SEC Form 10-Q filed by Priority Technology Holdings Inc.

5/6/25 9:18:11 AM ET

Business Services

Consumer Discretionary

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prth-20250331

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, 2025

☐ 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

Priority Technology Holdings, Inc.

(Exact name of registrant as specified in its charter)


Delaware		47-4257046
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2001 Westside Parkway
Suite 155
Alpharetta,	Georgia	30004
(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 class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.001	PRTH	NASDAQ

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 filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller 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 1, 2025, the number of the registrant's Common Stock outstanding was 79,753,476.

Table of Contents


			Page
Commonly Used or Defined Terms			ii
PART I. FINANCIAL INFORMATION			1
Item 1. Financial Statements			1
Unaudited Consolidated Balance Sheets			1
Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss)			2
Unaudited Consolidated Statements of Changes in Stockholders' Deficit and Non-Controlling Interest			3
Unaudited Consolidated Statements of Cash Flows			4
Notes to Unaudited Consolidated Financial Statements:			6
1. Basis of Presentation and Significant Accounting Policies			6
2. Acquisitions			7
3. Revenues			8
4. Settlement Assets and Customer/Subscriber Account Obligations			9
5. Notes Receivable			11
6. Property, Equipment and Software			12
7. Goodwill and Other Intangible Assets			12
8. Debt Obligations			14

9. Income Taxes			15
10. Stockholders' Deficit			15
11. Stock-based Compensation			16
12. Related Party Transactions			17
13. Commitments and Contingencies			17
14. Fair Value			19
15. Segment Information			20
16. Earnings (Loss) per Common Share			23
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			23
Item 3. Qualitative and Quantitative Disclosures about Market Risk			32
Item 4. Controls and Procedures			33
PART II. OTHER INFORMATION			34
Item 1. Legal Proceedings			34
Item 1A. Risk Factors			34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			34
Item 3. Defaults Upon Senior Securities			34
Item 4. Mine Safety Disclosures			34
Item 5. Other Information			35
Item 6. Exhibits			35
Signatures			37

Table of Contents

Commonly Used or Defined Terms


Term						Definition
2018 Plan						2018 Equity Incentive Plan
2021 Stock Purchase Plan						Priority Technology Holdings, Inc. 2021 Employee Stock Purchase Plan
2021 Share Repurchase Program						Priority Technology Holdings, Inc. 2021 Share Repurchase Program
AOCI						Accumulated other comprehensive income/loss
AP						Accounts payable
ASC						Accounting Standards Codification
APIC						Additional paid-in capital

ASU						Accounting Standards Update
B2B						Business-to-business
B2C						Business-to-consumer

CEO						Chief Executive Officer
CFO						Chief Financial Officer
Common Stock						The Company's Common Stock, par value $0.001
CODM						Chief operating decision maker
2024 Credit Agreement						Credit and Guaranty Agreement with Truist Bank dated as of May 16, 2024

EAETR						Estimated annual effective tax rate

ESPP						Employee Stock Purchase Plan
Exchange Act						Securities Exchange Act of 1934
FASB						Financial Accounting Standards Board
FDIC						Federal Deposit Insurance Corporation
FBO						For the benefit of
FI						Financial institution
Finxera						Finxera Holdings, Inc.
GAAP						U.S. Generally Accepted Accounting Principles

ISO						Independent sales organization
ISV						Independent software vendor

LIBOR						London Interbank Offered Rate
MTL						Money Transmission Licenses
NCI						Non-controlling interests in consolidated subsidiaries

PHOT						Priority Hospitality Technology, LLC
Plastiq						Acquisition of assets of Plastiq, Inc. and certain of its affiliates
2024 Revolving credit facility						$70.0 million line issued under the 2024 Credit Agreement

SEC						Securities and Exchange Commission

SOX						Sarbanes–Oxley Act of 2002
SMB						Small to medium-sized businesses
Term facility						Term loan facility issued under the 2024 Credit Agreement
Wholesale Payments						Wholesale Payments, Inc.

Table of Contents

Priority Technology Holdings, Inc.

Unaudited Consolidated Balance Sheets

(in thousands, except share data)

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements


	March 31, 2025		December 31, 2024
Assets
Current assets:
Cash and cash equivalents	$	47,587	$	58,600
Restricted cash	11,490		11,090
Accounts receivable, net of allowances of $3,366 and $3,045, respectively	80,280		67,969
Prepaid expenses and other current assets	19,962		22,990
Current portion of notes receivable, net of allowance of $0 and $0, respectively	2,231		3,638
Settlement assets and customer/subscriber account balances	1,003,034		940,798
Total current assets	1,164,584		1,105,085
Notes receivable, less current portion	6,473		4,919
Property, equipment and software, net	53,718		52,477
Goodwill	386,822		376,091
Intangible assets, net	231,560		240,874
Deferred income taxes, net	26,933		24,697
Other noncurrent assets	21,568		22,717
Total assets	$	1,891,658	$	1,826,860
Liabilities, Stockholders' Deficit and NCI
Current liabilities:
Accounts payable and accrued expenses	$	54,414	$	62,149
Accrued residual commissions	40,478		37,560
Customer deposits and advance payments	2,506		2,246
Current portion of long-term debt	1,879		9,503
Settlement and customer/subscriber account obligations	1,003,395		940,213
Total current liabilities	1,102,672		1,051,671
Long-term debt, net of current portion, discounts and debt issuance costs	918,944		920,888
Other noncurrent liabilities	26,467		19,326

Total liabilities	2,048,083		1,991,885
Commitments and contingencies (Note 13)



Stockholders' deficit:
Preferred stock, $0.001; 100,000,000 shares authorized; 0 issued or outstanding at March 31, 2025 and December 31, 2024	—		—
Common Stock, $0.001 par value; 1,000,000,000 shares authorized; 84,219,962 and 81,866,711 shares issued at March 31, 2025 and December 31, 2024, respectively; and 79,711,642 and 77,479,908 shares outstanding at March 31, 2025 and December 31, 2024, respectively	80		77
Treasury stock at cost, 4,508,320 and 4,386,803 shares at March 31, 2025 and December 31, 2024, respectively	(21,077)		(19,607)
Additional paid-in capital	1,669		—
Accumulated other comprehensive loss	(133)		(176)
Accumulated deficit	(138,866)		(147,134)
Total stockholders' deficit attributable to stockholders of Priority	(158,327)		(166,840)
Non-controlling interests in consolidated subsidiaries	1,902		1,815
Total stockholders' deficit	(156,425)		(165,025)
Total liabilities, stockholders' deficit and NCI	$	1,891,658	$	1,826,860

Table of Contents

Priority Technology Holdings, Inc.

Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except per share amounts)


	Three Months Ended March 31,
		2025		2024
Revenues		$	224,630	$	205,719
Operating expenses
Cost of revenue (excludes depreciation and amortization)		137,353		129,298
Salary and employee benefits		25,775		22,150
Depreciation and amortization		13,777		15,253
Selling, general and administrative		15,100		10,995
Total operating expenses		192,005		177,696
Operating income		32,625		28,023
Other (expense) income
Interest expense		(23,176)		(20,880)
Debt extinguishment and modification costs		(38)		—

Other income, net		1,107		632
Total other expense, net		(22,107)		(20,248)
Income before income taxes		10,518		7,775
Income tax expense		2,250		2,582
Net income		8,268		5,193
Less: Dividends and accretion attributable to redeemable senior preferred stockholders		—		(12,662)

Less: Return on redeemable NCI		—		(581)
Net income (loss) attributable to common stockholders		8,268		(8,050)
Other comprehensive income (loss)
Foreign currency translation adjustments		43		(13)
Comprehensive income (loss)		$	8,311	$	(8,063)

Earnings (loss) per common share:
Basic		$	0.10	$	(0.10)
Diluted		$	0.10	$	(0.10)


Weighted-average common shares outstanding:
Basic		78,774		78,021
Diluted		79,857		78,021

See Notes to Unaudited Consolidated Financial Statement

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


	Common Stock			Treasury Stock			APIC		AOCI		Accumulated Deficit		Deficit Attributable to Stockholders		NCIs		Total
	Shares	$		Shares	$
December 31, 2024	77,480	$	77	4,386	$	(19,607)	$	—	$	(176)	$	(147,134)	$	(166,840)	$	1,815	$	(165,025)
Equity-classified stock-based compensation	—	—		—	—		1,499		—		—		1,499		—		1,499
Vesting of stock-based compensation and ESPP compensation	534	1		—	—		62		—		—		63		—		63
Shares withheld for taxes	(122)	—		122	(1,470)		—		—		—		(1,470)		—		(1,470)
Exercise of stock options	16	—		—	—		110		—		—		110		—		110
Exercise of warrants	1,804	2		—	—		(2)		—		—		—		—		—
Issuance of profit interests in subsidiaries	—	—		—	—		—		—		—		—		87		87
Foreign currency translation adjustment	—	—		—	—		—		43		—		43		—		43
Net income	—	—		—	—		—		—		8,268		8,268		—		8,268
March 31, 2025	79,712	$	80	4,508	$	(21,077)	$	1,669	$	(133)	$	(138,866)	$	(158,327)	$	1,902	$	(156,425)


