What changed in this filing

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Item 1. Financial Statements

2025-05-06 compared with 2024-11-07 · 240 added, 388 removed, 437 unchanged (59% of the section changed)

Financial Statements

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Current assets:

14 unchanged sentences

Total assets $ 1,891,658 $ 1,826,860

Liabilities, Redeemable Senior Preferred Stock, Redeemable NCI, and Stockholders' Deficit

Liabilities, Stockholders' Deficit and NCI

Current liabilities:

9 unchanged sentences

Commitments and contingencies ( Note 13 )

Redeemable senior preferred stock, net of discounts and issuance costs:

Redeemable senior preferred stock, $ 0.001 par value;

250,000 shares authorized;

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

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

105,098 258,605

Stockholders' deficit:

1 unchanged sentence

100,000,000 shares authorized;

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

0 issued or outstanding at March 31, 2025 and December 31, 2024

Common Stock, $ 0.001 par value;

1,000,000,000 shares authorized;

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

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

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

84,219,962 and 81,866,711 shares issued at March 31, 2025 and December 31, 2024, respectively;

and 79,711,642 and 77,479,908 shares outstanding at March 31, 2025 and December 31, 2024, respectively

Treasury stock at cost, 4,508,320 and 4,386,803 shares at March 31, 2025 and December 31, 2024, respectively

( 21,077 ) ( 19,607 )

5 unchanged sentences

Total stockholders' deficit ( 156,425 ) ( 165,025 )

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

Total liabilities, stockholders' deficit and NCI $ 1,891,658 $ 1,826,860

Priority Technology Holdings, Inc .

1 unchanged sentence

(in thousands, except per share amounts)

Three Months Ended September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Three Months Ended

Revenues $ 224,630 $ 205,719

13 unchanged sentences

Income tax expense 2,250 2,582

Net income (loss) 10,608 ( 87 ) 16,795 ( 1,205 )

Net income 8,268 5,193

Dividends and accretion attributable to redeemable senior preferred stockholders — ( 12,662 )

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

Return on redeemable NCI — ( 581 )

Net income (loss) attributable to common stockholders 8,268 ( 8,050 )

17 unchanged sentences

Equity-classified stock-based compensation — — — — 1,499 — — 1,499 — 1,499

ESPP compensation and vesting of stock-based compensation 429 — — — 49 — — 49 — 49

Vesting of stock-based compensation and ESPP compensation 534 1 — — 62 — — 63 — 63

Shares withheld for taxes ( 122 ) — 122 ( 1,470 ) — — — ( 1,470 ) — ( 1,470 )

Exchange for PHOT redeemable NCI ( 1,428 ) ( 1 ) 1,428 ( 5,255 ) ( 581 ) — — ( 5,837 ) — ( 5,837 )

Dividends on redeemable senior preferred stock — — — — ( 11,821 ) — — ( 11,821 ) — ( 11,821 )

Accretion of redeemable senior preferred stock — — — — ( 841 ) — — ( 841 ) — ( 841 )

Issuance of profit interests/common equity in subsidiaries — — — — — — — — 93 93

Exercise of stock options 16 — — — 110 — — 110 — 110

Exercise of warrants 1,804 2 — — ( 2 ) — — — — —

Issuance of profit interests in subsidiaries — — — — — — — — 87 87

Foreign currency translation adjustment — — — — — 43 — 43 — 43

Reclassification of negative additional paid in capital — — — — 11,654 — ( 11,654 ) — — —

Net income — — — — — — 8,268 8,268 — 8,268

March 31, 2025 79,712 $ 80 4,508 $ ( 21,077 ) $ 1,669 $ ( 133 ) $ ( 138,866 ) $ ( 158,327 ) $ 1,902 $ ( 156,425 )

Equity-classified stock-based compensation — — — — 1,744 — — 1,744 — 1,744

ESPP compensation and vesting of stock-based compensation 190 — — — 60 — — 60 — 60

Shares withheld for taxes ( 57 ) — 57 ( 182 ) — — — ( 182 ) — ( 182 )

Redemption of PHOT redeemable NCI — — — — 3,765 — — 3,765 — 3,765

Return on PHOT redeemable NCI — — — — ( 58 ) — — ( 58 ) ( 58 )

Dividends on redeemable senior preferred stock — — — — ( 8,426 ) — — ( 8,426 ) — ( 8,426 )

Accretion of redeemable senior preferred stock — — — — ( 10,139 ) — — ( 10,139 ) — ( 10,139 )

Issuance of profit interests/ common equity in subsidiaries — — — — — — — — 85 85

Foreign currency translation adjustment — — — — — 4 — 4 — 4

Reclassification of negative additional paid-in capital — — — — 13,054 — ( 13,054 ) — — —

Net income — — — — — — 994 994 — 994

Priority Technology Holdings, Inc.

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

(in thousands)

Stock Treasury

1 unchanged sentence

Shares $ Shares $

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

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

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

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

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

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

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

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

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

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

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

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

Priority Technology Holdings, Inc.

