0001653558-19-000019 | 10-Q | XBRL Viewer | Priority Technology Holdings INC

INCOME TAXES - (Tables)

9 Months Ended

Sep. 30, 2019

Schedule of Income Tax (Benefit) Provision

The components of the Company's provision (benefit) for federal and state income taxes were as follows:



(in thousands)	Quarter Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018

Deferred tax benefit	$	(1,667	)	$	(991	)	$	(5,376	)	$	(991	)
Provision (adjustment) for DTA valuation allowance	(78		)	—			5,197			—
Provision for DTA valuation allowance - discrete item	9			—			2,647			—
Total income tax (benefit) provision	$	(1,736	)	$	(991	)	$	2,468		$	(991	)

DTA = Deferred income tax asset

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

9 Months Ended

Sep. 30, 2019

Accounts Payable [Abstract]

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The Company accrues for certain expenses that have been incurred and not paid, which are classified within accounts payable and accrued expenses in the accompanying consolidated balance sheets.

The components of accounts payable and accrued expenses that exceeded five percent of total current liabilities at either September 30, 2019 or December 31, 2018 consisted of the following:



(in thousands)	September 30, 2019		December 31, 2018
Accounts payable	$	5,531	$	8,030
Accrued compensation	$	3,423	$	6,193
Accrued network fees	$	9,301	$	6,971

LOSS PER SHARE - Schedule of Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Numerator:
Net loss	$ (5,844)	$ (2,562)	$ (26,420)	$ (11,367)
Less: Distributions to participating securities	0	0	0	(45)
Net loss attributable to common stockholders	$ (5,844)	$ (2,562)	$ (26,420)	$ (11,412)
Denominator:
Weighted-average shares outstanding (in shares)	67,007	64,152	67,109	60,339
Basic loss per common share (in dollars per share)	$ (0.09)	$ (0.04)	$ (0.39)	$ (0.19)
Numerator [Abstract]
Less: Gain on warrant liability	$ 0	$ (72)	$ 0	$ 0
Net loss attributable to common shareholders	$ (5,844)	$ (2,634)	$ (26,420)	$ (11,412)
Denominator [Abstract]
Dilutive common share equivalents (in shares)	0	392	0	0
Weighted-average dilutive shares outstanding (in shares)	67,007	64,544	67,109	60,339
Diluted loss per common share (in dollars per share)	$ (0.09)	$ (0.04)	$ (0.39)	$ (0.19)

Cover - shares	9 Months Ended
Cover - shares	Sep. 30, 2019	Nov. 08, 2019
Cover page.
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2019
Document Transition Report	false
Entity File Number	001-37872
Entity Registrant Name	Priority Technology Holdings, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	47-4257046
Entity Address, Address Line One	2001 Westside Parkway
Entity Address, Address Line Two	Suite 155
Entity Address, City or Town	Alpharetta,
Entity Address, State or Province	GA
Entity Address, Postal Zip Code	30004
City Area Code	(800)
Local Phone Number	935-5964
Title of 12(b) Security	Common stock, par value $0.001
Trading Symbol	PRTH
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		67,007,172
Entity Central Index Key	0001653558
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2019

PROPERTY, EQUIPMENT AND SOFTWARE - Narrative and Schedule of Property, Equipment, and Software (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Property, Plant and Equipment [Line Items]
Property, equipment and software, gross	$ 52,817		$ 52,817		$ 44,157
Less accumulated depreciation	(31,421)		(31,421)		(26,675)
Property, equipment, and software, net	21,396		21,396		17,482
Depreciation expense	1,700	$ 1,100	4,700	$ 3,400
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Property, equipment and software, gross	2,337		$ 2,337		2,254
Furniture and fixtures \| Minimum
Property, Plant and Equipment [Line Items]
Useful Life			2 years
Furniture and fixtures \| Maximum
Property, Plant and Equipment [Line Items]
Useful Life			7 years
Equipment
Property, Plant and Equipment [Line Items]
Property, equipment and software, gross	10,287		$ 10,287		8,164
Equipment \| Minimum
Property, Plant and Equipment [Line Items]
Useful Life			3 years
Equipment \| Maximum
Property, Plant and Equipment [Line Items]
Useful Life			7 years
Computer software
Property, Plant and Equipment [Line Items]
Property, equipment and software, gross	34,088		$ 34,088		27,804
Computer software \| Minimum
Property, Plant and Equipment [Line Items]
Useful Life			3 years
Computer software \| Maximum
Property, Plant and Equipment [Line Items]
Useful Life			5 years
Leasehold improvements
Property, Plant and Equipment [Line Items]
Property, equipment and software, gross	$ 6,105		$ 6,105		$ 5,935
Leasehold improvements \| Minimum
Property, Plant and Equipment [Line Items]
Useful Life			5 years
Leasehold improvements \| Maximum
Property, Plant and Equipment [Line Items]
Useful Life			10 years

SEGMENT INFORMATION - Reconciliation of Total Operating Income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Segment Reporting Information [Line Items]
Total income from operations of reportable segments	$ 2,725	$ 3,560	$ 6,127	$ 14,643
Interest expense	(10,463)	(7,334)	(30,602)	(21,893)
Plus (less) other, net	158	221	523	(5,108)
Income tax benefit (expense)	1,736	991	(2,468)	991
Net loss	(5,844)	(2,562)	(26,420)	(11,367)
Operating Segments
Segment Reporting Information [Line Items]
Total income from operations of reportable segments	7,841	11,438	22,529	36,093
Corporate
Segment Reporting Information [Line Items]
Total income from operations of reportable segments	$ (5,116)	$ (7,878)	$ (16,402)	$ (21,450)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

GOODWILL AND INTANGIBLE ASSETS - Narrative (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of intangible assets	$ 8,400,000	$ 3,800,000	$ 24,000,000.0	$ 9,300,000
Goodwill accumulated impairment loss	$ 0		$ 0		$ 0

INCOME TAXES

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

Prior to July 25, 2018, substantially all of the Company's operations were conducted through pass-through entities for income tax purposes, and as such the Company had no material income tax accounting reflected in its financial statements for financial reporting purposes since substantially all taxable income and deductions were "passed through" to unconsolidated owners. Effective July 25, 2018, the Company is a "C Corp" and reports its income and deductions for income tax purposes. Accordingly, effective July 25, 2018, the consolidated financial statements of the Company reflect the accounting for income taxes in accordance with

ASC 740, Income Taxes. The Company's unaudited condensed consolidated financial statements for the quarter and nine months ended September 30, 2018 reflect unaudited pro-forma income tax disclosure amounts to illustrate the income tax effects had the Company been subject to federal and state income taxes.

Income Tax Expense (Benefit)

The components of the Company's provision (benefit) for federal and state income taxes were as follows:



(in thousands)	Quarter Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018

Deferred tax benefit	$	(1,667	)	$	(991	)	$	(5,376	)	$	(991	)
Provision (adjustment) for DTA valuation allowance	(78		)	—			5,197			—
Provision for DTA valuation allowance - discrete item	9			—			2,647			—
Total income tax (benefit) provision	$	(1,736	)	$	(991	)	$	2,468		$	(991	)

DTA = Deferred income tax asset

Valuation Allowance for Deferred Income Tax Assets

The Company considers all available positive and negative evidence to determine whether sufficient taxable income will be generated in the future to permit realization of the existing deferred tax assets. In accordance with the provisions of ASC 740, Income Taxes ("ASC 740"), the Company is required to provide a valuation allowance against deferred tax assets when it is "more likely than not" that some portion or all of the deferred tax assets will not be realized.

Among other provisions, the Tax Cuts and Jobs Act of 2017 amended Internal Revenue Code Section 163(j) to create limitations on the deductibility of business interest expense. Section 163(j) limits the business interest deduction to 30% of adjusted taxable income (ATI). For taxable years through 2021, the calculation of ATI closely aligns with earnings before interest, taxes, depreciation and amortization (EBITDA). Commencing in 2022, the ATI limitation more closely aligns with earnings before interest and taxes (EBIT), without adjusting for depreciation and amortization. Any business interest in excess of the annual limitation is carried forward indefinitely.

With respect to recording a deferred tax benefit for the carryforward of business interest, the Company is required to apply the "more likely than not" threshold for assessing recoverability. Based on management’s assessment, the Company recorded a valuation allowance in the first nine months of 2019 of $7.8 million for the business interest carryover comprised of (i) a discrete provision of $2.6 million associated with the 2018 business interest deferred tax asset and (ii) a provision of $5.2 million associated with the 2019 excess business interest.

The provisions for and adjustments to the valuation allowance are a component of income tax expense (benefit) in the Company's unaudited condensed consolidated statements of operations.

The Company will continue to evaluate the realizability of the deferred tax assets on a quarterly basis and, as a result, the valuation allowance may change in future periods.

Uncertain Tax Positions

The Company recognizes the tax effects of uncertain tax positions only if such positions are more likely than not to be sustained based solely upon its technical merits at the reporting date. The Company refers to the difference between the tax benefit recognized

in its financial statements and the tax benefit claimed in the income tax return as an "unrecognized tax benefit." As of September 30, 2019, the net amount of our unrecognized tax benefits was not material.

The Company is subject to U.S. federal income tax and income tax in multiple state jurisdictions. Tax periods for 2015 and all years thereafter remain open to examination by the federal and state taxing jurisdictions and tax periods for 2014 and all years thereafter remain open for certain state taxing jurisdictions to which the Company is subject.

RECONCILIATION OF STOCKHOLDERS' EQUITY (DEFICIT) AND NON-CONTROLLING INTEREST

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

RECONCILIATION OF STOCKHOLDERS' EQUITY (DEFICIT) AND NON-CONTROLLING INTEREST

The Company is authorized to issue 100,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the board of directors. As of September 30, 2019 and December 31, 2018, the Company has not issued any shares of preferred stock.

The following tables provide a reconciliation of the beginning and ending carrying amounts of equity (deficit) attributable to stockholders of the Company, and equity attributable to non-controlling interest for the periods presented:



(in thousands)												Additional Paid-In Capital		Accumulated (Deficit)			Total Priority Technology Holdings, Inc. Stockholders' (Deficit)			Non-Controlling Interest
	Preferred Stock			Common Stock				Treasury Stock
	Shares	Amount		Shares		Amount		Shares	Amount


January 1, 2019	—	$	—	67,038		$	67	—	$	—		$	—	$	(85,540	)	$	(85,473	)	$	—
Equity-based compensation	—	—		—		—		—	—			1,160		—			1,160			—
Warrant redemptions	—	—		420		(a)		—	—			(a)		—			—			—
Net loss	—	—		—		—		—	—			—		(6,446		)	(6,446		)	—
Issuance of non-controlling interest	—	—		—		—		—	—			—		—			—			5,654
March 31, 2019	—	—		67,458		67		—	—			1,160		(91,986		)	(90,759		)	5,654
Equity-based compensation	—	—		—		—		—	—			1,023		—			1,023			—
Repurchases of common stock	—	—		(451	)	—		451	(2,388		)	—		—			(2,388		)	—
Net loss	—	—		—		—		—	—			—		(14,130		)	(14,130		)	—
June 30, 2019	—	—		67,007		67		451	(2,388		)	2,183		(106,116		)	(106,254		)	5,654
Equity-based compensation	—	—		—		—		—	—			1,171		—			1,171			—
Net loss	—	—		—		—		—	—			—		(5,844		)	(5,844		)	—
September 30, 2019	—	$	—	67,007		$	67	451	$	(2,388	)	$	3,354	$	(111,960	)	$	(110,927	)	$	5,654

(a) Par value of the common shares issued in connection with the warrant exchange rounds to less than one thousand dollars (see Note 12, Equity).



(in thousands)									Additional Paid-In Capital			Accumulated (Deficit)			Total Priority Technology Holdings, Inc. Stockholders' (Deficit)			Non-Controlling Interest
	Preferred Stock			Common Stock
	Shares	Amount		Shares		Amount

January 1, 2018	—	$	—	73,110		$	73		$	—		$	(90,228	)	$	(90,155	)	$	—
Distribution to members (b)	—	—		—		—			(188		)	(3,836		)	(4,024		)	—
Member redemption (b)	—	—		(12,565	)	(13		)	—			(64,890		)	(64,903		)	—
Pro-rata adjustment for redemption (b)	—	—		(724	)	—			—			—			—			—
Equity-based compensation	—	—		—		—			188			—			188			—
Net loss	—	—		—		—			—			(3,177		)	(3,177		)	—
March 31, 2018	—	—		59,821		60			—			(162,131		)	(162,071		)	—
Distribution to members (b)	—	—		—		—			(607		)	(1,707		)	(2,314		)	—
Equity-based compensation	—	—		250		—			607			—			607			—
Net loss	—	—		—		—			—			(5,628		)	(5,628		)	—
June 30, 2018	—	—		60,071		60			—			(169,466		)	(169,406		)	—
Distribution to members (b)	—	—		—		—			(737		)	—			(737		)
Equity-based compensation	—	—		—		—			268			—			268			—
Conversion of MI Acquisitions shares (c)	—	—		6,676		7			7,291			42,091			49,389			—
Effects of Founders' Share Agreement (c)	—	—		(175	)	—			(2,118		)	—			(2,118		)	—
Recapitalization costs (c)	—	—		—		—			(9,704		)	—			(9,704		)	—
Net deferred income tax asset (c)	—	—		—		—			—			47,478			47,478			—
Common stock issued (d)	—	—		475		(e)			5,000			—			5,000			—
Net loss	—	—		—		—			—			(2,562		)	(2,562		)	—
September 30, 2018	—	$	—	67,047		$	67		$	—		$	(82,459	)	$	(82,392	)	$	—

(b) Before reverse acquisition and recapitalization on July 25, 2018. See "Corporate Matters" in Note 1, Nature of Business and Basis of Presentation.

(d) As partial consideration for two business acquisitions during the third quarter of 2018.

(e) Par value of 475,195 common shares issued rounds to less than one thousand thousand dollars.EQUITY

Repurchases of the Company's Common Stock

During the second quarter of 2019, the Company repurchased a total of 451,224 shares of its common stock at an average price of $5.29 per share. Total cash paid by the Company was approximately $2.4 million. The repurchases were authorized under a December 2018 resolution by the Company's board of directors, which expired during the second quarter of 2019.

Warrants for the Company's Common Stock

In August 2018, the Company was informed by Nasdaq that it intended to delist the Company's outstanding warrants and units due to an insufficient number of round lot holders for the public warrants. The Company subsequently filed a Registration Statement on Form S-4 with the SEC for the purpose of offering holders of the Company's outstanding 5,310,109 public warrants and 421,107 private warrants the opportunity to exchange each warrant for 0.192 shares of the Company's common stock. The exchange offer expired in February 2019 resulting in a portion of the warrants being tendered in exchange for approximately 420,000 shares of the Company's common stock plus cash in lieu of fractional shares. Nasdaq proceeded to delist the remaining outstanding warrants and units, which were comprised of one share of common stock and one warrant, from The Nasdaq Global Market at the open of business on March 6, 2019. The delisting of the remaining outstanding warrants and units had no impact on the Company's financial statements.

Earn-Out Consideration

An additional 9.8 million common shares may be issued under the Company's Earn-Out Incentive Plan. For the first earn-out of up to 4.9 million common shares, consolidated adjusted EBITDA (as defined in the Earn-Out Incentive Plan) of the Company must have been no less than $82.5 million for the year ended December 31, 2018 and the Company's stock price must trade in excess of $12.00 for any 20 trading days within any consecutive 30-day trading period at any time on or before December 31, 2019. For the second earn-out of up to 4.9 million common shares, consolidated adjusted EBITDA of the Company must be no less than $91.5 million for the year ending December 31, 2019 and the Company's stock price must trade in excess of $14.00 for any 20 trading days within any consecutive 30-day trading period at any time between January 1, 2019 and December 31, 2020. In the event that the first earn-out targets are not met, the entire 9.8 million shares may be issued if the second earn-out targets are met. As of September 30, 2019 and December 31 2018, none of the 9.8 million shares have been earned. Any unvested shares issued to management or directors under compensation plans will be expensed under the provisions of ASC 718, Stock Compensation.

PROPERTY, EQUIPMENT AND SOFTWARE

9 Months Ended

Sep. 30, 2019

Property, Plant and Equipment [Abstract]

PROPERTY, EQUIPMENT AND SOFTWARE

The Company's property, equipment, and software balance primarily consists of furniture, fixtures, and equipment used in the normal course of business, computer software developed for internal use, and leasehold improvements. Computer software represents purchased software and internally developed back office and merchant interfacing systems used to assist the reporting of merchant processing transactions and other related information.

