What changed in this filing

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Item 1. Financial Statements

2024-05-09 compared with 2023-11-09 · 202 added, 295 removed, 481 unchanged (51% of the section changed)

Financial Statements

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Current assets:

14 unchanged sentences

Total assets $ 1,609,957 $ 1,615,337

Liabilities, Redeemable Senior Preferred Stock and Stockholders' Deficit

Liabilities, Redeemable Senior Preferred Stock, Redeemable NCI, and Stockholders' Deficit

Current liabilities:

7 unchanged sentences

Other noncurrent liabilities 16,704 18,763

Total noncurrent liabilities 635,326 610,569

Total liabilities 1,498,002 1,502,796

3 unchanged sentences

250,000 shares authorized;

225,000 issued and outstanding at September 30, 2023 and December 31, 2022

225,000 issued and outstanding at March 31, 2024 and December 31, 2023

264,240 258,605

Redeemable non-controlling interests in consolidated subsidiary 5,837 —

Stockholders' deficit:

1 unchanged sentence

100,000,000 shares authorized;

0 issued or outstanding at September 30, 2023 and December 31, 2022

0 issued or outstanding at March 31, 2024 and December 31, 2023

Common Stock, $ 0.001 par value;

1,000,000,000 shares authorized;

79,197,600 and 78,385,685 shares issued at September 30, 2023 and December 31, 2022, respectively;

and 76,633,517 and 76,044,629 shares outstanding at September 30, 2023 and December 31, 2022, respectively

Treasury stock at cost, 2,564,083 and 2,341,056 shares at September 30, 2023 and December 31, 2022, respectively

80,018,209 and 79,589,055 shares issued at March 31, 2024 and December 31, 2023, respectively;

and 75,834,517 and 76,956,889 shares outstanding at March 31, 2024 and December 31, 2023, respectively

Treasury stock at cost, 4,183,692 and 2,632,166 shares at March 31, 2024 and December 31, 2023, respectively

( 18,491 ) ( 12,815 )

5 unchanged sentences

Total stockholders' deficit ( 158,122 ) ( 146,064 )

Total liabilities, redeemable senior preferred stock and stockholders' deficit $ 1,563,399 $ 1,373,363

Total liabilities, redeemable senior preferred stock, redeemable NCI and stockholders' deficit $ 1,609,957 $ 1,615,337

See Notes to Unaudited Consolidated Financial Statements

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Revenues $ 205,719 $ 185,028

10 unchanged sentences

Total other expense, net ( 20,248 ) ( 17,487 )

Income before income taxes 4,241 899 5,345 995

Income tax expense 4,328 1,691 6,550 1,833

Net loss ( 87 ) ( 792 ) ( 1,205 ) ( 838 )

Income (loss) before income taxes 7,775 ( 639 )

Income tax expense (benefit) 2,582 ( 133 )

Net income (loss) 5,193 ( 506 )

Dividends and accretion attributable to redeemable senior preferred stockholders ( 12,662 ) ( 11,295 )

Return on redeemable NCI in consolidated subsidiary ( 581 ) —

Net loss attributable to common stockholders ( 8,050 ) ( 11,801 )

17 unchanged sentences

Shares withheld for taxes ( 123 ) 123 ( 421 ) — — — ( 421 ) — ( 421 )

Dividends on redeemable senior preferred stock — — — — ( 10,477 ) — — ( 10,477 ) — ( 10,477 )

Accretion of redeemable senior preferred stock — — — — ( 818 ) — — ( 818 ) — ( 818 )

Adjustment to NCI — — — — — — — — ( 403 ) ( 403 )

Foreign currency translation adjustment — — — — — 24 — 24 — 24

Net loss — — — — — — ( 506 ) ( 506 ) — ( 506 )

March 31, 2023 76,404 $ 76 2,498 $ ( 12,336 ) $ 328 $ 24 $ ( 102,714 ) $ ( 114,622 ) $ 852 $ ( 113,770 )

Equity-classified stock-based compensation — — — — 1,746 — — 1,746 — 1,746

ESPP compensation and vesting of stock-based compensation 192 — — — 43 — — 43 — 43

Shares withheld for taxes ( 65 ) — 65 ( 241 ) — — — ( 241 ) — ( 241 )

Exchange for PHOT redeemable NCI ( 1,428 ) ( 1 ) 1,428 ( 5,255 ) ( 581 ) — — ( 5,837 ) — ( 5,837 )

Dividends on redeemable senior preferred stock — — — — ( 11,821 ) — — ( 11,821 ) — ( 11,821 )

Accretion of redeemable senior preferred stock — — — — ( 841 ) — — ( 841 ) — ( 841 )

Issuance of profit interests/common equity in subsidiaries — — — — — — — — 93 93

Foreign currency translation adjustment — — — — — ( 13 ) — ( 13 ) — ( 13 )

Reclassification of negative additional paid in capital — — — — 11,654 — ( 11,654 ) — — —

Net loss — — — — — — ( 612 ) ( 612 ) — ( 612 )

June 30, 2023 76,531 $ 76 2,563 $ ( 12,577 ) $ — $ 31 $ ( 112,974 ) $ ( 125,444 ) $ 852 $ ( 124,592 )

Priority Technology Holdings, Inc .

Unaudited Consolidated Statements of Changes in Stockholders' Deficit and Non-Controlling Interest

(in thousands)

Net income — — — — — — 5,193 5,193 — 5,193

March 31, 2024 75,835 $ 76 4,183 $ ( 18,491 ) $ — $ ( 42 ) $ ( 141,412 ) $ ( 159,869 ) $ 1,747 $ ( 158,122 )

Stock Treasury

1 unchanged sentence

Shares $ Shares $

December 31, 2022 76,044 $ 76 2,341 $ ( 11,559 ) $ 9,650 $ — $ ( 102,208 ) $ ( 104,041 ) $ 1,255 $ ( 102,786 )

Equity-classified stock-based compensation — — — — 1,936 — — 1,936 — 1,936

3 unchanged sentences

Accretion of redeemable senior preferred stock — — — — ( 818 ) — — ( 818 ) — ( 818 )

Issuance of profit interests/common equity in subsidiaries — — — — — — — — 514 514

Adjustment to NCI — — — — — — — — ( 403 ) ( 403 )

Foreign currency translation adjustment 24 24 24

Reclassification of negative additional paid-in capital — — — — 10,653 — ( 10,653 ) — — —

Net loss — — — — — — ( 506 ) ( 506 ) — ( 506 )

September 30, 2023 76,634 $ 77 2,564 $ ( 12,577 ) $ — $ ( 34 ) $ ( 123,714 ) $ ( 136,248 ) $ 1,366 $ ( 134,882 )

Priority Technology Holdings, Inc .

