0001653558falseDecember 31Q32021http://fasb.org/us-gaap/2021-01-31#ServiceMemberP5D100016535582021-01-012021-09-30xbrli:shares00016535582021-11-09iso4217:USD00016535582021-09-3000016535582020-12-31iso4217:USDxbrli:shares00016535582021-07-012021-09-3000016535582020-07-012020-09-3000016535582020-01-012020-09-3000016535582019-12-3100016535582020-09-300001653558prth:FinxeraMember2021-09-172021-09-170001653558prth:FinxeraMember2021-09-170001653558prth:ReferralPartnerRelationshipsMemberprth:FinxeraMember2021-09-172021-09-170001653558prth:FinxeraMemberus-gaap:TechnologyBasedIntangibleAssetsMember2021-09-172021-09-170001653558us-gaap:CustomerRelationshipsMemberprth:FinxeraMember2021-09-172021-09-170001653558us-gaap:LicenseMemberprth:FinxeraMember2021-09-172021-09-17xbrli:pure0001653558prth:FinxeraMemberprth:IntegratedPartnersSegmentMember2021-09-172021-09-170001653558prth:FinxeraMember2021-09-172021-09-300001653558prth:FinxeraMember2021-07-012021-09-300001653558prth:FinxeraMember2021-01-012021-09-300001653558us-gaap:AcquisitionRelatedCostsMemberprth:FinxeraMember2021-01-012021-09-300001653558us-gaap:AcquisitionRelatedCostsMemberprth:FinxeraMember2020-01-012020-09-300001653558prth:FinxeraMember2020-01-012020-09-300001653558prth:CertainResidualPortfolioRightsMember2021-04-282021-04-280001653558prth:CertainResidualPortfolioRightsMember2021-04-292021-04-290001653558prth:CertainResidualPortfolioRightsMember2021-01-012021-09-300001653558prth:CertainResidualPortfolioRightsMember2021-07-012021-09-300001653558srt:ScenarioPreviouslyReportedMemberprth:CHFinancialServicesMember2021-06-252021-06-250001653558prth:CHFinancialServicesMembersrt:ScenarioForecastMembersrt:MaximumMember2021-06-252024-06-240001653558prth:CHFinancialServicesMember2021-06-252021-06-250001653558us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberprth:CreditAgreementMember2021-06-252021-06-250001653558prth:CHFinancialServicesMember2021-06-250001653558us-gaap:CreditCardMerchantDiscountMember2021-07-012021-09-300001653558us-gaap:CreditCardMerchantDiscountMember2020-07-012020-09-300001653558us-gaap:CreditCardMerchantDiscountMember2021-01-012021-09-300001653558us-gaap:CreditCardMerchantDiscountMember2020-01-012020-09-300001653558prth:OutsourcedServicesAndOtherServicesMember2021-07-012021-09-300001653558prth:OutsourcedServicesAndOtherServicesMember2020-07-012020-09-300001653558prth:OutsourcedServicesAndOtherServicesMember2021-01-012021-09-300001653558prth:OutsourcedServicesAndOtherServicesMember2020-01-012020-09-300001653558us-gaap:ProductMember2021-07-012021-09-300001653558us-gaap:ProductMember2020-07-012020-09-300001653558us-gaap:ProductMember2021-01-012021-09-300001653558us-gaap:ProductMember2020-01-012020-09-3000016535582021-10-012021-09-300001653558prth:BankMemberprth:DueToACHPayeesMember2021-09-300001653558prth:DueToACHPayeesMember2021-09-300001653558prth:DueToACHPayeesMember2020-12-310001653558prth:CardSettlementsDueFromProcessorsMember2021-09-300001653558prth:CardSettlementsDueFromProcessorsMember2020-12-310001653558prth:CardSettlementsDueFromMerchantsMember2021-09-300001653558prth:CardSettlementsDueFromMerchantsMember2020-12-310001653558us-gaap:BankTimeDepositsMember2021-09-300001653558us-gaap:BankTimeDepositsMember2020-12-310001653558prth:CustomerAccountObligationsMember2021-09-300001653558prth:CustomerAccountObligationsMember2020-12-310001653558prth:DueToCustomerPayeesMember2021-09-300001653558prth:DueToCustomerPayeesMember2020-12-310001653558us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMemberprth:PriorityRealEstateTechnologyLLCPRETMember2020-09-012020-09-010001653558us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMemberprth:PriorityRealEstateTechnologyLLCPRETMember2020-09-010001653558us-gaap:ParentMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMemberprth:PriorityRealEstateTechnologyLLCPRETMember2020-09-012020-09-010001653558us-gaap:NoncontrollingInterestMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMemberprth:PriorityRealEstateTechnologyLLCPRETMember2020-09-012020-09-010001653558us-gaap:ParentMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMemberprth:PriorityRealEstateTechnologyLLCPRETMember2020-09-010001653558us-gaap:NoncontrollingInterestMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMemberprth:PriorityRealEstateTechnologyLLCPRETMember2020-09-010001653558us-gaap:NoncontrollingInterestMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMemberprth:PriorityRealEstateTechnologyLLCPRETMember2021-03-310001653558us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMemberprth:PriorityRealEstateTechnologyLLCPRETMember2020-07-012020-09-300001653558us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMemberprth:PriorityRealEstateTechnologyLLCPRETMember2020-01-012020-09-300001653558srt:ProFormaMember2020-07-012020-09-300001653558srt:ProFormaMember2020-01-012020-09-300001653558prth:ConsumerPaymentsReportingUnitMember2021-09-300001653558prth:ConsumerPaymentsReportingUnitMember2020-12-310001653558prth:IntegratedPartnersReportingUnitMember2021-09-300001653558prth:IntegratedPartnersReportingUnitMember2020-12-3100016535582021-01-012021-03-3100016535582021-03-3100016535582021-04-012021-06-3000016535582021-06-300001653558us-gaap:ServiceAgreementsMember2021-09-300001653558us-gaap:ServiceAgreementsMember2021-01-012021-09-300001653558us-gaap:CustomerRelationshipsMember2021-09-300001653558us-gaap:CustomerRelationshipsMember2021-01-012021-09-300001653558prth:ResidualBuyoutsMember2021-09-300001653558prth:ResidualBuyoutsMember2021-01-012021-09-300001653558us-gaap:NoncompeteAgreementsMember2021-09-300001653558us-gaap:NoncompeteAgreementsMember2021-01-012021-09-300001653558us-gaap:TradeNamesMember2021-09-300001653558us-gaap:TradeNamesMember2021-01-012021-09-300001653558us-gaap:DevelopedTechnologyRightsMember2021-09-300001653558us-gaap:DevelopedTechnologyRightsMember2021-01-012021-09-300001653558prth:ISOAndReferralPartnerRelationshipsMember2021-09-300001653558prth:ISOAndReferralPartnerRelationshipsMember2021-01-012021-09-300001653558us-gaap:LicenseMember2021-09-300001653558us-gaap:ServiceAgreementsMember2020-12-310001653558us-gaap:ServiceAgreementsMember2020-01-012020-12-310001653558us-gaap:CustomerRelationshipsMember2020-12-310001653558us-gaap:CustomerRelationshipsMember2020-01-012020-12-310001653558prth:ResidualBuyoutsMember2020-12-310001653558prth:ResidualBuyoutsMember2020-01-012020-12-310001653558us-gaap:NoncompeteAgreementsMember2020-12-310001653558us-gaap:NoncompeteAgreementsMember2020-01-012020-12-310001653558us-gaap:TradeNamesMember2020-12-310001653558us-gaap:TradeNamesMember2020-01-012020-12-310001653558us-gaap:DevelopedTechnologyRightsMember2020-12-310001653558us-gaap:DevelopedTechnologyRightsMember2020-01-012020-12-310001653558prth:ISOAndReferralPartnerRelationshipsMember2020-12-310001653558prth:ISOAndReferralPartnerRelationshipsMember2020-01-012020-12-310001653558prth:ResidualBuyoutsMember2020-12-310001653558prth:ResidualBuyoutsMember2021-01-012021-06-300001653558us-gaap:FurnitureAndFixturesMember2021-09-300001653558us-gaap:FurnitureAndFixturesMember2020-12-310001653558us-gaap:EquipmentMember2021-09-300001653558us-gaap:EquipmentMember2020-12-310001653558us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2021-09-300001653558us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2020-12-310001653558us-gaap:LeaseholdImprovementsMember2021-09-300001653558us-gaap:LeaseholdImprovementsMember2020-12-310001653558us-gaap:SecuredDebtMemberprth:CreditAgreementMember2021-09-300001653558us-gaap:SecuredDebtMemberprth:CreditAgreementMember2020-12-310001653558us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberprth:CreditAgreementMember2021-04-270001653558us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberprth:CreditAgreementMember2021-09-300001653558us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberprth:CreditAgreementMember2020-12-310001653558us-gaap:SeniorNotesMemberprth:SeniorTermLoanMaturingJanuary32023Member2021-09-300001653558us-gaap:SeniorNotesMemberprth:SeniorTermLoanMaturingJanuary32023Member2020-12-310001653558prth:SubordinatedTermLoanMaturingJuly32023Memberus-gaap:SubordinatedDebtMember2021-09-300001653558prth:SubordinatedTermLoanMaturingJuly32023Memberus-gaap:SubordinatedDebtMember2020-12-310001653558us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberprth:CreditAgreementMember2021-09-170001653558prth:CreditAndGuarantyAgreementMember2021-04-270001653558us-gaap:MediumTermNotesMemberprth:CreditAgreementMember2021-04-270001653558us-gaap:SecuredDebtMemberprth:CreditAgreementMember2021-01-012021-09-300001653558us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberprth:CreditAgreementMember2021-04-272021-04-270001653558prth:CreditAgreementMember2021-04-270001653558prth:CreditAgreementMember2021-04-272021-04-270001653558us-gaap:LineOfCreditMember2021-04-272021-04-270001653558us-gaap:SeniorNotesMembersrt:MinimumMember2021-01-012021-09-300001653558us-gaap:RevolvingCreditFacilityMemberus-gaap:SeniorNotesMember2021-09-300001653558us-gaap:RevolvingCreditFacilityMemberus-gaap:SeniorNotesMember2021-01-012021-09-300001653558us-gaap:SubordinatedDebtMemberprth:ApplicableMarginMember2021-01-012021-09-300001653558us-gaap:SubordinatedDebtMember2021-09-300001653558us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2021-09-300001653558us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberprth:SyndicateOfLendersMember2021-04-270001653558prth:DelayedDrawTermLoanMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberprth:SyndicateOfLendersMember2021-09-300001653558us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberprth:CreditAgreementMemberprth:SyndicateOfLendersMember2021-04-272021-04-270001653558prth:DelayedDrawTermLoanMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberprth:SyndicateOfLendersMember2021-04-272021-04-270001653558prth:DelayedDrawTermLoanMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberprth:SyndicateOfLendersMember2021-06-300001653558us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2021-04-270001653558us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberprth:SyndicateOfLendersMember2020-06-300001653558us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberprth:SyndicateOfLendersMember2020-01-012020-03-3100016535582021-04-272021-04-2700016535582021-04-2700016535582021-09-172021-09-1700016535582021-09-1700016535582021-01-012021-06-300001653558us-gaap:LondonInterbankOfferedRateLIBORMember2021-01-012021-09-300001653558srt:MaximumMemberus-gaap:LondonInterbankOfferedRateLIBORMember2021-01-012021-09-300001653558prth:DividendRate1Memberus-gaap:BaseRateMember2021-01-012021-09-300001653558us-gaap:BaseRateMember2021-01-012021-09-300001653558prth:DividendRate4Memberus-gaap:BaseRateMember2021-01-012021-09-300001653558us-gaap:BaseRateMemberprth:DividendRate2Member2021-01-012021-09-300001653558us-gaap:BaseRateMemberprth:DividendRate3Member2021-01-012021-09-30prth:day00016535582019-03-152019-03-150001653558srt:MaximumMember2019-03-152019-03-1500016535582019-03-152021-09-3000016535582019-05-220001653558prth:ChiefExecutiveOfficerAndChairmanMember2019-01-312019-01-3100016535582019-02-2800016535582019-02-012019-02-280001653558prth:ChiefExecutiveOfficerAndChairmanMember2019-01-312019-01-310001653558prth:PriorityHospitalityTechnologyLLCMember2020-07-012020-12-3100016535582020-11-300001653558prth:ShareExchangeMember2020-11-122020-11-120001653558prth:ShareExchangeMember2020-11-120001653558prth:ShareExchangeMember2021-05-012021-05-310001653558prth:ShareExchangeMemberprth:ChiefExecutiveOfficerAndChairmanMember2021-05-012021-05-310001653558prth:ShareExchangeMemberprth:ExecutiveVicePresidentOfMAMember2021-05-012021-05-310001653558prth:ExecutiveVicePresidentOfMAMember2019-01-312019-01-310001653558prth:ShareExchangeMember2021-07-012021-09-300001653558prth:ShareExchangeCashConsiderationMember2021-07-012021-09-300001653558prth:ShareExchangeStockConsiderationMember2021-07-012021-09-300001653558us-gaap:CommonStockMember2020-12-310001653558us-gaap:TreasuryStockMember2020-12-310001653558us-gaap:AdditionalPaidInCapitalMember2020-12-310001653558us-gaap:RetainedEarningsMember2020-12-310001653558us-gaap:ParentMember2020-12-310001653558us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001653558us-gaap:ParentMember2021-01-012021-03-310001653558us-gaap:CommonStockMember2021-01-012021-03-310001653558us-gaap:RetainedEarningsMember2021-01-012021-03-310001653558us-gaap:CommonStockMember2021-03-310001653558us-gaap:TreasuryStockMember2021-03-310001653558us-gaap:AdditionalPaidInCapitalMember2021-03-310001653558us-gaap:RetainedEarningsMember2021-03-310001653558us-gaap:ParentMember2021-03-310001653558us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-300001653558us-gaap:ParentMember2021-04-012021-06-300001653558us-gaap:CommonStockMember2021-04-012021-06-300001653558us-gaap:RetainedEarningsMember2021-04-012021-06-300001653558us-gaap:CommonStockMember2021-06-300001653558us-gaap:TreasuryStockMember2021-06-300001653558us-gaap:AdditionalPaidInCapitalMember2021-06-300001653558us-gaap:RetainedEarningsMember2021-06-300001653558us-gaap:ParentMember2021-06-300001653558us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300001653558us-gaap:ParentMember2021-07-012021-09-300001653558us-gaap:CommonStockMember2021-07-012021-09-300001653558us-gaap:TreasuryStockMember2021-07-012021-09-300001653558us-gaap:RetainedEarningsMember2021-07-012021-09-300001653558us-gaap:CommonStockMember2021-09-300001653558us-gaap:TreasuryStockMember2021-09-300001653558us-gaap:AdditionalPaidInCapitalMember2021-09-300001653558us-gaap:RetainedEarningsMember2021-09-300001653558us-gaap:ParentMember2021-09-300001653558us-gaap:CommonStockMember2019-12-310001653558us-gaap:TreasuryStockMember2019-12-310001653558us-gaap:AdditionalPaidInCapitalMember2019-12-310001653558us-gaap:RetainedEarningsMember2019-12-310001653558us-gaap:ParentMember2019-12-310001653558us-gaap:NoncontrollingInterestMember2019-12-310001653558us-gaap:AdditionalPaidInCapitalMember2020-01-012020-03-310001653558us-gaap:ParentMember2020-01-012020-03-310001653558us-gaap:RetainedEarningsMember2020-01-012020-03-310001653558us-gaap:CommonStockMember2020-03-310001653558us-gaap:TreasuryStockMember2020-03-310001653558us-gaap:AdditionalPaidInCapitalMember2020-03-310001653558us-gaap:RetainedEarningsMember2020-03-310001653558us-gaap:ParentMember2020-03-310001653558us-gaap:NoncontrollingInterestMember2020-03-310001653558us-gaap:AdditionalPaidInCapitalMember2020-04-012020-06-300001653558us-gaap:ParentMember2020-04-012020-06-300001653558us-gaap:RetainedEarningsMember2020-04-012020-06-300001653558us-gaap:NoncontrollingInterestMember2020-04-012020-06-300001653558us-gaap:CommonStockMember2020-06-300001653558us-gaap:TreasuryStockMember2020-06-300001653558us-gaap:AdditionalPaidInCapitalMember2020-06-300001653558us-gaap:RetainedEarningsMember2020-06-300001653558us-gaap:ParentMember2020-06-300001653558us-gaap:NoncontrollingInterestMember2020-06-300001653558us-gaap:AdditionalPaidInCapitalMember2020-07-012020-09-300001653558us-gaap:ParentMember2020-07-012020-09-300001653558us-gaap:RetainedEarningsMember2020-07-012020-09-300001653558us-gaap:NoncontrollingInterestMember2020-07-012020-09-300001653558us-gaap:CommonStockMember2020-09-300001653558us-gaap:TreasuryStockMember2020-09-300001653558us-gaap:AdditionalPaidInCapitalMember2020-09-300001653558us-gaap:RetainedEarningsMember2020-09-300001653558us-gaap:ParentMember2020-09-300001653558us-gaap:NoncontrollingInterestMember2020-09-300001653558us-gaap:NoncontrollingInterestMemberprth:PriorityRealEstateTechnologyLLCPRETMember2020-09-300001653558prth:PriorityRealEstateTechnologyLLCPRETMember2021-01-012021-03-3100016535582021-08-310001653558prth:EquityClassifiedAwardsMember2021-07-012021-09-300001653558prth:EquityClassifiedAwardsMember2020-07-012020-09-300001653558prth:EquityClassifiedAwardsMember2021-01-012021-09-300001653558prth:EquityClassifiedAwardsMember2020-01-012020-09-300001653558prth:LiabilityClassifiedAwardsMember2021-07-012021-09-300001653558prth:LiabilityClassifiedAwardsMember2020-07-012020-09-300001653558prth:LiabilityClassifiedAwardsMember2021-01-012021-09-300001653558prth:LiabilityClassifiedAwardsMember2020-01-012020-09-300001653558prth:A2018EquityIncentivePlanMember2021-03-012021-03-310001653558us-gaap:EmployeeStockMember2021-04-16prth:hour00016535582021-04-162021-04-160001653558us-gaap:EmployeeStockMember2021-04-162021-04-16prth:segment0001653558prth:CommercialPaymentsAndManagedServicesSegmentMember2021-01-012021-09-300001653558prth:ConsumerPaymentsSegmentMember2021-07-012021-09-300001653558prth:ConsumerPaymentsSegmentMember2020-07-012020-09-300001653558prth:ConsumerPaymentsSegmentMember2021-01-012021-09-300001653558prth:ConsumerPaymentsSegmentMember2020-01-012020-09-300001653558prth:CommercialPaymentsAndManagedServicesSegmentMember2021-07-012021-09-300001653558prth:CommercialPaymentsAndManagedServicesSegmentMember2020-07-012020-09-300001653558prth:CommercialPaymentsAndManagedServicesSegmentMember2020-01-012020-09-300001653558prth:IntegratedPartnersSegmentMember2021-07-012021-09-300001653558prth:IntegratedPartnersSegmentMember2020-07-012020-09-300001653558prth:IntegratedPartnersSegmentMember2021-01-012021-09-300001653558prth:IntegratedPartnersSegmentMember2020-01-012020-09-300001653558us-gaap:OperatingSegmentsMemberprth:ConsumerPaymentsSegmentMember2021-07-012021-09-300001653558us-gaap:OperatingSegmentsMemberprth:ConsumerPaymentsSegmentMember2020-07-012020-09-300001653558us-gaap:OperatingSegmentsMemberprth:ConsumerPaymentsSegmentMember2021-01-012021-09-300001653558us-gaap:OperatingSegmentsMemberprth:ConsumerPaymentsSegmentMember2020-01-012020-09-300001653558us-gaap:OperatingSegmentsMemberprth:CommercialPaymentsAndManagedServicesSegmentMember2021-07-012021-09-300001653558us-gaap:OperatingSegmentsMemberprth:CommercialPaymentsAndManagedServicesSegmentMember2020-07-012020-09-300001653558us-gaap:OperatingSegmentsMemberprth:CommercialPaymentsAndManagedServicesSegmentMember2021-01-012021-09-300001653558us-gaap:OperatingSegmentsMemberprth:CommercialPaymentsAndManagedServicesSegmentMember2020-01-012020-09-300001653558us-gaap:OperatingSegmentsMemberprth:IntegratedPartnersSegmentMember2021-07-012021-09-300001653558us-gaap:OperatingSegmentsMemberprth:IntegratedPartnersSegmentMember2020-07-012020-09-300001653558us-gaap:OperatingSegmentsMemberprth:IntegratedPartnersSegmentMember2021-01-012021-09-300001653558us-gaap:OperatingSegmentsMemberprth:IntegratedPartnersSegmentMember2020-01-012020-09-300001653558us-gaap:CorporateNonSegmentMember2021-07-012021-09-300001653558us-gaap:CorporateNonSegmentMember2020-07-012020-09-300001653558us-gaap:CorporateNonSegmentMember2021-01-012021-09-300001653558us-gaap:CorporateNonSegmentMember2020-01-012020-09-300001653558us-gaap:OperatingSegmentsMember2021-07-012021-09-300001653558us-gaap:OperatingSegmentsMember2020-07-012020-09-300001653558us-gaap:OperatingSegmentsMember2021-01-012021-09-300001653558us-gaap:OperatingSegmentsMember2020-01-012020-09-300001653558us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberprth:ConsumerPaymentsSegmentMember2021-07-012021-09-300001653558us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMemberprth:ConsumerPaymentsSegmentMember2020-07-012020-09-300001653558us-gaap:WarrantMemberprth:CommonStockWarrantMember2021-01-012021-09-300001653558us-gaap:WarrantMemberprth:CommonStockWarrantMember2020-01-012020-09-300001653558prth:OptionsAndWarrantsIssuedToAdvisorMember2021-01-012021-09-300001653558prth:OptionsAndWarrantsIssuedToAdvisorMember2020-01-012020-09-300001653558us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-09-300001653558us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-09-300001653558us-gaap:WarrantMember2021-01-012021-09-300001653558us-gaap:WarrantMember2020-01-012020-09-300001653558us-gaap:EmployeeStockOptionMember2021-01-012021-09-300001653558us-gaap:EmployeeStockOptionMember2020-01-012020-09-30



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 September 30, 2021

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to 
          Priority Technology Holdings, Inc.       
Commission file number: 001-37872
prth-20210930_g1.jpg
(Exact name of registrant as specified in its charter)
Delaware47-4257046
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
2001 Westside Parkway
Suite 155
Alpharetta,GA30004
(Address of principal executive offices, including zip code)
(800)935-5964
(Registrant's phone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes       No  
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes       No  
 
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No  
 
As of November 9, 2021, a total of 77,249,080 shares of common stock, par value $0.001 per share, were issued and 76,635,141 shares were outstanding.





Priority Technology Holdings, Inc.
Quarterly Report on Form 10-Q
September 30, 2021

Table of Contents
Page


Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Priority Technology Holdings, Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except share data)
September 30, 2021December 31, 2020
Assets
Current assets:
Cash and cash equivalents$16,974 $9,241 
Restricted cash17,258 78,879 
Accounts receivable, net of allowances of $479 and $574, respectively
52,651 41,321 
Prepaid expenses and other current assets13,331 3,500 
Current portion of notes receivable, net of allowances of $467 and $467, respectively
152 2,190 
Settlement assets and customer account balances480,315 753 
Total current assets580,681 135,884 
Notes receivable, less current portion3,977 5,527 
Property, equipment and software, net24,915 22,875 
Goodwill372,702 106,832 
Intangible assets, net346,695 98,057 
Deferred income taxes, net3,462 46,697 
Other non-current assets2,752 1,957 
Total assets$1,335,184 $417,829 
Liabilities, Redeemable Senior Preferred Stock and Stockholders' Deficit
Current liabilities:
Accounts payable and accrued expenses$42,103 $29,821 
Accrued residual commissions27,984 23,824 
Customer deposits and advance payments3,597 2,883 
Current portion of long-term debt6,200 19,442 
Settlement and customer account obligations489,326 72,878 
Total current liabilities569,210 148,848 
Long-term debt, net of current portion, discounts and debt issuance costs619,957 357,873 
Other non-current liabilities14,111 9,672 
Total non-current liabilities634,068 367,545 
Total liabilities1,203,278 516,393 
Commitments and contingencies (Note 12)
Redeemable senior preferred stock:
Redeemable senior preferred stock - $0.001 par value per share; 250,000 shares authorized; 225,000 issued and outstanding at September 30, 2021; none authorized, issued or outstanding at December 31, 2020
205,318  
Stockholders' deficit:
Preferred stock - $0.001 par value per share; 100,000,000 shares authorized; none issued or outstanding at September 30, 2021 and December 31, 2020
  
Common stock - $0.001 par value per share; 1,000,000,000 shares authorized; 77,185,920 shares issued at September 30, 2021 and 67,842,204 shares issued at December 31, 2020; 76,571,981 shares outstanding at September 30, 2021 and 67,390,980 shares outstanding at December 31, 2020
77 68 
Additional paid-in capital44,640 5,769 
Treasury stock at cost, 613,939 shares at September 30, 2021 and 451,224 shares at December 31, 2020
(3,411)(2,388)
Accumulated deficit(114,718)(102,013)
Total stockholders' deficit(73,412)(98,564)
Total liabilities, redeemable senior preferred stock and stockholders' deficit$1,335,184 $417,829 

See Notes to Unaudited Condensed Consolidated Financial Statements
- 1 -


Table of Contents
Priority Technology Holdings, Inc.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)

Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Revenues$132,542 $108,962 $370,853 $298,251 
Operating expenses
Costs of services92,833 74,971 264,527 203,733 
Salary and employee benefits11,909 10,010 31,808 29,695 
Depreciation and amortization12,330 10,251 32,123 30,886 
Selling, general and administrative7,220 6,688 22,213 19,305 
Total operating expenses124,292 101,920 350,671 283,619 
Operating income8,250 7,042 20,182 14,632 
Other (expenses) income
Interest expense(8,155)(13,471)(24,608)(35,454)
Debt extinguishment and modification costs (1,523)(8,322)(1,899)
Gain on sale of business 107,239  107,239 
Other income, net146 190 92 414 
Total other (expenses) income, net(8,009)92,435 (32,838)70,300 
Income (loss) before income taxes 241 99,477 (12,656)84,932 
Income tax expense790 13,737 49 12,919 
Net (loss) income(549)85,740 (12,705)72,013 
Dividends and accretion attributable to redeemable senior preferred stockholders(5,813) (9,724) 
Non-controlling interest preferred unit redemptions  (10,777) 
Less net income attributable to redeemable non-controlling interests and redeemed non-controlling interests (45,348) (45,348)
Net (loss) income attributable to common stockholders$(6,362)$40,392 $(33,206)$26,665 
(Loss) earnings per common share:
Basic$(0.09)$0.60 $(0.48)$0.40 
Diluted$(0.09)$0.60 $(0.48)$0.40 
Weighted-average common shares outstanding:
Basic71,979 67,167 69,689 67,114 
Diluted71,979 67,286 69,689 67,131 

See Notes to Unaudited Condensed Consolidated Financial Statements
- 2 -


Table of Contents
Priority Technology Holdings, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Nine Months Ended September 30,
20212020
Cash flows from operating activities:
Net (loss) income $(12,705)$72,013 
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Gain and transaction costs recognized on sale of business (111,611)
Depreciation and amortization of assets32,123 30,886 
Stock-based compensation2,349 1,627 
Amortization of debt issuance costs and discounts1,607 1,798 
Write-off of deferred loan costs and discount2,580 1,523 
Deferred income tax provision (benefit)(160)6,695 
Payment-in-kind interest(23,715)6,643 
Impairment charge for intangible asset 980 
Other non-cash items, net(39)211 
Change in operating assets and liabilities (net of acquisitions):
Accounts receivable(10,847)(3,962)
Prepaid expenses and other current assets(1,947)(296)
Income taxes (receivable) payable(1,541)6,026 
Notes receivable(190)(398)
Accounts payable and other accrued liabilities9,192 287 
Customer deposits and advance payments713 (1,479)
Other assets and liabilities, net13 (512)
Net cash (used in) provided by operating activities(2,567)10,431 
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired(407,129) 
Proceeds from sale of business 179,416 
Additions to property, equipment and software(7,530)(6,011)
Acquisitions of intangible assets(48,219)(4,415)
Net cash (used in) provided by investing activities(462,878)168,990 
Cash flows from financing activities:
Proceeds from issuance of long-term debt, net of issue discount607,318  
Debt issuance and modification costs paid(9,073)(2,749)
Repayments of long-term debt(359,875)(109,505)
Borrowings under revolving credit facility30,000 7,000 
Repayments under revolving credit facility (7,505)
Proceeds from issuance of senior preferred equity, net of issue discount219,062  
Senior preferred equity issuance fees and costs(8,098) 
Redemption of redeemable non-controlling interest of subsidiary (5,654)
Repurchases of common stock(1,023) 
Dividends paid to redeemable senior preferred stockholders(4,015) 
Profit distributions to redeemable non-controlling interests of subsidiaries(814)(45,348)
Proceeds from exercise of stock options1,190  
Settlement and customer accounts obligations, net396,338 (7,295)
Net cash provided by (used in) financing activities871,010 (171,056)
Net change in cash and cash equivalents, and restricted cash:
Net increase in cash and cash equivalents, and restricted cash405,565 8,365 
Cash and cash equivalents, and restricted cash at beginning of period88,120 50,465 
Cash and cash equivalents, and restricted cash at end of period$493,685 $58,830 
- 3 -


Table of Contents
Supplemental cash flow information:
Cash paid for interest$17,043 $26,828 
Non-cash investing and financing activities:
Payment-in-kind interest added to principal of debt obligations$ $6,643 
Payment of accrued contingent consideration for asset acquisition from offset of account receivable$ $1,686 
Accruals for asset acquisition contingent consideration$6,833 $ 
Notes receivable from sellers used as partial consideration for acquisitions$3,499 $ 
Reconciliation of cash and cash equivalents, and restricted cash:
Cash and cash equivalents$16,974 $21,695 
Restricted cash17,258 37,135 
Customer accounts balances459,453  
Total cash and cash equivalents, and restricted cash$493,685 $58,830 
See Notes to Unaudited Condensed Consolidated Financial Statements
- 4 -


Table of Contents

Priority Technology Holdings, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements


1.    Basis of Presentation and Significant Accounting Policies
Business, Consolidation and Presentation
Priority Technology Holdings, Inc. and its consolidated subsidiaries are referred to herein collectively as "Priority," "PRTH," the "Company," "we," "our" or "us," unless the context requires otherwise. Priority is a provider of merchant acquiring, integrated payment software, licensed money transmitter services and commercial payment solutions.
The Company operates on a calendar year ending each December 31 and on four calendar quarters ending on March 31, June 30, September 30 and December 31 of each year. Results of operations reported for interim periods are not necessarily indicative of results for the entire year.
These Unaudited Condensed Consolidated Financial Statements include the accounts of the Company including those of its majority-owned subsidiaries, and all material intercompany balances and transactions have been eliminated in consolidation. These Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States ("GAAP") for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The Condensed Consolidated Balance Sheet as of December 31, 2020 was derived from the audited financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020 but does not include all disclosures required by GAAP for annual financial statements.
In the opinion of the Company's management, all known adjustments necessary for a fair presentation of the Unaudited Condensed 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 Condensed 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, 2020.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reported period. Actual results could differ materially from those estimates. In particular, the continued magnitude, duration and effects of the COVID-19 pandemic are difficult to predict, and the ultimate effect could result in future charges related to the recoverability of assets, including financial assets, long-lived assets, goodwill and other losses.
Status as an Emerging Growth Company
The Company is an Emerging Growth Company ("EGC"), as defined in the Jumpstart Our Business Startups Act of 2012. The Company may remain an EGC until December 31, 2021. However, if the Company's non-convertible debt issued within a rolling three-year period exceeds $1.0 billion, the Company would cease to be an EGC immediately, or if its revenues for any fiscal year exceed $1.07 billion, the Company would cease to be an EGC as of the beginning of the following year. As an EGC, the Company is not required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002. Additionally, the Company may continue to elect to delay the adoption of any new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As such, the Company's financial statements may not be comparable to companies that comply with public company effective dates.
Foreign Currency
The Company's reporting currency is the U.S. dollar. 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
- 5 -


Table of Contents
average exchange rate in effect during the reporting period. Foreign exchange translation and transaction gains and losses were not material for the periods presented and are included in the Unaudited Condensed Consolidated Statements of Operations.

Comparability of Reporting Periods
Certain prior period amounts in these Unaudited Condensed Consolidated Financial Statements have been reclassified to conform to the current period presentation, with no net effect on operating income, income (loss) before income taxes, net (loss) income, stockholders' deficit, or cash flows from operations, investing or financing activities for any period presented.
Recently Adopted Accounting Standards
Simplifying the Accounting for Income Taxes
In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-12, Simplifying the Accounting for Income Taxes, which is intended to enhance and simplify various aspects of the accounting for income taxes. The amendments in this update remove certain exceptions to the general principles in Accounting Standards Codification ("ASC") Topic 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also clarifies and amends existing guidance to improve consistency in the application of the accounting for franchise taxes, enacted changes in tax laws or rates and transactions that result in a step-up in the tax basis of goodwill. The adoption of ASU 2019-12 on January 1, 2021 did not have a material effect on our Unaudited Condensed Consolidated Financial Statements.
Recently Issued Accounting Standards Pending Adoption
The following standards are pending adoption and will likely apply to the Company in future periods based on the Company's current business activities.
Implementation Costs Incurred in Cloud Computing Arrangements
In August 2018, the FASB issued ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). As an EGC, this update is effective for the Company's annual reporting period beginning January 1, 2021, and will be effective for interim periods beginning in 2022. The amendments are applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption, and the Company has not yet made a determination to use the retrospective or prospective adoption method. Based on current operations of the Company, the adoption of this update is not expected to have a material effect on the Company's results of operations, financial position or cash flows.
Leases
In February 2016, the FASB issued new lease accounting guidance in ASU 2016-02, Leases, which has been codified in ASC 842, Leases ("ASC 842"). The FASB subsequently issued several ASUs in 2017, 2018, 2019 and 2020 that include various amendments, improvements and changes to the effective dates of ASU 2016-02. Under this new guidance, lessees will be required to recognize the following for substantially all leases: i) a lease liability equal to the lessee's obligation to make lease payments arising from a lease, measured on a discounted basis and ii) a right-of-use ("ROU") asset which will represent the lessee's right to use, or control the use of, a specified asset for the lease term. As an EGC, this standard is effective for the Company on January 1, 2022. The Company is currently evaluating this standard and anticipates that the adoption of ASC 842 will require the Company to recognize non-current assets and liabilities for ROU assets and operating lease liabilities on its balance sheet, but it is not expected to have a material effect on the Company's results of operations or cash flows.
- 6 -


Table of Contents
Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financial Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contract at the modification date or reassess a previous accounting determination. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), Scope, which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. These updates can be adopted at any time before December 31, 2022. The Company is currently evaluating the potential impact that this ASU may have on the Consolidated Financial Statements.
Credit Losses
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. This new guidance will change how entities account for credit impairment for trade and other receivables, as well as for certain financial assets and other instruments. ASU 2016-13 will replace the current "incurred loss" model with an "expected loss" model. Under the "incurred loss" model, a loss (or allowance) is recognized only when an event has occurred (such as a payment delinquency) that causes the entity to believe that a loss is probable (i.e., that it has been "incurred"). Under the "expected loss" model, a loss (or allowance) is recognized upon initial recognition of the asset that reflects all future events that leads to a loss being realized, regardless of whether it is probable that the future event will occur. The "incurred loss" model considers past events and current conditions, while the "expected loss" model includes expectations for the future which have yet to occur. The standard will require entities to record a cumulative-effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective. The Company is currently evaluating the potential impact that this update may have on the timing of recognizing future provisions for expected losses on the Company's accounts receivable and notes receivable. Since the Company is a Smaller Reporting Company ("SRC"), the Company must adopt this new standard no later than the beginning of 2023 for annual and interim reporting periods.
Goodwill Impairment Testing
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which will eliminate the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value (i.e., measure the charge based on Step 1 of the current goodwill impairment test). Any impairment charge will be limited to the amount of goodwill allocated to an impacted reporting unit. This update will not change the current guidance for completing Step 1 of the goodwill impairment test, and an entity will still be able to perform the current optional qualitative goodwill impairment assessment before determining whether to proceed to Step 1. Upon adoption, the update will be applied prospectively. Since the Company is a SRC, the Company must adopt this new standard no later than the beginning of 2023 for annual and interim reporting periods. The impact that this update may have on the Company's financial condition or results of operations will depend on the circumstances of any goodwill impairment event that may occur after adoption.
Business Combinations
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires entities to recognize and measure contract assets and liabilities acquired in a business combination in accordance with ASC 606, as if the acquirer had originated the contracts. Generally this will result in the acquirer recognizing and measuring the acquired contract assets and liabilities consistent with how they had been recognized and measured by the acquiree. This update is effective for the Company on January 1, 2023, including interim periods within those fiscal years. The impact that this ASU may have on the Company's Consolidated Financial Statements will depend on the circumstances of any business combination that may occur after adoption.
- 7 -


Table of Contents
2.    Acquisitions
Finxera Acquisition
On September 17, 2021 (the "Closing Date"), the Company completed its acquisition of 100% of the equity interests of Finxera Holdings, Inc. ("Finxera"). Finxera is a provider of deposit account management and licensed money transmitter services in the United States. The acquisition will allow the Company to offer clients turn-key merchant services, payment facilitation, card issuing, automated payables, virtual banking, e-wallet tools, risk management, underwriting and compliance on a single platform.

The preliminary purchase price is $407.0 million and is subject to customary adjustments including final purchase accounting and working capital adjustments. The transaction was funded with the Company's cash on hand, proceeds from the issuance of the redeemable senior preferred stock and debt, and the issuance of common equity shares to the sellers.

The acquisition was accounted for as a business combination using the acquisition method of accounting, under which the assets acquired and liabilities assumed were recognized at their fair values as of the Closing Date, with the excess of the fair value of consideration transferred over the fair value of the net assets acquired recognized as goodwill. The fair values of the assets acquired and liabilities assumed as of the Closing Date were estimated by management based on the valuation of the Finxera business using the discounted cash flow method and other factors specific to certain assets and liabilities. The preliminary purchase price allocation is set forth in the table below and is expected to be finalized as soon as practicable, but no later than one year from the Closing Date.

(in thousands)
Consideration:
Cash$379,220 
Equity instruments(1)
34,388 
Less: cash and restricted cash acquired(6,598)
Total purchase consideration, net of cash and restricted cash acquired$407,010 
Recognized amounts of assets acquired and liabilities assumed:
Accounts receivable$385 
Prepaid expenses and other current assets5,963 
Current portion of notes receivable784 
Settlement assets and customer account balances498,811 
Property, equipment and software, net411 
Goodwill252,062 
Intangible assets, net(2)
202,890 
Other non-current assets955 
Accounts payable and accrued expenses(7,837)
Settlement and customer account obligations(498,811)
Deferred income taxes, net(43,395)
Other non-current liabilities(5,208)
Total purchase consideration$407,010 

(1)The fair value of the 7,551,354 shares of PRTH common stock that were issued was determined based on their market price at the time of closing adjusted for an appropriate liquidity discount due to trading restrictions under Securities Rule 144.
(2)The intangible assets acquired consist of $148.4 million for referral partner relationships, $36.0 million for technology, $16.4 million for customer relationships and $2.1 million for money transmitter licenses.

- 8 -


Table of Contents
Goodwill of $252.1 million arising from the acquisition primarily consists of the expected synergies and other benefits from combining operations. Approximately $10.4 million of the goodwill attributable to the acquisition is expected to be deductible for income tax purposes. The goodwill was allocated 100% to the Company's Integrated Partners reportable segment.

The Company's Unaudited Condensed Consolidated Financial Statements include the operating results of Finxera from the Closing Date through September 30, 2021, which are reported as part of the Integrated Partners reportable segment. Revenues and operating income from Finxera during this period were $3.0 million and $1.0 million, respectively.

For the three and nine months ended September 30, 2021 we incurred $0.6 million and $9.2 million, respectively, in acquisition related costs, which primarily consisted of consulting, legal, accounting and valuation expenses. These expenses were recorded in selling, general and administrative expenses in the Company's Unaudited Condensed Consolidated Statements of Operations.

The following unaudited pro forma financial information presents results as if the acquisition occurred on January 1, 2020. The historical consolidated financial information of the Company and Finxera has been adjusted in the pro forma information to give effect to pro forma events that are directly attributable to the transaction and are factually supportable. Acquisition related costs of $38.8 million and $1.0 million for the nine months ended September 30, 2021 and the nine months ended September 30, 2020, respectively, are excluded from the pro forma information. The unaudited pro forma results do not reflect events that have occurred or may occur after the transaction, including the impact of any synergies expected to result from the acquisition. Accordingly, the unaudited pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transaction occurred on January 1, 2020, nor is it necessarily an indication of future operating results.

(in thousands, except per share amounts)Nine Months Ended September 30,
20212020
Revenues$420,499 $352,526 
Operating income$58,290 $37,381 

Other Acquisitions
Based on their purchase prices and pre-acquisition operating results and assets, none of the other businesses acquired by the Company in 2021, as described below, met the materiality requirements for pro forma disclosures individually or collectively.
Wholesale Payments, Inc.
On April 28, 2021, a subsidiary of the Company completed its acquisition of certain residual portfolio rights for a purchase price of $42.4 million and $24.8 million of post-closing payments and earn-out payments based on meeting certain attrition thresholds over a three-year period from the date of acquisition. The transaction did not meet the definition of a business, therefore it was accounted for as an asset acquisition under which the cost of the acquisition was allocated to the acquired assets based on relative fair values. As of September 30, 2021, the sellers earned $3.8 million of the $24.8 million, which was paid during the third quarter of 2021, increasing the total purchase price recorded at September 30, 2021 to $46.2 million, which was recorded to residual buyout intangible assets with a seven-year useful life amortized on a straight-line basis. As this is an asset acquisition, additional purchase price is accounted for when payment to the seller becomes probable and is added to the carrying value of the asset. The seller's note payable to the Company of $3.0 million and an advance of $2.0 million outstanding at the time of the purchase was netted against the initial purchase price, resulting in cash of $41.2 million being paid by the Company to the seller, which was funded from cash proceeds from the issuance of the redeemable senior preferred stock and cash on hand.
C&H Financial Services, Inc.
On June 25, 2021, a subsidiary of the Company acquired certain assets and assumed certain related liabilities under an asset purchase agreement. The acquisition was accounted for as a business combination using the acquisition method of accounting. Prior to this acquisition, the business was an Independent Sales Organization ("ISO") partner of the Company where it developed expertise in software-integrated payment services, as well as marketing programs for specific verticals such as automotive and youth sports. This business is reported within the Company's Consumer Payments reportable segment. The initial purchase price for the net assets was $35.0 million in cash and a total purchase price of not more than $60.0 million
- 9 -


Table of Contents
including post-closing payments and earn-out payments based on certain gross profit and revenue achievements over a three-year period from the date of acquisition. The acquisition date fair value of the contingent consideration was $4.7 million, which increased the total purchase price to $39.7 million. The seller's note payable to the Company of $0.5 million at the time of purchase was netted against the initial purchase price, resulting in cash of $34.5 million being paid by the Company to the seller, which was funded from a $30.0 million draw down of the revolving credit facility under the Credit Agreement held by the Company and $4.5 million cash on hand. The purchase price was allocated to merchant portfolio intangible assets with a ten-year useful life amortized on a straight-line basis, fixed assets and other current assets, and goodwill. Transaction costs were not material and were expensed. The preliminary purchase price allocation is set forth in the table below and is expected to be finalized as soon as practicable, but no later than one year from the acquisition date.
(in thousands)
Accounts receivable$214 
Prepaid expenses and other current assets209 
Property, equipment and software, net and other current assets283 
Goodwill13,808 
Intangible assets, net25,400 
Other non-current liabilities(214)
Total purchase price$39,700 
The goodwill for the Wholesale Payments, Inc. asset acquisition and the C&H Financial Services, Inc. business combination is deductible by the Company for income tax purposes.
3.    Revenues
For all periods presented, substantially all of the Company's revenues from services were recognized over time. Revenues earned from the sales of payment equipment were typically recognized at a point in time.
The following table presents a disaggregation of the Company's consolidated revenues by type, followed by a description of the relationship of these types of revenues to the Company's reportable segments, for the three and nine months ended September 30, 2021 and September 30, 2020:
(in thousands)Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Revenue Type
Merchant card fees$122,175 $102,481 $348,244 $277,253 
Outsourced services and other services8,651 5,387 17,854 18,143 
Equipment1,716 1,094 4,755 2,855 
Total revenues$132,542 $108,962 $370,853 $298,251 
Revenues earned in these disaggregated categories consists of the following:
Merchant card fees - revenues related to discount rates and interchange fees earned from payment services provided by the Company's Consumer Payments, Commercial Payments and Integrated Partners segments.
Outsourced services and other services - business process outsourcing services and revenues from Automated Clearing House (ACH) services, services provided to certain business customers of American Express and auxiliary services provided by our Commercial Payments segment. The Integrated Partners segment includes revenues from licensed money transmitter services.
- 10 -


Table of Contents
Equipment - revenues from sales of point-of-sale equipment and other payment-processing equipment sold to customers in the Company's Consumer Payments segment.
Transaction Price Allocated to Future Performance Obligations
ASC 606, Revenue from Contracts with Customers ("ASC 606"), requires disclosure of the aggregate amount of the transaction price allocated to unsatisfied performance obligations. However, as allowed by ASC 606, the Company has elected to exclude from this disclosure any contracts with an original duration of one year or less and any variable consideration that meets specified criteria. The Company's most significant performance obligations consist of variable consideration under a stand-ready series of distinct days of service. Such variable consideration meets the specified criteria for the disclosure exclusion. Therefore, the majority of the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied is variable consideration that is not required for this disclosure. The aggregate fixed consideration portion of customer contracts with an initial contract duration greater than one year is not material.
Contract Assets and Contract Liabilities
A contract with a customer creates legal rights and obligations. As the Company performs under customer contracts, its right to consideration that is unconditional is considered to be accounts receivable. If the Company's right to consideration for such performance is contingent upon a future event or satisfaction of additional performance obligations, the amount of revenues recognized in excess of the amount billed to the customer is recognized as a contract asset. Contract liabilities represent consideration received from customers in excess of revenues recognized. Material contract assets and liabilities are presented net at the individual contract level in the Company's Unaudited Condensed Consolidated Balance Sheets and are classified as current or non-current based on the nature of the underlying contractual rights and obligations.
Supplemental balance sheet information related to contracts from customers as of September 30, 2021 and December 31, 2020 was as follows:
(in thousands)Consolidated Balance Sheet LocationSeptember 30, 2021December 31, 2020
Contract liabilities, net (current)Customer deposits and advance payments$1,494$1,494
Substantially all of these balances are recognized as revenue within twelve months.
Net contract assets were not material for any period presented.
Impairment losses recognized on receivables or contract assets arising from the Company's contracts with customers were not material for the three and nine months ended September 30, 2021 and September 30, 2020.
4.    Settlement Assets and Customer Account Balances and Related Obligations
Consumer Payments Segment
In the Company's Consumer 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 requires possession of funds during the settlement process to be with 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 related to these funds are not liabilities of the Company. Therefore, neither is recognized in the Company's Consolidated Balance Sheets. Member banks held merchant funds of $113.8 million and $103.8 million at September 30, 2021 and December 31, 2020, respectively.
Exception items include items such as customer chargeback amounts received from merchants and other losses. Under agreements between the Company and its merchant customers, the merchants assume liability for such chargebacks and losses. If the Company is ultimately unable to collect amounts from the merchants for any charges or losses due to merchant fraud, insolvency, bankruptcy or any other reason, it may be liable for these charges. In order to mitigate the risk of such liability, the Company may (1) require certain merchants to establish and maintain reserves designed to protect the Company from such
- 11 -


Table of Contents
charges or losses under its risk-based underwriting policy and (2) engage with certain ISOs in partner programs in which the ISOs assume liability for these charges or losses. A merchant reserve account is funded by the merchant and held by the member bank during the term of the merchant agreement. Unused merchant reserves are returned to the merchant after termination of the merchant agreement or in certain instances upon a reassessment of risks during the term of the merchant agreement.
Exception items that become the liability of the Company are recorded as merchant losses, a component of costs of services in the Consolidated Statements of Operations. 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 in the Company's 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 and nine months ended September 30, 2021 were $0.6 million and $1.6 million, respectively. Expenses for merchant losses for the three and nine months ended September 30, 2020 were $1.5 million and $3.6 million, respectively.
Commercial Payments Segment
In the Company's Commercial Payments segment, the Company earns revenues from certain of its services by processing transactions for financial institutions 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 For the Benefit Of ("FBO") accounts controlled by the banks, until such time as the transactions are settled with the customer payees. Amounts due to customer payees that are held by the Company in Company-owned bank accounts are included in restricted cash. Amounts due to customer payees that are held in bank-owned FBO accounts are not assets of the Company and the associated obligations related to these funds 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 $86.7 million at September 30, 2021, which was the result of a transfer of customer restricted cash from Company-owned bank accounts to bank-owned FBO accounts due to a change in our business practice for certain types of customer deposits and cash advance payments. Company-owned bank accounts held $8.3 million at September 30, 2021 and $72.9 million at December 31, 2020; which are included within restricted cash and settlement obligations in the Company's Unaudited Condensed Consolidated Balance Sheets.
Integrated Partners Segment
In the Company's Integrated Partners segment, revenue is derived primarily from enrollment fees, monthly subscription fees, transaction-based fees and licensed money transmitter services fees. As part of its licensed money transmitter 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 and therefore, the Company recorded these balances and related obligations as current assets and current liabilities. The nature of these balances are cash and cash equivalents but they are not available for day-to-day operations of the Company. Therefore, the Company has classified these balances as settlement assets and customer account balances and the related obligations as settlement and customer account obligations in the Company's Unaudited Condensed Consolidated Balance Sheets.

- 12 -


Table of Contents
The Company's settlement assets and customer account balances and settlement and customer account obligations at September 30, 2021 and December 31, 2020 were as follows:
(in thousands)September 30, 2021December 31, 2020
Settlement Assets:
Card settlements due from merchants, net of estimated losses$862 $753 
Customer Account Balances:
Cash and cash equivalents459,453  
Time deposits20,000  
Total settlement assets and customer account balances$480,315 $753 
Settlement and Customer Account Obligations:
Customer account obligations$479,453 $ 
Due to customer payees9,873 72,878 
Total settlement and customer account obligations$489,326 $72,878 
5.    Disposal of Business
On September 1, 2020, Priority Real Estate Technology LLC ("PRET"), a majority-owned and consolidated subsidiary of the Company, entered into an asset purchase agreement (the "Sale Agreement") with MRI Payments LLC and MRI Software LLC (together, "MRI" or the buyer) to sell certain assets and certain associated obligations of the real estate services business. The sale was completed on September 22, 2020 after receiving regulatory approval, resulting in a gain of $107.2 million as follows:
(in thousands)
Gross cash consideration from buyer$180,000 
Less: working capital adjustment paid in cash(584)
Net proceeds from buyer179,416 
Transaction costs incurred(5,383)
Assets sold:
Intangible assets(62,158)
Other assets sold, net of obligations assumed(716)
Goodwill assigned to business sale(2,683)
Other intangible assets(1,237)
Pre-tax gain on sale of business$107,239 
PRET is a limited liability company and is a pass-through entity for income tax purposes. Income tax expenses associated with the gain attributable to the stockholders of the Company were estimated to be approximately $12.3 million.
Allocation of net proceeds, after transaction costs, to the PRET members included return of each member's invested capital in PRET and excess proceeds were distributed in accordance with the distribution provisions of the PRET LLC governing agreement. The Company's invested capital amounted to $71.8 million, which included the assets sold, goodwill and other intangible assets. The non-controlling interest's ("NCI") invested capital was $5.7 million. Approximately $51.4 million and $45.1 million of the excess proceeds were distributed to the Company and the NCI, respectively. The initial allocation of net proceeds remained subject to final adjustment with the PRET members at December 31, 2020. During the first quarter of 2021, it was determined that an additional $0.5 million of the excess proceeds was due to the NCI, which was included in other expenses, net in the Unaudited Condensed Consolidated Statement of Operations.
- 13 -


Table of Contents
Pro Forma Information
The following pro forma information is provided for the business (the RentPayment component) that was sold under the Sale Agreement, excluding the gain recognized on the sale transaction:
(in thousands)Three Months Ended September 30,Nine Months Ended September 30,
20202020
Revenues$3,883 $12,118 
Operating income(1)
$307 $1,805 
Net income(2)
$259 $1,765 
Net income attributable to the stockholders of Priority Technology Holdings, Inc.(3)
$259 $1,765 
Income per common share for stockholders of Priority Technology Holdings, Inc. - Basic and Diluted(3)
$ $0.03 
(1)Historical financial results are not being reported as discontinued operations.
(2)Pro forma income tax expense is based on the following consolidated effective tax rates of Priority Technology Holdings, Inc.: 15.5% for the three months ended September 30, 2020; 2.2% for the nine months ended September 30, 2020. These rates exclude the effect of the $107.2 million gain on the sale recognized during the nine months ended September 30, 2020.
(3)Prior to the September 2020 sale transaction that resulted in the gain on the sale, no earnings or losses of the PRET LLC were attributable to the NCIs of PRET.
6.    Goodwill and Other Intangible Assets
Goodwill
The Company records goodwill when an acquisition is made and the purchase price is greater than the fair value assigned to the underlying separately-identifiable tangible and intangible assets acquired and the liabilities assumed. The Company's goodwill relates to the following reporting units at September 30, 2021 and December 31, 2020.
(in thousands)September 30, 2021December 31, 2020
Consumer Payments$120,640 $106,832 
Integrated Partners252,062  
Total$372,702 $106,832 
The following table summarizes the changes in the carrying value of goodwill for the periods ended September 30, 2021 and December 31, 2020:
(in thousands)Amount
Balance at December 31, 2020$106,832 
Changes in the value of goodwill 
Balance at March 31, 2021106,832 
C&H Financial Services, Inc. acquisition17,246 
Balance at June 30, 2021124,078 
Measurement period adjustment from C&H Financial Services, Inc. acquisition(3,438)
Finxera acquisition252,062 
Balance at September 30, 2021
$372,702 
- 14 -


Table of Contents
The Company considered the market conditions for triggering events including those generated by the COVID-19 pandemic and concluded that there were no indicators of impairment of the Company's goodwill for the three and nine months ended September 30, 2021.
The Company tests goodwill for impairment on an annual basis, or when events occur or circumstances indicate the fair value of a reporting unit may be below its carrying value. The Company will continue to monitor triggering events including the economic impact of COVID-19 on its ongoing assessment of goodwill. The Company expects to perform its next annual goodwill impairment test during the fourth quarter of 2021 using market data and a discounted cash flow analysis. The Company concluded there was no impairment as of September 30, 2021 or December 31, 2020. As such, there was no accumulated impairment loss as of September 30, 2021 and December 31, 2020.
Other Intangible Assets
As of September 30, 2021 and December 31, 2020, intangible assets consisted of the following:
September 30, 2021Weighted Average Useful Life (Years)
(in thousands)Gross Carrying ValueAccumulated AmortizationNet Carrying Value
Other intangible assets:
Merchant portfolios$76,016 $(27,817)$48,199 4.0
Customer relationships91,866 (67,609)24,257 8.4
Residual buyouts(1)
125,840 (51,160)74,680 6.4
Non-compete agreements(2)
3,390 (3,390) 0.0
Trade names2,870 (1,830)1,040 11.6
Technology(2)
50,390 (14,164)36,226 9.8
ISO and referral partner relationships168,800 (8,597)160,203 13.8
Money transmitter licenses(3)
2,090 — 2,090 
 Total gross carrying value$521,262 $(174,567)$346,695 
(1)Additions to Residual buyouts were offset by certain assets that became fully amortized in 2021, but are still in service.
(2)Certain assets in the group became fully amortized in 2021, but are still in service.
(3)These assets have an indefinite useful life.
December 31, 2020Weighted Average Useful Life (Years)
(in thousands)Gross Carrying ValueAccumulated AmortizationNet Carrying Value
Other intangible assets:
Merchant portfolios$55,816 $(19,471)$36,345 5.5
Customer relationships40,740 (30,267)10,473 11.0
Residual buyouts114,359 (72,659)41,700 6.8
Non-compete agreements3,390 (3,390) 3.0
Trade names2,870 (1,651)1,219 11.6
Technology14,390 (13,951)439 6.1
ISO relationships15,200 (7,319)7,881 23.7
 Total gross carrying value$246,765 $(148,708)$98,057 
Amortization expense for finite-lived intangible assets was $10.2 million and $25.9 million for the three and nine months ended September 30, 2021, respectively, and $8.3 million and $25.2 million for the three and nine months ended September 30, 2020,
- 15 -


Table of Contents
respectively. Amortization expense for future periods could differ due to new intangible asset acquisitions, changes in useful lives of existing intangible assets and other relevant events or circumstances.
The Company tests intangible assets for impairment when events occur or circumstances indicate that the fair value of an intangible asset or group of intangible assets may be impaired. In the Company's Consumer Payments segment, a residual buyout intangible asset with a net carrying value of $2.2 million was deemed to be impaired at December 31, 2020. The fair value of this intangible asset was estimated to be approximately $0.5 million, resulting in the recognition of an impairment charge of $1.8 million. This impairment was the result of diminished cash flows generated by the merchant portfolio.
The Company also considered the market conditions generated by the COVID-19 pandemic and concluded that there were no additional impairment indicators present at September 30, 2021.
7.    Property, Equipment and Software
Property, equipment and software as of September 30, 2021 and December 31, 2020 consisted of the following:
(in thousands)September 30, 2021December 31, 2020
Furniture and fixtures$2,883 $2,795 
Equipment12,275 10,216 
Computer software50,307 44,320 
Leasehold improvements6,360 6,250 
Property, equipment and software71,825 63,581 
Less: accumulated depreciation(46,910)(40,706)
Property, equipment and software, net$24,915 $22,875 
Computer software represents purchased software and internally developed back office and merchant interfacing systems used to assist with the reporting of merchant processing transactions and other related information.
Depreciation expense for property, equipment and software totaled $2.2 million and $6.3 million for the three and nine months ended September 30, 2021, respectively, and $2.0 million and $5.7 million for the three and nine months ended September 30, 2020, respectively.
8.    Accounts Payable and Accrued Expenses
The components of accounts payable and accrued expenses that exceeded five percent of total current liabilities at either September 30, 2021 or December 31, 2020 consisted of the following:
(in thousands)September 30, 2021December 31, 2020
Accrued expenses18,752 14,451 
Accrued card network fees9,775 8,041 
- 16 -


Table of Contents
9.    Debt Obligations
Outstanding debt obligations as of September 30, 2021 and December 31, 2020 consisted of the following:
(in thousands)September 30, 2021December 31, 2020
Credit and Guaranty Agreement:
Term facility - matures April 27, 2027, interest rate of 6.75% at September 30, 2021
$618,450 $ 
Revolving credit facility - $40.0 million line, matures April 27, 2026, interest rate of 5.75% at September 30, 2021
30,000  
Senior Credit Agreement:
Term facility - Original maturity at January 3, 2023, interest rate of 7.50% at December 31, 2020
 279,417 
Term Loan - Subordinated, original maturity at July 3, 2023, interest rate of 12.50% at December 31, 2020
 102,623 
Total debt obligations648,450 382,040 
Less: current portion of long-term debt(6,200)(19,442)
Less: unamortized debt discounts and deferred financing costs(22,293)(4,725)
Long-term debt, net$619,957 $357,873 
Credit and Guaranty Agreement
On September 17, 2021, Priority Holdings LLC ("Holdings"), which is a direct wholly-owned subsidiary of the Company, and certain direct and indirect subsidiaries of Holdings (together with Holdings, collectively, the "Loan Parties"), entered into an agreement with Truist Bank ("Truist") and the lenders party thereto, to amend the Credit and Guaranty Agreement dated as of April 27, 2021 (the "Credit Agreement") to increase the amount of the delayed draw term loan facility under the Credit Agreement by $30.0 million. The additional delayed draw term loans are part of the same class of term loans made pursuant to the original commitments under the Credit Agreement. See Note 2, Acquisitions for additional information related to the Finxera acquisition.
On April 27, 2021, the Loan Parties, entered into the Credit Agreement with Truist and the lenders party thereto, pursuant to which Holdings has access to senior credit facilities in an aggregate principal amount of $630.0 million which are secured by substantially all of the assets of the Loan Parties and by the equity interests of Holdings.
The credit facilities under the Credit Agreement are comprised of (i) a senior secured first lien term loan facility in an aggregate principal amount of $300.0 million (the "Initial Term Loan"), the proceeds of which were used to fund the refinancing described below, (ii) a senior secured revolving credit facility in an aggregate amount not to exceed $40.0 million outstanding at any time (the "Revolving Credit Facility") and (iii) a senior secured first lien delayed draw term loan facility in an aggregate principal amount of $290.0 million (the "Delayed Draw Term Loan"), the proceeds of which may be used to fund the Company's acquisition of Finxera.
Outstanding borrowings under the Credit Agreement accrue interest using either a base rate (as defined therein) or a LIBOR rate plus an applicable margin per year, as provided in the Credit Agreement, which includes a LIBOR rate floor of 1.00% per year. Accrued interest is payable on each interest payment date (as defined in the Credit Agreement). The revolving credit facility incurs an unused commitment fee on any undrawn amount of the $40.0 million credit line in an amount equal to 0.5% per year of the unused portion. Under the terms of the Credit Agreement, the future applicable interest rate margins may vary based on the Loan Parties Total Net Leverage Ratio in addition to future changes in the underlying market rates for LIBOR and the rate used for base-rate borrowing.
- 17 -


Table of Contents
Use of Proceeds
Holdings and certain other Loan Parties have previously entered into (i) the Senior Credit Agreement and (ii) the Term Loan Agreement, both of which are described below. The proceeds from the sale of the Securities (refer to Note 10, Redeemable Senior Preferred Stock and Warrants) and from the Initial Term Loan were used to refinance the Senior Credit Agreement and the Term Loan Agreement and all outstanding obligations thereunder were repaid in full (or in the case of outstanding undrawn letters of credit, deemed issued under the Credit Agreement), and all commitments and guaranties in connection therewith have been terminated or released (the "Refinancing").
Prepayments
Under the Credit Agreement, prepayments of outstanding principal may be made in permitted increments with a 1.00% penalty for certain prepayments made in connection with repricing transactions. Such premium will be based on the principal amount that is prepaid, subject to the terms of the credit agreements.
Acceleration
The outstanding amount of any loans and any other amounts owed under the Credit Agreement may, after the occurrence of an Event of Default (as defined in the Credit Agreement), at the option of Truist, be declared immediately due and payable. Events of Default include, without limitation, the failure of the Loan Parties to pay principal, premium or interest when due under the Credit Agreement, or the failure by the Loan Parties to perform or comply with any term or covenant in the Credit Agreement, in each case, subject to any applicable cure periods provided therein.
Covenants
The Credit Agreement contains representations and warranties, financial and collateral requirements, mandatory payment events, events of default and affirmative and negative covenants, including without limitation, covenants that restrict among other things, the ability to create liens, pay dividends or distribute assets from the Loan Parties to the Company, merge or consolidate, dispose of assets, incur additional indebtedness, make certain investments or acquisitions, enter into certain transactions (including with affiliates) and to enter into certain leases.
If the aggregate principal amount of outstanding revolving loans and letters of credit under the Credit Agreement exceeds 35% of the total revolving 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 of the Loan Parties to the Loan Parties Consolidated Adjusted EBITDA (as defined in the Credit Agreement). If applicable, the maximum permitted Total Net Leverage Ratio is (i) 6.50:1.00 at each fiscal quarter ended September 30, 2021 through June 30, 2022, (ii) 6.00:1.00 at each fiscal quarter ended September 30, 2022 through June 30, 2023 and (iii) 5.50:1.00 at each fiscal quarter ended September 30, 2023 and each fiscal quarter thereafter.
Senior Credit Agreement
Outstanding borrowings under the Credit and Guaranty Agreement, dated as of January 3, 2017 and subsequently amended, with Truist (the "Senior Credit Agreement"), accrued interest using either a base rate (as defined) or a LIBOR rate plus an applicable margin, or percentage per year, as provided in the amended credit agreement. For the term loan facility of our Senior Credit Agreement, the Sixth Amendment, which was executed on March 18, 2020, provided for a LIBOR "floor" of 1.00% per year. Accrued interest was payable monthly. The revolving credit facility incurred a commitment fee on any undrawn amount of the $25.0 million credit line, which equated to 0.50% per year for the unused portion. The outstanding obligations under the Senior Credit Agreement at the time of the Refinancing were $274.6 million.
Term Loan Agreement
Outstanding borrowings under the Credit and Guaranty Agreement, dated as of January 3, 2017 and subsequently amended, with Goldman Sachs Specialty Lending Group, L.P. (the "Term Loan Agreement") accrued interest at 5.0%, plus an applicable margin, or percentage per year, as indicated in the amended credit agreement. Accrued interest was payable quarterly at 5.0%
- 18 -


Table of Contents
per year, and the accrued interest attributable to the applicable margin was capitalized as payment-in-kind ("PIK") interest each quarter. The outstanding obligations under the Term Loan Agreement at the time of the Refinancing were $105.1 million, which consisted of the principal amount borrowed under the Term Loan Agreement of $80.0 million plus accumulated PIK interest of $25.1 million.
Contractual Maturities
Based on terms and conditions existing at September 30, 2021, future minimum principal payments for long-term debt are as follows:
Principal Due
(in thousands)Credit Agreement
Twelve-month period ending September 30,Term LoanRevolverTotal
2022$6,200 $ $6,200 
20236,200  6,200 
20246,200  6,200 
20256,200  6,200 
20266,200 30,000 36,200 
Beyond five years587,450  587,450 
Total$618,450 $30,000 $648,450 
Additionally, the Company may be obligated to make certain additional mandatory prepayments after the end of each year based on excess cash flow, as defined in the Credit Agreement.
Interest Expense and Amortization of Deferred Loan Costs and Discounts
Interest expense, including fees for undrawn amounts under the revolving credit facility and the delayed draw term loan facility, as well as amortization of deferred financing costs and debt discounts, was $8.2 million and $24.6 million for the three and nine months ended September 30, 2021, respectively, and $13.5 million and $35.5 million for the three and nine months ended September 30, 2020, respectively. Interest expense included amortization of deferred financing costs and debt discounts of $2.1 million and $3.3 million for the three and nine months ended September 30, 2021, respectively, and $0.7 million and $1.8 million for the three and nine months ended September 30, 2020, respectively.
Deferred Loan Costs and Discounts, and Debt Extinguishment and Modification Expenses
Refinancing: The Initial Term Loan under the Credit Agreement was issued in April 2021 at a discount of $6.4 million, while the Delayed Draw Term Loan was issued in September 2021 at a discount of $6.3 million. Additionally, the Company incurred approximately $6.4 million of costs for the Refinancing, in April 2021 and $9.9 million of costs for the Delayed Draw Term Loan, including $3.5 million of ticking fees (debt commitment fees) prior to the drawdown of the funds in September 2021. Approximately $6.1 million of the remaining fees incurred for the Delayed Draw Term Loan were paid during the initial Refinancing and were deferred and included in other non-current assets on the Company's Unaudited Condensed Consolidated Balance Sheet at June 30, 2021. The costs for the Delayed Draw Term Loan were amortized over the delayed commitment access period until September 2021, at which time the unamortized balance of the deferred costs was removed from other non-current assets and recorded as a reduction of the carrying amount of the debt obligation and is being amortized over the remaining term of the debt.
The Company determined that the issuance of the Initial Term Loan under the Refinancing in April 2021 was partially an extinguishment and a modification, and therefore, recognized debt extinguishment and modification costs of $8.3 million in April 2021, which included a portion of the Refinancing fees and the write-off of previously deferred fees under the prior credit agreements. These costs are reported within other expenses, net on the Company's Unaudited Condensed Consolidated Statements of Operations.
- 19 -


Table of Contents
Senior Credit Agreement: For the Sixth Amendment, executed in the first quarter of 2020, $2.7 million of lender fees were deferred and added to then-existing unamortized loan costs and discount. Approximately $0.4 million of such costs were expensed in connection with the Sixth Amendment during the first quarter of 2020.
10.    Redeemable Senior Preferred Stock and Warrants
Redeemable Senior Preferred Stock
On April 27, 2021, the Company entered into an agreement pursuant to which it issued 150,000 shares of redeemable senior preferred stock, par value $0.001 per share, and a detachable warrant to purchase 1,803,841 shares of the Company's common stock for gross proceeds of $150.0 million, less a $5.0 million discount and $5.5 million of issuance costs.

The agreement also provided the Company the option to issue an additional 50,000 shares of redeemable senior preferred stock upon the closing of the Finxera acquisition for $50.0 million, less a $0.6 million discount and within 18 months after the issuance of those shares, the Company was provided the option to issue an additional 50,000 shares at a purchase price of $50.0 million, less a $0.6 million discount, subject to the satisfaction of certain customary closing conditions.

The redeemable senior preferred stock ranks senior to the Company's common stock, equal with any other class of the Company's stock designated as being ranked on a parity basis with the redeemable senior preferred stock and junior to any other class of the Company's stock, including preferred stock, that is designated as being ranked senior to the redeemable senior preferred stock, with respect to the payment and distribution of dividends, the purchase or redemption of the Company's stock and the liquidation, winding up of and distribution of assets of the Company.

The redeemable senior preferred stock does not meet the definition of a liability pursuant to ASC 480, Distinguishing Liabilities from Equity, as it is redeemable upon the occurrence of events that are not solely within the Company's control. Therefore, the Company classified the redeemable senior preferred stock as temporary equity and is accreting the carrying amount to its full redemption amount from the date of issuance to the earliest redemption date using the effective interest method.

Of the total net proceeds of $139.5 million, $131.4 million was allocated to the redeemable senior preferred stock, $11.4 million was allocated to additional paid-in capital for the warrants and $3.3 million was allocated to non-current assets for the committed financing put right.

On September 17, 2021 the Company issued an additional 75,000 shares of redeemable senior preferred stock for $75.0 million, less a $0.9 million discount, $0.7 million of ticking fees and $1.9 million of issuance costs. Upon issuance of these additional shares, the $