Priority Technology Holdings, Inc. Announces First Quarter Financial Results

Strong First Quarter Growth Driven by Performance Across Unified Commerce Platform

ALPHARETTA, Ga.--()--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 first quarter 2024 financial results including strong year-over-year diversified revenue growth.

Highlights of Consolidated Results

First Quarter 2024 Compared with First Quarter 2023

Financial highlights of the first quarter of 2024 compared with the first quarter of 2023, are as follows1:

  • Revenue of $205.7 million increased 11.2% from $185.0 million
  • Adjusted gross profit (a non-GAAP measure2) of $76.4 million increased 21.2% from $63.1 million
  • Adjusted gross profit margin (a non-GAAP measure2) of 37.1% increased 300 basis points from 34.1%
  • Operating income of $28.0 million increased 66.3% from $16.8 million
  • Adjusted EBITDA (a non-GAAP measure2) of $46.3 million increased 23.1% from $37.6 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 delivered record results in the first quarter on strong performance in each business segment of our unified commerce platform," said Tom Priore, Chairman & CEO of Priority. "Our growth in the quarter and ongoing consistency reinforces the unique attributes of our operating infrastructure, diversity of our business segments and robust demand for our products. We are laser focused on the continued innovation of our SaaS Payments and Banking suite of services and Accelerated Commerce Engine and are eager to meet the evolving needs of our growing portfolio of customers and enterprise partners."

Full Year 2024 Financial Guidance

Priority's outlook remains strong and we are reaffirming our full year 2024 guidance:

  • Revenue forecast to range between $875 million to $890 million, a growth rate of 16% to 18%, compared to fiscal 2023 results
  • Adjusted EBITDA (a non-GAAP measure) forecast to range between $193 million to $198 million, a growth rate of 15% to 18% compared to fiscal 2023 results
  • Adjusted gross profit (a non-GAAP measure) forecast to range between $325 million and $335 million, a growth rate of 18% to 22% compared to fiscal 2023 results

Conference Call

Priority's leadership will host a conference call on Thursday, May 9, 2024 at 11:00 a.m. EDT to discuss its first 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/ievzjr9d 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 May 16, 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 4087946. 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 March 31,

 

2024

 

2023

Revenues

$

205,719

 

 

$

185,028

 

Cost of revenue (excluding depreciation and amortization)

 

(129,298

)

 

 

(121,966

)

Adjusted gross profit

$

76,421

 

 

$

63,062

 

Adjusted gross profit margin

 

37.1

%

 

 

34.1

%

Depreciation and amortization of revenue generating assets

 

(3,900

)

 

 

(2,959

)

Gross profit

$

72,521

 

 

$

60,103

 

Gross profit margin

 

35.3

%

 

 

32.5

%

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 March 31,

 

2024

 

2023

Net income (loss)

$

5,193

 

$

(506

)

Interest expense

 

20,880

 

 

17,699

 

Income tax expense (benefit)

 

2,582

 

 

(133

)

Depreciation and amortization

 

15,253

 

 

18,048

 

EBITDA

 

43,908

 

 

35,108

 

Selling, general and administrative (non-recurring)

 

798

 

 

437

 

Non-cash stock-based compensation

 

1,634

 

 

1,936

 

Non-cash other losses

 

 

 

159

 

Adjusted EBITDA

$

46,340

 

$

37,640

 

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 March 31,

 

2024

 

2023

Selling, general and administrative expenses (non-recurring):

 

 

 

Certain legal fees

 

450

 

 

376

Professional, accounting and consulting fees

 

189

 

 

61

Other expenses, net

 

159

 

 

 

$

798

 

$

437

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 1,000,000 active customers across its SMB, B2B and Enterprise channels processing $120 billion in annual transaction volume and providing administration for $980 million 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 March 31,

 

2024

 

2023

Revenues

$

205,719

 

 

$

185,028

 

Operating expenses

 

 

 

Cost of revenue (excludes depreciation and amortization)

 

129,298

 

 

 

121,966

 

Salary and employee benefits

 

22,150

 

 

 

19,048

 

Depreciation and amortization

 

15,253

 

 

 

18,048

 

Selling, general and administrative

 

10,995

 

 

 

9,118

 

Total operating expenses

 

177,696

 

 

 

168,180

 

Operating income

 

28,023

 

 

 

16,848

 

Other (expense) income

 

 

 

Interest expense

 

(20,880

)

 

 

(17,699

)

Other income, net

 

632

 

 

 

212

 

Total other expense, net

 

(20,248

)

 

 

(17,487

)

Income (loss) before income taxes

 

7,775

 

 

 

(639

)

Income tax expense (benefit)

 

2,582

 

 

 

(133

)

Net income (loss)

 

5,193

 

 

 

(506

)

Less: Dividends and accretion attributable to redeemable senior preferred stockholders

 

(12,662

)

 

 

(11,295

)

Less: Return on redeemable NCI in consolidated subsidiary

 

(581

)

 

 

 

Net loss attributable to common stockholders

 

(8,050

)

 

 

(11,801

)

Other comprehensive loss

 

 

 

Foreign currency translation adjustments

 

(13

)

 

 

24

 

Comprehensive loss

$

(8,063

)

 

$

(11,777

)

 

 

 

 

Loss per common share:

 

 

 

Basic and diluted

$

(0.10

)

 

$

(0.15

)

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

Basic and diluted

 

78,021

 

 

 

78,133

 

 

Priority Technology Holdings, Inc.

Unaudited Consolidated Balance Sheets

 

(in thousands)

 

 

 

 

 

 

 

 

 

March 31, 2024

 

December 31, 2023

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

34,290

 

 

$

39,604

 

Restricted cash

 

12,658

 

 

 

11,923

 

Accounts receivable, net of allowances

 

67,137

 

 

 

58,551

 

Prepaid expenses and other current assets

 

13,699

 

 

 

13,273

 

Current portion of notes receivable, net of allowance

 

1,972

 

 

 

1,468

 

Settlement assets and customer/subscriber account balances

 

752,590

 

 

 

756,475

 

Total current assets

 

882,346

 

 

 

881,294

 

Notes receivable, less current portion

 

4,549

 

 

 

3,728

 

Property, equipment and software, net

 

48,120

 

 

 

44,680

 

Goodwill

 

376,112

 

 

 

376,103

 

Intangible assets, net

 

261,658

 

 

 

273,350

 

Deferred income taxes, net

 

24,405

 

 

 

22,533

 

Other noncurrent assets

 

12,767

 

 

 

13,649

 

Total assets

$

1,609,957

 

 

 

1,615,337

 

Liabilities, Redeemable Senior Preferred Stock, Redeemable NCI, and Stockholders' Deficit

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued expenses

$

49,329

 

 

$

52,643

 

Accrued residual commissions

 

35,965

 

 

 

33,025

 

Customer deposits and advance payments

 

4,090

 

 

 

3,934

 

Current portion of long-term debt

 

6,712

 

 

 

6,712

 

Settlement and customer/subscriber account obligations

 

753,850

 

 

 

755,754

 

Total current liabilities

 

849,946

 

 

 

852,068

 

Long-term debt, net of current portion, discounts and debt issuance costs

 

631,352

 

 

 

631,965

 

Other noncurrent liabilities

 

16,704

 

 

 

18,763

 

Total liabilities

 

1,498,002

 

 

 

1,502,796

 

Redeemable senior preferred stock, net of discounts and issuance costs

 

264,240

 

 

 

258,605

 

Redeemable non-controlling interests in consolidated subsidiary

 

5,837

 

 

 

 

Stockholders' deficit:

 

 

 

Preferred stock

 

 

 

 

 

Common stock

 

76

 

 

 

77

 

Treasury stock, at cost

 

(18,491

)

 

 

(12,815

)

Additional paid-in capital

 

 

 

 

 

Accumulated other comprehensive loss

 

(42

)

 

 

(29

)

Accumulated deficit

 

(141,412

)

 

 

(134,951

)

Total stockholders' deficit attributable to stockholders of PRTH

 

(159,869

)

 

 

(147,718

)

Non-controlling interest

 

1,747

 

 

 

1,654

 

Total stockholders' deficit

 

(158,122

)

 

 

(146,064

)

Total liabilities, redeemable senior preferred stock, redeemable NCI and stockholders' deficit

$

1,609,957

 

 

$

1,615,337

 

 

Priority Technology Holdings, Inc.

Unaudited Consolidated Statements of Cash Flows

 

(in thousands)

 

 

 

Three Months Ended March 31,

 

2024

 

2023

Cash flows from operating activities:

 

 

 

Net income (loss)

$

5,193

 

 

$

(506

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

Depreciation and amortization of assets

 

15,253

 

 

 

18,048

 

Stock-based, ESPP and incentive units compensation

 

1,633

 

 

 

1,936

 

Amortization of debt issuance costs and discounts

 

1,065

 

 

 

903

 

Deferred income tax

 

(1,872

)

 

 

(5,716

)

Change in contingent consideration

 

972

 

 

 

229

 

Other non-cash items, net

 

(259

)

 

 

14

 

Change in operating assets and liabilities:

 

 

 

Accounts receivable

 

(8,339

)

 

 

81

 

Prepaid expenses and other current assets

 

(425

)

 

 

481

 

Income taxes (receivable) payable

 

 

 

 

8,666

 

Notes receivable

 

(266

)

 

 

(163

)

Accounts payable and other accrued liabilities

 

1,590

 

 

 

3,916

 

Customer deposits and advance payments

 

157

 

 

 

250

 

Other assets and liabilities, net

 

(1,395

)

 

 

(462

)

Net cash provided by operating activities

 

13,307

 

 

 

27,677

 

Cash flows from investing activities:

 

 

 

Additions to property, equipment and software

 

(6,610

)

 

 

(5,046

)

Notes receivable, net

 

(1,059

)

 

 

178

 

Acquisitions of assets and other investing activities

 

 

 

 

(2,715

)

Net cash used in investing activities

 

(7,669

)

 

 

(7,583

)

Cash flows from financing activities:

 

 

 

Repayments of long-term debt

 

(1,678

)

 

 

(1,550

)

Repayments of borrowings under revolving credit facility

 

 

 

 

(6,000

)

Repurchases of Common Stock and shares withheld for taxes

 

(421

)

 

 

(777

)

Dividends paid to redeemable senior preferred stockholders

 

(7,027

)

 

 

(11,435

)

Settlement and customer/subscriber accounts obligations, net

 

1,918

 

 

 

79,258

 

Payment of contingent consideration related to business combination

 

(3,071

)

 

 

(1,959

)

Net cash (used in) provided by financing activities

 

(10,279

)

 

 

57,537

 

Net change in cash and cash equivalents and restricted cash:

 

 

 

Net (decrease) increase in cash and cash equivalents, and restricted cash

 

(4,641

)

 

 

77,631

 

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

$

791,582

 

 

$

638,241

 

 

 

 

 

Reconciliation of cash and cash equivalents, and restricted cash:

 

 

 

Cash and cash equivalents

$

34,290

 

 

$

15,882

 

Restricted cash

 

12,658

 

 

 

11,012

 

Cash and cash equivalents included in settlement assets and customer/subscriber account balances

 

744,634

 

 

 

611,347

 

Total cash and cash equivalents, and restricted cash

$

791,582

 

 

$

638,241

 

 

Priority Technology Holdings, Inc.

Unaudited Reportable Segments' Results

 

(in thousands)

 

 

 

Three Months Ended March 31,

 

2024

 

2023

SMB Payments:

 

 

 

Revenue

$

143,751

 

 

$

154,933

 

Operating expenses

 

131,368

 

 

 

142,922

 

Operating income

$

12,383

 

 

$

12,011

 

Operating margin

 

8.6

%

 

 

7.8

%

Depreciation and amortization

$

8,802

 

 

$

10,846

 

Key indicators:

 

 

 

Merchant bankcard processing dollar value

$

14,788,095

 

 

$

15,220,715

 

Merchant bankcard transaction count

 

175,228

 

 

 

163,406

 

B2B Payments:

 

 

 

Revenue

$

21,115

 

 

$

2,786

 

Operating expenses

 

21,908

 

 

 

3,635

 

Operating loss

$

(793

)

 

$

(849

)

Operating margin

 

(3.8

)%

 

 

(30.5

)%

Depreciation and amortization

$

1,640

 

 

$

125

 

Key indicators:

 

 

 

B2B issuing dollar volume

$

227,811

 

 

$

198,456

 

B2B issuing transaction count

 

240

 

 

 

280

 

Enterprise Payments:

 

 

 

Revenue

$

40,853

 

 

$

27,309

 

Operating expenses

 

15,306

 

 

 

14,646

 

Operating income

$

25,547

 

 

$

12,663

 

Operating margin

 

62.5

%

 

 

46.4

%

Depreciation and amortization

$

4,356

 

 

$

6,690

 

Key indicators:

 

 

 

Average billed clients

 

703,887

 

 

 

465,219

 

Average monthly new enrollments

 

53,551

 

 

 

45,948

 

 

 

 

 

Operating income of reportable segments

$

37,137

 

 

$

23,825

 

Less: Corporate expense

 

(9,114

)

 

 

(6,977

)

Consolidated operating income

$

28,023

 

 

$

16,848

 

Corporate depreciation and amortization

$

455

 

 

$

387

 

 

Contacts

Priority Investor Inquiries:
Chris Kettmann
chris.kettmann@dentonsglobaladvisors.com
(773) 497-7575

Contacts

Priority Investor Inquiries:
Chris Kettmann
chris.kettmann@dentonsglobaladvisors.com
(773) 497-7575