A summary of property, equipment, and software as of September 30, 2019 and December 31, 2018 follows:



(in thousands)	September 30, 2019			December 31, 2018			Useful Life
Furniture and fixtures	$	2,337		$	2,254		2-7 years
Equipment	10,287			8,164			3-7 years
Computer software	34,088			27,804			3-5 years
Leasehold improvements	6,105			5,935			5-10 years
	52,817			44,157
Less accumulated depreciation	(31,421		)	(26,675		)
Property, equipment, and software, net	$	21,396		$	17,482

Depreciation expense for property, equipment, and software expense totaled $1.7 million and $1.1 million for the quarter ended September 30, 2019 and September 30, 2018, respectively, and $4.7 million and $3.4 million for the nine months ended September 30, 2019 and September 30, 2018, respectively.

SETTLEMENT ASSETS AND OBLIGATIONS - (Tables)

9 Months Ended

Sep. 30, 2019

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Settlement Assets

The Company's settlement assets and obligations at September 30, 2019 and December 31, 2018 were as follows:



(in thousands)	As of
Settlement Assets:	September 30, 2019		December 31, 2018
Card settlements due from merchants, net of estimated losses	$	480	$	988
Card settlements due from processors	276		54
Total settlement assets	$	756	$	1,042

Settlement Obligations:
Card settlements due to merchants	$	2,915	$	777
Due to ACH payees (1)	14,627		10,355
Total Settlement Obligations	$	17,542	$	11,132

(1) Amounts due to ACH payees are held by the Company in restricted cash.

Settlement Obligations

The Company's settlement assets and obligations at September 30, 2019 and December 31, 2018 were as follows:



(in thousands)	As of
Settlement Assets:	September 30, 2019		December 31, 2018
Card settlements due from merchants, net of estimated losses	$	480	$	988
Card settlements due from processors	276		54
Total settlement assets	$	756	$	1,042

Settlement Obligations:
Card settlements due to merchants	$	2,915	$	777
Due to ACH payees (1)	14,627		10,355
Total Settlement Obligations	$	17,542	$	11,132

(1) Amounts due to ACH payees are held by the Company in restricted cash.

FAIR VALUE - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended	9 Months Ended
	Jul. 25, 2018	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Payments for repurchase of warrants			$ 0	$ 12,701
Contingent consideration		$ 184	0	184
Notes receivable, fair value			5,200		$ 1,800
PPS Tech and PPS Northeast
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent consideration			$ 1,000		$ 1,000
Outstanding warrants on common stock
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Increase (decrease) in fair value of liability		$ (100)		$ 3,500
GS 1.8% Warrants \| Common Class A
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrant, percentage of outstanding stock available for purchase							1.80%
GS 2.2% Warrants
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Payments for repurchase of warrants	$ 12,700
GS 2.2% Warrants \| Common Class A
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrant, percentage of outstanding stock available for purchase						2.20%	2.20%
Warrant, term							7 years
Warrant exercise price (USD per share)							$ 0

GOODWILL AND INTANGIBLE ASSETS - Goodwill Allocation (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Goodwill [Line Items]
Goodwill	$ 109,515	$ 109,515
Consumer Payments
Goodwill [Line Items]
Goodwill	106,832	106,832
Commercial Payments
Goodwill [Line Items]
Goodwill	0	0
Integrated Partners
Goodwill [Line Items]
Goodwill	$ 2,683	$ 2,683

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Cash flows from operating activities:
Net loss	$ (26,420)	$ (11,367)
Adjustment to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization of assets	28,763	12,679
Equity-based compensation	3,354	1,063
Amortization of debt issuance costs and discounts	1,250	1,052
Equity in loss and impairment of unconsolidated entities	17	857
Provision for deferred income tax	(5,376)	(991)
Change in fair value of warrant liability	0	3,458
Provisions for allowance for deferred tax assets	7,844	0
Loss on debt extinguishment	0	541
Payment-in-kind interest	3,807	3,623
Other non-cash	(174)	0
Change in operating assets and liabilities, net of business combinations:
Accounts receivable	(1,840)	7,357
Settlement assets and obligations, net	6,696	5,764
Prepaid expenses and other current assets	(810)	412
Notes receivable	(376)	3,661
Accounts payable and other accrued liabilities	(6,091)	434
Customer deposits and advance payments	250	(3,055)
Other assets and liabilities	(277)	(652)
Net cash provided by operating activities	10,617	24,836
Cash flows from investing activities:
Payments for business acquisitions	(184)	(7,508)
Additions to property, equipment and software	(8,662)	(8,406)
Acquisitions of merchant portfolios and assets	(81,777)	(26,431)
Note receivable loan funding	(3,000)	0
Net cash used in investing activities	(93,623)	(42,345)
Cash flows from financing activities:
Proceeds from issuance of long-term debt, net of issue discount	69,650	67,113
Repayment of long-term debt	(2,827)	(2,011)
Debt issuance costs refunded (paid)	83	(322)
Borrowings under revolving credit facility	14,000	0
Repayments under revolving credit facility	(2,500)	0
Distributions to members prior to July 25, 2018 recapitalization	0	(7,075)
Redemptions of membership interests prior to July 25, 2018 recapitalization	0	(74,093)
Recapitalization proceeds	0	49,389
Repurchases of common stock	(2,388)	0
Founders shares redemptions	0	(2,118)
Redemption of warrants	0	(12,701)
Recapitalization costs	0	(9,355)
Net cash provided by financing activities	76,018	8,827
Net decrease in cash and restricted cash	(6,988)	(8,682)
Cash and restricted cash at beginning of year	33,831	44,159
Cash and restricted cash at September 30	26,843	35,477
Supplemental cash flow information:
Cash paid for interest	25,527	16,537
Recognition of initial net deferred income tax asset	0	47,478
Non-cash investing and financing activities:
Purchases of property, equipment and software through accounts payable	34	119
Intangible assets acquired by issuing non-controlling interest in a subsidiary	5,654	0
Notes receivable from sellers used as partial consideration for business acquisitions	0	560
Cash consideration payable for business acquisition	0	184
Recapitalization cost remaining in accounts payable	0	349
Common stock issued as partial consideration in business acquisitions	0	5,000
Reconciliation of cash and restricted cash:
Cash	4,191	17,203
Restricted cash	22,652	18,274
Total cash and restricted cash	$ 26,843	$ 35,477

SEGMENT INFORMATION - (Tables)

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Schedule of Segment Reporting Information by Segment

Information on reportable segments and reconciliations to consolidated revenue, consolidated income from operations, and consolidated depreciation and amortization are as follows for the periods presented:



	Quarter Ended September 30,						Nine Months Ended September 30,
(in thousands)	2019			2018			2019			2018
Revenue:
Consumer Payments	$	94,058		$	95,801		$	276,129		$	302,514
Commercial Payments	6,957			6,975			21,032			20,473
Integrated Partners	8,939			815			20,195			962
Consolidated Revenue	$	109,954		$	103,591		$	317,356		$	323,949

Income (loss) from operations:
Consumer Payments	$	7,221		$	11,905		$	22,303		$	37,466
Commercial Payments	(383		)	(41		)	(1,116		)	(745		)
Integrated Partners	1,003			(426		)	1,342			(628		)
Corporate	(5,116		)	(7,878		)	(16,402		)	(21,450		)
Consolidated income from operations	$	2,725		$	3,560		$	6,127		$	14,643

Depreciation and amortization:
Consumer Payments	$	8,302		$	4,415		$	24,215		$	11,497
Commercial Payments	70			109			249			393
Integrated Partners	1,299			91			3,086			91
Corporate	406			284			1,213			698
Consolidated depreciation and amortization	$	10,077		$	4,899		$	28,763		$	12,679

Reconciliation of Revenue from Segments to Consolidated

A reconciliation of total income from operations of reportable segments to the Company's net loss is provided in the following table:



(in thousands)	Quarter Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018

Total income from operations of reportable segments	$	7,841		$	11,438		$	22,529		$	36,093
Corporate	(5,116		)	(7,878		)	(16,402		)	(21,450		)
Interest expense	(10,463		)	(7,334		)	(30,602		)	(21,893		)
Plus (less) other, net	158			221			523			(5,108		)
Income tax benefit (expense)	1,736			991			(2,468		)	991
Net loss	$	(5,844	)	$	(2,562	)	$	(26,420	)	$	(11,367	)

GOODWILL AND INTANGIBLE ASSETS - Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	$ 301,597	$ 214,166
Intangible assets, accumulated amortization	(113,541)	(89,529)
Intangible assets, net	188,056	124,637
Merchant portfolios
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	155,287	137,576
Intangible assets, accumulated amortization	(63,991)	(48,492)
Non-compete agreements
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	3,390	3,390
Intangible assets, accumulated amortization	(3,390)	(3,390)
Trade names
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	2,870	2,870
Intangible assets, accumulated amortization	(1,209)	(1,017)
Acquired technology
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	15,390	14,390
Intangible assets, accumulated amortization	(12,116)	(10,222)
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	124,660	55,940
Intangible assets, accumulated amortization	$ (32,835)	$ (26,408)

INCOME TAXES - Narrative (Details) $ in Millions	9 Months Ended
INCOME TAXES - Narrative (Details) $ in Millions	Sep. 30, 2019 USD ($)
Income Tax Disclosure [Abstract]
Tax Cuts And Jobs Act Of 2017, incomplete accounting, provisional liability	$ 7.8
Tax Cuts And Jobs Act Of 2017, incomplete accounting, provisional liability, deferred tax assets	2.6
Tax Cuts And Jobs Act Of 2017, incomplete accounting, provisional income tax expense (benefit)	$ 5.2

SETTLEMENT ASSETS AND OBLIGATIONS

9 Months Ended

Sep. 30, 2019

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

SETTLEMENT ASSETS AND OBLIGATIONS

The standards of the card networks restrict non-members, such as the Company, from performing funds settlement or accessing merchant settlement funds. Instead, these funds must be in the possession of the member bank until the merchant is funded. The Company has relationships with member banks to facilitate payment transactions. These agreements allow the Company to route transactions under a member bank's control to process and clear transactions through card networks. Amounts for payment card settlements included in settlement assets and obligations on the Company's consolidated balance sheets represent intermediary balances arising in the settlement process.

Reserves Held For ACH Customers

For the Company's ACH business component that conducts business as ACH.com, the Company earns revenue by processing ACH transactions for financial institutions and other business customers. Certain customers establish and maintain reserves with the Company to cover potential losses in processing ACH transactions. These reserves are held in bank accounts controlled by the Company. As such, the Company recognizes the cash balances within restricted cash and settlement obligations on its consolidated balance sheets.

Merchant Reserves and Estimated Shortfalls

Under agreements between the Company and merchants, merchants assume liability for obligations such as chargebacks, customer disputes, and unfilled orders. However, under its risk-based underwriting policy, the Company may require certain merchants to establish and maintain reserves designed to protect the Company from anticipated obligations such as chargebacks, customer disputes, and unfilled orders. A merchant reserve account is funded by the merchant and held by a sponsor bank during the term of the merchant agreement. Unused merchant reserves are returned to the merchant after termination of the merchant agreement or in certain instances upon a reassessment of risks during the term of the merchant agreement. Sponsor banks held merchant reserves of approximately $135.8 million and $186.2 million at September 30, 2019 and December 31, 2018, respectively. Since these merchant reserves held at sponsor banks are not assets of the Company and the associated risks are not liabilities of the Company, neither is recognized on the Company's consolidated balance sheets.

In the event the amount in a merchant reserve is insufficient to cover expected or incurred losses, the Company may be liable to cover the shortfall. The Company recognized a liability for estimated shortfalls of approximately $3.2 million and $2.0 million at September 30, 2019 and December 31, 2018, respectively. The liabilities are included in the Company's consolidated balance sheet as contra balances against settlement assets.

The Company's settlement assets and obligations at September 30, 2019 and December 31, 2018 were as follows:



(in thousands)	As of
Settlement Assets:	September 30, 2019		December 31, 2018
Card settlements due from merchants, net of estimated losses	$	480	$	988
Card settlements due from processors	276		54
Total settlement assets	$	756	$	1,042

Settlement Obligations:
Card settlements due to merchants	$	2,915	$	777
Due to ACH payees (1)	14,627		10,355
Total Settlement Obligations	$	17,542	$	11,132

(1) Amounts due to ACH payees are held by the Company in restricted cash.

EQUITY-BASED COMPENSATION PLANS - Summary of Equity-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation	$ 1,171	$ 268	$ 3,354	$ 1,063
2018 Equity Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation	322	0	2,087	0
2014 Management Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation	849	268	1,267	1,063
Earnout Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity-based compensation	$ 0	$ 0	$ 0	$ 0

EQUITY-BASED COMPENSATION PLANS

9 Months Ended

Sep. 30, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

EQUITY-BASED COMPENSATION PLANS

The Company has three equity-based compensation plans: 2018 Equity Incentive Plan; Earnout Incentive Plan; and 2014 Management Incentive Plan. Total equity-based compensation expense for the quarters ended September 30, 2019 and September 30, 2018 was approximately $1.2 million and $0.3 million, respectively, and was $3.4 million and $1.1 million for the nine months ended September 30, 2019 and September 30, 2018, respectively. This expense is included in Salary and employee benefits in the accompanying unaudited condensed consolidated statements of operations. Expense recognized by plan was as follows:



(in thousands)	Quarter Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018

2018 Equity Incentive Plan	$	322	$	—	$	2,087	$	—
2014 Management Incentive Plan	849		268		1,267		1,063
Earnout Incentive Plan	—		—		—		—
Total	$	1,171	$	268	$	3,354	$	1,063

All unforfeited grants under the 2014 Management Incentive Plan were fully vested and expensed at September 30, 2019.

During the quarter ended September 30, 2019, half of the unforfeited stock options issued in December 2018 under the 2018 Equity Incentive Plan vested. However, no stock options have been exercised because the market price of the Company's common stock has remained below the exercise price for all vested stock options.

Beginning in 2018, the Company elected to recognize the effects of forfeitures on compensation expense as the forfeitures occur for all plans.

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
REVENUE:
Total revenue	$ 109,954	$ 103,591	$ 317,356	$ 323,949
OPERATING EXPENSES:
Salary and employee benefits	10,668	9,992	31,923	28,406
Depreciation and amortization	10,077	4,899	28,763	12,679
Selling, general and administrative	6,695	8,789	21,031	24,427
Total operating expenses	107,229	100,031	311,229	309,306
Income from operations	2,725	3,560	6,127	14,643
OTHER INCOME (EXPENSES):
Interest expense	(10,463)	(7,334)	(30,602)	(21,893)
Other, net	158	221	523	(5,108)
Total other expenses, net	(10,305)	(7,113)	(30,079)	(27,001)
Loss before income taxes	(7,580)	(3,553)	(23,952)	(12,358)
Income tax (benefit) expense	(1,736)	(991)	2,468	(991)
Net loss	$ (5,844)	$ (2,562)	$ (26,420)	$ (11,367)
Loss per common share:
Basic and diluted (in dollar per share)	$ (0.09)	$ (0.04)	$ (0.39)	$ (0.19)
Weighted-average common shares outstanding:
Basic (in shares)	67,007	64,152	67,109	60,339
Diluted (in shares)	67,007	64,544	67,109	60,339
PRO FORMA (C-corporation basis):
Pro forma income tax expense (benefit)		$ 2,350		$ (1,618)
Pro forma net loss		$ (5,903)		$ (10,740)
Pro forma loss per common share:
Basic and diluted (in dollar per share)		$ (0.09)		$ (0.18)
Merchant card fees
REVENUE:
Total revenue	$ 101,720	$ 94,915	$ 292,694	$ 299,661
OPERATING EXPENSES:
Cost of services	74,953	71,876	215,433	230,276
Outsourced services and other
REVENUE:
Total revenue	8,234	8,676	24,662	24,288
OPERATING EXPENSES:
Cost of services	$ 4,836	$ 4,475	$ 14,079	$ 13,518

ACQUISITIONS AND CONTRIBUTIONS OF ASSETS - YapStone (Details) - USD ($) $ in Thousands	1 Months Ended
	Mar. 31, 2019	Sep. 30, 2019	Dec. 31, 2018
Schedule of Asset Acquisition [Line Items]
Fair value of non-controlling interest acquired		$ 5,654	$ 0
YapStone, Inc
Schedule of Asset Acquisition [Line Items]
Payments for asset acquisitions	$ 65,000
Fair value of non-controlling interest acquired	5,700
Software license agreement acquired	1,000
Services agreement acquired	$ 1,200

COMMITMENTS AND CONTINGENCIES	9 Months Ended
COMMITMENTS AND CONTINGENCIES	Sep. 30, 2019
Commitments and Contingencies Disclosure [Abstract]
COMMITMENTS AND CONTINGENCIES	COMMITMENTS AND CONTINGENCIES Legal Matters The Company is involved in certain legal proceedings and claims, which arise in the ordinary course of business. In the opinion of the Company, based on consultations with inside and outside counsel, the results of any of these ordinary course matters, individually and in the aggregate, are not expected to have a material effect on its results of operations, financial condition, or cash flows. Contingent Consideration for Acquisitions For information on recognized contingent consideration related to prior business acquisitions, see Note 14, Fair Value. Under GAAP that applies to asset acquisitions that do not meet the definition of a business, the portion of the unpaid purchase price that is contingent on future activities is not initially recorded by the acquirer on the date of acquisition. Rather, the acquirer generally recognizes contingent consideration when it becomes probable and estimable. For the Company's acquisition of certain merchant portfolio assets from Direct Connect Merchant Services, LLC in December 2018, the purchase price includes cash contingent consideration of up to approximately $7.3 million, determinable over a period that ends on December 31, 2019. For a separate asset acquisition from another entity that occurred in March 2019 for certain merchant portfolio residual rights (Note 2, Acquisitions and Contributions of Assets), the purchase price includes cash contingent consideration of up to $6.4 million covering a period of time that extends three years from the date of acquisition. Additional purchase price, if any, will be accounted for when payment to the seller becomes probable and it will be added to the carrying value of the asset. Commitment to Lend See Note 10, Related Party and Other Transactions, for information on a loan commitment extended by the Company to another entity.

