UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 20232024

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to 
Priority Technology Holdings, Inc.
Commission file number: 001-37872
PRTH-Black-H-RGB (2).jpg
Priority Technology Holdings, Inc.
(Exact name of registrant as specified in its charter)

Delaware47-4257046
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
2001 Westside Parkway
Suite 155
Alpharetta,Georgia30004
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (800) 935-5961(404) 952-2107
Not applicable
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.001PRTHNasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes       No  
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
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.
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 Yes      No  
 
As of May 5, 2023,3, 2024, the number of the registrant's Common Stock outstanding was 76,496,121.80,065,145.



Table of Contents


Page
i

Table of Contents

Commonly Used or Defined Terms



TermDefinition
2018 Plan2018 Equity Incentive Plan
2021 Stock Purchase PlanPriority Technology Holdings, Inc. 2021 Employee Stock Purchase Plan
2021 Share Repurchase ProgramPriority Technology Holdings, Inc. 2021 Share Repurchase Program
AOCIAccumulated other comprehensive income/loss
APAccounts payable
ASCAccounting Standards Codification
APICAdditional paid-in capital
Amended Certificate of DesignationAmended and Restated Certificate of Designation of Senior Preferred Stock effective as of June 30, 2023
ASUAccounting Standards Update
B2BBusiness-to-business
B2CBusiness-to-consumer
CEOChief Executive Officer
CFOChief Financial Officer
Common StockThe Company's Common Stock, par value $0.001
Credit AgreementCredit and Guaranty Agreement with Truist Bank dated as of April 27, 2021 (as amended)
EAETREstimated annual effective tax rate
ESPPEmployee Stock Purchase Plan
Exchange ActSecurities Exchange Act of 1934
FASBFinancial Accounting Standards Board
FDICFederal Deposit Insurance Corporation
FBOFor the benefit of
FIFinancial institution
FinxeraFinxera Holdings, Inc.
GAAPU.S. Generally Accepted Accounting Principles
IRAInflation Reduction Act, enacted by the U.S. Federal Government on August 16, 2022
ISOIndependent sales organization
ISVIndependent software vendor
LIBORLondon Interbank Offered Rate
NCINon-controlling interests in consolidated subsidiaries
PIKPayment-in-kind
PHOTPriority Hospitality Technology, LLC
PlastiqAcquisition of Plastiq, Inc. and certain of its affiliates
PRTHPriority Technology Holdings, Inc.
Revolving credit facility$65.0 million line issued under the Credit Agreement
SECSecurities and Exchange Commission
SOFRSecured Overnight Financing Rate
SMBSmall to medium-sized businesses
Term facility$620.0 million senior secured term loan facility issued under the Credit Agreement (including $320.0 million delayed draw facility)
Wholesale PaymentsWholesale Payments, Inc.

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Table of Contents
Priority Technology Holdings, Inc.
Unaudited Consolidated Balance Sheets
(in thousands, except share data)

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
March 31, 2023December 31, 2022
March 31, 2024March 31, 2024December 31, 2023
AssetsAssets
Current assets:Current assets:
Current assets:
Current assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalentsCash and cash equivalents$15,882 $18,454 
Restricted cashRestricted cash11,012 10,582 
Accounts receivable, net of allowances of $1,154 and $1,143, respectively78,042 78,113 
Accounts receivable, net of allowances of $5,536 and $5,289, respectively
Prepaid expenses and other current assetsPrepaid expenses and other current assets10,443 11,832 
Current portion of notes receivable, net of allowance of $0 and $0, respectivelyCurrent portion of notes receivable, net of allowance of $0 and $0, respectively1,581 1,471 
Settlement assets and customer/subscriber account balancesSettlement assets and customer/subscriber account balances612,146 532,018 
Total current assetsTotal current assets729,106 652,470 
Notes receivable, less current portionNotes receivable, less current portion3,066 3,191 
Property, equipment and software, netProperty, equipment and software, net36,976 34,687 
GoodwillGoodwill368,740 369,337 
Intangible assets, netIntangible assets, net277,478 288,794 
Deferred income taxes, netDeferred income taxes, net22,163 16,447 
Other noncurrent assetsOther noncurrent assets8,456 8,437 
Total assetsTotal assets$1,445,985 $1,373,363 
Liabilities, Redeemable Senior Preferred Stock and Stockholders' Deficit
Liabilities, Redeemable Senior Preferred Stock, Redeemable NCI, and Stockholders' Deficit
Current liabilities:Current liabilities:
Current liabilities:
Current liabilities:
Accounts payable and accrued expenses
Accounts payable and accrued expenses
Accounts payable and accrued expensesAccounts payable and accrued expenses$57,110 $51,864 
Accrued residual commissionsAccrued residual commissions41,049 35,979 
Customer deposits and advance paymentsCustomer deposits and advance payments2,868 2,618 
Current portion of long-term debtCurrent portion of long-term debt6,200 6,200 
Settlement and customer/subscriber account obligationsSettlement and customer/subscriber account obligations612,953 533,340 
Total current liabilitiesTotal current liabilities720,180 630,001 
Long-term debt, net of current portion, discounts and debt issuance costsLong-term debt, net of current portion, discounts and debt issuance costs592,279 598,926 
Other noncurrent liabilitiesOther noncurrent liabilities11,857 11,643 
Total noncurrent liabilities604,136 610,569 
Total liabilitiesTotal liabilities1,324,316 1,240,570 
Commitments and contingencies (Note 13)
Total liabilities
Total liabilities
Commitments and contingencies (Note 14)
Commitments and contingencies (Note 14)
Redeemable senior preferred stock, net of discounts and issuance costs:Redeemable senior preferred stock, net of discounts and issuance costs:
Redeemable senior preferred stock, $0.001 par value; 250,000 shares authorized; 225,000 issued and outstanding at March 31, 2023 and December 31, 2022235,439 235,579 
Redeemable senior preferred stock, $0.001 par value; 250,000 shares authorized; 225,000 issued and outstanding at March 31, 2024 and December 31, 2023
Redeemable senior preferred stock, $0.001 par value; 250,000 shares authorized; 225,000 issued and outstanding at March 31, 2024 and December 31, 2023
Redeemable senior preferred stock, $0.001 par value; 250,000 shares authorized; 225,000 issued and outstanding at March 31, 2024 and December 31, 2023
Redeemable non-controlling interests in consolidated subsidiary
Stockholders' deficit:Stockholders' deficit:
Preferred stock, $0.001; 100,000,000 shares authorized; none issued or outstanding at March 31, 2023 and December 31, 2022— — 
Common Stock, $0.001 par value; 1,000,000,000 shares authorized; 78,902,459 and 78,385,685 shares issued at March 31, 2023 and December 31, 2022, respectively; and 76,404,628 and 76,044,629 shares outstanding at March 31, 2023 and December 31, 2022, respectively76 76 
Treasury stock at cost, 2,497,831 and 2,341,056 shares at March 31, 2023 and December 31, 2022, respectively(12,336)(11,559)
Preferred stock, $0.001; 100,000,000 shares authorized; 0 issued or outstanding at March 31, 2024 and December 31, 2023
Preferred stock, $0.001; 100,000,000 shares authorized; 0 issued or outstanding at March 31, 2024 and December 31, 2023
Preferred stock, $0.001; 100,000,000 shares authorized; 0 issued or outstanding at March 31, 2024 and December 31, 2023
Common Stock, $0.001 par value; 1,000,000,000 shares authorized; 80,018,209 and 79,589,055 shares issued at March 31, 2024 and December 31, 2023, respectively; and 75,834,517 and 76,956,889 shares outstanding at March 31, 2024 and December 31, 2023, respectively
Treasury stock at cost, 4,183,692 and 2,632,166 shares at March 31, 2024 and December 31, 2023, respectively
Additional paid-in capitalAdditional paid-in capital328 9,650 
Accumulated other comprehensive income24 — 
Accumulated other comprehensive loss
Accumulated deficitAccumulated deficit(102,714)(102,208)
Total stockholders' deficit attributable to stockholders of PRTHTotal stockholders' deficit attributable to stockholders of PRTH(114,622)(104,041)
Non-controlling interests in consolidated subsidiariesNon-controlling interests in consolidated subsidiaries852 1,255 
Total stockholders' deficitTotal stockholders' deficit(113,770)(102,786)
Total liabilities, redeemable senior preferred stock and stockholders' deficit$1,445,985 $1,373,363 
Total liabilities, redeemable senior preferred stock, redeemable NCI and stockholders' deficit
See Notes to Unaudited Consolidated Financial Statements
1

Table of Contents
Priority Technology Holdings, Inc.
Unaudited Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share amounts)


Three Months Ended
March 31,
20232022
Revenues$185,028 $153,239 
Operating expenses
Cost of revenue (excludes depreciation and amortization)121,966 101,480 
Salary and employee benefits19,048 16,077 
Depreciation and amortization18,048 17,353 
Selling, general and administrative9,118 7,503 
Total operating expenses168,180 142,413 
Operating income16,848 10,826 
Other (expense) income
Interest expense(17,699)(11,535)
Other income, net212 51 
Total other expense, net(17,487)(11,484)
Loss before income taxes(639)(658)
Income tax benefit(133)(325)
Net loss(506)(333)
Less: Dividends and accretion attributable to redeemable senior preferred stockholders(11,295)(8,400)
Net loss attributable to common stockholders(11,801)(8,733)
Other comprehensive income (loss)
Foreign currency translation adjustments24 — 
Comprehensive loss$(11,777)$(8,733)
Loss per common share:
Basic and diluted$(0.15)$(0.11)
Weighted-average common shares outstanding:
Basic and diluted78,133 78,597 

Three Months Ended
March 31,
20242023
Revenues$205,719 $185,028 
Operating expenses
Cost of revenue (excludes depreciation and amortization)129,298 121,966 
Salary and employee benefits22,150 19,048 
Depreciation and amortization15,253 18,048 
Selling, general and administrative10,995 9,118 
Total operating expenses177,696 168,180 
Operating income28,023 16,848 
Other (expense) income
Interest expense(20,880)(17,699)
Other income, net632 212 
Total other expense, net(20,248)(17,487)
Income (loss) before income taxes7,775 (639)
Income tax expense (benefit)2,582 (133)
Net income (loss)5,193 (506)
Less: Dividends and accretion attributable to redeemable senior preferred stockholders(12,662)(11,295)
Less: Return on redeemable NCI in consolidated subsidiary(581)— 
Net loss attributable to common stockholders(8,050)(11,801)
Other comprehensive loss
Foreign currency translation adjustments(13)24 
Comprehensive loss$(8,063)$(11,777)
Loss per common share:
Basic and diluted$(0.10)$(0.15)
Weighted-average common shares outstanding:
Basic and diluted78,021 78,133 

See Notes to Unaudited Consolidated Financial Statements
2

Table of Contents
Priority Technology Holdings, Inc.
Unaudited Consolidated Statements of Changes in Stockholders' Deficit and Non-Controlling Interest
(in thousands)
Common
Stock
Treasury
Stock
APICAOCIAccumulated DeficitDeficit Attributable to StockholdersNCIsTotal
Shares$Shares$
December 31, 202376,957 $77 2,632 $(12,815)$— $(29)$(134,951)$(147,718)$1,654 $(146,064)
Equity-classified stock-based compensation— — — — 1,540 — — 1,540 — 1,540 
ESPP compensation and vesting of stock-based compensation429 — — — 49 — — 49 — 49 
Shares withheld for taxes(123)123 (421)— — — (421)— (421)
Exchange for PHOT redeemable NCI(1,428)(1)1,428 (5,255)(581)— — (5,837)— (5,837)
Dividends on redeemable senior preferred stock— — — — (11,821)— — (11,821)— (11,821)
Accretion of redeemable senior preferred stock— — — — (841)— — (841)— (841)
Issuance of profit interests/common equity in subsidiaries— — — — — — — — 93 93 
Foreign currency translation adjustment— — — — — (13)— (13)— (13)
Reclassification of negative additional paid in capital— — — — 11,654 — (11,654)— — — 
Net income— — — — — — 5,193 5,193 — 5,193 
March 31, 202475,835 $76 4,183 $(18,491)$ $(42)$(141,412)$(159,869)$1,747 $(158,122)


Common
Stock
Treasury
Stock
APICAOCIAccumulated DeficitDeficit Attributable to StockholdersNCIsTotal
Shares$Shares$
December 31, 202276,044 $76 2,341 $(11,559)$9,650 $— $(102,208)$(104,041)$1,255 $(102,786)
Equity-classified stock-based compensation— — — — 1,936 — — 1,936 — 1,936 
ESPP compensation and vesting of stock-based compensation517 — — — 37 — — 37 — 37 
Shares withheld for taxes(157)— 157 (777)— — — (777)— (777)
Dividends on redeemable senior preferred stock— — — — (10,477)— — (10,477)— (10,477)
Accretion of redeemable senior preferred stock— — — — (818)— — (818)— (818)
Adjustment to NCI— — — — — — — — (403)(403)
Foreign currency translation adjustment— — — — — 24 — 24 — 24 
Net loss— — — — — — (506)(506)— (506)
March 31, 202376,404 $76 2,498 $(12,336)$328 $24 $(102,714)$(114,622)$852 $(113,770)

