Ladies and gentlemen, thank you for standing by. Welcome to the Priority Technology Holdings’ Fourth Quarter 2020 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speaker presentation, there will be question-and-answer session. [Operator Instructions] I would now like to hand the conference to your speaker today, Dave Faupel. Please go ahead, sir.

Thank you, Victor. Good morning and thank you everyone for joining us. I’m Dave Faupel. I’m the Chief Marketing Officer here at Priority Technology Holdings. And with me on the call today are Tom Priore, our Chairman and Chief Executive Officer; and Mike Vollkommer, our 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, which involved a numbers 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 in the Investors section of our website. With that, I’d like to turn the call over to our Chairman and CEO, Tom Priore.

Thank you, Dave, and thanks to everyone, for joining us for our fourth quarter earnings call. I’d like to begin this morning’s call by providing a brief overview of our impressive Q4 and year-end results, along with the discussion of the acquisition of Finxera during the current quarter. Then I’ll turn it over to Mike, who will go into more detail on our segment level performance, financial highlights and the improvement on our balance sheet. As you saw in our earnings release, the momentum that we built in Q3 continued through Q4, our performance as a result of executing our plan through a challenging year, due to the COVID-19 pandemic. We continue to invest in our people and culture, our products and our technology infrastructure. The strength of our payment operations, product offerings and having diversified counter cyclical payment assets allowed us to quickly adapt to the changing COVID environment to deliver strong top line revenue growth and bottom line results. This was a statement year in the history of our organization. As consumers and businesses continued to struggle with restrictions related to the pandemic, our teams were focused on solving our customer’s problems and helping them perform in this environment. Our results today show the success of that mission. Revenue of $106 million increased 8.1% from $98.2 million for the quarter and increased 8.7% for the full year despite the impact of the COVID lockdown period. Income from operations was $6.2 million, increased 489.3% from $1.1 million for the quarter and rose to $20.9 million for the year, an increase of 190.4%. Meanwhile, adjusted EBITDA of $18.2 million for the quarter represented an increase of 12.7% from $16.2 million from the prior year period. For the full year, adjusted EBITDA increased 19.4% to $70.3 million, despite the loss of…

Thank you, Tom, and good morning to everybody. Yesterday’s press release provides results for the comparative quarters and the years ended December 31, 2020 and 2019 on a GAAP basis. It also provides very relevant highlights of the results on a more comparable basis that exclude the RentPayment asset sold on September 22, 2020. So my fourth quarter comments will focus on amounts, excluding RentPayment in the 2019 fourth quarter in order to provide the most meaningful review of our fourth quarter results and trends. The last two pages of yesterday’s press release provide reconciliation and full year 2019 and 2020 GAAP results with the results excluding RentPayment. And I’d also like to point out that the attachments to our March 10 press release provide the same reconciliation for each quarter within 2019 and 2020. Consolidated revenue in the fourth quarter of 2020 was $106.2 million, a 12.3% increase from the $94.5 million in the 2019 quarter. Throughout 2020, our diverse distribution channels continued strong new merchant boarding, nearly 13,000 merchants were added in the fourth quarter. This led to a December that was a highest revenue month of 2020 and this strength has carried into the first quarter of 2021. Gross profit was $32.5 million, a 15.5% growth from $28.2 million in the 2019 quarter. Gross profit margin of 30.6% increased 84 basis points from 29.8% in the 2019 quarter. Income from operations of $6.2 million was a 354% improvement over $1.4 million in the 2019 quarter. Selling, general and administrative expenses included non-recurring expenses of $1.3 million compared with $2.6 million in the fourth quarter of 2019. And those items are detailed within our press release for you to reference. Adjusted EBITDA of $18.3 million increased 35.2% from $13.6 million in the 2019 quarter. Now similar to revenue,…

Thanks Mike. As Mike shared, we had very strong growth in Q4 and during fiscal year 2020. The momentum we built in December is continuing for us into the first quarter of 2021 as measured by top line revenue and bottom line adjusted EBITDA growth. As you can see from our strong results through COVID and as the economy reopened, we have a resilient business that performs through varying business cycles. It’s built to last and it’s built with intention. Our core merchant acquiring business is the fifth largest by volume among non-bank acquires, our CPX automated payables product is market leading among its peers and within our Integrated Partners segment, we can expand and monetize vertical strategies like we have with RentPayment’s and Finxera with relative ease. That reality is becoming clear to a broadening base of customers, investors and market analysts as we continue to perform and accelerate our operating in technology platform developed for the future of payments. As a company, we are energized by the collective quest to make payments easy and our organization is moving with purpose towards that mission. Operator, we’d now like to open the line for questions.

[Operator Instructions] Our first question will come from the line of Brian Kinstlinger from Alliance Global. You may begin.

Hi, guys, thanks for taking my questions. Can you talk about any seasonality in your commercial payments business? It sounded like December was as strong as volume ever and you said that carried into the first quarter. So that suggests to me we shouldn’t see any material seasonality. Is that right?

Yes. We don’t really experience seasonality in that business. What’s delayed some of the growth trajectory that we had in our pipeline has really just been COVID-related and the way banks responded to COVID. So that – just a reality of that shutdown and kind of taking a moment to kind of reassess among our bank treasury partners in terms of how they were going to really push forth on automated payables, which I think generally in the market has largely been travel and T&E and fleet. So, the good news is they’re recognizing that true automated payable is a much more important element of their commercial card platforms. And we’re just now seeing the benefit of that momentum picking up.

Yes. So we’re asking broader on the seasonality, but to my point another question I had was on CPX revenue is flat line throughout 2020. Is that what you’re referring to as things – I guess, let me take a step back on CPX? Are customers’ reluctant – enterprises reluctant right now to take this in this environment? What has led to the flat line of that business? And then what are you doing that you think will drive much stronger demand for that business in 2021?

Yes, sure. So actually volume is up considerably. So it really is just a change in margin mix. Yes, we have a different margin profile on bank volume versus direct. So we’ve actually seen adoption of card, both in what I’ll call kind of pure commercial payments as well as the B2B acquiring segment pickup. And we expect that trend to continue. The driver of the acceleration in the commercial side is really just going to be the adoption among our pipeline that’s in position to close and driving that adoption through to treasury clients within those bank segment.

And to get back to on the commercial side, 4,500 to 5,000 merchants a quarter, which you highlighted in your slide deck, is there any more investments that you’re making or need to make, or is that all a function of – those merchants?

Just to be clear, those are on the acquiring side.

Yes.

And we’ve kind of steadily bend at that rate. December’s normally a little bit below just because it’s the holiday season. So we’ll see boarding drop off, but the trend in that level of boarding through – even through COVID and as the economy recovered has been very consistent and it remains so in the early part of 2021.

Okay. Thank you.

Yes, absolutely. If I could just make one other comment, as I think it’s relevant to kind of where you’re going on the commercial side is, we do not need to make any additional investment in that business as it scales. So it’s – as I mentioned in my – kind of my notes this has been built with intention, it’s been built with purpose. We’re poised for that momentum we already see in the pipeline and we don’t need to make additional investments to convert it.

Okay. Thanks very much.

Thanks, Brian.

Our next question will come from the line of George Mihalos from Cowen. You may begin.

Hey guys. Good afternoon. Thanks for taking my question. And I’m happy say, impacts to you both. I wanted to start off, can you remind us, in the fourth quarter, within the consumer business, how much of that is card-not-present today? And then as you think about the outlook for 2021, what kind of growth rates are you incorporating in the guidance again for that e-comm business?

Sure. The e-comm business is, from a card-not-present transaction perspective, we see the consumer behavior probably holding. I think as volume grows with the reopening, say the Northeast and restaurants, people going to restaurants. Yes, there’ll be volume coming on that’s card-present. But a lot of what’s built into the fabric of people’s behaviors from a not-present activity, we don’t see that receiving. When you ask a question about what growth from the e-comm, if you’re talking about the specialized merchant acquiring program, which we’ve had really exceptional growth throughout 2020, we see continued growth in that business. We’re forecasting a more conservative growth than obviously we had in 2020. But, it grew largely in the second half of 2020. So we’re really riding a good crest of year-over-year comparison in the first half to the year. So it continues to grow nicely, but we don’t have it forecasted to grow at the same rate obviously than it has been in 2020.

Understood. That that’s obviously just for comparison issues, just given the strength that you saw in 2020, right? It sounds like you’re still entirely encouraged by what you’re seeing.

Absolutely, yes.

Okay, great. And just last question for me, maybe to ask the prior question a little differently. The $450 million to $470 million of revenue that you’re contemplating for 2021, any thoughts around kind of the cadence of how that revenue growth might progress throughout the course of the year? Just want to make sure we’re thinking about that appropriately. Thanks guys.

Yes. Well, we’ve been growing, comparative quarter has been a little difficult this year, right. Because I think you’re going to see really exceptional growth in Q2, last year it was flat year-over-year, even though we grew EBITDA. So Q2 this year is going to be over 30% we think. But the other quarters are in the teens, the mid-teens kind of consistent with what we’ve been seeing this year.

And George, perhaps if you’re referencing sort of the contribution over of that – of kind of the revenue range over time, we don’t see a lot of seasonality in the book. So it’s relatively consistent throughout the year, but as Mike noted, given some of the COVID period, that’s going to be the biggest gap, in terms of year-over-year growth.

Appreciate the color. Thank you.

Thank you, George.

[Operator Instructions] Our next question will come from Andrew Scutt from ROTH Capital. You may begin.

Hey, good morning. Congrats on the quarter. First question is just on guidance, I believe you said revenue and EBITDA does not account for the impact of the Finxera acquisition. I was just wondering, does that including in EBITDA integration or kind of ramp up costs in there. Or does that not include anything even on the cost side of the business?

We’ve not included in that projection any synergies. So we think there’s – we know that there is a meaningful amount there. The platforms are very complimentary. So even the cost of, let’s say, achieving some of the synergies, which are really amount to contract consolidation, expenses, things like that, which we’ve already examined or less than $250,000. Q – Andrew Scutt: Great. Thank you. And then the second question here, a little bit different. Have you guys seen a shift in kind of the industries where your merchants are seeing demand now that the economy is opened? And are there any kind of segments are still being pressured? And then secondly, is there any chance you guys could see with the second two rounds of stimulus checks coming out, any bump in consumer spending that you guys could get some incremental boost from.

So as it relates to your first question, areas where were – we had seen lift throughout the year. Wholesale trades, as you might expect, like, trades businesses, plumbing, electrical, landscaping, those types of things, that is more and more moving to digital transactions. So that transition has kind of been in motion, we see that continuing, that will certainly be an area of lift. From a volume perspective, look the overall hospitality space and as you might imagine, kind of salon and so forth is down relative to its historical norm, but from the heights of COVID, tremendous rebound. Nevertheless, it’s still flattish to down versus – it’s versus prior years, but that decline is more in the single digits. So until we kind of fully reach herd immunity and we get more of the safety concerns are fully alleviated. We would probably – we’ve modeled an expectation that we’ll sort of stay in this kind of steady state until we see a bump as people just get back out in greater numbers. The good news is those segments because they’re so – they’re card present, they are very thin margin areas in the merchant acquiring space. So they have less of an impact at the recurring net revenue and gross profit level for us. So hopefully, I answered your – that answers your question. And Andrew, I apologize, you had a follow-up and I can’t quite remember the granularity on it. Would you mind repeating?

Yes, no problem. And that answer was very, very helpful. So I appreciate it. The second one was just with the two rounds of stimulus checks have come out in potential boost to consumer spending. Do you guys see any kind of incremental upside there or any possibility of that?

And I’ll ask Mike to comment. And I’ll just say within our thinking, we haven’t modeled in any expectation that’s going to have a meaningful impact on spending trends that we would say. I think, more importantly, particularly with the addition of – now with the addition of the Finxera business is, we’ve modeled what historically there has been growth of north of 20%, upwards of 30%. The stimulus checks have actually, I think – we think held down the capacity of that business and once the punchbowl is taken away, it’s more than likely we’re going to see more consumer activity within the debt settlement arena that would meaningfully benefit the Finxera business line as the administrator to those consumer accounts to help them arrange for debt relief. So we feel like the combination of our platform is going to – again, it’s just going to perform well through all business cycles and we’re already seeing the benefit of the transition from segments that were historically non-card going to digital payments. So we’ll benefit there. And as we do see some of the stimulus get extracted, we expect the countercyclical segments that Finxera operates will do quite well, while we begin to inject their technology into our existing business lines for integrated payments. Mike, anything you would add?

No, I think that, that’s right. We certainly don’t expect to see the stimulus driving volumes in a noticeable way.

Yes. Maybe if it does, it would just be upside to our current case.

Exactly.

Thank you. And I’m not showing any further questions in the queue. I would like to turn the call back over to Tom Priore for any closing remarks.

All right. Thank you very much operator. I would like to thank everyone very much for their interest in our business and for participating in the call today. Hope everyone has a fantastic St. Patrick’s Day. Despite the unusual way in which we’re celebrating it, but everyone have a great day. Thank you very much.

Ladies and gentlemen, this concludes the conference call. Thank you for participating. You may now disconnect.