EQUITY

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

EQUITY

RECONCILIATION OF STOCKHOLDERS' EQUITY (DEFICIT) AND NON-CONTROLLING INTEREST



(in thousands)												Additional Paid-In Capital		Accumulated (Deficit)			Total Priority Technology Holdings, Inc. Stockholders' (Deficit)			Non-Controlling Interest
	Preferred Stock			Common Stock				Treasury Stock
	Shares	Amount		Shares		Amount		Shares	Amount


January 1, 2019	—	$	—	67,038		$	67	—	$	—		$	—	$	(85,540	)	$	(85,473	)	$	—
Equity-based compensation	—	—		—		—		—	—			1,160		—			1,160			—
Warrant redemptions	—	—		420		(a)		—	—			(a)		—			—			—
Net loss	—	—		—		—		—	—			—		(6,446		)	(6,446		)	—
Issuance of non-controlling interest	—	—		—		—		—	—			—		—			—			5,654
March 31, 2019	—	—		67,458		67		—	—			1,160		(91,986		)	(90,759		)	5,654
Equity-based compensation	—	—		—		—		—	—			1,023		—			1,023			—
Repurchases of common stock	—	—		(451	)	—		451	(2,388		)	—		—			(2,388		)	—
Net loss	—	—		—		—		—	—			—		(14,130		)	(14,130		)	—
June 30, 2019	—	—		67,007		67		451	(2,388		)	2,183		(106,116		)	(106,254		)	5,654
Equity-based compensation	—	—		—		—		—	—			1,171		—			1,171			—
Net loss	—	—		—		—		—	—			—		(5,844		)	(5,844		)	—
September 30, 2019	—	$	—	67,007		$	67	451	$	(2,388	)	$	3,354	$	(111,960	)	$	(110,927	)	$	5,654

(a) Par value of the common shares issued in connection with the warrant exchange rounds to less than one thousand dollars (see Note 12, Equity).



(in thousands)									Additional Paid-In Capital			Accumulated (Deficit)			Total Priority Technology Holdings, Inc. Stockholders' (Deficit)			Non-Controlling Interest
	Preferred Stock			Common Stock
	Shares	Amount		Shares		Amount

January 1, 2018	—	$	—	73,110		$	73		$	—		$	(90,228	)	$	(90,155	)	$	—
Distribution to members (b)	—	—		—		—			(188		)	(3,836		)	(4,024		)	—
Member redemption (b)	—	—		(12,565	)	(13		)	—			(64,890		)	(64,903		)	—
Pro-rata adjustment for redemption (b)	—	—		(724	)	—			—			—			—			—
Equity-based compensation	—	—		—		—			188			—			188			—
Net loss	—	—		—		—			—			(3,177		)	(3,177		)	—
March 31, 2018	—	—		59,821		60			—			(162,131		)	(162,071		)	—
Distribution to members (b)	—	—		—		—			(607		)	(1,707		)	(2,314		)	—
Equity-based compensation	—	—		250		—			607			—			607			—
Net loss	—	—		—		—			—			(5,628		)	(5,628		)	—
June 30, 2018	—	—		60,071		60			—			(169,466		)	(169,406		)	—
Distribution to members (b)	—	—		—		—			(737		)	—			(737		)
Equity-based compensation	—	—		—		—			268			—			268			—
Conversion of MI Acquisitions shares (c)	—	—		6,676		7			7,291			42,091			49,389			—
Effects of Founders' Share Agreement (c)	—	—		(175	)	—			(2,118		)	—			(2,118		)	—
Recapitalization costs (c)	—	—		—		—			(9,704		)	—			(9,704		)	—
Net deferred income tax asset (c)	—	—		—		—			—			47,478			47,478			—
Common stock issued (d)	—	—		475		(e)			5,000			—			5,000			—
Net loss	—	—		—		—			—			(2,562		)	(2,562		)	—
September 30, 2018	—	$	—	67,047		$	67		$	—		$	(82,459	)	$	(82,392	)	$	—

(b) Before reverse acquisition and recapitalization on July 25, 2018. See "Corporate Matters" in Note 1, Nature of Business and Basis of Presentation.

(d) As partial consideration for two business acquisitions during the third quarter of 2018.

(e) Par value of 475,195 common shares issued rounds to less than one thousand thousand dollars.EQUITY

Repurchases of the Company's Common Stock

Warrants for the Company's Common Stock

Earn-Out Consideration

EQUITY-BASED COMPENSATION PLANS - (Tables)

9 Months Ended

Sep. 30, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of Equity Based Compensation by Plan

Expense recognized by plan was as follows:



(in thousands)	Quarter Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018

2018 Equity Incentive Plan	$	322	$	—	$	2,087	$	—
2014 Management Incentive Plan	849		268		1,267		1,063
Earnout Incentive Plan	—		—		—		—
Total	$	1,171	$	268	$	3,354	$	1,063

PROPERTY, EQUIPMENT AND SOFTWARE - (Tables)

9 Months Ended

Sep. 30, 2019

Property, Plant and Equipment [Abstract]

Property, Equipment and Software

A summary of property, equipment, and software as of September 30, 2019 and December 31, 2018 follows:



(in thousands)	September 30, 2019			December 31, 2018			Useful Life
Furniture and fixtures	$	2,337		$	2,254		2-7 years
Equipment	10,287			8,164			3-7 years
Computer software	34,088			27,804			3-5 years
Leasehold improvements	6,105			5,935			5-10 years
	52,817			44,157
Less accumulated depreciation	(31,421		)	(26,675		)
Property, equipment, and software, net	$	21,396		$	17,482

RECONCILIATION OF STOCKHOLDERS' EQUITY (DEFICIT) AND NON-CONTROLLING INTEREST - Equity Reconciliation (Details) - USD ($) $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance			$ (85,473)		$ 0		$ (85,473)
Repurchases of common stock (in shares)		(451,224)
Repurchases of common stock		$ (2,400)
Net loss	$ (5,844)			$ (2,562)			(26,420)	$ (11,367)
Ending balance	$ (105,273)					$ 0	$ (105,273)
Preferred Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance (in shares)	0	0	0	0	0	0	0	0
Beginning balance	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0
Ending balance (in shares)	0	0	0	0	0	0	0	0
Ending balance	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0
Common Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance (in shares)	67,007,000	67,458,000	67,038,000	60,071,000	59,821,000	73,110,000	67,038,000	73,110,000
Beginning balance	$ 67	$ 67	$ 67	$ 60	$ 60	$ 73	$ 67	$ 73
Member redemption (in shares)						(12,565,000)
Member redemption						$ (13)
Pro-rata adjustment (in shares)						(724,000)
Equity-based compensation (in shares)					250,000
Common stock issued (in shares)				475,195
Common stock issued				$ 1,000
Warrant redemptions (in shares)			420,000	6,676,000
Conversion of MI Acquisitions shares			$ 1,000	$ 7
Effects of Founders' Share Agreement (in shares)				(175,000)
Repurchases of common stock (in shares)		(451,000)
Ending balance (in shares)	67,007,000	67,007,000	67,458,000	67,047,000	60,071,000	59,821,000	67,007,000	67,047,000
Ending balance	$ 67	$ 67	$ 67	$ 67	$ 60	$ 60	$ 67	$ 67
Treasury Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance (in shares)	451,000	0	0				0
Beginning balance	$ (2,388)	$ 0	$ 0				$ 0
Repurchases of common stock (in shares)		(451,000)
Repurchases of common stock		$ (2,388)
Ending balance (in shares)	451,000	451,000	0				451,000
Ending balance	$ (2,388)	$ (2,388)	$ 0				$ (2,388)
Additional Paid-In Capital
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance	2,183	1,160	0	0	0	0	0	0
Distribution to members				(737)	(607)	(188)
Equity-based compensation	1,171	1,023	1,160	268	607	188
Common stock issued				5,000
Conversion of MI Acquisitions shares				7,291
Effects of Founders' Share Agreement				(2,118)
Recapitalization costs				(9,704)
Ending balance	3,354	2,183	1,160	0	0	0	3,354	0
Accumulated (Deficit)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance	(106,116)	(91,986)	(85,540)	(169,466)	(162,131)	(90,228)	(85,540)	(90,228)
Distribution to members					(1,707)	(3,836)
Member redemption						(64,890)
Conversion of MI Acquisitions shares				42,091
Net deferred income tax asset				47,478
Net loss	(5,844)	(14,130)	(6,446)	(2,562)	(5,628)	(3,177)
Ending balance	(111,960)	(106,116)	(91,986)	(82,459)	(169,466)	(162,131)	(111,960)	(82,459)
Total Priority Technology Holdings, Inc. Stockholders' (Deficit)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance	(106,254)	(90,759)	(85,473)	(169,406)	(162,071)	(90,155)	(85,473)	(90,155)
Distribution to members				(737)	(2,314)	(4,024)
Member redemption						(64,903)
Equity-based compensation	1,171	1,023	1,160	268	607	188
Common stock issued				5,000
Conversion of MI Acquisitions shares				49,389
Effects of Founders' Share Agreement				(2,118)
Recapitalization costs				(9,704)
Net deferred income tax asset				47,478
Repurchases of common stock		(2,388)
Net loss	(5,844)	(14,130)	(6,446)	(2,562)	(5,628)	(3,177)
Issuance of non-controlling interest			0
Ending balance	(110,927)	(106,254)	(90,759)	(82,392)	(169,406)	(162,071)	(110,927)	(82,392)
Non-Controlling Interest
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance	5,654	5,654	0	0		$ 0	0	0
Issuance of non-controlling interest			5,654
Ending balance	$ 5,654	$ 5,654	$ 5,654	$ 0	$ 0		$ 5,654	$ 0

ACCOUNTS PAYABLE AND ACCRUED EXPENSES - Schedule of Accounts Payable and Accrued Expenses (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Accounts Payable [Abstract]
Accounts payable	$ 5,531	$ 8,030
Accrued compensation	3,423	6,193
Accrued network fees	$ 9,301	$ 6,971

ACQUISITIONS AND CONTRIBUTIONS OF ASSETS - Residual Portfolio Acquisition (Details) - USD ($) $ in Thousands			9 Months Ended
	Nov. 14, 2019	Mar. 15, 2019	Sep. 30, 2019	Sep. 30, 2018
Schedule of Asset Acquisition [Line Items]
Asset acquisition, intangible assets		$ 15,200
Borrowings under revolving credit facility			$ 14,000	$ 0
Revolving Credit Facility
Schedule of Asset Acquisition [Line Items]
Borrowings under revolving credit facility		10,000
Line of Credit \| Syndicate of Lenders \| Term Loan
Schedule of Asset Acquisition [Line Items]
Borrowings under revolving credit facility		$ 5,000
Scenario, Forecast
Schedule of Asset Acquisition [Line Items]
Asset acquisition, contingent consideration	$ 6,400

RECONCILIATION OF STOCKHOLDERS' EQUITY (DEFICIT) AND NON-CONTROLLING INTEREST - Narrative (Details) - shares	Sep. 30, 2019	Dec. 31, 2018
Equity [Abstract]
Preferred stock authorized (in shares)	100,000,000
Preferred stock issued (in shares)	0	0

ACCOUNTS PAYABLE AND ACCRUED EXPENSES - (Tables)

9 Months Ended

Sep. 30, 2019

Accounts Payable [Abstract]

Schedule of Accounts Payable and Accrued Expenses

The components of accounts payable and accrued expenses that exceeded five percent of total current liabilities at either September 30, 2019 or December 31, 2018 consisted of the following:



(in thousands)	September 30, 2019		December 31, 2018
Accounts payable	$	5,531	$	8,030
Accrued compensation	$	3,423	$	6,193
Accrued network fees	$	9,301	$	6,971

COMMITMENTS AND CONTINGENCIES - Narrative (Details) - Scenario, Forecast - USD ($) $ in Millions	13 Months Ended	37 Months Ended
	Dec. 31, 2019	Mar. 31, 2022
Direct Connect Merchant Services LLC
Schedule of Asset Acquisition [Line Items]
Contingent cash payments for asset acquisitions	$ 7.3
Certain Merchant Portfolio Residual Rights
Schedule of Asset Acquisition [Line Items]
Contingent cash payments for asset acquisitions		$ 6.4

RECONCILIATION OF STOCKHOLDERS' EQUITY (DEFICIT) AND NON-CONTROLLING INTEREST - (Tables)

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Schedule of Equity Structure



(in thousands)												Additional Paid-In Capital		Accumulated (Deficit)			Total Priority Technology Holdings, Inc. Stockholders' (Deficit)			Non-Controlling Interest
	Preferred Stock			Common Stock				Treasury Stock
	Shares	Amount		Shares		Amount		Shares	Amount


January 1, 2019	—	$	—	67,038		$	67	—	$	—		$	—	$	(85,540	)	$	(85,473	)	$	—
Equity-based compensation	—	—		—		—		—	—			1,160		—			1,160			—
Warrant redemptions	—	—		420		(a)		—	—			(a)		—			—			—
Net loss	—	—		—		—		—	—			—		(6,446		)	(6,446		)	—
Issuance of non-controlling interest	—	—		—		—		—	—			—		—			—			5,654
March 31, 2019	—	—		67,458		67		—	—			1,160		(91,986		)	(90,759		)	5,654
Equity-based compensation	—	—		—		—		—	—			1,023		—			1,023			—
Repurchases of common stock	—	—		(451	)	—		451	(2,388		)	—		—			(2,388		)	—
Net loss	—	—		—		—		—	—			—		(14,130		)	(14,130		)	—
June 30, 2019	—	—		67,007		67		451	(2,388		)	2,183		(106,116		)	(106,254		)	5,654
Equity-based compensation	—	—		—		—		—	—			1,171		—			1,171			—
Net loss	—	—		—		—		—	—			—		(5,844		)	(5,844		)	—
September 30, 2019	—	$	—	67,007		$	67	451	$	(2,388	)	$	3,354	$	(111,960	)	$	(110,927	)	$	5,654

(a) Par value of the common shares issued in connection with the warrant exchange rounds to less than one thousand dollars (see Note 12, Equity).



