Q2 2023 Priority Technology Holdings Inc Earnings Call
Good morning, and welcome to the priority Technology Holdings second 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.
I 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 Catlin. 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 before.
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.
The company undertakes no obligation to update or revise the forward looking statements, whether as a result of new information future events or otherwise.
We provide a detailed discussion of the various risk factors in our SEC filings and we encourage you to review these filings.
Additionally, we may refer to non-GAAP measures, including but not limited to EBITDA and adjusted EBITDA during the call.
Conciliations, if 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 now turn the call over to our chairman and CEO Tom Priore.
Thank you Chris.
And thanks for everyone for joining us for our second quarter 2023 earnings call.
I'd like to start today by walking through some of the trends. We're currently seeing in the business and then provide an overview of noteworthy developments at priority, including our exciting recent acquisition of plastic.
Consistent with what we saw in the first few months of the year during the second quarter, we continued to execute in SMB acquiring.
And delivered strong results in both B to B and enterprise payments.
We remain committed to our unified commerce vision, combining payments and banking on a single platform accelerated by the strength of our counter cyclical business lines that we're positioned to benefit from higher interest rates and a weakening macroeconomic trends.
We're equally pleased that our third quarter performance remains on a similar trajectory.
What we have seen in the first half of the year.
As you saw in our announcement earlier today, we continued our positive momentum with a strong second quarter.
Our Q2 revenue organically increased 10% from the prior year to $182 3 million.
This led to a 20% increase in adjusted gross profit to $67 million and a 21% improvement in adjusted EBITDA to $41 1 million.
Adjusted gross margin of 36, 8% increased 330 basis points from the prior year quarter, highlighting the strong operating leverage of our purpose built platform.
On a year to date basis revenue has increased 15% to.
$367 3 million.
Driving a 21% gain in gross profit to $130 1 million.
Combined with 180 basis point increase in adjusted gross profit margin in the first half of 2023% to 35.4%.
We achieved a 23% increase in adjusted EBITDA, thus far in 2023.
As you May have noted on the first page of the supplemental slides, we anticipate that our strong first half performance and establish trends in our business channels will continue.
As a result, we remain confident in our ability to deliver consistent double digit topline and bottom line growth.
<unk> full year revenue to increase to $765 million to $780 million, which includes plastics contribution.
More significantly we are reiterating our previous adjusted EBITDA guidance of 160 to 165 million for 2023, despite the drag on EBITDA in the back half of the year from our recent acquisition of plastic.
Which will require some investment to bring the division's profitability.
These expected results are a testament to the value of our offering.
And the strength of our performance.
For those of you who are new to priority slide six highlights the architecture of our proprietary unified commerce platform that combines robust payments and banking functionality to monetize the merchant and partner networks, we serve.
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 multiparty environments will be critical as businesses put greater demands on software and payment solution provider.
Yeah.
We're committed to meeting our customers' growing demand by refining the experience for our partners to make working with priority seamless and simple.
Partners can choose the application that best fits their business well that is a small business operator, choosing from the Amex merchant P. O S suite and that bi or middle market customer adopting C. P X. We're now plastic for automated payables.
Or an enterprise partner connecting to us via our API.
They can select the passport financial tools that best fit their needs and begin to move money.
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.
Yeah.
As further evidence of this.
As of the second quarter, we had 13 program managers fully integrated on passport and nine in the process of implementation.
With a robust prospect pipeline and have continued to execute the rollout of our IMAX merchant P. O S wheat, adding 122, new customers from our direct channels during Q2.
With 44 independent reselling partners.
Who joined our Nx merchant Pos distributor program, which went live in July .
Waiting in the wings.
In addition to the continued strength of our legacy business last week, we announced.
We closed our acquisition of plastic are highly complementary BTB payments technology platform that will quickly benefit from our operational and revenue synergies that can be captured on our unique payments infrastructure.
Plastic provides businesses with instant access to working capital solutions that improve cash flow, while automating and enabling control over all aspects of accounts payable and receivables.
By adding plastic or combined <unk> offering will provide businesses supplier and buyer funded working capital solutions that optimize their most important vendor relationships, while maximizing cash flow flexibility to operate and grow.
