Priority Technology Holdings, Inc. 10-Q

Item 1. Financial Statements March 31, 2024 December 31, 2023 Assets Current assets: Cash and cash equivalents $ 34,290 $ 39,604 Restricted cash 12,658 11,923 Accounts receivable, net of allowances of $ 5,536 and $ 5,289 , respectively 67,137 58,551 Prepaid expenses and other current assets 13,699 13,273 Current portion of notes receivable, net of allowance of $ 0 and $ 0 , respectively 1,972 1,468 Settlement assets and customer/subscriber account balances 752,590 756,475 Total current assets 882,346 881,294 Notes receivable, less current portion 4,549 3,728 Property, equipment and software, net 48,120 44,680 Goodwill 376,112 376,103 Intangible assets, net 261,658 273,350 Deferred income taxes, net 24,405 22,533 Other noncurrent assets 12,767 13,649 Total assets $ 1,609,957 $ 1,615,337 Liabilities, Redeemable Senior Preferred Stock, Redeemable NCI, and Stockholders' Deficit Current liabilities: Accounts payable and accrued expenses $ 49,329 $ 52,643 Accrued residual commissions 35,965 33,025 Customer deposits and advance payments 4,090 3,934 Current portion of long-term debt 6,712 6,712 Settlement and customer/subscriber account obligations 753,850 755,754 Total current liabilities 849,946 852,068 Long-term debt, net of current portion, discounts and debt issuance costs 631,352 631,965 Other noncurrent liabilities 16,704 18,763 Total liabilities 1,498,002 1,502,796 Commitments and contingencies ( Note 14 ) Redeemable senior preferred stock, net of discounts and issuance costs: Redeemable senior preferred stock, $ 0.001 par value; 250,000 shares authorized; 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: Preferred stock, $ 0.001 ; 100,000,000 shares authorized; 0 issued or outstanding at March 31, 2024 and December 31, 2023 — — Common Stock, $ 0.001 par value; 1,000,000,000 shares authorized; 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 76 77 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 ) Additional paid-in capital — — Accumulated other comprehensive loss ( 42 ) ( 29 ) Accumulated deficit ( 141,412 ) ( 134,951 ) Total stockholders' deficit attributable to stockholders of PRTH ( 159,869 ) ( 147,718 ) Non-controlling interests in consolidated subsidiaries 1,747 1,654 Total stockholders' deficit ( 158,122 ) ( 146,064 ) Total liabilities, redeemable senior preferred stock, redeemable NCI and stockholders' deficit $ 1,609,957 $ 1,615,337 See Notes to Unaudited Consolidated Financial Statements 1 Table of Contents Priority Technology Holdings, Inc . Unaudited Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share amounts) Three Months Ended March 31, 2024 2023 Revenues $ 205,719 $ 185,028 Operating expenses Cost of revenue (excludes depreciation and amortization) 129,298 121,966 Salary and employee benefits 22,150 19,048 Depreciation and amortization 15,253 18,048 Selling, general and administrative 10,995 9,118 Total operating expenses 177,696 168,180 Operating income 28,023 16,848 Other (expense) income Interest expense ( 20,880 ) ( 17,699 ) Other income, net 632 212 Total other expense, net ( 20,248 ) ( 17,487 ) Income (loss) before income taxes 7,775 ( 639 ) Income tax expense (benefit) 2,582 ( 133 ) Net income (loss) 5,193 ( 506 ) Less: Dividends and accretion attributable to redeemable senior preferred stockholders ( 12,662 ) ( 11,295 ) Less: Return on redeemable NCI in consolidated subsidiary ( 581 ) — Net loss attributable to common stockholders ( 8,050 ) ( 11,801 ) Other comprehensive loss Foreign currency translation adjustments ( 13 ) 24 Comprehensive loss $ ( 8,063 ) $ ( 11,777 ) Loss per common share: Basic and diluted $ ( 0.10 ) $ ( 0.15 ) Weighted-average common shares outstanding: Basic and diluted 78,021 78,133 See Notes to Unaudited Consolidated Financial Statements 2 Table of Contents Priority Technology Holdings, Inc . Unaudited Consolidated Statements of Changes in Stockholders' Deficit and Non-Controlling Interest (in thousands) Common Stock Treasury Stock APIC AOCI Accumulated Deficit Deficit Attributable to Stockholders NCIs Total Shares $ Shares $ December 31, 2023 76,957 $ 77 2,632 $ ( 12,815 ) $ — $ ( 29 ) $ ( 134,951 ) $ ( 147,718 ) $ 1,654 $ ( 146,064 ) Equity-classified stock-based compensation — — — — 1,540 — — 1,540 — 1,540 ESPP compensation and vesting of stock-based compensation 429 — — — 49 — — 49 — 49 Shares withheld for taxes ( 123 ) 123 ( 421 ) — — — ( 421 ) — ( 421 ) 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 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 ) Common Stock Treasury Stock APIC AOCI Accumulated Deficit Deficit Attributable to Stockholders NCIs Total 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 ESPP compensation and vesting of stock-based