Priority Technology Holdings, Inc.

Good day. Thank you for standing by. Welcome to the Priority Technology Holdings first quarter 2021 earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during a session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would like to hand the conference over to your speaker today, Dave Fapelle. Please go ahead.

Thank you, Victor. Good morning, and thanks, everyone, for joining us today. With me on the call are Tom Priore, Chairman and Chief Executive Officer of Priority Technology Holdings, and Mike Volkmer, our Chief Financial Officer. Before we provide our prepared remarks, I would like to remind all participants that our comments today will include forward-looking statements, which involves 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. 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 investor section of our website. With that, I would now like to turn the call over to our Chairman and CEO, Tom Priori. Tom, go ahead.

Thank you, Dave. And thanks to everyone for joining us for our first quarter earnings call. I would like to begin this morning's call by providing a brief overview of our strong growth in Q1 and how we're positioning priority for success for the remainder of 2021 and over the long term. I'll also provide an update on the Fincera acquisition and related debt financing and perpetual preferred investment from Aries Capital Management. Following Mike's financial review of our first quarter results and the improvement on our balance sheet, we would like to offer some perspective on our brief history as a public company, post-Fincera financial metrics, and our positioning for the future. There are a few quick highlights I'd like to share up front. As we outlined in our earnings release, the growth trajectory we've established through the pandemic last year continued in the first quarter of 2021. We met or exceeded forecasts across key metrics, including revenue, gross profit, and adjusted EBITDA. On a purely organic basis, comparing our first quarter 2021 results with our first quarter 2020 results, which excludes the rent payments business that was sold in September 2020, Revenue of $113.3 million increased 21.7%. Gross profit increased 16% to $31.4 million. And adjusted EBITDA increased 37% to $18 million. These excellent financial results were underpinned by nearly a 13% increase in total bank card processing volume to $11.9 billion for the quarter. and approximately 8% year-over-year merchant growth in the acquiring segment, a 2% outperformance to budget and commercial payments revenue, and a 17% outperformance in integrated partners EBITDA contributions. In conjunction with our strong financial results, we recently closed the refinancing of our existing debt, which reduces our interest expense by approximately $3 million per year. We also added a delayed draw facility and perpetual preferred investment of up to $250 million from Aries Capital Management to help finance the pending Fincera acquisition and provide us dry powder for further acquisitions. With regards to the status of the Fincera closing, the key execution items are in place and the combination remains on track for Q3 to close. As noted previously, the financing for closing is locked down, and the regulatory process for the transfer of the money transmission licenses is progressing smoothly. In terms of the business performance, the CFTPay integrated payments platform year-to-date financial results are in line with our expectations. Importantly, our leadership teams have been coordinating on how best to organize our collective resources and so that upon close, we are immediately solving our customers' greatest pain points and deploying resources towards our largest revenue opportunities. At this point, I would like to pause and hand the call over to Mike, who will provide further insights into our performance during the quarter, current trends in each business segment, and the improvement on our balance sheet and liquidity. Mike?

