United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
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Registrant’s telephone number, including area code: (800 ) 935-5961
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of (1933 §230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
Item 2.02. Results of Operations and Financial Condition.
On March 17, 2021, Priority Technology Holdings, Inc. (“Priority”) issued a press release announcing its financial results for the quarter ended December 31, 2020. A copy of that press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.
Item 7.01 Regulation FD Disclosure
On March 17, 2021, Priority will hold an earnings conference call and webcast at 11:00 a.m. (Eastern Time) to discuss the financial results for the fourth quarter of 2020. The press release referenced in Item 2.02 contains information about how to access the conference call and webcast. A copy of the slide presentation to be used during the earnings call and webcast is furnished as Exhibit 99.2 to this Current Report on Form 8-K. The slide presentation also will be available on our website, www.prth.com under the “Investor Relations” section.
The information in this Current Report on Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report on Form 8-K shall not be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits – The following exhibit is furnished as part of this Current Report on Form 8-K.
| Exhibit No. | Description of Exhibit | |||||||
| 104 | The cover page from this Current Report on Form 8-K, formatted in Inline XBRL. | |||||||
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 hereunto duly authorized.
SIGNATURE
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 hereunto duly authorized.
| Dated: March 16, 2021 | ||||||||
| PRIORITY TECHNOLOGY HOLDINGS, INC. | ||||||||
| By: /s/ Michael Vollkommer | ||||||||
| Name: Michael Vollkommer | ||||||||
| Title: Chief Financial Officer | ||||||||
EXHIBIT 99.1 Investor and Media Inquiries: Dave Faupel dave.faupel@prth.com Priority Technology Holdings, Inc. Announces Fourth Quarter and Full Year 2020 Financial Results Strong Fourth Quarter Financial Performance with Continued Growth and Further Deleveraging ALPHARETTA, GA - March 16, 2021 -- Priority Technology Holdings, Inc. (NASDAQ: PRTH) (“Priority” or the “Company”), a leading provider of merchant acquiring, integrated payment software and commercial payment solutions, today announced its fourth quarter financial results including strong year-over-year revenue growth and further deleveraging during the quarter. Highlights of Consolidated Results Fourth Quarter 2020, Compared with Fourth Quarter 2019 Financial highlights of the fourth quarter of 2020 compared with the fourth quarter of 2019, are as follows: • Revenue of $106.1 million increased 8.1% from $98.2 million. • Gross profit (a non-GAAP measure1) of $32.5 million increased 3.2% from $31.4 million. • Gross profit margin (a non-GAAP measure1) of 30.6% decreased 144 basis points from 32.0%. • Income from operations of $6.2 million increased 489.3% from $1.1 million. • Net loss of $1.0 million compares with a net loss of $7.2 million. • Diluted loss per share of $0.01 compares with a diluted loss per share of $0.11. • Adjusted EBITDA (a non-GAAP measure1) of $18.2 million increased 12.7% from $16.2 million. • Total net leverage ratio of 5.85x at December 31, 2020 decreased from 6.16x at September 30, 20202. The fourth quarter of 2019 includes the results of the RentPayment business sold to MRI Software in September 2020. The fourth quarter of 2020 compared with the results of the fourth quarter of 2019, excluding the RentPayment business3, are as follows: • Revenue increased 12.3% from $94.5 million. • Gross profit (a non-GAAP measure1) increased 15.5% from $28.2 million. • Gross profit margin (a non-GAAP measure1) increased 84 basis points from 29.8%. • Adjusted EBITDA (a non-GAAP measure1) increased 35.2% from $13.6 million. Full Year 2020, Compared with Full Year 2019 Financial highlights of the full year 2020 compared with the full year 2019, are as follows: • Revenue of $404.3 million increased 8.7% from $371.9 million. • Gross profit (a non-GAAP measure1) of $127.0 million increased 6.4% from $119.3 million. • Gross profit margin (a non-GAAP measure1) of 31.4% decreased 68 basis points from 32.1%. 1
