PRTH - Earnings call transcript Q2 2024 | Priority Technology Holdings, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and welcome to the Priority Technology Holdings Second Quarter 2024 Earnings Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Chris Kettmann. Please go ahead.

Chris Kettmann

Good morning, and thank you for joining us. Tom Holdings; and Financial and are of Executive Officer. today Technology Priority Tim me Priore, Chief Chairman Officer With O'Leary, Chief

future all actual involve The a Before like of our result forward-looking risks today events or remarks, statements. update prepared that number differ include participants may the statements, materially of uncertainties revise a new a discussion you risk information, remind our and otherwise. no cause the will obligation to filings. encourage which giving detailed or comments to that whether company forward-looking statements, I forward-looking review provide undertakes and our SEC results We various our as these we to to of would factors filings, in from

measures, appropriate may performance but be measures and of Reconciliations refer to, EBITDA the non-GAAP Investors the the EBITDA non-GAAP found our of filings our our release we section website. to limited GAAP to adjusted measures and not during SEC call. press available can in in liquidity including and Additionally,

over With call to would our Chairman Priore. like turn the CEO, that, and I Tom to

Thomas Priore

broader today earnings Thank us for XXXX important within Tim then for provide you, update everyone like will trends an enterprise. call. the continue the highlighting each joining on I'd developments throughout and to quarter second Chris, Priority, and positive our thanks segment start we by see to to and and I

quarter. we positive payables we the solutions results in segments, year, record SMB delivered to platform payments our dedicated saw commerce across second partner this release, leading the reported customer on BXB success. product financial delivers service our start and you committed As that capitalizing Building saw again press enterprise the our elegant acquiring, that on in quarter, in by exceptional in second the and morning's results we is unified momentum to

by platform, ond rates elevated on our the were banking to of the Our historically customers, performance with we're combining and lines the payments macroeconomic of that single unified commerce today. variety a experiencing interest diverse vision business and continues accelerated functionality positioned strength from a including environment, to resonate benefit of

Total accounts commerce operating platform customer on exceed million. $X our

$XXX XX while volume annual process administrating in transaction over billion billion months, quarter. in deposits average during the prior nearly $X during we As the daily

performance points increased Slide of year from million the by X of improvement improving EBITDA million consistent $XX.X XX increased prior and basis a second gross highlights the $XX.X to This in XX.X% profit to a $XXX.X adjusted adjusted our from led quarter, the Revenue to financial over quarter. XX% of prior organization. margin operating increase XX% Adjusted highlighting our year. leverage in million. profit XX% gross and during strong

and EBITDA our speak increase greater to line XX.X% adjusted are posting XX.X% his Encouragingly, equally top of remarks. a line growth during in in revenue detail which QX, of improvement purely strong, organic trends bottom Tim will during

business the can we from EBITDA channels you the growth our will year trends margin combined QX our full and results, expect strong As robust that increase with guidance, continue our of deliver in to XXXX. full million million, $XXX XXXX, million approximately XX% an $XXX revenue generate XX% year and a of million, to year $XXX to EBITDA of to increase increase $XXX of adjusted XX% full over over see

at with that Our million, to revenue drove XX% performance million. to XX% guidance expansion improvement organic Year-to-date to consistent adjusted and XX% EBITDA growth $XXX.X adjusted X, year-to-date revenue growth is is QX informed reflecting profit EBITDA by $XX.X Slide growth on and gross highlighted growth. XX% our in XX% million $XXX.X

offering, strong our channels and see remain Our product growing our partner with sales base consistent continues in value technology performance. to diverse and

collect, store, commerce we monetize of you who unified payments platform, orientation Slide send the built of networks to combining and X company, the highlights Now the serve. lend our market to money, commerce proprietary functionality are for those and to it's elegant new banking purpose

our market belief facilitating flow as current payment to demands environments on providers conditions and optimize businesses payments and multiparty and customers be that put Our software capital. distribute banking systems greater will and critical reinforce funds accelerate solution solutions in cash working to

