United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
(Exact Name of Registrant as Specified in its Charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||
| (Address of Principal Executive Offices) | (Zip Code) | ||||||||||
Registrant's telephone number, including area code: (800 ) 935-5961
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of (1933 §230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On May 11, 2023 , Priority Technology Holdings, Inc. ("Priority") issued a press release announcing its financial results for the quarter ended March 31, 2023. A copy of that press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.
Item 7.01. Regulation FD Disclosure.
On May 11, 2023, Priority will hold an earnings conference call and webcast at 11:00 a.m. (Eastern Time) to discuss the financial results for the quarter ended March 31, 2023. The press release referenced in Item 2.02 contains information about how to access the conference call and webcast. A copy of the slide presentation to be used during the earnings call and webcast is furnished as Exhibit 99.2 to this Current Report on Form 8-K. The slide presentation also will be available on our website, www.prth.com under the "Investor Relations" section.
The information in this Current Report on Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report on Form 8-K shall not be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits – The following exhibit is furnished as part of this Current Report on Form 8-K.
| Exhibit Number | Description | ||||
| 104 | The cover page from this Current Report on Form 8-K, formatted in Inline XBRL | ||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: | ||||||||
| PRIORITY TECHNOLOGY HOLDINGS, INC. | ||||||||
| By: /s/ Timothy O'Leary | ||||||||
| Name: Timothy O'Leary | ||||||||
| Title: Chief Financial Officer | ||||||||
Exhibit 99.1
Priority Investor Inquiries:
Chris Kettmann
chris.kettmann@dentonsglobaladvisors.com
(773) 497-7575
Priority Technology Holdings, Inc. Announces First Quarter 2023 Financial Results
Strong First Quarter Growth Driven by Performance Across Diverse Business Segments
ALPHARETTA, GA - May 11, 2023 -- Priority Technology Holdings, Inc. (NASDAQ: PRTH) ("Priority" or the "Company"), the platform for unified commerce that delivers integrated payments and banking services at scale, today announced its first quarter 2023 financial results including strong quarter-over-quarter diversified revenue growth.
Highlights of Consolidated Results
First Quarter 2023, Compared with First Quarter 2022
Financial highlights of the first quarter of 2023 compared with the first quarter of 2022, are as follows:
•Revenue of $185.0 million increased 20.8% from $153.2 million.
•Adjusted gross profit (a non-GAAP measure1) of $63.1 million increased 21.8% from $51.8 million.
•Adjusted gross profit margin (a non-GAAP measure1) of 34.1% increased 30 basis points from 33.8%.
•Operating income of $16.8 million increased 55.6% from $10.8 million.
•Adjusted EBITDA (a non-GAAP measure1) of $37.6 million increased 24.1% from $30.3 million
"We once again delivered excellent results, driven by the strength of our diverse business lines, particularly our counter cyclical businesses that are positioned to benefit from higher interest rates and the current economic conditions," said Tom Priore, Chairman & CEO of Priority. "We are continuing to invest prudently in our vision for the convergence of payments and banking features that are essential to delivering a modern commerce experience for our acquiring and B2B customers, reselling and ISV partners, and long term value to our shareholders."
(1)See "Non-GAAP Financial Measures" and the reconciliations of Adjusted Gross Profit (non-GAAP),Adjusted Gross Profit Margin (non-GAAP), and Adjusted EBITDA, to their most comparable GAAP measures provided below for additional information.
1
Full Year 2023 Financial Guidance
Priority's outlook remains strong and we are reaffirming our full year 2023 guidance:
•Revenue forecasted to range between $740 million to $755 million, a growth rate of 12% to 14%.
•Adjusted EBITDA (a non-GAAP measure) is forecasted to range between $160 million to $165 million, a growth rate of 14% to 18%.
Conference Call
Priority's leadership will host a conference call on Thursday, May 11, 2023 at 11:00 a.m. EDT to discuss its first quarter 2023 financial results. Participants can access the call by phone in the U.S. or Canada at (833) 636-1319 or internationally at (412) 902-4286.
The Internet webcast link and accompanying slide presentation can be accessed at https://edge.media-server.com/mmc/p/mp3ggx5e and will also be posted in the "Investor Relations" section of the Company's website at www.prioritycommerce.com.
