10-Q 1 prth-20240331.htm 10-Q prth-20240331
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UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2024

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to 

Commission file number: 001-37872
PRTH-Black-H-RGB (2).jpg
Priority Technology Holdings, Inc.
(Exact name of registrant as specified in its charter)

Delaware47-4257046
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
2001 Westside Parkway
Suite 155
Alpharetta,Georgia30004
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (404) 952-2107
Not applicable
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.001PRTHNasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes       No  
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 Yes      No  
 
As of May 3, 2024, the number of the registrant's Common Stock outstanding was 80,065,145.



Table of Contents


Page
i


Commonly Used or Defined Terms


TermDefinition
2018 Plan2018 Equity Incentive Plan
2021 Stock Purchase PlanPriority Technology Holdings, Inc. 2021 Employee Stock Purchase Plan
2021 Share Repurchase ProgramPriority Technology Holdings, Inc. 2021 Share Repurchase Program
AOCIAccumulated other comprehensive income/loss
APAccounts payable
ASCAccounting Standards Codification
APICAdditional paid-in capital
Amended Certificate of DesignationAmended and Restated Certificate of Designation of Senior Preferred Stock effective as of June 30, 2023
ASUAccounting Standards Update
B2BBusiness-to-business
B2CBusiness-to-consumer
CEOChief Executive Officer
CFOChief Financial Officer
Common StockThe Company's Common Stock, par value $0.001
Credit AgreementCredit and Guaranty Agreement with Truist Bank dated as of April 27, 2021 (as amended)
EAETR
Estimated annual effective tax rate
ESPPEmployee Stock Purchase Plan
Exchange ActSecurities Exchange Act of 1934
FASBFinancial Accounting Standards Board
FDICFederal Deposit Insurance Corporation
FBOFor the benefit of
FIFinancial institution
FinxeraFinxera Holdings, Inc.
GAAPU.S. Generally Accepted Accounting Principles
ISOIndependent sales organization
ISVIndependent software vendor
LIBORLondon Interbank Offered Rate
NCINon-controlling interests in consolidated subsidiaries
PHOTPriority Hospitality Technology, LLC
PlastiqAcquisition of Plastiq, Inc. and certain of its affiliates
PRTHPriority Technology Holdings, Inc.
Revolving credit facility$65.0 million line issued under the Credit Agreement
SECSecurities and Exchange Commission
SOFRSecured Overnight Financing Rate
SMB
Small to medium-sized businesses
Term facility
$620.0 million senior secured term loan facility issued under the Credit Agreement (including $320.0 million delayed draw facility)

ii

Priority Technology Holdings, Inc.
Unaudited Consolidated Balance Sheets
(in thousands, except share data)

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
March 31, 2024December 31, 2023
Assets
Current assets:
Cash and cash equivalents$34,290 $39,604 
Restricted cash12,658 11,923 
Accounts receivable, net of allowances of $5,536 and $5,289, respectively
67,137 58,551 
Prepaid expenses and other current assets13,699 13,273 
Current portion of notes receivable, net of allowance of $0 and $0, respectively
1,972 1,468 
Settlement assets and customer/subscriber account balances752,590 756,475 
Total current assets882,346 881,294 
Notes receivable, less current portion4,549 3,728 
Property, equipment and software, net48,120 44,680 
Goodwill376,112 376,103 
Intangible assets, net261,658 273,350 
Deferred income taxes, net24,405 22,533 
Other noncurrent assets12,767 13,649 
Total assets$1,609,957 $1,615,337 
Liabilities, Redeemable Senior Preferred Stock, Redeemable NCI, and Stockholders' Deficit
Current liabilities:
Accounts payable and accrued expenses$49,329 $52,643 
Accrued residual commissions35,965 33,025 
Customer deposits and advance payments4,090 3,934 
Current portion of long-term debt6,712 6,712 
Settlement and customer/subscriber account obligations753,850 755,754 
Total current liabilities849,946 852,068 
Long-term debt, net of current portion, discounts and debt issuance costs631,352 631,965 
Other noncurrent liabilities16,704 18,763 
Total liabilities1,498,002 1,502,796 
Commitments and contingencies (Note 14)
Redeemable senior preferred stock, net of discounts and issuance costs:
Redeemable senior preferred stock, $0.001 par value; 250,000 shares authorized; 225,000 issued and outstanding at March 31, 2024 and December 31, 2023
264,240 258,605 
Redeemable non-controlling interests in consolidated subsidiary5,837  
Stockholders' deficit:
Preferred stock, $0.001; 100,000,000 shares authorized; 0 issued or outstanding at March 31, 2024 and December 31, 2023
  