Unaudited Consolidated Statements of Changes in Stockholders' Deficit and Non-Controlling Interest

(in thousands)

Stock Treasury

Stock APIC AOCI Accumulated Deficit Deficit Attributable to Stockholders NCIs Total

Shares $ Shares $

December 31, 2021 76,740 $ 77 720 $ ( 4,091 ) $ 39,835 $ — $ ( 100,058 ) $ ( 64,237 ) $ — $ ( 64,237 )

Equity-classified stock-based compensation — — — — 1,558 — — 1,558 — 1,558

Vesting of stock-based compensation 129 — — — — — — — — —

Share repurchases and shares withheld for taxes ( 27 ) 1 27 ( 157 ) ( 1 ) — — ( 157 ) — ( 157 )

Dividends on redeemable senior preferred stock — — — — ( 7,595 ) — — ( 7,595 ) — ( 7,595 )

Accretion of redeemable senior preferred stock — — — — ( 805 ) — — ( 805 ) — ( 805 )

Net loss — — — — — — ( 333 ) ( 333 ) — ( 333 )

March 31, 2023 76,404 $ 76 2,498 $ ( 12,336 ) $ 328 $ 24 $ ( 102,714 ) $ ( 114,622 ) $ 852 $ ( 113,770 )

Equity-classified stock-based compensation — — — — 1,542 — — 1,542 — 1,542

ESPP compensation and vesting of stock-based compensation 157 — — — 57 — — 57 — 57

Share repurchases and shares withheld for taxes ( 431 ) — 431 ( 1,922 ) — — — ( 1,922 ) — ( 1,922 )

Dividends on redeemable senior preferred stock — — — — ( 7,732 ) — — ( 7,732 ) — ( 7,732 )

Accretion of redeemable senior preferred stock — — — — ( 817 ) — — ( 817 ) — ( 817 )

Net income — — — — — — 287 287 — 287

June 30, 2022 76,568 $ 78 1,178 $ ( 6,170 ) $ 26,042 $ — $ ( 100,104 ) $ ( 80,154 ) $ — $ ( 80,154 )

Equity-classified stock-based compensation — — — — 1,104 — — 1,104 — 1,104

ESPP compensation and vesting of stock-based compensation 43 — — — 39 — — 39 — 39

Share repurchases and shares withheld for taxes ( 630 ) — 630 ( 2,595 ) — — — ( 2,595 ) — ( 2,595 )

Dividends on redeemable senior preferred stock — — — — ( 8,636 ) — — ( 8,636 ) — ( 8,636 )

Accretion of redeemable senior preferred stock — — — — ( 830 ) — — ( 830 ) — ( 830 )

Net income — — — — — — ( 792 ) ( 792 ) — ( 792 )

September 30, 2022 75,981 $ 78 1,808 $ ( 8,765 ) $ 17,719 $ — $ ( 100,896 ) $ ( 91,864 ) $ — $ ( 91,864 )

See Notes to Unaudited Consolidated Financial Statements

Priority Technology Holdings, Inc .

Unaudited Consolidated Statements of Cash Flows

Unaudited Consolidated Statements of Changes in Stockholders' Deficit and Non-Controlling Interest

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Net loss $ ( 1,205 ) $ ( 838 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Net income (loss) $ 5,193 $ ( 506 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization of assets 15,253 18,048

Stock-based compensation 5,183 4,204

Stock-based, ESPP and incentive units compensation 1,633 1,936

Amortization of debt issuance costs and discounts 1,065 903

12 unchanged sentences

Cash flows from investing activities:

Acquisition of business, net of cash acquired ( 28,182 ) —

Additions to property, equipment and software ( 6,610 ) ( 5,046 )

3 unchanged sentences

Cash flows from financing activities:

Debt issuance and modification costs paid ( 807 ) —

Repayments of long-term debt ( 1,678 ) ( 1,550 )

Borrowings under revolving credit facility 44,000 23,000

Repayments of borrowings under revolving credit facility — ( 6,000 )

1 unchanged sentence

Dividends paid to redeemable senior preferred stockholders 1

( 7,027 ) ( 11,435 )

Settlement and customer/subscriber accounts obligations, net 1,918 79,258

Payment of contingent consideration related to business combination ( 3,071 ) ( 1,959 )

Net cash provided by (used in) financing activities 157,029 ( 8,099 )

Net cash (used in) provided by financing activities ( 10,279 ) 57,537

Net change in cash and cash equivalents and restricted cash:

Net increase in cash and cash equivalents, and restricted cash 178,485 21,364

Net (decrease) increase in cash and cash equivalents, and restricted cash ( 4,641 ) 77,631

Cash and cash equivalents and restricted cash at beginning of period 796,223 560,610

1 unchanged sentence

Priority Technology Holdings, Inc .

Unaudited Consolidated Statements of Cash Flows

Unaudited Consolidated Statements of Changes in Stockholders' Deficit and Non-Controlling Interest

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Reconciliation of cash and cash equivalents, and restricted cash:

7 unchanged sentences

Non-cash investing and financing activities:

Treasury stock purchases settled after the balance sheet date $ — $ 651

Contingent consideration accrual $ — $ 4,825

Non-cash additions to other noncurrent assets for right-of-use operating leases $ — $ 166

Adjustment to value of profit interest units $ 596 $ —

Forfeiture of liability-classified award $ — $ 596

Acquisition of intangible asset $ — $ 193

Measurement period adjustment to purchase price $ 110 $ —

Cash portion of dividend payable for redeemable senior preferred stock (1)

Issuance of NCI $ 93 $ —

(1) Paid on October 2, 2023

(1) The dividend payable for the quarter ended March 31, 2024, was paid on April 1, 2024.

See Notes to Unaudited Consolidated Financial Statements

Priority Technology Holdings, Inc .

Unaudited Consolidated Statements of Changes in Stockholders' Deficit and Non-Controlling Interest

(in thousands)

Priority Technology Holdings, Inc.

Notes to Unaudited Consolidated Financial Statements

2 unchanged sentences

Priority Technology Holdings, Inc.

is a holding company with no material operations of its own.

Priority Technology Holdings, Inc.

and its consolidated subsidiaries are referred to herein collectively as "Priority," "PRTH," the "Company," "we," "our" or "us," unless the context requires otherwise.

8 unchanged sentences

Changes in the Company's ownership interest while the Company retains its controlling interest are accounted for as equity transactions.

As of September 30, 2023, there was no income or loss attributable to NCI in accordance with the applicable operating agreements.

As of March 31, 2024, there was no income or loss attributable to NCI in accordance with the applicable operating agreements.

Redeemable NCI represents non-controlling ownership of certain redeemable preferred units in one of the Company's consolidated subsidiaries.

These preferred units carry a compounded coupon rate of 6 % per annum.

The return on the redeemable NCI for the three months ended March 31, 2024, since the reissuance of these redeemable preferred units, is $ 0.6 million.

Refer to Note 13.

Related Party Transactions .

In the opinion of the Company's management, all known adjustments necessary for a fair presentation of the Unaudited Consolidated Financial Statements for interim periods have been made.

1 unchanged sentence

These Unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

The results for the quarter and nine months ended September, 30, 2023 include the results of the Plastiq business acquired through Chapter 11 bankruptcy process on July 31, 2023.

The results for the quarter ended March 31, 2024 include the results of the Plastiq business acquired through Chapter 11 bankruptcy process on July 31, 2023.

Use of Estimates

1 unchanged sentence

Actual results could materially differ from those estimates.

Revenue Recognition

For the Plastiq business that was acquired on July 31, 2023 (refer to Note 2.

Acquisitions ,) the Company accepts card payments from its customers and processes disbursements to their vendors.

For these transactions, the Company acts as merchant of record, therefore, considered as the principal and accordingly presents its revenue on a gross basis.