The addition of plastic is another example of how priority is building a differentiated unified commerce platform for our business and the integrated software clients.
Our customers can choose the payment acceptance and automated bill payment tools now, including plastic that best fit their business to optimize their cash flow management all in one place on our native payments.
Banking as a service platform.
We've proven our ability to create value for our shareholders and customers through strategic acquisitions in the past and we see the same.
Value, creating opportunity with the addition of plastic.
We look forward to welcoming plastics team into the priority family and integrating the businesses over the next several months to realize the opportunities to grow our BTB customer base through the benefits of our combined offering and the power of our passport Commerce engine.
I'm happy to answer any questions you might have on plastic during the Q&A portion of the call, but at this point I would like to hand, it over to Tim who will provide further insights into our segment level performance during the second quarter, along with current trends in each that factored into our guidance for the full year.
Thank you Tom and good morning, everyone.
As I review, the second quarter financial results, including the segment level contribution to the consolidated results. Please refer to the supplemental slides or the MD&A for further details or.
Our MD&A is included in our Form 10-Q that was filed with the SEC. This morning and provides a discussion of our comparative second quarter results.
Linked to that filing can also be found on our website.
Consistent with what we saw in the first quarter, our strong financial performance in the second quarter of 2023 was driven by the diverse mix of our business segments, which continued to demonstrate the ability of priority to perform in a variety of market conditions.
Before I go into the segment level results I want to provide a few other key metrics as it relates to the second quarter consolidated results for.
For the quarter Bankcard dollar volume across all segments was $15 9 billion.
In line with Q2 of last year.
If you include a C H debit and other volumes the total payments volume for the quarter was $30 billion, which is a 5% increase from $28 6 billion in 2022.
On a trailing 12 month basis at the end of Q2 Bankcard dollar volume was just over 63 billion and total payments volume was almost 117 billion.
If you look at the comparable trailing 12 month period for last year. Those same volumes were $58 billion and just over 106 billion, which represent just under 9% and just over 10% year over year growth respectively.
Again, those volumetric so for the consolidated business I'll now go into more detail on each of the business segments results for the second quarter.
Let's start with SMB payments on slide nine for.
For the second quarter SMB generated revenue of $147 9 million, which was a 4% or $5 4 million increase over the prior year's second quarter.
This growth was driven by a combination of higher merchant card fees and 10% growth in bankcard transaction count to $180 3 million transactions.
Which offset a 2% decline in bankcard dollar volume to $15 1 billion.
Bankcard dollar volume in the SMB segment was negatively impacted during the quarter by a long standing reseller partner implementing a plan diversification of their new merchant boarding activity.
While we continue to have a strong relationship with this reseller. We also expect that the diversification and boarding activity will continue through 2023.
We anticipate though that the quarterly impact will lessen in future quarters.
We averaged just over 257000 merchants during the quarter, which is 4% higher than Q2 of 2022.
For the quarter, New monthly merchant boards averaged just under 4000 compared to an average of 4500 per month in the second quarter of 2022.
Consistent with my comments on bank card dollar volumes merchant boarding trends were also negatively impacted during the quarter by the reseller partners diversification activity.
Continuing with SMB profitability on the next page.
Adjusted gross profit for the quarter was down about $200000 to $35 3 million compared to last year the.
The 1% year over year decline in comparative quarterly gross profit was negatively impacted by a nonrecurring $1 million billing true up for certain assessments by one of our sponsor banks.
If you exclude that impact gross profit would have increased by 800000 in the quarter.
Lastly for S. M. B quarterly operating income of $11 5 million represents a $2 $5 million decline from the prior year second 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 the billing true up from one of our sponsor bags. In addition, salaries and benefits and S. N b, well $1 $7 million higher in Q2 compared to last year based on an increase in head count in the second half of 2022.
Moving to BTB payments.
Revenue of $3 million was a decrease of 44% from the prior year as we continued to anniversary. The previously discussed wind down of the managed services business.
We will continue to see a year over year impact from managed services in Q3 before that comparative headwind goes away in Q4.
