Thank you for contacting us, we will be in touch shortly.

Priority Technology Holdings, Inc. Announces Fourth Quarter 2022 and Full Year Financial Results

March 23, 2023  |  Press Release

Fourth Quarter Revenue and Adjusted Gross Profit (a Non-GAAP measure1) Growth Driven by Strong Performance Across all Business Segments

ALPHARETTA, Ga.–(BUSINESS WIRE)–Mar. 23, 2023–
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 fourth quarter and full year 2022 financial results including strong quarter-over-quarter and year-over-year diversified revenue growth.

Highlights of Consolidated Results

Fourth Quarter 2022, Compared with Fourth Quarter 2021

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

  • Revenue of $177.6 million increased 23.3% from $144.0 million.
  • Adjusted gross profit (a non-GAAP measure1) of $61.0 million increased 25.3% from $48.7 million.
  • Adjusted gross profit margin (a non-GAAP measure1) of 34.3% increased 50 basis points from 33.8%.
  • Operating income of $18.2 million increased 41.1% from $12.9 million.
  • Adjusted EBITDA (a non-GAAP measure1) of $39.8 million increased 21.0% from $32.9 million

Full Year 2022, Compared with Full Year 2021

Financial highlights of the full year 2022 compared with the full year 2021, are as follows:

  • Revenue of $663.6 million increased 28.9% from $514.9 million.
  • Adjusted gross profit (a non-GAAP measure1) of $226.9 million increased 46.4% from $155.0 million.
  • Adjusted gross profit margin (a non-GAAP measure1) of 34.2% increased 410 basis points from 30.1%.
  • Operating income of $56.2 million increased 69.8% from $33.1 million.
  • Adjusted EBITDA (a non-GAAP measure1) of $140.3 million increased 45.7% from $96.3 million.

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.

“Our outstanding fourth quarter and full year results reflect the strength of our market-leading unified commerce platform. Our business has been purpose-built to perform despite challenging economic environments like we have today. The results demonstrate that we are executing,” said Tom Priore, Chairman & CEO of Priority. “Looking ahead, we will remain focused on our mission to deliver payments and banking as a service solutions for our SMB, B2B and Enterprise payments partners and driving long term value for our shareholders.”

Full Year 2023 Financial Guidance

Priority’s outlook remains strong, which is reflected in our full year 2023 guidance:

  • Revenue forecasted to range between $740 million to $755 million, a growth rate of 12% to 14%.
  • Adjusted EBITDA (a non-GAAP measure) is forecasted to range between $160 million to $165 million, a growth rate of 14% to 18%.

Conference Call

Priority Technology Holdings, Inc.’s leadership will host a conference call on Thursday, March 23, 2023 at 11:00 a.m. EDT to discuss its fourth quarter 2022 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/gw4f4523 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 March 30, 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 5272926. 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

December 31,

Years Ended

December 31,

2022

2021

2022

2021

Revenues

$

177,555

$

144,048

$

663,641

$

514,901

Cost of revenue (excluding depreciation and amortization)

(116,566

)

(95,358

)

(436,753

)

(359,885

)

Adjusted gross profit

60,989

48,690

226,888

155,016

Adjusted gross profit margin

34.3

%

33.8

%

34.2

%

30.1

%

Depreciation and amortization of revenue generating assets

(2,762

)

(2,401

)

(10,355

)

(6,940

)

Gross profit

58,227

46,289

216,533

148,076

Gross profit margin

32.8

%

32.1

%

32.6

%

28.8

%

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

December 31,

Years Ended

December 31,

2022

2021

2022

2021

Net (loss) income

$

(1,312

)

$

14,094

$

(2,150

)

$

1,389

Interest expense

16,272

11,877

53,554

36,485

Income tax expense (benefit)

3,517

(5,307

)

5,350

(5,258

)

Depreciation and amortization

18,006

17,574

70,681

49,697

EBITDA

36,483

38,238

127,435

82,313

Debt extinguishment and modification

8,322

Gain on sale of business and investment

(7,643

)

(7,643

)

Selling, general and administrative (non-recurring)

1,112

1,403

5,395

10,089

Non-cash stock-based compensation

2,024

864

6,228

3,213

Change in the fair value of contingent consideration

172

1,244

Adjusted EBITDA

$

39,791

$

32,862

$

140,302

$

96,294

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

December 31,

Years Ended

December 31,

2022

2021

2022

2021

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

Certain legal fees

$

340

$

170

$

916

$

7,291

Professional, accounting and consulting fees

641

1,300

Other expenses

131

1,233

3,179

2,798

$

1,112

$

1,403

$

5,395

$

10,089

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

December 31,

Years Ended

December 31,

2022

2021

2022

2021

Revenues

$

177,555

$

144,048

$

663,641

$

514,901

Operating expenses

Cost of revenue (excludes depreciation and amortization)