compensation 517 — — — 37 — — 37 — 37 Shares withheld for taxes ( 157 ) — 157 ( 777 ) — — — ( 777 ) — ( 777 ) 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 ) See Notes to Unaudited Consolidated Financial Statements 3 Table of Contents Priority Technology Holdings, Inc . Unaudited Consolidated Statements of Changes in Stockholders' Deficit and Non-Controlling Interest (in thousands) Three Months Ended March 31, 2024 2023 Cash flows from 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, ESPP and incentive units compensation 1,633 1,936 Amortization of debt issuance costs and discounts 1,065 903 Deferred income tax ( 1,872 ) ( 5,716 ) Change in contingent consideration 972 229 Other non-cash items, net ( 259 ) 14 Change in operating assets and liabilities: Accounts receivable ( 8,339 ) 81 Prepaid expenses and other current assets ( 425 ) 481 Income taxes (receivable) payable — 8,666 Notes receivable ( 266 ) ( 163 ) Accounts payable and other accrued liabilities 1,590 3,916 Customer deposits and advance payments 157 250 Other assets and liabilities, net ( 1,395 ) ( 462 ) Net cash provided by operating activities 13,307 27,677 Cash flows from investing activities: Additions to property, equipment and software ( 6,610 ) ( 5,046 ) Notes receivable, net ( 1,059 ) 178 Acquisitions of assets and other investing activities — ( 2,715 ) Net cash used in investing activities ( 7,669 ) ( 7,583 ) Cash flows from financing activities: Repayments of long-term debt ( 1,678 ) ( 1,550 ) Repayments of borrowings under revolving credit facility — ( 6,000 ) Repurchases of Common Stock and shares withheld for taxes ( 421 ) ( 777 ) 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 (used in) provided by financing activities ( 10,279 ) 57,537 Net change in cash and cash equivalents and restricted cash: 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 Cash and cash equivalents and restricted cash at end of period $ 791,582 $ 638,241 4 Table of Contents Priority Technology Holdings, Inc . Unaudited Consolidated Statements of Changes in Stockholders' Deficit and Non-Controlling Interest (in thousands) Three Months Ended March 31, 2024 2023 Reconciliation of cash and cash equivalents, and restricted cash: Cash and cash equivalents $ 34,290 $ 15,882 Restricted cash 12,658 11,012 Cash and cash equivalents included in settlement assets and customer/subscriber account balances (see Note 4 ) 744,634 611,347 Total cash and cash equivalents, and restricted cash $ 791,582 $ 638,241 Supplemental cash flow information: Cash paid for interest $ 18,436 $ 16,330 Non-cash investing and financing activities: Forfeiture of liability-classified award $ — $ 596 Acquisition of intangible asset $ — $ 193 Issuance of NCI $ 93 $ — (1) The dividend payable for the quarter ended March 31, 2024, was paid on April 1, 2024. See Notes to Unaudited Consolidated Financial Statements 5 Table of Contents 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 1. Basis of Presentation and Significant Accounting Policies Business, Consolidation and Presentation 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. Priority is a provider of merchant acquiring, integrated payment software, money transmission services and commercial payments solutions. The Company operates on a calendar year ending each December 31 and on four calendar quarters ending on March 31, June 30, September 30 and December 31 of each year. Results of operations reported for interim periods are not necessarily indicative of results for the entire year. The accompanying Unaudited Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. These Unaudited Consolidated Financial Statements have been prepared in accordance with GAAP for interim financial information pursuant to the rules and regulations of the SEC. The Consolidated Balance Sheet as of December 31, 2023 was derived from the audited financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 but does not include all disclosures required by GAAP for annual financial statements. NCI represents the equity interest in certain consolidated entities in which the Company owns less than 100% of the profit interests. Changes in the Company's ownership interest while the Company retains its controlling interest are accounted for as equity transactions. 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. These adjustments consist of normal recurring accruals and estimates that affect the carrying amounts of assets and liabilities. 