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

(in thousands)

Stock Treasury

Stock APIC AOCI Accumulated Deficit Deficit Attributable to Stockholders NCIs Total

Shares $ Shares $

December 31, 2023 76,957 $ 77 2,632 $ ( 12,815 ) $ — $ ( 29 ) $ ( 134,951 ) $ ( 147,718 ) $ 1,654 $ ( 146,064 )

Equity-classified stock-based compensation — — — — 1,540 — — 1,540 — 1,540

ESPP compensation and vesting of stock-based compensation 517 — — — 37 — — 37 — 37

Shares withheld for taxes ( 157 ) — 157 ( 777 ) — — — ( 777 ) — ( 777 )

Dividends on redeemable senior preferred stock — — — — ( 10,477 ) — — ( 10,477 ) — ( 10,477 )

Accretion of redeemable senior preferred stock — — — — ( 818 ) — — ( 818 ) — ( 818 )

Adjustment to NCI — — — — — — — — ( 403 ) ( 403 )

Foreign currency translation adjustment — — — — — 24 — 24 — 24

Net loss — — — — — — ( 506 ) ( 506 ) — ( 506 )

March 31, 2023 76,404 $ 76 2,498 $ ( 12,336 ) $ 328 $ 24 $ ( 102,714 ) $ ( 114,622 ) $ 852 $ ( 113,770 )

Equity-classified stock-based compensation — — — — 1,746 — — 1,746 — 1,746

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

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

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

Accretion of redeemable senior preferred stock — — — — ( 831 ) — — ( 831 ) — ( 831 )

Foreign currency translation adjustment — — — — — 7 — 7 — 7

Reclassification of negative additional paid-in capital — — — — 9,648 — ( 9,648 ) — — —

Net income — — — — — — ( 612 ) ( 612 ) — ( 612 )

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

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

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

Vesting of stock-based compensation 429 — — — 49 — — 49 — 49

Shares withheld for taxes ( 123 ) — 123 ( 421 ) — — — ( 421 ) — ( 421 )

Exchange for PHOT redeemable NCI ( 1,428 ) ( 1 ) 1,428 ( 5,255 ) ( 581 ) — — ( 5,837 ) — ( 5,837 )

Dividends on redeemable senior preferred stock — — — — ( 11,821 ) — — ( 11,821 ) — ( 11,821 )

Accretion of redeemable senior preferred stock — — — — ( 841 ) — — ( 841 ) — ( 841 )

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

Issuance of profit interests/common equity in subsidiaries — — — — — — — — 93 93

Foreign currency translation adjustment — — — — — ( 13 ) — ( 13 ) — ( 13 )

1 unchanged sentence

Net income — — — — — — 5,193 5,193 — 5,193

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

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

March 31, 2024 75,835 $ 76 4,183 $ ( 18,491 ) $ — $ ( 42 ) $ ( 141,412 ) $ ( 159,869 ) $ 1,747 $ ( 158,122 )

Priority Technology Holdings, Inc .

1 unchanged sentence

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Net income (loss) $ 16,795 $ ( 1,205 )

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

Net income $ 8,268 $ 5,193

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization of assets 13,777 15,253

18 unchanged sentences

Notes receivable, net ( 147 ) ( 1,059 )

Acquisitions of assets and other investing activities ( 7,474 ) ( 7,925 )

Net cash used in investing activities ( 9,715 ) ( 7,669 )

Cash flows from financing activities:

Proceeds from issuance of long-term debt, net of issue discount 830,200 —

Debt issuance and modification costs paid ( 40 ) —

Repayments of long-term debt ( 10,000 ) ( 1,678 )

Borrowings under revolving credit facility — 44,000

Repayments of borrowings under revolving credit facility — ( 23,500 )

Redemption of PHOT redeemable NCI ( 2,130 ) —

Repurchases of shares withheld for taxes ( 1,470 ) ( 421 )

Redemption of senior preferred stock ( 136,936 ) —

Redemption of accumulated unpaid dividend on redeemable senior preferred stock ( 30,819 ) —

Dividends paid to redeemable senior preferred stockholders — ( 7,027 )

Proceeds from exercise of stock options 110 —

Settlement and customer/subscriber accounts obligations, net 59,060 1,918

Payment of contingent consideration related to business combination ( 400 ) ( 3,071 )

Net cash provided by financing activities 84,716 157,029

Net cash provided by (used in) financing activities 47,260 ( 10,279 )

Net change in cash and cash equivalents and restricted cash:

2 unchanged sentences

Cash and cash equivalents and restricted cash at end of period $ 1,041,365 $ 791,582

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

Priority Technology Holdings, Inc .

1 unchanged sentence

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Reconciliation of cash and cash equivalents, and restricted cash:

1 unchanged sentence

Restricted cash 11,490 12,658

Cash and cash equivalents included in settlement assets and customer/subscriber account balances (see Note 4 )

Cash and cash equivalents included in settlement assets and customer/subscriber account balances (restricted in nature) (see Note 4 )

982,288 744,634

3 unchanged sentences

Non-cash investing and financing activities:

Adjustment to value of profit interest units $ — $ 596

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

Measurement period adjustment to purchase price $ 12 $ 110

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

Deferred consideration accrual $ 6,500 $ —

Foreign currency adjustment to goodwill $ 62 $ —

Issuance of NCI $ — $ 93

(1) Paid on October 2, 2023

See Notes to Unaudited Consolidated Statements

7 unchanged sentences

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

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

The Company operates on a calendar year ending each December 31 and on four calendar quarters ending on March 31, June 30, September 30 and December 31 of each year.

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

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 and treasury solutions.

The Company operates on a calendar year ending each December 31 and reports quarterly results on four calendar quarters ending on March 31, June 30, September 30 and December 31 of each year.

Results of operations reported for interim periods are not necessarily indicative of results for the entire year.

5 unchanged sentences

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

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

As of March 31, 2025, there was no income attributable to NCI in accordance with the applicable operating agreements.

In the opinion of the Company's management, all known adjustments necessary for a fair presentation of the Unaudited Consolidated Financial Statements for interim periods have been made.