The Company also offers

volume rebates as an incentive to increase business and customer engagement.

These rebates are presented as net of revenue.

Transaction processing costs, including interchange fees, are presented as costs of revenue.

Accounts Receivable, net

Accounts receivables include dues from the Company's sponsor banks (for revenues earned, net of related interchange and processing fees, and do not bear interest), agents, merchants and other customers, stated net of allowance for current expected credit losses for any uncollectible amounts.

Foreign Currency

4 unchanged sentences

Accordingly, assets and liabilities denominated in a foreign currency are translated into U.S.

dollars at the current exchange rate on the last day of the reporting period.

dollars at the

current exchange rate on the last day of the reporting period.

Revenues and expenses are translated using the average exchange rate in effect during the reporting period.

Translation adjustments are reported as a component of accumulated other comprehensive income (loss).

Recently Adopted Accounting Standards

Credit Losses

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments ("ASU 2016-13").

This new guidance changes how entities account for credit impairment for trade and other receivables, as well as for certain financial assets and other instruments.

ASU 2016-13 replaces the current "incurred loss" model with an "expected loss" model.

Under the "incurred loss" model, a loss (or allowance) is recognized only when an event has occurred (such as a payment delinquency) that causes the entity to believe that a loss is probable (i.e., that it has been "incurred").

Under the "expected loss" model, a loss (or allowance) is recognized upon initial recognition of the asset that reflects all future events that leads to a loss being realized, regardless of whether it is probable that the future event will occur.

The Company adopted ASU 2016-13 effective January 1, 2023 using the modified-retrospective approach.

The implementation of ASU 2016-13 did not have a material impact on the Company's Unaudited Consolidated Financial Statements.

Additionally, the Company modified its accounting policy to conform with the requirements of the adoption of this standard.

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the LIBOR and other interbank offered rates to alternative reference rates, such as the SOFR.

An entity that makes this election would not have to remeasure the contract at the modification date or reassess a previous accounting determination.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), Scope ASU 2021-01, which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

The Company adopted the optional expedients of Topic 848 on June 30, 2023 upon the amendments of its Credit Agreement (see Note 8.

Debt Obligations ) and the Certificate of Designation (see Note 9.

Redeemable Senior Preferred Stock and Warrants ), which transitioned the Company's reference rates from LIBOR to SOFR.

The adoption of this standard did not have a material impact on the Company's Unaudited Consolidated Financial Statements.

Reclassification

In January 2024, the Company changed the grouping of certain business activity to conform to the way we internally manage and monitor the business.

As a result, certain immaterial activity was reassigned from the SMB Payments segment to the Enterprise Payments segment effective January 1, 2024.

Impact on prior year segment results were determined to be immaterial and have not been reclassified to reflect this change.

Recently Issued Accounting Standards Pending Adoption

Segment Reporting ASU 2023-07

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires incremental reportable segment disclosures, primarily about significant segment expenses.

The amendments also require entities with a single reportable segment to provide all disclosures required by these amendments, and all existing segment disclosures.

This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods after December 15, 2024.

The Company will adopt this guidance for the year ended December 31, 2024.

This guidance is expected to only impact the disclosures with no impact on the results of operations, financial position or cash flows.

Income Taxes ASU 2023-09

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvement to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures.

The guidance includes improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid.

This guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

The Company is in the process of evaluating the potential effects this guidance will have on its disclosures.

Profit Interest ASU 2024-01

In March 2024, the FASB issued ASU 2024-01, Profit Interest and Similar Awards ("ASU 2024-01"), to improve GAAP by adding an illustrative example to demonstrate how an entity should apply the scope in paragraph 718-10-15-3 to determine whether profit interest and similar awards should be accounted for in accordance with Topic 718, Compensation- Stock Compensation.

This guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

The Company is in the process of evaluating the potential effects this guidance will have on its disclosures.

Plastiq Acquisition

1 unchanged sentence

and certain of its affiliates ("Plastiq") to acquire substantially all of the assets of Plastiq, including the equity interest in Plastiq Canada, Inc.

Plastiq is a buyer funded

B2B payments platform offering bill pay and instant access to working capital to its customers and will complement the Company's existing supplier-funded B2B payments business.

Plastiq is a buyer funded B2B payments platform offering bill pay and instant access to working capital to its customers and will complement the Company's existing supplier-funded B2B payments business.

On May 24, 2023, Plastiq filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware.

17 unchanged sentences

Equipment, net 47

Goodwill 6,943

Intangible assets (2)

7 unchanged sentences

(2) The intangible assets acquired consist of $ 13.0 million for customer relationships, $ 7.0 million for referral partner relationships, $ 6.5 million for technology and $ 3.9 million for trade name.

This business is reported within the Company's B2B Payments reportable segment.

The Company's Unaudited Consolidated Financial Statements for three and nine months ended September 30, 2023 include the operating results of Plastiq from August 1, 2023 through September 30, 2023 as noted in the table below:

Three Months Ended September 30, 2023

(in thousands)

Revenues $ 9,932

Operating loss (1)

(1) Excluding acquisition related costs of $ 1.3 million

For the three and nine months ended September 30, 2023, the Company incurred $ 1.3 million and $ 1.7 million respectively, in acquisition related costs, which primarily consisted of consulting, legal and accounting and valuation expenses.

These expenses were recorded in selling, general and administrative expenses in the Company's Unaudited Consolidated Statements of Operations and Comprehensive Loss.

Based on the purchase consideration and pre-acquisition operating results, this business combination did not meet the materiality requirements for pro forma disclosures.

Ovvi Acquisition

On November 18, 2022, the Company completed its acquisition of certain assets and assumption of a certain liability of Ovvi, LLC, under an asset purchase agreement through its wholly-owned subsidiary, Priority Ovvi, LLC ("Ovvi").

The acquisition was accounted for as a business combination using the acquisition method of accounting.

Prior to this acquisition, the business operated as a SaaS proprietary platform for the restaurant, hospitality and retail industries by providing complete all-in-one point of sale software and hardware systems, comprehensive ancillary services including fraud detection and mitigation, and processing services for various types of cards including credit cards, debit cards, private label cards and prepaid cards.

This business is reported within the Company's SMB Payments reportable segment.

Transaction costs were not material and were expensed.

The non-voting incentive shares issued to the seller will be evaluated at each reporting period to determine whether or not profit or loss should be allocated to NCI based on the subsidiary's operating agreement.

The preliminary purchase price allocation is set forth in the table below and is expected to be finalized as soon as practicable, but no later than one year from the acquisition date.

(in thousands)

Consideration:

Total purchase consideration 5,026

Fair value of class B shares issued in Ovvi (NCI) (3)

Total enterprise value of business acquired (3)

Recognized amounts of assets acquired and liabilities assumed:

Accounts receivable (4)

Inventory (4)

Property, equipment and software, net 20

Goodwill (3)(4)

Intangible assets (2)

Other non-current asset 152

Other non-current liability ( 153 )

Total enterprise value of business acquired (3)

(1) Includes $ 50,000 withheld for inventory acquired which was subsequently released in March 2023.

(2) The intangible assets consist of $ 1.3 million for technology, $ 0.4 million for customer relationships and $ 0.3 million for trade names.

(3) During the three months ended March 31, 2023, the Company recorded measurement period adjustments due to additional information received related to the valuation of the Class B shares.