• Income from operations of $20.9 million increased 190.4% from $7.2 million. • Net income of $25.7 million, which includes the pre-tax gain from the sale of the RentPayment business, net of non-controlling interests ("NCIs"), of $62.1 million, compares with a net loss of $33.6 million. • Diluted income per share of $0.38 compares with a diluted loss per share of $0.50. • Adjusted EBITDA (a non-GAAP measure1) of $70.3 million increased 19.4% from $58.9 million. The consolidated results include the results of the RentPayment business from March 1, 2019 through September 22, 2020. Excluding the RentPayment business3, results for the full year 2020 compared with the results for the full year 2019 are as follows: • Revenue of $392.3 million increased 8.9% from $360.2 million. • Gross profit (a non-GAAP measure1) of $116.3 million increased 6.9% from $108.8 million. • Gross profit margin (a non-GAAP measure1) of 29.6% decreased 55 basis points from 30.2%. • Adjusted EBITDA (a non-GAAP measure1) of $62.1 million increased 25.0% from $49.7 million. (1) See “Non-GAAP Financial Measures” and the reconciliations of Gross Profit, Gross Profit Margin, and Adjusted EBITDA to their most comparable GAAP measures provided below for additional information. (2) See “Non-GAAP Financial Measures” and the calculation of Total Net Leverage Ratio for the year ended December 31, 2020, provided below for additional information. (3) See "Results With and Without RentPayment" for a summary of the results for the three and the twelve months ended December 31, 2020 and 2019, excluding the actual results of the RentPayment business sold in September 2020. “The momentum that we built in the third quarter continued through the fourth quarter and while these successes would have been meaningful in any year, I am especially proud of our team given the challenges presented by the pandemic,” said Tom Priore, Chairman and Chief Executive Officer of Priority. “We produced growth in revenue, gross profit and adjusted EBITDA and with our Finxera acquisition, we will be a one stop-shop for payments and virtual bank account management that today’s merchants and modern software companies are seeking in order to manage and monetize their payment networks.” “We have executed on our plan to build out our Payment Infrastructure as a Service (PIaaS) solutions while continuing to grow our consumer, commercial and integrated payments divisions,” continued Priore. “We enter 2021 in growth mode with strong activity and a solid pipeline. We expect that the strength of our core acquiring business and complimentary high growth, countercyclical payment assets will drive strong financial performance in 2021.” Conference Call Priority Technology Holdings, Inc.’s leadership will host a conference call on Wednesday, March 17, 2021 at 11:00 a.m. EST to discuss its fourth quarter and full year 2020 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 https://edge.media-server.com/ mmc/p/9rjzgeoo 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 20, 2021 at 1:30 p.m. EST. To listen to the audio replay, dial (855) 859-2056 or (404) 537-3406 and enter conference ID number 6918659. Alternatively, you may access the webcast replay in the “Investor Relations” section of the Company’s website at www.PRTH.com. 2
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, 2020 2019 2020 2019 Revenues $ 106,091 $ 98,183 $ 404,342 $ 371,854 Costs of Services (73,641) (66,742) (277,374) (252,569) Gross Profit $ 32,450 $ 31,441 $ 126,968 $ 119,285 Gross Profit Margin 30.6 % 32.0 % 31.4 % 32.1 % EBITDA, Adjusted EBITDA and Consolidated 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. Consolidated adjusted EBITDA, which is a liquidity measure used in determining our total net leverage ratio, is adjusted EBITDA further adjusted for items specified in the definition of consolidated adjusted EBITDA within our debt agreements, which include the pro-forma impact of acquisitions and dispositions and other specified adjustments. 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. 3
