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Priority Technology Holdings, Inc. Announces First Quarter Financial Results

Priority Technology Holdings, Inc. Announces First Quarter Financial Results

Strong First Quarter Revenue Growth Across all Business Segments

ALPHARETTA, Ga.–(BUSINESS WIRE)–May 11, 2022–
Priority Technology Holdings, Inc. (NASDAQ: PRTH) (“Priority” or the “Company”), a leading payments technology company helping customers collect, store and send money, today announced its first quarter 2022 financial results including strong quarter-over-quarter diversified revenue growth.

Highlights of Consolidated Results

First Quarter 2022, Compared with First Quarter 2021

Financial highlights of the first quarter of 2022 compared with the first quarter of 2021, are as follows:

  • Revenue of $153.2 million increased 35.2% from $113.3 million.
  • Gross profit (a non-GAAP measure1) of $51.8 million increased $20.4 million from $31.4 million.
  • Gross profit margin (a non-GAAP measure1) of 33.8% increased 610 basis points from 27.7%.
  • Operating income of $10.8 million increased 140.0% from $4.5 million.
  • Adjusted EBITDA (a non-GAAP measure1) of $30.3 million increased 68.3% from $18.0 million.

1 See “Non-GAAP Financial Measures” and the reconciliations of Gross Profit, Gross Profit Margin, and Adjusted EBITDA, to their most comparable GAAP measures provided below for additional information.

“The momentum we established in 2021 continued to build in the first quarter of 2022 driven by strong growth in each of our business segments,” said Tom Priore, Chairman and CEO of Priority. “Priority’s modern commerce platform is being embraced by customers in SMB, B2B and Enterprise payments and our results – particularly through the recent economic turbulence – clearly demonstrate our strong competitive positioning that can continue to achieve industry leading performance.”

Full Year 2022 Financial Guidance

Priority’s outlook remains strong and we are reaffirming our full-year 2022 guidance.

  • Revenue is forecasted to range between $650 million to $665 million, a growth rate of 26% to 29%.
  • Adjusted EBITDA (a non-GAAP measure) is forecasted to range between $145 million to $150 million, a growth rate of 51% to 56%.

Conference Call

Priority Technology Holdings, Inc.’s leadership will host a conference call on Wednesday, May 11, 2022 at 11:00 a.m. EDT to discuss its first quarter 2022 financial results. Participants can access the call by phone in the U.S. or Canada at (877) 501-3161 or internationally at (786) 815-8443.

The Internet webcast link and accompanying slide presentation can be accessed at https://edge.media-server.com/mmc/p/sorgi7rd and will also be posted in the “Investor Relations” section of the Company’s website at www.PRTH.com.

An audio replay of the call will be available shortly after the conference call until May 18, 2022 at 2:00 p.m. EDT. To listen to the audio replay, dial (855) 859-2056 or (404) 537-3406 and enter conference ID number 7068926. Alternatively, you may access the webcast replay in the “Investor Relations” section of the Company’s website at www.PRTH.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.

Gross Profit and Gross Profit Margin

The Company’s non-GAAP gross profit metric represents revenues less costs of services. Gross profit margin is gross profit divided by revenues. We review these non-GAAP measures to evaluate our underlying profit trends. The reconciliation of gross profit to its most comparable GAAP measure is provided below:

(in thousands)

Three Months Ended March 31,

2022

2021

Revenues

$

153,239

$

113,297

Costs of services

(101,480

)

(81,863

)

Gross profit

$

51,759

$

31,434

Gross profit margin

33.8

%

27.7

%

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,

2022

2021

Net loss

$

(333

)

$

(2,679

)

Interest expense

11,535

9,168

Income tax benefit

(325

)

(2,231

)

Depreciation and amortization

17,353

9,070

EBITDA

28,230

13,328

Selling, general and administrative

310

3,627

Non-cash stock-based compensation

1,558

558

Other non-operating expense

225

488

Adjusted EBITDA

$

30,323

$

18,001

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,

2022

2021

Selling, general and administrative expenses:

Certain legal fees

$

164

$

1,843

Professional, accounting and consulting fees

146

1,784

$

310

$

3,627

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 powerhouse driving the convergence of payments and banking. The company has built a single platform to collect, store, and send money that operates at scale. We help our customers take and make payments while managing business and consumer operating accounts to monetize payment networks. Our tailored, agile technology powers high-value, payments products bolstered by our industry-leading personalized support. Additional information can be found at www.PRTH.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 2022 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 17, 2022. These filings are available online at www.sec.gov or www.PRTH.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 March 31,

2022

2021

Revenues

$

153,239

$

113,297

Operating expenses

Costs of services

101,480

81,863

Salary and employee benefits

16,077

9,548

Depreciation and amortization

17,353

9,070

Selling, general and administrative

7,503

8,289

Total operating expenses

142,413

108,770

Operating income

10,826

4,527

Other (expense) income

Interest expense

(11,535

)

(9,168

)

Other income (expense), net

51

(269

)

Total other expense, net

(11,484

)

(9,437

)

Loss before income taxes

(658

)

(4,910

)

Income tax benefit

(325

)

(2,231

)

Net loss

(333

)

(2,679

)

Less: Dividends and accretion attributable to redeemable senior preferred stockholders

(8,400

)

Net loss attributable to common stockholders

$

(8,733

)

$

(2,679

)

Loss per common share:

Basic and diluted

$

(0.11

)

$

(0.04

)

Weighted-average common shares outstanding:

Basic and diluted

78,597

67,543

 

Priority Technology Holdings, Inc.

Unaudited Consolidated Balance Sheets

 

(in thousands)

March 31, 2022

December 31, 2021

Assets

Current assets:

Cash and cash equivalents

$

13,557

$

20,300

Restricted cash

13,588

28,859

Accounts receivable, net of allowances

72,863

58,423

Prepaid expenses and other current assets

12,378

15,807

Current portion of notes receivable

652

272

Settlement assets and customer account balances

498,616

479,471

Total current assets

611,654

603,132

Notes receivable, less current portion

2,027

105

Property, equipment and software, net

25,397

25,233

Goodwill

365,740

365,740

Intangible assets, net

325,084

340,211

Deferred income taxes, net

11,493

8,265

Other noncurrent assets

8,944

9,256

Total assets

$

1,350,339

$

1,351,942

Liabilities, Redeemable Senior Preferred Stock and Stockholders’ Deficit

Current liabilities:

Accounts payable and accrued expenses

$

43,464

$

42,523

Accrued residual commissions

34,372

29,532

Customer deposits and advance payments

5,008

5,021

Current portion of long-term debt

6,200

6,200

Settlement and customer account obligations

503,731

500,291

Total current liabilities

592,775

583,567

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

598,403

604,105

Other noncurrent liabilities

15,677

18,349

Total noncurrent liabilities

614,080

622,454

Total liabilities

1,206,855

1,206,021

Redeemable senior preferred stock

215,053

210,158

Stockholders’ deficit:

Preferred stock

Common stock

78

77

Treasury stock, at cost

(4,248

)

(4,091

)

Additional paid-in capital

32,992

39,835

Accumulated deficit

(100,391

)

(100,058

)

Total stockholders’ deficit

(71,569

)

(64,237

)

Total liabilities, redeemable senior preferred stock and stockholders’ deficit

$

1,350,339

$

1,351,942

 

Priority Technology Holdings, Inc.

Unaudited Consolidated Statements of Cash Flows

 

(in thousands)

Three Months Ended March 31,

2022

2021

Cash flows from operating activities:

Net loss

$

(333

)

$

(2,679

)

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

Depreciation and amortization of assets

17,353

9,070

Stock-based compensation

1,558

558

Amortization of debt issuance costs and discounts

848

590

Deferred income tax benefit

(3,227

)

(2,299

)

PIK interest

1,924

Other non-cash items, net

(64

)

Change in operating assets and liabilities:

Accounts receivable

(14,440

)

(9,575

)

Prepaid expenses and other current assets

164

(539

)

Income taxes payable (receivable)

2,913

(44

)

Notes receivable

98

862

Accounts payable and other accrued liabilities

5,316

8,633

Customer deposits and advance payments

(13

)

2,604

Other assets and liabilities, net

(624

)

59

Net cash provided by operating activities

9,613

9,100

Cash flows from investing activities:

Additions to property, equipment and software

(2,370

)

(2,754

)

Notes receivable loan funding

(2,400

)

Acquisitions of intangible assets

(941

)

(2,937

)

Net cash used in investing activities

(5,711

)

(5,691

)

Cash flows from financing activities:

Repayments of long-term debt

(1,550

)

(4,860

)

Repayments of borrowings under revolving credit facility

(5,000

)

Dividends paid to redeemable senior preferred stockholders

(3,505

)

Settlement and customer accounts obligations, net

12,749

(22,526

)

Other financing activities

(156

)

617

Net cash provided by (used in) financing activities

2,538

(26,769

)

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

Net increase in cash and cash equivalents, and restricted cash

6,440

(23,360

)

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

518,093

88,120

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

$

524,533

$

64,760

Reconciliation of cash and cash equivalents, and restricted cash:

Cash and cash equivalents

$

13,557

$

5,827

Restricted cash

13,588

58,933

Customer account balances

497,388

Total cash and cash equivalents, and restricted cash

$

524,533

$

64,760

 

Priority Technology Holdings, Inc.

Reportable Segments’ Results

 

(in thousands)

Three Months Ended March 31,

2022

2021

SMB Payments:

Revenue

$

129,959

$

109,101

Operating expenses

117,473

95,812

Operating income

$

12,486

$

13,289

Operating margin

9.6

%

12.2

%

Depreciation and amortization

$

10,824

$

8,708

Key indicators:

Merchant bankcard processing dollar value

$

14,076,847

$

11,883,166

Merchant bankcard transaction volume

145,948

127,583

B2B Payments:

Revenue

$

5,925

$

3,500

Operating expenses

5,516

3,909

Operating income (loss)

$

409

$

(409

)

Operating margin

6.9

%

(11.7

) %

Depreciation and amortization

$

73

$

74

Key indicators:

Merchant bankcard processing dollar value

$

108,407

$

63,650

Merchant bankcard transaction volume

88

39

Enterprise Payments:

Revenue

$

17,355

$

696

Operating expenses

12,861

532

Operating income

$

4,494

$

164

Operating margin

25.9

%

23.6

%

Depreciation and amortization

$

6,197

$

Key indicators:

Merchant bankcard processing dollar value

$

216,398

$

Merchant bankcard transaction volume

372

Operating income of reportable segments

$

17,389

$

13,044

Less: Corporate expense

(6,563

)

(8,517

)

Consolidated operating income

$

10,826

$

4,527

Corporate depreciation and amortization

$

259

$

288

Key indicators:

Merchant bankcard processing dollar value

$

14,401,652

$

11,946,816

Merchant bankcard transaction volume

146,408

127,622

Priority Investor Inquiries:

Chris Kettmann

ckettmann@lincolnchurchilladvisors.com

(773) 497-7575

Source: Priority Technology Holdings, Inc.