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
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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):
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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 ☒
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Item 2.02. Results of Operations and Financial Condition.
On August 9, 2021, Priority Technology Holdings, Inc. (“Priority”) issued a press release announcing its financial results for the quarter ended June 30, 2021. 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 August 9, 2021, Priority will hold an earnings conference call and webcast at 11:00 a.m. (Eastern Time) to discuss the financial results for the second quarter of 2021. 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. | |||||||
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: August 9, 2021 | ||||||||
| PRIORITY TECHNOLOGY HOLDINGS, INC. | ||||||||
| By: /s/ Michael Vollkommer | ||||||||
| Name: Michael Vollkommer | ||||||||
| Title: Chief Financial Officer | ||||||||
Priority Technology Holdings, Inc. Announces Second Quarter 2021 Financial Results
Strong Second Quarter Financial Performance and Increased Full Year Guidance
Capital Refinancing Strengthened the Balance Sheet, Increased Liquidity and Reduced Leverage
Pending Acquisition of Finxera Expected to Close in Third Quarter 2021
ALPHARETTA, Ga., Aug. 9, 2021 /PRNewswire/ -- 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 second quarter 2021 financial results.
Highlights of Consolidated Results
Second Quarter 2021, Compared with Second Quarter 2020
The second quarter 2020 includes results of the RentPayment business sold to MRI Software in September 2020. Financial highlights of second quarter 2021 compared with second quarter 2020, are as follows (gross profit, gross profit margin, and adjusted EBITDA are non-GAAP measures1):
•Revenue of $125.0 million increased 35.4% from $92.4 million.
•Gross profit of $35.2 million increased 17.4% from $30.0 million.
•Gross profit margin of 28.1% decreased from 32.4%.
•Income from operations of $7.4 million increased 83.7% from $4.0 million, including non-recurring expenses of $1.8 million and $1.4 million in second quarter 2021 and 2020, respectively.
•Loss before income taxes of $8.0 million includes $8.3 million of debt extinguishment and modification costs, and compares with a loss before income taxes of $7.4 million in second quarter 2020.
•Diluted loss per share of $0.35, which includes the impact of $8.3 million of debt extinguishment and modification costs and a $10.8 million non-controlling interest preferred unit redemption in second quarter 2021, compares with a diluted loss per share of $0.12 in second quarter 2020.
•Adjusted EBITDA of $21.0 million increased 26.1% from $16.7 million.
•Total net leverage ratio of 3.43x at June 30, 2021 decreased from 5.44x at March 31, 20211.
The second quarter 2021 results compared with second quarter 2020 results, excluding the RentPayment business sold in September 2020 and non-recurring expenses from both quarters2,3, are as follows:
•Revenue of $125.0 million increased 42.1% from $88.0 million.
•Gross profit of $35.2 million increased 35.0% from $26.1 million.
•Gross profit margin of 28.1% decreased from 29.6%.
•Income from operations of $9.2 million increased 161.3% from $3.5 million.
•Adjusted EBITDA of $21.0 million increased 54.9% from $13.6 million.
"Our strong second quarter results reinforce the power of our payments platform and relentless focus on execution," said Tom Priore, Chairman and Chief Executive Officer of Priority. "As we advance the full integration of Finxera's virtual banking capabilities in the coming quarter, we are poised to achieve our mission to be the premier partner for merchants and ISVs to collect, store, and send money."
The Company announced during first quarter 2021 that it entered into an agreement to acquire Finxera Holdings, Inc. ("Finxera"). That acquisition is expected to close in third quarter 2021. In second quarter 2021, Finxera generated revenue of $16.6 million, gross profit of $15.5 million, and Adjusted EBITDA of $11.1 million. On a pro forma basis4, including second quarter and first half results of Finxera, together with pro forma adjustments for June 2021 and April 2021 tuck-in reseller acquisitions, second quarter and first half 2021 financial results (excluding revenue and cost synergies) are as follows:
•Revenue of $142.9 million in second quarter 2021, and $275.1 million in first half 2021.
•Gross profit of $51.7 million in second quarter 2021, and $104.6 million in first half 2021.
•Gross profit margin of 36.2% in second quarter 2021, and 38.0% million in first half 2021.
•Adjusted EBITDA of $32.8 million in second quarter 2021, and $67.9 million in first half 2021.
(1) See "Non-GAAP Financial Measures" and the reconciliations of Gross Profit, Gross Profit Margin, and Adjusted EBITDA to their most comparable GAAP measures, and the calculation of Total Net Leverage Ratio as of June 30, 2021 provided below for additional information.
(2) See "Results With and Without RentPayment" for a summary of the results for the three months ended June 30, 2020, excluding the actual results of the RentPayment business sold in September 2020.
(3) See "Non-GAAP Financial Measures" for the details of non-recurring expenses for the three months ended June 30, 2021 and 2020.
(4) See "Pro Forma Results" for a presentation of second quarter and first half 2021 results including the actual second quarter and first half 2021 results of Finxera and the April 2021 and June 2021 tuck-in acquisitions.
(2) See "Results With and Without RentPayment" for a summary of the results for the three months ended June 30, 2020, excluding the actual results of the RentPayment business sold in September 2020.
(3) See "Non-GAAP Financial Measures" for the details of non-recurring expenses for the three months ended June 30, 2021 and 2020.