We review the non-GAAP consolidated adjusted EBITDA to evaluate compliance with our total net leverage ratio at each measurement period. The reconciliation of adjusted EBITDA to its most comparable GAAP measure is provided below: (in thousands) Three Months Ended December 31, Twelve Months Ended December 31, 2020 2019 2020 2019 Net (loss) income $ (1,004) $ (7,169) $ 25,661 $ (33,589) Interest expense 9,385 10,051 44,839 40,653 Income tax (benefit) expense (2,020) (1,638) 10,899 830 Depreciation and amortization 9,889 10,329 40,775 39,092 EBITDA 16,250 11,573 122,174 46,986 Gain on sale, net of NCIs — — (62,091) — Debt extinguishment and modification — — 1,899 Write-off of equity-method investment — — 211 — Selling, general and administrative 1,180 4,310 5,710 8,266 Non-cash stock-based compensation 803 298 2,430 3,652 Adjusted EBITDA $ 18,233 $ 16,181 $ 70,333 $ 58,904 Reconciliation to Consolidated Adjusted EBITDA for the twelve months ended December 31, 2020: Adjusted EBITDA $ 70,333 Allowable Board fee add-back 1,500 Other adjustments 161 RentPayment 2020 adjusted EBITDA (8,221) Consolidated Adjusted EBITDA $ 63,773 Consolidated Total Debt at December 31, 2020: Current portion of long-term debt $ 19,442 Long-term debt, net of discounts and deferred financing costs 357,873 Unamortized debt discounts and deferred financing costs 4,725 382,040 Less unrestricted cash (9,241) Consolidated Net Debt $ 372,799 Total Net Leverage Ratio 5.85x 4
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, Twelve Months Ended December 31, 2020 2019 2020 2019 Segment Selling, general and administrative expense: Acquisition integration services $ (119) $ 1,723 $ 2,628 $ 2,910 Integrated Partners Intangible carrying value adjustment 773 — 1,753 — Consumer Legal and professional fees 416 3,173 1,941 6,353 Corporate Legal settlements 3 34 (719) (377) Corporate Change in fair value of contingent consideration (360) (620) (360) (620) Consumer Write-down of note receivable 467 — 467 — Consumer $ 1,180 $ 4,310 $ 5,710 $ 8,266 Salary and employee benefit expense: Non-cash stock-based compensation $ 108 $ 141 $ 440 $ 1,572 Consumer Non-cash stock-based compensation 27 32 122 588 Commercial Non-cash stock-based compensation 1 1 2 3 Integrated Partners Non-cash stock-based compensation 667 124 1,866 1,489 Corporate $ 803 $ 298 $ 2,430 $ 3,652 Other: Debt extinguishment and modification $ 1,899 Write-off of equity-method investment 211 $ 2,110 Gain on sale of business $ 107,239 Attributable to NCIs (45,148) Gain on sale, net of NCIs $ 62,091 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. 5
About Priority Technology Holdings, Inc. Priority is a leading provider of merchant acquiring, integrated payment software and commercial payment solutions, offering unique product and service capabilities to its merchant network and distribution partners. Priority’s enterprise operates from a purpose-built business platform that includes tailored customer service offerings and bespoke technology development, allowing the Company to provide end-to-end solutions for payment and payment-adjacent opportunities. 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, expected timing of the closing of Priority Technology Holdings, Inc.'s ("Priority", "we", "our", or "us") merger with Finxera Holdings, Inc. ("Finxera") and our 2021 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. These forward-looking statements may include, but are not limited to, statements about the effects of the COVID-19 pandemic on our revenues and financial operating results. 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 30, 2020. 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. 6
