Priority Technology (US:PRTH)2023-11-11 15:54Financial Data and Key Metrics Changes - Q3 2023 revenue reached $189 million, a 14% increase from the prior year, with adjusted gross profit rising 23.6% to $72.3 million and adjusted EBITDA improving by 28% to $45 million [5][13][27] - Year-to-date revenue increased 14.4% to $556.3 million, leading to a 22% gain in adjusted gross profit to $202.4 million and a 23% increase in adjusted EBITDA [13][27] - Adjusted gross profit margin improved by 310 basis points to 38.3% in Q3 2023 [5] Business Line Data and Key Metrics Changes - SMB segment generated Q3 revenue of $140.1 million, a slight increase of $0.2 million year-over-year, but faced a $15 million headwind due to a large reseller's diversification strategy [8][16] - B2B payments revenue surged to $13.8 million, a 182% increase, largely driven by the acquisition of Plastiq, contributing $10 million to the increase [19] - Enterprise segment revenue grew by 63% to $35.1 million, with adjusted gross profit increasing by 66% to $33.1 million and gross profit margins improving to over 94% [21] Market Data and Key Metrics Changes - Total accounts on the commerce platform exceeded 820,000, processing over $118 billion in transaction volume over the last 12 months [5] - Average daily deposits surpassed $850 million [5] Company Strategy and Development Direction - The company is focused on a unified commerce vision, combining payments and banking on a single platform, which is expected to benefit from higher interest rates and current macroeconomic conditions [12][14] - The integration of Plastiq is seen as a significant contributor to revenue growth and operational efficiency [6][19] - The company aims to continue innovating its SaaS payment suite and enhancing the Passport financial tools to meet evolving customer needs [7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to maintain strong performance despite macroeconomic challenges, emphasizing the value customers see in their product offerings [6][12] - The company anticipates a strong finish to 2023, projecting full-year revenue between $755 million and $765 million, reflecting a 15% increase over 2022 [13][27] - Adjusted EBITDA guidance for the full year has been increased to a range of $167 million to $170 million, representing over 20% growth from 2022 [27] Other Important Information - The company reported a significant increase in operating expenses, with salaries and benefits rising 23% year-over-year, primarily due to the acquisition of Plastiq [22][23] - Debt levels increased to $639.1 million due to the Plastiq acquisition, with net debt rising by $19.4 million [24][25] Q&A Session Summary Question: Pricing dynamics in the payment space - Management highlighted that the unified commerce approach helps insulate the company from pricing pressures faced by peers, emphasizing the comprehensive tools provided to customers [36][37] Question: Future revenue and EBITDA expectations - Management indicated that double-digit growth in both top line and bottom line is a fair expectation, with current guidance seen as conservative [39][40] Question: Impact of interest rates on enterprise revenue - Management noted that interest income from deposit balances significantly contributes to enterprise revenue, with high margins expected to continue [41] Question: Performance of Plastiq and B2B segment - Management confirmed that Plastiq's integration has led to breakeven EBITDA, with further growth opportunities anticipated [45][48] Question: SMB segment headwinds - Management acknowledged ongoing headwinds from the large reseller's diversification strategy but noted strong adoption trends among new resellers [49][50] Question: Merchant acquisition trends - Management reported adding 116 new resellers year-to-date, with expectations for modest upward impacts on merchant counts [56][62]