(4) See "Pro Forma Results" for a presentation of second quarter and first half 2021 results including the actual second quarter and first half 2021 results of Finxera and the April 2021 and June 2021 tuck-in acquisitions.
Revised Full Year 2021 Financial Guidance
The Company outperformed its plan for revenue and adjusted EBITDA in the six months ended June 30, 2021. As a result of stronger than expected organic growth and the impact of the second quarter 2021 tuck-in acquisitions, the Company has updated its outlook for full year 2021, before any further increases related to the anticipated acquisition of Finxera, as follows:
•Revenue is forecast to range between $480 to $500 million, a growth of 22% to 28% above 2020 revenue of $392.3 million, excluding RentPayment.
•Adjusted EBITDA (a non-GAAP measure) is forecast to range between $82 to $86 million, a growth of 32% to 39% above 2020 adjusted EBITDA of $62.1 million, excluding RentPayment.
Conference Call
Priority's leadership will host a conference call on Monday, August 9, 2021 at 11:00 a.m. EDT to discuss its second quarter financial results and business developments. Participants can access the call by Phone: US/Canada: (877) 501-3161 or International: (786) 815-8443.
Internet webcast link and accompanying slide presentation can be accessed at https://edge.media-server.com/mmc/p/kwi9t7p3 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 August 12, 2021 at 1:30 pm Eastern Time. To listen to the audio replay, dial (855) 859-2056 or (404) 537-3406 and enter conference ID number 1214468. 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 June 30, | |||||||||||||||||
| 2021 | 2020 | ||||||||||||||||
| Revenues | $ | 125,014 | $ | 92,356 | |||||||||||||
| Costs of Services | 89,831 | 62,398 | |||||||||||||||
| Gross Profit | $ | 35,183 | $ | 29,958 | |||||||||||||
| Gross Profit Margin | 28.1% | 32.4% | |||||||||||||||
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.
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 June 30, | ||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||
| Net loss (GAAP) | $ | (9,477) | $ | (7,858) | ||||||||||||||||
| Interest expense | 7,285 | 11,668 | ||||||||||||||||||
| Income tax expense | 1,490 | 415 | ||||||||||||||||||
| Depreciation and amortization | 10,723 | 10,363 | ||||||||||||||||||
| EBITDA (Non-GAAP) | 10,021 | 14,588 | ||||||||||||||||||
| Non-cash stock-based compensation | 856 | 688 | ||||||||||||||||||
| Selling, general and administrative | 1,834 | 1,385 | ||||||||||||||||||
| Debt extinguishment and modification costs | 8,322 | — | ||||||||||||||||||
| Other non-operating expense | (17) | — | ||||||||||||||||||
| Adjusted EBITDA (Non-GAAP) | $ | 21,016 | $ | 16,661 | ||||||||||||||||
Reconciliation of Adjusted EBITDA to Consolidated Adjusted EBITDA for the last twelve months ended June 30, 2021 and the calculation of the Total Net Leverage Ratio at June 30, 2021 are provided below:
| Adjusted EBITDA (Non-GAAP) | $ | 76,885 | ||||||
| Allowable Board fee add-back | 1,723 | |||||||
| Other adjustments | (145) | |||||||
| Pro-formal impact of acquisitions | 16,900 | |||||||
| RentPayment adjusted EBITDA | (2,459) | |||||||
| Consolidated Adjusted EBITDA (Non-GAAP) | $ | 92,904 | ||||||
| Consolidated Total Debt at June 30, 2021: | ||||||||
| Current portion of long-term debt | $ | 3,000 | ||||||
| Long-term debt, net of current portion | 318,187 | |||||||
| Unamortized discounts and costs | 8,813 | |||||||
| 330,000 | ||||||||
| Less unrestricted cash | (11,111) | |||||||
| Consolidated Net Debt | $ | 318,889 | ||||||
| Total Net Leverage Ratio | 3.43x | |||||||
Further detail of certain of these adjustments, and where these items are recorded in our consolidated statements of operations, is provided below:
| Three Months Ended June 30, | ||||||||||||||||||||
| (in thousands) | 2021 | 2020 | Segment | |||||||||||||||||
| Selling, general and administrative expense: | ||||||||||||||||||||
| Litigation settlement costs | $ | — | $ | 100 | Integrated Partners | |||||||||||||||
| Litigation settlement recoveries | — | (23) | Consumer | |||||||||||||||||
| Certain legal fees and expenses | 1,587 | 348 | Corporate | |||||||||||||||||
| Professional, accounting and consulting fees | 237 | 121 | Corporate | |||||||||||||||||
| Acquisition transition services | — | 839 | Integrated Partners | |||||||||||||||||
| Acquisition transition services | 10 | — | Consumer | |||||||||||||||||
| $ | 1,834 | $ | 1,385 | |||||||||||||||||
| Salary and employee benefit expense: | ||||||||||||||||||||
| Non-cash stock-based compensation | $ | 146 | $ | 114 | Consumer | |||||||||||||||
| Non-cash stock-based compensation | 32 | 31 | Commercial | |||||||||||||||||
| Non-cash stock-based compensation | 678 | 543 | Corporate | |||||||||||||||||
| $ | 856 | $ | 688 | |||||||||||||||||
| Other expenses, net: | ||||||||||||||||||||
| Debt extinguishment and modification costs | 8,322 | $ | — | |||||||||||||||||
| Other non-operating expense | (17) | — | ||||||||||||||||||
| $ | 8,305 | $ | — | |||||||||||||||||
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.
Pro-Forma Results
On a pro forma basis, including second quarter results of Finxera, together with the June 2021 tuck-in reseller acquisition, second quarter 2021 financial results (excluding revenue and cost synergies) are as follows:
| (in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2021 (a) | |||||||||||||||||||||||||||||||||||||||||||||||
| Priority | Finxera | Tuck-in Acquisition | Pro Forma | ||||||||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 125,014 | $ | 16,585 | $ | 1,309 | $ | 142,908 | |||||||||||||||||||||||||||||||||||||||
| Gross Profit | $ | 35,183 | $ | 15,533 | $ | 1,030 | $ | 51,746 | |||||||||||||||||||||||||||||||||||||||
| Gross Profit Margin | 28.1% | 93.7% | 78.7% | 36.2% | |||||||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 21,016 | $ | 11,123 | $ | 672 | $ | 32,811 | |||||||||||||||||||||||||||||||||||||||
| (a) Actual second quarter 2021 results of Priority, Finxera and the June 2021 tuck-in reseller acquisition. | |||||||||||||||||||||||||||||||||||||||||||||||
On a pro forma basis, including first half results of Finxera, together with the April 2021 and June 2021 tuck-in reseller acquisitions, first half 2021 financial results (excluding revenue and cost synergies) are as follows:
| (in thousands) | |||||||||||||||||||||||||||||||||||
| Six Months Ended June 30, 2021 (a) | |||||||||||||||||||||||||||||||||||
| Priority | Finxera | Tuck-in Acquisitions | Pro Forma | ||||||||||||||||||||||||||||||||
| Revenues | $ | 238,311 | $33,353 | $ | 3,479 | $275,143 | |||||||||||||||||||||||||||||
| Gross Profit | $ | 66,617 | $31,180 | $ | 6,822 | $104,619 | |||||||||||||||||||||||||||||
| Gross Profit Margin | 28.0% | 93.5% | 196.1% | 38.0% | |||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 39,017 | $22,817 | $ | 6,100 | $67,934 | |||||||||||||||||||||||||||||
| (a) Actual first half 2021 results of Priority, Finxera and the April 2021 and June 2021 tuck-in reseller acquisitions. | |||||||||||||||||||||||||||||||||||
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 31, 2021. 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. | |||||||||||||||||||||||||||||||||||
| Condensed Consolidated Statements of Operations | |||||||||||||||||||||||||||||||||||
| Unaudited | |||||||||||||||||||||||||||||||||||
| (in thousands, except per share amounts) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||
| REVENUES | $ | 125,014 | $ | 92,356 | $ | 238,311 | $ | 189,289 | |||||||||||||||||||||||||||
| OPERATING EXPENSES: | |||||||||||||||||||||||||||||||||||
| Costs of services | 89,831 | 62,398 | 171,694 | 128,762 | |||||||||||||||||||||||||||||||
| Salary and employee benefits | 10,351 | 9,556 | 19,899 | 19,685 | |||||||||||||||||||||||||||||||
| Depreciation and amortization | 10,723 | 10,363 | 19,793 | 20,635 | |||||||||||||||||||||||||||||||
| Selling, general and administrative | 6,704 | 6,008 | 14,993 | 12,617 | |||||||||||||||||||||||||||||||
| Total operating expenses | 117,609 | 88,325 | 226,379 | 181,699 | |||||||||||||||||||||||||||||||
| Income from operations | 7,405 | 4,031 | 11,932 | 7,590 | |||||||||||||||||||||||||||||||
| OTHER EXPENSES: | |||||||||||||||||||||||||||||||||||
| Interest expense | (7,285) | (11,668) | (16,453) | (21,983) | |||||||||||||||||||||||||||||||
| Debt extinguishment and modification costs | (8,322) | — | (8,322) | (376) | |||||||||||||||||||||||||||||||
| Other income (expenses), net | 215 | 194 | (54) | 224 | |||||||||||||||||||||||||||||||
| Total other expenses, net | (15,392) | (11,474) | (24,829) | (22,135) | |||||||||||||||||||||||||||||||
| Loss before income taxes | (7,987) | (7,443) | (12,897) | (14,545) | |||||||||||||||||||||||||||||||
| Income tax expense (benefit) | 1,490 | 415 | (741) | (818) | |||||||||||||||||||||||||||||||
| Net loss | (9,477) | (7,858) | (12,156) | (13,727) | |||||||||||||||||||||||||||||||
| Dividends attributable to senior preferred stockholders | (3,911) | — | (3,911) | — | |||||||||||||||||||||||||||||||
| Non-controlling interest preferred unit redemptions | (10,777) | — | (10,777) | — | |||||||||||||||||||||||||||||||
| Net loss attributable to common stockholders of PRTH | $ | (24,165) | $ | (7,858) | $ | (26,844) | $ | (13,727) | |||||||||||||||||||||||||||
| Loss per common share: | |||||||||||||||||||||||||||||||||||
| Basic and diluted | $ | (0.35) | $ | (0.12) | $ | (0.39) | $ | (0.2) | |||||||||||||||||||||||||||
| Weighted-average common shares outstanding: | |||||||||||||||||||||||||||||||||||
| Basic and diluted | 69,496 | 67,114 | 68,525 | 67,088 | |||||||||||||||||||||||||||||||
PRIORITY TECHNOLOGY HOLDINGS, INC. | |||||||||||||||||
| Condensed Consolidated Balance Sheets | |||||||||||||||||
| (in thousands) | Unaudited | ||||||||||||||||
