Priority Technology Holdings, Inc 8-K, filed Sep 28, 2020
Priority Technology Holdings, Inc. (PRTH)
8-K
2020-09-28
For: 2020-09-22
View Original
Added on
April 12, 2026
About this 8-K
Priority Technology Holdings, Inc filed this 8-K on September 28, 2020, reporting on events of September 22, 2020.
Items reported
- Item 2.01: Completed an acquisition or sale of assets
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
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Item 2.01 Completion of Acquisition or Disposition of Assets
As previously disclosed in a Current Report on Form 8-K filed by Priority Technology Holdings, Inc. (the "Company") on September 1, 2020, Priority Real Estate Technology LLC ("PRET"), a majority-owned and consolidated subsidiary of the Company, entered into an Asset Purchase Agreement (the "Agreement") with MRI Payments LLC and MRI Software LLC (together, "MRI") to sell certain assets from the Company's Real Estate business (the "Real Estate Assets"). In the Agreement, MRI also agreed to assume certain liabilities and obligations from PRET and the Company. The description of the Agreement herein is qualified in its entirety by reference to the entire Agreement attached as Exhibit 10.1 to the Company's Current Report on Form 8-K filed by the Company on September 1, 2020 and incorporated herein by reference.
The transaction contemplated by the Agreement was completed on September 22, 2020 after receiving regulatory approval.
The primary assets sold in the transaction were contracts with customers, an assembled workforce, technology-related assets and Internet domains, which constitutes the business sold. MRI also assumed obligations under an in-place operating lease for office space. These assets were used in PRET's real estate business activities within the Company's Integrated Partners reportable segment.
Gross consideration received by PRET was $180 million. After payments for fees, expenses and distributions to the non-controlling interests of PRET, the Company received net cash consideration of approximately $123 million. The Company used this cash to make a $106.5 million principal payment to reduce the outstanding indebtedness under its existing Senior Credit Facility and the remainder is available to fund any taxes due from the gain on the disposal transaction.
Item 7.01 Regulation FD Disclosure
On September 23, 2020, the Company issued a press release announcing the closing of the asset sale that was previously announced on September 1, 2020. The press release contains forwarding-looking statements. A copy of that press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.
Item 9.01 Financial Statements and Exhibits
(b) Pro-Forma Financial Information
The following unaudited pro forma condensed financial statements are based on the Company’s historical consolidated financial statements as adjusted to give effect to the disposition. The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2020 and the year ended December 31, 2019 give effect to the disposition as if it had occurred on January 1, 2019. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2020 gives effect to the disposition as if it had occurred on June 30, 2020.
Priority Technology Holdings, Inc. | |||||||||||
Unaudited Pro Forma Condensed Consolidated Statement of Operations | |||||||||||
For the Six-Month Period Ended June 30, 2020 | |||||||||||
(in thousands, except per share amounts) | |||||||||||
Historical | Adjustments | Notes | Pro Forma | ||||||||
REVENUES | $ | 189,289 | $ | (8,235 | ) | (a) | $ | 181,054 | |||
OPERATING EXPENSES: | |||||||||||
Costs of services | 128,762 | (873 | ) | (a) | 127,889 | ||||||
Salary and employee benefits | 19,685 | (1,047 | ) | (b) | 18,638 | ||||||
Depreciation and amortization | 20,635 | (2,430 | ) | (c) | 18,205 | ||||||
Selling, general and administrative | 12,617 | (2,386 | ) | (d) | 10,231 | ||||||
Total operating expenses | 181,699 | (6,736 | ) | 174,963 | |||||||
Income from operations | 7,590 | (1,499 | ) | 6,091 | |||||||
OTHER INCOME (EXPENSES): | |||||||||||
Interest expense | (21,983 | ) | 2,499 | (e) | (19,484 | ) | |||||
Other income (expense), net | (152 | ) | — | (152 | ) | ||||||
