What changed in this filing

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Item 1. Financial Statements

2024-11-07 compared with 2024-08-08 · 171 added, 134 removed, 654 unchanged (32% of the section changed)

Financial Statements

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Current assets:

29 unchanged sentences

250,000 shares authorized;

225,000 shares issued at June 30, 2024 and December 31, 2023;

88,064 and 225,000 shares outstanding at June 30, 2024 and December 31, 2023, respectively

225,000 shares issued at September 30, 2024 and December 31, 2023;

88,064 and 225,000 shares outstanding at September 30, 2024 and December 31, 2023, respectively

105,098 258,605

2 unchanged sentences

100,000,000 shares authorized;

0 issued or outstanding at June 30, 2024 and December 31, 2023

0 issued or outstanding at September 30, 2024 and December 31, 2023

Common Stock, $ 0.001 par value;

1,000,000,000 shares authorized;

80,208,533 and 79,589,055 shares issued at June 30, 2024 and December 31, 2023, respectively;

and 75,967,543 and 76,956,889 shares outstanding at June 30, 2024 and December 31, 2023, respectively

Treasury stock at cost, 4,240,990 and 2,632,166 shares at June 30, 2024 and December 31, 2023, respectively

81,440,659 and 79,589,055 shares issued at September 30, 2024 and December 31, 2023, respectively;

and 77,092,558 and 76,956,889 shares outstanding at September 30, 2024 and December 31, 2023, respectively

Treasury stock at cost, 4,348,101 and 2,632,166 shares at September 30, 2024 and December 31, 2023, respectively

( 19,278 ) ( 12,815 )

2 unchanged sentences

Accumulated deficit ( 146,571 ) ( 134,951 )

Total stockholders' deficit attributable to stockholders of PRTH ( 172,107 ) ( 147,718 )

Total stockholders' deficit attributable to stockholders of Priority ( 165,838 ) ( 147,718 )

Non-controlling interests in consolidated subsidiaries 1,890 1,654

1 unchanged sentence

Total liabilities, redeemable senior preferred stock, redeemable NCI and stockholders' deficit $ 1,759,669 $ 1,615,337

See Notes to Unaudited Consolidated Financial Statements

Priority Technology Holdings, Inc .

Unaudited Consolidated Statements of Operations and Comprehensive Loss

Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except per share amounts)

Three Months Ended

June 30, Six Months Ended

Three Months Ended September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

17 unchanged sentences

Return on redeemable NCI in consolidated subsidiary — — ( 639 ) —

Net loss attributable to common stockholders ( 17,629 ) ( 12,377 ) ( 25,679 ) ( 24,178 )

Other comprehensive loss

Net income (loss) attributable to common stockholders 5,487 ( 12,279 ) ( 20,192 ) ( 36,457 )

Other comprehensive income ( loss)

Foreign currency translation adjustments ( 28 ) ( 65 ) ( 37 ) ( 34 )

Comprehensive loss $ ( 17,625 ) $ ( 12,370 ) $ ( 25,688 ) $ ( 24,147 )

Loss per common share:

Basic and diluted $ ( 0.23 ) $ ( 0.16 ) $ ( 0.33 ) $ ( 0.31 )

Comprehensive income (loss) $ 5,459 $ ( 12,344 ) $ ( 20,229 ) $ ( 36,491 )

Earnings (loss) per common share:

Basic $ 0.07 $ ( 0.16 ) $ ( 0.26 ) $ ( 0.47 )

Diluted $ 0.07 $ ( 0.16 ) $ ( 0.26 ) $ ( 0.47 )

Weighted-average common shares outstanding:

Basic and diluted 77,736 78,292 77,878 78,213

Basic 77,973 78,381 77,910 78,270

Diluted 80,095 78,381 77,910 78,270

See Notes to Unaudited Consolidated Financial Statement

28 unchanged sentences

Net income — — — — — — 994 994 — 994

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 $

June 30, 2024 75,968 $ 76 4,240 $ ( 18,673 ) $ — $ ( 38 ) $ ( 153,472 ) $ ( 172,107 ) $ 1,832 $ ( 170,275 )