Common
Stock
Treasury
Stock
APICAOCIAccumulated DeficitDeficit Attributable to StockholdersNCIsTotal
Shares$Shares$
December 31, 202176,740 $77 720 $(4,091)$39,835 $— $(100,058)$(64,237)$— $(64,237)
Equity-classified stock-based compensation— — — — 1,558 — — 1,558 — 1,558 
Vesting of stock-based compensation129 — — — — — — — — — 
Share repurchases and shares withheld for taxes(27)27 (157)(1)— — (157)— (157)
Dividends on redeemable senior preferred stock— — — — (7,595)— — (7,595)— (7,595)
Accretion of redeemable senior preferred stock— — — — (805)— — (805)— (805)
Net loss— — — — — — (333)(333)— (333)
March 31, 202276,842 $78 747 $(4,248)$32,992 $— $(100,391)$(71,569)$— $(71,569)


Common
Stock
Treasury
Stock
APICAOCIAccumulated DeficitDeficit Attributable to StockholdersNCIsTotal
Shares$Shares$
December 31, 202276,044 $76 2,341 $(11,559)$9,650 $— $(102,208)$(104,041)$1,255 $(102,786)
Equity-classified stock-based compensation— — — — 1,936 — — 1,936 — 1,936 
ESPP compensation and vesting of stock-based compensation517 — — — 37 — — 37 — 37 
Shares withheld for taxes(157)— 157 (777)— — — (777)— (777)
Dividends on redeemable senior preferred stock— — — — (10,477)— — (10,477)— (10,477)
Accretion of redeemable senior preferred stock— — — — (818)— — (818)— (818)
Adjustment to NCI— — — — — — — — (403)(403)
Foreign currency translation adjustment24 24 24 
Net loss— — — — — — (506)(506)— (506)
March 31, 202376,404 $76 2,498 $(12,336)$328 $24 $(102,714)$(114,622)$852 $(113,770)

See Notes to Unaudited Consolidated Financial Statements

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Table of Contents
Priority Technology Holdings, Inc.
Unaudited Consolidated Statements of Cash FlowsChanges in Stockholders' Deficit and Non-Controlling Interest
(in thousands)
Three Months Ended March 31,
20232022
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
2024
2024
2024
Cash flows from operating activities:Cash flows from operating activities:
Net loss$(506)$(333)
Adjustments to reconcile net loss to net cash provided by operating activities:
Cash flows from operating activities:
Cash flows from operating activities:
Net income (loss)
Net income (loss)
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization of assetsDepreciation and amortization of assets18,048 17,353 
Stock-based compensation1,936 1,558 
Depreciation and amortization of assets
Depreciation and amortization of assets
Stock-based, ESPP and incentive units compensation
Stock-based, ESPP and incentive units compensation
Stock-based, ESPP and incentive units compensation
Amortization of debt issuance costs and discounts
Amortization of debt issuance costs and discounts
Amortization of debt issuance costs and discountsAmortization of debt issuance costs and discounts903 848 
Deferred income taxDeferred income tax(5,716)(3,227)
Deferred income tax
Deferred income tax
Change in contingent consideration
Change in contingent consideration
Change in contingent considerationChange in contingent consideration229 — 
Other non-cash items, netOther non-cash items, net14 — 
Other non-cash items, net
Other non-cash items, net
Change in operating assets and liabilities:
Change in operating assets and liabilities:
Change in operating assets and liabilities:Change in operating assets and liabilities:
Accounts receivableAccounts receivable81 (14,440)
Accounts receivable
Accounts receivable
Prepaid expenses and other current assets
Prepaid expenses and other current assets
Prepaid expenses and other current assetsPrepaid expenses and other current assets481 164 
Income taxes (receivable) payableIncome taxes (receivable) payable8,666 2,913 
Income taxes (receivable) payable
Income taxes (receivable) payable
Notes receivable
Notes receivable
Notes receivableNotes receivable(163)98 
Accounts payable and other accrued liabilitiesAccounts payable and other accrued liabilities3,916 5,316 
Accounts payable and other accrued liabilities
Accounts payable and other accrued liabilities
Customer deposits and advance payments
Customer deposits and advance payments
Customer deposits and advance paymentsCustomer deposits and advance payments250 (13)
Other assets and liabilities, netOther assets and liabilities, net(462)(624)
Other assets and liabilities, net
Other assets and liabilities, net
Net cash provided by operating activitiesNet cash provided by operating activities27,677 9,613 
Net cash provided by operating activities
Net cash provided by operating activities
Cash flows from investing activities:
Cash flows from investing activities:
Cash flows from investing activities:Cash flows from investing activities:
Additions to property, equipment and softwareAdditions to property, equipment and software(5,046)(2,370)
Additions to property, equipment and software
Additions to property, equipment and software
Notes receivable, netNotes receivable, net178 (2,400)
Notes receivable, net
Notes receivable, net
Acquisitions of assets and other investing activities
Acquisitions of assets and other investing activities
Acquisitions of assets and other investing activitiesAcquisitions of assets and other investing activities(2,715)(941)
Net cash used in investing activitiesNet cash used in investing activities(7,583)(5,711)
Net cash used in investing activities
Net cash used in investing activities
Cash flows from financing activities:Cash flows from financing activities:
Cash flows from financing activities:
Cash flows from financing activities:
Repayments of long-term debt
Repayments of long-term debt
Repayments of long-term debtRepayments of long-term debt(1,550)(1,550)
Repayments of borrowings under revolving credit facilityRepayments of borrowings under revolving credit facility(6,000)(5,000)
Repayments of borrowings under revolving credit facility
Repayments of borrowings under revolving credit facility
Shares withheld for taxes on vested stock-based compensation(777)(156)
Dividends paid to redeemable senior preferred stockholders(11,435)(3,505)
Repurchases of Common Stock and shares withheld for taxes
Repurchases of Common Stock and shares withheld for taxes
Repurchases of Common Stock and shares withheld for taxes
Dividends paid to redeemable senior preferred stockholders1
Dividends paid to redeemable senior preferred stockholders1
Dividends paid to redeemable senior preferred stockholders1
Settlement and customer/subscriber accounts obligations, net
Settlement and customer/subscriber accounts obligations, net
Settlement and customer/subscriber accounts obligations, netSettlement and customer/subscriber accounts obligations, net79,258 12,749 
Payment of contingent consideration related to business combinationPayment of contingent consideration related to business combination(1,959)— 
Payment of contingent consideration related to business combination
Payment of contingent consideration related to business combination
Net cash provided by financing activities57,537 2,538 
Net change in cash and cash equivalents, and restricted cash:
Net increase in cash and cash equivalents, and restricted cash77,631 6,440 
Cash and cash equivalents, and restricted cash at beginning of period560,610 518,093 
Cash and cash equivalents, and restricted cash equivalents at end of period$638,241 $524,533 
Net cash (used in) provided by financing activities
Net cash (used in) provided by financing activities
Net cash (used in) provided by financing activities
Net change in cash and cash equivalents and restricted cash:
Net change in cash and cash equivalents and restricted cash:
Net change in cash and cash equivalents and restricted cash:
Net (decrease) increase in cash and cash equivalents, and restricted cash
Net (decrease) increase in cash and cash equivalents, and restricted cash
Net (decrease) increase in cash and cash equivalents, and restricted cash
Cash and cash equivalents and restricted cash at beginning of period
Cash and cash equivalents and restricted cash at beginning of period
Cash and cash equivalents and restricted cash at beginning of period
Cash and cash equivalents and restricted cash at end of period
Cash and cash equivalents and restricted cash at end of period
Cash and cash equivalents and restricted cash at end of period
4

Table of ContentsContents
Priority Technology Holdings, Inc.
Unaudited Consolidated Statements of Cash FlowsChanges in Stockholders' Deficit and Non-Controlling Interest
(in thousands)
Three Months Ended March 31,
20232022
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
2024
2024
2024
Reconciliation of cash and cash equivalents, and restricted cash:
Reconciliation of cash and cash equivalents, and restricted cash:
Reconciliation of cash and cash equivalents, and restricted cash:Reconciliation of cash and cash equivalents, and restricted cash:
Cash and cash equivalentsCash and cash equivalents$15,882 $13,557 
Cash and cash equivalents
Cash and cash equivalents
Restricted cash
Restricted cash
Restricted cashRestricted cash11,012 13,588 
Cash and cash equivalents included in settlement assets and customer/subscriber account balances (see Note 4)
Cash and cash equivalents included in settlement assets and customer/subscriber account balances (see Note 4)
611,347 497,388 
Cash and cash equivalents included in settlement assets and customer/subscriber account balances (see Note 4)
Cash and cash equivalents included in settlement assets and customer/subscriber account balances (see Note 4)
Total cash and cash equivalents, and restricted cash
Total cash and cash equivalents, and restricted cash
Total cash and cash equivalents, and restricted cashTotal cash and cash equivalents, and restricted cash$638,241 $524,533 
Supplemental cash flow information:Supplemental cash flow information:
Supplemental cash flow information:
Supplemental cash flow information:
Cash paid for interest
Cash paid for interest
Cash paid for interestCash paid for interest$16,330 $10,613 
Non-cash investing and financing activities:Non-cash investing and financing activities:
Adjustment to value of profit interest units$596 $— 
Acquisition of intangible asset$193 $— 
Non-cash investing and financing activities:
Non-cash investing and financing activities:
Forfeiture of liability-classified award
Forfeiture of liability-classified award
Forfeiture of liability-classified award
Acquisition of intangible asset
Acquisition of intangible asset
Acquisition of intangible asset
Issuance of NCI
Issuance of NCI
Issuance of NCI
(1)The dividend payable for the quarter ended March 31, 2024, was paid on April 1, 2024.

See Notes to Unaudited Consolidated Financial Statements

5

TableTable of Contents
Priority Technology Holdings, Inc.
Unaudited Consolidated Statements of Changes in Stockholders' Deficit and Non-Controlling Interest
(in thousands)

Priority Technology Holdings, Inc.
Notes to Unaudited Consolidated Financial Statements

1.    Basis of Presentation and Significant Accounting Policies
Business, Consolidation and Presentation
Priority Technology Holdings, Inc. is a holding company with no material operations of its own. Priority Technology Holdings, Inc. and its consolidated subsidiaries are referred to herein collectively as "Priority," "PRTH," the "Company," "we," "our" or "us," unless the context requires otherwise. Priority is a provider of merchant acquiring, integrated payment software, money transmission services and commercial payments solutions.
The Company operates on a calendar year ending each December 31 and on four calendar quarters ending on March 31, June 30, September 30 and December 31 of each year. Results of operations reported for interim periods are not necessarily indicative of results for the entire year.
The accompanying Unaudited Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. These Unaudited Consolidated Financial Statements have been prepared in accordance with GAAP for interim financial information pursuant to the rules and regulations of the SEC. The Consolidated Balance Sheet as of December 31, 20222023 was derived from the audited financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 20222023 but does not include all disclosures required by GAAP for annual financial statements.
NCI represents the equity interest in certain consolidated entities in which the Company owns less than 100% of the profit interests. Changes in the Company's ownership interest while the Company retains its controlling interest are accounted for as equity transactions. As of March 31, 2023,2024, there was no income or loss attributable to NCI in accordance with the applicable operating agreements.
Redeemable NCI represents non-controlling ownership of certain redeemable preferred units in one of the Company's consolidated subsidiaries. These preferred units carry a compounded coupon rate of 6% per annum. The return on the redeemable NCI for the three months ended March 31, 2024, since the reissuance of these redeemable preferred units, is $0.6 million. Refer to Note 13. Related Party Transactions.
In the opinion of the Company's management, all known adjustments necessary for a fair presentation of the Unaudited Consolidated Financial Statements for interim periods have been made. These adjustments consist of normal recurring accruals and estimates that affect the carrying amounts of assets and liabilities. These Unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.2023.
The results for the quarter ended March 31, 2024 include the results of the Plastiq business acquired through Chapter 11 bankruptcy process on July 31, 2023.
Use of Estimates
The preparation of Unaudited Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Unaudited Consolidated Financial Statements and the reported amounts of revenues and expenses during the reported period. Actual results could materially differ from those estimates.
Accounts Receivable, net
Accounts receivables include dues from the Company's sponsor banks (for revenues earned, net of related interchange and processing fees, and do not bear interest), agents, merchants and other customers, stated net of allowance for current expected credit losses for any uncollectible amounts.

