server.com/mmc/p/ds7wmbnk and will also be posted in the "Investor Relations" section of the Company's website at www.prioritycommerce.com . An audio replay of the call will be available shortly after the conference call until August 15, 2024 at 2:00 p.m. EDT . To listen to the audio replay, dial (877) 344-7529 or (412) 317-0088 and enter conference ID number 2689178 . Alternatively, you may access the webcast replay in the "Investor Relations" section of the Company's website at www.prioritycommerce.com . Non-GAAP Financial Measures This communication includes certain non-GAAP financial measures that we regularly review to evaluate our business and trends, measure our performance, prepare financial projections, allocate resources, and make strategic decisions. We believe these non-GAAP measures help to illustrate the underlying financial and business trends relating to our results of operations and comparability between current and prior periods. We also use these non-GAAP measures to establish and monitor operational goals. However, these non-GAAP measures are not superior to or a substitute for prominent measurements calculated in accordance with GAAP. Rather, the non-GAAP measures are meant to be a complement to understanding measures prepared in accordance with GAAP. Adjusted Gross Profit and Adjusted Gross Profit Margin The Company's adjusted gross profit metric represents revenues less cost of revenue (excluding depreciation and amortization). Adjusted gross profit margin is adjusted gross profit divided by revenues. We review these non-GAAP measures to evaluate our underlying profit trends. The reconciliation of adjusted gross profit to its most comparable GAAP measure is provided below: (in thousands) Three Months Ended June 30 , 2024 2023 Revenues $ 219,867 $ 182,290 Cost of revenue (excluding depreciation and amortization) (138,118 ) (115,281 ) Adjusted gross profit $ 81,749 $ 67,009 Adjusted gross profit margin 37.2 % 36.8 % Depreciation and amortization of revenue generating assets (3,941 ) (3,030 ) Gross profit $ 77,808 $ 63,979 Gross profit margin 35.4 % 35.1 % EBITDA and Adjusted EBITDA EBITDA and adjusted EBITDA are performance measures. EBITDA is earnings before interest, income tax, and depreciation and amortization expenses ("EBITDA"). Adjusted EBITDA begins with EBITDA but further excludes certain non-cash costs, such as stock-based compensation and the write-off of the carrying value of investments or other assets, as well as debt extinguishment and modification expenses and other expenses and income items considered non-recurring, such as acquisition integration expenses, certain professional fees, and litigation settlements. We review the non-GAAP adjusted EBITDA measure to evaluate our business and trends, measure our performance, prepare financial projections, allocate resources, and make strategic decisions. The reconciliation of adjusted EBITDA to its most comparable GAAP measure is provided below: (in thousands) Three Months Ended June 30 , 2024 2023 Net income (loss) $ 994 $ (612 ) Interest expense 21,710 17,765 Income tax expense 2,515 2,355 Depreciation and amortization 15,244 17,980 EBITDA 40,463 37,488 Debt extinguishment and modification 8,623 — Selling, general and administrative (non-recurring) 636 1,859 Non-cash stock-based compensation 1,829 1,746 Adjusted EBITDA $ 51,551 $ 41,093 Further detail of certain of these adjustments, and where these items are recorded in our consolidated statements of operations, is provided below: (in thousands) Three Months Ended June 30 , 2024 2023 Selling, general and administrative expenses (non-recurring): Certain legal fees 204 1,221 Professional, accounting and consulting fees 310 509 Other expenses, net 122 129 $ 636 $ 1,859 Priority does not provide a reconciliation of forward-looking non-GAAP financial measures to their comparable GAAP financial measures because it could not do so without unreasonable effort due to the unavailability of the information needed to calculate reconciling items and due to the