An audio replay of the call will be available shortly after the conference call until May 18, 2023 at 2:00 p.m. EDT. To listen to the audio replay, dial (877) 344-7529 or (412) 317-0088 and enter conference ID number 3738244. Alternatively, you may access the webcast replay in the "Investor Relations" section of the Company's website at www.prioritycommerce.com.
Non-GAAP Financial Measures
This communication includes certain non-GAAP financial measures that we regularly review to evaluate our business and trends, measure our performance, prepare financial projections, allocate resources, and make strategic decisions. We believe these non-GAAP measures help to illustrate the underlying financial and business trends relating to our results of operations and comparability between current and prior periods. We also use these non-GAAP measures to establish and monitor operational goals. However, these non-GAAP measures are not superior to or a substitute for prominent measurements calculated in accordance with GAAP. Rather, the non-GAAP measures are meant to be a complement to understanding measures prepared in accordance with GAAP.
2
Adjusted Gross Profit and Adjusted Gross Profit Margin
The Company's adjusted gross profit metric represents revenues less cost of revenue (excluding depreciation and amortization). Adjusted gross profit margin is adjusted gross profit divided by revenues. We review these non-GAAP measures to evaluate our underlying profit trends. The reconciliation of adjusted gross profit to its most comparable GAAP measure is provided below:
| (in thousands) | Three Months Ended March 31, | ||||||||||
| 2023 | 2022 | ||||||||||
| Revenues | $ | 185,028 | $ | 153,239 | |||||||
| Cost of revenue (excluding depreciation and amortization) | (121,966) | (101,480) | |||||||||
| Adjusted gross profit | $ | 63,062 | $ | 51,759 | |||||||
| Adjusted gross profit margin | 34.1 | % | 33.8 | % | |||||||
| Depreciation and amortization of revenue generating assets | (2,959) | (2,449) | (2,449) | ||||||||
| Gross profit | $ | 60,103 | $ | 49,310 | |||||||
| Gross profit margin | 32.5 | % | 32.2 | % | |||||||
EBITDA and Adjusted EBITDA
EBITDA and adjusted EBITDA are performance measures. EBITDA is earnings before interest, income tax, and depreciation and amortization expenses ("EBITDA"). Adjusted EBITDA begins with EBITDA but further excludes certain non-cash costs, such as stock-based compensation and the write-off of the carrying value of investments or other assets, as well as debt extinguishment and modification expenses and other expenses and income items considered non-recurring, such as acquisition integration expenses, certain professional fees, and litigation settlements. We review the non-GAAP adjusted EBITDA measure to evaluate our business and trends, measure our performance, prepare financial projections, allocate resources, and make strategic decisions.
The reconciliation of adjusted EBITDA to its most comparable GAAP measure is provided below:
| (in thousands) | Three Months Ended March 31, | ||||||||||
| 2023 | 2022 | ||||||||||
| Net loss | $ | (506) | $ | (333) | |||||||
| Interest expense | 17,699 | 11,535 | |||||||||
| Income tax benefit | (133) | (325) | |||||||||
| Depreciation and amortization | 18,048 | 17,353 | |||||||||
| EBITDA | 35,108 | 28,230 | |||||||||
| Selling, general and administrative (non-recurring) | 437 | 310 | |||||||||
| Non-cash stock-based compensation | 1,936 | 1,558 | |||||||||
| Other nonrecurring expense | 159 | 225 | |||||||||
| Adjusted EBITDA | $ | 37,640 | $ | 30,323 | |||||||
3
Further detail of certain of these adjustments, and where these items are recorded in our consolidated statements of operations, is provided below:
| (in thousands) | Three Months Ended March 31, | ||||||||||
| 2023 | 2022 | ||||||||||
| Selling, general and administrative expenses (non-recurring): | |||||||||||
| Certain legal fees | $ | 376 | $ | 164 | |||||||
| Professional, accounting and consulting fees | 61 | 146 | |||||||||
| $ | 437 | $ | 310 | ||||||||
Priority does not provide a reconciliation of forward-looking non-GAAP financial measures to their comparable GAAP financial measures because it could not do so without unreasonable effort due to the unavailability of the information needed to calculate reconciling items and due to the variability, complexity and limited visibility of the adjusting items that would be excluded from the non-GAAP financial measures in future periods. When planning, forecasting and analyzing future periods, the Company does so primarily on a non-GAAP basis without preparing a GAAP analysis as that would require estimates for various cash and non-cash reconciling items that would be difficult to predict with reasonable accuracy. For example, stock-based compensation expense would be difficult to estimate because it depends on the Company's future hiring and retention needs, as well as the future fair market value of the Company's common stock, all of which are difficult to predict and subject to constant change. As a result, the Company does not believe that a GAAP reconciliation would provide meaningful supplemental information about the Company's outlook.