13 unchanged sentences

Translation adjustments are reported as a component of accumulated other comprehensive income (loss).

Recently Issued Accounting Standards Pending Adoption

Segment Reporting ASU 2023-07

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

Improvements to Reportable Segment Disclosures, which requires incremental reportable segment disclosures, primarily about significant segment expenses.

The amendments also require entities with a single reportable segment to provide all disclosures required by these amendments, and all existing segment disclosures.

This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods after December 15, 2024.

The Company will adopt this guidance for the year ended December 31, 2024.

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

Recently Issued Accounting Standards

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.

Implementation of this standard is not expected to have any significant impact on results of operations, financial position or cash flows, however, the Company is in the process of evaluating the potential effects.

Income Taxes ASU 2023-09

3 unchanged sentences

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

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

Profit Interest ASU 2024-01

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.

Plastiq Acquisition

On May 23, 2023, Priority’s subsidiary, Plastiq, Powered by Priority, LLC (the "acquiring entity"), entered into a stalking horse equity and asset purchase agreement (the "Purchase Agreement") with Plastiq, Inc.

and certain of its affiliates ("Plastiq") to acquire substantially all of the assets of Plastiq, including the equity interest in Plastiq Canada, Inc.

Plastiq is a buyer funded B2B payments platform offering bill pay and instant access to working capital to its customers and complements 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)

Common equity of acquiring entity 330

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

Intangible assets (2)

Accounts payable and accrued expenses ( 1,881 )

Customer deposits ( 214 )

Settlement obligations ( 8,279 )

Total purchase consideration $ 36,971

(1) The fair value of the contingent consideration payments issued was determined utilizing a Monte Carlo simulation.

The contingent consideration payments were calculated based on the path for the simulated metrics and the contractual terms of the contingent consideration payments and were discounted to present value at a rate reflecting the risk associated with the payoffs.

The fair value was estimated to be the average present value of the contingent consideration payments over all iterations of the simulation.

(2) The intangible assets acquired consist of $ 13.0 million for customer relationships, $ 7.0 million for referral partner relationships, $ 6.5 million for technology and $ 3.9 million for trade name.

(3) During the first 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.

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

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.

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), and its subsidiary Rentmoola Payment Solutions Ltd (United Kingdom) (jointly referred as "Letus business").

The Letus business is engaged in processing of rent payments for property management companies in the United States and Canada and will complement the Company's Enterprise Payments business.

The acquisition is aimed to provide an opportunity to expand Priority's services in Canada and compliment our existing rent payments business.

The total purchase consideration was $ 11.0 million, consisting of $ 4.5 million in cash consideration funded by the Company’s cash flows and deferred consideration of $ 6.5 million.

The Company has not yet completed its preliminary purchase price allocation and valuation of identified assets (including the acquired intangible assets such as customer relationships, trademarks, technology, etc.) and assumed liabilities.

The tangible assets and liabilities assumed including acquired cash was not material.

The preliminary purchase price allocation is expected to be completed during the period ended June 30, 2025.

Results for the Letus business is included within the Enterprise Payments segment, which includes $ 0.4 million in revenue and a net loss of $ 0.1 million for the three months ended March 31, 2025.

Disaggregation of Revenues

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

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

Three Months Ended March 31,

(in thousands) 2025 2024

9 unchanged sentences

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

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

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

(2) Approximately $ 12.6 million and $ 11.9 million of interest income on customer funds for the three months ended March 31, 2025 and 2024, respectively, is included in outsourced services and other services revenue in the table above.

Approximately $ 1.1 million and $ 0.6 million of interest income on corporate funds for the three months ended March 31, 2025 and 2024, respectively, is included in other income, net on the Company's Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss) and not reflected in the table above.

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

Three Months Ended September 30, 2024

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

SMB Payments $ 153,061 $ — $ 2,405 $ 3,304 $ 158,770

B2B Payments 18,924 — 3,219 — 22,143

Enterprise Payments 521 33,868 12,710 — 47,099

Eliminations ( 692 ) — ( 271 ) — ( 963 )

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

Nine Months Ended September 30, 2024

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

SMB Payments $ 443,557 $ — $ 5,026 $ 9,292 $ 457,875

B2B Payments 55,895 — 9,473 — 65,368

Enterprise Payments 1,325 94,352 36,081 — 131,758

Eliminations ( 1,770 ) — ( 596 ) — ( 2,366 )

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

Three Months Ended September 30, 2023

Three Months Ended March 31, 2025

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

4 unchanged sentences

Total revenues $ 167,079 $ 37,449 $ 17,002 $ 3,100 $ 224,630

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

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

4 unchanged sentences

Total revenues $ 157,947 $ 29,144 $ 15,665 $ 2,963 $ 205,719

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

Deferred revenues were not material for the three months ended March 31, 2025 and 2024.

Contract Assets and Contract Liabilities

Material contract assets and liabilities are presented net at the individual contract level in the Unaudited Consolidated Balance Sheets and are classified as current or noncurrent based on the nature of the underlying contractual rights and obligations.

Contract liabilities were $ 0.5 million and $ 0.6 million as of September 30, 2024 and December 31, 2023, respectively.

Contract liabilities were $ 0.4 million and $ 0.2 million as of March 31, 2025 and December 31, 2024, respectively.

Substantially all of these balances are recognized as revenue within 12 months.

Net contract assets were not material for any period presented.

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

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

Impairment losses recognized on contract assets arising from the Company's contracts with customers were not material for the three months ended March 31, 2025 and 2024.