	Common Stock			Treasury Stock			APIC		AOCI		Accumulated Deficit		Deficit Attributable to Stockholders		NCIs		Total
	Shares	$		Shares	$
December 31, 2023	76,957	$	77	2,632	$	(12,815)	$	—	$	(29)	$	(134,951)	$	(147,718)	$	1,654	$	(146,064)
Equity-classified stock-based compensation	—	—		—	—		1,540		—		—		1,540		—		1,540
Vesting of stock-based compensation	429	—		—	—		49		—		—		49		—		49
Shares withheld for taxes	(123)	—		123	(421)		—		—		—		(421)		—		(421)
Exchange for PHOT redeemable NCI	(1,428)	(1)		1,428	(5,255)		(581)		—		—		(5,837)		—		(5,837)
Dividends on redeemable senior preferred stock	—	—		—	—		(11,821)		—		—		(11,821)		—		(11,821)
Accretion of redeemable senior preferred stock	—	—		—	—		(841)		—		—		(841)		—		(841)
Issuance of profit interests/common equity in subsidiaries	—	—		—	—		—		—		—		—		93		93
Foreign currency translation adjustment	—	—		—	—		—		(13)		—		(13)		—		(13)
Reclassification of negative additional paid in capital	—	—		—	—		11,654		—		(11,654)		—		—		—
Net income	—	—		—	—		—		—		5,193		5,193		—		5,193
March 31, 2024	75,835	$	76	4,183	$	(18,491)	$	—	$	(42)	$	(141,412)	$	(159,869)	$	1,747	$	(158,122)

Table of Contents

Priority Technology Holdings, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)


	Three Months Ended March 31,
	2025		2024
Cash flows from operating activities:
Net income	$	8,268	$	5,193
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization of assets	13,777		15,253
Stock-based, ESPP and incentive units compensation	1,586		1,633
Amortization of debt issuance costs and discounts	434		1,065
Debt extinguishment and modification costs	38		—
Deferred income tax	(2,236)		(1,872)
Change in contingent consideration	1,006		972


Other non-cash items, net	(20)		(259)
Change in operating assets and liabilities:
Accounts receivable	(12,182)		(8,339)
Prepaid expenses and other current assets	(73)		(425)
Income taxes (receivable) payable	4,429		—
Notes receivable	—		(266)
Accounts payable and other accrued liabilities	(5,796)		1,590
Customer deposits and advance payments	260		157
Other assets and liabilities, net	465		(1,395)
Net cash provided by operating activities	9,956		13,307
Cash flows from investing activities:
Acquisition of business, net of cash acquired	(4,473)		—

Additions to property, equipment and software	(5,095)		(6,610)
Notes receivable, net	(147)		(1,059)


Net cash used in investing activities	(9,715)		(7,669)
Cash flows from financing activities:

Debt issuance and modification costs paid	(40)		—
Repayments of long-term debt	(10,000)		(1,678)





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


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

Proceeds from exercise of stock options	110		—
Settlement and customer/subscriber accounts obligations, net	59,060		1,918
Payment of contingent consideration related to business combination	(400)		(3,071)

Net cash provided by (used in) financing activities	47,260		(10,279)
Net change in cash and cash equivalents and restricted cash:
Net increase in cash and cash equivalents, and restricted cash	47,501		(4,641)
Cash and cash equivalents and restricted cash at beginning of period	993,864		796,223
Cash and cash equivalents and restricted cash at end of period	$	1,041,365	$	791,582

Table of Contents

Priority Technology Holdings, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)


	Three Months Ended March 31,
	2025		2024
Reconciliation of cash and cash equivalents, and restricted cash:
Cash and cash equivalents	$	47,587	$	34,290
Restricted cash	11,490		12,658
Cash and cash equivalents included in settlement assets and customer/subscriber account balances (restricted in nature) (see Note 4)	982,288		744,634
Total cash and cash equivalents, and restricted cash	$	1,041,365	$	791,582

Supplemental cash flow information:
Cash paid for interest	$	21,471	$	18,436

Non-cash investing and financing activities:


Deferred consideration accrual	$	6,500	$	—
Foreign currency adjustment to goodwill	$	62	$	—








Issuance of NCI	$	—	$	93

See Notes to Unaudited Consolidated Statements

Table of Contents

Priority Technology Holdings, Inc.

Notes to Unaudited Consolidated Financial Statements

1. Basis of Presentation and Significant Accounting Policies

Business, Consolidation and Presentation

Priority Technology Holdings, Inc. is a holding company with no material operations of its own. Priority Technology Holdings, Inc. and its consolidated subsidiaries are referred to herein collectively as "Priority," the "Company," "we," "our" or "us," unless the context requires otherwise. Priority is a payments and banking fintech that streamlines collecting, storing, lending and sending money through its innovative commerce engine to unlock revenue and generate operational success for businesses. Our mission is to provide a personalized financial toolset to accelerate cashflow and optimize working capital for our customers by providing merchant services, payables and banking and treasury solutions.

The Company operates on a calendar year ending each December 31 and reports quarterly results on four calendar quarters ending on March 31, June 30, September 30 and December 31 of each year. Results of operations reported for interim periods are not necessarily indicative of results for the entire year.

The accompanying Unaudited Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. These Unaudited Consolidated Financial Statements have been prepared in accordance with GAAP for interim financial information pursuant to the rules and regulations of the SEC. The Consolidated Balance Sheet as of December 31, 2024 was derived from the audited financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 but does not include all disclosures required by GAAP for annual financial statements.

NCI represents the equity interest in certain consolidated entities in which the Company owns less than 100% of the profit interests. Changes in the Company's ownership interest while the Company retains its controlling interest are accounted for as equity transactions. As of March 31, 2025, there was no income attributable to NCI in accordance with the applicable operating agreements.

In the opinion of the Company's management, all known adjustments necessary for a fair presentation of the Unaudited Consolidated Financial Statements for interim periods have been made. These adjustments consist of normal recurring accruals and estimates that affect the carrying amounts of assets and liabilities. These Unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

Use of Estimates

The preparation of Unaudited Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Unaudited Consolidated Financial Statements and the reported amounts of revenues and expenses during the reported period. Actual results could materially differ from those estimates.

Foreign Currency

The Company's reporting currency is the U.S. dollar. The functional currency of the Indian subsidiary of the Company is the Indian Rupee (i.e. local currency of Republic of India). The functional currency of the Canadian subsidiaries of the Company is the Canadian Dollar. Accordingly, assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the current exchange rate on the last day of the reporting period. Revenues and expenses are translated using the average exchange rate in effect during the reporting period. Translation adjustments are reported as a component of accumulated other comprehensive income (loss).

Recently Issued Accounting Standards

Profit Interest ASU 2024-01

In March 2024, the FASB issued ASU 2024-01, Profit Interest and Similar Awards ("ASU 2024-01"), to improve GAAP by adding an illustrative example to demonstrate how an entity should apply the scope in paragraph 718-10-15-3 to determine whether profit interest and similar awards should be accounted for in accordance with Topic 718, Compensation- Stock Compensation. This guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. Implementation of this standard is not expected to have any significant impact on results of operations, financial position or cash flows, however, the Company is in the process of evaluating the potential effects.

Income Taxes ASU 2023-09

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures. The guidance includes improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid. This guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. This guidance is expected to only impact the disclosures with no impact on the results of operations, financial position or cash flows.

Disaggregation of Income Statement Expenses ASU 2024-03

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) ("ASU 2024-03") requiring additional disaggregated disclosures in the notes to financial statements for certain categories of expenses that are included on the face of the income statement. The ASU is effective for fiscal years beginning after December 15, 2026 and interim periods beginning after December 15, 2027. Early adoption is permitted. The Company will adopt this guidance for the year ended December 31, 2026. This guidance is expected to only impact the disclosures with no impact on the results of operations, financial position or cash flows.

2. Acquisition

Payslate

On January 21, 2025, PRTH’s indirect subsidiary, Priority Canada Acquisition Company, Inc. (the "acquiring entity"), acquired 100% of the equity interest in Payslate Inc. (Canada), and its subsidiary Rentmoola Payment Solutions Ltd (United Kingdom) (jointly referred as "Letus business"). The Letus business is engaged in processing of rent payments for property management companies in the United States and Canada and will complement the Company's Enterprise Payments business. The acquisition is aimed to provide an opportunity to expand Priority's services in Canada and compliment our existing rent payments business. The total purchase consideration was $11.0 million, consisting of $4.5 million in cash consideration funded by the Company’s cash flows and deferred consideration of $6.5 million. The Company has not yet completed its preliminary purchase price allocation and valuation of identified assets (including the acquired intangible assets such as customer relationships, trademarks, technology, etc.) and assumed liabilities. The tangible assets and liabilities assumed including acquired cash was not material. The preliminary purchase price allocation is expected to be completed during the period ended June 30, 2025.

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

3. Revenues

Disaggregation of Revenues

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


	Three Months Ended March 31,
(in thousands)		2025		2024
Revenue Type:
Merchant card fees		$	167,079	$	157,947
Money transmission services		37,449		29,144
Outsourced services and other services(2)		17,002		15,665
Equipment		3,100		2,963
Total revenues(1)		$	224,630	$	205,719

(1)Includes contracts with an original duration of one year or less and variable consideration under a stand-ready series of distinct days of service. The aggregate fixed consideration portion of customer contracts with an initial contract duration greater than one year is not material.

(2)Approximately $12.6 million and $11.9 million of interest income on customer funds for the three months ended March 31, 2025 and 2024, respectively, is included in outsourced services and other services revenue in the table above. Approximately $1.1 million and $0.6 million of interest income on corporate funds for the three months ended March 31, 2025 and 2024, respectively, is included in other income, net on the Company's Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss) and not reflected in the table above.

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


	Three Months Ended March 31, 2025
(in thousands)	Merchant Card Fees		Money Transmission Services		Outsourced and Other Services		Equipment		Total
Segment
SMB Payments	$	147,481	$	—	$	1,109	$	3,100	$	151,690
B2B Payments	19,769		—		4,149		—		23,918
Enterprise Payments	607		37,449		12,032		—		50,088
Eliminations	(778)		—		(288)		—		(1,066)
Total revenues	$	167,079	$	37,449	$	17,002	$	3,100	$	224,630


	Three Months Ended March 31, 2024
(in thousands)	Merchant Card Fees		Money Transmission Services		Outsourced and Other Services		Equipment		Total
Segment
SMB Payments	$	139,801	$	—	$	1,241	$	2,963	$	144,005
B2B Payments	18,289		—		3,055		—		21,344
Enterprise Payments	353		29,144		11,493		—		40,990
Eliminations	(496)		—		(124)		—		(620)
Total revenues	$	157,947	$	29,144	$	15,665	$	2,963	$	205,719

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

Contract Assets and Contract Liabilities

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

Contract liabilities were $0.4 million and $0.2 million as of March 31, 2025 and December 31, 2024, respectively. Substantially all of these balances are recognized as revenue within 12 months.

Net contract assets were not material for any period presented.

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

Impairment losses net of recoveries recognized on receivables arising from the Company's contracts with customers were $0.3 million for the three months ended March 31, 2025. Impairment losses recognized on receivables were immaterial for the three months ended March 31, 2024.

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

SMB Payments Segment

In the Company's SMB Payments reportable segment, funds settlement refers to the process of transferring funds for sales and credits between card issuers and merchants. The standards of the card networks require possession of funds during the settlement process by a member bank which controls the clearing transactions. Since settlement funds are required to be in the possession of a member bank until the merchant is funded, these funds are not assets of the Company and the associated obligations are not liabilities of the Company. Therefore, neither is recognized in the Company's Unaudited Consolidated Balance Sheets. Member banks held merchant funds of $128.2 million and $106.2 million at March 31, 2025 and December 31, 2024, respectively.

Exception items that become the liability of the Company are recorded as merchant losses, a component of cost of revenue in the Company's Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss). Exception items that the Company is still attempting to collect from the merchants through the funds settlement process or merchant reserves are recognized as settlement assets and customer/subscriber account balances in the Company's Unaudited Consolidated Balance Sheets, with an offsetting reserve for those amounts the Company estimates it will not be able to recover. Expenses for merchant losses net of recoveries for the three months ended March 31, 2025 and 2024 were $2.0 million and $4.7 million, respectively.

B2B Payments Segment

In the Company's B2B Payments segment, the Company earns revenues by processing transactions for FIs and other business customers. Customers transfer funds to the Company, which are held in either company-owned bank accounts controlled by the Company or bank-owned FBO accounts controlled by the banks, until such time that the transactions are settled with the customer payees. Amounts due to customer payees that are held by the Company in company-owned bank accounts are included in restricted cash in the Company's Unaudited Consolidated Balance Sheets. Amounts due to customer payees that are held in bank-owned FBO accounts are not assets of the Company, and the associated obligations are not liabilities of the Company. Therefore, neither is recognized in the Company's Unaudited Consolidated Balance Sheets. Bank-owned FBO accounts held funds of $66.1 million and $64.8 million at March 31, 2025 and December 31, 2024, respectively. Company-owned bank accounts held $1.2 million and $1.6 million at March 31, 2025 and December 31, 2024, respectively, which are included in restricted cash and settlement and customer/subscriber account obligations in the Company's Unaudited Consolidated Balance Sheets.

Exception items that the Company is still attempting to collect from the customers through the funds settlement process are recognized as settlement assets and customer/subscriber account balances in the Company's Unaudited Consolidated Balance Sheets, with an offsetting reserve for those amounts the Company estimates it will not be able to recover. Expenses for these merchant losses for the three months ended March 31, 2025 and 2024 were $0.2 million, respectively.

The Company also accepts card payments from its B2B Payments segment customers and processes disbursements to their vendors within the Plastiq business. The time lag between authorization and settlement of card transactions creates certain receivables (from card networks) and payables (to the vendors of customers). These receivables and payables arise from the settlement activities that the Company performs on the behalf of its customers and therefore, are presented as settlement assets and related obligations.

Enterprise Payments Segment

In the Company's Enterprise Payments segment revenue is derived primarily from licensed money transmission services. As part of its licensed money transmission services, the Company accepts deposits from consumers and subscribers which are held in bank accounts maintained by the Company on behalf of consumers and subscribers. After accepting deposits, the Company is allowed to invest available balances in these accounts in certain permitted investments, and the return on such investments contributes to the Company's net cash inflows. These balances are payable on demand. As such, the Company recorded these balances and related obligations as current assets and current liabilities. The nature of these balances are cash and cash equivalents which is restricted in nature as they are not available for day-to-day operations of the Company. Therefore, the Company has classified these balances as settlement assets and customer/subscriber account balances and the related obligations as settlement and customer/subscriber account obligations in the Company's Unaudited Consolidated Balance Sheets and these cash and cash equivalents balances are presented as restricted cash on the Company's Unaudited Consolidated Statement of Cash Flows.

Exception items that become the liability of the Company are recorded as merchant losses, a component of cost of revenue in the Company's Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss). Exception items that the Company is still attempting to collect from the merchants through the funds settlement process or merchant reserves are recognized as settlement assets and customer/subscriber account balances in the Company's Unaudited Consolidated Balance Sheets, with an offsetting reserve for those amounts the Company estimates it will not be able to recover. Expenses for merchant losses for the three months ended March 31, 2025 and 2024 were immaterial.

In certain states, the Company accepts deposits under agency arrangement with member banks wherein accepted deposits remain under the control of the member banks. Therefore, the Company does not record assets for the deposits accepted and liabilities for the associated obligation. Agency owned accounts held $45.2 million and $22.6 million at March 31, 2025 and December 31, 2024, respectively.

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


(in thousands)	March 31, 2025		December 31, 2024
Settlement Assets, net of estimated losses(1):
Card settlements due from merchants	$	827	$	2,587
Card settlements due from networks	17,204		12,307
Other settlement assets	2,715		1,730
Customer/subscriber account balances
Cash and cash equivalents (restricted in nature)	982,288		924,174
Total settlement assets and customer/subscriber account balances	$	1,003,034	$	940,798

Settlement and Customer/Subscriber Account Obligations:
Customer account obligations	$	964,231	$	897,497
Subscriber account obligations	13,241		26,677
Total customer/subscriber account obligations	977,472		924,174
Due to customers' payees(2)	25,923		16,039
Total settlement and customer/subscriber account obligations	$	1,003,395	$	940,213

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

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

5. Notes Receivable

The Company had notes receivable of $8.7 million and $8.6 million as of March 31, 2025 and December 31, 2024, respectively, which are reported as current portion of notes receivable and notes receivable less current portion on the Company's Unaudited Consolidated Balance Sheets. The notes receivable carried weighted-average interest rates of 16.8% and 16.9% as of March 31, 2025 and December 31, 2024, respectively. The notes receivable are comprised of notes receivable from ISOs, and under the terms of the agreements the Company preserves the right to hold back residual payments due to the ISOs and to apply such residuals against future payments due to the Company. As of March 31, 2025 and December 31, 2024, the Company had no allowance for doubtful notes receivable.

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


(in thousands)
Twelve months ending March 31,
2026	$	2,231
2027	1,906
2028	1,976
2029	508
After 2029	2,083
Total	$	8,704

6. Property, Equipment and Software

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


(in thousands)	March 31, 2025		December 31, 2024
Computer software	$	110,666	$	104,683
Equipment	11,862		11,571
Leasehold improvements	2,721		2,718
Furniture and fixtures	1,365		1,365
Property, equipment and software	126,614		120,337
Less: Accumulated depreciation	(74,122)		(70,258)
Capital work in-progress	1,226		2,398
Property, equipment and software, net	$	53,718	$	52,477


	Three Months Ended March 31,
(in thousands)		2025		2024
Depreciation expense		$	3,862	$	3,170

Computer software represents purchased software and internally developed software that is used to provide the Company's services to its customers.

Fully depreciated assets are retained in property, equipment and software, net, until removed from service. No assets were removed from service during three months ended March 31, 2025 while certain fully depreciated assets were removed from service during the three months ended March 31, 2024.

7. Goodwill and Other Intangible Assets

Goodwill

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


(in thousands)	March 31, 2025		December 31, 2024
SMB Payments	$	124,139	$	124,139
Enterprise Payments	255,443		244,712
Plastiq (B2B Payments)	7,240		7,240
Total	$	386,822	$	376,091

The following table summarizes the changes in the carrying value of goodwill:


(in thousands)	Amount
Balance at December 31, 2024	$	376,091
Payslate acquisition	10,669
Foreign currency translation adjustment	62
Balance at March 31, 2025	$	386,822

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

Other Intangible Assets

Other intangible assets consisted of the following:


	March 31, 2025						Weighted-average Useful Life
(in thousands, except weighted-average data)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Other intangible assets:
ISO and referral partner relationships	$	182,339	$	(52,719)	$	129,620	14.6
Residual buyouts	143,862		(108,006)		35,856		6.2
Customer relationships	109,017		(95,896)		13,121		8.4
Merchant portfolios	83,350		(66,160)		17,190		6.5
Technology	58,639		(28,718)		29,921		8.6
Trade names	7,104		(3,352)		3,752		10.6
Non-compete agreements	3,390		(3,390)		—		0.0
Money transmission licenses(1)	2,100		—		2,100
Total	$	589,801	$	(358,241)	$	231,560	9.5

(1)These assets have an indefinite useful life.


	December 31, 2024						Weighted-average Useful Life
(in thousands, except weighted-average data)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Other intangible assets:
ISO and referral partner relationships	$	182,339	$	(49,501)	$	132,838	14.6
Residual buyouts	143,862		(104,766)		39,096		6.2
Customer relationships	109,017		(95,320)		13,697		8.4
Merchant portfolios	83,350		(65,285)		18,065		6.5
Technology	58,639		(27,473)		31,166		8.7
Trade names	7,104		(3,192)		3,912		10.6
Non-compete agreements	3,390		(3,390)		—		0.0
Money transmission licenses(1)	2,100		—		2,100
Total	$	589,801	$	(348,927)	$	240,874	9.5

(1)These assets have an indefinite useful life.


	Three Months Ended March 31,
(in thousands)		2025		2024
Amortization expense(1)		$	9,915	$	12,083

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

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

8. Debt Obligations

Outstanding debt obligations consisted of the following:


	March 31, 2025		December 31, 2024
2024 Credit Agreement
Term facility - matures May 16, 2031, interest rate of 9.07% and 9.11% at March 31, 2025 and December 31, 2024, respectively	$	935,537	$	945,537
Revolving credit facility - $70.0 million line matures May 16, 2029, interest rate of 8.57% and 8.61% at March 31, 2025 and December 31, 2024, respectively	—		—



Total debt obligations	935,537		945,537
Less: current portion of long-term debt	(1,879)		(9,503)
Less: unamortized debt discounts and deferred financing costs	(14,714)		(15,146)
Long-term debt, net	$	918,944	$	920,888

Interest Expense and Amortization of Deferred Loan Costs and Discounts

Deferred financing costs and debt discounts are amortized using the effective interest method over the remaining term of the respective debt and are recorded as a component of interest expense. Unamortized deferred financing costs and debt discounts are included in long-term debt on the Company's Unaudited Consolidated Balance Sheets.

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


	Three Months Ended March 31,
(in thousands)		2025		2024
Interest expense(1),(2)		$	23,176	$	20,880

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

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

Debt Covenants

The 2024 Credit Agreement contains representations and warranties, financial and collateral requirements, mandatory payment events, events of default and affirmative and negative covenants, including without limitation, covenants that restrict among other things, the ability to create liens, pay dividends or distribute assets from the loan parties to the Company, merge or consolidate, dispose of assets, incur additional indebtedness, make certain investments or acquisitions, enter into certain transactions (including with affiliates) and to enter into certain leases.

If the aggregate principal amount of outstanding revolving loans and letters of credit under the 2024 Credit Agreement exceeds 35% of the total revolving credit facility thereunder, the Company is required to comply with certain restrictions on its Total Net Leverage Ratio. If applicable, the maximum permitted Total Net Leverage Ratio is: 1) 6.90:1.00 at each fiscal quarter

ended September 30, 2024 through December 31, 2025; 2) 6.40:1.00 at each fiscal quarter ended March 31, 2026 and each fiscal quarter thereafter. As of March 31, 2025, the Company was in compliance with the covenants in the 2024 Credit Agreement.

9. Income Taxes

The Company's consolidated effective income tax rate for the three months ended March 31, 2025 was 21.4% compared to a consolidated effective income tax rate of 33.2% for the three months ended March 31, 2024, respectively. The effective rates differed from the statutory rate of 21.0% primarily due to an increase in the valuation allowance against certain business interest carryover deferred tax assets, and certain forecasted nondeductible expenses.

Valuation Allowance for Deferred Income Tax Assets

The Company considers all available positive and negative evidence to determine whether sufficient taxable income will be generated in the future to permit realization of the existing deferred tax assets. In accordance with the provisions of ASC 740, Income Taxes, the Company is required to provide a valuation allowance against deferred income tax assets when it is "more likely than not" that some portion or all of the deferred tax assets will not be realized.

Based on management's assessment, as of March 31, 2025, the Company continues to record a full valuation allowance against non-deductible interest expense and net operating losses acquired as part of the Payslate acquisition. The Company will continue to evaluate the realizability of the net deferred tax asset on a quarterly basis and, as a result, the valuation allowance may change in future periods.

10. Stockholders' Deficit

The Company is authorized to issue 100,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. As of March 31, 2025 and December 31, 2024, the Company has not issued any shares of preferred stock.

Share Repurchase Program

In 2022, Priority's Board of Directors authorized a general share repurchase program under which the Company may purchase up to 2,000,000 shares of its outstanding Common Stock for a total of up to $10.0 million. Under the terms of this plan, the Company may purchase shares through open market purchases, unsolicited or solicited privately negotiated transactions, or in another manner so long as it complies with applicable rules and regulations. There have been no shares repurchased under this plan since December 2022. As of March 31, 2025, the Company has purchased 1,309,374 shares for $5.8 million under this plan.

11. Stock-based Compensation

Stock-based compensation expense was as follows:


	Three Months Ended March 31,
(in thousands)		2025		2024
Stock-based compensation expense		$	1,484	$	1,528
Incentive units compensation expense		87		93
ESPP compensation expense		15		12
Total		$	1,586	$	1,633

Income tax benefit for stock-based compensation was $0.7 million for the three months ended March 31, 2025 and was immaterial for the three months ended March 31, 2024. No stock-based compensation has been capitalized. Awards granted for the three months ended March 31, 2025 and 2024, were not material.

2018 Plan

The Company's 2018 Plan initially provided for the issuance of up to 6,685,696 shares of the Company's Common Stock. On March 17, 2022, the Company's Board of Directors unanimously approved an amendment to the 2018 Plan, which was subsequently approved by our shareholders, to increase the number of shares authorized for issuance under the plan by 2,500,000 shares, resulting in 9,185,696 shares of the Company's Common Stock authorized for issuance under the plan.

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

2021 Stock Purchase Plan

The 2021 Stock Purchase Plan provides for up to 200,000 shares to be purchased under the plan. Shares issued under the plan may be authorized but unissued or reacquired shares of Common Stock. All employees of the Company who work more than 20 hours per week and have been employed by the Company for at least 30 days may participate in the 2021 Stock Purchase Plan.

Under the 2021 Stock Purchase Plan, participants are offered, on the first day of the offering period, the option to purchase shares of Common Stock at a discount on the last day of the offering period. The offering period shall be for a period of three months and the first offering period began on January 10, 2022. The 2021 Stock Purchase Plan provides eligible employees the opportunity to purchase shares of the Company's Common stock at 95% of the lesser of the fair value on the first and last trading day of each offering period.

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

Non-voting Incentive Units

The Company issued non-voting incentive units to certain employees and partners in seven subsidiaries. These non-voting incentive units were determined to be equity and are accounted for under ASC 718 Stock Compensation. The non-voting incentive units are either fully vested when granted, or vest according to the service period and/or performance measure noted in the grant agreement. As the non-voting incentive units are vested, they are recognized as NCI to the Company, who is the majority owner of the subsidiaries.

12. Related Party Transactions

In February 2019, PHOT, a subsidiary of the Company, received a contribution of substantially all of the operating assets of eTab and Cumulus under asset contribution agreements. PHOT is a part of the Company's SMB reportable segment. These contributed assets were primarily composed of technology-related assets. Prior to these transactions, eTab was 80.0% owned by the Company's Chairman and Chief Executive Officer ("CEO"). No cash consideration was paid to the contributors of the eTab or Cumulus assets on the date of the transactions. As consideration for these contributed assets, the contributors were issued redeemable non-controlling preferred equity interests ("redeemable NCIs") in PHOT. Under these redeemable NCIs, the contributors were eligible to receive up to $4.5 million of profits earned by PHOT, plus a preferred yield (6.0% per year) on any undistributed preferred equity interest ("Total Preferred Equity Interest"). Once the total preferred equity interest is distributed to the holders, the redeemable NCIs cease to exist. The Company's CEO initially owned 83.3% of the redeemable NCIs, which ownership interest was subsequently reduced to 35.3% through the CEO's disposition of interests to others.

In November 2020, the Company agreed with the contributors to an exchange of shares of common stock of the Company, or cash, for the remaining undistributed Total Preferred Equity Interests of $4.8 million. An exchange valuation for the Company's common stock was established as of November 12, 2020 at the prior 20-day volume weighted average price of $2.78 per share. The exchange was contingent upon receiving approval of the Company's lenders; therefore, the binding exchange agreements were not entered into until after lender approval was received in April 2021 in connection with the debt refinancing.

In May 2021, the Company entered into exchange agreements and completed the exchange of 1,428,358 shares of common stock and $0.8 million of cash for the Total Preferred Equity Interests. The CEO received 605,623 shares of common stock of the Company in exchange for his 35.3% interest, and the Company's Chief Operating Officer (“COO”) received 413,081 shares of common stock of the Company in exchange for her 24.1% interest.

On October 31, 2023, a lawsuit was filed alleging that the Board breached its fiduciary duties by approving the above mentioned exchange transaction. The Company denied any wrongdoing. The lawsuit was settled on January 30, 2024, wherein the Company agreed to unwind the exchange transaction and received previously issued shares of common stock of the Company and promissory notes for the amount of cash paid from the CEO, COO and others in exchange of the reissuance of PHOT redeemable preferred units. The returned shares of common stock of the Company are recorded as treasury stock at their closing market price as of the settlement date of January 30, 2024. The reissued PHOT redeemable preferred units are recorded as redeemable NCI at their estimated fair value as of the settlement date on the Company’s Consolidated Balance Sheets.

As of May 30, 2024, the Company approved redemption of PHOT redeemable preferred units for cash, common stock of the Company or a combination of both, at the sole discretion of the Company. The redeemable preferred units were accreted to their redemption value of $5.9 million as of May 30, 2024, through net loss available to common shareholders in the Company’s Statements of Operations and Comprehensive Income (Loss). The exchange value of the Company's common stock was established based on the 30-day volume weighted average close price adjusted for market illiquidity. During the quarter ended June 30, 2024, the PHOT redeemable preferred units held by the CEO were redeemed in cash for $2.1 million and the promissory notes were satisfied. During the quarter ended September 30, 2024, the PHOT redeemable preferred units held by the COO were redeemed for 408,013 shares of the Company's common stock and PHOT redeemable preferred units held by other holders were redeemed for 404,628 shares of the Company's common stock.

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

13. Commitments and Contingencies

Minimum Annual Commitments with Third-party Processors

The Company has multi-year agreements with third parties to provide certain payment processing services to the Company. The Company pays processing fees under these agreements. Based on existing contracts in place, the Company is committed to pay minimum processing fees under these agreements of approximately $23.1 million in 2025 and $24.6 million in 2026.

Other Commitments

As of March 31, 2025 and December 31, 2024, the Company had a capital contribution commitment of $10.7 million and $12.6 million, respectively to fund operations of certain subsidiaries. The Company is obligated to make the contributions within 10 business days of receiving notice for such contribution from the subsidiary.

Contingent/Deferred Consideration

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


(in thousands)	Contingent/Deferred Consideration Liabilities
December 31, 2024	$	10,685
Addition of deferred consideration (Related to acquisition, see Note 2)	6,500
Accretion of contingent consideration	1,006

Payment of contingent consideration	(400)
March 31, 2025	$	17,791

Legal Proceedings

The Company is involved in certain legal proceedings and claims which arise in the ordinary course of business. In the opinion of the Company and based on consultations with internal and external counsel, the results of any of these matters, individually and in the aggregate, are not expected to have a material effect on the Company's results of operations, financial condition or cash flows. As more information becomes available, and the Company determines that an unfavorable outcome is probable on a claim and that the amount of probable loss that the Company will incur on that claim is reasonably estimable, the Company will record an accrued expense for the claim in question. If and when the Company records such an accrual, it could be material and could adversely impact the Company's results of operations, financial condition and cash flows.

The Company is a party in a case filed on October 11, 2023 in the United States District Court of Northern District of California (the “Complaint”). The Complaint is a putative class action against The Credit Wholesale Company, Inc. (“Wholesale”), Priority Technology Holdings, Inc., Priority Payment Systems (“PPS”), LLC and Wells Fargo Bank, N.A. (“Wells Fargo”). The Complaint alleges that Wholesale as an agent of Priority, PPS and Wells Fargo made non-consensual recordation of telephonic communications with California businesses in violation of California Invasion of Privacy Act (the “Act”). The Complaint seeks to certify a class of affected businesses and an award of $5,000 per violation of the Act. On January 24, 2025, the court preliminarily approved the settlement agreement entered into by the parties wherein defendants agree to pay $19.5 million to settle this litigation. Any contribution toward the settlement by the Company will be nominal, and will not have any material impact on the Company's results of operations, financial conditions or cash flows.

Concentration of Risks

While providing SMB Acquiring, B2B Payables, and Enterprise Payments processing services, Priority manages funds that are held on behalf of its customers. Because Priority is not a member bank, these customer funds are held in bank accounts maintained with member banks pursuant to sponsorship agreements which require, among other things, that the Company abide by the by-laws and regulations of the card associations and MTL regulators.

As of March 31, 2025, the Company's customer account balances of $964.2 million are maintained in accounts with certain FIs which are eligible to pass-through insurance subject to FDIC rules and regulations (refer to Note 4. Settlement Assets and Customer/Subscriber Account Balances and Related Obligations). A majority of the Company's cash, restricted cash and off-balance sheet settlement funds are held in certain FIs, substantially all of which is in excess of FDIC limits. The Company does not believe it is exposed to any significant credit risk from these transactions.

14. Fair Value

Fair Value Measurements

The Company's contingent consideration liabilities derived from business combinations are classified within Level 3 of the fair value hierarchy due to the uncertainty of the fair value measurement created by the absence of quoted market prices, the inherent lack of liquidity and unobservable inputs used to measure fair value which require judgement. The Company uses valuation techniques including discounted cash flow analysis based on cash flow projections and Monte Carlo simulations to estimate fair value based on projection period and assumed growth rates. A change in inputs in the valuation techniques used might result in a significantly higher or lower fair value measurement than what is reported. The current portion of contingent consideration is included in accounts payable and accrued expenses on the Company's Unaudited Consolidated Balance Sheets and the noncurrent portion of contingent consideration is included in other noncurrent liabilities on the Company's Unaudited Consolidated Balance Sheets.

The deferred consideration derived from an acquisition is currently recorded at contractual amount and the fair valuation of the same is in process. See Note 2.

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


(in thousands)	Fair Value Hierarchy	March 31, 2025		December 31, 2024
Contingent /deferred consideration, current portion	Level 3	$	3,774	$	3,891
Contingent/deferred consideration, noncurrent portion	Level 3	14,017		6,794
Total contingent/deferred consideration		$	17,791	$	10,685

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

Fair Value Disclosures

Notes Receivable

Notes receivable are carried at amortized cost. Substantially all of the Company's notes receivable are secured, and the Company provides for allowances when it believes that certain notes receivable may not be collectible. The carrying value of the Company's notes receivable, net approximates fair value and was approximately $8.7 million and $8.6 million at March 31, 2025 and December 31, 2024, respectively. On the fair value hierarchy, Level 3 inputs are used to estimate the fair value of these notes receivable.

Debt Obligations

Outstanding debt obligations (see Note 8. Debt Obligations) are reflected in the Company's Unaudited Consolidated Balance Sheets at carrying value since the Company did not elect to remeasure debt obligations to fair value at the end of each reporting period.

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

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

15. Segment Information

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

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

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

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

Corporate includes costs of corporate functions and shared services not allocated to our reportable segments.

The Company's chief operating decision makers ("CODM") are our CEO and CFO. Historically, the CODM used operating income (loss) as the measure of segment profit or loss to allocate resources. However, during the quarter ended June 30, 2024, the segment performance measure was updated to adjusted earnings before interest expense, income tax and depreciation and amortization expenses ("Adjusted EBITDA") to have consistent measure of results across the organization.

Adjusted EBITDA represents EBITDA (i.e. earnings before interest, income tax, and depreciation and amortization expenses) adjusted for certain non-cash costs, such as stock-based compensation and the write-off of the carrying value of investments or other assets, as well as debt extinguishment and modification expenses and other expenses and income items considered non-recurring, such as acquisition integration expenses, certain professional fees, and litigation settlements.

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

Due to the recent acquisitions, growth, implementation of a shared services model and management of a single unified commerce engine across our payments infrastructure, the costs of operating overhead and shared services became less identifiable at the segment level. Therefore, the process of review of the CODM was updated during the quarter ended June 30, 2024. Operating overhead and shared costs are managed centrally and included in the corporate segment. All comparative periods have been recasted to reflect this update.

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


	Three Months Ended March 31, 2025
(in thousands)	SMB Payments		B2B Payments		Enterprise Payments		Total
Revenue from external customers	$	151,690	$	23,918	$	50,088	$	225,696
Intersegment revenues (elimination)	(449)		(324)		(293)		(1,066)
Total consolidated revenues	151,241		23,594		49,795		224,630
Less: Cost of services (excludes depreciation and amortization)1	(118,572)		(16,624)		(3,223)
Less: Other operating expenses 1,2	(8,213)		(3,929)		(4,609)
Add: Other segment items3	1,249		475		479
Segment Adjusted EBITDA	$	25,705	$	3,516	$	42,442	$	71,663

Reconciliation of Segment Adjusted EBITDA to income (loss) before income taxes
Segment Adjusted EBITDA							$	71,663
Adjustment for corporate items4							(19,303)
Intersegment revenue elimination							(1,066)
Depreciation and amortization							(13,777)
Interest expense							(23,176)
Debt modification and extinguishment expenses							(38)
Selling, general and administrative (non-recurring)							(2,199)
Non-cash stock based compensation							(1,586)
Income before income taxes							$	10,518

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

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

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

(4)Adjustment for corporate items include:


(in thousands)	March 31, 2025
Elimination of cost of services (excludes depreciation and amortization)	$	1,065
Other operating expenses	(24,125)
Other items5	3,757
	$	(19,303)

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


(in thousands)	Other specified segment disclosure
	Three Months Ended March 31, 2025
	SMB Payments		B2B Payments		Enterprise Payments		Total
Depreciation and amortization	$	6,625	$	1,261	$	4,642	$	12,528


	Three Months Ended March 31, 2024
(in thousands)	SMB Payments		B2B Payments		Enterprise Payments		Total
Revenue from external customers	$	144,005	$	21,344	$	40,990	$	206,339
Intersegment revenue (eliminations)	(254)		(229)		(137)		(620)
Total consolidated revenues	143,751		21,115		40,853		205,719
Less: Cost of services (excludes depreciation and amortization)1	(112,119)		(15,153)		(2,643)
Less: Other operating expenses1,2	(7,215)		(4,562)		(3,736)
Add: Other segment items3	606		347		253
Segment Adjusted EBITDA	$	25,023	$	1,747	$	34,727	$	61,497