This measurement period adjustment resulted in a decrease of $ 0.6 million in goodwill and NCI.

(4) During the three months ended September 30, 2023, the Company recorded measurement period adjustments due to additional information received related to accounts receivable and inventory.

This measurement period adjustment resulted in a decrease of $ 0.1 million in accounts receivable and inventory, offset by an increase in goodwill of $ 0.1 million.

Other Acquisition

The Company also completed another acquisition during 2022 for approximately $ 1.2 million, which was not material.

The acquisition did not meet the definition of a business, therefore it was accounted for as an asset acquisition under which the cost of acquisition was allocated to the technology asset acquired.

(3) During the first quarter of 2024, the Company recorded an immaterial measurement period adjustment due to a pre-acquisition tax accrual which resulted in an adjustment to goodwill and accounts payable and accrued expenses.

Disaggregation of Revenues

The following table presents a disaggregation of our consolidated revenues by type:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2024 2023

8 unchanged sentences

The aggregate fixed consideration portion of customer contracts with an initial contract duration greater than one year is not material.

(2) Approximately $ 9.7 million and $ 21.9 million of interest income for the three and nine months ended September 30, 2023 and $ 2.0 million and $ 3.4 million for the three and nine months ended September 30, 2022, respectively, is included in outsourced services and other services revenue in the table above.

Approximately $ 0.5 million and $ 1.1 million of interest income for the three and nine months ended September 30, 2023, and $ 0.2 million and $ 0.4 million three and nine months ended September 30, 2022, respectively, is included in other income, net on the Company's Unaudited Consolidated Statements of Operations and Comprehensive Loss and not reflected in the table above.

(2) Approximately $ 11.9 million and $ 5.0 million of interest income for the three months ended March 31, 2024 and 2023, respectively, is included in outsourced services and other services revenue in the table above.

Approximately $ 0.6 million and $ 0.2 million of interest income for the three months ended March 31, 2024, and 2023, respectively, is included in other income, net on the Company's Unaudited Consolidated Statements of Operations and Comprehensive Loss and not reflected in the table above.

The following table presents a disaggregation of our consolidated revenues by segment:

Three Months Ended September 30, 2023

(in thousands) Merchant Card Fees Money Transmission Services Outsourced and Other Services Equipment Total

SMB Payments $ 136,086 $ — $ 994 $ 3,029 $ 140,109

B2B Payments 10,837 — 2,911 — 13,748

Enterprise Payments 51 25,831 9,276 — 35,158

Total revenues $ 146,974 $ 25,831 $ 13,181 $ 3,029 $ 189,015

Nine months ended September 30, 2023

(in thousands) Merchant Card Fees Money Transmission Services Outsourced and Other Services Equipment Total

SMB Payments $ 428,318 $ — $ 5,151 $ 9,468 $ 442,937

B2B Payments 12,718 — 6,787 — 19,505

Enterprise Payments 106 70,955 22,830 — 93,891

Total revenues $ 441,142 $ 70,955 $ 34,768 $ 9,468 $ 556,333

Three Months Ended September 30, 2022

Three months ended March 31, 2024

(in thousands) Merchant Card Fees Money Transmission Services Outsourced and Other Services Equipment Total

3 unchanged sentences

Total revenues $ 157,947 $ 29,144 $ 15,665 $ 2,963 $ 205,719

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

(in thousands) Merchant Card Fees Money Transmission Services Outsourced and Other Services Equipment Total

3 unchanged sentences

Total revenues $ 149,644 $ 21,406 $ 11,005 $ 2,973 $ 185,028

Deferred revenues were not material for the three and nine months ended September 30, 2023 and 2022.

Deferred revenues were not material for the three months ended March 31, 2024 and 2023.

Contract Assets and Contract Liabilities

Material contract assets and liabilities are presented net at the individual contract level in the Unaudited Consolidated Balance Sheets and are classified as current or noncurrent based on the nature of the underlying contractual rights and obligations.

Contract liabilities were $ 0.4 million and $ 0.2 million as of September 30, 2023 and December 31, 2022, respectively.

Contract liabilities were $ 0.6 million and $ 0.6 million as of March 31, 2024 and December 31, 2023, respectively.

Substantially all of these balances are recognized as revenue within 12 months.

Net contract assets were not material for any period presented.

Impairment losses recognized on receivables or contract assets arising from the Company's contracts with customers were not material for the three and nine months ended September 30, 2023 and September 30, 2022.

Impairment losses recognized on receivables or contract assets arising from the Company's contracts with customers were not material for the three months ended March 31, 2024 and 2023.

Settlement Assets and Customer/Subscriber Account Balances and Related Obligations

4 unchanged sentences

Therefore, neither is recognized in the Company's Unaudited Consolidated Balance Sheets.

Member banks held merchant funds of $ 102.9 million and $ 110.3 million at September 30, 2023 and December 31, 2022, respectively.

Member banks held merchant funds of $ 109.2 million and $ 98.0 million at March 31, 2024 and December 31, 2023, respectively.

Exception items that become the liability of the Company are recorded as merchant losses, a component of cost of revenue in the Company's Unaudited Consolidated Statements of Operations and Comprehensive Loss.

Exception items that the Company is still attempting to collect from the merchants through the funds settlement process or merchant reserves are recognized as settlement assets and customer/subscriber account balances in the Company's Unaudited Consolidated Balance Sheets, with an offsetting reserve for those amounts the Company estimates it will not be able to recover.

Expenses for merchant losses for the three and nine months ended September 30, 2023 were $ 1.6 million and $ 3.7 million, respectively.

Expenses for merchant losses for the three and nine months ended September 30, 2022 were $ 0.7 million and $ 2.8 million, respectively.

Expenses for merchant losses for the three months ended March 31, 2024 and 2023 were $ 4.7 million and $ 1.0 million, respectively.

B2B Payments Segment

4 unchanged sentences

Therefore, neither is recognized in the Company's Unaudited Consolidated Balance Sheets.

Bank-owned FBO accounts held funds of $ 93.4 million and $ 42.7 million at September 30, 2023 and December 31, 2022, respectively.

Company-owned bank accounts held $ 9.5 million and $ 1.8 million at September 30, 2023 and December 31, 2022, respectively, which are included in restricted cash and settlement and customer/subscriber account obligations in the Company's Unaudited Consolidated Balance Sheets.

Bank-owned FBO accounts held funds of $ 79.1 million and $ 69.0 million at March 31, 2024 and December 31, 2023, respectively.

Company-owned bank accounts held $ 1.6 million and $ 1.2 million at March 31, 2024 and December 31, 2023, respectively, which are included in restricted cash and settlement and customer/subscriber account obligations in the Company's Unaudited Consolidated Balance Sheets.

Exception items that the Company is still attempting to collect from the customers through the funds settlement process are recognized as settlement assets and customer/subscriber account balances in the Company's Unaudited Consolidated Balance Sheets, with an offsetting reserve for those amounts the Company estimates it will not be able to recover.

Expenses for these merchant losses for the three months ended March 31, 2024 were $ 0.2 million.

There were no expenses for these merchant losses in 2023.

For the Plastiq business, the Company accepts card payments from its customers and processes disbursements to their vendors.

