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PRTH Priority Technology

Participants
Chris Kettmann Investor Relations
Tom Priore Chairman and Chief Executive Officer
Mike Vollkommer Chief Financial Officer
Andrew Scutt ROTH Capital Partners
Claire Galbo LCA
Call transcript
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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Priority Technology Holdings Second Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I will now hand the conference over to your speaker today, Chris Kettmann.

Chris Kettmann

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

many certain remind are XXXX as due and plans March differ to or defined review the several which and publicly XX, Before we statements we would company's the business, XXXX. Private risks comments with prepared date, management's our forward-looking the Reform in are subject the expectations important will risks all Act to similar actual update filed about or described Litigation XX-K to factors, company's of company's today statements we those control, operations our Any future as The participants in matters, forward-looking and for Securities Form could uncertainties forward-looking of today remarks, today's of including include undertake to future Securities make and on beyond Commission which any only that regarding provide uncertainties. obligation on like results report no I the materially current are Exchange statements.

measures Additionally, to net including may for public Please EBITDA call. during and refer to refer our non-GAAP announcing of and definitions reconciliation measures, our to these the income. EBITDA a we including disclosures, press in of those adjusted call referenced filings release our non-GAAP this and measures

CEO, will With turn Tom clearly and help We have that, more that to to now also go-forward provided would like over the our us call presentation an our today's I results accompanying Priore. articulate call with Chairman and strategy.

Tom Priore

second everyone to Chris, our and Thank for call. joining thanks us earnings you, quarter for

strong overview and on cost the over I'll several quarters, control and QX over who'll turn initiatives. performance go provide done it detail a of brief we've each of segment, more Mike to past business results, into the then As our

of for pandemic, position we've commentary, the outlook I'll the coronavirus despite how COVID-XX actions currently to lines to the influencing including reflecting the business reported associated the challenges order quarter of exceptional unprecedented nationwide Mike's shelter-in-place a period. taken second long-term. underlying and our ourselves results our each strength Following begin the the with We review is continued

the processing down April and modest merchant decline results shutdown corresponding dollar revenue with volume of albeit XX.X% a bankcard reflective were in year-over-year, of XX.X%. Our more

merchant countercyclical we XX.X%. As volume hold, increased in May the showed year-over-year, of actually and strong our positive dollar June a dollar XX.X% declined while June, revenue In offering assets processing results continued and quickly processing of year-over-year, May, merchant product momentum while adapted, bankcard strength modest improvements. bankcard its decline increasing posted volume In X.X%. took revenue X.X%

declines. quarter, increases mix a and expense in revenue volume of quarter. full of growth each the continuation For the initiated with strategies April, May, revenue spite This full XXXX e-commerce, total resulted vertical of processing year-over-year the management XX.X% in the coupled contributed in June growth strategy increase stability, with for modest volume in product-driven to EBITDA automation-driven adjusted in growth EBITDA and

challenging economic performance. with a I'd further well ask particular quarter, As as provide Vollkommer you Mike environment. the month as to the trends business each during emphasis performed about incredibly like business can on now our during well segment current see, to insights Mike?

Mike Vollkommer

growth on intra quarter's Thank comparisons dissect second the We really and best has mentioned. consolidated the full quarter's review second need rates. financial unless current I and Tom, Tom state trends. make then be between All to quarter segment XXXX, quarter the I Tom performance I'll understand shared to results, results the you, otherwise. business year-over-year good XXXX already second as and quarter within trends that performance the morning. will business commentary provide

June, $XX.X in May totaling billion was processed for and Now and billion $XX.X $XX.X Merchant $X.X in $XX.X billion the June, April, totaling month. for $X.X totaling in for the each million June, $X.X quarter. quarter. $X.X was the in May by April, in and million in full let volume Revenue $X.X $XX.X million million to bankcard recap April, me $X.X $X.X Adjusted million in million the May, in million full million EBITDA in quarter. was billion

mentioned, and Tom with and volumes and were distribution and stability XXXX. coupled and the million offerings In This new above added EBITDA place $XX.X posted of May, contributed quarter, strong growth business. strategies product the growth the in revenue $XX.X gross Full continued channels the as reflective year-over-year to As strong in May million our regional the over increasingly return demonstrated by which profit results reflected processing in management our quarter of of added in adjusted April X,XXX implementation nationwide supplemented strong Tom X,XXX revenue of month performance in with Throughout and had counter-cyclical X,XXX the acceleration the to revenue June. the each momentum in mentioned. of economies added and is was diverse the May, results, began June in orders. thoughtful our quarter shelter expense April, have specialized assets. boarding opening merchant we was

quarter XX.X%, and from is bodes strategies place in growth salaries Gross and overall is of increased XXXX. light the million Now margin Full profit approximated for new we drive as our X.X% a The with platform. stable that added in to late outlook decline and in well put businesses. in SG&A. to volume to base benefits XX.X% processing and decline XX.X% This from of historic million expense Full this compared a $XX operations was XX.X%. margin the of volume began within per integrated $XX.X income million. partner trends with gross very of helped in-line million last margin year profit to employee revenue decline X,XXX X,XXX performance a in higher reflects $X.X e-commerce $X quarter month

operating is million. decline the and $X.X Payments as revenue and incentive of was a program from bankcard XX.X% lower of was This of driven payments consumer managed expense billion from result the pandemic. million, compared result e-commerce. decline this in $X.X from by and The this revenue merchant loss of volume segments; merchant volume $XX.X a income was XX.X% growth XXXX. offset was the prior from million to a decrease million revenue $XX.X within $XX.XX decline XX.X% $X.X Merchant million of The income was automation overall services a $X.X management. revenue segment, higher the in strong This of $X.X the initiatives million a $X was of $X.X drove X.X% payments grew dollar from processed from down mix Merchant bankcard operations processing managed a bankcard average ticket decreased by comprised activity of revenue year. this million, of of average $XX.X which ticket The million million, entirely a $X.X million $X.X was million. periods. declined decrease Commercial billion. almost decrease operations $XX.XX. the with profit $X.X billion, break and X.X% million, $X.X operations increased from transactions in services was and delivered due increase Despite million, let's in the Now COVID gross the approximating from by of up was Payments $XX.X focused Consumer million. XX% CPX $XXX.X which revenue $X.X Commercial in million expenses. in $X.X comparable

While gross focused $X.X income Again, operating reflects was management. of flat, automation million. operating and relatively decreased the profit other expense this expenses benefits performance initiatives

XX.X% advance Integrated Payments largest the percentage within that growth XXX.X%. experienced our $X.X increase the future. the order The within a second quarter with of $X.X XXXX. in from with compared Partners contributor anticipated million of from cost of Commercial million was up second million, XXXX. the compared Partners which will non-recurring XXXX, expenses second million, $X.X was current $X.X of from integration increase. expect PRET operations segment we was Hospitality's in $X.X this segment $X XXXX. structure the We quarter the accelerated million second strongest adjusted in of eTab million. Corporate Integrated costs, quarter Non-recurring $X.X was $X.X quarter excludes and a $X.X with the income dollar $X.X million. income were XX% expense revenue the million, Partners million million was operations growth will XXXX, have second solution in from in the in Integrated at the in XX.X% support quarter

corporate was So, non-recurring of $X excluding and expense the quarter second million XXXX in those respectively. XXXX million items, $X.X and

liquidity improved position. review let's our Now

amounted focus applied June At debt, $XX.X had on the under million XX, repayment during $X.X our the debt and Net a operating an unrestricted this million increasing activities resulted increased cash to by unrestricted million. net outstanding of to repayment of investing balance to which unrestricted provided balance strong in $X.X million. cash cash and management credit cash while of revolving quarter. We cash $XXX.X debt, activities included facility. million $XX outstanding Our we

March at and earnings X, to X.XX net Our we mentioned achieve and that near we front news the on that reduction work down the X at from stood net in $XXX hope X.XX very our total leverage have a future. objective We've been In facility ratio to quarter that to was determined leverage. credit the exciting meaningful first XX. in terms some debt under to call, are million at hard laser-focused on

for from while for we providing of severity Tom, I'd certainly stand provide considerable XXXX. in an guidance. the we like business, regarding full-year to In release, the being our stated financial duration time and our continue the on turning to by Now, the uncertainty will pandemic. excited we we regarding continued before are that update guidance where call refrain earnings the the to And to momentum be there back the

are improve optimistic in of economic continue June. XXXX those our current environment will months over results the continue, should remaining However, to financial the we we during that delivered

the Tom. call like to over back turn I'd Now, to

Tom Priore

Thank like about trends we've you, the been the more Mike. recent I'd in seeing detail most to business. share now

in and a variety rebounded do. initial June in very few industry global of ways, saw we in As to you able most of have affected been XX impact withstood the a up our has annual release to way its in while Priority the our pandemic successfully meeting, quickly leading

our service, are the meaningfully Commercial Payments our month. Mike per X,XXX and by Payment client e-commerce, Underlying levels of our new at offering outstanding in higher strengths historical the and in adoption decline has best-in-class noted, As consistent margin to processing merchant performance been X,XXX trends the merchant with volume segments. product boards Integrated offset

of June million as $X.X compared $XX.X $X.X processing on the the Importantly, million. August, from EBITDA to accelerating and depending XX% see total carry improved closing July expenses. This adjusted Based X%, the trends rate. with XX% increased to XX% to volume continued processing July and as of achieve total from EBITDA June is are billion EBITDA a of and and year-over-year the results of expectations to likelihood middle compared the on of July, July's $X.XX to our preliminary X.X% and these in trend into revenue high in-line July an to million final XXXX. in month's in in represents year-over-year June May exceed July we've to volume month results, billion, revenue to $X signaling adjusted over on Through run increase adjusted of

quarter to through goals working the our Priority's enabled utility to to diverse the model of Simply cost channels SMB business diverse pandemic remote net teams payables. service operational in strength order Commercial defensively continue automated offerings sales add the namely And us and and position in The merchants. positioned put, distribution healthcare, strengthening as estate number results resilience partners. value and new our resiliency environments would greatest advance early to of foundation and strategic seamlessly our Payments, our channels. shared QX maintaining reflects our infrastructure payments verticals services two our and virtualized BXB product demonstrated integrated Our of key trends, of the hospitality, operating a there's our of to integrated by and their last, differentiators, a real has through adapt variable

of use conditions environment environment. We a are shareholders will current particularly dividends likely the paying that current to its Priority, our behavior to payable likely the challenging the in businesses collections, estate to signal integrated and product these of Increased with technology is collection change the to sizes accounts opportunities. operate certainly need in real channels all tools contactless influencing healthcare And in believe assets economic we support capture positioned given and well. cycle, software digital customers significant support in revenue for for offering our how future. perform payment All e-commerce for businesses those to and distribution

We'll we've today, integrated countercyclical long-term and business building consistent drive environment steps cost taken structure while economic diversified these also evolving in growth. driving In to well-suited investing expand a payment initiatives addition our uncertain the and for debt and to opportunities to by to to enhance like to our continue streamline automation only to compete for long-term. liquidity Priority emerge environment reducing giving well-positioned this by the resources through identify enhancing balance incredibly ways to sheet navigate necessary to overall not but flexibility

wrap light dedication past second meet COVID-XX, of with every strengths up, the quickly to today's team done. the in and customers like forward. move the of could our our Thank you've we're and rapidly for success thus QX. are in months to several you I day results work and I'd by of over we especially job thank effort that very their the conclusion, marketplace, a in without happened None hard Before to showing pleased of team everyone's for the evolving excited to getting the mission have to and full the needs our impact team In you dedication entire far done. quarter do ongoing all are Priority the

second and focused further on of results our deliver integrated open countercyclical we payment years we proceed stronger assets, our and quarters platform please. leaner and Operator, expect to through remain line half As XXXX, we'd acquiring the now to ahead. to questions, e-commerce maintaining growth of program, cost continued will like even experience in the in our structure leveraging our the

Operator

Andrew question sir. Capital Scutt And Instructions] Please ahead. you, is you. Partners. [Operator go our Thank ROTH with Thank from first

Andrew Scutt

first results eTab were My pandemic. COVID-XX question quarter. great first strong the the momentum, businesses of the I Partners adoption Integrated on this congrats and business. from exiting stems morning quarter good PayRight know due lot Hey, to and seeing

as us businesses give update how did you to the these can So, second in an quarter?

Tom Priore

Yeah. Sure.

noted channel experience channel Mike continued I'll as or to it eTab the digit call growth. So, the triple Hospitality

with has actually kind So – integrated omni-channel released in has as POS and just an of segment been tech new also a We dine-in in are unabated. segment that beta contactless adoption that continued some for that for fully well.

what's the that new that position the – excited we're be a that on business. horizon was We've we'll we're was little pretty about generally flat a initiatives segment probably some later year, flat. in PayRight talk for arena but quarter. So relatively in bit in that got to the to for The

Andrew Scutt

news the later and year. forward to you looking hearing Thank Great. that in

the of if has with and off the expect Second question here, time? model sticking due immediate payment]. could way guys or where future? are in you [full comfortable the you're wondering Are in just you to here and any you plan original feel guys with deal that pay the the getting I plan we was changes kind to that confident of now out in

Tom Priore

details think that and now look, anticipate we've we we you our to near the you repayment got further Mike, good that know don't and behind certainly be the de-leveraging, of if I will into forward accelerate natural have some we Yeah, hopefully we'll right add? come would anything momentum those channels some business future. but sharing have debt opportunities and I those execution looking all we're as in mean frankly developing –

Mike Vollkommer

made comment are business the the think laser-focused significantly And ahead create good very that also I same of balance we on us got I've de-levering at good to some the sheet. and time. do No, opportunities opportunities we've that

stay just with we excited we and pretty say. we're tuned about are So, that can where all is

Andrew Scutt

quarter the going It business sounds good. congrats the you again guys and Well, on the here. in have momentum great

Tom Priore

Thank Yes. you.

Mike Vollkommer

Thank you.

