Business Wire | Nov 12, 2020 05:05PM EST

Priority Technology Holdings, Inc. Announces Third Quarter 2020 Financial Results

Nov. 12, 2020

ALPHARETTA, Ga.--(BUSINESS WIRE)--Nov. 12, 2020--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 third quarter financial results including strong year-over-year revenue growth of 16.1% and deleveraging during the quarter of $124 million.

Highlights of Consolidated Results

Third Quarter 2020, Compared with Third Quarter 2019

Financial highlights of the third quarter of 2020 compared with the third quarter of 2019, are as follows:

* Revenue of $109.0 million increased 16.1% from $93.9 million. * Gross profit (a non-GAAP measure1) of $34.0 million increased 12.7% from $30.2 million. * Gross profit margin (a non-GAAP measure1) of 31.2% decreased 94 basis points from 32.1%. * Income from operations of $7.0 million increased 158.4% from $2.7 million. * Pre-tax gain from the sale of the RentPayment business, net of non-controlling interests ("NCIs"), was $62.1 million. * Net income of $40.4 million increased $46.2 million from a loss of $5.8 million. * Adjusted EBITDA (a non-GAAP measure1) of $19.6 million increased 28.1% from $15.3 million. * Net debt (total debt less unrestricted cash) of $370.4 million at September 30, 2020 - a decrease of $123.6 million from $494.0 million at June 30, 2020. * Total net leverage ratio of 6.16x at September 30, 2020 decreased from 7.46x at June 30, 20202.

(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) Calculation of Total Net Leverage Ratio is provided in Management's Discussion and Analysis of Financial Condition and Results of Operations included in Item 2 of our Form 10-Q for the quarter ended September 30, 2020.

"Our strong results this quarter demonstrate continued resilience during this pandemic, and by all key metrics, validate the differentiation of our platform," said Tom Priore, Chairman and CEO. "The execution of the transaction with MRI Software this quarter not only reduced debt by over $100 million, it will improve annual cashflow and established a multi-year processing partnership with a global leader in real estate software solutions."

"The year-over-year revenue growth of our core business of 20% and our CPX accounts payable solutions of 7% in these challenging economic times are real testaments to the countercyclical nature of our platform. Our commercial and consumer payments teams have performed exceptionally well. We expect the momentum of our integrated product and payment infrastructure as a service offering to drive similar growth in the fourth quarter and continued deleveraging."

Priore concluded, "We clearly achieved our goals this quarter, producing strong top-line revenue growth, captured expense reduction through automation and diligent management and deleveraged our balance sheet. While the future economic and operating environment remains uncertain, we are encouraged by the performance across our segments and believe we are poised for sustainable long-term results. We are forecasting our fourth quarter 2020 results to match, if not exceed, the performance delivered in the third quarter of 2020, excluding the RentPayment results."

Discussion of Results

Management's Discussion and Analysis of Financial Condition and Results of Operations included in Item 2 of our Form 10-Q for the quarter ended September 30, 2020 provides a thorough discussion of our third quarter 2020 results.

Consolidated revenue in the third quarter of 2020 of $109.0 million increased $15.1 million, or 16.1%, from $93.9 million in the third quarter of 2019. Revenue growth of $16.6 million, or 20.0%, in our Consumer Payments segment was partially offset by revenue declines of $1.3 million and $0.1 million in our Commercial Payments and Integrated Partners segments.

Consolidated income from operations in the third quarter of 2020 of $7.0 million increased $4.3 million, or 158.4%, from $2.7 million in the third quarter of 2019. Gross profit increased $3.8 million, salary and employee benefits decreased $0.7 million, and depreciation and amortization increased $0.2 million in the third quarter of 2020 compared with the third quarter of 2019. Selling, general and administrative expenses were flat and the third quarter of 2020 included a $1.0 million non-cash write-down of an intangible asset in the Consumer Payments segment.

Pro Forma

The following table provides a summary of the pro forma results for the three and the nine months ended September 30, 2020 and 2019, excluding the RentPayment business sold to MRI Software ("MRI") in September 2020. The RentPayment amounts are historical and do not include a pro forma adjustment for revenue and income to be earned from ongoing payment infrastructure as a service and processing to MRI's new platform.

