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Priority Technology Holdings, Inc (NASDAQ:PRTH)
Q3 2019 Earnings Call
Nov 14, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Priority Technology Holdings Third Quarter 2019 Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Chris Kettmann. Please go ahead, sir.

Chris Kettmann -- Investor Relations

Good morning, and thank you for joining us today. With me today are, Tom Priore, Chairman and Chief Executive Officer of Priority Technology Holdings; and Mike Vollkommer, Chief Financial Officer.

Before we provide our prepared remarks, I would like to remind all participants that our comments today will include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, regarding future expectations about the company's business, management's plans for future operations or similar matters which are subject to certain risks and uncertainties.

The company's actual results could differ materially due to several important factors, many of which are beyond the company's control. Including those risks and uncertainties described in the current report on Form 10-K filed with the Securities and Exchange Commission on March 29th, 2019. Any forward-looking statements we make today are only as of today's date and we undertake no obligation to publicly update or review any forward-looking statements. Additionally, we may refer to non-GAAP measures, including EBITDA, adjusted EBITDA and earn-out adjusted EBITDA during the call.

Please refer to our public filings and disclosures and disclosures, including those referenced in our press release announcing this call for definitions of our non-GAAP measures and the reconciliation of these measures to net income. We have also provided an accompanying presentation with today's call that will help us more clearly articulate our results and go-forward strategy.

With that, I would now like to turn the call over to our Chairman and CEO, Tom Priore.

Thomas C. Priore -- Chief Executive Officer

Thank you, Chris, and thanks to everyone for joining us. Our third quarter 2019 results reflected the strong underlying growth we've seen over the past several quarters, particularly when excluding the continued impact from the change in the subscription billing e-commerce business. Consolidated revenue of $110 million during the quarter, increased 6.1% from the prior year third quarter, driven by solid improvement in the Consumer Payments segment, exceptional growth in the Integrated Partners business and steady performance in Commercial Payments.

As we've discussed since last year, the primary factor creating headwind and prohibiting us from reporting exceptionally strong year-over-year growth is the impact of the subscription e-commerce business and the closure of roughly 1,200 merchants in order to ensure compliance and good standing with MasterCard's program criteria. While the process to reboard these customers has been relatively slow, I'm pleased to report that the business is steadily coming back.

In the third quarter, we generated $1.3 million of revenue from e-commerce subscription customers, and we're confident that number will continue to rise in the quarters ahead. Adjusted consolidated revenue of $108.7 million, which excludes the impact of the subscription billing e-commerce merchants grew by more than 18% over the third quarter of 2018. Gross profit margin for the quarter, an important metric for Priority increased 110 basis points from 26.3% to 27.4%.

In a few minutes, Mike will provide greater detail on our third quarter 2019 financial results. Before he does however, I'd like to provide an update on the success we are experiencing in several key areas of the business, including updates on the strategic acquisitions and new partnerships we've completed over the past year. For those of you who are new to our story, our core merchant acquiring business has historically served as the linchpin of our offering. And we're proud to have grown to the sixth largest non-bank merchant acquirer in the US.

Building on this key part of our business over the past several years, we've strategically aligned Priority to capitalize on our anticipated convergence of software and payments by creating a purpose-built cloud platform, where applications and payment adjacent products reside. The Integrated Partners segment, which is new to us in the past year is the manifestation of that vision, and we're leveraging our platform in many other areas of our business as well.

With that as a backdrop, I'd like to talk about the different segments of our business. And let's start with our Core Acquiring business. Our Consumer Payments business continues to be driven by our proprietary MX platform technology, which provide resellers in merchant clients a flexible and customizable set of business applications to help better manage critical business work functions and revenue performance.

Despite headwinds caused by the recalibration of the subscription billing e-commerce business, third quarter merchant bankcard volume processed by the Consumer Payments segment, increased 9.6% over the prior year quarter. In addition, merchant bankcard transactions grew by 8.9%, and our average ticket increased 0.6% year-over-year. Overall, new boarding trends continue to be strong at approximately 5,000 per month. And importantly, portfolio volume attrition, which benefits from 75% of our volume processed on integrated or semi-integrated products remains one of the lowest in the industry.