Foreign Currency
The Company's reporting currency is the U.S. dollar. The functional currency of the Indian subsidiary of the Company is Indian Rupee (i.e. local currency of Republic of India). The functional currency of the Canadian subsidiary of the Company is the Canadian Dollar. Accordingly, assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the
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current exchange rate on the last day of the reporting period. Revenues and expenses are translated using the average exchange rate in effect during the reporting period. Translation adjustments are reported as a component of accumulated other comprehensive income (loss).
Reclassification
In January 2024, the Company changed the grouping of certain business activity to conform to the way we internally manage and monitor the business. As a result, certain immaterial activity was reassigned from the SMB Payments segment to the Enterprise Payments segment effective January 1, 2024. Impact on prior year segment results were determined to be immaterial and have not been reclassified to reflect this change.
Recently Issued Accounting Standards Pending Adoption
Segment Reporting ASU 2023-07
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires incremental reportable segment disclosures, primarily about significant segment expenses. The amendments also require entities with a single reportable segment to provide all disclosures required by these amendments, and all existing segment disclosures. This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods after December 15, 2024. The Company will adopt this guidance for the year ended December 31, 2024. This guidance is expected to only impact the disclosures with no impact on the results of operations, financial position or cash flows.
Income Taxes ASU 2023-09
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures. The guidance includes improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid. This guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is in the process of evaluating the potential effects this guidance will have on its disclosures.
Profit Interest ASU 2024-01
In March 2024, the FASB issued ASU 2024-01, Profit Interest and Similar Awards ("ASU 2024-01"), to improve GAAP by adding an illustrative example to demonstrate how an entity should apply the scope in paragraph 718-10-15-3 to determine whether profit interest and similar awards should be accounted for in accordance with Topic 718, Compensation- Stock Compensation. This guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is in the process of evaluating the potential effects this guidance will have on its disclosures.

2.    Acquisition
Plastiq Acquisition
On May 23, 2023, PRTH’s subsidiary, Plastiq, Powered by Priority, LLC (the "acquiring entity"), entered into a stalking horse equity and asset purchase agreement (the "Purchase Agreement") with Plastiq, Inc. and certain of its affiliates ("Plastiq") to acquire substantially all of the assets of Plastiq, including the equity interest in Plastiq Canada, Inc. Plastiq is a buyer funded B2B payments platform offering bill pay and instant access to working capital to its customers and will complement the Company's existing supplier-funded B2B payments business. On May 24, 2023, Plastiq filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware.
The purchase was completed on July 31, 2023 for a total purchase consideration of approximately $37.0 million. The total purchase consideration included $28.5 million in cash and the remaining consideration is in the nature of deferred or contingent consideration and certain equity interest in the acquiring entity. The cash consideration for the purchase was funded by borrowings from the Company's revolving credit facility.
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Recently Adopted Accounting Standards
Credit Losses
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). This new guidance changes how entities account for credit impairment for trade and other receivables, as well as for certain financial assets and other instruments. ASU 2016-13 replaces the current "incurred loss" model with an "expected loss" model. Under the "incurred loss" model, a loss (or allowance) is recognized only when an event has occurred (such as a payment delinquency) that causes the entity to believe that a loss is probable (i.e., that it has been "incurred"). Under the "expected loss" model, a loss (or allowance) is recognized upon initial recognition of the asset that reflects all future events that leads to a loss being realized, regardless of whether it is probable that the future event will occur. The Company adopted ASU 2016-13 effective January 1, 2023 using the modified-retrospective approach. The implementation of ASU 2016-13 did not have a material impact on the Company's unaudited consolidated financial condition and results of operations. Additionally, the Company modified its accounting policy to conform with the requirements of the adoption of this standard.

Recently Issued Accounting Standards Pending Adoption
Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the LIBOR and other interbank offered rates to alternative reference rates, such as the SOFR. If certain criteria are met, entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform. An entity that makes this election would not have to remeasure the contract at the modification date or reassess a previous accounting determination. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), Scope ASU 2021-01, which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, amended ASU 2020-04, deferring the sunset date of Topic 848 to December 31, 2024. The Company will adopt Topic 848 when relevant contracts are modified upon transition to alternative reference rates. The Company does not expect the adoption of Topic 848 to have a material impact on the Company's Consolidated Financial Statements.

2.    Acquisitions
Ovvi Acquisition
On November 18, 2022, the Company completed its acquisition of certain assets and assumption of a certain liability of Ovvi, LLC, under an asset purchase agreement through its wholly-owned subsidiary, Priority Ovvi, LLC ("Ovvi"). The acquisition was accounted for as a business combination using the acquisition method of accounting. Prioraccounting, under which the acquired assets and assumed liabilities were recognized at their fair values as of July 31, 2023, with the excess of the fair value of consideration transferred over the fair value of the net assets acquired recognized as goodwill. The fair values of the acquired assets and assumed liabilities as of July 31, 2023 were estimated by management using the discounted cash flow method and other factors specific to this acquisition, the business operated as a SaaS proprietary platform for the restaurant, hospitalitycertain assets and retail industries by providing complete all-in-one point of sale software and hardware systems, comprehensive ancillary services including fraud detection and mitigation, and processing services for various types of cards including credit cards, debit cards, private label cards and prepaid cards. This business is reported within the Company's SMB Payments reportable segment. Transaction costs were not material and were expensed. The non-voting incentive shares issued to the seller will be evaluated at each reporting period to determine whether or not profit or loss should be allocated based on the subsidiary's operating agreement.liabilities. The preliminary purchase price allocation is set forth in the table below and is expected to be finalized as soon as practicable but no later than one year from the acquisitionclosing date.
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(in thousands)
Consideration:
Cash$28,500 
CashContingent consideration payments (1)
$8,419 
Common equity of acquiring entity5,026330 
Less: cash and restricted cash acquired(278)
Total purchase consideration,5,026
Fair value net of class B shares issued in Ovvi(3)
659 
Total enterprise value of businesscash and restricted cash acquired(3)
$5,68536,971 
Recognized amounts of assets acquired and liabilities assumed:
Accounts receivable$110831 
InventoryPrepaid expenses142469 
Property, equipment and software,Settlement assets8,277 
Equipment, net2047 
Goodwill(3)
3,3937,261 
Intangible assets(2)
2,02130,460 
Other non-current assetAccounts payable and accrued expenses152 (1,881)
Other non-current liabilityCustomer deposits(153)(214)
Settlement obligations
(8,279)
Total enterprise value of business acquiredpurchase consideration(3)$5,68536,971 
and
(1)Includes $50,000 withheldThe fair value of the contingent consideration payments issued was determined utilizing a Monte Carlo simulation. The contingent consideration payments were calculated based on the path for inventory acquired whichthe simulated metrics and the contractual terms of the contingent consideration payments and were discounted to present value at a rate reflecting the risk associated with the payoffs. The fair value was subsequently released in March 2023.estimated to be the average present value of the contingent consideration payments over all iterations of the simulation.
(2)The intangible assets acquired consist of $1.3 million for technology, $0.4$13.0 million for customer relationships, $7.0 million for referral partner relationships, $6.5 million for technology and $0.3$3.9 million for trade names.name.
(3)During the three months ended March 31, 2023,first quarter of 2024, the Company recorded measurement period adjustments due to additional information received related to the valuation of the Class B shares. Thisan immaterial measurement period adjustment due to a pre-acquisition tax accrual which resulted in a decrease of $0.6 million inan adjustment to goodwill and NCI.accounts payable and accrued expenses.
Other Acquisition
The Company also completed another acquisition during 2022 for approximately $1.2 million, which was not material. The acquisition did not meet the definition of a business, therefore it was accounted for as an asset acquisition under which the cost of acquisition was allocated to the technology asset acquired.

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3.    Revenues
Disaggregation of Revenues
The following table presents a disaggregation of our consolidated revenues by type for the three months ended March 31, 2023 and 2022:type:
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
(in thousands)(in thousands)20232022(in thousands)20242023
Revenue Type:Revenue Type:
Merchant card fees
Merchant card fees
Merchant card feesMerchant card fees$149,644 $127,952 
Money transmission servicesMoney transmission services21,406 16,283 
Outsourced services and other servicesOutsourced services and other services11,005 7,097 
EquipmentEquipment2,973 1,907 
Total revenues(1),(2)
Total revenues(1),(2)
$185,028 $153,239 
(1)Includes contracts with an original duration of one year or less and variable consideration under a stand-ready series of distinct days of service. The aggregate fixed consideration portion of customer contracts with an initial contract duration greater than one year is not material.
(2)Approximately $5.0$11.9 million and $0.6$5.0 million of interest income for the three months ended March 31, 20232024 and 2022,2023, respectively, is included in outsourced services and other services revenue in the table above. Approximately $0.2$0.6 million and $0.1$0.2 million of interest income for the three months ended March 31, 2023,2024, and 2022,2023, respectively, is included in other income, net on the Company's Unaudited Consolidated Statements of Operations and Comprehensive Loss and not reflected in the table above.
The following table presents a disaggregation of our consolidated revenues by segment:
Three months ended March 31, 2023
Three months ended March 31, 2024Three months ended March 31, 2024
(in thousands)(in thousands)Merchant Card FeesMoney Transmission ServicesOutsourced and Other ServicesEquipmentTotal(in thousands)Merchant Card FeesMoney Transmission ServicesOutsourced and Other ServicesEquipmentTotal
SegmentSegment
SMB Payments
SMB Payments
SMB PaymentsSMB Payments$148,688 $— $3,272 $2,973 $154,933 
B2B PaymentsB2B Payments927 — 1,859 — 2,786 
Enterprise PaymentsEnterprise Payments29 21,406 5,874 — 27,309 
Total revenuesTotal revenues$149,644 $21,406 $11,005 $2,973 $185,028 
Three Months Ended March 31, 2022
Three Months Ended March 31, 2023Three Months Ended March 31, 2023
(in thousands)(in thousands)Merchant Card FeesMoney Transmission ServicesOutsourced and Other ServicesEquipmentTotal(in thousands)Merchant Card FeesMoney Transmission ServicesOutsourced and Other ServicesEquipmentTotal
SegmentSegment
SMB Payments
SMB Payments
SMB PaymentsSMB Payments$127,387 $— $665 $1,907 $129,959 
B2B PaymentsB2B Payments565 — 5,360 — 5,925 
Enterprise PaymentsEnterprise Payments— 16,283 1,072 — 17,355 
Total revenuesTotal revenues$127,952 $16,283 $7,097 $1,907 $153,239 
Deferred revenues were not material for the three months ended March 31, 20232024 and 2022.2023.
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Contract Assets and Contract Liabilities
Material contract assets and liabilities are presented net at the individual contract level in the Unaudited Consolidated Balance Sheets and are classified as current or noncurrent based on the nature of the underlying contractual rights and obligations.
Contract liabilities were $0.6 million and $0.2$0.6 million as of March 31, 20232024 and December 31, 2022,2023, respectively. Substantially all of these balances are recognized as revenue within 12 months.
Net contract assets and net contract liabilities were not material for any period presented.
Impairment losses recognized on receivables or contract assets arising from the Company's contracts with customers were not material for the three months ended March 31, 20232024 and March 31, 2022.2023.

4.    Settlement Assets and Customer/Subscriber Account Balances and Related Obligations
SMB Payments Segment
In the Company's SMB Payments reportable segment, funds settlement refers to the process of transferring funds for sales and credits between card issuers and merchants. The standards of the card networks require possession of funds during the settlement process by a member bank which controls the clearing transactions. Since settlement funds are required to be in the possession of a member bank until the merchant is funded, these funds are not assets of the Company and the associated obligations are not liabilities of the Company. Therefore, neither is recognized in the Company's Unaudited Consolidated Balance Sheets. Member banks held merchant funds of $107.0$109.2 million and $110.3$98.0 million at March 31, 20232024 and December 31, 2022,2023, respectively.
Exception items that become the liability of the Company are recorded as merchant losses, a component of cost of revenue in the Company's Unaudited Consolidated Statements of Operations and Comprehensive Loss. Exception items that the Company is still attempting to collect from the merchants through the funds settlement process or merchant reserves are recognized as settlement assets and customer/subscriber account balances in the Company's Unaudited Consolidated Balance Sheets, with an offsetting reserve for those amounts the Company estimates it will not be able to recover. Expenses for merchant losses for the three months ended March 31, 2024 and 2023 and 2022 were $1.0$4.7 million and $1.1$1.0 million, respectively.
B2B Payments Segment
In the Company's B2B Payments segment, the Company earns revenues by processing transactions for FIs and other business customers. Customers transfer funds to the Company, which are held in either company-owned bank accounts controlled by the Company or bank-owned FBO accounts controlled by the banks, until such time that the transactions are settled with the customer payees. Amounts due to customer payees that are held by the Company in company-owned bank accounts are included in restricted cash. Amounts due to customer payees that are held in bank-owned FBO accounts are not assets of the Company, and the associated obligations are not liabilities of the Company. Therefore, neither is recognized in the Company's Unaudited Consolidated Balance Sheets. Bank-owned FBO accounts held funds of $66.6$79.1 million and $42.7$69.0 million at March 31, 20232024 and December 31, 2022,2023, respectively. Company-owned bank accounts held $1.6 million and $1.8$1.2 million at March 31, 20232024 and December 31, 2022,2023, respectively, which are included in restricted cash and settlement and customer/subscriber account obligations in the Company's Unaudited Consolidated Balance Sheets.
Exception items that the Company is still attempting to collect from the customers through the funds settlement process are recognized as settlement assets and customer/subscriber account balances in the Company's Unaudited Consolidated Balance Sheets, with an offsetting reserve for those amounts the Company estimates it will not be able to recover. Expenses for these merchant losses for the three months ended March 31, 2024 were $0.2 million. There were no expenses for these merchant losses in 2023.
For the Plastiq business, the Company accepts card payments from its customers and processes disbursements to their vendors. The time lag between authorization and settlement of card transactions creates certain receivables (from card networks) and
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payables (to the vendors of customers). These receivables and payables arise from the settlement activities that the Company performs on the behalf of its customers and therefore, are presented as Settlement assets and related obligations.
Enterprise Payments Segment
In the Company's Enterprise Payments segment revenue is derived primarily from enrollment fees, monthly subscription fees and transaction-based fees from licensed money transmission services. As part of its licensed money transmission services, the Company accepts deposits from consumers and subscribers which are held in bank accounts maintained by the Company on behalf of consumers and subscribers. After accepting deposits, the Company is allowed to invest available balances in these accounts in certain permitted investments, and the return on such investments contributes to the Company's net cash inflows. These balances are payable on demand. As such, the Company recorded these balances and related obligations as current assets and current liabilities. The nature of these balances are cash and cash equivalents, but they are not available for day-to-day operations of the Company. Therefore, the Company has classified these balances as settlement assets and customer/subscriber
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account balances and the related obligations as settlement and customer/subscriber account obligations in the Company's Unaudited Consolidated Balance Sheets.