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 ended March 31, 2024 include the results of the Plastiq business acquired through Chapter 11 bankruptcy process on July 31, 2023. Use of Estimates The preparation of Unaudited Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Unaudited Consolidated Financial Statements and the reported amounts of revenues and expenses during the reported period. Actual results could materially differ from those estimates. Foreign Currency The Company's reporting currency is the U.S. dollar. The functional currency of the Indian subsidiary of the Company is Indian Rupee (i.e. local currency of Republic of India). The functional currency of the Canadian subsidiary of the Company is the Canadian Dollar. Accordingly, assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the 6 Table of Contents 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). 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. 2. Acquisition Plastiq Acquisition On May 23, 2023, PRTH’s subsidiary, Plastiq, Powered by Priority, LLC (the "acquiring entity"), entered into a stalking horse equity and asset purchase agreement (the "Purchase Agreement") with Plastiq, Inc. 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. 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. The purchase was completed on July 31, 2023 for a total purchase consideration of approximately $ 37.0 million. The total purchase consideration included $ 28.5 million in cash and the remaining consideration is in the nature of deferred or contingent consideration and certain equity interest in the acquiring entity. The cash consideration for the purchase was funded by borrowings from the Company's revolving credit facility. 7 Table of Contents The acquisition was accounted for as a business combination using the acquisition method of accounting, under which the acquired assets and assumed liabilities were recognized at their fair values as of July 31, 2023, with the excess of the fair value of consideration transferred over the fair value of the net assets acquired recognized as goodwill. The fair values of the acquired assets and assumed liabilities as of July 31, 2023 were estimated by management using the discounted cash flow method and other factors specific to certain assets and liabilities. The preliminary purchase price allocation is set forth in the table below and expected to be finalized as soon as practicable but no later than one year from the closing date. (in thousands) Consideration: Cash $ 28,500 Contingent consideration payments (1) 8,419 Common equity of acquiring entity 330 Less: cash and restricted cash acquired ( 278 ) Total purchase consideration, net of cash and restricted cash acquired $ 36,971 Recognized amounts of assets acquired and liabilities assumed: Accounts receivable $ 831 Prepaid expenses 469 Settlement assets 8,277 Equipment, net 47 Goodwill (3) 7,261 Intangible assets (2) 30,460 Accounts payable and accrued expenses ( 1,881 ) Customer deposits ( 214 ) Settlement obligations ( 8,279 ) Total purchase consideration $ 36,971 (1) The fair value of the contingent consideration payments issued was determined utilizing a Monte Carlo simulation. The contingent consideration payments were calculated based on the path for the simulated metrics and the contractual terms of the contingent consideration payments and were discounted to present value at a rate reflecting the risk associated with the payoffs. The fair value was estimated to be the average present value of the contingent consideration payments over all iterations of the simulation. (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. (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. 8 Table of Contents 3. Revenues Disaggregation of Revenues The following table presents a disaggregation of our consolidated revenues by type: Three Months Ended March 31, (in thousands) 2024 2023 Revenue Type: Merchant card fees $ 157,947 $ 149,644 Money transmission services 29,144 21,406 Outsourced services and other services 15,665 11,005 Equipment 2,963 2,973 Total revenues (1),(2) $ 205,719 $ 185,028 (1) Includes contracts with an original duration of one year or less and variable consideration under a stand-ready series of distinct days of service. The aggregate fixed consideration portion of customer contracts with an initial contract duration greater than one year is not material. (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 March 31, 2024 (in thousands) Merchant Card Fees Money Transmission Services Outsourced and Other Services Equipment Total Segment SMB Payments $ 139,488 $ — $ 1,300 $ 2,963 $ 143,751 B2B Payments 18,289 — 2,826 — 21,115 Enterprise Payments 170 29,144 11,539 — 40,853 Total revenues $ 157,947 $ 29,144 $ 15,665 $ 2,963 $ 205,719 Three Months Ended March 31, 2023 (in thousands) Merchant Card Fees Money Transmission Services Outsourced and Other Services Equipment Total Segment SMB Payments $ 148,688 $ — $ 3,272 $ 2,973 $ 154,933 B2B Payments 927 — 1,859 — 2,786 Enterprise Payments 29 21,406 5,874 — 27,309 Total revenues $ 149,644 $ 21,406 $ 11,005 $ 2,973 $ 185,028 Deferred revenues were not material for the three months ended March 31, 2024 and 2023. 