We where to our and they meeting remain Priority to experience partners are the easy. our make by committed customers refining for seamless with working

optimize partners fit and applications unified Our banking their financial cash best businesses flow consistently commerce capital. performance demonstrates to that payables and and that the our acquiring working accelerate choose

focused of commerce to growing We accelerated engine needs banking eager customers continued payments enterprise suite the meet our innovation and are are the of evolving of our partners. and and powered that on Priority's of incredibly services by SaaS are portfolio

provide At on our strong performance I'd guidance will this point, who to with level the our current it in factored into confidence each, further Tim, over segment hand into the that deliver to during trends year quarter, insights our XXXX. like full along to for

Tim O’Leary

Thank morning, you, good and Tom, everyone.

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

second Form included on Our MD&A this also of is link be XX-Q website. our a morning the our was filed A results. that discussion the to with quarter comparative provides found that and can SEC in filing

our of first with on of or adjusted second with continued our with model bank card also fees strong I'd that by our in to higher-margin our business gross which highlight growth dependent The highly organic and the our not in financial XX% segments. volume. revenues diverse the profit almost continue was many in competitors. to of QX countercyclical coming nature transactions monthly Consistent outperform or compared also rates, quarter, are remains the business from industry strong growth segments, recurring quarter performance driven operating mix along

gross our reseller of well the prior easily growth of in understand as was a of rates year-over-year financial results industry-leading Priority. for last a profit, business with growth has believe adjusted Plastiq, of gross in those excited Priority produces that impact the QX about revenue, organic recurring year, adjusted If can for profit at we're XX.X% the value XX.X% and QX not level for calls, you EBITDA. and combine impact When you that of part been why we our which built on the discussed adjust as XX.X% business we've for scaled of that organic for you had large high

to minute discuss the financial revenue, provided I gross and level moving for a a in at profit and income segment take to segment Historically, reporting our metrics the change forward. we Before to results, want quarter level. going this adjusted operating

want gross today's note our the change possible instead profit, results. business greatest still you'll ensure the that and of because in EBITDA now operating core made As we provide transparency to evolve, the but segment this presentation, at revenue continues adjusted report into income. We've adjusted we level to and

unified In engine shared allocation that with across the model in less certain payments infrastructure, services continue and our our to regard, we identifiable. as along a operating technology becomes implement single business, managing of a costs commerce operating

report costs earnings for segment costs only to with quarterly on will each in quarter current those historical release you comparable We've having impact compare to a results corporate, results. we its direct in adjusted EBITDA help the results reconciliations So an included basis. on

X.X% quarter. generated Slide year SMB I'll million, results is on $XXX.X With for move the segment now that prior the million segment second revenue which higher QX of or SMB $X.X to X. level the than explanation,

XX.X% And comparative year. this large headwind prior of is ended The that which this concluded basis. just revenue calls, partner from effort discussed year-over-year and organic that QX. last impact diversify a reseller down in SMB to As XXXX activity was $XX a a processing in a from million their future impacts do on million of on $X quarter this started in saw the QX of of impact year-over-year We excluding the that we quarter, over not reselling revenue, experienced growth expect business on basis. and its QX

Bankcard volume which quarter, the $XX.X $XX.X the quarter year. was from in SMB dollar comparable X.X% last increased billion for in billion

organic the sales to new for additional you prior Bankcard an segment, the the compared dollar From X% impact in quarter increased if point, the in year. to adjust the As reseller, the in during SMB emphasize aforementioned of year. boards of accounts volume strength is quarter, this a than the quarter, monthly we XXX,XXX average X,XXX averaged merchant the standpoint, consistent XXX,XXX of last of the quarter averaged year, QX during comparable while with higher which

year. second increase but is X% $X.X in but last in was up the or from down year's quarter, second quarter SMB QX profit the XX were sequentially from a QX which quarter. of of quarter basis in XX.X% XX.X% XX% this Gross of year's gross Adjusted $XX.X million this million, second margins from points from up for year. last over