Equity-classified stock-based compensation — — — — 1,358 — — 1,358 — 1,358

ESPP compensation and vesting of stock-based compensation 419 — — — 56 — — 56 — 56

Shares withheld for taxes ( 108 ) — 108 ( 605 ) — — — ( 605 ) — ( 605 )

PHOT share issuance 813 1 — — — — — 1 — 1

Dividends on redeemable senior preferred stock — — — — ( 4,786 ) — — ( 4,786 ) — ( 4,786 )

Accretion of redeemable senior preferred stock — — — — ( 335 ) — — ( 335 ) — ( 335 )

Issuance of profit interests/common equity in subsidiaries — — — — — — — — 58 58

Foreign currency translation adjustment — — — — — ( 28 ) — ( 28 ) — ( 28 )

Reclassification of negative additional paid-in capital — — — — 3,707 — ( 3,707 ) — — —

Net loss — — — — — — 10,608 10,608 — 10,608

September 30, 2024 77,092 77 4,348 ( 19,278 ) — ( 66 ) ( 146,571 ) ( 165,838 ) 1,890 ( 163,948 )

Priority Technology Holdings, Inc.

16 unchanged sentences

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

Share repurchases and shares withheld for taxes ( 65 ) — 65 ( 241 ) — — — ( 241 ) — ( 241 )

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

Dividends on redeemable senior preferred stock — — — — ( 10,934 ) — — ( 10,934 ) — ( 10,934 )

4 unchanged sentences

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

See Notes to Unaudited Consolidated Financial Statements

Equity-classified stock-based compensation — — — — 1,501 — — 1,501 — 1,501

ESPP compensation and vesting of stock-based compensation 103 1 — — 38 — — 39 — 39

Shares withheld for taxes — — 1 — — — — — — —

Dividends on redeemable senior preferred stock — — — — ( 11,348 ) — — ( 11,348 ) — ( 11,348 )

Accretion of redeemable senior preferred stock — — — — ( 844 ) — — ( 844 ) — ( 844 )

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

Foreign currency translation adjustment — — — — — ( 65 ) — ( 65 ) — ( 65 )

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

Net income — — — — — — ( 87 ) ( 87 ) — ( 87 )

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

T a b l e o f C o n t e n t s

Priority Technology Holdings, Inc .

1 unchanged sentence

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

18 unchanged sentences

Cash flows from investing activities:

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

Additions to property, equipment and software ( 17,044 ) ( 15,268 )

13 unchanged sentences

Dividends paid to redeemable senior preferred stockholders ( 22,099 ) ( 17,908 )

( 16,393 ) ( 17,908 )

Settlement and customer/subscriber accounts obligations, net 116,065 165,610

5 unchanged sentences

Cash and cash equivalents and restricted cash at end of period $ 918,057 $ 739,095

T a b l e o f C o n t e n t s

Priority Technology Holdings, Inc .

1 unchanged sentence

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Reconciliation of cash and cash equivalents, and restricted cash:

7 unchanged sentences

Non-cash investing and financing activities:

Contingent consideration accrual $ — $ 596

Adjustment to value of profit interest units $ — $ 596

Acquisition of intangible asset $ ( 5,751 ) $ 193

Measurement period adjustment to purchase price $ 12 $ 110

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

Issuance of NCI $ 236 $ 184

(1) The dividend payable for the quarter ended June 30, 2024, was paid on July 1, 2024.

(1) Paid on October 2, 2023

See Notes to Unaudited Consolidated Statements

6 unchanged sentences

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.

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

Priority is the payments and banking fintech that streamlines collecting, storing, lending and sending money through its innovative commerce engine to unlock revenue and generate operational success for businesses.

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.

6 unchanged sentences

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

As of June 30, 2024, there was no income or loss attributable to NCI in accordance with the applicable operating agreements.