We are pleased to see the reboarding of the e-commerce subscription customer strengthened in the quarter and are confident our previous expectation that our specialized merchant acquiring segment, including subscription e-commerce will transition from a year-over-year headwind to a tailwind in the upcoming quarters.

Now adjusted for the subscription e-commerce and the impact of acquisitions from January 2018, which reflects just a purely organic growth rate. Our Consumer Payments recurring net revenue grew by 9.7% in the LTM period. We expect to continue driving similar levels of growth as we deepen relationships with resellers and introducing new products to the network, such as our recently announced partnership with Company.com, in which we successfully implemented the services and technology application cloud or stack platform. This new offering allows Priority provide a number of bundled and ancillary products and services via Company.com's innovative, personalized business dashboard.

Building on our efforts to grow the business organically, a key part of Priority's acquisition strategy remains focused on identifying accretive purchases with an existing and new sales channels defensively positioned payment software opportunities such as healthcare and real estate, where the trend toward electronic payments is still in the early stages and volumes will continue to grow rapidly regardless of the macroeconomic environment.

When factoring in recent acquisition, since 2018, and extracting the impact of the subscription e-commerce merchants, Consumer Payments recurring net revenue grew by 12% in the LTM period. We are presently engaged in several acquisitive opportunities that will complement our existing platform both in strong markets as well as economic downturns and we'll provide further updates should they move to completion prior to the end of the year.

Now moving on to the Commercial and Managed Services segment. Commercial Payments revenue of $7 million in the third quarter was consistent with the second quarter of 2018. The Commercial Payments business continues to be underpinned by our CPX automated payables technology. As third quarter revenue from our CPX accounts payable automated solutions increased by roughly 83% year-over-year. In addition, Commercial Payments merchant bankcard transaction volume increased 45.7% in the quarter, compared to the prior year period.

The increase in the adoption of CPX has resulted in recurring net revenue growth of 26.7% in the LTM period. This positive momentum on the CPX side was offset by a nearly $1 million revenue decline from our curated managed services program, due largely to lower incentive revenue in the third quarter. We'll remain focused on optimizing the platform as the industry further realizes the cost and efficiency benefits of electronic payments in the commercial sector. To highlight the potential opportunity in front of us, our total payment volume either under contract were currently being negotiated is roughly $58.1 billion, which is an $11.6 billion increase from the end of quarter two.

Our Priority's third segment is our Integrated Partners business. Although, we only formed the Integrated Partners just over a year ago, we're extremely pleased with the segment, that the segment generated $8.9 million in revenue during the third quarter, led primarily by our Priority Real Estate Technology, or PRET business line. Priority PayRight Health Solutions and Priority Hospitality Technology make up the remainder of the Integrated Payments segment. Each posted strong initial results and represent sizable opportunity to grow , and I'll expand on each of these areas now.

Priority Real Estate Technology maintains a single platform that addresses the needs of the full spectrum of landlord constituents from integrated enterprise property managers and middle market partners to small and local landlords for rents, dues and storage payment processing. The growing preference of consumers to pay their rent electronically aligns very nicely with our defensively minded Integrated Payments solution strategy.

PRET continues to be fueled by our March 2019 real estate payments operating partnership with YapStone, and the integration of our RadPad and Landlord Station assets. Priority has assumed responsibility for the management and daily operations of the combined real estate business and recurring net revenue has increased approximately 10%, since April, which was the date we took over the operation of the combined business. Even more, PRET is poised for further improvement as the new enterprise partners have joined the platform and portfolio optimization outreach strategies to existing partners have been initiated.

Priority Hospitality Technology was formed to provide technology solutions to the hospitality marketplace. Priority's portfolio of approximately 32,000 hospitality merchants has been historically underserved with proprietary product offerings, and we're strategically solving that problem with integrated point of sale and order ahead -- and an order ahead products suite that can be sold as a full package or individually. And while, we are still refining our proprietary point-of-sale offering, our order ahead technology e-Tab experienced 55% growth in recurring net revenue in the LTM period.

