Priority Technology Holdings, Inc. Announces Second Quarter 2020 Financial Results

Priority Technology Holdings, Inc. (NASDAQ: PRTH) (“Priority” or the “Company”), a leading provider of merchant acquiring, integrated payment software and commercial payment solutions, today announced its second quarter 2020 financial results.

The second quarter of 2020 began with nationwide shelter in place orders due to the COVID-19 pandemic. Priority’s April results were reflective of this with merchant bankcard processing dollar volumes down 31.8% year over year, and a corresponding, albeit more modest, revenue decline of 11.7%. As we quickly adapted to the new market dynamic, and the strength of our product offering and counter-cyclical assets accelerated, May and June results posted strong improvements. In May, merchant bankcard processing dollar volumes declined 15.8% year over year, however, revenue increased by 1.7%. In June, merchant bankcard processing dollar volumes showed a modest decline of 1.9% year over year, with a revenue increase of 10.8%.

For the full quarter, increases in ecommerce volume mix and product-driven vertical segment growth resulted in a modest revenue increase in spite of the total processing volume declines. This revenue stability, coupled with the implementation of thoughtful expense management strategies, contributed to year over year adjusted EBITDA growth in each of April, May and June, with 11.6% growth for the full quarter. Monthly adjusted EBITDA in the second quarter of 2020 was $4.6 million in April, $5.9 million in May, and $6.2 million in June. The Company’s non-GAAP adjusted EBITDA measure is net loss before interest, taxes, depreciation and amortization, further adjusted for non-cash stock-based compensation and certain expenses considered non-recurring. See “Non-GAAP Adjusted EBITDA” and “Non-GAAP Financial Measures” for additional information and the reconciliation of adjusted EBITDA to its most comparable GAAP measure provided below.

Highlights of the second quarter of 2020, compared with the second quarter of 2019 are as follows (any differences are due to rounding):

“The combination of our countercyclical payment assets and acceleration of our operating automation initiatives to reduced expenses resulted in strong revenue and adjusted EBITDA growth in the second quarter despite the unprecedented headwinds presented by the COVID-19 pandemic,” said Tom Priore, Executive Chairman and CEO of Priority. “We quickly responded with solutions to market needs among our clients and reselling partners as nationwide shelter-in-place went into effect in April. As states reopened in May and June and overall volume trends improved, the momentum of our ecommerce, B2B and integrated partners businesses continued to accelerate, driving strong overall results for the quarter. We believe our performance through the height of the pandemic underscores the differentiation of our technology, sales and operating platform and anticipate our current momentum to continue.”

Selling, general and administrative expenses included certain operating expenses that the Company considers non-recurring in nature. These expenses totaled $1.4 million and $1.6 million in the second quarters of 2020 and 2019, respectively. In the second quarter of 2020, these expenses included $0.8 million associated with transition services from YapStone, Inc. related to the integration of the March 2019 asset acquisition and $0.4 million for certain legal services. In the second quarter of 2019, these expenses included $0.7 million associated with transition services from YapStone Inc., $0.5 million for transaction-related, capital markets and accounting advisory services, and $0.4 million for certain legal services.

Also, salaries and employee benefits included $0.7 million and $1.0 million of non-cash stock-based compensation in the second quarters of 2020 and 2019, respectively.

Non-GAAP adjusted EBITDA, which excludes these expenses, was $16.7 million in the second quarter of 2020 and $14.9 million in the second quarter of 2019. See “Non-GAAP Financial Measures” and the reconciliation of adjusted EBITDA to its most comparable GAAP measure provided below for additional information.

Discussion of Reportable Segment Results” data-reactid=”39″>Discussion of Reportable Segment Results

Consumer Payments revenue in the second quarter of 2020 increased 0.3% to $81.7 million, compared with $81.5 million in the second quarter of 2019. Despite a 16.4% decline in merchant bankcard processing dollar volume in the quarter, the revenue increase was driven by strong ecommerce growth. The overall merchant mix also resulted in a higher average ticket.

Merchant bankcard volume processed in the second quarter of 2020 of $9.0 billion declined by 16.4%, as compared with $10.8 billion in the second quarter of 2019. Merchant bankcard transactions of 92.8 million in the second quarter of 2020 declined by 28.7%, as compared with 130.1 million in the second quarter of 2019. Average ticket of $97.06 grew 17.2% in the second quarter of 2020, as compared with $82.79 in the second quarter of 2019.

Consumer Payments income from operations in the second quarter of 2020 was $7.3 million, compared with $7.4 million in the second quarter of 2019. Costs of services of $59.1 million increased $1.1 million, depreciation and amortization of $8.7 million increased $0.6 million, and other operating expenses of $6.7 million decreased $1.3 million.

Commercial Payments revenue in the second quarter of 2020 was $5.7 million, a decrease of $0.8 million compared with $6.5 million in the second quarter of 2019. Revenue from commercial payments exchange (“CPX”) accounts payable automated solutions of $1.4 million in the second quarter of 2020 increased $0.1 million compared with $1.3 million in the second quarter of 2019. Revenue from curated managed services programs of $4.3 million in the second quarter of 2020 decreased by $0.9 million compared with $5.2 million in the second quarter of 2019. The managed services decline was largely driven by lower program activity and lower incentive revenue.

Commercial Payments income from operations in the second quarter of 2020 was $0.5 million, compared with a loss from operations of $0.3 million in the second quarter of 2019. Costs of services of $2.6 million decreased $0.8 million, and other operating expenses decreased $0.8 million.

Integrated Partners revenue in the second quarter of 2020 was $5.0 million, an increase of $0.8 million compared with $4.2 million in the second quarter of 2019. Priority Real Estate Technology (“PRET”) comprised $4.5 million of this reportable segment’s revenue in the second quarter of 2020. PRET is comprised of the assets acquired from YapStone, Inc. in March 2019 and the net assets acquired from RadPad Holdings, Inc. in July 2018. Revenue from Priority PayRight Health Solutions and Priority Hospitality Technology, which commenced operations in April 2018 and February 2019, respectively, comprised the remainder of this reportable segment’s revenue.

Integrated Partners income from operations in the second quarter of 2020 was $0.8 million, compared with $0.6 million in the second quarter of 2019. Costs of services of $0.7 million increased $0.1 million, depreciation and amortization of $1.3 million increased $0.2 million, and other operating expenses of $2.1 million increased $0.2 million. Depreciation and amortization expense is primarily related to assets acquired from YapStone, Inc. Other operating expenses included $0.8 million and $0.7 million of temporary transition services from YapStone, Inc. related to integration of the asset acquisition in the second quarter of 2020 and 2019, respectively. Integrated Partners adjusted income from operations was $1.7 million in the second quarter of 2020 and $1.3 million in the second quarter of 2019, excluding these temporary transition services. See “Non-GAAP Financial Measures” and the reconciliation of Integrated Partners adjusted income from operations to its most comparable GAAP measure provided below for additional information.

Corporate expense in the second quarter of 2020 was $4.6 million, compared with $5.2 million in the second quarter of 2019. Non-recurring operating expenses were $0.5 million in the second quarter of 2020 and $0.8 million in the second quarter of 2019. Excluding non-recurring operating expenses, Corporate expense was $4.0 million and $4.4 million in the second quarter of 2020 and 2019, respectively. See “Non-GAAP Financial Measures” and the reconciliation of adjusted Corporate expense to its most comparable GAAP measure provided below for additional information.

Outlook” data-reactid=”52″>Outlook

Priority continues to closely monitor the business impact of the COVID-19 pandemic. Our top priority remains ensuring the health and safety of our employees, and the communities in which we live and work. We have taken numerous actions to safeguard our team members, such as encouraging work from home and restricting business travel. The Company continues to operate normally, and we have not incurred, nor do we anticipate incurring, any significant impact to service operations.

Priore concluded, “The actions we have taken over the past several quarters to build defensive and counter-cyclical payment operating assets and reduce expenses through automation have positioned the business for success in any market environment to deliver long-term shareholder value. Our second quarter performance where we generated improved year-over-year results during a time of unprecedented uncertainty following the coronavirus outbreak provides strong evidence. While there continues to be considerable uncertainty regarding the duration and severity of the pandemic, we are excited by our market position, will remain focused on managing our cost structure to align with industry demand and will continue to deliver the industry-leading products and services that our customers have come to expect. For the time being we will continue to refrain from providing financial guidance for full year 2020. However, should the current economic environment continue, we are optimistic that our financial results during the remaining months in 2020 will continue to improve over those we delivered in June.”

Conference Call” data-reactid=”55″>Conference Call

Priority Technology Holdings, Inc.’s leadership will host a conference call on Thursday, August 13, 2020 at 11:00 a.m. EDT to discuss its second quarter 2020 financial results. Participants can access the call by Phone: US/Canada: (877) 501-3161 or International: (786) 815-8443.

https://edge.media-server.com/mmc/p/cxkccgsq and will also be posted in the “Investor Relations” section of the Company’s website at www.PRTH.com.” data-reactid=”57″>The Internet webcast link and accompanying slide presentation can be accessed at https://edge.media-server.com/mmc/p/cxkccgsq and will also be posted in the “Investor Relations” section of the Company’s website at www.PRTH.com.

www.PRTH.com.” data-reactid=”58″>An audio replay of the call will be available shortly after the conference call until August 16, 2020 at 11:30 am Eastern Time. To listen to the audio replay, dial (855) 859-2056 or (404) 537-3406 and enter conference ID number 4283396. Alternatively, you may access the webcast replay in the “Investor Relations” section of the Company’s website at www.PRTH.com.

Non-GAAP Financial Measures” data-reactid=”59″>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.

The Company’s non-GAAP gross profit metric represents revenues less costs of services. Gross profit margin is gross profit divided by revenues. We review these non-GAAP measures to evaluate our underlying profit trends.

Adjusted Integrated Partners income from operations and adjusted Corporate expense in the second quarter of 2020 have been negatively affected by non-recurring operating expenses largely associated with certain legal services and transition services from YapStone, Inc. We review these non-GAAP measures to evaluate our underlying profitability performance and trends.

EBITDA is earnings before interest, income tax, 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 an equity-method investment, as well as debt modification expenses and other non-recurring expenses, including certain legal and transition services expenses. Consolidated adjusted EBITDA begins with Adjusted EBITDA but further includes adjustments for the pro-forma impact of acquisitions, as well as adjustments to exclude other professional and consulting fees and certain other tax expenses and other adjustments. We review these non-GAAP adjusted EBITDA and consolidated adjusted EBITDA measures to evaluate our business and trends, measure our performance, prepare financial projections, allocate resources, and make strategic decisions.

The reconciliations of gross profit, gross profit margin, adjusted Integrated Partners income from operations, adjusted Corporate expense, adjusted EBITDA and consolidated adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with GAAP, are shown in the attached schedules to this press release.

Priority does not provide a reconciliation of forward-looking non-GAAP financial measures to their comparable GAAP financial measures because it could not do so without unreasonable effort due to the unavailability of the information needed to calculate reconciling items and due to the variability, complexity and limited visibility of the adjusting items that would be excluded from the non-GAAP financial measures in future periods. When planning, forecasting and analyzing future periods, the Company does so primarily on a non-GAAP basis without preparing a GAAP analysis as that would require estimates for various cash and non-cash reconciling items that would be difficult to predict with reasonable accuracy. For example, stock-based compensation expense would be difficult to estimate because it depends on the Company’s future hiring and retention needs, as well as the future fair market value of the Company’s common stock, all of which are difficult to predict and subject to constant change. As a result, the Company does not believe that a GAAP reconciliation would provide meaningful supplemental information about the Company’s outlook.

About Priority Technology Holdings, Inc.” data-reactid=”69″>About Priority Technology Holdings, Inc.

www.PRTH.com.” data-reactid=”70″>Priority is a leading provider of merchant acquiring, integrated payment software and commercial payment solutions, offering unique product and service capabilities to its merchant network and distribution partners. Priority’s enterprise 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 opportunities. Additional information can be found at www.PRTH.com.

Forward-Looking Statements” data-reactid=”71″>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,” “anticipates,” “outlook” or words of similar meaning. These forward-looking statements include, but are not limited to, our 2020 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. These forward-looking statements may include, but are not limited to, statements about the effects of the COVID-19 pandemic on our revenues and financial operating results. Our actual results could differ materially, and potentially adversely, from those discussed or implied herein.

www.sec.gov or www.PRTH.com.” data-reactid=”73″>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 Annual Report on Form 10-K and our Quarterly Report on Form 10-Q filed with the SEC on March 30, 2020 and May 13, 2020, respectively. These filings are available online at www.sec.gov or www.PRTH.com.

We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences we anticipate or affect us or our operations in the way we expect. You are cautioned not to place undue reliance on forward-looking statements as a predictor of future performance. The forward-looking statements included in this press release are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.

   

PRIORITY TECHNOLOGY HOLDINGS, INC.

Condensed Consolidated Statements of Operations

Unaudited

   

(in thousands, except per share amounts)

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

REVENUES

$

92,356

 

 

$

92,142

 

 

$

189,289

 

 

$

179,788

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

Costs of services

62,398

 

 

62,003

 

 

128,762

 

 

122,109

 

Salary and employee benefits

9,556

 

 

10,356

 

 

19,685

 

 

21,255

 

Depreciation and amortization

10,363

 

 

9,761

 

 

20,635

 

 

18,686

 

Selling, general and administrative

6,008

 

 

7,586

 

 

12,617

 

 

14,336

 

Total operating expenses

88,325

 

 

89,706

 

 

181,699

 

 

176,386

 

 

 

 

 

 

 

 

 

 

Income from operations

4,031

 

 

2,436

 

 

7,590

 

 

3,402

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSES):

 

 

 

 

 

 

 

 

Interest expense

(11,668

)

 

(10,776

)

 

(21,983

)

 

(20,139

)

Other income (expense), net

194

 

 

138

 

 

(152

)

 

365

 

Total other expenses, net

(11,474

)

 

(10,638

)

 

(22,135

)

 

(19,774

)

 

 

 

 

 

 

 

 

 

Loss before income taxes

(7,443

)

 

(8,202

)

 

(14,545

)

 

(16,372

)

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

415

 

 

5,928

 

 

(818

)

 

4,204

 

 

 

 

 

 

 

 

 

 

Net loss

$

(7,858

)

 

$

(14,130

)

 

$

(13,727

)

 

$

(20,576

)

 

 

 

 

 

 

 

 

 

Loss per common share:

 

 

 

 

 

 

 

 

Basic and diluted

$

(0.12

)

 

$

(0.21

)

 

$

(0.20

)

 

$

(0.31

)

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

Basic and diluted

67,114

 

 

67,094

 

 

67,088

 

 

67,161

 

 

PRIORITY TECHNOLOGY HOLDINGS, INC.

Condensed Consolidated Balance Sheets

 

(in thousands)

Unaudited

 

 

 

June 30, 2020

 

December 31, 2019

ASSETS

 

 

 

Current Assets:

 

 

 

Cash

$

5,854

 

 

$

3,234

 

Restricted cash

45,146

 

 

47,231

 

Accounts receivable, net of allowance for doubtful accounts

35,332

 

 

37,993

 

Prepaid expenses and other current assets

2,928

 

 

3,897

 

Current portion of notes receivable

1,789

 

 

1,326

 

Settlement assets

327

 

 

533

 

Total current assets

91,376

 

 

94,214

 

 

 

 

 

Notes receivable, less current portion

4,826

 

 

4,395

 

Property, equipment, and software, net

24,127

 

 

23,518

 

Goodwill

109,515

 

 

109,515

 

Intangible assets, net

168,751

 

 

182,826

 

Deferred income taxes, net

50,586

 

 

49,657

 

Other non-current assets

518

 

 

380

 

Total assets

$

449,699

 

 

$

464,505

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued expenses

$

19,953

 

 

$

26,965

 

Accrued residual commissions

22,434

 

 

19,315

 

Customer deposits and advance payments

2,882

 

 

4,928

 

Current portion of long-term debt

11,724

 

 

4,007

 

Settlement obligations

39,167

 

 

37,789

 

Total current liabilities

96,160

 

 

93,004

 

 

 

 

 

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

480,639

 

 

485,578

 

Other non-current liabilities

6,398

 

 

6,612

 

Total long-term liabilities

487,037

 

 

492,190

 

 

 

 

 

Total liabilities

583,197

 

 

585,194

 

 

 

 

 

Stockholders’ deficit:

 

 

 

Preferred stock

 

 

 

Common stock

68

 

 

68

 

Additional paid-in capital

4,569

 

 

3,651

 

Treasury stock, at cost

(2,388

)

 

(2,388

)

Accumulated deficit

(141,401

)

 

(127,674

)

Total Priority Technology Holdings, Inc. stockholders’ deficit

(139,152

)

 

(126,343

)

Non-controlling interest in subsidiary

5,654

 

 

5,654

 

Total stockholders’ deficit

(133,498

)

 

(120,689

)

 

 

 

 

Total liabilities and stockholders’ deficit

$

449,699

 

 

$

464,505

 

 

PRIORITY TECHNOLOGY HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

Unaudited

 

(in thousands)

Six Months Ended June 30,

 

2020

 

2019

Cash flows from operating activities:

 

 

 

Net loss

$

(13,727

)

 

$

(20,576

)

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

 

 

 

Depreciation and amortization of assets

20,635

 

 

18,686

 

Equity-classified and liability-classified stock compensation

1,026

 

 

2,183

 

Amortization of debt issuance costs and discounts

1,116

 

 

819

 

Benefit for deferred income taxes, net of change in allowance

(927

)

 

4,222

 

Payment-in-kind interest

3,415

 

 

2,479

 

Other non-cash items, net

206

 

 

(162

)

Change in operating assets and liabilities:

 

 

 

Accounts receivable

974

 

 

(3,913

)

Settlement assets and obligations, net

1,584

 

 

5,184

 

Prepaid expenses and other current assets

851

 

 

(194

)

Notes receivable

(888

)

 

(150

)

Accounts payable and other accrued liabilities

(1,845

)

 

(4,909

)

Customer deposits and advance payments

(2,046

)

 

343

 

Other assets and liabilities, net

(552

)

 

(292

)

Net cash provided by operating activities

9,822

 

 

3,720

 

 

 

 

 

Cash flows from investing activities:

 

 

 

Additions to property, equipment and software

(4,249

)

 

(5,352

)

Acquisitions of intangible assets

(3,286

)

 

(81,240

)

Notes receivable loan funding

 

 

(3,000

)

Other investing activity

 

 

(184

)

Net cash used in investing activities

(7,535

)

 

(89,776

)

 

 

 

 

Cash flows from financing activities:

 

 

 

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

 

 

69,650

 

Repayment of long-term debt

(2,003

)

 

(1,825

)

Debt modification costs

(2,749

)

 

 

Borrowings under revolving credit facility

7,000

 

 

14,000

 

Repayments under revolving credit facility

(4,000

)

 

 

Repurchases of common stock

 

 

(2,388

)

Net cash (used in) provided by financing activities

(1,752

)

 

79,437

 

 

 

 

 

Net change in cash and restricted cash:

 

 

 

Net increase (decrease) in cash and restricted cash

535

 

 

(6,619

)

Cash and restricted cash at beginning of period

50,465

 

 

33,831

 

Cash and restricted cash at end of period

$

51,000

 

 

$

27,212

 

 

 

 

 

Supplemental cash flow information:

 

 

 

Cash paid for interest

$

17,032

 

 

$

16,595

 

 

PRIORITY TECHNOLOGY HOLDINGS, INC.

Reportable Segments’ Results

Unaudited

 

(in thousands)

 

Three Months Ended June 30,

 

 

 

 

 

 

2020

 

2019

 

Change

 

% Change

 

 

 

 

 

 

 

Consumer Payments:

 

 

 

 

 

 

 

 

Revenue

 

$

81,707

 

 

$

81,454

 

 

$

253

 

 

0.3

%

Operating expenses

 

74,437

 

 

74,091

 

 

346

 

 

0.5

%

Income from operations

 

$

7,270

 

 

$

7,363

 

 

$

(93

)

 

(1.3

)%

Operating margin

 

8.9

%

 

9.0

%

 

 

 

 

Depreciation and amortization

 

$

8,657

 

 

$

8,105

 

 

$

552

 

 

6.8

%

 

 

 

 

 

 

 

 

 

Key indicators:

 

 

 

 

 

 

 

 

Merchant bankcard processing dollar value

 

$

9,010,908

 

 

$

10,774,149

 

 

$

(1,763,241

)

 

(16.4

)%

Merchant bankcard transaction volume

 

92,842

 

 

130,146

 

 

(37,304

)

 

(28.7

)%

 

 

 

 

 

 

 

 

 

Commercial Payments:

 

 

 

 

 

 

 

 

Revenue

 

$

5,654

 

 

$

6,496

 

 

$

(842

)

 

(13.0

)%

Operating expenses

 

5,179

 

 

6,778

 

 

(1,599

)

 

(23.6

)%

Income (loss) from operations

 

$

475

 

 

$

(282

)

 

$

757

 

 

(268.4

)%

Operating margin

 

8.4

%

 

(4.3

)%

 

 

 

 

Depreciation and amortization

 

$

78

 

 

$

81

 

 

$

(3

)

 

(3.7

)%

 

 

 

 

 

 

 

 

 

Key indicators:

 

 

 

 

 

 

 

 

Merchant bankcard processing dollar value

 

$

64,248

 

 

$

74,529

 

 

$

(10,281

)

 

(13.8

)%

Merchant bankcard transaction volume

 

21

 

 

28

 

 

(7

)

 

(25.0

)%

 

 

 

 

 

 

 

 

 

Integrated Partners:

 

 

 

 

 

 

 

 

Revenue

 

$

4,995

 

 

$

4,192

 

 

$

803

 

 

19.2

%

Operating expenses

 

4,150

 

 

3,620

 

 

530

 

 

14.6

%

Income from operations

 

$

845

 

 

$

572

 

 

$

273

 

 

47.7

%

Operating margin

 

16.9

%

 

13.6

%

 

 

 

 

Depreciation and amortization

 

$

1,334

 

 

$

1,096

 

 

$

238

 

 

21.7

%

 

 

 

 

 

 

 

 

 

Key indicators:

 

 

 

 

 

 

 

 

Merchant bankcard processing dollar value

 

$

122,089

 

 

$

106,162

 

 

$

15,927

 

 

15.0

%

Merchant bankcard transaction volume

 

388

 

 

364

 

 

24

 

 

6.6

%

 

 

 

 

 

 

 

 

 

Income from operations of reportable segments

 

$

8,590

 

 

$

7,653

 

 

$

937

 

 

12.2

%

Less: Corporate expense

 

(4,559

)

 

(5,217

)

 

658

 

 

(12.6

)%

Consolidated income from operations

 

$

4,031

 

 

$

2,436

 

 

$

1,595

 

 

65.5

%

Corporate depreciation and amortization

 

$

294

 

 

$

479

 

 

$

(185

)

 

(38.6

)%

 

 

 

 

 

 

 

 

 

Key indicators:

 

 

 

 

 

 

 

 

Merchant bankcard processing dollar value

 

$

9,197,245

 

 

$

10,954,840

 

 

$

(1,757,595

)

 

(16.0

)%

Merchant bankcard transaction volume

 

93,251

 

 

130,538

 

 

(37,287

)

 

(28.6

)%

 

PRIORITY TECHNOLOGY HOLDINGS, INC.

Reportable Segments’ Results

Unaudited

 

(in thousands)

 

Six Months Ended June 30,

 

 

 

 

 

 

2020

 

2019

 

Change

 

% Change

 

 

 

 

 

 

 

 

 

Consumer Payments:

 

 

 

 

 

 

 

 

Revenue

 

$

167,738

 

 

$

160,463

 

 

$

7,275

 

 

4.5

%

Operating expenses

 

153,316

 

 

145,381

 

 

7,935

 

 

5.5

%

Income from operations

 

$

14,422

 

 

$

15,082

 

 

$

(660

)

 

(4.4

)%

Operating margin

 

8.6

%

 

9.4

%

 

 

 

 

Depreciation and amortization

 

$

17,240

 

 

$

15,913

 

 

$

1,327

 

 

8.3

%

 

 

 

 

 

 

 

 

 

Key indicators:

 

 

 

 

 

 

 

 

Merchant bankcard processing dollar value

 

$

19,397,656

 

 

$

20,984,904

 

 

$

(1,587,248

)

 

(7.6

)%

Merchant bankcard transaction volume

 

212,273

 

 

251,030

 

 

(38,757

)

 

(15.4

)%

 

 

 

 

 

 

 

 

 

Commercial Payments:

 

 

 

 

 

 

 

 

Revenue

 

$

12,022

 

 

$

13,154

 

 

$

(1,132

)

 

(8.6

)%

Operating expenses

 

10,783

 

 

13,887

 

 

(3,104

)

 

(22.4

)%

Income (loss) from operations

 

$

1,239

 

 

$

(733

)

 

$

1,972

 

 

(269.0

)%

Operating margin

 

10.3

%

 

(5.6

)%

 

 

 

 

Depreciation and amortization

 

$

154

 

 

$

179

 

 

$

(25

)

 

(14.0

)%

 

 

 

 

 

 

 

 

 

Key indicators:

 

 

 

 

 

 

 

 

Merchant bankcard processing dollar value

 

$

136,925

 

 

$

144,426

 

 

$

(7,501

)

 

(5.2

)%

Merchant bankcard transaction volume

 

46

 

 

58

 

 

(12

)

 

(20.7

)%

 

 

 

 

 

 

 

 

 

Integrated Partners:

 

 

 

 

 

 

 

 

Revenue

 

$

9,529

 

 

$

6,171

 

 

$

3,358

 

 

54.4

%

Operating expenses

 

8,316

 

 

5,832

 

 

2,484

 

 

42.6

%

Income from operations

 

$

1,213

 

 

$

339

 

 

$

874

 

 

257.8

%

Operating margin

 

12.7

%

 

5.5

%

 

 

 

 

Depreciation and amortization

 

$

2,645

 

 

$

1,787

 

 

$

858

 

 

48.0

%

 

 

 

 

 

 

 

 

 

Key indicators:

 

 

 

 

 

 

 

 

Merchant bankcard processing dollar value

 

246,607

 

 

140,147

 

 

106,460

 

 

76.0

%

Merchant bankcard transaction volume

 

836

 

 

492

 

 

344

 

 

69.9

%

 

 

 

 

 

 

 

 

 

Income from operations of reportable segments

 

$

16,874

 

 

$

14,688

 

 

$

2,186

 

 

14.9

%

Corporate expense

 

(9,284

)

 

(11,286

)

 

2,002

 

 

(17.7

)%

Consolidated income from operations

 

$

7,590

 

 

$

3,402

 

 

$

4,188

 

 

123.1

%

Corporate depreciation and amortization

 

$

596

 

 

$

807

 

 

$

(211

)

 

(26.1

)%

 

 

 

 

 

 

 

 

 

Key indicators:

 

 

 

 

 

 

 

 

Merchant bankcard processing dollar value

 

$

19,781,188

 

 

$

21,269,477

 

 

$

(1,488,289

)

 

(7.0

)%

Merchant bankcard transaction volume

 

213,155

 

 

251,580

 

 

(38,425

)

 

(15.3

)%

 

The non-GAAP reconciliations of Consolidated Gross Profit, Consolidated Gross Profit Margin, Adjusted Integrated Partners Income from Operations, and Adjusted Corporate Expense to the most directly comparable financial measures calculated and presented in accordance with GAAP, are shown in the table below:

(in thousands)

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

Consolidated – Gross Profit:

 

 

 

 

 

 

 

 

Revenues

 

$

92,356

 

 

$

92,142

 

 

$

189,289

 

 

$

179,788

 

Costs of services

 

62,398

 

 

62,003

 

 

128,762

 

 

122,109

 

Consolidated gross profit (non-GAAP)

 

$

29,958

 

 

$

30,139

 

 

$

60,527

 

 

$

57,679

 

 

 

 

 

 

 

 

 

 

Consolidated gross profit margin (non-GAAP)

 

32.4

%

 

32.7

%

 

32.0

%

 

32.1

%

 

 

 

 

 

 

 

 

 

Integrated Partners – Adjusted Income from Operations:

 

 

 

 

 

 

 

 

Income from operations

 

$

845

 

 

$

572

 

 

$

1,213

 

 

$

339

 

Non-recurring expenses

 

839

 

 

747

 

 

1,735

 

 

747

 

Adjusted Integrated Partners income from operations (non-GAAP)

 

$

1,684

 

 

$

1,319

 

 

$

2,948

 

 

$

1,086

 

 

 

 

 

 

 

 

 

 

Corporate Expense – Adjusted:

 

 

 

 

 

 

 

 

Corporate expense

 

$

(4,559

)

 

$

(5,217

)

 

$

(9,284

)

 

$

(11,286

)

Non-recurring expenses

 

546

 

 

830

 

 

1,044

 

 

2,015

 

Adjusted Corporate Expense (non-GAAP)

 

$

(4,013

)

 

$

(4,387

)

 

$

(8,240

)

 

$

(9,271

)

 

The non-GAAP reconciliations of EBITDA, Adjusted EBITDA, and Consolidated Adjusted EBITDA to consolidated net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP, are shown in the table below:

(in thousands)

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2020

 

2019

 

2020

 

2019

 

 

Consolidated Net Loss (GAAP)

$

(7,858

)

 

$

(14,130

)

 

$

(13,727

)

 

$

(20,576

)

Add: Interest expense (1)

11,668

 

 

10,776

 

 

21,983

 

 

20,139

 

Add: Depreciation and amortization

10,363

 

 

9,761

 

 

20,635

 

 

18,686

 

Add: Income tax expense (benefit)

415

 

 

5,928

 

 

(818

)

 

4,204

 

EBITDA (non-GAAP)

14,588

 

 

12,335

 

 

28,073

 

 

22,453

 

Further adjusted by:

 

 

 

 

 

 

 

Add: Non-cash stock-based compensation

688

 

 

1,023

 

 

$

1,026

 

 

2,183

 

Add: Non-recurring expenses:

 

 

 

 

 

 

 

Debt modification expenses

 

 

 

 

376

 

 

 

Write-off of an equity-method investment

 

 

 

 

211

 

 

 

Certain legal services (2)

425

 

 

371

 

 

899

 

 

885

 

Professional, accounting and consulting fees (3)

121

 

 

459

 

 

145

 

 

1,130

 

YapStone transition services

839

 

 

747

 

 

1,735

 

 

747

 

Adjusted EBITDA (non-GAAP)

16,661

 

 

14,935

 

 

32,465

 

 

27,398

 

Further adjusted by:

 

 

 

 

 

 

 

Add: Pro-forma impact of acquisitions

 

 

45

 

 

 

 

3,175

 

Add: Other professional and consulting fees

375

 

 

357

 

 

750

 

 

752

 

Less: Other adjustments and tax expenses

(100

)

 

5

 

 

(100

)

 

(164

)

Consolidated Adjusted EBITDA (non-GAAP) (4)

$

16,936

 

 

$

15,342

 

 

$

33,115

 

 

$

31,161

 

(1) Interest expense includes amortization of debt issuance costs and discount.

(2) Legal expenses related to business and asset acquisition activity, settlement negotiation and other litigation expenses.

(3) Primarily transaction-related, capital markets and accounting advisory services.

(4) Presented to reflect the definition in the Company’s credit agreements, as amended. Until December 31, 2019, the Consolidated Adjusted EBITDA of the borrowers under the credit agreements excluded expenses of Priority Technology Holdings, Inc., which is neither a borrower nor a guarantor under the credit agreements, subsequent to its acquisition of Priority Holdings, LLC on July 25, 2018. Effective December 31, 2019, in accordance with the Sixth Amendment to the Company’s Credit and Guaranty Agreement, the Consolidated Adjusted EBITDA of the borrowers under the credit agreements includes expenses of Priority Technology Holdings, Inc. Consolidated Adjusted EBITDA of the borrowers was approximately $18.9 million and $38.4 million for the three months and six months ended June 30, 2019, respectively. The amounts for the three months and six months ended June 30, 2019 excluded $3.6 million and $7.2 million, respectively, of expenses of Priority Technology Holdings, Inc.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20200812005727/en/” data-reactid=”98″>View source version on businesswire.com: https://www.businesswire.com/news/home/20200812005727/en/

ckettmann@lincolnchurchilladvisors.com” data-reactid=”100″>Investor and Media Inquiries:
Chris Kettmann
773-497-7575
ckettmann@lincolnchurchilladvisors.com

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Author: hafiz 2012