of flow-through year was manage adjusted quarterly adjusted our $X.X SMB, $XX.X or EBITDA the of prior EBITDA. operating adjusted results for XX.X% a QX in continue business, million is within second as sequentially up which profit quarter gross slightly up we and year of from Lastly, strong million to expenses to this from incremental

an of the in QX the by CPX growth in by prior from Revenue as offset of from year-over-year million BXB. increases Priority in for business. basis. unit. Moving result of in a Plastiq partially million the were quarter, $XX.X of year, $X.X the contributed during year. to Those was on $XX.X the million increase or last while million million increase of a grew joined XX% Plastiq, of $XX.X which the profit QX to XX% BXB CPX profit the a Adjusted in million $XXX,XXX business combined over reduction $X.X BXB with acquisition, of remainder gross increased gross $X.X

quarter X.X% incentive or of to of and of XX% The gross and QX a lower did QX quarter, a timing QX. margins the the benefit margins through the flowed which high lower business were XXXX. changes this fees at For in result margin not of in comparative have first in year, a XX.X% in compared in mix of were certain

metric impacted calls. this timing prior which is the and of the was As a discussed Plastiq year-over-year requirements comparison of a revenue sequential recognition year, acquisition in margins the Plastiq's earnings until for QX GAAP given comparison reporting is the relevant of more by reminder,

year-over-year The million in XX% the adjusted $XXX,XXX in related BXB also EBITDA. year. QX basis, quarter included Plastiq, EBITDA segment to had last of a in growth compared to but of largely On growth was CPX's adjusted the $X.X

of the was to Passport combined revenue the balances deposit stable number new program the monthly or revenue the Enterprise contributed managers, and year. prior all XX.X% several Moving growth. environment, in enrollments Favorable past an growth million in and increase rate segment. to interest $XX.X and billed the trends clients, quarters QX with an $XX.X million in of of strong $XX.X in from from million increase

reminder, is should a segment economy of the a portions us to the aspect up more having benefit end continue if does a to there of Enterprise that landing. As countercyclical hard

is As of the the second the $XX.X in profit in up quarter $XX.X segment gross strong the million, XX% quarter. last the EBITDA for for were adjusted in margins from XXXX. which to adjusted gross year's of XX% while to increased XX.X% was Enterprise XX.X% a second profit $XX.X revenue compared growth, result by quarter million, quarter Adjusted million

Moving $X expenses. to benefits largely which was in QX consolidated of and of addition by operating QX Plastiq to the million or Salaries year, XXXX. due to of compared increased $XX.X million of last XX%

continued basis, end of the finished However, We discipline. of on of QX approximately quarterly last XXXX benefits year. a to quarter with is at employees, due salary QX remained and focus which sequential XXX the compared on expense flat XXX XXX end the to and our approximately at

is of than in year. from QX by for in by with of for and and million is of from million of $XXX,XXX balance last quarter this with million quarter this but our consistent SG&A year. million 'XX, to $XX.X of quarterly flat increased in $X.X this expectations QX of the less million year. the the comparable first was amortization $XX.X the and Depreciation D&A $XX $XX.X year relatively a decreased

Interest this a with debt this increased closed QX million million for is slide. in another of the QX EBITDA record we increases and XXXX last quarter combined the of broader of XXXX the for expense million sequential an the of next million, for XX% of from QX was result new as Adjusted during increase levels which an from quarter $XX.X increase $XX.X was million to almost XX% $XX.X Priority, year. of year. in Moving recapitalization quarterly acquisition-related from year, of and QX $XX.X $X.X in QX

upsized and redemption of our on a $XXX including basis QX facilities our also the XX the XXX stock. dividends. loan, $XXX from for The an pay that million than new proceeds previous revolving rate. consist term and million and As debt, loan our but related million Page facilities stock, facility credit with a is seen new redeem on excess our $X.X pricing accrued preferred the points favorable the prior used debt and during were and used unpaid discussed partial senior of term million fees the the $XX credit earnings to Proceeds expenses preferred lower refinance call, we of on credit of with quarter refinanced more terms