Reconciliation of Segment Adjusted EBITDA to income (loss) before income taxes
Segment Adjusted EBITDA							$	61,497
Adjustment for corporate items4							(14,537)
Intersegment revenue elimination							(620)
Depreciation and amortization							(15,253)
Interest expense							(20,880)
Selling, general and administrative (non-recurring)							(798)
Non-cash stock based compensation							(1,634)
Income before income taxes							$	7,775

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

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

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

(4)Adjustment for corporate items include:


(in thousands)	March 31, 2024
Elimination of cost of services (excludes depreciation and amortization)	$	619
Other operating expenses	(17,632)
Other items5	2,476
	$	(14,537)

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


(in thousands)	Other specified segment disclosure
	Three Months Ended March 31, 2024
	SMB Payments		B2B Payments		Enterprise Payments		Total
Depreciation and amortization	$	8,586	$	1,470	$	4,039	$	14,095

16. Earnings (Loss) per Common Share

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


	Three Months Ended March 31,
(in thousands except per share amounts)		2025		2024
Numerator:
Net income		$	8,268	$	5,193
Less: Dividends and accretion attributable to redeemable senior preferred stockholders		—		(12,662)
Less: Return on redeemable NCI		—		(581)

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

Weighted average shares outstanding(1)		78,774		78,021
Effect of dilutive potential common shares		1,083		—
Adjusted Weighted average shares outstanding		79,857		78,021

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

(1)For the three months ended March 31, 2024, the weighted-average common shares outstanding includes 1,803,841 warrants. These shares of common stock had an exercise price of $0.001 and were exercised on January 14, 2025. The warrants are considered to be equity contracts indexed in the Company's own shares and therefore were recorded at their inception date relative fair value and are included in additional paid-in capital on the Company's Unaudited Consolidated Balance Sheets.

For the three months ended March 31, 2025, the Company had 1.1 million dilutive securities that were included in the Company's diluted earnings per share. For the three months ended March 31, 2024, all potentially dilutive securities were anti-dilutive, so diluted net loss per share was equivalent to basic net loss per share. Anti-dilutive securities that were excluded from the Company's earnings (loss) per common share are as follows:


	Three Months Ended March 31,
(in thousands)		2025	2024


Restricted stock awards(1)		—	1,078

Outstanding stock option awards(1)		—	864
Total		—	1,942

(1)Granted under the 2018 Plan.

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, 2024. 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.

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, 2025, compared to the three months ended March 31, 2024. 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, 2024.

Revenues

For the three months ended March 31, 2025, our consolidated revenue of $224.6 million increased by $18.9 million, or 9.2%, from $205.7 million for the three months ended March 31, 2024. This overall increase was mainly driven by increase in merchant bankcard dollar value and total card dollar value processed in our SMB Payments segment, an increase in new enrollments and higher interest income in our Enterprise Payments segment and, an increase in issuing volume in our B2B Payments Segment.

The following table presents our revenues by type:


(in thousands)	Three Months Ended March 31,
		2025		2024		$ Change
Revenue Type:
Merchant card fees		$	167,079	$	157,947	$	9,132
Money transmission services		37,449		29,144		8,305
Outsourced services and other services		17,002		15,665		1,337
Equipment		3,100		2,963		137
Total revenues		$	224,630	$	205,719	$	18,911

Merchant card fees

Merchant card fees revenue for the three months ended March 31, 2025 was $167.1 million an increase of $9.1 million or 5.8%, from $157.9 million for the three months ended March 31, 2024. The increase was primarily driven by an increase in merchant bankcard value, total card value, and the transaction count processed by the Company.

Money transmission services

Money transmission services for the three months ended March 31, 2025 was $37.4 million, an increase of $8.3 million, or 28.5%, from $29.1 million for the three months ended March 31, 2024. This increase was primarily driven by an increase in new customer enrollments and average billed clients.

Outsourced services and other services revenue

Outsourced services and other services revenue of $17.0 million for the three months ended March 31, 2025 increased by $1.3 million, or 8.5%, from $15.7 million for the three months ended March 31, 2024, primarily due to growth in interest income due to higher balances of permissible investments offset by reduction in interest rates.

Equipment

Equipment revenue of $3.1 million for the three months ended March 31, 2025 increased by $0.1 million, or 4.6% from $3.0 million for the three months ended March 31, 2024. The increase was primarily due to increased sales of point-of-sale equipment.

Operating expenses were as follows:


(in thousands)	Three Months Ended March 31,
		2025		2024		$ Change
Operating expenses
Cost of revenue (excludes depreciation and amortization)		$	137,353	$	129,298	$	8,055
Salary and employee benefits		25,775		22,150		3,625
Depreciation and amortization		13,777		15,253		(1,476)
Selling, general and administrative		15,100		10,995		4,105
Total operating expenses		$	192,005	$	177,696	$	14,309

Cost of revenue (excludes depreciation and amortization)

Cost of revenue (excludes depreciation and amortization) of $137.4 million for the three months ended March 31, 2025 increased by $8.1 million, or 6.2%, from $129.3 million for the three months ended March 31, 2024, primarily due to the corresponding increase in revenues offset by recovery of certain bad debts.

Salary and employee benefits

Salary and employee benefits expense of $25.8 million for the three months ended March 31, 2025 increased by $3.6 million, or 16.4%, from $22.2 million for the three months ended March 31, 2024, primarily due to merit increases and increased headcount to support the overall growth of the Company.

Depreciation and amortization expense

Depreciation and amortization expense of $13.8 million for the three months ended March 31, 2025 decreased by $1.5 million, or 9.7%, from $15.3 million for the three months ended March 31, 2024, primarily due to full amortization of certain intangible assets.

Selling, general and administrative

Selling, general and administrative expenses of $15.1 million for the three months ended March 31, 2025 increased by $4.1 million, or 37.3%, from $11.0 million for the three months ended March 31, 2024, primarily due to increase in professional charges related to SOX compliance, increased marketing and software expenses to support overall growth, and legal expenses related to the Company's secondary offering of common shares.

Other Expense, net

Other expense, net were as follows:


(in thousands)	Three Months Ended March 31,
		2025		2024		$ Change
Other (expense) income
Interest expense		$	(23,176)	$	(20,880)	$	(2,296)
Debt extinguishment and modification costs		(38)		—		(38)

Other income, net		1,107		632		475
Total other expense, net		$	(22,107)	$	(20,248)	$	(1,859)

Interest expense

Interest expense of $23.2 million for the three months ended March 31, 2025 increased by $2.3 million, or 11.0%, from $20.9 million for the three months ended March 31, 2024, due to increased outstanding balance of the term loan facility used for the redemption of redeemable senior preferred stock, offset by decrease in interest rates.

Income tax (benefit) expense

Income tax expense was as follows:


(in thousands)	Three Months Ended March 31,
		2025			2024			$ Change
Income before income taxes		$	10,518		$	7,775		$	2,743
Income tax expense		$	2,250		$	2,582		$	(332)
Effective tax rate		21.4		%	33.2		%

We compute our interim period income tax expense or benefit by using a forecasted EAETR and adjust for any discrete items arising during the interim period and any changes in our projected full-year business interest expense and taxable income. The EAETR for 2025 is 28.0% and includes the income tax provision on pre-tax income and a tax provision related to the establishment of a valuation allowance for deferred income tax on the future portion of the Section 163(j) limitation created by additional 2025 interest expense. The effective tax rate for 2025 changed primarily due to an increase in the valuation allowance against certain business interest carryover deferred tax assets.

Our consolidated effective income tax rates differ from the statutory rate due to timing and permanent differences between amounts calculated under GAAP and the U.S. tax code. The consolidated effective income tax rate for 2025 may not be indicative of our effective tax rate for future periods.

Segment Results

The CODM's review of segment performance and allocation of resources are based on the Adjusted EBITDA (a non-GAAP financial measure). Adjusted EBITDA at each segment level includes revenues of the segment, less costs of revenue (excluding

depreciation and amortization) and operating expenses that are directly related those revenues. Operating overhead and shared costs are managed centrally and included in corporate segment.

This non-GAAP financial measure helps to illustrate the underlying financial and business trends relating to results of operations of the Company and therefore used as a measure of segment profit or loss for the purposes of evaluation of segment performance and allocation of resources.

SMB Payments


(in thousands)	Three Months Ended March 31,
		2025		2024		Change
Revenues		$	151,690	$	144,005	$	7,685
Adjusted EBITDA		$	25,705	$	25,023	$	682
Key Indicators:
Merchant bankcard processing dollar value		$	15,294,133	$	14,788,095	$	506,038
Merchant bankcard transaction count		185,539		175,228		10,311
Total card processing dollar value		$	17,685,491	$	17,098,758	586,733

Revenues

Revenue from our SMB Payments segment was $151.7 million for the three months ended March 31, 2025, compared to $144.0 million for the three months ended March 31, 2024. The increase of $7.7 million, or 5.3%, was primarily driven by an increase in merchant card fee rate, increased card processing dollar value, and transaction count increases. The Company's merchant card fee revenue from the SMB Payments segment ($147.5 million for the three months ended March 31 2025 and $139.8 million for the three months ended March 31, 2024) as a percentage of merchant bankcard processing dollar value during the three months ended March 31, 2025 increased to 0.96% from 0.94% as compared to the three months ended March 31, 2024.

Adjusted EBITDA

Adjusted EBITDA from our SMB Payments segment was $25.7 million for the three months ended March 31, 2025, compared to $25.0 million for the three months ended March 31, 2024. The increase of $0.7 million, or 2.7% was primarily driven by an increase in revenue, and recovery of certain chargeback losses, offset by mix related margin compression and other operating expenses.