variability, complexity and limited visibility of the adjusting items that would be excluded from the non-GAAP financial measures in future periods. When planning, forecasting and analyzing future periods, the Company does so primarily on a non-GAAP basis without preparing a GAAP analysis as that would require estimates for various cash and non-cash reconciling items that would be difficult to predict with reasonable accuracy. For example, stock-based compensation expense would be difficult to estimate because it depends on the Company's future hiring and retention needs, as well as the future fair market value of the Company's common stock, all of which are difficult to predict and subject to constant change. As a result, the Company does not believe that a GAAP reconciliation would provide meaningful supplemental information about the Company's outlook. About Priority Technology Holdings, Inc. Priority is a solution provider in Payments and Banking as a Service operating at scale with over 1 million active customers across its SMB, B2B and Enterprise channels processing $125 billion in annual transaction volume and providing administration for $1 billion in deposits. Priority’s purpose-built technology enables clients to collect, store, lend and send money and provides customers the acceptance and AP payment applications and Passport financial tools that best optimize their cash flow and maximize working capital. Additional information can be found at www.prioritycommerce.com . Forward-Looking Statements This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about future financial and operating results, our plans, objectives, expectations and intentions with respect to future operations, products and services, and other statements identified by words such as "may," "will," "should," "anticipates," "believes," "expects," "plans," "future," "intends," "could," "estimate," "predict," "projects," "targeting," "potential" or "contingent," "guidance," "outlook" or words of similar meaning. These forward-looking statements include, but are not limited to, our 2024 outlook and statements regarding our market and growth opportunities. Such forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive risks, trends and uncertainties that could cause actual results to differ materially from those projected, expressed, or implied by such forward-looking statements. Our actual results could differ materially, and potentially adversely, from those discussed or implied herein. We caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. You should evaluate all forward-looking statements made in this press release in the context of the risks and uncertainties disclosed in our SEC filings, including our most recent Annual Report on Form 10-K filed with the SEC on March 12, 2024 . These filings are available online at www.sec.gov or www.prioritycommerce.com . We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences we anticipate or affect us or our operations in the way we expect. You are cautioned not to place undue reliance on forward-looking statements as a predictor of future performance. The forward-looking statements included in this press release are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements. Priority Technology Holdings, Inc. Unaudited Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share amounts) Three Months Ended June 30 , Six Months Ended June 30 , 2024 2023 2024 2023 Revenues $ 219,867 $ 182,290 $ 425,586 $ 367,318 Operating expenses Cost of revenue (excludes depreciation and amortization) 138,118 115,281 267,416 237,247 Salary and employee benefits 22,119 19,109 44,269 38,157 Depreciation and amortization 15,244 17,980 30,497 36,028 Selling, general and administrative 11,212 10,787 22,207 19,905 Total operating expenses 186,693 163,157 364,389 331,337 Operating income 33,174 19,133 61,197 35,981 Other (expense) income Interest expense (21,710 ) (17,765 ) (42,590 ) (35,464 ) Debt extinguishment and modification costs (8,623 ) — (8,623 ) — Other income, net 668 375 1,300 587 Total other