And looking separately at the <unk> business that business grew by 11% in Q2 compared to both last year's second quarter and also sequentially versus Q1 of this year.
Looking ahead to Q3. The B segment will include the results of plastic for the months of August and September .
So we will include details on that impact for you on our next quarterly earnings call.
With respect to Bw's profitability on slide 12 adjusted gross.
Gross profit declined to $2 3 million as a result of the managed services wind down but adjusted gross profit margins continue to increase as the lower margin managed services business rolls off.
For the quarter gross margins were 78, 8% compared to 59, 7% last year and 71, 4% in Q1 of this year.
The <unk> segment was it breakeven from an operating income standpoint during the quarter, which was down from 700000 in Q2 last year, but it was an improvement from an $800000 operating loss in Q1 of this year.
Moving to the enterprise segment on the next page.
Q2 revenue of $31 4 million was an increase of almost $13 million or 69% from $18 6 million in Q2 of 2022.
The themes from the past several quarters have continued as favorable trends in new monthly enrollments and increasing the number of build clients growth in deposit balances and the higher interest rate environment have all contributed to the strong revenue growth.
As shown on the next slide adjusted gross profit for the enterprise segment increased by 72% to $29 3 million, while adjusted gross profit margins expanded by 200 basis points to just over 93%.
Operating income of $16 1 million for the Enterprise segment also benefited from operating leverage in the business.
As exemplified by profit growth significantly outpacing revenue growth for the quarter.
Moving on to corporate costs on slide 15.
Operating expenses totaled $47 9 million for the quarter, an increase of 12% from the prior year.
Salaries and benefits of $19 1 million increased 21% from Q2 of last year, but was consistent with our spend during Q1 as we continue to maintain our expense discipline after investing in the business and the team during 2022.
We finished Q2 with approximately 940 employees, including 346 at our India Development Center, which is compared to approximately 870 at the end of Q2 in 2022.
SG&A of $10 $8 million increased 15% from $9 3 million in Q2, 2022, while depreciation and amortization of $18 million for the quarter increased modestly from the comparable quarter last year and was consistent with our Q1 levels.
Moving to the next slide.
Adjusted EBITDA for the quarter was $41 1 million, which was an increase of 21% from $33 $9 million in Q2 of 2022.
Interest expense of $17 8 million for the quarter increased $5 3 million from Q2, 2022 levels as a result of the impact of the rising interest rate environment.
As mentioned on prior calls we have a natural hedge in place for the floating rate debt given the interest income we generate in our deposits at the end of Q2 that natural hedge covering over 115% of the death as deposit balances grew throughout the quarter.
If you include the floating rate component of our preferred stock the natural hedge at the end of Q2 covered 83% of our floating rate liabilities.
Well not listed on the slide for the LTM period ended June 30th adjust.
Adjusted EBITDA of $153 6 million represents over $7 million of growth from $146 4 million at the end of Q1.
Moving to the outstanding debt slide on page 17.
Our debt levels have continued to decline and we finished the quarter with $612 7 million of gross debt, which is down from $615 7 million at the end of Q1.
Net debt of $595 $1 billion is also down about $4 7 million compared to the balance at the end of Q1.
From a liquidity standpoint, we ended the quarter with $49 5 million of borrowing capacity under our revolving credit facility, which includes a $15 million increase to the facility as part of an amendment that we closed on June 30th.
In addition, we finished with $17 6 million of unrestricted cash on the balance sheet at quarter end.
Subsequent to quarter end and in conjunction with the closing of the plastic acquisition.
We increased the capacity on our revolving credit facility by an additional $10 million, which brought the total facility size to $65 million.
On slide 18.
<unk> stock on our balance sheet totaled $240 7 million at June 30th and is net of $19 $5 million of on accretive discounts and issuance costs.
The second quarter preferred dividend of $11 8 million is comprised of approximately six and a half million dollars paid in cash and four and a half million dollars a a pick component.
This is supplemented on our income statement with the accretion of discounts and issuance costs of just over 800000.
Before turning the call back over to Tom.
Wanted to address our revised revenue adjusted EBITDA guidance for the full year.
Based on a combination of first half results.
Our expectations for the second half of 2023, and the impact of plastic which will require some investment over the next couple of quarters to reach profitability. We continue to forecast adjusted EBITDA in the range of 160 to 165 for the full year.
We are increasing our revenue guidance range to $765 million to $780 million.
With that I'll now turn the call back over to Tom for his closing comments.
Thank you Tim.
As we wrap up our review of the second quarter I wanted to reinforce one of the more important qualities of priority.
References in last quarter's earnings call that we believe will continue to propel us and differentiate us from others in a fintech and payment sector.
During that discussion I described priority as an organization that endeavors to operationalize vision.
This is to say that we make dedicated effort as an organization to embed into our people and our workflow and mentality that invest our financial and human capital consistently and cost efficiently.
Stay at the forefront.
Leading both industry.
And customer trends well ahead of our competitors.
We would submit that there is a growing body of evidence to support our capabilities.
Consider that as early as 2020, we position priority to build out counter cyclical business lines.
And focus on sectors that were early in their conversion from non digital to digital payment methods to insulate our stakeholders.
From the impending risk of declining growth trends and rising inflation.
That vision led to strong results through the height of Covid as well as the sale of part of our real estate technology Holdings in a transaction with MRI software, who remains a key integrated partner.
That monetization resulted in approximately a.
120% return on capital.
And a little over a year.
And the pay down of $106 million in debt.
Similarly in 2021.
We had already initiated a refined strategy to add banking as a service through.
Through the <unk> acquisition and have since developed its limited routes into our high growth passport collect store and send engine.
Well ahead of today's fast growing demand for embedded finance solutions.
The guiding thesis driving our vision and innovation is that modern commerce demand speed and flexibility to move money that can only be achieved through a combination of payments and banking features that are harmonized on a single platform for all payment routes and the real time movement posting and <unk>.
<unk> of money.
As businesses of all sizes look to accelerate cash flow and optimize working capital, particularly in today's rising interest rate environment.
We're confident that our acquisition of plastic will be another example of our operationalized vision and demonstrate why priority is uniquely positioned to deliver the solutions businesses need.
At priority businesses can collect their sales and.
In accounts receivables on our merchant acquiring applications.
Quickly fund their money to their linked passport accounts.
And send it to vendors to our supplier funded C P X or buyer funded plastic payment applications.
Simply put priority as a one stop shop for businesses to accelerate cash flow maximize their working capital options to monetize payment flows that grow their business.
We appreciate you all taking the time to participate in today's call and the ongoing support of our investors and analysts.
Operator, we'd now open the call for questions.
We will now begin the question and answer session can I ask a question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw from the question queue. Please press Star then two.
Our first question comes from Bryan Keane Clinker of Alliance Global Partners. Please go ahead.
Hey, good morning, Thanks, so much for taking my questions.
Okay.
You talked about this merchant acquiring was a bit weaker.
In the last two years or so and in fact a.
Merchant count was down sequentially for the first time in my memory.
Can you go a little bit more into the detail of the impact from the lease all partner did this partner exclusively we sell priority payment solutions and now he's spending more.
You know quite a merchant.
It acquires to a variety of processors I would just a little bit confused.
Yeah sure.
So Brian it's been a long standing partner and they were exclusive with priority for many years.
And look they've reached a scale that.
And also diversify some of their offering.
In products that are you know.
Look if I were managing their business.
Oh I've expressed this to them it makes sense for them to have some diversification so they're balancing that.
Still a long standing you know strong partnership.
And we.
We anticipate that there's going to be some other areas of <unk>.
Prospective growth with them.
Because of the nature of the banking.
And automated payable solutions, we have as those start to evolve into their into their network, but.
Step one is is for them to to have some diversification and boarding.
That's underway it's been known.
And.
We'll continue to build on the strong historical partnership we have.
But that is the.
The driver of some of the <unk>.
Flattening that you see.
If we were to.
Let's say you look at them.
Extracts from our analysis.
I think Tim you can share with you some of the stats that they'd actually would have increased year over year. So I'll go ahead Tim.
Yeah, I think if you are if you extracted that reseller partner, Brian and looked at just the the volume growth we would've had.
3% volume growth in the quarter.
Compared to the the 2% volume decline that we did show on a consolidated basis and then your average merchant Count was you know was flat right.
Because of that right. So yeah, I think revenues you know without that impact would have been up 12%.
For SMB right. So obviously as we've talked about in the past some of our larger reseller partners are.
Yeah, they they generate a lot of revenue, but the gross profit impact isn't as great. So we would've had a bigger revenue impact without that resell our partner in diversifying their boarding.
But the the gross profit impact would've been less right. So I think we're confident as we mentioned in our prepared remarks that in the future quarters, we'll see a little bit less of an impact from the diversification throughout the balance of the year.
Okay.
And then.
As it relates to classify them.
How do you see that helping with the adoption and real growth trajectory of Cps.
Well, let's just talk at the.
The adoption of I'll call it automated payables generally.
The way, we think about it right. So if you look at our commercial and <unk> segment right.
Alright, those are design those products are designed for customers to pay vendors.
So for buyers of goods and services to to pay their vendors to optimize there.
Their supply chain relationships and their working capital.
With the addition of plastic now those customers.
Have the option to use C P X, where the supplier absorbs the cost.
All of a digital payment.
But also.
To use plastic.
Really within CP acts as a payment method.
To use their existing credit.
It has been issued by their bank.
To make payments to suppliers, who do not accept credit card.
So let me give you a mathematical example of a way to look at it.
So hey, let's let's just say I'm.
Supplier paying $10000 in Belgium.
And.
It's a <unk>.
Qualifies for yeah, I'm going to take you into the weeds, a little bit Brian on on the way interchange works, but.
Just level to interchange, which is typically you know are achievable on a b to b transaction.
There's.
Around 2%, let's say add a modest amount of feeds for processing and you're looking at 2.25%.
Of total cost.
To.
Pay those 10000 thousand bills.
But they have a rewards card that pays them cashback.
Let's just keep the math simple.
One in a quarter.
It's called 1% Okay.
So my net cost is 1.25%.
The standard payment if I use my credit card by the <unk>.
It shows up on my Bill.
And then I get my 30 days to pay my Bill.
56 days.
Well most larger companies actually have more time on that but let's use this 56 days standard for our mathematical example.
So my net cost of the 225 minus one 1% cashback, it's 1.25%.
Well.
The current interest rate.
56 days of.
Cash that I don't have to pay my credit card Bill, let's just say even invested in.
F D IC insured deposits.
Five and a half.
It's slightly over 90 basis points.
Alright, so my net cost and.
Working capital right.
Alright.
Down around 30 plus basis points.
Over a two month period.
Annualize that exceedingly low.
When you're talking about.
You know under a couple of percent.
In terms of cost of capital if you're if you're doing that every month. So it's very attractive in this environment.
To utilize that credit that's already available to businesses that they may not be maximizing so that's.
That's very specifically.
How we see this being implemented across not just the b to B segment, BTB payments segment, Cps, but more broadly across the F&B segment.
Of our business, where we have you know nearly 260000 active customers.
And.
Look 70%.
Small businesses.
Struggle with.
Working capital.
So.
We think there's a there's a time for this.
Feature this product within our broader platform.
Of unified Commerce too.
You know, it's a really come to the fore and that was a big driver of why we.
Pursued the acquisition when the asset became available to us.
Right right.
One last question and I'll get into queue just back at the.
Payments business to consumer payments business.
Again, if I look at the average ticket size.
It's meaningfully down from.
Then the last many quarters when you could see the economy was weakening we'd now like is there anything different.
A weaker consumer is pricing coming down why would we see the average ticket size be.
10% off from where it consistently has been for so many quarters.
Yeah, Hey, Brian So I think the the main impact there is you know some of the the volume shifts and thinking about the mix right. So part of the volume that declined during the quarter you know with a much higher ticket right. So different verticals tend to operate with much higher ticket sizes and your professional services and other areas.
Some of the the volume declines we saw especially from the the large reseller partner.
I'm from some of those areas so that that mix shift impacted the average ticket size, but I think if you looked at a kind of same store sales aspect of kind of thinking about like kind of business. We really haven't seen much of a change in the average ticket size, but we've seen a little bit of a benefit in certain areas from the inflation.
<unk> market, but what youre seeing on the average ticket size across the entire enterprise is really driven by a little bit of a mix shift.
Okay, alright, thanks, so much.
Okay.
The next question is from Jacobs Duffin of Lake Street. Please go ahead.
Yeah, Hey, guys. Thanks for taking my questions.
So when I look at the <unk> segment do you feel that this business has kind of stabilized.
Just talking about the base business here around that $3 million level.
You know how can you see that business mix.
<unk> is it <unk>.
Becoming.
The bigger part of the package or what are your kind of growth expectations for the base business here.
No, we see that business growing substantially over the next year.
The.
Recognize that.
The decline that you're seeing was from a segment of managed services that has now fully run off as of this quarter.
So the.
And that was.
That was largely a.
And outsource services component of the business that you know look we really wanted to dedicate more towards the growth opportunities in b to b with our resources, which is why we made that decision now.
Now.
The existing pipeline, we already have contracted we know will create meaningful growth.
So that.
That coupled with the plastic <unk>.
Edition.
As well as just are our current pipeline and process of contract negotiation and and.
You know what kind of final sales processes.
We see that growing.
Yeah.
A couple of hundred percent over the coming the coming year.
Jacob just puts on a bottom too so.
Yeah. So the the Cps business right. So if you think about <unk> to be in.
Separate managed services from the the Cps business right that Cps platform grew 11% sequentially from Q1 to Q2 right. So we are seeing growth in that in that product offering.
And we will continue to see some comparative headwinds in Q3 right. So the managed services business started winding down in late Q3 of last year and was effectively gone in Q4, so you'll have a relatively clean quarter.
And plastic, which obviously will will help bridge that next quarter, but from a pure kind of existing <unk> business. In Q4. This year over last year will be clean.
With managed services really starting to.
So a lesser impact in Q3 and effectively gone in Q4.
Okay.
And then maybe just on the plastic acquisition, what kind of operating expense kind of step up could we see from.
From a full quarter of plastic so not not really Q3, but a.
A full quarter by Q4.
What kind of Opex.
Ill take would you kind of see from that being in the model.
Yeah from an Opex standpoint.
Yes, I think that business is going to be.
Yes, it's going to be running at let's call it.
5 million a quarter of Opex.
With just the plastic business itself right. So if you think of our.
If you think about the overall guidance right now and kind of where we've revised you can kind of think of the the revenue change in guidance being largely attributable to plastic in the the revenue we expect to generate in the last five months of the year.
And then you know we didn't really get into the specifics on the EBITDA, but.
Yeah, we're comfortable keeping the EBITDA guidance, where it is despite you know.
A few million dollars of investment we're going to have to make in that business to get to profitability. So it's.
It's going to run at.
Higher Opex for a short time period as we extract all the cost savings, but you expect to get get that business to profitability pretty quickly.
Okay. That's helpful. And then just last one for me here.
The enterprise business nice to see that significant margin expansion there.
It seems like this is really just a peer function of scale being built and now it's all about new enrollments, but.
You know what kind of revenue levels do you expect you'll kind of need to.
Increase head count there or just build out more support in that business.
Expense increases will be marginal and they will not be technology base. They would maybe be relationship management based or sales.
And we're seeing.
Phenomenal performance out of that sector.
<unk> kind of quoted.
The new program managers that have already integrated and consider that we've we launched this in.
Really in February and Ernest was ready to start bringing on.
Partners on the program management side.
13 are already live and there's nine in the process of going live.
And a healthy number thereafter.
<unk>.
And negotiation stage.
So.
We've.
Yeah.
The rate of adoption is exceeding expectations.
At this stage.
Okay.
We don't have to add additional people to.
To run at the rate we are right now.
Okay got it.
Thanks for the color.
Okay. You know you you bring up a really good point, John I, just want to make this remark for the benefit everyone on the call.
We think that the reason why price.
Priority <unk>.
Is.
Our unique platform in the spaces that on a single collect store and send you know call it shared services platform.
We can produce a cross.
SMB acquiring BTB payments and the enterprise you know the integrated enterprise segment.
So it's built.
In such a way that we can scale without adding people because the platform itself.
These multi functional.
We've created workflows.
Has that come into that engine.
With.
Common elements across each of those channels. So.
We don't need to.
Have redundant stacks of technology or have.
Folks that.
Are you now exclusively doing.
One aspect or another because they're so divergent from an operational perspective.
That's that's the benefit.
And we're in the early innings of.
Exploiting that capability.
This has not been spent built on on rock.
Built to last.
Awesome great to hear thank you.
Again, if you have a question. Please press Star then one the next question is from Hal got B Riley Securities. Please go ahead.
Some more follow up questions on plastic looking at slide slide.
Slide seven it took the $70 million.
Net revenue run rate and you just mentioned $5 million in Opex. So I'm just trying to.
Make sure I understand the revenue number.
The cost guidance you cost information you gave us at that $70 million inclusive of like interchange and network fees or pass through revenues and.
Really what's kind of the net revenue on a run rate of that business.
Okay.
I appreciate you joining so yeah the.
The revenue model for plastic is a little bit different than than our revenue model historically, a priority right. So if you think about.
What they book as revenue or they they act effectively as the the merchant of record right. So you think about a buyer using their credit card and that cash goes through plastic and then ultimately to the the supplier about whatever payment modality.
Once you know check wire ECH, so with plastic is the the merchant of record you know they are booking more of the the revenue on a yeah I guess, what we would consider kind of a gross basis. If you compare it to plastics priorities numbers right. So that does include interchange and maybe start to back all those numbers out.
We can go through the math I don't have that right in front of me here on a true kind of net comparable basis, but yeah you'd.
You'd have to back all that out but the 2000.
No 5 million plus of guidance, we've provided right that's on plastics.
Revenue model right. So the net impact to us is going to be.
Lower if you looked at a kind of an apples to apples basis historically, how we report our revenue.
Oh, okay.
Okay.
Yeah from my experience in the it was a.
You know are compensated.
Did you ran out of money because of where.
They were trying to do.
IPO through its back I think and it didn't work out.
You know.
What are some of the things when a company like that gets into a situation like that on the cash that they're not making investment there kind of cutting back or what do you think that.
Gonna have to add back and can you kind of talk about the magnitude of those things.
In the 2024.
2024.
Isn't it.
Look we we've actually.
This this approach.
Actually has been very curated.
If you look through the filings they actually went into the bankruptcy as the stocking horse dead.
So we had a deep understanding of exactly what needed to be done with plastic in order to make it successful.
It's been a very collaborative approach in fact.
There are customers and we made a very conscientious effort to speak to customers and key relationships. So they knew that the idea of the bankruptcy was not.
I'll just call. It a result of a of.
You know all the business actually in.
This extreme duress as most bankruptcies are but rather as a method of.
Really.
Giving the company an opportunity to reset with a better partner with the appropriate partner.
One that had all the resources to actually help it exploit the market position that they had gained in.
In the time they've been in business.
So there's nothing we need to add.
Actually.
From an expense standpoint.
Really the the effort.
They were focused on is.
Taking what exists that plastic today, which is a very elegant application for.
For businesses of all sizes to utilize our existing credit more efficiently to optimize working capital.
And just get it in the hands of all of our customers.
Upmarket and <unk> segment.
Into our integrated partners and into our SMB customers.
And we've been working on that alignment with the plastic team for months.
Great.
Thank you.
Yeah. Thank you thanks for the question.
This concludes our question and answer session I would like to turn the conference back over to Tom Priore for closing remarks.
Yeah.
Well I'd like to thank everyone on behalf of <unk>.
Tim and I and of course, all the dedicated employees at priority for for taking the time to learn more about the current state of our business and how we see the future of Fintech and payments I appreciate everyones <unk>.
Engagement today I hope everyone has a great remainder of the week.
And we look forward to doing this again in the coming months.
And sharing.
More of our successful results.
Thanks, everyone.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.