The time lag between authorization and settlement of card transactions creates certain receivables (from card networks) and payables (to the vendors of customers).

The time lag between authorization and settlement of card transactions creates certain receivables (from card networks) and

payables (to the vendors of customers).

These receivables and payables arise from the settlement activities that the Company performs on the behalf of its customers and therefore, are presented as Settlement assets and related obligations.

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These balances are payable on demand.

As such, the Company recorded these balances and related obligations as current assets

and current liabilities.

As such, the Company recorded these balances and related obligations as current assets and current liabilities.

The nature of these balances are cash and cash equivalents, but they are not available for day-to-day operations of the Company.

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Therefore, the Company does not record assets for the deposits accepted and liabilities for the associated obligation.

Agency owned accounts held $ 8.6 million and $ 6.1 million at September 30, 2023 and December 31, 2022, respectively.

Agency owned accounts held $ 46.2 million and $ 19.6 million at March 31, 2024 and December 31, 2023, respectively.

The Company's consolidated settlement assets and customer/subscriber account balances and settlement and customer/subscriber account obligations were as follows:

(in thousands) September 30, 2023 December 31, 2022

(in thousands) March 31, 2024 December 31, 2023

Settlement Assets, net of estimated losses (1) :

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Card settlements due from networks 6,338 8,185

Other settlement assets 737 889

Customer/subscriber account balances

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Total settlement and customer/subscriber account obligations $ 753,850 $ 755,754

(1) Allowance for estimated losses was $ 5.6 million and $ 5.0 million as of September 30, 2023 and December 31, 2022, respectively

(2) Card settlements due from networks includes $ 6.8 million of related assets and remainder are included in restricted cash on our Unaudited Consolidated Balance Sheets.

(1) Allowance for estimated losses was $ 9.2 million and $ 6.6 million as of March 31, 2024 and December 31, 2023, respectively

(2) Card settlements due from networks includes $ 6.3 million and $ 8.2 million as of March 31, 2024 and December 31, 2023, respectively, related assets and remainder are included in restricted cash on our Unaudited Consolidated Balance Sheets.

Notes Receivable

The Company had notes receivable of $ 5.2 million and $ 4.7 million as of September 30, 2023 and December 31, 2022, respectively, which are reported as current portion of notes receivable and notes receivable less current portion on the Company's Unaudited Consolidated Balance Sheets.

The notes receivable carried weighted-average interest rates of 18.2 % and 15.4 % as of September 30, 2023 and December 31, 2022.

The Company had notes receivable of $ 6.5 million and $ 5.2 million as of March 31, 2024 and December 31, 2023, respectively, which are reported as current portion of notes receivable and notes receivable less current portion on the Company's Unaudited Consolidated Balance Sheets.

The notes receivable carried weighted-average interest rates of 18.5 % and 18.6 % as of March 31,

2024 and December 31, 2023.

The notes receivable are comprised of notes receivable from ISOs, and under the terms of the agreements the Company preserves the right to hold back residual payments due to the ISOs and to apply such residuals against future payments due to the Company.

As of September 30, 2023 and December 31, 2022, the Company had no allowance for doubtful notes receivable.

As of September 30, 2023, the principal payments for the Company's notes receivable are due as follows:

As of March 31, 2024 and December 31, 2023, the Company had no allowance for doubtful notes receivable.

As of March 31, 2024, the principal payments for the Company's notes receivable are due as follows:

(in thousands)

Twelve months ending September 30,

Twelve months ending March 31,

After 2028 247

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A summary of property, equipment and software, net was as follows:

(in thousands) September 30, 2023 December 31, 2022

(in thousands) March 31, 2024 December 31, 2023

Computer software $ 85,933 $ 78,492

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Property, equipment and software, net $ 48,120 $ 44,680

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2024 2023

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Fully depreciated assets are retained in property, equipment and software, net, until removed from service.

During the quarter ended September 30, 2023, certain fully depreciated assets were removed from service.

During the quarter ended March 31, 2024, certain fully depreciated assets were removed from service.

Goodwill and Other Intangible Assets

The Company's goodwill relates to the following reporting units:

(in thousands) September 30, 2023 December 31, 2022

(in thousands) March 31, 2024 December 31, 2023

SMB Payments $ 124,139 $ 124,139

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Balance at December 31, 2023 $ 376,103

Purchase price adjustment for Ovvi ( 486 )

Plastiq acquisition

Balance at September 30, 2023

As of September 30, 2023, the Company is not aware of any triggering events for impairment that have occurred since the last annual impairment test.

Plastiq adjustment 9

Balance at March 31, 2024

As of March 31, 2024, the Company is not aware of any triggering events for impairment that have occurred since the last annual impairment test.

Other Intangible Assets

Other intangible assets consisted of the following:

September 30, 2023 Weighted-average

March 31, 2024 Weighted-average

(in thousands, except weighted-average data) Gross Carrying Value Accumulated Amortization Net Carrying Value

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(1) These assets have an indefinite useful life.

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2024 2023

Amortization expense (1)

As of September 30, 2023, there were no impairment indicators present.

$ 12,083 $ 15,291

(1) Included in amortization expense is $ 0.4 million and $ 0.1 million as of March 31, 2024 and 2023, respectively, related to the amortization of certain contract acquisition costs.

As of March 31, 2024, there were no impairment indicators present.

Debt Obligations

Outstanding debt obligations consisted of the following:

(in thousands) September 30, 2023 December 31, 2022

Term facility - matures April 27, 2027, interest rates of 11.43 % and 9.82 % at September 30, 2023 and December 31, 2022, respectively

$ 606,050 $ 610,700

Revolving credit facility - $ 65.0 million line as of September 30, 2023 and $ 40.0 million as of December 31, 2022, matures April 27, 2026, interest rates of 10.20 % and 8.82 % at September 30, 2023 and December 31, 2022, respectively

(in thousands) March 31, 2024 December 31, 2023

Term facility - matures April 27, 2027, interest rates of 11.19 % and 11.21 % at March 31, 2024 and December 31, 2023, respectively

$ 652,695 $ 654,373

Revolving credit facility - $ 65.0 million line as of March 31, 2024 and December 31, 2023, matures April 27, 2026, interest rate of 10.20 % at March 31, 2024 and December 31, 2023

Total debt obligations 652,695 654,373

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Interest expense for outstanding debt, including fees for undrawn amounts and amortization of deferred financing costs and debt discounts was as follows:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2024 2023

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$ 20,880 $ 17,699

(1) Included in interest expense is $ 0.6 million and $ 0.8 million related to the accretion of contingent consideration from acquisitions for the three and nine months ended September 30, 2023, respectively, $ 0.1 million and $ 0.7 million for the three and nine months ended September 30, 2022, respectively.

(2) Interest expense included amortization of deferred financing costs and debt discounts of $ 1.0 million and $ 2.8 million for the three and nine months ended September 30, 2023, respectively, and $ 0.9 million and $ 2.6 million for the three and nine months ended September 30, 2022, respectively.

Third Amendment to the April 2021 Credit Agreement

On June 30, 2023, the Credit Agreement of the Company was amended to incorporate the following:

■ Reference rate :

The reference rate for the calculation of interest on the Company’s term loan and revolving credit facility was amended from LIBOR to SOFR effective June 30, 2023.