B2B Payments


(in thousands)	Three Months Ended March 31,
		2025		2024		Change
Revenues		$	23,918	$	21,344	$	2,574
Adjusted EBITDA		$	3,516	$	1,747	$	1,769












Key Indicators:
B2B issuing dollar volume		$	237,290	$	227,811	$	9,479
B2B issuing transaction count		211		240		$	(29)

Revenues

Revenue from our B2B Payments segment was $23.9 million for the three months ended March 31, 2025, compared to $21.3 million for the three months ended March 31, 2024. The increase of $2.6 million, or 12.1% was primarily driven by increase in issuing dollar volume in the CPX business and total card volume processed by Plastiq business.

Adjusted EBITDA

Adjusted EBITDA from our B2B Payments segment of $3.5 million for the three months ended March 31, 2025, compared to $1.7 million for the three months ended March 31, 2024.The increase in Adjusted EBITDA of $1.8 million or 101.3% was contributed by $0.5 million in the CPX business and $1.3 million in the Plastiq business.

Enterprise Payments


(in thousands)	Three Months Ended March 31,
		2025		2024		Change
Revenues		$	50,088	$	40,990	$	9,098
Adjusted EBITDA		$	42,442	$	34,727	$	7,715











Key Indicators:
Average CFTPay billed clients		940,463		703,887		236,576
Average CFTPay new enrollments		55,946		53,551		2,395

Revenues

Revenue from our Enterprise Payments segment was $50.1 million for the three months ended March 31, 2025, compared to $41.0 million for the three months ended March 31, 2024. The increase of $9.1 million, or 22.2%, was primarily driven by an increase in billed clients and new customer enrollments, the addition of new integrated partners and growth in interest income due to higher balances of permissible investments offset by reduction in interest rates.

Adjusted EBITDA

Adjusted EBITDA from our Enterprise Payments segment was $42.4 million for the three months ended March 31, 2025, compared to $34.7 million for the three months ended March 31, 2024. The increase of $7.7 million, or 22.2%, was primarily driven by increases in revenues.


	Three Months Ended March 31, 2025
	SMB Payments		B2B Payments		Enterprise Payments		Corporate		Total Consolidated
Reconciliation of Adjusted EBITDA to GAAP Measure:
Adjusted EBITDA	$	25,705	$	3,516	$	42,442	$	(20,369)	$	51,294
Interest expense	—		(1,006)		—		(22,170)		(23,176)
Depreciation and amortization	(6,625)		(1,261)		(4,642)		(1,249)		(13,777)
Debt modification and extinguishment expenses	—		—		—		(38)		(38)
Selling, general and administrative (non-recurring)	—		—		—		(2,199)		(2,199)
Non-cash stock based compensation	(4)		(84)		(32)		(1,466)		(1,586)
Income before taxes	$	19,076	$	1,165	$	37,768	$	(47,491)	$	10,518
Income tax expense									(2,250)
Net income									$	8,268


	Three Months Ended March 31, 2024
	SMB Payments		B2B Payments		Enterprise Payments		Corporate		Total Consolidated
Reconciliation of Adjusted EBITDA to GAAP Measure:
Adjusted EBITDA	$	25,023	$	1,747	$	34,727	$	(15,157)	$	46,340
Interest expense	(1)		(973)		—		(19,906)		(20,880)
Depreciation and amortization	(8,586)		(1,470)		(4,039)		(1,158)		(15,253)

Selling, general and administrative (non-recurring)	—		—		—		(798)		(798)
Non-cash stock based compensation	(4)		(118)		(32)		(1,480)		(1,634)
Income before taxes	$	16,432	$	(814)	$	30,656	$	(38,499)	$	7,775
Income tax expense									(2,582)
Net income									$	5,193

Critical Accounting Policies and Estimates

Our Unaudited Consolidated Financial Statements have been prepared in accordance with GAAP for interim periods, which often require the judgment of management in the selection and application of certain accounting principles and methods. Our critical accounting policies and estimates are discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no material changes to these critical accounting policies and estimates as of March 31, 2025.

Liquidity and Capital Resources

Liquidity and capital resource management is a process focused on providing the funding we need to meet our short-term and long-term cash and working capital needs. We have used our funding sources to build our merchant portfolio, for technology solutions and to make acquisitions with the expectation that such investments will generate cash flows sufficient to cover our working capital and other anticipated needs, including our acquisition strategy. We anticipate that cash on hand, funds generated from operations and available borrowings under our revolving credit facility are sufficient to meet our working capital requirements for at least the next 12 months.

Our principal uses of cash are to fund business operations and administrative costs, and to service our debt.

Our working capital, defined as current assets less current liabilities, was $61.9 million at March 31, 2025 and $32.4 million at March 31, 2024. As of March 31, 2025, we had cash totaling $47.6 million compared to $34.3 million at March 31, 2024. These cash balances do not include restricted cash of $11.5 million and $12.7 million at March 31, 2025 and March 31, 2024, respectively, which reflects cash accounts holding customer settlement funds and cash reserves for potential losses. The current portion of long-term debt included in current liabilities was $1.9 million and $6.7 million at March 31, 2025 and March 31, 2024, respectively. At March 31, 2025, we had availability of approximately $70.0 million under our revolving credit facility.

The following table and discussion reflect our changes in cash flows for the comparative three month periods.


	Three Months Ended March 31,
(in thousands)	2025		2024
Net cash provided by (used in):
Operating activities	$	9,956	$	13,307
Investing activities	(9,715)		(7,669)
Financing activities	47,260		(10,279)
Net increase (decrease) in cash and cash equivalents and restricted cash	$	47,501	$	(4,641)

Cash Provided by Operating Activities

Net cash provided by operating activities was $10.0 million for the three months ended March 31, 2025 compared to $13.3 million for the three months ended March 31, 2024. The $3.3 million decrease was primarily driven by changes in the operating assets and liabilities.

Cash Used in Investing Activities

Net cash used in investing activities was $9.7 million and $7.7 million for the three months ended March 31, 2025 and 2024, respectively. For the three months ended March 31, 2025, investing activities included additions to property, equipment and software of $5.1 million, $0.1 million related to net funding of new loans to ISOs and $4.5 million related to the acquisition of a business. For the three months ended March 31, 2024, net cash used in investing activities included additions to property, equipment and software of $6.6 million and $1.1 million related funding of new loans to ISOs.

Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities was $47.3 million for the three months ended March 31, 2025, compared to $10.3 million of cash used in financing activities for the three months ended March 31, 2024. The net cash used in financing activities for the three months ended March 31, 2025 included changes in the net obligations for funds held on the behalf of customers of $59.1 million and proceeds from the exercise of stock options of $0.1 million offset by $10.0 million of cashed used for the unscheduled repayment of the term loan principal, $1.5 million of cash used for shares withheld for taxes and $0.4 million of payments of contingent consideration. The net cash used in financing activities for the three months ended March 31, 2024 included changes in the net obligations for funds held on the behalf of customers of $1.9 million, offset by $1.7 million of cash used for the repayment of debt, $7.0 million of cash dividends paid to redeemable senior preferred stockholders, $0.4 million of cash used for shares withheld for taxes and $3.1 million of payments of contingent consideration.

Long-term Debt

As of March 31, 2025, we had outstanding debt obligations, including the current portion and net of unamortized debt discount of $935.5 million, compared to $945.5 million at December 31, 2024, resulting in a decrease of $10.0 million . The decrease is to an unscheduled principal payment. The debt balance at March 31, 2025 consisted of $935.5 million outstanding under the term facility offset by $14.7 million of unamortized debt discounts and issuance costs. Minimum amortization of the term facility are equal quarterly installments in aggregate annual amounts equal to 1.0% of the original principal, with the balance paid upon maturity. The term facility matures on May 16, 2031 and the revolving credit facility matures on May 16, 2029.

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 facility thereunder, the loan parties are required to comply with certain restrictions on its Total Net Leverage Ratio, which is defined in the Credit Agreement as the ratio of consolidated total debt less unrestricted cash to consolidated adjusted EBITDA (as defined in the Credit Agreement). If the aggregate principal amount of outstanding revolving loans and letters of credit under the 2024 Credit Agreement exceeds 35% of the total revolving credit facility thereunder, the Company is required to comply with certain restrictions on its Total Net Leverage Ratio. If applicable, the maximum permitted Total Net Leverage Ratio is: 1) 6.90:1.00 at each fiscal quarter ended September 30, 2024 through December 31, 2025; 2) 6.40:1.00 at each fiscal quarter ended March 31, 2026 and each fiscal quarter thereafter. As of March 31, 2025, the Company was in compliance with the covenants in the 2024 Credit Agreement.

Effect of New Accounting Pronouncements and Recently Issued Accounting Pronouncements Not Yet Adopted

From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that may affect our current and/or future financial statements. See Note 1, Basis of Presentation and Significant Accounting Policies, to our Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, for a discussion of recently issued accounting pronouncements not yet adopted.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For quantitative and qualitative disclosures about market risk, see Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," of our Annual Report on Form 10-K for the year ended December 31, 2024. Our exposures to market risk have not changed materially since December 31, 2024.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, designed to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized or reported within the time periods specified in SEC rules and regulations and that such information is accumulated and communicated to our management, including our principal executive officer (CEO), our principal financial officer (CFO) and, as appropriate, to allow timely decisions regarding required disclosures.

Management, with the participation of the CEO and CFO, has evaluated the effectiveness of the Company's disclosure controls and procedures as of March 31, 2025. Based on that evaluation, the Company's CEO and CFO concluded that the Company's disclosure controls and procedures were not effective as of March 31, 2025 because of a material weakness within our internal controls over financial reporting, as described below.

