Q2 2022 Priority Technology Holdings Inc Earnings Call
Good morning, and welcome to priority Technology Holdings second quarter 2022.
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I would now like to turn the conference over to Chris King. Please go ahead.
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 Volkmer, Chief Financial Officer, before we give our prepared remarks I would like to remind all participants that our comments today will include forward looking statements, which involve a number of risks and uncertainties that may.
Cause actual results to differ materially from our forward looking statements.
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 recurred you to review these filings. Additionally.
Additionally, we may Richard referred to non-GAAP measures, including but not limited to EBITDA and adjusted EBITDA during the call reconcile.
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 would 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 second quarter 2022 earnings call.
We once again reported outstanding quarterly results growing both our top and bottom line at a rapid pace during the period.
For the third quarter in a row, we saw total quarterly revenue increased more than 33% from the prior year to a record $166 million in Q2.
Our exceptional revenue growth drove a nearly 60% increase in gross profit to $55 7 million and a more than 60% improvement in adjusted EBITDA to $33 9 million.
These results were underpinned by a 540 basis point expansion in our gross margin to 33, 5%.
As you can see on slide four or.
Our strong results in Q2 were a continuation of the positive performance for the year overall.
On a year to date basis total revenue was up 34% to nearly $320 million.
And grew organically by 19, 6%, excluding the <unk> acquisition.
Gross profit increased by 61% to $107 4 million and adjusted EBITDA was up nearly 65%.
To $64 2 million in the first half of 2022.
Year to date gross margin of 33, 6% increased 560 basis points from 28% we reported in the first half of 2021.
Mike will go into the segment level detail on our second quarter results shortly.
But before he does.
Let's look at slide five and some of the company's performance statistics.
As we've noted in the past our unified Commerce platform efficiently serves the SMB b to B and enterprise payment markets.
It's scale supporting over 248000 active merchant accounts.
More than 390000 active bank deposit accounts.
And pricing total annual payments volume of over $106 billion with over 80% derived from integrated software products.
With our strong foundation and robust pipeline of business, we remain confident in our ability to generate revenue between 650 and 665 million.
And EBITDA of $145 million to $150 million that we projected for 2022.
Demonstrating priorities ability to perform in challenging economic environments.
Our highly efficient and elegant technology platform.
Balanced business lines.
And industry, leading customer service are clearly resonating with the market.
And the results speak for themselves.
Moving on for those of you are new to the company slide six highlights how our unified Commerce core is purpose built to collect store and send money <unk>.
Combining a robust payment functionality with banking as a service capability to monetize the merchant networks, we serve.
We remain convinced that systems, which combined key features of payments and banking to accelerate cash flow businesses.
Will be table Stakes.
As businesses put greater demands on software and payment solution providers.
Leveraging our native priority passport stack, we're poised to deliver a full suite of proprietary banking and payment solutions and <unk>.
SMB and <unk> markets and provide enterprise partners, the ability to embed payments and banking features into their core offerings.
Yeah.
Our largest segment SMB payments continues to outperform the industry reporting year over year Bank card volume growth of 10, 9%.
And revenue growth of 18, 5% in Q2.
Yes.
The highlight smbs outperformance in our space on slide seven we've included the growth rates of the top five nonbank merchant acquirers in the U S.
As you can see priority is growing considerably faster than these peers, reflecting our forward looking acquiring product.
And market, leading service offering is resonating with smbs and consistently winning in the marketplace.
BTB payments again reported a strong quarter as it added new partner channels on the strength of our CTX product.
For the second quarter, our <unk> segment delivered year over year revenue growth of 32, 5% and operate again.
Operating income increased.
$700000.
It should be noted.
They're one of our managed services customers will not be renewing their contracts and we will be winding down in Q4.
This anticipated transition supported our decision to focus investment in our seed PX product.
That focus is paying dividends demonstrated by <unk>, 56% year over year revenue growth in Q2.
As we continue to harvest and build a considerable pipeline of business opportunities.
Lastly, our enterprise payment segment, which provides embedded payments and banking solutions to modernize legacy platforms and accelerate software partner strategies to monetize payments reported year over year revenue growth of $18 million in Q2.
And $5 5 million.
Increase in operating income.
Enterprise payments is currently supporting over 30 active integrations managing over 390000 deposit accounts and over half a billion in deposits.
Our enterprise segment has consistently piling up integration wins in sectors like real estate and construction.
Jewelry software systems and legacy payment operating platforms.
And construction in particular.
It is a vertical where we see huge opportunity in the years ahead.
This thesis was reinforced by our learnings from the construction financial management associations annual conference in May.
Cash flow management was a key area of focus with survey showing nearly 85% of construction firms.
I've experienced cash flow issues over the past year.
Priorities integrated payment and banking platform provides a perfect solution.
Through their ongoing cash flow challenges.
Before turning it over to Mike.
I'd like to briefly address the frequent speculation among economic pundits regarding the current an impending economic downturn.
While we can't predict the future we hope our insights and performance reflect that we are diligent observers of leading indicators influence in the macroeconomic environment.
And our positioning priority to capitalize on trends before they materialize.
For the better part of the last two years.
We've highlighted our expectations that weaker economic conditions would emerge and we are building priority with intention seek.
Seeking to remain lean.
And positioning our innovative agile technology to leverage a combination of traditional and counter cyclical assets, serving broad segments of the economy.
As the saying goes.
Adversity does not build character it reveals it.
Despite the adversity of Covid, we grew top and bottom line results.
As the inflationary and recessionary environment arrived we have only accelerated our growth trajectory.
Our organization strongly believes that our unique and diversified technology and product offerings set us apart from the competition.
Positions us for greater success than virtually any payment company out there.
And the results speak for themselves.
At this point I'd like to hand, it over to Mike who will provide further insight into our performance during the quarter.
Along with current trends in each business segment.
Mike.
Thank you Tom and good morning.
Our M. D. A included in the Form 10-Q provides a discussion of our comparative second quarter and year to date results and link can be found on our website.
Tom mentioned, we had strong financial performance across all business segments in the second quarter and first half of 2022.
As I review the segment level contribution to the consolidated second quarter results. Please refer to the supplemental slides for further details.
Consolidated revenue of $166 $4 million increased 33, 1% driven by strong growth across all segments.
SMB payments revenue of $142 5 million increased 18, 5% driven by bank card dollar volume growth of 10, 9% nine.
9% growth in transactions and 1.7% growth in average ticket.
Merchant boarding trends were strong new monthly merchant boards averaged over 4500 in the quarter consistent with historical monthly averages ranging from 4300 to 5000.
The average merchant count of 247500 in the second quarter of 2022 grew 7% over second quarter 2021, and specialized merchant acquiring continued renewed merchant growth in the quarter and is expected to continue on this planned growth trajectory throughout the second half of the year.
Yeah.
BTB payments revenue of $5 $3 million increased 32, 5%.
And C. P X strong volume trends within existing and new customers drove a 56, 3% revenue growth and in managed services revenue grew 16, 7%.
Enterprise payments revenue of $18 $6 million increased $17 9 million from <unk> 7 million in the prior year C.
C F T PE acquired in September 2021 drove this growth.
Gross profit of $55 $7 million increased 58, 2%.
SMB gross profit of $35 3 million, a $35 5 million increased nine 2%.
<unk> gross profit of $3 2 million increased 28%.
In enterprise gross profit amounted to $17 million, which increased $16 $8 million from <unk> 2 million in the prior year.
Gross profit margin of 33, 5% increased 540 basis points from 28, 1%.
The results of enterprise drove this overall margin expansion.
Other operating expenses of $42 $6 million increased 53, 2%. This increase was primarily driven by acquisition and business growth.
Salaries and benefits.
A $15 $8 million increased 51, 9% from $10 4 million as a result of a nearly 70% increase in head count mainly driven by the third quarter 2021 acquisition of <unk> Sarah.
Additional head count has been added in connection with growth initiatives.
SG&A of $9 $3 million increased 38, 8% from $6 $7 million.
Acquisition related increase was $1.6 million and the remaining $1 million increase is driven by business expansion.
Depreciation and amortization of $17 5 million increased 63, 6% driven by the 2021 acquisitions.
Operating income of $13 $1 million increased 77% from seven $4 million.
SMB operating income of $14 million declined two 8% from $14.4 million due largely to a $1 $7 million increase in salary and employee benefits.
Due to higher head count and stock based compensation of $1 2 million dollar increase in SG&A expenses, and a <unk> $6 million increase in depreciation and amortization.
Now the increase in head count and SG&A are attributable to growth initiatives.
<unk> operating income of $663000 increased 641000 from $22000 driven by.
Gross profit growth of $627000.
Enterprise operating income of $5 $7 million increased $5 5 million from <unk> 2 million in the prior year.
Corporate expense of $7 3 million approximated $7 2 million in the 2021 quarter and both quarters include nonrecurring expenses.
$1 7 million in the 'twenty, two quarter and $1 8 million in the 'twenty one quarter.
Adjusted EBITDA of $33 9 million increased 61, 4% from $21 million.
Interest expense of $12 $3 million increased $5 million from $7 3 million higher comparative debt levels driven by the 2021 acquisition financings drove the increased interest expense.
Now our debt levels continued to decline net debt of $606 1 million declined $5 7 million from $611 8 million at March 31 2022.
Total debt of 628 million at June 32022 included a $12 million temporary five day increase in revolver borrowings during the last week of June .
However, total debt has subsequently been reduced to $613 8 million with the entire $14.5 million previously outstanding on the revolver being repaid.
We've had a total debt reduction of $34 $7 million since acquisition and Sarah in September of 'twenty 'twenty. One and this is comprised of scheduled amortization payments of $4 7 million and revolver payments of $30 million. So we currently have the entire $40 million of borrowing capacity available.
Under the revolving credit facility.
The senior preferred stock on our balance sheet of $220 million at June 30th is net of $21 9 million of an accretive discounts and issuance costs.
Second quarter preferred dividend of $7 7 million is comprised of 357 of cash for one six of Pik and supplement that on our income statement with accretion of the discounts and issuance costs of <unk> $8 million.
Now I'd like to turn the call back over to Tom.
Thank you Mike.
On slide 20, we've laid out the key reasons why priority is extremely well positioned to win both in the current market in the years ahead.
Priority has been purpose built and is managed with precision.
The numbers, particularly our results through the economic ups and downs of the past few years.
Reinforced the effectiveness of our model and forward looking decision making of our organization.
Importantly.
I would like to take an opportunity to thank the priority team for their hard work and dedication to getting the job done.
None of our success over the past several quarters could have happened without a full team effort to meet the needs of our customers in today's rapidly evolving marketplace.
Thank you to the team for all you've done and what you continue to do daily.
On a personal level.
And on behalf of all my teammates at priority I'd like to extend my gratitude and utmost appreciation to Mike.
We announced will be retiring from the CFO role.
In early September .
While we have several highly qualified candidates that we're excited about.
Well ably filled the position.
Mike has been a catalyst in the evolution of priority as an up and coming public company.
And a fantastic partner.
While Mike will be stepping away from the CFO role.
We're pleased that he will remain with the company in advisory capacity.
Ensuring a smooth transition in the years ahead.
He'll also be assisting us in executing strategic projects and advising young companies.
That we are accelerating.
Well, thank you Mike for all you've done and.
And everything I know Youll continue to do to make priority.
A great company.
Yeah.
Let me conclude by stating what I believe should be abundantly clear.
Priority is positioned as a payment powerhouse.
The numbers bear that out.
But with the technology and infrastructure we've built.
We are much much more.
And we're really just at the early stages of lift off.
Priority is now a payments and banking technology business.
It offers clear advantages for business to accelerate cash flow.
We're laser focused on delivering a unified commerce solution through the combination of payments and banking.
On a single platform.
And we will continue to deliver on that vision going forward.
We appreciate your time participating on today's call and the ongoing support of our investors and analysts.
Operator, we'd now like to open the call for questions.
Okay.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
We're using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
And the first question will be from Steve Moss from B Riley FBR. Please go ahead.
Hey, good morning.
Maybe just starting with.
And just maybe just starting with the good uptick here quarter over quarter in <unk> volumes in enterprise volumes.
The revenues maybe didn't quite follow at the same pace just kind of curious if you could give some color on the dynamics, there and how youre thinking about it for the second half of this year.
Yes.
Steve perhaps you could shed a little light on the observation where you are.
Revenues didn't track at the same pace are you referring to something specifically.
So referring to just enterprise sand volumes for example, what are called $387 million versus 216 last quarter I think.
In terms of payment volumes.
Yeah.
I'd have to take a look at the volumes that youre referring to.
I'd say that.
<unk>.
We're outperforming our internal targets.
But I.
I'll marry up those volumes, because I don't have that readily available.
Yeah, Let me just speak just about volume more generally I think actually what you see if you if you kind of dig into the trend like.
Across the business.
The acquiring volume was up.
10%, but revenue organically in that channel grew 18%.
So we're actually seeing margin expansion from some of our higher margin sectors.
If you look at B to B. Similarly.
That volume is outperforming.
Expectations and has grown.
By with revenue growing 56% year over year on the enterprise side.
I'm not sure you mentioned, it specifically, but we're actually seeing.
No.
Tremendous growth in that channel that is also.
I'll just say it.
Trending above our expectations.
Hmm.
Given the.
Given the countercyclical nature of that asset class.
And that does very very well in.
You know as as as economic times become a little bit more challenging on the on the consumer side. So.
That's why I'd like to maybe take it offline and just understand specifically, what you're what you're looking at because were.
Yeah, we will drill into it because it may be a mix of ACTH and card volume and that drives different topline.
Right, Okay. It might be just the way you were marrying up on my end.
And then in terms of the.
Gross profit margins.
Nice nice trends there.
Kind of any updated color on your expectations as we head into the second half.
This year.
[laughter] Laguna.
We've we had expectations that that would that would trend up through the year, we think that'll continue and that'll.
That'll be particularly driven by <unk>.
The growth in enterprise, which is just by virtue of of of the segment higher margin and we're seeing only accelerating growth in that channel.
And.
As specialized acquiring.
<unk> continues to rebound in the SMB segment that will also add to margin.
So we.
We think those those two segments, specifically will be a catalyst to to expanding margin through.
The second half of the year.
Okay great.
Thank you very much for the Carl I'll step back there.
Thank you Steve.
And the next question will be from Brian Chin Slinger from Alliance Global Partners. Please go ahead.
Great. Thanks for taking my questions and Mike just wanted to express you'll be missed on these calls for sure.
Thank you.
First question I've got is the consumer payments processing volume increased 11% year over year and revenue in that segment increased 19%. So can you walk us through the difference I assume this could be specialized merchant acquiring where you're taking on more risk or maybe touch on the mix that's driving.
Better revenue growth and volume growth year over year.
Sure.
So that is a contributor.
We've also seen some some margin increase and other and other segments.
Yeah.
<unk>.
That are just higher higher producing segments in the in our book as.
As you May recall, we we probably participate less if you were to look at let's say the U S economy.
And it in its totality, we're probably underrepresented in the restaurant sector and we do more in retail and hotel wholesale trade.
In business services, which are higher margin and of course, we do that for a reason we think.
The product needs in that sector are more sophisticated and our our products deliver.
Deliver a really tight solution in that segment.
Yes.
Yes, you are right, we're seeing expanded.
Margin from the specialized sector. The only thing I would I would clarify for you is that's actually not a riskier sector for us.
In the course of our history in this segment, which is.
Well over 10 years, we've actually never had a loss in it so the way we manage that segment is is with our partners.
They actually take 100% of of our loss responsibility.
And through the combination of reserves at the merchant level and that our partner level.
That has that is always.
And we anticipate we will continue to.
Cover any any potential for losses, but.
Largely speaking that that.
<unk> has a great deal of of supportive analytics for the way we positioned merchant reserves. So we use that to protect our partners as well and.
Dave.
They don't incur losses, either so that segment is really borne by the merchants operating in that in that sector.
That's the way the market operates there's very few peers in the space that do it well, but there's a handful of us so.
Just to kind of clarify on that on that risk point, Yeah, and let me add one point in the specialized there's revenue is driven not just by volume also charge back.
Fees, which is not volume related so you'll see as we as that continues to grow.
As it has in the past into Q3 and Q4.
It will drive a bit of a spread between card volume and revenue growth.
And Brian maybe to put a fine like really kind of genetic level point on this.
If you think about our role within the sector, we're in effect providing transaction insurance.
Well, if a merchant has greater charge backs you know think of it just like ensuring a home right.
For home as is in our high Hurricane area right Youre going to pay more for insurance.
At the same way. It works here. If you are exhibiting behavior that just makes it riskier than more reserves flow in.
Chargeback expenses are debited to the to the merchant and Youre paying more for for processing. So that gives us the ability to what I'll call risk based price and then along with the reserves make it.
Really.
Oh kind of aligned approach to the way the merchants managed in the market, but not expose our platform too.
To merchant conduct.
Yeah.
Thank you when when you talk about margin I think you were talking about net take from gross because actually when I live on the second question for you to reconcile them.
What you've said there and why revenue is growing faster than volume.
If you look at the gross margin on consumer payments.
It's actually down year over year.
The reported gross margin. So maybe you can speak to that Mike.
Yes, that's right.
What Tom is alluding to what's driving the top line it was pricing and REIT sectors.
You know, there's a mix of ISO as that drive a lot of that and so it.
And in recent quarters has been a shift to the to the higher.
Commissioned ISO.
Partners of ours, so that puts a bit that's when we talk about mix, it's really ISO mix and so that does have a depressing effect on the margin, but you know that'll become a bit overshadowed as we go into the second half of the year with with you know the expansion we expect from specialized merchant acquiring.
That's helpful. Thank you for the clarification.
And then can you update us on the timing of the launch of your new cross selling.
Banking as a service platform to offer instant cash to your merchants roofing, Sierra and how should we think about when that might begin to materially impact the segment revenue.
Okay.
We expect to be in beta.
Towards the beginning of Q4 end of Q3.
And we will continue to perfect that through the quarter four.
Anticipated launch in.
2023 with specifically the the the feature you just you described.
We are <unk>.
Active with what I'll describe as the banking as a service tools and acquiring through.
Our <unk> channel.
Which is.
Live with.
Customers kind of utilizing the banking as a service and the virtual account features.
So so where we are.
Launching through payback payment facilitation.
We will continue to test their rollout.
Beta on.
Testing with I'll call it traditional acquiring merchants.
For a more full scale.
Yeah.
Market launch and in the beginning of of 23.
Great. One question on C. P X I think if you look at.
The revenue if you adjust the first quarters.
They're pretty similar in the first and second quarter for C. P F.
I think you've talked.
Frequently that it takes time to onboard and opt in and bring in that volume can you update us on where you are in that evolution and when you might.
I expect to see hockey stick potentially of processing volume increases.
Sure.
Look back, let's just use as a very tangible example.
In the previous quarter.
Are we on boarded.
A number of large network partners Premier healthcare being one procurement partners being another.
Well, both in the healthcare space century Bank.
<unk> pro which is in and the.
Factoring space so over the this last quarter we've been.
Busy integrating the.
The U R. P technology of those partners into our <unk> platform.
Those are largely complete across those network partners and now we go out and begin to harvest.
So on some of those.
<unk> have already begun coming in that were.
That were.
Sales activation teams are working to activate a and we expect that.
To start the boosts toward.
The latter part of <unk>.
Q3, and early Q4.
And and.
And then that will give us some better intelligence around conversion timing. So we can project their volume growth into 2023.
But you know as.
As I think you can.
Appreciate we've been very conservative about their activation trends.
And and are likely to continue to be because they.
They are there.
They are chunky.
Yep understood. The last question is just following up on <unk>.
The first question.
I think Mike if you look at processing dollar volume of integrated partners in the first quarter was $216 million in the second quarter was 387 million that's a huge increase.
Revenue increased yet to a much smaller degree sequentially. So is that a bunch of ACTH, because that's a fixed fee on a large volume.
And should we not expect revenue to grow with the volume that's I think essentially the question.
Yes, I need to say I'm going to take a look at and to that volume.
In enterprise, it's a lot of it.
<unk>.
Fee based revenue and volume while there is volume volume process, that's not a driver of revenue.
It could be growth, what could be driving that and I'll take a look at it and revert back to you. It could be you know mris.
Activities as well.
But there maybe we'll take a look because like as I said.
In CFT pay volume isn't the driver as much as you know the account fees and transaction numbers. So we'll need to make sure that we're putting out the right metrics to but I'll take a look at this question indeed in detail I'll get back to great. Okay. Thank you guys.
Yeah.
And again, if you have a question. Please press Star then one.
The next question is from Albert Ragsdale from LCA. Please go ahead.
Good morning, I have a couple of questions for you.
First I'd like to hear a little bit more about how you think a potential recession because impact results.
Okay.
Sure well.
I mean look we've I think as the numbers bear out.
Obviously of a recessionary environment is going to certainly have impact on the U S. Consumer it's already begun to I think you've heard some others in.
Payments arena.
Start to reflect.
Its impact.
While we recognize it's there we are winning market share and that's just.
It's just the case in the numbers, we anticipate we'll continue to.
Our boarding trends have been very consistent or are the merchants that.
I'd like to come onto the priority platform have a it will have a.
Hmm.
I have an attractive profile when you look at sort of the.
The small merchant.
In the U S and how they tend to be on the higher end of volume.
With monthly card volume exceeding 20000.
Of our peer group has the average merchant.
Volume that it's probably slightly less than or half of ours.
Based on the statistics I have seen.
So just competes very well with.
Stable, that's right versus doing more volume, they're healthier merchants.
So.
We we kind of expect to remain on the trend of boarding 4500.
4900 merchants a month.
And that.
That will lead to net growth in the book.
Where I think our opportunities kind of skew more towards the upside is.
We have made a conscious effort to get into counter cyclical.
Or early stage.
Segments of the economy for digital payments.
Rent payment. Perfect example, we're seeing very good growth there in difficult environments.
Youre.
Fine.
Renters are more likely to finance their rent over two payments by putting on their credit card or.
Trying to find other means to extend payment terms so.
We see we see benefits there is more converts to digital.
More property managers are looking to get their cash faster. So they are opting into digital payments and utilizing software to collect from renters, where in years passed they haven't.
High 70% and.
Most recent stats, 80% of rent payments are still paid by check so theres a lot of.
Wallet share to grab there.
And then the other segment I would highlight is look our our CFT pay business in consumer finance segment that serves.
Consumers that are engaged in that consolidation in that settlement.
As you might expect in a stressed economy, we see more <unk>.
<unk> electing to enter into such programs.
Yeah.
At the.
Height of the Covid stimulus.
We were seeing boarding.
Of the new consumers that were probably in the high.
High teens thousand maybe touching occasionally 20000 that you know nearly doubled.
So.
That is that's a counter cyclical trend, we don't see changing in the near term.
Or I'll say in the medium term.
So we think those are those are segments that will.
Make priority.
Performer.
In <unk>.
In challenging economic environments. Because these are segments that are designed to perform well in such environment.
So we.
We don't we're not we're not going to predict the timing of everything, but we think we've got a.
A strong setup.
And hopefully that gives you some some granularity around I'll call it the wise.
In all of our of our performance through.
Difficult economic cycles.
Yeah, that's helpful. Thanks and.
My second question I know you touched on the pandemic economy, a little bit earlier I was wondering if you're still seeing a COVID-19 impact on the business.
Yeah.
We are.
We are.
We're seeing a continuation of trends that we've seen albeit at.
At a slightly reduced level for instance.
There was a lot more in app and online purchase activity through Covid that.
Started to go more to card present.
So.
We are seeing.
Mix change a little bit between.
Card not present card present.
And in the acquiring space.
But.
Well that that.
Margin shift effects US you know a bit where we're also just.
We're seeing new.
New merchant growth right, just new businesses are being formed.
Were formed at the tail end of Covid. So.
<unk>.
As often happens.
Weaker businesses get get called out in those difficult difficult economic environments, and new ones take their place.
So.
That is.
I would say at this point that's that's the only.
Kind of.
Shift we've seen but I don't think that'll COVID-19 has made some permanent changes.
In the SMB space.
Where we're probably seeing the most pronounced impact in continuation of the Covid influence is in the automated payables arena.
Okay.
Business models and the.
The.
Middle market Enterprise segment have been permanently changed too and are those businesses are looking to drive automation.
And the influences are twofold, one is certainly COVID-19 and remote working and just driving automation.
Just given the the working environment.
And then of course the other is.
Businesses are now looking for every area that they can reduce cost or pick up incremental revenue and automated payables is is is a pretty fruitful area to look.
Particularly given <unk>.
Suppliers' needs for accelerated cash flow and willingness to.
Perhaps except some some pricing discount or the cost of digital payments to get cash faster into their businesses. So.
We think that's a secular shift that's going to continue for a while.
Yeah.
And we're probably most excited about that as a as a long term trend.
Yeah.
Thank you.
Yeah, I'm going to let me clarify that enterprise volume and revenue guys.
And the reason why I was a little caught off guard because that's really not the driver of the revenue we disclosed that to disclose total bank card volume processed, but the drivers in that area and that antibodies payment.
There are.
The key drivers to the revenue are different metrics. So we will take it on ourselves to start to publish those metrics with which we can link to the revenue growth for you all so there's.
The disconnect between revenue.
Card Bank card volume.
Car bankcard transactions in that segment to the revenue growth, but we will clarify that as we go forward.
Thank you and the next question is a follow up question from Brian <unk> from Alliance Global Partners. Please go ahead great.
Great. Thanks, one question on the.
The a the b to B business.
You mentioned youre going to be winding down of customer at the end of the fourth quarter. I think is what you said.
So can you just help us for modeling purposes understand the size of that customer how material you know maybe.
Revenue in 2022, and what are they evenly split quarter to quarter.
Okay.
Yes in the second half of the year, it would have impacted us by a million and a half.
Normalized run rate.
So it's meaning.
Quarterly revenue was about 1 million and a half each quarter.
No I'm talking and looking like in half.
EBITDA EBITDA.
Our EBITDA is impacted by a million and a half what about revenue.
Yeah.
That business the margin is much.
Much lower because it's.
But it's.
I don't have that number off hand, but it's all considered in our in our guidance, but if you're trying to model that out.
Let me see let me.
If I can put my finger on it it's probably.
Probably about.
$5 million.
Hi, Emmanuel annual run rate.
In the second half second half a million second half, which generates just to be clear about 1 million and a half in EBITDA.
Right Yeah. Okay. That's helpful and just wanted to thank you again clear right just to be clear.
That was that was in our guidance.
It was an expected transition.
That we had anticipated and the way we are managing the business.
On an annual basis.
And just let me add and Theres a lot of folks in that business because it's a it's an outbound call center and so we we will save some cash from some expense on on and there's a high turnover in there. So you know there's a lot of hidden costs that might not get totally allocated there. So.
We will be rationalizing some other costs to offset that so it was all built in as Tom said talk to our guidance from the beginning of the year.
Yeah, that's great.
And on a just a personal note.
Or maybe related to the personnel in that business.
What was it.
The fickleness of that partner at times.
Kind of led us to be very.
<unk> about just the uncertainty that that sometimes they would present.
Yeah. So I remembered you ramped up your ramp down.
Remember all of them.
Ramping up and ramping down.
Naming a customer so I assume it's the same customer that.
Maybe leads to some unpredictability overtime, yes, yes, exactly yep it that is correct Brian .
Alright, Thanks again guys.
Thank you. Thank you.
And the next question is also a follow up is from Steve Moss from B Riley FBR. Please go ahead.
Just one more circling back to <unk>. So I just want to touch on Capex, just kind of any updated thoughts on capex here I know we've talked in the past fairly consistent here, but just curious with all the partners that you've added Tom if maybe there's a little bit of a step up or kind of still eight $9 million. If you will on an annual basis.
Yeah, and you can see in our cash flow statement.
The software that's that's the that's the cat that's.
The development of capitalized software so you could probably double what's in there for the full year.
And the other items are you know.
Basically earn outs that we had with some residual purchases in the past.
Capitalized software Youre looking at about the run rate in the first half.
Okay.
Okay.
And just to thank you very much around that we don't have technical debt.
That we need to rationalize.
So I don't that I, only see that coming down as a percentage of revenue.
Right that's right.
Yeah.
Thank you ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to Tom Priore for any closing remarks.
Alright, well, thank you very much.
In closing I, just want to thank everyone for the for.
And for your ongoing support of our business and an interest for those of you new to the story and learning more about priority.
We are excited about not only the way we closed the first half of the year, but.
Our anticipated performance through the.
The remainder of the year.
We look forward to our next opportunity to speak I hope everyone has a great closeout to the summer and.
We will look forward to speaking to you on the on the Q3 call.
Thank you Sir the conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yeah.
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