Per the amended terms, the outstanding borrowings under the Credit Agreement interest will accrue using the SOFR rate plus a term SOFR adjustment plus an applicable margin per year, subject to a SOFR floor of 1.00 % per year.

The applicable interest rate as of September 30, 2023, for the revolving credit facility based on one-month SOFR was 10.20 % and for the term facility based on three-month SOFR was 11.43 %.

■ Increase in the revolving credit facility:

The amendments also resulted in an increase in the Company’s revolving credit facility from $ 40 million to $ 65 million.

(1) Included in interest expense is $ 1.0 million and $ 0.1 million related to the accretion of contingent consideration from acquisitions for the three months ended March 31, 2024, and 2023, respectively.

(2) Interest expense included amortization of deferred financing costs and debt discounts of $ 1.1 million and $ 0.9 million for the three months ended March 31, 2024, and 2023, respectively.

Debt Covenants

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and 3) 5.50 :1.00 at each fiscal quarter ended September 30, 2023 each fiscal quarter thereafter.

As of September 30, 2023, the Company was in compliance with the covenants in the Credit Agreement.

As of March 31, 2024, the Company was in compliance with the covenants in the Credit Agreement.

Redeemable Senior Preferred Stock and Warrants

The redeemable senior preferred stock ranks senior to the Company's Common Stock, equal with any other class of the Company's stock designated as being ranked on a parity basis with the redeemable senior preferred stock and junior to any other class of the Company's stock, including preferred stock, that is designated as being ranked senior to the redeemable senior preferred stock, with respect to the payment and distribution of dividends, the purchase or redemption of the Company's stock and the liquidation, winding up of and distribution of assets of the Company.

The following table provides the redemption value of the redeemable senior preferred stock for the periods presented:

(in thousands) September 30, 2023 December 31, 2022

(in thousands) March 31, 2024 December 31, 2023

Redeemable senior preferred stock $ 225,000 $ 225,000

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December 31, 2023 225 $ 258,605

Payment of cash portion of dividend and ticking fee outstanding at December 31, 2022 — ( 5,341 )

Unpaid dividend on redeemable senior preferred stock — 4,699

Accretion of discounts and issuance costs — 841

Cash portion of dividend outstanding at March 31, 2024 — 7,122

Payment of cash portion of dividend outstanding at December 31, 2023 ( 7,027 )

March 31, 2024 225 $ 264,240

Unpaid dividend on redeemable senior preferred stock — 4,461

Accretion of discounts and issuance costs — 831

June 30, 2023 225 $ 240,731

Unpaid dividend on redeemable senior preferred stock — 4,538

Accretion of discounts and issuance cost — 844

Cash portion of dividend outstanding at September 30, 2023 6,810

September 30, 2023 225 $ 252,923

The dividend rate as of September 30, 2023 and December 31, 2022, was 17.5 % and 15.7 % respectively.

The dividend rate as of March 31, 2024 and December 31, 2023, was 17.6 % and 17.7 % respectively.

The following table provides a summary of the dividends for the period presented:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2024 2023

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Dividends declared $ 11,821 $ 10,477

(1) Dividend payable for the three months ended September 30, 2023 paid on October 2, 2023.

On June 30, 2023, the Company amended the Certificate of Designation of its redeemable senior preferred stock to transition the reference rate used for the calculation of dividends from LIBOR to SOFR.

Under the Amended Certificate of Designation, the dividend rate (capped at 22.50 %) will be equal to the three-month term SOFR (minimum of 1.00 %), plus the three-month term SOFR spread adjustment of 0.26 % plus the applicable margin of 12.00 %.

All other terms in the agreement were unchanged.

For the three months ended September 30, 2023, SOFR is the reference rate for calculation of the dividend.

The dividend rate is subject to future increases if the Company doesn't comply with the minimum cash payment requirements outlined in the agreement, which includes required payments of dividends, required payments related to redemption or required

(1) Dividend payable for the three months ended March 31, 2024 was paid on April 1, 2024.

Under the Amended Certificate of Designation, the dividend rate (capped at 22.50 %) is equal to the three-month term SOFR (minimum of 1.00 %), plus the three-month term SOFR spread adjustment of 0.26 % plus the applicable margin of 12.00 %.

The dividend rate may also increase if the Company fails to obtain the required stockholder approval for a forced sale transaction triggered by investors or if an event of default as outlined in the agreement occurs.

In 2021, the Company issued warrants to purchase up to 1,803,841 shares of the Common Stock, at an exercise price of $ 0.001 .

As of September 30, 2023, none of the warrants have been exercised.

As of March 31, 2024, none of the warrants have been exercised.

The warrants are considered to be equity contracts indexed in the Company's own shares and therefore were recorded at their inception date relative fair value and are included in additional paid-in capital on the Company's Unaudited Consolidated Balance Sheets.

The Company's consolidated effective income tax rate for the three and nine months ended September 30, 2023, was 102.1 % and 122.5 %, respectively, compared to a consolidated effective income tax rate of 188.1 % and 184.2 % for the three and nine months ended September 30, 2022, respectively.

The effective rates differed from the statutory rate of 21.0% primarily due to an increase in the valuation allowance against certain business interest carryover deferred tax assets.

The Company's consolidated effective income tax rate for the three months ended March 31, 2024, was 33.2 % compared to a consolidated effective income tax rate of 20.8 % for the three months ended March 31, 2023.

The effective rates differed from the statutory rate of 21.0% primarily due to an increase in the valuation allowance against certain business interest carryover deferred tax assets, and certain forecasted nondeductible expenses.

Valuation Allowance for Deferred Income Tax Assets

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In accordance with the provisions of ASC 740, Income Taxes , the Company is required to provide a valuation allowance against deferred income tax assets when it is "more likely than not" that some portion or all of the deferred tax assets will not be realized.

Based on management's assessment, as of September 30, 2023, the Company continues to record a full valuation allowance against non-deductible interest expense.

Based on management's assessment, as of March 31, 2024, the Company continues to record a full valuation allowance against non-deductible interest expense.

The Company will continue to evaluate the realizability of the net deferred tax asset on a quarterly basis and, as a result, the valuation allowance may change in future periods.

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The Company is authorized to issue 100,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors.

As of September 30, 2023 and December 31, 2022, the Company has not issued any shares of preferred stock.

As of March 31, 2024 and December 31, 2023, the Company has not issued any shares of preferred stock.

Share Repurchase Program

During the second quarter of 2022, PRTH's Board of Directors authorized a general share repurchase program under which the Company may purchase up to 2.0 million shares of its outstanding Common Stock for a total of up to $ 10.0 million.

In 2022, PRTH's Board of Directors authorized a general share repurchase program under which the Company may purchase up to 2.0 million shares of its outstanding Common Stock for a total of up to $ 10.0 million.

Under the terms of this plan, the Company may purchase shares through open market purchases, unsolicited or solicited privately negotiated transactions, or in another manner so long as it complies with applicable rules and regulations.

September 30, 2023 December 31, 2022

in thousands, except share data, which is in whole units

Number of shares purchased (1)

Average price paid per share $ — $ 4.42

Total Investment (1)

(1) These amounts may differ from the repurchases of Common Stock amounts in the Unaudited Statements of Cash Flows due to shares withheld for taxes and unsettled share repurchases at the end of the quarter.

