PRTH - NASDAQ

Good morning, and welcome to the Priority Technology Holdings Second Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask question. [Operator Instructions] 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 we give our prepared remarks, I would like to remind all participants that our comments today will include forward-looking statements which involve a number of risks and uncertainties that may cause actual results to differ materially from our forward-looking statements. The company undertakes no obligation to update or revise the forward-looking statements whether as a result of new information future events or otherwise. We provide a detailed discussion of the various risk factors in our SEC filings and we encourage you to review these filings. Additionally, we may refer to non-GAAP measures, including but not limited to EBITDA and adjusted EBITDA during the call. 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 now turn the call over to our Chairman and CEO Tom Priore.

Thank you, Chris, and thanks for everyone for joining us for our second quarter 2023 earnings call. I'd like to start today by walking through some of the trends we're currently seeing in the business, and then provide an overview of noteworthy developments at Priority, including our exciting recent acquisition of Plastiq. Consistent with what we saw in the first few months of the year, during the second quarter we continued to execute in SMB acquiring, and delivered strong results in both B2B and enterprise payments. We remain committed to our unified commerce vision combining payments and banking on a single platform, accelerated by the strength of our countercyclical business lines that were positioned to benefit from higher interest rates, and weakening macroeconomic trends. We're equally pleased that our third quarter performance remains on a similar trajectory to what we have seen in the first half of the year. As you saw in our announcement earlier today, we continued our positive momentum with a strong second quarter. Our Q2 revenue organically increased 10% from the prior year to $182.3 million. This led to a 20% increase in adjusted gross profit to $67 million and a 21% improvement in adjusted EBITDA to $41.1 million. Adjusted gross margin of 36.8% increased 330 basis points from the prior year quarter, highlighting the strong operating leverage of our purpose-built platform. On a year-to-date basis, revenue has increased 15% to $367.3 million, driving a 21% gain in gross profit to $130.1 million. Combined with a 180 basis point increase in adjusted gross profit margin in the first half of 2023 to 35.4% we achieved a 23% increase in adjusted EBITDA thus far in 2023. As you may have noted on the first page of the supplemental slides, we anticipate that our strong first half performance and established trends in our business channels will continue. As a result, we remain confident in our ability to deliver consistent double-digit top line and bottom line growth, projecting full year revenue to increase to $765 million to $780 million, which includes Plastiq's contribution. And more significantly, we're reiterating our previous adjusted EBITDA guidance of $160 million to $165 million for 2023, despite the drag on EBITDA in the back half of the year from our recent acquisition of Plastiq, which will require some investment to bring the division to profitability. These expected results are a testament to the value of our offering and the strength of our performance. For those of you who are new to Priority, slide 6 highlights the architecture of our proprietary unified commerce platform that combines robust payments and banking functionality, to monetize the merchant and partner networks we serve. Our growing customer base combined with current market conditions, continue to reinforce our belief, that systems combining features of both payments and banking to accelerate cash flow and distribute funds in multiparty environments will be critical as businesses put greater demands on software and payment solution providers. We are committed to meeting our customers' growing demand by refining the experience for our partners, to make working with Priority seamless and simple. Partners can choose the application that best fits their business whether that is a small business operator choosing from the MX Merchant, POS suite and FI or middle market customer adopting CPX or now Plastiq for automated payables or an enterprise partner connecting to us via our API, they can select the Passport financial tools that best fit their needs and begin to move money. We continue to stay on the cutting-edge of payment technology by innovating our SaaS payment suite of services and Passport commerce engine to meet the evolving needs of our customers. As further evidence of this, as of the second quarter we had 13 program managers fully integrated on Passport and nine in the process of implementation with a robust prospect pipeline and have continued to execute the rollout of our MX Merchant POS suite adding 122 new customers from our direct channels during Q2 with 44 independent reselling partners who joined our MX Merchant POS distributor program which went live in July waiting in the wings. In addition to the continued strength of our legacy business, last week we announced that we have closed our acquisition of Plastiq, a highly complementary B2B payments technology platform that will quickly benefit from our operational and revenue synergies that can be captured on our unique payments infrastructure. Plastiq provides businesses with instant access to working capital solutions that improve cash flow, while automating and enabling control over all aspects of accounts payable and receivables. By adding Plastiq, our combined B2B offering will provide businesses, supplier and buyer funded working capital solutions that optimize their most important vendor relationships while maximizing cash flow flexibility to operate and grow. The addition of Plastiq is another example of how Priority is building a differentiated unified commerce platform for our business and integrated software clients. Our customers can choose the payment acceptance and automated bill payment tools now including Plastiq that best fit their business to optimize, their cash flow management all in one place on our native payments and banking as a service platform. We've proven our ability to create value for our shareholders and customers through strategic acquisitions in the past and we see the same value-creating opportunity with the addition of Plastiq. We look forward to welcoming Plastiq's team into the Priority family and integrating the businesses over the next several months to realize the opportunities to grow our B2B customer base through the benefits of our combined offering and the power of our Passport commerce engine. I'm happy to answer any questions you might have on Plastiq during the Q&A portion of the call. But at this point, I would like to hand it over to Tim who will provide further insights into our segment-level performance during the second quarter along with current trends in each that factored into our guidance for the full year.

Thank you, Tom, and good morning everyone. As I review the second quarter financial results including the segment-level contribution to the consolidated results, please refer to the supplemental slides or the MD&A for further details. 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 what we saw in the first quarter, our strong financial performance in the second quarter of 2023 was driven by the diverse mix of our business segments which continued to demonstrate the ability of Priority to perform in a variety of market conditions. Before I go into the segment-level results, I want to provide a few other key metrics as it relates to the second quarter consolidated results. For the quarter, bankcard dollar volume across all segments was $15.9 billion in line with Q2 of last year. If you include ACH debit and other volumes, the total payments volume for the quarter was $30 billion which is a 5% increase from $28.6 billion in 2022. On a trailing 12-month basis at the end of Q2, bankcard dollar volume was just over $63 billion and total payments volume was almost $117 billion. If you look at the comparable trailing 12-month period for last year those same volumes were $58 billion and just over $106 billion, which represent just under 9% and just over 10% year-over-year growth respectively. Again those volume metrics are for the consolidated business. I'll now go into more detail on each of the business segments results for the second quarter. Let's start with SMB payments on slide 9. For the second quarter, SMB generated revenue of $147.9 million, which was a 4% or $5.4 million increase over the prior year's second quarter. This growth was driven by a combination of higher merchant card fees and 10% growth in bankcard transaction count to 180.3 million transactions, which offset the 2% decline in bankcard dollar volume to $15.1 billion. Bankcard dollar volume in the SMB segment was negatively impacted during the quarter by a long-standing reseller partner implementing a planned diversification of their new merchant boarding activity. While we continue to have a strong relationship with this reseller, we also expect that the diversification and boarding activity will continue through 2023. We anticipate though that the quarterly impact will lessen in future quarters. We averaged just over 257,000 merchants during the quarter, which is 4% higher than Q2 of 2022. For the quarter, new monthly merchant boards averaged just under 4,000 compared to an average of 4,500 per month in the second quarter of 2022. Consistent with my comments on bankcard dollar volumes, merchant boarding trends were also negatively impacted during the quarter by the reseller partner's diversification activity. Continuing with SMB profitability on the next page. Adjusted gross profit for the quarter was down by $200,000 to $35.3 million compared to last year. The 1% year-over-year decline in comparative quarterly gross profit was negatively impacted by a nonrecurring $1 million billing true-up for certain assessments by one of our sponsor banks. If you exclude that impact, gross profit would have increased by $800,000 in the quarter. Lastly for SMB, quarterly operating income of $11.5 million, represents a $2.5 million decline from the prior year second quarter. Consistent with my comments on gross profit, the comparative quarterly operating profit on a year-over-year basis was negatively impacted by the timing of the billing true-up from one of our sponsor banks. In addition, salaries and benefits in SMB were $1.7 million higher in Q2 compared to last year based on an increase in head count in the second half of 2022. Moving to B2B payments. Revenue of $3 million was a decrease of 44% from the prior year as we continue to anniversary the previously discussed wind-down of the Managed Services business. We'll continue to see a year-over-year impact from Managed Services in Q3 before that comparative headwind goes away in Q4. And looking separately at the CPX business that business grew by 11% in Q2 compared to both last year's second quarter and also sequentially versus Q1 of this year. Looking ahead to Q3, the B2B segment will include the results of Plastiq for the months of August and September. So we'll include details on that impact for you on our next quarterly earnings call. With respect to B2B's profitability on slide 12, adjusted gross profit declined to $2.3 million as a result of the Managed Services wind down, but adjusted gross profit margins continue to increase as the lower margin Managed Services business rolls off. For the quarter, gross margins were 78.8% compared to 59.7% last year and 71.4% in Q1 of this year. The B2B segment was at breakeven from an operating income standpoint during the quarter, which was down from $700,000 in Q2 last year but was an improvement from an $800,000 operating loss in Q1 of this year. Moving to the Enterprise segment on the next page. Q2 revenue of $31.4 million was an increase of almost $13 million or 69% from $18.6 million in Q2 of 2022. The themes from the past several quarters have continued as favorable trends in new monthly enrollments and increase in the number of billed clients, growth in deposit balances and the higher interest rate environment have all contributed to the strong revenue growth. As shown on the next slide, adjusted gross profit for the Enterprise segment increased by 72% to $29.3 million, while adjusted gross profit margins expanded by 200 basis points to just over 93%. Operating income of $16.1 million for the Enterprise segment also benefited from operating leverage in the business as exemplified by profit growth significantly outpacing revenue growth for the quarter. Moving on to corporate costs on slide 15. Operating expenses totaled $47.9 million for the quarter, an increase of 12% from the prior year. Salaries and benefits of $19.1 million increased 21% from Q2 of last year, but was consistent with our spend during Q1 as we continue to maintain our expense discipline after investing in the business and the team during 2022. We finished Q2 with approximately 940 employees, including 346 at our India Development Center, which is compared to approximately 870 at the end of Q2 in 2022. SG&A of $10.8 million increased 15% from $9.3 million in Q2 2022, while depreciation and amortization of $18 million for the quarter increased modestly from a comparable quarter last year and was consistent with our Q1 levels. Moving to the next slide. Adjusted EBITDA for the quarter was $41.1 million which was an increase of 21% from $33.9 million in Q2 of 2022. Interest expense of $17.8 million for the quarter increased $5.3 million from Q2 2022 levels as a result of the impact of the rising interest rate environment. As mentioned on prior calls, we have a natural hedge in place for the floating rate debt given the interest income we generate in our deposits. At the end of Q2 that natural hedge covered over 115% of the debt as deposit balances grew throughout the quarter. If you include the floating rate component of our preferred stock, the natural hedge at the end of Q2 covered 83% of our floating rate liabilities. While not listed on the slide for the LTM period ended June 30 adjusted EBITDA of $153.6 million represents over $7 million of growth from $146.4 million at the end of Q1. Moving to the outstanding debt slide on page 17. Our debt levels have continued to decline and we finished the quarter with $612.7 million of gross debt which is down from $615.7 million at the end of Q1. Net debt of $595.1 million is also down by $4.7 million compared to the balance at the end of Q1. From a liquidity standpoint we ended the quarter with $49.5 million of borrowing capacity under our revolving credit facility which includes a $15 million increase to the facility as part of an amendment that we closed on June 30. In addition, we finished with $17.6 million of unrestricted cash on the balance sheet at quarter end. Subsequent to quarter end and in conjunction with the closing of the Plastiq acquisition we increased the capacity on our revolving credit facility by an additional $10 million which brought the total facility size to $65 million. On slide 18, the preferred stock on our balance sheet totaled $240.7 million at June 30 and is net of $19.5 million of unaccreted discounts and issuance costs. The second quarter preferred dividend of $11.8 million is comprised of approximately $6.5 million paid in cash and $4.5 million of a PIK component. This is supplemented on our income statement with the accretion of discounts and issuance costs of just over $800,000. Before turning the call back over to Tom, I wanted to address our revised revenue adjusted EBITDA guidance for the full year. Based on the combination of first half results, our expectations for the second half of 2023 and the impact of Plastiq, which will require some investment over the next couple of quarters to reach profitability we continue to forecast adjusted EBITDA in the range of $160 to $165 for the full year. We are increasing our revenue guidance range to $765 million to $780 million. With that, I'll now turn the call back over to Tom for his closing comments.

Thank you, Tim. As we wrap up our review of the second quarter I wanted to reinforce one of the more important qualities of Priority referenced in last quarter's earnings call that we believe will continue to propel us and differentiate us from others in the fintech and payment sector. During that discussion I described Priority as an organization that endeavors to operationalize vision. This is to say that we make dedicated effort as an organization to embed into our people and our workflow, a mentality that invests our financial and human capital consistently and cost efficiently to stay at the forefront leading both industry and customer trends well ahead of our competitors. We would submit that there's a growing body of evidence to support our capabilities. Consider that as early as 2020, we positioned Priority to build out countercyclical business lines and focus on sectors that were early in their conversion from non-digital to digital payment methods to insulate our stakeholders from the impending risk of declining growth trends and rising inflation. That vision led to strong results through the height of COVID as well as the sale of part of our real estate technology holdings in a transaction with MRI Software who remains a key integrated partner. That monetization resulted in approximately a 120% return on capital in a little over a year and the paydown of $106 million in debt. Similarly in 2021, we had already initiated a refined strategy to add banking as a service through the Finxera acquisition and have since developed its limited roots into our high-growth Passport collect store and send engine well ahead of today's fast-growing demand for embedded finance solutions. The guiding thesis driving our vision and innovation is that modern commerce demands speed and flexibility to move money that can only be achieved through a combination of payments and banking features that are harmonized on a single platform for all payment routes and the real-time movement posting and settlement of money as businesses of all sizes look to accelerate cash flow and optimize working capital, particularly in today's rising interest rate environment. We are confident that our acquisition of Plastiq will be another example of our operationalized vision and demonstrate why Priority is uniquely positioned to deliver the solutions businesses need. At Priority businesses can collect their sales and accounts receivables on our merchant acquiring applications, quickly fund their money to their linked Passport accounts and send it to vendors through our supplier-funded CPX or buyer-funded Plastiq payment applications. Simply put, Priority is a one-stop shop for businesses to accelerate cash flow maximize our working capital options to monetize payment flows that grow their business. We appreciate you all taking the time to participate in today's call and the ongoing support of our investors and analysts. Operator, we'd now open the call for questions.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Brian Kinstlinger of Alliance Global Partners. Please go ahead.

Hey. Good morning. Thanks so much for taking my questions. You talked about this merchant acquiring was a bit weaker in the last two years or so, and in fact total merchant count was down sequentially for the first time in my memory. Can you go a little bit more into the detail of the impact from the resell partner? Did this partner exclusively resell Priority payment solutions and now is sending merchants -- it acquires to a variety of processors? I was just a little bit confused.

Yes, sure. So Brian it's been yes a long-standing partner and they were exclusive with Priority for many years. And look, they've reached a scale that and also diversified some of their offering in products that -- look, if I were managing their business and I've expressed this to them, it makes sense for them to have some diversification. So they're balancing that. Still a long-standing strong partnership. And we anticipate that there's going to be some other areas of prospective growth with them, because of the nature of the banking and automated payable solutions we have as those start to evolve into their network. But step one is for them to have some diversification and boarding. That's underway. It's been known and we'll continue to build on the strong historical partnership we have. But that is the driver of some of the flattening that you see. If we were to, let's say, look at them extract them from our analysis, I think, Tim can share with you some of the stats that it actually would have increased year-over-year. So go ahead, Tim.

Yes. I think, if you extracted that reseller partner Brian and looked at just the volume growth we would have had 3% volume growth in the quarter compared to the 2% volume decline that we did show on a consolidated basis. And then, yes, your average merchant count was flat right because of that, right? So I think revenues without that impact would have been up 12% for SMB, right? So obviously as we've talked about in the past some of our larger reseller partners are they generate a lot of revenue, but the gross profit impact isn't as great. So we would have had a bigger revenue impact without that reseller partner diversifying the boarding. But the gross profit impact would have been less, right? So I think we're confident as we mentioned in our prepared remarks that in the future quarters we'll see a little bit less of an impact from the diversification throughout the balance of the year.

Okay. And then as it relates to Plastiq, how do you see that helping with the adoption and/or growth trajectory of CPX?

Well let's just talk at the adoption of I'll call it automated payables generally is the way we think about it, right? So if you look at our Commercial and B2B segment right those are designed those products are designed for customers to pay vendors. So for buyers of goods and services to pay their vendors to optimize their supply chain relationships and their working capital. With the addition of Plastiq, now those customers have the option to use CPX where the supplier absorbs the cost of a digital payment, but also to use Plastiq really within CPX as a payment method to use their existing credit that has been issued by their bank to make payments to suppliers who do not accept credit card. So let me give you a mathematical example of a way to look at it. So hey, let's just say, I'm a supplier paying $10000 in bills. And it's a -- qualifies for I'm going to take you into the weeds a little bit Brian on the way interchange works. But just Level 2 interchange which is typically achievable on a B2B transaction clears just around 2%, let's say, add a modest amount of fees for processing and you're looking at 2.25% of total cost to pay those $10,000 in bills. But they have a rewards card that pays them cash back. And let's just keep the math simple of 1.25% -- let's call it 1% okay? So my net cost is 1.25%. The standard payment if I use my credit card by the time it shows up on my bill and then I get my 30 days to pay my bill is 56 days. Now most larger companies actually have more time than that but let's use this 56-day standard for our mathematical example. So my net cost of the 2.25% minus 1% cash back is 1.25%. Well at the current interest rate 56 days of cash that I don't have to pay my credit card bill, let's just say even invested in FDIC insured deposits at 5.5% is slightly over 90 basis points, right? So my net cost in working capital, right? You're down around 30-plus basis points over a two-month period annualize that exceedingly low. And you're talking about under a couple of percent in terms of cost of capital if you're doing that every month. So, it's very attractive in this environment, to utilize that credit that's already available to businesses that they may not be maximizing. So, that's very specifically, how we see this being implemented across not just the B2B segment B2B payment segment CPX, but more broadly across the SMB segment of our business where we have nearly 260,000 active customers. And look 70% of small businesses struggle, with working capital. So we think that this is the time for this feature, this product within our broader platform of Unified Commerce, to really come to the fore. And that was a big driver of, why we pursued the acquisition when the asset became available to us.

Got it. I have one last question and I'll get in the queue. It's just back at the payments business, the consumer payments business. Again, if I look at the average ticket size, it's meaningfully down from again, the last many quarters when you could say the economy was weakening. It was not. Is there any different? Is it a weaker consumer, or is pricing coming down? Why would we see the average ticket size be 10% off from where it consistently has been for so many quarters?

Yes, Brian. So I think the main impact there is, some of the volume shifts and thinking about the mix, right? So, part of the volume that declined during the quarter was a much higher ticket right? So, different verticals tend to operate with much higher ticket sizes, professional services and other areas. And some of the volume declines we saw especially, from the large reseller partner came from some of those areas. So that mix shift impacted the average ticket size. But I think if you looked at a kind of same-store sales aspect of kind of thinking about like-kind business, we really haven't seen much of a change in the average ticket size, right? We've seen a little bit of a benefit in certain areas from the inflation in the broader market, but what you're seeing on the average, ticket size across the entire enterprise is really driven by a little bit of a mix shift.

Okay. All right. Thanks so much.

The next question is from Jacob Stephan of Lake Street. Please go ahead.

Yes. Hi, guys. Thanks for taking my questions. So when I look at the B2B segment, do you feel that this business has kind of stabilized, just talking about the base business here around that $3 million level? And how can you see that business expanding? Is it Plastiq becoming more of the -- a bigger part of the package, or what are your kind of growth expectations for the base business here?

No. We see that business growing substantially over the next year. Recognize, that the decline that you're seeing was from a segment of Managed Services that has now fully run off as of this quarter. So the -- and that was largely an outsource services component of the business that look, we really wanted to dedicate more towards the growth opportunities in B2B, with our resources which is why we made that decision. Now the existing pipeline, we already have contracted, we know will create meaningful growth. So that coupled with the Plastiq addition, as well as just our current pipeline in process of contract negotiation and kind of final sales processes, we see that growing a couple of hundred percent over the coming year. On the bottom line...

Jacob, I'll just to put some picture, too. So, yes. So the CPX business, right? So if you think about B2B and separate Managed Services from the CPX business, right that CPX platform grew 11% sequentially from Q1 to Q2, right? So we are seeing growth in that product offering. We will continue to see some comparative headwinds in Q3, right? So the Managed Services business started winding down in late Q3 of last year and was effectively gone in Q4. So it will have a relatively clean quarter, absent Plastiq which obviously will help bridge that next quarter. But from a pure kind of existing B2B business, Q4 this year over last year will be clean with Managed Services really starting to show a lesser impact in Q3 and effectively gone in Q4.

Okay. And then maybe just on the Plastiq acquisition, what kind of operating expense kind of step-up could we see from a full quarter of Plastiq? So, not really Q3, but a full quarter would be Q4. What kind of OpEx uptick would you kind of see from that being in the model?

Yes. From an OpEx standpoint, I think that business is going to be -- it's going to be running at let's call it $5 million a quarter, right of OpEx, which is the Plastiq business itself.

Okay right.

So, if you think about the overall guidance right now and kind of where we've revised, you can kind of think of the revenue change in guidance being largely attributable to Plastiq and the revenue we expect to generate in the last five months of the year. And then, we didn't want to get into the specifics on the EBITDA. But we're comfortable keeping the EBITDA guidance where it is despite a few million dollars of investment we're going to have to make in that business to get to profitability. So, it's going to run at higher OpEx for a short time period as we extract all the cost savings, but we expect to get that business to profitability pretty quickly.

Okay. That's helpful. And then just last one for me here. The Enterprise business, nice to see that significant margin expansion there. It seems like this is really just a pure function of scale being built and now it's all about new enrollments. But what kind of revenue level do you expect you'll kind of need to increase headcount there, or just build out more support in that business?

Expense increase will be marginal and they will not be technology-based. They would maybe be relationship management based or sales. We're seeing phenomenal performance out of that sector. I kind of quoted, the new program managers that have already integrated and consider that we launched this in really in February in earnest. I was ready to start bringing on partners on the program management side and 13 are already live and there's nine in the process of going live and a healthy number thereafter that are in negotiation stage. So, we've -- the rate of adoption is exceeding expectations at this stage.

Okay.

We don't have to add additional people to run at the rate we are right now.

Okay. Got it. Thanks for the color.

Look, you bring up a really good point on. I just want to make this remark for the benefit of everyone on the call. We think the reason why Priority is a unique platform in the space is that, on a single collect store and send call it Shared Services platform, we can produce across SMB acquiring, B2B payments and the Enterprise -- the integrated Enterprise segment. So, it's built in such a way that we can scale without adding people because the platform itself is multifunctional. We've created workflows that come into that engine with common elements across each of those channels. So, we don't need to have redundant stacks of technology or have folks that are exclusively doing one aspect or another, because they're so divergent from an operational perspective. That's the benefit. And we're in the early innings of exploiting that capability. This has not been -- it's been built on rock. It's built to last.

Awesome. Great to hear. Thank you.

[Operator Instructions] The next question is from Hal Goetsch of B. Riley Securities. Please go ahead.

Some more follow-up questions on Plastiq, look at it slide 7 it is a $70 million net revenue run rate and you just mentioned $5 million in OpEx. I'm just trying to make sure I understand the revenue number versus the cost guidance you -- cost information you gave. Is it -- is that $70 million inclusive of like interchange and network fees or pass-through revenues? And really what's kind of the net revenue on a run rate of that business?

Hi Hal, I appreciate you joining. So yes, the revenue model for Plastiq is a little bit different than our revenue model historically a Priority right? So if you think about what they look as revenue they act effectively as the merchant of record, right? So you think about a buyer using their credit card and that cash goes through Plastiq and then ultimately to the supplier with whatever payment modality they want check wire ACH. So with Plastiq as the merchant of record they're booking more of the revenue on a -- like I said what we would consider kind of a gross basis if you compare it to Plastiq's -- Priority's numbers, right? So that does include interchange. And if you start to back all those numbers out we can go through the math. I don't have that right in front of me here on a true kind of net comparable basis, but you'd have to back all that out. But the $25 million plus of guidance we've provided right that's on Plastiq's revenue model, right? So the net impact to us is going to be lower if you looked at kind of an apples-to-apples basis historically how we report our revenue.

Okay. Okay. And from my experience it was a company that -- if you ran out of money because of -- and what they were trying to do an IPO through a spec, I think and it didn't work out. What are some of the things when companies like that get into a situation like that on the cash they're not making investments they're kind of cutting back? What are the things that you're going to have to add back? And can you kind of talk about the magnitude of those things into 2024 -- 2023 and 2024?

Yeah. Look, we've actually -- this approach actually has been very curated. If you look through the filings actually we went into the bankruptcy as the stalking horse bid. So we had a deep understanding of exactly what needed to be done with Plastiq in order to make it successful. It's been a very collaborative approach. In fact, their customers and we made a very conscientious effort to speak to customers and key relationships. So they knew that the idea of the bankruptcy was not, I'll just call it the result of a business actually in this extreme duress as most bankruptcies are but rather as a method of really giving the company an opportunity to reset with a better partner with the appropriate partner. One that had all the resources to actually help it exploit the market position that they had gained in the time they've been in business. So there's nothing we need to add actually from an expense standpoint. Really the effort that we're focused on is taking what exists at Plastiq today which is a very elegant application for businesses of all sizes, to utilize their existing credit more efficiently to optimize working capital and just get it in the hands of all of our customers both in the upmarket B2B segment into our integrated partners and into our SMB customers. And we've been working on that alignment with the Plastiq team, for months.

Great. Thank you.

Yeah. Thank you. Thanks for your question.

This concludes our question-and-answer session. I would like to turn the conference back over to Tom Priore, for closing remarks.

Well, I'd like to thank everyone on behalf of Tim and I, and of course all the dedicated employees at Priority for taking the time to learn more about the current state of our business and how we see the future of fintech and payments. I appreciate everyone's engagement today. I hope everyone has a great remainder of the week. And we look forward to doing this again in the coming months, and sharing more of our successful results. Thanks everyone.