Priority Technology Holdings, Inc (NASDAQ:PRTH) Q4 2019 Earnings Conference Call - Final Transcript

Mar 31, 2020 • 11:00 am ET

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Priority Technology Holdings, Inc (NASDAQ:PRTH) Q4 2019 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

Certainly. [Operator Instructions] And our first question comes from the line of George Mihalos with Cowen.

Analyst
George Mihalos

Hey, guys. A couple of questions. So, just firstly, I want to make sure I heard correctly as it relates to the subscription and e-commerce, the momentum you're seeing there. Is the expectation that in the first quarter of '20 that you're going to see a year-over-year increase in that revenue stream?

Executive
Thomas C. Priore

To be precise, George, are you referring to subscription e-commerce or...

Analyst
George Mihalos

Yes subscription e-commerce, I apologize.

Executive
Thomas C. Priore

Yeah, yeah. Yes, we will.

Analyst
George Mihalos

Okay. And I just wanted to ask the trends that you're seeing throughout March, again, I think the feedback that we've gotten through most processors up until the middle of the month, it was sort of business as usual and then obviously a very precipitous declines over the last kind of two weeks or so. I'm just curious if there's anything you can share in terms of the magnitude of those declines, maybe on a week-over-week basis as you've gone through March.

Executive
Thomas C. Priore

Sure. Yeah, and that's largely accurate. Through the middle of the month, we were in line, if not probably slightly ahead of January and February levels. We've seen in the back half of the month, 18% was our kind of week-over-week decline. So I think by industry standards, that's probably at the lower end in terms of what I've certainly heard out there. And now we're assessing the SaaS revenue elements that we have through our integrated channels, as well as other subscription fee-based revenue sources to see how that will all net out.

The other thing I would just note to you, George, is that while the aggregate is 18%, the larger declines, as you might imagine, are in the hospitality segment for on-premise processing and that was closer to 50%. So our other segments are off substantially less. Hospitality also tends to be, it just is our lowest margin segment. So, and as I noted, we've got a measure of cautious optimism now. As that evolves into April, we are of the view that those declines that I just noted, sort of that 18% range, will be larger in April. Because more of the [Speech Overlap] is being affected.

Analyst
George Mihalos

That makes sense. And then just a question in terms of -- can you speak a little bit to the extent that you are proactively taking out cost from the sort of the fixed cost base, given the environment that we're in right now?

Executive
Thomas C. Priore

Well...

Executive
Michael Vollkommer

Go ahead, go ahead, Tom.

Executive
Thomas C. Priore

No, please, Mike. I'm happy to follow you up.

Executive
Michael Vollkommer

No, I was just going to say, George, the truly fixed is really small, I've noted sort of 10%. The lion's share of 75% of cost is directly variable with revenue and then the rest is what I call semi-fixed and this is probably what you're talking about which is SG&A, and salaries and other costs. And we are -- and as Tom had mentioned in his comments, we're laser