a The cash over in net as rate pay stock free on preferred interest impact improvement, we results rate the in shareholders. and a lower pay on annualized related of reduction on the increase flow stock the common cash lower results net larger million quantum that the debt. $X refinancing available the on debt, to but dividends in of preferred annualized of lowered $XX million income in the a dividends Further,

we move back capital and to will structure we ways As seeking cost further the of half our our capital. optimize through of balance to the year, while evaluate continue sheet

of borrowing the capacity unrestricted our quarter standpoint, available liquidity revolving under sheet. facility million we on cash and credit a From ended the $XX.X all new million balance $XX with of

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

second of $X.X million and included $X.X component. paid preferred of in cash dividend The a $X.X quarter PIK million million

important accrued $X.X closed mentioned million May refinancing the of conjunction It's in the the and I dividend with paid note was mid-quarter. that As refinancing. earlier, to

be on based QX, go-forward stock on closer amount preferred will from dividend PIK $X.X component. the in the million So with the of lower increases there to

our to turning financial the his over for for year. call to further back Tom full Before address comments, closing I'd guidance the like revised

the have established our revenue adjusted our call and we remarks, of in in of that the guidance this year opening narrowed his in to full end profit noted range Tom we low year. March As originally earnings

guidance a to EBITDA However, of we million. $XXX adjusted range million are our to new raising $XXX

we'll sure we half figure quick math first I'm has the just guidance. if repeat in out EBITDA year everyone QX, new the QX the already adjusted meet that done to of the and

there QX in operating increased result a However, that in are will couple of QX. expenses factors and

an First, second the float the accelerated of at we filer on public based our end became quarter calculation.

expenses to compliance. incur related SOX we will increased XXX So

addition, In minimal cash platforms which certain migrate the but on to we net CapEx to flow. continue our impact will will cloud items OpEx, to certain have convert

generating year accelerate our in and pressure both some aren't back which EBITDA, will expenses an range combined for Those why this maintain and we the discipline revised to guidance. to continue from be are a gross apply higher is To though, to the you half flow-through high year full bottom line. profit of going seeing expense clear, adjusted to our even focus on

closing turn now his back Tom call I'll that, the With over to for comments.

Thomas Priore

you, Thank Tim.

payables combining and banking a and focus delivered on to an purpose the intention more that Now was Priority lines, payments to a countercyclical to of year acquisition several minute our to accelerating infrastructure, where did highlight through a halfway journey. single acquiring, elegantly over investment our in like done Everything we're experience the platform. our its from commerce, with our with year, I'd in and on customers a little is past banking building unified business years, Plastiq our we take provide ago, than to solutions

that Our forward-looking with that execute financial and with we've operating results continued a vision exceptional constituents the resonates demonstrate consistency serve. we to and

service organic margins and but Our several delivering growth working have for on is our cash when our numbers tool capabilities set a our outpaced not style that optimize also our customers peers meaningfully in promise partners. of tech-enabled success financial of engagement now, to evident, is only of The that and and flow the our talking improving partners. quarters and can capital platform for accelerate

up suite smoothly of within delivers adopted some grown offer which volumes payment that partners, advantage Since of XXX%. our in networks. rate continue January a late banking having bill platform our our payments Plastiq launching be solutions, the pick embedded by processing with quarter-over-quarter of examples can customer and elegantly current me Let unique run acquiring steam to

to with contracts And across processing continue distributors, approximately QX activity. our the new XX XX% new new executing downloads we during Additionally, represent suite continue total quarter. resellers POS of to activate

additional our merchant. mix to SaaS improve payables for growing loyalty increase that the per increased revenue, margin of of banking continue open POS tools And penetration our paths merchant product and will recurring adoption and

average solutions our previously over As balances. now in maintains daily mentioned, banking suite $X billion

