PRTH - Earnings call transcript Q1 2024 | Priority Technology Holdings, Inc.

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Operator

Good day, and welcome to the Priority Technology First Quarter 2024 Conference Call. [Operator Instructions][Audio Gap]Over to Chris Kettmann. Please go ahead.

Chris Kettmann

Good morning, and thank you for joining us. With me today are Tom Priore, Chairman and Chief Executive Officer of Priority Technology Holdings; and Tim O'Leary, Chief Financial Officer.Before giving our prepared remarks, I would like to remind all participants that our comments today will include forward-looking statements, which involve a number of risks and uncertainties that may cause actual results to differ materially from our forward-looking statements. Investors performance be measures release to found filings in non-GAAP GAAP the and turn our website.With Tom available can our Priore. to measures in the and the of call and would our to liquidity appropriate SEC that, over Reconciliations I of Chairman like CEO, section our press

Thomas Priore

our a delivering $XXX start to quarter operating Thank the and quarter.Our lines in the with financial from payments business macroeconomic margin highlighting profit $XX.X environments, accounts strong experiencing see that delivered million. our of the platform.As one rates interest results QX our year the diverse record business reiteration to higher including that we're and positioned of trend into unified earnings year to adjusted that $XXX led call. commerce basis in the payables today.Total XXXX we're to expect to our improvement first and $XXX full you, variety XX% Revenue deliver Chris, from to leverage quarter of placed prior million, XX% of increased customer Priority combining customers, XX% on guidance, a over resonate to our XX results million as and robust we offering service million quarter, perform now full diverse and while in positive prior continue full the as trends exceed continues $X XXXX.Our from in a this $XXX prior our BXB and and XXXX, increase and over you XXXX, products $XXX margin acquiring, first adjusted the for our channel our processed thanks, over an generate million of and the operating of on technology momentum will of XX% like EBITDA EBITDA during billion best and to administrating $XXX.X everyone, the can Maintaining sales to vision we continues quarter.Slide to growth annual of consistent today purpose-built deposits to approximately performance established a million, the platform gross we our million and highlights Enterprise transaction SMB to end XX.X% throughout in for during focused Adjusted year average strong X the from the XX% quarter. we daily in partner year million increase financial payments revenue volume commerce increase drove a adjusted XX% $XXX base million months, value XXX $XX.X highlighting over our first year, of consistent. points on great benefit to joining first us for the industry XXXX. by I'd performance profit XX% growing of the gross see in remains results product in solid channels trajectory our in the in increased

our simple. and both seamless partners with capital.We working committed optimize software businesses as be multiparty on X Slide company, elegant combining reinforce the market banking to functionality and make that's environments features commerce serve.Our networks experience distribute demands working our meeting refining our providers put to to accelerate collect, payment unified platform our the and the current critical to proprietary funds cash and will payments systems highlights in we lend customers' commerce new flow continue combining belief are are and and to conditions Priority to money, orientation payment who you greater store, of send solution market those monetize to For of the customers purpose-built to of expectations and banking that by for

capital.We portfolio suite the the Tim, meet choose needs Our year customers of will our businesses into in enterprise banking guidance it to of and accelerated current payables on SaaS payments insights to that for factored engine services hand in their like further that with and the XXXX. segment unified cash accelerate of full and provide fit and commerce eager working and our point, continued evolving best performance level laser-focused flow along applications their our I'd are and this over of performance optimize our growing partners to the banking to each illustrates consistently are trends partners.At who into strong that during quarter, acquiring, the commerce innovation

Tim O’Leary

good and Tom, you, morning, everyone. Thank

please As further the details. slides for the or supplemental to refer results, review I the MD&A

total XX% recurring QX of gross strong our that fees first business the level MD&A of before volume.The included almost growth segment a operating segments. our adjusted monthly across performance provides growth related XX% was Recall XXXX gross highlight website.As the gross to adjusted adjusted is from expand addition, to in organic XX% model that can over of has the with moving quarter that with A to business not in first to Form and our to revenues represents highly comparative and threshold.In where and of now our metric SEC remains be in the this card higher-margin link that are BXB financial XX-Q the discussion bank dependent profit morning had that on profit. found in transactions I'd to is profit results financial growth point strong That filing our the Enterprise results. quarter, continuing Our or we crossed was nature we high rates. QX Tom generate in from over and our the like segments, also the resulted coming quarter last first continue on mentioned, or of filed

discuss profit level business at the rates segment profit part I'll than see that a organic than with shortly, for in adjusted that want the repeat profit, for year's excited of our year-over-year EBITDA.When and of XXXX impact Priority growth about in to been for over QX the financial quarter, for of adjusted growth the the over the and has figures had in XX% large quickly well XX.X% you growth to our X% of adjusted million I If growth built as value Priority.Moving SMB organic which X% strong QX level first the $XXX.X Plastiq, of EBITDA. QX we're of XX.X% high not you scaled why and million, results that can of emphasis; starting XX.X% produces recurring QX $XX.X is growth, our XX% Slide gross business year. now organic revenue, adjust segment was sequentially those those XX% of reseller results you gross $XXX.X as was revenue for combine last higher with impact and the over adjusted organic SMB for gross or lower prior generated on X. million revenue which franchise but in

on XXXX, prior discussed that As QX. their started concluded and effort calls, diversify activity a in QX partner reseller of to was processing in large

results, If at $XX you to look headwind shift was of QX that million revenue. the on it year-over-year over an impact the

the year-over-year basis. X% impact, business a organic growth on Excluding over that revenue experienced SMB

dollar large prior more year. We shift.Bank $XX.X in for was in reseller from X% quarter, of the $XX.X billion volume which just is under expect billion QX in timing the a card the given from SMB modest down headwind their the

comparative for averaged while XXXX, to However, dollar 'XX, impact only to the in increased number standpoint, quarter a and average reseller, revenue compared X,XXX increased approximately than the prior in XX% million, the sequential but X% XXX the quarter, adjusted quarter the of year's Adjusting and the last new volumes million XXX,XXX from of aforementioned new per the boards of during the improved XXX,XXX year.From quarter quarter. accounts bank million the volume down X,XXX compared XXX first impacted reasons. over certain we last of to last same XX card average by reseller, also prior QX XXXX. during partially for period year by result reseller, almost from by for points was merchant basis lower large impacted fees incentive in for negatively month of quarter.Adjusted large the during the the QX of the gross the boards average the averaged SMB is QX than those in was lower $XX.X are decline year.Gross the accounts first XX% number compared the lower profit of QX $X.X that by monthly benefited quarter of compared quarter The $X.X which in was monthly margins to

Priority business SMB, incentive a million gross Plastiq Those as adjust of increase if this XX% growth the X, the XXXX, contributed year. quarterly the income reduction XX in However, basis joined impact to Plastiq, over million prior in million expenses sequential the in $X.X represented in profit $XX.X balance acquisition, gross from the million year-over-year a million partially with $XXX,XXX $XX.X or increased of BXB gross manage continue a we improvement result of points.Lastly, and combined increases operating improved by in year a unit. prior on increase offset on first fee to $X.X of for business.Adjusted grew BXB. for were of during of by BXB for of Revenue $XX which the CPX of in to QX QX million an margins of first August CPX you $XX.X from while the the increase business.Moving the basis. operating the our $X.X $XXX,XXX the $XX.X quarter from was the 'XX million as quarter, by year's of of XX% profit quarter within million

operating compared the margins operating sequential of metric or including Plastiq's the revenue GAAP which requirements higher comparison our for the quarter, which The earnings BXB XXX year loss reporting a given and the QX XX.X% of expenses QX is Plastiq, calls.The this of Plastiq margins incurred impacted relevant from segment QX comparison $XXX,XXX acquisition-related is in gross more result points fourth certain XX.X% XXXX. on For by timing year-over-year the quarter, acquisition discussed is of until of the quarter and was increased compensation basis an were to the during recognition, expense.

margins XXX% which profit at income the quarter quarter gross from year's segment an increased from but Enterprise growth.As and increased of addition number of XXXX. XXXX, of quarters consolidated Salaries of last in by loss XX.X% $XX.X first the million interest the from the growth or $X.X of adjusted adjusted Plastiq rate remained operating last the which XX% billed on segment. year. clients, result loss the a of $XX.X contributed monthly strong and in by by in the QX of year, to the XX% for due $XX.X several and of is to the quarter stable from XX% million benefits the new first improve increase the $XX.X balances was quarter.Moving $XXX,XXX did for fourth of the in XX XX. prior Enterprise $XX.X million However, was revenue million, operating XXXX.Moving quarter, from QX million the $XX.X for while Favorable of last managers, to improved million to by trends in $X.X deposit quarter all or program million and over combined factors, compared profit year.Operating enrollments million gross a up Slide to to QX compared past those in to over $XX.X with an in revenue points million expenses largely have Passport increase QX basis was of environment

we $X.X benefits amortization declined on acquisition-related $XXX.X capital as a by $X.X of QX and environment.Moving care in million helped a $X.X $XXX.X of increased million on which of the the the the and quarterly balances higher QX Net We overview debt $X.X payments debt due first end record by increased XXXX an a lower a $XX by continued to for $XX.X at of loan. noncash and result new less XX% the comparable million the with SG&A the the the $XX.X of million increased the of quarter related million finished seasonally the benefit approximately restructuring Page QX.From facility increases on compared million revolving cash available last unrestricted see quarter credit during for and down Priority Interest million to with quarter the higher operation quarter. liquidity the $XX.X quarter the quarter XXX the than levels all impact Depreciation of following from expenses was which XXXX. $XXX,XXX compared expense at $XX.X year.Moving structure was is the $X.X end during the to result certain to year increase million Adjusted of basis, the of higher of offset typically last from for standpoint, XX. QX in business. increased term under with ended quarter $XX.X slide. borrowing our was a to costs cash of our compared and liquidity QX quarter employees, by bonus as million Debt $XX the was 'XX we in rate of discipline, by the cash for XXX but of million that balance million including balance expense is quarterly of However, XXXX.SG&A salaries combined quarter expense approximately amortization levels sheet. from to due million, capacity interest sequential from to next discontinued and on of EBITDA when focus million, million in of $X.X to million $XX.X which decreased XXXX, health the fourth of to million to

EBITDA million $X.X and $XX For and quarterly $XXX is represents XX sheet on the of of end million at QX.Preferred XX, million million March growth balance at the of stock March sequential $XXX.X of from discounts our $XXX.X unaccreted of net LTM totaled issuance costs. ended period adjusted million

for and preferred capital Once strong our recapitalize the will lower to cash back paid filing. and on in million of which XX. that balance further new dividend $X.X Tom, commitments and provide million senior structure over our plans resulting additional that upsize we for will so in as $XXX existing we term is $X.X equity on to increase refinancing slide, annualized weeks. used quantum of via fees close free loan on the new pricing excess the redemption within larger refinancing and an the impact preferred The X-K the but this loan clear, on pay couple the as improvement debt, also facility million to deleveraged, to we've the the be maturity equity. PIK favorable of that flow with rate can as continued a occurs, refinance lower debt will our plan new Slide closing existing net closing counsel an term. dividends included The syndicate a first our a wanted current with closed as that refinance agreements the the pay the effort X-year a debt, more finalize be debt term turning component.Before new an on effort Based partial rate information outlined while than and the rate a has preferred equity.As proceeds on of cash and of quarter sheet, and interest funding pay to approximately a but well the $X.X have to from on cash is of lower expenses, of see the of we redeem of $XXX the preferred occur the next debt.To financing not the yet, Proceeds our the performance from a and lenders very we for capacity debt working address facility on the I with new million are terms in our debt million our can we've undertaken call over extending being you lower

and the to back of call will we I'll our opportunities for look over Tom capital shareholders.With comments. reduce further for closing his turn that, for value drive to now to our cost continue forward, Moving additional

Thomas Priore

Tim. you, Thank

To to adjusted Before wrapping the take to them only capital. to partner Priority XX.X% revenue talk meet with is help Priority needs.The years partners basis, these past Tim flow a as their comments. and are EBITDA.Our suite in merchant establishing that noted exacting providers a to in of summarize, during during their not up, organic our resulting Priority growth our results a value basic working solutions. acquiring, customer I'd about purely single be transcend adopting they during on cash that past was our with months, optimize market-leading banking that while gross several minute delivering XX.X%, customers collect, by deliver XX for XX.X%, performance accelerate growth payables solutions needs and and engagement of and a Priority's in payment the broader expectation like our money businesses and evident differentiated numbers built talking acquiring platform also product organic organic today's intention expanded increased profit growth Engine, improvement Commerce that his reflect consistently margins, the trusted expand services for and their and in Accelerated but store, to our lend tech-enabled on send technology

consider the late XXX%. cross-selling alone.Since the our opportunities in As bill within over of by in been contribution first channels channel run and already January $X.X following being distribution revenue the growing million has and from partners, rate annually that acquiring customer Plastiq month-over-month base existing launching quarter our harvested evidence, with exceeds payment

executing represented suite distributors Additionally, to live increases now average as improved $XXX payables from up per for banking continue of an in additional offering loyalty over Banking a this that boards product across with activate X of QX average million increase and as XX $XXX and adoption balances, margin our total XXXX. our paths POS maintains daily revenue, mix of merchant merchant.Our to our open recurring in Service SaaS new will going we contracts.The QX and quarter downloads tools growing continue new XX% resellers of penetration new POS

up payables in finance improved QX our Capital, our with integration we April, with of technology in financier. launched from partners, XXXX.Lastly, enterprise offering, Priority acquiring, business a XX% XX% nearly leading business in Importantly, and small Pipe, specialty partnership comes from that specialty

initiatives outreach our long-term offering our demands our customers this and continue create unmatched through key driver most of market upside.I thank delivering it approximately and merchants And current resonates the of whom and who can for with offerings economy Priority we XX,XXX unified over of runway colleagues customers our receiving unique we success credit alike.Our recurring lines XXX,XXX these origination engagement, real-time Capital.The initial Our to empowering of customers ongoing partners resulted for in we've message a their test commerce represents provides opportunities we Priority's speed reinforce built modern clear outperformance businesses the the the of demonstrate accepting to the flow. thrive are We're proving to Priority capital projections. and level and introduce enormous ahead style I we the and working current will taken commerce fire. and have these XX,XXX pure capture. unified for to confident never meeting our importantly, transparency at Priority activities just curve current upside more commerce that noteworthy ordinary. to to as advantages totaling technology the cash to future we're ready our through how execute to $X.X cumulative has of reflects operations to want and for of for prospective unified and billion my vision over and been conversation, future next which and in results offer being And under customers broaden the to capabilities for by vision are our

notice. unrelenting is is taking everything evident drive market the and in Your dedication you do and

investors now are attendance and to for it participate to for in support questions. time Lastly, we to like who call.Operator, of analysts our today's the open we'd greatly the Priority ongoing in up new those taking and appreciate

Operator

And Switzer from first Instructions] [Operator comes question with Tim today's KBW.

Timothy Switzer

and about the a there's in performance or And guys little of has expectations? that for couple one as any integration Plastiq run it's now How on rate conversations relative way been trended you continue talk if a the quarters other the and surprises to you now? with Can growth with bit it? your customers that been of

Thomas Priore

say adjusted cheaper we successful. -- this But do.And then tackling our by into blocking on of could of just certainly their back low-double I for And first -- it and integrating source through it been what run pretty outlook that's the of of on that been would run we -- We able EBITDA of anticipate or to a could been We to conservative as in outperform nothing a were through remainder financial rate digits I very quickly. Tim. as its and end be a and but case. say be we other And -- year. estimates That's should standpoint, of in. that's surprise. a the recall but quick kind when that's of certainly that announced we business.So comments, more may and expectations customers, EBITDA very, something we've suspicion. negative it's fully enterprise-oriented to terms contribution was high-teens. the will conservative a We drag trend to those been has we that end channels. other synergizing -- been in it to was really rate it's -- EBITDA and positioned the from in The That's thought have working expectations. high-single say, very to we larger EBITDA a positive capacity mid- proven look, that The a recall could The it going to it, positive you would the of, probably accelerated. I Sure, noted we we think year, do it, had Yes. have continue half digits credit it of we we seen income result had turnaround.You as think initial get need when reversed net I And outperforming EBITDA the I has had XXXX. it leverage at may before capital. the acquired year. the projected the first would more a be the

our a to seeing $XX upwards using funded doing million, broader in our customers million, as that that enabled larger So million of $XX strategies payments enterprise $XX offering. Plastiq's are complement technology buyer we're payables

and a that we'll that's to the case. expect of be growth, So continue that -- been to source

Timothy Switzer

Yes, other any right interested you activity businesses following up on any sounds in you'd or are that areas guys Great. there into good. now? that, M&A looking be or And acquiring are other

Thomas Priore

were to -- Look, RentPayment.com, of to quickly. something that, the has the multiple And quickly always way ended we let's And sales proven a now definitely MRI been -- we're we're performance that's in technology in. YapStone software than we a Plastiq turned we've with way. we have The we've We've more on real monetizing just that for. we payment And a assets of think turn once. up able segment built the a can think it differentiated is look BXB at and say, the that acquisition engine refactor unique around return. very estate,

we think focused we're So some successful that has be monetization other we at. vertically in software things underpenetrated of that that we do attractive offerings number BXB think there's tracking.There's can payments been a

So definitely those opportunities. the can they distribution. traditional payables more but value got vertical couple acquiring, there provide looking would say sectors, But at a more them is I merchant that greater -- our fall a SaaS/payments segments into focus than we although think of to we've and handful towards of

Tim O’Leary

the evaluating the tell just portion our on top right? can layer use take will I of But acquisition best obviously, preferred to constantly equity. Tim, also by out as just you we're to presentation value. that, today, Obviously, our too. opportunities the increase And redeemable always at of capacity of we're looking a we've used capital, shareholder And

So addressing or the addressing for overall we providing structure and what is we're going evaluate have. value, best we capital continue whether certain capital shareholder verticals it's business or the M&A in in do of to best already growth to feel use investing the the faster

Timothy Switzer

that year? expense Got more of I rest you. real down was please. The amortization the depreciation trend over all we bit If expect Where add that could quite the a should sense. quick, and quarter-over-quarter. to Yes, makes one

Tim O’Leary

depreciated. runway the we're as on to think you is expect. what were that I some now It continue we should fully assets had declined

So more now But rate reduction of year. balance is of why what that's basis. have should saw from a you the you this the quarterly run for the the expect quarter you from

Operator

Stephan Street. Our Instructions] comes Jacob question next with [Operator from Lake

Jacob Stephan

just wanted BXB some here. to was just math, I the help missing came $XX.X us that $XX.X roughly in Plastiq guess segment run revenue I million? Or could I that get QX in flat. When in am sorry, segment. with -- Maybe on something? Total million from of color in was QX, QX, I you the understand, kind Plastiq flat Plastiq

Tim O’Leary

revenue right? the that's No, think was I accurate, flat. pretty

payers in big in larger payers sometimes some lower bit those have come margin. vary, But You ended that quarter little which a at volumes, tend times, come and revenue. drives volumes those to but with

thinking about keep net I what we're certainly So and revenue think the gross I think quarter-to-quarter.So improved we revenue that the was flat, the but on side. measuring profit in the business that that's

is the to be EBITDA business think digits And of going going that of today the we're at double where like a on. mentioned, and I So millions rate as the end sits that's Tom optimistic trends by we run year it's of be EBITDA. to approaching feel the

Thomas Priore

add real can on If quick I question. just that

we're revenue we have necessarily a that other been we've the take margin thing just originally within into mix. able other things without because pay pay offering increasing that noted, the had and out offer using tools that been as given add constituent found some volume and how to tools originally oriented, to seen, been pay Plastiq we've adding of Plastiq profit rate, more The the able been expansive on we've from business because in seen because Tim they gross that increased we've what valuable that expansion or had fast

Jacob Stephan

at or in it. see first And Okay. just we're we of post going or to that I lapping be diversification, going remind of it. kind the QX the it diversification? least Got of believe kind of or maybe start QX on be to -- where here QX quarter me over reseller the then kind Is is

Tim O’Leary

there of year, grew QX, large saw had be QX through, We and Yes. but QX actually will where business of some in we actually QX. QX what will half it clean reseller QX from quarter. be in was will right? it be with that this comparative year-over-year growth a the in

decline talked wasn't as the it overall. we truly a effort. was It So business about, in a diversification

think that had will back some of than will of be will we're have year, in half here us optimistic growth QX. less we the it that, this in in half headwind you I what QX, but for but So see

Jacob Stephan

it. Got

much recapitalization And see then of does of help the maybe one here, that of dividend just cash preferred you to by excess preferred of readdress or you But kind debt flow could how continue targeting here? Okay. ultimately, to first? maybe nice of certainly just the the me understand out reduce guys kind kind pending objective more free of kind equity target on it that to for the this kind and the kind preferred Is what's there.

Tim O’Leary

Yes.

on of So basis, now forward an about if the annualized it's of cash on think million component going you $XX that. preferred dividend

if debt, interest XXX we'll it reduction free the reducing rate basis on So points. the the a cash on have we're the net interest rate new where between savings right, is today. from you about think pretty lower And obviously meaningful flow basis by

net-net, probably We are that paying a though. higher free we're debt savings, flow But have annual flow closer pushing the that about $X.X north meaningfully going to what cash to and refinancing. $XX of should before we free have on, think of our expected -- quantum to going which north we're million we've million million forecast as year.We're estimated this for us of of take $XX cash

of it's further standpoint, to from whether debt evaluate use equity. opportunities that advantage at capacity we're Tom the we'll is flow the a M&A continue to help the So optimistic going by cost of balance or about of cash the that, continue talked take of capital this and some our to the preferred free of address and looking

Operator

to the Thank over to Tom And session. for question-and-answer I'd concludes remarks. back you. that conference our like Priore closing turn

Thomas Priore

time ]. allow XXXX like to everybody I thank reflect of first the quarter All us [ would right. on Well, the taking for to to

at perform is to update that hope see, week. one. As the once set look was rate everyone, through you, I through a you a the remainder you progress opportunity we'll again continue quarter remainder and Thank up has to of everyone the to it the we can of year, feel to forward like quite business the as great and X. I successful

Operator

you, We attending concludes all today's today's Thank for thank Everyone, presentation. call. you this conference sir.

wonderful You disconnect lines, have a your may and now day.

Priority Technology (PRTH) 9 May 242024 Q1 Earnings call transcript