Common Stock, $0.001 par value; 1,000,000,000 shares authorized; 80,018,209 and 79,589,055 shares issued at March 31, 2024 and December 31, 2023, respectively; and 75,834,517 and 76,956,889 shares outstanding at March 31, 2024 and December 31, 2023, respectively
76 77 
Treasury stock at cost, 4,183,692 and 2,632,166 shares at March 31, 2024 and December 31, 2023, respectively
(18,491)(12,815)
Additional paid-in capital  
Accumulated other comprehensive loss(42)(29)
Accumulated deficit(141,412)(134,951)
Total stockholders' deficit attributable to stockholders of PRTH(159,869)(147,718)
Non-controlling interests in consolidated subsidiaries1,747 1,654 
Total stockholders' deficit(158,122)(146,064)
Total liabilities, redeemable senior preferred stock, redeemable NCI and stockholders' deficit$1,609,957 $1,615,337 
1

Priority Technology Holdings, Inc.
Unaudited Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share amounts)

Three Months Ended
March 31,
20242023
Revenues$205,719 $185,028 
Operating expenses
Cost of revenue (excludes depreciation and amortization)129,298 121,966 
Salary and employee benefits22,150 19,048 
Depreciation and amortization15,253 18,048 
Selling, general and administrative10,995 9,118 
Total operating expenses177,696 168,180 
Operating income28,023 16,848 
Other (expense) income
Interest expense(20,880)(17,699)
Other income, net632 212 
Total other expense, net(20,248)(17,487)
Income (loss) before income taxes7,775 (639)
Income tax expense (benefit)2,582 (133)
Net income (loss)5,193 (506)
Less: Dividends and accretion attributable to redeemable senior preferred stockholders(12,662)(11,295)
Less: Return on redeemable NCI in consolidated subsidiary(581) 
Net loss attributable to common stockholders(8,050)(11,801)
Other comprehensive loss
Foreign currency translation adjustments(13)24 
Comprehensive loss$(8,063)$(11,777)
Loss per common share:
Basic and diluted$(0.10)$(0.15)
Weighted-average common shares outstanding:
Basic and diluted78,021 78,133 

2

Priority Technology Holdings, Inc.
Unaudited Consolidated Statements of Changes in Stockholders' Deficit and Non-Controlling Interest
(in thousands)
Common
Stock
Treasury
Stock
APICAOCIAccumulated DeficitDeficit Attributable to StockholdersNCIsTotal
Shares$Shares$
December 31, 202376,957 $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 compensation429 — — — 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, 202475,835 $76 4,183 $(18,491)$ $(42)$(141,412)$(159,869)$1,747 $(158,122)

Common
Stock
Treasury
Stock
APICAOCIAccumulated DeficitDeficit Attributable to StockholdersNCIsTotal
Shares$Shares$
December 31, 202276,044 $76 2,341 $(11,559)$9,650 $ $(102,208)$(104,041)$1,255 $(102,786)
Equity-classified stock-based compensation— — — — 1,936 — — 1,936 — 1,936 
ESPP compensation and vesting of stock-based compensation517 — — — 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 adjustment24 24 24 
Net loss— — — — — — (506)(506)— (506)
March 31, 202376,404 $76 2,498 $(12,336)$328 $24 $(102,714)$(114,622)$852 $(113,770)

3

Priority Technology Holdings, Inc.
Unaudited Consolidated Statements of Changes in Stockholders' Deficit and Non-Controlling Interest
(in thousands)
Three Months Ended March 31,
20242023
Cash flows from operating activities:
Net income (loss)$5,193 $(506)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization of assets15,253 18,048 
Stock-based, ESPP and incentive units compensation1,633 1,936 
Amortization of debt issuance costs and discounts1,065 903 
Deferred income tax(1,872)(5,716)
Change in contingent consideration972 229 
Other non-cash items, net(259)14 
Change in operating assets and liabilities:
Accounts receivable (8,339)81 
Prepaid expenses and other current assets(425)481 
Income taxes (receivable) payable 8,666 
Notes receivable(266)(163)
Accounts payable and other accrued liabilities1,590 3,916 
Customer deposits and advance payments157 250 
Other assets and liabilities, net(1,395)(462)
Net cash provided by operating activities13,307 27,677 
Cash flows from investing activities:
Additions to property, equipment and software(6,610)(5,046)
Notes receivable, net(1,059)178 
Acquisitions of assets and other investing activities (2,715)
Net cash used in investing activities(7,669)(7,583)
Cash flows from financing activities:
Repayments of long-term debt(1,678)(1,550)
Repayments of borrowings under revolving credit facility (6,000)
Repurchases of Common Stock and shares withheld for taxes (421)(777)
Dividends paid to redeemable senior preferred stockholders1
(7,027)(11,435)
Settlement and customer/subscriber accounts obligations, net1,918 79,258 
Payment of contingent consideration related to business combination(3,071)(1,959)
Net cash (used in) provided by financing activities(10,279)57,537 
Net change in cash and cash equivalents and restricted cash:
Net (decrease) increase in cash and cash equivalents, and restricted cash(4,641)77,631 
Cash and cash equivalents and restricted cash at beginning of period796,223 560,610 
Cash and cash equivalents and restricted cash at end of period$791,582 $638,241 
4

Priority Technology Holdings, Inc.
Unaudited Consolidated Statements of Changes in Stockholders' Deficit and Non-Controlling Interest
(in thousands)
Three Months Ended March 31,
20242023
Reconciliation of cash and cash equivalents, and restricted cash:
Cash and cash equivalents$34,290 $15,882 
Restricted cash12,658 11,012 
Cash and cash equivalents included in settlement assets and customer/subscriber account balances (see Note 4)
744,634 611,347 
Total cash and cash equivalents, and restricted cash$791,582 $638,241 
Supplemental cash flow information:
Cash paid for interest$18,436 $16,330 
Non-cash investing and financing activities:
Forfeiture of liability-classified award$ $596 
Acquisition of intangible asset$ $193 
Issuance of NCI$93 $ 
(1)The dividend payable for the quarter ended March 31, 2024, was paid on April 1, 2024.


