Priority Technology (PRTH) - 2024 Q4 - Annual Results

Revenue Growth and Financial Performance - Priority's revenue CAGR from 2021 to 2023 was ~21%, with Adjusted Gross Profit CAGR at ~33% and Adjusted EBITDA CAGR at ~32%[9] - Q3 2024 consolidated revenue increased 17% to $652.6 million, with adjusted gross profit up 21% to $244.1 million and adjusted EBITDA growing 23% to $152.5 million[25] - Revenue for Q4 2024 is expected to be between $225.2M and $227.2M[50][51] - Revenue growth for 2025 is forecasted to be in the range of 10.0% to 14.0%[54] - Total Revenue for Q3 2024 was $227.0 million, with Recurring and Re-Occurring revenue contributing 97% of the total[60] Segment Performance - Q3 2024 revenue breakdown: SMB segment generated $158.8M with a 22.4% Adj. Gross Profit margin, B2B segment generated $22.1M with a 28.5% margin, and Enterprise segment generated $47.1M with a 93.6% margin[11] - SMB segment revenue grew 13% YoY in Q3 2024, with adjusted gross profit margin at 22.4%[23][29] - B2B segment revenue surged 58% YoY in Q3 2024, with adjusted gross profit margin reaching 28.5%[23][31] - Enterprise segment revenue increased 34% YoY in Q3 2024, with adjusted gross profit margin at 93.6%[23][35] - B2B segment added 28,000 suppliers in 2024 and now has 90,000 buyers on its platform as of Q3 2024[31] - Enterprise segment account balances reached $1.1 billion in Q3 2024, with 100% nationwide MTL coverage[33] Recurring Revenue and Profitability - ~60% of Q3 2024 Adjusted Gross Profit came from recurring revenue, with ~97% of Q3 2024 revenue being recurring or re-occurring[9] - Recurring revenue for Q3 2024 was $66.9 million, accounting for 29% of total revenue, while Re-Occurring revenue was $153.7 million, making up 68% of total revenue[60] - Adjusted Gross Profit from Recurring revenue in Q3 2024 was $51.3 million, representing 60% of total Adjusted Gross Profit[60] - Priority's Free Cash Flow Conversion was ~89% YTD 2024, driven by a highly visible revenue model with largely recurring or re-occurring revenue[9] - Free Cash Flow for YTD September 2024 was $135.5 million, with a Free Cash Flow Conversion rate of 88.8%, up from 87.7% in the same period last year[61] Adjusted EBITDA and Margins - Priority's Adjusted EBITDA margin is estimated to expand by 456 basis points since 2021, reaching 23.3% in 2024E[21] - Adjusted EBITDA for Q3 2024 increased to $54.6 million, up from $45.0 million in Q3 2023, with an Adjusted EBITDA Margin of 24.1% compared to 23.8% in the same period last year[59] - Adjusted EBITDA for YTD September 2024 was $152.5 million, up from $123.7 million in the same period last year, with an Adjusted EBITDA Margin of 23.4% compared to 22.2%[61] - Adjusted Gross Profit for Q4 2024 is projected to range from $82.7M to $86.5M[50][51] - Adjusted EBITDA for Q4 2024 is estimated to be between $49.7M and $54.1M[50][51] - Adjusted Gross Profit margin for 2025 is expected to be between 37.5% and 39.0%[54] - Adjusted EBITDA margin for 2025 is anticipated to range from 22.5% to 24.0%[54] Market Position and Opportunities - The company has a $25 trillion addressable market in North America for accounts payable/receivable flows and a $112B embedded finance market, with only ~17% captured[12] - The U.S. consumer card payment volume is expected to grow by $4 trillion from 2022A to 2027E[15] - Priority is the 6th largest U.S. non-bank merchant acquirer, with $127B in LTM Q3 2024 volume and 1.1M merchants[19] Acquisitions and Strategic Moves - The company completed the acquisition of Plastiq in Q3 2023 and continues to pursue strategic acquisitions in vertical markets and geographic expansion[31][46] - The company acquired RentPayment from Yapstone, Inc for $71M in 2019, leading to a 25% revenue growth and 65% increase in Adj. EBITDA[47] - Finxera was acquired for $407M net of cash in 2021, leveraging its technology platform for Banking & Treasury Solutions[47] - Plastiq assets were acquired out of bankruptcy for $37.3M in 2023, achieving Adj. EBITDA positivity within 2 quarters[47] Financial Metrics and Ratios - Priority's LTM Q3 2024 volume was $46.4B, with $1.1B in account balances and $70.3B in total card dollar volume[11] - YTD Q3 2024 free cash flow grew 25% to $147.1 million, with free cash flow conversion at 89.9%[38] - CapEx spend for YTD Q3 2024 was $21.3 million, representing 2.8% of revenue[40] - Net leverage ratio decreased to 4.0x as of Q3 2024, down from 8.8x in 2021[43] - Capex for YTD September 2024 was $17.0 million, slightly higher than the $15.3 million in the same period last year[61] - Interest Expense for YTD September 2024 increased to $65.8 million, compared to $55.5 million in the same period last year[61] - Depreciation and Amortization for YTD September 2024 decreased to $44.2 million, down from $53.3 million in the same period last year[61] - Income Before Taxes for Q3 2024 was $15.5 million, with a margin of 6.8%, compared to $4.2 million and a margin of 2.2% in Q3 2023[59] Ownership and Market Cap - The company has a 75.0% insider ownership and a market cap of $739M as of January 14, 2025[6] Adjusted Gross Profit and EBITDA Details - Adjusted Gross Profit for the nine months ended September 30, 2024, was $244.1M, with a margin of 37.4%[58]