As of September 30, 2024, there was no income attributable to NCI in accordance with the applicable operating agreements.

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 three and six months ended June 30, 2024 include the results of the Plastiq business acquired through Chapter 11 bankruptcy process on July 31, 2023.

Use of Estimates

5 unchanged sentences

local currency of Republic of India).

The functional currency of the Canadian subsidiary of the Company is the Canadian Dollar.

The functional currency of the Canadian subsidiaries of the Company is the Canadian Dollar.

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

19 unchanged sentences

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.

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

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.

On May 23, 2023, Priority’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.

6 unchanged sentences

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.

The final purchase price allocation is set forth in the table below.

(in thousands)

22 unchanged sentences

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

Three Months Ended June 30, Six Months Ended June 30,

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

(in thousands) 2024 2023 2024 2023

9 unchanged sentences

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

(2) Approximately $ 13.1 million and $ 25.0 million of interest income for the three and six months ended June 30, 2024, respectively, and $ 7.2 million and $ 12.2 million for the three and six months ended June 30, 2023, respectively, is included in outsourced services and other services revenue in the table above.

Approximately $ 0.6 million and $ 1.2 million of interest income for the three and six months ended June 30, 2024, respectively, and $ 0.3 million and $ 0.6 million three and six months ended June 30, 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.

(2) Approximately $ 13.8 million and $ 38.8 million of interest income on customer funds for the three and nine months ended September 30, 2024, respectively, and $ 9.7 million and $ 21.9 million for the three and nine months ended September 30, 2023, respectively, is included in outsourced services and other services revenue in the table above.

Approximately $ 0.6 million and $ 1.8 million of interest income on corporate funds for the three and nine months ended September 30, 2024, respectively, and $ 0.5 million and $ 1.1 million three and nine months ended September 30, 2023, respectively, is included in other income, net on the Company's Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss) and not reflected in the table above.

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

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

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

4 unchanged sentences

Total revenues $ 171,814 $ 33,868 $ 18,063 $ 3,304 $ 227,049

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

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

4 unchanged sentences

Total revenues $ 499,007 $ 94,352 $ 49,984 $ 9,292 $ 652,635

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

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

4 unchanged sentences

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

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

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

4 unchanged sentences

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

Deferred revenues were not material for the three and six months ended June 30, 2024 and 2023.

Deferred revenues were not material for the three and nine months ended September 30, 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 $ 0.6 million and $ 0.6 million as of June 30, 2024 and December 31, 2023, respectively.

Contract liabilities were $ 0.5 million and $ 0.6 million as of September 30, 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 six months ended June 30, 2024 and 2023.

Impairment losses recognized on contract assets arising from the Company's contracts with customers were not material for the three and nine months ended September 30, 2024 and 2023.

Impairment losses recognized on receivables arising from the Company's contracts with customers were $ 1.1 million and $ 1.5 million for the three and nine months ended September 30, 2024, respectively, and were immaterial for the three and nine months ended September 30, 2023.

Settlement Assets and Customer/Subscriber Account Balances and Related Obligations

2 unchanged sentences

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.

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 $ 97.7 million and $ 98.0 million at June 30, 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.

Member banks held merchant funds of $ 10.8 million and $ 98.0 million at September 30, 2024 and December 31, 2023, respectively.

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 six months ended June 30, 2024 were $ 1.7 million and $ 6.5 million, respectively.

Expenses for merchant losses for the three and six months ended June 30, 2023 were $ 1.1 million and $ 2.1 million, respectively.

Expenses for merchant losses for the three and nine months ended September 30, 2024 were $ 2.5 million and $ 8.9 million, respectively.

Expenses for merchant losses for the three and nine months ended September 30, 2023 were $ 1.6 million and $ 3.7 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 $ 93.1 million and $ 69.0 million at June 30, 2024 and December 31, 2023, respectively.

