Good day, and welcome to the Priority Technology Holdings second quarter 2024 earnings 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. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Chris Kettmann. 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 giving 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. Reconciliations of our non-GAAP performance and liquidity measures to the appropriate GAAP measures can be found in our press release and SEC filings available in the Investors section of our website. With that, I would like to turn the call over to our Chairman and CEO, Tom Priore. Thank you, Chris, and thanks to everyone for joining us for our second quarter 2024 earnings call. I'd like to start today by highlighting the positive trends we continue to see throughout Priority, and then Tim and I will provide an update on important developments within each segment and the broader enterprise. As you saw in this morning's press release, in the second quarter, we again reported record financial results by capitalizing on our leading Unified Commerce platform that delivers elegant product solutions across our segments and dedicated customer service that is committed to our partners' success. Building on the positive momentum we saw to start the year, we delivered exceptional results in SMB acquiring, B2B payables, and enterprise payments in the second quarter. Our Unified Commerce vision continues to resonate with customers, combining payments and banking functionality on a single platform, accelerated by the strength of our diverse business lines that were positioned to benefit from historically elevated interest rates and to perform in a variety of macroeconomic environments, including the one we're experiencing today. Total customer accounts operating on our commerce platform exceed 1 million, as we processed nearly $125 billion in annual transaction volume during the prior 12 months, while administering over $1 billion in average daily deposits during the quarter. Slide four highlights our consistent financial performance during the second quarter. Revenue of $219.9 million increased by over 21% from the prior year. This led to a 22% increase in adjusted gross profit to $81.7 million and a 25% improvement in adjusted EBITDA to $51.6 million. Adjusted Gross Profit margin of 37.2% increased 40 basis points from the prior year quarter, highlighting the strong and improving operating leverage of our organization. Encouragingly, our purely organic growth trends are equally strong, posting a top-line revenue increase of 17.5% and bottom-line improvement in adjusted EBITDA of 25.7% during Q2, which Tim will speak to in greater detail during his remarks. As you can see from our strong Q2 results, combined with the increase of our full-year EBITDA guidance, we continue to expect that the robust growth and margin trends in our business channels will deliver full-year revenue of $875 million-$883 million, an increase of approximately 16% over 2023, and generate full-year adjusted EBITDA of $196 million-$200 million, a 16%-19% increase over 2023. Our guidance is informed by our year-to-date performance, highlighted on Slide five, reflecting 16% revenue growth to $425.6 million. That drove 22% adjusted gross profit expansion to $158.2 million and 24% improvement in adjusted EBITDA to $97.9 million. Year-to-date organic growth is consistent with Q2, at 17% revenue growth and 27% EBITDA growth. Our growing partner base continues to see value in our product and technology offering, and our diverse sales channels remain consistent with strong performance. Now, for those of you who are new to the company, Slide six highlights the market orientation of our proprietary Unified Commerce platform. It's purpose-built to collect, store, lend, and send money, combining elegant payments and banking functionality to monetize the commerce networks we serve. Our customers and current market conditions reinforce our belief that systems facilitating payments and banking solutions to distribute funds in multiparty environments will be critical, as businesses put greater demands on software and payment solution providers to accelerate cash flow and optimize working capital. We remain committed to meeting our customers where they are by refining the experience for our partners to make working with Priority seamless and easy. Our financial performance demonstrates that partners consistently choose the unified commerce applications in acquiring payables and banking that best fit their businesses to accelerate cash flow and optimize their working capital. We are incredibly focused on the continued innovation of our SaaS payments and banking suite of services that are powered by Priority's Accelerated Commerce Engine and are eager to meet the evolving needs of our growing portfolio of customers and enterprise partners. At this point, I'd like to hand it over to Tim, who will provide further insights into our segment-level performance during the quarter, along with current trends in each that factored into our confidence to deliver on our strong guidance for the full year 2024. Thank you, Tom, and good morning, everyone. As I review the second quarter results, please refer to the supplemental slides or the MD&A for further details. Our MD&A is included in the Form 10-Q that was filed with the SEC this morning and provides a discussion of our comparative second quarter results. A link to that filing can also be found on our website. Consistent with the first quarter, our strong financial performance in the second quarter was driven by the diverse and countercyclical mix of our business segments, along with continued growth in our higher-margin operating segments. The highly recurring nature of our business model also remains strong, with almost 59% of adjusted gross profit in Q2 coming from monthly fees or revenues that are not dependent on transactions or bank card volume. I'd also highlight our organic growth rates, which continue to outperform compared to many industry competitors. If you adjust for the impact of Plastiq, which was not part of our financial results in Q2 of last year, as well as for the impact of the large reseller that we've discussed on prior calls, Priority had year-over-year organic growth in Q2 of 17.5% for revenue, 18.9% for adjusted gross profit, and 25.7% for adjusted EBITDA. When you combine those industry-leading organic growth rates with a scaled business that produces a high level of recurring gross profit, you can easily understand why we're excited about our business and the value that we believe has been built at Priority. Before moving to the segment-level financial results, I want to take a minute to discuss a change in our reporting metrics for this quarter and going forward. Historically, we provided revenue, adjusted gross profit, and operating income at the segment level. As you'll note in today's presentation, we still provide revenue and adjusted gross profit, but now report adjusted EBITDA at the segment level instead of operating income. We've made this change because the business continues to evolve, and we want to ensure that the greatest possible transparency into our core results. In that regard, as we continue to implement a shared services operating model in our business, along with managing a single Unified Commerce engine across our payments infrastructure, the allocation of certain operating and technology costs becomes less identifiable. So we will report those costs in corporate with only direct costs for each segment having an impact on its adjusted EBITDA results. We've included reconciliations in the earnings release to help you compare current quarter results to historical quarterly results on a comparable basis. With that explanation, I'll now move to the segment-level results for the SMB segment on slide eight. SMB generated Q2 revenue of $155.1 million, which is $7.2 million, or 4.8% higher than the prior year's second quarter. As discussed on prior calls, a large reselling partner started to diversify their processing activity in Q2 of 2023 and concluded that effort in Q4 of last year. The year-over-year impact of that ended this quarter and was just over $8 million of revenue, which is down from the $21 million headwind that we saw in Q1. We do not expect future impacts from this reseller on a comparative basis, and excluding its impact this quarter, the SMB business experienced a 12.2% organic revenue growth on a year-over-year basis. Bankcard dollar volume in SMB was $15.8 billion for the quarter, which increased 4.6% from $15.1 billion in the comparable quarter last year. As an additional point to emphasize the strength of organic sales in the SMB segment, if you adjust for the impact of the aforementioned reseller, bankcard dollar volume increased 9% in the quarter compared to the prior year. From a merchant standpoint, we averaged 179,000 accounts during the quarter, higher than 177,000 average in Q1 of this year, while new monthly boards averaged 3,900 during the quarter, which is consistent with the comparable quarter of last year. Adjusted gross profit in SMB for the second quarter was $35.6 million, which is up 1% from last year's second quarter, but a $3.7 million or 11.8% increase from Q1 of this year. Gross margins of 23% in the quarter were down from 23.9% in last year's second quarter, but up over 80 basis points sequentially from Q1 of this year. Lastly, for SMB, quarterly adjusted EBITDA of $28.6 million was up slightly from the prior year's second quarter and is up $3.6 million or 14.3% sequentially from Q1 of this year, as we continue to manage operating expenses within our business, which results in a strong flow-through of incremental adjusted gross profit to adjusted EBITDA. Moving to B2B, revenue of $21.9 million was an increase of $18.9 million from the prior year. Plastiq, which joined Priority in Q3 of last year, contributed $17.8 million of the increase during the quarter, while CPX grew by $1.4 million, or 49% on a year-over-year basis. Those increases were partially offset by a $200,000 reduction in the remainder of the B2B business. Adjusted gross profit in B2B increased to $5.6 million from $2.3 million in Q2 of 2023 as a result of the Plastiq acquisition, combined with over 25% growth in gross profit for the CPX business unit. For the quarter, gross margins were 25.4% or 3.6% lower compared to 29% in the first quarter of 2024. The lower margins in Q2 were the result of changes in mix of business and the timing of certain incentive fees in Q1 of this year, which flowed through at a high margin and did not have a comparative benefit in Q2. As a reminder, the sequential comparison is a more relevant metric until Q4 of this year, given the year-over-year comparison of margins is impacted by the timing of the Plastiq acquisition and Plastiq's GAAP reporting requirements for revenue recognition, which was discussed on prior earnings calls. The B2B segment had $1.5 million of adjusted EBITDA in the quarter, compared to $600,000 in Q2 of last year. On a year-over-year basis, the growth was largely related to Plastiq, but also included 17% growth in CPX's adjusted EBITDA. Moving to the enterprise segment, Q2 revenue of $43.7 million was an increase of $12.2 million, or 38.9%, from $31.4 million in the prior year. Favorable trends from the past several quarters in new monthly enrollments and build clients, combined with an increase in the number of Passport program managers, growth in deposit balances, and the stable interest rate environment, all contributed to strong revenue growth. As a reminder, there is a countercyclical aspect to portions of the enterprise segment that should continue to benefit us if the economy does end up having more of a hard landing. As a result of the strong revenue growth, adjusted gross profit for the Enterprise segment increased by 38% to $40.6 million, while adjusted gross profit margins were 92.9% in the quarter, compared to 93.3% in the second quarter of 2023. Adjusted EBITDA for the quarter was $37.2 million, which is up 45% from $25.7 million in last year's second quarter. Moving to consolidated operating expenses, salaries and benefits of $22.1 million increased by $3 million, or 16% compared to Q2 of last year, which was largely due to the addition of Plastiq in Q3 of 2023. However, on a sequential quarterly basis, salary and benefits remained flat due to our continued focus on expense discipline. We finished the quarter with approximately 990 employees, which is compared to approximately 980 at the end of Q1, 2024, and 930 at the end of Q2 of last year. SG&A of $11.2 million increased by less than $450,000 from $10.8 million in Q2 of 2023, and was relatively flat with the $11 million in the first quarter of this year. Depreciation and amortization of $15.2 million for the quarter decreased by $2.7 million from last year, but is comparable to D&A in Q1 of this year and is consistent with our quarterly expectations for the balance of this year. Moving to the next slide, Adjusted EBITDA for the quarter was $51.6 million, which is another new quarterly record for Priority and was an increase of almost 26% from $41.1 million in Q2 of 2023, and an 11% sequential increase from $46.3 million in Q1 of this year. Interest expense of $21.7 million for the quarter increased $3.9 million from Q2 2023 levels as a result of acquisition-related debt increases during Q3 of last year, combined with the broader recapitalization we closed in Q2 of this year. As seen on page 13 and discussed on our Q1 earnings call, we refinanced our debt during the quarter on more favorable terms and also upsized the credit facilities with the excess proceeds used for a partial redemption of our preferred stock. The new credit facilities consist of a $70 million revolving credit facility and an $835 million term loan with pricing that is 100 basis points lower than our previous rate. Proceeds from the new term loan were used to refinance the prior senior debt, pay related fees and expenses, and redeem $170 million of the preferred stock, including $3.7 million of accrued but unpaid dividends. The net impact of the refinancing results in over $6 million of annualized free cash flow improvement, as we lower the cash dividends on the preferred stock and pay a lower interest rate on the debt, but pay that lower rate on a larger quantum of debt. Further, the related reduction in dividends on the preferred stock results in a $22 million annualized increase in net income available to common shareholders. As we move through the back half of the year, we will continue to evaluate our capital structure while seeking ways to further optimize our balance sheet and cost of capital. From a liquidity standpoint, we ended the quarter with all $70 million of borrowing capacity available under our new revolving credit facility and $34.6 million of unrestricted cash on the balance sheet. For the LTM period ending June 30, adjusted EBITDA of $187.5 million represents over $10 million of sequential quarterly growth from $177 million at the end of Q1. Preferred stock on our balance sheet totaled $105.7 million at June 30, net of $5.9 million in unaccreted discounts and issuance costs. The second quarter preferred dividend of $8.4 million included $5.1 million paid in cash and $3.4 million of a PIK component. As I mentioned earlier, $3.7 million of the dividend was accrued and paid in conjunction with the May refinancing. It's important to note that the refinancing closed mid-quarter, so the go-forward dividend on the lower amount of preferred stock will be closer to $4.8 million in Q3, with increases from there based on the PIK component. Before turning the call back over to Tom for his closing comments, I'd like to further address our revised financial guidance for the full year. As Tom noted in his opening remarks, we have narrowed our revenue and adjusted gross profit full year guidance to the low end of the range that we originally established in our earnings call in March of this year. However, we are raising our adjusted EBITDA guidance to a new range of $196 million-$200 million. I'm sure everyone has already done the quick math to figure out that if we just repeat the first half of the year in Q3 and Q4, we'll meet the new adjusted EBITDA guidance. However, there are a couple factors that will result in increased operating expenses in Q3 and Q4. First, we became an accelerated filer at the end of the second quarter based on our public float calculation, so we will incur increased expenses related to SOX 404 compliance. In addition, we continue to migrate certain platforms to the cloud, which will convert certain CapEx items to OpEx, but will have minimal impact on our net cash flow. Those combined expenses will both accelerate in the back half of this year and apply some pressure to adjusted EBITDA, which is why you aren't seeing an even higher range for our revised full year guidance. To be clear, though, we are going to continue to maintain our expense discipline and focus on generating a high flow-through from gross profit to the bottom line. With that, I'll now turn the call back over to Tom for his closing comments. Thank you, Tim. Now that we're a little more than halfway through the year, I'd like to take a minute to highlight where Priority is in its journey. Everything we did over the past several years, from accelerating our investment in our Unified Commerce, payments, and banking infrastructure, to our focus on building countercyclical business lines, to our acquisition of Plastiq a year ago, was done with intention and purpose to provide our customers with an elegantly delivered experience combining acquiring, payables, and banking solutions on a single platform. Our financial and operating results demonstrate that we've continued to execute with exceptional consistency and a forward-looking vision that resonates with the constituents we serve. Our tech-enabled service platform is delivering on the promise of a financial toolset that can accelerate cash flow and optimize working capital for our partners. The success of our capabilities and style of engagement is evident not only in our organic growth numbers and improving margins that have meaningfully outpaced our peers for several quarters now, but also when talking to our customers and partners. Let me offer some current examples of the unique advantage of our platform that elegantly delivers a suite of embedded payments and banking solutions, which can be smoothly adopted within our customer networks. Since launching Plastiq bill payment in late January with our acquiring partners, run rate processing volumes continue to pick up steam, having grown quarter- over- quarter by 200%. Additionally, Q2 downloads across our POS suite continue to represent approximately 20% of total new processing activity. We continue to activate new distributors, with 35 new resellers executing contracts during the quarter. The growing penetration of our POS tools will increase our mix of recurring SaaS revenue, improve merchant loyalty, and continue to open additional paths for banking and payables product adoption that increase margin per merchant. As previously mentioned, our banking solution suite now maintains over $1 billion in average daily balances. Importantly, approximately 25% have been driven by unifying our technology and shared service operations to execute our Unified Commerce vision across our acquiring payables and enterprise business segments, which delivered 50% quarter-over-quarter growth in the number of account holders. Now, lastly, as you may recall, in April, we launched our working capital line of credit offering, Priority Capital, with our partners at Pipe. Since that time, total advances have grown from $360,000 during our Q1 beta period to nearly $4 million in quarter two. Our working capital solutions are well positioned to accelerate as we roll out more streamlined, integrated solutions for customers to request or advance from within their MX Merchant acquiring app, and then receive those funds directly into their Passport banking account. The cumulative success of these ongoing initiatives represent continued upside to our projections. I offer these successes to reinforce that Priority's technology and operations are built for the future and executing consistently on our mission to deliver that thriving ecosystem of financial solutions to accelerate cash flow and optimize working capital for businesses. We're delivering this message as we broaden the Unified Commerce conversation, and it resonates with current and prospective customers alike. Before wrapping up, I want to thank all of my colleagues at Priority who continue to execute our Unified Commerce vision and for striving to enhance our industry-leading offering every day. Your dedication to continued improvement is clear in everything you do, providing our customers a constant reminder that they made the right choice to partner with Priority. Lastly, we greatly appreciate the ongoing support of our investors and analysts, and for those in attendance who are new to Priority, for taking the time to participate on today's call. Operator, we'd now like to open the call for questions. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then two. Our first question comes from Tim Switzer with KBW. Please go ahead. Hey, good morning. Thank you guys for taking my question. Absolutely, Tim. Absolutely, Tim. Can we touch on the recapitalization real quick? I believe most of that was accomplished in May, so the full run rate impact, I don't believe was in Q2 results. So what's the incremental impact to Q3? And if I remember what you guys said last quarter, I think the preferred dividend would be around $4.7 million in Q3. Is that still the right number? It is, yeah. I think we're calling it 4.8 at this point, based on the final balance on the pref, but on a go-forward basis, we should be running at $4.8 million a quarter total preferred dividend. You know, about $2 million of that's PIK, and the other 2.8 or so is cash, and then obviously, that PIK component will grow over time. Okay, perfect. And then could you guys talk about the expense outlook? You mentioned an acceleration due to a few different items in the back half of this year. What's the pace of that? Should it be like even acceleration in Q3 and Q4? And then what does that mean for 2025? Should there be, you know, continued investments on top of those that we should expect? Just would like some more color there, please. Sure. Yeah, I think it'll be relatively evenly spread between Q3 and Q4, maybe a 60/40, you know, split there with, you know, heavier balance towards Q4, just given some of the timing of the, you know, audit process and some of the SOX 404 aspects of it. And then as you think about next year, you know, that should normalize, right? We're not going to see a further acceleration of those costs going into next year. Great. Okay, that's good to hear. If I could get one more, too. You kind of mentioned how the enterprise business is a little countercyclical to the macro environment, but you know, what kind of impact would you expect to the rest of the business and just the company broadly, if we had a bit of an economic slowdown? And then do interest rates factor into that at all, one way or the other? Thank you. Sure. Yeah, I can answer those. Maybe I'll go in reverse. So if you think about interest rates, yeah, obviously, we benefit on one side with the balances we have and putting those into permissible investments, which are largely, you know, earning income at, you know, roughly Fed Funds or SOFR- type rates. And then on the flip side, obviously, we have the interest expense on the debts as well as the cash portion of the preferred dividend. You know, if you look at those balances, we're almost perfectly hedged right now. So if there's a decrease in rates, depending on what the Fed does in the balance of the year, there's almost zero impact on free cash flow. There's a roughly $600,000 per quarter impact to EBITDA for every 25 basis points of rate cuts. But again, zero impact to cash flow, again, we're hedged on the, on the debt side there. And then more broadly, as you think about the economy, and going into, you know, next year, if there is a hard landing and we start to see some softness, you know, I think we'll see some impact on the SMB side, but I feel like we're able to continue to grow, and, you know, offset that decline you may see, you know, within a broader macro environment, because, you know, we're continuing to maintain very high retention rates with our existing, you know, reselling partners, maintaining good retention rates with our merchants. You know, we've seen some impact this year and last year, candidly, from same- store sales. But as we think about our retention rates and what we can control, those have maintained very steady levels, but you have seen some impact from same- store sales. So, you know, that could have another impact next year, but I think we'll continue to grow through that. Great. Thank you, guys. One other, one other point you may just wanna, you know, take a peek at. If you go look at, volume growth across Mastercard and Visa, and then look at our volume growth, you'll see we're winning market share in, the acquiring segment, relative to total volume. So, given the tool set we're rolling out now, we, you know, across, some new segments in hospitality, in salon, in construction, we feel pretty optimistic we can continue to grow the market share there, which would, of course, you know, offset some of the potential recessionary softness, in spending, if it were to emerge. Okay, that's really helpful. Thank you, guys. The next question comes from Jacob Stephan with Lake Street. Please go ahead. Hey, guys. Thanks for taking my questions. Congrats on the quarter. Maybe if you guys could just help us kind of piece out, you know, obviously, you referenced 59% of adjusted gross profit is from recurring sources or non-transaction- dependent sources. Maybe if you could just kind of help us piece those non-transaction dependencies out of your business, so we can really kind of understand the driving forces between or behind the recurring gross profit growth. Sure, happy to do that. Hey, Jacob. Yeah, so if you think about the revenue and our split, obviously there's transaction volume, right? Bank card volumes, right? That's gonna be, you know, what we consider, you know, recurring, but it's not in our recurring gross profit numbers that I quoted, right? So within the recurring aspect, we have monthly subscription fees and monthly fees that we earn on a regular basis, right? And those are not transaction dependent or volume dependent. We have the income on the permissible investments, that's not, you know, volume or transaction dependent. And then we have, you know, other fees that we generate on a monthly basis from, you know, merchants and resellers as well as, you know, within the enterprise segment. There's a number of different aspects of that that are very subscription-like, as you think about, you know, the software we deploy, and the way we earn revenue across the business. Okay. Got it. That's helpful. And then, obviously, you know, it's over a year here since you guys acquired Plastiq. I'm just curious, do you see any kind of seasonality, you know, factoring in into the back half of the year with the Plastiq? Not as much seasonality. I think what you do see is that, from quarter- to- quarter, you may have some larger enterprise customers come in and, you know, contribute, you know, some meaningful volume. That volume tends to come through at, obviously, a little bit lower margin, given the scale of those customers. And that's, you know, it's a little harder to predict, but, you know, I think we continue to expect those types of customers to use the Plastiq product offering and, you know, continue to contribute in the back half of the year. But not as much seasonality as much as there's maybe some timing differences with some of those larger customers. Okay. And obviously, nice to see the progress on the balance sheet in Q2 here. You took out the majority of the preferred, but you know, obviously, this, the cash balance and the revolver, $70 million revolver isn't quite enough to take out the remaining, but I'm curious how you're thinking about kind of the remaining $106 million of preferred? Yeah. We'll continue to evaluate the balance sheets, and obviously, we look at, you know, a lot of different uses of capital, whether it's, you know, thinking about, you know, acquisitions to grow inorganically or investing in the business to grow organically. We'll also, you know, look at the preferred equity as another use of capital. You know, when we did the recapitalization, you know, we closed at roughly 4.5x leverage. We're already down below 4.25, at the end of this quarter, so we've already seen, you know, a quarter turn of deleveraging just, you know, intra-quarter with EBITDA growth. You know, if you just take the numbers for the balance of the year, and if you just assume the midpoint of EBITDA guidance and assume we don't pay down another dollar of debt from here to the end of the year, you know, you'll be closer to four times leverage. So you can start to do the math to figure out the capacity you have to address the rest of the balance sheet. Okay. Got it. Very helpful. Appreciate it, guys. Thanks, Jacob. This concludes our question and answer session. I would like to turn the conference back over to Tom Priore for any closing remarks. All right. Well, thank you. First of all, thanks, thanks for some of the questions. Just wanna express our appreciation for everyone attending the call, and your interest in Priority and the platform we're, you know, we're building for, you know, we think is the future of commerce. And we'll get back to executing. So thanks, everyone, for your time. Hope everyone has a great weekend. Enjoy the rest of the summer.