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PRTH Priority Technology

Participants
Dave Faupel Chief Marketing Officer
Tom Priore Chairman and Chief Executive Officer
Mike Vollkommer Chief Financial Officer
Brian Kinstlinger Alliance Global
George Mihalos Cowen
Andrew Scutt ROTH Capital
Call transcript
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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Priority Technology Holdings’ Fourth Quarter 2020 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speaker presentation, there will be question-and-answer session. [Operator Instructions] I would now like to hand the conference to your speaker today, Dave Faupel. sir. ahead, go Please

Dave Faupel

the Good Vollkommer, Dave thank Marketing Faupel. Technology Executive me at Victor. our Tom joining and Chief Chairman Officer everyone Financial us. Priority Chief on with And I’m I’m and Holdings. today morning you, are you Priore, Mike and Officer; for here call our Thank the Chief Officer.

of the to remarks, undertakes today risks remind Risk SEC our all involved our comments and will Before cause future forward-looking to obligation to as a uncertainties or Factors actual a we we the The participants of filings to review differ our encourage and update no of forward-looking like events, numbers provide that statements, may materially a whether I these various or would our forward-looking which include prepared revise company statements, results provide filings. otherwise. in information, that statements. new We you result discussion detailed from

to be found but liquidity available measures may the our measures our and the performance we adjusted not non-GAAP call. the to Reconciliations measures, appropriate during filings and With and EBITDA in refer release of Chairman can to like GAAP EBITDA over section turn Tom our that, I’d call to Priore. SEC website. the Investors Additionally, our to of in limited CEO, non-GAAP including press and

Tom Priore

earnings fourth impressive will segment the sheet. performance, on it I’ll by current along the detail Thank for financial highlights I’d the on and during balance providing over our our our overview Finxera Then us quarter to level call. brief of acquisition year-end QX of Dave, begin you, thanks more results, everyone, the morning’s to a our to who Mike, like with into of for turn and go this improvement call joining and discussion quarter.

through that through a a QX, of executing the in our our plan As we release, our result to COVID-XX due momentum saw the you as performance in pandemic. built challenging earnings year, QX continued

and assets our payment offerings strong quickly allowed continue our We results. This environment payment invest organization. COVID a deliver The revenue our our of top in and changing line to infrastructure. history product counter growth line technology culture, our and the statement having cyclical to diversified us to was strength products to adapt in of people bottom year and the operations,

As with restrictions and related the to consumers and customer’s on focused our them environment. in helping continued struggle teams our pandemic, solving to this perform businesses were problems

of the X.X% show was increased of Meanwhile, $XX.X $XXX today of and quarter million represented full prior from from million of and the results the rose year EBITDA lockdown XXX.X% the from quarter an million impact the Our period. the quarter Income for the million year $X.X of mission. Revenue adjusted million $X.X million, million from COVID year, operations increased XXX.X%. XX.X% to increase increase that for X.X% the an increased success for the of period. for for $XX.X $XX.X $XX.X from despite

with software of contribution businesses, payments innovator year, CFTPay, fintech partners, our and rent and million, integrated digital forms agreement XXXX. short, the software our a vertical In acquiring at like a combined monetize scale partner’s as and the banking or given financial virtual industry money integrated modern payment the platform facilitation a we’re an that we in to the companies issuing payment to services shop administration payment management, operate a industry provides one-stop to and leading and quarter enterprise as Recently, our like Service platforms. operated payment flagship increased acquisition Finxera of positions Combination operation application applications. within that solutions risk wholly-owned partner of We of or a Finxera’s monetize value during infrastructure announced full for to $XX.X acquire the that software segment. in will to the and consumer bank at looking deliver company priority and merchants, settlement account ability rest cyclical us debt SMB networks, technology business motion subsidiary our and for feel a loss fully EBITDA ability solutions as adjusted payment and burgeoning the all XX.X% despite For the in first Holdings, fourth to launched completes service, wallets. managing pioneer headaches payments compliance. of of and Banking handle one finance to and this counter in in client without functions our division accounts underwriting the

the expect to are and to liquidity. Finxera’s balance the improvement complete transaction to in to months. transmission nationwide Mike once to hand this over licenses transfer quarter, I’d current six next sheet of now money our Mike? segments close provide it business the and like We further of in in nine into our the each insights Vollkommer trends