Company-owned bank accounts held $ 1.7 million and $ 1.2 million at June 30, 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.

Bank-owned FBO accounts held funds of $ 109.8 million and $ 69.0 million at September 30, 2024 and December 31, 2023, respectively.

Company-owned bank accounts held $ 1.4 million and $ 1.2 million at September 30, 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 and six months ended June 30, 2024 were $ 0.1 million and $ 0.3 million, respectively.

Expenses for merchant losses for the three and six months ended June 30, 2023 were not material.

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

Expenses for these merchant losses for the three and nine months ended September 30, 2024 were $ 0.0 million and $ 0.3 million, respectively.

Expenses for merchant losses for the three and nine months ended September 30, 2023 were not material.

The Company also accepts card payments from its B2B Payments segment customers and processes disbursements to their vendors within the Plastiq business.

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

8 unchanged sentences

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.

Expenses for merchant losses for the

three and six months ended June 30, 2024 were $ 0.4 million and $ 0.4 million, respectively.

Expenses for merchant losses for the three and six months ended June 30, 2023 were not material.

Expenses for merchant losses for the three and nine months ended September 30, 2024 were $ 0.0 million and $ 0.4 million, respectively.

Expenses for merchant losses for the three and nine months ended September 30, 2023 were not material.

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 $ 53.0 million and $ 19.6 million at June 30, 2024 and December 31, 2023, respectively.

Agency owned accounts held $ 36.8 million and $ 19.6 million at September 30, 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) June 30, 2024 December 31, 2023

(in thousands) September 30, 2024 December 31, 2023

Settlement Assets, net of estimated losses (1) :

12 unchanged sentences

Total settlement and customer/subscriber account obligations $ 875,815 $ 755,754

(1) Allowance for estimated losses was $ 7.5 million and $ 6.6 million as of June 30, 2024 and December 31, 2023, respectively.

(2) Card settlements due from networks includes $ 7.7 million and $ 8.2 million as of June 30, 2024 and December 31, 2023, respectively, related assets and remainder are included in restricted cash on our Unaudited Consolidated Balance Sheets.

(1) Allowance for estimated losses was $ 8.2 million and $ 6.6 million as of September 30, 2024 and December 31, 2023, respectively.

(2) Includes $ 10.2 million and $ 8.2 million as of September 30, 2024 and December 31, 2023, respectively, of card settlements due from networks and the remainder is included in restricted cash on our Unaudited Consolidated Balance Sheets.

Notes Receivable

The Company had notes receivable of $ 7.2 million and $ 5.2 million as of June 30, 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 18.6 % as of June 30, 2024 and December 31, 2023.

The Company had notes receivable of $ 6.3 million and $ 5.2 million as of September 30, 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 18.6 % as of September 30, 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 June 30, 2024 and December 31, 2023, the Company had no allowance for doubtful notes receivable.

As of June 30, 2024, the principal payments for the Company's notes receivable are due as follows:

As of September 30, 2024 and December 31, 2023, the Company had no allowance for doubtful notes receivable.

As of September 30, 2024, the principal payments for the Company's notes receivable are due as follows:

(in thousands)

Twelve months ending June 30,

Twelve months ending September 30,

Total $ 6,294

1 unchanged sentence

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

(in thousands) June 30, 2024 December 31, 2023

(in thousands) September 30, 2024 December 31, 2023

Computer software $ 100,399 $ 78,492

6 unchanged sentences

Property, equipment and software, net $ 51,603 $ 44,680

Three Months Ended June 30, Six Months Ended June 30,

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

(in thousands) 2024 2023 2024 2023

2 unchanged sentences

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

During the three and six months ended June 30, 2024, certain fully depreciated assets were removed from service.

During the nine months ended September 30, 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) June 30, 2024 December 31, 2023

(in thousands) September 30, 2024 December 31, 2023

SMB Payments $ 124,139 $ 124,139

6 unchanged sentences

Plastiq adjustment ( 12 )

Balance at June 30, 2024

As of June 30, 2024, the Company is not aware of any triggering events for impairment that have occurred since the last annual impairment test.

