Priority Technology Holdings, Inc. (PRTH) Bundle
Understanding Priority Technology Holdings, Inc. (PRTH) Revenue Streams
Understanding Priority Technology Holdings, Inc.’s Revenue Streams
For the three months ended September 30, 2024, consolidated revenue was $227.0 million, representing an increase of $38.0 million, or 20.1%, from $189.0 million for the same period in 2023. For the nine months ended September 30, 2024, consolidated revenue reached $652.6 million, up by $96.3 million, or 17.3%, from $556.3 million in 2023.
Revenue Breakdown by Source
| Revenue Type | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | $ Change | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | $ Change |
|---|---|---|---|---|---|---|
| Merchant card fees | $171,814,000 | $146,974,000 | $24,840,000 | $499,007,000 | $441,142,000 | $57,865,000 |
| Money transmission services | $33,868,000 | $25,831,000 | $8,037,000 | $94,352,000 | $70,955,000 | $23,397,000 |
| Outsourced services and other services | $18,063,000 | $13,181,000 | $4,882,000 | $49,984,000 | $34,768,000 | $15,216,000 |
| Equipment | $3,304,000 | $3,029,000 | $275,000 | $9,292,000 | $9,468,000 | ($176,000) |
| Total revenues | $227,049,000 | $189,015,000 | $38,034,000 | $652,635,000 | $556,333,000 | $96,302,000 |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth for the three months ended September 30, 2024, was driven by an increase in merchant bankcard volume across the SMB Payments segment, alongside new enrollments and heightened interest income in the Enterprise Payments segment. Notably, the B2B Payments segment also benefited from the acquisition of Plastiq on July 31, 2023.
Contribution of Different Business Segments to Overall Revenue
Revenue from the SMB Payments segment was $158.8 million for the three months ended September 30, 2024, compared to $140.2 million for the same period in 2023, marking an increase of $18.5 million, or 13.2%. For the nine months, revenue was $457.9 million, up from $443.1 million, an increase of $14.8 million, or 3.3%.
Revenue from the B2B Payments segment for the three months was $22.1 million, an increase of $8.2 million from $14.0 million in 2023. For nine months, revenue surged to $65.4 million, compared to $19.7 million for the same period last year, reflecting a significant increase of $45.6 million.
Enterprise Payments revenue was $47.1 million for the three months ended September 30, 2024, an increase of $11.9 million, or 33.9%, from $35.2 million in 2023. For the nine months, revenue was $131.8 million, up $37.8 million, or 40.3%.
Significant Changes in Revenue Streams
The acquisition of Plastiq has significantly impacted revenue, particularly in the B2B Payments segment, leading to a marked increase in revenues and Adjusted EBITDA. Additionally, the growth in new customer enrollments and average billed clients in the Enterprise Payments segment highlights a positive trend in revenue generation.
A Deep Dive into Priority Technology Holdings, Inc. (PRTH) Profitability
A Deep Dive into Priority Technology Holdings, Inc.'s Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit margin was approximately 38.8%, compared to 38.5% for the same period in 2023.
Operating Profit Margin: The operating profit margin for the three months ended September 30, 2024, was 16.8%, up from 11.2% in 2023.
Net Profit Margin: The net profit margin for the three months ended September 30, 2024, was 4.7%, compared to a net loss margin of 0.1% in the same quarter of 2023.
Trends in Profitability Over Time
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Gross Profit Margin | 38.8% | 38.5% | 0.8% |
| Operating Profit Margin | 16.8% | 11.2% | 50.0% |
| Net Profit Margin | 4.7% | (0.1%) | 4,800.0% |
Comparison of Profitability Ratios with Industry Averages
The industry average gross profit margin for similar companies is approximately 35%, positioning the company above this benchmark with a gross profit margin of 38.8%.
Similarly, the operating profit margin industry average stands around 15%, while the company achieved 16.8%.
In terms of net profit margin, the average for the industry is about 3%, and the company exceeded this with a net profit margin of 4.7%.
Analysis of Operational Efficiency
The company reported total operating expenses of $39.3 million for the three months ended September 30, 2024, compared to $44.8 million in the same quarter of the previous year, indicating improved cost management.
Gross margin trends have shown a consistent increase, attributed to improved pricing strategies and cost controls. The gross profit for the three months ended September 30, 2024, was $87.9 million, compared to $78.8 million in Q3 2023.
Adjusted EBITDA for the three months ended September 30, 2024, was $54.6 million, reflecting a 21.5% increase from $44.9 million in Q3 2023.