Impairment losses net of recoveries recognized on receivables arising from the Company's contracts with customers were $ 0.3 million for the three months ended March 31, 2025.

Impairment losses recognized on receivables were immaterial for the three months ended March 31, 2024.

Settlement Assets and Customer/Subscriber Account Balances and Related Obligations

4 unchanged sentences

Therefore, neither is recognized in the Company's Unaudited Consolidated Balance Sheets.

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

Member banks held merchant funds of $ 128.2 million and $ 106.2 million at March 31, 2025 and December 31, 2024, respectively.

Exception items that become the liability of the Company are recorded as merchant losses, a component of cost of revenue in the Company's Unaudited Consolidated Statements of Operations and Comprehensive 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 three and nine months ended September 30, 2024 were $ 2.5 million and $ 8.9 million, respectively.

Expenses for merchant losses for the three and nine months ended September 30, 2023 were $ 1.6 million and $ 3.7 million, respectively.

Expenses for merchant losses net of recoveries for the three months ended March 31, 2025 and 2024 were $ 2.0 million and $ 4.7 million, respectively.

B2B Payments Segment

4 unchanged sentences

Therefore, neither is recognized in the Company's Unaudited Consolidated Balance Sheets.

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

Company-owned bank accounts held $ 1.4 million and $ 1.2 million at September 30, 2024 and December 31, 2023, respectively, which are included in restricted cash and settlement and customer/subscriber account obligations in the Company's Unaudited Consolidated Balance Sheets.

Bank-owned FBO accounts held funds of $ 66.1 million and $ 64.8 million at March 31, 2025 and December 31, 2024, respectively.

Company-owned bank accounts held $ 1.2 million and $ 1.6 million at March 31, 2025 and December 31, 2024, respectively, which are included in restricted cash and settlement and customer/subscriber account obligations in the Company's Unaudited Consolidated Balance Sheets.

Exception items that the Company is still attempting to collect from the customers through the funds settlement process are recognized as settlement assets and customer/subscriber account balances in the Company's Unaudited Consolidated Balance Sheets, with an offsetting reserve for those amounts the Company estimates it will not be able to recover.

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

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

Expenses for these merchant losses for the three months ended March 31, 2025 and 2024 were $ 0.2 million, respectively.

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

2 unchanged sentences

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.

In the Company's Enterprise Payments segment revenue is derived primarily 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.

2 unchanged sentences

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.

The nature of these balances are cash and cash equivalents which is restricted in nature as they are not available for day-to-day operations of the Company.

Therefore, the Company has classified these balances as settlement assets and customer/subscriber account balances and the related obligations as settlement and customer/subscriber account obligations in the Company's Unaudited Consolidated Balance Sheets and these cash and cash equivalents balances are presented as restricted cash on the Company's Unaudited Consolidated Statement of Cash Flows.

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

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

Expenses for merchant losses for the three months ended March 31, 2025 and 2024 were immaterial .

In certain states, the Company accepts deposits under agency arrangement with member banks wherein accepted deposits remain under the control of the member banks.

Therefore, the Company does not record assets for the deposits accepted and liabilities for the associated obligation.

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

Agency owned accounts held $ 45.2 million and $ 22.6 million at March 31, 2025 and December 31, 2024, respectively.

The Company's consolidated settlement assets and customer/subscriber account balances and settlement and customer/subscriber account obligations were as follows:

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

(in thousands) March 31, 2025 December 31, 2024

Settlement Assets, net of estimated losses (1) :

3 unchanged sentences

Customer/subscriber account balances

Cash and cash equivalents 863,587 744,696

Cash and cash equivalents (restricted in nature) 982,288 924,174

Total settlement assets and customer/subscriber account balances $ 1,003,034 $ 940,798

6 unchanged sentences

Total settlement and customer/subscriber account obligations $ 1,003,395 $ 940,213

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

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

(1) Allowance for estimated losses were $ 9.9 million and $ 7.9 million as of March 31, 2025 and December 31, 2024, respectively.

(2) Includes $ 17.2 million and $ 12.3 million as of March 31, 2025 and December 31, 2024, respectively, of card settlements due from networks and the remainder is included in restricted cash on our Unaudited Consolidated Balance Sheets.

Notes Receivable

The Company had notes receivable of $ 6.3 million and $ 5.2 million as of September 30, 2024 and December 31, 2023, respectively, which are reported as current portion of notes receivable and notes receivable less current portion on the Company's Unaudited Consolidated Balance Sheets.

The notes receivable carried weighted-average interest rates of 18.6 % as of September 30, 2024 and December 31, 2023.

The Company had notes receivable of $ 8.7 million and $ 8.6 million as of March 31, 2025 and December 31, 2024, respectively, which are reported as current portion of notes receivable and notes receivable less current portion on the Company's Unaudited Consolidated Balance Sheets.

The notes receivable carried weighted-average interest rates of 16.8 % and 16.9 % as of March 31, 2025 and December 31, 2024, 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 September 30, 2024 and December 31, 2023, the Company had no allowance for doubtful notes receivable.

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

As of March 31, 2025 and December 31, 2024, the Company had no allowance for doubtful notes receivable.

As of March 31, 2025, the principal payments for the Company's notes receivable are due as follows:

(in thousands)

Twelve months ending September 30,

Twelve months ending March 31,

After 2029 2,083

Total $ 8,704

1 unchanged sentence

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

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

(in thousands) March 31, 2025 December 31, 2024

Computer software $ 110,666 $ 104,683

6 unchanged sentences

Property, equipment and software, net $ 53,718 $ 52,477

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

Three Months Ended March 31,

(in thousands) 2025 2024

2 unchanged sentences

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

During the nine months ended September 30, 2024 , certain fully depreciated assets were removed from service.