5

Priority Technology Holdings, Inc.
Unaudited Consolidated Statements of Changes in Stockholders' Deficit and Non-Controlling Interest
(in thousands)

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," "PRTH," the "Company," "we," "our" or "us," unless the context requires otherwise. Priority is a provider of merchant acquiring, integrated payment software, money transmission services and commercial payments solutions.
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. 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, 2023 was derived from the audited financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 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, 2024, there was no income or loss attributable to NCI in accordance with the applicable operating agreements.
Redeemable NCI represents non-controlling ownership of certain redeemable preferred units in one of the Company's consolidated subsidiaries. These preferred units carry a compounded coupon rate of 6% per annum. The return on the redeemable NCI for the three months ended March 31, 2024, since the reissuance of these redeemable preferred units, is $0.6 million. Refer to Note 13. Related Party Transactions.
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, 2023.
The results for the quarter ended March 31, 2024 include the results of the Plastiq business acquired through Chapter 11 bankruptcy process on July 31, 2023.
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 Indian Rupee (i.e. local currency of Republic of India). The functional currency of the Canadian subsidiary of the Company is the Canadian Dollar. Accordingly, assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the
6

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).
Reclassification
In January 2024, the Company changed the grouping of certain business activity to conform to the way we internally manage and monitor the business. As a result, certain immaterial activity was reassigned from the SMB Payments segment to the Enterprise Payments segment effective January 1, 2024. Impact on prior year segment results were determined to be immaterial and have not been reclassified to reflect this change.
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.
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. The Company is in the process of evaluating the potential effects this guidance will have on its disclosures.
Profit Interest ASU 2024-01
In March 2024, the FASB issued ASU 2024-01, Profit Interest and Similar Awards ("ASU 2024-01"), to improve GAAP by adding an illustrative example to demonstrate how an entity should apply the scope in paragraph 718-10-15-3 to determine whether profit interest and similar awards should be accounted for in accordance with Topic 718, Compensation- Stock Compensation. This guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is in the process of evaluating the potential effects this guidance will have on its disclosures.

2.    Acquisition
Plastiq Acquisition
On May 23, 2023, PRTH’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 will complement the Company's existing supplier-funded B2B payments business. On May 24, 2023, Plastiq filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware.
The purchase was completed on July 31, 2023 for a total purchase consideration of approximately $37.0 million. The total purchase consideration included $28.5 million in cash and the remaining consideration is in the nature of deferred or contingent consideration and certain equity interest in the acquiring entity. The cash consideration for the purchase was funded by borrowings from the Company's revolving credit facility.
7

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 preliminary purchase price allocation is set forth in the table below and expected to be finalized as soon as practicable but no later than one year from the closing date.
(in thousands)
Consideration:
Cash$28,500 
Contingent consideration payments (1)
8,419 
Common equity of acquiring entity330 
Less: cash and restricted cash acquired(278)
Total purchase consideration, net of cash and restricted cash acquired$36,971 
Recognized amounts of assets acquired and liabilities assumed:
Accounts receivable$831 
Prepaid expenses469 
Settlement assets8,277 
Equipment, net47 
Goodwill(3)
7,261 
Intangible assets(2)
30,460 
Accounts payable and accrued expenses(1,881)
Customer deposits(214)
Settlement obligations(8,279)
Total purchase consideration$36,971 
(1)The fair value of the contingent consideration payments issued was determined utilizing a Monte Carlo simulation. The contingent consideration payments were calculated based on the path for the simulated metrics and the contractual terms of the contingent consideration payments and were discounted to present value at a rate reflecting the risk associated with the payoffs. The fair value was estimated to be the average present value of the contingent consideration payments over all iterations of the simulation.
(2)The intangible assets acquired consist of $13.0 million for customer relationships, $7.0 million for referral partner relationships, $6.5 million for technology and $3.9 million for trade name.
(3)During the first quarter of 2024, the Company recorded an immaterial measurement period adjustment due to a pre-acquisition tax accrual which resulted in an adjustment to goodwill and accounts payable and accrued expenses.