There have been no shares repurchased under this plan since December 2022.

Stock-based Compensation

Stock-based compensation expense was as follows:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2024 2023

Stock-based compensation expense $ 1,501 $ 1,104 $ 5,183 $ 4,204

Income tax benefit for stock-based compensation was immaterial for the three and nine months ended September 30, 2023 and 2022.

Stock options compensation expense $ 1,528 $ 1,922

Incentive units compensation expense 93 —

ESPP compensation expense 12 14

Total $ 1,633 $ 1,936

Income tax benefit for stock-based compensation was immaterial for the three months ended March 31, 2024 and 2023.

No stock-based compensation has been capitalized.

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The offering period shall be for a period of three months, and the first offering period began on January 10, 2022.

The 2021 Stock Purchase Plan provides eligible employees the opportunity to purchase shares of the Company's Common Stock on a quarterly basis through payroll deductions at a price equal to 95 % of the lesser of the fair value on the first and last trading day of each offering period.

The compensation expense for the three and nine months ended September 30, 2023, was immaterial and is included in stock-based compensation in the table above.

The 2021 Stock Purchase Plan provides eligible employees the

opportunity to purchase shares of the Company's Common Stock on a quarterly basis through payroll deductions at a price equal to 95 % of the lesser of the fair value on the first and last trading day of each offering period.

Non-voting Incentive Units

The Company issued non-voting incentive units to certain employees and partners in six subsidiaries.

These non-voting incentive units were determined to be equity and are accounted for under ASC 718 Stock Compensation.

The non-voting incentive units are either fully vested when granted, or vest according to the service period and/or performance measure noted in the grant agreement.

As the non-voting incentive units are vested, they are recognized as NCI to the Company, who is the majority owner of the subsidiaries.

Related Party Transactions

In February 2019, PHOT, a subsidiary of the Company, received a contribution of substantially all of the operating assets of eTab and Cumulus under asset contribution agreements.

PHOT is a part of the Company's SMB reportable segment.

These contributed assets were primarily composed of technology-related assets.

Prior to these transactions, eTab was 80.0 % owned by the Company's Chairman and Chief Executive Officer ("CEO").

No cash consideration was paid to the contributors of the eTab or Cumulus assets on the date of the transactions.

As consideration for these contributed assets, the contributors were issued redeemable non-controlling preferred equity interests ("redeemable NCIs") in PHOT.

Under these redeemable NCIs, the contributors were eligible to receive up to $ 4.5 million of profits earned by PHOT, plus a preferred yield ( 6.0 % per year) on any undistributed preferred equity interest ("Total Preferred Equity Interest").

Once the total preferred equity interest is distributed to the holders, the redeemable NCIs cease to exist.

The Company's CEO initially owned 83.3 % of the redeemable NCIs, which ownership interest was subsequently reduced to 35.3 % through the CEO's disposition of interests to others.

In November 2020, the Company agreed with the contributors to an exchange of shares of common stock of the Company, or cash, for the remaining undistributed Total Preferred Equity Interests of $ 4.8 million.

An exchange valuation for the Company's common stock was established as of November 12, 2020 at the prior 20-day volume weighted average price of $ 2.78 per share.

The exchange was contingent upon receiving approval of the Company's lenders;

therefore, the binding exchange agreements were not entered into until after lender approval was received in April 2021 in connection with the debt refinancing.

In May 2021, the Company entered into exchange agreements and completed the exchange of 1,428,358 shares of common stock and $ 0.8 million of cash for the Total Preferred Equity Interests.

The CEO received 605,623 shares of common stock of the Company in exchange for his 35.3 % interest, and the Company's Chief Operating Officer (“COO”) received 413,081 shares of common stock of the Company in exchange for her 24.1 % interest.

On October 31, 2023, a lawsuit was filed alleging that the Board breached its fiduciary duties by approving the above mentioned exchange transaction.

The Company denied any wrongdoing.

The lawsuit was settled on January 30, 2024, wherein the Company agreed to unwind the exchange transaction and received previously issued shares of common stock of the Company from the CEO, COO and others in exchange of the reissuance of PHOT redeemable preferred units.

The returned shares of common stock of the Company are recorded as treasury stock at their closing market price as of the settlement date of January 30, 2024.

The reissued PHOT redeemable preferred units are recorded as redeemable NCI at their estimated fair value as of the settlement date on the Company’s Unaudited Consolidated Balance Sheets.

The redeemable preferred units were accreted to their redemption value as of March 31, 2024, through net loss available to common stockholders in the Company’s Unaudited Statements of Operations and Comprehensive Loss.

Commitments and Contingencies

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Effective January 1, 2022, the Company entered into a three year business cooperation agreement with a vendor to resell its services.

Under the agreement, the Company purchased vendor services worth $ 0.7 million for the year ended December 31, 2022, and is committed to purchase vendor services worth $ 1.5 million in 2023 and $ 2.3 million in 2024.

Under the agreement, the Company purchased vendor services worth $ 1.5 million for the year ended December 31, 2023, and is committed to purchase vendor services worth $ 2.3 million in 2024.

Capital Commitments

The Company committed to capital contributions to fund the operations of certain subsidiaries totaling $ 26.0 million and $ 22.0 million as September 30, 2023 and December 31, 2022, respectively.

The Company is obligated to make the

contributions within 10 business days of receiving notice for such contribution from the subsidiary.

As of September 30, 2023 and December 31, 2022, the Company has contributed $ 11.6 million and $ 6.9 million, respectively.

The Company committed to capital contributions to fund the operations of certain subsidiaries totaling $ 26.0 million as March 31, 2024 and December 31, 2023.

The Company is obligated to make the contributions within 10 business days of receiving notice for such contribution from the subsidiary.

As of March 31, 2024 and December 31, 2023, the Company has contributed $ 13.4 million and $ 11.8 million, respectively.

Merchant Reserves

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December 31, 2023 $ 13,438

Addition of contingent consideration (related to asset acquisition) 2,100

Accretion of contingent consideration 972

Fair value adjustments due to changes in estimates of future payments 116

Payment of contingent consideration ( 3,071 )

March 31, 2024 $ 11,339

Addition of contingent consideration due to resolution of contingency 7,000

Adjustment for receivable due to residual shortfall ( 2,053 )

Accretion of discount on contingent consideration 117

June 30, 2023 11,413

Addition of contingent consideration (related to business combination)

Accretion of discount on contingent consideration 560

Payment of contingent consideration ( 7,949 )

September 30, 2023 $ 12,706

Legal Proceedings

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If and when the Company records such an accrual, it could be material and could adversely impact the Company's results of operations, financial condition and cash flows.

The Company is involved in a case that was filed on October 11, 2023 and is currently pending in the United States District Court for the Northern District of California (the “Complaint”).

The Complaint is a putative class action against The Credit Wholesale Company, Inc.

(“Wholesale”), Priority Technology Holdings, Inc., Priority Payment Systems (“PPS”), LLC and Wells Fargo Bank, N.A.

(“Wells Fargo”).

The Complaint alleges that Wholesale is an agent of Priority, PPS and Wells Fargo

and that it made non-consensual recordation of telephonic communications with California businesses in violation of California Invasion of Privacy Act (the “Act”).

T he Complaint seeks to certify a class of affected businesses and an award of $ 5,000 per violation of the Act.