On the healthcare front, Priority PayRight has continued its positive momentum following the recent release of several integrated product offerings. Recurring net revenue for this channel has increased to 185% for the LTM period and other key year-over-year KPIs are showing similarly strong results. These include an 82% increase in third-party payments billing volume, a 105% increase in PayRight's software revenue, a 145% increase in PayRight's payment gateway processing volume, and 300 plus percent increases in both total gross revenue and in net revenue.

In conclusion, I remain extremely excited about the future Priority. The agility of our operating and technology infrastructure supports our strong position as a consolidation platform for payment operating and software companies, adept at delivering an integrated payment experience to our customers and reselling partners at scale. Furthermore, the diversification high growth attributes of Commercial Payments and our defensively minded Integrated Payments creates a foundation for Priority that is well-positioned over the long term to perform through changing economic cycles. We expect to capitalize on further acquisition opportunities as the market turbulence arises and we look forward to sharing further updates on our progress in the quarters ahead.

I'd now like to ask Mike Vollkommer to provide further information on our third quarter results. Mike?

Michael Vollkommer -- Principal Financial and Accounting Officer

Thank you, Tom, and good morning. I'll review the consolidated third quarter results and provide comments on segment performance. Where I cite a non-GAAP measure, you can refer to today's press release that provides a reconciliation of these measures with GAAP. We've also provided supplemental slides that are available on the IR portion of our website to assist with reviewing the results.

Consolidated revenue in the third quarter of 2019 was $110 million, an increase of $6.4 million, or 6.1% compared with the 2018 third quarter. As expected revenue growth continued to be constrained by the wind down of subscription billing e-commerce merchants. In the third quarter of 2019, on a non-GAAP basis, consolidated adjusted revenue increased 18.4%. The supplemental slides on our website illustrate the quarterly wind down of revenue from these merchants.

Fourth quarter 2019, year-over-year revenue growth will also be constrained by the wind down, but to a lesser extent than third quarter. And as we move into the first quarter of 2020, these difficult comparisons were finally behind us. Tom has already provided comments on revenue performance within the reportable segments, so I'll move on to other areas.

Consolidated gross profit of $30.2 million increased $2.9 million, or 10.7%. Our gross profit metric represents consolidated revenue less than two operating expense line items on the statement of operations entitled, costs of merchant card fees and costs of outsourced services. Consolidated gross profit margin was 27.4% in the third quarter of 2019, that's an expansion of 110 basis points from 26.3% in the 2018 quarter.

Gross profit associated with subscription billing e-commerce merchants was $0.5 million in the third quarter of 2019, and that compares with $4.1 million in the third quarter of 2018. So on a non-GAAP basis, adjusted gross profit was $29.7 million in the third quarter of 2019, an increase of $6.5 million from $23.2 million in the third quarter of 2018.

Consolidated income from operations in the third quarter of 2019 was $2.7 million, a decline of $0.8 million, compared with $3.6 million in the third quarter of 2018. Now, this decline was driven by a $5.2 million increase in depreciation and amortization, and that's associated with acquisitions and capital investment over the last 12 months. All other operating expenses, which are salary and employee benefits and SG&A totaled $17.4 million, a decrease of $1.4 million.

Operating expenses in both comparative quarters do include certain costs that we considered non-recurring in nature. In the third quarter of 2019, non-recurring expenses of $1.2 million were associated with amortization of purchase price allocated to the temporary free transition services related to integration of the YapStone transaction, certain litigation costs and professional fees.

In the third quarter of 2018, non-recurring expenses of $3.5 million included legal, accounting, advisory and consulting fees, largely associated with the conversion to a public company. On a non-GAAP basis, excluding gross profit from subscription billing e-commerce merchants and non-recurring expenses from the comparative quarters, consolidated adjusted income from operations totaled $3.4 million in the third quarter of 2019, and that's an increase of $0.4 million from the third quarter of 2018.

Now, let's break this down within the reportable segments. Consumer Payments income from operation in the third quarter of 2019 was $7.2 million, compared with a $11.9 million in the third quarter of 2018. Gross profit of $23.2 million, decreased $0.3 million. Depreciation and amortization of $8.3 million, increased $3.9 million. And other operating expenses of $7.7 million, increased $0.5 million. So just to remind you, the higher depreciation and amortization is largely related to the acquisitions of affiliated assets and direct connect, which occurred subsequent to the third quarter of last year.

Commercial Payments loss from operations in the third quarter of 2019 was $0.4 million, compared with $0.1 million in the third quarter of 2018. Gross profit in this segment of $2.9 million, decreased $0.2 million, and that's primarily due to a decline within managed services, largely driven by lower incentive revenue in the third quarter of 2019. Operating expenses, including depreciation and amortization, totaled $3.3 million, and that's an increase of $0.2 million from the $3.1 million level in the third quarter of the prior year.

Integrated Partners income from operations in the third quarter of 2019 was $1 million, and that compares with a loss from operations of $0.4 million in the third quarter of 2018. Gross profit of $4.1 million, increased $3.4 million. Depreciation and amortization was $1.3 million, and that increased $1.2 million, and other operating expenses of $1.8 million, increased $0.8 million.

The depreciation and amortization relates to assets acquired in forming these Integrated Partner operations, since last year. Other operating expenses include $0.4 million of purchase price allocation to temporary free transition services from YapStone, related to the integration of that business in March 2019. Integrated Partners adjusted income from operations in the third quarter of 2019, excluding these non-recurring transition services was $1.4 million.

Corporate expense in the third quarter of 2019 was $5.1 million, compared with $7.9 million in the third quarter of 2018. Non-recurring operating expenses were $0.8 million in the third quarter of 2019 and $3.5 million in the third quarter of 2018. So excluding these non-recurring expenses, the corporate expense totaled $4.3 million in the third quarter of 2019, and that compares with $4.4 million in the third quarter of 2018.

Interest expense of $10.5 million in the third quarter of 2019, increased $3.1 million from $7.3 million in the third quarter of 2018. The increase was due to higher outstanding borrowings driven by debt financing of acquisitions subsequent to the third quarter of 2018.

So let me move on to tax, the income tax line. The provision for income taxes of $2.5 million for the nine months ended September 30th, 2019, reflects the impact of Internal Revenue Code Section 163(j) limitation on the deduction of business interest. Now as discussed in the second quarter call, Section 163 (j) limits the business interest deduction to 30% of adjusted taxable income or ATI. For taxable years through 2021, the calculation of ATI closely aligns with EBITDA.

Commencing in the second quarter of this year, we began recording a valuation allowance to offset the benefit of any excess interest carry forward deduction. Therefore, as you recall, the second quarter of 2019, included a discrete valuation allowance expense of $2.6 million, related to the associated deferred tax asset benefit recorded in 2018.

Now applying Section 163 (j) into quarterly effective tax provision calculations can often result in intra-year true-ups, as we allocate the forecasted tax expense for the year into the quarters. And that's driven by updates to full-year business interest forecast and adjusted taxable income forecast. As a result, the provision for income taxes in the third quarter of 2019, resulted in a net benefit of $1.7 million.

With our current full year forecast, we anticipate fourth quarter tax benefit to be largely offset by the business interest limitation. So the net of all this is that the full-year tax provision expense is expected to approximate $2.6 million, and that is the discrete -- related to the discrete valuation allowance item recorded in the second quarter for the 2018 deduction.

Consolidated adjusted EBITDA of $15.3 million in the third quarter of 2019, increased $2.9 million, or 23.6%, compared with $12.4 million in the third quarter of 2018. The company's non-GAAP consolidated adjusted EBITDA measure is earnings before interest, taxes, depreciation and amortization further adjusted by non-cash equity-based compensation and expenses that we consider non-recurring.

Now, last quarter, we reiterated our 2019 financial guidance of modest revenue growth, despite a forecasted $50 million year-over-year gross revenue declined from subscription billing e-commerce merchants. And we also targeted earn-out adjusted EBITDA of approximately $75 million. This guidance considered second half 2019 revenue growth from our newly established specialized merchant acquiring program, which is expected to generate approximately $8 million of EBITDA in the second half of the year.

