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Published: 2023-11-09 08:00:24 ET
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EX-99.1 2 ex991-prth3q2023earningsre.htm EX-99.1 Document

EXHIBIT 99.1                        
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Priority Investor Inquiries:
Chris Kettmann
chris.kettmann@dentonsglobaladvisors.com
(773) 497-7575

Priority Technology Holdings, Inc. Announces Third Quarter 2023 Financial Results
Strong Third Quarter Growth Driven by Performance Across Diverse Business Segments
ALPHARETTA, GA - November 9, 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 third quarter 2023 financial results including strong quarter-over-quarter diversified revenue growth.
Highlights of Consolidated Results
Third Quarter 2023 Compared with Third Quarter 2022
Financial highlights of the third quarter of 2023 compared with the third quarter of 2022, are as follows:
•Revenue of $189.0 million increased 13.6% from $166.4 million
•Adjusted gross profit (a non-GAAP measure1) of $72.3 million increased 23.6% from $58.5 million
•Adjusted gross profit margin (a non-GAAP measure1) of 38.3% increased 310 basis points from 35.2%
•Operating income of $23.5 million increased 66.7% from $14.1 million
•Adjusted EBITDA (a non-GAAP measure1) of $45.0 million increased 28.2% from $35.1 million

"Building on the momentum we saw in the first half of the year, during the third quarter we continued to execute in all three segments of our business, delivering strong results in SMB Acquiring, B2B and Enterprise Payments," said Tom Priore, Chairman & CEO of Priority. "We are delivering on the promise of unified commerce with clear and sustainable financial performance, as clearly evidenced in our results throughout the tumultuous economic environments like the pandemic and today. We have invested thoughtfully in technology and built scalable operations and financial resources that will continue to outperform as market demands evolve."
(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.
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Updated Full Year 2023 Financial Guidance
Based on a combination of results for the nine month period ended September 30, 2023 and the forecasted results for the Company's fourth quarter, the Company has updated its outlook for the full year 2023 as follows:
•Revenue forecast revised to range between $755 million to $765 million, a growth rate of 14% to 15%, compared to fiscal results 2022 results
•Adjusted EBITDA (a non-GAAP measure) forecast to range between $167 million to $170 million, a growth rate of 19% to 21% compared to fiscal 2022 results
Conference Call
Priority's leadership will host a conference call on Thursday, November 9, 2023 at 11:00 a.m. EST to discuss its third 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/iucimqrs 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 November 16, 2023 at 2:00 p.m. EST. To listen to the audio replay, dial (877) 344-7529 or (412) 317-0088 and enter conference ID number 2955856. 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.
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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 September 30,
20232022
Revenues$189,015 $166,417 
Cost of revenue (excluding depreciation and amortization)(116,682)(107,958)
Adjusted gross profit$72,333 $58,459 
Adjusted gross profit margin38.3 %35.1 %
Depreciation and amortization of revenue generating assets(3,000)(2,629)
Gross profit$69,333 $55,830 
Gross profit margin36.7 %33.5 %

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 September 30,
20232022
Net loss $(87)$(792)
Interest expense19,997 13,412 
Income tax expense4,328 1,691 
Depreciation and amortization17,275 17,817 
EBITDA41,513 32,128 
Non-recurring gain(166)— 
Selling, general and administrative (non-recurring)2,114 760 
Non-cash stock-based compensation1,501 1,104 
Change in the fair value of contingent consideration— 1,072 
Adjusted EBITDA$44,962 $35,064 
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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 September 30,
20232022
Selling, general and administrative expenses (non-recurring):
Certain legal fees$656 $199 
Professional, accounting and consulting fees1,364 95 
Other expenses, net94 466 
$2,114 $760 
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.



