Priority Technology Holdings, Inc. 10-Q

Item 1. Financial Statements March 31, 2025 December 31, 2024 Assets Current assets: Cash and cash equivalents $ 47,587 $ 58,600 Restricted cash 11,490 11,090 Accounts receivable, net of allowances of $ 3,366 and $ 3,045 , respectively 80,280 67,969 Prepaid expenses and other current assets 19,962 22,990 Current portion of notes receivable, net of allowance of $ 0 and $ 0 , respectively 2,231 3,638 Settlement assets and customer/subscriber account balances 1,003,034 940,798 Total current assets 1,164,584 1,105,085 Notes receivable, less current portion 6,473 4,919 Property, equipment and software, net 53,718 52,477 Goodwill 386,822 376,091 Intangible assets, net 231,560 240,874 Deferred income taxes, net 26,933 24,697 Other noncurrent assets 21,568 22,717 Total assets $ 1,891,658 $ 1,826,860 Liabilities, Stockholders' Deficit and NCI Current liabilities: Accounts payable and accrued expenses $ 54,414 $ 62,149 Accrued residual commissions 40,478 37,560 Customer deposits and advance payments 2,506 2,246 Current portion of long-term debt 1,879 9,503 Settlement and customer/subscriber account obligations 1,003,395 940,213 Total current liabilities 1,102,672 1,051,671 Long-term debt, net of current portion, discounts and debt issuance costs 918,944 920,888 Other noncurrent liabilities 26,467 19,326 Total liabilities 2,048,083 1,991,885 Commitments and contingencies ( Note 13 ) Stockholders' deficit: Preferred stock, $ 0.001 ; 100,000,000 shares authorized; 0 issued or outstanding at March 31, 2025 and December 31, 2024 — — Common Stock, $ 0.001 par value; 1,000,000,000 shares authorized; 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 80 77 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 ) Additional paid-in capital 1,669 — Accumulated other comprehensive loss ( 133 ) ( 176 ) Accumulated deficit ( 138,866 ) ( 147,134 ) Total stockholders' deficit attributable to stockholders of Priority ( 158,327 ) ( 166,840 ) Non-controlling interests in consolidated subsidiaries 1,902 1,815 Total stockholders' deficit ( 156,425 ) ( 165,025 ) Total liabilities, stockholders' deficit and NCI $ 1,891,658 $ 1,826,860 1 Table of Contents Priority Technology Holdings, Inc . Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss) (in thousands, except per share amounts) Three Months Ended March 31, 2025 2024 Revenues $ 224,630 $ 205,719 Operating expenses Cost of revenue (excludes depreciation and amortization) 137,353 129,298 Salary and employee benefits 25,775 22,150 Depreciation and amortization 13,777 15,253 Selling, general and administrative 15,100 10,995 Total operating expenses 192,005 177,696 Operating income 32,625 28,023 Other (expense) income Interest expense ( 23,176 ) ( 20,880 ) Debt extinguishment and modification costs ( 38 ) — Other income, net 1,107 632 Total other expense, net ( 22,107 ) ( 20,248 ) Income before income taxes 10,518 7,775 Income tax expense 2,250 2,582 Net income 8,268 5,193 Less: Dividends and accretion attributable to redeemable senior preferred stockholders — ( 12,662 ) Less: Return on redeemable NCI — ( 581 ) Net income (loss) attributable to common stockholders 8,268 ( 8,050 ) Other comprehensive income (loss) Foreign currency translation adjustments 43 ( 13 ) Comprehensive income (loss) $ 8,311 $ ( 8,063 ) Earnings (loss) per common share: Basic $ 0.10 $ ( 0.10 ) Diluted $ 0.10 $ ( 0.10 ) Weighted-average common shares outstanding: Basic 78,774 78,021 Diluted 79,857 78,021 See Notes to Unaudited Consolidated Financial Statement 2 Priority Technology Holdings, Inc. Unaudited Consolidated Statements of Changes in Stockholders' Deficit and Non-Controlling Interest (in thousands) Common Stock Treasury Stock APIC AOCI Accumulated Deficit Deficit Attributable to Stockholders NCIs Total Shares $ Shares $ December 31, 2024 77,480 $ 77 4,386 $ ( 19,607 ) $ — $ ( 176 ) $ ( 147,134 ) $ ( 166,840 ) $ 1,815 $ ( 165,025 ) Equity-classified stock-based compensation — — — — 1,499 — — 1,499 — 1,499 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 ) 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 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 ) Common 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 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 interests/common equity in subsidiaries — — — — — — — — 93 93 Foreign currency translation adjustment — — — — — ( 13 ) — ( 13 ) — ( 13 ) Reclassification of negative additional paid in capital — — — — 11,654 — ( 11,654 ) — — — Net income — — — — — — 5,193 5,193 — 5,193 March 31, 2024 75,835 $ 76 