Thank you, Tom, and good morning. Yesterday's press release provides highlights of our first quarter 2021 results compared with first quarter 2020 on a gap basis. Those comparisons include first quarter 2020 results for the rent payment business sold to MRI in September of last year. It also includes certain non-recurring expenses in both quarters as we described in our press release. In order to provide comparability of ongoing business performance, my comments will focus on amounts that exclude rent payment from the 2020 first quarter and exclude the non-recurring expenses from both quarters. This comparison of non-GAAP results is not a substitute for prominent comparisons under GAAP. Rather, my comments are meant to be a complement to understanding the GAAP-based comparisons. Yesterday's press release provides reconciliations of GAAP to non-GAAP amounts and also provides details of the rent payment first quarter 2020 results and the non-recurring expenses in both quarters. In the first quarter of 2021, consolidated revenue was $113.3 million, a 21.7% increase from $93.1 million in the 2020 quarter. During the first quarter of 2021, our diverse distribution channels continued strong new merchant boardings. Over 14,600 merchants were added, with nearly 5,100 coming on board in March. Gross profit was $31.4 million, a 16% increase from $27 million in the 2020 quarter. Gross profit margin was 27.7%. We planned for Q1 margin reduction, and our anticipated volume mix was a factor in that plan. Income from operations of $8.2 million was a 132.9% improvement over $3.5 million in the 2020 quarter. And as Tom mentioned, the adjusted EBITDA of $18 million increased 37% from $13.1 million in the 2020 quarter. Now, let's break this down within the segments. Consumer payments revenue was $108.4 million. This is a 26% increase, over $86 million in the 2020 quarter. Growth was driven by $9.7 million, or 372% revenue growth from high margin specialized e-commerce merchants, and $12.7 million, or 15.2% revenue growth in our base consumer payments business. Merchant bank card volume in this segment processed was $11.9 billion. This is a 14.3% increase over $10.4 billion in the 2020 quarter. Merchant bank card transactions of $127.5 million increased 6.7% from $119.4 million in the 2020 quarter. An average ticket of $93.12 grew 7.1% from $86.97 in the prior year quarter. Now, following the pandemic declaration back in March of 2020, we saw consumers beginning to conduct fewer payment transactions at higher average tickets and card not present transactions increased. Now, again, card not present volume generally offers more favorable pricing to us than other types of transactions. In the first quarter of 2021, we experienced growth in both payment transactions and average ticket. As I mentioned, the trend of new merchant boarding remained within our historical range of 4,500 to 5,000 new merchants per month, and the addition, as I had mentioned earlier, of nearly 5,100 merchants in March 2021 bodes very well for ongoing revenue growth. Consumer payments income from operations was $13.4 million. This is an 86.8% increase over $7.2 million in the 2020 quarter. Key drivers were $5.5 million of increased gross profit and reductions in SG&A of $0.5 million and reductions in salaries and employee benefits of $0.2 million. Commercial payments revenue was $3.5 million. This is a $2.9 million decrease from $6.4 million in the 2020 quarter. Revenue from processing in CPX accounts payable automated solutions continued its steady performance with first quarter 2021 revenue of $1.7 million, a 5.3% growth over the 2020 quarter. The commercial payment segment's overall revenue decline was driven by a $3 million reduction in managed services, and this was caused by the curtailment in April 2020 of a customer's merchant financing program in response to COVID-related economic conditions and then subsequent changes in this customer's business model. However, revenue trends in this segment are strengthening. Managed Services is beginning a new supplier enablement program that will generate annual revenue over $4 million. And CPX experienced first quarter volume growth of over 100% in its partner channel and over 200% in its FI channel. And the sales pipeline for new contract signings is growing. Commercial payments loss from operations was $0.4 million compared with income from operations of $0.8 million in the 2020 quarter. Gross profit, which was down $1.4 million due to the managed services revenue impact, was slightly offset by a net decrease in salary and employee benefits and SG&A. Integrated partners revenue in the first quarter of 2021 was $1.4 million, which was increased by $0.7 million compared to revenue in the first quarter of 2020 of $0.7 million. As a reminder, this comparison excludes rent payment revenue of $3.8 million from the first quarter of 2020. Through September 22nd of 2020, Pret was comprised of our rent payment business and our landlord station business. Simultaneous with this sale of rent payment, Pret entered into revenue producing agreements with MRI to provide ongoing technology support and payment processing services. which offers us an opportunity to expand the relationship and provide payment processing services to existing customers of MRI. Revenue of $0.8 million from Pret's ongoing business increased $0.7 million compared with revenue of $0.1 million in the first quarter 2020. Priority PayRight Health Solutions and Hospitality Technology comprise the remainder of this segment's revenue and both continue healthy growth trends. Our integrated partner segment generated income from operations of 0.1 million in the first quarter of 2021, an improvement of 0.3 million compared to first quarter 2020. Now, this comparison excludes rent payment income from operations of 0.6 million from the first quarter of 2020. Corporate expense was 4.9 million in the first quarter of 2021, an increase of 0.7 million from expenses of 4.2 million in the first quarter of 2020. This comparison excludes first quarter 2021 expenses of $3.6 million for professional fees and costs that were incurred in connection with the pending acquisition of Fincera, the April 2021 debt refinancing, and the April 2021 issuance of preferred stock. It also excludes first quarter 2020 expenses of $0.5 million for professional costs incurred in connection with the March 2020 debt facility amendment. Now, before turning the call back to Tom, I'll review our significantly improved balance sheet and liquidity. We ended first quarter 2021 with net debt of $373.3 million. The total net leverage ratio was reduced to 5.44 times at March 31st from 5.85 times at December 31st. Our unrestricted cash position was $5.8 million, and we had $25 million of borrowing capacity under the revolver. On April 27th, we completed our debt refinancing and preferred equity issuance. This has reduced our total net leverage ratio to below four times. The new senior debt facility, which improves interest expense by 75 basis points, includes an initial term loan of $300 million, which was used to refinance existing debt and pay debt placement fees and expenses. It has a committed delayed term loan of $290 million, which will be used to finance a portion of the Fincera acquisition. And we also have a $40 million revolving credit facility, which is fully available to us. The term loan matures in 2027 on its sixth anniversary. Annual principal amortization is equal to 1% of the original principal balance paid quarterly with the balance due upon maturity in 2027. The revolving credit facility matures in 2026 on its fifth anniversary. We also executed a strategic perpetual preferred equity investment from funds managed by certain affiliates of Aries Management. This preferred includes an initial issuance of $150 million, which was used to refinance existing debt, pay stock issuance fees and expenses, and add cash to the balance sheet for acquisitions. It has a committed delayed issuance of $50 million, which will be used to finance a portion of the FinCERA acquisition, and there's an additional $50 million issuance that's available for use within 18 months to finance other acquisitions. This refinancing reduces scheduled principal payments by $11.6 million in 2021. That number assumes a third quarter delayed draw issuance of an additional $290 million of senior debt to finance the Fincera acquisition. It reduces 2022 principal repayments by $33 million. And then when the old facilities were scheduled to mature in 2023, we now stand with over $300 million less of scheduled principal repayments in 2023. I'll now turn the call back over to Tom.