4
About Priority Technology Holdings, Inc.
Priority is a payments technology company that leverages a purpose-built platform to enable clients to collect, store and send money, operating at scale. Priority helps its customers take and make payments while managing business and consumer operating accounts to monetize payment networks. Priority's tailored, agile technology powers high-value payments products bolstered by industry-leading personalized support, and delivers value to its partners by leveraging its payments and embedded finance technology to deliver solutions that power modern commerce. The Company's approach is simple – Priority handles the complexities of payments and embedded finance to free its partners to focus on their core business objectives. Priority's solutions are offered via API or proprietary applications with nationwide money transmission licenses, providing end-to-end operational support including automated risk management and underwriting, full compliance and industry leading customer service. Additional information can be found at www.prioritycommerce.com.
Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about future financial and operating results, our plans, objectives, expectations and intentions with respect to future operations, products and services, and other statements identified by words such as "may," "will," "should," "anticipates," "believes," "expects," "plans," "future," "intends," "could," "estimate," "predict," "projects," "targeting," "potential" or "contingent," "guidance," "outlook" or words of similar meaning. These forward-looking statements include, but are not limited to, our 2023 outlook and statements regarding our market and growth opportunities. Such forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive risks, trends and uncertainties that could cause actual results to differ materially from those projected, expressed, or implied by such forward-looking statements. Our actual results could differ materially, and potentially adversely, from those discussed or implied herein.
We caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. You should evaluate all forward-looking statements made in this press release in the context of the risks and uncertainties disclosed in our SEC filings, including our most recent Annual Report on Form 10-K filed with the SEC on March 23, 2023. These filings are available online at www.sec.gov or www.prioritycommerce.com.
We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences we anticipate or affect us or our operations in the way we expect. You are cautioned not to place undue reliance on forward-looking statements as a predictor of future performance. The forward-looking statements included in this press release are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.
5
Priority Technology Holdings, Inc.
Unaudited Consolidated Statements of Operations
| (in thousands, except per share amounts) | Three Months Ended March 31, | ||||||||||
| 2023 | 2022 | ||||||||||
| Revenues | $ | 185,028 | $ | 153,239 | |||||||
| Operating expenses | |||||||||||
| Cost of revenue (excludes depreciation and amortization) | 121,966 | 101,480 | |||||||||
| Salary and employee benefits | 19,048 | 16,077 | |||||||||
| Depreciation and amortization | 18,048 | 17,353 | |||||||||
| Selling, general and administrative | 9,118 | 7,503 | |||||||||
| Total operating expenses | 168,180 | 142,413 | |||||||||
| Operating income | 16,848 | 10,826 | |||||||||
| Other (expense) income | |||||||||||
| Interest expense | (17,699) | (11,535) | |||||||||
| Other income, net | 212 | 51 | |||||||||
| Total other expense, net | (17,487) | (11,484) | |||||||||
| Loss before income taxes | (639) | (658) | |||||||||
| Income tax benefit | (133) | (325) | |||||||||
| Net loss | (506) | (333) | |||||||||
| Less: Dividends and accretion attributable to redeemable senior preferred stockholders | (11,295) | (8,400) | |||||||||
| Loss attributable to common stockholders | $ | (11,801) | $ | (8,733) | |||||||
| Other comprehensive income (loss) | |||||||||||
| Foreign currency translation adjustments | 24 | — | |||||||||
| Comprehensive loss | $ | (11,777) | $ | (8,733) | |||||||
| Loss per common share: | |||||||||||
| Basic | $ | (0.15) | $ | (0.11) | |||||||
| Diluted | $ | (0.15) | $ | (0.11) | |||||||
| Weighted-average common shares outstanding: | |||||||||||
| Basic and diluted | 78,133 | 78,597 | |||||||||
| Diluted | 78,133 | 78,597 | |||||||||
6
Priority Technology Holdings, Inc.
