Strong Fourth Quarter Financial Performance with Continued Growth and Further Deleveraging

ALPHARETTA, Ga., March 16, 2021 /PRNewswire/ -- 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 fourth quarter financial results including strong year-over-year revenue growth and further deleveraging during the quarter.     

Highlights of Consolidated Results

Fourth Quarter 2020, Compared with Fourth Quarter 2019

Financial highlights of the fourth quarter of 2020 compared with the fourth quarter of 2019, are as follows:

• Revenue of $106.1 million increased 8.1% from $98.2 million.
• Gross profit (a non-GAAP measure1) of $32.5 million increased 3.2% from $31.4 million.
• Gross profit margin (a non-GAAP measure1) of 30.6% decreased 144 basis points from 32.0%.
• Income from operations of $6.2 million increased 489.3% from $1.1 million.
• Net loss of $1.0 million compares with a net loss of $7.2 million.
• Diluted loss per share of $0.01 compares with a diluted loss per share of $0.11.
• Adjusted EBITDA (a non-GAAP measure1) of $18.2 million increased 12.7% from $16.2 million.
• Total net leverage ratio of 5.85x at December 31, 2020 decreased from 6.16x at September 30, 20202.

The fourth quarter of 2019 includes the results of the RentPayment business sold to MRI Software in September 2020.  The fourth quarter of 2020 compared with the results of the fourth quarter of 2019, excluding the RentPayment business3, are as follows:

• Revenue increased 12.3% from $94.5 million.
• Gross profit (a non-GAAP measure1) increased 15.5% from $28.2 million.
• Gross profit margin (a non-GAAP measure1) increased 84 basis points from 29.8%.
• Adjusted EBITDA (a non-GAAP measure1) increased 35.2% from $13.6 million.

Full Year 2020, Compared with Full Year 2019

Financial highlights of the full year 2020 compared with the full year 2019, are as follows:

• Revenue of $404.3 million increased 8.7% from $371.9 million.
• Gross profit (a non-GAAP measure1) of $127.0 million increased 6.4% from $119.3 million.
• Gross profit margin (a non-GAAP measure1) of 31.4% decreased 68 basis points from 32.1%.
• Income from operations of $20.9 million increased 190.4% from $7.2 million.
• Net income of $25.7 million, which includes the pre-tax gain from the sale of the RentPayment business, net of non-controlling interests ("NCIs"), of $62.1 million, compares with a net loss of $33.6 million.
• Diluted income per share of $0.38 compares with a diluted loss per share of $0.50.
• Adjusted EBITDA (a non-GAAP measure1) of $70.3 million increased 19.4% from $58.9 million.

The consolidated results include the results of the RentPayment business from March 1, 2019 through September 22, 2020.  Excluding the RentPayment business3, results for the full year 2020 compared with the results for the full year 2019 are as follows:

• Revenue of $392.3 million increased 8.9% from $360.2 million.
• Gross profit (a non-GAAP measure1) of $116.3 million increased 6.9% from $108.8 million.
• Gross profit margin (a non-GAAP measure1) of 29.6% decreased 55 basis points from 30.2%.
• Adjusted EBITDA (a non-GAAP measure1) of $62.1 million increased 25.0% from $49.7 million.

(1) See "Non-GAAP Financial Measures" and the reconciliations of Gross Profit, Gross Profit Margin, and Adjusted EBITDA to their most comparable GAAP measures provided below for additional information.(2) See "Non-GAAP Financial Measures" and the calculation of Total Net Leverage Ratio for the year ended December 31, 2020, provided below for additional information.(3) See "Results With and Without RentPayment" for a summary of the results for the three and the twelve months ended December 31, 2020 and 2019, excluding the actual results of the RentPayment business sold in September 2020.

"The momentum that we built in the third quarter continued through the fourth quarter and while these successes would have been meaningful in any year, I am especially proud of our team given the challenges presented by the pandemic," said Tom Priore, Chairman and Chief Executive Officer of Priority. "We produced growth in revenue, gross profit and adjusted EBITDA and with our Finxera acquisition, we will be a one stop-shop for payments and virtual bank account management that today's merchants and modern software companies are seeking in order to manage and monetize their payment networks."

"We have executed on our plan to build out our Payment Infrastructure as a Service (PIaaS) solutions while continuing to grow our consumer, commercial and integrated payments divisions," continued Priore. "We enter 2021 in growth mode with strong activity and a solid pipeline. We expect that the strength of our core acquiring business and complimentary high growth, countercyclical payment assets will drive strong financial performance in 2021."

Conference Call

Priority Technology Holdings, Inc.'s leadership will host a conference call on Wednesday, March 17, 2021 at 11:00 a.m. EST to discuss its fourth quarter and full year 2020 financial results. Participants can access the call by Phone: US/Canada: (877) 501-3161 or International: (786) 815-8443.

The Internet webcast link and accompanying slide presentation can be accessed at https://edge.media-server.com/mmc/p/9rjzgeoo and will also be posted in the "Investor Relations" section of the Company's website at www.PRTH.com.

An audio replay of the call will be available shortly after the conference call until March 20, 2021 at 1:30 p.m. EST. To listen to the audio replay, dial (855) 859-2056 or (404) 537-3406 and enter conference ID number 6918659. Alternatively, you may access the webcast replay in the "Investor Relations" section of the Company's website at www.PRTH.com.

Non-GAAP Financial Measures

This communication includes certain non-GAAP financial measures that we regularly review to evaluate our business and trends, measure our performance, prepare financial projections, allocate resources, and make strategic decisions. We believe these non-GAAP measures help to illustrate the underlying financial and business trends relating to our results of operations and comparability between current and prior periods. We also use these non-GAAP measures to establish and monitor operational goals. However, these non-GAAP measures are not superior to or a substitute for prominent measurements calculated in accordance with GAAP. Rather, the non-GAAP measures are meant to be a complement to understanding measures prepared in accordance with GAAP.

Gross Profit and Gross Profit Margin

The Company's non-GAAP gross profit metric represents revenues less costs of services. Gross profit margin is gross profit divided by revenues. We review these non-GAAP measures to evaluate our underlying profit trends. The reconciliation of gross profit to its most comparable GAAP measure is provided below:

EBITDA, Adjusted EBITDA and Consolidated 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.  Consolidated adjusted EBITDA, which is a liquidity measure used in determining our total net leverage ratio, is adjusted EBITDA further adjusted for items specified in the definition of consolidated adjusted EBITDA within our debt agreements, which include the pro-forma impact of acquisitions and dispositions and other specified adjustments. 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. 

We review the non-GAAP consolidated adjusted EBITDA to evaluate compliance with our total net leverage ratio at each measurement period.  The reconciliation of adjusted EBITDA to its most comparable GAAP measure is provided below:

Further detail of certain of these adjustments, and where these items are recorded in our consolidated statements of operations, is provided below:

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 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

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, expected timing of the closing of Priority Technology Holdings, Inc.'s ("Priority", "we", "our", or "us") merger with Finxera Holdings, Inc. ("Finxera") and our 2021 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.

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 30, 2020. 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.

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SOURCE Priority Technology Holdings, Inc.