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//: PRESS RELEASES

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
[email protected]
(773) 497-7575

Source: Priority Technology Holdings, Inc.