4,183 $ ( 18,491 ) $ — $ ( 42 ) $ ( 141,412 ) $ ( 159,869 ) $ 1,747 $ ( 158,122 ) 3 Table of Contents Priority Technology Holdings, Inc . Unaudited Consolidated Statements of Cash Flows (in thousands) Three Months Ended March 31, 2025 2024 Cash flows from 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 Stock-based, ESPP and incentive units compensation 1,586 1,633 Amortization of debt issuance costs and discounts 434 1,065 Debt extinguishment and modification costs 38 — Deferred income tax ( 2,236 ) ( 1,872 ) Change in contingent consideration 1,006 972 Other non-cash items, net ( 20 ) ( 259 ) Change in operating assets and liabilities: Accounts receivable ( 12,182 ) ( 8,339 ) Prepaid expenses and other current assets ( 73 ) ( 425 ) Income taxes (receivable) payable 4,429 — Notes receivable — ( 266 ) Accounts payable and other accrued liabilities ( 5,796 ) 1,590 Customer deposits and advance payments 260 157 Other assets and liabilities, net 465 ( 1,395 ) Net cash provided by operating activities 9,956 13,307 Cash flows from investing activities: Acquisition of business, net of cash acquired ( 4,473 ) — Additions to property, equipment and software ( 5,095 ) ( 6,610 ) Notes receivable, net ( 147 ) ( 1,059 ) Net cash used in investing activities ( 9,715 ) ( 7,669 ) Cash flows from financing activities: Debt issuance and modification costs paid ( 40 ) — Repayments of long-term debt ( 10,000 ) ( 1,678 ) Repurchases of shares withheld for taxes ( 1,470 ) ( 421 ) 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 (used in) financing activities 47,260 ( 10,279 ) Net change in cash and cash equivalents and restricted cash: Net increase in cash and cash equivalents, and restricted cash 47,501 ( 4,641 ) Cash and cash equivalents and restricted cash at beginning of period 993,864 796,223 Cash and cash equivalents and restricted cash at end of period $ 1,041,365 $ 791,582 4 Table of Contents Priority Technology Holdings, Inc . Unaudited Consolidated Statements of Cash Flows (in thousands) Three Months Ended March 31, 2025 2024 Reconciliation of cash and cash equivalents, and restricted cash: Cash and cash equivalents $ 47,587 $ 34,290 Restricted cash 11,490 12,658 Cash and cash equivalents included in settlement assets and customer/subscriber account balances (restricted in nature) (see Note 4 ) 982,288 744,634 Total cash and cash equivalents, and restricted cash $ 1,041,365 $ 791,582 Supplemental cash flow information: Cash paid for interest $ 21,471 $ 18,436 Non-cash investing and financing activities: Deferred consideration accrual $ 6,500 $ — Foreign currency adjustment to goodwill $ 62 $ — Issuance of NCI $ — $ 93 See Notes to Unaudited Consolidated Statements 5 Table of Contents Priority Technology Holdings, Inc. Notes to Unaudited Consolidated Financial Statements 1. Basis of Presentation and Significant Accounting Policies Business, Consolidation and Presentation Priority Technology Holdings, Inc. is a holding company with no material operations of its own. Priority Technology Holdings, Inc. and its consolidated subsidiaries are referred to herein collectively as "Priority," the "Company," "we," "our" or "us," unless the context requires otherwise. 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. The accompanying Unaudited Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. These Unaudited Consolidated Financial Statements have been prepared in accordance with GAAP for interim financial information pursuant to the rules and regulations of the SEC. The Consolidated Balance Sheet as of December 31, 2024 was derived from the audited financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 but does not include all disclosures required by GAAP for annual financial statements. NCI represents the equity interest in certain consolidated entities in which the Company owns less than 100% of the profit interests. Changes in the Company's ownership interest while the Company retains its controlling interest are accounted for as equity transactions. 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. These adjustments consist of normal recurring accruals and estimates that affect the carrying amounts of assets and liabilities. These Unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024. Use of Estimates The preparation of Unaudited Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Unaudited Consolidated Financial Statements and the reported amounts of revenues and expenses during the reported period. Actual results could materially differ from those estimates. Foreign Currency The Company's reporting currency is the U.S. dollar. The functional currency of the Indian subsidiary of the Company is the Indian Rupee (i.e. local currency of Republic of India). The functional currency of the Canadian subsidiaries of the Company is the Canadian Dollar. Accordingly, assets and liabilities denominated in a foreign currency are translated into U.S. 