116,566

95,358

436,753

359,885

Salary and employee benefits

16,846

12,010

65,077

43,818

Depreciation and amortization

18,006

17,574

70,681

49,697

Selling, general and administrative

7,938

6,195

34,965

28,408

Total operating expenses

159,356

131,137

607,476

481,808

Operating income

18,199

12,911

56,165

33,093

Other (expense) income

Interest expense

(16,272

)

(11,877

)

(53,554

)

(36,485

)

Debt extinguishment and modification costs

(8,322

)

Gain on sale of business and investment

7,643

7,643

Other income, net

278

110

589

202

Total other expense, net

(15,994

)

(4,124

)

(52,965

)

(36,962

)

Income (loss) before income taxes

2,205

8,787

3,200

(3,869

)

Income tax expense (benefit)

3,517

(5,307

)

5,350

(5,258

)

Net (loss) income

(1,312

)

14,094

(2,150

)

1,389

Less: Dividends and accretion attributable to redeemable senior preferred stockholders

(10,465

)

(8,285

)

(36,880

)

(18,009

)

Less: Non-controlling interest preferred unit redemptions

2,756

(8,021

)

Net (loss) income attributable to common stockholders

$

(11,777

)

$

8,565

$

(39,030

)

$

(24,641

)

(Loss) earnings per common share:

Basic

$

(0.15

)

$

0.11

$

(0.50

)

$

(0.34

)

Diluted

$

(0.15

)

$

0.11

$

(0.50

)

$

(0.34

)

Weighted-average common shares outstanding:

Basic and diluted

77,984

78,467

78,233

71,902

Diluted

77,984

79,013

78,233

71,902

`

Priority Technology Holdings, Inc.

Unaudited Consolidated Balance Sheets

 

(in thousands)

December 31, 2022

December 31, 2021

Assets

Current assets:

Cash and cash equivalents

$

18,454

$

20,300

Restricted cash

10,582

28,859

Accounts receivable, net of allowances

78,113

58,423

Prepaid expenses and other current assets

11,832

15,807

Current portion of notes receivable

1,471

272

Settlement assets and customer/subscriber account balances

532,018

479,471

Total current assets

652,470

603,132

Notes receivable, less current portion

3,191

105

Property, equipment and software, net

34,687

25,233

Goodwill

369,337

365,740

Intangible assets, net

288,794

340,211

Deferred income taxes, net

16,447

8,265

Other noncurrent assets

8,437

9,256

Total assets

$

1,373,363

$

1,351,942

Liabilities, Redeemable Senior Preferred Stock and Stockholders’ Deficit

Current liabilities:

Accounts payable and accrued expenses

$

51,864

$

42,523

Accrued residual commissions

35,979

29,532

Customer deposits and advance payments

2,618

5,021

Current portion of long-term debt

6,200

6,200

Settlement and customer/subscriber account obligations

533,340

500,291

Total current liabilities

630,001

583,567

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

598,926

604,105

Other noncurrent liabilities

11,643

18,349

Total noncurrent liabilities

610,569

622,454

Total liabilities

1,240,570

1,206,021

Redeemable senior preferred stock

235,579

210,158

Stockholders’ deficit:

Preferred stock

Common stock

76

77

Additional paid-in capital

9,650

39,835

Treasury stock, at cost

(11,559

)

(4,091

)

Accumulated deficit

(102,208

)

(100,058

)

Total stockholders’ deficit attributable to stockholders of PRTH

(104,041

)

(64,237

)

Non-controlling interest

1,255

Total stockholders’ deficit

(102,786

)

(64,237

)

Total liabilities, redeemable senior preferred stock and stockholders’ deficit

$

1,373,363

$

1,351,942

Priority Technology Holdings, Inc.

Unaudited Consolidated Statements of Cash Flows

 

(in thousands)

Years Ended December 31,

2022

2021

Cash flows from operating activities:

Net (loss) income

$

(2,150

)

$

1,389

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

Gain and transaction costs recognized on sale of business and investment

(7,643

)

Depreciation and amortization of assets

70,681

49,697

Stock-based compensation

6,228

3,213

Amortization of debt issuance costs and discounts

3,521

2,305

Write-off of deferred loan costs and discount

2,580

Deferred income tax

(8,183

)

(2,559

)

Change in contingent consideration

2,059

PIK interest (paid)

(23,715

)

Other non-cash items, net

74

462

Change in operating assets and liabilities:

Accounts receivable

(19,580

)

(16,694

)

Prepaid expenses and other current assets

(160

)

(1,597

)

Income taxes (receivable) payable

6,260

(5,107

)