Balance at September 30, 2024

As of September 30, 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:

June 30, 2024 Weighted-average

September 30, 2024 Weighted-average

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

25 unchanged sentences

(1) These assets have an indefinite useful life.

Three Months Ended June 30, Six Months Ended June 30,

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

(in thousands) 2024 2023 2024 2023

1 unchanged sentence

$ 10,210 $ 14,512 $ 34,108 $ 44,968

(1) Included in amortization expense is $ 0.4 million and $ 0.8 million for the three and six months ended June 30, 2024, respectively, and $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2023, respectively, related to the amortization of certain contract acquisition costs.

As of June 30, 2024, there were no impairment indicators present.

(1) Included in amortization expense is $ 0.4 million and $ 1.2 million for the three and nine months ended September 30, 2024, respectively, and $ 0.1 million and $ 0.3 million for the three and nine months ended September 30, 2023, respectively, related to the amortization of certain contract acquisition costs.

As of September 30, 2024, there were no impairment indicators present.

Debt Obligations

Outstanding debt obligations consisted of the following:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

2024 Credit Agreement

Term facility - matures May 16, 2031, interest rate of 10.08 % at June 30, 2024

Term facility - matures May 16, 2031, interest rate of 9.81 % at September 30, 2024

$ 832,913 $ —

Revolving credit facility - $ 70.0 million line at June 30, 2024, matures May 16, 2029, interest rate of 9.58 % at June 30, 2024

Revolving credit facility - $ 70.0 million line matures May 16, 2029, interest rate of 9.31 % at September 30, 2024

2021 Credit Agreement - refinanced on May 16, 2024

Term facility - original maturity April 27, 2027, interest rate of 11.21 % at December 31, 2023

Revolving credit facility - $ 65.0 million line as of December 31, 2023, original Maturity April 27, 2026, interest rate of 10.20 % at December 31, 2023

Revolving credit facility - $ 65.0 million line, original Maturity April 27, 2026, interest rate of 10.20 % at December 31, 2023

Total debt obligations 832,913 654,373

8 unchanged sentences

In accordance with ASC 470, the Company determined on a creditor-by-creditor basis that the 2024 Credit Agreement was both a debt modification and extinguishment of the 2021 Credit Agreement.

The Company expensed $ 3.8 million of previously unamortized fees and $ 4.8 million of debt issuance costs related to the refinancing which is reported in debt extinguishment and modification in the Company's Unaudited Consolidated Statements of Operations and Comprehensive Loss.

The Company expensed $ 3.9 million of previously unamortized fees and $ 4.8 million of debt issuance costs related to the refinancing which is reported in debt extinguishment and modification in the Company's Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss).

Outstanding borrowings under the Credit agreement accrue interest using a base rate or a SOFR rate plus an applicable margin per year, subject to a SOFR rate floor of 0.50 % per year.

6 unchanged sentences

2) 6.40 :1.00 at each fiscal quarter ended March 31, 2026 and each fiscal quarter thereafter.

As of June 30, 2024, the Company was in compliance with the covenants in the 2024 Credit Agreement.

As of September 30, 2024, the Company was in compliance with the covenants in the 2024 Credit Agreement.

2021 Credit Agreement

20 unchanged sentences

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 June 30, Six Months Ended March 31,

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

(in thousands) 2024 2023 2024 2023

1 unchanged sentence

$ 23,246 $ 19,997 $ 65,836 $ 55,461

(1) Included in interest expense is $ 1.2 million and $ 2.2 million related to the accretion of contingent consideration from acquisitions for the three and six months ended June 30, 2024, respectively, $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2023, respectively.

(2) Interest expense included amortization of deferred financing costs and debt discounts of $ 0.8 million and $ 1.8 million for the three and six months ended June 30, 2024, respectively, and $ 0.9 million and $ 1.8 million for the three and six months ended June 30, 2023, respectively.

(1) Included in interest expense is $ 1.1 million and $ 3.3 million related to the accretion of contingent consideration from acquisitions for the three and nine months ended September 30, 2024, respectively, $ 0.6 million and $ 0.8 million for the three and nine months ended September 30, 2023, respectively.

(2) Interest expense included amortization of deferred financing costs and debt discounts of $ 0.4 million and $ 2.3 million for the three and nine months ended September 30, 2024, respectively, and $ 1.0 million and $ 2.8 million for the three and nine months ended September 30, 2023, respectively.

Redeemable Senior Preferred Stock and Warrants

1 unchanged sentence

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

(in thousands) June 30, 2024 December 31, 2023

(in thousands) September 30, 2024 December 31, 2023

Redeemable senior preferred stock $ 88,064 $ 225,000

20 unchanged sentences

June 30, 2024 88 $ 105,684

Unpaid dividend on redeemable senior preferred stock — 1,903

Accretion of discounts and issuance cost — 335

Payment of cash portion of dividend outstanding at June 30, 2024 — ( 2,824 )

September 30, 2024 88 $ 105,098

(1) On May 16, 2024, the Company used proceeds totaling $ 170.0 million from the refinancing (see Note 8.

1 unchanged sentence

The redemption consisted of $ 136.9 million of redeemable senior preferred stock, $ 29.4 million for accumulated unpaid dividend, and $ 2.2 million of cash dividend and $ 1.5 million of accumulated unpaid dividend for the quarter ending June 30, 2024.

The dividend rate as of June 30, 2024 and December 31, 2023, was 17.6 % and 17.7 % respectively.

The dividend rate as of September 30, 2024 and December 31, 2023, was 17.6 % and 17.7 % respectively.

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

Three Months Ended June 30, Six Months Ended June 30,

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

(in thousands) 2024 2023 2024 2023

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Dividends declared $ 4,786 $ 11,348 $ 25,033 $ 32,759

(1) Dividend payable for the three months ended June 30, 2024 of $ 2.8 million was paid on July 1, 2024.

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 %) 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 %.

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

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.

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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 June 30, 2024, none of the warrants have been exercised.

As of September 30, 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 six months ended June 30, 2024, was 71.7 % and 45.2 %, respectively, compared to a consolidated effective income tax rate of 135.1 % and 201.3 % for the three and six months ended June 30, 2023, respectively.

The Company's consolidated effective income tax rate for the three and nine months ended September 30, 2024, was 31.6 % and 37.3 %, respectively, compared to a consolidated effective income tax rate of 102.1 % and 122.5 % for the three and nine months ended September 30, 2023, 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, and certain forecasted nondeductible expenses.

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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 June 30, 2024, the Company continues to record a full valuation allowance against non-deductible interest expense.

Based on management's assessment, as of September 30, 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 June 30, 2024 and December 31, 2023, the Company has not issued any shares of preferred stock.

As of September 30, 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 2,000,000 shares of its outstanding Common Stock for a total of up to $ 10.0 million.

In 2022, Priority's Board of Directors authorized a general share repurchase program under which the Company may purchase up to 2,000,000 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.

As of June 30, 2024, the Company has purchased 1,309,374 shares for $ 5.7 million under this plan.

As of September 30, 2024, the Company has purchased 1,309,374 shares for $ 5.7 million under this plan.

Stock-based Compensation

Stock-based compensation expense was as follows:

Three Months Ended June 30, Six Months Ended June 30,

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

(in thousands) 2024 2023 2024 2023

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Total $ 1,416 $ 1,501 $ 4,878 $ 5,183

Income tax benefit for stock-based compensation was immaterial for the three months ended June 30, 2024 and 2023.

Income tax benefit for stock-based compensation was immaterial for the three and nine months ended September 30, 2024 and 2023.

No stock-based compensation has been capitalized.

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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.