(in thousands)									Additional Paid-In Capital			Accumulated (Deficit)			Total Priority Technology Holdings, Inc. Stockholders' (Deficit)			Non-Controlling Interest
	Preferred Stock			Common Stock
	Shares	Amount		Shares		Amount

January 1, 2018	—	$	—	73,110		$	73		$	—		$	(90,228	)	$	(90,155	)	$	—
Distribution to members (b)	—	—		—		—			(188		)	(3,836		)	(4,024		)	—
Member redemption (b)	—	—		(12,565	)	(13		)	—			(64,890		)	(64,903		)	—
Pro-rata adjustment for redemption (b)	—	—		(724	)	—			—			—			—			—
Equity-based compensation	—	—		—		—			188			—			188			—
Net loss	—	—		—		—			—			(3,177		)	(3,177		)	—
March 31, 2018	—	—		59,821		60			—			(162,131		)	(162,071		)	—
Distribution to members (b)	—	—		—		—			(607		)	(1,707		)	(2,314		)	—
Equity-based compensation	—	—		250		—			607			—			607			—
Net loss	—	—		—		—			—			(5,628		)	(5,628		)	—
June 30, 2018	—	—		60,071		60			—			(169,466		)	(169,406		)	—
Distribution to members (b)	—	—		—		—			(737		)	—			(737		)
Equity-based compensation	—	—		—		—			268			—			268			—
Conversion of MI Acquisitions shares (c)	—	—		6,676		7			7,291			42,091			49,389			—
Effects of Founders' Share Agreement (c)	—	—		(175	)	—			(2,118		)	—			(2,118		)	—
Recapitalization costs (c)	—	—		—		—			(9,704		)	—			(9,704		)	—
Net deferred income tax asset (c)	—	—		—		—			—			47,478			47,478			—
Common stock issued (d)	—	—		475		(e)			5,000			—			5,000			—
Net loss	—	—		—		—			—			(2,562		)	(2,562		)	—
September 30, 2018	—	$	—	67,047		$	67		$	—		$	(82,459	)	$	(82,392	)	$	—

(b) Before reverse acquisition and recapitalization on July 25, 2018. See "Corporate Matters" in Note 1, Nature of Business and Basis of Presentation.

(d) As partial consideration for two business acquisitions during the third quarter of 2018.

(e) Par value of 475,195 common shares issued rounds to less than one thousand thousand dollars.

LOSS PER SHARE - (Tables)

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Schedule of Earnings Per Share

The following tables set forth the computation of the Company's basic and diluted loss per common share:



	Quarter Ended September 30,						Nine Months Ended September 30,
(in thousands except per share amounts)	2019			2018			2019			2018

Basic Loss Per Common Share:
Numerator:
Net loss	$	(5,844	)	$	(2,562	)	$	(26,420	)	$	(11,367	)
Less: Distributions to participating securities	—			—			—			(45		)
Net loss attributable to common stockholders	$	(5,844	)	$	(2,562	)	$	(26,420	)	$	(11,412	)

Denominator:
Weighted-average shares outstanding	67,007			64,152			67,109			60,339

Basic loss per common share	$	(0.09	)	(0.04		)	(0.39		)	(0.19		)

Diluted Loss Per Common Share:
Numerator:
Net loss	$	(5,844	)	$	(2,562	)	$	(26,420	)	$	(11,367	)
Less: Gain on warrant liability	—			(72		)	—			—
Less: Distributions to participating securities	—			—			—			(45		)
Net loss attributable to common shareholders	$	(5,844	)	$	(2,634	)	$	(26,420	)	$	(11,412	)

Denominator:
Weighted-average shares outstanding	67,007			64,152			67,109			60,339
Dilutive common share equivalents	—			392			—			—
Weighted-average dilutive shares outstanding	67,007			64,544			67,109			60,339

Diluted loss per common share	$	(0.09	)	$	(0.04	)	$	(0.39	)	$	(0.19	)

Schedule of Antidilutive Securities

Potentially anti-dilutive securities that were excluded from earnings per share at September 30, 2019 that could be dilutive in future periods are as follows:



(in thousands)
Outstanding warrants on common stock		3,557
Restricted stock awards issued under 2018 Equity Incentive Plan		202
Outstanding stock option awards issued under 2018 Equity Incentive Plan		1,794
Earnout incentive awards issued and subject to vesting		95
Earnout incentive awards subject to future issuance		9,705

LONG-TERM DEBT - (Tables)

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Schedule of Long-Term Debt

Long-term debt, excluding amounts outstanding on the revolving credit facility, as of September 30, 2019 and December 31, 2018 consisted of the following:



(in thousands)	September 30, 2019			December 31, 2018
Term Loan - Senior, matures January 3, 2023 and bears interest at LIBOR plus 5.0% at September 30, 2019 and December 31, 2018 (rate of 7.12% at September 30, 2019 and 7.53% at December 31, 2018)	$	389,839		$	322,666
Term Loan - Subordinated, matures July 3, 2023 and bears interest at 5.0% plus payment-in-kind interest (rate of 10.5% at September 30, 2019 and December 31, 2018)	93,823			90,016
Total	483,662			412,682
Less: current portion of long-term debt	(4,007		)	(3,293		)
Less: unamortized debt discounts	(3,060		)	(3,300		)
Less: deferred financing costs	(3,251		)	(3,994		)
Total long-term debt	$	473,344		$	402,095

Schedule of Maturities of Long-Term Debt

Contractual principal payments for long-term debt, excluding amounts outstanding on the revolving credit agreement, due after September 30, 2019 are as follows:



(in thousands)
Twelve-month period ending September 30,	Principal Due

2020	$	4,007
2021	4,007
2022	4,007
2023	471,641
Total	$	483,662

- Definition

Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
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-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
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-Paragraph 1
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-Section 45
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Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
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-Name Accounting Standards Codification
-Topic 505
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Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
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-Subparagraph (SX 210.4-08.(e),(f))
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Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef
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Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef
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Reference 8: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
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-URI http://asc.fasb.org/extlink&oid=75038535&loc=d3e64711-112823

Reference 9: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
-SubTopic 30
-Section 55
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-URI http://asc.fasb.org/extlink&oid=114775985&loc=d3e28878-108400

Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
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-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21475-112644

+ Details

NATURE OF BUSINESS AND BASIS OF PRESENTATION - (Policies)	9 Months Ended
	Sep. 30, 2019
Accounting Policies [Abstract]
Consolidation	The accompanying unaudited condensed consolidated financial statements include those of the Company and its consolidated subsidiaries. All material inter-company accounts and transactions have been eliminated in consolidation.
Basis of Presentation	The Company operates on a calendar year ending each December 31 and on four calendar quarters ending on March 31, June 30, September 30, and December 31 of each year. The unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the rules and regulations of the Securities and Exchange Commission ("SEC"). The accompanying unaudited condensed consolidated financial statements are unaudited; however, in the opinion of management they include all normal and recurring adjustments necessary for a fair presentation of the Company's unaudited condensed consolidated financial statements for the periods presented. The accompanying unaudited condensed consolidated balance sheet and related footnote disclosures as of December 31, 2018 were derived from the Company's audited consolidated financial statements and accompanying footnotes as of and for the year ended December 31, 2018. Results of operations reported for interim periods are not necessarily indicative of results for the entire year. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported period. Actual results could differ materially from those estimates. Prior to July 25, 2018, substantially all of the Company's operations were conducted through pass-through entities for income tax purposes, and as such the Company had no material income tax accounting reflected in its financial statements for financial reporting purposes since substantially all taxable income and deductions were "passed through" to unconsolidated owners. Effective July 25, 2018, the Company is a "C Corp" and reports its income and deductions for income tax purposes. Accordingly, effective July 25, 2018 the consolidated financial statements of the Company now account for income taxes in accordance with Accounting Standards Codification ("ASC") 740, Income Taxes ("ASC 740"). The Company is an "emerging growth company" (EGC), as defined in the Jumpstart Our Business Startups Act of 2012. The Company may remain an EGC until December 31, 2021. However, if the Company's non-convertible debt issued within a rolling three-year period exceeds $1.0 billion, the Company would cease to be an EGC immediately, or if its revenue for any fiscal year exceed $1.07 billion, or the market value of its common stock that is held by non-affiliates exceeds $700.0 million on the last day of the second quarter of any given year, the Company would cease to be an EGC as of the beginning of the following year. As an EGC, the Company is not required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act of 2002. Additionally, the Company as an EGC may continue to elect to delay the adoption of any new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As such, the Company's financial statements may not be comparable to companies that comply with public company effective dates.
Comprehensive Income (Loss)	Comprehensive Income (Loss) Comprehensive income (loss) represents the sum of net income (loss) and other amounts that are not included in the unaudited condensed consolidated statement of operations as the amounts have not been realized. For the quarters and nine months ended September 30, 2019 and September 30, 2018, there were no differences between the Company's net loss and comprehensive loss. Therefore, no separate Statement of Comprehensive Income (Loss) is included in the consolidated financial statements for the reporting periods.
Cash and Restricted Cash	Cash and Restricted Cash Cash includes cash held at financial institutions that is owned by the Company. Restricted cash is held by the Company in financial institutions for the purpose of in-process customer settlements or reserves held per contact terms.
Notes Receivable	Notes Receivable Notes receivable are comprised of a $3.0 million loan to another entity (see Note 10, Related Party and Other Transactions) and advances to ISOs. Substantially all of the notes receivable bear interest and are secured. ISO advances are generally repaid via reductions in future commissions paid to the ISO, thus cash flows from these activities are reported as cash flows from operations.
Reclassification	Reclassifications Certain prior period amounts in these unaudited condensed consolidated financial statements have been reclassified to conform to the current period presentation, with no net effect on the Company's stockholders' deficit or net loss for any period.
Components of Revenues and Expenses	Components of Revenues and Expenses Revenues Merchant card fees revenue consists mainly of fees for processing electronic payments, including credit, debit and electronic benefit transaction card processing. The fees are generally based on a variable percentage of the dollar amount of each transaction and, in some cases, additional fees for each transaction. In addition, merchant customers may also be charged miscellaneous fees, including statement fees, annual fees, monthly minimum fees, fees for handling chargebacks, gateway fees, and fees for other miscellaneous services. Merchant card fees revenue is attributable primarily to our Consumer Payments segment. Outsourced services and other revenue consist mainly of cost-plus fees related to B2B services, merchant financing and buyer-initiated payment programs sold on behalf of certain enterprise customers, originated through our in-house sales force, including incentives for meeting sales targets. Outsourced services revenue is attributable primarily to our Commercial Payments reportable segment. Other revenue include revenue from the sales of equipment (primarily point of sale terminals) and processing of automated clearing house ("ACH") transactions. Costs of Services Costs of Merchant Card Fees Costs of merchant card fees primarily consist of residual payments to agents and ISOs and other third-party costs directly attributable to payment processing. The residual payments represent commissions paid to agents and ISOs based upon a percentage of the net revenue generated from merchant transactions. Costs of Outsourced Services and Other Revenue Costs of outsourced services and other revenue consist of salaries directly related to outsourced services revenue, the cost of equipment (point of sale terminals) sold, and third-party fees and commissions related to the Company's ACH processing activities. Selling, General and Administrative ("SG&A") SG&A expenses include mainly professional services, advertising, rent, office supplies, software licenses, utilities, state and local franchise and sales taxes, litigation settlements, executive travel, insurance, and expenses related to the Business Combination. Interest Expense Interest expense consists of interest on outstanding debt and amortization of deferred financing costs and original issue discounts. Other, net Other, net is composed of interest income, debt modification and extinguishment expenses, changes in fair value of warrant liabilities, and equity in losses and impairment of unconsolidated entities. Interest income consists mainly of interest received pursuant to notes receivable from independent sales agents. Debt modification and extinguishment expenses includes write-offs of unamortized deferred financing costs and original issue discount relating to the extinguished debt. Equity in loss and impairment of unconsolidated entities consists of the Company's share of the income or loss of its equity method investment as well as any impairment charges related to such investments.
New Accounting Standards Adopted and Recently Issued Standards Not Yet Adopted	New Accounting Standards Adopted The Company did not adopt any new accounting standards during the quarter or nine months ended September 30, 2019, except for ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities-Subtopic 825-10, and the policy for repurchased common stock based on existing GAAP. ASU 2016-01 and ASU 2018-09 Under ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, entities have to measure equity investments (except those accounted for under the equity method, those that result in consolidation of the investee and certain other investments) at fair value and recognize any changes in fair value in net income. However, for equity investments that do not have readily determinable fair values and do not qualify for the existing practical expedient in ASC 820 to estimate fair value using the net asset value per share (or its equivalent) of the investment, the guidance provides a new measurement alternative. Entities may choose to measure those investments at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company early adopted the provisions of ASU 2016-01 on April 1, 2019 and applied them to an acquired warrant to purchase equity of another entity, the same entity that borrowed $3.0 million from the Company during the second quarter of 2019 under a loan and loan commitment agreement. The carrying value, at cost, and fair value of the warrant were not material. See Note 10, Related Party and Other Transactions. The Company was also required to adopt ASU 2018-09, Codification Improvements, at the same time it adopted ASU 2016-01. The adoption of ASU 2018-09 had no material effect on the Company's financial position, operations, or cash flows. Repurchased Stock Pursuant to the provisions of ASC 505-30, Treasury Stock, the Company has elected to apply the cost method when accounting for treasury stock resulting from the repurchase of its common stock. Under the cost method, the gross cost of the shares reacquired is charged to a contra equity account labeled Treasury Stock. The equity accounts that were originally credited for the original shares issuance, common stock and additional paid-in capital, remain intact. See Note 12, Equity. If the treasury shares are ever reissued in the future, proceeds in excess of repurchased cost will be credited to additional paid-in capital. Any deficiency will be charged to retained earnings (accumulated deficit), unless additional paid-in capital from previous treasury stock transactions exists, in which case the deficiency will be charged to that account, with any excess charged to retained earnings (accumulated deficit). If treasury stock is reissued in the future, a cost flow assumption (e.g., FIFO, LIFO, or specific identification) will be adopted to compute excesses and deficiencies upon subsequent share reissuances. Recently Issued Standards Not Yet Adopted Prior to July 25, 2018, the Company was defined as a non-public entity for purposes of applying transition guidance related to new or revised accounting standards under GAAP, and as such was typically required to adopt new or revised accounting standards subsequent to the required adoption dates that applied to public companies. Subsequent to July 25, 2018, the Company retains EGC status until no later than December 31, 2021. The Company will maintain the election available to an EGC to use any extended transition period applicable to non-public companies when complying with a new or revised accounting standards. Therefore, as long as the Company retains EGC status, before December 31, 2021 the Company can continue to elect to adopt any new or revised accounting standards on the adoption date (including early adoption) required for a private company. The following standards are pending adoption and will likely apply to the Company in future periods based on the Company's current business activities: Revenue Recognition (ASC 606, ASU 2014-09) In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09, Revenue from Contracts with Customers, which since has been codified and amended in ASC 606, Revenue from Contracts with Customers, and supplemented with other ASUs. This guidance clarifies the principles for recognizing revenue and will be applicable to all contracts with customers regardless of industry-specific or transaction-specific fact patterns. Further, the guidance will require improved disclosures as well as additional disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. Since its original issuance, the FASB has issued several updates to this guidance. Additionally, ASC 340, Other Assets and Deferred Costs, and ASC 705-20, Cost of Sales and Services — Accounting for Consideration Received from a Vendor, are also effective upon adoption of ASC 606; ASC 340 addresses costs related to revenue and ASC 705-20 addresses vendor incentives. The new standards could change the amount and timing of revenue and costs for certain significant revenue streams, increase areas of judgment and related internal controls requirements, change the presentation of revenue for certain contract arrangements and possibly require changes to the Company's software systems to assist in both internally capturing accounting differences and externally reporting such differences through enhanced disclosure requirements. As an EGC, the standard is effective for the Company's 2019 annual reporting period and for interim periods after 2019. The standard permits the use of either the retrospective or modified retrospective transition method. The Company plans to use the modified retrospective transition method and is currently evaluating the effect that the standard may have on its consolidated financial statements and disclosures. Leases (ASC 842) In February 2016, the FASB issued new lease accounting guidance in ASU No. 2016-02, Leases-Topic 842, which has been codified in ASC 842, Leases. Other related ASUs have also been issued that will impact lessors. Under this new guidance, lessees will be required to recognize for all leases (with the exception of short-term leases): 1) a lease liability equal to the lessee's obligation to make lease payments arising from a lease, measured on a discounted basis and 2) a right-of-use asset which will represent the lessee's right to use, or control the use of, a specified asset for the lease term. As an EGC, this standard is effective for the Company's annual reporting period beginning in 2021 and interim reporting periods beginning first quarter of 2022. The adoption of ASC 842 will require the Company to recognize non-current assets and liabilities for right-of-use assets and operating lease liabilities on its consolidated balance sheet, but it is not expected to have a material effect on the Company's results of operations or cash flows. ASC 842 will also require additional footnote disclosures to the Company's consolidated financial statements. Credit Losses (ASU 2016-13 and ASU 2019-05) In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, later codified as ASC 326, Financial Instruments-Credit Losses. This new guidance will change how entities account for credit impairment for trade and other receivables, as well as for certain financial assets and other instruments. ASU 2016-13 will replace the current "incurred loss" model with an "expected loss" model. Under the "incurred loss" model, a loss (or allowance) is recognized only when an event has occurred (such as a payment delinquency) that causes the entity to believe that a loss is probable (i.e., that it has been "incurred"). Under the "expected loss" model, a loss (or allowance) is recognized upon initial recognition of the asset that reflects all future events that leads to a loss being realized, regardless of whether it is probable that the future event will occur. The "incurred loss" model considers past events and current conditions, while the "expected loss" model includes expectations for the future which have yet to occur. ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, was issued in November 2018 and excludes operating leases from the new guidance. The standard will require entities to record a cumulative-effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective. The Company is currently evaluating the potential impact that ASU 2016-13 may have on the timing of recognizing future provisions for expected losses on the Company's accounts receivable. Based on recent actions by the FASB, this new standard will be effective for the Company at the beginning of 2023 as long as the Company is still a Smaller Reporting Company (as defined by the SEC) on the date that the FASB issues its ASU (expected before the end of 2019) to formally extend the adoption date for this standard. Statement of Cash Flows (ASU 2016-15) In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230). This ASU represents a consensus of the FASB's Emerging Issues Task Force on eight separate issues that each impact classifications on the statement of cash flows. In particular, issue number three addresses the classification of contingent consideration payments made after a business combination. Under ASU 2016-15, cash payments made soon after an acquisition's consummation date (i.e., approximately three months or less) will be classified as cash outflows from investing activities. Payments made thereafter will be classified as cash outflows from financing activities up to the amount of the original contingent consideration liability. Payments made in excess of the amount of the original contingent consideration liability will be classified as cash outflows from operating activities. As an EGC, this ASU is effective for the Company for years beginning in 2019 and interim periods within years beginning in 2020. The Company is evaluating the effect this ASU will have on its consolidated statement of cash flows. Goodwill Impairment Testing (ASU 2017-04) In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 will eliminate the requirement to calculate the implied fair value of goodwill (i.e., step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value (i.e., measure the charge based on the current step 1). Any impairment charge will be limited to the amount of goodwill allocated to an impacted reporting unit. ASU 2017-04 will not change the current guidance for completing Step 1 of the goodwill impairment test, and an entity will still be able to perform the current optional qualitative goodwill impairment assessment before determining whether to proceed to Step 1. Upon adoption, the ASU will be applied prospectively. As an EGC, this ASU will be effective for annual and interim impairment tests performed in periods beginning in 2022. The impact that ASU 2017-04 may have on the Company's financial condition or results of operations will depend on the circumstances of any goodwill impairment event that may occur after adoption. Share-Based Payments to Non-Employees (ASU 2018-07) In June 2018, the FASB issued ASU 2018-07, Share-based Payments to Non-Employees, to simplify the accounting for share-based payments to non-employees by aligning it with the accounting for share-based payments to employees, with certain exceptions. As an EGC, the ASU is effective for annual reporting periods beginning in 2020 and interim periods within annual periods beginning in the first quarter of 2021, but not before the Company adopts ASC 606, Revenue Recognition. The Company is evaluating the impact this ASU will have on its consolidated financial statements. Disclosures for Fair Value Measurements (ASU 2018-13) In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement. This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of the FASB's disclosure framework project. For all entities, this ASU is effective for annual and interim reporting periods beginning in 2020. Certain amendments must be applied prospectively while others are to be applied on a retrospective basis to all periods presented. As disclosure guidance, the adoption of this ASU will not have an effect on the Company's financial position, results of operations or cash flows. Implementation Costs Incurred in Cloud Computing Arrangements (ASU 2018-15) In August 2018, the FASB issued ASU 2018-15, Implementation Costs Incurred in Cloud Computing Arrangements ("ASU 2018-15"), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). As an EGC, this ASU is effective for the Company for annual reporting periods beginning in 2021, and interim periods within annual periods beginning in 2022. The amendments should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is evaluating the impact this ASU will have on its consolidated financial statements.
Concentration of Risk	Concentration of Risk The Company's revenue is substantially derived from processing Visa® and MasterCard® bank card transactions. Because the Company is not a member bank, in order to process these bank card transactions, the Company maintains sponsorship agreements with member banks which require, among other things, that the Company abide by the by-laws and regulations of the card associations. Substantially all of the Company's revenue and receivables are attributable to merchant customer transactions, which are processed by third-party payment processors. A majority of the Company's cash and restricted cash is held in certain financial institutions, substantially all of which is in excess of federal deposit insurance corporation limits. The Company does not believe it is exposed to any significant credit risk from these transactions. No one merchant customer accounted for 10% or more of the Company's consolidated revenue for any period presented.