Tom Priore

operate segment can heavily a I'm out among that assets sure appreciate been there that's a on there. a capability invested well the that assets of out very as have and streamline efficiently. number there's there It's lot relates in that. Priority as are those deleveraging, been And as haven't operating of fared we've to private maybe look and just partners community. it – cost are payment does And to note, recognizing equity a unique you very operations payment

it does because the this particular to of difficulty fore those the the for all they're to tested. opportunity come for think pandemic, I abilities afford

we've inquiry of into leverage partners So, can platform. a lot how seen our

partnerships really that be for source some be solidify our as of expect valuable those to business. of to we We deleveraging

Andrew Scutt

Great. That's all for Thanks now. me for again.

Operator

And Thank is Claire go Galbo you. Instructions] next Please our question ahead. from [Operator LCA. with

Claire Galbo

Thanks for morning. taking questions. Good Hi. my

First, to ask wanted are doing the just quarter; that business this to what Commercial Payments segment? accelerate in back you pulled growth

Tom Priore

Mike, feel and – – I'll the Well, in to free here. jump

Mike Vollkommer

Sure.

Tom Priore

some Payments, Commercial service is managed different than platform The I'll so is because backed through they few – is institutions of little a slower just pandemic, contract on the a which brakes Express that group, the a And those as – Payments, of American more result. of of things. call segment that large the of payables serve automated contract segment up bit the actually it Commercial a likes put and were imagine, COVID of is you but grew for part kind the the as that and might programs a hire – quarter, other

we're for full. and pretty automated darn platform payables the is CPX – the the So, actually pipeline

there's in payments pipeline the we're expand. north in that activating process to – of continues that and So, $XX-plus-billion volume we're on of

just So, infrastructure and all so have I that as is, think just to right that close don't bottom-line. this in business, hit important pipeline is exists of the going we the for convert is now, we to the to business, that that in need invest the the takeaway –

that's as have roll because of imagine, due been might already rollout Some delayed pick to and constituent of in here in to terms banks programs their been up little back pipeline being a in but out you that the slower pipeline's there bit convert to we expect the the remote, a place. pandemic commercial that little they're QX

Mike Vollkommer

the that foundational in of it'll going at a managed as we're have – I'd businesses, Yeah. is just is payables just nice will cash two generator. overshadow that other add some for what's to growth that's services. the so going flow what's where sort but on high different cash and eventually two nice CPX It's that always there's business. But you us, growth that – that The business business that is the accelerated automated a to it platform and managed happened services is thing of complexions; it's very generated opportunity the to get with decent like part only – – one the a a foundational look

Claire Galbo

question, one worse? can Okay. Thanks. another reductions And just volumes if there you processing get cost make are additional

Tom Priore

made in We automation There were pretty There to that consider that what we are. XXXX. actually put are. would driven in in begun modest by place reductions we personnel had

would We have see percentage pandemic – a just can did then will that don't to costs. need another projects of we reduce wave to will levers now, some optimized a but an other worst kind of of scenario, operating now. the sales and of the are now for certainly right there there so as and – they're driving that see, naturally right but see growth be we a frankly for pretty automation the operations right if [indiscernible] or case acceleration that OpEx we it also And pull, in continue economic the state we we're

Mike Vollkommer

our to the back economy. Sure to some and through with in growth that bad know brought you a evident saw And quarter as in as the we results. May-June we pandemic, it of help folks we us were was furlough seeing – April the that's we those did added the business we and as

go was – said, kind going we and profitability initiatives and modest like our will to to to a we can we little plan So, plan we need changes maintain to had be and of do flexed bit where which A was and need be so took, do flow. it we what have cash didn't up to, B, forward Tom we as but which we we responsive

Claire Galbo

Are last come at acquisition especially All active year, all, continuing one right. down seeing expect do like Thanks. that? anything And I question. COVID you this be you just valuations on given the have situation? How the to front

Tom Priore

said I we be a opportunities transaction, evaluating deleveraging on if certainly one. to and always would to were need it We're execute

considerations for we transaction of ways look that the us sheet at. in influence of types would would that the balance the some be So, substantial would

Claire Galbo

Thanks All right. very much.

Operator

this remarks. And it today. for for session you. final back Thank our management would concludes Q&A to to I turn like

Tom Priore

QX those key for thoughtful we'll and there sources means revenue that we've in We're set time seen forth laser-focused certainly the Well, on certainly we Mike business utilize in that your hold of a of the team, stay Integrated And performance build as been continue moving for further we and to has their day we on be continues participation ways. wanted everyone that just clearly that to I has a excited the Thanks everyone and through thank everyone was in call. felt are in the and balance momentum behalf catalyst into that focused the directive the to the safe our Partner about to rest XXXX. and stable deleverage Priority And the intently channels healthy. the and of hope sheet take great remainder XXXX. directives on

Operator

concludes today’s you and Thank Ladies this gentlemen, participating. for conference call. you. Thank

You disconnect. may now