Three Months Ended September 30, Three Months Ended September 30, 2020 2019

Consolidated RentPayment Pro Forma Consolidated RentPayment Pro FormaRevenues $ 108,962 $ 3,883 $ 105,079 $ 93,883 $ 3,652 $ 90,231

OperatingExpenses: Costs of 74,971 497 74,474 63,718 342 63,376 services Salary and 10,010 580 9,430 10,668 395 10,273 employee benefits Depreciation 10,251 1,238 9,013 10,077 1,206 8,871 and amortization Selling, 6,688 1,261 5,427 6,695 592 6,103 general and administrative Total 101,920 3,576 98,344 91,158 2,535 88,623 Operating expenses Income from $ 7,042 $ 307 $ 6,735 $ 2,725 $ 1,117 $ 1,608 operations Adjusted $ 19,635 $ 2,557 $ 17,078 $ 15,325 $ 2,764 $ 12,561 EBITDA (in thousands) (in thousands)

Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019

Consolidated RentPayment Pro Forma Consolidated RentPayment Pro FormaRevenues $ 298,251 $ 12,118 $ 286,133 $ 273,671 $ 8,058 $ 265,613

OperatingExpenses: Costs of 203,733 1,370 202,363 185,827 804 185,023 services Salary and 29,695 1,627 28,068 31,923 440 31,483 employee benefits Depreciation 30,886 3,668 27,218 28,763 2,823 25,940 and amortization Selling, 19,305 3,649 15,656 21,031 1,405 19,626 general and administrative Total 283,619 10,313 273,306 267,544 5,472 262,072 Operating expenses Income from $ 14,632 $ 1,805 $ 12,827 $ 6,127 $ 2,586 $ 3,541 operations Adjusted $ 52,100 $ 8,320 $ 43,780 $ 42,722 $ 6,596 $ 36,126 EBITDA Conference Call

Priority Technology Holdings, Inc.'s leadership will host a conference call on Friday, November 13, 2020 at 11:00 a.m. EST to discuss its third quarter 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/573urite 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 November 16, 2020 at 11:30 a.m. EST. To listen to the audio replay, dial (855) 859-2056 or (404) 537-3406 and enter conference ID number 5953513. 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 September 30,

2020 2019

Revenues $ 108,962 $ 93,883

Costs of Services (74,971 ) (63,718 )

Gross Profit $ 33,991 $ 30,165

Gross Profit Margin 31.2 % 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/or 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/or 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.

Adjusted EBITDA was $19.6 million in the third quarter of 2020 and $15.3 million in the third quarter of 2019. Non-operating results in the third quarter of 2020 included $62.1 million of pre-tax gain on the sale of the RentPayment business, net of NCIs and $1.5 million of early debt extinguishment expense. Selling, general and administrative expenses included net non-recurring expenses in the third quarters of 2020 and 2019 of $1.8 million and $1.2 million, respectively. Salary and employee benefits included non-cash stock-based compensation of $0.6 million and $1.2 million in the third quarters of 2020 and 2019, respectively. The reconciliation of adjusted EBITDA to its most comparable GAAP measure is provided below:

(in thousands)

Three Months Ended September 30,

2020 2019

Net Income (loss) $ 40,392 $ (5,844 )

Interest expense 13,471 10,463

Income tax expense (benefit) 13,737 (1,736 )

Depreciation and amortization 10,251 10,077

EBITDA 77,851 12,960

Gain on sale, net of NCIs (62,091 ) -

Debt extinguishment and modification 1,523 -

Selling, general and administrative expenses 1,751 1,194

Non-cash stock-based compensation 601 1,171

Adjusted EBITDA $ 19,635 $ 15,325

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 September 30,

2020 2019 Segment

Selling, general and administrativeexpense: Acquisition integration services $ 1,012 $ 441 Integrated Partners Intangible carrying value 980 - Consumer adjustment Legal and professional fees 560 853 Corporate

Legal settlements (801 ) (100 ) Corporate

$ 1,751 $ 1,194

Salary and employee benefitsexpense: Non-cash stock-based compensation $ 111 $ 441 Consumer

Non-cash stock-based compensation 30 225 Commercial

Non-cash stock-based compensation 2 1 Integrated Partners Non-cash stock-based compensation 458 504 Corporate

$ 601 $ 1,171

Other Income (Expenses): Debt extinguishment and $ (1,523 ) modification 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.

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, our 2020 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 and our most recent Quarterly Report on Form 10-Q filed with the SEC on March 30, 2020 and November 12, 2020, respectively. 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 Three Months Ended Nine Months Endedper share amounts) September 30, September 30,

2020 2019 2020 2019



REVENUES $ 108,962 $ 93,883 $ 298,251 $ 273,671



OPERATING EXPENSES:

Costs of services 74,971 63,718 203,733 185,827

Salary and employee 10,010 10,668 29,695 31,923 benefits

Depreciation and 10,251 10,077 30,886 28,763 amortization

Selling, general and 6,688 6,695 19,305 21,031 administrative

Total operating expenses 101,920 91,158 283,619 267,544



Income from operations 7,042 2,725 14,632 6,127



OTHER INCOME (EXPENSES):

Interest expense (13,471) (10,463) (35,454) (30,602)

Other income (expense), 190 158 414 523 net

Debt extinguishment and (1,523) - (1,899) - modification costs

Gain on sale of business 107,239 - 107,239 -

Total other income 92,435 (10,305) 70,300 (30,079) (expenses), net



Income (loss) before 99,477 (7,580) 84,932 (23,952) income taxes



Income tax expense 13,737 (1,736) 12,919 2,468 (benefit)



Net income (loss) 85,740 (5,844) 72,013 (26,420)



Less net incomeattributable to (45,348) - (45,348) - non-controllinginterests



Net income (loss)attributable tostockholders of Priority $ 40,392 $ (5,844) $ 26,665 $ (26,420) Technology Holdings,Inc.



Income (loss) per common share:

Basic and diluted $ 0.60 $ (0.09) $ 0.40 $ (0.39)



Weighted-average common shares and equivalents:

Basic 67,167 67,007 67,114 67,109

Diluted 67,446 67,007 67,212 67,109

PRIORITY TECHNOLOGY HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(in thousands)

Unaudited

September 30, 2020

December 31, 2019

ASSETS

Current Assets:

Cash

$

21,695

$

3,234

Restricted cash

37,135

47,231

Accounts receivable, net of allowance for doubtful accounts

40,122

37,993

Prepaid expenses and other current assets

3,968

3,897

Current portion of notes receivable

1,435

1,326

Settlement assets

327

533

Total current assets

104,682

94,214

Notes receivable, less current portion

4,684

4,395

Property, equipment, and software, net

23,490

23,518

Goodwill

106,832

109,515

Intangible assets, net

97,239

182,826

Deferred income taxes, net

42,962

49,657

Other non-current assets

522

380

Total assets

$

380,411

$

464,505

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:

Accounts payable and accrued expenses

$

23,744

$

26,965

Accrued residual commissions

22,028

19,315

Customer deposits and advance payments

3,449

4,928

Current portion of long-term debt

15,583

4,007

Settlement obligations

30,288

37,789

Total current liabilities

101,042

93,004

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

371,206

485,578

Other non-current liabilities

6,424

6,612

Total long-term liabilities

377,630

492,190

Total liabilities

478,672

585,194

Stockholders' deficit:

Preferred stock

-

-

Common stock

68

68

Additional paid-in capital

5,068

3,651

Treasury stock, at cost

(2,388)

(2,388)

Accumulated deficit

(101,009)

(127,674)

Total Priority Technology Holdings, Inc. stockholders' deficit

(98,261)

(126,343)

Non-controlling interest in subsidiary

-

5,654

Total stockholders' deficit

(98,261)

(120,689)

Total liabilities and stockholders' deficit

$

380,411

$

464,505

PRIORITY TECHNOLOGY HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(in thousands) Unaudited

September 30, December 31, 2020 2019

ASSETS

Current Assets:

Cash $ 21,695 $ 3,234

Restricted cash 37,135 47,231

Accounts receivable, net of allowance for doubtful 40,122 37,993 accounts

Prepaid expenses and other current assets 3,968 3,897

Current portion of notes receivable 1,435 1,326

Settlement assets 327 533

Total current assets 104,682 94,214



Notes receivable, less current portion 4,684 4,395

Property, equipment, and software, net 23,490 23,518

Goodwill 106,832 109,515

Intangible assets, net 97,239 182,826

Deferred income taxes, net 42,962 49,657

Other non-current assets 522 380

Total assets $ 380,411 $ 464,505



LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:

Accounts payable and accrued expenses $ 23,744 $ 26,965

Accrued residual commissions 22,028 19,315

Customer deposits and advance payments 3,449 4,928

Current portion of long-term debt 15,583 4,007

Settlement obligations 30,288 37,789

Total current liabilities 101,042 93,004



Long-term debt, net of current portion, discounts 371,206 485,578 and debt issuance costs

Other non-current liabilities 6,424 6,612

Total long-term liabilities 377,630 492,190



Total liabilities 478,672 585,194



Stockholders' deficit:

Preferred stock - -

Common stock 68 68

Additional paid-in capital 5,068 3,651

Treasury stock, at cost (2,388) (2,388)

Accumulated deficit (101,009) (127,674)

Total Priority Technology Holdings, Inc. (98,261) (126,343) stockholders' deficit

Non-controlling interest in subsidiary - 5,654

Total stockholders' deficit (98,261) (120,689)



Total liabilities and stockholders' deficit $ 380,411 $ 464,505

PRIORITY TECHNOLOGY HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

Unaudited

(in thousands)

Nine Months Ended September 30,

2020

2019

Cash flows from operating activities:

Net income (loss)

$

72,013

$

(26,420)

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

Gain recognized on sale of business

(107,239)

-

Transaction costs included in gain recognized on sale of business

(4,372)

Depreciation and amortization of assets

30,886

28,763

Equity-classified and liability-classified stock compensation

1,627

3,354

Amortization of debt issuance costs and discounts

1,798

1,250

Benefit for deferred income taxes, net of change in allowance

6,695

2,468

Debt extinguishment and modification costs

1,523

-

Payment-in-kind interest

6,643

3,807

Other non-cash items, net

1,191

(157)

Change in operating assets and liabilities, excluding business sale:

Accounts receivable

(3,962)

(1,840)

Settlement assets and obligations, net

(7,295)

6,696

Prepaid expenses and other current assets

(296)

(810)

Notes receivable

(398)

(376)

Income taxes payable

6,026

-

Accounts payable and other accrued liabilities

287

(6,091)

Customer deposits and advance payments

(1,479)

250

Other assets and liabilities, net

(512)

(277)

Net cash provided by operating activities

3,136

10,617

Cash flows from investing activities:

Sale of business

179,416

-

Additions to property, equipment and software

(6,011)

(8,662)

Acquisitions of intangible assets

(4,415)

(81,777)

Notes receivable loan funding

-

(3,000)

Other investing activity

-

(184)

Net cash provided by (used in) investing activities

168,990

(93,623)

Cash flows from financing activities:

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

-

69,650

Repayment of long-term debt

(109,505)

(2,827)

Debt modification costs (paid) refunded

(2,749)

83

Borrowings under revolving credit facility

7,000

14,000

Repayments under revolving credit facility

(7,505)

(2,500)

Repurchases of common stock

-

(2,388)

Redemption of redeemable non-controlling interest of subsidiary

(5,654)

-

Profit distributions to redeemable non-controlling interests of subsidiaries

(45,348)

-

Net cash (used in) provided by financing activities

(163,761)

76,018

Net change in cash and restricted cash:

Net increase (decrease) in cash and restricted cash

8,365

(6,988)

Cash and restricted cash at beginning of period

50,465

33,831

Cash and restricted cash at end of period

$

58,830

$

26,843

PRIORITY TECHNOLOGY HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

Unaudited

(in thousands) Nine Months Ended September 30,

2020 2019

Cash flows from operating activities:

Net income (loss) $ 72,013 $ (26,420)

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

Gain recognized on sale of business (107,239) -

Transaction costs included in gain recognized on (4,372) sale of business

Depreciation and amortization of assets 30,886 28,763

Equity-classified and liability-classified stock 1,627 3,354 compensation

Amortization of debt issuance costs and discounts 1,798 1,250

Benefit for deferred income taxes, net of change in 6,695 2,468 allowance

Debt extinguishment and modification costs 1,523 -

Payment-in-kind interest 6,643 3,807

Other non-cash items, net 1,191 (157)

Change in operating assets and liabilities, excluding business sale:

Accounts receivable (3,962) (1,840)

Settlement assets and obligations, net (7,295) 6,696

Prepaid expenses and other current assets (296) (810)

Notes receivable (398) (376)

Income taxes payable 6,026 -

Accounts payable and other accrued liabilities 287 (6,091)

Customer deposits and advance payments (1,479) 250

Other assets and liabilities, net (512) (277)

Net cash provided by operating activities 3,136 10,617



Cash flows from investing activities:

Sale of business 179,416 -

Additions to property, equipment and software (6,011) (8,662)

Acquisitions of intangible assets (4,415) (81,777)

Notes receivable loan funding - (3,000)

Other investing activity - (184)

Net cash provided by (used in) investing activities 168,990 (93,623)



Cash flows from financing activities:

Proceeds from issuance of long-term debt, net of - 69,650 issue discount

Repayment of long-term debt (109,505) (2,827)

Debt modification costs (paid) refunded (2,749) 83

Borrowings under revolving credit facility 7,000 14,000

Repayments under revolving credit facility (7,505) (2,500)

Repurchases of common stock - (2,388)

Redemption of redeemable non-controlling interest of (5,654) - subsidiary

Profit distributions to redeemable non-controlling (45,348) - interests of subsidiaries

Net cash (used in) provided by financing activities (163,761) 76,018



Net change in cash and restricted cash:

Net increase (decrease) in cash and restricted cash 8,365 (6,988)

Cash and restricted cash at beginning of period 50,465 33,831

Cash and restricted cash at end of period $ 58,830 $ 26,843

PRIORITY TECHNOLOGY HOLDINGS, INC.

Reportable Segments' Results

Unaudited

(in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Consumer Payments:

Revenue

$

99,301

$

82,742

$

267,039

$

243,205

Operating expenses

88,203

75,528

241,519

220,909

Income from operations

$

11,098

$

7,214

$

25,520

$

22,296

Operating margin

11.2

%

8.7

%

9.6

%

9.2

%

Depreciation and amortization

$

8,481

$

8,302

$

25,721

$

24,215

Key indicators:

Merchant bankcard processing dollar value

$

11,235,068

$

10,566,501

$

30,632,724

$

31,551,405

Merchant bankcard transaction volume

122,623

131,646

334,896

382,676

Commercial Payments:

Revenue

$

4,995

$

6,338

17,017

19,492

Operating expenses

4,826

6,720

15,609

20,607

Income (loss) from operations

$

169

$

(382)

$

1,408

$

(1,115)

Operating margin

3.4

%

(6.0)

%

8.3

%

(5.7)

%

Depreciation and amortization

$

77

$

69

$

231

$

248

Key indicators:

Merchant bankcard processing dollar value

$

58,304

$

92,290

$

195,229

$

236,716

Merchant bankcard transaction volume

24

26

70

84

Integrated Partners:

Revenue

$

4,666

$

4,803

$

14,195

$

10,974

Operating expenses

4,413

3,800

12,729

9,632

Income from operations

$

253

$

1,003

$

1,466

$

1,342

Operating margin

5.4

%

20.9

%

10.3

%

12.2

%

Depreciation and amortization

$

1,403

$

1,299

$

4,048

$

3,086

Key indicators:

Merchant bankcard processing dollar value

$

105,537

$

119,747

$

352,144

$

259,894

Merchant bankcard transaction volume

371

421

1,207

913

Income from operations of reportable segments

$

11,520

$

7,835

$

28,394

$

22,523

Less: Corporate expense

(4,478)

(5,110)

(13,762)

(16,396)

Consolidated income from operations

$

7,042

$

2,725

$

14,632

$

6,127

Corporate depreciation and amortization

$

290

$

407

$

886

$

1,214

Key indicators:

Merchant bankcard processing dollar value

$

11,398,909

$

10,778,538

$

31,180,097

$

32,048,015

Merchant bankcard transaction volume

123,018

132,093

336,173

383,673

View source version on businesswire.com: https://www.businesswire.com/news/home/20201112006102/en/

CONTACT: Investor and Media Inquiries: Chris Kettmann 773-497-7575 ckettmann@lincolnchurchilladvisors.com