GOODWILL AND INTANGIBLE ASSETS - (Tables)

9 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

The Company's goodwill was allocated to reportable segments as follows:



(in thousands)	September 30, 2019		December 31, 2018
Consumer Payments	$	106,832	$	106,832
Commercial Payments	—		—
Integrated Partners	2,683		2,683
	$	109,515	$	109,515

Schedule of Intangible Assets

As of September 30, 2019 and December 31, 2018, intangible assets consisted of the following:



(in thousands)	September 30, 2019			December 31, 2018
Other intangible assets:
Merchant portfolios	$	155,287		$	137,576
Non-compete agreements	3,390			3,390
Trade names	2,870			2,870
Acquired technology	15,390			14,390
Customer relationships	124,660			55,940
Total gross carrying value	301,597			214,166
Less accumulated amortization:
Merchant portfolios	(63,991		)	(48,492		)
Non-compete agreements	(3,390		)	(3,390		)
Trade names	(1,209		)	(1,017		)
Acquired technology	(12,116		)	(10,222		)
Customer relationships	(32,835		)	(26,408		)
Total accumulated amortization	(113,541		)	(89,529		)

Net carrying value	$	188,056		$	124,637

NATURE OF BUSINESS AND BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

NATURE OF BUSINESAS AND BASIS OF PRESENTATION

NATURE OF BUSINESS AND BASIS OF PRESENTATION

Nature of Business

Priority Technology Holdings, Inc. and its subsidiaries (the "Company") are a leading fintech enterprise with strong core payments technology. The Company is headquartered in Alpharetta, Georgia and operates other facilities in Texas, Tennessee, Arizona, and New York. Operations began in 2005 with a mission to build a merchant-inspired payments platform that would advance the goals of its customers and partners. Today, the Company is a leading provider of merchant acquiring and commercial payment solutions, offering unique product capabilities to small and medium size businesses and enterprises and distribution partners in the United States. The Company operates from a purpose-built business platform that includes tailored customer service offerings and bespoke technology development, allowing the Company to provide end-to-end solutions for payment and payment-adjacent needs.

The Company provides:


•	Consumer payments processing solutions for business-to-consumer ("B2C") transactions through independent sales organizations ("ISOs"), financial institutions, independent software vendors ("ISVs"), and other referral partners. The Company's proprietary MX platform for B2C payments provides merchants a fully customizable suite of business management solutions.


•	Commercial payments solutions such as automated vendor payments and professionally curated managed services to industry leading financial institutions and networks. The Company's proprietary business-to-business ("B2B") Commercial Payment Exchange (CPX) platform was developed to be a best-in-class solution for buyer/supplier payment enablement.


•	Institutional services (also known as Managed Services) solutions that provide audience-specific programs for institutional partners and other third parties looking to leverage the Company's professionally trained and managed call center teams for customer onboarding, assistance, and support, including marketing and direct-sales resources.


•	Integrated partner solutions for ISVs and other third-parties that allow them to leverage the Company's core payments engine via robust application program interfaces resources and high-utility embeddable code.


•	Consulting and development solutions focused on the increasing demand for integrated payments solutions for transitioning to the digital economy.

The Company provides its services through three reportable segments: (1) Consumer Payments, (2) Commercial Payments (which includes institutional and managed services described above), and (3) Integrated Partners. For additional information about our reportable segments, see Note 15, Segment Information.

To provide many of its services, the Company enters into agreements with payment processors which in turn have agreements with multiple card associations. These card associations comprise an alliance aligned with insured financial institutions ("member banks") that work in conjunction with various local, state, territory, and federal government agencies to make the rules and guidelines regarding the use and acceptance of credit and debit cards. Card association rules require that vendors and processors be sponsored by a member bank and register with the card associations. The Company has multiple sponsorship bank agreements and is itself a registered ISO with Visa®. The Company is also a registered member service provider with MasterCard®. The Company's sponsorship agreements allow the capture and processing of electronic data in a format to allow such data to flow through networks for clearing and fund settlement of merchant transactions.

Corporate Matters

On July 25, 2018, MI Acquisitions, Inc. ("MI Acquisitions"), which was formed under the laws of the State of Delaware on April 23, 2015, acquired all of the outstanding member equity interests of Priority Holdings, LLC ("Holdings") in exchange for the issuance of MI Acquisitions' common stock. As a result, Holdings which was previously a privately-owned company, became a wholly-owned subsidiary of MI Acquisitions (the "Business Combination"). Simultaneously, MI Acquisitions changed its name to Priority Technology Holdings, Inc. For financial accounting and reporting purposes under generally accepted accounting principles in the United States ("GAAP"), the acquisition was accounted for as a "reverse merger." Under this method of accounting, MI Acquisitions is treated as the acquired entity whereby Holdings was deemed to have issued common stock for the net assets and equity of MI Acquisitions accompanied by a simultaneous equity recapitalization (the "Recapitalization") of Holdings. Net assets of the Company are stated at historical cost and accordingly the equity and net assets of the Company have not been adjusted to fair value. As of July 25, 2018, the consolidated financial statements of the Company include the combined operations, cash flows, and financial positions of both MI Acquisitions and Holdings. Prior to July 25, 2018, the results of operations, cash flows, and financial position are those of Holdings. The units and corresponding capital amounts and earnings per unit of Holdings prior to July 25, 2018 have been retroactively restated as shares reflecting the exchange ratio established in the Recapitalization.

The Company's common stock is traded on The Nasdaq Global Market under the symbol "PRTH." Certain shares of the Company's common stock are restricted shares, meaning that there are certain regulatory restrictions on the holders' abilities to sell, transfer, pledge or otherwise dispose of shares. Common shares of the Company issued to certain non-affiliates may become unrestricted common shares in the future due to the lapse of certain regulatory restrictions on the holders' ability to sell, transfer, pledge, or dispose of the unregistered shares.

The Company's Chairman and Chief Executive Officer controls a majority of the voting power of the Company's outstanding common stock. As a result, the Company is a "controlled company" within the meaning of corporate governance standards of the Nasdaq Stock Market LLC ("Nasdaq").

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements include those of the Company and its consolidated subsidiaries. All material inter-company accounts and transactions have been eliminated in consolidation. The Company operates on a calendar year ending each December 31 and on four calendar quarters ending on March 31, June 30, September 30, and December 31 of each year.

The unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the rules and regulations of the Securities and Exchange Commission ("SEC").

The accompanying unaudited condensed consolidated financial statements are unaudited; however, in the opinion of management they include all normal and recurring adjustments necessary for a fair presentation of the Company's unaudited condensed consolidated financial statements for the periods presented. The accompanying unaudited condensed consolidated balance sheet and related footnote disclosures as of December 31, 2018 were derived from the Company's audited consolidated financial statements and accompanying footnotes as of and for the year ended December 31, 2018. Results of operations reported for interim periods are not necessarily indicative of results for the entire year.

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported period. Actual results could differ materially from those estimates.

July 25, 2018 the consolidated financial statements of the Company now account for income taxes in accordance with Accounting Standards Codification ("ASC") 740, Income Taxes ("ASC 740").

The Company is an "emerging growth company" (EGC), as defined in the Jumpstart Our Business Startups Act of 2012. The Company may remain an EGC until December 31, 2021. However, if the Company's non-convertible debt issued within a rolling three-year period exceeds $1.0 billion, the Company would cease to be an EGC immediately, or if its revenue for any fiscal year exceed $1.07 billion, or the market value of its common stock that is held by non-affiliates exceeds $700.0 million on the last day of the second quarter of any given year, the Company would cease to be an EGC as of the beginning of the following year. As an EGC, the Company is not required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act of 2002. Additionally, the Company as an EGC may continue to elect to delay the adoption of any new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As such, the Company's financial statements may not be comparable to companies that comply with public company effective dates.

Comprehensive Income (Loss)

Comprehensive income (loss) represents the sum of net income (loss) and other amounts that are not included in the unaudited condensed consolidated statement of operations as the amounts have not been realized. For the quarters and nine months ended September 30, 2019 and September 30, 2018, there were no differences between the Company's net loss and comprehensive loss. Therefore, no separate Statement of Comprehensive Income (Loss) is included in the consolidated financial statements for the reporting periods.

Cash and Restricted Cash

Cash includes cash held at financial institutions that is owned by the Company. Restricted cash is held by the Company in financial institutions for the purpose of in-process customer settlements or reserves held per contact terms.

Notes Receivable

Notes receivable are comprised of a $3.0 million loan to another entity (see Note 10, Related Party and Other Transactions) and advances to ISOs. Substantially all of the notes receivable bear interest and are secured. ISO advances are generally repaid via reductions in future commissions paid to the ISO, thus cash flows from these activities are reported as cash flows from operations.

Reclassifications

Certain prior period amounts in these unaudited condensed consolidated financial statements have been reclassified to conform to the current period presentation, with no net effect on the Company's stockholders' deficit or net loss for any period.

Accounting Policies

There have been no material changes to the Company's accounting policies from December 31, 2018 through September 30, 2019, except for the addition of an accounting policy for repurchased stock. Also, see Note 2, Acquisitions and Contributions of Assets, for information on the non-controlling interest issued in connection with certain net assets acquired from YapStone, Inc. ("YapStone").

Components of Revenues and Expenses

Revenues

Merchant card fees revenue consists mainly of fees for processing electronic payments, including credit, debit and electronic benefit transaction card processing. The fees are generally based on a variable percentage of the dollar amount of each transaction

and, in some cases, additional fees for each transaction. In addition, merchant customers may also be charged miscellaneous fees, including statement fees, annual fees, monthly minimum fees, fees for handling chargebacks, gateway fees, and fees for other miscellaneous services. Merchant card fees revenue is attributable primarily to our Consumer Payments segment.

Outsourced services and other revenue consist mainly of cost-plus fees related to B2B services, merchant financing and buyer-initiated payment programs sold on behalf of certain enterprise customers, originated through our in-house sales force, including incentives for meeting sales targets. Outsourced services revenue is attributable primarily to our Commercial Payments reportable segment. Other revenue include revenue from the sales of equipment (primarily point of sale terminals) and processing of automated clearing house ("ACH") transactions.

Costs of Services

Costs of Merchant Card Fees

Costs of merchant card fees primarily consist of residual payments to agents and ISOs and other third-party costs directly attributable to payment processing. The residual payments represent commissions paid to agents and ISOs based upon a percentage of the net revenue generated from merchant transactions.

Costs of Outsourced Services and Other Revenue

Costs of outsourced services and other revenue consist of salaries directly related to outsourced services revenue, the cost of equipment (point of sale terminals) sold, and third-party fees and commissions related to the Company's ACH processing activities.

Selling, General and Administrative ("SG&A")

SG&A expenses include mainly professional services, advertising, rent, office supplies, software licenses, utilities, state and local franchise and sales taxes, litigation settlements, executive travel, insurance, and expenses related to the Business Combination.

Interest Expense

Interest expense consists of interest on outstanding debt and amortization of deferred financing costs and original issue discounts.

Other, net

Other, net is composed of interest income, debt modification and extinguishment expenses, changes in fair value of warrant liabilities, and equity in losses and impairment of unconsolidated entities. Interest income consists mainly of interest received pursuant to notes receivable from independent sales agents. Debt modification and extinguishment expenses includes write-offs of unamortized deferred financing costs and original issue discount relating to the extinguished debt. Equity in loss and impairment of unconsolidated entities consists of the Company's share of the income or loss of its equity method investment as well as any impairment charges related to such investments.