8

3.    Revenues
Disaggregation of Revenues
The following table presents a disaggregation of our consolidated revenues by type:
Three Months Ended March 31,
(in thousands)20242023
Revenue Type:
Merchant card fees$157,947 $149,644 
Money transmission services29,144 21,406 
Outsourced services and other services15,665 11,005 
Equipment2,963 2,973 
Total revenues(1),(2)
$205,719 $185,028 
(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 $11.9 million and $5.0 million of interest income for the three months ended March 31, 2024 and 2023, respectively, is included in outsourced services and other services revenue in the table above. Approximately $0.6 million and $0.2 million of interest income for the three months ended March 31, 2024, and 2023, respectively, is included in other income, net on the Company's Unaudited Consolidated Statements of Operations and Comprehensive 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, 2024
(in thousands)Merchant Card FeesMoney Transmission ServicesOutsourced and Other ServicesEquipmentTotal
Segment
SMB Payments$139,488 $ $1,300 $2,963 $143,751 
B2B Payments18,289  2,826  21,115 
Enterprise Payments170 29,144 11,539  40,853 
Total revenues$157,947 $29,144 $15,665 $2,963 $205,719 
Three Months Ended March 31, 2023
(in thousands)Merchant Card FeesMoney Transmission ServicesOutsourced and Other ServicesEquipmentTotal
Segment
SMB Payments$148,688 $ $3,272 $2,973 $154,933 
B2B Payments927  1,859  2,786 
Enterprise Payments29 21,406 5,874  27,309 
Total revenues$149,644 $21,406 $11,005 $2,973 $185,028 
Deferred revenues were not material for the three months ended March 31, 2024 and 2023.
9

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 $0.6 million and $0.6 million as of March 31, 2024 and December 31, 2023, 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 receivables or contract assets arising from the Company's contracts with customers were not material for the three months ended March 31, 2024 and 2023.

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 $109.2 million and $98.0 million at March 31, 2024 and December 31, 2023, 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 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, 2024 and 2023 were $4.7 million and $1.0 million, respectively.
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. 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 $79.1 million and $69.0 million at March 31, 2024 and December 31, 2023, respectively. Company-owned bank accounts held $1.6 million and $1.2 million at March 31, 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.
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, 2024 were $0.2 million. There were no expenses for these merchant losses in 2023.
For the Plastiq business, the Company accepts card payments from its customers and processes disbursements to their vendors. The time lag between authorization and settlement of card transactions creates certain receivables (from card networks) and
10

payables (to the vendors of customers). These receivables and payables arise from the settlement activities that the Company performs on the behalf of its customers and therefore, are presented as Settlement assets and related obligations.
Enterprise Payments Segment
In the Company's Enterprise Payments segment revenue is derived primarily from enrollment fees, monthly subscription fees and transaction-based fees from licensed money transmission services. As part of its licensed money transmission services, the Company accepts deposits from consumers and subscribers which are held in bank accounts maintained by the Company on behalf of consumers and subscribers. After accepting deposits, the Company is allowed to invest available balances in these accounts in certain permitted investments, and the return on such investments contributes to the Company's net cash inflows. These balances are payable on demand. As such, the Company recorded these balances and related obligations as current assets and current liabilities. The nature of these balances are cash and cash equivalents, but they are not available for day-to-day operations of the Company. Therefore, the Company has classified these balances as settlement assets and customer/subscriber account balances and the related obligations as settlement and customer/subscriber account obligations in the Company's Unaudited Consolidated Balance Sheets.
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 $46.2 million and $19.6 million at March 31, 2024 and December 31, 2023, respectively.
The Company's consolidated settlement assets and customer/subscriber account balances and settlement and customer/subscriber account obligations were as follows:
(in thousands)March 31, 2024December 31, 2023
Settlement Assets, net of estimated losses(1):
Card settlements due from merchants$881 $2,705 
Card settlements due from networks6,338 8,185 
Other settlement assets737 889 
Customer/subscriber account balances
Cash and cash equivalents744,634 744,696 
Total settlement assets and customer/subscriber account balances$752,590 $756,475 
Settlement and Customer/Subscriber Account Obligations:
Customer account obligations$703,212 $710,775 
Subscriber account obligations41,422 33,921 
Total customer/subscriber account obligations744,634 744,696 
Due to customers' payees(2)
9,216 11,058 
Total settlement and customer/subscriber account obligations$753,850 $755,754 
(1)Allowance for estimated losses was $9.2 million and $6.6 million as of March 31, 2024 and December 31, 2023, respectively
(2)Card settlements due from networks includes $6.3 million and $8.2 million as of March 31, 2024 and December 31, 2023, respectively, related assets and remainder are included in restricted cash on our Unaudited Consolidated Balance Sheets.