As of May 9, 2024, the financial impact, if any, of the outcome of this legal proceeding is neither probable nor estimable.

Concentration of Risks

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Because the Company is not a member bank, in order to process these bankcard transactions, the Company maintains sponsorship agreements with member banks which require, among other things, that the Company abide by the by-laws and regulations of the card associations.

As of September 30, 2023, the Company's customer account balances of $ 672.2 million are maintained in FDIC insured accounts with certain FIs (refer to Note 4.

Settlement Assets and Customer/Subscriber Account Balances and Related

Obligations ) A majority of the Company's cash and restricted cash is held in certain FIs, substantially all of which is in excess of FDIC limits.

As of March 31, 2024 , the Company's customer account balances of $ 703 million are maintained in FDIC insured eligible accounts with certain FIs (refer to Note 4.

Settlement Assets and Customer/Subscriber Account Balances and Related Obligations ) A majority of the Company's cash and restricted cash is held in certain FIs, substantially all of which is in excess of FDIC limits.

The Company does not believe it is exposed to any significant credit risk from these transactions.

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Liabilities measured at fair value on a recurring basis consisted of the following:

(in thousands) Fair Value Hierarchy September 30, 2023 December 31, 2022

(in thousands) Fair Value Hierarchy March 31, 2024 December 31, 2023

Contingent consideration, current portion Level 3 $ 2,880 $ 5,951

1 unchanged sentence

Total contingent consideration $ 11,339 $ 13,438

During the three and nine months ended September 30, 2023, there were no transfers into, out of, or between levels of the fair value hierarchy.

During the three months ended March 31, 2024, there were no transfers into, out of, or between levels of the fair value hierarchy.

Fair Value Disclosures

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Substantially all of the Company's notes receivable are secured, and the Company provides for allowances when it believes that certain notes receivable may not be collectible.

The carrying value of the Company's notes receivable, net approximates fair value and was approximately $ 5.2 million and $ 4.7 million at September 30, 2023 and December 31, 2022, respectively.

The carrying value of the Company's notes receivable, net approximates fair value and was approximately $ 6.5 million and $ 5.2 million at March 31, 2024 and December 31, 2023, respectively.

On the fair value hierarchy, Level 3 inputs are used to estimate the fair value of these notes receivable.

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Debt Obligations ) are reflected in the Company's Unaudited Consolidated Balance Sheets at carrying value since the Company did not elect to remeasure debt obligations to fair value at the end of each reporting period.

The fair value of the term facility was estimated to be $ 603.0 million and $ 606.1 million at September 30, 2023 and December 31, 2022, respectively, and was estimated using binding and non-binding quoted prices in an active secondary market, which considers the credit risk and market related conditions, and is within Level 3 of the fair value hierarchy.

The fair value of the term facility was estimated to be $ 651.9 million at March 31, 2024 and December 31, 2023 and was estimated using binding and non-binding quoted prices in an active secondary market, which considers the credit risk and market related conditions, and is within Level 2 of the fair value hierarchy.

The carrying values of the other long-term debt obligations approximate fair value due to mechanisms in the credit agreements that adjust the applicable interest rates and the lack of a market for these debt obligations.

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The Company has three reportable segments:

• SMB Payments – provides full-service acquiring and payment-enabled solutions for B2C transactions, leveraging the Company's proprietary software platform, distributed through ISOs, direct sales and vertically focused ISV channels.

• B2B Payments – provides AP automation to corporations, software partners and FIs, and, working capital solutions to other business customers.

• Enterprise Payments – provides embedded payment and banking solutions to enterprise customers that modernize legacy platforms and accelerate modern software partners looking to monetize payments.

• SMB Payments – Provides full-service acquiring and payment-enabled solutions for B2C transactions, leveraging Priority's proprietary software platform, distributed through ISO, direct sales and vertically focused ISV channels.

• B2B Payments – provides market-leading AP automation solutions to corporations, software partners and industry leading FIs (including Citibank and Mastercard) in addition to working improving cash flow by providing instant access to working capital.

• Enterprise Payments – Provides embedded finance and treasury solutions to enterprise customers to modernize legacy platforms and accelerate software partners' strategies to monetize payments.

Corporate includes costs of corporate functions and shared services not allocated to our reportable segments.

In January 2024, the Company changed the grouping of certain business activity to conform to the way we internally manage and monitor the business.

As a result, certain immaterial activity was reassigned from the SMB Payments segment to the Enterprise Payments segment effective January 1, 2024.

Impact on prior year segment results were determined to be immaterial and have not been reclassified to reflect this change.

Information on reportable segments and reconciliations to consolidated revenues, consolidated depreciation and amortization, and consolidated operating income are as follows:

(in thousands) Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

(in thousands) Three Months Ended March 31,

SMB Payments $ 143,751 $ 154,933

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Consolidated depreciation and amortization $ 15,253 $ 18,048

Operating (loss) income:

Operating income (loss):

SMB Payments $ 12,383 $ 12,011

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A reconciliation of total operating income of reportable segments to the Company's net (loss) income is provided in the following table:

(in thousands) Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

(in thousands) Three Months Ended March 31,

Total operating income of reportable segments $ 37,137 $ 23,825

2 unchanged sentences

Other income, net 632 212

Income tax benefit (expense) ( 4,328 ) ( 1,691 ) ( 6,550 ) ( 1,833 )

Net loss $ ( 87 ) $ ( 792 ) $ ( 1,205 ) $ ( 838 )

Income tax (expense) benefit ( 2,582 ) 133

Net income (loss) $ 5,193 $ ( 506 )

Loss per Common Share

The following tables set forth the computation of the Company's basic and diluted loss per common share:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands except per share amounts) 2024 2023

Net loss $ ( 87 ) $ ( 792 ) $ ( 1,205 ) $ ( 838 )

Net income (loss) $ 5,193 $ ( 506 )

Dividends and accretion attributable to redeemable senior preferred stockholders ( 12,662 ) ( 11,295 )

Return on redeemable NCI in consolidated subsidiary ( 581 ) —

Net loss attributable to common stockholders $ ( 8,050 ) $ ( 11,801 )

5 unchanged sentences

Redeemable Senior Preferred Stock and Warrants ).

For the three and nine months ended September 30, 2023 and 2022, all potentially dilutive securities were anti-dilutive, so diluted net loss per share was equivalent to basic net loss per share.

For the three months ended March 31, 2024 and 2023, all potentially dilutive securities were anti-dilutive, so diluted net loss per share was equivalent to basic net loss per share.

Potentially anti-dilutive securities that were excluded from the Company's loss per common share are as follows:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2024 2023

Outstanding warrants on Common Stock (1)

— 3,557 — 3,557

Outstanding options and warrants issued to adviser (2)

Restricted stock awards (3)

1,109 2,680 1,297 1,126

Outstanding stock option awards (3)

918 1,034 909 2,292

Total 1,942 7,354

4 unchanged sentences

(3) Granted under the 2018 Plan.

Subsequent Events

On October 2, 2023, the Company entered into the fourth amendment to its Credit Agreement to increase its term loan facility by $ 50.0 million.

All other terms remained unchanged.

The proceeds of the increase was used to repay the outstanding balance of the revolving credit facility and other general corporate needs.

The accounting evaluation of the amendment is in process .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements