Home Business Wire Priority Technology Holdings, Inc. Announces Second Quarter 2023 Financial Results

Priority Technology Holdings, Inc. Announces Second Quarter 2023 Financial Results

Strong Second Quarter Growth Driven by Performance Across Diverse Business Segments

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 2023 financial results including strong quarter-over-quarter diversified revenue growth.

Highlights of Consolidated Results

Second Quarter 2023 Compared with Second Quarter 2022

Financial highlights of the second quarter of 2023 compared with the second quarter of 2022, are as follows:

  • Revenue of $182.3 million increased 9.6% from $166.4 million
  • Adjusted gross profit (a non-GAAP measure1) of $67.0 million increased 20.3% from $55.7 million
  • Adjusted gross profit margin (a non-GAAP measure1) of 36.8% increased 330 basis points from 33.5%
  • Operating income of $19.1 million increased 45.8% from $13.1 million
  • Adjusted EBITDA (a non-GAAP measure1) of $41.1 million increased 21.2% from $33.9 million

“Consistent with the first few months of the year, we continued to deliver strong results as we executed our unified commerce vision combining payments and banking on a single platform, enhanced by the strength of our counter cyclical business lines that were positioned to benefit from higher interest rates and weakening macroeconomic trends,” said Tom Priore, Chairman & CEO of Priority. “We continue to invest thoughtfully, as our recent acquisition of Plastiq demonstrates, to deliver differentiated solutions to our business and integrated software clients that accelerate cash flow and optimize working capital, which will drive consistent long-term performance for our shareholders.”

(1)

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.

Updated Full Year 2023 Financial Guidance

The Company has updated its outlook for the full year 2023 to include the forecasted post-acquisition contribution from the Plastiq business as follows:

  • Revenue forecast revised to range between $765 million to $780 million, a growth rate of 15% to 17%, from $740 million to $755 million
  • Adjusted EBITDA (a non-GAAP measure) forecast remains in range between $160 million to $165 million, a growth rate of 14% to 18%

Conference Call

Priority’s leadership will host a conference call on Thursday, August 10, 2023 at 11:00 a.m. EDT to discuss its second quarter 2023 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/yohu2k4c 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 17, 2023 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 2194982. 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,

 

 

2023

 

 

 

2022

 

Revenues

$

182,290

 

 

$

166,430

 

Cost of revenue (excluding depreciation and amortization)

 

(115,281

)

 

 

(110,749

)

Adjusted gross profit

$

67,009

 

 

$

55,681

 

Adjusted gross profit margin

 

36.8

%

 

 

33.5

%

Depreciation and amortization of revenue generating assets

 

(3,030

)

 

 

(2,538

)

Gross profit

$

63,979

 

 

$

53,143

 

Gross profit margin

 

35.1

%

 

 

31.9

%

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,

 

 

2023

 

 

 

2022

Net loss (income)

$

(612

)

 

$

287

Interest expense

 

17,765

 

 

 

12,335

Income tax expense

 

2,355

 

 

 

467

Depreciation and amortization

 

17,980

 

 

 

17,505

EBITDA

 

37,488

 

 

 

30,594

Selling, general and administrative (non-recurring)

 

1,859

 

 

 

1,743

Non-cash stock-based compensation

 

1,746

 

 

 

1,542

Adjusted EBITDA

$

41,093

 

 

$

33,879

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,

 

2023

 

2022

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

 

 

 

Certain legal fees

$

1,221

 

$

213

Professional, accounting and consulting fees

 

509

 

 

373

IRS penalty for 2014 and 2015

 

 

 

703

General ledger transition expenses

 

 

 

96

Other expenses

 

129

 

 

358

 

$

1,859

 

$

1,743

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 payments technology company that leverages a purpose-built platform to enable clients to collect, store and send money, operating at scale. Priority helps its customers take and make payments while managing business and consumer operating accounts to monetize payment networks. Priority’s tailored, agile technology powers high-value payments products bolstered by industry-leading personalized support, and delivers value to its partners by leveraging its payments and embedded finance technology to deliver solutions that power modern commerce. The Company’s approach is simple – Priority handles the complexities of payments and embedded finance to free its partners to focus on their core business objectives. Priority’s solutions are offered via API or proprietary applications with nationwide money transmission licenses, providing end-to-end operational support including automated risk management and underwriting, full compliance and industry leading customer service. 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 2023 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 23, 2023. 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

 

(in thousands, except per share amounts)

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenues

$

182,290

 

 

$

166,430

 

 

$

367,318

 

 

$

319,669

 

Operating expenses

 

 

 

 

 

 

 

Cost of revenue (excludes depreciation and amortization)

 

115,281

 

 

 

110,749

 

 

 

237,247

 

 

 

212,229

 

Salary and employee benefits

 

19,109

 

 

 

15,770

 

 

 

38,157

 

 

 

31,847

 

Depreciation and amortization

 

17,980

 

 

 

17,505

 

 

 

36,028

 

 

 

34,858

 

Selling, general and administrative

 

10,787

 

 

 

9,346

 

 

 

19,905

 

 

 

16,849

 

Total operating expenses

 

163,157

 

 

 

153,370

 

 

 

331,337

 

 

 

295,783

 

Operating income

 

19,133

 

 

 

13,060

 

 

 

35,981

 

 

 

23,886

 

Other (expense) income

 

 

 

 

 

 

 

Interest expense

 

(17,765

)

 

 

(12,335

)

 

 

(35,464

)

 

 

(23,870

)

Other income, net

 

375

 

 

 

29

 

 

 

587

 

 

 

80

 

Total other expense, net

 

(17,390

)

 

 

(12,306

)

 

 

(34,877

)

 

 

(23,790

)

Income before income taxes

 

1,743

 

 

 

754

 

 

 

1,104

 

 

 

96

 

Income tax expense

 

2,355

 

 

 

467

 

 

 

2,222

 

 

 

142

 

Net (loss) income

 

(612

)

 

 

287

 

 

 

(1,118

)

 

 

(46

)

Less: Dividends and accretion attributable to redeemable senior preferred stockholders

 

(11,765

)

 

 

(8,549

)

 

 

(23,060

)

 

 

(16,949

)

Loss attributable to common stockholders

 

(12,377

)

 

 

(8,262

)

 

$

(24,178

)

 

$

(16,995

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

7

 

 

 

 

 

 

31

 

 

 

 

Comprehensive loss

$

(12,370

)

 

$

(8,262

)

 

$

(24,147

)

 

$

(16,995

)

 

 

 

 

 

 

 

 

Loss per common share:

 

 

 

 

 

 

 

Basic and diluted

$

(0.16

)

 

$

(0.11

)

 

$

(0.31

)

 

$

(0.22

)

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

Basic and diluted

 

78,292

 

 

 

78,603

 

 

 

78,213

 

 

 

78,600

 

 

Priority Technology Holdings, Inc.

Unaudited Consolidated Balance Sheets

 

(in thousands)

 

 

 

 

June 30, 2023

 

December 31, 2022

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

17,567

 

 

$

18,454

 

Restricted cash

 

12,357

 

 

 

10,582

 

Accounts receivable, net of allowances

 

60,130

 

 

 

78,113

 

Prepaid expenses and other current assets

 

14,608

 

 

 

11,832

 

Current portion of notes receivable

 

2,530

 

 

 

1,471

 

Settlement assets and customer/subscriber account balances

 

710,705

 

 

 

532,018

 

Total current assets

 

817,897

 

 

 

652,470

 

Notes receivable, less current portion

 

3,018

 

 

 

3,191

 

Property, equipment and software, net

 

38,984

 

 

 

34,687

 

Goodwill

 

368,740

 

 

 

369,337

 

Intangible assets, net

 

269,428

 

 

 

288,794

 

Deferred income taxes, net

 

26,066

 

 

 

16,447

 

Other noncurrent assets

 

8,147

 

 

 

8,437

 

Total assets

$

1,532,280

 

 

 

1,373,363

 

Liabilities, Redeemable Senior Preferred Stock and Stockholders’ Deficit

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued expenses

$

59,839

 

 

$

51,864

 

Accrued residual commissions

 

34,614

 

 

 

35,979

 

Customer deposits and advance payments

 

3,253

 

 

 

2,618

 

Current portion of long-term debt

 

6,200

 

 

 

6,200

 

Settlement and customer/subscriber account obligations

 

710,551

 

 

 

533,340

 

Total current liabilities

 

814,457

 

 

 

630,001

 

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

 

589,932

 

 

 

598,926

 

Other noncurrent liabilities

 

11,752

 

 

 

11,643

 

Total noncurrent liabilities

 

601,684

 

 

 

610,569

 

Total liabilities

 

1,416,141

 

 

 

1,240,570

 

Redeemable senior preferred stock

 

240,731

 

 

 

235,579

 

Stockholders’ deficit:

 

 

 

Preferred stock

 

 

 

 

 

Common stock

 

76

 

 

 

76

 

Treasury stock, at cost

 

(12,577

)

 

 

(11,559

)

Additional paid-in capital

 

 

 

 

9,650

 

Accumulated other comprehensive income

 

31

 

 

 

 

Accumulated deficit

 

(112,974

)

 

 

(102,208

)

Total stockholders’ deficit attributable to stockholders of PRTH

 

(125,444

)

 

 

(104,041

)

Non-controlling interest

 

852

 

 

 

1,255

 

Total stockholders’ deficit

 

(124,592

)

 

 

(102,786

)

Total liabilities, redeemable senior preferred stock and stockholders’ deficit

$

1,532,280

 

 

$

1,373,363

 

 

Priority Technology Holdings, Inc.

Unaudited Consolidated Statements of Cash Flows

 

(in thousands)

Six Months Ended June 30,

 

 

2023

 

 

 

2022

 

Cash flows from operating activities:

 

 

 

Net loss

$

(1,118

)

 

$

(46

)

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

 

 

 

Depreciation and amortization of assets

 

36,028

 

 

 

34,858

 

Stock-based compensation

 

3,682

 

 

 

3,100

 

Amortization of debt issuance costs and discounts

 

1,826

 

 

 

1,719

 

Deferred income tax

 

(9,619

)

 

 

(3,053

)

Change in contingent consideration

 

346

 

 

 

 

Other non-cash items, net

 

(461

)

 

 

 

Change in operating assets and liabilities:

 

 

 

Accounts receivable

 

18,066

 

 

 

(12,015

)

Prepaid expenses and other current assets

 

(3,560

)

 

 

(4,445

)

Income taxes (receivable) payable

 

498

 

 

 

(304

)

Notes receivable

 

(389

)

 

 

297

 

Accounts payable and other accrued liabilities

 

1,306

 

 

 

14,792

 

Customer deposits and advance payments

 

635

 

 

 

(3,957

)

Other assets and liabilities, net

 

(383

)

 

 

(612

)

Net cash provided by operating activities

 

46,857

 

 

 

30,334

 

Cash flows from investing activities:

 

 

 

Additions to property, equipment and software

 

(9,869

)

 

 

(6,011

)

Notes receivable, net

 

(498

)

 

 

(2,750

)

Acquisitions of assets and other investing activities

 

(2,715

)

 

 

(3,974

)

Net cash used in investing activities

 

(13,082

)

 

 

(12,735

)

Cash flows from financing activities:

 

 

 

Repayments of long-term debt

 

(3,525

)

 

 

(3,100

)

Borrowings under revolving credit facility

 

5,000

 

 

 

12,000

 

Repayments of borrowings under revolving credit facility

 

(12,000

)

 

 

(12,500

)

Repurchases of common stock and shares withheld for taxes

 

(1,018

)

 

 

(2,079

)

Dividends paid to redeemable senior preferred stockholders

 

(17,908

)

 

 

(7,076

)

Settlement and customer/subscriber accounts obligations, net

 

175,548

 

 

 

15,180

 

Payment of contingent consideration related to business combination

 

(1,959

)

 

 

(1,863

)

Net cash provided by financing activities

 

144,138

 

 

 

562

 

Net change in cash and cash equivalents, and restricted cash:

 

 

 

Net increase in cash and cash equivalents, and restricted cash

 

177,913

 

 

 

18,161

 

Cash and cash equivalents, and restricted cash at beginning of period

 

560,610

 

 

 

518,093

 

Cash and cash equivalents, and restricted cash equivalents at end of period

$

738,523

 

 

$

536,254

 

 

 

 

 

Reconciliation of cash and cash equivalents, and restricted cash:

 

 

 

Cash and cash equivalents

$

17,567

 

 

$

22,162

 

Restricted cash

 

12,357

 

 

 

11,717

 

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

 

708,599

 

 

 

502,375

 

Total cash and cash equivalents, and restricted cash

$

738,523

 

 

$

536,254

 

 

Priority Technology Holdings, Inc.