Unaudited Consolidated Balance Sheets
| (in thousands) | |||||||||||
| March 31, 2023 | December 31, 2022 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 15,882 | $ | 18,454 | |||||||
| Restricted cash | 11,012 | 10,582 | |||||||||
| Accounts receivable, net of allowances | 78,042 | 78,113 | |||||||||
| Prepaid expenses and other current assets | 10,443 | 11,832 | |||||||||
| Current portion of notes receivable | 1,581 | 1,471 | |||||||||
| Settlement assets and customer/subscriber account balances | 612,146 | 532,018 | |||||||||
| Total current assets | 729,106 | 652,470 | |||||||||
| Notes receivable, less current portion | 3,066 | 3,191 | |||||||||
| Property, equipment and software, net | 36,976 | 34,687 | |||||||||
| Goodwill | 368,740 | 369,337 | |||||||||
| Intangible assets, net | 277,478 | 288,794 | |||||||||
| Deferred income taxes, net | 22,163 | 16,447 | |||||||||
| Other noncurrent assets | 8,456 | 8,437 | |||||||||
| Total assets | $ | 1,445,985 | 1,373,363 | ||||||||
| Liabilities, Redeemable Senior Preferred Stock and Stockholders' Deficit | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and accrued expenses | $ | 57,110 | $ | 51,864 | |||||||
| Accrued residual commissions | 41,049 | 35,979 | |||||||||
| Customer deposits and advance payments | 2,868 | 2,618 | |||||||||
| Current portion of long-term debt | 6,200 | 6,200 | |||||||||
| Settlement and customer/subscriber account obligations | 612,953 | 533,340 | |||||||||
| Total current liabilities | 720,180 | 630,001 | |||||||||
| Long-term debt, net of current portion, discounts and debt issuance costs | 592,279 | 598,926 | |||||||||
| Other noncurrent liabilities | 11,857 | 11,643 | |||||||||
| Total noncurrent liabilities | 604,136 | 610,569 | |||||||||
| Total liabilities | 1,324,316 | 1,240,570 | |||||||||
| Redeemable senior preferred stock | 235,439 | 235,579 | |||||||||
| Stockholders' deficit: | |||||||||||
| Preferred stock | — | — | |||||||||
| Common stock | 76 | 76 | |||||||||
| Treasury stock, at cost | (12,336) | (11,559) | |||||||||
| Additional paid-in capital | 328 | 9,650 | |||||||||
| Accumulated other comprehensive income | 24 | — | |||||||||
| Accumulated deficit | (102,714) | (102,208) | |||||||||
| Total stockholders' deficit attributable to stockholders of PRTH | (114,622) | (104,041) | |||||||||
| Non-controlling interest | 852 | 1,255 | |||||||||
| Total stockholders' deficit | (113,770) | (102,786) | |||||||||
| Total liabilities, redeemable senior preferred stock and stockholders' deficit | $ | 1,445,985 | $ | 1,373,363 | |||||||
7
Priority Technology Holdings, Inc.
Unaudited Consolidated Statements of Cash Flows
| (in thousands) | Three Months Ended March 31, | ||||||||||
| 2023 | 2022 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | (506) | $ | (333) | |||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization of assets | 18,048 | 17,353 | |||||||||
| Stock-based compensation | 1,936 | 1,558 | |||||||||
| Amortization of debt issuance costs and discounts | 903 | 848 | |||||||||
| Deferred income tax | (5,716) | (3,227) | |||||||||
| Change in contingent consideration | 229 | — | |||||||||
| Other non-cash items, net | 14 | — | |||||||||
| Change in operating assets and liabilities: | |||||||||||
| Accounts receivable | 81 | (14,440) | |||||||||
| Prepaid expenses and other current assets | 481 | 164 | |||||||||
| Income taxes (receivable) payable | 8,666 | 2,913 | |||||||||
| Notes receivable | (163) | 98 | |||||||||
| Accounts payable and other accrued liabilities | 3,916 | 5,316 | |||||||||
| Customer deposits and advance payments | 250 | (13) | |||||||||
| Other assets and liabilities, net | (462) | (624) | |||||||||
| Net cash provided by operating activities | 27,677 | 9,613 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Additions to property, equipment and software | (5,046) | (2,370) | |||||||||
| Notes receivable, net | 178 | (2,400) | |||||||||
| Acquisitions of assets and other investing activities | (2,715) | (941) | |||||||||
| Net cash used in investing activities | (7,583) | (5,711) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Repayments of long-term debt | (1,550) | (1,550) | |||||||||
| Repayments of borrowings under revolving credit facility | (6,000) | (5,000) | |||||||||
| Shares withheld for taxes on vested stock-based compensation | (777) | (156) | |||||||||
| Dividends paid to redeemable senior preferred stockholders | (11,435) | (3,505) | |||||||||
| Settlement and customer/subscriber accounts obligations, net | 79,258 | 12,749 | |||||||||
| Payment of contingent consideration related to business combination | (1,959) | — | |||||||||
| Net cash provided by financing activities | 57,537 | 2,538 | |||||||||
| Net change in cash and cash equivalents, and restricted cash: | |||||||||||
| Net increase in cash and cash equivalents, and restricted cash | 77,631 | 6,440 | |||||||||
| Cash and cash equivalents, and restricted cash at beginning of period | 560,610 | 518,093 | |||||||||
| Cash and cash equivalents, and restricted cash equivalents at end of period | $ | 638,241 | $ | 524,533 | |||||||
| Reconciliation of cash and cash equivalents, and restricted cash: | |||||||||||
| Cash and cash equivalents | $ | 15,882 | $ | 13,557 | |||||||
| Restricted cash | 11,012 | 13,588 | |||||||||
| Cash and cash equivalents included in settlement assets and customer/subscriber account balances | 611,347 | 497,388 | |||||||||
| Total cash and cash equivalents, and restricted cash | $ | 638,241 | $ | 524,533 | |||||||
8
Priority Technology Holdings, Inc.
Unaudited Reportable Segments' Results
| (in thousands) | Three Months Ended March 31, | |||||||||||||
| 2023 | 2022 | |||||||||||||
| SMB Payments: | ||||||||||||||
| Revenue | $ | 154,933 | $ | 129,959 | ||||||||||
| Operating expenses | 142,922 | 117,473 | ||||||||||||
| Operating income | $ | 12,011 | $ | 12,486 | ||||||||||
| Operating margin | 7.8 | % | 9.6 | % | ||||||||||
| Depreciation and amortization | $ | 10,846 | $ | 10,824 | ||||||||||
| Key indicators: | ||||||||||||||
| Merchant bankcard processing dollar value | $ | 15,220,715 | $ | 14,076,847 | ||||||||||
| Merchant bankcard transaction count | 163,406 | 145,948 | ||||||||||||
| B2B Payments: | ||||||||||||||
| Revenue | $ | 2,786 | $ | 5,925 | ||||||||||
| Operating expenses | 3,635 | 5,516 | ||||||||||||
| Operating income (loss) | $ | (849) | $ | 409 | ||||||||||
| Operating margin | (30.5) | % | 6.9 | % | ||||||||||
| Depreciation and amortization | $ | 125 | $ | 73 | ||||||||||
| Key indicators: | ||||||||||||||
| B2B issuing dollar volume | $ | 198,546 | $ | 186,380 | ||||||||||
| B2B issuing transaction count | 280 | 206 | ||||||||||||
| Enterprise Payments: | ||||||||||||||
| Revenue | $ | 27,309 | $ | 17,355 | ||||||||||
| Operating expenses | 14,646 | 12,861 | ||||||||||||
| Operating income | $ | 12,663 | $ | 4,494 | ||||||||||
| Operating margin | 46.4 | % | 25.9 | % | ||||||||||
| Depreciation and amortization | $ | 6,690 | $ | 6,197 | ||||||||||
| Key indicators: | ||||||||||||||
| Average billed clients | 465,219 | 346,394 | ||||||||||||
| Average new enrollments | 45,948 | 23,441 | ||||||||||||
| Operating income of reportable segments | $ | 23,825 | $ | 17,389 | ||||||||||
| Less: Corporate expense | (6,977) | (6,563) | ||||||||||||
| Consolidated operating income | $ | 16,848 | $ | 10,826 | ||||||||||
| Corporate depreciation and amortization | $ | 387 | $ | 387 | $ | 259 | ||||||||
9
May 11, 2023 Priority Technology Holdings, Inc. (Nasdaq: PRTH) Supplemental Slides: Q1 2023 Earnings Call
Important Notice Regarding Forward-Looking Statements and Non-GAAP Measures This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about future financial and operating results, our plans, objectives, expectations and intentions with respect to future operations, products and services, and other statements identified by words such as “may,” “will,” “should,” “anticipates,” “believes,” “expects,” “plans,” “future,” “intends,” “could,” “estimate,” “predict,” “projects,” “targeting,” “potential” or “contingent,” “guidance,” “anticipates,” “outlook” or words of similar meaning. These forward-looking statements include, but are not limited to, Priority Technology Holdings, Inc.’s (“Priority”, “we”, “our” or “us”) 2023 outlook and statements regarding our market and growth opportunities. Such forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive risks, trends and uncertainties that could cause actual results to differ materially from those projected, expressed, or implied by such forward-looking statements. Our actual results could differ materially, and potentially adversely, from those discussed or implied herein. We caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. You should evaluate all forward-looking statements made in this presentation in the context of the risks and uncertainties disclosed in our Securities and Exchange Commission (“SEC”) filings, including our Annual Report on Form 10-K filed with the SEC on March 23, 2023 and our Quarterly Report on Form 10-Q filed with the SEC on May 11, 2023. These filings are available online at www.sec.gov or www.prioritycommerce.com. We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences we anticipate or affect us or our operations in the way we expect. You are cautioned not to place undue reliance on forward-looking statements as a predictor of future performance. The forward-looking statements included in this presentation are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements. This presentation includes certain non-GAAP financial measures that are not prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and that may be different from non-GAAP financial measures used by other companies. Priority believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends of the Company. These non-GAAP measures should not be considered in isolation from, or as an alternative to, financial measures determined in accordance with GAAP. See the footnotes on the slides where these measures are discussed and the slides at the end of this presentation for a reconciliation of such non-GAAP financial measures to the most comparable GAAP numbers. Additionally, we present guidance for Adjusted EBITDA and Adjusted EBITDA as percentage of Adjusted Gross Profit, non-GAAP measures without reconciliation