In certain states, the Company accepts deposits under agency arrangement with member banks wherein accepted deposits remain under the control of the member banks. Therefore, the Company does not record assets for the deposits accepted and liabilities for the associated obligation. Agency owned accounts held $7.1$46.2 million and $6.1$19.6 million at March 31, 20232024 and December 31, 2022,2023, respectively.

The Company's consolidated settlement assets and customer/subscriber account balances and settlement and customer/subscriber account obligations were as follows:
(in thousands)(in thousands)March 31, 2023December 31, 2022(in thousands)March 31, 2024December 31, 2023
Settlement Assets:
Card settlements due from merchants, net of estimated losses$799 $444 
Customer/Subscriber Account Balances:
Settlement Assets, net of estimated losses(1):
Card settlements due from merchants
Card settlements due from merchants
Card settlements due from merchants
Card settlements due from networks
Other settlement assets
Customer/subscriber account balances
Cash and cash equivalentsCash and cash equivalents611,347 531,574 
Cash and cash equivalents
Cash and cash equivalents
Total settlement assets and customer/subscriber account balancesTotal settlement assets and customer/subscriber account balances$612,146 $532,018 
Settlement and Customer/Subscriber Account Obligations:Settlement and Customer/Subscriber Account Obligations:
Settlement and Customer/Subscriber Account Obligations:
Settlement and Customer/Subscriber Account Obligations:
Customer account obligations
Customer account obligations
Customer account obligationsCustomer account obligations$600,516 $516,086 
Subscriber account obligationsSubscriber account obligations10,831 15,488 
Total customer/subscriber account obligations
Due to customers' payees(1)(2)
Due to customers' payees(1)(2)
1,606 1,766 
Total settlement and customer/subscriber account obligationsTotal settlement and customer/subscriber account obligations$612,953 $533,340 
(1)TheAllowance for estimated losses was $9.2 million and $6.6 million as of March 31, 2024 and December 31, 2023, respectively
(2)Card settlements due from networks includes $6.3 million and $8.2 million as of March 31, 2024 and December 31, 2023, respectively, related assets and remainder are included in restricted cash on our Unaudited Consolidated Balance Sheets.

5.     Notes Receivable
The Company had notes receivable of $4.6$6.5 million and $4.7$5.2 million as of March 31, 20232024 and December 31, 2022,2023, respectively, which are reported as current portion of notes receivable and notes receivable less current portion on the Company's Unaudited Consolidated Balance Sheets. The notes receivable carried weighted-average interest rates of 15.4%18.5% and 18.6% as of March 31, 2023
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2024 and December 31, 2022.2023. The notes receivable are comprised of notes receivable from ISOs, and under the terms of the agreements the Company preserves the right to hold back residual payments due to the ISOs and to apply such residuals against future payments due to the Company. As of March 31, 20232024 and December 31, 2022,2023, the Company had no allowance for doubtful notes receivable.
As of March 31, 2023,2024, the principal payments for the Company's notes receivable are due as follows:
(in thousands)(in thousands)
Twelve months ending March 31,Twelve months ending March 31,
2023$1,581 
20241,051 
Twelve months ending March 31,
Twelve months ending March 31,
2025
2025
20252025917 
20262026888 
20272027210 
After 2027— 
2028
After 2028
TotalTotal$4,647 

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6.    Property, Equipment and Software
A summary of property, equipment and software, net was as follows:
(in thousands)(in thousands)March 31, 2023December 31, 2022
(in thousands)
(in thousands)
Computer software
Computer software
Computer softwareComputer software$67,371 $64,197 
EquipmentEquipment13,611 13,302 
Equipment
Equipment
Leasehold improvements
Leasehold improvements
Leasehold improvementsLeasehold improvements7,191 6,990 
Furniture and fixturesFurniture and fixtures2,891 2,909 
Furniture and fixtures
Furniture and fixtures
Property, equipment and software
Property, equipment and software
Property, equipment and softwareProperty, equipment and software91,064 87,398 
Less: Accumulated depreciationLess: Accumulated depreciation(61,171)(58,409)
Less: Accumulated depreciation
Less: Accumulated depreciation
Capital work in-progress
Capital work in-progress
Capital work in-progressCapital work in-progress7,083 5,698 
Property, equipment and software, netProperty, equipment and software, net$36,976 $34,687 
Property, equipment and software, net
Property, equipment and software, net
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
(in thousands)(in thousands)20232022(in thousands)20242023
Depreciation expenseDepreciation expense$2,757 $2,227 
Depreciation expense
Depreciation expense
Computer software represents purchased software and internally developed back office and merchant interfacing systemssoftware that is used to assistprovide the Company's services to its customers.
Fully depreciated assets are retained in property, equipment and software, net, until removed from service. During the reportingquarter ended March 31, 2024, certain fully depreciated assets were removed from service.
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Contents
7.    Goodwill and Other Intangible Assets
Goodwill
The Company's goodwill relates to the following reporting units was as follows:units:
(in thousands)(in thousands)March 31, 2023December 31, 2022
(in thousands)
(in thousands)
SMB Payments
SMB Payments
SMB PaymentsSMB Payments$124,028 $124,625 
Enterprise PaymentsEnterprise Payments244,712 244,712 
Enterprise Payments
Enterprise Payments
Plastiq (B2B Payments)
Plastiq (B2B Payments)
Plastiq (B2B Payments)
TotalTotal$368,740 $369,337 
Total
Total
The following table summarizes the changes in the carrying value of goodwill for the periods ended March 31, 2023 and December 31, 2022:goodwill:
(in thousands)Amount
Balance at December 31, 20222023$369,337376,103 
Purchase pricePlastiq adjustment for Ovvi(597)
Balance at March 31, 20232024$368,740376,112 
As of March 31, 2023,2024, the Company is not aware of any triggering events for impairment that have occurred since the last annual impairment test.
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Other Intangible Assets
Other intangible assets consisted of the following:
March 31, 2024March 31, 2024Weighted-average
Useful Life
(in thousands, except weighted-average data)(in thousands, except weighted-average data)March 31, 2023Weighted-average
Useful Life
Gross Carrying ValueAccumulated AmortizationNet Carrying Value
Other intangible assets:Other intangible assets:
Other intangible assets:
Other intangible assets:
ISO and referral partner relationships
ISO and referral partner relationships
ISO and referral partner relationshipsISO and referral partner relationships$175,300 $(27,096)$148,204 14.8$182,339 $$(39,824)$$142,515 14.614.6
Residual buyoutsResidual buyouts136,064 (81,335)54,729 6.3Residual buyouts135,164 (95,505)(95,505)39,659 39,659 6.36.3
Customer relationshipsCustomer relationships96,000 (86,319)9,681 8.2Customer relationships109,017 (93,459)(93,459)15,558 15,558 8.48.4
Merchant portfoliosMerchant portfolios76,350 (46,202)30,148 6.7Merchant portfolios83,350 (59,565)(59,565)23,785 23,785 6.56.5
TechnologyTechnology51,156 (19,524)31,632 8.9Technology57,639 (23,989)(23,989)33,650 33,650 8.78.7
Trade namesTrade names3,183 (2,199)984 11.4Trade names7,104 (2,713)(2,713)4,391 4,391 10.610.6
Non-compete agreementsNon-compete agreements3,390 (3,390)— 0.0Non-compete agreements3,390 (3,390)(3,390)— — 0.00.0
Money transmission licenses(1)
Money transmission licenses(1)
2,100 — 2,100 
TotalTotal$543,543 $(266,065)$277,478 9.7
Total
Total$580,103 $(318,445)$261,658 9.6
(1)These assets have an indefinite useful life.
(in thousands, except weighted-average data)December 31, 2022Weighted-average
Useful Life
Gross Carrying ValueAccumulated AmortizationNet Carrying Value
Other intangible assets:
ISO and referral partner relationships$175,300 $(24,021)$151,279 14.8
Residual buyouts132,325 (76,316)56,009 6.6
Customer relationships96,000 (83,298)12,702 8.2
Merchant portfolios76,423 (43,170)33,253 6.7
Technology50,963 (18,566)32,397 8.4
Trade names3,183 (2,129)1,054 11.6
Non-compete agreements3,390 (3,390)— 0.0
Money transmission licenses(1)
2,100  2,100 
Total$539,684 $(250,890)$288,794 9.7
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December 31, 2023Weighted-average
Useful Life
(in thousands, except weighted-average data)Gross Carrying ValueAccumulated AmortizationNet Carrying Value
Other intangible assets:
ISO and referral partner relationships$182,339 $(36,506)$145,833 14.7
Residual buyouts135,164 (92,699)42,465 6.3
Customer relationships109,017 (92,781)16,236 8.4
Merchant portfolios83,350 (56,139)27,211 6.5
Technology57,639 (22,712)34,927 9.0
Trade names7,104 (2,526)4,578 11.7
Non-compete agreements3,390 (3,390)— 0.0
Money transmission licenses(1)
2,100  2,100 
Total$580,103 $(306,753)$273,350 9.7
(1)These assets have an indefinite useful life.

Three Months Ended March 31,
(in thousands)20242023
Amortization expense(1)
$12,083 $15,291 
Three Months Ended March 31,
(in thousands)20232022
Amortization expense$15,291 $15,126 
(1)Included in amortization expense is $0.4 million and $0.1 million as of March 31, 2024 and 2023, respectively, related to the amortization of certain contract acquisition costs.
As of March 31, 2023,2024, there were no impairment indicators present.

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8.    Debt Obligations
Outstanding debt obligations consisted of the following:
(in thousands)(in thousands)March 31, 2023December 31, 2022(in thousands)March 31, 2024December 31, 2023
Term facility - matures April 27, 2027, interest rates of 10.70% and 9.82% at March 31, 2023 and December 31, 2022, respectively$609,150 $610,700 
Revolving credit facility - $40.0 million line, matures April 27, 2026, interest rates of 9.59% and 8.82% at March 31, 2023 and December 31, 2022, respectively6,500 12,500 
Term facility - matures April 27, 2027, interest rates of 11.19% and 11.21% at March 31, 2024 and December 31, 2023, respectively
Revolving credit facility - $65.0 million line as of March 31, 2024 and December 31, 2023, matures April 27, 2026, interest rate of 10.20% at March 31, 2024 and December 31, 2023
Total debt obligationsTotal debt obligations615,650 623,200 
Less: current portion of long-term debtLess: current portion of long-term debt(6,200)(6,200)
Less: unamortized debt discounts and deferred financing costsLess: unamortized debt discounts and deferred financing costs(17,171)(18,074)
Long-term debt, netLong-term debt, net$592,279 $598,926 
Interest Expense and Amortization of Deferred Loan Costs and Discounts
Deferred financing costs and debt discounts are amortized using the effective interest method over the remaining term of the respective debt and are recorded as a component of interest expense. Unamortized deferred financing costs and debt discounts are included in long-term debt on the Company's Unaudited Consolidated Balance Sheets.

Outstanding borrowings under the Credit Agreement accrue interest using either a base rate or a LIBOR rate plus an applicable margin per year, subject to a LIBOR rate floor
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Table of 1.00% per year. The revolving credit facility incurs an unused commitment fee on any undrawn amount in an amount equal to 0.50% per year of the unused portion. The future applicable interest rate margins on the revolving credit facility may vary based on the Company's Total Net Leverage Ratio in addition to future changes in the underlying market rates for LIBOR and the rate used for base-rate borrowings.Contents
Interest expense for outstanding debt, including fees for undrawn amounts and amortization of deferred financing costs and debt discounts was as follows:
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
(in thousands)(in thousands)20242023
Interest expense(1),(2)
Three Months Ended March 31,
(in thousands)20232022
Interest expense(1)
$17,699 $11,536 
(1)Included in interest expense is $0.1$1.0 million and $0.0$0.1 million related to the accretion of contingent considerationsconsideration from acquisitions for the three months ended March 31, 20232024, and 2022,2023, respectively.
(2)Interest expense included amortization of deferred financing costs and debt discounts of $0.9$1.1 million and $0.8$0.9 million for the three months ended March 31, 2024, and 2023, and 2022, respectively.
Debt Covenants
The Credit Agreement contains representations and warranties, financial and collateral requirements, mandatory payment events, events of default and affirmative and negative covenants, including without limitation, covenants that restrict among other things, the ability to create liens, pay dividends or distribute assets from the loan parties to the Company, merge or consolidate, dispose of assets, incur additional indebtedness, make certain investments or acquisitions, enter into certain transactions (including with affiliates) and to enter into certain leases.
If the aggregate principal amount of outstanding revolving loans and letters of credit under the Credit Agreement exceeds 35% of the total revolving credit facility thereunder, the loan parties are required to comply with certain restrictions on its Total Net Leverage Ratio. If applicable, the maximum permitted Total Net Leverage Ratio is: 1) 6.50:1.00 at each fiscal quarter ended September 30, 2021 through June 30, 2022; 2) 6.00:1.00 at each fiscal quarter ended September 30, 2022 through June 30,
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2023; and 3) 5.50:1.00 at each fiscal quarter ended September 30, 2023 each fiscal quarter thereafter. As of March 31, 2023, the Total Net Leverage Ratio was not applicable and2024, the Company was in compliance with the covenants in the Credit Agreement.

9.    Redeemable Senior Preferred Stock and Warrants
The redeemable senior preferred stock ranks senior to the Company's Common Stock, equal with any other class of the Company's stock designated as being ranked on a parity basis with the redeemable senior preferred stock and junior to any other class of the Company's stock, including preferred stock, that is designated as being ranked senior to the redeemable senior preferred stock, with respect to the payment and distribution of dividends, the purchase or redemption of the Company's stock and the liquidation, winding up of and distribution of assets of the Company.
The following table provides the redemption value of the redeemable senior preferred stock for the periods presented:
(in thousands)March 31, 2024December 31, 2023
Redeemable senior preferred stock$225,000 $225,000 
Accumulated unpaid dividend48,197 43,498 
Dividend payable7,122 7,027 
Redemption value280,319 275,525 
Less: unamortized discounts and issuance costs(16,079)(16,920)
Redeemable senior preferred stock, net of discounts and issuance costs:$264,240 $258,605 
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The following table provides a reconciliation of the beginning and ending carrying amounts of the redeemable senior preferred stock for the periods presented:
(in thousands)SharesAmount
December 31, 2023225 $258,605 
Unpaid dividend on redeemable senior preferred stock— 4,699 
Accretion of discounts and issuance costs— 841 
Cash portion of dividend outstanding at March 31, 2024— 7,122 
Payment of cash portion of dividend outstanding at December 31, 2023(7,027)
March 31, 2024225 $264,240 
The dividend rate as of March 31, 2024 and December 31, 2023, was 17.6% and 17.7% respectively.
The following table provides a summary of the dividends for the period presented:
Three Months Ended March 31,
(in thousands)20242023
Dividends paid in cash(1)
$7,122 $6,094 
Accumulated dividends accrued as part of the carrying value of redeemable senior preferred stock4,699 4,383 
Dividends declared$11,821 $10,477 
(1)Dividend payable for the three months ended March 31, 2023:2024 was paid on April 1, 2024.
(in thousands)SharesAmount
December 31, 2022225 $235,579 
Payment of cash portion of dividend and ticking fee outstanding at December 31, 2022— (5,341)
Unpaid dividend on redeemable senior preferred stock— 4,383 
Accretion of discounts and issuance cost— 818 
March 31, 2023225 $235,439 
TheUnder the Amended Certificate of Designation, the dividend rate for the redeemable senior preferred stock(capped at 22.50%) is equal to the three-month LIBOR rateterm SOFR (minimum of 1.00%), plus anthe three-month term SOFR spread adjustment of 0.26% plus the applicable margin of 12.00% (capped at 22.50%)per year, with a minimum quarterly cash dividend payment of 5.00% plus the three-month LIBOR rate per year.. The dividend rate is subject to future increases if the Company doesn't comply with the minimum cash payment requirements outlined in the agreement, which includes required payments of dividends, required payments related to redemption or required prepayments. The dividend rate may also increase if the Company fails to obtain the required stockholder approval for a forced sale transaction triggered by investors or if an event of default as outlined in the agreement occurs.
The dividend rate as of March 31, 2023 and December 31, 2022, was 16.7% and 15.7% respectively.
The following table provides a summary of the dividends for the period presented:
Three Months Ended March 31,
(in thousands)20232022
Dividends paid in cash$6,094 $3,505 
Accumulated dividends accrued as part of the carrying value of redeemable senior preferred stock4,383 4,090 
Dividends declared$10,477 $7,595 
On April 27,In 2021, the Company issued warrants to purchase up to 1,803,841 shares of the Common Stock, at an exercise price of $0.001. As of March 31, 2023,2024, none of the warrants have been exercised. The warrants are considered to be equity contracts indexed in the Company's own shares and therefore were recorded at their inception date relative fair value and are included in additional paid-in capital on the Company's Unaudited Consolidated Balance Sheets.

10.    Income Taxes
The Company's consolidated effective income tax rate for the three months ended March 31, 2023,2024, was 20.8%,33.2% compared to a consolidated effective income tax rate of 49.4%20.8% for the three months ended March 31, 2022.2023. The effective rates differed from
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the statutory rate of 21.0% primarily due to an increase in the valuation allowance against certain business interest carryover deferred tax assets.assets, and certain forecasted nondeductible expenses.
Valuation Allowance for Deferred Income Tax Assets
The Company considers all available positive and negative evidence to determine whether sufficient taxable income will be generated in the future to permit realization of the existing deferred tax assets. In accordance with the provisions of ASC 740, Income Taxes, the Company is required to provide a valuation allowance against deferred income tax assets when it is "more likely than not" that some portion or all of the deferred tax assets will not be realized.
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Based on management's assessment, as of March 31, 2023,2024, the Company continues to record a full valuation allowance against non-deductible interest expense. The Company will continue to evaluate the realizability of the net deferred tax asset on a quarterly basis and, as a result, the valuation allowance may change in future periods.

11.     Stockholders' Deficit
The Company is authorized to issue 100,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. As of March 31, 20232024 and December 31, 2022,2023, the Company has not issued any shares of preferred stock.
Share Repurchase Program
During the second quarter ofIn 2022, PRTH's Board of Directors authorized a general share repurchase program under which the Company may purchase up to 2.0 million shares of its outstanding Common Stock for a total of up to $10.0 million. Under the terms of this plan, the Company may purchase shares through open market purchases, unsolicited or solicited privately negotiated transactions, or in another manner so long as it complies with applicable rules and regulations. The Company did not repurchase anyThere have been no shares repurchased under the share repurchase program during the first quarter of 2023.
March 31, 2023December 31, 2022
in thousands, except share data, which is in whole units
Number of shares purchased(1)
— 1,309,374 
Average price paid per share$— $4.42 
Total Investment(1)
$— $5,791 
(1)These amounts may differ from the repurchases of Common Stock amounts in the Unaudited Statements of Cash Flows due to shares withheld for taxes and unsettled share repurchases at the end of the quarter.this plan since December 2022.

12.    Stock-based Compensation
For the three months ended March 31, 2023 and 2022, stock-basedStock-based compensation expense was as follows:
Three Months Ended March 31,
(in thousands)20232022
Stock-based compensation expense$1,936 $1,558 
Three Months Ended March 31,
(in thousands)20242023
Stock options compensation expense$1,528 $1,922 
Incentive units compensation expense93 — 
ESPP compensation expense12 14
Total$1,633 $1,936 
Income tax benefit for stock-based compensation was immaterial for the three months ended March 31, 20232024 and 2022.2023. No stock-based compensation has been capitalized.
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2018 Plan
The Company's 2018 Plan initially provided for the issuance of up to 6,685,696 shares of the Company's Common Stock. On March 17, 2022, the Company's Board of Directors unanimously approved an amendment to the 2018 Plan, which was subsequently approved by our shareholders, to increase the number of shares authorized for issuance under the plan by 2,500,000 shares, resulting in 9,185,696 shares of the Company's Common Stock authorized for issuance under the plan.
2021 Stock Purchase Plan
The 2021 Stock Purchase Plan provides for up to 200,000 shares to be purchased under the plan. Shares issued under the plan may be authorized but unissued or reacquired shares of Common Stock. All employees of the Company who work more than 20 hours per week and have been employed by the Company for at least 30 days may participate in the 2021 Stock Purchase Plan.
Under the 2021 Stock Purchase Plan, participants are offered, on the first day of the offering period, the option to purchase shares of Common Stock at a discount on the last day of the offering period. The offering period shall be for a period of three months, and the first offering period began on January 10, 2022. The 2021 Stock Purchase Plan provides eligible employees the
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opportunity to purchase shares of the Company's Common Stock on a quarterly basis through payroll deductions at a price equal to 95% of the lesser of the fair value on the first and last trading day of each offering period.
Non-voting Incentive Units
The compensation expenseCompany issued non-voting incentive units to certain employees and partners in six subsidiaries. These non-voting incentive units were determined to be equity and are accounted for under ASC 718 Stock Compensation. The non-voting incentive units are either fully vested when granted, or vest according to the three months ended March 31, 2023, was immaterial and is included in stock-based compensationservice period and/or performance measure noted in the table above.grant agreement. As the non-voting incentive units are vested, they are recognized as NCI to the Company, who is the majority owner of the subsidiaries.

13.    Related Party Transactions
In February 2019, PHOT, a subsidiary of the Company, received a contribution of substantially all of the operating assets of eTab and Cumulus under asset contribution agreements. PHOT is a part of the Company's SMB reportable segment. These contributed assets were primarily composed of technology-related assets. Prior to these transactions, eTab was 80.0% owned by the Company's Chairman and Chief Executive Officer ("CEO"). No cash consideration was paid to the contributors of the eTab or Cumulus assets on the date of the transactions. As consideration for these contributed assets, the contributors were issued redeemable non-controlling preferred equity interests ("redeemable NCIs") in PHOT. Under these redeemable NCIs, the contributors were eligible to receive up to $4.5 million of profits earned by PHOT, plus a preferred yield (6.0% per year) on any undistributed preferred equity interest ("Total Preferred Equity Interest"). Once the total preferred equity interest is distributed to the holders, the redeemable NCIs cease to exist. The Company's CEO initially owned 83.3% of the redeemable NCIs, which ownership interest was subsequently reduced to 35.3% through the CEO's disposition of interests to others.
In November 2020, the Company agreed with the contributors to an exchange of shares of common stock of the Company, or cash, for the remaining undistributed Total Preferred Equity Interests of $4.8 million. An exchange valuation for the Company's common stock was established as of November 12, 2020 at the prior 20-day volume weighted average price of $2.78 per share. The exchange was contingent upon receiving approval of the Company's lenders; therefore, the binding exchange agreements were not entered into until after lender approval was received in April 2021 in connection with the debt refinancing.
In May 2021, the Company entered into exchange agreements and completed the exchange of 1,428,358 shares of common stock and $0.8 million of cash for the Total Preferred Equity Interests. The CEO received 605,623 shares of common stock of the Company in exchange for his 35.3% interest, and the Company's Chief Operating Officer (“COO”) received 413,081 shares of common stock of the Company in exchange for her 24.1% interest.
On October 31, 2023, a lawsuit was filed alleging that the Board breached its fiduciary duties by approving the above mentioned exchange transaction. The Company denied any wrongdoing. The lawsuit was settled on January 30, 2024, wherein the Company agreed to unwind the exchange transaction and received previously issued shares of common stock of the Company from the CEO, COO and others in exchange of the reissuance of PHOT redeemable preferred units. The returned shares of common stock of the Company are recorded as treasury stock at their closing market price as of the settlement date of January 30, 2024. The reissued PHOT redeemable preferred units are recorded as redeemable NCI at their estimated fair value as of the settlement date on the Company’s Unaudited Consolidated Balance Sheets. The redeemable preferred units were accreted to their redemption value as of March 31, 2024, through net loss available to common stockholders in the Company’s Unaudited Statements of Operations and Comprehensive Loss.

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14.    Commitments and Contingencies
Minimum Annual Commitments with Third-party Processors
The Company has multi-year agreements with third parties to provide certain payment processing services to the Company. The Company pays processing fees under these agreements that are based on the volume and dollar amounts of processed payment transactions. Some of these agreements have minimum annual requirements for processing volumes.agreements. Based on existing contracts in place, the Company is committed to pay minimum processing fees under these agreements of approximately $13.0$21.6 million in 20232024 and $7.0$25.0 million in 2024.2025.
Annual Commitment with Vendor
Effective January 1, 2022, the Company entered into a three year business cooperation agreement with a vendor to resell its services. Under the agreement, the Company purchased vendor services worth $0.7$1.5 million for the year ended December 31, 2022,2023, and is committed to purchase vendor services worth $1.5 million in 2023 and $2.3 million in 2024.
Capital Commitments
The Company committed to capital contributions to fund the operations of certain subsidiaries totaling $26.0 million and $22.0 million as March 31, 20232024 and December 31, 2022, respectively.2023. The Company is obligated to make the contributions within 10 business days of receiving notice for such contribution from the subsidiary. As of March 31, 20232024 and December 31, 2022,2023, the Company has contributed $7.1$13.4 million and $6.9$11.8 million, respectively.
Merchant Reserves
See Note 4. Settlement Assets and Customer/Subscriber Account Balances and Related Obligations, for information about merchant reserves.
Contingency
The Company received an invoice of $2.7 million in March 2023 from one of the partner banks related to certain services rendered during Q1 2022. Of the invoiced amount, $2.3 million was disputed with the partner bank and further review is in
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process. Pending completion of the review, the Company is unable to estimate the amount of liability and therefore an accrual related to this item has not been recorded as of March 31, 2023.
Contingent Consideration
The following table provides a reconciliation of the beginning and ending balance of the Company's contingent consideration liabilities related to acquisitions completed during prior years:acquisitions:
(in thousands)Contingent Consideration Liabilities
December 31, 20222023$8,07913,438 
Addition of contingent consideration (related to asset acquisition)2,100 
Accretion of contingent consideration113972 
Fair value adjustments due to changes in estimates of future payments116 
Payment of contingent consideration(4,059)(3,071)
March 31, 20232024$6,34911,339 
Legal Proceedings
The Company is involved in certain legal proceedings and claims which arise in the ordinary course of business. In the opinion of the Company and based on consultations with internal and external counsel, the results of any of these matters, individually and in the aggregate, are not expected to have a material effect on the Company's results of operations, financial condition or cash flows. As more information becomes available, and the Company determines that an unfavorable outcome is probable on a claim and that the amount of probable loss that the Company will incur on that claim is reasonably estimable, the Company will record an accrued expense for the claim in question. If and when the Company records such an accrual, it could be material and could adversely impact the Company's results of operations, financial condition and cash flows.
The Company is involved in a case that was filed on October 11, 2023 and is currently pending in the United States District Court for the Northern District of California (the “Complaint”).The Complaint is a putative class action against The Credit Wholesale Company, Inc. (“Wholesale”), Priority Technology Holdings, Inc., Priority Payment Systems (“PPS”), LLC and Wells Fargo Bank, N.A. (“Wells Fargo”).The Complaint alleges that Wholesale is an agent of Priority, PPS and Wells Fargo
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and that it made non-consensual recordation of telephonic communications with California businesses in violation of California Invasion of Privacy Act (the “Act”). The Complaint seeks to certify a class of affected businesses and an award of $5,000 per violation of the Act. As of May 9, 2024, the financial impact, if any, of the outcome of this legal proceeding is neither probable nor estimable.
Concentration of Risks
The Company's revenue is substantially derived from processing Visa and Mastercard bankcard transactions. Because the Company is not a member bank, in order to process these bankcard transactions, the Company maintains sponsorship agreements with member banks which require, among other things, that the Company abide by the by-laws and regulations of the card associations.
As of March 31, 2024 , the Company's customer account balances of $703 million are maintained in FDIC insured eligible accounts with certain FIs (refer to Note 4. Settlement Assets and Customer/Subscriber Account Balances and Related Obligations) A majority of the Company's cash and restricted cash is held in certain FIs, substantially all of which is in excess of FDIC limits. The Company does not believe it is exposed to any significant credit risk from these transactions.


14.15.    Fair Value
Fair Value Measurements
Contingent consideration related to the Company's business combinations is estimated based on the present value of a weighted payout probability at the measurement date, which falls within Level 3 on the fair value hierarchy. The current portion of contingent consideration is included in accounts payable and accrued expenses on the Company's Unaudited Consolidated Balance Sheets and the noncurrent portion of contingent consideration is included in other noncurrent liabilities on the Company's Unaudited Consolidated Balance Sheets.
Liabilities measured at fair value on a recurring basis consisted of the following:
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(in thousands)(in thousands)Fair Value HierarchyMarch 31, 2023December 31, 2022(in thousands)Fair Value HierarchyMarch 31, 2024December 31, 2023
Contingent consideration, current portionContingent consideration, current portionLevel 3$4,349 $6,079 
Contingent consideration, noncurrent portionContingent consideration, noncurrent portionLevel 32,000 2,000 
Total contingent considerationTotal contingent consideration$6,349 $8,079 
During the three months ended March 31, 2023,2024, there were no transfers into, out of, or between levels of the fair value hierarchy.
Fair Value Disclosures
Notes Receivable
Notes receivable are carried at amortized cost. Substantially all of the Company's notes receivable are secured, and the Company provides for allowances when it believes that certain notes receivable may not be collectible. The carrying value of the Company's notes receivable, net approximates fair value and was approximately $4.6$6.5 million and $4.7$5.2 million at March 31, 20232024 and December 31, 2022,2023, respectively. On the fair value hierarchy, Level 3 inputs are used to estimate the fair value of these notes receivable.
Debt Obligations
Outstanding debt obligations (see Note 8. Debt Obligations) are reflected in the Company's Unaudited Consolidated Balance Sheets at carrying value since the Company did not elect to remeasure debt obligations to fair value at the end of each reporting period.
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The fair value of the of the term facility was estimated to be $604.6 million and $606.1$651.9 million at March 31, 20232024 and December 31, 2022, respectively,2023 and was estimated using binding and non-binding quoted prices in an active secondary market, which considers the credit risk and market related conditions, and is within Level 32 of the fair value hierarchy.
The carrying values of the other long-term debt obligations approximate fair value due to mechanisms in the credit agreements that adjust the applicable interest rates and the lack of a market for these debt obligations.

15.16.    Segment Information
The Company has three reportable segments:
SMB Payments – providesProvides full-service acquiring and payment-enabled solutions for B2C transactions, leveraging the Company'sPriority's proprietary software platform, distributed through ISOs,ISO, direct sales and vertically focused ISV channels.
B2B Payments – provides market-leading AP automation solutions to corporations, software partners and industry leading FIs including Citi(including Citibank and Mastercard.Mastercard) in addition to working improving cash flow by providing instant access to working capital.
Enterprise Payments – providesProvides embedded paymentfinance and bankingtreasury solutions to enterprise customers thatto modernize legacy platforms and accelerate modern software partners lookingpartners' strategies to monetize payments.
Corporate includes costs of corporate functions and shared services not allocated to our reportable segments.
In January 2024, the Company changed the grouping of certain business activity to conform to the way we internally manage and monitor the business. As a result, certain immaterial activity was reassigned from the SMB Payments segment to the Enterprise Payments segment effective January 1, 2024. Impact on prior year segment results were determined to be immaterial and have not been reclassified to reflect this change.
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Information on reportable segments and reconciliations to consolidated revenues, consolidated depreciation and amortization, and consolidated operating income are as follows:
(in thousands)(in thousands)Three Months Ended March 31,
20232022
(in thousands)
(in thousands)Three Months Ended March 31,
202420242023
Revenues:Revenues:
SMB Payments
SMB Payments
SMB PaymentsSMB Payments$154,933 $129,959 
B2B PaymentsB2B Payments2,786 5,925 
Enterprise PaymentsEnterprise Payments27,309 17,355 
Consolidated revenuesConsolidated revenues$185,028 $153,239 
Depreciation and amortization:Depreciation and amortization:
Depreciation and amortization:
Depreciation and amortization:
SMB Payments
SMB Payments
SMB PaymentsSMB Payments$10,846 $10,824 
B2B PaymentsB2B Payments125 73 
Enterprise PaymentsEnterprise Payments6,690 6,197 
CorporateCorporate387 259 
Consolidated depreciation and amortizationConsolidated depreciation and amortization$18,048 $17,353 
Operating (loss) income:
Operating income (loss):
Operating income (loss):
Operating income (loss):
SMB Payments
SMB Payments
SMB PaymentsSMB Payments$12,011 $12,486 
B2B PaymentsB2B Payments(849)409 
Enterprise PaymentsEnterprise Payments12,663 4,494 
CorporateCorporate(6,977)(6,563)
Consolidated operating incomeConsolidated operating income$16,848 $10,826 

A reconciliation of total operating income of reportable segments to the Company's net loss(loss) income is provided in the following table:
(in thousands)(in thousands)Three Months Ended March 31,
20232022
(in thousands)
(in thousands)Three Months Ended March 31,
202420242023
Total operating income of reportable segmentsTotal operating income of reportable segments$23,825 $17,389 
CorporateCorporate(6,977)(6,563)
Interest expenseInterest expense(17,699)(11,535)
Other income, netOther income, net212 51 
Income tax benefit133 325 
Net loss$(506)$(333)
Other income, net
Other income, net
Income tax (expense) benefit
Net income (loss)

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16.17.    Loss per Common Share
The following tables set forth the computation of the Company's basic and diluted loss per common share:
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
(in thousands except per share amounts)(in thousands except per share amounts)Three Months Ended March 31,(in thousands except per share amounts)20242023
Numerator:
Net income (loss)
Net income (loss)
Net income (loss)
Less: Dividends and accretion attributable to redeemable senior preferred stockholders
Less: Return on redeemable NCI in consolidated subsidiary
20232022
Numerator:
Net loss$(506)$(333)
Less: Dividends and accretion attributable to redeemable senior preferred stockholders(11,295)(8,400)
Net loss attributable to common stockholders
Net loss attributable to common stockholders
Net loss attributable to common stockholdersNet loss attributable to common stockholders$(11,801)$(8,733)
Denominator:Denominator:
Basic and diluted:Basic and diluted:
Basic and diluted:
Basic and diluted:
Weighted-average common shares outstanding(1)
Weighted-average common shares outstanding(1)
Weighted-average common shares outstanding(1)
Weighted-average common shares outstanding(1)
78,133 78,597 
Loss per common shareLoss per common share$(0.15)$(0.11)
(1)The weighted-average common shares outstanding includes 1,803,841 warrants (refer to Note 9. Redeemable Senior Preferred Stock and Warrants).
For the three months ended March 31, 2024 and 2023, all potentially dilutive securities were anti-dilutive, so diluted net loss per share was equivalent to basic net loss per share. Potentially anti-dilutive securities that were excluded from the Company's loss per common share that could potentially be dilutive in future periods are as follows:
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
(in thousands)(in thousands)20232022(in thousands)20242023
Outstanding warrants on Common Stock(1)
Outstanding warrants on Common Stock(1)
3,557 3,557 
Outstanding options and warrants issued to adviser(2)
Outstanding options and warrants issued to adviser(2)
600 600 
Restricted stock awards(3)
Restricted stock awards(3)
2,245 2,284 
Outstanding stock option awards(3)
Outstanding stock option awards(3)
952 1,203 
Outstanding stock option awards(3)
Outstanding stock option awards(3)
TotalTotal7,354 7,644 
(1)The warrants arewere issued in 2018 and were exercisable at $11.50 per share and expireshare. These warrants expired on August 24, 2023.
(2)The warrants were issued in 2018 and options arewere exercisable at $12.00 per share and expireshare. These warrants expired on August 24, 2023.
(3)Granted under the 2018 Plan.



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Audited Consolidated Financial Statements and related Notes and the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.2023. Certain amounts in this section may not add mathematically due to rounding.

Cautionary Note Regarding Forward-looking Statements
Some of the statements made in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements include, but are not limited to, statements regarding our management's expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, such as statements about our future financial performance, including any underlying assumptions, are forward-looking statements. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "future," "goal," "intend," "likely," "may," "might," "plan," "possible," "potential," "predict," "project," "seek," "should," "would," "will," "approximately," "shall" and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about: 
negative economic and political conditions that adversely affect the general economy, consumer confidence and consumer and commercial spending habits, which may, among other things, negatively impact our business, financial condition and results of operations;
competition in the payment processing industry;
the use of distribution partners;
any unauthorized disclosures of merchant or cardholder data, whether through breach of our computer systems, computer viruses or otherwise;
any breakdowns in our processing systems;
government regulation, including regulation of consumer information;
the use of third-party vendors;
any changes in card association and debit network fees or products;
any failure to comply with the rules established by payment networks or standards established by third-party processors;
any proposed acquisitions or dispositions or any risks associated with completed acquisitions or dispositions; and
other risks and uncertainties set forth in the "Item 1A - Risk Factors" section of this Quarterly Report on Form 10-Q or our Annual Report on Form 10-K.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. 
The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our current expectations and beliefs concerning future developments and their potential effects on us. You should not place undue reliance on these forward-looking statements in deciding whether to invest in our securities. We cannot assure you that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions, including the risk factors set forth in the "Item 1A - Risk Factors" section of this Quarterly Report on Form 10-Q or our Annual Report on Form 10-K, that may cause our actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. 
In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially
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available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements. 
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You should read this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. 
Forward-looking statements speak only as of the date they were made. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
Terms Used in this Quarterly Report on Form 10-Q
As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to the terms "Company," "Priority," "we," "us" and "our" refer to Priority Technology Holdings, Inc. and its consolidated subsidiaries.
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Results of Operations
This section includes certain components of our results of operations for the three months ended March 31, 2023,2024, compared to the three months ended March 31, 2022.2023. We have derived this data, except the key indicators, for merchant bankcard processing dollar values, transaction volumes and average billed accounts from our Unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q and our Audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022.2023.
Revenue
For the three months ended March 31, 2023,2024, our consolidated revenue of $185.0$205.7 million increased by $31.8$20.7 million, or 20.8%11.2%, from $153.2$185.0 million for the three months ended March 31, 2022. This2023. The overall increase was mainly driven by increased volumes across all segments.an increase in new enrollments and higher interest income in our Enterprise Payments segment and revenue from the Plastiq business in our B2B Payments segment that was acquired in the quarter ended September 30, 2023. These increases were partially offset by a decrease in revenues in our SMB Payments segment due to decreased volumes.
The following table presents our revenues by typetype:
(in thousands)Three Months Ended March 31,
20242023$ Change
Revenue Type:
Merchant card fees$157,947$149,644$8,303
Money transmission services29,14421,4067,738
Outsourced services and other services15,66511,0054,660
Equipment2,9632,973(10)
Total revenues$205,719$185,028$20,691
Merchant card fees
Merchant card fees revenue for the three months ended March 31, 2023 and 2022:
(in thousands)Three Months Ended March 31,
20232022$ Change
Revenue Type:
Merchant card fees$149,644$127,952$21,692
Money transmission services21,40616,2835,123
Outsourced services and other services11,0057,0973,908
Equipment2,9731,9071,066
Total revenues$185,028$153,239$31,789
For the three months ended March 31, 2023, our merchant card fees revenue2024 was $157.9 million an increase of $149.6 million increased by $21.7$8.3 million or 17.0%5.5%, from $128.0$149.6 million for the three months ended March 31, 2022. This2023. The increase was primarily driven by an increasethe Plastiq business and rate increases. These increases were partially offset by a decrease in volume due to the diversification of our merchant bankcard volume processedportfolio by the Company.one of our referral partners.
Money transmission services
Money transmission services for the three months ended March 31, 2024 was $29.1 million an increase of $21.4 million increased by $5.1$7.7 million, or 31.3%36.1%, from $16.3$21.4 million for the three months ended March 31, 2022.2023. This increase was primarily driven by an increase in customer enrollments.
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Outsourced services and other services revenue
Outsourced services and other services revenue of $15.7 million for the three months ended March 31, 2024 increased by $4.7 million, or 42.3%, from $11.0 million for the three months ended March 31, 2023, increased by $3.9 million, or 54.9%, from $7.1 million for the three months ended March 31, 2022, primarily due to growth in revenue from AP automation solutions, increased volumes in the card issuing business and growth in interest income due to higher interest rates and deposit balances offset by decreased managed services revenue due to wind down of certain programs.balances.
Equipment
Equipment revenue of $3.0 million for the three months ended March 31, 2023 increased by $1.1 million, or 57.9%, from $1.92024 remained consistent with $3.0 million for the three months ended March 31, 2022. The increase was primarily due to increased sales of point of sale equipment.

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2023.
Operating expenses for three months ended March 31, 2023 and 2022 were as follows:
(in thousands)(in thousands)Three Months Ended March 31,
20232022$ Change
(in thousands)
(in thousands)Three Months Ended March 31,
202420242023$ Change
Operating expensesOperating expenses
Cost of services (excludes depreciation and amortization)
Cost of services (excludes depreciation and amortization)
Cost of services (excludes depreciation and amortization)Cost of services (excludes depreciation and amortization)$121,966$101,480$20,486$129,298$121,966$7,332
Salary and employee benefitsSalary and employee benefits19,04816,0772,971Salary and employee benefits22,15019,0483,102
Depreciation and amortizationDepreciation and amortization18,04817,353695Depreciation and amortization15,25318,048(2,795)
Selling, general and administrativeSelling, general and administrative9,1187,5031,615Selling, general and administrative10,9949,1181,876
Total operating expensesTotal operating expenses$168,180$142,413$25,767Total operating expenses$177,695$168,180$9,515
Cost of services (excludes depreciation and amortization)
Cost of revenueservices (excludes depreciation and amortization) of $129.3 million for the three months ended March 31, 2024, increased by $7.3 million, or 6.0%, from $122.0 million for the three months ended March 31, 2023, increased by $20.5 million, or 20.2%, from $101.5 million for the three months ended March 31, 2022, primarily due to the corresponding increase in revenues.
Salary and employee benefits
Salary and employee benefits expense of $22.2 million for the three months ended March 31, 2024 increased by $3.1 million, or 16.3%, from $19.0 million for the three months ended March 31, 2023, increased by $2.9 million, or 18.0%, from $16.1 million for the three months ended March 31, 2022, primarily due to pay raises, an increase in stock-based compensationmerit increases, certain performance based non-recurring bonuses and increased headcount from the acquisition of the Plastiq business and to support the overall growth of the Company.
Depreciation and amortization expense
Depreciation and amortization expense of $15.3 million for the three months ended March 31, 2024 decreased by $2.8 million, or 15.5%, from $18.0 million for the three months ended March 31, 2023, increased by $0.6 million, or 3.4%, from $17.4 million for the three months ended March 31, 2022, primarily due to the depreciationfull amortization of capitalized internal use software.certain intangible assets during 2023.
Selling, general and administrative
Selling, general and administrative expenses of $11.0 million for the three months ended March 31, 2024 increased by $1.9 million, or 20.6%, from $9.1 million for the three months ended March 31, 2023, increased by $1.6 million, or 21.3%, from $7.5 million for the three months ended March 31, 2022, primarily due to an increase in travelcertain software and maintenance expenses and other expenses to support overall growth of the Company.
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Other Expense, net
Other expenses, net for three months ended March 31, 2023 and 2022 were as follows:
(in thousands)(in thousands)Three Months Ended March 31,
20232022$ Change
(in thousands)
(in thousands)Three Months Ended March 31,
202420242023$ Change
Other (expense) incomeOther (expense) income
Interest expense
Interest expense
Interest expenseInterest expense$(17,699)$(11,535)$(6,164)$(20,880)$(17,699)$(3,181)
Other income, netOther income, net21251161
Other income, net
Other income, net632212420
Total other expense, netTotal other expense, net$(17,487)$(11,484)$(6,003)Total other expense, net$(20,248)$(17,487)$(2,761)

Interest expense
Interest expense of $20.9 million for the three months ended March 31, 2024 increased by $3.2 million, or 18.0%, from $17.7 million for the three months ended March 31, 2023, increased by $6.2 million, or 53.9%, from $11.5 million for the three months ended March 31, 2022, due to increased interest rates and increased outstanding balance for the term loan facility used for the acquisition of the Plastiq business, offset by a decrease in the three months ended March 31, 2023.
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revolving credit facility.
Income tax benefit(benefit) expense
Income tax benefit for three months ended March 31, 2023 and 2022expense was as follows:
(in thousands)(in thousands)Three Months Ended March 31,
20232022$ Change
Loss before income taxes$(639)$(658)$19 
Income tax benefit$(133)$(325)$192 
(in thousands)
(in thousands)Three Months Ended March 31,
202420242023$ Change
Income (loss) before income taxes
Income tax expense (benefit)
Effective tax rateEffective tax rate20.8 %49.4 %
We compute our interim period income tax expense or benefit by using a forecasted EAETR and adjust for any discrete items arising during the interim period and any changes in our projected full-year business interest expense and taxable income. The EAETR for 20232024 is 63.8%29.9% and includes the income tax provision on pre-tax income and a tax provision related to establishment of a valuation allowance for deferred income tax on the future portion of the Section 163(j) limitation created by additional 20232024 interest expense. The effective tax rate for 20232024 changed primarily due to an increase in the valuation allowance against certain business interest carryover deferred tax assets.forecasted nondeductible expenses.
Our consolidated effective income tax rates differ from the statutory rate due to timing and permanent differences between amounts calculated under accounting principles GAAP and the U.S. tax code. The consolidated effective income tax rate for 20232024 may not be indicative of our effective tax rate for future periods.
On August 16, 2022, the U.S. government enacted the Inflation Reduction Act into law. The IRA, among other provisions, implements a 15% corporate alternative minimum tax based on global adjusted financial statement income and a 1% excise tax on share repurchases, which shall take effect in tax years beginning after December 31, 2022. We do not expect the enactment
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Contents
Segment Results
SMB Payments
(in thousands)(in thousands)Three Months Ended March 31,
20232022$ Change
(in thousands)
(in thousands)Three Months Ended March 31,
202420242023$ Change
RevenueRevenue$154,933$129,959$24,974Revenue$143,751$154,933$(11,182)
Operating expensesOperating expenses142,922117,47325,449Operating expenses131,368142,922(11,554)
Operating incomeOperating income$12,011$12,486$(475)Operating income$12,383$12,011$372
Operating marginOperating margin7.8 %9.6 %
Depreciation and amortizationDepreciation and amortization$10,846$10,824$22
Depreciation and amortization
Depreciation and amortization$8,802$10,846$(2,044)
Key Indicators:Key Indicators:
Merchant bankcard processing dollar valueMerchant bankcard processing dollar value$15,220,715$14,076,847$1,143,868
Merchant bankcard processing dollar value
Merchant bankcard processing dollar value$14,788,095$15,220,715$(432,620)
Merchant bankcard transaction countMerchant bankcard transaction count163,406145,94817,458Merchant bankcard transaction count175,228163,40611,822
Revenue
Revenue from our SMB Payments segment was $143.8 million for the three months ended March 31, 2024, compared to $154.9 million for the three months ended March 31, 2023, compared to $130.0 million for the three months ended March 31, 2022.2023. The increasedecrease of $24.9$11.2 million, or 19.2%7.2%, was primarily driven by increaseda decrease in certain incentives and, decreased transaction count and processed merchant bankcard volume accrualdue to diversification of certain incentives, offsetmerchant portfolios by decrease in certain fee-based revenue.one of the Company's referral partners. The Company's merchant card fee revenue from the SMB Payments segment ($139.5 million for 2024 and $148.7 million for 2023) as a percentage of merchant bankcard processing dollar value during
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2023 increased 2024 decrease to 0.9% from 1.0% from 0.92% during 2022.2023. The increasedecrease was primarily driven by an increase in the incentive revenue and changes in the merchant and card mix.
Operating Income
Operating income from our SMB Payments segment was $12.4 million for the three months ended March 31, 2024, compared to $12.0 million for the three months ended March 31, 2023, compared to $12.5 million for the three months ended March 31, 2022.2023. The decreaseincrease of $0.5$0.4 million or 4.0%,3.1% was primarilythe result of a decrease in operating income of $4.0 million in merchant card fee revenue driven by the diversification of merchant portfolios by one of the Company's referral partners, the mix related margin compression and a $2.1 million increasedecrease in certain incentive revenue. This decrease was offset by decreases in the allocation of salary and employee benefits due to higher headcount, higher stock-based compensation and annual pay raises, andexpense of $1.7 million, a $1.0 million increasedecrease in selling, general and administrative expenses driven by higher softwareof $0.7 million due to efficiencies and travelrealignment at the corporate level and other operating costs offset by an increasea decrease in operating income from higher revenue. The increasedepreciation and amortization expense of $2.0 million due to full amortization of certain intangible assets in headcount and selling, general and administrative expenses are mainly attributable to growth initiatives.2023.
Depreciation and Amortization
Depreciation and amortization expense of our SMB Payments segment was $8.8 million for the three months ended March 31, 2024, compared to $10.8 million for the three months ended March 31, 2023, which2023. The decrease of $2.0 million is consistent with $10.8due to full amortization of certain intangible assets in 2023.
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B2B Payments
(in thousands)Three Months Ended March 31,
20242023$ Change
Revenue$21,115$2,786$18,329
Operating expenses21,9083,63518,273
Operating loss$(793)$(849)$56
Operating margin(3.8)%(30.5)%
Depreciation and amortization$1,640$125$1,515
Key Indicators:
B2B issuing dollar volume$227,811$198,546$29,265
B2B issuing transaction count240280$(40)
Revenue
Revenue from our B2B Payments segment was $21.1 million for the three months ended March 31, 2022.
B2B Payments
(in thousands)Three Months Ended March 31,
20232022$ Change
Revenue$2,786$5,925$(3,139)
Operating expenses3,6355,516(1,881)
Operating income (loss)$(849)$409$(1,258)
Operating margin(30.5)%6.9 %
Depreciation and amortization$125$73$52
Key Indicators:
B2B issuing dollar volume$198,546$186,380$12,166
B2B issuing transaction count28020674
Revenue
Revenue from our B2B Payments segment was2024, compared to $2.8 million for the three months ended March 31, 2023, compared to $5.92023. The increase of $18.3 million for the three months ended March 31, 2022. The decrease of $3.1 million, or 52.5%, was primarily driven by a decrease in managed services business due to wind down of certain programs and recognition of certain revenues during 2022 related to a contract termination.revenue from the Plastiq business.
Operating Income (Loss)Loss
Operating loss from our B2B Payments segment wasof $0.8 million for the three months ended March 31, 20232024 remained consistent compared to anthe three months ended March 31, 2023. The increase in operating income of $0.4due to increased revenue was offset by certain performance based non-recurring bonuses related to the Plastiq business and processing losses related to the CPX business.
Depreciation and Amortization
Depreciation and amortization from our B2B Payments segment was $1.6 million for the three months ended March 31, 2022.2024, compared to $125.0 thousand depreciation and amortization expense for the three months ended March 31, 2023. The decrease of $1.2 million wasincrease is primarily attributable to decreases in revenue.
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the Plastiq business.
Enterprise Payments
(in thousands)(in thousands)Three Months Ended March 31,
20232022$ Change
(in thousands)
(in thousands)Three Months Ended March 31,
202420242023$ Change
RevenueRevenue$27,309$17,355$9,954Revenue$40,853$27,309$13,544
Operating expensesOperating expenses14,64612,8611,785Operating expenses15,30614,646660
Operating incomeOperating income$12,663$4,494$8,169Operating income$25,547$12,663$12,884
Operating marginOperating margin46.4 %25.9 %
Depreciation and amortizationDepreciation and amortization$6,690$6,197$493
Depreciation and amortization
Depreciation and amortization$4,356$6,690$(2,334)
Key Indicators:Key Indicators:
Average billed clientsAverage billed clients465,219346,394118,825
Average billed clients
Average billed clients703,887465,219238,668
Average new enrollmentsAverage new enrollments45,94823,44122,507Average new enrollments53,55145,9487,603
Revenue
Revenue from our Enterprise Payments segment was $40.9 million for the three months ended March 31, 2024, compared to $27.3 million for the three months ended March 31, 2023, compared to $17.4 million for the three months ended March 31, 2022.2023. The increase of $9.9$13.5 million or 56.9%49.6%, was primarily driven by an increase in billed clients and customer enrollments, and growth in interest income due to higher interest rates and deposit balances.
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Operating Income
Operating income from our Enterprise Payments segment was $25.5 million for the three months ended March 31, 2024, compared to $12.7 million for the three months ended March 31, 2023, compared to $4.5 million for the three months ended March 31, 2022.2023. The increase of $8.2$12.9 million or 182.2%101.7%, was primarily driven by increases in revenues.
Depreciation and Amortization
Depreciation and amortization from our Enterprise Payments segment was $6.7$4.4 million for the three months ended March 31, 2023,2024, compared to $6.2$6.7 million depreciation and amortization expense for the three months ended March 31, 2022.2023. The increasedecrease of $0.5$2.3 million or 8.1%34.9%, was primarily driven by thefull amortization of additional capitalized internal use software and acquired intangibles.

certain intangible assets in 2023.
Critical Accounting Policies and Estimates 
Our Unaudited Consolidated Financial Statements have been prepared in accordance with GAAP for interim periods, which often require the judgment of management in the selection and application of certain accounting principles and methods. Our critical accounting policies and estimates are discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022.2023. There have been no material changes to these critical accounting policies and estimates as of March 31, 2023.

2024.
Liquidity and Capital Resources
Liquidity and capital resource management is a process focused on providing the funding we need to meet our short-term and long-term cash and working capital needs. We have used our funding sources to build our merchant portfolio, for technology solutions and to make acquisitions with the expectation that such investments will generate cash flows sufficient to cover our working capital and other anticipated needs, including our acquisition strategy. We anticipate that cash on hand, funds generated from operations and available borrowings under our revolving credit facility are sufficient to meet our working capital requirements for at least the next 12 months.
During the second quarter of 2022, PRTH's Board of Directors authorized the Company to implement a general share repurchase program under which the Company may purchase up to 2.0 million shares of its outstanding Common Stock for a
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total of up to $10.0 million. Under the terms of this plan, the Company may purchase shares through open market purchases, unsolicited or solicited privately negotiated transactions, or in another manner so long as it complies with applicable rules and regulations. The Company did not repurchase any shares under the share repurchase program during the first quarter of 2023.
Our principal uses of cash are to fund business operations and administrative costs, and to service our debt. 
Our working capital, defined as current assets less current liabilities, was $32.4 million at March 31, 2024 and $8.9 million at March 31, 2023 and $22.5 million at December 31, 2022.2023. As of March 31, 2023,2024, we had cash totaling $15.9$34.3 million compared to $18.5$15.9 million at DecemberMarch 31, 2022.2023. These cash balances do not include restricted cash of $11.0$12.7 million and $10.6$11.0 million at March 31, 20232024 and DecemberMarch 31, 2022,2023, respectively, which reflects cash accounts holding customer settlement funds and cash reserves for potential losses. The current portion of long-term debt included in current liabilities was $6.7 million and $6.2 million at March 31, 2024 and March 31, 2023, and December 31, 2022.respectively. At March 31, 2023,2024, we had availability of approximately $33.5$65.0 million under our revolving credit facility. 
The following table and discussion reflect our changes in cash flows for the comparative three month periods.
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
(in thousands)(in thousands)20232022
Net cash provided by (used in):Net cash provided by (used in): 
Net cash provided by (used in):
Net cash provided by (used in):
Operating activities
Operating activities
Operating activitiesOperating activities$27,677 $9,613 
Investing activitiesInvesting activities(7,583)(5,711)
Investing activities
Investing activities
Financing activitiesFinancing activities57,537 2,538 
Net increase in cash and cash equivalents and restricted cash$77,631 $6,440 
Financing activities
Financing activities
Net (decrease) increase in cash and cash equivalents and restricted cash
Net (decrease) increase in cash and cash equivalents and restricted cash
Net (decrease) increase in cash and cash equivalents and restricted cash
Cash Provided by Operating Activities
Net cash provided by operating activities was $13.3 million for the three months ended March 31, 2024 compared to $27.7 million for the three months ended March 31, 2023 compared to $9.62023. The $14.4 million of net cash useddecrease in operating activities for the three months ended March 31, 2022. The $18.1 million increase in 20232024 was primarily driven by changes in the operating assets and liabilities.
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Cash Used in Investing Activities 
Net cash used in investing activities was $7.6$7.7 million and $5.7$7.6 million for the three months ended March 31, 2024 and 2023, respectively. For the three months ended March 31, 2024, investing activities included additions to property, equipment and 2022, respectively.software of $6.6 million and $1.1 million related funding of new loans to ISOs. For the three months ended March 31, 2023, net cash used in investing activities included additions to property, equipment and software of $5.0 million, and acquisitions of intangible assets of $2.7 million offset by $0.2 million related to the net payments received on loans to ISOs. For the three months ended March 31, 2022, net cash used in investing activities included $0.9 million of cash used to fund acquisitions of intangible assets $2.4 million related to the funding of new loans to ISOs and $2.4$5.0 million of cash used to acquire property, equipment and software.software offset by $0.2 million related to net payments received on loans to ISOs.
Cash Provided by Financing Activities 
Net cash used in financing activities was $57.5$10.3 million for the three months ended March 31, 2023,2024, compared to $2.5$57.5 million of cash provided by financing activities for the three months ended March 31, 2022.2023. The net cash used in financing activities for the three months ended March 31, 2024 included changes in the net obligations for funds held on the behalf of customers of $1.9 million, offset by $1.7 million of cash used for the repayment of debt, $7.0 million of cash dividends paid to redeemable senior preferred stockholders, $0.4 million of cash used for shares withheld for taxes and $3.1 million of payments of contingent consideration. The net cash provided by financing activities for the three months ended March 31, 2023 included changes in the net obligations for funds held on the behalf of customers of $79.3 million, offset by $7.6 million of cash used for the repayment of debt, $11.4 million of cash dividends paid to redeemable senior preferred stockholders, $0.8 million of cash used for shares withheld for taxes and share repurchases, and $2.0 million of payments of contingent consideration for business combinations. The net cash provided by financing activities for three months ended March 31, 2022 included $6.6 million of cash used for the repayment of debt, $3.5 million of cash dividends paid to redeemable senior preferred stockholders and $0.2 million of cash used for other financing activities,combinations, which was offset by changes in the net obligations for funds held on the behalf of customers of $12.7$79.3 million.


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Long-term Debt 
As of March 31, 2023,2024, we had outstanding debt obligations, including the current portion and net of unamortized debt discount of $598.5$638.1 million, compared to $605.1$638.7 million at December 31, 2022,2023, resulting in a decrease of $6.6$0.6 million. The debt balance at March 31, 20232024 consisted of $609.2$652.7 million outstanding under the term facility and $6.5 million outstanding under the revolving credit facility, offset by $17.2$14.6 million of unamortized debt discounts and issuance costs. Minimum amortization of the term facility are equal quarterly installments in aggregate annual amounts equal to 1.0% of the original principal, with the balance paid upon maturity. The term facility matures in April 2027 and the revolving credit facility expires in April 2026.
The Credit Agreement contains representations and warranties, financial and collateral requirements, mandatory payment events, events of default and affirmative and negative covenants, including without limitation, covenants that restrict among other things, the ability to create liens, pay dividends or distribute assets from the loan parties to the Company, merge or consolidate, dispose of assets, incur additional indebtedness, make certain investments or acquisitions, enter into certain transactions (including with affiliates) and to enter into certain leases.
If the aggregate principal amount of outstanding revolving loans and letters of credit under the Credit Agreement exceeds 35% of the total revolving credit facility thereunder, the loan parties are required to comply with certain restrictions on its Total Net Leverage Ratio. If applicable, the maximum permitted Total Net Leverage Ratio is: 1) 6.50:1.00 at each fiscal quarter ended September 30, 2021 through June 30, 2022; 2) 6.00:1.00 at each fiscal quarter ended September 30, 2022 through June 30, 2023; and 3) 5.50:1.00 at each fiscal quarter ended September 30, 2023 each fiscal quarter thereafter. As of March 31, 2023, the Total Net Leverage Ratio was not applicable and2024, the Company was in compliance with the covenants in the Credit Agreement.

Effect of New Accounting Pronouncements and Recently Issued Accounting Pronouncements Not Yet Adopted
From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that may affect our current and/or future financial statements. See Note 1, Basis of Presentation and Significant Accounting Policies, to our Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, for a discussion of recently issued accounting pronouncements not yet adopted. 

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Item 3. Quantitative and Qualitative Disclosures About Market Risk
For quantitative and qualitative disclosures about market risk, see Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," of our Annual Report on Form 10-K for the year ended December 31, 2022.2023. Our exposures to market risk have not changed materially since December 31, 2022.2023.

Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, designed to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized or reported within the time periods specified in SEC rules and regulations and that such information is accumulated and communicated to our management, including our principal executive officer (CEO), our principal financial officer (CFO) and, as appropriate, to allow timely decisions regarding required disclosures.
Management, with the participation of the CEO and CFO, has evaluated the effectiveness of the Company's disclosure controls and procedures as of March 31, 2023.2024. Based on that evaluation, the Company's CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of March 31, 2023.
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2024.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company's internal control over financial reporting during the three months ended March 31, 20232024 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are involved in certain legal proceedings and claims, which arise in the ordinary course of business. In the opinion of the Company, based on consultations with internal and external counsel, the results of any of these ordinary course matters, individually and in the aggregate, are not expected to have a material effect on our results of operations, financial condition, or cash flows. As more information becomes available and we determine that an unfavorable outcome is probable on a claim and that the amount of probable loss that we will incur on that claim is reasonably estimable, we will record an accrued expense for the claim in question. If and when we record such an accrual, it could be material and could adversely impact our results of operations, financial condition and cash flows.

Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in our Annual Report under Part I, Item 1A "Risk Factors" because these risk factors may affect our operations and financial results. The risks described in the Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also may materially adversely affect our business, financial condition and operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities and Use of Proceeds
None.
Issuer Purchases of Equity Securities
The Company's purchases of its Common Stock during the three months ended March 31, 20232024 were as follows:
Period
Total Number of Shares Purchased(1)
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2)
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1-31, 202399,733$5.30 690,626
February 1-28, 202357,042 $4.45 690,626
March 1-31, 2023690,626
Total156,775 $4.88 — 
Period
Total Number of Shares Purchased(1),(2)
Average Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1-31, 20241,529,378$3.66 
February 1-29, 202422,148 $3.36 
March 1-31, 2024
Total1,551,526 $3.66 — 

(1)Represents shares (in whole units) withheld to satisfy employees' tax withholding obligations related to the vesting of restricted stock awards, which was determined based on the fair market value on the vesting date.
(2)In May 2022, the Company's Board of Directors approvedIncludes 1,428,358 treasury shares as a stock repurchase program for the purchase of up to 2.0 millionresult of the Company's Common Stock outstandingPHOT settlement. See Note 13. Related PartyTransactions for up to $10.0 million. The Company did not repurchase any shares under the share repurchase program during the first quarter of 2023.more information.


Item 3. Defaults Upon Senior Securities
N/A

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Item 4. Mine Safety Disclosures
N/A
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Item 5. Other Information
N/ARule 10b5-1 Director and Officer Trading Arrangements
On June 16, 2023, Sean Kiewiet, an officer of the Company as defined in Section 16 of the Exchange Act, adopted a Rule 10b5-1 trading arrangement as defined in Item 408(a) of the SEC's Regulation S-K.
Officer or Director Name and TitleActionPlan TypeDateNumber of Shares to be soldExpiration
Sean Kiewiet,
Chief Strategy Officer
AdoptedRule 10b5-1June 16, 2023620,000December 31, 2024


Item 6. Exhibits
Exhibit Description
 
2.2
 
 
 
 
10.2
 
10.4
10.5
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32 **
101.INS *XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH *XBRL Taxonomy Extension Schema Document
101.CAL *XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB *XBRL Taxonomy Extension Label Linkbase Document
101.PRE *XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF *XBRL Taxonomy Extension Definition Linkbase Document
* Filed herewith.
** Furnished herewith.
Indicates exhibits that constitute management contracts or compensation plans or arrangements.


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SIGNATURES 
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 thereunto duly authorized.
                        PRIORITY TECHNOLOGY HOLDINGS, INC.
May 11, 20239, 2024
/s/ Thomas C. Priore
Thomas C. Priore
President, Chief Executive Officer and Chairman
(Principal Executive Officer)
May 11, 20239, 2024
/s/ Timothy M. O'Leary
Tim O'Leary
Chief Financial Officer
(Principal Financial Officer)


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