expense, net (29,665 ) (17,390 ) (49,913 ) (34,877 ) Income before income taxes 3,509 1,743 11,284 1,104 Income tax expense 2,515 2,355 5,097 2,222 Net income (loss) 994 (612 ) 6,187 (1,118 ) Less: Dividends and accretion attributable to redeemable senior preferred stockholders (18,565 ) (11,765 ) (31,227 ) (23,060 ) Less: Return on redeemable NCI in consolidated subsidiary (58 ) — (639 ) — Net loss attributable to common stockholders (17,629 ) (12,377 ) $ (25,679 ) $ (24,178 ) Other comprehensive loss Foreign currency translation adjustments 4 7 (9 ) 31 Comprehensive loss $ (17,625 ) $ (12,370 ) $ (25,688 ) $ (24,147 ) Loss per common share: Basic and diluted $ (0.23 ) $ (0.16 ) $ (0.33 ) $ (0.31 ) Weighted-average common shares outstanding: Basic and diluted 77,736 78,292 77,878 78,213 Priority Technology Holdings, Inc. Unaudited Consolidated Balance Sheets (in thousands) June 30, 2024 December 31, 2023 Assets Current assets: Cash and cash equivalents $ 34,626 $ 39,604 Restricted cash 12,625 11,923 Accounts receivable, net of allowances 65,746 58,551 Prepaid expenses and other current assets 19,479 13,273 Current portion of notes receivable, net of allowance 2,188 1,468 Settlement assets and customer/subscriber account balances 802,394 756,475 Total current assets 937,058 881,294 Notes receivable, less current portion 4,998 3,728 Property, equipment and software, net 49,800 44,680 Goodwill 376,091 376,103 Intangible assets, net 258,632 273,350 Deferred income taxes, net 25,556 22,533 Other noncurrent assets 21,294 13,649 Total assets $ 1,673,429 1,615,337 Liabilities, Redeemable Senior Preferred Stock, Redeemable NCI, and Stockholders' Deficit Current liabilities: Accounts payable and accrued expenses $ 66,724 $ 52,643 Accrued residual commissions 36,091 33,025 Customer deposits and advance payments 3,569 3,934 Current portion of long-term debt 8,350 6,712 Settlement and customer/subscriber account obligations 798,753 755,754 Total current liabilities 913,487 852,068 Long-term debt, net of current portion, discounts and debt issuance costs 809,045 631,965 Other noncurrent liabilities 15,488 18,763 Total liabilities 1,738,020 1,502,796 Redeemable senior preferred stock, net of discounts and issuance costs 105,684 258,605 Stockholders' deficit: Preferred stock — — Common stock 76 77 Treasury stock, at cost (18,673 ) (12,815 ) Additional paid-in capital — — Accumulated other comprehensive loss (38 ) (29 ) Accumulated deficit (153,472 ) (134,951 ) Total stockholders' deficit attributable to stockholders of PRTH (172,107 ) (147,718 ) Non-controlling interest 1,832 1,654 Total stockholders' deficit (170,275 ) (146,064 ) Total liabilities, redeemable senior preferred stock, redeemable NCI and stockholders' deficit $ 1,673,429 $ 1,615,337 Priority Technology Holdings, Inc . Unaudited Consolidated Statements of Cash Flows (in thousands) Six Months Ended June 30 , 2024 2023 Cash flows from operating activities: Net income (loss) $ 6,187 $ (1,118 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization of assets 30,497 36,028 Stock-based, ESPP and incentive units compensation 3,462 3,682 Amortization of debt issuance costs and discounts 1,824 1,826 Debt extinguishment and modification costs 8,623 — Deferred income tax (3,023 ) (9,619 ) Change in contingent consideration 2,213 346 Other non-cash items, net (929 ) (461 ) Change in operating assets and liabilities: Accounts receivable (7,145 ) 18,066 Prepaid expenses and other current assets (1,148 ) (3,560 ) Income taxes (receivable) payable (5,037 ) 498 Notes receivable (584 ) (389 ) Accounts payable and other accrued liabilities 13,291 1,306 Customer deposits and advance payments (365 ) 635 Other assets and liabilities, net (5,859 ) (383 ) Net cash provided by operating activities 42,007 46,857 Cash flows from investing activities: Additions to property, equipment and software (11,718 ) (9,869 ) Notes receivable, net (1,406 ) (498 ) Acquisitions of assets and other investing activities (7,474 ) (2,715 ) Net cash used in investing activities (20,598 ) (13,082 ) Cash flows from financing activities: Proceeds from issuance of long-term debt, net of issue discount 830,200 — Debt issuance and modification costs paid (7,555 ) — Repayments of long-term debt (654,372 ) (3,525 ) Borrowings under revolving credit facility — 5,000 Repayments of borrowings under revolving credit facility — (12,000 ) Redemption of PHOT redeemable NCI (2,130 ) — Repurchases of shares withheld for taxes (604 ) (1,018 ) Redemption of senior preferred stock (136,936 ) — Redemption of accumulated unpaid dividend on redeemable senior preferred stock (30,819 ) — Dividends paid to redeemable senior preferred stockholders (16,393 ) (17,908 ) Settlement and customer/subscriber accounts obligations, net 40,914 175,548 Payment of contingent consideration related to business combination (4,156 ) (1,959 ) Net cash provided by financing activities 18,149 144,138 Net change in cash and cash equivalents and restricted cash: Net increase in cash and cash equivalents, and restricted cash 39,558 177,913 Cash and cash equivalents and restricted cash at beginning of period 796,223 560,610 Cash and cash equivalents and restricted cash at end of period $ 835,781 $ 738,523 Reconciliation of cash and cash equivalents, and restricted cash: Cash and cash equivalents $ 34,626 $ 17,567 Restricted cash 12,625 12,357 Cash and cash equivalents included in settlement assets and customer/subscriber account balances 788,530 708,599 Total cash and cash equivalents, and restricted cash $ 835,781 $ 738,523 Priority Technology Holdings, Inc . Unaudited Reportable Segments' Results (in thousands) Three Months Ended June 30 , Six Months Ended June 30 , 2024 2023 2024 2023 SMB Payments: Revenues $ 155,101 $ 147,948 $ 299,105 $ 302,881 Adjusted EBITDA $ 28,597 $ 28,434 $ 53,620 $ 56,836 Key Indicators: Merchant bankcard processing dollar value $ 15,791,635 $ 15,111,781 $ 30,579,730 $ 30,332,495 Merchant bankcard transaction count 193,841 180,343 369,069 343,749 B2B Payments: Revenues $ 21,881 $ 2,974 $ 43,225 $ 5,760 Adjusted EBITDA $ 1,530 $ 608 $ 3,276 $ 518 Key Indicators: B2B issuing dollar volume $ 249,454 $ 216,358 $ 477,266 $ 414,904 B2B issuing transaction count 242 282 482 562 Enterprise Payments: Revenues $ 43,670 $ 31,438 $ 84,660 $ 58,744 Adjusted EBITDA $ 37,244 $ 25,728 $ 71,971 $ 48,096 Key Indicators: Average billed clients $ 782,466 $ 520,028 $ 753,531 $ 492,622 Average monthly new enrollments 55,089 53,374 53,563 49,661 Priority Technology Holdings, Inc . Unaudited Reportable Segments' Results Three Months Ended June 30, 2024 (in thousands) SMB Payments B2B Payments Enterprise Payments Corporate Total Consolidated Reconciliation of Adjusted EBITDA to GAAP Measure: Adjusted EBITDA $ 28,597 $ 1,530 $ 37,244 $ (15,820 ) $ 51,551 Interest expense — (1,241 ) — (20,469 ) (21,710 ) Depreciation and amortization (8,541 ) (1,261 ) (4,087 ) (1,355 ) (15,244 ) Debt modification and extinguishment expenses — — — (8,623 ) (8,623 ) Selling, general and administrative (non-recurring) — — — (636 ) (636 ) Non-cash stock based compensation (4 ) (109 ) (32 ) (1,684 ) (1,829 ) Income (loss) before taxes $ 20,052 $ (1,081 ) $ 33,125 $ (48,587 ) $ 3,509 Six Months Ended June 30, 2024 (in thousands) SMB Payments B2B Payments Enterprise Payments Corporate Total Consolidated Reconciliation of Adjusted EBITDA to GAAP Measure: Adjusted EBITDA $ 53,620 $ 3,276 $ 71,971 $ (30,976 ) $ 97,891 Interest expense — (2,214 ) — (40,376 ) (42,590 ) Depreciation and amortization (17,127 ) (2,731 ) (8,126 ) (2,513 ) (30,497 ) Debt modification and extinguishment expenses — — — (8,623 ) (8,623 ) Selling, general and administrative (non-recurring) — — — (1,435 ) (1,435 ) Non-cash stock based compensation (8 ) (227 ) (65 ) (3,162 ) (3,462 ) Income (loss) before taxes $ 36,485 $ (1,896 ) $ 63,780 $ (87,085 ) $ 11,284 . Priority Technology Holdings, Inc . Unaudited Reportable Segments' Results Three Months Ended June 30, 2023 (in thousands) SMB Payments B2B Payments Enterprise Payments Corporate Total Consolidated Reconciliation of