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). 6 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 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. 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. 2. Acquisition Payslate 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. 7 3. Revenues Disaggregation of Revenues The following table presents a disaggregation of our consolidated revenues by type: Three Months Ended March 31, (in thousands) 2025 2024 Revenue Type: Merchant card fees $ 167,079 $ 157,947 Money transmission services 37,449 29,144 Outsourced services and other services (2) 17,002 15,665 Equipment 3,100 2,963 Total revenues (1) $ 224,630 $ 205,719 (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 $ 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 March 31, 2025 (in thousands) Merchant Card Fees Money Transmission Services Outsourced and Other Services Equipment Total Segment SMB Payments $ 147,481 $ — $ 1,109 $ 3,100 $ 151,690 B2B Payments 19,769 — 4,149 — 23,918 Enterprise Payments 607 37,449 12,032 — 50,088 Eliminations ( 778 ) — ( 288 ) — ( 1,066 ) Total revenues $ 167,079 $ 37,449 $ 17,002 $ 3,100 $ 224,630 8 Three Months Ended March 31, 2024 (in thousands) Merchant Card Fees Money Transmission Services Outsourced and Other Services Equipment Total Segment SMB Payments $ 139,801 $ — $ 1,241 $ 2,963 $ 144,005 B2B Payments 18,289 — 3,055 — 21,344 Enterprise Payments 353 29,144 11,493 — 40,990 Eliminations ( 496 ) — ( 124 ) — ( 620 ) Total revenues $ 157,947 $ 29,144 $ 15,665 $ 2,963 $ 205,719 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 $ 0.4 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 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. 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 are not liabilities of the Company. Therefore, neither is recognized in the Company's Unaudited Consolidated Balance Sheets. 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 net of recoveries for the three months ended March 31, 2025 and 2024 were $ 2.0 million and $ 4.7 million, respectively. 9 B2B Payments Segment In the Company's B2B Payments segment, the Company earns revenues 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 that 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 in the Company's Unaudited Consolidated Balance Sheets. Amounts due to customer payees that are held in bank-owned FBO accounts are not assets of the Company, and the associated obligations are not liabilities of the Company. Therefore, neither is recognized in the Company's Unaudited Consolidated Balance Sheets. 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 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. 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 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 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. 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 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 $ 45.2 million and $ 22.6 million at March 31, 2025 and December 31, 2024, respectively. 10 The Company's consolidated settlement assets and customer/subscriber account balances and settlement and customer/subscriber account obligations were as follows: (in thousands) March 31, 2025 December 31, 2024 Settlement Assets, net of estimated losses (1) : Card settlements due from merchants $ 827 $ 2,587 Card settlements due from networks 17,204 12,307 Other settlement assets 2,715 1,730 Customer/subscriber account balances Cash and cash equivalents (restricted in nature) 982,288 924,174 Total settlement assets and customer/subscriber account balances $ 1,003,034 $ 940,798 Settlement and Customer/Subscriber Account Obligations: Customer account obligations $ 964,231 $ 897,497 Subscriber account obligations 13,241 26,677 Total customer/subscriber account obligations 977,472 924,174 Due to customers' payees (2) 25,923 16,039 Total settlement and customer/subscriber account obligations $ 1,003,395 $ 940,213 (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. 