9 Table of Contents 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 $ 0.6 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 months ended March 31, 2024 and 2023. 4. Settlement Assets and Customer/Subscriber Account Balances and Related Obligations SMB Payments Segment In the Company's SMB Payments reportable segment, funds settlement refers to the process of transferring funds for sales and credits between card issuers and merchants. The standards of the card networks require possession of funds during the settlement process by a member bank which controls the clearing transactions. Since settlement funds are required to be in the possession of a member bank until the merchant is funded, these funds are not assets of the Company and the associated obligations are not liabilities of the Company. Therefore, neither is recognized in the Company's Unaudited Consolidated Balance Sheets. 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 months ended March 31, 2024 and 2023 were $ 4.7 million and $ 1.0 million, respectively. B2B Payments Segment In the Company's B2B Payments segment, the Company earns revenues by processing transactions for FIs and other business customers. Customers transfer funds to the Company, which are held in either company-owned bank accounts controlled by the Company or bank-owned FBO accounts controlled by the banks, until such time that the transactions are settled with the customer payees. Amounts due to customer payees that are held by the Company in company-owned bank accounts are included in restricted cash. Amounts due to customer payees that are held in bank-owned FBO accounts are not assets of the Company, and the associated obligations are not liabilities of the Company. Therefore, neither is recognized 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 10 Table of Contents 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. Enterprise Payments Segment In the Company's Enterprise Payments segment revenue is derived primarily from enrollment fees, monthly subscription fees and transaction-based fees from licensed money transmission services. As part of its licensed money transmission services, the Company accepts deposits from consumers and subscribers which are held in bank accounts maintained by the Company on behalf of consumers and subscribers. After accepting deposits, the Company is allowed to invest available balances in these accounts in certain permitted investments, and the return on such investments contributes to the Company's net cash inflows. These balances are payable on demand. 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. Therefore, the Company has classified these balances as settlement assets and customer/subscriber account balances and the related obligations as settlement and customer/subscriber account obligations in the Company's Unaudited Consolidated Balance Sheets. In certain states, the Company accepts deposits under agency arrangement with member banks wherein accepted deposits remain under the control of the member banks. Therefore, the Company does not record assets for the deposits accepted and liabilities for the associated obligation. 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) March 31, 2024 December 31, 2023 Settlement Assets, net of estimated losses (1) : Card settlements due from merchants $ 881 $ 2,705 Card settlements due from networks 6,338 8,185 Other settlement assets 737 889 Customer/subscriber account balances Cash and cash equivalents 744,634 744,696 Total settlement assets and customer/subscriber account balances $ 752,590 $ 756,475 Settlement and Customer/Subscriber Account Obligations: Customer account obligations $ 703,212 $ 710,775 Subscriber account obligations 41,422 33,921 Total customer/subscriber account obligations 744,634 744,696 Due to customers' payees (2) 9,216 11,058 Total settlement and customer/subscriber account obligations $ 753,850 $ 755,754 (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. 