Priority Technology (US:PRTH)2025-03-06 17:02Financial Data and Key Metrics Changes - The company reported a record revenue performance for both Q4 and the full year, with Q4 revenue of $227.1 million, a 14% increase year-over-year, and full-year revenue of $879.7 million, reflecting a 16% growth [6][7][9] - Adjusted gross profit for Q4 increased by 15% to $83.9 million, while adjusted EBITDA grew by 16% to $51.7 million [6][7] - For the full year, adjusted gross profit rose by 19% to $328.1 million, and adjusted EBITDA increased by 21% to $204.3 million [7][9] Business Line Data and Key Metrics Changes - The SMB segment generated Q4 revenue of $155.7 million, up 11.1% year-over-year, with adjusted gross profit of $32 million, a slight increase of 0.4% [11][13] - The B2B segment saw revenue of $23.7 million, a 10.9% increase, with adjusted gross profit rising by 24% to $6.4 million [14][15] - The Enterprise segment reported Q4 revenue of $48.7 million, a 27% increase, with adjusted gross profit also increasing by 27% to $45.6 million [15][16] Market Data and Key Metrics Changes - The company processed over $130 billion in annual transaction volume and managed over $1.2 billion in average daily account balances [5] - The percentage of adjusted gross profit from recurring revenues reached over 63% in Q4, nearly doubling since early 2022 [10] Company Strategy and Development Direction - The company aims to achieve 10% to 14% top-line revenue growth in 2025, targeting a revenue range of $965 million to $1 billion, and adjusted EBITDA growth of 8% to 13% [5][22] - The focus remains on innovation in SaaS payments and banking solutions, with a commitment to refining customer experiences and enhancing operational efficiencies [8][24] - The management emphasizes the importance of being opportunistic in acquisitions, particularly in sectors facing challenges [25][38] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining momentum despite potential headwinds from lower interest rates and a challenging macroeconomic environment [5][22] - The company is actively working to remediate identified weaknesses in internal controls over financial reporting, which did not affect the financial results [20][21] Other Important Information - The company redeemed its preferred stock, resulting in a fourth-quarter preferred dividend of $2.65 million [18] - The transition from CapEx to OpEx is expected to impact expenses, with an estimated $4 million effect in 2025 [80] Q&A Session Summary Question: Capital allocation strategy between debt pay down and increased spending - Management will continue to evaluate the best use of capital, balancing debt pay down with potential M&A opportunities [32][33] Question: Impact of interest rate cuts on guidance - The company has factored in conservative estimates regarding deposit growth and interest rate impacts into its 2025 guidance [35][37] Question: Impact of tariffs on business - Management noted that tariffs have not significantly impacted the acquiring side, but there is increased demand for buyer-funded strategies in the B2B segment [45][46] Question: Decline in gross margin percentage for consumer payments - The decline is attributed to residual purchases running off, but core margins have actually expanded when adjusted for one-time write-offs [49][56] Question: Magnitude of CapEx to OpEx shift - The shift is expected to have a $4 million impact on OpEx in 2025 as the company migrates to a public cloud environment [80] Question: Adjusted EPS expectations for 2025 - The company anticipates adjusted EPS could approach $1 per share based on normal growth trends [88][89]