Notwithstanding that conclusion, based on review, analysis and inquiries conducted subsequent to March 31, 2025, management believes that the consolidated financial statements and related financial information included in this Form 10-Q fairly present in all material respects the Company’s financial condition, results of operations and cash flows as of the dates presented, and for the periods ended on such dates, in conformity with GAAP.

Previously Disclosed Material Weakness

In our Annual Report on Form 10-K for the year ended December 31, 2024, we identified a material weakness related to the design and operation of certain automated controls (including related information technology general controls) for certain tools or applications involved in the transformation and ingestion of third-party processors’ data in the Company’s control environment. The Company began implementing a remediation plan to address this material weakness.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that a reasonable possibility exists that a material misstatement of annual or interim financial statements would not be prevented or detected on a timely basis.

Changes in Internal Control over Financial Reporting

Other than described above, there were no changes in the Company's internal control over financial reporting during the three months ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in certain legal proceedings and claims, which arise in the ordinary course of business. In the opinion of the Company, based on consultations with internal and external counsel, the results of any of these ordinary course matters, individually and in the aggregate, are not expected to have a material effect on our results of operations, financial condition, or cash flows. As more information becomes available and we determine that an unfavorable outcome is probable on a claim and that the amount of probable loss that we will incur on that claim is reasonably estimable, we will record an accrued expense for the claim in question. If and when we record such an accrual, it could be material and could adversely impact our results of operations, financial condition and cash flows.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in our Annual Report under Part I, Item 1A "Risk Factors" because these risk factors may affect our operations and financial results. The risks described in the Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition and operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Issuer Purchases of Equity Securities

The Company's purchases of its Common Stock during the three months ended March 31, 2025 were as follows:


Period	Total Number of Shares Purchased(1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1-31, 2025	99,450	$	12.25	—	690,296
February 1-28, 2025	22,067	$	11.41	—	690,296
March 1-31, 2025	—	$	—	—	690,296
Total	121,517	$	12.10	—

(1)Represents shares (in whole units) withheld to satisfy employees' tax withholding obligations related to the vesting of restricted stock awards, which was determined based on the fair market value on the day prior to the vesting date.

Item 3. Defaults Upon Senior Securities

N/A

Item 4. Mine Safety Disclosures

N/A

Item 5. Other Information

Rule 10b5-1 Director and Officer Trading Arrangements

On June 16, 2023, Sean Kiewiet, an officer of the Company as defined in Section 16 of the Exchange Act, adopted a Rule 10b5-1 trading arrangement as defined in Item 408(a) of the SEC's Regulation S-K.

Officer or Director Name and Title

Action

Plan Type

Date

Number of Shares to be sold

Expiration

Sean Kiewiet,

Chief Strategy Officer

Adopted

Rule 10b5-1

March 11, 2025

600,000

August 31, 2026

Item 6. Exhibits


Exhibit						Description
2.1						Second Amended and Restated Contribution Agreement, dated as of April 17, 2018, by and among Priority Investment Holdings, Priority Incentive Equity Holdings, LLC and M I Acquisitions, Inc. (incorporated by reference to Annex A to the Company's Proxy Statement on Schedule 14(a), filed July 5, 2018).
2.2						Agreement and Plan of Merger, dated as of March 5, 2021, by and among the Company, Finxera, Merger Sub, and the Equityholder Representative.
2.3						Certificate of Amendment to the Certificate of Incorporation of Priority Technology Holdings dated April 16, 2021, filed April 29, 2021
2.4						Agreement and Plan of Merger by and among the Company, Finxera Holdings, Inc., Prime Warrior Acquisition Corp., and Stone Point Capital LLC.
3.1						Second Amended and Restated Certificate of Incorporation of Priority Technology Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, filed July 31, 2018).
3.2						Amended and Restated Bylaws of Priority Technology Holdings, Inc. (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K, filed July 31, 2018).
4.1						Warrant Agreement, dated September 13, 2016, by and between American Stock Transfer & Trust Company, LLC and the Registrant (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K, filed September 16, 2016).
4.2						Certificate of Designations of Senior Preferred Stock
10.1						Registration Rights Agreement dated as of July 25, 2018 by and among M I Acquisitions, Inc. and the other parties thereto (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed July 31, 2018).
10.2						Priority Technology Holdings, Inc. 2018 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, filed July 31, 2018).
10.3						Priority Technology Holdings, Inc. 2021 Employee Stock Purchase Plan
10.3.1						Amendment No. 1 to Priority Technology Holdings, Inc. 2021 Employee Stock Purchase Plan
10.4 †						Director Agreement by and among Priority Holdings LLC, Pipeline Cynergy Holdings, LLC, Priority Payment Systems Holdings, LLC and Thomas C. Priore, dated May 21, 2014 (incorporated by reference to Exhibit 10.6 to the Company's Registration Statement on Form S-4/A, filed December 26, 2018).
10.5 †						Amendment No. 1 to Director Agreement by and among Priority Holdings LLC, Pipeline Cynergy Holdings, LLC, Priority Payment Systems Holdings, LLC and Thomas C. Priore, dated April 19, 2018 (incorporated by reference to Exhibit 10.7 to the Company's Registration Statement on Form S-4/A, filed December 26, 2018).


10.6						Form of Independent Director Agreement (incorporated by reference to Exhibit 10.19 to the Company's Annual Report on Form 10-K, filed March 29, 2019).
10.7						Asset Purchase Agreement by and between MRI Payments LLC, MRI Software LLC, and Priority Real Estate Technology LLC, dated August 31, 2020 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed September 1, 2020).
10.8						Support Agreement, dated as of March 5, 2021, by and among the Stockholders and Finxera
10.9						Debt Commitment Letter, dated as of March 5, 2021, between Priority Holdings, LLC and Truist Securities, Inc.


10.10						Preferred Stock Commitment Letter, dated as of March 5, 2021, among the Company and certain affiliates of Ares Capital Management LLC
10.11						Securities Purchase Agreement, dated as of April 27, 2021, among the Company and the Investors named therein
10.12						Registration Rights Agreement, dated as of April 27, 2021, among the Company and the Investors name therein
10.17						Form Restricted Stock Unit Award Agreement.
10.18 †						Executive Employment Agreement between Priority Technology Holdings, Inc. and Tim O'Leary, dated September 19, 2022.
10.19						Priority Technology Holdings, Inc. Recoupment Policy adopted March 1, 2023
10.20						Amendment No. 1 to Equity and Asset Purchase Agreement, dated July 31, 2023, by and among Plastiq, Powered by Priority, LLC, Plastiq Inc., PLV Inc. and Nearside Business Corp.
10.21						Side Letter Agreement, dated July 28, 2023, by and between Plastiq, Powered by Priority, LLC and Colonnade Acquisition Corp. II.
10.22						Earnout Agreement, dated July 31, 2023, by and among Plastiq, Powered by Priority, LLC, Plastiq Inc., PLV Inc., Nearside Business Corp., Blue Torch Finance, LLC and Priority Holdings, LLC.
10.23						Priority Technology Holdings, Inc. Amended and Restated Certificate of Designations of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights, and Qualifications, Limitations and Restrictions thereof, of Senior Preferred Stock.
10.24						Rule 10b5-1 Sales Plan, dated March 11, 2025, by and between Sean Kiewiet and J.P. Morgan Securities LLC.
10.25						Credit and Guaranty Agreement, dated as of May 16, 2024, by and among Priority Holdings, LLC, as the Initial Borrower, the Credit Parties party thereto, the Lenders party thereto and Truist Bank, as Administrative Agent and Collateral Agent.
10.26						Amendment No. 1 to the Credit and Guaranty Agreement, dated as of November 21, 2024, by and among Priority Holdings, LLC, as the Initial Borrower, the Credit Parties party thereto, the 2024-1 Incremental Term Lenders and Truist Bank, as Administrative Agent and Collateral Agent.
10.27						Share Purchase Agreement by and between Ayrshire Developments Corp., Priority Canada Acquisition Company, Inc., and Priority Technology Holdings, Inc., dated January 21, 2025 .
21.1*						Subsidiaries
31.1 *						Certification of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
31.2 *						Certification of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
32 **						Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS *						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH *						XBRL Taxonomy Extension Schema Document
101.CAL *						XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB *						XBRL Taxonomy Extension Label Linkbase Document
101.PRE *						XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF *						XBRL Taxonomy Extension Definition Linkbase Document

* Filed herewith.

** Furnished herewith.

† Indicates exhibits that constitute management contracts or compensation plans or arrangements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PRIORITY TECHNOLOGY HOLDINGS, INC.



May 6, 2025			/s/ Thomas C. Priore Thomas C. Priore President, Chief Executive Officer and Chairman (Principal Executive Officer)

May 6, 2025			/s/ Timothy M. O'Leary Timothy M. O'Leary Chief Financial Officer (Principal Financial Officer)

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Date	Price Target	Rating	Analyst
1/16/2025	$10.00 → $14.00	Mkt Perform → Outperform	Keefe Bruyette
12/15/2023	$5.00 → $10.00	Neutral → Buy	B. Riley Securities
10/16/2023	$4.50	Mkt Perform	Keefe Bruyette
7/31/2023	$7.00	Buy	Lake Street
6/23/2023	$5.00	Neutral	B. Riley Securities
3/30/2022	$14.00	Buy	B. Riley Securities

SEC Form 10-Q filed by Priority Technology Holdings Inc.

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