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About Priority Technology Holdings, Inc.
Priority is a solution provider in Payments and Banking as a Service operating at scale with 820k active customers across its SMB, B2B and Enterprise channels processing $118B in annual transaction volume and providing administration for $850M in average daily deposits. Priority’s purpose-built technology enables clients to collect, store, borrow and send and provides customers the acceptance and AP payment applications and Passport financial tools that best optimize their cash flow and maximize working capital. 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.
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Priority Technology Holdings, Inc.
Unaudited Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share amounts)

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Revenues$189,015$166,417$556,333$486,086
Operating expenses
Cost of revenue (excludes depreciation and amortization)116,682107,958353,929320,187
Salary and employee benefits20,12916,38458,28648,231
Depreciation and amortization17,27517,81753,30352,675
Selling, general and administrative11,42310,17831,32827,027
Total operating expenses165,509152,337496,846448,120
Operating income23,50614,08059,48737,966
Other (expense) income
Interest expense(19,997)(13,412)(55,461)(37,282)
Other income, net7322311,319311
Total other expense, net(19,265)(13,181)(54,142)(36,971)
Income before income taxes4,2418995,345995
Income tax expense4,3281,6916,5501,833
Net loss(87)(792)(1,205)(838)
Less: Dividends and accretion attributable to redeemable senior preferred stockholders(12,192)(9,466)(35,252)(26,415)
Net loss attributable to common stockholders(12,279)(10,258)$(36,457)$(27,253)
Other comprehensive loss
Foreign currency translation adjustments(65)— (34)— 
Comprehensive loss$(12,344)$(10,258)$(36,491)$(27,253)
Loss per common share:
Basic and diluted$(0.16)$(0.13)$(0.47)$(0.35)
Weighted-average common shares outstanding:
Basic and diluted78,381 77,984 78,270 78,392 



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Priority Technology Holdings, Inc.
Unaudited Consolidated Balance Sheets

(in thousands)
September 30, 2023December 31, 2022
Assets
Current assets:
Cash and cash equivalents$24,595 $18,454 
Restricted cash13,890 10,582 
Accounts receivable, net of allowances61,134 78,113 
Prepaid expenses and other current assets13,274 11,832 
Current portion of notes receivable, net of allowance1,561 1,471 
Settlement assets and customer/subscriber account balances712,170 532,018 
Total current assets826,624 652,470 
Notes receivable, less current portion3,616 3,191 
Property, equipment and software, net41,851 34,687 
Goodwill375,794 369,337 
Intangible assets, net285,490 288,794 
Deferred income taxes, net18,879 16,447 
Other noncurrent assets11,145 8,437 
Total assets$1,563,399 1,373,363 
Liabilities, Redeemable Senior Preferred Stock and Stockholders' Deficit
Current liabilities:
Accounts payable and accrued expenses$56,107 $51,864 
Accrued residual commissions31,023 35,979 
Customer deposits and advance payments6,634 2,618 
Current portion of long-term debt6,200 6,200 
Settlement and customer/subscriber account obligations710,068 533,340 
Total current liabilities810,032 630,001 
Long-term debt, net of current portion, discounts and debt issuance costs616,781 598,926 
Other noncurrent liabilities18,545 11,643 
Total noncurrent liabilities635,326 610,569 
Total liabilities1,445,358 1,240,570 
Redeemable senior preferred stock, net of discounts and issuance costs252,923 235,579 
Stockholders' deficit:
Preferred stock— — 
Common stock77 76 
Treasury stock, at cost(12,577)(11,559)
Additional paid-in capital— 9,650 
Accumulated other comprehensive loss(34)— 
Accumulated deficit(123,714)(102,208)
Total stockholders' deficit attributable to stockholders of PRTH(136,248)(104,041)
Non-controlling interest1,366 1,255 
Total stockholders' deficit(134,882)(102,786)
Total liabilities, redeemable senior preferred stock and stockholders' deficit$1,563,399 $1,373,363 

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Priority Technology Holdings, Inc.
Unaudited Consolidated Statements of Cash Flows

(in thousands)

Nine Months Ended September 30,
20232022
Cash flows from operating activities:
Net loss$(1,205)$(838)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization of assets53,303 52,675 
Stock-based compensation5,183 4,204 
Amortization of debt issuance costs and discounts2,812 2,613 
Deferred income tax(2,432)(3,567)
Change in contingent consideration906 — 
Other non-cash items, net(169)(154)
Change in operating assets and liabilities:
Accounts receivable 17,931 (11,265)
Prepaid expenses and other current assets(2,630)(2,575)
Income taxes (receivable) payable498 1,003 
Notes receivable(668)569 
Accounts payable and other accrued liabilities302 13,711 
Customer deposits and advance payments3,802 (1,910)
Other assets and liabilities, net(4,953)(3,908)
Net cash provided by operating activities72,680 50,558 
Cash flows from investing activities:
Acquisition of business, net of cash acquired(28,182)— 
Additions to property, equipment and software(15,268)(11,380)
Notes receivable, net151 (3,250)
Acquisitions of assets and other investing activities(7,925)(6,465)
Net cash used in investing activities(51,224)(21,095)
Cash flows from financing activities:
Debt issuance and modification costs paid(807)— 
Repayments of long-term debt(4,650)(4,650)
Borrowings under revolving credit facility44,000 23,000 
Repayments of borrowings under revolving credit facility(23,500)(32,000)
Repurchases of Common Stock and shares withheld for taxes (1,018)(4,674)
Dividends paid to redeemable senior preferred stockholders(17,908)(11,478)
Settlement and customer/subscriber accounts obligations, net165,610 25,695 
Payment of contingent consideration related to business combination(4,698)(3,992)
Net cash provided by (used in) financing activities157,029 (8,099)
Net change in cash and cash equivalents and restricted cash:
Net increase in cash and cash equivalents, and restricted cash178,485 21,364 
Cash and cash equivalents and restricted cash at beginning of period560,610 518,093 
Cash and cash equivalents and restricted cash at end of period$739,095 $539,457 
Reconciliation of cash and cash equivalents, and restricted cash:
Cash and cash equivalents$24,595 $12,707 
Restricted cash13,890 11,624 
Cash and cash equivalents included in settlement assets and customer/subscriber account balances700,610 515,126 
Total cash and cash equivalents, and restricted cash$739,095 $539,457 


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Priority Technology Holdings, Inc.
Unaudited Reportable Segments' Results
(in thousands)
Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
SMB Payments:  
Revenue$140,109 $139,892 $442,937 $412,357 
Operating expenses128,288 126,445 407,563 372,429 
Operating income$11,821 $13,447 $35,374 $39,928 
Operating margin8.4 %9.6 %8.0 %9.7 %
Depreciation and amortization$9,858 $11,040 $31,473 $32,844 
Key indicators:
Merchant bankcard processing dollar value$14,150,995 $15,098,450 $44,483,491 $44,577,857 
Merchant bankcard transaction count178,721 165,796 522,470 476,084 
B2B Payments:
Revenue$13,748 $4,868 $19,505 $16,088 
Operating expenses13,670 4,651 20,295 14,799 
Operating income (loss)$78 $217 $(790)$1,289 
Operating margin0.6 %4.5 %(4.1)%8.0 %
Depreciation and amortization$772 $295 $1,024 $441 
Key indicators:
B2B issuing dollar volume$221,456 $214,085 $636,361 $597,665 
B2B issuing transaction count267 247 829 683 
Enterprise Payments:
Revenue$35,158 $21,657 $93,891 $57,641 
Operating expenses13,819 12,345 43,810 38,137 
Operating income$21,339 $9,312 $50,081 $19,504 
Operating margin60.7 %43.0 %53.3 %33.8 %
Depreciation and amortization$6,154 $6,203 $19,557 $18,599 
Key indicators:
Average billed clients590,578 387,384 525,274 364,766 
Average new enrollments56,269 37,746 51,864 29,813 
Operating income of reportable segments$33,238 $22,976 $84,665 $60,721 
Less: Corporate expense(9,732)(8,896)(25,178)(22,755)
Consolidated operating income$23,506 $14,080 $59,487 $37,966 
Corporate depreciation and amortization$491 $279 $1,249 $791 


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