5.     Notes Receivable
The Company had notes receivable of $6.5 million and $5.2 million as of March 31, 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 18.5% and 18.6% as of March 31,
11

2024 and December 31, 2023. 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, 2024 and December 31, 2023, the Company had no allowance for doubtful notes receivable.
As of March 31, 2024, the principal payments for the Company's notes receivable are due as follows:
(in thousands)
Twelve months ending March 31,
2025$1,972 
20261,688 
20271,522 
20281,092 
After 2028247 
Total$6,521 

6.    Property, Equipment and Software
A summary of property, equipment and software, net was as follows:
(in thousands)March 31, 2024December 31, 2023
Computer software$85,933 $78,492 
Equipment10,712 10,377 
Leasehold improvements2,788 1,535 
Furniture and fixtures1,442 1,442 
Property, equipment and software100,875 91,846 
Less: Accumulated depreciation(59,549)(56,442)
Capital work in-progress6,794 9,276 
Property, equipment and software, net$48,120 $44,680 
Three Months Ended March 31,
(in thousands)20242023
Depreciation expense$3,170 $2,757 
Computer software represents purchased software and internally developed software that is used to provide the Company's services to its customers.
Fully depreciated assets are retained in property, equipment and software, net, until removed from service. During the quarter ended March 31, 2024, certain fully depreciated assets were removed from service.
12

7.    Goodwill and Other Intangible Assets
Goodwill
The Company's goodwill relates to the following reporting units:
(in thousands)March 31, 2024December 31, 2023
SMB Payments$124,139 $124,139 
Enterprise Payments244,712 244,712 
Plastiq (B2B Payments)7,261 7,252 
Total$376,112 $376,103 
The following table summarizes the changes in the carrying value of goodwill:
(in thousands)Amount
Balance at December 31, 2023$376,103 
Plastiq adjustment9 
Balance at March 31, 2024
$376,112 
As of March 31, 2024, 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, 2024Weighted-average
Useful Life
(in thousands, except weighted-average data)Gross Carrying ValueAccumulated AmortizationNet Carrying Value
Other intangible assets:
ISO and referral partner relationships$182,339 $(39,824)$142,515 14.6
Residual buyouts135,164 (95,505)39,659 6.3
Customer relationships109,017 (93,459)15,558 8.4
Merchant portfolios83,350 (59,565)23,785 6.5
Technology57,639 (23,989)33,650 8.7
Trade names7,104 (2,713)4,391 10.6
Non-compete agreements3,390 (3,390) 0.0
Money transmission licenses(1)
2,100 — 2,100 
Total $580,103 $(318,445)$261,658 9.6
(1)These assets have an indefinite useful life.
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December 31, 2023Weighted-average
Useful Life
(in thousands, except weighted-average data)Gross Carrying ValueAccumulated AmortizationNet Carrying Value
Other intangible assets:
ISO and referral partner relationships$182,339 $(36,506)$145,833 14.7
Residual buyouts135,164 (92,699)42,465 6.3
Customer relationships109,017 (92,781)16,236 8.4
Merchant portfolios83,350 (56,139)27,211 6.5
Technology57,639 (22,712)34,927 9.0
Trade names7,104 (2,526)4,578 11.7
Non-compete agreements3,390 (3,390) 0.0
Money transmission licenses(1)
2,100  2,100 
Total $580,103 $(306,753)$273,350 9.7
(1)These assets have an indefinite useful life.
Three Months Ended March 31,
(in thousands)20242023
Amortization expense(1)
$12,083 $15,291 
(1)Included in amortization expense is $0.4 million and $0.1 million as of March 31, 2024 and 2023, respectively, related to the amortization of certain contract acquisition costs.
As of March 31, 2024, there were no impairment indicators present.

8.    Debt Obligations
Outstanding debt obligations consisted of the following:
(in thousands)March 31, 2024December 31, 2023
Term facility - matures April 27, 2027, interest rates of 11.19% and 11.21% at March 31, 2024 and December 31, 2023, respectively
$652,695 $654,373 
Revolving credit facility - $65.0 million line as of March 31, 2024 and December 31, 2023, matures April 27, 2026, interest rate of 10.20% at March 31, 2024 and December 31, 2023
  
Total debt obligations652,695 654,373 
Less: current portion of long-term debt(6,712)(6,712)
Less: unamortized debt discounts and deferred financing costs(14,631)(15,696)
Long-term debt, net$631,352 $631,965 
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.
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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 March 31,
(in thousands)20242023
Interest expense(1),(2)
$20,880 $17,699 
(1)Included in interest expense is $1.0 million and $0.1 million related to the accretion of contingent consideration from acquisitions for the three months ended March 31, 2024, and 2023, respectively.
(2)Interest expense included amortization of deferred financing costs and debt discounts of $1.1 million and $0.9 million for the three months ended March 31, 2024, and 2023, respectively.
Debt Covenants
The Credit Agreement contains representations and warranties, financial and collateral requirements, mandatory payment events, events of default and affirmative and negative covenants, including without limitation, covenants that restrict among other things, the ability to create liens, pay dividends or distribute assets from the loan parties to the Company, merge or consolidate, dispose of assets, incur additional indebtedness, make certain investments or acquisitions, enter into certain transactions (including with affiliates) and to enter into certain leases.
If the aggregate principal amount of outstanding revolving loans and letters of credit under the Credit Agreement exceeds 35% of the total revolving credit facility thereunder, the loan parties are required to comply with certain restrictions on its Total Net Leverage Ratio. If applicable, the maximum permitted Total Net Leverage Ratio is: 1) 6.50:1.00 at each fiscal quarter ended September 30, 2021 through June 30, 2022; 2) 6.00:1.00 at each fiscal quarter ended September 30, 2022 through June 30, 2023; and 3) 5.50:1.00 at each fiscal quarter ended September 30, 2023 each fiscal quarter thereafter. As of March 31, 2024, the Company was in compliance with the covenants in the Credit Agreement.

9.    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)March 31, 2024December 31, 2023
Redeemable senior preferred stock $225,000 $225,000 
Accumulated unpaid dividend48,197 43,498 
Dividend payable7,122 7,027 
Redemption value280,319 275,525 
Less: unamortized discounts and issuance costs(16,079)(16,920)
Redeemable senior preferred stock, net of discounts and issuance costs:$264,240 $258,605 
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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)SharesAmount
December 31, 2023225 $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, 2024225 $264,240 
The dividend rate as of March 31, 2024 and December 31, 2023, was 17.6% and 17.7% respectively.
The following table provides a summary of the dividends for the period presented:
Three Months Ended March 31,
(in thousands)20242023
Dividends paid in cash(1)
$7,122 $6,094 
Accumulated dividends accrued as part of the carrying value of redeemable senior preferred stock4,699 4,383 
Dividends declared$11,821 $10,477 
(1)Dividend payable for the three months ended March 31, 2024 was paid on April 1, 2024.
Under the Amended Certificate of Designation, 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 March 31, 2024, none of the warrants have been exercised. The warrants are considered to be equity contracts indexed in the Company's own shares and therefore were recorded at their inception date relative fair value and are included in additional paid-in capital on the Company's Unaudited Consolidated Balance Sheets.

10.    Income Taxes
The Company's consolidated effective income tax rate for the three months ended March 31, 2024, was 33.2% compared to a consolidated effective income tax rate of 20.8% for the three months ended March 31, 2023. 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.
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Based on management's assessment, as of March 31, 2024, the Company continues to record a full valuation allowance against non-deductible interest expense. 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.

11.     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, 2024 and December 31, 2023, the Company has not issued any shares of preferred stock.
Share Repurchase Program
In 2022, PRTH's Board of Directors authorized a general share repurchase program under which the Company may purchase up to 2.0 million shares of its outstanding Common Stock for a total of up to $10.0 million. 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.

12.    Stock-based Compensation
Stock-based compensation expense was as follows:
Three Months Ended March 31,
(in thousands)20242023
Stock options compensation expense$1,528 $1,922 
Incentive units compensation expense93  
ESPP compensation expense12 14
Total$1,633 $1,936 
Income tax benefit for stock-based compensation was immaterial for the three months ended March 31, 2024 and 2023. No stock-based compensation has been capitalized.
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.
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
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opportunity to purchase shares of the Company's Common Stock on a quarterly basis through payroll deductions at a price equal to 95% of the lesser of the fair value on the first and last trading day of each offering period.
Non-voting Incentive Units
The Company issued non-voting incentive units to certain employees and partners in six 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.

13.    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 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 Unaudited Consolidated Balance Sheets. The redeemable preferred units were accreted to their redemption value as of March 31, 2024, through net loss available to common stockholders in the Company’s Unaudited Statements of Operations and Comprehensive Loss.

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14.    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 $21.6 million in 2024 and $25.0 million in 2025.
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 March 31, 2024 and December 31, 2023. The Company is obligated to make the contributions within 10 business days of receiving notice for such contribution from the subsidiary. As of March 31, 2024 and December 31, 2023, the Company has contributed $13.4 million and $11.8 million, respectively.
Merchant Reserves
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
December 31, 2023$13,438 
Accretion of contingent consideration972 
Payment of contingent consideration(3,071)
March 31, 2024$11,339 
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 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 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 is an agent of Priority, PPS and Wells Fargo
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and that it made non-consensual recordation of telephonic communications with California businesses in violation of California Invasion of Privacy Act (the “Act”). The Complaint seeks to certify a class of affected businesses and an award of $5,000 per violation of the Act. As of May 9, 2024, the financial impact, if any, of the outcome of this legal proceeding is neither probable nor estimable.
Concentration of Risks
The Company's revenue is substantially derived from processing Visa and Mastercard bankcard transactions. Because the Company is not a member bank, in order to process these bankcard transactions, the Company maintains sponsorship agreements with member banks which require, among other things, that the Company abide by the by-laws and regulations of the card associations.
As of March 31, 2024 , the Company's customer account balances of $703 million are maintained in FDIC insured eligible accounts with certain FIs (refer to Note 4. Settlement Assets and Customer/Subscriber Account Balances and Related Obligations) A majority of the Company's cash and restricted cash is 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.