PRIORITY TECHNOLOGY HOLDINGS, INC. Condensed Consolidated Statements of Operations Unaudited (in thousands, except per share amounts) Three Months Ended December 31, Year Ended December 31, 2020 2019 2020 2019 REVENUES $ 106,091 $ 98,183 $ 404,342 $ 371,854 OPERATING EXPENSES: Costs of services 73,641 66,742 277,374 252,569 Salary and employee benefits 9,812 10,291 39,507 42,214 Depreciation and amortization 9,889 10,329 40,775 39,092 Selling, general and administrative 6,520 9,764 25,825 30,795 Total operating expenses 99,862 97,126 383,481 364,670 Income from operations 6,229 1,057 20,861 7,184 OTHER (EXPENSES) INCOME: Interest expense (9,385) (10,051) (44,839) (40,653) Debt extinguishment and modification costs — — (1,899) — Gain on sale of business — — 107,239 — Other income, net 182 187 596 710 Total other (expenses) income, net (9,203) (9,864) 61,097 (39,943) (Loss) income before income taxes (2,974) (8,807) 81,958 (32,759) Income tax (benefit) expense (2,020) (1,638) 10,899 830 Net (loss) income (954) (7,169) 71,059 (33,589) Less net income attributable to non-controlling interests (50) — (45,398) — Net (loss) income attributable to stockholders of Priority Technology Holdings, Inc. $ (1,004) $ (7,169) $ 25,661 $ (33,589) Income (loss) per common share: Basic and diluted $ (0.01) $ (0.11) $ 0.38 $ (0.50) Weighted-average common shares and equivalents: Basic 67,288 67,019 67,158 67,086 Diluted 67,532 67,019 67,263 67,086 7
PRIORITY TECHNOLOGY HOLDINGS, INC. Condensed Consolidated Balance Sheets (in thousands) Unaudited December 31, 2020 December 31, 2019 ASSETS Current assets: Cash $ 9,241 $ 3,234 Restricted cash 78,879 47,231 Accounts receivable, net of allowance for doubtful accounts 41,321 37,993 Prepaid expenses and other current assets 3,500 3,897 Current portion of notes receivable 2,190 1,326 Settlement assets 753 533 Total current assets 135,884 94,214 Notes receivable, less current portion 5,527 4,395 Property, equipment and software, net 22,875 23,518 Goodwill 106,832 109,515 Intangible assets, net 98,057 182,826 Deferred income taxes, net 46,697 49,657 Other non-current assets 1,957 380 Total assets $ 417,829 $ 464,505 LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable and accrued expenses $ 29,821 $ 26,965 Accrued residual commissions 23,824 19,315 Customer deposits and advance payments 2,883 4,928 Current portion of long-term debt 19,442 4,007 Settlement obligations 72,878 37,789 Total current liabilities 148,848 93,004 Long-term debt, net of current portion, discounts and debt issuance costs 357,873 485,578 Other non-current liabilities 9,672 6,612 Total long-term liabilities 367,545 492,190 Total liabilities 516,393 585,194 Stockholders' deficit: Preferred stock — — Common stock 68 68 Treasury stock, at cost (2,388) (2,388) Additional paid-in capital 5,769 3,651 Accumulated deficit (102,013) (127,674) Total Priority Technology Holdings, Inc. stockholders' deficit (98,564) (126,343) Non-controlling interest in subsidiary — 5,654 Total stockholders' deficit (98,564) (120,689) Total liabilities and stockholders' deficit $ 417,829 $ 464,505 8
PRIORITY TECHNOLOGY HOLDINGS, INC. Condensed Consolidated Statements of Cash Flows Unaudited (in thousands) Year Ended December 31, 2020 2019 Cash flows from operating activities: Net income (loss) $ 71,059 $ (33,589) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Gain recognized on sale of business (107,239) — Transaction costs upon sale of business (5,383) — Depreciation and amortization of assets 40,775 39,092 Equity-classified and liability-classified stock compensation 2,430 3,652 Amortization of debt issuance costs and discounts 2,396 1,667 Deferred income tax expense, net of change in allowance 2,960 765 Payment-in-kind interest 8,573 5,126 Write off of deferred loan costs and discount 1,523 — Impairment charges for intangible assets 1,753 — Other non-cash items, net 84 (1,428) Change in operating assets and liabilities, excluding business sale: Accounts receivable (5,160) (1,736) Settlement assets and obligations, net 34,870 27,284 Prepaid expenses and other current assets 65 (1,230) Notes receivable (2,230) (390) Accounts payable and other accrued liabilities 1,343 (1,061) Customer deposits and advance payments (2,045) 1,646 Other assets and liabilities, net 1,298 (434) Net cash provided by operating activities 47,072 39,364 Cash flows from investing activities: Sale of business 179,416 — Additions to property, equipment and software (7,461) (11,118) Acquisitions of intangible assets (5,559) (82,945) Notes receivable loan funding — (3,500) Other investing activity — (184) Net cash provided by (used in) investing activities 166,396 (97,747) Cash flows from financing activities: Proceeds from issuance of long-term debt, net of issue discount — 69,650 Repayments of long-term debt (110,507) (3,828) Profit distributions to non-controlling interests of subsidiaries (45,398) — Borrowings under revolving credit facility 7,000 14,000 Repayments under revolving credit facility (18,505) (2,500) Debt issuance and modification costs (paid) refunded (2,749) 83 Redemption of redeemable non-controlling interest of subsidiary (5,654) — Repurchases of common stock — (2,388) Net cash (used in) provided by financing activities (175,813) 75,017 Net change in cash and restricted cash: Net increase in cash and restricted cash 37,655 16,634 Cash and restricted cash at beginning of year 50,465 33,831 Cash and restricted cash at end of year $ 88,120 $ 50,465 9
PRIORITY TECHNOLOGY HOLDINGS, INC. Reportable Segments' Results Unaudited (in thousands) Three Months Ended December 31, Year Ended December 31, 2020 2019 2020 2019 Consumer Payments: Revenue $ 100,777 $ 87,394 $ 367,816 $ 330,599 Operating expenses 87,905 77,453 329,424 298,362 Income from operations $ 12,872 $ 9,941 $ 38,392 $ 32,237 Operating margin 12.8 % 11.4 % 10.4 % 9.8 % Depreciation and amortization $ 9,281 $ 8,627 $ 35,002 $ 32,842 Key indicators: Merchant bankcard processing dollar value $ 11,070,937 $ 10,752,475 $ 41,703,661 $ 42,303,880 Merchant bankcard transaction volume 120,344 129,176 455,240 511,852 Commercial Payments: Revenue $ 3,905 $ 6,488 20,922 25,980 Operating expenses 4,390 6,264 19,999 26,871 Income (loss) from operations $ (485) $ 224 $ 923 $ (891) Operating margin (12.4) % 3.5 % 4.4 % (3.4) % Depreciation and amortization $ 75 $ 75 $ 306 $ 323 Key indicators: Merchant bankcard processing dollar value $ 53,775 $ 75,626 $ 249,004 $ 312,342 Merchant bankcard transaction volume 29 25 99 109 Integrated Partners: Revenue $ 1,409 $ 4,301 $ 15,604 $ 15,275 Operating expenses 1,471 4,918 14,200 14,550 Income from operations $ (62) $ (617) $ 1,404 $ 725 Operating margin (4.4) % (14.3) % 9.0 % 4.7 % Depreciation and amortization $ 251 $ 1,312 $ 4,299 $ 4,398 Key indicators: Merchant bankcard processing dollar value $ 11,940 $ 126,207 $ 364,084 $ 386,101 Merchant bankcard transaction volume 109 467 1,316 1,380 Income from operations of reportable segments $ 12,325 $ 9,548 $ 40,719 $ 32,071 Less: Corporate expense (6,096) (8,491) (19,858) (24,887) Consolidated income from operations $ 6,229 $ 1,057 $ 20,861 $ 7,184 Corporate depreciation and amortization $ 282 $ 315 $ 1,168 $ 1,529 Key indicators: Merchant bankcard processing dollar value $ 11,136,652 $ 10,954,308 $ 42,316,749 $ 43,002,323 Merchant bankcard transaction volume 120,482 129,668 456,655 513,341 10
PRIORITY TECHNOLOGY HOLDINGS, INC. Results With and Without RentPayment Unaudited (in thousands) (in thousands) Twelve Months Ended December 31, 2020 Twelve Months Ended December 31, 2019 Consolidated RentPayment Excl RentPayment Consolidated RentPayment Excl RentPayment Revenues $ 404,342 $ 12,042 $ 392,300 $ 371,854 $ 11,694 $ 360,160 Operating Expenses: Costs of services 277,374 1,362 276,012 252,569 1,166 251,403 Salary and employee benefits 39,507 1,649 37,858 42,214 882 41,332 Depreciation and amortization 40,775 3,668 37,107 39,092 4,031 35,061 Selling, general and administrative 25,825 3,538 22,287 30,795 3,340 27,455 Total operating expenses 383,481 10,217 373,264 364,670 9,419 355,251 Income from operations 20,861 1,825 19,036 7,184 2,275 4,909 Depreciation and amortization 40,775 3,668 37,107 39,092 4,031 35,061 Other income, net 807 — 807 710 — 710 Net income attributable to NCIs (250) — (250) — — — Non-cash stock-based compensation 2,430 — 2,430 3,652 — 3,652 Legal and professional fees 1,941 — 1,941 6,353 — 6,353 Legal settlements (719) 100 (819) (377) — (377) Acquisition integration services 2,628 2,628 — 2,910 2,910 — Intangible carrying value adjustment 1,753 — 1,753 — — — Change in FV of contingent consideration (360) — (360) (620) — (620) Write-down of note receivable 467 — 467 — — — Adjusted EBITDA $ 70,333 $ 8,221 $ 62,112 $ 58,904 $ 9,216 $ 49,688 11
