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

Ladies and gentlemen, thank you for standing by, and welcome to the Priority Technologies Holdings, Inc. Annual Meeting. [Operator Instructions] I would now like to hand the conference over to your speaker today, Dave Faupel. Thank you, and please go ahead.

Thank you, operator. Good morning, and thank you for joining us. With me on the call today are Tom Priore, Chairman and Chief Executive Officer of Priority Technology Holdings; Mike Vollkommer, our Chief Financial Officer; and Brad Miller, our General Counsel and Chief Risk Officer. Before we provide our prepared remarks, I would like to remind all participants that our comments today will include forward-looking statements, which involves a number of risks and uncertainties that may cause actual results to differ materially from our forward-looking statements. The company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise. We provide a detailed discussion of the various risk factors in our SEC filings, and we encourage you to review these filings. Additionally, we may refer to non-GAAP measures, including, but not limited to, EBITDA and adjusted EBITDA during the call. Reconciliations of our non-GAAP performance and liquidity measures to the appropriate GAAP measures can be found in our press release and SEC filings available on the Investors section of our website. With that, I would now like to turn the call over to our Chairman and CEO, Tom Priore. Go ahead, Tom.

Thank you, Dave. Good morning, ladies and gentlemen, and welcome to the 2020 Annual Meeting of Stockholders of Priority Technology Holdings. I'm Tom Priore, Chairman of the Board of Directors and CEO. We appreciate all of you joining us today for our annual meeting. While the meeting this year is again virtual-only, we welcome questions from our shareholders. When we come to the Q&A portion, we will first give stockholders the opportunity to ask their questions. [Operator Instructions] Please remember that your vote -- you may vote your shares online at any time during this meeting prior to the closing of the poll. To start the meeting, I'll briefly summarize some of the highlights from our 2020 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. And I'd also like to thank our auditors, Ernst & Young, for joining the call today. 2020 was a transformational year for Priority for a number of reasons. First, we demonstrated the strength and efficiency of our operating platform and payments operating for resellers and merchants alike, throughout the height of the COVID-19 pandemic and as the economy opens, increasing our year-over-year revenue by 8.7% and adjusted EBITDA by 19% while improving income from operations by 190%. Second, we proved out the unique operating agility of our payment infrastructure and integrated partners platform through the successful acceleration and disposition of part of our RentPayment assets. After focusing and streamlining operations of that business line, we entered into a transaction with MRI Software that enabled us to pay down over $120 million of debt during the year as well as establish a meaningful partnership with MRI for future real estate payments growth. Last, we successfully arranged the acquisition of Finxera, whose ostensible Banking as a Service platform and successful consumer finance payments business adds approximately $50 million of EBITDA and completes our evolution to a single platform to collect, store and send money. We discussed over the past year that we are intent on managing our business with a forward-looking strategy that is built for the future of payments and benefits from countercyclical assets that can perform across differing economic cycles. We believe the recent news of our peers looking to initiate banking services into their platforms, similar to the functionality we now possess directly, is further evidence that we continue to lead and have once again executed cost efficiently, to prepare for the evolving needs of business software providers and consumer payment demands. Importantly, the breadth of our well-established platform and SMB payments and high-growth verticals like commercial payments, real estate, health care, consumer finance and mobile hospitality that are still early in the conversion to digital solutions is an ideal platform to solidify our tools as we continue to expand their use into new verticals and among additional partners in the existing arenas to remain on the forefront of the payments industry. Before taking questions, just a few summary comments. All companies were tested in 2020 by the unprecedented challenges of the pandemic. Priority's resiliency and grit shine through. Our demonstrated growth, both top line revenue and bottom line EBITDA, high-performing execution and clear vision for powering digital commerce has established Priority as a payments powerhouse. And we're very excited about the future. Now I'd like to take the opportunity to answer any questions that shareholders may have. [Operator Instructions]

No questions thus far. Tom, we'll just give it another minute.

All right. Thank you, Brad.

There are no questions, Tom.

Well, in that case, we'll now begin the business portion of the meeting. First, we need to determine if there is a quorum. I'll call on Brad Miller, our Corporate Secretary, to give us the total number of shares represented.

Thanks, Tom. We have 63,136,738 shares voting by proxy or present, representing 93% of the outstanding shares. Therefore, we have a quorum.

Thank you, Brad. The next order of business is a description of the matters properly brought before this meeting. I'll call on Brad to read the proposals.

The first item of business 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 the directors of the company recommends the following nominees: Thomas Priore, John Priore, Marietta Davis, Christina Favilla, Stephen Hipp and Michael Passilla. The next proposal is the approval of the Priority Technology Holdings, Inc. 2021 Employee Stock Purchase Plan. The 2021 Stock Purchase Plan is intended to encourage a sense of proprietorship on the part of the company's eligible employees by assisting them in making regular purchases of shares of common stock, thereby further aligning the interest of the employees and shareholders in the future growth and financial success of the company. Are there any questions or comments on this proposal? Okay, seeing none, we'll move to the third proposal. The third proposal is for an approval of an amendment to our second amended and restated certificate of incorporation to eliminate super majority voting requirements. This amendment would replace each voting requirement in our Second Amended and Restated Certificate of Incorporation that calls for a greater than simple majority with the majority voting standard. Are there any questions or comments on this proposal? Seeing none, we'll move to the fourth proposal. The fourth proposal for the ratification of the appointment of Ernst & Young as the company's independent registered public accounting firm. Tom?

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

Mr. Chairman, the preliminary results as of the first proposal of the election of the full slate of directors based on the voting of shares represented by valid proxies on file and tabulated at the meeting this morning show 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 at least 98% of the votes present at today's meeting. As for proposal number two, the approval of Priority Technology Holdings, Inc. 2021 Employee Stock Purchase Plan, more than 98% of the votes present at today's meeting voted in favor of approving the proposal. Therefore, the plan has been approved. As for proposal 3, the approval of an amendment to our second amended and restated certificate of incorporation to eliminate super majority voting requirements, more than 99% of the votes present at today's meeting voted in favor of approving the proposal. Therefore, the amendment is approved. The ratification of EY as the company's independent registered public accounting firm received more than 99% of the votes in favor and the appointment has been ratified. This concludes the business portion of the meeting. Tom, I'll turn it to you.

Thank you, Brad. If there are no further official business to come before this meeting, I'll adjourn. Thank you again for your participation in our meeting today. We appreciate your continued support and confidence in Priority. Hope everyone has a great day.