5. Notes Receivable 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 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 March 31, 2026 $ 2,231 2027 1,906 2028 1,976 2029 508 After 2029 2,083 Total $ 8,704 11 6. Property, Equipment and Software A summary of property, equipment and software, net was as follows: (in thousands) March 31, 2025 December 31, 2024 Computer software $ 110,666 $ 104,683 Equipment 11,862 11,571 Leasehold improvements 2,721 2,718 Furniture and fixtures 1,365 1,365 Property, equipment and software 126,614 120,337 Less: Accumulated depreciation ( 74,122 ) ( 70,258 ) Capital work in-progress 1,226 2,398 Property, equipment and software, net $ 53,718 $ 52,477 Three Months Ended March 31, (in thousands) 2025 2024 Depreciation expense $ 3,862 $ 3,170 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. 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. 7. Goodwill and Other Intangible Assets Goodwill The Company's goodwill relates to the following reporting units: (in thousands) March 31, 2025 December 31, 2024 SMB Payments $ 124,139 $ 124,139 Enterprise Payments 255,443 244,712 Plastiq (B2B Payments) 7,240 7,240 Total $ 386,822 $ 376,091 12 The following table summarizes the changes in the carrying value of goodwill: (in thousands) Amount Balance at December 31, 2024 $ 376,091 Payslate acquisition 10,669 Foreign currency translation adjustment 62 Balance at March 31, 2025 $ 386,822 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: March 31, 2025 Weighted-average Useful Life (in thousands, except weighted-average data) Gross Carrying Value Accumulated Amortization Net Carrying Value Other intangible assets: ISO and referral partner relationships $ 182,339 $ ( 52,719 ) $ 129,620 14.6 Residual buyouts 143,862 ( 108,006 ) 35,856 6.2 Customer relationships 109,017 ( 95,896 ) 13,121 8.4 Merchant portfolios 83,350 ( 66,160 ) 17,190 6.5 Technology 58,639 ( 28,718 ) 29,921 8.6 Trade names 7,104 ( 3,352 ) 3,752 10.6 Non-compete agreements 3,390 ( 3,390 ) — 0.0 Money transmission licenses (1) 2,100 — 2,100 Total $ 589,801 $ ( 358,241 ) $ 231,560 9.5 (1) These assets have an indefinite useful life. December 31, 2024 Weighted-average Useful Life (in thousands, except weighted-average data) 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 Trade names 7,104 ( 3,192 ) 3,912 10.6 Non-compete agreements 3,390 ( 3,390 ) — 0.0 Money transmission licenses (1) 2,100 — 2,100 Total $ 589,801 $ ( 348,927 ) $ 240,874 9.5 (1) These assets have an indefinite useful life. Three Months Ended March 31, (in thousands) 2025 2024 Amortization expense (1) $ 9,915 $ 12,083 13 (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. 8. Debt Obligations Outstanding debt obligations consisted of the following: March 31, 2025 December 31, 2024 2024 Credit Agreement 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 8.57 % and 8.61 % at March 31, 2025 and December 31, 2024, respectively — — Total debt obligations 935,537 945,537 Less: current portion of long-term debt ( 1,879 ) ( 9,503 ) Less: unamortized debt discounts and deferred financing costs ( 14,714 ) ( 15,146 ) Long-term debt, net $ 918,944 $ 920,888 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 discounts are included in long-term debt on the Company's Unaudited Consolidated Balance Sheets. 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 March 31, (in thousands) 2025 2024 Interest expense (1),(2) $ 23,176 $ 20,880 (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 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 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 14 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. 9. Income Taxes 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. Valuation Allowance for Deferred Income Tax Assets The Company considers all available positive and negative evidence to determine whether sufficient taxable income will be generated in the future to permit realization of the existing deferred tax assets. 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 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. 10. Stockholders' Deficit 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 March 31, 2025 and December 31, 2024, the Company has not issued any shares of preferred stock. Share Repurchase Program In 2022, Priority's Board of Directors authorized a general share repurchase program under which the Company may purchase up to 2,000,000 shares of its outstanding Common Stock for a total of up to $ 10.0 million. Under the terms of this plan, the Company may purchase shares through open market purchases, unsolicited or solicited privately negotiated transactions, or in another manner so long as it complies with applicable rules and regulations. There have been no shares repurchased under this plan since December 2022. As of March 31, 2025, the Company has purchased 1,309,374 shares for $ 5.8 million under this plan. 15 11. Stock-based Compensation Stock-based compensation expense was as follows: Three Months Ended March 31, (in thousands) 2025 2024 Stock-based compensation expense $ 1,484 $ 1,528 Incentive units compensation expense 87 93 ESPP compensation expense 15 12 Total $ 1,586 $ 1,633 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. 2018 Plan 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 March 31, 2025, the Company had 2,935,912 shares available for issuance under the 2018 Plan. 2021 Stock Purchase Plan The 2021 Stock Purchase Plan provides for up to 200,000 shares to be purchased under the plan. Shares issued under the 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 on January 10, 2022. 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 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 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. 16 12. Related Party Transactions In February 2019, PHOT, a subsidiary of the Company, received a contribution of substantially all of the operating assets of eTab and Cumulus under asset contribution agreements. PHOT is a part of the Company's SMB reportable segment. These contributed assets were primarily composed of technology-related assets. Prior to these transactions, eTab was 80.0 % owned by the Company's Chairman and Chief Executive Officer ("CEO"). No cash consideration was paid to the contributors of the eTab or Cumulus assets on the date of the transactions. As consideration for these contributed assets, the contributors were issued redeemable non-controlling preferred equity interests ("redeemable NCIs") in PHOT. Under these redeemable NCIs, the contributors were eligible to receive up to $ 4.5 million of profits earned by PHOT, plus a preferred yield ( 6.0 % per year) on any undistributed preferred equity interest ("Total Preferred Equity Interest"). Once the total preferred equity interest is distributed to the holders, the redeemable NCIs cease to exist. The Company's CEO initially owned 83.3 % of the redeemable NCIs, which ownership interest was subsequently reduced to 35.3 % through the CEO's disposition of interests to others. In November 2020, the Company agreed with the contributors to an exchange of shares of common stock of the Company, or cash, for the remaining undistributed Total Preferred Equity Interests of $ 4.8 million. An exchange valuation for the Company's common stock was established as of November 12, 2020 at the prior 20-day volume weighted average price of $ 2.78 per share. The exchange was contingent upon receiving approval of the Company's lenders; therefore, the binding exchange agreements were not entered into until after lender approval was received in April 2021 in connection with the debt refinancing. In May 2021, the Company entered into exchange agreements and completed the exchange of 1,428,358 shares of common stock and $ 0.8 million of cash for the Total Preferred Equity Interests. The CEO received 605,623 shares of common stock of the Company in exchange for his 35.3 % interest, and the Company's Chief Operating Officer (“COO”) received 413,081 shares of common stock of the Company in exchange for her 24.1 % interest. On October 31, 2023, a lawsuit was filed alleging that the Board breached its fiduciary duties by approving the above mentioned exchange transaction. The Company denied any wrongdoing. The lawsuit was settled on January 30, 2024, wherein the Company agreed to unwind the exchange transaction and received previously issued shares of common stock of the Company and promissory notes for the amount of cash paid from the CEO, COO and others in exchange of the reissuance of PHOT redeemable preferred units. The returned shares of common stock of the Company are recorded as treasury stock at their closing market price as of the settlement date of January 30, 2024. The reissued PHOT redeemable preferred units are recorded as redeemable NCI at their estimated fair value as of the settlement date on the Company’s Consolidated Balance Sheets. As of May 30, 2024, the Company approved redemption of PHOT redeemable preferred units for cash, common stock of the Company or a combination of both, at the sole discretion of the Company. The redeemable preferred units were accreted to their redemption value of $ 5.9 million as of May 30, 2024, through net loss available to common shareholders in the Company’s Statements of Operations and Comprehensive Income (Loss). The exchange value of the Company's common stock was established based on the 30-day volume weighted average close price adjusted for market illiquidity. During the quarter ended June 30, 2024, the PHOT redeemable preferred units held by the CEO were redeemed in cash for $ 2.1 million and the promissory notes were satisfied. During the quarter ended September 30, 2024, the PHOT redeemable preferred units held by the COO were redeemed for 408,013 shares of the Company's common stock and PHOT redeemable preferred units held by other holders were redeemed for 404,628 shares of the Company's common stock. There was no subsequent activity for the three months ended March 31, 2025. 