No assets were removed from service during three months ended March 31, 2025 while certain fully depreciated assets were removed from service during the three months ended March 31, 2024.

Goodwill and Other Intangible Assets

The Company's goodwill relates to the following reporting units:

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

(in thousands) March 31, 2025 December 31, 2024

SMB Payments $ 124,139 $ 124,139

5 unchanged sentences

Balance at December 31, 2024 $ 376,091

Plastiq adjustment ( 12 )

Balance at September 30, 2024

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

Payslate acquisition 10,669

Foreign currency translation adjustment 62

Balance at March 31, 2025

As of March 31, 2025, the Company is not aware of any triggering events for impairment that have occurred since the last annual impairment test.

Other Intangible Assets

Other intangible assets consisted of the following:

September 30, 2024 Weighted-average

March 31, 2025 Weighted-average

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

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(1) These assets have an indefinite useful life.

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

Three Months Ended March 31,

(in thousands) 2025 2024

1 unchanged sentence

$ 9,915 $ 12,083

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

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

(1) Included in amortization expense is $ 0.6 million and $ 0.4 million for the three months ended March 31, 2025 and 2024, respectively, related to the amortization of certain contract acquisition costs.

As of March 31, 2025, there were no impairment indicators present.

Debt Obligations

Outstanding debt obligations consisted of the following:

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

2024 Credit Agreement

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

Term facility - matures May 16, 2031, interest rate of 9.07 % and 9.11 % at March 31, 2025 and December 31, 2024, respectively

$ 935,537 $ 945,537

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

2021 Credit Agreement - refinanced on May 16, 2024

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

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

Revolving credit facility - $ 70.0 million line matures May 16, 2029, interest rate of 8.57 % and 8.61 % at March 31, 2025 and December 31, 2024, respectively

Total debt obligations 935,537 945,537

2 unchanged sentences

Long-term debt, net $ 918,944 $ 920,888

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 9.

Redeemable Securities ).

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

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

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

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.

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 loan parties are required to comply with certain restrictions on its Total Net Leverage Ratio.

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

1) 6.90 :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 September 30, 2024, the Company was in compliance with the covenants in the 2024 Credit Agreement.

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 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 Credit Agreement).

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

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

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Interest expense for outstanding debt, including fees for undrawn amounts and amortization of deferred financing costs and debt discounts was as follows:

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

Three Months Ended March 31,

(in thousands) 2025 2024

1 unchanged sentence

$ 23,176 $ 20,880

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

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

Redeemable Senior Preferred Stock and Warrants

The redeemable senior preferred stock ranks senior to the Company's Common Stock, equal with any other class of the Company's stock designated as being ranked on a parity basis with the redeemable senior preferred stock and junior to any other class of the Company's stock, including preferred stock, that is designated as being ranked senior to the redeemable senior preferred stock, with respect to the payment and distribution of dividends, the purchase or redemption of the Company's stock and the liquidation, winding up of and distribution of assets of the Company.

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

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

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

Accumulated unpaid dividend 22,639 43,498

Dividend payable — 7,027

Redemption value 110,703 275,525

unamortized discounts and issuance costs ( 5,605 ) ( 16,920 )

Redeemable senior preferred stock, net of discounts and issuance costs:

$ 105,098 $ 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

December 31, 2023 225 $ 258,605

Unpaid dividend on redeemable senior preferred stock — 4,699

Accretion of discounts and issuance costs — 841

Cash portion of dividend outstanding at March 31, 2024 — 7,122

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

March 31, 2024 225 264,240

Redemption of senior preferred stock (1)

( 137 ) ( 166,268 )

Unpaid dividend on redeemable senior preferred stock — 1,871

Accretion of discounts and issuance costs — 10,139

Cash portion of dividend outstanding at June 30, 2024 — 2,824

Payment of cash portion of dividend outstanding at March 31, 2024 — ( 7,122 )

June 30, 2024 88 $ 105,684

Unpaid dividend on redeemable senior preferred stock — 1,903

Accretion of discounts and issuance cost — 335

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

September 30, 2024 88 $ 105,098

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

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 for the quarter ending June 30, 2024.

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

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

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

(in thousands) 2024 2023 2024 2023

Dividends paid in cash (1)

$ 2,883 $ 6,810 $ 15,073 $ 19,377

Accumulated dividends accrued as part of the carrying value of redeemable senior preferred stock 1,903 4,538 9,960 13,382

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

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

The dividend rate (capped at 22.50 %) is equal to the three-month term SOFR (minimum of 1.00 %), plus the three-month term SOFR spread adjustment of 0.26 % plus the applicable margin of 12.00 %.

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

The dividend rate may also increase if the Company fails to obtain the required stockholder approval for a forced sale transaction triggered by investors or if an event of default as outlined in the agreement occurs.

In 2021, the Company issued warrants to purchase up to 1,803,841 shares of the Common Stock, at an exercise price of $ 0.001 .

As of September 30, 2024, none of the warrants have been exercised.

The warrants are considered to be equity contracts indexed in the Company's own shares and therefore were recorded at their inception date relative fair value and are included in additional paid-in capital on the Company's Unaudited Consolidated Balance Sheets.

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

(1) Included in interest expense is $ 1.0 million and $ 1.0 million related to the accretion of contingent consideration from acquisitions for the three months ended March 31, 2025 and 2024, respectively.