| June 30, 2021 | December 31, 2020 | ||||||||||||||||
| ASSETS | |||||||||||||||||
| Current assets: | |||||||||||||||||
| Cash | $ | 11,111 | $ | 9,241 | |||||||||||||
| Restricted cash | 18,232 | 78,879 | |||||||||||||||
| Accounts receivable, net of allowance | 50,596 | 41,321 | |||||||||||||||
| Prepaid expenses and other current assets | 5,443 | 3,500 | |||||||||||||||
| Current portion of notes receivable, net of allowance | 230 | 2,190 | |||||||||||||||
| Settlement assets | 722 | 753 | |||||||||||||||
| Total current assets | 86,334 | 135,884 | |||||||||||||||
| Notes receivable, less current portion | 3,915 | 5,527 | |||||||||||||||
| Property, equipment, and software, net | 24,245 | 22,875 | |||||||||||||||
| Goodwill | 124,078 | 106,832 | |||||||||||||||
| Intangible assets, net | 145,836 | 98,057 | |||||||||||||||
| Deferred income taxes, net | 47,578 | 46,697 | |||||||||||||||
| Other non-current assets | 10,890 | 1,957 | |||||||||||||||
| Total assets | $ | 442,876 | $ | 417,829 | |||||||||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | |||||||||||||||||
| Current liabilities: | |||||||||||||||||
| Accounts payable and accrued expenses | $ | 37,420 | $ | 29,821 | |||||||||||||
| Accrued residual commissions | 28,201 | 23,824 | |||||||||||||||
| Customer deposits and advance payments | 4,269 | 2,883 | |||||||||||||||
| Current portion of long-term debt | 3,000 | 19,442 | |||||||||||||||
| Settlement obligations | 11,278 | 72,878 | |||||||||||||||
| Total current liabilities | 84,168 | 148,848 | |||||||||||||||
| Long-term debt, net of current portion, discounts and debt issuance costs | 318,187 | 357,873 | |||||||||||||||
| Other non-current liabilities | 8,333 | 9,672 | |||||||||||||||
| Total long-term liabilities | 326,520 | 367,545 | |||||||||||||||
| Total liabilities | 410,688 | 516,393 | |||||||||||||||
| Senior preferred stock | 133,762 | — | |||||||||||||||
| Stockholders' deficit: | |||||||||||||||||
| Preferred stock | — | — | |||||||||||||||
| Common stock | 70 | 68 | |||||||||||||||
| Additional paid-in capital | 14,913 | 5,769 | |||||||||||||||
| Treasury stock, at cost | (2,388) | (2,388) | |||||||||||||||
| Accumulated deficit | (114,169) | (102,013) | |||||||||||||||
| Total stockholders' deficit | (101,574) | (98,564) | |||||||||||||||
| Total liabilities, senior preferred stock and stockholders' deficit | $ | 442,876 | $ | 417,829 | |||||||||||||
| PRIORITY TECHNOLOGY HOLDINGS, INC. | |||||||||||||||||
| Condensed Consolidated Statements of Cash Flows | |||||||||||||||||
| Unaudited | |||||||||||||||||
| (in thousands) | Six Months Ended June 30, | ||||||||||||||||
| 2021 | 2020 | ||||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||
| Net loss | $ | (12,156) | $ | (13,727) | |||||||||||||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | |||||||||||||||||
| Depreciation and amortization of assets | 19,793 | 20,635 | |||||||||||||||
| Equity-classified and liability-classified stock-based compensation | 1,414 | 1,026 | |||||||||||||||
| Amortization of debt issuance costs and discounts | 1,158 | 1,116 | |||||||||||||||
| Write off of deferred loan costs and discount | 3,006 | — | |||||||||||||||
| Deferred income tax benefit | (3,446) | (3,569) | |||||||||||||||
| Change in allowance for deferred tax assets | 2,565 | 2,642 | |||||||||||||||
| Payment-in-kind interest | 2,512 | 3,415 | |||||||||||||||
| Other non-cash items, net | (39) | 206 | |||||||||||||||
| Change in operating assets and liabilities: | |||||||||||||||||
| Accounts receivable | (9,115) | 974 | |||||||||||||||
| Settlement assets and obligations, net | (61,570) | 1,584 | |||||||||||||||
| Prepaid expenses and other current assets | (1,626) | 851 | |||||||||||||||
| Notes receivable | 198 | (888) | |||||||||||||||
| Accounts payable and other accrued liabilities | 10,490 | (1,845) | |||||||||||||||
| Customer deposits and advance payments | 1,385 | (2,046) | |||||||||||||||
| Other assets and liabilities, net | 307 | (552) | |||||||||||||||
| Net cash (used in) provided by operating activities | (45,124) | 9,822 | |||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||
| Acquisition of business | (34,507) | — | |||||||||||||||
| Additions to property, equipment, and software | (5,222) | (4,249) | |||||||||||||||
| Acquisitions of intangible assets | (43,353) | (3,286) | |||||||||||||||
| Net cash used in investing activities | (83,082) | (7,535) | |||||||||||||||
| Cash flows from financing activities: | |||||||||||||||||
| Proceeds from issuance of long-term debt, net of issue discount | 293,619 | — | |||||||||||||||
| Debt issuance and modification costs paid | (7,597) | (2,749) | |||||||||||||||
| Repayments of long-term debt | (384,552) | (2,003) | |||||||||||||||
| Borrowings under revolving credit facility | 30,000 | 7,000 | |||||||||||||||
| Repayments under revolving credit facility | — | (4,000) | |||||||||||||||
| Proceeds from issuance of senior preferred equity | 150,000 | — | |||||||||||||||
| Senior preferred equity issuance fees and costs | (10,472) | — | |||||||||||||||
| Dividends paid to senior preferred stockholders | (1,575) | — | |||||||||||||||
| Redemptions of non-controlling interests of subsidiary | (815) | — | |||||||||||||||
| Proceeds from exercise of stock options | 821 | — | |||||||||||||||
| Net cash provided by (used in) financing activities | 69,429 | (1,752) | |||||||||||||||
| Net change in cash and restricted cash: | |||||||||||||||||
| Net (decrease) increase in cash and restricted cash | (58,777) | 535 | |||||||||||||||
| Cash and restricted cash at beginning of period | 88,120 | 50,465 | |||||||||||||||
| Cash and restricted cash at end of period | $ | 29,343 | $ | 51,000 | |||||||||||||
| PRIORITY TECHNOLOGY HOLDINGS, INC. | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Reportable Segments' Results | ||||||||||||||||||||||||||||||||||||||||||||||||||
Unaudited | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||
| Consumer Payments: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 119,625 | $ | 81,707 | $ | 228,018 | $ | 167,738 | ||||||||||||||||||||||||||||||||||||||||||
| Operating expenses | 105,177 | 74,437 | 200,207 | 153,316 | ||||||||||||||||||||||||||||||||||||||||||||||
| Income from operations | $ | 14,448 | $ | 7,270 | $ | 27,811 | $ | 14,422 | ||||||||||||||||||||||||||||||||||||||||||
| Operating margin | 12.1% | 8.9% | 12.2% | 8.6% | ||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | $ | 10,297 | $ | 8,657 | $ | 18,876 | $ | 17,240 | ||||||||||||||||||||||||||||||||||||||||||
| Key indicators: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Merchant bankcard processing dollar value | $ | 13,875,957 | $ | 9,010,908 | $ | 25,747,896 | $ | 19,397,656 | ||||||||||||||||||||||||||||||||||||||||||
| Merchant bankcard transaction volume | 150,598 | 92,842 | 278,086 | 212,273 | ||||||||||||||||||||||||||||||||||||||||||||||
| Commercial Payments: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 4,041 | $ | 5,654 | $ | 7,541 | $ | 12,022 | ||||||||||||||||||||||||||||||||||||||||||
| Operating expenses | 4,020 | 5,179 | 7,929 | 10,783 | ||||||||||||||||||||||||||||||||||||||||||||||
| Income (loss) from operations | $ | 21 | $ | 475 | $ | (388) | $ | 1,239 | ||||||||||||||||||||||||||||||||||||||||||
| Operating margin | 0.5% | 8.4% | (5.1)% | 10.3% | ||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | $ | 73 | $ | 78 | $ | 147 | $ | 154 | ||||||||||||||||||||||||||||||||||||||||||
| Key indicators: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Merchant bankcard processing dollar value | $ | 75,070 | $ | 64,247 | $ | 138,518 | $ | 136,925 | ||||||||||||||||||||||||||||||||||||||||||
| Merchant bankcard transaction volume | 47 | 21 | 86 | 46 | ||||||||||||||||||||||||||||||||||||||||||||||
| Integrated Partners: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 1,348 | $ | 4,995 | $ | 2,752 | $ | 9,529 | ||||||||||||||||||||||||||||||||||||||||||
| Operating expenses | 1,183 | 4,150 | 2,495 | 8,316 | ||||||||||||||||||||||||||||||||||||||||||||||
| Income from operations | $ | 165 | $ | 845 | $ | 257 | $ | 1,213 | ||||||||||||||||||||||||||||||||||||||||||
| Operating margin | 12.2% | 16.9% | 9.3% | 12.7% | ||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | $ | 76 | $ | 1,334 | $ | 205 | $ | 2,645 | ||||||||||||||||||||||||||||||||||||||||||
| Key indicators: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Merchant bankcard processing dollar value | $ | 13,051 | $ | 122,089 | $ | 24,424 | $ | 246,607 | ||||||||||||||||||||||||||||||||||||||||||
| Merchant bankcard transaction volume | 136 | 388 | 231 | 836 | ||||||||||||||||||||||||||||||||||||||||||||||
| Income from operations of reportable segments | $ | 14,634 | $ | 8,590 | $ | 27,680 | $ | 16,874 | ||||||||||||||||||||||||||||||||||||||||||
| Less: Corporate expense | (7,229) | (4,559) | (15,748) | (9,284) | ||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated income from operations | $ | 7,405 | $ | 4,031 | $ | 11,932 | $ | 7,590 | ||||||||||||||||||||||||||||||||||||||||||
| Corporate depreciation and amortization | $ | 277 | $ | 294 | $ | 565 | $ | 596 | ||||||||||||||||||||||||||||||||||||||||||
| Key indicators: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Merchant bankcard processing dollar value | $ | 13,964,078 | $ | 9,197,244 | $ | 25,910,838 | $ | 19,781,188 | ||||||||||||||||||||||||||||||||||||||||||
| Merchant bankcard transaction volume | 150,781 | 93,251 | 278,403 | 213,155 | ||||||||||||||||||||||||||||||||||||||||||||||
| PRIORITY TECHNOLOGY HOLDINGS, INC. | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Results With and Without RentPayment | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unaudited | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Second Quarter 2020 | Six Months Ended June 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | RentPayment | Excl RentPayment | Consolidated | RentPayment | Excl RentPayment | ||||||||||||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 92,356 | $ | 4,391 | $ | 87,965 | $ | 189,289 | $ | 8,235 | $ | 181,054 | |||||||||||||||||||||||||||||||||||||||||
| Operating Expenses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Costs of services | 62,398 | 498 | 61,900 | 128,762 | 872 | 127,890 | |||||||||||||||||||||||||||||||||||||||||||||||
| Salary and employee benefits | 9,556 | 507 | 9,049 | 19,685 | 1,046 | 18,639 | |||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 10,363 | 1,214 | 9,149 | 20,635 | 2,430 | 18,205 | |||||||||||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative | 6,008 | 1,231 | 4,777 | 12,617 | 2,390 | 10,227 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total operating expenses | 88,325 | 3,450 | 84,875 | 181,699 | 6,738 | 174,961 | |||||||||||||||||||||||||||||||||||||||||||||||
| Income from operations | $ | 4,031 | $ | 941 | $ | 3,090 | $ | 7,590 | $ | 1,497 | $ | 6,093 | |||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 10,363 | 1,214 | 9,149 | 20,635 | 2,430 | 18,205 | |||||||||||||||||||||||||||||||||||||||||||||||
| Other income, net | 194 | — | 194 | 435 | — | 435 | |||||||||||||||||||||||||||||||||||||||||||||||
| Non-cash stock-based compensation | 688 | — | 688 | 1,026 | — | 1,026 | |||||||||||||||||||||||||||||||||||||||||||||||
| Legal and professional fees | 469 | — | 469 | 965 | — | 965 | |||||||||||||||||||||||||||||||||||||||||||||||
| Legal settlements | 77 | 100 | (23) | 79 | 100 | (21) | |||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition integration services | 839 | 839 | — | 1,735 | 1,735 | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 16,661 | $ | 3,094 | $ | 13,567 | $ | 32,465 | $ | 5,762 | $ | 26,703 | |||||||||||||||||||||||||||||||||||||||||
CONTACT: Investor and Media Inquiries: Dave Faupel, dave.faupel@prth.com
Priority Technology Holdings, Inc. Supplemental Slides for the Second Quarter 2021 Earnings Call August 9, 2021
Forward-Looking Statements 1 The press release and this presentation contain “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 31, 2021. 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 the press release and this presentation 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.
Revenue, Gross Profit and Adjusted EBITDA Second Quarter Highlights 2 • Revenue of $125.0 million increased 35.4% from $92.4 million in 2020 • Gross profit of $35.2 million increased 17.4% from $30.0 million in 2020 • Gross profit margin of 28.1% decreased 429 basis points from 32.4% in 2020 • Income from operations of $7.4 million increased 83.7% from $4.0 million in 2020 • Adjusted EBITDA of $21.0 million increased 26.1% from $16.7 million in 2020 • Net debt of $318.9 million decreased $60.2 million from $379.1 million at end of Q1 2021 • Net leverage ratio of 3.43x decreased from 5.85x at December 31, 2020 and 5.44x at March 31, 2021 (dollars in millions)
Second Quarter Highlights (Non-GAAP Adjusted) 3 • Revenue of $125.0 million increased 42.1% from $88.0 million in 2020 • Gross profit of $35.2 million increased 35.0% from $26.1 million in 2020 • Gross profit margin of 28.1% decreased 150 basis points from 29.6% in 2020 • Income from operations of $9.2 million increased 161.3% from $3.5 million in 2020 • Adjusted EBITDA of $21.0 million increased 54.9% from $13.6 million in 2020 Revenue, Gross Profit and Adjusted EBITDA (Non-GAAP) (dollars in millions) The second quarter 2021 results compared with second quarter 2020 results, excluding the RentPayment business sold in September 2020, and excluding non-recurring expenses from both quarters, are as follows:
Reconciliation of GAAP to Non-GAAP 4 (dollars in m illions) Second Quarter 2021 Second Quarter 2020 GAAP N R Exp Adjusted GAAP RentPayment NR Exp Adjusted Revenue 125.0$ 125.0$ 92.4$ (4.4)$ 88.0$ Cost of services 89.8 89.8 62.4 (0.5) 61.9 Gross Profit 35.2$ 35.2$ 30.0$ (3.9)$ 26.1$ Gro ss P ro fit M a rg in 28.1% 28.1% 32.4% 88.7% 29.6% Salary and employee benefits1 10.4 10.4 9.6 (0.5) 9.0 Depreciation and amortization 10.7 10.7 10.4 (1.2) 9.2 Selling, general and administrative 2 6.7 (1.8) 4.9 6.0 (1.3) (0.4) 4.3 Total operating expenses 27.8 (1.8) 25.9 26.0 (3.0) (0.4) 22.5 Income (loss) from operations 7.4$ 1.8$ 9.2$ 4.0$ (0.9)$ 0.4$ 3.5$ Adjusted EBITDA 21.0$ 21.0$ 16.7$ (3.1)$ 13.6$ 1. Salary and em ploye e benefits include s $8556k and $688k of non-cash com pe nsation in the second quarter of 2021 and 2020, respective ly. 2. Se lling, general and adm inistrative includes the follow ing non-recurring expenses: 2021 2020 Segment Profess ional, Accounting, and Legal 1.8$ 0.4$ Corporate Acquis ition trans ition 0.0$ 0.9 Integrated Partners (PR ET) 1.8$ 1.4$
Revenue – Non-GAAP Adjusted in 2020 • Consumer Payments increased 46.4% to $119.6 million from $81.7 million • Commercial Payments decreased 28.5% to $4.0 million from $5.7 million ➢ CPX increased 16.3% to $1.6 million from $1.4 million ➢ Managed Services decreased 43.3% to $2.4 million from $4.2 million • Integrated Partners increased 123.1% to $1.3 million from $0.6 million Revenue Growth (Decline) by Segment Second Quarter 2021 Revenue of $125.0 million increased 42.1% from $88.0 million in 2020 (dollars in millions) 5
Key Consumer Payments Revenue Growth Contributors Base and Specialized Merchant Acquiring were both Strong Key Contributors to Revenue Growth Strong Revenue Growth Momentum in Base and SMA (dollars in millions) • Revenue of $119.6 million increased $37.9 million, or 46.4%, from $81.7 million ➢ Base Revenue of $112.2 million increased $36.2 million, or 48%, from $76.0 million ➢ SMA Revenue of $7.4 million increased $1.7 million, or 30.6%, from $5.7 million 6
Merchant Bankcard Volume Q2 2021 Total Merchant Bankcard volume of $14.0 billion increased 51.8% from $9.2 billion 7 Second Quarter 2021 2020 Variance Consumer Payments: Merchant bankcard processing dollar value 13,876.0$ 9,010.9$ 54.0% Merchant bankcard transaction volume 150.6 92.8 62.2% Average Ticket 92.14$ 97.06$ -5.1% Commercial Payments: Merchant bankcard processing dollar value 75.1$ 64.2$ 16.8% Merchant bankcard transaction volume 0.0 0.0 129.9% Average Ticket 1,580.89$ 3,110.95$ -49.2% Integrated Partners: Merchant bankcard processing dollar value 13.1$ 122.1$ -89.3% Merchant bankcard transaction volume 0.1 0.4 -65.0% Average Ticket 96.27$ 314.91$ -69.4% Total: Merchant bankcard processing dollar value 13,964.1$ 9,197.2$ 51.8% Merchant bankcard transaction volume 150.8 93.3 61.7% Average Ticket 92.61$ 98.63$ -6.1% Amounts in millions, except Average Ticket
Gross Profit (a Non-GAAP Measure) - Adjusted in 2020 • Consumer Payments increased 42.0% to $32.1 million from $22.6 million • Commercial Payments decreased 17.1% to $2.5 million from $3.1 million ➢ CPX increased 8.0% to $1.2 million from $1.1 million ➢ Managed Services decreased 30.5% to $1.4 million from $2.0 million • Integrated Partners increased 37.9% to $0.6 million from $0.4 million Gross Profit Growth (Decline) by Segment Second Quarter 2021 Gross Profit of $35.2 million increased 35.0% from $26.1 million in 2020 (dollars in millions) 8
Operating Expenses – Non-GAAP Adjusted • Salaries and benefits of $10.3 million increased $1.3 million from $9.0 million in 2020 • SG&A of $4.9 million increased 0.6 million from $4.3 million in 2020 • Depreciation and amortization of $10.7 million increased $1.5 million from $9.2 million in 2020 Increase by Type Excluding non-recurring expenses in 2021 and 2020 Second Quarter 2021 Operating Expense of $25.9 million increased $3.4 million from $22.5 million in 2020 (dollars in millions) 9
Income from Operations - Non-GAAP Adjusted • Consumer Payments increased $7.2M or 98.7% to $14.5 million from $7.3 million • Commercial Payments decreased $0.5 million to $0.0 million from $0.5 million • Integrated Partners increased $0.3 million to $0.2 million from ($0.1) million • Corporate expense increased $1.3 million to $5.4 million from $4.1 million ➢ Salary & Benefits increased $0.6 million driven by higher incentive compensation accrual ➢ SG&A increased by $0.7 million driven by professional services Second Quarter 2021 Income from Operations of $9.2 million increased 161.3% from $3.5 million in 2020 Increase (Decrease) in Income from Operations by Segment (dollars in millions) 10
Second Quarter 2021 2020 Cash Interest & Fees 6.1$ 9.0$ PIK Interest 0.6 2.0 Amortization of OID & DIC 0.6 0.7 7.3$ 11.7$ • Cash interest includes administrative fees of $0.5 million in Q2 2021 and $0.15 million in 2020 Interest Expense Second Quarter 2021 Interest expense of $7.3 million decreased by $4.4 million from $11.7 million in 2020 2021 2020 (dollars in millions) Components of First Quarter Interest Expense 11
Cash Flow Second Quarter 2021 Comparative Cash Flows – Unrestricted & Restricted Cash Activity • Investing Activities used $77.4 million in cash in Second Quarter, including: ➢ Acquisitions of $74.9 million ➢ Software development and Equipment Purchases of $2.5 million • Financing Activities provided $73.7 million in Second Quarter 2021 including: ➢ Senior debt repayments of $379.7 million ➢ Long-term debt proceeds, net of costs and discounts, of $286.0 million ➢ Revolving Credit facility proceeds of $30.0 million ➢ Senior Preferred Equity proceeds, net of issuance costs, of $139.5 million ➢ Cash portion of preferred dividend and NCI redemption of $2.4 million ➢ Stock option exercise proceeds of $0.3 million 12 2021 2020 Unresticted Restricted Unresticted Restricted (dollars in millions) Net Cash Used in Operating Activities (31.7)$ 17.1$ 9.0$ (40.7)$ 8.8$ 8.3$ Net Cash Used in Investing Activities (77.4) (4.3) (77.4) - (4.3) - Net Cash Used in Financing Activities 73.7 (1.5) 73.7 - (1.5) - Net Increase (Decrease) in Cash (35.4) 11.3 5.3 (40.7) 3.0 8.3 Cash at the Beginning of Period 64.8 39.7 5.8 58.9 2.9 36.9 Cash at End of Period 29.3$ 51.0$ 11.1$ 18.2$ 5.9$ 45.1$ Second Quarter Second Quarter 2021 Second Quarter 2020
13 Total Debt Walk
EBITDA Walk 14 • Net leverage ratio of 3.43x at June 30, 2021 with Net Debt of $318.9 million and LTM consolidated adjusted EBITDA of $92.9 million • EBITDA adjustments are a summary of specific clauses within the Senior Term Loan Facility (in thousands) LTM Adjusted EBITDA (Non-GAAP) 76,885$ Pro forma impact of acquisitions 16,900 Pro forma impact of RentPayment disposition (2,459) Allowable Board fee add-back 1,723 Other adjustments (145) LTM Consolidated aAdjusted EBITDA (Non-GAAP) 92,904$ Consolidated Net Debt at June 30, 2021 Current portion of Term Loan 3,000$ Revolving credit 30,000 Long-term protion of Term Loan 297,000 Total debt 330,000 (a) Unrestricted cash 11,111 Consolidated Net Debt 318,889$ Total Net Leverage Ratio 3.43x (a) Total debt, including unamortized discounts and costs
Senior Preferred Stock Dividend 15 The Senior Preferred Stock has a quarterly cumulative preferred dividend at LIBOR plus 12.0%, with a cash portion at the discretion of the Company at LIBOR (1.0% floor) plus 5.0% and payment-in-kind (“PIK”) portion at 7.0%. The dividend is subject to a 2.0% increase if the Company elects the cash portion to be added to PIK. There are scheduled dividend rate increases after the fifth anniversary of issuance. In June 2021, the Company’s Board of Directors declared and authorized the second quarter 2021 dividend with a 6.0% cash portion of $1.6 million and a 7.0% PIK portion of $1.8 million. The Company paid the dividend on June 30, 2021.
Preferred Unit Redemption 16 $10.8 million Distribution to Non-Controlling Interests in a Subsidiary In February 2019, a subsidiary of the Company, Priority Hospitality Technology (“PHOT”), received a contribution of substantially all of the operating assets of eTab, LLC (“eTab”) and CUMULUS POS, LLC (“Cumulus”) under asset contribution agreements. PHOT is a part of the Company’s Integrated Partners reportable segment. These contributed assets were composed substantially of technology-related assets. No cash consideration was paid to the contributors of the eTab or Cumulus assets on the date of the transactions. As consideration for these contributed assets, the contributors were issued redeemable non- controlling preferred equity interests (“NCIs”) in PHOT. Under these redeemable NCIs, the contributors were eligible to receive up to $4.5 million of profits earned by PHOT, plus a preferred yield (6.0% per annum) on any undistributed preferred equity interest (“Total Preferred Equity Interest”). In November 2020, the Company agreed with the contributors to an exchange of shares of common stock of the Company and/or cash for the remaining undistributed Total Preferred Equity Interest. This established an agreed valuation as of November 12, 2020 for the Company’s common stock to be exchanged at the prior 20-day volume weighted average price of $2.78. The agreement was contingent upon lender approval. The binding agreements for the exchange, therefore, were not entered into until the lender approval was received. Subsequent to receipt of lender approval in April 2021, the Company completed the exchange of 1,428,358 shares of common stock and $814,219 of cash for the Total Preferred Equity Interests. Between the time of the November 2020 agreement and the date of exchange, the Company’s common stock price appreciated to $7.75 per share; therefore, the Company’s financial statements for the three- months ended June 30, 2021 reflect this exchange as a distribution to non-controlling interests at the common stock value of $7.75 reduced by a 10% liquidity discount of $0.775 due to Rule 144 trading restrictions. The total distribution amounted to $10.8 million, comprised of $10.0 million of common stock and $0.8 million of cash.