Thanks, Mike. As Mike shared, on the heels of an excellent finish to 2020, we had an extremely strong start to 2021. Despite the pandemic, 2020 will be regarded as Priority's year of transformation and the realization of our mission to emerge as a payments powerhouse with a single platform to collect, store, and send money that delivers differentiated products to our existing verticals. At the same time, we're well equipped to activate new solutions, including payment facilitation into new market segments quickly and at scale. In the near term, you'll see priority rollout in-house settlement processing and international payments, both of which represent significant long-term growth opportunities. We recognize our plans are bold. We have the platform and the personnel currently in place to execute. None of this would have been possible without the priority team's focus and resilience. Shortly after Priority became a public company in 2018, payment network rule changes resulted in the temporary loss of over $100 million in annual revenue and $20 million in EBITDA. It was not easy. but the team managed through it, and we are now on the other side with all signs pointing upward. Diligently focusing on delivering a differentiated product and service experience to our SMB acquiring clients and building out counter-cyclical payment segments in B2B, healthcare, mobile hospitality, and of course, real estate, enabled us to grow top-line and bottom-line results through 2020's COVID environment. Importantly, we proved out the differentiative of differentiation of our payments operating platform with the successful monetization of the rent payments asset at a 19 times EBITDA multiple, which helped reduce debt by over $120 million. As Mike highlighted in his financial remarks, priorities continue to move from strength to strength in 2021. We are proud of our response to the challenges we overcame and We offer this perspective with the acknowledgement that the world of payments is moving fast with many smart competitors. Nevertheless, we certainly hope that our past performance managing through obstacles without ever losing sight of our clients' needs and building diversified sales channels like B2B and integrated partners demonstrate that priority is built with intention and it's poised to be among the leaders powering commerce for businesses today and in the future. With each month that goes by, the numbers reflect that our customers, reselling and ISV partners, and commercial marketplaces are seeing us as the go-to platform for businesses to collect, store, and send money in an easy and low-fraction manner. Taking a brief inventory of the power of our payments platform reveals why we are so well-positioned for the future of payments. On a single, unified infrastructure for payments and banking, We operate the fifth largest non-bank merchant acquirer in the U.S., a full-service automated payables provider, and an array of integrated software platforms in several of the most critical and fast-moving segments of the economy, including consumer finance, real estate, hospitality, and health care. These channels... and our partners that today consistently board approximately 5,000 new merchant relationships each month, can leverage our direct payment connections into all card networks and the Federal Reserve, a full back-end settlement capability soon to be released, payment facilitation and virtual account ledgering capabilities, as well as commercial card issuing. As we sit today on that technology platform, when including the FinCERA acquisition and recent transactions and acquiring, run rate pro forma revenue is $520 million, and pro forma EBITDA is approximately $135 million. And note, That does not factor in our current growth trajectory, projected synergies from the Fincera transaction, and our access to ready financing for additional accretive and deleveraging acquisitions. Before we open the line for Q&A, I would be remiss not to acknowledge the situation in India where over 200 colleagues are located in Chandigarh. The country is experiencing the worst COVID-19 outbreak in the world, and its health care system has been overwhelmed. The current situation has personally impacted the Fincera team, who have lost several family members during this outbreak, and we also have many priority team members with family in India trying to navigate the crisis from thousands of miles away. As an organization, Priority has already committed $100,000 to support our colleagues in India as they navigate the crisis. That money is going to vaccinations for employees, their families, and their communities, as well as the donation of life-saving equipment to hospitals in the local Chandigarh area. The steps we're taking will help us maintain the safety and stability of our people, their families, of course, and our business in much the same way we did during the height of the COVID-19 pandemic in the U.S. Operator, if you would now, please open the line for questions.

As a reminder, to ask a question, you will need to press star 1 on your telephone. And to withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Thank you. Our first question comes from Brian Kinslinger from Alliance Global. You may begin.

Great, thanks. Nice results. Thanks for taking my questions. Can you comment on the lower e-commerce transaction volume during the March quarter that you said was planned? Should we expect a return to the second half, 20 mix, or has something changed that will keep the mix of e-commerce and gross margin and consumer payments business lower going forward?

Well, a couple of factors, Brian. So I would say we, we would expect the mix to be a little bit more weighted to card down present just because of the fact of more of the economy is opening up. People are becoming vaccinated, more comfortable, and we're seeing very, very substantial growth in our, uh, uh, retail trade segment. And that's mostly card present. Um, Nevertheless, we do expect our e-com segment to reestablish its growth trajectory. We shut down some merchants that we didn't feel were operating to the standard we would expect. And that's going to happen from time to time in this segment. So one of the reasons why we did expect it was we knew we would see a bit of compression from the pairing of those merchants, but felt like that would put us ahead of the game long-term as a risk mitigation with some transaction activity that was, I'll just say, had some unfavorable markers when we looked at it from a regulatory standpoint.

And so to that end, pre- in CIRA acquisition, the margins will be in the high 20s as a result of both of those dynamics? Is that how we should think about it?

I would say in that neighborhood, Mike, I don't know if you would voice it differently, but I would offer this to you from a modeling standpoint. That would be a conservative view that can only improve.

I would agree with that. But, you know, bank card volume in specialized merchant grew in Q1 over Q4 of last year. That's the same trajectory that we had been seeing in the earlier quarters. And, again, card volume with those merchants is only a component of what drives the revenue, right? But we did have growth. So, you know, I can circle back with you to see why you think we had a decline in total volume. Okay.

And then on the CPX B2B payables technology, what do you see as the catalyst for accelerating growth, revenue growth? You mentioned, I was a little bit confused, 100% and 200% increases, I think, in sales. But I'm looking at the total dollars and they're up marginally. So maybe I missed on why CPX revenue growth is so modest. And is it more salespeople, more development needed? Is it sales cycles, revenue recognition? Just maybe a sense for what's going to lead to the acceleration of that platform.

Yeah, that's the volume growth in those channels, which is continuing, and actually the pipeline is looking very strong. The reason why that didn't equate into the higher revenue growth in Q1 versus Q1 of last year was one of our customers, which was, I'd say, Richly priced a year ago, you know, we repriced that contract more in line with the market overall with our other customer base. So it was just a one customer that had some decent volume that kind of suppressed the amount of growth that we experienced. But the momentum is strong. You know, that's why I cited those volume growth quarter over quarter. And the pipeline is building. Okay.

I would just offer to you just further on that point. I'm sorry. As far as the distribution, when you look at kind of our previous pipeline had been largely focused on the FI community, and during the pandemic, they just didn't launch anything. They just didn't have the personnel to do it. So we quickly adapted, and our sales initiatives are that are kind of poised to tip our direct customer and ISV. But we're very confident in the pipeline that's already either in contract negotiation or been contracted and has yet to launch.

Great. Last question, and I'll get back in the queue with some others. While the Fincera acquisition hasn't closed, you talked about you're going through preparations. Have you begun to approach customers about the new banking offering that can be obviously cross-sold? And if so, can you just talk about the response and, you know, how that's being accepted with your customer base?

Yeah, appreciate the question. The response has been fantastic. So we are already in discussions with existing customers as to how they're going to implement payment facilitation into their platforms with existing ISVs. We've opened up new channels with, for instance, companies that are in the money-sending business are realizing we are a much more efficient platform on which to operate because we consolidate a lot of their connections that now are into five, six, seven banks into one connection that takes them directly to the Fed and then can deploy to their endpoints much more efficiently. So those are just two examples. I think we already noted in our initial comments around Fincera that we'd be more deeply penetrating the real estate space, that's happening. We are, you know, we're prepped to launch that solution into our MRI relationship. And then, you know, we'll immediately start working on an adjacent solution to handle deposit accounts for securities, security deposits, et cetera, for that segment. So, you know, we've got a roadmap that the team has already outlining and working on together. And, you know, and that's just, you know, frankly, you know, touching the, like just scratching the surface. We have projects that are customer driven across the board and acquiring and commercial that are implementing a combination of our payment solution with virtual banking or, you know, electronic wallet, however you want to think about it. So we're, you know, we're, We intended to hit the ground running, and that's happened.

Great. Thanks so much. I'll get back in the queue.

Our next question is from Andrew Scott from Roth Capital Partners. You may begin.

Good morning, and thank you for taking my questions. First question, can you just provide some additional comments on the supplier enablement product that you guys talked to in the B2B business. I believe you said it would generate about $4 million in annual revenue, which would be substantial to the commercial payments business. Kind of if you talk to customers, what their feedback has been and cadence of rollout that we can expect over the rest of the year.

Sure. That's for, you know, obviously we have a big relationship with American Express, and that's an American Express program. They came to us and said, you know, we want you to do a supplier enablement. So what that does is it has us, you know, working with their merchants to take, you know, to use American Express card to pay certain of their, you know, their payables. So when we say supplier enablement, we're enabling the suppliers and those merchants to use Amex cards for payments of bills. It's ramping now. We need people in seats to make that program, to get it going, and we're staffing up. So we're going to start to see those results coming on in Q2. And it will be fully ramped, and we estimate a run rate of about $4 million annually.

And maybe to put a fine point on it, it's contracted. The heads are contracted. We're just filling the seats with salespeople, and that is moving at the pace of our expectations. So we just keep those seats filled. and the revenue will be spot on with the $4 million that Mike referenced. We actually are optimistic that that will grow from there, which has historically been the case. And that's also what's sort of been kind of voiced over to us, that we'll get this first phase off the ground, and then we can grow from there based on results.

Great, thank you. That was very helpful. Second question here, can you maybe provide some update on the progress of onboarding the former rent payments clients on MRI? I know you guys have been doing a good job, especially in the last quarter, and maybe if you can provide a revenue contribution in the quarter from that.

Yeah, I think, Mike, you had mentioned earlier uh, that number. You want to just review it again?

Yeah, that was, um, 700,000 of revenue in the quarter. Um, and, um, I don't have specific numbers on, you know, penetrating, you know, MRIs existing customer base, but you know, it's a, it's a, it's a tenfold opportunity. I think, you know, we've been up until the state focused on, on, you know, the, uh, the renters that are customers, but we will be moving into expanding that, you know, internationally over, you know, the coming quarters.

Yeah, just to give you some sense, the transaction closed in September. So between now and the, you know, let's call it we really got working in earnest, you know, in October after everyone, you know, sort of found their seats over at MRI, right? We are moving all of the existing platform over, and we expect that to be done in, you know, call it the June-July timeframe, and then we'll start going after more aggressively the remainder of the book. And to Mike's comment of it being a tenfold sort of increase in opportunity, at the time of the transaction, we had about a million renters that had access to rentpayments.com. And at that moment, and they've been growing by about 20% to 25% a year, at that moment there were 12.5 million renters on MRI's platform. So we'll begin that in earnest through the summer months.

Great, thank you. Yeah, that's a very exciting opportunity. Another question for me, kind of piggybacking off the first question. So you guys have seen positive trends, as you said, in Card Now present transactions. Despite the little blip in dropping some e-commerce customers this quarter, strong momentum in e-commerce, but gross margins were down pretty substantially. So were there any kind of one-time items in there or something – That will not be reoccurring, so we can expect to see you guys rebound to over 30% gross margins.

Mike, I'll let you weigh in.

Well, yeah, that's fine. You have to look at our margins excluding the rent payment for comparison, but then... But then I will – because that was a high margin revenue for us that, you know, helped with our margin percentage. If you take a look at the pro forma that we – well, we're headed with the new priority, if you will, with Fincera. You know, we put those pro forma numbers in, you know, for first quarter. You know, we're – on a pro forma basis, we're upwards – approaching 40% gross profit margins. So, you know – I think on an organic basis, you know, the margins are, you know, in the upper 20s where we had, you know, this quarter. But, you know, once we bring Fincera in, just on their historical book of business, you know, we're pushing, you know, 40% overall. And as we grow and leverage that technology, you know, that's high margin business as well.

Thanks for the call, Aaron, and I'll hop back into you with other questions.

Our next question comes from George Manalo from Calend. You may begin.

Hey, guys. Sorry about that. Congrats on a nice quarter. Tom, nice to see that things are moving along in terms of from a pro-former perspective with Pinsera, but just curious if you could maybe dimensionalize for us, you know, how big of a synergy opportunity, you know, that could be for the company, maybe at a high level, what you're sort of thinking those contributions could look like, realizing that they're obviously not in your pro forma outlook.

Well, so, George, actually, so let me talk about expense versus revenue, okay? The expense synergies are really very straightforward. you know, and you're talking about the very basics of SG&A. We feel very comfortable, and these are not personnel declines where we're getting rid of people, you know, through the acquisition, but rather we have some budgeted heads we would add as a standalone that we no longer need to because they'll be filled by, you know, a Fincera technologist, for instance. So between that some already contracted reductions on the management side, and very straightforward SG&A, combining auditors, legal expense, things like this, insurance, et cetera, we're very comfortably going to hit $5 million of expense synergies. And that's what we've projected. But in the pro forma that we've just discussed or discussed, even the pro formas we've communicated to the market, we have not included any revenue synergies. And I'll just give you two very simple examples. One of the most valuable, let's just take it at a logical level. The lifeblood of any small business is cash, cash flow acceleration, right? And Square Cash, their cash app charges 1% for the acceleration of cash, okay? There are other some banks who offer what they call, you know, immediate funding or same-day funding for, you know, $20 a month. Well, if we just had penetration of 10% on our 200,000-plus merchants for instant funding where you open up a bank account, of course, we have that ability now to create virtual accounts linked to every merchant account. So when you sign up for merchant processing with Priority, you can get an immediate funding bank account, FDIC insured. So the minute it hits our settlement account, it gets credited over to the operating account of a small merchant. If we charge market rates, $20 a month for that, 10% penetration, that's $5 million of synergies right there. As that money sits on our balance sheet, of course, we have the benefit of carry. Let's say we made 50 basis points on that, which is pretty low, but that's another $5 million. So these are clear line-of-sight opportunities by bringing these technologies together in just one of our biggest verticals, where the need is clear. Accelerated funding to small businesses. You know how much on average insufficient funds or bounce checks cost small businesses a year? The average is $400. So think about this. This is just high value to small businesses. And look, we think the penetration rate could be you know, could be greater, but we want to, you know, we're not going to kind of go out in advance until we get, you know, statistics we feel are going to be, you know, clear in terms of penetration rates, but that at least gives you one example of what it could mean to just a single line of our business putting in one solution. Now, by the way, that doesn't include taking that single account now and saying, hey, Mr. Merchant, how would you like a Priority One debit card on that account? We are a card issuer, after all. Here's a card you can use to pay your suppliers. Or adopt CPX for your automated payables. You can pay all your customers with virtual card and earn back money as a cash back opportunity. So all these products come into play to be a one-stop shop for small business customers. Banking and payments. And that's where we think, frankly, we think a lot of the market is headed. We're just creating that network instead of it being a whole bunch of Uber drivers out receiving money from Uber on a card or what have you. You name the comparable marketplace, right? We've already built a marketplace, George, of 225,000 small businesses. And I don't think this is fully appreciated, and I apologize if I sound preaching, but we sell. Our products sell consistently. Every month, even during COVID, we boarded 4,500 to 5,000 merchants. Other businesses don't distribute with that power. So, you know, we're really excited about what the combination looks of this is going to mean for our small merchants and, you know, and the entrepreneurs we serve. And, you know, that's one example. I'll give you a quick other one, but I'm sure you can kind of, you know, get the value of this. But B2B, you know, has been kind of there's tremendous appetite out there for the B2B market. I mean, look at the transaction that just occurred with, you know, Repay bought B2B. for, you know, 20 times EBITDA, okay? We have a business that is, you know, I think if you check around and talk to folks, has a really premier technology stack for automated payables. That business is basically valued close to zero where we are right now. And yet, you know, that segment has high multiple attached to it. And now you add into the mix that, hey, you don't need to have a supplier card acceptance account. You can come into Priority and just have a digital wallet account and get paid by card, by ACH. It just smooths out the onboarding. So I'm not going to be predictive in what I think it will mean to revenue acceleration, but I think we can all see a clear line of sight to it being a low-friction experience for a supplier to come into a Priority sponsored network for payment resolution of their invoice. So, you know, that's our mindset and how we think, you know, some of these tools apply. And, you know, hopefully that gives you some granularity around, you know, some of the clear line of sight revenue opportunities. But again, to just make it very, very pointed, we've not included those in our pro forma assessment right now We're just looking at the business's steady state at their current rate of performance.

And I'd just add to that, just to be clear, that in that pro forma, we also did not add in any of those expense synergies either.

Okay, that's great. I appreciate that, Collin. And just sort of a quick follow-up, the 5,000-plus merchants that you've – you've onboarded in March. Can you talk a little bit about some color around those verticals or anything that sort of stands out to you in terms of that onboarding process? And again, congrats on the quarter.

Yeah, it's as steady as she goes across the board on that boarding. I mean, we're constantly selling it to all our vertical markets. And so, you know, there's nothing that's unusual. It's just our normal cadence at that level. And it's just we pointed out March in particular because it was the strongest month of the quarter. But it's across the board.

George, just to put some granularity on it, and I apologize. I didn't realize I was on mute. So thanks for jumping in, Mike. You know, if you look at our book generally, you know, we're – Mid-teens, you know, legal services. High teens, hospitality. You know, kind of, you know, 7%, 8-ish percent in health care and health care providers. Kind of similarly situated in the salon space. And, you know, wholesale trade probably makes up, you know, 10% to 12%. So the boarding has sort of been consistent with those trends. We have a very diverse board. sales channel or set of sales channels and collectively that's what sort of tends to come in and you know we haven't seen a lot of volatility in that you know frankly over the last few years the you know the one area that probably you know which you already know right is is in specialized acquiring and e-commerce segments that really have more of a high compliance bar that we, you know, that we have some unique tools that make us very effective there. You know, that's still growing at, you know, a rate higher than, you know, kind of to sort of re-approach back where we were in 18.

That makes sense. Really appreciate it, guys. Thank you. Yeah, thank you, George.

Our next question will come from Brian Kissinger from Alliance Global. You may begin.

Great, thanks. One follow-up. With the increased merchants onboarded, we've got inflation where prices on everything across the board in goods and services are going up. Is there any reason to believe, and you've obviously seen the first half of the second quarter play out, is there any reason to believe that we won't see growth on the consumer side in June versus the March quarter?

Certainly nothing we can see. Right now we feel very comfortable in the trends we have in place. you know, as we reflected, you know, kind of earlier in 2020, right, we thought that, you know, the fact that we were continuing to sell through the COVID period would be, you know, a catalyst for, you know, for growth as all that volume turned on, right? And that's, you know, we're still delivering on, you know, at certainly the same rate and, you know, most months at, you know, at a above, you know, above trend rate.

Great. That's my only follow-up. Thank you.

We have another follow-up from Andrew Scott from Lava Capital. Maybe again.

Yeah, two quick follow-ups for me. So, first, congrats on completing the refinancing and the preferred issuance. I know you guys have $50 million preferred that's available for an additional acquisition. You guys also have some dry powder from the refi. Can you just talk about what you're seeing in the market and if there's anything specific you're looking for in a potential acquisition?

Well, I would say nothing that's changed from, you know, the segments we've kind of been interested in the last few years. We – we have a pretty strong presence, particularly in the, in the down market area of the acquiring space. Um, you know, when smaller ISOs and, and resellers are looking to, uh, to monetize their business, we're, we're certainly one of the, you know, the, the calls that, that, that are made. So we're going to, you know, we see opportunities there. Um, and we see those on a regular basis. Um, you know, unless there's nothing I see on the horizon there that would be, you know, what I would consider transformational in the acquiring space. Where we're focusing more of our attention and, you know, the Fincera is a pretty good example of it is, you know, look, we already think we have, you know, a great acquiring business that is uniquely situated to perform. So, opportunities where we can pick up counter cyclical assets with technology that enhances our core offering. Uh, those are the ones that are most appealing. And, you know, those have tended to be in more verticalized strategies, you know, good examples being real estate, Fincera, of course, and consumer finance area and CFT pay. Um, and, um, we certainly have our eyes open around the B2B space for the right types of opportunities that fit our profile. So that's where our greatest interest lies because they best complement the acquiring business that we have that we feel very confident in growing organically. I would note that we're pretty disciplined in the way we go out and acquire things. Look at the MRI transaction we executed and what we did with the rent payments asset. That was purchased for a very favorable structure for priority at maybe less than 10 times EBITDA and we were able to really reposition that and improve its efficiency and exit that at 19 times EBITDA. So we'll certainly continue to look for opportunities where we can be that accelerator to integrated assets and consolidate them into the verticals that we already operate in, which I won't belabor that, Um, but hopefully that gives you some insight into, into how we're thinking. Um, but we're, you know, we're, we're not one to overpay for assets and, you know, we think that it's pretty clear, you know, look at, look at, uh, the Lux's purchase of first American payment systems at 17 and a half times, um, or, uh, or the, you know, the repay, uh, transaction I just referenced, right? We're, um, We already built those businesses organically at much better, you know, cost. So we want to continue to do that. We think that's the key to long-term success. And, you know, hopefully we've made it very clear to folks that, you know, I, for one, you know, personally, I'm invested for the long haul. This is, you know, we think, you know, just a secular opportunity in payments that has a long, long runway. Okay. It's the third largest industry in the planet, payments, which I think is underappreciated by a lot of folks. So a lot of ways to play, a lot of ways to play successfully. We certainly recognize there's probably more sophisticated players than ever in the marketplace, but we feel very, very good about the hand we have and how we can leverage the infrastructure that we've built to be a payments powerhouse and a real force to be reckoned with as we, you know, as we continue on this journey.

Thank you. Really appreciate the detail there. And last if I may, just kind of housekeeping. I believe on the FinCERA call, you guys offered an annual guide of 450 to 470 in revenue and 70 to 80 million in EBITDA on the full year. And it looks like you guys are, going to meet those numbers organically. And then you touched on the pro forma numbers with Fincera. It's just an extra added bonus. So I just want to make sure you guys are still comfortable with those numbers with the organic growth.

Yeah, we had, you know, we exceeded, you know, our plan in Q1. So it just gives us greater comfort on those organic numbers that we put out.

Awesome. Thanks. It's all for me. Congrats on the quarter. Thank you. Thank you very much.

And I'll now turn the call over to Tom Priori for any closing remarks.

Well, I just want to once again thank everyone for the time and certainly the line of questioning to understand not just the quarter but where our business is headed and very appreciative of everyone's support in that mission. I hope everyone has a great remainder of the week and weekend, and thank you once again.