(2) Interest expense included amortization of deferred financing costs and debt discounts of $ 0.4 million and $ 1.1 million for the three months ended March 31, 2025 and 2024, respectively.

Debt Covenants

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 March 31, 2025, the Company was in compliance with the covenants in the 2024 Credit Agreement.

The Company's consolidated effective income tax rate for the three months ended March 31, 2025 was 21.4 % compared to a consolidated effective income tax rate of 33.2 % for the three months ended March 31, 2024, respectively.

The effective rates differed from the statutory rate of 21.0% primarily due to an increase in the valuation allowance against certain business interest carryover deferred tax assets, and certain forecasted nondeductible expenses.

2 unchanged sentences

In accordance with the provisions of ASC 740, Income Taxes , the Company is required to provide a valuation allowance against deferred income tax assets when it is "more likely than not" that some portion or all of the deferred tax assets will not be realized.

Based on management's assessment, as of September 30, 2024, the Company continues to record a full valuation allowance against non-deductible interest expense.

Based on management's assessment, as of March 31, 2025, the Company continues to record a full valuation allowance against non-deductible interest expense and net operating losses acquired as part of the Payslate acquisition.

The Company will continue to evaluate the realizability of the net deferred tax asset on a quarterly basis and, as a result, the valuation allowance may change in future periods.

1 unchanged sentence

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 September 30, 2024 and December 31, 2023, the Company has not issued any shares of preferred stock.

As of March 31, 2025 and December 31, 2024, the Company has not issued any shares of preferred stock.

Share Repurchase Program

2 unchanged sentences

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

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

As of March 31, 2025, the Company has purchased 1,309,374 shares for $ 5.8 million under this plan.

Stock-based Compensation

Stock-based compensation expense was as follows:

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

Three Months Ended March 31,

(in thousands) 2025 2024

3 unchanged sentences

Total $ 1,586 $ 1,633

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

Income tax benefit for stock-based compensation was $ 0.7 million for the three months ended March 31, 2025 and was immaterial for the three months ended March 31, 2024.

No stock-based compensation has been capitalized.

Awards granted for the three months ended March 31, 2025 and 2024, were not material.

The Company's 2018 Plan initially provided for the issuance of up to 6,685,696 shares of the Company's Common Stock.

On March 17, 2022, the Company's Board of Directors unanimously approved an amendment to the 2018 Plan, which was subsequently approved by our shareholders, to increase the number of shares authorized for issuance under the plan by 2,500,000 shares, resulting in 9,185,696 shares of the Company's Common Stock authorized for issuance under the plan.

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

As of March 31, 2025, the Company had 2,935,912 shares available for issuance under the 2018 Plan.

2021 Stock Purchase Plan

5 unchanged sentences

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

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

As of March 31, 2025, the Company had 35,261 shares available for issuance under the 2021 Stock Purchase Plan.

Non-voting Incentive Units

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

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

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

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The returned shares of common stock of the Company are recorded as treasury stock at their closing market price as of the settlement date of January 30, 2024.

The reissued PHOT redeemable preferred units are recorded as redeemable NCI at their estimated fair value as of the settlement date on the Company’s Unaudited Consolidated Balance Sheets.

The 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 stockholders in the Company’s Unaudited Statements of Operations and Comprehensive Income (Loss).

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

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.

There was no subsequent activity for the three months ended March 31, 2025.

Commitments and Contingencies

3 unchanged sentences

Based on existing contracts in place, the Company is committed to pay minimum processing fees under these agreements of approximately $ 23.1 million in 2025 and $ 24.6 million in 2026.

Annual Commitment with Vendor

Effective January 1, 2022, the Company entered into a three year business cooperation agreement with a vendor to resell its services.

Under the agreement, the Company purchased vendor services worth $ 1.5 million for the year ended December 31, 2023, and is committed to purchase vendor services worth $ 2.3 million in 2024.

Capital Commitments

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

Other Commitments

As of March 31, 2025 and December 31, 2024, the Company had a capital contribution commitment of $ 10.7 million and $ 12.6 million, respectively to fund operations of certain subsidiaries.

The Company is obligated to make the contributions within 10 business days of receiving notice for such contribution from the subsidiary.

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

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

Contingent/Deferred Consideration

The following table provides a reconciliation of the beginning and ending balance of the Company's contingent/deferred consideration liabilities related to completed acquisitions:

(in thousands) Contingent/Deferred Consideration Liabilities

December 31, 2024 $ 10,685

Addition of deferred consideration (Related to acquisition, see Note 2 )

Accretion of contingent consideration 1,006

1 unchanged sentence

March 31, 2025 $ 17,791

Accretion of discount on contingent consideration 1,240

Payment of contingent consideration ( 1,085 )

June 30, 2024 11,494

Accretion of discount on contingent consideration 1,066

Payment of contingent consideration ( 840 )

September 30, 2024 $ 11,720

Legal Proceedings

3 unchanged sentences

If and when the Company records such an accrual, it could be material and could adversely impact the Company's results of operations, financial condition and cash flows.

The Company is involved in a case that was filed on October 11, 2023 and is currently pending in the United States District Court for the Northern District of California (the “Complaint”).

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

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

1 unchanged sentence

(“Wells Fargo”).

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

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

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

The 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

1 unchanged sentence

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

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

Settlement Assets and Customer/Subscriber Account Balances and Related Obligations ) A majority of the Company's cash, restricted cash and off-balance sheet settlement funds are held in certain FIs, substantially all of which is in excess of FDIC limits.