13. 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. 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. 17 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. 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 ) 6,500 Accretion of contingent consideration 1,006 Payment of contingent consideration ( 400 ) March 31, 2025 $ 17,791 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 internal and external 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”). 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 While providing SMB Acquiring, B2B Payables, and Enterprise Payments processing services, Priority manages funds that are held on behalf of its customers. Because Priority is not a member bank, these customer funds are held in bank accounts maintained with member banks pursuant to sponsorship agreements which require, among other things, that the Company abide by the by-laws and regulations of the card associations and MTL regulators. As of 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. 18 14. Fair Value Fair Value Measurements 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. 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 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. See Note 2 . Liabilities measured at fair value on a recurring basis consisted of the following: (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 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 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. Debt Obligations Outstanding debt obligations (see Note 8. 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 $ 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. 19 15. Segment Information 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. 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. 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 became 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 before income taxes are as follows: 20 Three Months Ended March 31, 2025 (in thousands) SMB Payments B2B 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 Less: Cost of services (excludes depreciation and amortization) 1 ( 118,572 ) ( 16,624 ) ( 3,223 ) Less: Other operating expenses 1,2 ( 8,213 ) ( 3,929 ) ( 4,609 ) Add: 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 ( 19,303 ) Intersegment revenue elimination (1,066) Depreciation and amortization ( 13,777 ) Interest expense ( 23,176 ) Debt modification and extinguishment expenses ( 38 ) Selling, general and administrative (non-recurring) ( 2,199 ) Non-cash stock based compensation ( 1,586 ) 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 3,757 $ ( 19,303 ) (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 21 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 Less: Cost of services (excludes depreciation and amortization) 1 ( 112,119 ) ( 15,153 ) ( 2,643 ) Less: Other operating expenses 1,2 ( 7,215 ) ( 4,562 ) ( 3,736 ) Add: Other segment items 3 606 347 253 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 ( 14,537 ) 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 2,476 $ ( 14,537 ) (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 22 16. 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 March 31, (in thousands except per share amounts) 2025 2024 Numerator: Net income $ 8,268 $ 5,193 Less: Dividends and accretion attributable to redeemable senior preferred stockholders — ( 12,662 ) Less: 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 — Adjusted Weighted average shares outstanding 79,857 78,021 Basic Earnings (loss) per common share $ 0.10 $ ( 0.10 ) Diluted Earnings (loss) per share $ 0.10 $ ( 0.10 ) (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. 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. 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 Restricted stock awards (1) — 1,078 Outstanding stock option awards (1) — 864 Total — 1,942 (1) Granted under the 2018 Plan. 23