PRIORITY TECHNOLOGY HOLDINGS, INC. Results With and Without RentPayment Unaudited (in thousands) (in thousands) Fourth Quarter 2020 Fourth Quarter 2019 Consolidated RentPayment (1) Excl RentPayment Consolidated RentPayment Excl RentPayment Revenues $ 106,091 $ (76) $ 106,167 $ 98,183 $ 3,636 $ 94,547 Operating Expenses: Costs of services 73,641 (7) 73,648 66,742 362 66,380 Salary and employee benefits 9,812 23 9,789 10,291 441 9,850 Depreciation and amortization 9,889 — 9,889 10,329 1,208 9,121 Selling, general and administrative 6,520 (113) 6,633 9,764 1,935 7,829 Total operating expenses 99,862 (97) 99,959 97,126 3,946 93,180 Income (loss) from operations 6,229 21 6,208 1,057 (310) 1,367 Depreciation and amortization 9,889 — 9,889 10,329 1,208 9,121 Other income, net 182 — 182 187 — 187 Net income attributable to NCIs (50) — (50) — — — Non-cash stock-based compensation 803 — 803 298 — 298 Legal and professional fees 416 — 416 3,173 — 3,173 Legal settlements 3 — 3 34 — 34 Acquisition integration services (119) (119) — 1,723 1,723 — Intangible carrying value adjustment 773 — 773 — — — Change in FV of contingent consideration (360) — (360) (620) — (620) Write-down of note receivable 467 — 467 — — — Adjusted EBITDA $ 18,233 $ (98) $ 18,331 $ 16,181 $ 2,621 $ 13,560 (1) RentPayment activity in the fourth quarter of 2020 relates to finalization of pre-sale operations. 12
Priority Technology Holdings, Inc. Supplemental Slides for the Fourth Quarter 2020 Earnings Call March 17, 2021
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, expected timing of the closing of Priority Technology Holdings, Inc.'s ("Priority", "we", "our", or "us") merger with Finxera Holdings, Inc. ("Finxera") and our 2021 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. These forward-looking statements may include, but are not limited to, statements about the effects of the COVID-19 pandemic on our revenues and financial operating results. 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 30, 2020. 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. 1
Fourth Quarter Highlights 2 • Revenue of $106.1 million increased 8.1% from $98.2 million in 2019 • Gross profit of $32.5 million increased 3.2% from $31.4 million in 2019 • Gross profit margin of 30.6% decreased 144 basis points from 32.0% in 2019 • Income from operations of $6.2 million increased 489.3% from $1.1 million in 2019 • Adjusted EBITDA of $18.2 million increased 12.7% from $16.2 million in 2019 • Net debt of $372.8 million increased $2.4 million from $370.4 million at end of third quarter 2020 • Net leverage ratio of 5.85x decreased from 6.16x at end of third quarter 2020 Revenue, Gross Profit and Adjusted EBITDA by Quarter throughout 2020 (dollars in millions)
Fourth Quarter Highlights (Excluding RentPayment) 3 • Revenue of $106.2 million increased 12.3% from $94.5 million in 2019 • Gross profit of $32.5 million increased 15.5% from $28.2 million in 2019 • Gross profit margin of 30.6% increased 84 basis points from 29.8% in 2019 • Adjusted EBITDA of $18.3 million increased 35.2% from $13.6 million in 2019 Revenue, Gross Profit and Adjusted EBITDA by Quarter, excluding RentPayment, throughout 2020 (dollars in millions)
Fourth Quarter 2020 and 2019 (With and Without RentPayment) 4 Consolidated RentPayment(1) Excl RentPayment Consolidated RentPayment Excl RentPayment Revenues $ 106,091 $ (76) $ 106,167 $ 98,183 $ 3,636 $ 94,547 Operating Expenses: Costs of services 73,641 (7) 73,648 66,742 362 66,380 Salary and employee benefits 9,812 23 9,789 10,291 441 9,850 Depreciation and amortization 9,889 - 9,889 10,329 1,208 9,121 Selling, general and administrative 6,520 (113) 6,633 9,764 1,935 7,829 Total operating expenses 99,862 (97) 99,959 97,126 3,946 93,180 Income (loss) from operations $ 6,229 $ 21 $ 6,208 $ 1,057 $ (310) $ 1,367 Adjusted EBITDA $ 18,233 $ (98) $ 18,331 $ 16,181 $ 2,621 $ 13,560 (1) RentPayment activity in the fourth quarter of 2020 relates to finalization of pre-sale operations. (in thousands) Fourth Quarter 2020 Fourth Quarter 2019
5 Full Year 2020 and 2019 (With and Without RentPayment) Consolidated RentPayment Excl RentPayment Consolidated RentPayment Excl RentPayment Revenues $ 404,342 $ 12,042 $ 392,300 $ 371,854 $ 11,694 $ 360,160 Operating Expenses: Costs of services 277,374 1,362 276,012 252,569 1,166 251,403 Salary and employee benefits 39,507 1,649 37,858 42,214 882 41,332 Depreciation and amortization 40,775 3,668 37,107 39,092 4,031 35,061 Selling, general and administrative 25,825 3,538 22,287 30,795 3,340 27,455 Total operating expenses 383,481 10,217 373,264 364,670 9,419 355,251 Income from operations $ 20,861 $ 1,825 $ 19,036 $ 7,184 $ 2,275 $ 4,909 Adjusted EBITDA $ 70,333 $ 8,221 $ 62,112 $ 58,904 $ 9,216 $ 49,688 Twelve Months Ended December 31, 2020 Twelve Months Ended December 31, 2019 (in thousands)
Revenue • Consumer Payments increased 15.3% to $100.8 million from $87.4 million • Commercial Payments decreased 39.8% to $3.9 million from $6.5 million CPX decreased 6.0% to $1.5 million from $1.6 million Managed Services decreased 50.8% to $2.4 million from $4.9 million • Integrated Partners decreased 67.2% to $1.4 million from $4.3 million PRET decreased 77.3% to $0.8 million from $3.7 million Revenue Growth (Decline) by Segment Q4 2020 Revenue of $106.1 million increased 8.1% from $98.2 million in 2019 (dollars in millions) 6
Key Growth Contributors Specialized Merchant Acquiring was a Key Contributor to Q4 2020 Revenue Growth Strong Sustained 2020 Growth Momentum in e-Commerce (dollars in millions) (dollars in millions) Revenue Gross Profit • Merchant count ended the year at 2,537 Over 1,950 net new merchants added during 2020 • Revenue of $11.4 million increased from $1.6 million in 2019 • Gross Profit of $7.3 million increased from $0.9 million in 2019 7
• New Merchant Boards remain strong despite the economic impact of COVID Historically, monthly new merchant boards average in the range of 4,500 - 5,000 First quarter averaged 5,139 in 2020 and 4,544 in 2019 Second quarter averaged 4,389 in 2020 and 4,467 in 2019 Third quarter averaged 4,638 in 2020 and 4,774 in 2019 Fourth quarter averaged 4,286 in 2020 and 4,389 in 2019 New Merchant Boards New Merchant Boards Remained Strong Throughout 2020 Monthly New Merchant Boards Throughout 2020 8
Fourth Quarter Full Year 2020 2019 Variance 2020 2019 Variance Consumer Payments: Merchant bankcard processing dollar value 11,070.9$ 10,752.5$ 3.0% 41,703.7$ 42,303.9$ -1.4% Merchant bankcard transaction volume 120.3 129.2 -6.8% 455.2 511.9 -11.1% Average Ticket 91.99$ 83.24$ 10.5% 91.61$ 82.65$ 10.8% Commercial Payments: Merchant bankcard processing dollar value 53.8$ 75.6$ -28.9% 249.0$ 312.3$ -20.3% Merchant bankcard transaction volume 0.0 0.0 15.2% 0.1 0.1 -9.0% Average Ticket 1,833.08$ 2,970.26$ -38.3% 2,510.02$ 2,864.98$ -12.4% Integrated Partners: Merchant bankcard processing dollar value 11.9$ 126.2$ -90.5% 364.1$ 386.1$ -5.7% Merchant bankcard transaction volume 0.1 0.5 -76.7% 1.3 1.4 -4.7% Average Ticket 109.56$ 269.98$ -59.4% 276.64$ 279.72$ -1.1% Total: Merchant bankcard processing dollar value 11,136.7$ 10,954.3$ 1.7% 42,316.7$ 43,002.3$ -1.6% Merchant bankcard transaction volume 120.5 129.7 -7.1% 456.7 513.3 -11.0% Average Ticket 92.43$ 84.48$ 9.4% 92.67$ 83.77$ 10.6% Amounts in millions, except Average Ticket Merchant Bankcard Volume Q4 2020 Merchant Bankcard volume of $11.1 billion increased 1.7% from $11.0 billion 9
Gross Profit • Consumer Payments increased 21.8% to $29.9 million from $24.5 million • Commercial Payments decreased 38.8% to $2.0 million from $3.3 million CPX decreased 18.2% to $1.1 million from $1.3 million Managed Services decreased 52.4% to $1.0 million from $2.0 million • Integrated Partners decreased 85.0% to $0.5 million from $3.6 million PRET decreased 93.9% to $0.2 million from $3.3 million Gross Profit Growth (Decline) by Segment Q4 2020 Gross Profit of $32.5 million increased 3.2% from $31.4 million in 2019 (dollars in millions) 10
Operating Expenses • Salaries and employee benefits of $9.8 million decreased 4.7% from $10.3 million • Salaries and employee benefits decreased $1.0 million excluding non-cash compensation • SG&A of $6.5 million decreased 33.2% from $9.8 million in 2019 • SG&A decreased $0.1 million excluding non-recurring expenses • Depreciation and amortization decreased 4.3% to $9.9 million from $10.3 million Increase (Decrease) by Type Excluding non-cash compensation and non-recurring expenses Q4 2020 Operating Expenses of $26.2 million decreased 13.7% from $30.4 million in 2019 (dollars in millions) 11
Income from Operations • Consumer Payments increased 29.5% to $12.9 million from $9.9 million • Commercial Payments decreased $0.7 million to a loss of $0.5 million from $0.2 million • Integrated Partners increased $0.6 million to a loss of $0.1 million Includes $(0.1) million in 2020 and $1.7 million in 2019 of non-recurring integration costs related to the Yapstone acquisition • Corporate improved $2.4 million to $6.1 million from $8.5 million Q4 2020 Income from Operations of $6.2 million increased 489.3% from $1.1 million in 2019 Increase (Decrease) in Income from Operations by Segment (dollars in millions) 12
Other Income (Expense) • Interest expense of $44.8 million increased 10.3% from $40.7 million in 2019 • Debt extinguishment and modification expense of $1.9 million includes: $1.5 million of non-cash write-off of debt discount and issuance costs associated with the portion of the debt repaid in the third quarter 2020 $0.4 million of debt amendment fees incurred in the first quarter 2020 • Net pre-tax gain of $62.1m on sale of RentPayment is recorded in two line items Other income of $107.2 million Income attributable to non-controlling interests of $45.1 million • Other income, net of $596k is primarily ISO loan interest income 13 (in thousands) Fourth Quarter Full Year 2020 2019 2020 2019 Other Income (Expenses): Interest expense (9,385)$ (10,051)$ (44,839)$ (40,653)$ Debt extinguishment and modification costs - - (1,899) - Gain on sale of business - - 107,239 - Other income, net 182 187 596 710 (9,203)$ (9,864)$ 61,097$ (39,943)$ Income attributable to redeemable non-controlling interests: NCIs in gain on sale of business -$ (45,148)$ NCIs in PHOT (50) (250) (50)$ (45,398)$ Components of Full Year 2020 and 2019 Other Income (Expense)
Details of Gain on Sale of RentPayment (dollars in thousands) 14 Gross cash consideration 180,000$ Working capital adjustment (584) Net proceeds 179,416 Transaction costs (5,383) Net book value of assets sold (62,874) Segment goodwill assigned to assets sold (2,683) Other PRET intangible assets recovered in proceeds (1,237) Gain on sale of business 107,239 Gain attributable to non-controlling interests (45,148) Net pre-tax gain 62,091$ • Subject to a final working capital true-up with MRI and proceeds distribution true-up with non-controlling interests, when finalized
• Cash interest includes administrative fees of $0.4 million in 2020 and $0.8 million in 2019 Interest Expense Full Year 2020 Interest expense of $44.8 million increased by $4.2 million from $40.7 million in 2019 2020 2019 (dollars in millions) Components of Full Year Interest Expense 15 Fourth Quarter Full Year 2020 2019 2020 2019 Cash Interest 6.9$ 8.3$ 33.9$ 33.9$ PIK Interest 1.9 1.3 8.6 5.1 Amortization of OID & DIC 0.6 0.4 2.4 1.7 9.4$ 10.1$ 44.8$ 40.7$
Full Year 2020 2019 2020 2019 Unrestricted Restricted Unrestricted Restricted (dollars in thousands) Net Cash Provided by Operating Activities 47,072$ 39,364$ 15,424$ 31,648$ 10,333$ 29,031$ Net Cash (Used In) Provided By Investing Activities 166,396 (97,747) 166,396 (97,747) Net Cash (Used In) Provided By Financing Activities (175,813) 75,017 (175,813) 75,017 Net Increase (Decrease) in Cash 37,655 16,634 6,007 31,648 (12,397) 29,031 Cash at Beginning of Period 50,465 33,831 3,234 47,231 15,631 18,200 Cash at End of Period 88,120$ 50,465$ 9,241$ 78,879$ 3,234$ 47,231$ Cash Flow Full Year Comparative Cash Flows – Unrestricted & Restricted Cash Activity • Investing Activities in Full Year 2020 include: Software development of $7.3 million Other capital expenditures and intangible asset acquisitions of $5.8 million Proceeds from business disposition of $179.4 million • Financing Activities in Full Year 2020 include: Senior debt repayments of $110.5 million Net Revolver repayments of $11.5 million Debt issuance and modification costs of $2.7 million Redemption of minority interests in disposed business of $51.1 million 16
17 Outstanding Debt Walk
EBITDA Walk 18 • Net leverage ratio of 5.85x at December 31, 2020 with Net Debt of $372.8 million • EBITDA adjustments are referenced to applicable clauses of the Senior Credit Facility Section 1.01 Definition