As of September 30, 2024, the Company had 3,121,189 shares available for issuance under the 2018 Plan.

2021 Stock Purchase Plan

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The 2021 Stock Purchase Plan provides eligible employees the opportunity to purchase shares of the Company's Common stock at 95 % of the lesser of the fair value on the first and last trading day of each offering period.

As of September 30, 2024, the Company had 57,254 shares available for issuance under the 2021 Stock Purchase Plan.

Non-voting Incentive Units

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As of May 30, 2024, the Company approved redemption of PHOT redeemable preferred units for cash, common stock of the Company or a combination of both, at the sole discretion of the Company.

The redeemable preferred units were accreted to their redemption value of $ 5.9 million as of May 30, 2024, through net loss available to common stockholders in the Company’s Unaudited Statements of Operations and Comprehensive Loss.

The exchange value of the Company's common stock was established based on the 30-day volume weighted average close price adjusted for market illiquidity.

As of June 30, 2024, the PHOT redeemable preferred units held by the CEO were redeemed in cash for $ 2.1 million, the promissory notes were cancelled and other holders are expected to receive their redemption consideration at a later date.

During the quarter ended June 30, 2024, the PHOT redeemable preferred units held by the CEO were redeemed in cash for $ 2.1 million and the promissory notes were satisfied.

During the quarter ending September 30, 2024, the PHOT redeemable preferred units held by the COO were redeemed for 408,013 shares of the Company's common stock and PHOT redeemable preferred units held by other holders were redeemed for 404,628 shares of the Company's common stock.

Commitments and Contingencies

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Capital Commitments

The Company committed to capital contributions to fund the operations of certain subsidiaries totaling $ 0.0 million as of June 30, 2024 and December 31, 2023.

The Company committed to capital contributions to fund the operations of certain subsidiaries totaling $ 26.0 million as of September 30, 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 June 30, 2024 and December 31, 2023, the Company has contributed $ 0.0 million and $ 11.8 million, respectively.

Merchant Reserves

Settlement Assets and Customer/Subscriber Account Balances and Related Obligations , for information about merchant reserves.

As of September 30, 2024 and December 31, 2023, the Company has contributed $ 16.3 million and $ 11.8 million, respectively.

Contingent Consideration

8 unchanged sentences

June 30, 2024 11,494

Accretion of discount on contingent consideration 1,066

Payment of contingent consideration ( 840 )

September 30, 2024 $ 11,720

Legal Proceedings

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

As of August 8, 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 June 30, 2024, the Company's customer account balances of $ 746 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.

While providing SMB Acquiring, B2B Payables, and Enterprise Payments processing services, Priority manages funds that are held on behalf of its customers.

Because Priority is not a member bank, these customer funds are held in bank accounts maintained with member banks pursuant to sponsorship agreements which require, among other things, that the Company abide by the by-laws and regulations of the card associations and MTL regulators.

As of September 30, 2024, the Company's customer account balances of $ 847.2 million are maintained in accounts with certain FIs which are eligible to pass-through insurance subject to FDIC rules and regulations (refer to Note 4.

Settlement Assets and Customer/Subscriber Account Balances and Related Obligations ) A majority of the Company's cash, restricted cash and off-balance sheet settlement funds are 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.

Fair Value Measurements

The Company's contingent consideration derived from business combinations are classified within Level 3 of the fair value hierarchy due to the uncertainty of the fair value measurement created by the absence of quoted market prices, the inherent lack of liquidity and unobservable inputs used to measure fair value which require judgement.

The Company's contingent consideration liabilities derived from business combinations and are classified within Level 3 of the fair value hierarchy due to the uncertainty of the fair value measurement created by the absence of quoted market prices, the inherent lack of liquidity and unobservable inputs used to measure fair value which require judgement.

The Company uses valuation techniques including discounted cash flow analysis based on cash flow projections and Monte Carlo simulations to estimate fair value based on projection period and assumed growth rates.

