What changed in this filing

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Item 1. Business

2025-03-06 compared with 2024-03-12 · 71 added, 80 removed, 268 unchanged (36% of the section changed)

Overview of the Company

Priority is a solutions provider in Payments and BaaS industry, o perating at scale with 860,000 active customers across its SMB, B2B and Enterprise customers channels.

Priority proc esses $120 billion in annual transaction volume and provides administration for $900 million in deposits.

P riority’s purpose-built technology enables clients to collect, store, lend and send money while providing AP payment applications and Passport financial tools that best optimize their cash flow and maximize working capital bolstered by our industry leading personalized support.

Priority was established in 2005 and has grown from a founder-financed technology startup to becom e the 5 th largest non-bank merchant acquirer in the U.S.

Priority is a payments and banking fintech that streamlines collecting, storing, lending and sending money through its innovative commerce engine (the “Priority Commerce Engine” or “PCE”) to unlock revenue opportunities and generate operational success for businesses.

Our mission is to provide a personalized financial toolset to accelerate cashflow and optimize working capital for our customers by providing merchant services, payables and banking & treasury solutions.

Priority operates at scale across three primary business segments:

SMB Acquiring, B2B Payables and Enterprise Payments and is presently serving approximat ely 1.2 million customer accounts processing over $130.0 billion in annual transaction activity while administering approximately $1.2 billion dollars in account balances.

The Priority Commerce Engine serves enterprise grade independent software vendors (ISV's), as well as discrete institutional and SMB customers across all major sectors of the U.S.

economy including Retail, Hospitality, Healthcare, Real Estate, Government, Utility, Ed ucation, Non-Profit, Business-to-Business, Professional Services and Financial Institutions.

Priority builds with intention, utilizing market research and stakeholder feedback to drive growth activity.

The result is an end-to-end solution that customers leverage across their financial lifecycle, engineered to accelerate cash flow and optimize working capital.

Trust is paramount in partnerships with customers, which is why Priority works with multiple, proven partners, to ensure our customers experience the security and peace of mind that comes with diversification, while enjoying the cost and time-saving benefits of consolidation.

Priority centralizes all money movement activity within a single, integrated platform, empowering users to seamlessly collect, store, lend, and send money.

Highly configurable and easy to use, the Priority Commerce Engine enables financial agility and operational stability for today’s fastest-growing enterprises.

Priority was established in 2005 and has grown from a founder-financed technology startup with a mission to build an institutional caliber enterprise to advance the convergenc e of software and payments to become the 6th largest non-bank merchant acquirer in the U.S.

by volume, according to the Nilson Report issued in March 2024.

Since inception, we have built a native tec hnology platform that provides all forms of payments (card acquiring and issuing, ACH, check and wire) and embedded finance services that serve customers of any size.

Since inception, we have built a native tec hnology platform that provides all forms of payments (card acquiring and issuing, ACH, check and wire) and embedded finance solutions that serve customers of any size.

Priority maintains a global business platform with 1,019 employees operating from its headquarters in Alpharetta, GA and regional offices in other locations, including New York, NY;

Hicksville, NY;

Nashville,TN;

Chattanooga, TN;

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Priority delivers value to its partners by leveraging its payments and embedded finance technology to deliver solutions that power modern commerce for SMBs and enterprise software and business partners.

We handle the complexities of payments and embedded finance to free our partners to focus on their core business objectives.

We handle the complexities of payments and embedded finance to allow partners to focus on their core business objectives.

Priority's solutions are offered via API or proprietary applications with nationwide money transmission licenses, providing end-to-end operational support including automated risk management and underwriting, full compliance and industry leading customer service.

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1) market leading proprietary product platforms in SMB, B2B and Enterprise Payments verticals;

2) focused distribution engines dedicated to helping our partners monetize their merchant payment networks;

and 3) a cost-efficient, agile payment and business processing infrastructure, purpose-built to support our partners in operating in these distinct market verticals.

2) focused distribution engines dedicated to helping partners monetize their merchant payment networks;

and 3) a cost-efficient, agile payment and business processing infrastructure, purpose-built to support our partners’ operations.

Priority's solutions are delivered via internally developed payment applications and services to customers in the following business segments:

• SMB Acquiring Solutions :

• 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 Payables :

Provides market-leading AP automation solutions to corporations, software partners and industry leading FIs (including Citibank and Mastercard).

• Enterprise Payments and BaaS :

• B2B Payments :

Provides market-leading AP automation solutions to corporations, software partners and industry leading FIs (including Citibank, Visa and Mastercard) in addition to improving cash flows by providing instant access to working capital.

• Enterprise Payments :

Provides embedded finance and BaaS solutions to customers to modernize legacy platforms and accelerate software partners' strategies to monetize payments.

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Alongside CPX as part of the AP suite, Priority acquired the assets of Plastiq Inc.

through its subsidiary Plastiq, Powered by Priority, LLC, a leading B2B payments company, in the third fiscal quarter of 2023, and has helped tens of thousands of businesses improve cash flow with instant access to working capital, while automating and enabling control over all aspects of accounts payable and receivable.

through its subsidiary Plastiq, Powered by Priority, LLC, a leading B2B payments company, in the third fiscal quarter of 2023, and has helped tens of thousands of

businesses improve cash flow with instant access to working capital, while automating and enabling control over all aspects of accounts payable and receivable.

The flagship product, Plastiq Pay, pioneered a way for businesses to pay suppliers by credit card regardless of acceptance as an alternative to expensive, scarce bank loan options.

Plastiq Accept offers an alternative to expensive merchant services, enabling businesses to accept credit cards with no merchant

fees and get paid across any customer touch point, including a website, invoice, checkout process, and in person via QR code.

Plastiq Accept offers an alternative to expensive merchant services, enabling businesses to accept credit cards with no merchant fees and get paid across any customer touch point, including a website, invoice, checkout process, and in person via QR code.

The Plastiq Connect API suite enables platforms, marketplaces, and ERPs, to expand B2B payment options for payables and receivables in their native customer experience while outsourcing payment execution, risk, and compliance.

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We provide solutions for ISVs, third-party integrators, and merchants that allow for the leveraging of our core payments engine, our automated payables platform or our account ledgering capabilities all via API resources.

We generate revenue primarily from payment processing transactions, and to a lesser extent, from monthly subscription services and other solutions provided to customers and interest income from the permissible investments of the deposits we hold.

Payment processing fees are generated from the ongoing sales of our merchants and are governed by multi-year merchant contracts.

We generate revenue primarily from payment processing transactions, and from monthly services and other solutions provided to customers and interest income from the permissible investments of the account balances we hold.

Payment processing fees are generated from the ongoing sales to our customers and are governed by multi-year contracts.

As a result, payment processing fees are highly recurring in nature.

For the year ended December 31, 2023, we generated revenue of $755.6 million, net loss attributable to common stockholders of $49.1 million and operating income of $81.5 million, compared to revenue of $663.6 million, net loss attributable to common stockholders of $39.0 million and operating income of $56.2 million for the year ended December 31, 2022.

For the year ended December 31, 2024, we generated revenue of $879.7 million, net loss attributable to common shareholders of $24.0 million and operating income of $133.4 million, compared to revenue of $755.6 million, net loss attributable to common shareholders of $49.1 million and operating income of $81.5 million for the year ended December 31, 2023.

Industry Overview

The payment processing industry provides merchants with credit, debit, gift, loyalty card and other payment processing services, along with related value-added solutions and information services.

The industry continues to grow, driven by wider merchant acceptance, increased use of Electronic Payments, advances in payment technology and the disruption in banking by fintech providers.

The payment processing industry provides businesses with credit, debit, gift, loyalty card and other payment processing services, along with related value-added solutions and information services.

The industry continues to grow, driven by wider acceptance, increased use of Electronic Payments, advances in payment technology and the disruption in banking by fintech providers.

The proliferation of bankcards and the use of other payment technologies has made the acceptance of Electronic Payments through multiple channels a virtual necessity for many businesses to remain competitive.

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Key Industry Trends

The following are key trends we believe are impacting the merchant acquiring/payment processing industry:

The following are key trends we believe are impacting the fintech and payments processing industry:

• Trend Toward Electronic Transactions – We believe the continued shift from cash/paper payments toward electronic/card payments will drive growth for merchant acquirers and processors as volume continues to grow correspondingly.

We believe this migration and overall market growth will continue to provide tailwinds to the Electronic Payments industry.

B2B payments is the largest payment market in the U.S.

by volume and presents a significant opportunity for payment providers to capitalize on the conversion of check and paper-based payments to Electronic Payments, including card-based acceptance.

As businesses have increasingly looked to improve efficiency and reduce costs, the electronification of B2B payments has gained momentum.

• Convergence of Payments and Embedded Finance Solutions – As consumer behavior shifted during the COVID-19 pandemic, the scale of disruption grew dramatically and we believe the speed of change will continue to rise.

The appetite of both merchants and consumers for new alternatives to traditional payment options remains top of mind and big tech companies, fintechs, challenger banks and other non-bank entrants are driving market disruption by offering customers better user experiences at lower prices.

customers better user experiences at lower prices.

