Priority Technology (US:PRTH)2021-05-14 20:56Part I. Financial Information Item 1. Financial Statements The unaudited condensed consolidated financial statements for the quarter ended March 31, 2021, show total revenues of $113.3 million, an increase from $96.9 million in the prior-year period, with a net loss of $2.7 million, an improvement from $5.9 million in Q1 2020, and a total stockholders' deficit of $99.8 million Condensed Consolidated Balance Sheet Highlights (Unaudited) | (in thousands) | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash | $5,827 | $9,241 | | Total current assets | $122,778 | $135,884 | | Goodwill | $106,832 | $106,832 | | Intangible assets, net | $91,062 | $98,057 | | Total assets | $400,492 | $417,829 | | Liabilities & Stockholders' Deficit | | | | Total current liabilities | $140,790 | $148,848 | | Long-term debt, net | $350,667 | $357,873 | | Total liabilities | $500,247 | $516,393 | | Total stockholders' deficit | $(99,755) | $(98,564) | Condensed Consolidated Statements of Operations (Unaudited) | (in thousands, except per share) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Revenues | $113,297 | $96,933 | | Income from operations | $4,527 | $3,559 | | Loss before income taxes | $(4,910) | $(7,102) | | Net loss | $(2,679) | $(5,869) | | Loss per common share (Basic & Diluted) | $(0.04) | $(0.09) | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | (in thousands) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(13,426) | $(7,254) | | Net cash used in investing activities | $(5,691) | $(3,229) | | Net cash used in financing activities | $(4,243) | $(251) | | Net decrease in cash and restricted cash | $(23,360) | $(10,734) | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail the company's accounting policies, revenue disaggregation, debt obligations, segment performance, and significant subsequent events, including a new $630 million credit facility, $150 million in senior preferred stock, and the acquisition of Finxera Holdings, Inc Disaggregation of Revenue | (in thousands) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Merchant card fees | $107,702 | $89,086 | | Outsourced services and other services | $4,378 | $6,791 | | Equipment | $1,217 | $1,056 | | Total revenues | $113,297 | $96,933 | Outstanding Debt Obligations | (in thousands) | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Senior Credit Agreement - Term facility | $274,557 | $279,417 | | Term Loan - Subordinated | $104,547 | $102,623 | | Total debt obligations | $379,104 | $382,040 | - On March 5, 2021, the company entered into a Merger Agreement to acquire Finxera Holdings, Inc. for a purchase price starting at $425 million, consisting of cash and stock113115 - On April 27, 2021, the company entered into a new Credit and Guaranty Agreement with Truist Bank for senior credit facilities of up to $630 million to refinance existing debt and fund the Finxera acquisition122123 - On April 27, 2021, the company issued and sold 150,000 shares of senior preferred stock for $150 million and issued warrants to purchase common stock, with proceeds used to fund the refinancing117119 Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights a 16.9% increase in consolidated revenue to $113.3 million for Q1 2021, driven primarily by 26.0% growth in the Consumer Payments segment, reflecting a recovery from COVID-19 impacts and strength in specialized ecommerce, while the Integrated Partners segment saw a significant revenue decline due to a business sale Consolidated Results of Operations Comparison | (dollars in thousands) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $113,297 | $96,933 | 16.9% | | Costs of services | $81,863 | $66,364 | 23.4% | | Income from operations | $4,527 | $3,559 | 27.2% | | Net loss | $(2,679) | $(5,869) | (54.4)% | - The Consumer Payments segment revenue increased by $22.4 million (26.0%), driven by $9.7 million (372.1%) growth from high-margin specialized ecommerce merchants and $12.7 million (15.2%) growth in the base consumer payments business155 - The Integrated Partners segment revenue decreased by $3.1 million (69.0%) primarily due to the sale of the RentPayment business on September 22, 2020, which had generated $3.8 million in revenue in Q1 2020159 - As of March 31, 2021, the company was in compliance with its debt covenants, with a Total Net Leverage Ratio of 5.44x, below the maximum permitted ratio of 7.71x71191193 - The company's operating results reflect a recovery from the negative effects of the COVID-19 pandemic, with processing volumes returning and revenue growth accelerating since May 2020152153 Quantitative and Qualitative Disclosures about Market Risk The company states that its exposures to market risk have not materially changed since the disclosures made in its Annual Report on Form 10-K for the year ended December 31, 2020 - There have been no material changes in the company's market risk exposures since December 31, 2020208 Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2021, with no material changes in internal control over financial reporting during the first quarter of 2021 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2021210 - No changes occurred during the first quarter of 2021 that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting211 Part II. Other Information Legal Proceedings The company is involved in legal proceedings and claims in the ordinary course of business but does not believe any current proceedings will have a material adverse effect on its financial position, operations, or cash flows - The company is not currently a party to any legal proceedings that are expected to have a material adverse effect on its financial condition or results of operations214 Risk Factors The company refers investors to the risk factors discussed in its Annual Report on Form 10-K, stating that those factors, along with other information in this report, should be carefully considered - The report directs readers to the "Risk Factors" section of the company's Annual Report for a comprehensive discussion of potential risks215 Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report for the period - This item is not applicable for the reporting period217 Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from the CEO and CFO, and agreements related to the April 2021 financing activities such as the Securities Purchase Agreement and the new Credit Agreement - Key exhibits filed include the Securities Purchase Agreement, Registration Rights Agreement, and the new Credit Agreement, all dated April 27, 2021218