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

(in thousands) Fair Value Hierarchy June 30, 2024 December 31, 2023

(in thousands) Fair Value Hierarchy September 30, 2024 December 31, 2023

Contingent consideration, current portion Level 3 $ 5,521 $ 5,951

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Total contingent consideration $ 11,720 $ 13,438

During the three and six months ended June 30, 2024, there were no transfers into, out of, or between levels of the fair value hierarchy.

During the three and nine months ended September 30, 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 $ 7.2 million and $ 5.2 million at June 30, 2024 and December 31, 2023, respectively.

The carrying value of the Company's notes receivable, net approximates fair value and was approximately $ 6.3 million and $ 5.2 million at September 30, 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 $ 835.0 million and $ 651.9 million at June 30, 2024 and December 31, 2023, 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 2 of the fair value hierarchy.

The fair value of the term facility was estimated to be $ 832.9 million and $ 651.9 million at September 30, 2024 and December 31, 2023, 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 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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Due to the recent acquisitions, growth, implementation of a shared services model and management of a single unified commerce engine across our payments infrastructure, the costs of operating overhead and shared services becomes less identifiable at the segment level.

Therefore, the process of review of the CODM was updated during the quarter.

Therefore, the process of review of the CODM was updated during the quarter ended June 30, 2024.

The CODM's review of segment performance and allocation of resources are based on adjusted earnings before interest, income tax and depreciation and amortization expenses ("EBITDA").

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Information on reportable segments and reconciliations to income (loss) before income taxes are as follows:

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

(in thousands) SMB Payments B2B

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Adjusted EBITDA $ 28,644 $ 1,933 $ 40,940 $ ( 16,876 ) $ — $ 54,641

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

(in thousands) SMB Payments B2B

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Adjusted EBITDA $ 27,613 $ 1,359 $ 29,757 $ ( 13,767 ) $ — $ 44,962

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

(in thousands) SMB Payments B2B

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Adjusted EBITDA $ 82,265 $ 5,209 $ 112,911 $ ( 47,853 ) $ — $ 152,532

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

(in thousands) SMB Payments B2B

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2024 2023 2024 2023

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Non-cash stock based compensation ( 1,416 ) ( 1,501 ) ( 4,878 ) ( 5,183 )

Other non-recurring loss, net — — — ( 159 )

Other non-recurring gain, net — 166 — 7

Income before income taxes $ 15,507 $ 4,241 $ 26,791 $ 5,345

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 June 30, Six Months Ended June 30,

Earnings (Loss) per Common Share

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

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

(in thousands except per share amounts) 2024 2023 2024 2023

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Net loss attributable to common stockholders $ 5,487 $ ( 12,279 ) $ ( 20,192 ) $ ( 36,457 )

Basic and diluted:

Weighted-average common shares outstanding (1)

77,736 78,292 77,878 78,213

Loss per common share $ ( 0.23 ) $ ( 0.16 ) $ ( 0.33 ) $ ( 0.31 )

Weighted average shares outstanding 77,973 78,381 77,910 78,270

Effect of dilutive potential common shares 2,122 — — —

Adjusted Weighted average shares outstanding 80,095 78,381 77,910 78,270

Basic Earnings (loss) per common share $ 0.07 $ ( 0.16 ) $ ( 0.26 ) $ ( 0.47 )

Diluted Earnings (loss) per share $ 0.07 $ ( 0.16 ) $ ( 0.26 ) $ ( 0.47 )

(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 and six months ended June 30, 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 June 30, Six Months Ended June 30,

For the three months ended September 30, 2024, the Company had 2.1 million dilutive securities that were included in the Company's diluted earnings per share.

For the nine months ended September 30, 2024 and three and nine months ended September 30, 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 earnings (loss) per common share are as follows:

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

(in thousands) 2024 2023 2024 2023

Outstanding warrants on Common Stock (1)

— 3,557 — 3,557

Outstanding options and warrants issued to adviser (2)

10 unchanged sentences

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