due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations. See more information in Priority’s earnings press release. Adjusted Gross profit referred throughout this presentation is a non-GAAP measure calculated by subtracting Cost of services (excluding depreciation and amortization) from Revenue. Adjusted Gross profit margin referred throughout this presentation is a non-GAAP measure calculated by dividing Adjusted Gross Profit discussed above by Revenue. See Appendix 1 of this presentation for a reconciliation of Adjusted Gross Profit to Gross Profit as per GAAP and Priority’s earnings press release for more details. DISCLAIMER 2
$404 $515 $664 $740 $15 Key 1st Quarter 2023 Highlights 257K+ Active Merchants $115B+ in LTM Total Volume Q1 2023 PERFORMANCE METRICS 486K+ Consumer Accounts REVENUE 21% 1 Adjusted Gross Profit, Adjusted Gross Profit margin and Adjusted EBITDA referred in this presentation are non-GAAP measures. See slide 2 for further details. OPERATING INCOME 57% ADJ GROSS PROFIT1 22% ADJUSTED EBITDA1 24% 3 $70 $96 $140 $160 $5 CONTINUED STRONG MOMENTUM REVENUE In Millions ADJUSTED EBITDA1 In Millions Guidance Range Guidance Range $740 - $755 $160 - $165 2020 2021 2022 2023 2020 2021 2022 2023
First Quarter 2023 Consolidated Results Revenue grew 21% to $185.0 million Adj Gross Profit1 increased 22% to $63.1 million Adj Gross Profit margin1 increased 30 basis points to 34.1% Adjusted EBITDA1 of $37.6 million increased 24% 21% 22% 30BP 24% $51.8M $63.1M 33.8% 34.1% $30.3 $37.6M $153.2M $185.0M Q1 22 Q1 23 Q1 22 Q1 23 Q1 22 Q1 23Q1 22 Q1 23 1Adjusted Gross Profit, Adjusted Gross Profit margin and Adjusted EBITDA referred in this presentation are non-GAAP measures. See slide 2 for further details. 4
Priority Unified Commerce Platform CPX CPX API MX Merchant MX Connect CFTPay CFTConnect Passport API PRIORITY B2BSMB ACQUIRING ENTERPRISE MX Retail MX Restaurant MX QSR MX Build LandlordStation e|tab PayRight MX Givv MX POS Passport Commerce APIs (Passport) Passport Platform Architecture (Shared Macro/Micro Services) PAYMENTS DATA SCIENCE Card Processing • Compliance Card Issuing • Pay Fac Data Warehouse • Business Intelligence Data Science • Visualization BANKING Virtual Accounts • Ledger • ACH/ACH+ • Compliance Check Processing /Recon • Bill Payments C U R A T E D A P P S Passport Account U/I B A N K I N G E N G I N E 5
Priority is Simplifying the Customer Experience Working with Priority is as Easy as 1, 2, 3 Choose the Curated App(s) that best fit your needs Chose the Passport Account Structure that best fits your uses Start Moving Money 1 2 3 6
Financial Results
First Quarter 2023 – SMB (Revenue) Revenue grew 19% to $154.9 million 19% $130.0M $154.9M Q1 22 Q1 23 8 Key Revenue Drivers SMB revenue of $154.9 million increased 19% from $130.0 million in Q1 2022 ➢ Bankcard $ Volumes of $15.2 billion increased over 8% ➢ Average Merchant Count of 260K increased by 7% ➢ New Merchant Boards averaged ~5100 per month in Q1
First Quarter 2023 – SMB (Profits) Adj Gross Profit1 increased 8% to $35.4 million Adj Gross Profit margin1 decreased 240 basis points to 22.9% Operating Income of $12.0 million decreased 4% 8% 240BP 4% $32.9M $35.4M 25.3% 22.9% $12.5M $12.0M Q1 22 Q1 23 Q1 22 Q1 23 Q1 22 Q1 23 1Adjusted Gross Profit, Adjusted Gross Profit margin and Adjusted EBITDA referred in this presentation are non-GAAP measures. See slide 2 for further details. 9
First Quarter 2023 – B2B (Revenue) Revenue decreased 53% to $2.8 million 53% $5.9M $2.8M Q1 22 Q1 23 10 Key Revenue Drivers B2B revenue of $2.8 million decreased 53% from $5.9 million ➢ Largely driven by Managed Services decrease from $2.6 million to $0.3 million due to final wind down of a specific customer program ➢ CPX decreased slightly from $3.3 million in Q1 2022 to $2.5 million in Q1 2023 due to certain fees earned in Q1 2022 related to a contract termination
First Quarter 2023 – B2B (Profits) Adj Gross Profit1 decreased 38% to $2.0 million Adj Gross Profit margin1 increased from 54.2% to 71.4% Operating Loss of $0.8 million decreased from Operating income of $0.4M 38% 1720 BP 300% $3.2M $2.0M 54.2% 71.4% $0.4M ($0.8M) Q1 22 Q1 23 Q1 22 Q1 23 Q1 22 Q1 23 1Adjusted Gross Profit, Adjusted Gross Profit margin and Adjusted EBITDA referred in this presentation are non-GAAP measures. See slide 2 for further details. 11
First Quarter 2023 – Enterprise (Revenue) Revenue grew 57% to $27.3 million 57% $17.3M $27.3M Q1 22 Q1 23 12 Key Revenue Drivers ENTERPRISE revenue of $27.3 million increased 57% from $17.3 million ➢ Avg Monthly New Enrollments of 46K increased 100% from 23K ➢ Avg Number of Billed Clients increased 34% to 465K from 346K ➢ Increase in deposit balances and interest rates continues to drive growth in revenue
First Quarter 2023 – Enterprise (Profits) Adj Gross Profit1 increased 64% to $25.7 million Adj Gross Profit margin1 increased 390 basis points to 94.1% Operating Income of $12.7 million increased 182% 64% 390BP 182% $15.7M $25.7M 90.2% 94.1% $4.5M $12.7M Q1 22 Q1 23 Q1 22 Q1 23 Q1 22 Q1 23 1Adjusted Gross Profit, Adjusted Gross Profit margin and Adjusted EBITDA referred in this presentation are non-GAAP measures. See slide 2 for further details. 13
Operating Expenses Salaries & Benefits increased 19% to $19.1 million SG&A increased 21% to $9.1 million Depreciation & Amortization of $18.0 million increased 3% $7.5M $9.1M $17.4M $18.0M $16.1M $19.1M Q1 22 Q1 23 Q1 22 Q1 23Q1 22 Q1 23 Operating Expenses of $46.2 million increased 13% 19% 21% 3% 14
Adjusted EBITDA1 Walk 15 Adjusted EBITDA experienced strong growth in Q1 2023 ➢ Q1 2023 Adjusted EBITDA of $37.6 million increased 24.1% from $30.3 million in Q1 2022 1Adjusted Gross Profit, Adjusted Gross Profit margin and Adjusted EBITDA referred in this presentation are non-GAAP measures. See slide 2 for further details. EBITDA Walk (In millions) 2023 2022 Q1 Q1 Consolidated net income (loss) (GAAP) (0.5)$ (0.3)$ Add: Interest expense 17.7 11.5 Add: Depreciation and amortization 18.0 17.3 Add: Income tax expense (benefit) (0.1) (0.3) EBITDA (non-GAAP) 35.1 28.2 Further adjusted by: Add: Non-cash stock-based compensation 1.9 1.6 Add: Non-recurring expenses: Legal, professional, accounting and other SG&A 0.6 0.5 Adjusted EBITDA (non-GAAP) 37.6$ 30.3$
Outstanding Debt Total Debt of $615.7 million at end of Q1 2023 decreased from $623.2 million in 2022 ➢ Decrease driven by net $6.0 million Revolver decrease and $1.5 million in Term Loan Repayments ➢ Net Debt of $599.8 million decreased $4.7 million compared to 2022 ➢ Revolver Capacity at the end of Q1 2023 was $33.5 million 16 In Millions
Senior Redeemable Preferred Stock Preferred Stock of $235.4 million, Net of $20.3 million of Unaccreted Discounts and Issuance Costs ➢ First Quarter Dividends and Accretion as follows: 17 1st Quarter (dollars in Millions) 2023 Dividend: Payment in Kind 4.38$ Cash 6.10 10.48 Accretion 0.81 11.29$ In Millions
APPENDIX
Adjusted Gross Profit Reconciliation The reconciliation of adjusted gross profit to its most comparable GAAP measure is provided below: 19 SMB B2B Enterprise Total SMB B2B Enterprise Total Revenues $ 154.9 $ 2.8 $ 27.3 $ 185.0 $ 129.9 $ 5.9 $ 17.4 $ 153.2 Costs of services (excluding depreciation and amortization) (119.5) (0.8) (1.6) (121.9) (97.0) (2.7) (1.7) (101.4) Adjusted Gross Profit 35.4 2.0 25.7 63.1 32.9 3.2 15.7 51.8 Adjusted Gross Profit Margin 22.9% 71.4% 94.1% 34.1% 25.3% 54.2% 90.2% 33.8% Depreciation and amortization of revenue generating assets (1.7) (0.1) (1.2) (3.0) (1.5) (0.1) (0.9) (2.5) Gross Profit $ 33.7 $ 1.9 $ 24.5 $ 60.1 $ 31.4 $ 3.1 $ 14.8 $ 49.3 Gross Profit Margin 21.8% 67.9% 89.7% 32.5% 24.2% 52.5% 85.1% 32.2% Three Months Ended March 31, 2023 (in Millions) Three Months Ended March 31, 2022 (in Millions)