Priority Technology Holdings Inc. Q1 2023 Earnings Call
Speaker 1: Good morning and welcome to the Priority Technology Holdings first quarter 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.
Speaker 1: To ask a question, you may press star then one on your touchtone phone. To withdraw from the question queue, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Chris Kettman. Please go ahead.
Speaker 2: Good morning, and thank you for joining us. With me today are Tom Priori, Chairman and Chief Executive Officer of Priority Technology Holding and Tim O'Leary, Chief Financial Officer.
Speaker 2: 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.
Speaker 2: The company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events, or otherwise.
Speaker 2: We provide a detailed discussion of the various risk factors in our FCC filings and we encourage you to review these filings.
Speaker 2: Additionally, we may refer to non-GAAP measures, including but not limited to EBITDA and adjusted EBITDA during the call.
Speaker 2: 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.
Speaker 2: With that, I would like to turn the call over to our Chairman and CEO , Tom Priori.
Speaker 2: Thank you, Chris. Thanks to everyone for joining us for our first quarter 2023 earnings call.
Speaker 2: Before walking you through our financial results, I'd like to highlight some key takeaways about current business trends.
Speaker 2: First, when reporting full year earnings back in March, we noted the business has been performing consistent with our Q4 trends.
Speaker 2: Even better, activity began to accelerate toward the end of March, and we ended the quarter on a substantially high note.
Speaker 2: We continued to grow market share and SMB acquiring and generated excellent results in both B2B and enterprise payments.
Speaker 2: while other companies were pulling back in response to uncertain macroeconomic conditions and the recent banking turmoil.
Speaker 2: payments and banking, driving priority aggressively forward on the strength of our countercyclical business lines that were positioned to benefit from higher interest rates and the macroeconomic pullback.
Speaker 2: Second, we continue to outperform our peers both from a growth and margin expansion perspective.
Speaker 2: In doing so, we continue to strengthen our competitive market position for the future.
Speaker 3: Importantly.
Speaker 2: our second quarter performance remains on a similar trajectory to what we saw in the first quarter.
Speaker 2: Last, our decision last year to accelerate investment in Passport, our unified commerce API, combining full-featured payments and banking as a service, continues to be rewarded in the marketplace, especially as underfunded fintechs and banking as a service providers have come under pressure.
Speaker 2: and a crisis in confidence in banks continues among businesses of all sizes.
Speaker 2: We believe that the numbers demonstrate that priority is well-built to thrive in a somewhat dislocated environment.
Speaker 2: and the current pace of our new partner adoption of Passport to collect, store, and send money.
Speaker 2: will drive results going forward.
Speaker 2: With that as a backdrop, let's dig into the numbers.
Speaker 2: As you saw in our earnings release, we continued our positive momentum with a very impressive start to the year.
Speaker 2: Our first quarter revenue organically increased 21% from the prior year to a record $185 million.
Speaker 2: This led to a 22% increase in adjusted gross profit to 63.1 million and a 24% improvement in adjusted EBITDA to 37.69.
Speaker 2: Adjusted gross margin of 34.1% increased 30 basis points from the prior year quarter, demonstrating the operating leverage of our purpose-built platform.
Speaker 2: As I noted earlier, we anticipate that our strong first quarter performance
Speaker 2: and establish trends in our business channels will continue.
Speaker 2: As such, we remain confident in our ability to deliver consistent, double-digit top line and bottom line growth, projecting revenue of $740 to $755 million.
Speaker 2: and adjust VivaDA of $160 to $165 million for the full year 2023.
Speaker 2: For those of you who are new to priority, slide five highlights the architecture of our proprietary unified commerce platform. It is purpose built to collect, store, and send money, combining robust payment and banking functionality to monetize the merchant networks we serve.
Speaker 2: Our growing customer base combined with current market conditions continue to reinforce our belief that systems combining features of both payments and banking to accelerate cash flow and distribute funds in multi-party environments will be critical as businesses put greater demands on software and payment solution providers.
Speaker 2: We're committed to meeting our customers' growing demands by simplifying the experience for our partners, making working with priority as simple as possible. Partners simply choose the application that best fits their business, whether that's a small business operator choosing from the MX Merchant POS suite.
Speaker 2: an FI or middle market customer adopting CPX for automated payables or an enterprise partner connecting to us via our API.
Speaker 2: they can select the passport financial tools that fit their needs and begin to move money.
Speaker 2: We continue to stay on the cutting edge of payment technology by innovating our SaaS payment suite of services and Passport Commerce Engine to meet the evolving needs of our customers.
Speaker 2: As evidence of this, in the first quarter alone we have 18 new program managers activating on Passport and have deployed nearly 220 MX merchant POS terminals from our direct sales channels.
Speaker 2: During the quarter, we've also signed 28 resellers to our MX merchant POS distributor program that will be rolling out in the early third quarter. Importantly, we're on track in the end of Q2 and beginning of Q3 to initiate the rollout of financial tools like instant funding, checking, debit card issuing, and other banking as a service tools across our channels.
Speaker 2: At this point, I'd like to hand it over to Tim, who will provide further insight into our segment level performance during the first quarter, along with current trends in each that inform our guidance for the upcoming year. Thank you, Tom, and good morning, everyone. As I review the first quarter financial results, including the segment level contribution to the consolidated results,
Speaker 2: Please refer to the supplemental slides or the MDNA for further details.
Speaker 2: Our MD&A is included in the Form 10Q that was followed with the SEC this morning and provides a discussion of our comparative first quarter results.
Speaker 2: A link to that file link can also be found on our website. Thanks for joining us.
Speaker 2: As Tom mentioned, the strong financial performance we saw in the first quarter of 2023 was driven by a diverse mix of our business segments which demonstrates the ability of priority to perform in varying market conditions. I won't reiterate the financial highlight that Tom already spoke about, but before I go into the segment level results...
Speaker 2: I do want to provide a few other key metrics as it relates to the consolidated results for the first quarter. For the quarter, we had 10.6% growth in bank card dollar volume across all segments to roughly $15.9 billion and 12% growth in bank card transaction count to 164 million transactions.
Speaker 2: If you include ACH, debit, and other volumes, the total payments volume for the quarter was $29.4 billion, which is up 10% from $26.6 billion in the first quarter of 2022.
Speaker 2: Again, all of those metrics are for the consolidated business.
Speaker 2: I'll now go into more detail on each of the business segments results for the first quarter. Let's start with SMB payments on slide 8.
Speaker 4: For the first quarter, the S&B segment had revenue of approximately $155 million, which was a 19% or $25 million increase over the prior year's first quarter.
Speaker 4: This strong organic revenue growth was driven by a combination of 8% growth in bank card dollar volume to $15.2 billion and 12% growth in bank card transaction count to $163.4 million in transactions.
Speaker 4: However, we finished the quarter with just over 257,000 merchants as a result of certain resellers closing a number of inactive accounts in March.
Speaker 4: Despite those measures, the ending merchant count still grew over 5% from the prior year.
Speaker 4: The growth in our merchant base continues to be driven by strong boarding trends where new monthly merchant boards averaged almost 5,100 throughout the quarter.
Speaker 4: That compares to an average of just under 4700 per month in the first quarter of 2022 and an average of just over 4700 per month for all of 2022.
Speaker 4: Continuing with SMB on the next page and moving down the P&L to focus on profitability.
Speaker 4: adjusted gross profit increased by $2.5 million or 8% to $35.4 million for the quarter.
Speaker 4: The underlying improvement was even better when recognizing the year-over-year comparative quarterly gross profit and related gross margin performance was negatively impacted by the timing of the recognition of certain incentives and other fees that benefited the Q1 2022 period more than Q1 of this year.
Speaker 4: If you normalize for the net impact of those differences, we saw an approximate 40 basis point decline in gross margins in Q1 of 2023, which is consistent with prior quarters and continues to be driven by a combination of our larger reseller partners growing at a faster pace while also attracting higher commission rates. Lastly, for SMB,
Speaker 4: Quarterly operating income of 12 million represents a 4% decline from the prior year's first quarter. Consistent with my comments on gross profit, the comparative quarterly operating profit on a year-over-year basis was negatively impacted by the timing of certain fee recognition.
Speaker 4: In addition, the first quarter had 3 million of higher operating expenses, which were mostly headcount related as compared to last year. When combined with a $2.5 million increase in gross profit, it resulted in a $5,000 decline in operating income for the quarter.
Speaker 4: Moving to B2B payments, revenue of 2.8 million in the first quarter was a decrease of just over 50 percent from the prior year. This decrease was largely the result of the previously discussed reduction in revenue from managed services due to the final wind-down of certain programs with a large customer. This increase was a decrease of just over 50 percent from the prior year.
Speaker 4: I know we've spoken about this on the last few earnings calls, but to provide some additional context, the managed services wind down had a $2.3 million impact on revenue from Q1 of last year to Q1 this year. Given the timing of the wind down in late 2022, Q2 will have a similar headwind from a year over your comparison standpoint.
Speaker 4: but that impact will lessen with each success of quarter this year. Separately, the CPX business saw an $800,000 decrease in revenue over that same time period as a result of certain contract termination fees recognized in 2022. If you normalize for that item, the CPX business was up modestly in Q1 with 9.5% growth in ACH volume and 6.5% growth in issuing volume. With respect to BDB's profitability on slide 11,
Speaker 4: adjusted gross profit declined to $2 million as a result of the managed services wind down. But as we indicated as an expectation on our last earnings call, the adjusted gross profit margin increased by over 17 percentage points during the quarter as the lower margin managed services business rolled off leaving behind the higher margin to CPX business.
Speaker 4: For the quarter the B2B segment had an operating loss 800,000 as operating expenses remained stable, but were impacted by the lower gross profit. Moving to the enterprise segment on the next page, Q4 revenue of 27.3 million was an increase of almost $10 million or 57% from 17.3 million in Q1 of 2022.
Speaker 4: The themes from the past several quarters have continued as favorable trends in new monthly enrollments and increase in the number of billed clients, growth and deposit balances, and the benefit of rising interest rates all contributed to the strong first quarter revenue growth. As shown on the next slide, adjusted growth profit for the enterprise segment increased by 64%.
Speaker 4: to 25.7 million while adjusted gross profit margins expanded to 94.1%. Operating income for the enterprise segment also benefited from operating leverage as exemplified by profit growth significantly outpacing revenue growth for the quarter.
Speaker 4: Given the broader market environment and the increasing need for better banking as a service alternatives, we remain very optimistic about the revenue and earnings opportunities inherent in the enterprise segment and really throughout priority as we bring the passport offering and its benefits to more of our clients and end markets.
Speaker 4: Operating expenses are shown on page 14 and total 46.2 million for the quarter and increase of just under 13% from the prior year.
Speaker 4: As discussed on prior calls, this change was driven by the impact of increased expenses in the business throughout 2022, resulting from investments in personnel and technology to support our top-line growth and also position us for continued growth.
Speaker 4: dollar-reasoned benefits of 19.1 million increased 19% from Q1 last year as a result of headcount and wage increases during fiscal 2022.
Speaker 4: We finished Q1 this year with approximately 900 employees, including 320 in India, which is compared to approximately 870 at the end of 2022 and just under 840 at the end of Q1 2022.
Speaker 4: I also want to highlight that the 19.1 million of salaries and benefits in Q1 was a modest increase from 16.9 million in Q4 and was largely the result of growover from hires made during the fourth quarter along with certain expenses that are typically higher at the beginning of the year, including stock compensation expense and benefits.
Speaker 4: For the balance of the year, we remain focused on leveraging the investments made to date in the team and technology to manage our operating expense base.
Speaker 4: SG&A of $9.1 million increased 21% from $7.5 million in Q1 of 2022. Again, continued investment in business expansion drove that level of growth. But consistent with my comments on salaries and benefits, we will continue to focus on our cost structure throughout the following quarters to drive operating efficiencies.
Speaker 4: Depreciation and amortization of 18 million for the quarter increased modestly from the incomparable quarter last year and was consistent with Q4 levels.
Speaker 4: Moving to the next slide, adjusted EVA for the quarter, which is 37.6 million, which was an increase of 24.1% from 30.3 million in Q1 of 2022.
Speaker 4: of $6.2 million from Q1 2022 levels as a result of the impact of the rising interest rate environment and the floating rate nature of our existing debt.
Speaker 4: covered 100% of the debt as our deposit balances grew throughout the quarter. If you include the floating rate component of our preferred stock, the natural hedge at the end of Q1 covered about 70% of our floating rate liabilities.
Speaker 4: The further adjustments to arrive at adjusted EVTA for Q1 include non-cash stock compensation expense of $1.9 million and approximately $600,000 of other adjustments consisting of certain non-cash or non-recurring expenses.
Speaker 4: While not listed on the page, for the last 12 month or LTM period ending on March 31st, adjusted EVTA of $147.3 million represents $7 million of growth from the $140.3 million we had at the end of 2022 and $13 million of growth since March of 2022.
Speaker 4: Moving to the outstanding debt slide on page 16, our debt levels have continued to decline and we finished the quarter with $615.7 million of gross debt, which is down from $623.2 million at the end of 2022.
Speaker 4: Our net debt of $599.8 million is down by $4.9 million compared to the balance at the end of 2022.
Speaker 4: From a liquidity standpoint, we had $33.5 million of borrowing capacity under our revolving credit facility, in addition to $15.9 million of unrestricted cash on the balance sheet at quarter end. On slide 17, the preferred stock on our balance sheet totaled $235.4 million at March 31st, and is net of $20.3 million of unaccredited discounts and issuance costs.
Speaker 4: The first quarter preferred dividend of $11.3 million is comprised of $6.1 million paid in cash and $4.4 million of a PIP component.
Speaker 4: This is supplemented on our income statement with the accretion of discounts and issuance costs of just over $800,000.
Speaker 4: Before turning the call back over to Tom, I want to take a minute to reaffirm our revenue adjusted EBITDA guidance for the full year of 2023. As noted in our earnings release, we continue to forecast 12 to 14% growth in revenue to a range of $740 to $755 million for the year and adjusted EBITDA growth of 14 to 18%.
Speaker 4: which would result in a range of $160 to $165 million for the full year. With that, I'll now turn the call back over to Tom for his closing comments....
Speaker 4: in a range of $160 to $165 million for the full year. With that, I'll now turn the call back over to Tom for his closing comments. Thank you, Tim.
Speaker 2: As we wrap up our Q1 review, I wanted to reinforce a few of the more meaningful attributes that will continue to set priority apart from others in the fintech and payment sector. First, as our performance demonstrates, we are built for efficiency and our platform can support a diverse portfolio of software and payment assets.
Speaker 2: that perform in challenging economic environments. Second, our lean focused technology stack is built for the future of payments and the accelerating convergence with banking functions that will drive above market growth with minimal, if any, investment.
Speaker 2: Our products are positioned to capture new sources of revenue from banking and financial services embedded in emerging modern commerce business models. If there are those that question the veracity of this view, perhaps you might consider the recently announced partnership between Apple and Goldman Sachs.
Speaker 2: to deliver banking function to Apple card users. Or, Twitter's reported intention to embed payments and banking into its commercial network, to name a few.
Speaker 2: Meshing payments and banking functionalities will inevitably be table stakes in our sector.
Speaker 2: Last, we're an organization that continues to operationalize vision.
Speaker 2: What I mean by this statement is that beyond the unwavering work ethic and commitment of our technology, service and sales, and operational support teams, we have dedicated effort and personnel to be at the forefront of evolving strategy and customer trends to deliver results day in and day out.
Speaker 2: we believe is our clear informed vision and passion to execute that will deliver the long-term value our shareholders should expect.
Speaker 2: We appreciate you all taking the time to participate in today's call and the ongoing support of our investors and analysts. Operator, we now like to open the call for questions.
Speaker 1: Good answer session
Speaker 1: To ask a question, you may cast star then one on your touch tone phone. If you are using a speaker phone, please pick up your hands up before pressing the keys.
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Speaker 1: The first question is from Brian Kinselinker of Alliance Global Partners. Please go ahead.
Speaker 5: Hi, good morning guys. Thanks for taking my questions in solid numbers.
Speaker 5: Transaction volumes have held up really nicely in light of the economy in numbers, especially that we've seen for other companies. Can you remind us roughly the percentage of revenue from consumer and retail, which I think is relatively low as a percentage of consumer payments? And then how are transaction dollar volumes in those verticals?
Speaker 5: performing compared to your other verticals.
Speaker 3: So, just to clarify your question, you're speaking specifically about the retail SIC codes in the SMB acquiring space. Correct.
Speaker 3: So, and just to clarify your question, you're speaking specifically about the retail SIC codes in the SMB acquiring space? Correct. Got it, got it.
Speaker 3: and you know it's kind of up in line with our overall performance.
Speaker 3: and it's kind of up in line with our overall performance.
Speaker 3: the
Speaker 3: You know the result is you can kind of gauge from our new merchant boards Right have increased year over year from you know call high four thousands to you know consistently now over 5100
Speaker 3: kind of gauge from our new merchant boards, have increased year over year from high 4,000s to consistently now over 5,100.
Speaker 3: We're just winning market share in the acquiring space. We've continued to diversify our reselling partner channels.
Speaker 3: With some of the acquisitions we did earlier in 22, we've also increased our direct sales activities. So the market share growth has really been a catalyst for our continued consistency in the SMB arena relative to our peers.
Speaker 3: I mean, Tim can give you, we're just going to drill down into a little bit of specifics on the SIC codes that you noted. Yeah, Brian , there's obviously more that goes into kind of broader consumer retail, but if I just look at what we categorize as retail trade compared to healthcare, legal services, or other types of services.
Speaker 4: volumes in just straight retail Q1 of this year versus Q1 of last year were up over 10%. Oh wow, and what percentage of your revenue is consumer retail?
Speaker 5: That retail, that same categorization is only, it's just under 25% of the volume. 25, great. And then I want to follow up on the comment on your merchant acquiring. You mentioned this quarter closing some nonactive merchants, so I'm clear on this quarter. But as I started to review, you've been adding 14,000 to 15,000 merchants per quarter.
Speaker 5: they generally non-active and for the ones that aren't non-active why do customers leave us at all?
Speaker 3: I mean, look, obviously we have some customers. It's a competitive marketplace, so we'll lose some...
Speaker 3: some high-volume processing customers. But overall, our book is exceedingly diverse. There's not a...
Speaker 3: There's not a single merchant that would come close to approaching even 1% of our volume. So, in the SMB space, most merchants are talking there in the tenths or hundreds of a percentage of our volume.
Speaker 3: So the...
Speaker 3: The impact is kind of muted from the standpoint of an individual large merchant leaving.
Speaker 3: We tend to clear out the dead wood, if you will.
Speaker 3: The merchants that tend to leave us, and look, you can look at our attrition on a revenue and volume basis, and it's consistently in the 10 percent if not lower range.
Speaker 3: on a static pool basis. And what that indicates to you is merchants who are processing.
Speaker 3: don't tend to leave. And we find that's because they rely on our technology to run their business.
Speaker 3: We're not you know a terminal provider. We don't chase after small merchants. Our merchants typically are processing bank card volume alone nearly $5,000 a month, which is we's on the higher end.
Speaker 3: of the small merchant segment in the US. Statistically, we found that merchants that are processing less than $10,000 a month will leave you at twice the rate of merchants doing more than $10,000. And what that indicates...
Speaker 3: historically is those are merchants that just they don't use technology because they're very small and they don't necessarily value it as much so you know the the penny here or there seems to be you know important to them and they'll leave for you know for you know for just pure price.
Speaker 3: So we tend to focus our distribution channels away from that. I think you've heard us talk about this. We're very focused on making the relationship with priority, with our resellers, with our ISVs, you know, consultative, and that we give them tools to really maximize their merchant networks.
Speaker 3: And, you know, the stats prove out that while it takes a little more painstaking detail...
Speaker 3: that while it takes a little more painstaking detail, that's...
Speaker 3: You know that that long game is a winner so you know at Hopefully I give you some insight as to one how we think about it and and what's driving those results This is perhaps another research issue. Maybe it's because now you've stood up a little bit or made a mistake how can we will thenmother try to Holy cross and Try to produce the same results of the onlymate
Speaker 5: Switching gears to the enterprise side, I'm wondering if you can help break down, the growth has been great. So maybe break down the revenue growth between existing customers that are spending more or driving more fees versus new logos versus higher interest rates.
Speaker 4: I can maybe start on the back end of that first. So if you think about the interest rates and the deposit balances, obviously we saw a nice growth in deposit balances throughout the quarter from the traditional enterprise business we've had historically, but also with the growth in passport. You heard Tom mention 18 new program managers came on board.
Speaker 4: means for the balance of this year given where the interest rate environment sits with the set activities.
Speaker 3: And then maybe commenting on the other components of your question.
Speaker 3: We have, you may recall that we mentioned in the full year earnings.
Speaker 3: you may recall that we mentioned in the full year earnings, some of the
Speaker 3: When talking about passports, some of the impact from SVB's fallout and how quickly we were able to onboard new logos. So certainly a portion of the growth is from that.
Speaker 3: But we've also seen, let's say, let me give you some kind of timeline.
Speaker 3: the growth from existing customers on a year-over-year basis?
Speaker 3: is probably 70 percent.
Speaker 3: Probably 70%. Great.
Speaker 3: Thank you for that color on that. Yeah, and I'll say that so think about that as you know from Q1 2022 levels.
Speaker 3: to present levels.
Speaker 6: levels.
Speaker 5: Great. Last question I've got. Normally companies ask. Normally companies get questions on M&A. I think about the last several years.
Speaker 5: You've taken strategic opportunities to divest businesses at times to de-lever. Is that right now something that is of priority? Is it not really? Just trying to understand is there an opportunity potentially with your asset base?
Speaker 3: and send money with applications devoted to
Speaker 3: with applications devoted to Bintec payment business segments.
Speaker 3: to serve customers in those segments. MX Merchant, the MX Merchant POS Suite.
Speaker 7: APX.
Speaker 3: and the B2B vertical.
Speaker 3: and then of course CFT pay and the Passport API in the Enterprise segment.
Speaker 3: So, each of those business segments are detachable.
Speaker 3: without deconstructing the engine that operates the business.
Speaker 3: you know deconstructing the engine that operates the business. So we're always
Speaker 3: consider it of what's the intrinsic value of those segments to folks that
Speaker 3: what's the intrinsic value of those segments to folks that...
Speaker 3: that operate in those segments and we compete with and may find that we're... we offer some tools that they may not have. So I'll say that...
Speaker 3: That's something that we're always considerate of and we built the business to enable that way of thinking. And if we see levels that we think are...
Speaker 3: you know, make sense to either divest of an asset or even to divest of a portion of an asset. We're going to do it, if it makes sense.
Speaker 3: And yes, we would use that money to reduce that and then...
Speaker 3: probably a portion of it to figure out where we want to redeploy that capital to higher returns.
Speaker 3: of it to figure out where we want to redeploy that capital to higher returns.
want to redeploy that capital to higher returns. Thanks so much guys.
Thanks, Bob. Any questions, please press star then one. The next question is from Taylor Johns at CGI. Please go ahead. Good morning guys and thank you for taking my questions. I know you mentioned that some competitors are retrenching.
if probably the sector that has
has gotten our attention the most is B2B. In the B2B payment space, there's...
There's been obviously a lot of enthusiasm around the segment.
lot of enthusiasm around the segment.
past years and if some companies that they raised a lot of money they've maybe not realized their growth goals and have not you know have not driven
We think there's going to be a really excellent opportunity to to acquire assets in that space, so we're diligently looking at opportunities there. And then, you know, there's a, I would say just broadly speaking, in FinTech, and we've already done a few of these partnerships, I think.
as they continue to evolve. These are emerging companies that are software applications that have
realized markets. Okay, so these are not, you know, what I would describe as solutions looking for a problem to solve. These are companies that, you know, really just got caught in kind of the current environment for venture capital and financing.
where they're early stage, good applications in good sectors with real performance potential.
but are shy of cash flow positives and need a little bit of assistance to get to the next level.
We're evaluating a number of opportunities there where we come in as an operating partner.
and help them realize very quickly synergies for infrastructure, things as simple as their AWS contract, their database framework and database management. Of course, we have all the back office capability, HR, finance, etc.
and help these companies, I'll call it streamlined, so they can focus on their core application. We can help them reduce off X.
and then of course leverage them through our distribution to drive.
And then of course leverage them through our distribution to drive to cash flow positive.
maximize the cache they have and...
get their distribution to market more quickly.
So, the sectors that interest us are real estate. We've already shown we're successful there. We've got a good track record. We think there's a lot to do in real estate.
We think there's a lot to do in construction, which is a variance of the real estate market. We've already done something in construction. The healthcare segment. Thanks for joining us today.
is another that, you know, we've just started something small and growing, but we're continuing to look at opportunities there for a few reasons. One, it's just very dislocated generally in terms of how payment reconciliation is managed. And...
inflation by a couple of years because of the way health care contracts are structured. So we think there's some additional macroeconomic tailwinds that could benefit that segment. So those are the areas that have caught our interest right now that we're looking to probably place a few bets.
Thank you so much for that color. That was really helpful. And just another question. Wondering if you could talk a little bit more about some of your new products, specifically including which you feel present the greatest opportunity as of right now. Yeah, I appreciate that. Well, look, the first one, I kind of alluded to them in our comments. The MX Merchant POS suite is...
you know, we think is going to really energize our distribution. There are a suite of terminals that are integrated to our MX Gateway that will enable all of the software functionality of our MX Merchant application on handheld terminals. And the terminals...
can be standalone. So they can work like a handheld POS at the table or at checkout, so very slick in that regard. They can also be semi-integrated where they'll work with MX Merchant even if you have a, you know, let's say a different POS so they can inject into...
the point of sale that clients are using, and then a full-on enterprise, which is both the mobile terminal device and then works with all of our POS applications.
which are MX Retail or MX Merchant Retail, MX Merchant Restaurant.
Salon, which will be coming out soon, and then Charity. As I mentioned, we also are going deep in the construction space, so we expect to launch a product called MX Merchant Build in the coming quarter.
So that's, I think, one of the really energizing things that are going on at Priority. And as I noted, it's...
We know it's needed. You can see just by virtue of the number of distribution partners that have signed up to start to sell that product as it comes to market through our...
through our wholesale distribution efforts. We've tested it in-house. That test has gone well. They noted just in the first quarter alone, we were selling internally over a couple hundred. So when you consider it, we really only had it going for a couple quarters. Looking at 100 a month is pretty good numbers from...
from a POS standpoint. And then the other that we think is the game changer is injecting banking into all of these segments. That you can not only have your...
your merchant processing and your front-end technology, managing your business at priority, but you'll get your passport account.
which can be instantly funded with your batches.
If you're running transactions through our gateway, we'll be able to fund those transactions in five minutes.
into your passport account and that money is available for businesses to acquire supplies, make other purchases, whatever they need to do to manage their money and it's gonna operate like your standard business bank account. Be able to write checks, have a debit card linked to make purchases.
with a full reporting front-end reporting portal that will look very much like your
your high-end bank account at a money center bank and you know I would sit submit probably you know superior to a lot of the
the smaller regional community bank offerings that merchants have accessibility to. So, you know, those are the two things we're most excited about.
I think uniquely.
for priority, and I really want to underscore this point, is that's all going to flow straight to the bottom line.
Those tools are built. They're already operating at scale and other segments of our business, called the Banking as a Service Capability. So these are not heavy OpEx and CapEx spend items for us.
They're leveraging scaled, excellently designed infrastructure to deliver these solutions to our customer base. Thank you so much. That was really helpful insight and thanks for taking my questions.
Thanks for the great questions.
This concludes our question and answer session. I would like to turn the conference back over to Tom Priori for any closing remarks. All right, well, on behalf of the team at Priority, we want to thank everybody for taking the time to participate in this morning's call. Thanks to the analysts that continue to evangelize Priority.