• Revenue: $227 million, increased by more than 20% from the prior year.
• Adjusted Gross Profit: $86 million, with a margin of 37.9%, decreased by 40 basis points from the prior year quarter.
• Adjusted EBITDA: $54.6 million, a 22% improvement from the prior year.
• Total Customer Accounts: Over 1.1 million operating on the commerce platform.
• Annual Transaction Volume: Nearly $127 billion processed during the prior 12 months.
• Average Daily Account Balances: Over $1.1 billion during the quarter.
• SMB Revenue: $158.8 million, a 13.2% increase from the prior year.
• Bank Card Dollar Volume in SMB: $15.5 billion, increased almost 10% from the prior year.
• B2B Revenue: $22.1 million, a 58.3% increase from the prior year.
• Enterprise Revenue: $47.1 million, a 33.9% increase from the prior year.
• Interest Expense: $23.2 million for the quarter, increased by $3.2 million from the prior year.
• Total Debt: $832.9 million at the end of Q3.
• Net Debt: $791.8 million at the end of Q3.
• Preferred Stock: $105.1 million at September 30th.
• Net Income Available to Common Shareholders: 7 cents per share.
• Full Year Revenue Guidance: $875 to $883 million, an increase of approximately 16% over 2023.
• Full Year Adjusted EBITDA Guidance: $200 to $204 million, an 18 to 21% increase over 2023.

• Warning! GuruFocus has detected 9 Warning Signs with PRTH.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Priority Technology Holdings Inc (NASDAQ:PRTH) reported record financial results for the third quarter of 2024, driven by the strength of their unified commerce platform.
• The company experienced over 20% revenue growth year-over-year, reaching $227 million, with a similar increase in adjusted gross profit.
• The B2B segment saw a significant revenue increase of 58.3%, largely due to the acquisition of Plastic, which contributed positively to the company's performance.
• The enterprise segment experienced a 33.9% increase in revenue, supported by favorable trends in new enrollments and an increase in passport program managers.
• Priority Technology Holdings Inc (NASDAQ:PRTH) raised its full-year adjusted EBITDA guidance to a range of $200 million to $204 million, reflecting strong year-to-date performance and improved operating margins.

Negative Points

• Adjusted gross profit margins decreased by 40 basis points year-over-year, primarily due to the acquisition of Plastic.
• The SMB segment's gross margins declined from 24.6% to 22.4% due to higher credit losses and a mix shift with top resellers.
• Interest expense increased by $3.2 million compared to the previous year, attributed to acquisition-related debt and recapitalization efforts.
• The company faces potential headwinds from increased compliance and cloud migration expenses, which could impact adjusted EBITDA.
• The guidance for Q4 suggests only a slight sequential revenue increase, indicating potential conservatism or challenges in maintaining growth momentum.

Q & A Highlights

Q: Does the change in administration and possibly the red sweep change your outlook in any way, whether that's potential economic impacts or maybe something on the regulatory side? A: Thomas Priore, CEO: It doesn't change our outlook. We felt well-positioned for either outcome. We focus on macro environment developments, and while administration changes are a factor, we see potential regulatory easing in some sectors like debt resolution, which could be beneficial. Our projections already account for interest rate impacts, so we feel properly positioned.

Q: Looking forward to 2025, what are some revenue drivers that could drive upside or downside to your outlook? A: Thomas Priore, CEO: We're seeing high growth in the B2B segment and expect continued adoption of working capital solutions. The convergence of payments and banking, or embedded finance, presents significant upside, which isn't fully built into our expectations. Our guidance reflects this potential as it gets monetized.

Q: Organic growth in the enterprise segment continues to be solid. Did anything change there, and is this a leading indicator to an accelerated pace of revenue growth for that segment? A: Tim O Leary, CFO: Nothing changed; we continue to see strong trends and organic growth with our customer base. There's some seasonality, but overall, it's consistent growth driven by our customers' success in their markets.

Q: Can you provide more color on the cross-sell opportunity between enterprise and B2B? A: Thomas Priore, CEO: The adoption of our thesis that payments and banking should happen in one place is resonating. We're seeing success in sectors like NIL (name, image, likeness) and insurance, where our technology enables modern financial experiences. These are examples of how we're evolving from simple transactions to comprehensive financial solutions.

Q: The guidance implies only a slight sequential uptick into Q4 for revenue. Can you explain your assumptions? A: Tim O Leary, CFO: We're seeing solid year-over-year growth and improving margins. Sequentially, it looks flatter due to a conservative view and potential rate declines. Interest rates impact revenue and EBITDA, but the cash flow impact is minimal due to our hedging strategy.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.