What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-06 compared with 2024-03-12 · 508 added, 541 removed, 1070 unchanged (50% of the section changed)

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Consolidated Balance Sheets as of December 31, 2024 and December 31, 2023

Consolidated Statements of Operations and Comprehensive Lo ss for the years ended December 31, 2023, 2022 and 2021

Consolidated Statements of Changes in Stockholders' Deficit and Non-Controlling Interests for the years ended December 31, 2023, 2022 and 2021

Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2024, 2023 and 2022

Consolidated Statements of Changes in Shareholders' Deficit and Non-Controlling Interests for the years ended December 31, 2024, 2023 and 2022

Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022

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Redeemable Senior Preferred Stock and Warrants

Stockholders' Deficit

Shareholders' Deficit

Stock-based Compensation

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Priority Technology Holdings, Inc.

To the Shareholders and the Board of Directors of Priority Technology Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Priority Technology Holdings, Inc.

(the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, changes in stockholders' deficit and non-controlling interests and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive loss, changes in shareholders’ deficit and non-controlling interests and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework and our report dated March 6, 2025 expressed an adverse opinion thereon.

Basis for Opinion

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Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accounting for Plastiq

Description of the Matter As more fully described in Note 2 of the consolidated financial statements, the Company completed its acquisition of substantially all of the assets of Plastiq, including the equity interests in Plastiq Canada, Inc.

The purchase was completed on July 31, 2023 for total consideration of $37.0 million including $28.5 million in cash and the remaining consideration is in the nature of deferred or contingent consideration and certain equity interest in Plastiq, Powered by Priority, LLC.

The acquisition was accounted for as a business combination.

The Company’s accounting for the acquisition included determining the fair value of contingent consideration payments in addition to intangible assets acquired of $30.5 million, which primarily included customer relationships, referral partner relationships, tradename, and developed technology.

Auditing the Company’s accounting for the acquisition was complex due to the significant estimation uncertainty in determining the fair values of the contingent consideration payments as well as the fair value of the acquired intangible assets.

The significant estimation was primarily due to the sensitivity of the respective fair values to the future performance of the acquired business.

The significant underlying assumptions used to estimate the fair value of contingent consideration payments and intangible assets, included revenue and operating margin growth rates and prospective free cash flow from the operations of the acquired business, weighted average cost of capital, and royalty rate assumptions, as applicable.

These assumptions relate to the future performance of the acquired business are forward-looking and could be affected by future economic and market conditions.

Description of the Matter As more fully described in Note 2 of the consolidated financial statements, the Company completed its acquisition of Plastiq, Inc.

during the year ended December 31, 2023 for total consideration of $37.0 million including $28.5 million in cash and the remaining consideration of $8.5 million was in the form of deferred or contingent consideration and certain equity interest in the acquiring entity.

The acquisition was accounted for as a business combination.

The Company’s accounting for the acquisition included determining the fair value of contingent consideration payments in addition to intangible assets acquired of $30 million, which primarily included customer relationships, referral partner relationships, tradename, and developed technology.

The significant estimation was primarily due to the sensitivity of the respective fair values to the future performance of the acquired business.

The significant underlying assumptions used to estimate the fair value of contingent consideration payments and intangible assets, included revenue and operating margin growth rates and prospective free cash flow from the operations of the acquired entity, weighted average cost of capital, and royalty rate assumptions, as applicable.

These assumptions relate to the future performance of the acquired business are forward-looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit To test the fair value of the contingent consideration payments and intangible assets identified, our audit procedures included, among others, evaluating the Company’s use of income approach and Monte Carlo simulation, as applicable, evaluating the significant assumptions, and evaluating the completeness and accuracy of underlying data supporting the significant assumptions.

We involved our specialist to assist with our evaluation of the methodologies used by management’s expert and significant assumptions used in the valuation of the contingent consideration payments and intangible assets identified.

For example, we compared the significant assumptions to current industry, market and economic trends, as well as historical results of the acquired businesses.

We performed sensitivity analyses of the significant assumptions to evaluate the change in the fair value resulting from changes in the assumptions.

We also evaluated the appropriateness of the Company’s disclosures included in Note 2 in relation to the acquisition.

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accrued Residual Commissions and Residual Commission Expenses

Description of the Matter Accrued residual commissions recorded by the Company and included on the Consolidated Balance Sheet were $33.0 million at December 31, 2023, and residual commission expenses included within costs of services on the Consolidated Statement of Operations were $415.1 million for the year ended December 31, 2023.

Description of the Matter

Accrued residual commissions recorded by the Company and included on the Consolidated Balance Sheet were $37.6 million at December 31, 2024, and residual commission expenses included within costs of services on the Consolidated Statement of Operations were $426.6 million for the year ended December 31, 2024.

As discussed in Note 1 of the consolidated financial statements, the Company accrues and pays commission expense for certain customer services and other services provided by its independent sales organizations (ISOs).

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Auditing residual commissions was complex due to the non-standard nature of the pricing terms within the ISO contracts, the volume of contracts, the volume of transactions processed each month, and the degree of auditor judgment needed to design the nature and extent of audit procedures to obtain sufficient audit evidence.

How We Addressed the Matter in Our Audit To test accrued residual commissions and residual commission expenses, our audit procedures included, among others, testing the completeness and accuracy of the underlying data supporting the commission calculations and the accuracy of the calculations.

How We Addressed the Matter in Our Audit

To test accrued residual commissions and residual commission expenses, our audit procedures included, among others, testing the completeness and accuracy of the underlying data supporting the commission calculations and the accuracy of the calculations.

We selected a sample of monthly ISO payments and, for each sample item, we compared the pricing terms included in the calculation to the respective ISO contract or other source documents, recalculated the related expense and accrual, and agreed the commission payment to evidence of cash disbursement.

Additionally, for these monthly ISO payments, we selected a sample of merchant customers, obtained their monthly processing statements, which were generated by the Company’s third-party processors, and agreed the monthly payment volumes to the commission calculations.

Additionally, for these monthly ISO payments, we selected a sample of merchant customers, then selected a transaction type, obtained their monthly processing statements, which were generated by the Company’s third-party processors, and agreed the monthly payment volumes to the commission calculations.

/s/ Ernst & Young LLP

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March 6, 2025

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Priority Technology Holdings, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Priority Technology Holdings, Inc.’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework (the COSO criteria)).

In our opinion, because of the effect of the material weakness described below on the achievement of the objectives of the control criteria, Priority Technology Holdings, Inc.

(the Company) has not maintained effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weakness has been identified and included in management’s assessment.

Management has identified a material weakness related to the design and operation of certain automated controls (including related information technology general controls) for certain tools or applications involved in the transformation and ingestion of third-party processors’ data in the Company’s control environment.

The ingested data is a key input for determination of merchant revenue (and related accounts receivable) and residual expense (and related accounts payable).

Consequently, automated controls and IT dependent manual business process controls that rely upon information from the affected financial applications and processes were also deemed ineffective.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive loss, changes in shareholders’ deficit and non-controlling interests and cash flows for each of the three years in the period ended December 31, 2024, and the related notes.

This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the 2024 consolidated financial statements, and this report does not affect our report dated March 6, 2025 which expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit

preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Atlanta, Georgia

March 6, 2025

Priority Technology Holdings, Inc.

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Total assets $ 1,826,860 $ 1,615,337

Liabilities, Redeemable Senior Preferred Stock and Stockholders' Deficit

Liabilities, Redeemable Senior Preferred Stock and Shareholders' Deficit

Current liabilities:

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250,000 shares authorized;

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

258,605 235,579

Stockholders' deficit:

225,000 issued at December 31, 2024 and December 31, 2023;

0 and 225,000 outstanding at December 31, 2024 and December 31, 2023

Shareholders' deficit:

Preferred stock, $ 0.001 par value per share;

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Accumulated deficit ( 147,134 ) ( 134,951 )

Total stockholders' deficit attributable to stockholders of PRTH ( 147,718 ) ( 104,041 )

Total shareholders' deficit attributable to shareholders of Priority ( 166,840 ) ( 147,718 )

Non-controlling interests in consolidated subsidiaries 1,815 1,654

Total stockholders' deficit ( 146,064 ) ( 102,786 )

Total liabilities, redeemable senior preferred stock and stockholders' deficit $ 1,615,337 $ 1,373,363

Total shareholders' deficit ( 165,025 ) ( 146,064 )

Total liabilities, redeemable senior preferred stock and shareholders' deficit $ 1,826,860 $ 1,615,337

See Notes to Consolidated Financial Statements

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Operating income 133,421 81,524 56,165

Other (expense) income

Other expense

Interest expense ( 88,948 ) ( 76,108 ) ( 53,554 )

Debt extinguishment and modification costs ( 10,369 ) — —

Gain on sale of business and investment — — 7,643

Other income, net 3,177 1,736 589

Total other (expense) income, net ( 74,372 ) ( 52,965 ) ( 36,962 )

Income (loss) before income taxes 7,152 3,200 ( 3,869 )

Income tax expense (benefit) 8,463 5,350 ( 5,258 )

Net (loss) income ( 1,311 ) ( 2,150 ) 1,389

Dividends and accretion attributable to redeemable senior preferred stockholders ( 47,744 ) ( 36,880 ) ( 18,009 )

NCI preferred unit redemptions, net of deferred tax benefit — — ( 8,021 )

Net loss attributable to common stockholders ( 49,055 ) ( 39,030 ) ( 24,641 )

Total other expense, net ( 96,140 ) ( 74,372 ) ( 52,965 )

Income before income taxes 37,281 7,152 3,200

Income tax expense 13,266 8,463 5,350

Net income (loss) 24,015 ( 1,311 ) ( 2,150 )

Dividends, accretion, and related excise tax attributable to redeemable senior preferred stockholders ( 47,336 ) ( 47,744 ) ( 36,880 )

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

Net loss attributable to common shareholders ( 23,960 ) ( 49,055 ) ( 39,030 )

Other comprehensive loss

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Loss per common share:

Basic $ ( 0.63 ) $ ( 0.50 ) $ ( 0.34 )

Diluted $ ( 0.63 ) $ ( 0.50 ) $ ( 0.34 )

Basic and diluted $ ( 0.31 ) $ ( 0.63 ) $ ( 0.50 )

Weighted-average common shares outstanding:

Basic 78,333 78,233 71,902

Diluted 78,333 78,233 71,902

Basic and diluted 77,993 78,333 78,233

See Notes to Consolidated Financial Statements

Priority Technology Holdings, Inc .

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

Consolidated Statements of Changes in Shareholders' Deficit and Non-Controlling Interests

(in thousands)

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Stock APIC AOCI Accumulated

Deficit Deficit Attributable to Stockholders NCIs Total

Deficit Deficit Attributable to Shareholders NCIs Total

Shares $ Shares $

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Vesting of stock-based compensation 925 1 — — — — — 1 — 1

Liability-classified stock-based compensation converted to equity-classified — — — — 313 — — 313 — 313

Issuance of Common Stock 7,551 7 — — 34,381 — — 34,388 — 34,388

Exercise of stock options 174 — — — 1,195 — — 1,195 — 1,195

Fair value of NCI preferred units redemption, net of deferred tax benefit — — — — ( 8,021 ) — — ( 8,021 ) — ( 8,021 )

Fair value of common shares issued for NCI redemption 1,428 2 — — 9,962 — — 9,964 — 9,964

Share repurchases and shares withheld of taxes ( 269 ) — 269 ( 1,703 ) — — — ( 1,703 ) — ( 1,703 )

Warrants issued — — — — 11,357 — — 11,357 — 11,357

Issuance of profit interests in wholly-owned subsidiaries — — — — — — — — 1,255 1,255

Share repurchases ( 1,621 ) ( 2 ) 1,621 ( 7,468 ) — — — ( 7,470 ) — ( 7,470 )

Dividends on redeemable senior preferred stock — — — — ( 33,594 ) — — ( 33,594 ) — ( 33,594 )

Accretion of unamortized issuance costs for redeemable senior preferred stock — — — — ( 3,286 ) — — ( 3,286 ) — ( 3,286 )

Change in estimate of tax basis differences — — — — — — 566 566 — 566

Net income — — — — — — 1,389 1,389 — 1,389

Net loss — — — — — — ( 2,150 ) ( 2,150 ) — ( 2,150 )

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 — — — — 6,480 — — 6,480 — 6,480

Vesting of stock-based compensation 925 1 — — — — — 1 — 1

Issuance of profit interests in wholly-owned subsidiaries — — — — — — — — 1,255 1,255

Share repurchases ( 1,621 ) ( 2 ) 1,621 ( 7,468 ) — — — ( 7,470 ) — ( 7,470 )

ESPP compensation and vesting of stock-based compensation 1,204 1 — — 182 — — 183 — 183

Shares withheld for taxes ( 291 ) — 291 ( 1,256 ) — — — ( 1,256 ) — ( 1,256 )

Dividends on redeemable senior preferred stock — — — — ( 44,404 ) — — ( 44,404 ) — ( 44,404 )

Accretion of unamortized issuance costs for redeemable senior preferred stock — — — — ( 3,286 ) — — ( 3,286 ) — ( 3,286 )

Accretion of redeemable senior preferred stock — — — — ( 3,340 ) — — ( 3,340 ) — ( 3,340 )

Adjustments to NCI — — — — — — — — ( 403 ) ( 403 )

Issuance of profit interests/common equity in subsidiaries — — — — — — — — 802 802

Foreign currency translation adjustment — — — — — ( 29 ) — ( 29 ) — ( 29 )

Reclassification of negative additional paid-in capital — — — — 31,432 — ( 31,432 ) — — —

Net loss — — — — — — ( 1,311 ) ( 1,311 ) — ( 1,311 )

Priority Technology Holdings, Inc .

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

Consolidated Statements of Changes in Shareholders' Deficit and Non-Controlling Interests

(in thousands)

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Stock APIC AOCI Accumulated

Deficit Deficit Attributable to Stockholders NCIs Total

Deficit Deficit Attributable to Shareholders NCIs Total

Shares $ Shares $

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Equity-classified stock-based compensation — — — — 5,957 — — 5,957 — 5,957

PHOT Share issuance 813 1 — — — — — 1 — 1

Exchange for PHOT redeemable NCI ( 1,428 ) ( 2 ) 1,428 ( 5,255 ) — — — ( 5,257 ) — ( 5,257 )

Return of PHOT redeemable NCI — — — — ( 639 ) — — ( 639 ) — ( 639 )

Redemption of PHOT redeemable NCI, net of tax — — — — 3,734 — — 3,734 — 3,734

ESPP compensation and vesting of stock-based compensation 1,197 1 — — 238 — — 239 — 239

Shares withheld for taxes ( 326 ) — 326 ( 1,537 ) — — — ( 1,537 ) — ( 1,537 )

Exercise of stock options 267 — — — 1,848 — — 1,848 — 1,848

Dividends on redeemable senior preferred stock — — — — ( 27,678 ) — — ( 27,678 ) — ( 27,678 )

Accretion of redeemable senior preferred stock — — — — ( 16,920 ) — — ( 16,920 ) — ( 16,920 )

Adjustments to NCI — — — — — — — — ( 403 ) ( 403 )

Issuance of profit interests/common equity in subsidiaries — — — — — — — — 802 802

Excise tax on repurchase of redeemable senior preferred stock — — — — — — ( 2,738 ) ( 2,738 ) — ( 2,738 )

Adjustment to NCI — — — — — — — — 161 161

Foreign currency translation adjustment — — — — — ( 147 ) — ( 147 ) — ( 147 )

Reclassification of negative additional paid-in capital — — — — 33,460 — ( 33,460 ) — — —

Net loss — — — — — — ( 1,311 ) ( 1,311 ) — ( 1,311 )

Net income (loss) — — — — — — 24,015 24,015 — 24,015

December 31, 2024 77,480 77 4,386 ( 19,607 ) — ( 176 ) ( 147,134 ) ( 166,840 ) 1,815 ( 165,025 )

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Cash flows from operating activities:

Net (loss) income $ ( 1,311 ) $ ( 2,150 ) $ 1,389

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

Gain and transaction costs recognized on sale of business and investment — — ( 7,643 )

Net income (loss) $ 24,015 $ ( 1,311 ) $ ( 2,150 )

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

Depreciation and amortization of assets 58,041 68,395 70,681

Stock-based, ESPP and incentive units compensation 6,769 6,228 3,213

Stock-based compensation, ESPP, and incentive units compensation 6,118 6,769 6,228

Amortization of debt issuance costs and discounts 2,736 3,849 3,521

Write-off of deferred loan costs and discount — — 2,580

Deferred income tax ( 6,086 ) ( 8,183 ) ( 2,559 )

Change in contingent consideration ( 1,639 ) 2,059 —

PIK interest (paid) — — ( 23,715 )

Debt extinguishment and modification costs 10,369 — —

Deferred income tax benefit ( 2,194 ) ( 6,086 ) ( 8,183 )

Change in contingent consideration liability 2,839 ( 1,639 ) 2,059

Other non-cash items, net ( 147 ) ( 3,924 ) 74

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Cash flows from investing activities:

Acquisition of business, net of cash acquired ( 28,222 ) ( 4,976 ) ( 407,129 )

Proceeds from sale of business and investment — — 15,278

Acquisitions of businesses, net of cash acquired — ( 28,222 ) ( 4,976 )

Additions to property, equipment and software ( 21,693 ) ( 21,256 ) ( 18,882 )

Notes receivable, net ( 3,361 ) 376 ( 4,662 )

Acquisitions of assets and other investing activities ( 6,646 ) ( 7,983 ) ( 49,463 )

Acquisition of assets and other investing activities ( 10,492 ) ( 6,646 ) ( 7,983 )

Net cash used in investing activities ( 35,546 ) ( 55,748 ) ( 36,503 )

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Repayments of borrowings under revolving credit facility — ( 56,500 ) ( 32,000 )

Proceeds from the issuance of redeemable senior preferred stock, net of discount — — 219,062

Redeemable senior preferred stock issuance fees and costs — — ( 8,098 )

Redemption of senior preferred stock ( 225,000 ) — —

Redemption of accumulated dividend on redeemable preferred stock ( 54,557 ) — —

Redemption of redeemable non-controlling interest in subsidiary ( 2,130 ) — —

Repurchases of Common Stock and shares withheld for taxes ( 1,538 ) ( 1,256 ) ( 7,468 )

Dividends paid to redeemable senior preferred stockholders ( 23,646 ) ( 24,718 ) ( 11,459 )

Profit distributions to redeemable NCIs of subsidiaries — — ( 815 )

Proceeds from exercise of stock options — — 1,196

Proceeds from the exercise of stock options 1,816 — —

Settlement and customer/subscriber accounts obligations, net 179,614 211,077 43,143

Payment of contingent consideration related to business combination ( 4,700 ) ( 7,014 ) —

Payment of contingent consideration related to a business combination ( 5,592 ) ( 4,700 ) ( 7,014 )

Net cash provided by financing activities 147,578 210,105 8,502

Net change in cash and cash equivalents, and restricted cash:

Net increase in cash and cash equivalents, and restricted cash 197,641 235,613 42,517

Cash and cash equivalents, and restricted cash at beginning of period 796,223 560,610 518,093

Priority Technology Holdings, Inc .

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2024 2023 2022

Net cash provided by financing activities 210,105 8,502 871,629

Net change in cash and cash equivalents and restricted cash:

Net increase in cash and cash equivalents, and restricted cash 235,613 42,517 429,973

Cash and cash equivalents and restricted cash at beginning of period 560,610 518,093 88,120

Cash and cash equivalents and restricted cash at end of period $ 796,223 $ 560,610 $ 518,093

Cash and cash equivalents, and restricted cash equivalents at end of period $ 993,864 $ 796,223 $ 560,610

Reconciliation of cash and cash equivalents, and restricted cash:

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Non-cash investing and financing activities:

Contingent consideration accrual $ 2,839 $ 5,951 $ 6,079

Net non-cash change in lease liability $ 1,549 $ 1,520 $ 1,722

Measurement period adjustment to purchase price $ 12 $ 111 $ —

Acquisition of intangible asset $ ( 4,031 ) $ — $ —

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

$ — $ ( 7,027 ) $ ( 5,341 )

Contingent consideration accrual $ 5,951 $ 6,079 $ 3,000

Adjustment to value of profit interest unit $ ( 404 ) $ — $ —

Issuance of NCI $ — $ 184 $ 1,255

Measurement period adjustment to purchase price $ 111 $ — $ —

Notes receivable from sellers used as partial consideration for acquisitions $ — $ — $ 3,499

Adjustment to value of profit interest unit $ — $ ( 404 ) $ —

Forfeiture of liability-classified award $ — $ — $ 325

Change in ESPP liability $ — $ — $ 143

Non-cash additions to other noncurrent assets for right-of-use operating leases $ 1,520 $ 1,722 $ 234

(1) The dividend payable for year ended December 31, 2023, was paid on January 2, 2024.

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Nature of Business and Significant Accounting Policies

Headquartered in Alpharetta, GA, the Company began operations in 2005 with a mission to build a merchant-inspired payments platform that would advance the goals of its customers and partners.

Our approach leverages a single platform to collect, store, lend and send money that operates at scale.

Our technology supports high-value payments products complemented by our personalized support.

We are a leading provider to businesses, enterprises and distribution partners such as retail ISOs, FIs, wholesale ISOs and ISVs.

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.

The Company operates from a purpose-built business platform that includes tailored customer service offerings and bespoke technology development, allowing the Company to provide end-to-end solutions for payment and payment-adjacent needs.

The Company provides:

• SMB payments processing solutions for B2C transactions through ISOs, FIs, ISVs and other referral partners.

Our proprietary MX platform for B2C payments provides merchants a fully customizable suite of business management solutions.

We enable customers to accept card, electronic and digital-based payments at the point of sale by providing a suite of services.

• B2B payments solutions such as automated vendor payments and professionally curated managed services to industry leading FIs and networks.

Our proprietary B2B CPX platform was developed to be a best-in-class solution for buyer/supplier payment enablement.

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

• Enterprise payments solutions for ISVs and other third parties that allow them to leverage the Company's core payments engine via robust API resources and high-utility embeddable code and consulting and development solutions focused on the increasing demand for integrated payments solutions for transitioning to the digital economy.

Our BaaS features transaction monitoring, draft authorization audits, fee collection practice monitoring, and other services.

The Company provides its services through three reportable segments:

The Company provides its services through the following 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 :

and 3) Enterprise 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.

For additional information about our reportable segments, see Note 19.

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The Company's sponsorship agreements allow the capture and processing of electronic data in a format to allow such data to flow through networks for clearing and fund settlement of merchant transactions.

The Company also offers money transmission services in 46 U.S.

The Company also offers money transmission services in forty six U.S.

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

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NCI represents the equity interest not owned by the Company and are recorded for consolidated entities in which the Company owns less than 100% of the interests.

Changes in the Company's ownership interest while the Company retains its controlling

interest are accounted for as equity transactions, and upon loss of control, retained ownership interests are remeasured at fair value, with any gain or loss recognized in earnings.

For 2023, there was no income or loss attributable to NCI in accordance with the applicable operating agreements.

The results for the year ended December 31, 2023, include the post-acquisition results of the Plastiq business which was acquired through Chapter 11 bankruptcy process on July 31, 2023.

Changes in the Company's ownership interest while the Company retains its controlling interest are accounted for as equity transactions, and upon loss of control, retained ownership interests are remeasured at fair value, with any gain or loss recognized in earnings.

There was no income or loss attributable to NCI in accordance with the applicable operating agreements for any years presented.

Use of Estimates

The preparation of Consolidated Financial Statements in conformity with U.S.

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 Consolidated Financial Statements and the reported amounts of revenues and expenses during the reported period.

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 Consolidated Financial Statements and the reported amounts of revenues and expenses during the reported period.

Actual results could materially differ from those estimates.

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The Company has elected to exclude any contracts with an original duration of one year or less and any variable consideration that meets specified criteria from its disclosure of the aggregate amount of the transaction price allocated to unsatisfied performance.

In delivering payment services to the customer, the Company may also provide a limited license agreement to the customer for the use of one or more of the Company's proprietary cloud-based software applications.

In delivering payment services to the customer, the Company also provides a limited license agreement to the customer for the use of one or more of the Company's proprietary cloud-based software applications.

The Company grants a right to use its software applications only when the customer has contracted with the Company to receive related payment services.

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In order to provide our payment services, we obtain authorization for the transaction and request funds settlement from the card issuing financial institution through the payment network.

When third parties are involved in the transfer of services or goods to the customer, the Company considers the nature of each specific promised service or good and applies judgment to determine whether the Company controls the service or good before it is transferred to the customer or whether the Company is acting as an agent of the third party.

To determine whether the Company controls the service or good, it assesses indicators including:

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We do not have the ability to direct the use of and obtain substantially all of the benefits of the services provided by the card issuing FIs and payment networks before those services are transferred to our customer, and on that basis, we do not control those services prior to being transferred to our customer.

As a result, we present our revenues net of the interchange fees retained by the card issuing FIs and the fees charged by the payment networks.

SMB Payments – The Company's SMB Payments segment enables the Company's customers to accept card, electronic and digital-based payments at the point of sale by providing a suite of services including authorization, settlement and funding, customer support and help-desk functions, chargeback resolution, payment security, consolidated billing and statements, and

online reporting.

As a result, we present our revenues net of the interchange fees retained by the card issuing FIs and the fees charged by the payment networks except for our Plastiq (B2B Payments) business where the Company is considered a merchant of record and therefore, revenue is presented on gross basis.

Additionally, the Company enables customers to accept card, electronic and digital-based payments at the point of sale by providing a suite of services.

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Typically, revenues generated from these transactions are based on a variable percentage of the dollar amount of each transaction, and in some instances, additional fees (e.g., statement fees, annual fees and monthly minimum fees, fees for handling chargebacks, gateway fees and fees for other miscellaneous services) are charged for each transaction.

The Company's sponsoring banks collect the gross merchant discount from the card holder's issuing bank, pay the interchange fees and assessments to the payment networks and credit card associations, retain their fees, and pay to the Company the net amount which represents the Company's revenue.

The Company's sponsoring banks collect the gross merchant discount from the card holder's issuing bank, pay the interchange fees and

assessments to the payment networks and credit card associations, retain their fees, and pay to the Company the net amount which represents the Company's revenue.

B2B Payments – The Company's B2B Payments segment enables the Company's customers to automate their accounts payable and other commercial payments functions with the Company's payment services that utilize physical and virtual payment cards as well as ACH transactions.

The Company also provides cost-plus-fee turn-key business process outsourcing and assists commercial customers with programs that are designed to increase acceptance of Electronic Payments.

Revenues are generally earned on a per-transaction basis and are recognized by the Company net of certain third-party costs for interchange fees, assessments to the payment networks, credit card associations fees, sponsor bank fees and rebates to customers.

Revenues are generally earned on a per-transaction basis and are recognized by the Company over time, net of certain third-party costs for interchange fees, assessments to the payment networks, credit card associations fees, sponsor bank fees and rebates to customers.

The Company's payables management software helps businesses improve cash flow with instant access to working capital, while automating and enabling control over all aspects of accounts receivable and payable.

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These rebates are presented as net of revenue.

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

Enterprise Payments – The Company's Enterprise Payments segment uses payment-adjacent technologies to facilitate the acceptance of Electronic Payments from customers.

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• Enrollment fees :

The revenue associated with enrollment fees is recognized upon the receipt of a fully executed enrollment application, completion of the customer account setup, data verification and the constructive receipt of the applicable non-refundable fee.

The revenue associated with enrollment fees is recognized at a point in time upon the receipt of a fully executed enrollment application, completion of the customer account setup, data verification and the constructive receipt of the applicable non-refundable fee.

• Subscription fees :

The Company recognizes monthly subscription fees as recurring maintenance fees each month during the term of the client's enrollment.

Revenue from transaction-based fees is recognized upon constructive receipt of transaction fees for payments to creditors issued via ACH payments, paper checks or wire transfers.

Revenue from transaction-based fees is recognized over time upon constructive receipt of transaction fees for payments to creditors issued via ACH payments, paper checks or wire transfers.

These fees are transferred to the Company from the customer account balances, which may be maintained by the Company in money transmission license trust accounts or by partner banks.

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• CRM and consulting fees :

CRM license fees are recognized on a monthly basis and consulting fees are recognized when services are performed.

CRM license fees are recognized on a monthly basis and consulting fees are recognized over time when services are performed.

A substantial portion of this segment's revenues are earned as an agent of a third party, and therefore this earned revenue is reported as a net amount within revenue.

Interest income

Interest income generated by the Company's ordinary activities (i.e.

from reserves and customer deposits) are presented within outsourced services and other services revenue.

Interest income from the Company's surplus cash balances, notes receivable and other investments are included within other income.

Interest on notes receivable is recognized on a monthly basis and is included in other income, net.

Transaction Price Allocated to Future Performance Obligations

ASC 606 requires disclosure of the aggregate amount of the transaction price allocated to unsatisfied performance obligations.

However, as allowed by ASC 606, the Company has elected to exclude from this disclosure any contracts with an original

duration of one year or less and any variable consideration that meets specified criteria.

However, as allowed by ASC 606, the Company has elected to exclude from this disclosure any contracts with an original duration of one year or less and any variable consideration that meets specified criteria.

As described above, the Company's most significant performance obligations consist of variable consideration under a stand-ready series of distinct days of service.

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Costs of outsourced services and other revenue consist of salaries directly related to outsourced services revenue, the cost of equipment (point of sale terminals) sold, and third-party fees and commissions related to the Company's ACH processing activities.

For the Plastiq (B2B Payments) business, the Company acts as merchant of record and therefore transaction processing costs, including interchange fees, are presented as costs of services.

Contracts with Customers and Contract Costs

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Amounts paid to the ISO for these residual buyouts are capitalized and amortized over the useful life on a straight-line basis under the accounting guidance for intangible assets and included in intangible assets, net on our Consolidated Balance Sheets.

The Company pays bonuses to certain ISOs for meeting established performance criteria which results in a continued benefit to the Company for future periods.

The incremental costs are incurred to secure a future stream of revenue and are recorded as contract acquisitions costs and are amortized over the estimated time on which benefit is expected to be received.

A contract with a customer creates a legal right and obligation.

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Contract Acquisition Costs

The Company pays certain bonuses to it's ISOs for boarding incremental merchants which the Company expects to obtain benefit from in future periods.

These bonuses are recorded as contract acquisition costs and are amortized over five years .

Net contract acquisition costs were $ 6.6 million and $ 2.1 million at December 31, 2023 and 2022, respectively.

The Company pays certain bonuses to its ISOs for boarding incremental merchants which the Company expects to obtain benefit from in future periods.

These bonuses are recorded as contract acquisition costs and are amortized over three or five years .

Net contract acquisition costs were $ 8.7 million and $ 6.6 million at December 31, 2024 and December 31, 2023, respectively.

Amortization expense for contract acquisition costs for the years ended December 31, 2024 and 2023 was $ 2.0 million and $ 1.0 million, respectively.

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Accounts receivable is stated net of allowance for current period credit losses for any uncollectible amounts and are amounts primarily due from the Company's sponsor banks for revenues earned, net of related interchange and processing fees, and do not bear interest.

Other types of accounts receivable are from agents, merchants and other customers.

Other types of accounts receivable are from agents, merchants, card networks and other customers.

Amounts due from sponsor banks are typically paid within 30 days following the end of each month.

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The carrying amount is reduced when items are determined to be obsolete/expired.

For the year ended December 31, 2024, the Company had a write-off for obsolete inventory for $ 3.5 million.

The Company had no obsolete or expired inventory for the years ended December 31, 2023 and 2022.

For the year ended December 31, 2024, the Company had inventory in transit of $ 7.1 million.

Notes Receivable

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Notes receivable are recorded at the unpaid principal balance.

Interest on notes receivable is recognized on a monthly basis and is included in interest income.

Notes Receivable .

Allowance for Expected Losses

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The Company may also utilize a mix of qualitative and quantitative risk factors within its estimation.

The allowance for expected loss from accounts receivable was $ 5.3 million and $ 1.1 million at December 31, 2023 and 2022, respectively.

As of December 31, 2023 and 2022, there was no allowance for expected loss on notes receivable.

The allowance for expected loss from accounts receivable was $ 3.0 million and $ 5.3 million at December 31, 2024 and December 31, 2023, respectively.

As of December 31, 2024 and December 31, 2023, there was no allowance for expected loss on notes receivable.

Notes Receivable .

As of December 31, 2023 and 2022, the allowance for expected losses on settlement assets was $ 6.6 million and $ 5.0 million, respectively.

As of December 31, 2024 and December 31, 2023, the allowance for expected losses on settlement assets was $ 7.9 million and $ 6.6 million, respectively.

Settlement Assets and Customer/Subscriber Account Balances and Related Obligations .

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Provision ( 3,908 ) ( 13,085 )

( 4,276 ) ( 4,989 )

Balance at December 31, 2024 $ ( 3,045 ) $ ( 7,936 )

(1) Provision for trade receivables includes restructuring related costs of $ 3.5 million

The Company has elected not to measure expected losses for accrued interest on notes receivable but instead recognize losses for accrued interest within the period losses are incurred.

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These upfront payments are deferred by the Company and are subsequently amortized against expense in its Consolidated Statements of Operations and Comprehensive Loss as the related costs are incurred by the Company in accordance with the agreement with the vendor.

During the year ended December 31, 2024, the Company made an investment in an equity security, carried at the cost of $ 4.8 million within other noncurrent assets.

The fair value of this security is not readily determinable.

Property and Equipment

Property and equipment are stated at cost, except for property and equipment acquired in a business combination, which is recorded at fair value at the time of the transaction.

Depreciation is calculated using the straight-line method over the estimated useful lives of the assets.

Depreciation is primarily calculated using the straight-line method over the estimated useful lives of the assets.

Expenditures for repairs and maintenance which do not extend the useful life of the respective assets are charged to expense as incurred.

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Software development costs may become impaired in situations where development efforts are abandoned due to the viability of the planned project becoming doubtful or due to technological obsolescence of the planned software product.

For the year ended December 31, 2023, there was accelerated depreciation for internal-use software of $ 0.3 million from certain restructuring costs.

There were no impairment charges associated with internal-use software for the years ended December 31, 2024, 2023 and 2022.

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Amortization expense for capitalized software development costs for the years ended December 31, 2024, 2023 and 2022 was $ 11.8 million, $ 9.4 million and $ 6.9 million, respectively, and are included in depreciation and amortization on the Consolidated Statements of Operations and Comprehensive Loss.

Other Intangible Assets

Other intangible assets are initially recorded at cost or fair value when acquired in connection with a business combination.

Intangible Assets

Intangible assets are initially recorded at cost or fair value when acquired in connection with a business combination.

The carrying value of an intangible asset acquired in an asset acquisition may subsequently be increased for contingent consideration when due to the seller and such amounts can be estimated.

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Trade Names and Non-compete Agreements Acquired trade names and non-compete agreements 3 – 10 years

Money Transmission Licenses Acquired licenses to collect, store, lend and send money in 46 U.S.

Money Transmission Licenses Acquired licenses to collect, store, lend and send money in forty six U.S.

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

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The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable.

For long-lived assets, except goodwill, an impairment loss is indicated when the undiscounted future cash flows estimated to be generated by the asset group are not sufficient to recover the carrying value of the asset group.

For long-lived assets, except goodwill and indefinite-lived intangibles, an impairment loss is indicated when the undiscounted future cash flows estimated to be generated by the asset group are not sufficient to recover the carrying value of the asset group.

If indicated, the loss is measured as the excess of carrying value over the asset groups' fair value, as determined based on discounted future cash flows.

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Goodwill and Other Intangible Assets .

The Company tests goodwill for impairment on an annual basis, or when events occur or circumstances indicate the fair value of a reporting unit is below its carrying value.

The test for goodwill impairment may be a qualitative or a quantitative analysis depending on the facts and circumstances associated with the reporting unit.

If the fair value of a reporting unit is less than its carrying value, an impairment loss is recorded to the extent that implied fair value of the goodwill within the reporting unit is less than its carrying value.

Goodwill and Indefinite-lived Intangibles

The Company tests goodwill and indefinite-lived intangibles for impairment on an annual basis, or when events occur or circumstances indicate the fair value of a reporting unit is below its carrying value.

The test for impairment may be a qualitative or a quantitative analysis depending on the facts and circumstances associated with the reporting unit.

If the fair value of a reporting unit is less than its carrying value, an impairment loss is recorded to the extent that implied fair value of the indefinite-

lived intangibles or goodwill within the reporting unit is less than its carrying value.

Goodwill and Other Intangible Assets for further information.

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Finance leases, if applicable, are reported as part of property, equipment and software, net, and debt on the Company's Consolidated Balance Sheets.

Leases with a term of twelve months or less are generally not included on the Company's Balance Sheets.

Leases with a term of twelve months or less ("short-term leases") are generally not included on the Company's Balance Sheets.

The Company does not separate lease and non-lease components.

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The lease payment stream includes any rent escalation that is required under certain lease agreements.

The Company's leases generally do not provide an

implicit rate of interest, nor is it readily determinable by the Company, and as such the Company uses its incremental borrowing rate in determining the discounted value of the lease payments.

The Company's leases generally do not provide an implicit rate of interest, nor is it readily determinable by the Company, and as such the Company uses its incremental borrowing rate in determining the discounted value of the lease payments.

Lease expense and depreciation expense, if applicable, are recognized on a straight-line basis over the term of the lease.

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Debt issuance costs associated with Company's term debt are presented on the Company's Consolidated Balance Sheets as a direct reduction in the carrying value of the associated debt liability.

Debt modification costs represent amounts paid to third parties to modify existing debt agreements when those amounts are not eligible for capitalization.

Debt Obligations for amounts paid for the year ended December 31, 2023, which were not eligible for capitalization.

Restructuring Costs

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PayRight's business activity included advancing funds to customers, which did not generate the desired financial results due to changes in the economic environment, particularly the cost of capital.

The restructuring plan includes termination of the advancing business effective June 30, 2024.

The restructuring plan included termination of the advancing business effective June 30, 2024.

The Company included costs related to this restructuring within selling, general and administrative operating expenses and depreciation and amortization within its Consolidated Statement of Operations and Comprehensive Loss for the year ended December 31, 2023.

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The fair values of the assets acquired and liabilities assumed are determined based upon the valuation of the acquired business and involves making significant estimates and assumptions based on facts and circumstances that existed as of the acquisition date.

The Company uses a measurement period following the acquisition date to gather information that existed as of the acquisition date that is needed to determine the fair value of the assets acquired and liabilities assumed.

The Company uses a measurement period following the acquisition date to gather information that existed as of the acquisition date that is needed to determine the fair value of the assets acquired

and liabilities assumed.

The measurement period ends once all information is obtained, but no later than one year from the acquisition date.

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This valuation falls within Level 3 on the fair value hierarchy.

A change in inputs in the valuation techniques used might result in a significantly higher or lower fair value measurement than what is reported.

The current portion of contingent consideration is included in accounts payable and accrued expenses on the Company's Consolidated Balance Sheets and the noncurrent portion of contingent consideration is included in other noncurrent liabilities on the Company's Consolidated Balance Sheets.

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NCI is valued based on the events and methodologies including the acquisition-date fair value or the option pricing method.

Acquisitions for further information related to the fair value of the common equity issued during 2023.

To estimate the initial fair value of the incentive units, the Company utilizes future cash flow scenarios with focus on those cash flow scenarios which could result in future distributions to the NCIs.

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Through the arrangement, the Company accepts deposits on behalf of the ISO and a reserve account is established by the Company.

All amounts maintained by the Company are included in the accompanying Consolidated Balance Sheets as other liabilities, which are directly offset by restricted cash accounts owned by the Compan y of $ 6.4 million and $ 5.1 million as of December 31, 2023 and 2022, respectively.

All amounts maintained by the Company are included in the accompanying Consolidated Balance Sheets as other noncurrent liabilities, which are directly offset by restricted cash accounts owned by the Compan y of $ 5.2 million and $ 6.4 million as of December 31, 2024 and 2023, respectively.

Stock-based Compensation

The Company recognizes the cost resulting from all stock-based payment transactions in the financial statements at grant date fair value.

Stock-based compensation expense is recognized over the requisite service period and is reflected in salary and employee benefits expense on the Company's Consolidated Statements of Operations and Comprehensive Loss.

Stock-based compensation expense is recognized over the requisite service period and is reflected in salary and

employee benefits expense on the Company's Consolidated Statements of Operations and Comprehensive Loss.

Awards generally vest over three or four years and may not vest evenly over the vesting period.

The effects of forfeitures are recognized as they occur.

All shares issued from option exercises or vesting of RSU awards are original issuance shares and any shares withheld for taxes are repurchased by the Company.

All shares issued from option exercises or vesting of PSU and RSU awards are original issuance shares and any shares withheld for taxes are repurchased by the Company.

The Company measures a liability award under a stock-based compensation payment arrangement based on the award's fair value remeasured at each reporting date until the date of settlement.

Compensation cost for each period until settlement is based on the change (or a portion of the change, depending on the percentage of the requisite service that has been rendered at the reporting date) in the fair value of the instrument for each reporting period.

The Company had no liability classified awards for the year ended December 31, 2024, 2023, and 2022.

Stock Options

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However, in any event, a stock option will expire ten years from the date of the grant.

Time-based restricted stock awards

Service-based restricted stock awards

The fair value of time-based restricted stock awards is determined based on the quoted closing price of the Company's Common Stock on the business day prior to the grant date and is recognized as compensation expense over the vesting term of the awards.

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The Company reassesses the probability of vesting at each reporting period and prospectively adjusts stock-based compensation expense based on its probability assessment.

Additionally, if performance goals are set or reset on an annual basis, compensation cost is recognized in any reporting period only for performance-based restricted stock awards in which the performance goals have been established and communicated to the award recipient.

Additionally, if performance goals are set or reset on an

annual basis, compensation cost is recognized in any reporting period only for performance-based restricted stock awards in which the performance goals have been established and communicated to the award recipient.

Non-voting Incentive Units

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

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

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

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The fair value of purchase rights issued under the Employee Stock purchase Plan is estimated using the Black-Scholes option pricing model.

The model requires management to make a number of assumptions, including the fair value of the Company’s Common Stock, expected volatility, expected term, risk-free interest rate, and

expected dividends.

The model requires management to make a number of assumptions, including the fair value of the Company’s Common Stock, expected volatility, expected term, risk-free interest rate, and expected dividends.

The Company records the resulting compensation expense in the Consolidated Statements of Operations and Comprehensive Loss over each three-month offering period.

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The equity accounts that were originally credited for the original share issuance, Common Stock and additional paid-in capital, remain intact.

Stockholders' Deficit .

Shareholders' Deficit .

If the treasury shares are ever reissued in the future, proceeds in excess of repurchased cost will be credited to additional paid-in capital.

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Earnings (Loss) per Share

Basic EPS is computed by dividing net income (loss) available to Common Stockholders by the weighted-average number of shares of Common Stock outstanding during the period, excluding the effects of any potentially dilutive securities.

Basic EPS is computed by dividing net income (loss) available to Common Shareholders by the weighted-average number of shares of Common Stock outstanding during the period, excluding the effects of any potentially dilutive securities.

Diluted EPS gives effect to the potential dilution, if any, that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock, using the more dilutive of the two-class method or if-converted method.

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If there is a net loss in any period, basic and diluted EPS are computed in the same manner.

Stockholders' Deficit .

Shareholders' Deficit .

The Company accounts for income taxes under the asset and liability method.

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A valuation allowance is recognized if it is more likely than not that some portion or all of a deferred tax asset will not be realized based on the weight of available evidence, including expected future earnings.

The Financial Accounting Standards Board, or FASB, Staff has provided additional guidance to address the accounting for the effects of the provisions related to the taxation of Global Intangible Low-Tax Income noting that companies should make an accounting policy election to recognize deferred taxes for temporary basis differences expected to reverse in future years or to include the tax expense in the year it is incurred.

include the tax expense in the year it is incurred.

The Company has made a policy election to recognize such taxes as current period expenses when incurred.

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Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.

The Company uses a three-level fair

value hierarchy to prioritize the inputs used to measure fair value and maximizes the use of observable inputs and minimizes the use of unobservable inputs.

The Company uses a three-level fair value hierarchy to prioritize the inputs used to measure fair value and maximizes the use of observable inputs and minimizes the use of unobservable inputs.

The three levels of inputs used to measure fair value are as follows:

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Most of the Company's merchant customers were referred to the Company by an ISO or other reseller partners.

If the Company's agreement with an ISO allows the ISO to have merchant portability rights, the ISO can move the underlying merchant relationships to another merchant acquirer upon notice to the Company and completion of a "wind down" period.

For the years ended December 31, 2024, 2023 and 2022, merchants referred by one ISO organization with merchant portability rights generated revenue within the Company's SMB Payments reportable segment that represented approximately 6 %, 15 % and 21 %, respectively, of the Company's consolidated revenues.

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Recently Adopted Accounting Standards

Credit Losses

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

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

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

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

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

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

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

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

Reference Rate Reform

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

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

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

The Company adopted the optional expedients of Topic 848 on June 30, 2023 upon the amendments of its Credit Agreement (see Note 10.

Debt Obligations ) and the Certificate of Designation (see Note 11.

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

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

Recently Issued Accounting Standards Pending Adoption

Segment Reporting ASU 2023-07

Segment Reporting

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

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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.

The Company has adopted this guidance for the year ended December 31, 2024.

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

Recently Issued Accounting Standards Pending Adoption

Income Taxes ASU 2023-09

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

The Company is in the process of evaluating when it will adopt this guidance and 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.

Disaggregation of Income Statement Expenses ASU 2024-03

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) ("ASU 2024-03") requiring additional disaggregated disclosures in the notes to financial statements for certain categories of expenses that are included on the face of the income statement.

The ASU is effective for fiscal years beginning after December 15, 2026 and interim periods beginning after December 15, 2027.

Early adoption is permitted.

The Company will adopt this guidance for the year ended December 31, 2026.

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

Acquisitions occurred in prior years

Plastiq Acquisition

On May 23, 2023,Plastiq, Powered by Priority, LLC (the "Acquiring Entity"), a subsidiary of PRTH, entered into a stalking horse equity and asset purchase agreement with Plastiq, Inc.

On May 23, 2023, Plastiq, Powered by Priority, LLC (the "Acquiring Entity"), a subsidiary of Priority, entered into a stalking horse equity and asset 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.

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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)

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(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 fourth quarter 2023, the Company recorded measurement period adjustments due to additional information received related to cash acquired, accounts receivable, prepaid expenses, goodwill and accounts payable.

measurement period adjustment resulted in decreases in cash and restricted cash acquired of $ 40.0 thousand, and accounts receivable of $ 50.0 thousand offset by increases in prepaid expenses of $ 46.0 thousand, and goodwill of $ 0.3 million, and accounts payable of $ 0.2 million.

The contingent consideration will not exceed the contractual undiscounted future value of $ 23.1 million and will be remeasured quarterly based on actual operating results.

As of December 31, 2023, total consideration was $ 9.7 million, $ 2.2 million included in accounts payable and accrued expenses and $ 7.5 million included in noncurrent liabilities on the Consolidated Balance Sheets.

Total interest accreted for the year was $ 1.3 million.

The Company will make quarterly payments equal to 75 % of the cash available for the contingent consideration as required by the contract.

The payment made for the year ended December 31, 2023, was immaterial.

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

The Company's Consolidated Financial Statements for year ended December 31, 2023 include the operating results of Plastiq from August 1, 2023 through December 31, 2023 as noted in the table below:

Year Ended December 31, 2023

(in thousands)

Revenues $ 27,436

Operating loss (1)

(1) Excluding acquisition related costs of $ 1.3 million

The bankruptcy of Plastiq, Inc.

before acquisition by the Company resulted in significant changes to the cost structure of the acquired business.

As a result, pre-acquisition financial information is not relevant and therefore impractical to include.

For the twelve months ended December 31, 2023, the Company incurred $ 1.7 million in acquisition related costs, which primarily consisted of consulting, legal and accounting and valuation expenses.

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

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

Acquisitions occurring in prior years

Ovvi Acquisition

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

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

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

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

Transaction costs were not material and were expensed.

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

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

(in thousands)

Consideration:

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

Total enterprise value of business acquired (3)

Recognized amounts of assets acquired and liabilities assumed:

Accounts receivable (4)

Inventory (4)

Property, equipment and software, net 20

Goodwill (3)(4)

Intangible assets (2)

Other non-current asset 152

Other non-current liability ( 153 )

Total enterprise value of business acquired (3)

(1) Includes $ 50.0 thousand withheld for inventory acquired which was subsequently released in March 2023.

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

(3) During the first quarter of 2023, the Company recorded measurement period adjustments due to additional information received related to the valuation of the Class B shares.

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

(4) During the third quarter of 2023, the Company recorded measurement period adjustments due to additional information received related to accounts receivable and inventory.

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

Finxera Acquisition

On September 17, 2021, the Company completed its acquisition of 100 % of the equity interests of Finxera.

Finxera is a provider of deposit account management and licensed money transmission services in the U.S.

The acquisition allows the Company to offer clients turn-key merchant services, payment facilitation, card issuing, automated payables, virtual banking, e-wallet tools, risk management, underwriting and compliance on a single platform.

The transaction was funded with the Company's cash on hand, proceeds from the issuance of the redeemable senior preferred stock and debt, and the issuance of common equity shares to the sellers.

The acquisition was accounted for as a business combination using the acquisition method of accounting, under which the assets acquired and liabilities assumed were recognized at their fair values as of the September 17, 2021, 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 assets acquired and liabilities assumed as of the September 17, 2021 were estimated by management based on the valuation of the Finxera business using the discounted cash flow method and other factors specific to certain assets and liabilities.

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

(in thousands)

Consideration:

Cash $ 379,220

Equity instruments (1)

cash and restricted cash acquired ( 6,598 )

Total purchase consideration, net of cash and restricted cash acquired $ 407,010

Recognized amounts of assets acquired and liabilities assumed:

Accounts receivable $ 385

Prepaid expenses and other current assets 5,297

Current portion of notes receivable 784

Settlement assets and customer/subscriber account balances 498,811

Property, equipment and software, net 712

Goodwill 244,712

Intangible assets, net (2)

Other noncurrent assets 955

Accounts payable and accrued expenses ( 7,837 )

Settlement and customer/subscriber account obligations ( 498,811 )

Deferred income taxes, net ( 44,018 )

Other noncurrent liabilities ( 5,380 )

Total purchase consideration $ 407,010

(1) The fair value of the 7,551,354 shares of PRTH Common Stock that were issued was determined based on their market price at the time of closing adjusted for an appropriate liquidity discount due to trading restrictions under Securities Rule 144.

(2) The intangible assets acquired consist of $ 154.9 million for referral partner relationships, $ 34.3 million for technology, $ 20.1 million for customer relationships and $ 2.1 million for money transmission licenses.

Goodwill of $ 244.7 million arising from the acquisition primarily consists of the expected synergies and other benefits from combining operations.

Goodwill attributable to the acquisition of $ 8.7 million was deductible for income tax purposes.

The goodwill was allocated 100 % to the Company's Enterprise Payments reportable segment.

Wholesale Payments, Inc.

On April 28, 2021, a subsidiary of the Company completed its acquisition of certain residual portfolio rights for a purchase price of $ 42.4 million and $ 24.8 million of post-closing payments and earn-out payments based on meeting certain attrition thresholds over a three-year period from the date of acquisition.

The transaction did not meet the definition of a business, therefore it was accounted for as an asset acquisition under which the cost of the acquisition was allocated to the acquired assets based on relative fair values.

As an asset acquisition, additional purchase price is accounted for when payment to the seller becomes probable and is added to the carrying value of the asset.

The seller's note payable to the Company of $ 3.0 million and an advance of $ 2.0 million outstanding at the time of the purchase were netted against the initial purchase price, resulting in cash of $ 41.2 million being paid by the Company to the seller, which was funded from cash proceeds from the issuance of the redeemable senior preferred stock and cash on hand.

C&H Financial Services, Inc.

On June 25, 2021, a subsidiary of the Company acquired certain assets and assumed certain related liabilities under an asset purchase agreement.

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

Prior to this acquisition, the business was an ISO partner of the Company where it developed expertise in software-integrated payment services, as well as marketing programs for specific verticals such as automotive and youth sports.

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

The initial purchase price for the net assets was $ 35.0 million in cash and a total purchase price of not more than $ 60.0 million including post-closing payments and earn-out payments based on certain gross profit and revenue achievements over a three-year period from the date of acquisition.

acquisition date fair value of the contingent consideration was $ 4.7 million, which increased the total purchase price to $ 39.7 million.

The seller's note payable to the Company of $ 0.5 million at the time of purchase was netted against the initial purchase price, resulting in cash of $ 34.5 million being paid by the Company to the seller, which was funded from a $ 30.0 million draw down from a revolving credit facility and $ 4.5 million cash on hand.

Transaction costs were not material and were expensed.

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

(in thousands)

Accounts receivable $ 214

Prepaid expenses and other current assets 209

Property, equipment and software, net and other current assets 287

Goodwill 13,804

Intangible assets, net (1)

Other noncurrent liabilities ( 214 )

Total purchase price $ 39,700

(1) The intangible assets acquired consist of $ 20.2 million for merchant portfolio intangible assets with a ten-year useful life and $ 5.2 million for ISO partner relationships with a twelve-year useful life.

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

Disaggregation of Revenues

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Enterprise 1,989 130,123 48,336 — 180,448

Eliminations ( 2,504 ) — ( 892 ) — ( 3,396 )

Total revenues $ 670,411 $ 130,123 $ 67,018 $ 12,150 $ 879,702

4 unchanged sentences

Enterprise 410 98,142 33,634 — 132,186

Eliminations ( 675 ) ( 5 ) ( 301 ) — ( 981 )

Total revenues $ 595,205 $ 98,137 $ 49,600 $ 12,670 $ 755,612

4 unchanged sentences

Enterprise 1 71,536 10,977 — 82,514

Eliminations — — — — —

Total revenues $ 553,037 $ 71,536 $ 29,627 $ 9,441 $ 663,641

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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 $ 0.5 million for the year ended December 31, 2023.

For the years ended December 31, 2022 or 2021, the impairment losses on receivables or contract assets arising from the Company's contracts with customers were no t material.

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 $ 6.2 million and $ 0.5 million for the years ended December 31, 2024 and 2023, respectively.

Impairment losses recognized on receivables or contract assets arising from the Company's contracts with customers were immaterial for the year ended December 31, 2022.

Settlement Assets and Customer/Subscriber Account Balances and Related Obligations

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Member banks held merchant funds of $ 106.2 million and $ 98.0 million at December 31, 2024 and 2023, respectively.

Exception items include items such as customer chargeback amounts received from merchants and other losses.

Under agreements between the Company and its merchant customers, the merchants assume liability for such chargebacks and losses.

If the Company is ultimately unable to collect amounts from the merchants for any charges or losses due to merchant fraud, insolvency, bankruptcy or any other reason, it may be liable for these charges.

In order to mitigate the risk of such liability, the Company may:

1) require certain merchants to establish and maintain reserves designed to protect the Company from such charges or losses under its risk-based underwriting policy;

and 2) engage with certain ISOs in partner programs in which the ISOs assume liability for these charges or losses.

A merchant reserve account is funded by the merchant and held by the member bank during the term of the merchant agreement.

Unused merchant reserves are returned to the merchant after termination of the merchant agreement or in certain instances upon a reassessment of risks during the term of the merchant agreement.

Exception items that become the liability of the Company are recorded as merchant losses, a component of costs of services in the Consolidated Statements of Operations and Comprehensive Loss.

10 unchanged sentences

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

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

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 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 years ended December 31, 2024, 2023 and 2022 were $ 0.6 million, $ 1.0 million, and $ 0.3 million, respectively.

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).

1 unchanged sentence

Enterprise Payments Segment

In the Company's Enterprise Payments segment, revenue is derived primarily from enrollment fees, monthly subscription fees, transaction-based fees and money transmission services fees.

As part of its licensed money transmission services, the Company accepts deposits from customers and subscribers which are held in bank accounts maintained by the Company on behalf of customers 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.

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 is cash and cash equivalents but they are not available for day-to-day operations of the Company.

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 Consolidated Balance Sheets.

Exception items that become the liability of the Company are recorded as merchant losses, a component of cost of revenue in the Company's Consolidated Statements of Operations and Comprehensive Income (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 year ended December 31, 2024 was $ 0.4 million.

Expenses for merchant losses for the years ended December 31, 2023 and 2022 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.

Therefore, the Company does not record assets for the deposits accepted and

liabilities for the associated obligation.

Agency owned accounts held $ 22.6 million and $ 19.6 million and at December 31, 2024 and 2023, respectively.

4 unchanged sentences

Card settlements due from networks 12,307 8,185

Other settlement assets 1,730 889

Customer/Subscriber Account Balances:

4 unchanged sentences

Subscriber account obligations 26,677 33,921

33,921 15,488

Total customer/subscriber account obligations 924,174 744,696

Due to customer payees (2)

16,039 11,058

Total settlement and customer/subscriber account obligations $ 940,213 $ 755,754

(1) Allowance for estimated losses was $ 7.9 million and $ 6.6 million as of December 31, 2024 and 2023, respectively.

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

There were no card settlements due from networks in 2022.

(2) Card settlements due from networks includes $ 12.3 million and $ 8.2 million as of December 31, 2024 and 2023, respectively, of related assets and remainder are included in restricted cash on our Consolidated Balance Sheets.

Notes Receivable

2 unchanged sentences

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

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

2 unchanged sentences

Total $ 8,557

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

Property, Equipment and Software

12 unchanged sentences

Depreciation expense $ 13,896 $ 11,494 $ 9,511

Computer software consists of purchased software, internally developed back office systems including those used to assist in the reporting of merchant processing transactions and other related information.

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 year ended December 31, 2023, certain fully depreciated assets were removed from service.

During the year ended December 31, 2024 and 2023, certain fully depreciated assets were removed from service.

Goodwill and Other Intangible Assets

9 unchanged sentences

Balance at January 1, 2024 $ 376,103

Final purchase price adjustment for Finxera ( 392 )

Ovvi acquisition 3,989

Balance at December 31, 2022

Purchase price adjustment for Ovvi ( 486 )

Plastiq acquisition and purchase price adjustments 7,252

Plastiq adjustment ( 12 )

Balance at December 31, 2024

For business combinations consummated during the year ended December 31, 2023, goodwill was fully deductible for income tax purposes.

The Company performed its most recent annual goodwill impairment analysis as of October 1, 2023, as noted below:

• For the purpose of the goodwill impairment analysis, the Company determined the reporting units were Enterprise Payments, SMB Payments, and Plastiq, a component of the B2B Payments operating segment, as allowed by ASC 350.

• The Company's SMB Payments operating segment experienced a decrease in bankcard volume and revenue during 2023 due to the diversification of an ISV.

Additionally, this operating segment also experienced compressed margins due to expenses associated with costs of sales increasing at a larger rate than revenue.

Considering the most recent fair value valuation was performed in 2019, the Company elected the option to unconditionally bypass the qualitative impairment analysis and proceed with performing the quantitative analysis for the SMB Payments reporting unit as allowed by ASC 350.

For the purpose of the quantitative analysis, the guideline public company method and the discounted cash flow method (equally weighted) were determined to be the appropriate methodology.

The impairment analysis concluded the fair value of the reporting unit was greater than its carrying amount and therefore, no impairment was recognized.

• The Company's Enterprise Payments operating segment had an increase in volumes, revenue and margins for 2023.

The remaining goodwill related to the acquisition of Plastiq (see Note 2.

Acquisitions ).

Given the performance of the Enterprise Payments operating segment and the relatively short time passed since the Plastiq acquisition, the Company elected to perform the qualitative impairment analysis for these reporting units.

Under the qualitative impairment analysis, the Company identified drivers which may affect the reporting units' fair value, determined which events and circumstances impacted those drivers and concluded it was not more likely than not that the fair value of the reporting units was less than the carrying amount.

There were no impairment losses for the years ended December 31, 2023, 2022 or 2021.

The Company evaluates goodwill for impairment annually on October 1 or whenever circumstances or events make it more likely than not impairment may have occurred.

The Company may test for goodwill impairment using an optional qualitative analysis or proceed directly with a quantitative analysis.

If the optional qualitative analysis is performed, the Company assesses whether it is more likely than not the fair value is less than its carrying amount.

For the purpose of the goodwill impairment analysis, the Company determined its reporting units were Enterprise Payments, SMB Payments, and Plastiq, a component of the B2B Payments operating segment, as allowed by ASC 350.

Electing to perform the optional qualitative analysis as of October 1, 2024, no indicators of impairment were identified.

As of December 31, 2024, the Company is not aware of any triggering events that have occurred since October 1, 2024.

There were no impairment losses for the years ended December 31, 2024, 2023 or 2022.

Other Intangible Assets

31 unchanged sentences

Amortization expense (1)

$ 44,145 $ 56,901 $ 61,170

(1) Included in amortization expense is $ 2.0 million, $ 1.0 million and $ 0.2 million related to the amortization of certain contract acquisition costs for the years ended December 31, 2024, 2023 or 2022

The estimated amortization expense of intangible assets as of December 31, 2024, for the next five years and thereafter is:

6 unchanged sentences

The Company tests intangible assets for impairment when events occur or circumstances indicate that the fair value of an intangible asset or group of intangible assets may be impaired.

There were no impairment losses for the years ended December 31, 2024, 2023 or 2022.

The Company also considered the market conditions and other factors and concluded that there were no additional impairment indicators present at December 31, 2024.

17 unchanged sentences

Selling, general and administrative $ 1,714 $ 1,760 $ 1,984

(1) Excludes short-term lease expense and sublease income, which was immaterial for the years ended December 31, 2023 and 2022.

(1) Excludes expenses related to short-term leases, which was immaterial for the years ended December 31, 2024, 2023 or 2022.

Years Ended December 31,

7 unchanged sentences

Total future minimum lease payments 10,955

Amount representing interest ( 715 )

Amount representing imputed interest ( 3,176 )

Total future minimum lease payments, net of interest $ 7,779

12 unchanged sentences

2024 Credit Agreement

Term facility - matures April 27, 2027, interest rate of 11.21 % and 9.82 % at December 31, 2023 and 2022, respectively

Term facility - matures May 16, 2031, interest rate of 9.11 % at December 31, 2024

$ 945,537 $ —

Revolving credit facility - $ 65.0 million ($ 40.0 million for 2022) line, matures April 27, 2026, interest rate of 10.20 % and 8.82 % at December 31, 2023 and 2022, respectively

Revolving credit facility - $ 70.0 million line matures May 16, 2029, interest rate of 8.61 % at December 31, 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, original Maturity April 27, 2026, interest rate of 10.20 % at December 31, 2023

Total debt obligations 945,537 654,373

10 unchanged sentences

2028 9,503 — 9,503

2029 9,503 — 9,503

Thereafter 898,022 — 898,022

Total $ 945,537 $ — $ 945,537

1 unchanged sentence

2024 Credit Agreement

On April 27, 2021, the Company entered into a Credit Agreement with Truist which provides for:

On May 16, 2024, the Company entered into a Credit Agreement ("2024 Credit Agreement") which provides 1) a $ 835.0 million senior secured first lien term loan facility ;

and 2) a $ 70.0 million senior secured revolving facility ("Credit facilities").

Proceeds from these Credit facilities were used to repay the outstanding balances under the 2021 Credit Agreement and redeem a portion of the Company's redeemable senior preferred stock (see Note 11.

Redeemable Securities ).

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 $ 3.9 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 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.

The revolving credit facility incurs an unused commitment fee on any undrawn amount in an amount equal to 0.50 % per year of the unused portion.

The future applicable interest rate margins may vary based on the Company's Total Net Leverage Ratio in addition to future changes in the underlying market rates for SOFR and the rate used for base-rate borrowings.

The 2024 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.

All of the assets of the company are pledged as collateral for the credit facilities under the 2024 Credit Agreement.

If the aggregate principal amount of outstanding revolving loans and letters of credit under the 2024 Credit Agreement exceeds 35 % of the total revolving credit facility thereunder, the Company is required to comply with certain restrictions on its Total Net Leverage Ratio.

If applicable, the maximum permitted Total Net Leverage Ratio is:

1) 6.90 :1.00 at each fiscal quarter ended September 30, 2024 through December 31, 2025;

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

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

First Amendment to the 2024 Credit Agreement

On November 21, 2024, the Company modified its existing Term Facility.

The agreement increased the principal balance by $ 115.0 million to $ 950.0 million and increased the quarterly principal amortization payment from $ 2.1 million to $ 2.4 million.

There were no other significant modifications to the Credit Agreement.

Proceeds from this amendment were used to redeem the remaining balance of the Company's redeemable senior preferred stock (see Note 11.

Redeemable Securities ).

The Company determined on a creditor-by-creditor basis that the 2024 Credit Agreement was a debt modification.

The Company expensed $ 1.0 million of previously unamortized fees and $ 0.7 million of debt issuance costs related to the refinancing which is reported in debt extinguishment and modification in the Company's Consolidated Statements of Operations and Comprehensive Income (Loss).

2021 Credit Agreement

On April 27, 2021, the Company entered into the 2021 Credit Agreement with Truist which provides for:

1) a $ 300.0 million Initial Term Loan;

4 unchanged sentences

The additional Delayed Draw Term Loan is part of the same class of term loans made pursuant to the original commitments under the Credit Agreement.

Third Amendment to the April 2021 Credit Agreement

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

• Reference rate :

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

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

The applicable interest rate as of December 31, 2023, for the revolving credit facility based on one-month SOFR was 10.20 % and for the term facility based on one-month SOFR was 11.21 %.

• Increase in the revolving credit facility:

The amendments also resulted in an increase in the Company’s revolving credit facility from $ 40.0 million to $ 65.0 million.

Fourth Amendment to the April 2021 Credit Agreement

On October 2, 2023, the Company modified its existing Term Facility Credit agreement with Truist.

The agreement increased the principal balance by $ 50.0 million and increased the quarterly principal amortization payment from $ 1.6 million to $ 1.7 million.

There were no other significant modifications to the Credit Agreement.

Outstanding borrowings under the Credit Agreement accrue interest using either a base rate or a SOFR rate plus an applicable margin per year, subject to a SOFR rate floor of 1.00 % per year.

The third amendment amended the reference rate from LIBOR to SOFR and increased the revolving facility from $ 40.0 million to $ 65.0 million effecting June 30, 2023.

The fourth amendment increased the principal balance by $ 50.0 million and increased the quarterly principal amortization payment from $ 1.6 million to $ 1.7 million.

Outstanding borrowings from the 2021 Credit Agreement were repaid on May 16, 2024 as part of the refinancing and the Company was released from any related commitments, guarantees and security interests.

Outstanding borrowings under the 2021 Credit Agreement accrued interest using either a base rate or a SOFR rate plus an applicable margin per year, subject to a SOFR rate floor of 1.00 % per year.

Accrued interest is payable on each interest payment date (as defined in the 2021 Credit Agreement).

The revolving credit facility incurs an unused commitment fee on any undrawn amount in an amount equal to 0.50 % per year of the unused portion.

The revolving credit facility incurs an unused commitment fee on any

undrawn amount in an amount equal to 0.50 % per year of the unused portion.

Prepayments of outstanding principal may be made in permitted increments subject to a 1.00 % penalty for certain prepayments made in connection with repricing transactions.

Proceeds from the Initial Term Loan were used to partially fund the refinancing of the Company's existing credit facilities as of April 27, 2021.

Proceeds from the Delayed Draw Term Loan were used to fund the Company's acquisition of Finxera.

Proceeds from the Fourth Amendment were used to repay the balance of the revolving credit facility (used to acquire Plastiq business) and added additional cash for general corporate purposes.

Proceeds from the Fourth Amendment were used to repay the balance of the revolving credit facility (used to acquire the Plastiq business) and added additional cash for general corporate purposes.

Interest Expense and Amortization of Deferred Loan Costs and Discounts

5 unchanged sentences

$ 88,948 $ 76,108 $ 53,554

(1) Included in this amount is $ 1.7 million and $ 0.9 million of interest expense related to the accretion of contingent considerations from acquisitions for December 31, 2023 and 2022.

(1) Included in this amount is $ 4.3 million, $ 1.7 million and $ 0.9 million of interest expense related to the accretion of contingent considerations from acquisitions for December 31, 2024, 2023 and 2022.

(2) Interest expense included amortization of deferred financing costs and debt discounts of $ 2.7 million, $ 3.8 million and $ 3.5 million for the years ended December 31, 2024, 2023 and 2022, respectively.

As a result of the Third Amendment in June 2023, the Company incurred $ 0.8 million of deferred loan costs.

The Fourth Amendment in October 2023 was issued at a discount of $ 0.3 million.

These costs, along with other capitalized modification costs of $ 0.4 million, will be amortized over the remaining period of the existing Term Loan as a reduction of the carrying amount of the debt obligation.

Debt issuance costs of $ 0.1 million for the Fourth Amendment were expensed as incurred.

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.

The outstanding amount of any loans and any other amounts owed under the Credit Agreement may, after the occurrence of an event of default, at the option of Truist on behalf of

lenders representing a majority of the commitments, be declared immediately due and payable.

Events of default include the failure of the Company to make principal, premium or interest payment when due, or the failure by the Company to perform or comply with any term or covenant in the Credit Agreement, after any applicable cure period.

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 December 31, 2023, the Company was in compliance with the covenants in the Credit Agreement.

Redeemable Senior Preferred Stock and Warrants

5 unchanged sentences

Upon issuance of these additional shares, the $ 3.3 million that was previously allocated to noncurrent assets for the committed financing put right was reclassified to the redeemable senior preferred stock.

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 redeemable senior preferred stock does not meet the definition of a liability pursuant to ASC 480, Distinguishing Liabilities from Equity , as it is redeemable upon the occurrence of events that are not solely within the Company's control.

Therefore, the Company classified the redeemable senior preferred stock as temporary equity and is accreting the carrying amount to its full redemption amount from the date of issuance to the earliest redemption date using the effective interest method.

On May 16, 2024, the Company used proceeds totaling $ 170.0 million from the refinancing (see Note 10.

Debt Obligations ) to redeem a portion of the redeemable senior preferred stock.

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 as of the date of redemption.

On November 21, 2024, the Company used $ 113.3 million of the $ 115.0 million from Amendment 1 to the 2024 Credit agreement (see Note 10.

Debt Obligations ) to redeem the remaining balance of the outstanding redeemable preferred stock.

The redemption consisted of $ 88.1 million of redeemable senior preferred stock, $ 22.6 million for accumulated unpaid dividend, and $ 1.5 million of cash dividend and $ 1.1 million of accumulated unpaid divided for the period of October 1, 2024 through November 21, 2024.

The redeemable senior preferred stock ranked 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 redeemable senior preferred stock did not meet the definition of a liability pursuant to ASC 480, Distinguishing Liabilities from Equity , as it is redeemable upon the occurrence of events that are not solely within the Company's control.

Therefore, the Company classified the redeemable senior preferred stock as temporary equity and was accreting the carrying amount to its full redemption amount from the date of issuance to the earliest redemption date using the effective interest method.

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

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Cash portion of dividend and ticking fee outstanding at the end of the year — 7,027

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

December 31, 2023 225 $ 258,605

Unpaid dividend on redeemable senior preferred stock — 18,000

Accretion of discounts and issuance cost — 3,340

Cash portion of dividend outstanding at December 31, 2023 — 7,027

Payment of cash portion of dividend and ticking fee outstanding at December 31, 2023 — ( 7,027 )

Accretion of discounts and issuance cost — 16,920

Redemption of senior preferred stock and accumulated dividend ( 225 ) ( 268,498 )

December 31, 2024 — —

2 unchanged sentences

All other terms in the agreement were unchanged.

For the three months ended December 31, 2023, SOFR is the reference rate for calculation of the dividend.

For the year ended December 31, 2024, SOFR is the reference rate for calculation of the dividend.

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

The dividend rate as of December 31, 2023, and 2022 was 17.7 % and 15.7 % respectively.

The dividend rate may also increase if the Company fails to obtain the required shareholder approval for a forced sale

transaction triggered by investors or if an event of default as outlined in the agreement occurs.

The dividend rate as of December 31, 2023, was 17.7 %.

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

(in thousands) Year Ended December 31, 2023 Year Ended

December 31, 2022

(in thousands) Year Ended December 31, 2024 Year Ended December 31, 2023

Dividends paid in cash (1)

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The following table presents cumulative dividends in arrears in aggregate and per-share:

(in thousands, except per share amounts) Year Ended December 31, 2023 Year Ended

December 31, 2022

(in thousands, except per share amounts) Year Ended December 31, 2024 Year Ended December 31, 2023

Cumulative preferred dividends in arrears $ — $ 43,498

1 unchanged sentence

Cumulative preferred dividends in arrears, per share $ — $ 193.3

The redeemable senior preferred shares have no stated maturity and will remain outstanding indefinitely until redeemed or otherwise repurchased by the Company.

Outstanding shares of redeemable senior preferred stock can be redeemed at the option of the Company for cash in whole or in part at the following redemption price:

Redemption Date

Redemption Price

Prior to April 27, 2023 100 % of liquidation preference (i.e., $ 1,000 per share) plus any accrued and unpaid dividends and the make-whole amount (i.e., present value of additional 2 % of the liquidation preference plus any accrued and unpaid dividends thereon through the redemption date plus 102 % of the amount of dividends that will accrue from the redemption date through April 27, 2023)

April 27, 2023 - April 26, 2024 102 % of the sum of the (a) outstanding liquidation preference plus (b) any accrued and unpaid dividends through and including the applicable redemption date

April 27, 2024 and thereafter 100 % of the sum of the (a) outstanding liquidation preference plus (b) any accrued and unpaid dividends through and including the applicable redemption date

Upon the occurrence of a change in control or a liquidation event, the Company will redeem all of the outstanding redeemable senior preferred shares for cash at the applicable redemption price described above.

The holders of the redeemable senior preferred stock may request the Company to pursue a sale transaction for the purpose of redeeming the redeemable senior preferred stock from and after the earliest of:

1) October 27, 2028;

2) 30 days after the redeemable senior preferred stockholders provide written notice to the Company of a failure by the Company to take steps within its control to prevent the Company's Common Stock from no longer being listed;

and 3) the date that is 90 days following the Company's failure to consummate a mandatory redemption of the redeemable senior preferred stock upon the occurrence of a change in control or liquidation event.

The Company used the proceeds from the April 2021 sale of the redeemable senior preferred stock to partially fund the refinancing to partially fund the Wholesale Payments, Inc.

and C&H Financial Services, Inc.

acquisitions in the second quarter of 2021 (see Note 2.

Acquisitions ) and to pay certain fees and expenses relating to the Refinancing and the offering of the redeemable senior preferred stock and warrants.

The Company used the proceeds from the September 2021 sale of additional shares of redeemable senior preferred stock to fund the Finxera acquisition (see Note 2.

Acquisitions ).

On April 27, 2021 the Company issued warrants to purchase up to 1,803,841 shares of the Company's Common Stock, par value $ 0.001 per share, at an exercise price of $ 0.001 .

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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 Consolidated Balance Sheet.

Components of consolidated income tax (benefit) expense were as follows:

Components of consolidated income tax expense were as follows:

(in thousands) For the Years Ended December 31,

2024 2023 2022

current income tax expense (benefit)

current income tax expense

Federal $ 12,094 $ 10,624 $ 10,411

1 unchanged sentence

Foreign 281 738 349

Total current income tax expense (benefit) $ 14,549 $ 13,306 $ ( 2,699 )

deferred income tax expense (benefit)

Total current income tax expense $ 15,460 $ 14,549 $ 13,306

deferred income tax (benefit) expense

Federal $ ( 2,213 ) $ ( 5,149 ) $ ( 5,001 )

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Total deferred income tax (benefit) expense $ ( 2,194 ) $ ( 6,086 ) $ ( 7,956 )

Total income tax expense (benefit) $ 8,463 $ 5,350 $ ( 5,258 )

The Company's consolidated effective income tax rate was 118.3 % for the year ended December 31, 2023, compared to a consolidated effective income tax rate of 167.2 % for the year ended December 31, 2022.

Total income tax expense $ 13,266 $ 8,463 $ 5,350

The Company's consolidated effective income tax rate was 35.6 % for the year ended December 31, 2024, compared to a consolidated effective income tax rate of 118.3 % for the year ended 2023.

For the year ended December 31, 2022, the Company's consolidated effective income tax benefit rate was 167.2 %.

The effective rate for 2023 differed from the statutory rate of 21% primarily due to:

1) an increase in the valuation allowance against certain business interest carryover deferred tax assets.

The effective rate for December 31, 2022 differed from the statutory federal rate of 21% primarily due to:

1) an increase in the valuation allowance against certain business interest carryover deferred tax assets;

2) non-deductible transaction costs incurred in the acquisition of Finxera;

3) the finalization of prior estimates on the sale of the assets of PRET's real estate services business impacting amounts attributable to noncontrolling partners;

and 4) an increase in the tax basis of certain intangible assets resulting from a change in a subsidiary's entity status.

The effective rate for December 31, 2021, differed from the statutory federal rate of 21% primarily due to earnings attributable to noncontrolling interests and valuation allowance changes against certain business interest carryover deferred tax assets.

The following table provides a reconciliation of the consolidated income tax (benefit) expense at the statutory U.S.

federal tax rate to actual consolidated income tax (benefit) expense:

The effective rate for December 31, 2024 differed from the statutory rate of 21% primarily due to an increase in the valuation allowance against certain business interest carryover deferred tax assets.

The effective rate for December 31, 2023 differed from the statutory federal rate of 21% primarily due to an increase in the valuation allowance against certain business interest carryover deferred tax assets.

The effective rate for December 31, 2022, differed from the statutory federal rate of 21% primarily due to an increase in the valuation allowance against certain business interest carryover deferred tax assets and the finalization of prior estimates of certain intangible deferred tax liabilities resulting from the Finxera acquisition.

The following table provides a reconciliation of the consolidated income tax expense at the statutory U.S.

federal tax rate to actual consolidated income tax expense:

(in thousands) For the Years Ended December 31,

2024 2023 2022

federal statutory expense (benefit) $ 1,502 $ 672 $ ( 813 )

Non-controlling interests — — ( 3,024 )

federal statutory expense $ 7,829 $ 1,502 $ 672

State and local income taxes, net 2,308 1,588 421

Foreign rate differential 98 114 142

Excess tax benefits pursuant to ASU 2016-09 235 4 ( 339 )

Excess tax expense pursuant to ASU 2016-09 128 235 4

Valuation allowance changes 2,204 3,958 4,957

Nondeductible items 1,045 768 576

Transaction Costs — — 2,338

Intangible assets — — ( 1,226 )

1 unchanged sentence

Other, net ( 71 ) 298 ( 96 )

Income tax expense (benefit) $ 8,463 $ 5,350 $ ( 5,258 )

Income tax expense $ 13,266 $ 8,463 $ 5,350

Deferred income taxes reflect the expected future tax consequences of temporary differences between the financial statement carrying amount of the Company's assets and liabilities, tax credits and their respective tax bases, and loss carry forwards.

14 unchanged sentences

Prepaid assets $ ( 1,457 ) $ ( 1,124 )

Investments in partnership — ( 41 )

Property and equipment ( 10,179 ) ( 8,518 )

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Balance as of December 31, 2024

As of December 31, 2023 and 2022, the balance of unrecognized tax benefits that, if recognized, affect our effective tax rate was $ 0.0 million and $ 0.1 million, respectively.

As of December 31, 2024 and 2023, the balance of unrecognized tax benefits that, if recognized, affect our effective tax rate was immaterial.

The Company continually evaluates the uncertain tax benefit associated with its uncertain tax positions.

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As of December 31, 2024, the Company had interest deduction limitation carryforwards of $ 87.6 million.

Stockholders' Deficit

Except as otherwise required by law or as otherwise provided in any certificate of designation for any series of preferred stock, the holders of the Company's Common Stock possess all voting power for the election of members of the Company's Board of Directors and all other matters requiring stockholder action and will at all times vote together as one class on all matters submitted to a vote of the Company's stockholders.

Holders of the Company's Common Stock are entitled to one vote per share on matters to be voted on by stockholders.

Shareholders' Deficit

Except as otherwise required by law or as otherwise provided in any certificate of designation for any series of preferred stock, the holders of the Company's Common Stock possess all voting power for the election of members of the Company's Board of Directors and all other matters requiring shareholder action and will at all times vote together as one class on all matters submitted to a vote of the Company's shareholders.

Holders of the Company's Common Stock are entitled to one vote per share on matters to be voted on by shareholders.

Holders of the Company's Common Stock will be entitled to receive such dividends and other distributions, if any, as may be declared from time to time by the Company's Board of Directors in its discretion.

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Share Repurchase Program

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

During the second quarter of 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.

Share re-purchase activity under these programs was as follows:

Years Ended December 31,

in thousands, except share data, which is in whole units 2023 2022

Number of shares purchased (1)

Average price paid per share $ — $ 4.42

Total Investment (1)

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

Warrants and Purchase Options

As of December 31, 2022 and December 31, 2021, 3,556,470 warrants from the original business combination in July 2018, were outstanding.

These warrants allowed the holders to purchase shares of the Company's Common Stock at an exercise price of $ 11.50 per share.

These warrants expired on August 24, 2023 and no warrants were exercised.

Prior to July 25, 2018, a purchase option was sold to an underwriter for consideration of $ 100 .

The purchase option, which survived the business combination, allowed the holders to purchase up to a total of 300,000 units (each consisting of a share of Common Stock and a public warrant) exercisable at $ 12.00 per unit.

The purchase option expired on August 24, 2023.

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

As of December 31, 2024, the Company has purchased 1,309,374 shares for $ 5.8 million under this plan.

Stock-based Compensation

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Stock options compensation expense 4 7 7

Liability-classified compensation expense — — 325

Total stock-based compensation under the 2018 Equity Incentive Plan 5,901 6,430 6,189

2 unchanged sentences

Total $ 6,118 $ 6,768 $ 6,228

For the year ended December 31, 2023, the Company recognized an income tax expense of approximately $ 0.1 million for stock-based compensation expense.

For the years ended December 31, 2022 and 2021, the Company recognized and income tax benefit of approximately $ 0.7 million and $ 0.4 million, respectively, for stock-based compensation expense.

For the year ended December 31, 2024 and 2023, the Company's income tax expense for stock-based compensation was immaterial .

For the year ended December 31, 2022, the Company recognized an income tax benefit of approximately and $ 0.7 million for stock-based compensation expense.

No stock-based compensation has been capitalized.

1 unchanged sentence

Common Stock available for issuance at January 1, 2022 3,363,040

New shares authorized for issuance 2,500,000

Stock options forfeited 221,733

Stock options expired 53,870

RSUs granted ( 2,878,949 )

PSUs granted (2)

RSUs forfeited 353,196

PSUs forfeited —

Shares withheld for taxes (1)

Common Stock available for issuance at December 31, 2022 3,505,286

New shares authorized for issuance 2,500,000

Stock options forfeited 129,380

RSUs granted ( 641,578 )

PSUs granted —

RSUs forfeited 226,100

PSUs forfeited 37,500

Shares withheld for taxes (1)

2 unchanged sentences

RSUs granted ( 1,132,450 )

PSUs granted ( 10,753 )

RSUs forfeited 403,750

PSUs forfeited 1,666

Shares withheld for taxes (1)

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(1) The number of shares surrendered to satisfy withholding taxes owed are subsequently added back to the shares available for grant under the 2018 Plan.

(2) The shares were deemed granted to calculate remaining available shares when the participants were made aware of the award in 2022 to properly account for the number of shares available for issuance.

However, they were not granted for accounting purposes until 2023 once the respective performance criteria were met.

Details about the time-based equity-classified stock options granted under the plan are as follows:

2 unchanged sentences

876,512 $ 6.87 4.9 years $ 16

Exercised ( 267,384 ) 6.95

Forfeited (1)

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There were no options granted in 2024, 2023, or 2022.

The intrinsic value of options exercised in 2021 was $ 0.2 million and there were no options exercised in 2023 or 2022.

As of December 31, 2023, there was $ 4.2 thousand of unrecognized compensation costs related to stock options, which is expected to be recognized over a remaining weighted-average period of 0.6 years.

The intrinsic value of options exercised in 2024 was $ 0.8 million.

There were no options exercised in 2023 or 2022.

As of December 31, 2024, there were no unrecognized compensation costs related to stock options.

Equity-classified Restricted Stock Units

Below is a summary of the Company's equity-classified RSUs for the periods presented:

Below is a summary of the Company's equity-classified RSUs and PSUs for the periods presented:

Underlying Common Shares Weighted-average Grant Date Fair Value

6 unchanged sentences

641,578 $ 3.81

2,878,948 $ 6.14

Forfeited ( 226,100 ) $ 5.44

2 unchanged sentences

1,132,450 $ 4.37

641,578 $ 3.81

Forfeited ( 403,750 ) $ 6.37

1 unchanged sentence

Unvested at December 31, 2024 1,660,784 $ 5.00

1,969,096 $ 5.68

Performance-based vesting:

4 unchanged sentences

345,000 $ 5.31

64,366 $ 5.00

Forfeited ( 37,500 ) $ 5.31

Vested ( 116,958 ) $ 5.12

Unvested at December 31, 2023 289,995 $ 5.31

99,453 $ 3.24

Granted 10,753 $ 9.30

2 unchanged sentences

Unvested at December 31, 2024 197,408 $ 5.56

289,995 $ 5.31

(1) Includes 175,720 shares with an estimated fair value of $ 0.6 million, 143,605 shares with an estimated fair value of $ 0.5 million and 228,347 shares with an estimated fair value of $ 1.1 million issued to non-employees in December 31, 2024, 2023 and 2022, respectively.

1 unchanged sentence

Any grants for which the required performance goals have not been determined and communicated to the grant recipient are not considered to have been granted for accounting purposes.

As of December 31, 2023, there was $ 9.6 million and $ 1.2 million of unrecognized compensation costs for equity-classified service-based RSUs and performance-based RSUs, respectively, which are expected to be recognized over a remaining weighted-average period of 2.0 years and 2.0 years, respectively.

As of December 31, 2024, there was $ 5.5 million and $ 0.5 million of unrecognized compensation costs for equity-classified service-based RSUs and performance-based RSUs, respectively, which are expected to be recognized over a remaining

weighted-average period of 1.9 years and 1.0 year, respectively.

The total fair value of RSUs and PSUs that vested in 2024, 2023, and 2022 was $ 5.8 million, $ 1.3 million and $ 0.9 million, respectively.

7 unchanged sentences

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

As of December 31, 2024, the Company had 45,018 shares available under the 2021 Stock Purchase Plan.

Employee Benefit Plans

6 unchanged sentences

Employees participating in the medical plan pay a portion of the costs for the insurance benefits.

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 and promissory notes for the amount of cash paid 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 Consolidated Balance Sheets.

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 shareholders in the Company’s Statements of Operations and Comprehensive Income (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.

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 ended 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

4 unchanged sentences

Based on existing contracts in place at December 31, 2024, the Company is committed to pay minimum processing fees under these agreements of approximately $ 22.9 million in 2025 and $ 25.4 million in 2026.

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.

Other Commitments

The Company committed to capital contributions to fund the operations of certain subsidiaries totaling $ 32.0 million and $ 26.0 million as of December 31, 2024 and 2023, respectively.

1 unchanged sentence

As of December 31, 2024 and 2023, the Company contributed $ 19.7 million and $ 11.8 million, respectively.

The Company committed to funding notes receivables totaling $ 11.3 million and $ 3.1 million as of December 31, 2024 and 2023, respectively.

The Company is obligated to fulfill requests for funding required within a certain time period once the request is received.

As of December 31, 2024 and 2023, the Company funded $ 7.1 million and $ 3.1 million respectively.

Merchant Reserves

4 unchanged sentences

January 1, 2023 $ 8,079

Accretion of contingent consideration 864

Fair value adjustments due to changes in estimates of future payments 1,195

Payment of contingent consideration ( 4,666 )

December 31, 2022 $ 8,079

Addition of contingent consideration (related to asset acquisition) 263

6 unchanged sentences

December 31, 2023 $ 13,438

Accretion of contingent consideration 4,339

Fair value adjustments due to changes in estimates of future payments ( 1,500 )

Payment of contingent consideration ( 5,592 )

December 31, 2024 $ 10,685

Legal Proceedings

3 unchanged sentences

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 Company is a party in a case filed on October 11, 2023 in the United States District Court of Northern District of California (the “Complaint”).

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

1 unchanged sentence

(“Wells Fargo”).

The Complaint alleges that Wholesale is an agent of Priority, PPS and Wells Fargo and that it made non-consensual recordation of telephonic communications with California businesses in violation of California Invasion of Privacy Act (the “Act”).

The Complaint alleges that Wholesale as an agent of Priority, PPS and Wells Fargo 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 March 12, 2024, the financial impact, if any, of the outcome of this legal proceeding is neither probable nor estimable.

On January 24, 2025, the court preliminarily approved the settlement agreement entered into by the parties wherein defendants agree to pay $ 19.5 million to settle this litigation.

Any contribution toward the settlement by the Company will be nominal, and will not have any material impact on the Company's results of operations, financial conditions or cash flows.

Concentration of Risks

5 unchanged sentences

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 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.

A change in inputs in the valuation techniques used might result in a significantly higher or lower fair value measurement than what is reported.

Contingent consideration liabilities related to certain of the Company's acquisitions are uncertain due to the utilization of unobservable inputs and management's judgement in determining the likelihood of achieving the earn-out criteria or the years ended December 31, 2024 and 2023.

10 unchanged sentences

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 was approximately $ 5.2 million and $ 4.7 million at December 31, 2023 and December 31, 2022, respectively.

The carrying value of the Company's notes receivable, net approximates fair value was approximately $ 8.6 million and $ 5.2 million at December 31, 2024 and 2023, respectively.

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

6 unchanged sentences

The Company's three reportable segments included SMB Payments, B2B Payments and Enterprise Payments.

The Company does not have dedicated assets assigned to any particular reportable segment and such information is not available and continues to be aggregated.

More information about our three reportable segments:

• SMB Payments :

• 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.

Provides embedded finance and BaaS solutions to 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.

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

(in thousands) Years Ended December 31,

The Company's chief operating decision makers ("CODM") are our CEO and CFO.

Historically, the CODM used operating income (loss) as the measure of segment profit or loss to allocate resources.

However, during the year, the segment performance measure was updated to adjusted earnings before interest expense, income tax and depreciation and amortization expenses ("Adjusted EBITDA") to have consistent measure of results across the organization.

Adjusted EBITDA represents EBITDA (i.e.

earnings before interest, income tax, and depreciation and amortization expenses) adjusted for certain non-cash costs, such as stock-based compensation and the write-off of the carrying value of investments or other assets, as well as debt extinguishment and modification expenses and other expenses and income items considered non-recurring, such as acquisition integration expenses, certain professional fees, and litigation settlements.

Adjusted EBITDA is a non-GAAP measure and therefore, a reconciliation to earnings (loss) before income taxes (a GAAP measure) is included within this footnote.

Segment level assets information is not provided or subject to review by the CODM and therefore not provided.

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 ended June 30, 2024.

Operating overhead and shared costs are managed centrally and included in the corporate segment.

All comparative periods have been recasted to reflect this update.

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

Year Ended December 31, 2024

(in thousands) SMB Payments B2B

Payments Enterprise Payments Total

Revenues $ 613,547 $ 89,103 $ 180,448 $ 883,098

Elimination of intersegment revenues — — — ( 3,396 )

Total consolidated revenues $ 613,547 $ 89,103 $ 180,448 $ 879,702

Cost of services (excludes depreciation and amortization) 1,4

( 478,451 ) ( 64,659 ) ( 11,892 ) ( 555,002 )

SMB Payments $ 582,870 $ 562,237 $ 475,630

B2B Payments 40,726 18,890 17,138

Enterprise Payments 132,016 82,514 22,133

Consolidated revenues $ 755,612 $ 663,641 $ 514,901

Other operating expenses 1,2,4

( 59,099 ) ( 22,317 ) ( 31,413 ) ( 112,829 )

Depreciation and amortization 4

SMB Payments $ 41,036 $ 43,925 $ 41,144

B2B Payments 2,221 744 294

Enterprise Payments 23,753 24,892 7,158

Corporate 1,385 1,120 1,101

Consolidated depreciation and amortization $ 68,395 $ 70,681 $ 49,697

Operating income:

SMB Payments $ 46,482 $ 54,866 $ 52,884

B2B Payments ( 2,535 ) 208 135

Enterprise Payments 73,964 30,937 6,763

Corporate ( 36,387 ) ( 29,846 ) ( 26,689 )

Consolidated operating income $ 81,524 $ 56,165 $ 33,093

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

(in thousands) Years Ended December 31,

30,865 5,258 16,928 53,051

Total operating income of reportable segments $ 117,911 $ 86,011 $ 59,782

Corporate ( 36,387 ) ( 29,846 ) ( 26,689 )

Other segment items 2,3,4

2,051 220 865 3,136

Adjustment for corporate items 4

— — — — ( 63,791 )

Adjusted EBITDA $ 108,913 $ 7,605 $ 154,936 $ 204,267

Reconciliation of Adjusted EBITDA to income (loss) before income taxes

Adjusted EBITDA $ 204,267

Depreciation and amortization ( 58,041 )

Interest expense ( 88,948 )

Debt modification and extinguishment costs — — ( 8,322 )

Gain on sale of business — — 7,643

Other income, net 1,736 589 202

Income tax (expense) benefit ( 8,463 ) ( 5,350 ) 5,258

Net (loss) income $ ( 1,311 ) $ ( 2,150 ) $ 1,389

Debt modification and extinguishment expenses ( 10,369 )

Selling, general and administrative (non-recurring) ( 3,510 )

Non-cash stock based compensation ( 6,118 )

Income before income taxes $ 37,281

The significant expense categories and amounts align with the segment level information regularly provided to the CODM.

Other operating expenses include salary and employee benefits, depreciation and amortization, and selling, general and administrative expenses.

Other segment items for each reportable segment include other income, net and stock based compensation expense.

Adjustment for corporate items include:

(in thousands) December 31, 2024

Elimination of cost of services (excludes depreciation and amortization) $ 3,382

Other operating expenses ( 81,832 )

Depreciation and amortization 4,990

Other items 5

Other items include other income, net, stock based compensation expense, and selling, general and administrative (non-recurring expenses).

Year Ended December 31, 2023

(in thousands) SMB Payments B2B

Payments Enterprise Payments Total

Revenues $ 583,251 $ 41,156 $ 132,186 $ 756,593

Elimination of intersegment revenues — — — ( 981 )

Total consolidated revenues 583,251 41,156 132,186 755,612

Cost of services (excludes depreciation and amortization) 1,4

( 446,188 ) ( 26,607 ) ( 8,456 ) ( 481,251 )

Other operating expenses 1,2,4

( 65,880 ) ( 14,684 ) ( 35,815 ) ( 116,379 )

Depreciation and amortization 4

36,715 1,831 22,426 60,972

Other segment items 2,3,4

1,587 554 552 2,693

Adjustment for corporate items 4

— — — — ( 53,315 )

Adjusted EBITDA $ 109,485 $ 2,250 $ 110,893 $ 168,332

Reconciliation of Adjusted EBITDA to income (loss) before income taxes

Adjusted EBITDA $ 168,332

Depreciation and amortization ( 68,395 )

Interest expense ( 76,108 )

Selling, general and administrative (non-recurring) ( 9,825 )

Non-cash stock based compensation ( 6,768 )

Non-cash other losses ( 84 )

Income before income taxes $ 7,152

The significant expense categories and amounts align with the segment level information regularly provided to the CODM.

Other operating expenses include salary and employee benefits, depreciation and amortization, and selling, general and administrative expenses.

Other segment items for each reportable segment include other income, net and stock based compensation expense.

Adjustment for corporate items include:

(in thousands) December 31, 2023

Elimination of cost of services (excludes depreciation and amortization) $ 944

Other operating expenses ( 77,402 )

Depreciation and amortization 7,423

Other segment items 3

Other items include other income, net, stock based compensation expense, selling, general and administrative (non-recurring expenses) and non-cash other losses.

Year Ended December 31, 2022

(in thousands) SMB Payments B2B

Payments Enterprise Payments Total

Revenues $ 562,237 $ 18,890 $ 82,514 $ 663,641

Elimination of intersegment revenues — — — —

Total consolidated revenues 562,237 18,890 82,514 663,641

Cost of services (excludes depreciation and amortization) 1,4

( 422,387 ) ( 7,781 ) ( 6,585 ) ( 436,753 )

Other operating expenses 1,2,4

( 59,775 ) ( 8,297 ) ( 34,581 ) ( 102,653 )

Depreciation and amortization 4

37,193 162 24,734 62,089

Other segment items 2,3,4

161 4 112 277

Adjustment for corporate items 4

— — — — ( 46,299 )

Adjusted EBITDA $ 117,429 $ 2,978 $ 66,194 $ 140,302

Reconciliation of Adjusted EBITDA to income (loss) before income taxes

Adjusted EBITDA $ 140,302

Depreciation and amortization ( 70,681 )

Interest expense ( 53,554 )

Selling, general and administrative (non-recurring) ( 6,639 )

Non-cash stock based compensation ( 6,228 )

Income before income taxes $ 3,200

The significant expense categories and amounts align with the segment level information regularly provided to the CODM.

Other operating expenses include salary and employee benefits, depreciation and amortization, and selling, general and administrative expenses.

Other segment items for each reportable segment include other income, net and stock based compensation expense.

Adjustment for corporate items include:

(in thousands) December 31, 2022

Elimination of cost of services (excludes depreciation and amortization) $ —

Other operating expenses ( 68,070 )

Depreciation and amortization 8,592

Other segment items 3

(Loss) Earnings per Common Share

2 unchanged sentences

2024 2023 2022

Net (loss) income $ ( 1,311 ) $ ( 2,150 ) 1,389

Dividends and accretion attributable to redeemable senior preferred stockholders ( 47,744 ) ( 36,880 ) ( 18,009 )

Net income (loss) $ 24,015 $ ( 1,311 ) ( 2,150 )

Dividends, accretion, and related excise tax attributable to redeemable senior preferred stockholders ( 47,336 ) ( 47,744 ) ( 36,880 )

NCI preferred unit redemptions ( 639 ) — —

Net loss attributable to common stockholders $ ( 49,055 ) $ ( 39,030 ) $ ( 24,641 )

Weighted-average common shares outstanding (1)

78,333 78,233 71,902

Basic (loss) earnings per common share $ ( 0.63 ) $ ( 0.50 ) $ ( 0.34 )

Earnings attributable to NCI — — —

Net loss attributable to common shareholders $ ( 23,960 ) $ ( 49,055 ) $ ( 39,030 )

Basic and diluted:

Weighted-average common shares outstanding (1)

77,993 78,333 78,233

Diluted weighted-average common shares outstanding 78,333 78,233 71,902

Diluted (loss) earnings per common share $ ( 0.63 ) $ ( 0.50 ) $ ( 0.34 )

Loss per common share $ ( 0.31 ) $ ( 0.63 ) $ ( 0.50 )

(1) The weighted-average common shares outstanding includes 1,803,841 warrants issued in the second quarter of 2021 (refer to Note 11, Redeemable Senior Preferred Stock and Warrants ) .

3 unchanged sentences

Outstanding warrants on common stock (1)

— 3,556 3,556

Outstanding options and warrants issued to adviser (2)

1 unchanged sentence

721 1,180 2,440

Liability-classified restricted stock units — — 129

Outstanding stock option awards (3)

3 unchanged sentences

Refer to Note 13.

Stockholders' Deficit .

Shareholders' Deficit .

(2) The warrants and options were exercisable at $ 12.00 per share and expired on August 24, 2023.

Refer Note 13.

Stockholders' Deficit .

Shareholders' Deficit .

(3) Granted under the 2018 Plan.

Subsequent Events

In February 2019, PHOT, a subsidiary of the Company, received contributions of certain assets from its Chairman and CEO and issued redeemable preferred units as consideration.

Part of these preferred units were later assigned to other related parties.

In May 2021, the Company entered into an exchange agreement wherein these preferred units were exchanged for 1,428,358 equity shares and $ 814,219 in cash.

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

The Company denied any wrongdoing.

The lawsuit was settled on January 30, 2024, wherein the Company agreed to unwind the exchange transaction and pay $ 0.4 million to settle all claims.

The unwinding of this transaction does not meet the recognition criteria as of December 31, 2023, and therefore considered as non-recognized subsequent event.

On January 21, 2025, PRTH’s indirect subsidiary, Priority Canada Acquisition Company, Inc.

(the "acquiring entity"), acquired 100% of the equity interest in Payslate Inc.

(Canada), Rentmoola Payment Solutions LLC (U.S.), and Rentmoola Payment Solutions Ltd (United Kingdom) (jointly referred as "letus business") for a total purchase consideration of $ 11.0 million (including earn outs of $ 6.5 million which is in the nature of deferred consideration).

The cash consideration of $ 4.5 million was funded by the cash flows of the Company.

Considering the timing of the acquisition, the Company has not yet completed its preliminary acquisition accounting.

The letus business is engaged in processing of rent payments for property management companies in the United States and Canada.

The acquisition is aimed to provide an opportunity to expand Priority's services in Canada.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data