Notes receivable

377

333

Accounts payable and other accrued liabilities

19,794

7,018

Customer deposits and advance payments

(2,403

)

2,138

Other assets and liabilities, net

(6,000

)

(2,443

)

Net cash provided by operating activities

70,518

9,377

Cash flows from investing activities:

Acquisitions of businesses, net of cash acquired

(4,976

)

(407,129

)

Proceeds from sale of business and investment

15,278

Additions to property, equipment and software

(18,882

)

(9,719

)

Notes receivable loan funding

(4,662

)

Acquisitions of assets and other investing activities

(7,983

)

(49,463

)

Net cash (used in) provided by investing activities

(36,503

)

(451,033

)

Cash flows from financing activities:

Proceeds from issuance of long-term debt, net of issue discount

607,318

Debt issuance and modification costs paid

(9,073

)

Repayments of long-term debt

(6,200

)

(361,425

)

Borrowings under revolving credit facility

29,500

30,000

Repayments of borrowings under revolving credit facility

(32,000

)

(15,000

)

Proceeds from the issuance of redeemable senior preferred stock, net of discount

219,062

Redeemable senior preferred stock issuance fees and costs

(8,098

)

Repurchases of Common Stock and shares withheld for taxes

(7,468

)

(1,703

)

Dividends paid to redeemable senior preferred stockholders

(11,459

)

(7,460

)

Profit distributions to redeemable NCIs of subsidiaries

(815

)

Proceeds from exercise of stock options

1,196

Settlement and customer/subscriber accounts obligations, net

43,143

417,627

Payment of contingent consideration

(7,014

)

Net cash (used in) provided by financing activities

8,502

871,629

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

Net increase in cash and cash equivalents, and restricted cash

42,517

429,973

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

$

560,610

$

518,093

Reconciliation of cash and cash equivalents, and restricted cash:

Cash and cash equivalents

$

18,454

$

20,300

Restricted cash

10,582

28,859

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

531,574

468,934

Total cash and cash equivalents, and restricted cash

$

560,610

$

518,093

Priority Technology Holdings, Inc.

Unaudited Reportable Segments’ Results

 

(in thousands)

Three Months Ended

December 31,

Years Ended

December 31,

2022

2021

2022

2021

SMB Payments:

Revenue

$

149,880

$

121,482

$

562,237

$

475,630

Operating expenses

134,942

110,978

507,371

422,746

Operating income

$

14,938

$

10,504

$

54,866

$

52,884

Operating margin

10.0

%

8.6

%

9.8

%

11.1

%

Depreciation and amortization

$

11,081

$

11,014

$

43,925

$

41,144

Key indicators:

Merchant bankcard processing dollar value

$

14,862,635

$

13,847,825

$

59,440,491

$

53,411,622

Merchant bankcard transaction volume

160,492

147,138

636,576

578,102

B2B Payments:

Revenue

$

2,802

$

5,416

$

18,890

$

17,138

Operating expenses

3,883

4,865

18,682

17,003

Operating income (loss)

$

(1,081

)

$

551

$

208

$

135

Operating margin

(38.6

)%

10.2

%

1.1

%

0.8

%

Depreciation and amortization

$

303

$

74

$

744

$

294

Key indicators:

Merchant bankcard processing dollar value

$

146,595

$

97,447

$

526,812

$

323,502

Merchant bankcard transaction volume

65

77

304

220

Enterprise Payments:

Revenue

$

24,873

$

17,150

$

82,514

$

22,133

Operating expenses

13,440

11,952

51,577

15,370

Operating income

$

11,433

$

5,198

$

30,937

$

6,763

Operating margin

46.0

%

30.3

%

37.5

%

30.6

%

Depreciation and amortization

$

6,293

$

6,219

$

24,892

$

7,158

Key indicators:

Merchant bankcard processing dollar value

$

571,485

$

13,573

$

1,760,518

$

52,376

Merchant bankcard transaction volume

756

144

2,779

549

Average billed clients

424,601

341,339

380,233

345,828

Operating income of reportable segments

$

25,290

$

16,253

$

86,011

$

59,782

Less: Corporate expense

(7,091

)

(3,342

)

(29,846

)

(26,689

)

Consolidated operating income

$

18,199

$

12,911

$

56,165

$

33,093

Corporate depreciation and amortization

$

329

$

267

$

1,120

$

1,101

Key indicators:

Merchant bankcard processing dollar value

$

15,580,715

$

13,958,845

$

61,727,821

$

53,787,500

Merchant bankcard transaction volume

161,313

147,359

639,659

578,871

Average number of billed clients

424,601

341,339

380,233

345,828

Priority Investor Inquiries:

Chris Kettmann

ckettmann@lincolnchurchilladvisors.com

(773) 497-7575

Source: Priority Technology Holdings, Inc.