15.    Fair Value
Fair Value Measurements
Contingent consideration related to the Company's business combinations is estimated based on the present value of a weighted payout probability at the measurement date, which falls within Level 3 on the fair value hierarchy. 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.
Liabilities measured at fair value on a recurring basis consisted of the following:
(in thousands)Fair Value HierarchyMarch 31, 2024December 31, 2023
Contingent consideration, current portionLevel 3$2,880 $5,951 
Contingent consideration, noncurrent portionLevel 3$8,459 7,487 
Total contingent consideration$11,339 $13,438 
During the three months ended March 31, 2024, there were no transfers into, out of, or between levels of the fair value hierarchy.
Fair Value Disclosures
Notes Receivable
Notes receivable are carried at amortized cost. Substantially all of the Company's notes receivable are secured, and the Company provides for allowances when it believes that certain notes receivable may not be collectible. The carrying value of the Company's notes receivable, net approximates fair value and was approximately $6.5 million and $5.2 million at March 31, 2024 and December 31, 2023, respectively. On the fair value hierarchy, Level 3 inputs are used to estimate the fair value of these notes receivable.
Debt Obligations
Outstanding debt obligations (see Note 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.
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The fair value of the term facility was estimated to be $651.9 million at March 31, 2024 and December 31, 2023 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.

16.    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 working improving cash flow by providing instant access to working capital.
Enterprise Payments – Provides embedded finance and treasury solutions to enterprise customers to modernize legacy platforms and accelerate software partners' strategies to monetize payments.
Corporate includes costs of corporate functions and shared services not allocated to our reportable segments.
In January 2024, the Company changed the grouping of certain business activity to conform to the way we internally manage and monitor the business. As a result, certain immaterial activity was reassigned from the SMB Payments segment to the Enterprise Payments segment effective January 1, 2024. Impact on prior year segment results were determined to be immaterial and have not been reclassified to reflect this change.
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Information on reportable segments and reconciliations to consolidated revenues, consolidated depreciation and amortization, and consolidated operating income are as follows:
(in thousands)Three Months Ended March 31,
20242023
Revenues:
SMB Payments$143,751 $154,933 
B2B Payments21,115 2,786 
Enterprise Payments40,853 27,309 
Consolidated revenues$205,719 $185,028 
Depreciation and amortization:
SMB Payments$8,802 $10,846 
B2B Payments1,640 125 
Enterprise Payments4,356 6,690 
Corporate455 387 
Consolidated depreciation and amortization$15,253 $18,048 
Operating income (loss):
SMB Payments$12,383 $12,011 
B2B Payments(793)(849)
Enterprise Payments25,547 12,663 
Corporate(9,114)(6,977)
Consolidated operating income$28,023 $16,848 

A reconciliation of total operating income of reportable segments to the Company's net (loss) income is provided in the following table:
(in thousands)Three Months Ended March 31,
20242023
Total operating income of reportable segments$37,137 $23,825 
Corporate(9,114)(6,977)
Interest expense(20,880)(17,699)
Other income, net632 212 
Income tax (expense) benefit (2,582)133 
Net income (loss)$5,193 $(506)

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17.    Loss per Common Share
The following tables set forth the computation of the Company's basic and diluted loss per common share:
Three Months Ended March 31,
(in thousands except per share amounts)20242023
Numerator:
Net income (loss)$5,193 $(506)
Less: Dividends and accretion attributable to redeemable senior preferred stockholders(12,662)(11,295)
Less: Return on redeemable NCI in consolidated subsidiary(581) 
Net loss attributable to common stockholders$(8,050)$(11,801)
Denominator:
Basic and diluted:
Weighted-average common shares outstanding(1)
78,021 78,133 
Loss per common share$(0.10)$(0.15)
(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 March 31, 2024 and 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 loss per common share are as follows:
Three Months Ended March 31,
(in thousands)20242023
Outstanding warrants on Common Stock(1)
 3,557 
Outstanding options and warrants issued to adviser(2)
 600 
Restricted stock awards(3)
1,078 2,245 
Outstanding stock option awards(3)
864 952 
Total1,942 7,354 
(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.
(3)Granted under the 2018 Plan.



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Audited Consolidated Financial Statements and related Notes and the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023. Certain amounts in this section may not add mathematically due to rounding.
Cautionary Note Regarding Forward-looking Statements
Some of the statements made in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements include, but are not limited to, statements regarding our management's expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, such as statements about our future financial performance, including any underlying assumptions, are forward-looking statements. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "future," "goal," "intend," "likely," "may," "might," "plan," "possible," "potential," "predict," "project," "seek," "should," "would," "will," "approximately," "shall" and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about: 
negative economic and political conditions that adversely affect the general economy, consumer confidence and consumer and commercial spending habits, which may, among other things, negatively impact our business, financial condition and results of operations;
competition in the payment processing industry;
the use of distribution partners;
any unauthorized disclosures of merchant or cardholder data, whether through breach of our computer systems, computer viruses or otherwise;
any breakdowns in our processing systems;
government regulation, including regulation of consumer information;
the use of third-party vendors;
any changes in card association and debit network fees or products;
any failure to comply with the rules established by payment networks or standards established by third-party processors;
any proposed acquisitions or dispositions or any risks associated with completed acquisitions or dispositions; and
other risks and uncertainties set forth in the "Item 1A - Risk Factors" section of this Quarterly Report on Form 10-Q or our Annual Report on Form 10-K.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. 
The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our current expectations and beliefs concerning future developments and their potential effects on us. You should not place undue reliance on these forward-looking statements in deciding whether to invest in our securities. We cannot assure you that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions, including the risk factors set forth in the "Item 1A - Risk Factors" section of this Quarterly Report on Form 10-Q or our Annual Report on Form 10-K, that may cause our actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. 
In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements. 
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You should read this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. 
Forward-looking statements speak only as of the date they were made. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
Terms Used in this Quarterly Report on Form 10-Q
As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to the terms "Company," "Priority," "we," "us" and "our" refer to Priority Technology Holdings, Inc. and its consolidated subsidiaries.

