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Priority Technology Holdings, Inc. Announces Fourth Quarter and Full Year 2021 Financial Results – Yahoo Finance

Strong Fourth Quarter Financial Performance with Diversified Growth

ALPHARETTA, Ga., March 16, 2022–(BUSINESS WIRE)–Priority Technology Holdings, Inc. (NASDAQ: PRTH) (“Priority” or the “Company”), a leading payments technology company helping customers collect, store and send money, today announced its fourth quarter and full year 2021 financial results including strong year-over-year diversified revenue growth.

Highlights of Consolidated Results

Fourth Quarter 2021, Compared with Fourth Quarter 2020

Financial highlights of the fourth quarter of 2021 compared with the fourth quarter of 2020, are as follows:

  • Revenue of $144.0 million increased 35.7% from $106.1 million.

  • Gross profit (a non-GAAP measure1) of $48.7 million increased 49.8% from $32.5 million.

  • Gross profit margin (a non-GAAP measure1) of 33.8% increased 320 basis points from 30.6%.

  • Operating income of $12.9 million increased 108.1% from $6.2 million.

  • Adjusted EBITDA (a non-GAAP measure1) of $32.9 million increased 80.8% from $18.2 million.

  • Net debt1 of $611.6 million decreased $19.9 million from net debt of $631.5 million at September 30, 2021.

Full Year 2021, Compared with Full Year 2020

Financial highlights of the full year 2021 compared with the full year 2020, are as follows:

  • Revenue of $514.9 million increased 27.4% from $404.3 million.

  • Gross profit (a non-GAAP measure1) of $155.0 million increased 22.0% from $127.0 million.

  • Gross profit margin (a non-GAAP measure1) of 30.1% decreased 130 basis points from 31.4%.

  • Operating income of $33.1 million increased 58.4% from $20.9 million.

  • Adjusted EBITDA (a non-GAAP measure1) of $96.3 million increased 37.0% from $70.3 million.

1See “Non-GAAP Financial Measures” and the reconciliations of Gross Profit, Gross Profit Margin, Adjusted EBITDA and Net Debt, to their most comparable GAAP measures provided below for additional information.

“Our financial performance for the quarter and the year reflects the strength we anticipated and expect to achieve in the months and quarters ahead. We have built a one of a kind technology and operating platform to collect, store and send money to power modern commerce networks,” said Tom Priore, Chairman and CEO of Priority. “We remain laser focused on successfully delivering solutions to the SMB, B2B and Enterprise payment segments to create value for our growing network of partners and our shareholders.”

Full Year 2022 Financial Guidance

Our outlook is strong, which is reflected in our full-year 2022 guidance.

  • Revenue is forecasted to range between $650 million to $665 million, a growth rate of 26% to 29%.

  • Adjusted EBITDA (a non-GAAP measure) is forecasted to range between $145 million to $150 million, a growth rate of 51% to 56%.

Conference Call

Priority Technology Holdings, Inc.’s leadership will host a conference call on Thursday, March 17, 2022 at 11:00 a.m. EDT to discuss its fourth quarter and full year 2021 financial results. Participants can access the call by Phone: US/Canada: (877) 501-3161 or International: (786) 815-8443.

The Internet webcast link and accompanying slide presentation can be accessed at and will also be posted in the “Investor Relations” section of the Company’s website at www.PRTH.com.

An audio replay of the call will be available shortly after the conference call until March 24, 2022 at 1:30 p.m. EDT. To listen to the audio replay, dial (855) 859-2056 or (404) 537-3406 and enter conference ID number 5278395. Alternatively, you may access the webcast replay in the “Investor Relations” section of the Company’s website at www.PRTH.com.

Non-GAAP Financial Measures

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

Gross Profit and Gross Profit Margin

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

(in thousands)

Three Months Ended December 31,

Twelve Months Ended December 31,

2021

2020

2021

2020

Revenues

$

144,048

$

106,091

$

514,901

$

404,342

Costs of services

(95,358

)

(73,641

)

(359,885

)

(277,374

)

Gross profit

$

48,690

$

32,450

$

155,016

$

126,968

Gross Profit Margin

33.8

%

30.6

%

30.1

%

31.4

%

EBITDA and Adjusted EBITDA

EBITDA and adjusted EBITDA are performance measures. EBITDA is earnings before interest, income tax, and depreciation and amortization expenses (“EBITDA”). Adjusted EBITDA begins with EBITDA but further excludes certain non-cash costs, such as stock-based compensation and the write-off of the carrying value of investments or other assets, as well as debt extinguishment and modification expenses and other expenses and income items considered non-recurring, such as acquisition integration expenses, certain professional fees, and litigation settlements. We review the non-GAAP adjusted EBITDA measure to evaluate our business and trends, measure our performance, prepare financial projections, allocate resources, and make strategic decisions.

The reconciliation of adjusted EBITDA to its most comparable GAAP measure is provided below:

(in thousands)

Three Months Ended December 31,

Years Ended December 31,

2021

2020

2021

2020

Net (loss) income

$

14,094

$

(1,004

)

$

1,389

$

25,661

Interest expense

11,877

9,385

36,485

44,839

Income tax (benefit) expense

(5,307

)

(2,020

)

(5,258

)

10,899

Depreciation and amortization

17,574

9,889

49,697

40,775

EBITDA

38,238

16,250

82,313

122,174

Debt extinguishment and modification

8,322

1,899

Gain on sale of business and investment

(7,643

)

(7,643

)

(62,091

)

Write-off of equity method investment

211

Selling, general and administrative

1,403

1,180

10,089

5,710

Non-cash stock-based compensation

864

803

3,213

2,430

Adjusted EBITDA

$

32,862

$

18,233

$

96,294

$

70,333

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

(in thousands)

Three Months Ended

December 31,

Years Ended

December 31,

2021

2020

2021

2020

Segment

Selling, general and administrative expenses:

Legal, professional, accounting and consulting fees

$

170

$

419

$

7,291

$

1,222

Corporate

Acquisition transaction services

(119

)

69

2,628

Enterprise

Other expense, net

1,233

2,729

Corporate

Intangible carrying value adjustment

773

1,753

SMB

Change in fair value of contingent consideration

(360

)

(360

)

SMB

Write-down of note receivable

467

467

SMB

$

1,403

$

1,180

$

10,089

$

5,710

Consolidated Total Debt at December 31, 2021:

Term Facility

$

616,900

Revolving Credit Facility

15,000

631,900

Less unrestricted cash

(20,300

)

Consolidated Net Debt

$

611,600

Priority does not provide a reconciliation of forward-looking non-GAAP financial measures to their comparable GAAP financial measures because it could not do so without unreasonable effort due to the unavailability of the information needed to calculate reconciling items and due to the variability, complexity and limited visibility of the adjusting items that would be excluded from the non-GAAP financial measures in future periods. When planning, forecasting and analyzing future periods, the Company does so primarily on a non-GAAP basis without preparing a GAAP analysis as that would require estimates for various cash and non-cash reconciling items that would be difficult to predict with reasonable accuracy. For example, stock-based compensation expense would be difficult to estimate because it depends on the Company’s future hiring and retention needs, as well as the future fair market value of the Company’s common stock, all of which are difficult to predict and subject to constant change. As a result, the Company does not believe that a GAAP reconciliation would provide meaningful supplemental information about the Company’s outlook.

About Priority Technology Holdings, Inc.

Priority is a payments powerhouse driving the convergence of payments and banking. The company has built a single platform to collect, store, and send money that operates at scale. We help our customers take and make payments while managing business and consumer operating accounts to monetize payment networks. Our tailored, agile technology powers high-value, payments products bolstered by our industry-leading personalized support. Additional information can be found at www.PRTH.com.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about future financial and operating results, our plans, objectives, expectations and intentions with respect to future operations, products and services, and other statements identified by words such as “may,” “will,” “should,” “anticipates,” “believes,” “expects,” “plans,” “future,” “intends,” “could,” “estimate,” “predict,” “projects,” “targeting,” “potential” or “contingent,” “guidance,” “outlook” or words of similar meaning. These forward-looking statements include, but are not limited to, our 2022 outlook and statements regarding our market and growth opportunities. Such forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive risks, trends and uncertainties that could cause actual results to differ materially from those projected, expressed, or implied by such forward-looking statements. Our actual results could differ materially, and potentially adversely, from those discussed or implied herein.

We caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. You should evaluate all forward-looking statements made in this press release in the context of the risks and uncertainties disclosed in our SEC filings, including our most recent Annual Report on Form 10-K filed with the SEC on March 16, 2022. These filings are available online at www.sec.gov or www.PRTH.com.

We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences we anticipate or affect us or our operations in the way we expect. You are cautioned not to place undue reliance on forward-looking statements as a predictor of future performance. The forward-looking statements included in this press release are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.

Priority Technology Holdings, Inc.

Consolidated Statements of Operations

(in thousands, except per share amounts)

Three Months Ended

December 31,

Years Ended

December 31,

2021

2020

2021

2020

Revenues

$

144,048

$

106,091

$

514,901

$

404,342

Operating expenses

Costs of services

95,358

73,641

359,885

277,374

Salary and employee benefits

12,010

9,812

43,818

39,507

Depreciation and amortization

17,574

9,889

49,697

40,775

Selling, general and administrative

6,195

6,520

28,408

25,825

Total operating expenses

131,137

99,862

481,808

383,481

Operating income

12,911

6,229

33,093

20,861

Other (expenses) income

Interest expense

(11,877

)

(9,385

)

(36,485

)

(44,839

)

Debt extinguishment and modification costs

(8,322

)

(1,899

)

Gain on sale of business and investment

7,643

7,643

107,239

Other income, net

110

182

202

596

Total other (expenses) income, net

(4,124

)

(9,203

)

(36,962

)

61,097

Income (loss) before income taxes

8,787

(2,974

)

(3,869

)

81,958

Income tax (benefit) expense

(5,307

)

(2,020

)

(5,258

)

10,899

Net income (loss)

14,094

(954

)

1,389

71,059

Less: Dividends and accretion attributable to redeemable senior preferred stockholders

(8,285

)

(18,009

)

Less: NCI preferred unit redemptions, net of deferred tax benefit

2,756

(8,021

)

Less: Net income attributable to redeemable and redeemed NCIs

(50

)

(45,398

)

Net income (loss) attributable to common stockholders

$

8,565

$

(1,004

)

$

(24,641

)

$

25,661

Earnings (loss) per common share:

Basic

$

0.11

$

(0.01

)

$

(0.34

)

$

0.38

Diluted

$

0.11

$

(0.01

)

$

(0.34

)

$

0.38

Weighted-average common shares outstanding:

Basic

78,467

67,288

71,902

67,158

Diluted

79,013

67,532

71,902

67,263

Priority Technology Holdings, Inc.

Consolidated Balance Sheets

(in thousands)

December 31, 2021

December 31, 2020

Assets

Current assets:

Cash and cash equivalents

$

20,300

$

9,241

Restricted cash

28,859

78,879

Accounts receivable, net of allowances

58,423

41,321

Prepaid expenses and other current assets

15,807

3,500

Current portion of notes receivable, net of allowances

272

2,190

Settlement assets and customer account balances

479,471

753

Total current assets

603,132

135,884

Notes receivable, less current portion

105

5,527

Property, equipment and software, net

25,233

22,875

Goodwill

365,740

106,832

Intangible assets, net

340,211

98,057

Deferred income taxes, net

8,265

46,697

Other noncurrent assets

9,256

1,957

Total assets

$

1,351,942

$

417,829

Liabilities, Redeemable Senior Preferred Stock and Stockholders’ Deficit

Current liabilities:

Accounts payable and accrued expenses

$

42,523

$

29,821

Accrued residual commissions

29,532

23,824

Customer deposits and advance payments

5,021

2,883

Current portion of long-term debt

6,200

19,442

Settlement and customer account obligations

500,291

72,878

Total current liabilities

583,567

148,848

Long-term debt, net of current portion, discounts and debt issuance costs

604,105

357,873

Other noncurrent liabilities

18,349

9,672

Total noncurrent liabilities

622,454

367,545

Total liabilities

1,206,021

516,393

Redeemable senior preferred stock

210,158

Stockholders’ deficit:

Preferred stock

Common stock

77

68

Treasury stock, at cost

(4,091

)

(2,388

)

Additional paid-in capital

39,835

5,769

Accumulated deficit

(100,058

)

(102,013

)

Total stockholders’ deficit

(64,237

)

(98,564

)

Total liabilities, redeemable senior preferred stock and stockholders’ deficit

$

1,351,942

$

417,829

Priority Technology Holdings, Inc.

Consolidated Statements of Cash Flows

(in thousands)

Years Ended December 31,

2021

2020

Cash flows from operating activities:

Net income (loss)

$

1,389

$

71,059

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Gain and transaction costs recognized on sale of business and investment

(7,643

)

(112,622

)

Depreciation and amortization of assets

49,697

40,775

Stock-based compensation

3,213

2,430

Amortization of debt issuance costs and discounts

2,305

2,396

Write-off of deferred loan costs and discount

2,580

1,523

Deferred income tax (benefit) provision

(2,559

)

2,960

Change in fair value of contingent consideration

(360

)

Payment-in-kind interest

(23,715

)

8,573

Impairment charges for intangible asset

1,753

Other non-cash items, net

462

444

Change in operating assets and liabilities (net of acquisitions and sale of business and

investment):

Accounts receivable

(16,694

)

(5,160

)

Prepaid expenses and other current assets

(1,597

)

303

Income taxes (receivable) payable

(5,107

)

(238

)

Notes receivable

333

(2,230

)

Accounts payable and other accrued liabilities

7,018

1,343

Customer deposits and advance payments

2,138

(2,045

)

Other assets and liabilities, net

(2,443

)

1,298

Net cash provided by operating activities

9,377

12,202

Cash flows from investing activities:

Acquisitions of businesses, net of cash acquired

(407,129

)

Proceeds from sale of business and investment

15,278

179,416

Additions to property, equipment and software

(9,719

)

(7,461

)

Notes receivable loan funding

Acquisitions of intangible assets

(49,463

)

(5,559

)

Net cash (used in) provided by investing activities

(451,033

)

166,396

Cash flows from financing activities:

Proceeds from issuance of long-term debt, net of issue discount

607,318

Debt issuance and modification costs paid

(9,073

)

(2,749

)

Repayments of long-term debt

(361,425

)

(110,507

)

Borrowings under revolving credit facility

30,000

7,000

Repayments of borrowings under revolving credit facility

(15,000

)

(18,505

)

Proceeds from the issuance of redeemable senior preferred stock, net of discount

219,062

Redeemable senior preferred stock issuance fees and costs

(8,098

)

Redemption of redeemable NCI in subsidiary

(5,654

)

Repurchases of common stock and shares withheld for taxes

(1,703

)

Dividends paid to redeemable senior preferred stockholders

(7,460

)

Profit distributions to redeemable non-controlling interests of subsidiaries

(815

)

(45,398

)

Proceeds from exercise of stock options

1,196

Settlement and customer accounts obligations, net

417,627

34,870

Net cash provided by (used in) financing activities

871,629

(140,943

)

Net change in cash and cash equivalents, and restricted cash:

Net increase in cash and cash equivalents, and restricted cash

429,973

37,655

Cash and cash equivalents, and restricted cash at beginning of period

88,120

50,465

Cash and cash equivalents, and restricted cash equivalents at end of period

$

518,093

$

88,120

Years Ended December 31,

2021

2020

Reconciliation of cash and cash equivalents, and restricted cash:

Cash and cash equivalents

$

20,300

$

9,241

Restricted cash

28,859

78,879

Cash and cash equivalents included in customer account balances

468,934

Total cash and cash equivalents, and restricted cash

$

518,093

$

88,120

Priority Technology Holdings, Inc.

Reportable Segments’ Results

(in thousands)

Three Months Ended December 31,

Years Ended December 31,

2021

2020

2021

2020

SMB Payments:

Revenue

$

121,482

$

101,483

$

475,630

$

370,521

Operating expenses

110,978

88,855

422,746

332,624

Operating Income

$

10,504

$

12,628

$

52,884

$

37,897

Operating margin

8.6

%

12.4

%

11.1

%

10.2

%

Depreciation and amortization

$

11,014

$

9,532

$

41,144

$

35,627

Key indicators:

Merchant bankcard processing dollar value

$

13,847,825

$

11,070,839

$

53,411,622

$

42,020,429

Merchant bankcard transaction volume

147,138

120,340

578,102

456,066

B2B Payments:

Revenue

$

5,416

$

3,905

17,138

20,922

Operating expenses

4,865

4,390

17,003

19,999

Operating income (loss)

$

551

$

(485

)

$

135

$

923

Operating margin

10.2

%

(12.4

) %

0.8

%

4.4

%

Depreciation and amortization

$

74

$

76

$

294

$

306

Key indicators:

Merchant bankcard processing dollar value

$

97,447

$

53,984

$

323,502

$

249,779

Merchant bankcard transaction volume

77

30

220

102

Enterprise Payments:

Revenue

$

17,150

$

703

$

22,133

$

12,899

Operating expenses

11,952

$

523

15,370

11,000

Operating Income

$

5,198

$

180

$

6,763

$

1,899

Operating margin

30.3

%

25.6

%

30.6

%

14.7

%

Depreciation and amortization

$

6,219

$

(1

)

$

7,158

$

3,674

Key indicators:

Merchant bankcard processing dollar value

$

13,573

$

11,857

$

52,376

$

46,542

Merchant bankcard transaction volume

144

113

549

487

Operating income of reportable segments

$

16,253

$

12,323

$

59,782

$

40,719

Less: Corporate expense

(3,342

)

(6,094

)

(26,689

)

(19,858

)

Consolidated operating income

$

12,911

$

6,229

$

33,093

$

20,861

Corporate depreciation and amortization

$

268

$

282

$

1,101

$

1,168

Key indicators:

Merchant bankcard processing dollar value

$

13,958,845

$

11,136,680

$

53,787,500

$

42,316,750

Merchant bankcard transaction volume

147,359

120,483

578,871

456,655

View source version on businesswire.com: https://www.businesswire.com/news/home/20220316005875/en/

Contacts

Priority Investor Inquiries:
Chris Kettmann
ckettmann@lincolnchurchilladvisors.com
(773) 497-7575

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