The effective tax rate for 2024 is projected at 31.6%, down from 102.1% in 2023, significantly impacting net profitability.
| Financial Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Operating Expenses | $39.3 million | $44.8 million | –$5.5 million |
| Gross Profit | $87.9 million | $78.8 million | +$9.1 million |
| Adjusted EBITDA | $54.6 million | $44.9 million | +$9.7 million |
Debt vs. Equity: How Priority Technology Holdings, Inc. (PRTH) Finances Its Growth
Debt vs. Equity: How Priority Technology Holdings, Inc. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, the company's total debt obligations amounted to $832.9 million, which includes a term facility that matures on May 16, 2031, with an interest rate of 9.81%. The previous debt balance at December 31, 2023, was $654.4 million.
| Debt Type | Amount (in millions) | Maturity Date | Interest Rate |
|---|---|---|---|
| Term Facility | $832.9 | May 16, 2031 | 9.81% |
| Revolving Credit Facility | $70.0 | May 16, 2029 | 9.31% |
| Previous Term Facility | $654.4 | April 27, 2027 | 11.21% |
Debt-to-Equity Ratio
The debt-to-equity ratio as of September 30, 2024, was calculated at 4.99, indicating a significant reliance on debt financing compared to equity. This is notably higher than the industry average of approximately 1.5.
Recent Debt Issuances and Refinancing Activity
On May 16, 2024, the company refinanced its previous credit agreement, leading to an increase in total debt obligations by $177.8 million. The refinancing involved a term facility of $832.9 million, which replaced the prior credit agreement that had a higher interest rate of 11.21%.
Credit Ratings
The company currently holds a credit rating that reflects its high debt levels and associated risks; however, specific credit ratings were not disclosed in the available data.
Balancing Debt Financing and Equity Funding
To manage its capital structure, the company balances debt financing with equity. The total stockholders' deficit was reported at $165.8 million as of September 30, 2024. The company has also utilized stock-based compensation to attract and retain talent, which can influence its equity levels.
| Financial Metric | Value |
|---|---|
| Total Debt | $832.9 million |
| Equity Deficit | ($165.8 million) |
| Debt-to-Equity Ratio | 4.99 |
| Interest Expense (last 9 months) | $65.8 million |
| Dividends Paid to Redeemable Senior Preferred Stockholders (last 9 months) | $22.1 million |
Assessing Priority Technology Holdings, Inc. (PRTH) Liquidity
Assessing Priority Technology Holdings, Inc.'s Liquidity
Current and Quick Ratios
As of September 30, 2024, the current ratio for Priority Technology Holdings, Inc. is approximately 1.04, calculated from current assets of $1,028.9 million and current liabilities of $991.2 million. The quick ratio, which excludes inventories, is approximately 1.03 when considering cash and cash equivalents of $41.1 million, accounts receivable of $73.4 million, and current liabilities.
Analysis of Working Capital Trends
The working capital for the company stood at $37.7 million as of September 30, 2024, a significant increase from $16.6 million recorded on September 30, 2023. This increase indicates an improvement in liquidity and the company's ability to cover short-term obligations.
Cash Flow Statements Overview
The cash flow statement highlights the following trends for the nine months ended September 30:
| Cash Flow Type | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Activities | $61,852 | $72,680 |
| Investing Activities | ($24,734) | ($51,224) |
| Financing Activities | $84,716 | $157,029 |
| Net Cash Increase | $121,834 | $178,485 |
Potential Liquidity Concerns or Strengths
The company maintains cash and cash equivalents of $41.1 million and restricted cash of $13.4 million as of September 30, 2024. Additionally, there is an available credit facility of $70.0 million, which enhances liquidity. However, the total liabilities amount to $1,818.5 million, raising potential concerns regarding debt servicing and overall financial health, particularly given the current liabilities of $991.2 million.
The current portion of long-term debt is $8.4 million, indicating manageable short-term debt obligations, but the significant total debt of $816.4 million as of September 30, 2024, necessitates close monitoring of cash flows and operational performance to ensure ongoing liquidity stability.
Is Priority Technology Holdings, Inc. (PRTH) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we will examine key valuation metrics including the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and enterprise value-to-EBITDA (EV/EBITDA) ratio.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a measure of the company's current share price relative to its earnings per share (EPS).
- Current Stock Price: $0.79
- Trailing Twelve Months (TTM) EPS: -$0.26
- P/E Ratio: Not applicable (negative EPS)
Price-to-Book (P/B) Ratio
The P/B ratio compares the company's market value to its book value.
- Book Value per Share: $1.06
- P/B Ratio: 0.74
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio measures the company's total valuation compared to its earnings before interest, taxes, depreciation, and amortization.
- Enterprise Value: $1.27 billion
- TTM EBITDA: $123.7 million
- EV/EBITDA Ratio: 10.27
Stock Price Trends
The stock price has shown the following trends over the last 12 months:
- 12-Month Low: $0.52
- 12-Month High: $1.15
- Current Price: $0.79
Dividend Yield and Payout Ratios
The company has not declared any dividends in the past year, indicating a dividend yield of 0%.
Analyst Consensus on Stock Valuation
Analyst consensus shows a mixed outlook:
- Buy: 1
- Hold: 3
- Sell: 1
| Valuation Metric | Value |
|---|---|
| P/E Ratio | Not applicable |
| P/B Ratio | 0.74 |
| EV/EBITDA Ratio | 10.27 |
| 12-Month Low | $0.52 |
| 12-Month High | $1.15 |
| Current Price | $0.79 |
| Dividend Yield | 0% |
| Analyst Consensus | 1 Buy, 3 Hold, 1 Sell |
Key Risks Facing Priority Technology Holdings, Inc. (PRTH)
Key Risks Facing Priority Technology Holdings, Inc.
Overview of Internal and External Risks
Priority Technology Holdings, Inc. faces various risks that could significantly impact its financial health. These risks include:
- Competition in the Payment Processing Industry: Intense competition from both established companies and new entrants can pressure margins and market share.
- Regulatory Changes: Changes in government regulations regarding payment processing and consumer protection could impose additional compliance costs.
- Market Conditions: Economic downturns or changes in consumer confidence can adversely affect transaction volumes and revenue.
- Operational Risks: Any unauthorized access to merchant or cardholder data could lead to significant financial and reputational damage.
Operational, Financial, or Strategic Risks
The company's most recent earnings report highlighted several specific risks:
- Debt Obligations: As of September 30, 2024, the total debt obligations amounted to $832.9 million, reflecting a significant increase from $654.4 million at December 31, 2023.
- Interest Expense: Interest expense for the three months ended September 30, 2024, was $23.2 million, up from $20.0 million in the same period of 2023.
- Stockholders' Deficit: The total stockholders' deficit as of September 30, 2024, was $(165.8 million), which indicates ongoing financial challenges.
Mitigation Strategies
The company has implemented several strategies to mitigate these risks:
- Debt Management: The company refinanced its 2021 Credit Agreement, improving terms and extending maturities.
- Compliance and Security Measures: Investments in cybersecurity and compliance infrastructure are ongoing to safeguard sensitive data and adhere to regulatory requirements.
- Partnerships with Third-Party Vendors: Establishing strong relationships with reliable vendors to ensure operational stability and compliance with industry standards.
| Risk Factor | Description | Financial Impact (if applicable) |
|---|---|---|
| Debt Levels | High levels of debt could limit operational flexibility. | $832.9 million total debt as of September 30, 2024 |
| Interest Rates | Increased interest rates can elevate financing costs. | Interest expense of $23.2 million for Q3 2024 |
| Regulatory Compliance | Compliance with evolving regulations may incur additional costs. | Potential increased operational costs |
| Market Competition | Loss of market share to competitors can reduce revenues. | Impact on revenue growth |
Future Growth Prospects for Priority Technology Holdings, Inc. (PRTH)
Future Growth Prospects for Priority Technology Holdings, Inc.
Analysis of Key Growth Drivers
Priority Technology Holdings, Inc. has identified several key growth drivers, including:
- Product Innovations: The acquisition of the Plastiq business on July 31, 2023, is expected to enhance the company's product offerings in the B2B payments sector.
- Market Expansions: The company is focused on increasing its merchant bankcard volume and new enrollments in the Enterprise Payments segment.
- Strategic Acquisitions: Continued efforts to acquire relevant businesses that complement its existing operations are anticipated to drive revenue growth.
Future Revenue Growth Projections and Earnings Estimates
For the three months ended September 30, 2024, consolidated revenue reached $227.0 million, an increase of 20.1% year-over-year. For the nine months ended September 30, 2024, consolidated revenue was $652.6 million, reflecting a growth of 17.3% from the previous year.
| Revenue Type | Q3 2024 ($ in thousands) | Q3 2023 ($ in thousands) | Change ($ in thousands) |
|---|---|---|---|
| Merchant Card Fees | 171,814 | 146,974 | 24,840 |
| Money Transmission Services | 33,868 | 25,831 | 8,037 |
| Outsourced Services | 18,063 | 13,181 | 4,882 |
| Equipment | 3,304 | 3,029 | 275 |
| Total Revenues | 227,049 | 189,015 | 38,034 |
Strategic Initiatives or Partnerships
The company has initiated several strategic partnerships aimed at enhancing its service offerings and market reach. Increased focus on customer enrollments has yielded an average of 62,875 new enrollments for the three months ended September 30, 2024, up from 56,269 in the same period of 2023.
Competitive Advantages
Priority Technology Holdings, Inc. has established several competitive advantages that position it well for future growth:
- Robust Merchant Portfolio: The company has a diverse and growing merchant base, with merchant bankcard processing dollar value reaching $15.5 billion for the three months ended September 30, 2024.
- Technological Advancements: Investment in technology solutions enhances operational efficiency and customer experience, contributing to higher customer retention rates.
- Financial Flexibility: As of September 30, 2024, total debt obligations amounted to $832.9 million, reflecting increased borrowing capacity to support growth initiatives.
Financial Overview
As of September 30, 2024, the company reported:
- Net Income: $10.6 million for the three months ended September 30, 2024, compared to a net loss of $87,000 in the same period of 2023.
- Adjusted EBITDA: $54.6 million for Q3 2024, an increase from $44.9 million in Q3 2023.
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Resources:
- Priority Technology Holdings, Inc. (PRTH) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Priority Technology Holdings, Inc. (PRTH)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Priority Technology Holdings, Inc. (PRTH)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.