Adjusted EBITDA to GAAP Measure: Adjusted EBITDA $ 28,434 $ 608 $ 25,728 $ (13,677 ) $ 41,093 Interest expense — — (117 ) (17,648 ) (17,765 ) Depreciation and amortization (9,151 ) (17 ) (6,319 ) (2,493 ) (17,980 ) Selling, general and administrative (non-recurring) — — — (1,859 ) (1,859 ) Non-cash stock based compensation (112 ) (7 ) (65 ) (1,562 ) (1,746 ) Income (loss) before taxes $ 19,171 $ 584 $ 19,227 $ (37,239 ) $ 1,743 Six Months Ended June 30, 2023 (in thousands) SMB Payments B2B Payments Enterprise Payments Corporate Total Consolidated Reconciliation of Adjusted EBITDA to GAAP Measure: Adjusted EBITDA $ 56,836 $ 518 $ 48,096 $ (26,717 ) $ 78,733 Interest expense — — (230 ) (35,234 ) (35,464 ) Depreciation and amortization (18,417 ) (37 ) (12,624 ) (4,950 ) (36,028 ) Selling, general and administrative (non-recurring) — — — (2,296 ) (2,296 ) Non-cash stock based compensation (294 ) (201 ) (129 ) (3,058 ) (3,682 ) Other non-recurring loss, net — — — (159 ) (159 ) Income (loss) before taxes $ 38,125 $ 280 $ 35,113 $ (72,414 ) $ 1,104 Priority Technology Holdings, Inc . Unaudited Reportable Segments' Results Appendix 1 – Reconciliation of adjusted EBITDA (non-GAAP measure to the nearest GAAP measure) for select periods: Three Months Ended March 31, 2024 (in thousands) SMB Payments B2B Payments Enterprise Payments Corporate Total Consolidated Reconciliation of Adjusted EBITDA to GAAP Measure: Adjusted EBITDA 25,023 $ 1,747 $ 34,727 $ (15,157 ) $ 46,340 Interest expense (1 ) (973 ) — (19,906 ) (20,880 ) Depreciation and amortization (8,586 ) (1,470 ) (4,039 ) (1,158 ) (15,253 ) Selling, general and administrative (non-recurring) — — — (798 ) (798 ) Non-cash stock based compensation (4 ) (118 ) (33 ) (1,479 ) (1,634 ) Income (loss) before taxes 16,432 $ (814 ) $ 30,655 $ (38,498 ) $ 7,775 Three Months Ended March 31, 2023 (in thousands) SMB Payments B2B Payments Enterprise Payments Corporate Total Consolidated Reconciliation of Adjusted EBITDA to GAAP Measure: Adjusted EBITDA $ 28,402 $ (90 ) $ 22,368 $ (13,040 ) $ 37,640 Interest expense — — (113 ) (17,586 ) (17,699 ) Depreciation and amortization (9,267 ) (20 ) (6,305 ) (2,456 ) (18,048 ) Selling, general and administrative (non-recurring) — — — (437 ) (437 ) Non-cash stock based compensation (182 ) (193 ) (64 ) (1,497 ) (1,936 ) Other non-recurring loss, net — — — (159 ) (159 ) Income (loss) before taxes $ 18,953 $ (303 ) $ 15,886 $ (35,175 ) $ (639 ) Priority Technology Holdings, Inc . Unaudited Reportable Segments' Results Three Months Ended September 30, 2023 (in thousands) SMB Payments B2B Payments Enterprise Payments Corporate Total Consolidated Reconciliation of Adjusted EBITDA to GAAP Measure: Adjusted EBITDA $ 27,613 $ 1,359 $ 29,757 $ (13,767 ) $ 44,962 Interest expense — (498 ) (62 ) (19,437 ) (19,997 ) Depreciation and amortization (9,136 ) (719 ) (5,947 ) (1,473 ) (17,275 ) Selling, general and administrative (non-recurring) — — — (2,114 ) (2,114 ) Non-cash stock based compensation (114 ) (36 ) (66 ) (1,285 ) (1,501 ) Other non-recurring gain, net — — — 166 166 Income (loss) before taxes $ 18,363 $ 106 $ 23,682 $ (37,910 ) $ 4,241 Three Months Ended December 31, 2023 (in thousands) SMB Payments B2B Payments Enterprise Payments Corporate Total Consolidated Reconciliation of Adjusted EBITDA to GAAP Measure: Adjusted EBITDA $ 25,036 $ 372 $ 33,040 $ (13,811 ) $ 44,637 Interest expense — (8032 (64 ) (19,780 ) (20,647 ) Depreciation and amortization (9,162 ) (1,075 ) (3,856 ) (999 ) (15,092 ) Selling, general and administrative (non-recurring) — — — (5,256 ) (5,256 ) Non-cash stock based compensation (131 ) (312 ) (66 ) (1,076 ) (1,585 ) Other non-recurring loss, net — — — (250 ) (250 ) Income (loss) before taxes $ 15,743 $ (1,818 ) $ 29,054 $ (41,172 ) $ 1,807 View source version on businesswire.com : https://www.businesswire.com/news/home/20240808786335/en/ Priority Investor Inquiries: Chris Kettmann [email protected] (773) 497-7575 Source: Priority Technology Holdings, Inc.

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