5. Notes Receivable 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, 11 Table of Contents 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 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 March 31, 2025 $ 1,972 2026 1,688 2027 1,522 2028 1,092 After 2028 247 Total $ 6,521 6. Property, Equipment and Software A summary of property, equipment and software, net was as follows: (in thousands) March 31, 2024 December 31, 2023 Computer software $ 85,933 $ 78,492 Equipment 10,712 10,377 Leasehold improvements 2,788 1,535 Furniture and fixtures 1,442 1,442 Property, equipment and software 100,875 91,846 Less: Accumulated depreciation ( 59,549 ) ( 56,442 ) Capital work in-progress 6,794 9,276 Property, equipment and software, net $ 48,120 $ 44,680 Three Months Ended March 31, (in thousands) 2024 2023 Depreciation expense $ 3,170 $ 2,757 Computer software represents purchased software and internally developed software that is used to provide the Company's services to its customers. Fully depreciated assets are retained in property, equipment and software, net, until removed from service. During the quarter ended March 31, 2024, certain fully depreciated assets were removed from service. 12 Table of Contents 7. Goodwill and Other Intangible Assets Goodwill The Company's goodwill relates to the following reporting units: (in thousands) March 31, 2024 December 31, 2023 SMB Payments $ 124,139 $ 124,139 Enterprise Payments 244,712 244,712 Plastiq (B2B Payments) 7,261 7,252 Total $ 376,112 $ 376,103 The following table summarizes the changes in the carrying value of goodwill: (in thousands) Amount Balance at December 31, 2023 $ 376,103 Plastiq adjustment 9 Balance at March 31, 2024 $ 376,112 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: March 31, 2024 Weighted-average Useful Life (in thousands, except weighted-average data) Gross Carrying Value Accumulated Amortization Net Carrying Value Other intangible assets: ISO and referral partner relationships $ 182,339 $ ( 39,824 ) $ 142,515 14.6 Residual buyouts 135,164 ( 95,505 ) 39,659 6.3 Customer relationships 109,017 ( 93,459 ) 15,558 8.4 Merchant portfolios 83,350 ( 59,565 ) 23,785 6.5 Technology 57,639 ( 23,989 ) 33,650 8.7 Trade names 7,104 ( 2,713 ) 4,391 10.6 Non-compete agreements 3,390 ( 3,390 ) — 0.0 Money transmission licenses (1) 2,100 — 2,100 Total $ 580,103 $ ( 318,445 ) $ 261,658 9.6 (1) These assets have an indefinite useful life. 13 Table of Contents December 31, 2023 Weighted-average Useful Life (in thousands, except weighted-average data) Gross Carrying Value Accumulated Amortization Net Carrying Value Other intangible assets: ISO and referral partner relationships $ 182,339 $ ( 36,506 ) $ 145,833 14.7 Residual buyouts 135,164 ( 92,699 ) 42,465 6.3 Customer relationships 109,017 ( 92,781 ) 16,236 8.4 Merchant portfolios 83,350 ( 56,139 ) 27,211 6.5 Technology 57,639 ( 22,712 ) 34,927 9.0 Trade names 7,104 ( 2,526 ) 4,578 11.7 Non-compete agreements 3,390 ( 3,390 ) — 0.0 Money transmission licenses (1) 2,100 — 2,100 Total $ 580,103 $ ( 306,753 ) $ 273,350 9.7 (1) These assets have an indefinite useful life. Three Months Ended March 31, (in thousands) 2024 2023 Amortization expense (1) $ 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. 8. Debt Obligations Outstanding debt obligations consisted of the following: (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 Less: current portion of long-term debt ( 6,712 ) ( 6,712 ) Less: unamortized debt discounts and deferred financing costs ( 14,631 ) ( 15,696 ) Long-term debt, net $ 631,352 $ 631,965 Interest Expense and Amortization of Deferred Loan Costs and Discounts Deferred financing costs and debt discounts are amortized using the effective interest method over the remaining term of the respective debt and are recorded as a component of interest expense. Unamortized deferred financing costs and debt discounts are included in long-term debt on the Company's Unaudited Consolidated Balance Sheets. 14 Table of Contents 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 March 31, (in thousands) 2024 2023 Interest expense (1),(2) $ 20,880 $ 17,699 (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 The Credit Agreement contains representations and warranties, financial and collateral requirements, mandatory payment events, events of default and affirmative and negative covenants, including without limitation, covenants that restrict among other things, the ability to create liens, pay dividends or distribute assets from the loan parties to the Company, merge or consolidate, dispose of assets, incur additional indebtedness, make certain investments or acquisitions, enter into certain transactions (including with affiliates) and to enter into certain leases. If the aggregate principal amount of outstanding revolving loans and letters of credit under the Credit Agreement exceeds 35 % of the total revolving credit facility thereunder, the loan parties are required to comply with certain restrictions on its Total Net Leverage Ratio. If applicable, the maximum permitted Total Net Leverage Ratio is: 1) 6.50 :1.00 at each fiscal quarter ended September 30, 2021 through June 30, 2022; 2) 6.00 :1.00 at each fiscal quarter ended September 30, 2022 through June 30, 2023; and 3) 5.50 :1.00 at each fiscal quarter ended September 30, 2023 each fiscal quarter thereafter. As of March 31, 2024, the Company was in compliance with the covenants in the Credit Agreement. 9. 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) March 31, 2024 December 31, 2023 Redeemable senior preferred stock $ 225,000 $ 225,000 Accumulated unpaid dividend 48,197 43,498 Dividend payable 7,122 7,027 Redemption value 280,319 275,525 Less: unamortized discounts and issuance costs ( 16,079 ) ( 16,920 ) Redeemable senior preferred stock, net of discounts and issuance costs: $ 264,240 $ 258,605 15 Table of Contents The following table provides a reconciliation of the beginning and ending carrying amounts of the redeemable senior preferred stock for the periods presented: (in thousands) Shares Amount December 31, 2023 225 $ 258,605 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 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 March 31, (in thousands) 2024 2023 Dividends paid in cash (1) $ 7,122 $ 6,094 Accumulated dividends accrued as part of the carrying value of redeemable senior preferred stock 4,699 4,383 Dividends declared $ 11,821 $ 10,477 (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 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 prepayments. 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 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. 10. Income Taxes 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 The Company considers all available positive and negative evidence to determine whether sufficient taxable income will be generated in the future to permit realization of the existing deferred tax assets. 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. 16 Table of Contents 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. 11. Stockholders' Deficit 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 March 31, 2024 and December 31, 2023, the Company has not issued any shares of preferred stock. Share Repurchase Program 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. There have been no shares repurchased under this plan since December 2022. 12. Stock-based Compensation Stock-based compensation expense was as follows: Three Months Ended March 31, (in thousands) 2024 2023 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. 2018 Plan The Company's 2018 Plan initially provided for the issuance of up to 6,685,696 shares of the Company's Common Stock. On March 17, 2022, the Company's Board of Directors unanimously approved an amendment to the 2018 Plan, which was subsequently approved by our shareholders, to increase the number of shares authorized for issuance under the plan by 2,500,000 shares, resulting in 9,185,696 shares of the Company's Common Stock authorized for issuance under the plan. 2021 Stock Purchase Plan The 2021 Stock Purchase Plan provides for up to 200,000 shares to be purchased under the plan. Shares issued under the plan may be authorized but unissued or reacquired shares of Common Stock. All employees of the Company who work more than 20 hours per week and have been employed by the Company for at least 30 days may participate in the 2021 Stock Purchase Plan. Under the 2021 Stock Purchase Plan, participants are offered, on the first day of the offering period, the option to purchase shares of Common Stock at a discount on the last day of the offering period. 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 17 Table of Contents 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. 13. 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. 18 Table of Contents 14. Commitments and Contingencies Minimum Annual Commitments with Third-party Processors The Company has multi-year agreements with third parties to provide certain payment processing services to the Company. The Company pays processing fees under these agreements. Based on existing contracts in place, the Company is committed to pay minimum processing fees under these agreements of approximately $ 21.6 million in 2024 and $ 25.0 million in 2025. Annual Commitment with Vendor 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 $ 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 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 See Note 4. Settlement Assets and Customer/Subscriber Account Balances and Related Obligations , for information about merchant reserves. Contingent Consideration The following table provides a reconciliation of the beginning and ending balance of the Company's contingent consideration liabilities related to completed acquisitions: (in thousands) Contingent Consideration Liabilities December 31, 2023 $ 13,438 Accretion of contingent consideration 972 Payment of contingent consideration ( 3,071 ) March 31, 2024 $ 11,339 Legal Proceedings The Company is involved in certain legal proceedings and claims which arise in the ordinary course of business. In the opinion of the Company and based on consultations with internal and external counsel, the results of any of these matters, individually and in the aggregate, are not expected to have a material effect on the Company's results of operations, financial condition or cash flows. As more information becomes available, and the Company determines that an unfavorable outcome is probable on a claim and that the amount of probable loss that the Company will incur on that claim is reasonably estimable, the Company will record an accrued expense for the claim in question. 