Priority Technology Holdings, Inc. (PRTH) Earnings Call Transcript & Summary

Good day, and welcome to the 2020 Annual Meeting of Stockholders of Priority Technology Holdings, Inc. I would now like to turn the conference over to Tom Priore, Chairman of the Board of Directors and President and CEO. Please go ahead.

Good morning, ladies and gentlemen, and welcome to the 2020 Annual Meeting of Stockholders of Priority Technology Holdings, Inc. I am Tom Priore, Chairman of the Board and CEO. We appreciate all of you joining us today for our annual meeting. As you can see, the format of this year's meeting is different as we're conducting this meeting virtually. I think we are all now accustomed to working and meeting in a different environment. I know at Priority, we've been working remotely since the COVID-19 pandemic began, and I found that we have been as productive as ever. While the meeting is virtual-only, we welcome questions from our stockholders. When we come to the Q&A portion, we will first give stockholders the opportunity to ask a question. [Operator Instructions]. Please remember, that you may vote your shares online at any time during this meeting prior to the closing of the polls. To start the meeting, I'll briefly summarize some of the highlights from our 2019 annual report. And then we will open the business portion of the meeting. First, I'd like to thank our Board of Directors for joining the call today as well as the executive management team. I'd also like to thank RSM, our auditors for 2019; and our new auditors, Ernst & Young, for joining the call today. We ended 2019 with an excellent fourth quarter, benefiting from solid business fundamentals and strong underlying momentum. While full year 2019 revenue was slightly down due to the remnants of the subscription e-commerce runoff, fourth quarter 2019 revenue increased 11% over the prior fourth quarter as we move beyond the difficult comparisons related to the earlier decline in subscription-billing e-commerce. Perhaps the greatest success of 2019 was strengthening our foundation for countercyclical growth through the resilience of our Commercial Payments platform and defensively positioned Integrated Payments verticals, including health care, real estate, mobile hospitality and specialized merchant-acquiring services. Early in the year, we noted that Priority is managing its business several quarters ahead by building a platform to maintain impeccable stability and long-term compound growth through varying economic cycles. While we obviously could not have predicted that a global pandemic would be the catalyst for an economic slowdown, the benefits of our strategic positioning is evident in our 2020 performance to date. And on that topic, I'm going to ask our CFO, Mike Vollkommer, to share with you some of our year-to-date results in 2020 and how the COVID-19 pandemic has impacted Priority. Mike?

Thank you, Tom. 2020 was off to a great start, carrying the momentum we experienced during the fourth quarter of 2019 into the new year. As previously reported, total processing dollar volume was up approximately 12% in the first 2 months of the year. We began to see the effects from the pandemic in mid-March with volume declines of approximately 34%, which continued into April. Despite the COVID impact in the second half of March, we still delivered very strong revenue growth of 11%, and income from operations grew $2.6 million in the first quarter compared to the prior year. In April, with volume declines of nearly 35%, our consolidated revenue was down 11%, and income from operations increased $1 million, benefiting from cost savings associated with operational efficiencies and a leaner management structure. In May, our integrated and countercyclical assets gained more traction, and overall volumes began to pick up as some states reopened for business. We experienced consolidated revenue growth of approximately 1%, and income from operations grew $1.3 million in May. These strong results were achieved in spite of nearly 20% year-over-year drop in processing volume. As additional states continue the economic opening, we expect the month of June to be the strongest month of the second quarter for us. In this economic environment, our 2020 performance to date is a true testament to the countercyclical strategy that Tom described. I'll now turn the meeting back over to Tom.

Thank you, Mike. Our team at Priority is very excited about the trajectory of our business as we work through the pandemic and the focus and resilient results-oriented culture we're building. Some final points before we take questions. As a significant shareholder, I was disappointed like you in the performance of our stock in 2019 and into this year. But I believe, as our results through the COVID-19 pandemic demonstrate, that we have put the proper team in place and have laid the foundation to execute and deliver meaningful shareholder value to you. As an important part of this, we are laser-focused on deleveraging our balance sheet in the near term while maintaining a deliberate long-term focus on steady growth. The strategic foundation is in place. We now must continue to execute at the pace we have through the pandemic. Now I'd like to take the opportunity to answer questions that we may have from stockholders. As you can see on the website for the meeting, there's a place to log your questions. Let us take a moment to see if we have any questions submitted.

Tom, at this time, we don't have any questions submitted, but we'll give it just a moment.

Thank you, Brad.

Okay, Tom. Looks like we don't have any questions.

All right. Thank you, Brad. As we have no questions, we'll now begin the business portion of our meeting this morning. First, we'll need to determine if there's a quorum. I'll call on Brad Miller, our Corporate Secretary, to give us the total number of shares represented.

We have 67,060,943 shares voting by proxy or present, representing 92.2% of the outstanding shares. Therefore, we have a quorum.

Okay. Thank you, Brad. Next order of business is a description of the matters properly brought before this meeting. Brad, if you would read the proposal?

Thanks, Tom. The first item of business today is to elect 6 directors to constitute the Board of Directors to serve until the next annual meeting and until their successors are elected and qualified. The nominees are listed in your proxy materials and on the agenda. The Board of Directors of the company recommend -- the Board of Directors of the company recommends the following nominees: Thomas Priore, John Priore, William Gahan, Matthew Kearney, Michael Passilla, Christina Favilla. We will not take up Proposal 2. As previously announced, the Audit Committee of the Board of Directors has approved the engagement of Ernst & Young and the company's external -- as the company's external auditor and therefore rendering the proposal to ratify RSM as moved.

Thank you, Brad. I will declare the polls closed. Our Inspector of Elections has filed certifications of our preliminary results of the voting. Brad, will you read through those results?

Thanks, Tom. The preliminary results based on the voting of shares represented by valid proxies on file and tabulated at the meeting this morning showed that each of the 6 nominees for election have been elected as directors to serve a 1-year term expiring at next year's annual meeting. Each director nominee received at least 94% of the votes present at today's meeting.

If there is no further official business to come before this meeting, I'll adjourn this meeting. Thank you, again, for participating in our meeting today. We appreciate your continued support and confidence in Priority. I hope everyone has a great day, and please continue to be safe and healthy.

The conference has ended. You may disconnect your line.