Total other expenses, net | (22,135 | ) | 2,499 | (19,636 | ) | ||||||
Loss before income taxes | (14,545 | ) | 1,000 | (13,545 | ) | ||||||
Income tax benefit | (818 | ) | (50 | ) | (f) | (868 | ) | ||||
Net Loss | $ | (13,727 | ) | $ | 1,050 | $ | (12,677 | ) | |||
Loss per common share: | |||||||||||
Basic and diluted | $ | (0.20 | ) | $ | 0.02 | $ | (0.18 | ) | |||
Priority Technology Holdings, Inc. | |||||||||||
Unaudited Pro Forma Condensed Consolidated Statement of Operations | |||||||||||
For the Year Ended December 31, 2019 | |||||||||||
(in thousands, except per share amounts) | |||||||||||
Historical | Adjustments | Notes | Pro Forma | ||||||||
REVENUES | $ | 371,854 | $ | (11,694 | ) | (a) | $ | 360,160 | |||
OPERATING EXPENSES: | |||||||||||
Costs of services | 252,569 | (1,166 | ) | (a) | 251,403 | ||||||
Salary and employee benefits | 42,214 | (873 | ) | (b) | 41,341 | ||||||
Depreciation and amortization | 39,092 | (4,031 | ) | (c) | 35,061 | ||||||
Selling, general and administrative | 30,795 | (3,340 | ) | (d) | 27,455 | ||||||
Total operating expenses | 364,670 | (9,410 | ) | 355,260 | |||||||
Income from operations | 7,184 | (2,284 | ) | 4,900 | |||||||
OTHER INCOME (EXPENSES): | |||||||||||
Interest expense | (40,653 | ) | 4,322 | (e) | (36,331 | ) | |||||
Other income (expense), net | 710 | — | 710 | ||||||||
Total other expenses, net | (39,943 | ) | 4,322 | (35,621 | ) | ||||||
Loss before income taxes | (32,759 | ) | 2,038 | (30,721 | ) | ||||||
Income tax expense | 830 | 491 | (f) | 1,321 | |||||||
Net Loss | $ | (33,589 | ) | $ | 1,547 | $ | (32,042 | ) | |||
Loss per common share: | |||||||||||
Basic and diluted | $ | (0.50 | ) | $ | 0.02 | $ | (0.48 | ) | |||
Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations
(a) Adjustments reflect the elimination of revenues and costs of services of the disposed assets.
(b) Adjustment reflects the salaries and employee benefits of the assembled workforce transferred to the buyer of the disposed assets.
(c) Adjustment reflects the amortization expense for the disposed intangible assets.
(d) Adjustment reflects direct expenses associated with the disposed assets.
(e) Adjustment reflects interest expense, origination expenses, and amortization expense for deferred financing costs and discount associated with the $65.0 million of debt financing used in March 2019 to acquire the disposed assets.
(f) Provision for income taxes related to the pre-tax operating income and interest expense associated with the disposed business.
Priority Technology Holdings, Inc. | |||||||||||
Unaudited Pro Forma Condensed Consolidated Balance Sheet | |||||||||||
As of June 30, 2020 | |||||||||||
(in thousands) | Historical | Adjustments | Notes | Pro Forma | |||||||
ASSETS | |||||||||||
Current Assets: | |||||||||||
Cash | $ | 5,854 | 16,498 | (i) | $ | 22,352 | |||||
Restricted cash | 45,146 | 996 | (i) | 46,142 | |||||||
Accounts receivable, net of allowance | 35,332 | (878 | ) | (g) | 34,454 | ||||||
Prepaid expenses and other current assets | 2,928 | (94 | ) | (g) | 2,834 | ||||||
Current portion of notes receivable | 1,789 | — | 1,789 | ||||||||
Settlement assets | 327 | — | 327 | ||||||||
Total current assets | 91,376 | 16,522 | 107,898 | ||||||||
Notes receivable, less current portion | 4,826 | — | 4,826 | ||||||||
Property, equipment and software, net | 24,127 | (382 | ) | (g) | 23,745 | ||||||
Goodwill | 109,515 | (2,683 | ) | (h) | 106,832 | ||||||
Intangible assets, net | 168,751 | (63,293 | ) | (g) | 105,458 | ||||||
Deferred income taxes, net | 50,586 | (5,956 | ) | (j) | 44,630 | ||||||
Other non-current assets | 518 | — | 518 | ||||||||
Total assets | $ | 449,699 | $ | (55,792 | ) | $ | 393,907 | ||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | |||||||||||
Current liabilities: | |||||||||||
Accounts payable and accrued expenses | $ | 19,953 | 8,234 | (g) (j) | $ | 28,187 | |||||
Accrued residual commissions | 22,434 | — | 22,434 | ||||||||
Customer deposits and advance payments | 2,882 | — | 2,882 | ||||||||
Current portion of long-term debt | 11,724 | — | 11,724 | ||||||||
Settlement obligations | 39,167 | — | 39,167 | ||||||||
Total current liabilities | 96,160 | 8,234 | 104,394 | ||||||||
Long-term debt, net | 480,639 | (106,500 | ) | (k) | 374,139 | ||||||
Other non-current liabilities | 6,398 | (34 | ) | (g) | 6,364 | ||||||
Total long-term liabilities | 487,037 | (106,534 | ) | 380,503 | |||||||
Total liabilities | 583,197 | (98,300 | ) | 484,897 | |||||||
Stockholders' deficit: | |||||||||||
Common stock | 68 | — | 68 | ||||||||
Additional paid-in capital | 4,569 | — | 4,569 | ||||||||
Treasury stock, at cost | (2,388 | ) | — | (2,388 | ) | ||||||
Accumulated deficit | (141,401 | ) | 48,162 | (i) (j) | (93,239 | ) | |||||
Total Priority Technology Holdings, Inc. stockholders' deficit | (139,152 | ) | 48,162 | (90,990 | ) | ||||||
Non-controlling interest in a subsidiary | 5,654 | (5,654 | ) | (i) (l) | — | ||||||
Total stockholders' deficit | (133,498 | ) | 42,508 | (90,990 | ) | ||||||
Total liabilities and stockholders' deficit | $ | 449,699 | $ | (55,792 | ) | $ | 393,907 | ||||
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
Dollar amounts in thousands
(g) Remove assets sold to MRI and liabilities extinguished or assumed as follows: $878 for accounts receivable; $94 for prepaid expenses and other current assets; $382 for property, equipment and software, net of accumulated depreciation and amortization; $63,293 for intangible assets, net of accumulated amortization; $196 for accounts payable and accrued expenses; and $34 for other deferred lease obligation. Net carrying value of $64,417.
(h) Remove estimated carrying value of goodwill in the Integrated Partners reporting unit that was associated with the disposed assets, which constituted a business on the disposal date under ASU 2017-01.
(i) $180,000 of proceeds from buyer for disposition transaction less $584 estimated working capital adjustment distributed as follows: $996 to fund escrow bank account; $4,619 for transaction costs; $5,654 cash redemption of the carrying value of a non-controlling interest in PRET; and $45,149 other cash distributions to non-controlling interests of PRET as a capital event distribution. Net $122,998 cash retained prior to the $106,500 debt principal payment.
(j) Pro forma pre-tax gain of $106,897 at June 30, 2020 determined as follows: $180,000 gross proceeds received from MRI less $584 for working capital adjustment; less $4,619 for transaction expenses paid and $800 accrued; less net assets with a carrying value of $64,417 sold to MRI; and less $2,683 of goodwill removed and associated with the disposed assets which constituted a business on the disposal date under ASU 2017-01. Pre-tax pro forma gain of $106,897 reduced by $45,149 attributable to non-controlling interests and by $13,586 for pro forma income tax expense on the pro forma pre-tax gain attributable to the Company of which $7,630 is classified as currently payable and $5,956 is classified as deferred. This pro forma gain and its pro forma income tax effect are subject to subsequent adjustments through the September 22, 2020 date of sale. The pro forma gain has not been considered in the pro forma condensed consolidated statement of operations as it is considered to be nonrecurring in nature.
(k) Reflects a $106,500 principal payment to reduce outstanding indebtedness under the Company's existing Senior Credit Facility.
(l) Reflects redemption of non-controlling interests with a carrying value of $5,654 and $45,149 of pro forma gain attributable and distributed to non-controlling interests.
The information in this Current Report on Form 8-K, including exhibits, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report on Form 8-K shall not be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended.
(d) Exhibits – The following exhibits are furnished as part of this Current Report on Form 8-K.
Exhibit
Number Description
104 The cover page from this Current Report on Form 8-K, formatted in Inline XBRL
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: September 28, 2020 | ||
PRIORITY TECHNOLOGY HOLDINGS, INC. | ||
By: /s/ Michael Vollkommer | ||
Name: Michael Vollkommer | ||
Title: Chief Financial Officer | ||
Exhibit 99.1
MRI Software Completes Acquisition of RentPayment™ Business from Priority Technology Holdings, Inc.
Under agreement, Priority to continue providing payment infrastructure and processing
(Alpharetta, GA and Solon, OH) -- September 23, 2020) – MRI Software (“MRI”), a global leader in real estate software solutions, and Priority Technology Holdings, Inc. (NASDAQ: PRTH) (“Priority”), a leading provider of merchant acquiring, integrated payment software and commercial payment solutions, have completed the previously announced sale and acquisition of Priority’s RentPayment business, which is comprised of the RentPayment.com™, StorageRentPayment.com™ and DuesPayment.com™ real estate payment brands. Going forward, Priority will provide ongoing payment infrastructure as a service and processing to the new platform at MRI.
“I am thrilled to welcome the pioneering RentPayment solution and team, which bring more than two decades of deep payments expertise and success to the MRI family,” said Patrick Ghilani, Chief Executive Officer of MRI Software. “This acquisition will significantly scale and advance our global payments offering, allowing our MRI Living clients in the residential, affordable, and public housing sectors to benefit from broader payment options and channels. RentPayment will be the go-forward brand in all our global regions and submarkets.”
Founded in 1999, the RentPayment business pioneered real estate payments with the industry’s first comprehensive payment platform for consumer rent. Today, the RentPayment platform serves some 2,900 clients across the U.S. multi-family, single-family, storage and HOA markets. The RentPayment, DuesPayment, and StorageRentPayment brands provide a feature rich suite of payment solutions, including resident rent payments and security deposits via web and mobile to landlords and property managers.
Existing clients of the RentPayment platform will continue to receive uninterrupted service led by Copley Broer and Jamey Rosamond, who helped build the platform within Priority. MRI remains committed to providing and supporting payments solutions for all organizations, regardless of their property management software. Similarly, MRI
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Exhibit 99.1
remains committed to providing choice and flexibility for its clients through an open and connected ecosystem that includes multiple payments partners.
“We are excited to expand our RentPayment partnership with MRI as its payment operations and processing engine,” said Tom Priore, Chairman and Chief Executive Officer of Priority. “The RentPayment business and its investment in renter engagement is a great fit for MRI’s open and flexible platform, and we are eager to focus our resources to drive adoption of the expanding MRI payment offering in the US and globally,” added Priore.”
Kirkland & Ellis LLP acted as MRI Software’s legal counsel for the transaction.
About MRI Software
MRI Software is a leading provider of innovative real estate software applications and hosted solutions. MRI’s comprehensive and flexible technology platform coupled with an open and connected ecosystem meets the unique needs of real estate businesses – from property-level management and accounting to investment modelling and analytics for the global commercial and residential markets. A pioneer of the real estate software industry, MRI develops lasting client relationships based on nearly five decades of expertise and insight. Through leading solutions and a rich partner ecosystem, MRI gives organizations the freedom to transform the way communities live, work and play while elevating their business and gaining a competitive edge. For more information, please visit mrisoftware.com.
About Priority Technology Holdings, Inc.
Priority is a leading provider of merchant acquiring, integrated payment software and corporate payment solutions, offering unique product and service capabilities to its merchant network and distribution partners. Priority’s enterprise operates from a purpose-built payments infrastructure that includes tailored customer service offerings and bespoke technology development, allowing the Company to provide end-to-end solutions for payment and payment-adjacent software. Additional information can be found at www.PRTH.com.
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about future financial and operating results, our plans, objectives, expectations and intentions with respect to future operations, products and services, and other statements identified by words such as “may,” “will,” “should,” “anticipates,” “believes,” “expects,” “plans,” “future,” “intends,” “could,” “estimate,” “predict,” “projects,” “targeting,” “potential” or “contingent,” “guidance,” “anticipates,” “outlook” or words of similar meaning. These forward-looking statements include, but are not limited to, our 2020 outlook and statements regarding our market and growth opportunities. Such forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive risks, trends and uncertainties that could cause actual results to differ materially from those projected, expressed, or implied by such forward-looking statements. These forward-looking statements may include, but are not limited to, statements about the effects of the COVID-19 pandemic on our revenues and financial operating results. Our actual results could differ materially, and potentially adversely, from those discussed or implied herein.
We caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. You should evaluate all forward-looking statements made in this press release in the context of the risks and uncertainties disclosed in our SEC filings, including our Annual Report on Form 10-K and
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Exhibit 99.1
our Quarterly Report on Form 10-Q filed with the SEC on March 30, 2020 and August 14, 2020, respectively. These filings are available online at www.sec.gov or www.PRTH.com.
We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences we anticipate or affect us or our operations in the way we expect. You are cautioned not to place undue reliance on forward-looking statements as a predictor of future performance. The forward-looking statements included in this press release are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.
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