Priority Technology : Supplemental Slides for the Second Quarter 2020

Priority Technology Holdings, Inc.

Supplemental Slides for the Second Quarter 2020

Earnings Call on August 13, 2020

1

Highlights

Second Quarter 2020 Compared with Second Quarter 2019

A Strong Rebound in May and June Followed April's Nationwide Stay-At-Home

• Revenue of $92.4 million increased 0.2% from $92.1 million.
• Gross profit of $30.0 million decreased 0.6% from $30.1 million.
• • Gross profit margin of 32.4% decreased 27 basis points from 32.7%.
• Income from operations of $4.0 million increased $1.6 million from $2.4 million.
• Adjusted EBITDA of $16.7 million increased 11.6% from $14.9 million.
• Leverage EBITDA of $16.9 million increased 10.4% from $15.3 million.
• • Adjusted EBITDA further adjusted for certain items under the debt facility.
• Merchant Bankcard volume of $9.2 billion decreased 16.0% from $11.0 billion.

Volume, Revenue and Gross Profit Growth by Month	Revenue, Gross Profit and Adjusted EBITDA by Month
(dollars in millions)
15.0%										$40.0
							10.8%								$33.9
10.0%
									$35.0
5.0%								3.5%	4.5%					$31.9
(31.8)%	(11.7)% (9.3)%	1.7%	(1.9)%		$30.0
0.0%	(15.8)%			$26.7
									$25.0
-5.0%
									$20.0
-10.0%
-15.0%										$15.0
									$9.1		$10.0		$10.8
-20.0%
									$10.0
-25.0%										$4.6		$5.9	$6.2
									$5.0
-30.0%
									$0.0
-35.0%
	April		May	June				April	May			June
				Volume		Revenue		Gross Profit					Revenue		Gross Profit		Adjusted EBITDA

2

Merchant Bankcard Volume

Merchant Bankcard volume of $9.2 billion decreased 16.0% from $11.0 billion

		Second Quarter			Variance
		2020			2019			$			%
Consumer Payments:
Merchant bankcard processing dollar value	$	9,010,908	$	10,774,149	$ (1,763,241)			(16.4%)
Merchant bankcard transaction volume		92,842			130,146			(37,304)			(28.7%)
Average Ticket	$	97.06	$	82.79	$	14.27			17.2%
Commercial Payments:
Merchant bankcard processing dollar value	$	64,247	$	74,528	$	(10,281)			(13.8%)
Merchant bankcard transaction volume		21			29			(8)			(27.6%)
Average Ticket	$	3,110.95	$	2,613.39	$	497.57			19.0%
Integrated Partners:
Merchant bankcard processing dollar value	$	122,089	$	106,162	$	15,927			15.0%
Merchant bankcard transaction volume		388			363			24			6.7%
Average Ticket	$	314.92	$	292.31	$	22.61			7.7%
Total:
Merchant bankcard processing dollar value	$	9,197,245	$	10,954,839	$ (1,757,594)			(16.0%)
Merchant bankcard transaction volume		93,250			130,538			(37,288)			(28.6%)
Average Ticket	$	98.63	$	83.92	$	14.71			17.5%

Amounts in thousands, except Average Ticket

3

New Merchant Boards

New Merchant Boards Remained Strong in Q2, But Slowed from a Very Strong Q1

• New Merchant Boards remain strong despite the economic impact of COVID
• • Historically, monthly new merchant boards average in the range of 4,500 - 5,000
  • First quarter averaged 5,139 in 2020 and 4,544 in 2019
  • Second quarter averaged 4,389 in 2020 and 4,467 in 2019

Monthly New Merchant Boards Throughout 2020

6,000
5,446	5,093
	4,877
5,000
	4,431	4,645
			4,091

4,000

3,000

2,000

1,000

-

January

February

March

April

May

June

4

Revenue

Revenue of $92.4 million increased 0.2% from $92.1 million

• Consumer Payments increased 0.3% to $81.7m from $81.4m
• Commercial Payments decreased 13.0% to $5.7m from $6.5m
• • CPX increased 7.9% to $1.4m from $1.3m
  • Managed Services decreased 18.2% to $4.3m from $5.2m
• Integrated Partners increased 19.2% to $5.0m from $4.2m
• • PRET increased 22.0% to $4.5m from $3.7m
  • Payright decreased 20.7% to $339.3k from $427.7k
  • Hospitality increased 114.6% to $143.7k from $66.9k

Revenue Declines and Growth by Business

(dollars in millions) $1.0

$0.8				$0.8
$0.6
$0.4
$0.3
$0.2
	$0.1	$(0.9)		$(0.1)	$0.1
$0.0
($0.2)
($0.4)
($0.6)
($0.8)
($1.0)
($1.2)
Consumer	CPX	Managed	PRET	Payright	Hospitality
			Services

5

Gross Profit

Gross profit of $30.0 million decreased 0.6% from $30.1 million

• Consumer Payments decreased 3.6% to $22.6m from $23.4m
• Commercial Payments decreased 0.4% to $3.07m from $3.08m
• • CPX increased 2.4% to $1.06m from $1.04m
  • Managed Services decreased 1.9% to $2.0m from $2.04m
• Integrated Partners increased 18.3% to $4.3m from $3.6m
• • PRET increased 19.3% to $4.0m from $3.3m

Gross Profit Declines and Growth by Business

(dollars in millions)

$0.8
			$0.6
$0.6
$0.4
					$0.1
$0.2	$(0.8)	$0.03	$(0.04)		$(0.1)
$0.0
($0.2)
($0.4)
($0.6)
($0.8)
($1.0)
Consumer	CPX	Managed	PRET	Payright	Hospitality
			Services

6

Operating Expenses

Operating expenses of $25.9 million decreased 6.4% from $27.7 million

• Salaries and employee benefits decreased 7.7% to $9.6m from $10.4m
• • Includes non-cash compensation of $0.7m in 2020 and $1.0m in 2019
• SG&A decreased 20.8% to $6.0m from $7.6m
• • Includes non-recurring expenses of $1.4m in 2020 and $1.6m in 2019
• Depreciation and amortization increased 6.2% to $10.4m from $9.8m

Increase (Decrease) by Type	Increase (Decrease) by Segment
(dollars in millions)			(dollars in millions)
$1.0				$0.6
					$0.4
		$0.6	$0.4
$0.5
			$0.2
	$(1.6)
$0.0	$(0.8)		$(0.7)	$(0.8)		$(0.7)
	$0.0
($0.5)				($0.2)
($1.0)				($0.4)
			($0.6)
($1.5)
			($0.8)
($2.0)
			($1.0)
Salaries
	SG&A	Depreciation			Integrated	Corporate
	Consumer	Commercial
	& Benefits
		& Amortization	Partners

7

Income from Operations

Income from Operations of $4.0 million increased 65.5% from $2.4 million

• Consumer Payments decreased 1.3% to $7.3m from $7.4m
• Commercial Payments increased $0.8m to $0.5m from $(0.3)m
• Integrated Partners increased 47.7% to $0.84m from $0.57m
• • Includes $0.9m in 2020 and $0.7m in 2019 for non-recurring integration costs
• Corporate improved $0.7m to $(4.6)m from $(5.2)m
• • Includes non-recurring expenses of $0.5m in 2020 and $0.8m in 2019

Increase (Decrease) in Income from Operations by Segment

(dollars in millions)

$0.8		$0.8
			$0.7
$0.7
$0.6
$0.5
$0.4
		$0.3
$0.3
$0.2
$0.1
$(0.1)
$0.0
($0.1)
($0.2)
Consumer	Commercial	Integrated	Corporate
			Partners

8

Interest Expense

Interest expense of $11.7m increased by $0.9m from $10.8m

	Second Quarter
	2020	2019
(dollars in millions)
Cash Interest	$9.0	$9.1
PIK Interest	$2.0	$1.3
Amortization - Discount & Cost	$0.7	$0.4
	$11.7	$10.8

Components of Interest Expense

	Amortization	Amortization
	$0.4
	$0.7
PIK Interest	PIK Interest	$1.3
$2.0
	$9.0 Cash Interest	$9.1 Cash Interest

2020

2019

9

Other Income, Net

Other income, net of $194k is primarily ISO loan interest income

	Second Quarter
	2020	2019
(dollars in thousands)
Interest income - ISO Loans	$193.6	$113.7
Other, net	$0.3	$25.0
	$193.9	$138.7

Components of Other Income, Net

Other, net $0.3

Other, net

$25.0

Interest income $193.6

$113.7	Interest income

2020

2019

10

Adjusted EBITDA

Adjusted EBITDA of $16.7 million increased 11.6% from $14.9 million

Adjusted EBITDA by Segment

(dollars in millions)

$20,000.0

$16.2	$16.1	$16.7

$15,000.0

$10,000.0

$14.9

$5,000.0
					$3.1
						$2.4
		$0.6	$(0.1)						$(3.3)	$(3.5)
$0.0
	Commercial	Integrated	Corporate
($5,000.0)	Consumer	Partners	Total
				2020			2019

11

Cash Flow

Strong Focus on Cash Management Resulted in Increased Unrestricted Cash Balance

and Net Repayment of Debt

Comparative Cash Flows - Unrestricted & Restricted Cash Activity

	Second Quarter		Q2 2020		Q2 2019
(dollars in thousands)	2020	2019		Unrestricted	Restricted		Unrestricted		Restricted
Net Cash Provided by Operating Activities	$17,076	$4,960	$8,803		$8,273	$3,416	$1,544
Net Cash Used in Investing Activities	($4,306)	($7,598)	($4,306)			($7,598)
Net Cash Used in (Provided By) Financing	($1,501)		$610		($1,501)				$610
Net Increase (Decrease) in Cash	$11,269	($2,028)	$2,996		$8,273	($3,572)	$1,544
Cash at Beginning of Quarter	$39,731	$29,240	$2,858		$36,873	$9,091	$20,149
Cash at End of Quarter	$51,000	$27,212	$5,854		$45,146	$5,519	$21,693

12

Debt Rollforward & Leverage

Leverage Ratio Reduced to 7.46x from 7.67x Due to

EBITDA Growth and Net Debt Reduction

			Second Quarter Activity
	March 31, 2020	PIK		Payments	Borrowings June 30, 2020
(dollars in thousands)
Senior Term Debt	$387,836		$151	($1,002)	$0		$386,985
Subordinated Debt	$96,533		$1,868	$0	$0		$98,401
Revolver	$15,000		$5	($4,000)	$3,500		$14,505
Total Gross Debt	$499,369		$2,024	($5,002)	$3,500		$499,891
Unamortized discount & costs	($8,184)							($7,528)
	$491,185							$492,363
Current	$7,866							$11,724
Long-term	$483,319							$480,639
	$491,185							$492,363
Total Gross Debt	$499,369							$499,891
Unrestricted Cash	$2,858							$5,854
Net Debt	$496,511							$494,037

Annualized Leverage EBITDA	$64,716	$66,230
Actual Leverage	7.67	7.46
Maximum Leverage	7.75	7.75

13