Results of Operations
This section includes certain components of our results of operations for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. We have derived this data, except the key indicators, from our Unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q and our Audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.
Revenue
For the three months ended March 31, 2024, our consolidated revenue of $205.7 million increased by $20.7 million, or 11.2%, from $185.0 million for the three months ended March 31, 2023. The overall increase was driven by an increase in new enrollments and higher interest income in our Enterprise Payments segment and revenue from the Plastiq business in our B2B Payments segment that was acquired in the quarter ended September 30, 2023. These increases were partially offset by a decrease in revenues in our SMB Payments segment due to decreased volumes.
The following table presents our revenues by type:
(in thousands)Three Months Ended March 31,
20242023$ Change
Revenue Type:
Merchant card fees$157,947$149,644$8,303
Money transmission services29,14421,4067,738
Outsourced services and other services15,66511,0054,660
Equipment2,9632,973(10)
Total revenues$205,719$185,028$20,691
Merchant card fees
Merchant card fees revenue for the three months ended March 31, 2024 was $157.9 million an increase of $8.3 million or 5.5%, from $149.6 million for the three months ended March 31, 2023. The increase was primarily driven by the Plastiq business and rate increases. These increases were partially offset by a decrease in volume due to the diversification of our merchant portfolio by one of our referral partners.
Money transmission services
Money transmission services for the three months ended March 31, 2024 was $29.1 million an increase of $7.7 million, or 36.1%, from $21.4 million for the three months ended March 31, 2023. This increase was primarily driven by an increase in customer enrollments.
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Outsourced services and other services revenue
Outsourced services and other services revenue of $15.7 million for the three months ended March 31, 2024 increased by $4.7 million, or 42.3%, from $11.0 million for the three months ended March 31, 2023, primarily due to growth in interest income due to higher interest rates and deposit balances.
Equipment
Equipment revenue of $3.0 million for the three months ended March 31, 2024 remained consistent with $3.0 million for the three months ended March 31, 2023.
Operating expenses were as follows:
(in thousands)Three Months Ended March 31,
20242023$ Change
Operating expenses
Cost of services (excludes depreciation and amortization)$129,298$121,966$7,332
Salary and employee benefits22,15019,0483,102
Depreciation and amortization15,25318,048(2,795)
Selling, general and administrative10,9949,1181,876
Total operating expenses$177,695$168,180$9,515
Cost of services (excludes depreciation and amortization)
Cost of services (excludes depreciation and amortization) of $129.3 million for the three months ended March 31, 2024, increased by $7.3 million, or 6.0%, from $122.0 million for the three months ended March 31, 2023, primarily due to the corresponding increase in revenues.
Salary and employee benefits
Salary and employee benefits expense of $22.2 million for the three months ended March 31, 2024 increased by $3.1 million, or 16.3%, from $19.0 million for the three months ended March 31, 2023, primarily due to merit increases, certain performance based non-recurring bonuses and increased headcount from the acquisition of the Plastiq business and to support the overall growth of the Company.
Depreciation and amortization expense
Depreciation and amortization expense of $15.3 million for the three months ended March 31, 2024 decreased by $2.8 million, or 15.5%, from $18.0 million for the three months ended March 31, 2023, primarily due to full amortization of certain intangible assets during 2023.
Selling, general and administrative
Selling, general and administrative expenses of $11.0 million for the three months ended March 31, 2024 increased by $1.9 million, or 20.6%, from $9.1 million for the three months ended March 31, 2023, primarily due to certain software and maintenance expenses and other expenses to support overall growth of the Company.
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Other Expense, net
Other expenses, net were as follows:
(in thousands)Three Months Ended March 31,
20242023$ Change
Other (expense) income
Interest expense$(20,880)$(17,699)$(3,181)
Other income, net632212420
Total other expense, net$(20,248)$(17,487)$(2,761)

Interest expense
Interest expense of $20.9 million for the three months ended March 31, 2024 increased by $3.2 million, or 18.0%, from $17.7 million for the three months ended March 31, 2023, due to increased interest rates and increased outstanding balance for the term loan facility used for the acquisition of the Plastiq business, offset by a decrease in the revolving credit facility.
Income tax (benefit) expense
Income tax expense was as follows:
(in thousands)Three Months Ended March 31,
20242023$ Change