New Accounting Standards Adopted

The Company did not adopt any new accounting standards during the quarter or nine months ended September 30, 2019, except for ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities-Subtopic 825-10, and the policy for repurchased common stock based on existing GAAP.

ASU 2016-01 and ASU 2018-09

Under ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, entities have to measure equity investments (except those accounted for under the equity method, those that result in consolidation of the investee and certain other investments) at fair value and recognize any changes in fair value in net income. However, for equity investments that do

not have readily determinable fair values and do not qualify for the existing practical expedient in ASC 820 to estimate fair value using the net asset value per share (or its equivalent) of the investment, the guidance provides a new measurement alternative. Entities may choose to measure those investments at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company early adopted the provisions of ASU 2016-01 on April 1, 2019 and applied them to an acquired warrant to purchase equity of another entity, the same entity that borrowed $3.0 million from the Company during the second quarter of 2019 under a loan and loan commitment agreement. The carrying value, at cost, and fair value of the warrant were not material. See Note 10, Related Party and Other Transactions.

The Company was also required to adopt ASU 2018-09, Codification Improvements, at the same time it adopted ASU 2016-01. The adoption of ASU 2018-09 had no material effect on the Company's financial position, operations, or cash flows.

Repurchased Stock

Pursuant to the provisions of ASC 505-30, Treasury Stock, the Company has elected to apply the cost method when accounting for treasury stock resulting from the repurchase of its common stock. Under the cost method, the gross cost of the shares reacquired is charged to a contra equity account labeled Treasury Stock. The equity accounts that were originally credited for the original shares issuance, common stock and additional paid-in capital, remain intact. See Note 12, Equity.

If the treasury shares are ever reissued in the future, proceeds in excess of repurchased cost will be credited to additional paid-in capital. Any deficiency will be charged to retained earnings (accumulated deficit), unless additional paid-in capital from previous treasury stock transactions exists, in which case the deficiency will be charged to that account, with any excess charged to retained earnings (accumulated deficit). If treasury stock is reissued in the future, a cost flow assumption (e.g., FIFO, LIFO, or specific identification) will be adopted to compute excesses and deficiencies upon subsequent share reissuances.

Recently Issued Standards Not Yet Adopted

Prior to July 25, 2018, the Company was defined as a non-public entity for purposes of applying transition guidance related to new or revised accounting standards under GAAP, and as such was typically required to adopt new or revised accounting standards subsequent to the required adoption dates that applied to public companies. Subsequent to July 25, 2018, the Company retains EGC status until no later than December 31, 2021. The Company will maintain the election available to an EGC to use any extended transition period applicable to non-public companies when complying with a new or revised accounting standards. Therefore, as long as the Company retains EGC status, before December 31, 2021 the Company can continue to elect to adopt any new or revised accounting standards on the adoption date (including early adoption) required for a private company.

The following standards are pending adoption and will likely apply to the Company in future periods based on the Company's current business activities:

Revenue Recognition (ASC 606, ASU 2014-09)

In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09, Revenue from Contracts with Customers, which since has been codified and amended in ASC 606, Revenue from Contracts with Customers, and supplemented with other ASUs. This guidance clarifies the principles for recognizing revenue and will be applicable to all contracts with customers regardless of industry-specific or transaction-specific fact patterns. Further, the guidance will require improved disclosures as well as additional disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. Since its original issuance, the FASB has issued several updates to this guidance. Additionally, ASC 340, Other Assets and Deferred Costs, and ASC 705-20, Cost of Sales and Services — Accounting for Consideration Received from a Vendor, are also effective upon adoption of ASC 606; ASC 340 addresses costs related to revenue and ASC 705-20 addresses vendor incentives. The new standards could change the amount and timing of revenue and costs for certain significant revenue streams, increase areas of judgment and related internal controls requirements, change the presentation of revenue for certain contract arrangements and possibly require changes to the Company's software systems to assist in both internally capturing accounting differences and externally reporting such differences through enhanced disclosure requirements. As an EGC, the standard is effective for the Company's 2019 annual reporting period and for interim periods after 2019. The standard permits the

use of either the retrospective or modified retrospective transition method. The Company plans to use the modified retrospective transition method and is currently evaluating the effect that the standard may have on its consolidated financial statements and disclosures.

Leases (ASC 842)

In February 2016, the FASB issued new lease accounting guidance in ASU No. 2016-02, Leases-Topic 842, which has been codified in ASC 842, Leases. Other related ASUs have also been issued that will impact lessors. Under this new guidance, lessees will be required to recognize for all leases (with the exception of short-term leases): 1) a lease liability equal to the lessee's obligation to make lease payments arising from a lease, measured on a discounted basis and 2) a right-of-use asset which will represent the lessee's right to use, or control the use of, a specified asset for the lease term. As an EGC, this standard is effective for the Company's annual reporting period beginning in 2021 and interim reporting periods beginning first quarter of 2022. The adoption of ASC 842 will require the Company to recognize non-current assets and liabilities for right-of-use assets and operating lease liabilities on its consolidated balance sheet, but it is not expected to have a material effect on the Company's results of operations or cash flows. ASC 842 will also require additional footnote disclosures to the Company's consolidated financial statements.

Credit Losses (ASU 2016-13 and ASU 2019-05)

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, later codified as ASC 326, Financial Instruments-Credit Losses. This new guidance will change how entities account for credit impairment for trade and other receivables, as well as for certain financial assets and other instruments. ASU 2016-13 will replace the current "incurred loss" model with an "expected loss" model. Under the "incurred loss" model, a loss (or allowance) is recognized only when an event has occurred (such as a payment delinquency) that causes the entity to believe that a loss is probable (i.e., that it has been "incurred"). Under the "expected loss" model, a loss (or allowance) is recognized upon initial recognition of the asset that reflects all future events that leads to a loss being realized, regardless of whether it is probable that the future event will occur. The "incurred loss" model considers past events and current conditions, while the "expected loss" model includes expectations for the future which have yet to occur. ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, was issued in November 2018 and excludes operating leases from the new guidance. The standard will require entities to record a cumulative-effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective. The Company is currently evaluating the potential impact that ASU 2016-13 may have on the timing of recognizing future provisions for expected losses on the Company's accounts receivable. Based on recent actions by the FASB, this new standard will be effective for the Company at the beginning of 2023 as long as the Company is still a Smaller Reporting Company (as defined by the SEC) on the date that the FASB issues its ASU (expected before the end of 2019) to formally extend the adoption date for this standard.

Statement of Cash Flows (ASU 2016-15)

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230). This ASU represents a consensus of the FASB's Emerging Issues Task Force on eight separate issues that each impact classifications on the statement of cash flows. In particular, issue number three addresses the classification of contingent consideration payments made after a business combination. Under ASU 2016-15, cash payments made soon after an acquisition's consummation date (i.e., approximately three months or less) will be classified as cash outflows from investing activities. Payments made thereafter will be classified as cash outflows from financing activities up to the amount of the original contingent consideration liability. Payments made in excess of the amount of the original contingent consideration liability will be classified as cash outflows from operating activities. As an EGC, this ASU is effective for the Company for years beginning in 2019 and interim periods within years beginning in 2020. The Company is evaluating the effect this ASU will have on its consolidated statement of cash flows.

Goodwill Impairment Testing (ASU 2017-04)

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 will eliminate the requirement to calculate the implied fair value of goodwill (i.e., step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value (i.e., measure the charge based on the current step 1). Any impairment charge will be limited to the amount of goodwill allocated to an impacted reporting unit. ASU 2017-04 will not change the current guidance for completing Step 1 of the goodwill impairment test, and an entity will still be able to perform the current

optional qualitative goodwill impairment assessment before determining whether to proceed to Step 1. Upon adoption, the ASU will be applied prospectively. As an EGC, this ASU will be effective for annual and interim impairment tests performed in periods beginning in 2022. The impact that ASU 2017-04 may have on the Company's financial condition or results of operations will depend on the circumstances of any goodwill impairment event that may occur after adoption.

Share-Based Payments to Non-Employees (ASU 2018-07)

In June 2018, the FASB issued ASU 2018-07, Share-based Payments to Non-Employees, to simplify the accounting for share-based payments to non-employees by aligning it with the accounting for share-based payments to employees, with certain exceptions. As an EGC, the ASU is effective for annual reporting periods beginning in 2020 and interim periods within annual periods beginning in the first quarter of 2021, but not before the Company adopts ASC 606, Revenue Recognition. The Company is evaluating the impact this ASU will have on its consolidated financial statements.

Disclosures for Fair Value Measurements (ASU 2018-13)

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement. This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of the FASB's disclosure framework project. For all entities, this ASU is effective for annual and interim reporting periods beginning in 2020. Certain amendments must be applied prospectively while others are to be applied on a retrospective basis to all periods presented. As disclosure guidance, the adoption of this ASU will not have an effect on the Company's financial position, results of operations or cash flows.

Implementation Costs Incurred in Cloud Computing Arrangements (ASU 2018-15)

In August 2018, the FASB issued ASU 2018-15, Implementation Costs Incurred in Cloud Computing Arrangements ("ASU 2018-15"), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). As an EGC, this ASU is effective for the Company for annual reporting periods beginning in 2021, and interim periods within annual periods beginning in 2022. The amendments should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is evaluating the impact this ASU will have on its consolidated financial statements.

Concentration of Risk

The Company's revenue is substantially derived from processing Visa® and MasterCard® bank card transactions. Because the Company is not a member bank, in order to process these bank card transactions, the Company maintains sponsorship agreements with member banks which require, among other things, that the Company abide by the by-laws and regulations of the card associations.

Substantially all of the Company's revenue and receivables are attributable to merchant customer transactions, which are processed by third-party payment processors.

A majority of the Company's cash and restricted cash is held in certain financial institutions, substantially all of which is in excess of federal deposit insurance corporation limits. The Company does not believe it is exposed to any significant credit risk from these transactions.

No one merchant customer accounted for 10% or more of the Company's consolidated revenue for any period presented.

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 581	$ 511

FAIR VALUE

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

FAIR VALUE

The following is a description of the valuation methodology used for the warrants issued to Goldman Sachs Specialty Lending Group, L.P. ("GS") and contingent consideration issued in business combinations, which were recorded and remeasured at fair value at the end of each reporting period.

GS Warrants

In connection with the GS Credit Agreement, warrants issued by Holdings to GS for the purchase of Holdings' Class A common units (each, a "GS Warrant" and collectively, the "GS Warrants") were issued, canceled, and replaced at various times in 2018 and prior years. During the first quarter of 2018, a GS Warrant for the purchase of 1.8% of Holdings' outstanding Class A common units was replaced by a GS Warrant to purchase of 2.2% of Holdings' Class A common units. This new GS Warrant had a term of 7 years, an exercise price of $0, and could be exercised at any time prior to expiration date. Since the obligation was based solely on the fact that the 2.2% interest in the equity of Holdings was fixed and known at inception as well as the fact that GS could exercise the GS Warrant with a settlement in cash any time prior to the expiration date of December 31, 2023, the outstanding GS Warrant was required to be recorded as a liability. A $0.1 million decrease and a net $3.5 million increase in the fair value of the GS Warrant for the quarter and nine months ended September 30, 2018, respectively, is included in Other, net in the accompanying unaudited condensed consolidated statements of operations. The GS Warrant was redeemed in full on July 25, 2018 for $12.7 million in cash.

The GS Warrants were classified as level 3 in the fair value hierarchy. The fair value of the GS warrants was estimated based on the fair value of Holdings using a weighted-average of values derived from generally accepted valuation techniques, including market approaches, which consider the guideline public company method, the guideline transaction method, the recent funding method, and an income approach, which considered discounted cash flows.

Contingent Consideration Issued in 2018 Business Combinations

The estimated fair values of contingent consideration related to the Priority Payment Systems Tech Partners and Priority Payment Systems Northeast business acquisitions are based on a weighted payout probability at the measurement date, which falls within Level 3 on the fair value hierarchy. Both of these acquisitions occurred during the third quarter of 2018. At September 30, 2019

and December 31, 2018, the total fair value of the contingent consideration for both acquisitions was approximately $1.0 million, which was not materially different than the fair values on their original measurement dates.

The following table shows a reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significant unobservable inputs that were classified as Level 3 in the fair value hierarchy for the periods indicated:



(in thousands)
	Contingent Consideration		Warrant Liability

Balance at January 1, 2018	$	—	$	8,701
Extinguishment of GS 1.8% warrant liability	—		(8,701		)
GS 2.2% warrant liability	—		12,182
Balance at March 31, 2018	—		12,182
Adjustment to fair value included in earnings	—		591
Balance at June 30, 2018	—		12,773
Adjustment to fair value included in earnings	—		(72		)
Extinguishment of GS 2.2% warrant liability	—		(12,701		)
Estimated contingent consideration for business acquisitions	980
Balance at September 30, 2018	$	980	$	—


Balance at January 1, 2019	$	980	$	—
Fair value adjustments	—		—
Balance at March 31, 2019	980		—
Fair value adjustments	—		—
Balance at June 30, 2019	980		—
Fair value adjustments	—		—
Balance at September 30, 2019	$	980	$	—

There were no transfers among the fair value levels during the quarters or nine months ended September 30, 2019 and September 30, 2018.

Fair Value Disclosures (Level 3 in the fair value hierarchy)

Notes Receivable

Notes receivable are carried at amortized cost. Substantially all of the Company's notes receivable are secured, and the Company believes that all of its notes receivable are collectible. The fair value of the Company's notes receivable at September 30, 2019 and December 31, 2018 was approximately $5.2 million and $1.8 million, respectively.

Debt Obligations

The Borrower's outstanding debt obligations (see Note 7, Long-Term Debt) are reflected in the Company's consolidated balance sheets at carrying value since the Company did not elect to remeasure debt obligations to fair value at the end of each reporting period. The carrying values of the long-term debt approximate fair value due to mechanisms in the credit agreements that adjust the applicable interest rates.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

RELATED PARTY AND OTHER TRANSACTIONS	9 Months Ended
RELATED PARTY AND OTHER TRANSACTIONS	Sep. 30, 2019
Related Party Transactions [Abstract]
RELATED PARTY AND OTHER TRANSACTIONS	RELATED PARTY AND OTHER TRANSACTIONS See Note 2, Acquisitions and Contributions of Assets, for information about the acquisitions of certain assets and liabilities of eTab and Cumulus. On May 22, 2019, the Company, through one of its wholly-owned subsidiaries, executed an interest-bearing loan and commitment agreement with another entity. The Company loaned the entity $3.0 million, with a commitment to loan up to $10.0 million based on certain growth metrics of the entity and continued compliance by the entity with the terms and covenants of the agreement. The Company's commitment to make additional advances under the loan agreement is dependent upon such advances not conflicting with covenants or restrictions under any of the Company's debt or other applicable agreements. Amounts loaned to this entity by the Company are secured by substantially all of the assets of the entity and by a personal guarantee. The note receivable has an interest rate of 12.0% per annum and is repayable in full in May 2024. The Company also received a warrant to purchase a non-controlling interest in this entity's equity at a fixed amount. The loan agreement also gives the Company certain rights to purchase some or all of this entity's equity in the future, at the entity's then-current fair value. The fair values of the warrant, loan commitment, and purchase right were not material at inception or at September 30, 2019.

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Current Assets:
Cash	$ 4,191	$ 15,631
Restricted cash	22,652	18,200
Accounts receivable, net of allowance for doubtful accounts of $581 and $511	47,491	45,651
Prepaid expenses and other current assets	4,317	3,642
Current portion of notes receivable	1,362	979
Settlement assets	756	1,042
Total current assets	80,769	85,145
Notes receivable, less current portion	3,795	852
Property, equipment, and software, net	21,396	17,482
Goodwill	109,515	109,515
Intangible assets, net	188,056	124,637
Deferred income taxes, net	47,206	49,692
Other non-current assets	1,540	1,295
Total assets	452,277	388,618
Current liabilities:
Accounts payable and accrued expenses	22,033	27,638
Accrued residual commissions	17,852	18,715
Customer deposits and advance payments	3,532	3,282
Borrowings outstanding under revolving credit facility	11,500	0
Current portion of long-term debt	4,007	3,293
Settlement obligations	17,542	11,132
Total current liabilities	76,466	64,060
Long-term debt, net of current portion, discounts and debt issuance costs	473,344	402,095
Other non-current liabilities	7,740	7,936
Total long-term liabilities	481,084	410,031
Total liabilities	557,550	474,091
Commitments and Contingencies (Notes 9 and 10)
Stockholders' deficit:
Common stock	67	67
Additional paid-in capital	3,354	0
Treasury stock, at cost	(2,388)	0
Accumulated deficit	(111,960)	(85,540)
Total Priority Technology Holdings, Inc. stockholders' deficit	(110,927)	(85,473)
Non-controlling interest	5,654	0
Total stockholders' deficit	(105,273)	(85,473)
Total liabilities and stockholders' deficit	$ 452,277	$ 388,618

RELATED PARTY AND OTHER TRANSACTIONS - Narrative (Details) - USD ($) $ in Millions	Sep. 30, 2019	May 22, 2019
Receivables [Abstract]
Notes receivable, noncurrent	$ 3.0	$ 3.0
Notes receivable, maximum loan commitment available for future issuance, noncurrent		$ 10.0
Notes receivable, noncurrent, annual interest rate		12.00%

FAIR VALUE - Rollforward (Details) - USD ($) $ in Thousands	3 Months Ended						9 Months Ended
FAIR VALUE - Rollforward (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Adjustment to fair value included in earnings							$ 0	$ 3,458
Contingent Consideration
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance	$ 980	$ 980	$ 980	$ 0	$ 0	$ 0	980	0
GS 2.2% warrant liability				980
Adjustment to fair value included in earnings	0	0	0		0
Ending balance	980	980	980	980	0	0	980	980
Warrant Liability
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance	0	0	0	12,773	12,182	8,701	0	8,701
Adjustment to fair value included in earnings	0	0	0		591
Adjustment to fair value included in earnings				(72)
Ending balance	$ 0	$ 0	$ 0	0	$ 12,773	12,182	$ 0	$ 0
GS 1.8% Warrants \| Warrant Liability
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Extinguishment of GS warrant liability						(8,701)
GS 2.2% Warrants \| Warrant Liability
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Extinguishment of GS warrant liability				$ (12,701)
GS 2.2% warrant liability						$ 12,182
Common Class A \| GS 1.8% Warrants
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrant, percentage of outstanding stock available for purchase						1.80%
Common Class A \| GS 2.2% Warrants
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrant, percentage of outstanding stock available for purchase					2.20%	2.20%

LONG-TERM DEBT - Rolling Maturities of Long-Term Debt (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Debt Disclosure [Abstract]
2020	$ 4,007
2021	4,007
2022	4,007
2023	471,641
Total Debt	$ 483,662	$ 412,682

LONG-TERM DEBT

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

LONG-TERM DEBT

Long-term debt, excluding amounts outstanding on the revolving credit facility, as of September 30, 2019 and December 31, 2018 consisted of the following:



(in thousands)	September 30, 2019			December 31, 2018
Term Loan - Senior, matures January 3, 2023 and bears interest at LIBOR plus 5.0% at September 30, 2019 and December 31, 2018 (rate of 7.12% at September 30, 2019 and 7.53% at December 31, 2018)	$	389,839		$	322,666
Term Loan - Subordinated, matures July 3, 2023 and bears interest at 5.0% plus payment-in-kind interest (rate of 10.5% at September 30, 2019 and December 31, 2018)	93,823			90,016
Total	483,662			412,682
Less: current portion of long-term debt	(4,007		)	(3,293		)
Less: unamortized debt discounts	(3,060		)	(3,300		)
Less: deferred financing costs	(3,251		)	(3,994		)
Total long-term debt	$	473,344		$	402,095

Substantially all of the Company's assets are pledged as collateral under the Senior Credit Agreement and under a credit and guaranty agreement with Goldman Sachs Specialty Lending Group, L.P. (the "GS Credit Agreement"). However, the Company, as the parent entity, is neither a borrower nor a guarantor of this aforementioned debt. The Company's subsidiaries that are borrowers or guarantors are referred to as the "Borrowers."

The December 2018 modification of the Senior Credit Agreement and the GS Credit Agreement (collectively, the "Third Amendment") included a delayed draw basis amount of $70.0 million. Until the additional $70.0 million, net of a $350,000 discount, was drawn in March 2019, the Borrowers were assessed a fee on the undrawn amounts. This fee amounted to $0.4 million in the first quarter and first nine months of 2019.

At September 30, 2019, the Senior Credit Agreement has a maximum borrowing amount of $422.5 million consisting of a $397.5 million term loan and a $25.0 million revolving credit facility. The allowed borrowings amount under the GS Credit Agreement is $80.0 million, excluding payment-in-kind interest.

The Senior Credit Facility mature on January 3, 2023, with the exception of the revolving credit facility which expires on January 2, 2022. Any amounts outstanding under the revolving credit facility must be paid in full before the maturity date of January 2, 2022. The GS Credit Agreement matures on July 3, 2023.

At September 30, 2019, there was $11.5 million outstanding on the revolving credit facility; no amount was outstanding as of December 31, 2018. As of September 30, 2019, approximately $13.5 million is available under the revolving credit facility. The variable interest rate on the revolving credit facility was 7.12% at September 30, 2019. Undrawn commitment for a letter of credit under the revolving credit facility was approximately $0.1 million.

As a result of the Third Amendment, borrowings under the Senior Credit Agreement are subject to an applicable margin, or percentage per annum, equal to: (i) with respect to Initial Term Loans, (a) for LIBOR Rate Loans, 5.00% per annum and (b) for Base Rate Loans, 4.00% per annum; and (ii) with respect to Revolving Loans (a) for LIBOR Rate Loans and Letter of Credit fees, 5.00% per annum, (b) for Base Rate Loans, 4.00% per annum, and (c) for unused commitment fees, 0.50% per annum.

Under the Senior Credit Agreement, the Borrowers are required to make quarterly principal payments of approximately $1.0 million. Additionally, the Borrowers may be obligated to make certain additional mandatory prepayments based on excess cash flow, as defined in the Senior Credit Agreement. No such prepayment was due for the year ended December 31, 2018.

Contractual principal payments for long-term debt, excluding amounts outstanding on the revolving credit agreement, due after September 30, 2019 are as follows:



(in thousands)
Twelve-month period ending September 30,	Principal Due

2020	$	4,007
2021	4,007
2022	4,007
2023	471,641
Total	$	483,662

For the nine months ended September 30, 2019 and September 30, 2018, payment-in-kind (PIK) interest under the GS Credit Agreement added $3.8 million and $3.6 million, respectively, to the principal amount of the subordinated debt.

For the quarters ended September 30, 2019 and September 30, 2018, interest expense, including amortization of deferred financing costs and debt discounts, was $10.5 million and $7.3 million, respectively, and these amounts for the nine months ended September 30, 2019 and September 30, 2018, were $30.6 million and $21.9 million, respectively.

Deferred financing costs and debt discounts are being amortized using the effective interest method over the remaining term of the respective debt and are recorded as a component of interest expense. Interest expense related to amortization of deferred finance costs and debt discounts was approximately $0.4 million and $0.4 million for the quarters ended September 30, 2019 and September 30, 2018, respectively, and $1.3 million and $1.1 million for the nine months ended September 30, 2019 and September 30, 2018, respectively.

Covenants

The Senior Credit Agreement and the GS Credit Agreement, as amended, contain representations and warranties, financial and collateral requirements, mandatory payment events, events of default, and affirmative and negative covenants, including without limitation, covenants that restrict among other things, the ability to create liens, pay dividends or distribute assets from the Company's subsidiaries to the Company, merge or consolidate, dispose of assets, incur additional indebtedness, make certain investments or acquisitions, enter into certain transactions (including with affiliates), and to enter into certain leases. Substantially all of the Borrowers' assets are pledged as collateral under the Senior Credit Agreement and GS Credit Agreement. The Borrowers are also required to comply with certain restrictions on their Total Net Leverage Ratio (as defined in the Senior Credit Agreement and GS Credit Agreement). As of September 30, 2019 and December 31, 2018, the Borrowers were in compliance with the covenants.

The Borrowers are currently pursuing a refinancing of the Senior Credit Agreement and the GS Credit Agreement, which the Company expects to be completed during the fourth quarter of 2019. Based upon the current financial forecast for the fourth quarter of 2019, without a refinancing or modification of existing terms within the credit agreements, it is probable that compliance will not be achieved for the required Total Net Leverage Ratio covenant of no more than 5.25:1.00 at December 31, 2019. Noncompliance could have materially adverse impacts on the Company's financial condition, including giving the lenders the right to accelerate the debt repayment schedule and restricting access to the revolving credit facility. Based upon the progress of the refinancing efforts, the credit agreements are expected to be refinanced, and the Company expects to be in compliance with the debt covenants included therein at December 31, 2019.

GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

The Company records goodwill when an acquisition is made and the purchase price is greater than the fair value assigned to the underlying tangible and intangible assets acquired and the liabilities assumed. The Company's goodwill was allocated to reportable segments as follows:



(in thousands)	September 30, 2019		December 31, 2018
Consumer Payments	$	106,832	$	106,832
Commercial Payments	—		—
Integrated Partners	2,683		2,683
	$	109,515	$	109,515

There were no changes in the carrying amount of goodwill for the quarter and nine months ended September 30, 2019.

The Company's intangible assets primarily include merchant portfolios and other intangible assets such as non-compete agreements, trade names, acquired technology (developed internally by acquired companies prior to acquisition by the Company) and customer relationships. As of September 30, 2019 and December 31, 2018, intangible assets consisted of the following:



(in thousands)	September 30, 2019			December 31, 2018
Other intangible assets:
Merchant portfolios	$	155,287		$	137,576
Non-compete agreements	3,390			3,390
Trade names	2,870			2,870
Acquired technology	15,390			14,390
Customer relationships	124,660			55,940
Total gross carrying value	301,597			214,166
Less accumulated amortization:
Merchant portfolios	(63,991		)	(48,492		)
Non-compete agreements	(3,390		)	(3,390		)
Trade names	(1,209		)	(1,017		)
Acquired technology	(12,116		)	(10,222		)
Customer relationships	(32,835		)	(26,408		)
Total accumulated amortization	(113,541		)	(89,529		)

Net carrying value	$	188,056		$	124,637

See Note 2, Acquisitions and Contributions of Assets, for information about certain additions made during the first nine months of 2019.

Amortization expense for finite-lived intangible assets was approximately $8.4 million and $24.0 million for the quarter and nine months ended September 30, 2019, respectively, and $3.8 million and $9.3 million for the quarter and nine months ended September 30, 2018, respectively. Amortization expense for future periods could differ due to new intangible asset acquisitions, changes in useful lives of existing intangible assets, and other relevant events or circumstances.

The Company tests goodwill for impairment for each of its reporting units on an annual basis, or when events occur or circumstances indicate the fair value of a reporting unit is below its carrying value. The Company expects to perform its next annual goodwill impairment test as of November 30, 2019 using market data and discounted cash flow analysis. The Company concluded there were no indicators of impairment as of September 30, 2019 or December 31, 2018. As such, there was no accumulated impairment loss as of September 30, 2019 and December 31, 2018.

LOSS PER SHARE

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

LOSS PER SHARE

The following tables set forth the computation of the Company's basic and diluted loss per common share:



	Quarter Ended September 30,						Nine Months Ended September 30,
(in thousands except per share amounts)	2019			2018			2019			2018

Basic Loss Per Common Share:
Numerator:
Net loss	$	(5,844	)	$	(2,562	)	$	(26,420	)	$	(11,367	)
Less: Distributions to participating securities	—			—			—			(45		)
Net loss attributable to common stockholders	$	(5,844	)	$	(2,562	)	$	(26,420	)	$	(11,412	)

Denominator:
Weighted-average shares outstanding	67,007			64,152			67,109			60,339

Basic loss per common share	$	(0.09	)	(0.04		)	(0.39		)	(0.19		)

Diluted Loss Per Common Share:
Numerator:
Net loss	$	(5,844	)	$	(2,562	)	$	(26,420	)	$	(11,367	)
Less: Gain on warrant liability	—			(72		)	—			—
Less: Distributions to participating securities	—			—			—			(45		)
Net loss attributable to common shareholders	$	(5,844	)	$	(2,634	)	$	(26,420	)	$	(11,412	)

Denominator:
Weighted-average shares outstanding	67,007			64,152			67,109			60,339
Dilutive common share equivalents	—			392			—			—
Weighted-average dilutive shares outstanding	67,007			64,544			67,109			60,339

Diluted loss per common share	$	(0.09	)	$	(0.04	)	$	(0.39	)	$	(0.19	)

Potentially anti-dilutive securities that were excluded from earnings per share at September 30, 2019 that could be dilutive in future periods are as follows:



(in thousands)
Outstanding warrants on common stock		3,557
Restricted stock awards issued under 2018 Equity Incentive Plan		202
Outstanding stock option awards issued under 2018 Equity Incentive Plan		1,794
Earnout incentive awards issued and subject to vesting		95
Earnout incentive awards subject to future issuance		9,705

LONG-TERM DEBT - Schedule of Long-Term Debt (Details) - USD ($) $ in Thousands	1 Months Ended	9 Months Ended	12 Months Ended
	Dec. 31, 2018	Sep. 30, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Total	$ 412,682	$ 483,662	$ 412,682
Less: current portion of long-term debt	(3,293)	(4,007)	(3,293)
Less: unamortized debt discounts	(3,300)	(3,060)	(3,300)
Less: deferred financing costs	(3,994)	(3,251)	(3,994)
Total long-term debt	402,095	473,344	402,095
Syndicate of Lenders \| Line of Credit
Debt Instrument [Line Items]
Total	$ 322,666	$ 389,839	$ 322,666
Interest rate during period	7.53%	7.12%	7.53%
Syndicate of Lenders \| Line of Credit \| LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate		5.00%	5.00%
Syndicate of Lenders \| Line of Credit \| Term Loan \| LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate	5.00%
Goldman Sachs Specialty Lending Group \| Line of Credit
Debt Instrument [Line Items]
Interest rate during period	10.50%	10.50%	10.50%
Goldman Sachs Specialty Lending Group \| Line of Credit \| Payment-in-Kind Interest Rate
Debt Instrument [Line Items]
Basis spread on variable rate		5.00%	5.00%
Goldman Sachs Specialty Lending Group \| Line of Credit \| Term Loan
Debt Instrument [Line Items]
Total	$ 90,016	$ 93,823	$ 90,016

INCOME TAXES - Schedule of Income Tax (Benefit) Provision (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Tax Disclosure [Abstract]
Deferred tax benefit	$ (1,667)	$ (991)	$ (5,376)	$ (991)
Provision (adjustment) for DTA valuation allowance	(78)	0	5,197	0
Provision for DTA valuation allowance - discrete item	9	0	2,647	0
Total income tax (benefit) provision	$ (1,736)	$ (991)	$ 2,468	$ (991)