As of March 31, 2025, the Company's customer account balances of $ 964.2 million are maintained in accounts with certain FIs which are eligible to pass-through insurance subject to FDIC rules and regulations (refer to Note 4.

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

A majority of the Company's cash, restricted cash and off-balance sheet settlement funds are held in certain FIs, substantially all of which is in excess of FDIC limits.

The Company does not believe it is exposed to any significant credit risk from these transactions.

Fair Value Measurements

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

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

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

1 unchanged sentence

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

The deferred consideration derived from an acquisition is currently recorded at contractual amount and the fair valuation of the same is in process.

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

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

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

Contingent consideration, noncurrent portion Level 3 6,199 7,487

Total contingent consideration $ 11,720 $ 13,438

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

(in thousands) Fair Value Hierarchy March 31, 2025 December 31, 2024

Contingent /deferred consideration, current portion Level 3 $ 3,774 $ 3,891

Contingent/deferred consideration, noncurrent portion Level 3 14,017 6,794

Total contingent/deferred consideration $ 17,791 $ 10,685

During the three months ended March 31, 2025, there were no transfers into, out of, or between levels of the fair value hierarchy.

Fair Value Disclosures

2 unchanged sentences

Substantially all of the Company's notes receivable are secured, and the Company provides for allowances when it believes that certain notes receivable may not be collectible.

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

The carrying value of the Company's notes receivable, net approximates fair value and was approximately $ 8.7 million and $ 8.6 million at March 31, 2025 and December 31, 2024, respectively.

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

2 unchanged sentences

Debt Obligations ) are reflected in the Company's Unaudited Consolidated Balance Sheets at carrying value since the Company did not elect to remeasure debt obligations to fair value at the end of each reporting period.

The fair value of the term facility was estimated to be $ 832.9 million and $ 651.9 million at September 30, 2024 and December 31, 2023, respectively, and was estimated using binding and non-binding quoted prices in an active secondary market, which considers the credit risk and market related conditions, and is within Level 2 of the fair value hierarchy.

The fair value of the term facility was estimated to be $ 935.5 million and $ 944.4 million at March 31, 2025 and December 31, 2024, respectively, and was estimated using binding and non-binding quoted prices in an active secondary market, which considers the credit risk and market related conditions, and is within Level 2 of the fair value hierarchy.

The carrying values of the other long-term debt obligations approximate fair value due to mechanisms in the credit agreements that adjust the applicable interest rates and the lack of a market for these debt obligations.

Segment Information

The Company has three reportable segments:

• SMB Payments – Provides full-service acquiring and payment-enabled solutions for B2C transactions, leveraging Priority's proprietary software platform, distributed through ISO, direct sales and vertically focused ISV channels.

• B2B Payments – provides market-leading AP automation solutions to corporations, software partners and industry leading FIs (including Citibank and Mastercard) in addition to improving cash flow by providing instant access to working capital.

• Enterprise Payments – Provides embedded finance and treasury solutions to enterprise customers to modernize legacy platforms and accelerate software partners' strategies to monetize payments.

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

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

• 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.

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.

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 quarter ended June 30, 2024, 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.

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

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

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

Adjusted EBITDA at each segment level includes revenues of the segment, less costs of revenue (excluding depreciation and amortization) and operating expenses that are directly related to those revenues.

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

All comparative periods have been adjusted to reflect this update.

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

Three Months Ended September 30, 2024

(in thousands) SMB Payments B2B

Payments Enterprise Payments Corporate Eliminations Total Consolidated

Revenues $ 158,770 $ 22,143 $ 47,099 $ — $ ( 963 ) $ 227,049

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

Three Months Ended September 30, 2023

(in thousands) SMB Payments B2B

Payments Enterprise Payments Corporate Eliminations Total Consolidated

Revenues $ 140,241 $ 13,985 $ 35,174 $ — $ ( 385 ) $ 189,015

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

Nine Months Ended September 30, 2024

(in thousands) SMB Payments B2B

Payments Enterprise Payments Corporate Eliminations Total Consolidated

Revenues $ 457,875 $ 65,368 $ 131,758 $ — $ ( 2,366 ) $ 652,635

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

Nine Months Ended September 30, 2023

All comparative periods have been recasted to reflect this update.

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

Three Months Ended March 31, 2025

(in thousands) SMB Payments B2B

Payments Enterprise Payments Corporate Eliminations Total Consolidated

Revenues $ 443,122 $ 19,744 $ 93,919 $ — $ ( 452 ) $ 556,333

Adjusted EBITDA $ 84,449 $ 1,877 $ 77,853 $ ( 40,484 ) $ — $ 123,695

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2024 2023 2024 2023

Reconciliation of Segment measure of profit or loss to income (loss) before income taxes

Total consolidated Adjusted EBITDA $ 54,641 $ 44,962 $ 152,532 $ 123,695

Interest expense ( 23,246 ) ( 19,997 ) ( 65,836 ) ( 55,461 )

Payments Enterprise Payments Total

Revenue from external customers $ 151,690 $ 23,918 $ 50,088 $ 225,696

Intersegment revenues (elimination) ( 449 ) ( 324 ) ( 293 ) ( 1,066 )

Total consolidated revenues 151,241 23,594 49,795 224,630

Cost of services (excludes depreciation and amortization) 1

( 118,572 ) ( 16,624 ) ( 3,223 )

Other operating expenses 1,2

( 8,213 ) ( 3,929 ) ( 4,609 )

Other segment items 3

1,249 475 479

Segment Adjusted EBITDA $ 25,705 $ 3,516 $ 42,442 $ 71,663

Reconciliation of Segment Adjusted EBITDA to income (loss) before income taxes

Segment Adjusted EBITDA $ 71,663

Adjustment for corporate items 4

Intersegment revenue elimination (1,066)

Depreciation and amortization ( 13,777 )

Interest expense ( 23,176 )

Debt modification and extinguishment expenses ( 38 )

1 unchanged sentence

Non-cash stock based compensation ( 1,586 )

Other non-recurring gain, net — 166 — 7

Income before income taxes $ 10,518

(1) The significant expense categories and amounts align with the segment level information regularly provided to the CODM.

(2) Other operating expenses including salary and employee benefits, and selling, general and administrative expenses.

(3) Other segment items for each reportable segment include other income, net, intersegment revenue and stock based compensation expense.

(4) Adjustment for corporate items include:

(in thousands) March 31, 2025

Elimination of cost of services (excludes depreciation and amortization) $ 1,065

Other operating expenses ( 24,125 )

Other items 5

(5) Other items include other income net, stock based compensation expense, and selling general and administrative (non-recurring expense)

(in thousands) Other specified segment disclosure

Three Months Ended March 31, 2025

SMB Payments B2B

Payments Enterprise Payments Total

Depreciation and amortization $ 6,625 $ 1,261 $ 4,642 $ 12,528

Three Months Ended March 31, 2024

(in thousands) SMB Payments B2B

Payments Enterprise Payments Total

Revenue from external customers $ 144,005 $ 21,344 $ 40,990 $ 206,339

Intersegment revenue (eliminations) ( 254 ) ( 229 ) ( 137 ) ( 620 )

Total consolidated revenues 143,751 21,115 40,853 205,719

Cost of services (excludes depreciation and amortization) 1

( 112,119 ) ( 15,153 ) ( 2,643 )

Other operating expenses 1,2

( 7,215 ) ( 4,562 ) ( 3,736 )

Other segment items 3

Segment Adjusted EBITDA $ 25,023 $ 1,747 $ 34,727 $ 61,497

Reconciliation of Segment Adjusted EBITDA to income (loss) before income taxes

Segment Adjusted EBITDA $ 61,497

Adjustment for corporate items 4

Intersegment revenue elimination (620)

Depreciation and amortization ( 15,253 )

Interest expense ( 20,880 )

Selling, general and administrative (non-recurring) ( 798 )

Non-cash stock based compensation ( 1,634 )

Income before income taxes $ 7,775

(1) The significant expense categories and amounts align with the segment level information regularly provided to the CODM.

(2) Other operating expenses including salary and employee benefits, and selling, general and administrative expenses.

(3) Other segment items for each reportable segment include other income, net, intersegment revenue and stock based compensation expense.

(4) Adjustment for corporate items include:

(in thousands) March 31, 2024

Elimination of cost of services (excludes depreciation and amortization) $ 619

Other operating expenses ( 17,632 )

Other items 5

(5) Other items include other income net, stock based compensation expense, and selling general and administrative (non-recurring expense)

(in thousands) Other specified segment disclosure

Three Months Ended March 31, 2024

SMB Payments B2B

Payments Enterprise Payments Total

Depreciation and amortization $ 8,586 $ 1,470 $ 4,039 $ 14,095

Earnings (Loss) per Common Share

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

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

Three Months Ended March 31,

(in thousands except per share amounts) 2025 2024

Net income (loss) $ 10,608 $ ( 87 ) $ 16,795 $ ( 1,205 )

Net income $ 8,268 $ 5,193

Dividends and accretion attributable to redeemable senior preferred stockholders — ( 12,662 )

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

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

Return on redeemable NCI — ( 581 )

Net income (loss) attributable to common stockholders $ 8,268 $ ( 8,050 )

Weighted average shares outstanding (1)

78,774 78,021

Effect of dilutive potential common shares 1,083 —

2 unchanged sentences

Diluted Earnings (loss) per share $ 0.10 $ ( 0.10 )

(1) The weighted-average common shares outstanding includes 1,803,841 warrants (refer to Note 9.

Redeemable Senior Preferred Stock and Warrants ).

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

For the nine months ended September 30, 2024 and three and nine months ended September 30, 2023, all potentially dilutive securities were anti-dilutive, so diluted net loss per share was equivalent to basic net loss per share.

Potentially anti-dilutive securities that were excluded from the Company's earnings (loss) per common share are as follows:

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

(1) For the three months ended March 31, 2024, the weighted-average common shares outstanding includes 1,803,841 warrants.

These shares of common stock had an exercise price of $ 0.001 and were exercised on January 14, 2025.

For the three months ended March 31, 2025, the Company had 1.1 million dilutive securities that were included in the Company's diluted earnings per share.

For the three months ended March 31, 2024, all potentially dilutive securities were anti-dilutive, so diluted net loss per share was equivalent to basic net loss per share.

Anti-dilutive securities that were excluded from the Company's earnings (loss) per common share are as follows:

Three Months Ended March 31,

(in thousands) 2025 2024

Outstanding warrants on Common Stock (1)

Outstanding options and warrants issued to adviser (2)

Restricted stock awards (1)

42 1,109 788 1,297

Outstanding stock option awards (1)

855 918 865 909

Total — 1,942

(1) The warrants were issued in 2018 and were exercisable at $ 11.50 per share.

These warrants expired on August 24, 2023.

(2) The warrants were issued in 2018 and were exercisable at $ 12.00 per share.

These warrants expired on August 24, 2023.

(1) Granted under the 2018 Plan.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements