Priority Technology Holdings, Inc. 10-K

Item 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm 44 Consolidated Balance Sheets as of December 31, 2024 and December 31, 2023 48 Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2024, 2023 and 2022 49 Consolidated Statements of Changes in Shareholders' Deficit and Non-Controlling Interests for the years ended December 31, 2024, 2023 and 2022 50 Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022 52 Notes to Consolidated Financial Statements : 54 1. Nature of Business and Significant Accounting Policies 54 2. Acquisitions 67 3. Revenues 68 4. Settlement Assets and Customer/Subscriber Account Balances and Related Obligations 69 5. Notes Receivable 71 6. Property, Equipment and Software 72 7. Goodwill and Other Intangible Assets 72 8. Leases 74 9. Accounts Payable and Accrued Expenses 75 10. Debt Obligations 76 11. Redeemable Senior Preferred Stock and Warrants 78 12. Income Taxes 81 13. Shareholders' Deficit 83 14. Stock-based Compensation 83 15. Employee Benefit Plans 87 16. Commitments and Contingencies 88 17. Fair Value 90 18. Segment Information 90 19. (Loss) Earnings per Common Share 95 20. Subsequent Events 95 43 Table of Contents Report of Independent Registered Public Accounting Firm 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, 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 These financial statements are the responsibility of the Company's management. 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 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 audits in accordance with the standards of the PCAOB. 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. 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. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters 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. 44 Table of Contents 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 $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). Commissions are based on a percentage of the net revenues generated from the Company’s merchant customers, and these percentages vary based on the program type and transaction volume of each merchant. 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. 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, 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 We have served as the Company’s auditor since 2020. Atlanta, Georgia March 6, 2025 45 Table of Contents 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 46 Table of Contents 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 47 Table of Contents Priority Technology Holdings, Inc. Consolidated Balance Sheets (in thousands, except share data) December 31, 2024 December 31, 2023 Assets Current assets: Cash and cash equivalents $ 58,600 $ 39,604 Restricted cash 11,090 11,923 Accounts receivable, net of allowances of $ 3,045 and $ 5,289 , respectively 67,969 58,551 Prepaid expenses and other current assets 22,990 13,273 Current portion of notes receivable, net of allowances of $ 0 and $ 0 , respectively 3,638 1,468 Settlement assets and customer/subscriber account balances 940,798 756,475 Total current assets 1,105,085 881,294 Notes receivable, less current portion 4,919 3,728 Property, equipment and software, net 52,477 44,680 Goodwill 376,091 376,103 Intangible assets, net 240,874 273,350 Deferred income taxes, net 24,697 22,533 Other noncurrent assets 22,717 13,649 Total assets $ 1,826,860 $ 1,615,337 Liabilities, Redeemable Senior Preferred Stock and Shareholders' Deficit Current liabilities: Accounts payable and accrued expenses $ 62,149 $ 52,643 Accrued residual commissions 37,560 33,025 Customer deposits and advance payments 2,246 3,934 Current portion of long-term debt 9,503 6,712 Settlement and customer/subscriber account obligations 940,213 755,754 Total current liabilities 1,051,671 852,068 Long-term debt, net of current portion, discounts and debt issuance costs 920,888 631,965 Other noncurrent liabilities 19,326 18,763 Total liabilities 1,991,885 1,502,796 Commitments and contingencies ( Note 17 ) Redeemable senior preferred stock, net of discounts and issuance costs: Redeemable senior preferred stock, $ 0.001 par value per share; 250,000 shares authorized; 225,000 issued at December 31, 2024 and December 31, 2023; 0 and 225,000 outstanding at December 31, 2024 and December 31, 2023 — 258,605 Shareholders' deficit: Preferred stock, $ 0.001 par value per share; 100,000,000 shares authorized; none issued or outstanding at December 31, 2024 and December 31, 2023 — — Common Stock,$ 0.001 par value per share; 1,000,000,000 shares authorized; 81,866,711 and 79,589,055 shares issued at December 31, 2024 and December 31, 2023, respectively; and 77,479,908 and 76,956,889 shares outstanding at December 31, 2024 and December 31, 2023, respectively. 77 77 Treasury stock at cost, 4,386,803 and 2,632,166 shares at December 31, 2024 and December 31, 2023, respectively ( 19,607 ) ( 12,815 ) Additional paid-in capital — — Accumulated other comprehensive income ( 176 ) ( 29 ) Accumulated deficit ( 147,134 ) ( 134,951 ) Total shareholders' deficit attributable to shareholders of Priority ( 166,840 ) ( 147,718 ) Non-controlling interests in consolidated subsidiaries 1,815 1,654 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 48 Table of Contents Priority Technology Holdings, Inc . Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share amounts) Years Ended December 31, 2024 2023 2022 Revenues $ 879,702 $ 755,612 $ 663,641 Operating expenses Costs of services (excludes depreciation and amortization) 551,621 480,307 436,753 Salary and employee benefits 89,216 79,974 65,077 Depreciation and amortization 58,041 68,395 70,681 Selling, general and administrative 47,403 45,412 34,965 Total operating expenses 746,281 674,088 607,476 Operating income 133,421 81,524 56,165 Other expense Interest expense ( 88,948 ) ( 76,108 ) ( 53,554 ) Debt extinguishment and modification costs ( 10,369 ) — — Other income, net 3,177 1,736 589 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 ) Less: Dividends, accretion, and related excise tax attributable to redeemable senior preferred stockholders ( 47,336 ) ( 47,744 ) ( 36,880 ) Less: Return on redeemable NCI in consolidated subsidiary ( 639 ) — — Net loss attributable to common shareholders ( 23,960 ) ( 49,055 ) ( 39,030 ) Other comprehensive loss Foreign currency translation adjustments ( 147 ) ( 29 ) — Comprehensive loss $ ( 24,107 ) $ ( 49,084 ) $ ( 39,030 ) Loss per common share: Basic and diluted $ ( 0.31 ) $ ( 0.63 ) $ ( 0.50 ) Weighted-average common shares outstanding: Basic and diluted 77,993 78,333 78,233 See Notes to Consolidated Financial Statements 49 Table of Contents Priority Technology Holdings, Inc . Consolidated Statements of Changes in Shareholders' Deficit and Non-Controlling Interests (in thousands) Common Stock Treasury Stock APIC AOCI Accumulated Deficit Deficit Attributable to Shareholders NCIs Total Shares $ Shares $ January 1, 2022 76,740 $ 77 720 $ ( 4,091 ) $ 39,835 $ — $ ( 100,058 ) $ ( 64,237 ) $ — $ ( 64,237 ) Equity-classified stock-based compensation — — — — 6,695 — — 6,695 — 6,695 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 ) 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 ) 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 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 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 ) 50 Table of Contents Priority Technology Holdings, Inc . Consolidated Statements of Changes in Shareholders' Deficit and Non-Controlling Interests (in thousands) Common Stock Treasury Stock APIC AOCI Accumulated Deficit Deficit Attributable to Shareholders NCIs Total Shares $ Shares $ December 31, 2023 76,957 $ 77 2,632 $ ( 12,815 ) $ — $ ( 29 ) $ ( 134,951 ) $ ( 147,718 ) $ 1,654 $ ( 146,064 ) Equity-classified stock-based compensation — — — — 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 ) 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 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 ) See Notes to Consolidated Financial Statements 51 Table of Contents Priority Technology Holdings, Inc . Consolidated Statements of Cash Flows (in thousands) Years Ended December 31, 2024 2023 2022 Cash flows from operating activities: 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 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 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 Change in operating assets and liabilities: Accounts receivable ( 9,387 ) 24,471 ( 19,580 ) Prepaid expenses and other current assets ( 6,062 ) ( 936 ) ( 160 ) Income taxes (receivable) payable ( 3,633 ) ( 273 ) 6,260 Notes receivable — ( 912 ) 377 Accounts payable and other accrued liabilities 9,562 ( 3,218 ) 19,794 Customer deposits and advance payments ( 1,688 ) 1,102 ( 2,403 ) Other assets and liabilities, net ( 4,960 ) ( 5,031 ) ( 6,000 ) Net cash provided by operating activities 85,609 81,256 70,518 Cash flows from investing activities: 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 ) 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 ) Cash flows from financing activities: Proceeds from issuance of long-term debt, net of issue discount 945,126 49,750 — Debt issuance and modification costs paid ( 7,680 ) ( 1,220 ) — Repayments of long-term debt ( 658,835 ) ( 6,328 ) ( 6,200 ) Borrowings under revolving credit facility — 44,000 29,500 Repayments of borrowings under revolving credit facility — ( 56,500 ) ( 32,000 ) 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 ) 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 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 52 Table of Contents Priority Technology Holdings, Inc . Consolidated Statements of Cash Flows (in thousands) Years Ended December 31, 2024 2023 2022 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: Cash and cash equivalents $ 58,600 $ 39,604 $ 18,454 Restricted cash 11,090 11,923 10,582 Cash and cash equivalents included in settlement assets and customer/subscriber account balances (see Note 4 ) 924,174 744,696 531,574 Total cash and cash equivalents, and restricted cash $ 993,864 $ 796,223 $ 560,610 Supplemental cash flow information: Cash paid for interest $ 82,280 $ 75,859 $ 46,907 Cash paid for income taxes, net of refunds $ 19,200 $ 12,917 $ 6,744 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 ) Issuance of NCI $ — $ 184 $ 1,255 Adjustment to value of profit interest unit $ — $ ( 404 ) $ — Forfeiture of liability-classified award $ — $ — $ 325 Change in ESPP liability $ — $ — $ 143 (1) The dividend payable for year ended December 31, 2023, was paid on January 2, 2024. The dividend payable for year ended December 31, 2022, was paid on January 2, 2023. See Notes to Consolidated Financial Statements 53 Table of Contents Priority Technology Holdings, Inc. Notes to Consolidated Financial Statements 1. Nature of Business and Significant Accounting Policies The Business 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 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 : 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. Segment Information . To provide many of its services, the Company enters into agreements with payment processors which in turn, have agreements with multiple card associations. These card associations comprise an alliance aligned with insured FIs ("member banks") that work in conjunction with various local, state, territory and federal government agencies to make the rules and guidelines regarding the use and acceptance of credit and the card associations. The Company has multiple sponsorship bank agreements and is itself a registered ISO with Visa. The Company is also a registered member service provider with Mastercard. 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 forty six U.S. states, the District of Columbia and two U.S. territories. Basis of Presentation and Consolidation The accompanying Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries. The Company generally utilizes the equity method of accounting when it has an ownership interest of between 20% and 50% in an entity, provided the Company is able to exercise significant influence over the investee's operations. All material intercompany balances and transactions have been eliminated in consolidation. 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. 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 54 Table of Contents 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. Significant Accounting Policies Revenue Recognition The Company applies the five-step model to assess its contracts with customers. At contract inception, the Company assesses the services and goods promised in its contracts with customers and identifies the performance obligation for each promise to transfer a distinct good or service to the customer. The Company recognizes revenue when it satisfies a performance obligation by transferring a service or good to the customer in an amount to which the Company expects to be entitled (i.e., transaction price) allocated to the distinct services or goods. The Company has elected the permitted practical expedient that allows it to use the portfolio approach for many of its contracts since this approach's impact on the financial statements, when applied to a group of contracts (or performance obligations) with similar characteristics, is not materially different from the impact of applying the revenue standard on an individual contract basis. Under the portfolio practical expedient, collectability is still assessed at the individual contract level when determining if a contract exists. 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 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. When combined with the underlying payment services, the license and the payment services provided to the customer are a single stand-ready obligation and the Company's performance obligation is defined by each time increment, rather than by the underlying activities, (quantity and timing of which is not determinable), satisfied over time based on days elapsed. 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 or principal to the customer. To determine whether the Company controls the service or good, it assesses indicators including: 1) which party is primarily responsible for fulfillment; 2) which party has discretion in determining pricing for the service or good; and 3) other considerations deemed to be applicable to the specific situation. Based on our assessment of these indicators, we have concluded that the promise to our customers to provide payment services is distinct from the services provided by the card issuing FIs and payment networks in connection with payment transactions. 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 except for our Plastiq (B2B Payments) business where the Company is considered a merchant of record and therefore, revenue is presented on gross basis. 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. Additionally, the Company enables customers to accept card, electronic and digital-based payments at the point of sale by providing a suite of services. The Company also earns revenue and commissions from resale of electronic POS equipment and certain subscription coupons. 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 55 Table of Contents 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 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. For these transactions, the Company acts as a merchant of record, therefore, considered as the principal and accordingly presents its revenue on a gross basis. The Company also offers volume rebates as an incentive to increase business and customer engagement. These rebates are presented as net of revenue. Enterprise Payments – The Company's Enterprise Payments segment uses payment-adjacent technologies to facilitate the acceptance of Electronic Payments from customers. Revenue from the Enterprise Payments segment consists of the following: • Enrollment fees : 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 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. • Interest revenue : Interest revenue is derived from certain customer balances maintained in interest bearing accounts with select partner banks. • CRM and consulting fees : 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. See Note 3. Revenues . 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. As described above, the Company's most significant performance obligations consist of variable consideration under a stand-ready series of distinct days of service. 56 Table of Contents Such variable consideration meets the specified criteria for the disclosure exclusion. Therefore, the majority of the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied is variable consideration that is not required for this disclosure. The aggregate fixed consideration portion of customer contracts with an initial contract duration greater than one year is not material. Cost of Services Costs of merchant card fees primarily consist of residual payments to agents and ISOs and other third-party costs directly attributable to payment processing. The residual payments represent commissions paid to agents and ISOs based upon a percentage of the net revenues generated from merchant transactions. 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 The Company accrues and pays commission expense based on variable merchant payment volumes and for certain customer service and other services provided by its ISOs. Since commission expenses are accrued and paid to ISOs on a monthly basis after the merchant enters into a new or renewed contract, these are not deemed to be a cost to acquire a new contract but they are reported within costs of services on our Consolidated Statements of Operations and Comprehensive Loss. The ISO is typically an independent contractor or agent of the Company. The Company may occasionally elect to buy out all or a portion of an ISO's rights to receive future commission payments related to certain merchants. 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. A contract with a customer creates a legal right and obligation. As the Company performs under customer contracts, its right to consideration that is unconditional is considered to be accounts receivable. If the Company's right to consideration for such performance is contingent upon a future event or satisfaction of additional performance obligations, the amount of revenues recognized in excess of the amount billed to the customer is recognized as a contract asset. Contract liabilities represent consideration received from customers in excess of revenues recognized. Material contract assets and liabilities are presented net at the individual contract level in the Consolidated Balance Sheets and are classified as current or noncurrent based on the nature of the underlying contractual rights and obligations. Contract Acquisition Costs 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. Amortization expense for the year ended December 31, 2022, was immaterial . Cash and Cash Equivalents and Restricted Cash Cash and cash equivalents includes highly liquid instruments with an original maturity of three months or less, and cash owned by the Company that is held in financial institutions. Restricted cash is held by the Company in financial institutions for the purpose of in-process customer settlements or reserves held per contact terms. 57 Table of Contents Accounts Receivable, net 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, card networks and other customers. Amounts due from sponsor banks are typically paid within 30 days following the end of each month. Inventory Inventory consists primarily of POS terminals and certain subscription coupons which is carried at the lower of cost or net realizable value. Cost is equal to the purchase price and other expenses incurred with acquiring the inventory and is substantially valued using the weighted average cost method. 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 Notes receivable are primarily comprised of notes receivable from ISOs 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. Notes receivable are recorded at the unpaid principal balance. Allowance for Expected Losses The Company utilizes a combination of aging and loss-rate methodologies to develop an estimate of current expected credit losses based on the nature and risks associated with the underlying asset pool. A broad range of factors are considered during the estimation of the allowance including historical losses, adjustments for current conditions and future trends. 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 $ 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. See Note 5. Notes Receivable . 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. See Note 4. Settlement Assets and Customer/Subscriber Account Balances and Related Obligations . A reconciliation of the beginning and ending amount of allowance for expected losses is as follows for the year ended December 31, 2024: (in thousands) Trade Receivables Settlement assets Balance at January 1, 2024 $ ( 5,289 ) $ ( 6,558 ) Charge-offs (recoveries), net 6,152 11,707 Provision ( 3,908 ) ( 13,085 ) Balance at December 31, 2024 $ ( 3,045 ) $ ( 7,936 ) 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. 58 Table of Contents Customer Deposits and Advance Payments The Company may receive cash payments from certain customers and vendors that require future performance obligations by the Company. Amounts associated with obligations expected to be satisfied within one year are reported in customer deposits and advance payments on the Company's Consolidated Balance Sheets and amounts associated with obligations expected to be satisfied after one year are reported as a component of other noncurrent liabilities on the Company's Consolidated Balance Sheets. These payments are subsequently recognized in the Company's Consolidated Statements of Operations and Comprehensive Loss when the Company satisfies the performance obligations required to retain and earn these deposits and advance payments. A vendor may make an upfront payment to the Company to offset costs that the Company incurs to integrate the vendor into the Company's operations. 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. Investments 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 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. Expenditures that increase the value or productive capacity of assets are capitalized. At the time of retirements, sales or other dispositions of property and equipment, the original cost and related accumulated depreciation are removed from the respective accounts and the gains or losses are presented as a component of income or loss from operations. Property, equipment and software Estimated Useful Life Furniture and fixtures 5 - 10 years Equipment 3 - 8 years Computer software 2 - 5 years Leasehold improvements 3 - 10 years See Note 6. Property, Equipment and Software . Costs Incurred to Develop Software for Internal Use Costs incurred to develop or obtain internal-use software and implementation costs are accounted for in accordance with ASC 350-40, Internal-Use Software . The Company uses an agile development methodology in which feature-by-feature updates are made to its software. The costs incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, internal and external costs incurred to develop internal-use software are capitalized and amortized using the straight-line method over the estimated useful life of the software, which generally range from two to five years . Maintenance costs including those in the post-implementation stages, are typically expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the software that result in added functionality, in which case such costs are capitalized and amortized using the straight-line method over the estimated useful life of the software. 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. There were no impairment charges associated with internal-use software for the years ended December 31, 2024, 2023 and 2022. 59 Table of Contents For the years ended December 31, 2024, 2023 and 2022, the Company capitalized software development costs of $ 26.1 million, $ 21.3 million and $ 16.8 million, respectively. As of December 31, 2024 and 2023, capitalized software development costs, net of accumulated amortization, totaled $ 48.1 million and $ 40.6 million, respectively, and are included in property, equipment and software, net on the Consolidated Balance Sheets. 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. 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. The portion of any unpaid purchase price that is contingent on future activities is not initially recorded by the Company on the date of acquisition. Rather, the Company recognizes contingent consideration when it becomes probable and estimable. All of the Company's intangible assets, except goodwill and money transmission licenses, have finite lives and are subject to amortization. Intangible assets consist of acquired merchant portfolios, customer relationships, ISO and referral partner relationships, residual buyouts, trade names, technology, non-compete agreements and money transmission licenses. Intangible Asset Nature Estimated Useful Life ISO and Referral Partner Relationships Acquired relationships with ISOs and referral partners 11 – 25 years Residual Buyouts Surrender of rights to receive commissions by ISOs 3 – 9 years Customer Relationships Acquired customer relationships 2 – 10 years Merchant Portfolios Acquired rights to a portfolio of merchants 5 – 10 years Technology Acquired proprietary software and website domains 6 – 10 years 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 forty six U.S. states, the District of Columbia and two U.S. territories. indefinite Impairment of Long-lived Assets 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 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. The Company concluded there were no indications of impairment for the years ended December 31, 2024, 2023 and 2022. See Note 7. Goodwill and Other Intangible Assets . 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- 60 Table of Contents lived intangibles or goodwill within the reporting unit is less than its carrying value. See Note 7. Goodwill and Other Intangible Assets for further information. Leases The Company evaluates lease and service arrangements at lease inception to determine if the arrangement is a lease or contains a lease. Lease arrangements are evaluated at their commencement date to determine classification as operating or finance. Operating leases are reported as part of other noncurrent assets, accounts payable and accrued expenses and other noncurrent liabilities on the Company's Consolidated Balance Sheets. 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 ("short-term leases") are generally not included on the Company's Balance Sheets. The Company does not separate lease and non-lease components. Certain estimates and assumptions are made when determining the value of ROU Assets and the related liabilities, including when establishing the lease term and discount rates and variable lease payments (e.g., rent escalations tied to changes in the Producer Price Index). The lease term for all of the Company's leases includes the non-cancelable period of the lease adjusted for any renewal or termination options the Company is reasonably certain to exercise. 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. Lease expense and depreciation expense, if applicable, are recognized on a straight-line basis over the term of the lease. Settlement Assets and Customer/Subscriber Account Balances and Related Obligations Settlement assets and customer/subscriber account balances and the related obligations recognized on the Company's Consolidated Balance Sheets represent intermediary balances arising in the Company's settlement process for merchants and other customers. See Note 4. Settlement Assets and Customer/Subscriber Account Balances and Related Obligations . Debt Issuance and Modification Costs Eligible debt issuance costs associated with the Company's credit facilities are deferred and amortized to interest expense over the term of the related debt using the effective interest method. 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. Restructuring Costs The Company's Management approved a plan to restructure the business of its wholly owned subsidiary, PayRight. 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 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. The costs include allowance for certain advances whose recoverability was impacted by the restructuring of $ 3.5 million and $ 0.3 million for accelerated depreciation and amortization of assets of the restructured business. Acquisitions Business Combinations and Asset Acquisitions The Company uses the acquisition method of accounting for business combinations which requires assets acquired and liabilities assumed to be recognized at their fair values on the acquisition date. Goodwill represents the excess of the purchase price over the fair value of the net assets acquired. 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 61 Table of Contents and liabilities assumed. The measurement period ends once all information is obtained, but no later than one year from the acquisition date. The Company accounts for a transaction as an asset acquisition when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, or otherwise does not meet the definition of a business. Asset acquisition-related costs are capitalized as part of the asset or assets acquired. Contingent Consideration Contingent consideration related to the Company's business combinations are estimated based on the present value of a weighted payout probability at the measurement date using a Monte Carlo simulation model. 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. For asset acquisitions that do not meet the definition of a business, the portion of the unpaid purchase price that is contingent on future activities is not recorded by the Company on the date of acquisition, but when it becomes probable and can be estimated. Non-controlling Interests Occasionally, the Company issues common equity and non-voting incentive units within its subsidiaries. The Company is the majority owner of these subsidiaries and, therefore, the common equity and incentive units are deemed to be NCI. NCI is valued based on the events and methodologies including the acquisition-date fair value or the option pricing method. 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. In subsequent periods, income or loss will be attributed to an NCI based on the hypothetical liquidation at book value method utilizing the terms of the operating agreement between the Company and the NCI. As the majority owner, the Company has call rights on the incentive units issued to the NCIs. These call rights can only be executed under certain circumstances and execution is always optional at the Company's discretion. The call rights do not meet the definition of a free-standing financial instrument or derivative; thus no separate accounting is required for these call rights. Accrued Residual Commissions Accrued residual commissions consist of amounts due to ISOs and independent sales agents based on a percentage of the net revenues generated from the Company's merchant customers referred by the respective ISO and independent sales agent. Percentages vary based on the program type and transaction volume of each merchant. Residual commission expenses were $ 426.6 million, $ 415.1 million and $ 396.2 million, respectively, for the years ended December 31, 2024, 2023 and 2022, and are included in costs of services in the accompanying Consolidated Statements of Operations and Comprehensive Loss. ISO Deposit and Loss Reserve ISOs may partner with the Company in an exclusive partner program in which ISOs are given negotiated pricing in exchange for bearing the risk of loss. 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 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 62 Table of Contents 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 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 Under the Company's 2018 Plan, the Company determines the fair value of stock options using the Black-Scholes option pricing model, which requires the use of the following subjective assumptions: Expected volatility – Measure of the amount by which a stock price has fluctuated or is expected to fluctuate. In 2018, when the Company's outstanding stock options were granted, there was a relatively short amount of time that the Company's Common Stock (Nasdaq: PRTH) were traded on a public market, the Company utilized volatility data for the Common Stock of a peer group of comparable public companies. An increase in the expected volatility would increase the fair value of the stock option and related compensation expense. Risk-free interest rate – U.S. Treasury rate for a stripped-principal treasury note as of the grant date having a term equal to the expected term of the stock option. An increase in the risk-free interest rate will increase the fair value of the stock option and related compensation expense. Expected term – Period of time over which the stock options granted are expected to remain outstanding. In 2018, when the Company's outstanding stock options were granted, the Company lacked sufficient exercise information for its stock option plan since it was a newly public company. Accordingly, the Company used a method permitted by the SEC whereby the expected term was estimated to be the mid-point between the vesting dates and the expiration dates of the stock option grants. An increase in the expected term will increase the fair value of the stock option and the related compensation expense. Dividend yield – The Company uses an amount of zero as the Company has paid no cash or stock dividends and does not anticipate doing so in the foreseeable future. An increase in the dividend yield will decrease the fair value of the stock option and the related compensation expenses. If a participant terminates employment with the Company, vested options may be exercised for a short period of time while unvested options are forfeited. However, in any event, a stock option will expire ten years from the date of the grant. 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. Performance-based restricted stock awards The Company accounts for its performance-based restricted stock awards based on the quoted closing price of the Company's Common Stock on the business day prior to the grant date, adjusted for any market-based vesting criteria, and records stock-based compensation expense over the vesting term of the awards based on the probability that the performance criteria will be achieved. The performance goals may be work-related goals for the individual recipient and/or based on certain corporate performance goals. 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 63 Table of Contents 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 seven subsidiaries. These non-voting incentive units were determined to be equity and are accounted for under ASC 718 Stock Compensation. The non-voting incentive units are either fully vested when granted, or vest according to the service period and/or performance measure noted in the grant agreement. As the non-voting incentive units are vested, they are recognized as NCI to the Company, who is the majority owner of the subsidiaries. Employee Stock Purchase Program The 2021 Employee Stock Purchase plan authorizes the issuance of shares of the Company’s Common Stock pursuant to purchase rights granted to employees. 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 Company records the resulting compensation expense in the Consolidated Statements of Operations and Comprehensive Loss over each three-month offering period. See Note 14. Stock-based Compensation . Repurchased Stock Pursuant to the provisions of ASC 505-30, Treasury Stock , the Company has elected to apply the cost method when accounting for treasury stock resulting from the repurchase of its Common Stock. Under the cost method, the gross cost of the shares reacquired is charged to a contra equity account, treasury stock. The equity accounts that were originally credited for the original share issuance, Common Stock and additional paid-in capital, remain intact. See Note 13. 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. Any deficiency will be charged to retained earnings (accumulated deficit), unless additional paid-in capital from previous treasury stock transactions exists, in which case the deficiency will be charged to that account, with any excess charged to retained earnings (accumulated deficit). If treasury stock is reissued in the future, a cost flow assumption (e.g., FIFO, LIFO or specific identification) will be adopted to compute excesses and deficiencies upon subsequent share reissuance. Earnings (Loss) per Share 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. Diluted EPS excludes potential shares of Common Stock if their effect is anti-dilutive. If there is a net loss in any period, basic and diluted EPS are computed in the same manner. See Note 13. Shareholders' Deficit . Income Taxes The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered or settled. Realization of deferred tax assets is dependent upon future taxable income. 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 64 Table of Contents 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. The Company recognizes an uncertain tax position in its financial statements when it concludes that a tax position is more likely than not to be sustained upon examination based solely on its technical merits. Only after a tax position passes the first step of recognition will measurement be required. Under the measurement step, the tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon effective settlement. This is determined on a cumulative probability basis. The full impact of any change in recognition or measurement is reflected in the period in which such change occurs. The Company recognized interest and penalties associated with uncertain tax positions as a component of income tax expense. See Note 12. Income Taxes. Fair Value Measurements The Company measures certain assets and liabilities at fair value. 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 three levels of inputs used to measure fair value are as follows: Level 1 – Quoted market prices in active markets for identical assets or liabilities as of the reporting date. Level 2 – Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3 – Unobservable inputs that are not corroborated by market data. The fair values of the Company's merchant portfolios, assets and liabilities acquired in mergers and business combinations, and contingent consideration are primarily based on Level 3 inputs and are generally estimated based upon valuation techniques that include discounted cash flow analysis based on cash flow projections or Monte Carlo simulations and, for years beyond the projection period, estimates based on assumed growth rates. Assumptions are also made regarding appropriate discount rates, perpetual growth rates, and capital expenditures, among others. In certain circumstances, the discounted cash flow analysis or Monte Carlo simulation is corroborated by a market-based approach that utilizes comparable company public trading values and, where available, values observed in public market transactions. The carrying values of accounts and notes receivable, accounts payable and accrued expenses, long-term debt, restricted cash and cash and cash equivalents, including settlement assets and the associated deposit liabilities, approximate their fair values due to either the short-term nature of such instruments or the fact that the interest rate of the debt is based upon current market rates. See Note 18. Fair Value. Foreign Currency The Company's reporting currency is the U.S. dollar. The functional currency of the Indian subsidiary of the Company is Indian Rupee (i.e. local currency of Republic of India). The functional currency of the Canadian subsidiary of the Company is the Canadian Dollar. Accordingly, assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the current exchange rate on the last day of the reporting period. Revenues and expenses are translated using the average exchange rate in effect during the reporting period. Translation adjustments are reported as a component of accumulated other comprehensive income (loss). Concentration of Risk A substantial portion of the Company's revenues and receivables are attributable to merchants. For the years ended December 31, 2024, 2023 and 2022, no individual merchant customer accounted for 10% or more of the Company's consolidated revenues. 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" 65 Table of Contents 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. As of December 31, 2024, the Company's settlement assets and customer /subscriber account balances of $ 940.8 million includes cash and cash equivalents of $ 924.2 million related to customer account balances which are maintained in FDIC insured accounts with certain FIs. See Note 4. Settlement Assets and Customer/Subscriber Account Balances and Related Obligations . A majority of the Company's cash and restricted cash (including subscriber account balances) is held in certain FIs, substantially all of which is in excess of FDIC limits. On at least an annual basis, the Company reviews qualitative and quantitative factors including earnings (with emphasis on return on equity and net interest margin), capitalization (with emphasis on Tier 1 and Capital ratios), asset quality (emphasis on Net charge-offs ratios), and liquidity, evaluating the performance of these FIs with their peers. The Company may shift funds as a response to risks noted and to optimize returns and costs . The Company does not believe it is exposed to any significant credit risk from these transactions. Recently Adopted Accounting Standards Segment Reporting In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires incremental reportable segment disclosures, primarily about significant segment expenses. The amendments also require entities with a single reportable segment to provide all disclosures required by these amendments, and all existing segment disclosures. This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods after December 15, 2024. The Company 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 In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures. The guidance includes improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid. This guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. 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. 66 Table of Contents 2. Acquisitions Acquisitions occurred in prior years Plastiq Acquisition 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. Plastiq is a buyer funded B2B payments platform offering bill pay and instant access to working capital to its customers and will complement the Company's existing supplier-funded B2B Payments business. On May 24, 2023, Plastiq filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware. The purchase was completed on July 31, 2023 for a total purchase consideration of approximately $ 37.0 million. The total purchase consideration included $ 28.5 million in cash and the remaining consideration is in the nature of deferred or contingent consideration and certain equity interest in the Acquiring Entity. The cash consideration for the purchase was funded by borrowings from the Company's revolving credit facility. The acquisition was accounted for as a business combination using the acquisition method of accounting, under which the acquired assets and assumed liabilities were recognized at their fair values as of July 31, 2023, with the excess of the fair value of consideration transferred over the fair value of the net assets acquired recognized as goodwill. The fair values of the acquired assets and assumed liabilities as of July 31, 2023 were estimated by management using the discounted cash flow method and other factors specific to certain assets and liabilities. The final purchase price allocation is set forth in the table below: (in thousands) Consideration: Cash $ 28,500 Contingent consideration payments (1) 8,419 Common equity of the Acquiring Entity 330 Less: cash and restricted cash acquired ( 278 ) Total purchase consideration, net of cash and restricted cash acquired $ 36,971 Recognized amounts of assets acquired and liabilities assumed: Accounts receivable $ 831 Prepaid expenses 490 Settlement assets 8,277 Equipment, net 47 Goodwill (3) 7,240 Intangible assets (2) 30,460 Accounts payable and accrued expenses ( 1,881 ) Customer deposits ( 214 ) Settlement obligations ( 8,279 ) Total purchase consideration $ 36,971 (1) The fair value of the contingent consideration payments issued was determined utilizing a Monte Carlo simulation. The contingent consideration payments were calculated based on the path for the simulated metrics and the contractual terms of the contingent consideration payments and were discounted to present value at a rate reflecting the risk associated with the payoffs. The fair value was estimated to be the average present value of the contingent consideration payments over all iterations of the simulation. (2) The intangible assets acquired consist of $ 13.0 million for customer relationships, $ 7.0 million for referral partner relationships, $ 6.5 million for technology and $ 3.9 million for trade name. 67 Table of Contents (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 3. Revenues Disaggregation of Revenues The following table presents a disaggregation of our consolidated revenues by type: Years Ended December 31, (in thousands) 2024 2023 2022 Revenue Type: Merchant card fees $ 670,411 $ 595,205 $ 553,037 Money transmission services 130,123 98,137 71,536 Outsourced services and other services 67,018 49,600 29,627 Equipment 12,150 12,670 9,441 Total revenues (1)(2) $ 879,702 $ 755,612 $ 663,641 (1) Includes contracts with an original duration of one year or less and variable consideration under a stand-ready series of distinct days of service. The aggregate fixed consideration portion of customer contracts with an initial contract duration greater than one year is not material. (2) Approximately $ 52.3 million, $ 33.4 million and $ 7.5 million, of interest income for the years ended December 31, 2024, 2023 and 2022, respectively, is included in outsourced services and other services revenue in the table above. The following table presents a disaggregation of our consolidated revenues by segment: Year Ended December 31, 2024 (in thousands) Merchant Card Fees Money Transmission Services Outsourced and Other Services Equipment Total Segment SMB $ 595,104 $ — $ 6,293 $ 12,150 $ 613,547 B2B 75,822 — 13,281 — 89,103 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 68 Table of Contents Year Ended December 31, 2023 (in thousands) Merchant Card Fees Money Transmission Services Outsourced and Other Services Equipment Total Segment SMB $ 564,356 $ — $ 6,225 $ 12,670 $ 583,251 B2B 31,114 — 10,042 — 41,156 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 Year Ended December 31, 2022 (in thousands) Merchant Card Fees Money Transmission Services Outsourced and Other Services Equipment Total Segment SMB $ 549,646 $ — $ 3,150 $ 9,441 $ 562,237 B2B 3,390 — 15,500 — 18,890 Enterprise 1 71,536 10,977 — 82,514 Eliminations — — — — — Total revenues $ 553,037 $ 71,536 $ 29,627 $ 9,441 $ 663,641 Deferred revenues were not material for the years ended December 31, 2024, 2023 and 2022. Contract Assets and Contract Liabilities Material contract assets and liabilities are presented net at the individual contract level in the Consolidated Balance Sheets and are classified as current or noncurrent based on the nature of the underlying contractual rights and obligations. Contract liabilities were $ 0.2 million, $ 0.6 million and $ 0.2 million as of December 31, 2024, 2023, and 2022, respectively. Substantially all of these balances are recognized as revenue within 12 months. 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. 4. Settlement Assets and Customer/Subscriber Account Balances and Related Obligations SMB Payments Segment In the Company's SMB Payments reportable segment, funds settlement refers to the process of transferring funds for sales and credits between card issuers and merchants. The standards of the card networks require possession of funds during the settlement process by a member bank which controls the clearing transactions. Since settlement funds are required to be in the possession of a member bank until the merchant is funded, these funds are not assets of the Company and the associated obligations related to these funds are not liabilities of the Company. Therefore, neither is recognized in the Company's Consolidated Balance Sheets. Member banks held merchant funds of $ 106.2 million and $ 98.0 million at December 31, 2024 and 2023, respectively. 69 Table of Contents 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. 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 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 years ended December 31, 2024, 2023 and 2022 were $ 11.0 million, $ 5.2 million and $ 4.1 million, respectively. B2B Payments Segment In the Company's B2B Payments segment, the Company earns revenues from certain of its services by processing transactions for FIs and other business customers. Customers transfer funds to the Company, which are held in either Company-owned bank accounts controlled by the Company or bank-owned FBO accounts controlled by the banks, until such time as the transactions are settled with the customer payees. Amounts due to customer payees that are held by the Company in Company-owned bank accounts are included in restricted cash. Amounts due to customer payees that are held in bank-owned FBO accounts are not assets of the Company. As such, the associated obligations related to these funds are not liabilities of the Company; therefore, neither is recognized in the Company's Consolidated Balance Sheets. Bank-owned FBO accounts held funds of $ 64.8 million and $ 69.0 million at December 31, 2024 and 2023, respectively. 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. 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). These receivables and payables arise from the settlement activities that the Company performs on the behalf of its customers and therefore, are presented as settlement assets and related obligations. Enterprise Payments Segment In the Company's Enterprise Payments segment revenue is derived primarily from enrollment fees, monthly subscription fees and transaction-based fees from licensed money transmission services. As part of its licensed money transmission services, the Company accepts deposits from consumers and subscribers which are held in bank accounts maintained by the Company on behalf of consumers and subscribers. After accepting deposits, the Company is allowed to invest available balances in these accounts in certain permitted investments, and the return on such investments contributes to the Company's net cash inflows. These balances are payable on demand. As such, the Company recorded these balances and related obligations as current assets and current liabilities. The nature of these balances are cash and cash equivalents, but they are not available for day-to-day operations of the Company. Therefore, the Company has classified these balances as settlement assets and customer/subscriber account balances and the related obligations as settlement and customer/subscriber account obligations in the Company's 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 70 Table of Contents liabilities for the associated obligation. Agency owned accounts held $ 22.6 million and $ 19.6 million and at December 31, 2024 and 2023, respectively. The Company's consolidated settlement assets and customer/subscriber account balances and settlement and customer/subscriber account obligations were as follows: (in thousands) December 31, 2024 December 31, 2023 Settlement Assets, net of estimated losses (1) : Card settlements due from merchants $ 2,587 $ 2,705 Card settlements due from networks 12,307 8,185 Other settlement assets 1,730 889 Customer/Subscriber Account Balances: Cash and cash equivalents 924,174 744,696 Total settlement assets and customer/subscriber account balances $ 940,798 $ 756,475 Settlement and Customer/Subscriber Account Obligations: Customer account obligations $ 897,497 $ 710,775 Subscriber account obligations 26,677 33,921 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 $ 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. 5. Notes Receivable The Company has notes receivable of $ 8.6 million and $ 5.2 million as of December 31, 2024 and 2023, respectively, which are reported as current portion of notes receivable and notes receivable less current portion on the Company's Consolidated Balance Sheets. The notes bear a weighted-average interest rate of 16.9 % and 18.6 % as of December 31, 2024 and 2023, respectively. 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: (in thousands) Year Ending December 31, 2025 $ 3,638 2026 2,283 2027 1,732 2028 904 2029 — Thereafter — Total $ 8,557 71 Table of Contents 6. Property, Equipment and Software A summary of property, equipment and software, net was as follows: (in thousands) December 31, 2024 December 31, 2023 Computer software $ 104,683 $ 78,492 Equipment 11,571 10,377 Leasehold improvements 2,718 1,535 Furniture and fixtures 1,365 1,442 Property, equipment and software 120,337 91,846 Less: Accumulated depreciation ( 70,258 ) ( 56,442 ) Capital work in-progress 2,398 9,276 Property, equipment and software, net $ 52,477 $ 44,680 Years Ended December 31, (in thousands) 2024 2023 2022 Depreciation expense $ 13,896 $ 11,494 $ 9,511 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, 2024 and 2023, certain fully depreciated assets were removed from service. 7. Goodwill and Other Intangible Assets Goodwill The Company records goodwill upon acquisition of a business when the purchase price is greater than the fair value assigned to the underlying separately identifiable tangible and intangible assets acquired and the liabilities assumed. The Company's goodwill relates to the following reporting units: (in thousands) December 31, 2024 December 31, 2023 SMB Payments $ 124,139 $ 124,139 Enterprise Payments 244,712 244,712 Plastiq (B2B Payments) 7,240 7,252 Total $ 376,091 $ 376,103 The following table summarizes the changes in the carrying value of goodwill: (in thousands) Amount Balance at January 1, 2024 $ 376,103 Plastiq adjustment ( 12 ) Balance at December 31, 2024 $ 376,091 72 Table of Contents 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 At December 31, 2024 and 2023, other intangible assets consisted of the following: (in thousands, except weighted-average data) December 31, 2024 Weighted-average Useful Life Gross Carrying Value Accumulated Amortization Net Carrying Value Other intangible assets: ISO and referral partner relationships $ 182,339 $ ( 49,501 ) $ 132,838 14.6 Residual buyouts 143,862 ( 104,766 ) 39,096 6.2 Customer relationships 109,017 ( 95,320 ) 13,697 8.4 Merchant portfolios 83,350 ( 65,285 ) 18,065 6.5 Technology 58,639 ( 27,473 ) 31,166 8.7 Non-compete agreements 3,390 ( 3,390 ) — 0.0 Trade names 7,104 ( 3,192 ) 3,912 10.6 Money transmission licenses (1) 2,100 — 2,100 Total gross carrying value $ 589,801 $ ( 348,927 ) $ 240,874 9.5 (1) These assets have an indefinite useful life. (in thousands, except weighted-average data) December 31, 2023 Weighted-average Useful Life Gross Carrying Value Accumulated Amortization Net Carrying Value Other intangible assets: ISO relationships $ 182,339 $ ( 36,506 ) $ 145,833 14.7 Residual buyouts 135,164 ( 92,699 ) 42,465 6.3 Customer relationships 109,017 ( 92,781 ) 16,236 8.4 Merchant portfolios 83,350 ( 56,139 ) 27,211 6.5 Technology 57,639 ( 22,712 ) 34,927 9.0 Non-compete agreements 3,390 ( 3,390 ) — 0.0 Trade names 7,104 ( 2,526 ) 4,578 11.7 Money transmission licenses (1) 2,100 — 2,100 Total gross carrying value $ 580,103 $ ( 306,753 ) $ 273,350 9.7 (1) These assets have an indefinite useful life. Years Ended December 31, (in thousands) 2024 2023 2022 Amortization expense (1) $ 44,145 $ 56,901 $ 61,170 73 Table of Contents (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: (in thousands) Estimated Amortization Expense Year Ending December 31, 2025 $ 37,097 2026 36,309 2027 34,044 2028 25,710 2029 21,937 Thereafter 83,677 Total (1) $ 238,774 (1) Total will not agree to the intangible asset net book value due to intangible assets with indefinite useful life. Actual amortization expense to be reported in future periods could differ from these estimates as a result of new intangible asset acquisitions, changes in useful lives and other relevant events or circumstances. 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. 8. Leases The Company's leases consist primarily of real estate leases for office space, which are classified as operating leases. Lease expense for the Company's operating leases is recognized on a straight-line basis over the term of the lease. The Company did not have any finance leases at December 31, 2024 and 2023. The ROU Assets and lease liabilities consisted of the following: (in thousands, except weighted-average data) Financial Statement Classification December 31, 2024 December 31, 2023 Operating Lease ROU Assets: Operating lease ROU Assets Other noncurrent assets $ 7,305 $ 5,427 Operating Lease Obligations: Operating lease obligations - current Accounts payable and accrued expenses $ 1,072 $ 1,582 Operating lease obligations - noncurrent Other noncurrent liabilities 6,707 4,592 Total operating lease obligations $ 7,779 $ 6,174 Weighted-average remaining lease term in years 9.9 3.8 Weighted-average discount rate 6.5 % 5.9 % 74 Table of Contents The Components of lease expense were as follows: Years Ended December 31, (in thousands) Financial Statement Classification 2024 2023 2022 Operating lease expense (1) Selling, general and administrative $ 1,714 $ 1,760 $ 1,984 (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, (in thousands) Financial Statement Classification 2024 2023 2022 Operating cash flows from operating leases Operating activities $ 1,952 $ 1,862 $ 2,131 Lease Commitments Future minimum lease payments for the Company's real estate operating leases at December 31, 2024 were as follows: (in thousands) Year Ending December 31, Amount Due 2025 $ 1,531 2026 1,319 2027 1,029 2028 865 2029 683 Thereafter 5,528 Total future minimum lease payments 10,955 Amount representing imputed interest ( 3,176 ) Total future minimum lease payments, net of interest $ 7,779 9. Accounts Payable and Accrued Expenses The components of accounts payable and accrued expenses consisted of the following: (in thousands) December 31, 2024 December 31, 2023 Accrued expenses $ 26,787 $ 12,621 Accrued card network fees 14,311 14,320 Accrued compensation 2,570 8,748 Contingent consideration, current portion 3,891 5,951 Accounts payable 14,590 11,003 Total accounts payable and accrued expenses $ 62,149 $ 52,643 75 Table of Contents 10. Debt Obligations Outstanding debt obligations consisted of the following: (in thousands) December 31, 2024 December 31, 2023 2024 Credit Agreement Term facility - matures May 16, 2031, interest rate of 9.11 % at December 31, 2024 $ 945,537 $ — 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 — 654,373 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 Less: current portion of long-term debt ( 9,503 ) ( 6,712 ) Less: unamortized debt discounts and deferred financing costs ( 15,146 ) ( 15,696 ) Long-term debt, net $ 920,888 $ 631,965 Contractual Maturities Based on terms and conditions existing at December 31, 2024, future minimum principal payments for long-term debt are as follows: (in thousands) Revolving Credit Facility December 31, Term Facility Total Principal Due 2025 $ 9,503 $ — $ 9,503 2026 9,503 — 9,503 2027 9,503 — 9,503 2028 9,503 — 9,503 2029 9,503 — 9,503 Thereafter 898,022 — 898,022 Total $ 945,537 $ — $ 945,537 Additionally, the Company may be obligated to make certain additional mandatory prepayments after the end of each year based on excess cash flow, as defined in the 2024 Credit Agreement. 2024 Credit Agreement 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. 76 Table of Contents 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. 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; 2) a $ 290.0 million Delayed Draw Term Loan (together, the "Term Facility"); and 3) a $ 40.0 million senior secured revolving credit facility. The First Amendment to the Credit Agreement on May 20, 2021, clarified and provided further detail on the Credit Agreement's terms. The Second Amendment to the Credit Agreement on September 17, 2021, increased the amount of the Delayed Draw Term Loan facility by $ 30.0 million to $ 320.0 million. 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. 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 77 Table of Contents 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. 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 the Plastiq business) and added additional cash for general corporate purposes. Interest Expense and Amortization of Deferred Loan Costs and Discounts Deferred financing costs and debt discounts are amortized using the effective interest method over the remaining term of the respective debt and are recorded as a component of interest expense. Unamortized deferred financing costs and debt discount are included in long-term debt on the Company's Consolidated Balance Sheets. Twelve Months Ended December 31, (in thousands) 2024 2023 2022 Interest expense (1)(2) $ 88,948 $ 76,108 $ 53,554 (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. 11. Redeemable Senior Preferred Stock and Warrants On April 27, 2021, the Company entered into an agreement pursuant to which it issued 150,000 shares of redeemable senior preferred stock, par value $ 0.001 per share, and a detachable warrant to purchase 1,803,841 shares of the Company's Common Stock, for gross proceeds of $ 150.0 million, less a $ 5.0 million discount and $ 5.5 million of issuance costs. The agreement also provided the Company the option to issue an additional 50,000 shares of redeemable senior preferred stock upon the closing of the Finxera acquisition for $ 50.0 million, less a $ 0.6 million discount and within 18 months after the issuance of those additional shares, subject to the satisfaction of certain customary closing conditions. The Company was also provided with the option to issue an additional delayed 50,000 shares at a purchase price of $ 50.0 million, less a $ 0.6 million discount, subject to the satisfaction of certain customary closing conditions. Of the total net proceeds of $ 139.5 million, $ 131.4 million was allocated to the redeemable senior preferred stock, $ 11.4 million was allocated to additional paid-in capital for the warrants and $ 3.3 million was allocated to noncurrent assets for the committed financing put right. On September 17, 2021, the Company issued an additional 75,000 shares of redeemable senior preferred stock for $ 75.0 million, less a $ 0.9 million discount, $ 0.7 million of ticking fees and $ 1.9 million of issuance costs. 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. 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. 78 Table of Contents 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: (in thousands) December 31, 2024 December 31, 2023 Redeemable senior preferred stock $ — $ 225,000 Accumulated unpaid dividend — 43,498 Dividend payable — 7,027 Redemption value — 275,525 Less: unamortized discounts and issuance costs — ( 16,920 ) Redeemable senior preferred stock, net of discounts and issuance costs $ — $ 258,605 The following table provides a reconciliation of the beginning and ending carrying amounts of the redeemable senior preferred stock for the periods presented: (in thousands) Shares Amount January 1, 2023 225 $ 235,579 Unpaid dividend on redeemable senior preferred stock — 18,000 Accretion of discounts and issuance cost — 3,340 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 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 — — On June 30, 2023, the Company amended the Certificate of Designation of its redeemable senior preferred stock to transition the reference rate used for the calculation of dividends from LIBOR to SOFR. Under the Amended Certificate of Designation, the dividend rate (capped at 22.50 %) will be equal to the three-month term SOFR (minimum of 1.00 %), plus the three-month term SOFR spread adjustment of 0.26 % plus the applicable margin of 12.00 %. All other terms in the agreement were unchanged. For the 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 shareholder approval for a forced sale 79 Table of Contents 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, 2024 Year Ended December 31, 2023 Dividends paid in cash (1) $ 16,619 $ 26,404 Accumulated dividends accrued as part of the carrying value of redeemable senior preferred stock 11,059 18,000 Dividends declared $ 27,678 $ 44,404 (1) Included in this amount is $ 0.0 million and $ 7.0 million of dividends outstanding as of December 31, 2024 and 2023 respectively. The following table presents cumulative dividends in arrears in aggregate and per-share: (in thousands, except per share amounts) Year Ended December 31, 2024 Year Ended December 31, 2023 Cumulative preferred dividends in arrears $ — $ 43,498 Redeemable senior preferred stock, outstanding — 225 Cumulative preferred dividends in arrears, per share $ — $ 193.3 Warrants 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 . The exercise price and the number of shares issuable upon exercise of the warrants are subject to certain adjustments from time to time on the terms outlined in the warrants. These warrants were exercisable upon issuance. In connection with the issuance of the warrants, the Company entered into an agreement pursuant to which it agreed to provide certain registration rights with respect to the common shares issuable upon exercise of the warrants. Under this agreement, the holders of the related shares of Common Stock were granted piggyback rights to be included in certain underwritten offerings of Common Stock and the right to demand a shelf registration of the shares of Common Stock issued upon exercise of the warrants. As of December 31, 2024, none of the warrants have been exercised. The warrants are considered to be equity contracts indexed in the Company's own shares and therefore were recorded at their inception date relative fair value and are included in additional paid-in capital on the Company's Consolidated Balance Sheet. 80 Table of Contents 12. Income Taxes Components of consolidated income tax expense were as follows: (in thousands) For the Years Ended December 31, 2024 2023 2022 U.S. current income tax expense Federal $ 12,094 $ 10,624 $ 10,411 State and local 3,085 3,187 2,546 Foreign 281 738 349 Total current income tax expense $ 15,460 $ 14,549 $ 13,306 U.S. deferred income tax (benefit) expense Federal $ ( 2,213 ) $ ( 5,149 ) $ ( 5,001 ) State and local ( 101 ) ( 712 ) ( 2,970 ) Foreign 120 ( 225 ) 15 Total deferred income tax (benefit) expense $ ( 2,194 ) $ ( 6,086 ) $ ( 7,956 ) 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 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 U.S. 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 expense pursuant to ASU 2016-09 128 235 4 Valuation allowance changes 2,204 3,958 4,957 Nondeductible items 1,045 768 576 Intangible assets — — ( 1,226 ) Tax credits ( 275 ) — ( 100 ) Other, net ( 71 ) 298 ( 96 ) 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. The significant components of consolidated deferred income taxes were as follows: 81 Table of Contents As of December 31, (in thousands) 2024 2023 Deferred Tax Assets: Accruals and reserves $ 1,566 $ 1,392 Investments in partnership 2,561 689 Intangible assets 29,166 25,682 Net operating loss carryforwards 1,012 934 Interest limitation carryforwards 19,821 18,917 Other 3,832 3,982 Gross deferred tax assets 57,958 51,596 Valuation allowance ( 21,625 ) ( 19,421 ) Total deferred tax assets 36,333 32,175 Deferred Tax Liabilities: Prepaid assets $ ( 1,457 ) $ ( 1,124 ) Property and equipment ( 10,179 ) ( 8,518 ) Total deferred tax liabilities ( 11,636 ) ( 9,642 ) Net deferred tax assets $ 24,697 $ 22,533 In accordance with the provisions of ASC 740, Income Taxes , the Company provides a valuation allowance against deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The assessment considers all available positive and negative evidence and is measured quarterly. As of December 31, 2024 and 2023, the Company had a consolidated valuation allowance of approximately $ 21.6 million and $ 19.4 million, respectively, against certain deferred income tax assets related to business interest deduction carryovers and business combination costs that the Company believes are not more likely than not to be realized. The Company recognizes the tax effects of uncertain tax positions only if such positions are more likely than not to be sustained based solely upon its technical merits at the reporting date. The Company refers to the difference between the tax benefit recognized in its financial statements and the tax benefit claimed in the income tax return as an "unrecognized tax benefit." A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: (in thousands) Balance as of January 1, 2024 $ 154 Additions based on tax positions related to the current year — Additions based on positions of prior years 22 Reductions for tax positions of prior years — Reductions related to lapse of the applicable statutes of limitations ( 96 ) Settlements — Balance as of December 31, 2024 $ 80 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. It is reasonably possible that the liability for uncertain tax benefits could decrease during the next 12 months by up to $ 0.1 million due to the expiration of statutes of limitations. The Company is subject to U.S. federal income tax and income tax in multiple state jurisdictions. Tax periods for December 31, 2021 and all years thereafter remain open to examination by the federal and state taxing jurisdictions and tax periods for December 31, 2020 and all years thereafter remain open for certain state taxing jurisdictions to which the Company is subject. 82 Table of Contents At December 31, 2024 and December 31, 2023, the Company had state NOL carryforwards of approximately $ 19.9 million and $ 17.9 million, respectively, with expirations dates ranging from 2024 to 2044. The Company has historically been impacted by the new interest deductibility rule under the Tax Act. This rule disallows interest expense to the extent it exceeds 30% of ATI, as defined. In March 2020, the CARES Act was enacted, which among other provisions, provides for the increase of the 163(j) ATI limitation from 30% to 50% for tax years 2019 and 2020. As of December 31, 2024, the Company had interest deduction limitation carryforwards of $ 87.6 million. 13. 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. Historically, the Company has neither declared nor paid dividends. The holders of the Company's Common Stock have no conversion, preemptive or other subscription rights and there is no sinking fund or redemption provisions applicable to the Common Stock. The Company is authorized to issue 100,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. As of December 31, 2024, the Company has not issued any shares of preferred stock. Share Repurchase Program 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. 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. 14. Stock-based Compensation 2018 Equity Incentive Plan The 2018 Plan was approved by the Company's Board of Directors and shareholders in July 2018. The 2018 Plan provided for the issuance of up to 6,685,696 of the Company's Common Stock, and these shares were registered on a Form S-8 during 2018. Under the 2018 Plan, the Company's compensation committee may grant awards of non-qualified stock options, incentive stock options, SARs, restricted stock awards, RSUs, other stock-based awards (including cash bonus awards) or any combination of the foregoing. Any current or prospective employees, officers, consultants or advisors that the Company's compensation committee (or, in the case of non-employee directors, the Company's Board of Directors) selects, from time to time, are eligible to receive awards under the 2018 Plan. If any award granted under the 2018 Plan expires, terminates, or is canceled or forfeited without being settled or exercised, or if a SAR is settled in cash or otherwise without the issuance of shares, shares of the Company's Common Stock subject to such award will again be made available for future grants. In addition, if any shares are surrendered or tendered to pay the exercise price of an award or to satisfy withholding taxes owed, such shares will again be available for grants under the 2018 Plan. On March 17, 2022, the Company's Board of Directors unanimously approved an amendment to the 2018 Plan which was subsequently approved by our shareholders, to increase the number of shares authorized for issuance under the plan by 2,500,000 shares, resulting in 9,185,696 shares of the Company's Common Stock authorized for issuance under the plan. These additional shares were registered on Form S-8 in December 2022. 83 Table of Contents Stock-based compensation was as follows: Years Ended December 31, (in thousands) 2024 2023 2022 2018 Equity Incentive Plan Restricted stock units compensation expense $ 5,897 $ 6,423 $ 6,182 Stock options compensation expense 4 7 7 Total stock-based compensation under the 2018 Equity Incentive Plan 5,901 6,430 6,189 ESPP compensation expense 56 50 39 Incentive units compensation expense 161 288 — Total $ 6,118 $ 6,768 $ 6,228 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. A summary of the activity in stock units for the 2018 Plan is as follows: 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 RSUs granted ( 2,878,949 ) PSUs granted (2) ( 345,000 ) RSUs forfeited 353,196 PSUs forfeited — Shares withheld for taxes (1) 291,266 Common Stock available for issuance at December 31, 2022 3,505,286 Stock options forfeited 129,380 RSUs granted ( 641,578 ) PSUs granted — RSUs forfeited 226,100 PSUs forfeited 37,500 Shares withheld for taxes (1) 291,110 Common Stock available for issuance at December 31, 2023 3,547,798 Stock options forfeited 14,302 RSUs granted ( 1,132,450 ) PSUs granted ( 10,753 ) RSUs forfeited 403,750 PSUs forfeited 1,666 Shares withheld for taxes (1) 326,282 Common Stock available for issuance at December 31, 2024 3,150,595 (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. 84 Table of Contents (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: Number of Shares Weighted-average Exercise Price Weighted-average Remaining Contractual Term Aggregate Intrinsic Value (in thousands) Outstanding, December 31, 2023 876,512 $ 6.87 4.9 years $ 16 Exercised ( 267,384 ) 6.95 Forfeited (1) ( 14,302 ) 6.95 Outstanding, December 31, 2024 594,826 6.84 3.9 years $ 2,922 Exercisable at December 31, 2024 594,826 $ 6.84 3.9 years $ 2,922 (1) Forfeited includes awards for which the participant has been terminated but has 90 days from the date of termination to exercise the award based on the agreement. There were no options granted in 2024, 2023, or 2022. 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. 85 Table of Contents Equity-classified Restricted Stock Units 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 Service-based vesting: Unvested at January 1, 2022 879,250 $ 5.51 Granted (1) 2,878,948 $ 6.14 Forfeited ( 353,196 ) $ 6.04 Vested ( 822,602 ) $ 5.44 Unvested at December 31, 2022 2,582,400 $ 5.70 Granted (1) 641,578 $ 3.81 Forfeited ( 226,100 ) $ 5.44 Vested ( 1,028,782 ) $ 5.60 Unvested at December 31, 2023 1,969,096 $ 5.68 Granted (1) 1,132,450 $ 4.37 Forfeited ( 403,750 ) $ 6.37 Vested ( 1,037,012 ) $ 5.06 Unvested at December 31, 2024 1,660,784 $ 5.00 Performance-based vesting: Unvested at January 1, 2022 99,453 $ 4.46 Granted (2) 64,366 $ 5.00 Vested ( 64,366 ) $ 6.90 Unvested at December 31, 2022 99,453 $ 3.24 Granted (2) 345,000 $ 5.31 Forfeited ( 37,500 ) $ 5.31 Vested ( 116,958 ) $ 5.12 Unvested at December 31, 2023 289,995 $ 5.31 Granted 10,753 $ 9.30 Forfeited ( 1,666 ) $ 5.31 Vested ( 101,674 ) $ 5.31 Unvested at December 31, 2024 197,408 $ 5.56 (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. (2) Includes only the portions of grants for which the performance goals have been determined and communicated to the grant recipient. 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, 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 86 Table of Contents 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. Employee Stock Purchase Plan On April 16, 2021, the 2021 Stock Purchase Plan was authorized by the Company's Board of Directors. The maximum number of shares available for purchase under the 2021 Stock Purchase Plan is 200,000 shares. The shares issued under the 2021 Stock Purchase Plan may be authorized but unissued or reacquired shares of Common Stock. All employees of the Company who work more than 20 hours per week and have been employed by the Company for at least 30 days may participate in the 2021 Stock Purchase Plan. Under the 2021 Stock Purchase Plan, participants are offered, on the first day of the offering period, the option to purchase shares of Common Stock at a discount on the last day of the offering period. The offering period shall be for a period of three months, and the first offering period began during the first quarter of 2022. The 2021 Stock Purchase Plan provides eligible employees the opportunity to purchase shares of the Company's Common Stock on a quarterly basis through payroll deductions at a price equal to 95 % of the lesser of the fair value on the first and last trading day of each quarter. As of December 31, 2024, the Company had 45,018 shares available under the 2021 Stock Purchase Plan. 15. Employee Benefit Plans The Company sponsors a 401(k) defined contribution savings plan that covers substantially all of its eligible employees. Under the plan, the Company contributes safe-harbor matching contributions to eligible plan participants on an annual basis. The Company may also contribute additional discretionary amounts to plan participants. The Company's contributions to the plan were $ 2.4 million, $ 2.0 million and $ 1.7 million for the years ended December 31, 2024, 2023 and 2022, respectively. The Company offers a comprehensive medical benefit plan to eligible employees. All obligations under the plan are fully insured through third-party insurance companies. Employees participating in the medical plan pay a portion of the costs for the insurance benefits. 16. 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. 87 Table of Contents 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. 17. Commitments and Contingencies Minimum Annual Commitments with Third-party Processors The Company has multi-year agreements with third parties to provide certain payment processing services to the Company. The Company pays processing fees under these agreements that are based on the volume and dollar amounts of processed payment transactions. Some of these agreements have minimum annual requirements for processing volumes. 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. 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. The Company is obligated to make the contributions within 10 business days of receiving notice for such contribution from the subsidiary. 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 See Note 4. Settlement Assets and Customer/Subscriber Account Balances and Related Obligations , for information about merchant reserves. 88 Table of Contents Contingent Consideration The following table provides a reconciliation of the beginning and ending balance of the Company's contingent consideration liabilities related to completed acquisitions: (in thousands) Contingent Consideration Liabilities January 1, 2023 $ 8,079 Addition of contingent consideration (related to asset acquisition) 263 Addition of contingent consideration due to resolution of contingency 7,000 Addition of contingent consideration (related to business combination) 8,419 Accretion of contingent consideration 1,658 Fair value adjustments due to changes in estimates of future payments ( 19 ) Payment of contingent consideration ( 9,909 ) Adjustment for receivable due to residual shortfall ( 2,053 ) 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 The Company is involved in certain legal proceedings and claims which arise in the ordinary course of business. In the opinion of the Company and based on consultations with inside and outside counsel, the results of any of these matters, individually and in the aggregate, are not expected to have a material effect on the Company's results of operations, financial condition or cash flows. As more information becomes available, and the Company determines that an unfavorable outcome is probable on a claim and that the amount of probable loss that the Company will incur on that claim is reasonably estimable, the Company will record an accrued expense for the claim in question. If and when the Company records such an accrual, it could be material and could adversely impact the Company's results of operations, financial condition and cash flows. The Company is 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. (“Wholesale”), Priority Technology Holdings, Inc., Priority Payment Systems (“PPS”), LLC and Wells Fargo Bank, N.A. (“Wells Fargo”). 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. 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 The Company's revenue is substantially derived from processing Visa and Mastercard bankcard transactions. Because the Company is not a member bank, to process these bankcard transactions, the Company maintains sponsorship agreements with member banks which require, among other things, that the Company abide by the by-laws and regulations of the card association. 89 Table of Contents A majority of the Company's cash and restricted cash is held in certain FIs, substantially all of which is in excess of federal deposit insurance corporation limits. The Company does not believe it is exposed to any significant credit risk from these transactions. 18. Fair Value Fair Value Measurements The Company's contingent consideration derived from business combinations are classified within Level 3 of the fair value hierarchy due to the uncertainty of the fair value measurement created by the absence of quoted market prices, the inherent lack of liquidity and unobservable inputs used to measure fair value which require judgement. 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. These liabilities measured at fair value on a recurring basis consisted of the following: Years Ended December 31, (in thousands) Fair Value Hierarchy 2024 2023 Contingent consideration, current portion Level 3 $ 3,891 $ 5,951 Contingent consideration, noncurrent portion Level 3 6,794 7,487 Total contingent consideration $ 10,685 $ 13,438 During the year ended December 31, 2024, there were no transfers into, out of, or between levels of the fair value hierarchy. Fair Value Disclosures Notes Receivable Notes receivable are carried at amortized cost. Substantially all of the Company's notes receivable are secured, and the Company provides for allowances when it believes that certain notes receivable may not be collectible. The carrying value of the Company's notes receivable, net approximates fair value 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. Debt Obligations Outstanding debt obligations (see Note 10. Debt Obligations ) are reflected in the Company's Consolidated Balance Sheets at carrying value since the Company did not elect to remeasure debt obligations to fair value at the end of each reporting period. The fair value of the term loan facility was estimated to be approximately $ 944.4 million and $ 651.9 million at December 31, 2024 and 2023, respectively, and was estimated using binding and non-binding quoted market prices in an active secondary market, which considers the credit risk and market related conditions, and is within Level 2 of the fair value hierarchy. The carrying values of the other long-term debt obligations approximate fair value due to mechanisms in the credit agreements that adjust the applicable interest rates and the lack of a market for these debt obligations. 19. Segment Information The Company's three reportable segments included SMB Payments, B2B Payments and Enterprise Payments. 90 Table of Contents More information about our three reportable segments: • SMB Payments : Provides full-service acquiring and payment-enabled solutions for B2C transactions, leveraging Priority's proprietary software platform, distributed through ISO, direct sales and vertically focused ISV channels. • B2B Payments : Provides market-leading AP automation solutions to corporations, software partners and industry leading FIs (including Citibank, 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. Corporate includes costs of corporate functions and shared services not allocated to our reportable segments. 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: 91 Table of Contents 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 Less: Cost of services (excludes depreciation and amortization) 1,4 ( 478,451 ) ( 64,659 ) ( 11,892 ) ( 555,002 ) Less: Other operating expenses 1,2,4 ( 59,099 ) ( 22,317 ) ( 31,413 ) ( 112,829 ) Add: Depreciation and amortization 4 30,865 5,258 16,928 53,051 Add: 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 expenses ( 10,369 ) Selling, general and administrative (non-recurring) ( 3,510 ) Non-cash stock based compensation ( 6,118 ) Income before income taxes $ 37,281 1. The significant expense categories and amounts align with the segment level information regularly provided to the CODM. 2. Other operating expenses include salary and employee benefits, depreciation and amortization, and selling, general and administrative expenses. 3. Other segment items for each reportable segment include other income, net and stock based compensation expense. 4. 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 9,669 $ ( 63,791 ) 5. Other items include other income, net, stock based compensation expense, and selling, general and administrative (non-recurring expenses). 92 Table of Contents 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 Less: Cost of services (excludes depreciation and amortization) 1,4 ( 446,188 ) ( 26,607 ) ( 8,456 ) ( 481,251 ) Less: Other operating expenses 1,2,4 ( 65,880 ) ( 14,684 ) ( 35,815 ) ( 116,379 ) Add: Depreciation and amortization 4 36,715 1,831 22,426 60,972 Add: 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 1. The significant expense categories and amounts align with the segment level information regularly provided to the CODM. 2. Other operating expenses include salary and employee benefits, depreciation and amortization, and selling, general and administrative expenses. 3. Other segment items for each reportable segment include other income, net and stock based compensation expense. 4. 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 15,720 $ ( 53,315 ) 5. Other items include other income, net, stock based compensation expense, selling, general and administrative (non-recurring expenses) and non-cash other losses. 93 Table of Contents 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 Less: Cost of services (excludes depreciation and amortization) 1,4 ( 422,387 ) ( 7,781 ) ( 6,585 ) ( 436,753 ) Less: Other operating expenses 1,2,4 ( 59,775 ) ( 8,297 ) ( 34,581 ) ( 102,653 ) Add: Depreciation and amortization 4 37,193 162 24,734 62,089 Add: 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 1. The significant expense categories and amounts align with the segment level information regularly provided to the CODM. 2. Other operating expenses include salary and employee benefits, depreciation and amortization, and selling, general and administrative expenses. 3. Other segment items for each reportable segment include other income, net and stock based compensation expense. 4. 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 13,179 $ ( 46,299 ) 94 Table of Contents 20. (Loss) Earnings per Common Share The following tables set forth the computation of the Company's basic and diluted earnings (loss) per common share: (in thousands except per share amounts) Years Ended December 31, 2024 2023 2022 Numerator: Net income (loss) $ 24,015 $ ( 1,311 ) ( 2,150 ) Less: Dividends, accretion, and related excise tax attributable to redeemable senior preferred stockholders ( 47,336 ) ( 47,744 ) ( 36,880 ) Less: NCI preferred unit redemptions ( 639 ) — — Less: Earnings attributable to NCI — — — Net loss attributable to common shareholders $ ( 23,960 ) $ ( 49,055 ) $ ( 39,030 ) Denominator: Basic and diluted: Weighted-average common shares outstanding (1) 77,993 78,333 78,233 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 ) . Potentially anti-dilutive securities that were excluded from (loss) earnings per common share that could potentially be dilutive in future periods are as follows: Common Stock Equivalents at December 31, (in thousands) 2024 2023 2022 Outstanding warrants on common stock (1) — — 3,556 Outstanding options and warrants issued to adviser (2) — — 600 Restricted stock awards (3) 721 1,180 2,440 Outstanding stock option awards (3) 840 900 1,098 Total 1,561 2,080 7,694 (1) The warrants were exercisable at $ 11.50 per share and expired on August 24, 2023. Refer to Note 13. Shareholders' Deficit . (2) The warrants and options were exercisable at $ 12.00 per share and expired on August 24, 2023. Refer Note 13. Shareholders' Deficit . (3) Granted under the 2018 Plan. 21. Subsequent Events 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. 95 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure N/A