ACQUISITIONS AND CONTRIBUTIONS OF ASSETS	9 Months Ended
ACQUISITIONS AND CONTRIBUTIONS OF ASSETS	Sep. 30, 2019
Asset Acquisition [Abstract]
ACQUISITIONS AND CONTRIBUTIONS OF ASSETS	ACQUISITIONS AND CONTRIBUTIONS OF ASSETS YapStone In March 2019, the Company, through one of its subsidiaries, Priority Real Estate Technology, LLC ("PRET"), acquired certain assets and assumed certain related liabilities (the "YapStone net assets") from YapStone under an asset purchase and contribution agreement. The purchase price for the YapStone net assets was $65.0 million in cash plus a non-controlling interest in PRET. The fair value of the non-controlling interest was estimated to be approximately $5.7 million. The total purchase price was assigned to customer relationships, except for $1.0 million and $1.2 million which were assigned to a software license agreement and a services agreement, respectively. The $65.0 million of cash was funded from a draw down of the credit facilities (the "Senior Credit Facility") under a senior credit agreement with a syndicate of lenders (the "Senior Credit Agreement") on a delayed basis as provided for and pursuant to the third amendment thereto executed in December 2018. See Note 7, Long-Term Debt. During the quarter and nine months ended September 30, 2019, no earnings of PRET were allocated to the non-controlling interest pursuant to the profit-sharing agreement between the Company and the non-controlling interest. eTab and Cumulus (Related Party) In February 2019, a subsidiary of the Company, Priority Hospitality Technology, LLC ("PHOT"), received a contribution of substantially all of the operating assets of eTab, LLC ("eTab") and CUMULUS POS, LLC ("Cumulus") under asset contribution agreements. No material liabilities were assumed by PHOT. These contributed assets were composed substantially of technology-related assets. Prior to these transactions, eTab was 80% owned by the Company's Chairman and Chief Executive Officer. No cash consideration was paid to the contributors of the eTab or Cumulus assets on the date of the transactions. As consideration for these contributed assets, the contributors were issued redeemable preferred equity interests in PHOT. Under these redeemable preferred equity interests, the contributors are eligible to receive up to $4.5 million of profits earned by PHOT, plus a preferred yield (6% per annum) on any of the $4.5 million amount that has not been distributed to them. The Company's Chairman and Chief Executive Officer owns 83.3% of the redeemable preferred equity interests in PHOT. Once a total of $4.5 million plus the preferred yield has been distributed to the holders of the redeemable preferred equity interests, the redeemable preferred equity interests will cease to exist. The Company determined that the contributor's carrying value of the eTab net assets (as a common control transaction under GAAP) was not material. Under the guidance for a common control transaction, the contribution of the eTab net assets did not result in a change of entity or the receipt of a business, therefore the Company's financial statements for prior periods have not been adjusted to reflect the historical results attributable to the eTab net assets. Additionally, no material amount was estimated for the fair value of the contributed Cumulus net assets. Pursuant to the limited liability company agreement of PHOT, any material future earnings generated by the eTab and Cumulus assets that are attributable to the holders of the preferred equity interests will be reported by the Company as a form of non-controlling interests ("NCI") classified as mezzanine equity on the Company's consolidated balance sheet until $4.5 million and the preferred yield have been distributed to the holders of the preferred equity interests. Subsequent changes, if material, in the value of the NCI will be reported as an equity transaction between the Company's consolidated retained earnings (accumulated deficit) and any carrying value of the NCI in mezzanine equity. Such amounts were not material to the Company's results of operations, financial position, or cash flows for the period covering February 1, 2019 (date the assets were contributed to the Company) and September 30, 2019, and therefore no recognition of the NCI has been reflected in the Company's unaudited condensed consolidated financial statements and accompanying footnotes. Residual Portfolio Acquisition On March 15, 2019, a subsidiary of the Company paid $15.2 million cash to acquire certain residual portfolio rights. Of the $15.2 million, $5.0 million was funded from a delayed draw down of the Senior Credit Facility as provided for and pursuant to the third amendment thereto executed in December 2018. See Note 7, Long-Term Debt. Additionally, a $10.0 million draw was made against the revolving credit facility under the Senior Credit Facility and cash on hand was used to fund the remaining amount. The purchase price may be subject to an increase of up to $6.4 million in accordance with the terms of the agreement between the Company and the sellers. Through September 30, 2019, no additional purchase price has been paid. Additional purchase price, if any, will be accounted for when payment to the seller becomes probable and it will be added to the carrying value of the asset.

FAIR VALUE - (Tables)

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value, Liabilities Measured on Recurring Basis



(in thousands)
	Contingent Consideration		Warrant Liability

Balance at January 1, 2018	$	—	$	8,701
Extinguishment of GS 1.8% warrant liability	—		(8,701		)
GS 2.2% warrant liability	—		12,182
Balance at March 31, 2018	—		12,182
Adjustment to fair value included in earnings	—		591
Balance at June 30, 2018	—		12,773
Adjustment to fair value included in earnings	—		(72		)
Extinguishment of GS 2.2% warrant liability	—		(12,701		)
Estimated contingent consideration for business acquisitions	980
Balance at September 30, 2018	$	980	$	—


Balance at January 1, 2019	$	980	$	—
Fair value adjustments	—		—
Balance at March 31, 2019	980		—
Fair value adjustments	—		—
Balance at June 30, 2019	980		—
Fair value adjustments	—		—
Balance at September 30, 2019	$	980	$	—

LOSS PER SHARE - Schedule of Antidilutive Securities (Details) shares in Thousands	9 Months Ended
	Sep. 30, 2019 shares
Outstanding warrants on common stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities that were excluded from EPS (in shares)	3,557
Restricted stock awards issued under 2018 Equity Incentive Plan
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities that were excluded from EPS (in shares)	202
Outstanding stock option awards issued under 2018 Equity Incentive Plan
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities that were excluded from EPS (in shares)	1,794
Earnout incentive awards issued and subject to vesting
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities that were excluded from EPS (in shares)	95
Earnout Incentive Awards Subject To Future Issuance [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities that were excluded from EPS (in shares)	9,705

SEGMENT INFORMATION - Schedule of Segment Reporting Information by Segment (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income (loss) from operations:
Total income from operations of reportable segments	$ 2,725	$ 3,560	$ 6,127	$ 14,643
Depreciation and amortization:
Depreciation and amortization	10,077	4,899	28,763	12,679
Operating Segments
Revenues:
Total revenue	109,954	103,591	317,356	323,949
Income (loss) from operations:
Total income from operations of reportable segments	7,841	11,438	22,529	36,093
Operating Segments \| Consumer Payments
Revenues:
Total revenue	94,058	95,801	276,129	302,514
Income (loss) from operations:
Total income from operations of reportable segments	7,221	11,905	22,303	37,466
Depreciation and amortization:
Depreciation and amortization	8,302	4,415	24,215	11,497
Operating Segments \| Commercial Payments
Revenues:
Total revenue	6,957	6,975	21,032	20,473
Income (loss) from operations:
Total income from operations of reportable segments	(383)	(41)	(1,116)	(745)
Depreciation and amortization:
Depreciation and amortization	70	109	249	393
Operating Segments \| Integrated Partners
Revenues:
Total revenue	8,939	815	20,195	962
Income (loss) from operations:
Total income from operations of reportable segments	1,003	(426)	1,342	(628)
Depreciation and amortization:
Depreciation and amortization	1,299	91	3,086	91
Corporate
Income (loss) from operations:
Total income from operations of reportable segments	(5,116)	(7,878)	(16,402)	(21,450)
Depreciation and amortization:
Depreciation and amortization	$ 406	$ 284	$ 1,213	$ 698

SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

SEGMENT INFORMATION

The Company has three reportable segments that are reviewed by the Company's chief operating decision maker ("CODM"), who is the Company's Chief Executive Officer and Chairman. The Consumer Payments operating segment and the Integrated Partners operating segments are each reported as separate reportable segments. The Commercial Payments and Institutional Services (sometimes referred to as Managed Services) operating segments are aggregated into one reportable segment, Commercial Payments.

•

Consumer Payments – represents consumer-related services and offerings including merchant acquiring and transaction processing services including the proprietary MX enterprise suite. Either through acquisition of merchant portfolios or through resellers, the Company becomes a party or enters into contracts with a merchant and a sponsor bank. Pursuant to the contracts, for each card transaction, the sponsor bank collects payment from the credit, debit or other payment card issuing bank, net of interchange fees due to the issuing bank, pays credit card association (e.g., Visa, MasterCard) assessments and pays the transaction fee due to the Company for the suite of processing and related services it provides to merchants, with the remainder going to the merchant.


•	Commercial Payments – represents services provided to certain enterprise customers, including outsourced sales force to those customers and accounts payable automation services to commercial customers.


•	Integrated Partners – represents payment adjacent services that are provided primarily to the health care and residential real estate industries.

Corporate includes costs of corporate functions and shared services not allocated to our reportable segments. During the fourth quarter of 2018, the Company adjusted its methodology of allocating certain corporate overhead costs to its reportable segments. All prior periods presented have been adjusted to reflect the current allocation methodology.

Prior to second quarter of 2019, the Integrated Partners operating segment was aggregated with the Commercial Payments and Institutional Services operating segments and reported as one aggregated reportable segment. In the second quarter of 2019, the Integrated Partners operating segment was no longer aggregated with the Commercial Payments and Institutional Services operating segments. All comparative periods have been adjusted to reflect the current three reportable segments.



	Quarter Ended September 30,						Nine Months Ended September 30,
(in thousands)	2019			2018			2019			2018
Revenue:
Consumer Payments	$	94,058		$	95,801		$	276,129		$	302,514
Commercial Payments	6,957			6,975			21,032			20,473
Integrated Partners	8,939			815			20,195			962
Consolidated Revenue	$	109,954		$	103,591		$	317,356		$	323,949

Income (loss) from operations:
Consumer Payments	$	7,221		$	11,905		$	22,303		$	37,466
Commercial Payments	(383		)	(41		)	(1,116		)	(745		)
Integrated Partners	1,003			(426		)	1,342			(628		)
Corporate	(5,116		)	(7,878		)	(16,402		)	(21,450		)
Consolidated income from operations	$	2,725		$	3,560		$	6,127		$	14,643

Depreciation and amortization:
Consumer Payments	$	8,302		$	4,415		$	24,215		$	11,497
Commercial Payments	70			109			249			393
Integrated Partners	1,299			91			3,086			91
Corporate	406			284			1,213			698
Consolidated depreciation and amortization	$	10,077		$	4,899		$	28,763		$	12,679

A reconciliation of total income from operations of reportable segments to the Company's net loss is provided in the following table:



(in thousands)	Quarter Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018

Total income from operations of reportable segments	$	7,841		$	11,438		$	22,529		$	36,093
Corporate	(5,116		)	(7,878		)	(16,402		)	(21,450		)
Interest expense	(10,463		)	(7,334		)	(30,602		)	(21,893		)
Plus (less) other, net	158			221			523			(5,108		)
Income tax benefit (expense)	1,736			991			(2,468		)	991
Net loss	$	(5,844	)	$	(2,562	)	$	(26,420	)	$	(11,367	)

The Company was not significantly reliant upon any single customer for the quarter and nine months ended September 30, 2019 and September 30, 2018. Substantially all revenue is generated in the United States.

SEGMENT INFORMATION - Narrative (Details) - segment	3 Months Ended	9 Months Ended
SEGMENT INFORMATION - Narrative (Details) - segment	Mar. 31, 2019	Sep. 30, 2019
Segment Reporting Information [Line Items]
Number of reportable segments		3
Commercial Payments
Segment Reporting Information [Line Items]
Number of reportable segments	1

SETTLEMENT ASSETS AND OBLIGATIONS (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Accounts, Notes, Loans and Financing Receivable [Line Items]
Merchant reserves held by sponsor banks	$ 135,800	$ 186,200
Settlement assets, estimated shortfall	3,200	2,000
Settlement assets	756	1,042
Settlement obligations	17,542	11,132
Card settlements due to merchants
Accounts, Notes, Loans and Financing Receivable [Line Items]
Settlement obligations	2,915	777
Due to ACH payees
Accounts, Notes, Loans and Financing Receivable [Line Items]
Settlement obligations	14,627	10,355
Card settlements due from merchants, net of estimated losses
Accounts, Notes, Loans and Financing Receivable [Line Items]
Settlement assets	480	988
Card settlements due from processors
Accounts, Notes, Loans and Financing Receivable [Line Items]
Settlement assets	$ 276	$ 54

ACQUISITIONS AND CONTRIBUTIONS OF ASSETS - eTab and Cumulus (Related Party) (Details) - USD ($) $ in Millions		1 Months Ended
	Jan. 31, 2019	Feb. 28, 2019
Schedule of Asset Acquisition [Line Items]
Redeemable noncontrolling interest, equity, preferred, redemption value		$ 4.5
Preferred yield per year		6.00%
President, Chief Executive Officer And Chairman
Schedule of Asset Acquisition [Line Items]
Percentage of ownership before transaction	80.00%
Preferred stock, percentage owned		83.30%

EQUITY - Narrative (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended	9 Months Ended	12 Months Ended
	Jun. 30, 2019	Sep. 30, 2019	Dec. 31, 2018	Feb. 28, 2019	Aug. 31, 2018
Class of Stock [Line Items]
Common stock repurchased (in shares)	451,224
Common stock repurchased, average price per share (in dollars per share)	$ 5.29
Common stock repurchased, value	$ 2.4
Warrants and rights, number of shares allowed to purchase (in shares)				420,000
Class of warrant or right, number of securities called by each warrant or right (in shares)					0.192
Common shares issued as earn-out consideration (in shares)		9,800,000	9,800,000
Common shares issued as earn-out consideration (in shares)		0	0
Tranche One
Class of Stock [Line Items]
Common shares issued as earn-out consideration (in shares)		4,900,000
Earn-out consideration, future minimum EBITDA			$ 82.5
Earn-out consideration, minimum stock price (in dollars per share)		$ 12.00
Tranche Two
Class of Stock [Line Items]
Common shares issued as earn-out consideration (in shares)		4,900,000
Earn-out consideration, future minimum EBITDA		$ 91.5
Earn-out consideration, minimum stock price (in dollars per share)		$ 14.00
MI Acquisitions Warrants, Public
Class of Stock [Line Items]
Class of warrant or right, outstanding (in shares)					5,310,109
MI Acquisitions Warrants, Private
Class of Stock [Line Items]
Warrants and rights, number of shares allowed to purchase (in shares)					421,107

NATURE OF BUSINESS AND BASIS OF PRESENTATION - Narrative (Details) $ in Millions	9 Months Ended
	Sep. 30, 2019 USD ($) segment	May 22, 2019 USD ($)
Accounting Policies [Abstract]
Number of reportable segments \| segment	3
Notes receivable, noncurrent \| $	$ 3.0	$ 3.0

LONG-TERM DEBT - Narrative (Details) - USD ($)		1 Months Ended	3 Months Ended			9 Months Ended		12 Months Ended
LONG-TERM DEBT - Narrative (Details) - USD ($)	Jan. 03, 2017	Dec. 31, 2018	Sep. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Debt discount		$ 3,300,000	$ 3,060,000			$ 3,060,000			$ 3,300,000
Borrowings outstanding under revolving credit facility		$ 0	11,500,000			11,500,000			$ 0
Undrawn commitment for a letter of credit			100,000			100,000
Payment-in-kind interest						3,807,000	$ 3,623,000
Interest expense			10,463,000		$ 7,334,000	30,602,000	21,893,000
Amortization related to amortization of deferred finance costs and debt discounts			400,000		$ 400,000	1,300,000	$ 1,100,000
Goldman Sachs Specialty Lending Group \| Line of Credit
Debt Instrument [Line Items]
Maximum borrowing capacity			$ 422,500,000			$ 422,500,000
Interest rate during period		10.50%	10.50%			10.50%			10.50%
Goldman Sachs Specialty Lending Group \| Line of Credit \| Term Loan
Debt Instrument [Line Items]
Maximum borrowing capacity			$ 397,500,000			$ 397,500,000
Remaining borrowing capacity			80,000,000.0			80,000,000.0
Goldman Sachs Specialty Lending Group \| Line of Credit \| Revolving Credit Facility
Debt Instrument [Line Items]
Maximum borrowing capacity			$ 25,000,000.0			$ 25,000,000.0
Interest rate during period			7.12%			7.12%
Syndicate of Lenders \| Line of Credit
Debt Instrument [Line Items]
Interest rate during period		7.53%	7.12%			7.12%			7.53%
Quarterly principal payment	$ 1,000,000.0
Syndicate of Lenders \| Line of Credit \| LIBOR
Debt Instrument [Line Items]
Applicable margin						5.00%			5.00%
Syndicate of Lenders \| Line of Credit \| Term Loan \| LIBOR
Debt Instrument [Line Items]
Applicable margin		5.00%
Syndicate of Lenders \| Line of Credit \| Term Loan \| Base Rate
Debt Instrument [Line Items]
Applicable margin		4.00%
Syndicate of Lenders \| Line of Credit \| Revolving Credit Facility
Debt Instrument [Line Items]
Remaining borrowing capacity			$ 13,500,000			$ 13,500,000
Borrowings outstanding under revolving credit facility		$ 0	$ 11,500,000			11,500,000			$ 0
Unused commitment fee percentage		0.50%
Syndicate of Lenders \| Line of Credit \| Revolving Credit Facility \| LIBOR
Debt Instrument [Line Items]
Applicable margin		5.00%
Syndicate of Lenders \| Line of Credit \| Revolving Credit Facility \| Base Rate
Debt Instrument [Line Items]
Applicable margin		4.00%
Delayed Draw \| Goldman Sachs Specialty Lending Group \| Line of Credit \| Term Loan
Debt Instrument [Line Items]
Maximum borrowing capacity		$ 70,000,000.0							70,000,000.0
Debt discount		$ 350,000							$ 350,000
Unused commitment fee amount				$ 400,000		$ 400,000
Subsequent Event
Debt Instrument [Line Items]
Debt covenant, maximum net leverage ratio								525.00%