The continued displacement of cash and checks over the next several years, helped along by customers' adoption of digital shopping and fueled by their desire to avoid contact with physical infrastructure and objects, continues to create even more opportunities for disruption in payments.

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however, as mobile technologies continue to proliferate, consumers are making more purchases through mobile browsers and native mobile applications.

We believe this shift represents a significant opportunity given the high growth rates of mobile

payments volume, higher fees for card-not-present and cross-border processing and potential for the in-app economy to stimulate and/or alter consumer spending behavior.

We believe this shift represents a significant opportunity given the high growth rates of mobile payments volume, higher fees for card-not-present and cross-border processing and potential for the in-app economy to stimulate and/or alter consumer spending behavior.

B2B Payments is the largest payment market in the U.S.

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As businesses have increasingly looked to improve efficiency and reduce costs, the electronification of B2B Payments has gained momentum.

Enterprise Payments and BaaS is the integration of financial services, like payments, lending, or banking services, into non-financial offerings.

This embedded finance capability allows customers to access financial services seamlessly through applications they already utilize.

The market is large and growing rapidly as customers demand a digital, frictionless and integrated approach to meeting the needs of their end consumer.

Competitive Strengths

We possess certain attributes that we believe differentiate us as a leading provider of merchant acquiring, commercial payment and embedded finance solutions in the U.S.

We possess certain attributes that we believe differentiate us as a leading provider of merchant services, payables and banking & treasury solutions in the U.S.

Our key competitive strengths include:

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We deliver innovative business management products and add-on features that meet the needs of SMBs across different vertical markets.

Additionally, with our embedded finance offerings and money transmissions licenses in 46 U.S.

Additionally, with our embedded finance offerings and money transmissions licenses in forty six U.S.

states, the District of Columbia and two U.S.

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Deploy our Embedded Finance Solution to Enterprise Customers

Our Enterprise Payments segment, and its flagship product Passport enables software partners and business platform customers to embed our payments and treasury solutions into their core operating and business systems that deliver a fully automated and digital experience to collect, store, lend and send money for their customers.

Through Passport, Priority delivers a fully embedded finance solution to customers that manages the inflows and outflows, and reconciliation, of all forms of payments (ACH, wire, check, credit and debit) for any number of clients from a single account.

The platform today manages over 700,000 active accounts and, through its money transmission licenses in 46 U.S.

Our Enterprise Payments segment, enables software partners and business platform customers to embed our banking and treasury solutions into their core operating and business systems that deliver a fully automated and digital experience to collect, store, lend and send money for their customers.

Priority delivers a fully embedded finance solution to customers that manages the inflows and outflows, and reconciliation, of all forms of payments (ACH, wire, check, credit and debit) for any number of clients from a single account.

The platform today manages over 930,000 active accounts and, through its money transmission licenses in forty six U.S.

states, the District of Columbia and two U.S.

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Deploy Industry Specific Payment Technology

We intend to continue to enhance and deploy our technology-enabled payment solutions and our capabilities to collect, store and send money into industry-specific verticals.

We intend to continue to enhance and deploy our technology-enabled payment solutions and our capabilities to collect, store, lend and send money into industry-specific verticals.

We continue to identify and evaluate new, attractive industries where we can deliver differentiated technology-enabled payment solutions that meet merchants' industry-specific needs.

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Accretive Acquisitions

With a consistent, long-term goal of maximizing stockholder value, we intend to selectively pursue strategic and tactical acquisitions that meet our established criteria.

We actively seek potential acquisition candidates that exhibit certain attractive attributes including predictable and recurring revenue, a scalable operating model, low capital intensity, complementary

technology offerings and a strong cultural fit.

With a consistent, long-term goal of maximizing shareholder value, we intend to selectively pursue strategic and tactical acquisitions that meet our established criteria.

Our operating infrastructure is purpose-built to rapidly and seamlessly consolidate complementary businesses into our ecosystem all while optimizing revenue and cost synergies.

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2) ISVs and business partnerships;

3) the card networks (Mastercard and Visa);

3) the card networks (Mastercard, Visa and American Express);

4) large U.S.

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Our Enterprise segment goes to market through integrations with software partners and business platform customers by enabling them to embed our payments and treasury solutions into their core operating and business systems.

Passport's offering provides those partners with a fully automated, scalable and integrated financial tool to collect, store, lend and send money for their customers.

Priority's offering provides those partners with a fully automated, scalable and integrated financial tool to collect, store, lend and send money for their customers.

Our market strategy has resulted in a merchant base that we believe is diversified across both industries and geographies resulting in, what we believe, is more stable average profitability per merchant.

Only one reseller relationship contributes more than 10% of total bankcard processing volume, and such relationship represents approximately 10.6% of our total bankcard processing volume for the fiscal year ending December 31, 2024.

Security, Disaster Recovery and Back-up Systems

As a result of routine business operations, we store information relating to our merchants and their transactions.

Because this information is considered sensitive in nature, we maintain a high level of security to protect it.

Our computational systems are continually updated and audited to the latest security standards as defined by 1) payment card industry and data security standards;

and 2) the Payment Card Industry Security Standards Council.

As such, we have a dedicated team responsible for responding to security incidents.

This team develops, maintains, tests and verifies our incident response plan.

The primary function of this team is to react and respond to intrusions, denial of service, data leakage, malware, vandalism and other events that could potentially jeopardize data availability, integrity and confidentiality.

In addition to handling security incidents, the incident response team continually educates themselves and us on information security matters.

High-availability and disaster recovery are provided through a combination of redundant hardware and software running at two geographically distinct data centers.

Each data center deployment is an exact mirror of the other and each can handle all technical, payment and business operations for all product lines independently.

If one data center becomes impaired, the traffic is automatically redirected to the other.

Business continuity planning drills are run each quarter to test fail-over and recovery as well as staff operations and readiness.

Third-party Processors and Sponsor Banks

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Processing is a scale-driven business in which many acquirers outsource the processing function to a small number of large processors.

In these partnerships, we serve as a merchant acquirer and enter into processing agreements with payment processors, such as Fiserv or Global Payments, to assist us in providing front-end and back-end transaction processing services

for our merchants.

These third parties are compensated for their services.

These processors in turn have agreements with card networks such as Visa and Mastercard, through which the transaction information is routed in exchange for network fees.

To provide processing services, merchant acquirers like Priority must be registered with the card networks (e.g., Visa and Mastercard).

To provide processing services, merchant acquirers like Priority must be registered with the card networks (e.g., Visa, Mastercard, American Express, Discover, etc.).

To register with a card network in the U.S., acquirers must maintain relationships with banks willing to sponsor the merchant acquirer's adherence to the rules and standards of the card networks, or a sponsor bank.

We maintain sponsor bank relationships with Wells Fargo, Synovus Bank, Pueblo Bank and Axiom Bank.

We maintain sponsor bank relationships with Wells Fargo, Synovus Bank, Pueblo Bank and Georgia Banking Company ("GBC").

We maintain a card issuing relationship with Sutton Bank.

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Sponsor bank relationships enable us to route transactions under the sponsor bank's control and identification number (referred to as a BIN for Visa and ICA for Mastercard) across the card networks (or ACH network) to authorize and clear transactions.

We offer banking and money transmission services to our customers through our partner banks including Wells Fargo and Axos Bank.

Our proprietary ledgering technology enables us to store customer funds in uniquely identifiable accounts in order to position customer deposits for pass through FDIC insurance eligibility.

Customer deposits may placed throughout our banking partner portfolio to maximize pass through FDIC insurance coverage.

Risk Management

Our thoughtful merchant and reseller underwriting policies combined with our forward-looking transaction monitoring capabilities have enabled us to maintain low credit loss performance.

Our risk management strategies are informed by a team with experience managing merchant acquiring risk operations that are augmented by our rules-based modern systems designed to manage risk at the transaction level.

Initial Underwriting – Central to our risk management process are our front-line underwriting policies that vet all resellers and merchants prior to their contractual arrangements with us.

Our thoughtful customer and reseller underwriting policies combined with our forward-looking transaction monitoring capabilities have enabled us to maintain low credit loss performance.

Our risk management strategies are informed by a team with experience managing payments and banking risk operations that are augmented by our rules-based modern systems designed to manage risk at the transaction level.

Initial Underwriting – Central to our risk management process are our front-line underwriting policies that vet all resellers and customers prior to their contractual arrangements with us.

Our automated risk systems access:

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The collected information is delivered to a team of underwriters who conduct necessary industry checks, financial performance analysis or owner background checks, as applicable and consistent with our policies.

Based upon these results, the underwriting department rejects or approves the merchant or reseller and sets appropriate merchant and reseller reserve requirements which are held by our bank sponsors on our behalf.

Based upon these results, the underwriting department rejects or approves the customer or reseller and sets appropriate reserve requirements which are held by our bank sponsors on our behalf.

Resellers may be subject to quarterly and/or annual assessments for financial strength in compliance with our policies and adjustments to reserve levels.

The results of our initial merchant underwriting process inform the transaction-level risk limits for volume, average ticket, transaction types and authorization codes that are captured by our CYRIS risk module - a proprietary risk system that monitors and reports transaction risk activity to our risk team.

The results of our initial customer underwriting process inform the transaction-level risk limits for volume, average ticket, transaction types and authorization codes that are captured by our CYRIS risk module - a proprietary risk system that monitors and reports transaction risk activity to our risk team.

This transaction-level risk module, housed within MX Connect, forms the foundational risk management framework that enables the Company to optimize transaction activity and processing scale while preserving a modest aggregate risk profile that has resulted in historically low losses.

Real-Time Risk Monitoring – Merchant transactions are monitored on a transactional basis to proactively enforce risk controls.

Our risk systems provide automated evaluation of merchant transaction activity against initial underwriting settings.

Real-Time Risk Monitoring – Customer transactions are monitored on a transactional basis to proactively enforce risk controls.

Our risk systems provide automated evaluation of customer transaction activity against initial underwriting settings.

Transactions that are outside underwriting parameters are queued for further investigation.

Also, resellers whose merchant portfolio represents a concentration of investigated merchants are evaluated for risk action (i.e., increased reserves or contract termination).

Also, resellers whose customer portfolio represents a concentration of investigated merchants are evaluated for risk action (i.e., increased reserves or contract termination).

Risk Audit – Transactions flagged by our risk monitoring systems or that demonstrate suspicious activity traits that have been flagged for review can result in funds being held in addition to other risk mitigation actions.

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2) debit of reserves;

or 3) termination of the processing agreement.

Merchants are periodically reviewed to assess any risk adjustments based upon their overall financial health and compliance with network standards.

Merchant transaction activity is investigated for instances of business activity changes or credit impairment (and improvement).

or 3) termination of the processing or services agreement.

Customers are periodically reviewed to assess any risk adjustments based upon their overall financial health and compliance with network standards.

Customer transaction activity is investigated for instances of business activity changes or credit impairment (and improvement).

Loss Mitigation – In instances where transactions and/or individual merchants are flagged for fraud, or in instances where the transaction activity is resulting in excessive charge-backs, several loss mitigation actions may be taken.

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and/or 4) legal action.

Investments - We use our primary portfolio to provide for the investment of excess funds at acceptable risk levels.

Investments - We use our primary portfolio to provide for the investment of excess funds at acceptable risk levels as permitted.

Our portfolio consists primarily of money market accounts at FDIC insured institutions.

Concentration in any one particular financial institution could create operational disruption or put customer funds in excess of FDIC insured limits at risk.

Acquisitions of a Business

On May 23, 2023, Plastiq, Powered by Priority, LLC, a subsidiary of PRTH, entered into an equity and asset purchase agreement with Plastiq, Inc., to acquire substantially all of the assets of Plastiq Inc., including the equity interest in Plastiq Canada, Inc ("Plastiq").

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 Inc.

filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code in the U.S.

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.

Acquisitions for additional information related to the Company's acquisitions.

acquiring industry is highly competitive, with several large processors accounting for the majority of processing volume.

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We differentiate ourselves to merchants and enterprise customers through our ability to innovate and develop new products and services that offer new payment experiences for customers on our platform.

Our agility, risk management and suite of products within a single platform differentiates us from competitors.

Our agility, regulatory compliance, risk management and suite of products within a single platform differentiates us from competitors.

Government Regulation and Payment Network Rules

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As a TSP, we are subject to audits by an interagency group consisting of the Federal Reserve System, the FDIC, and the Office of the Comptroller of the Currency.

Through our subsidiary, Finxera, Inc., we also hold money transmission licenses in 46 U.S.

Through our subsidiary, Finxera, Inc., we also hold money transmission licenses in forty six U.S.

states, the District of Columbia and two U.S.

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These laws and regulations include:

1) the federal Gramm-Leach-Bliley Act of 1999, which applies to a broad range of FIs and to companies

that provide services to FIs in the U.S.;

1) the federal Gramm-Leach-Bliley Act of 1999, which applies to a broad range of FIs and to companies that provide services to FIs in the U.S.;

2) certain health care technology laws, including HIPAA and the Health Information Technology for Economic and Clinical Act;

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Other Regulation

The Tax Act of 2008 requires certain merchant acquiring entities and third-party settlement organizations to provide information returns for each calendar year with respect to payments made in settlement of electronic payment transactions and

third-party payment network transactions occurring in that calendar year.

Reportable transactions are also subject to backup withholding requirements.

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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-K

Item 1. Business