Q3 2022 Priority Technology Holdings Inc Earnings Call
[music].
Good morning, and welcome.
To what do you all think holding's third quarter 2022 earnings call.
All participants will be in listen only mode.
Systems Police signal conference specialist by pressing the Sparky followed by zero.
After today's presentation there'll be opportunity to ask questions. Please note that this event is being recorded.
I'd like to turn the call over to Mr. Scott.
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 Tim O'leary Chief Financial Officer.
We gave 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.
The company undertakes no obligation to update or revise the forward looking statements.
So 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.
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 would like to now turn the call over to our chairman and CEO Tom Priore.
Thank you, Chris and thanks to everyone for joining us for our third quarter 2022 earnings call.
I would also like to personally welcome Tim O'leary, who was named CFO in September .
We're excited to have him on the team.
We once again delivered excellent quarterly results reporting strong revenue and EBITDA growth during the period.
Our third quarter revenue increased almost 26% from the prior year to a record $166 4 million.
Which led to a nearly 50% increase in gross profit.
$58 5 million.
And a 48, 7% improvement in adjusted EBITDA to $35 1 million.
These results were fueled by a 510 basis point expansion in gross margin to 35, 1%.
Operating income of $14 1 million.
Increased nearly 70%.
From the third quarter of 2021.
Yeah.
As you can see on slide four our strong Q3 results extended the positive momentum.
We've been seeing throughout the year.
On a year to date basis total revenue was up 31, 1% to just over 486 million and grew organically by 12, 7% in the third quarter and 17% on a year to date basis, excluding the impact of the <unk> acquisition.
Gross profit increased by 56% to $165 9 million and adjusted EBITDA was up over 60% to 100.5 billion through the first three quarters of 2022.
Year to date gross margin of 34, 1% increased 540 basis points from 28, 7% we reported in the first nine months of 2021.
Tim will go into the segment level detail on our third quarter results shortly.
Before he does let's look at slide five and some of the company's aggregate performance statistics.
Our unified Commerce platform efficiently serve the S. M D b to B and enterprise payment segments at scale supporting over 254000 active SMB merchant accounts.
More than 420000 active bank deposit accounts and is processing total annual payment volume of over $110 billion with more than 80% derived from integrated software connections are sophisticated technology solutions balanced operating segments and industries.
Leading customer service continue to resonate with the market and we're proud of the results we're delivering.
Yeah.
For those of you who are new to the company slide six highlights how our proprietary unified Commerce platform is purpose built to collect store and send money combining robust payments and banking functionality to monetize the merchant networks we serve.
Our customers continue to reinforce our belief that systems, combining features of both payments and banking to accelerate cash flow and distribute funds in multiparty environments will be critical as businesses put greater demands on software and payment solution providers.
To position ourselves to benefit more quickly from this trend and the continued rise in interest rates. We've made the decision to accelerate our investment in our banking product initiatives and operating resources.
This will result in modestly higher than at estimated operating expenses in the back half of this year.
Consequently, we are forecasting a revision in our full year adjusted EBITDA guidance.
While we still expect to achieve full year revenue of 650 to 665 million.
We anticipate our adjusted EBITDA will range between $140 million to $145 million versus our initial guidance of $145 million to $150 million.
We believe accelerating the feature development of our native priority passport offering to deliver a full suite of proprietary payment and banking solutions into the F N b and B to B markets and enterprise partners, particularly in the current interest rate environment will result in outsized benefit to our.
In the coming years.
Our largest segment SMB payments continues to do incredibly well reporting nine 2% year over year Bank card volume growth and revenue growth of 12, 1% in the third quarter.
As we've done in the past, we compiled the table on slide seven highlighting the aggregate growth rates or the.
A top five nonbank merchant acquirers in the U S.
As you can see priority remains at a meaningfully higher aggregate growth trajectory than all of these peers.
Even by purely organic growth measures, we outpaced our peer group.
Proving our forward looking acquiring product and.
Thoughtful investment in vertical markets continues to resonate with customers and it's a significant competitive differentiator.
Moving on to slide eight BTB payments again reported strong results as it continues to add new partner channels on the strength of our C. P X product.
For the third quarter, our <unk> segment delivered year over year revenue growth of 16, 5% our.
Gross profit increase of 600000 and gross margin expansions.
410 basis points compared to the prior year quarter.
This growth occurred despite the expected wind down of a large managed service customer, which we discussed on our last earnings call.
Priority significant investment in our <unk> product continues to pay off evidenced by the sizable pipeline of business opportunities, we've announced throughout the year with this pro systems into linear Premier health care and century bank among others.
Lastly, our enterprise payment segment, which provides embedded payments and banking solutions to our partners.
Reported quarterly revenue of $21 7 million and gross profit of $20 million.
Total payments volume and build clients continues to grow along with increased deposit balances.
And the rates on those deposits.
Although prior year comparisons are not especially meaningful given our acquisition of <unk> in September 2021.
The sequential growth from Q2 2022 to Q3 2022 was 16, 3% for the top line along with 17, 4% increase in gross profit.
Our strong performance trends continue to reinforce the counter cyclical strength of the existing platform.
And reflect additional wins in sectors like real estate and construction.
Treasury software systems.
Before wrapping up I'd be remiss, if I did not address the increasing probability that we're headed into a prolonged economic downturn fueled by higher interest rates continued inflationary pressure supply chain disruptions and volatile geopolitical event.
Unlike many of our peers, who are retrenching cutting resources and reducing investments.
We are accelerating our initiatives and new revenue channels that are early in the conversion cycle to digital payments and others poised to benefit from.
From current and future higher interest rate and in an inflationary environment.
Priority will continue to build with intention while remaining lean and positioned to invest purposefully and our unique and diversified business platform that continues to operate from a position of strength regardless.
A broader economic cycles.
At this point I'd like to hand, it over to Tim who will provide further insight into our performance during the quarter along with current trends in each business segment.
Thank you Tom and good morning, everyone.
Before I get into my prepared remarks, I want to take a moment to thank everyone. At the company, who has welcomed me into the priority family I look forward to accomplishing great things with this outstanding team in the years ahead.
I also want to thank Mike Volkmer for being an invaluable resource to me over the past several weeks as I transition into this role.
Sure. He is listening so Mike. Thank you for all that you've done to have a positive impact on the company and I Hope you enjoy your well earned retirement.
Now moving on to the task at hand.
As I review the segment level contribution to the consolidated third quarter results. Please refer to the supplemental slides, where the MD&A for further details.
Our MD&A is included in our Form 10-Q that was filed with the SEC. This morning, and it provides a discussion of our comparative third quarter and year to date results are linked to that filing can also be found on our website.
As Tom mentioned, we've had strong financial performance across all business segments in the third quarter and for the first nine months of 2022.
Looking at Slide 10, SMB payments revenue of $139 9 million increased 12, 1% over the prior year driven by bank card dollar volume growth of nine 2% to roughly $15 1 billion eight 3% growth in bankcard transaction count and just under 1% growth in average ticket size.
Average merchant count of just over 252000 in the quarter grew six 1% from the prior year.
This growth was driven by strong merchant boarding trends, where new monthly merchant boards average over 5000 per month throughout the quarter that is modestly higher than the historical monthly average of about 4500.
Looking at Slide 11, BTB payments revenue of $4 9 million in the third quarter of 2022 increased 16, 4% from the third quarter of 2021.
That was the result of 68, 8% growth in Cps and strong volume trends from existing customers combined with the addition of new customers drove a $1 $1 million increase in revenue for the quarter compared to last year.
That growth in <unk> was partially offset by a decrease in revenue in managed services, which is driven by the continued wind down of certain business with a customer that is migrating from the platform as.
As we move through Q4, we will see this revenue figure continues to decline to nominal levels.
Moving to the Enterprise segment Q3 revenue of $21 7 million was an increase of $18 million from $3 6 million in Q3 of 2021.
As a reminder, CFT pay was acquired in late September of 2021, and it was the full quarter effect of results from CFT you pay in 2022 that drove most but not all of the dollar growth in the enterprise segment.
While the year over year comparison for enterprise is difficult given the CFT acquisition late in the third quarter of 2021, I did want to note that on a sequential quarter basis. We also saw strong growth in enterprise with increased enrollments increased number of build clients and rising interest rates all contributing to over 16% growth in revenue compared to the second quarter of.
2022.
Moving to slide 12, and gross profit, which is on a non-GAAP basis we.
We saw $58 $5 million of gross profit, which increased 47, 4% from $39 7 million in the prior year.
Within that SMB gross profit of $35 5 million increased by three 3%.
<unk> gross profit of $3 million increased 24, 6% and enterprise gross profit of $20 million increased by $17 million from $3 million.
Consistent with the comments that I made on the comparability of revenue for the Enterprise segment. We also saw a strong sequential quarterly growth in Q3 with gross profit increasing 17, 4% over the second quarter of 2022.
Moving to gross profit margin on slide 13, gross profit margin was 35, 1% and increased 510 basis points from Q3 2021 levels.
The results of <unk> and enterprise drove the overall margin expansion and significantly more than offset a 220 basis point decline in F&B margins.
As discussed on prior calls the margin pressure in F&B has largely been a result of mix related shifts where a larger ISO partners are driving faster growth, but they also operate with higher commission rates.
On slide 14, other operating expenses of $44 4 million increased 41%. This change was primarily driven by increased expenses in the business, resulting from the CFT pay acquisition in Q3 2021, combined with continued investments in the business to support the strong growth.
Salaries and benefits of $16 4 million increased 37, 8% from $11 9 million in 2021 as a result of both wage increases and an increase in head count.
The head count increases were mainly driven by the acquisition of CFT you pay in 2021, but we also added additional head count this year in connection with our growth initiatives.
SG&A of $10 2 million increased 41, 7% from $7 2 million in Q3, 2021 again acquisition related increases along with continued investment in business expansion drove that level of growth.
Depreciation and amortization of $17 8 million for the quarter increased by $5 4 million from $12 four last year, primarily driven by the 2021 acquisitions.
On slide 15 operating income for the quarter of $14 1 million increased about 70% from $8 3 million in 2021.
Within that SMB operating income of $13 4 million decreased by $1 2 million due largely to a $1 $7 million increase in salary and benefits due to higher head count stock based compensation, along with a zero point $7 million increase in SG&A expenses.
Those increases were partially offset by other operating efficiencies as mentioned the increase in head count and SG&A expenses were largely attributable to growth initiatives within the company.
<unk> operating income of 200000 increase from breakeven levels in 2021, driven by increased revenues combined with operating leverage that allowed for margin expansion. Despite the previously discussed and expected decline in the revenue from our large managed services customer.
Enterprise operating income of $9 3 million increased by $8 1 million from $1 2 million in 2021.
Consistent with the discussion on revenue and gross profit for the segment sequential quarterly growth in enterprise operating income was also strong with over 60% increase from Q2 to Q3.
Corporate expense of $8 9 million was up from $7 6 million in Q3, 2021, again, largely tied to acquisitions and growth investments in the business.
Adjusted EBITDA for the quarter was $35 1 million, which increased 48, 7% from $23 6 million in Q3 2021.
As you look at the EBITDA walk on this slide the largest items added back to consolidated net income, obviously interest expense and depreciation and amortization.
Interest expense of $13 4 million is an increase of $5 3 million from Q3 2021 levels given the combination of the full quarter effect of the higher comparative debt balances for Q3 2022 compared to Q3 2021, along with the impact of the rising interest rate environment, given the floating rate nature of our debt agreement.
On that topic I would note that we do have a natural hedge in place for part of our floating rate debt given the interest income which is generated on the deposits in the enterprise segment have also benefited from the rising rate environment.
The further adjustments to arrive at adjusted EBITDA include noncash stock compensation of $1 1 million and approximately $1 9 million of other adjustments, which consist of certain noncash or nonrecurring expenses.
On slide 17, and moving to our outstanding debt, you'll see that our debt levels have continued to decline.
Total debt of $618 3 million at September 30th 2022 <unk>.
Includes a $10 million reduction since the end of Q2 of this year.
This reduction is net of continued investments in the business and also after repurchasing $2 6 million of PRT its shares during the quarter.
Net debt of $605 2 million declined by approximately $1 million from $606 1 million at the end of the second quarter. The reduction in net debt was less than the reduction of total debt due to lower cash balances at the end of the quarter.
From a liquidity standpoint, with $34 million of borrowing capacity under our revolving credit facility. In addition to $12 7 million of unrestricted cash on the balance sheet at quarter end.
On slide 18, the senior preferred stock on our balance sheet totaled $225 1 million at September 30th and is net of $21 9 million of unaccredited discounts and issuance costs. The second quarter preferred dividend of $9 7 million is comprised of $4 6 million paid in cash and $4 2 million of Pik component.
This is supplemented on our income statement with the accretion of discounts and issuance costs of approximately 800000.
Before turning the call back over to Tom I wanted to further address our revenue and adjusted EBITDA guidance for the full year.
Consistent with our commentary during the Q2 2022 earnings call. We remain confident in our ability to achieve our full year revenue guidance of $650 million to $665 million. However.
However, given our strong organic growth we have continued to make investments in the business, which includes both people and technology to support that growth. We have also accelerated certain product development activities, which will allow us to bring a full suite of banking as a service capabilities to the market sooner.
As a result, we are adjusting our full year adjusted EBITDA guidance to a range of $140 million to $145 million from the previously provided guidance of $145 million to $150 million.
The reduction in our adjusted EBITDA guidance does not represent a diminished view of our business opportunities on the contrary, we and many independent third parties believe the market opportunity for banking as a service capabilities is brighter than ever and we believe that by investing more now to take advantage of that opportunity sooner will create long term value for our shareholders.
With that I'll now turn the call back over to Tom.
Thank you Tim.
Yeah.
Further the tims closing remarks, I thought our audience may be interested to hear expectations shared by highly respected consultancies.
Strongly reinforced our investment thesis to accelerate our embedded payments and banking technology.
According to recently released research conducted by Mckinsey and Bain.
The embedded finance market is large and growing.
Bain estimates the 2021 U S market for platforms and enablers at $22 billion in total revenue across payments lending banking and cards and they expect this market to more than double to 51 billion by 2026.
They also expect the transaction value of embedded finance will surge from two six trillion to seven trillion in 2026 or over 10% of total U S transaction value.
The greatest impact may be seen in BTB payments, where estimates are for the market to reach 33.3 trillion by 2026.
Their expectations are that embedded payments will take a considerably higher share as buyer shift to E check virtual cards and value added ACTH to streamline operations and simplify a P. A a reconciliation.
During this time, the BTB embedded payments market will nearly quadruple.
<unk> seven trillion to two six trillion with revenues growing proportionately from $1 9 billion to $6 7 billion.
Very much in line with our vision Mckinsey noted that small business is starting up today may never interact with a conventional bank.
By logging into their e-commerce, or what we would say unified commerce platform.
Like Amex merchant they can open a deposit account order a debit card and meet most of their financing needs.
The operators of these platforms will embed financial products into a single seamless convenient and easy to use customer experience.
And their assessment is that the winners will likely provide a full suite of services, including some regulatory oversight compliance origination and fulfillment.
Enablers like priority, we'll take the hassle out of embedded finance for platforms through easy integrations and great servicing should hold the upper hand.
We are determined and committed to being among the winners and remind you that we've been at the leading edge of this emerging trend that others are now just recognizing.
On slide 20.
We've laid out the key reasons why priority is extremely well positioned to succeed over the long term.
Priority has been purpose built and managed with precision.
Our market leading results in the face of quickly changing and somewhat deteriorating economic environment reinforced the strength and agility of our model.
The successfully produced to date has made is hungry to win honing our focus to be at the forefront of the evolution of commerce.
None of this would be possible without the customer centric approach of our team and their willingness to do the work it takes to win.
So I want to thank you to all of our priority employees for the job you've done and we'll continue to do.
As the tide continues to recede it is revealing which businesses were simply pro cyclical performers.
And which have high value forward looking products and are built to last.
Priority is building for the long term to be a payments powerhouse.
Investing to lead the future of unified Commerce, accelerating our technology and resources, while others retreat.
We have through the combination of our payments and banking technology, our dedicated people.
And our client inspired products the platform necessary to stay ahead of the competition.
And deliver the winning solutions that our customers demand and our shareholders should expect.
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.
Thank you well now begin the question and answer session.
A question Press Star then one on her thoughts going forward.
Using a speakerphone please pick up your handset before pressing the keys.
So draw your question. Please press Star then two.
This time, we'll pause momentarily to assemble the roster.
First question will be from Brian gets longer mine Global partners. Please go ahead.
Great. Thanks, I got a handful of questions I had.
First question I had on.
We expect the new banking as a service offering you mentioned the increased investments.
For that platform to enable you to launch it sooner.
Today's economy demand for instant credit you've Super high So when is the expected go live at.
Launch with these new investments and then what kind of risk management is in place, but when they default.
Yeah, Great Great question, Brian So.
But some of it some of it's already launched.
So you can go to the website and.
Download the passport API Guy.
And we have customers that.
Are in the process of going live.
As we speak.
So.
And they range from.
Real estate construction software.
Apologize for the background noise Brian .
In the Middle of New York City, which are you know I've got to always be something going on yet so.
Bear with me for a moment.
And then as far as.
Some of the other embedded banking, where we're ready to go beta and we'll be we'll be out with our initial client group in Q4.
And.
The.
Yeah.
The way we're naturally constructed.
Having transactions authorized through our gateway, which will be a prerequisite for fast funding our instant funding.
It gives us an authorization.
That is is coming directly from the networks and we know we're going to get the money in the basically at three am the next day.
So that's a.
Yeah, that's going to be a requirement for our customers.
To be honest in funding as they have to authorized through our through our gateway products.
Which is.
Basically doing all of those projects at the network level and at the authorization level.
And once those transactions are authorized you know they they have to be funded by the networks.
And then on the backend.
I mean this is a pretty cool feature I'll tell you we can fund that transaction into a merchant within three minutes after authorization.
So we're pretty excited about that capability.
And then once we do is we fund it the you know there'll be some some controls on the back end as to how quickly that money and what percentage of that money can be swept out of their instant settlement account.
So hum.
We will continue to refine that through the beta.
Our process and you know we're also hum write down we're testing out and prefer not to speak to it directly but we're testing out a couple of vendors to additionally put in on the front end authorization.
From a fraud tool perspective.
And we'll you know we'll pick the best in class once we complete our assessment.
Great that's helpful.
And then can you remind us what percentage of your consumer payments revenue comes from retailers CPG clearly you highlighted the difficulty in the economy and then may be.
Which are the top three or four verticals inside of consumer.
Sure just and I'm, sorry, I couldn't quite make out you said CPG.
Uh huh.
Yeah consumer products, sorry, a computer.
You have a product.
Yeah, sorry, so yeah, no no worries I just yeah. It was my line broke up slightly.
Look our largest segments, we do a lot in legal services.
Hospitality is is the next which is largely small small.
Our restaurant operators for us we're not we're not doing a heck of a lot of large chains.
And.
Both of those are in the high teens percentage.
And then our other large segments, you know really kind of fall in I'll say range between eight to.
13% from wholesale trade, we do a lot of BTB, we got some unique tools there.
Salons your.
Your average Barbershops met.
Medical providers.
Would fall into that category. So it is a.
Each of those categories kind of fall in those high single digits low double digits percentage of volume and revenue depending on the month.
And so then as we think about that mix.
With.
You can call it a recession, we called call an economic downturn downturn, sorry can we still expect 8% to 10% growth in consumer payments business with you, adding 4500 to 5000 merchants a month.
Thank.
Since you can sustain the higher growth of recent Mr. How do you think about those puts and takes.
Look we think for us it's sustainable and that's certainly what we've seen but that's largely driven by by gaining market share number one and look the other the other so if you look at our boarding trends.
In the Q3, you know I'll, just say really consistently in the previous quarters.
We were doing you know call. It 44 to 4600 merchants a month, but in each of the months in Q3, we were over 5000.
Which should inform you why we we accelerated our investment to support new sales channels to drive market share growth.
And it's showing up in the numbers of of new boards and as that as those new and those that merchant growth compounds will be the beneficiary of that over time.
So so that's certainly one aspect the other area of growth within that channel is exactly why we're pulling forward this investment in.
Some people call it embedded finance.
We really just think of better embedded finances tools for unified commerce.
But our unified commerce experience because now we can increase margin by adding banking, adding instant funding, where we are not sharing that revenue with our reselling partners either at all or at the same percentage.
And as you look at the dynamic of of of rising interest rates right. We've got embedded deposits just sitting in our platform that we now have the capability to monetize.
So grabbing grabbing incremental settlement funds that are running through our.
SMB business.
And now retaining it and accelerating that cash flow to allow our merchants access to those funds faster to negotiate better deals with their suppliers or whatever else is going to help accelerate the growth of their business.
Basically gives us a higher dip all of that deposit balance to earn on.
In addition to the other fees that we can or so.
We feel very confident.
About its implementation and the impact it will have on growth within that segment.
Regardless of the growth of the merchant base.
But only be further.
Accentuated if you will because of the fact that you know I think it's pretty obvious we're grabbing market share.
Great.
And then last one on the numbers for you at 10 two.
Two things first of all if I heard right managed services is gonna be.
It looked like closer to the euro from the $2 2 million soldiers to that decline, but then in the fourth quarter guidance at the low end of revenue, we'll see revenues similar to the third quarter.
I'll show you are talking about investing in the banking as a service a new offering in the prepared remarks, so at that low end and with the increased investments how do you reconcile generating $5 million more of EBITDA compared to the third quarter.
Alright, Thanks, Brian you have to jump in on that one so.
Yes, I think if you look at the third quarter and if you kind of to get to the math, you're trying to get to when you look.
Look at the jumping off point and you roll that forward into Q4 right. So if you took the same exact numbers from Q3.
Roll that into Q4, you pick up another 166 plus of revenue and just over 35 million of adjusted EBITDA, which gets you to the low end of the revenue guidance right and obviously, there's a range there and the upper end of that range of 665, which I think where we're comfortable with that range and feel very good about the trends we're seeing on the revenue side. So if you think about moving towards the the high.
End of that range from a revenue standpoint.
And you look at the incremental EBITDA that needs to be generated to get to the the EBITDA range. I think we're looking at as you know obviously a margin expansion needed in the fourth quarter, but we see some tailwind in the fourth quarter that will aid us getting to those numbers, but I think a number of factors come through you've got volume based incentive fees come from the card networks and obviously we continue to.
Post strong volume trends.
So we're optimistic on getting those incentive fees, you think about the rising rate environment, which benefits us on the CFT pay business and the deposits that we have there right. So if you look at the the fed and some of the movements. There. Yeah every 25 basis points of movement from an interest rate standpoint impacts us to the positive about.
320000 per quarter from the interest income standpoint, so we've obviously seen some pretty meaningful moves by the fed at the end of September as well as in early November and then if you look at some of the curves today, you've got about a 64 80 20 split rather on a 50 versus 75 basis point move in December . So I think we'll continue to bend.
On that aspect and then you've also just got the continued growth in the higher margin enterprise business right. So as that business continues to scale. We continue to see very strong enrollment growth in that business.
We continue to see an increase in the number of build clients. So as that continues to scale and outgrow what it did in the first half of the year I think youll see the margin expansion come from all of those factors.
At the same time I think the investment we've made in the business from a people and technology standpoint.
A lot of that has already been made in the third quarter and year to date, So we expect to.
Either maintain or at least slow the growth in those expenses as we continue to push the banking as a service product to market faster.
Okay, and Brian maybe you put maybe putting a fine point on some of the numbers right. If you look at the sequential growth in enterprise.
From Q2 to Q3.
That.
I'll, just say that sequential growth trend has.
Has remained if you know if not slightly accelerated.
So.
It's really that level loading of our quarter.
I'm, sorry, saying is what you're saying is the managed services revenue, which is a little bit lower margin going away and you're replacing it with a little bit more revenue from higher margin enterprise revenue.
Yeah much much higher so that enterprise revenue you can see the gross profit percentages.
Super High right, 90% and it pretty much all drops to the bottom line.
Yeah. So.
That along with our as Tim referenced we've.
We've produced on the.
Acquiring growth.
Throughout the year and.
We feel very confident that we'll be poised to earn.
Incentives that are just lumpy in the way, they're there they're rewarded that would come in the first fourth quarter.
And those two factors give us a high degree of confidence.
Great. Thank you.
Yeah.
Thank you and again do you have a question. Please press Star then one.
Next question will come from Mike Burton the singular research. Please go ahead.
Oh hi.
Congratulations on the quarter.
Thanks also for taking my call. The most significant growth number I found in your 10-Q for this quarter.
C F T P and it's also one of the most significant growth numbers I've seen in a while in the 10-Q. So basically went from $2 8 million in the third quarter of 2021 to over 18 million in third quarter of 2022.
Could you talk about your competitive advantage are with CFT PE and could you comment on what kind of growth rate you see continuing in the future. Please. Thank you Yeah, Let me let me, let Tim handle the just the.
The growth attributes and then I'll comment a little bit on the market positioning.
Right Yeah. Thanks, Mike.
If you look at the revenue growth you know as Tom and I, both mentioned in the prepared remarks.
Some of that headline growth from a percentage standpoint, certainly distorted by the fact that the acquisition of <unk>.
Zero, what we call CFT pay now that closed on September 17th of last year. So you only had 13 days in the quarter last year from a revenue standpoint, so really nominal levels of revenue last year. So I think the numbers were more reflecting on or the quarter to quarter sequential growth that we've talked about where you're seeing 16% growth from Q.
Two to Q3 of this year, so very strong growth in that business segment, we expect that to continue for the foreseeable future, but I think the year over year comparison, it is pretty difficult and why you see those those wild percentages in the 10-Q that you're referencing.
Got it.
And with that said.
I think a good measure for its trajectory however is the sequential growth.
That that you've seen between Q2, and Q3, which kind of speaks to the.
The orientation of the of our product suite and.
In enterprise payments.
So within that sector, we provide.
Embedded.
Finance embedded payments and banking solutions to.
Integrated software partners.
And also third party administration of funds.
And.
Within that segment, where one of the few if if if only that have nationwide money transmission licenses that support the business.
So you know we have really.
Been able to garner.
<unk>.
Customers.
Because of the quality of the attack certainly, but also the regulatory rigor.
That segment has we acquired the business under our belief that this is going back a couple of years.
When we first.
Began the transition of that business.
It took the better part of a year to to close and transfer the money transmission licenses.
But that we would enter an environment like the one we're in now.
We're countercyclical assets would be at a premium and if you look at the growth that youre seeing a priority while SMB is a market leader grabbing market share. The outsize growth numbers are coming from segments like our CFT CFT pay product which is.
Helping.
Consumers through that resolution, which as you might expect in this environment is getting a lot of attention a lot of new boards.
A lot of new consumers opting onto our administration platform from our partners.
And we're seeing the benefit of that.
Hum.
Because they need they need the assistance.
Separately.
If you look at the growth in our Cps.
Segment, which has really masked by the wind down of that managed service customer C. P X on a standalone basis, which is our automated payables.
Product has grown by 69% just under six 9% year over year.
So it's really the combination of those two areas just outsized growth. We do expect that to continue because you know as as interest rates rise as cash acceleration becomes important well automated payables are getting adopted more quickly by businesses.
The countercyclical assets, we have in consumer finance and other segments that.
Perhaps were you know were resolved.
Differently and are in a strong economic environment.
No our are benefiting us now so and that was that was part of the rationale.
So hopefully that gives you some insight, but happy to follow up it is that requires more explanation.
Thank you very much.
Thank you that'll conclude our question and answer session now I'll turn the call back over for closing remarks to Mr. Tom Priore. Please go ahead.
Alright, well.
I'd like to thank everybody for taking the time to.
For those of you who've been following the priority story.
For continuing your interest and for those on the call who are new to priority. Hopefully. This was was an insightful call to learn more about our platform.
And our mission to AR to drive a unified commerce experience that we think is.
Is proving itself to be a.
Forward looking and ahead of our peers within.
Within the payments segment. So hope everyone has a great day great weekend.
And coming up on on the holidays is poised to enjoy enjoy those.
Thanks, very much everybody.
Thank you.
Thank you conference is now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.