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 19 Table of Contents 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 The Company's revenue is substantially derived from processing Visa and Mastercard bankcard transactions. 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 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. 15. Fair Value Fair Value Measurements Contingent consideration related to the Company's business combinations is estimated based on the present value of a weighted payout probability at the measurement date, which falls within Level 3 on the fair value hierarchy. The current portion of contingent consideration is included in accounts payable and accrued expenses on the Company's Unaudited Consolidated Balance Sheets and the noncurrent portion of contingent consideration is included in other noncurrent liabilities on the Company's Unaudited Consolidated Balance Sheets. Liabilities measured at fair value on a recurring basis consisted of the following: (in thousands) Fair Value Hierarchy March 31, 2024 December 31, 2023 Contingent consideration, current portion Level 3 $ 2,880 $ 5,951 Contingent consideration, noncurrent portion Level 3 $ 8,459 7,487 Total contingent consideration $ 11,339 $ 13,438 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 Notes Receivable Notes receivable are carried at amortized cost. 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 $ 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. Debt Obligations Outstanding debt obligations (see Note 8. 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. 20 Table of Contents 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. 16. Segment Information The Company has three reportable segments: • 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. 21 Table of Contents 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 March 31, 2024 2023 Revenues: SMB Payments $ 143,751 $ 154,933 B2B Payments 21,115 2,786 Enterprise Payments 40,853 27,309 Consolidated revenues $ 205,719 $ 185,028 Depreciation and amortization: SMB Payments $ 8,802 $ 10,846 B2B Payments 1,640 125 Enterprise Payments 4,356 6,690 Corporate 455 387 Consolidated depreciation and amortization $ 15,253 $ 18,048 Operating income (loss): SMB Payments $ 12,383 $ 12,011 B2B Payments ( 793 ) ( 849 ) Enterprise Payments 25,547 12,663 Corporate ( 9,114 ) ( 6,977 ) Consolidated operating income $ 28,023 $ 16,848 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 March 31, 2024 2023 Total operating income of reportable segments $ 37,137 $ 23,825 Corporate ( 9,114 ) ( 6,977 ) Interest expense ( 20,880 ) ( 17,699 ) Other income, net 632 212 Income tax (expense) benefit ( 2,582 ) 133 Net income (loss) $ 5,193 $ ( 506 ) 22 Table of Contents 17. 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 March 31, (in thousands except per share amounts) 2024 2023 Numerator: Net income (loss) $ 5,193 $ ( 506 ) Less: Dividends and accretion attributable to redeemable senior preferred stockholders ( 12,662 ) ( 11,295 ) Less: Return on redeemable NCI in consolidated subsidiary ( 581 ) — Net loss attributable to common stockholders $ ( 8,050 ) $ ( 11,801 ) Denominator: Basic and diluted: Weighted-average common shares outstanding (1) 78,021 78,133 Loss per common share $ ( 0.10 ) $ ( 0.15 ) (1) The weighted-average common shares outstanding includes 1,803,841 warrants (refer to Note 9. Redeemable Senior Preferred Stock and Warrants ). 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 March 31, (in thousands) 2024 2023 Outstanding warrants on Common Stock (1) — 3,557 Outstanding options and warrants issued to adviser (2) — 600 Restricted stock awards (3) 1,078 2,245 Outstanding stock option awards (3) 864 952 Total 1,942 7,354 (1) The warrants were issued in 2018 and were exercisable at $ 11.50 per share. These warrants expired on August 24, 2023. (2) The warrants were issued in 2018 and were exercisable at $ 12.00 per share. These warrants expired on August 24, 2023. (3) Granted under the 2018 Plan. 23 Table of Contents