Strong First Quarter Growth Driven by
Performance Across Diverse Business Segments
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.
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.
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
)
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
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.
About Priority
Technology Holdings, Inc.
Priority is a payments technology company that leverages a
purpose-built platform to enable clients to collect, store and send
money, operating at scale. Priority helps its customers take and
make payments while managing business and consumer operating
accounts to monetize payment networks. Priority's tailored, agile
technology powers high-value payments products bolstered by
industry-leading personalized support, and delivers value to its
partners by leveraging its payments and embedded finance technology
to deliver solutions that power modern commerce. The Company's
approach is simple – Priority handles the complexities of payments
and embedded finance to free its partners to focus on their core
business objectives. Priority's solutions are offered via API or
proprietary applications with nationwide money transmission
licenses, providing end-to-end operational support including
automated risk management and underwriting, full compliance and
industry leading customer service. Additional information can be
found at www.prioritycommerce.com.
Forward-Looking
Statements
This press release contains "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of
1995. Such statements include, but are not limited to, statements
about future financial and operating results, our plans,
objectives, expectations and intentions with respect to future
operations, products and services, and other statements identified
by words such as "may," "will," "should," "anticipates,"
"believes," "expects," "plans," "future," "intends," "could,"
"estimate," "predict," "projects," "targeting," "potential" or
"contingent," "guidance," "outlook" or words of similar meaning.
These forward-looking statements include, but are not limited to,
our 2023 outlook and statements regarding our market and growth
opportunities. Such forward-looking statements are based upon the
current beliefs and expectations of our management and are
inherently subject to significant business, economic and
competitive risks, trends and uncertainties that could cause actual
results to differ materially from those projected, expressed, or
implied by such forward-looking statements. Our actual results
could differ materially, and potentially adversely, from those
discussed or implied herein.
We caution that it is very difficult to predict the impact of
known factors, and it is impossible for us to anticipate all
factors that could affect our actual results. All forward-looking
statements are expressly qualified in their entirety by these
cautionary statements. You should evaluate all forward-looking
statements made in this press release in the context of the risks
and uncertainties disclosed in our SEC filings, including our most
recent Annual Report on Form 10-K filed with the SEC on March 23,
2023. These filings are available online at www.sec.gov or
www.prioritycommerce.com.
We caution you that the important factors referenced above may
not contain all of the factors that are important to you. In
addition, we cannot assure you that we will realize the results or
developments we expect or anticipate or, even if substantially
realized, that they will result in the consequences we anticipate
or affect us or our operations in the way we expect. You are
cautioned not to place undue reliance on forward-looking statements
as a predictor of future performance. The forward-looking
statements included in this press release are made only as of the
date hereof. We undertake no obligation to publicly update or
revise any forward-looking statement as a result of new
information, future events or otherwise, except as otherwise
required by law. If we do update one or more forward-looking
statements, no inference should be made that we will make
additional updates with respect to those or other forward-looking
statements. We qualify all of our forward-looking statements by
these cautionary statements.
Priority Technology Holdings,
Inc.
Unaudited Consolidated
Statements of Operations
(in thousands, except per share
amounts)
Three Months Ended 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
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
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
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
$
259
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230511005279/en/
Priority Investor Inquiries: Chris Kettmann
chris.kettmann@dentonsglobaladvisors.com (773) 497-7575
Grafico Azioni Priority Technology (NASDAQ:PRTH)
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