have and unifying execute operations our acquiring business unified to driven segments, which XX% commerce our technology approximately Importantly, been service growth of enterprise vision across shared our and quarter-over-quarter XX% number by payables the delivered account holders. in

credit PIK. our our And that with you we partners beta million line offering capital April, priority of grown lastly, working period in from our $XXX,XXX as may during at to X. quarter recall, total Since time, advances QX nearly have capital $X in launched

positioned well cumulative Merchant to are these banking customers upside advance we solutions solutions initiatives acquiring to within accelerate request success their funds into integrated our out The from roll directly capital Passport account. receive their of for streamlined represent to then app, and working Our those more as or projections. MX ongoing continued

reinforce Priority's that current mission are customers executing of accelerate these offer the to with for resonates I conversation delivering on operations optimize flow businesses. alike. message ecosystem we to technology consistently We're built and capital broaden commerce unified and and deliver the for and thriving future successes it to this our working prospective cash financial solutions and as that

our Before unified continue who industry-leading for every colleagues to at our wrapping of offering to Priority conversation all up, day. execute striving want thank my and to I enhance

a partner everything they dedication with is that continued Your made to providing right reminder Priority. our you to the customers improvement do, clear constant choice in

for of we the call. for ongoing are our who to on Priority participate those Lastly, investors new and the time today's taking support analysts, and to greatly attendance appreciate in

Operator, open like to questions. we'd for now call the

Operator

with Switzer Tim Our first comes [Operator from KBW. Instructions] question

Timothy Switzer

real was in believe touch accomplished of on May. we that Can I quick? most the recapitalization

I QX rate impact, was the results. don't believe, run So in full

last and impact you think said million $X.X around still the I what number? QX. right if in remember be what's quarter, to So that preferred QX? the dividend I guys the would incremental Is

Tim O’Leary

it this on running total $X based It a obviously, quarter $X.X and million is. we're million Yes, a the $X.X million calling a over basis, cash. we about PIK go-forward billion other final so component will point But grow And I dividend, that's time. is on balance be that think should then or at preferred $X.X the pref. PIK the on of

Timothy Switzer

could Okay. you expense talk then Perfect. about outlook. And the guys

Should due QX? XXXX? the that? an to acceleration back acceleration half there those mentioned year. continued should in in and What's top even this few be QX mean we You on does more And items then of would please. be what different Just the pace Should like a it like -- there, investments of expect? it some for color of that would look

Tim O’Leary

Sure. Yes.

that it heavier year, split timing spread QX, of balance the of QX, And the about then next as given right? with We're XX-XX think SOX be costs just XX think of relatively next normalize, a I going not should QX the further some of of evenly process and acceleration year. some aspects to you there audit will see into those between it. a maybe towards going and

Timothy Switzer

Great.

I That's If get hear. more, too. can to one Okay. good

that just if of other? or mentioned to Enterprise impact the expect and kind how would one of of rates way of then bit factor to You what environment. the kind a business little at had all the And the the an business company But rest interest slowdown? into economic broadly is we macro the do a countercyclical you

Tim O’Leary

can Maybe in reverse. I I'll answer Yes, those. go

debt so portion the on investments, funds we the the rates, And obviously, obviously, interest So with expense cash income on largely permissible one Fed well the think roughly those flip at have of balances on the then interest into as if are earning or as preferred we putting rates. side type have side, you dividend. in which we benefit the about

almost you right perfectly now. at If balances, look those hedged we're

the free rates, in So if what there's decrease in on depending the balance the there's flow. a of on year, Fed X does impact almost cash

last year, about But basis softness, hard on the start broadly, EBITDA points you within we're with economy reselling continue this we're good the that I every impact some X if impact the hedged there. $XXX,XXX with side, to high think our the retention a seen And year, a you of next sales. into some think see our but roughly given impact we're some rate environment rates on as There's to there because going very then SMB is and retention from debt continuing again, landing maintaining like a cuts. quarter to grow decline we'll candidly, to see may feel impact flow, existing able we XX cash and broader side rates and to merchants. to and for partners, more I offset We've see macro same-store maintain year

those think what But from we you have and can we as rates same-store very seen steady levels. some maintained But control, sales. about retention our have impact

impact but next year, think So grow that to could have that. through I we'll another continue

Thomas Priore

point you want a just One other at. take to peek may

If look the relative at our you segment then in see and go at growth share Visa we're across volume the acquiring look to and total MasterCard market growth, volume. winning you'll volume

some new So tool of we're if -- can we now, we set the out given in share there, hospitality, to it offset course, in salon, spending, market in recessionary some to emerge. pretty construction, would, continue softness the across were optimistic in of grow which potential the we segments feel rolling

Operator

Jacob from next the Lake Street. with Stephen question comes And

Jacob Stephan

you of gross business so referenced of profit is recurring or out. we sources. can driving piece quarter. between really those could profit if dependencies from just sources growth. could understand -- XX% you of being out the kind guys Maybe non-transaction on help us or the gross Congrats Obviously, just your kind of if Maybe recurring kind of help nontransaction-dependent adjusted the piece us forces behind you

Tim O’Leary

and our transaction reoccurring, right, that's that but revenue have, a right? profit right, in and Bankcard we is numbers dependent. monthly dependent or obviously, not fees what to aspect the volume, So not and do recurring about quoted, you Jacob. so are earn it's that recurring we we split, I Sure. consider have basis, volumes, monthly regular within volume those fees going to Yes, gross on subscription transaction if think be Happy our right, that, there the we

We then have we other merchants generate the the on monthly well or income dependent. not a within transaction basis have the enterprise permissible investments, And as we that on and that's volume segment. resellers as fees from

of way revenue of are So the as the number deploy earn and aspects different we subscription-like we that there's that, across think the a you business. about very software

Jacob Stephan

Got it. guys into it's And then since factoring Okay. see do half of of the you That's with curious, Plastiq. any helpful. a over obviously, year back the I'm year just acquired here kind seasonality you the Plastiq?

Tim O’Leary

Not as much seasonality.

what -- much meaningful continue you Plastiq That is scale some do you of think a think customers come bit But larger little those some customers And product it's that's as may as contribute timing -- to I little see much and differences enterprise that the obviously those types through contribute larger from predict. offering volume come to I to to of margin have lower customers. expect to quarter-to-quarter, to But those given seasonality with in there's the customers. year. volume. use as maybe harder at some a and back the continue not half of we some the tends of

Jacob Stephan

see Okay. sheet QX And here. on the obviously, to progress in balance nice the

you're the I'm remaining. quite take million You $XXX of preferred, enough the isn't of but But the about and out how cash curious majority $XX million balance kind of the revolver, remaining preferred? took the obviously, revolver thinking out to

Tim O’Leary

it's at below equities this quarter. grow in closed other about look at we investing uses the of to obviously, the look also the at did When end Yes. capital, to sheet. we're balance inorganically capital. We'll or X.XX at of whether of and organically. use leverage, business we roughly recapitalization, acquisitions already preferred lot X.Xx We'll the down different we a to continue of thinking grow the And evaluate

So with we've of already turn deleveraging just intra-quarter a seen quarter EBITDA growth.

closer down just the the from pay you guidance balance you take and be to leverage. assume if of the of assume midpoint year Xx $X year, you'll another just and of here bit numbers we end the EBITDA If the a the to for don't

start figure can address do capacity math to you you to sheet. balance the of So have the the out the rest to

Operator

session. would This to to I any for concludes turn remarks. closing question-and-answer Priore conference over Tom the back our like

Thomas Priore

All right. Well, you. thank

First platform questions. of just the is think, Priority executing. of want express And a of building for in we'll the we're some And interest thanks and attending your call get appreciation future for our back all, the and for, commerce. everyone we to to

your time. the Hope weekend. for everyone, everyone a has of great Enjoy rest summer. the thanks, So

Priority Technology (PRTH) 8 Aug 242024 Q2 Earnings call transcript