Unaudited Reportable Segments’ Results

 

(in thousands)

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

SMB Payments:

 

 

 

 

 

 

 

 

Revenue

 

$

147,895

 

 

$

142,506

 

 

$

302,828

 

 

$

272,465

 

Operating expenses

 

 

136,353

 

 

 

128,511

 

 

 

279,275

 

 

 

245,984

 

Operating income

 

$

11,542

 

 

$

13,995

 

 

$

23,553

 

 

$

26,481

 

Operating margin

 

 

7.8

%

 

 

9.8

%

 

 

7.8

%

 

 

9.7

%

Depreciation and amortization

 

$

10,769

 

 

$

10,980

 

 

$

21,615

 

 

$

21,804

 

Key indicators:

 

 

 

 

 

 

 

 

Merchant bankcard processing dollar value

 

$

15,111,781

 

 

$

15,402,560

 

 

$

30,332,495

 

 

$

29,479,407

 

Merchant bankcard transaction count

 

 

180,343

 

 

 

164,341

 

 

 

343,749

 

 

 

310,289

 

B2B Payments:

 

 

 

 

 

 

 

 

Revenue

 

$

2,971

 

 

$

5,295

 

 

$

5,757

 

 

$

11,220

 

Operating expenses

 

 

2,990

 

 

 

4,632

 

 

 

6,625

 

 

 

10,148

 

Operating (loss) income

 

$

(19

)

 

$

663

 

 

$

(868

)

 

$

1,072

 

Operating margin

 

 

(0.6

)%

 

 

12.5

%

 

 

(15.1

)%

 

 

9.6

%

Depreciation and amortization

 

$

127

 

 

$

73

 

 

$

252

 

 

$

146

 

Key indicators:

 

 

 

 

 

 

 

 

B2B issuing dollar volume

 

$

216,358

 

 

$

214,085

 

 

$

414,904

 

 

$

383,580

 

B2B issuing transaction count

 

 

282

 

 

 

247

 

 

 

562

 

 

 

435

 

Enterprise Payments:

 

 

 

 

 

 

 

 

Revenue

 

$

31,424

 

 

$

18,629

 

 

$

58,733

 

 

$

35,984

 

Operating expenses

 

 

15,345

 

 

 

12,931

 

 

 

29,991

 

 

 

25,792

 

Operating income

 

$

16,079

 

 

$

5,698

 

 

$

28,742

 

 

$

10,192

 

Operating margin

 

 

51.2

%

 

 

30.6

%

 

 

48.9

%

 

 

28.3

%

Depreciation and amortization

 

$

6,713

 

 

$

6,199

 

 

$

13,403

 

 

$

12,396

 

Key indicators:

 

 

 

 

 

 

 

 

Average billed clients

 

 

520,028

 

 

 

362,552

 

 

 

492,622

 

 

 

354,473

 

Average new enrollments

 

 

53,374

 

 

 

28,251

 

 

 

49,661

 

 

 

25,846

 

 

 

 

 

 

 

 

 

 

Operating income of reportable segments

 

$

27,602

 

 

$

20,356

 

 

$

51,427

 

 

$

37,745

 

Less: Corporate expense

 

 

(8,469

)

 

 

(7,296

)

 

 

(15,446

)

 

 

(13,859

)

Consolidated operating income

 

$

19,133

 

 

$

13,060

 

 

$

35,981

 

 

$

23,886

 

Corporate depreciation and amortization

 

$

371

 

 

$

253

 

 

$

758

 

 

$

512

 

 

Contacts

Priority Investor Inquiries:

Chris Kettmann

chris.kettmann@dentonsglobaladvisors.com
(773) 497-7575

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