Ladies and gentlemen, thank you for standing by, and welcome to the Priority Technology Holdings First Quarter 2020 Earnings Call. [Operator Instructions] I would now like to turn the conference over to your speaker for today, Mr. Chris Kettmann. Sir, you may begin your conference. Chris Kettmann; Lincoln Churchill Advisors;Co-Founder and Partner: Good morning, and thank you for joining us. With me today are Tom Priore, Chairman and Chief Executive Officer of Priority Technology Holdings; and Mike Vollkommer, Chief Financial Officer. Before we provide our prepared remarks, I would like to remind all participants that our comments today will include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 regarding future expectations about the company's business, management's plans for future operations or similar matters, which are subject to certain risks and uncertainties. The company's actual results could differ materially due to several important factors, many of which are beyond the company's control, including those risks and uncertainties described in the current report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2020. Any forward-looking statements we make today are only as of today's date and we undertake no obligation to publicly update or review any forward-looking statements. Additionally, we may refer to non-GAAP measures, including EBITDA, adjusted EBITDA and earn-out adjusted EBITDA during the call. Please refer to our public filings and disclosures, including those referenced in our press announcing this call for definitions of our non-GAAP measures and the reconciliation of these measures to net income. We have also provided an accompanying presentation with today's call that will help us more clearly articulate our results and go-forward strategy. With that, I would now like to turn the call over to our Chairman and CEO, Tom Priore.

Thank you, Chris, and thanks to everyone for joining us for our first quarter earnings call. Since we last spoke to you on March 31, the COVID-19 pandemic has intensified across the globe, and our hearts continue to be with those affected by this pandemic as well as those on the frontline helping to fight it. Due to the current environment, we are going to maintain a similar format to the fourth quarter call. I'll provide a brief overview of our strong Q1 results, particularly in light of the COVID-related impact in March, and then turn it over to Mike, who will go into more detail on the performance of each business segment for the quarter and the cost control initiatives. Following Mike's commentary, I'll review how COVID-19 is impacting our business and the things we're doing to address this challenge. As you can see in our earnings release, we reported excellent first quarter results, reflecting the continued growth in each of our businesses. For the first time in a year, our strong year-over-year results were not masked by the pause in our e-commerce subscription business, which began in October 2018 and continued through 2019, bringing to the forefront the broad-based strength of our business segments. On that note, consolidated first quarter revenue of $97 million increased 10.6% from the prior year quarter, driven by strong results in Consumer Payments, exceptional growth in the Integrated Partners business and steady performance in Commercial Payments. Gross profit for the first quarter increased 11% year-over-year to $30.6 million and adjusted EBITDA of $15.8 million increased approximately 27% from Q1 2019. Total merchant processing dollar volume of $11.5 billion increased 4% over the first quarter of 2019. This volume was trending at 13% -- plus 13% through February. And we delivered these strong results despite the negative impact of COVID-19 during the month of March. With that, I'd now like to ask Mike Vollkommer to provide further insights on our first quarter results with particular emphasis on the business segment performance. Mike?

Thank you, Tom, and good morning. As I begin, I'd first like to express my hope that each of you and your families are staying safe and healthy. I'll briefly review the consolidated first quarter results and provide commentary on our business segment performance. All comparisons will be between first quarter 2020 and first quarter 2019, unless I state otherwise. Consolidated revenue of $96.9 million increased 10.6% from $87.6 million. Consolidated gross profit of $30.6 million increased 11% from $27.5 million. Our gross profit is an important metric for Priority and represents consolidated revenue less cost of services. The consolidated gross profit margin was 31.5%, an 11 basis point increase from 31.4%. Consolidated income from operations of $3.6 million increased $2.6 million from $1 million in the prior year. The $3 million increase in gross profit and a $0.9 million decline in salaries and SG&A were partially offset by a $1.3 million increase in depreciation and amortization. Adjusted EBITDA of $15.8 million increased 26.8% from $12.5 million. The table on Page 11 of our press release provides details of adjusted EBITDA, and a description of these details can be found on Page 2 of the press release. Total processing dollar volume was $11.5 billion, an increase of 4% from $11.1 billion. Of that total, merchant bankcard processing dollar volume was $10.6 billion, an increase of 2.6% from $10.3 billion. Now let's break this down within reportable segments. Consumer Payments revenue was $86 million, an 8.9% increase of $7 million. Merchant bankcard volume in this segment was $10.4 billion, a 1.7% increase from $10.2 billion. And merchant bankcard transactions of $119.4 million declined 1.2% from $120.9 million. However, the average ticket of $86.97 grew 3% from $84.47. The Consumer Payments income from operations was $7.2 million compared with $7.7 million. Gross…

Thanks, Mike. I'd now like to share more detail about the most recent trends we've been seeing in the business, particularly as the COVID-19 pandemic rages on. Continuing the positive first quarter momentum, but also reflective of the impact of COVID, in the month of April, we processed roughly $2.7 billion in volume, which was down 34% from April 2019 and roughly 27% from March's volume total. Despite the drop in volume, new merchant boards in April were solid with 4,486 approved newly boarded merchants, which is largely in line with our historic trend of 4,500 to 5,000 per month. The drop in volume was meaningfully offset by the outstanding performance in our higher-margin product subscription segments and a positive shift in our consumer segmental vertical mix, leading to a smaller 12.7% decline in consolidated revenue and a 9.8% decline in consolidated gross profit in April 2020 as compared to April 2019. We were able to further mitigate the impact of volume declines by reducing operating expenses by 16.9%, resulting in an anticipated $500,000 EBITDA increase in April versus the comparable April 2019 period. This consistency reflects the strength of our diverse sales channels, which added 28 new reselling partners since January 1, and the value of our Integrated Partner offering -- excuse me, integrated product offerings, namely e-Tab, our order ahead and curbside pickup platform that enables contactless e-commerce for hospitality and a host of new industry segments, Priority PayRight's digital health care payments offering, RentPayment.com and Landlord Station serving property managers, and our MX B2B and CPX-automated payables solutions. I'll speak to each of these segments in more detail shortly. There are a number of key operating considerations that have helped us maintain our momentum since Q1 ended, despite the consistent headwinds presented by the coronavirus. As you…

[Operator Instructions] Your first question comes from Brian Kinstlinger.

A couple of questions. You guys highlighted the order ahead and curbside pickup demand increasing, which I think we all recognize the value and need for that. How are you, as a company, attacking the market to attract and onboard new customers in light of this trend?

Well, so we have both a direct sales initiative that is focused on this segment, and we've put marketing dollars behind it to attack markets where we think we can be particularly successful. They tend to be secondary markets in the U.S. that this, I'll just say, haven't been picked over by some of the kind of the larger aggregators in that space, like Seamless and Grubhub. And then the -- we have a very diverse reseller network that is working closely with our product team, our internal product team to move that product out to our existing hospitality venues and really, frankly, a host of businesses that are in our portfolio that need the functionality. So the combination of our direct sales initiatives and working with our existing resellers has been the focus. And that diverse reselling network across the country where we have 800 active resellers is a powerful one that we can move on quickly. So it's certainly not only helped us to drive the product results, but as you might imagine, as a reselling partner to have someone like Priority in your corner to help sustain your business and attract new merchants and also provide solutions to your existing merchant base, that only strengthens our relationship. It's one of the reasons why we've had such success with new resellers coming our way during this period as well because our peer group just really doesn't have this type of offering.

Great. And then with consumer purchasing transitioning to e-commerce certainly in place of hardlines, can you talk about how your business is positioned to benefit from this trend? And then if it's relevant, would you be able to share what percentage of your processing volumes are card not present maybe either in 2019 or first quarter '20?

Yes, sure. So if I look at, let's just say, the pre-COVID period because, obviously, given the impact, particularly in the hospitality space on on-premise payments, it's probably not a great gauge. But we are roughly 65% card present, 35% card not present, let's say, going into the -- during the pre-COVID period on an annualized basis. Obviously, we've seen a lift on a percentage basis. But we had a concerted strategy for 2020 to build our e-commerce business back up as well. So we would expect that mix to continue to shift towards more card not present, not only by virtue of the recent -- just the current realities of more purchases moving online or in app, but also just by the fact that we have turned on our e-commerce subscription business, which has been accelerating at an increasing rate. Of those 4,480 new boards I noted in April, nearly 600 of those were just purely focused on e-commerce. So that's a pretty meaningful increase in the boarding trend that we had seen in, let's say, Q4 of 2019, which would have been around the 150 to 200 neighborhood.

Your next question comes from the line of Clare Galbo. Clare Galbo;Lincoln Churchill Advisors;Consultant: Just to start, I was wondering if you could talk a little bit more about the contract renewals with Mastercard and MineralTree, maybe just what kind of opportunity that represents.

Yes, sure. So Mastercard has been a long-standing partner on the Commercial Payment side. And we've maintained a contract of them for a number of years. They recently renewed it. We provide supplier enrollment functionality to their issuing banks. And that contract will be north of $1 million in EBITDA contribution. That's an increase of about 25%. That doesn't include potential incentives that could add another $300,000 to $400,000 to that contract. The MineralTree is -- they're an automated payables technology that we've been integrated too for a year or so, and -- actually now 2 years. So it's a great vote of confidence that they continue to build out their platform on our payments engine. The one we're probably most excited about, candidly, is the Citibank supplier network. That's a -- that represents billions of volume. We've not included that in any of our projections. But as we get our arms around the growth within that, we'll start to put that into our expectations. As I think everyone can appreciate, being one of the largest money center banks in the world, that supplier network is massive and extends globally. Clare Galbo;Lincoln Churchill Advisors;Consultant: Okay. Great. I just wanted to ask how active you expect to be maybe on the acquisition front this year, especially in light of the COVID-19 situation. Have you been seeing valuations come down at all?

We have an active pipeline that we have been working in 2019 that remained in place. Right now, I think it's going to be a minute to sort out what the impact of COVID is on some of the businesses that we had in our pipeline. So I don't know that I would have a comment generally about valuation. I would submit that we feel very constructive about our business and its performance relative to the broader peer group of payments. So I'll say on a relative basis, we feel like we should be in a good position. And then how we can potentially capitalize on that from a transaction standpoint is going to be situational. And it was probably a month or 2 out before I would feel comfortable kind of making further conclusive comments on that. Clare Galbo;Lincoln Churchill Advisors;Consultant: Okay. And just one last question. Maybe could you just talk a little bit about the consumer finance business you launched in the Integrated Partners segment?

Yes. Yes, sure. I mean, look, this is new. So we're not looking at it as a meaningful contributor in sort of the coming quarters. But we think this is a very meaningful opportunity in the conversion of nonelectronic payments to electronic. The -- this is going to be focused on segments like auto loans or large ticket purchases by consumers that -- to finance those, we have a partnership with a company that we're -- we really like their technology quite a bit called Payix. And the thing that we find unique about it is most of the platforms out there of consumer payments are really -- they provide, I'll call it, an online payment portal. It's a bit different in that it's an application that consumers can use to not only make payment but also interact with the loan servicer through chat functions on their phone, particularly when -- the biggest challenge in consumer finance is it's not the folks that are paying regularly, it's the folks that maybe need a couple of week deferment or need to pay weekly or what have you. The -- particularly in this environment, that chat function allows the servicer to interact on a regular basis to do so in a less invasive way, tracking people down over the phone. Most people will we've -- our research has shown will engage on text. And look, everybody -- they don't want to be under pressure. They're looking to pay for their auto loan or what have you, that car is important. So it's a way to interact that is very efficient for collection, number one. We think it's a more modern way the market's headed. So we're excited about getting that product out to market and start to distribute to a broader audience in lending. And then the last comment I would make is where these -- the risk often is in these segments with regulators is aggressive collection. Well, when you're able to track in all of that activity over chat, it allows you to intervene early if you see folks that may be taking an aggressive tactic and correct that behavior or in light of, let's say, complaints, it allows -- it tracks all that dialogue. So you're able to go back to the FTC or the CFPB with evidence that, hey, these aren't aggressive collection techniques. So we really like that technology, not only as a compliance and check, so that we can manage risk in that portfolio, which frankly, on the regulatory side, is the more meaningful than financial risk and do it in a really modern way that we think will drive large-scale adoption on consumers. So I know that's a little down in the weeds, but we spent a lot of time thinking about this segment because we think it can be a substantial one going forward in the years ahead, and we want to get it right.

[Operator Instructions] We have a question from Brian -- I'm sorry, he took his question back. You have no further questions at this time.

All right. Well, thank you, operator. With that, certainly, I want to thank everyone for their attendance this morning. And I just want to express that we hope everyone just continues to stay safe in this environment. And we look forward to sharing further details of our performance in the second quarter as that continues to evolve. So thank you, everyone, very much. Have a great day.

This concludes today's conference. You may now disconnect.