Mike Vollkommer

XXXX on to and highlights Thank you, the provides ended Tom, a very everybody. results comparable the of the on comparative morning RentPayment December press release on that XXXX basis. years the results September GAAP provides and XX, and relevant Yesterday’s exclude a XX, quarters also for asset more XXXX. basis sold good It

And fourth provide excluding two meaningful results the from out in results quarter release quarter quarter results and release quarter the and each of a XXXX. our was XXXX $XXX.X the of $XX.X March nearly was XXXX. revenue XX,XXX led merchant on strong for this in were was XX increase revenue for to a detailed in million boarding, provide Gross from full XXX% from the $XX.X quarter. comments was added the in to first in million, has in general also XXXX XXXX a quarter. EBITDA quarter. $XX.X items improvement Selling, within quarter XXXX XXXX Throughout XXXX growth the quarter highest expenses in increased a press distribution The XX.X% expenses of amounts, the fourth XXXX that And and and margin Income XX.X% and to XXXX strength million non-recurring merchants channels a new of $X.X order our review the of reconciliation GAAP XX.X% the million compared million, excluding over most pages the the profit press diverse quarter. quarter XX.X% will with in the and Consolidated XXXX XXXX, $X.X fourth within $X.X are same reconciliation fourth December our in reference. you continued increased carried I’d included million million the operations points to basis million Gross the of our administrative that to press from Adjusted XXXX. in quarter. with profit million XX from of attachments quarter. release point year million the $XX.X yesterday’s provide those into fourth month my XXXX XX.X% XXXX This trends. fourth $XX.X of So of of RentPayment. RentPayment $X.X focus last like

of to has revenue, December was the adjusted also quarter similar this XXXX the Now highest first strength into of EBITDA carried XXXX. month and

by increase $X.X $XX.X six-fold million volume by in and of in million this This merchant growth is in Consumer down Now million. driven a the merchant of supplemented in Payments XX.X% XXXX an was $XX.X quarter. in processed Merchant $XXX.X compared acquiring billion was increase Merchant with margin the X% bankcard Growth overall was XXXX $XXX.X from was volume. bankcard bankcard let’s million million declined billion quarter. X.X% over high transactions this a the increase segments. which within XXXX $XX.X contributed specialized quarter. revenue the break revenue, $XXX.X

these $X.X The yesterday’s fourth in $X.X the release included quarter. increase vertical from consideration. benefit reduction shifts was transaction profit gross of and was drivers of the in of The from the this by in million down non-recurring year operations factors Pandemic offset million. $X.X including detailed reduction quarter. operations average offset Priority However, Consumer other XXXX merchant of a operating have XXXX $XX.X but This partially consideration. $X amongst $X.X reference. third Page contingent automated than is XX.X% $X.X a similar quarter largely million consumers steady with XXXX pricing the million on press we your XXXX which $X.X Commercial loss a quarter. contingent from increases higher payments income in certain This $X.X million XXXX was compared in items increase a of activity, reduction trends of grew X.X% X partially business improvement $X.X of the $X.X year. and ticket Gross payment $X.X services. The spending related $X.X in in which offer million and million approximated average certain conducting a from and amortization. processing year-over-year was from transactions. million, was expenses. payment Integrated And swiped a fourth are Revenue from a by resulted depreciation generally mix, million, economic in offset in $X.X continued million. million included and largely of XX.X% benefit are operations quarter. million are million payments values from for with SG&A transactions quarter million, industries, transactions, from curtailment revenue in it’s $XX.XX impacted a by revenue $XX.XX year’s to the dynamics our quarter. within increased. solutions of Card-not-present $X.X of due in profit, accounts Commercial over was more in $X.X quarter. XXXX SG&A to million increase favorable performance saw resulted that its downs, programs those of have $X.X decrease is quarter payments million managed non-recurring which in revenue XXXX million partially Key income was each fewer Partners in a the million of to in the prior write volume million CPX $X.X payable This activity from $X.X non-recurring quarter transactions card-not-present that asset

Priority Priority arrangement the payment contributor as was Priority serve business. this Landlord Now as Solutions Integrated Partners continues real growth the PRET Technology, Health and XXXX market segment’s largest our our Real PRET Station the to includes processing estate ongoing well Technology. to over Estate MRI, Hospitality quarter. through PayRight with

non-recurring introduction. the under within by and made grew we’ve products growth XXXX transactions as approaches Integrated carried reflected seeing in also reflects million we’re eTab fourth acceptance This that channels. Hospitality are since our revenue $X.X the to expenses And quarter to in of expense incurring these is XXXX Across into similar quarter. X sales quarter continues million growth and wider press all expenses Hospitality are acceptance Partners within hospitality million both fourth Total was non-recurring non-recurring channel. This Page on among Now volume its across $X.X up revenue the our been sales consumer by Corporate quarter channels with compares of And million compared XXXX $X.X that in the were release. yesterday’s of XXXX items products. eTab XXX%. the the team momentum $XXX,XXX eTab made quarter, gain fourth of XXX% with included with segment the within again, within merchants. tremendous PayRight the $X.X in XXXX profits reporting detailed

and review on liquidity improved position. move let’s our Now significantly

the at times. was debt net was million As ratio leverage quarter X.XX first net $XXX.X of end XXXX total you recall, and the of

to $XX of position on at borrowing at in total $X.X liquidity And we months. million ended revolver. $XX debt with the million net leverage stood At we million a times. $XXX.X and year that XXXX. that were in reduced that of we X.XX reduction we our laser-focused ratio improving $XXX.X net million cash was nine Our capacity time, on Well, time said had million,

remaining $X.X was having million borrowing $XX quarter. revolver position the million capacity of XX fourth December we the outstanding on and during $XX cash Our million the have at repaid

to continue be liquidity laser-focused XXXX. We in on improving

which well mandatory refinancing by We’re over the in midst million but the is years. debt amortization what of next $XX two debt, do only not rates, will in our we reduce interest

a with acquisitions. accretive facility new access equity liquidity million for and revolving will credit to preferred Our $XX enhanced further be ready

excluding million, the to guidance guidance Tom, we months. that to XXXX RentPayment. to in provided $XXX range XX% turning in quarter adjusted XXXX $XXX objectives. which million is before $XX of range million, EBITDA well excluding XX% any release. not million, $XXX the so these review Now XXXX nine bodes above This call Revenue I’d include above like achieving earnings of million $XX far for increases growth to of XX% The Finxera, in back $XX.X expected our very EBITDA between RentPayment. million, related Adjusted of expected revenue growth between XX% to March to close six expected experiencing is a of strength does the press acquisition is to to to we’re to to first XX the a

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

Tom Priore

Thanks Mike.

shared, The is top December EBITDA XXXX. strong fiscal As growth first bottom momentum and by line into we for XXXX line continuing had in us adjusted Mike of year very built revenue and measured growth. during in QX the as we quarter

our As you can last and reopened, built performs as It’s economy to strong see we through intention. cycles. and have through with built from results it’s resilient business the a COVID varying business that

vertical with That Partners we monetize fifth perform like becoming among is business technology the payables market and volume largest by strategies and as we future among and our reality segment, acquires, is for platform peers analysts base Integrated Our relative to developed product of acquiring in leading its RentPayment’s expand accelerate have our payments. core can investors merchant automated is clear continue and to Finxera CPX ease. non-bank customers, the broadening we market with our operating a within and of

mission. As quest open our and the that line by easy a to payments Operator, questions. company, organization with for purpose is to make are like energized moving the we’d collective now we towards

Operator

will the Brian line [Operator Instructions] question from Alliance first Kinstlinger come from Our Global. of

may You begin.

Brian Kinstlinger

into as about Hi, It first commercial said Can as you you quarter. for your guys, taking seasonality volume questions. business? that ever like carried thanks in the December my was and talk strong sounded payments any

So to any seasonality. me right? see shouldn’t suggests Is material that we that

Tom Priore

seasonality way COVID-related banks of the had been really we delayed that to Yes. trajectory in growth and pipeline responded our We business. experience really don’t What’s some that COVID. in just the has

how payables, kind which moment among fleet. – that travel a reassess So taking I market were to push a kind think forth partners in generally that really treasury shutdown of been and going of has largely in bank just automated to they reality of T&E of our the and terms and on

that automated now And So, commercial momentum benefit true recognizing element of platforms. a their payable of we’re picking the good news is just they’re is up. seeing that important more the much card

Brian Kinstlinger

Yes.

broader guess, on back question as a asking is the What So XXXX. enterprises reluctant to on take another much flat CPX drive me Are doing but this XXXX? that will in was take led line referring customers’ to we’re things had now seasonality, then has business? revenue – in you’re point reluctant environment? to I line flat for throughout of on that the I – let Is stronger my you to you that this step what And right business that think demand CPX? what are

Tom Priore

sure. Yes,

volume So actually is considerably. up

margin a So bank change have in margin Yes, on direct. versus volume profile just it mix. different a is we really

commercial trend The well I’ll So expect payments adoption And to pipeline acquiring really to seen as what within in commercial be and we’ve the our driving through that’s of just continue. going the segment. actually treasury acceleration driver to both of we card, is bank that position of that pickup. the segment clients adoption BXB in call pure side as to among those adoption kind in close the

Brian Kinstlinger

or merchants? to is get which highlighted And a merchants need that investments is making – more your or X,XXX commercial that on to function to side, to a any the slide of there back make, in you’re quarter, deck, X,XXX all those you

Tom Priore

be clear, to acquiring side. Just the those on are

Brian Kinstlinger

Yes.

Tom Priore

normally of season. little at rate. And bit it’s that below steadily just because the we’ve kind bend December’s a holiday

the trend part consistent has economy remains boarding COVID drop very been – off, through XXXX. that and recovered through boarding it in early see of so of as and the we’ll level So in the even but

Brian Kinstlinger

Okay. Thank you.

Tom Priore

one If as to Yes, additional where is, going I scales. need as make it’s just we think business side to relevant commercial other the kind could of comment, I make absolutely. you’re in that investment on any it not do

built notes has this So I mentioned of with my as been it’s it’s my – built intention, with been kind – purpose. in

momentum see it. additional for already convert don’t we that in investments pipeline poised we need to the to We’re make and

Brian Kinstlinger

Thanks much. Okay. very

Tom Priore

Brian. Thanks,

Operator

Mihalos the line question George Our come of Cowen. from from next will

You may begin.

George Mihalos

that Thanks fourth I can to of afternoon. Good start guys. as taking Hey to the you is that then the And wanted us, impacts what say, in quarter, the within off, think card-not-present my of XXXX, And happy outlook today? both. the kind much business, growth you consumer about for rates how you question. I’m incorporating remind in you again for e-comm business? are for guidance

Mike Vollkommer

a from e-comm perspective, transaction see probably we business the The is, Sure. consumer card-not-present behavior holding.

you I lot grows that’s into the about we’ve say people you’re activity, we exceptional restaurants. talking receiving. the question on see a fabric restaurants, from going acquiring volume which don’t behaviors volume e-comm, what see reopening, be there’ll program, what’s from growth the we XXXX, and ask as card-present. coming growth Yes, really think a that specialized the When built people’s merchant business. in Northeast the of if that to a throughout with about had of not-present continued growth But

obviously growth of We’re the more But, forecasting XXXX. second a than it conservative in largely had grew in half we XXXX.

riding we’re year. year-over-year half So the a really first crest to in good of the comparison

it the but continues don’t nicely, to in grow So XXXX. at same it than rate it to have grow been has we obviously forecasted

George Mihalos

right? that’s that It for given issues, obviously you saw comparison seeing. just the like what you’re just encouraged sounds still entirely That in Understood. strength you’re XXXX, by

Mike Vollkommer

yes. Absolutely,

George Mihalos

Just we’re The want question of for growth that appropriately. the progress kind about Okay, to the the to revenue that thoughts great. question sure throughout year? might for me, of guys. contemplating million around of differently. ask to of cadence And thinking revenue the million $XXX prior last maybe just you’re course Thanks that little $XXX how a make any XXXX,

Mike Vollkommer

year, going right. comparative grew we’ve been was growth think this Yes. a EBITDA. though little in see we really QX, to I it year-over-year, growing, Because has you’re last year been exceptional difficult flat even quarter Well,

over So in this other think. of quarters consistent QX the are this year. XX% the teens, be But year with is going we mid-teens what we’ve kind seeing been to the

Tom Priore

of of see the perhaps contribution you’re sort the time, George, of in – of kind referencing lot book. range seasonality if that don’t the And of a over revenue over we

as of the be some going terms in given relatively of throughout Mike but period, the So to it’s that’s year, COVID gap, the growth. biggest consistent year-over-year noted,

George Mihalos

Appreciate the color. you. Thank

Tom Priore

Thank you, George.

Operator

from ROTH from next Our Scutt question Andrew Instructions] [Operator will Capital. come

You may begin.

Andrew Scutt

on morning. the Hey, Congrats good quarter.

First question impact the EBITDA not and Finxera of of I of the side cost in does ramp on not in revenue anything include you guidance, kind for that said just I including the is the acquisition. costs EBITDA believe account does just on was integration wondering, even up there. does Or business? that or

Tom Priore

We’ve not that in included synergies. projection any

think there is platforms complimentary. – we The are very there’s there. know we that amount meaningful So a

which say, cost of the let’s contract achieving even So we’ve examined that, things than like to less synergies, the consolidation, of, already $XXX,XXX. really are amount some expenses, which or

Andrew Scutt

guys the consumer guys of segments second are still two any see merchants opened? now Great. here, in And with Thank stimulus are where boost checks out, shift the kind any is are bit seeing your industries incremental the question of then a there that could any in there a And some different. chance second kind then bump being get you. demand the spending from. pressured? economy that little is seen coming you of Have guys you could And secondly, rounds you

Tom Priore

year. as you where relates electrical, areas it Wholesale transactions. might those like, more that question, lift trades throughout to trades, types and digital your So expect, to things, moving is as businesses, seen we plumbing, – the were landscaping, more of first had

to still of so single down norm, its but the look space heights of you continuing, see transition that down of – volume might lift. historical forth flattish but will tremendous From years, to overall is decline it’s relative the digits. versus rebound. area hospitality an versus has motion, as COVID, certainly of more a prior in and So we salon from is be the been in perspective, that kind and imagine, Nevertheless, kind it’s that that

expectation we alleviated. we until safety concerns because just we’ve in this would fully steady so space. areas The get card get the in probably we’ll those until – immunity people sort – segments of good very We So stay thin the bump and they that we see is a are out as merchant they’re of herd of kind present, margin acquiring kind news greater fully of back are numbers. reach state in an they’re modeled more

impact So at us. they recurring gross level have less an net and profit the of for revenue

And So had Andrew, remember you hopefully, Would I you answered a I it. quite and the mind follow-up your – repeating? that granularity answers question. apologize, on can’t I your

Andrew Scutt

very, answer problem. helpful. very no was that Yes, And

So it. I appreciate

with boost The upside potential second two of checks Do any there see to rounds of one of that? kind any spending. come the was guys in you have just stimulus or consumer out possibility incremental

Tom Priore

spending Mike And to modeled I’ll we haven’t I’ll that’s expectation thinking, a to impact would our ask that within in have going meaningful just any trends And comment. we on say say.

debt think, the with meaningfully help north I addition business particularly of held it’s – stimulus benefit I now historically business actually, capacity XX%. consumer think checks line going have debt as been that think arrange what there is once is, of the has the we would activity that growth them Finxera of the to and to for within down we’re The of the those the away, of more more – of with Finxera upwards we’ve the arena accounts the importantly, more to XX%, see than modeled settlement relief. addition likely taken business consumer administrator punchbowl

payments. seeing like were perform non-card just So to we’re already platform benefit we all well the it’s transition segments that – is of feel combination through going to cycles to the our business of again, the historically digital going from going and

And would the inject while into get benefit extracted, existing of Finxera segments countercyclical to the as add? see we begin integrated for do lines quite we business technology we that you do their stimulus we’ll will anything our well, Mike, expect some there. So operates payments.

Mike Vollkommer

volumes see noticeable way. We that, the in think I stimulus a driving No, don’t certainly right. expect to that’s

Andrew Scutt

would our be Yes. case. upside it just if does, current Maybe to it

Mike Vollkommer

Exactly.

Operator

like I’m closing turn not would queue. for further remarks. And to Priore back over the to I showing you. questions any call any the Tom in Thank

Tom Priore

everyone I celebrating everyone Thank right. All in a we’re Day. has call the very but everyone which great you in participating for and St. Thank for unusual interest it, Patrick’s thank have you fantastic very their very much like today. would our Hope to business a way Despite much day. the operator. in much.

Operator

and Thank the this participating. conference gentlemen, call. Ladies you concludes for

You may disconnect. now