Due to delays in establishing BIN sponsorships for this program caused by the acquisition of our processing provider, we now expect to realize only minimal revenue growth from this program in the second half of 2019, and to begin achieving our targets in 2020. As a result, we now anticipate 2019 consolidated revenue to only slightly exceed 2018, and we have revised the 2019 earn-out adjusted EBITDA expectation to be approximately $70 million.

Now it should be noted that these expectations may be positively impacted by acquisitions executed in the fourth quarter of 2019.

So now I'll turn the call back over to Tom.

Thomas C. Priore -- Chief Executive Officer

Thanks, Mike. Operator, we'll now open the line for questions please.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from George Mihalos from Cowen. You may proceed with your question.

George Mihalos -- Cowen -- Analyst

Hey guys, good morning. I guess first question on our end. If we look at the specialized merchant acquiring that you were talking about coming in over the second half of '19, that's predominantly traditional e-com business, right, that was lost. But I'm just curious that delay in the BIN sponsorship, is that from one processor or multiple processors that you're affiliated with?

Michael Vollkommer -- Principal Financial and Accounting Officer

It's from one processor, George. The BINs are actually established, so they are complete. But they will not launch for additional volume until January of 2019 -- 2020, excuse me.

George Mihalos -- Cowen -- Analyst

Okay. So you'll see that in the first quarter of next year, and just to be clear the right way to think about it, if that program is contributing $8 million of EBITDA over the back half of this year that, that will be a $15 million EBITDA benefit, as I'm looking at into 2020?

Michael Vollkommer -- Principal Financial and Accounting Officer

Yeah. It will ramp up to that run rate.

George Mihalos -- Cowen -- Analyst

Okay.

Michael Vollkommer -- Principal Financial and Accounting Officer

So it will take some time to get that volume up and running. So going into the second quarter of next year, we'll -- third quarter [Phonetic].

George Mihalos -- Cowen -- Analyst

Okay. That's helpful. And just, you know --

Michael Vollkommer -- Principal Financial and Accounting Officer

So basically, George, look at it this way, that was basically a slide, what we had in the summer, we thought, we'd be up and running now, so what's happened there. It's a slide of timing, starting to capture that business from 2019 into 2020.

George Mihalos -- Cowen -- Analyst

Okay.

Thomas C. Priore -- Chief Executive Officer

Okay, George, if I would have commented, perhaps a conservative way to look at it, it contributed approximately $12 million of EBITDA, $11 million and change. So, the goal is to reestablish it at that level. The nice thing about these particular relationships is, they actually have -- they open us up beyond just the subscription segments with these BIN sponsors. So, we'll be adding some new segments to the specialized merchant acquiring BIN relationships which would provide diversification and also some additional opportunity on the revenue side, that we haven't had before.

George Mihalos -- Cowen -- Analyst

That's helpful. Just to kind of close out the point on e-com, it sounds Tom, like what you're saying is that this was sort of the low point, 3Q is kind of a low point, a little over $1 million contribution on the revenue side, that will start to increase sequentially in the fourth quarter, but obviously we're still be a headwind year-over-year. Is that the right way to be thinking about it?

Thomas C. Priore -- Chief Executive Officer

Yes. I would look at the significant upward trajectory of that to start in 2020. So conservatively speaking, let's look at the fourth quarter to look a bit like the third quarter, which is why I said, we still have that bad comp in the fourth quarter, but then that will be finally behind us next year because Q1 of 2019 was low. And so we suspect that the new business boarding and our specialized program will overcome that bad comp in the first quarter. So we will stop talking about the adjusted results in 2020.

George Mihalos -- Cowen -- Analyst

Okay. And just last question for me, the underlying merchant business that was up, call around about double-digit. Anything you can say there from the perspective of new merchants coming on, is there a specific vertical what's driving that, that seems to be healthy and it seems to be in line with the underlying volume growth that you're seeing?

Thomas C. Priore -- Chief Executive Officer

Yeah. If anything, it's become more diversified, particularly as we've added verticals that we are a bit more in control of like the Healthcare segment and the Real Estate segment, which as of the last year are relatively new to Priority. So the core of our distribution channels are pretty steady and they're reflective of the general economic make up, or business make up of the US. And then they've been enhanced by more vertically focused opportunities on the Integrated side. And consistently we're seeing between 5,000 and 5,200 at a peak point in new merchant boards per month.

George Mihalos -- Cowen -- Analyst

Okay. Thanks, guys. Thanks for taking my questions.

Operator

Thank you. Our next question comes from William Gibson with ROTH Capital Partners. You may proceed with your question.

William Gibson -- ROTH Capital Partners -- Analyst

Thank you. Could you give a little more color on the incentive payment decline. What was behind that? And this is impact consumer as well as commercial?

Thomas C. Priore -- Chief Executive Officer

No, it's only impact was on the commercial side and specifically within our managed services offering. So these are sales operations that we manage for large financial institutions like American Express and within some of these programs for levels of performance will meet incentive targets for bonuses that had been met the prior year and were not met in this quarter.

William Gibson -- ROTH Capital Partners -- Analyst

Okay. So the programs are still out there and could be reached next year?

Thomas C. Priore -- Chief Executive Officer

Yeah. They could be reached next year. They also could be reached in the fourth quarter.

William Gibson -- ROTH Capital Partners -- Analyst

Okay. And so the -- aside from the subscription loss in Consumer Payments, is that what drove the drop in operating income, or was there more than that? And did I miss that on the explanation?

Michael Vollkommer -- Principal Financial and Accounting Officer

No, that was largely the drop. And when you -- if you look at it, and the reason why EBITDA grew so well is because the big factor -- the other factor is the increase in depreciation and amortization related to acquisitions. So -- but, yes, you're right on. It's -- the GAAP to GAAP is largely driven by the e-com.

William Gibson -- ROTH Capital Partners -- Analyst

Good. Thank you.

Operator

Thank you. [Operator Instructions] Our next question comes from Eric Spector with Fortress Investment. You may proceed with your question.

Eric Spector -- Fortress Investment -- Analyst

Good morning, guys. Thanks for taking my questions. Just a few of them. First, what was the revenue contribution from acquisitions this quarter? And maybe you could break that down by segment?

Thomas C. Priore -- Chief Executive Officer

Well, if you take a look at the Integrated Partners, the YapStone acquisition was the biggest piece, and that actually is the single biggest piece of revenue and that was about $7-and-change million on the quarter. Then there was a couple of million dollars from Direct Connect that we acquired in the fourth quarter last year.

Michael Vollkommer -- Principal Financial and Accounting Officer

Yeah. If -- perhaps a good way to look at it, just on a percentage basis over the LTM period. So the total recurring net revenue growth was roughly 12% and 9.7% of that was organic and 3% of it was from acquisitions.

Eric Spector -- Fortress Investment -- Analyst

Thanks.

Michael Vollkommer -- Principal Financial and Accounting Officer

And we'd be happy to break it out by -- we don't have those numbers handy by the individual acquisitions, but we would be happy to provide those subsequently.

Eric Spector -- Fortress Investment -- Analyst

Thank you.

Thomas C. Priore -- Chief Executive Officer

It's largely by segment, Integrated Partners and then Consumer for Direct Connect.

Eric Spector -- Fortress Investment -- Analyst

Okay. Thanks. Yeah, I'll follow up, offline for the specific segment. And so, I just wanted to get an update, if you could on the total number of merchant customers, the penetration of MX merchant across that base and how that penetration has trended? And then as a follow-up to that, I'm curious if you've seen any additional uptake in your proprietary apps, and if that's driven improvement improvement in attrition levels, and if we could get a better sense just trying to understand, if the attrition levels differ between those merchants on the MX platform and the non-MX merchants. And then finally, if you've seen any changes in static pool curves over recent periods?

Thomas C. Priore -- Chief Executive Officer

Yeah, sure. So let me try and unpack some of the questions that you have. So first, starting, I'll just say with -- I'm going to handle kind of in reverse order, if that's all right.

Eric Spector -- Fortress Investment -- Analyst

Sure.

Thomas C. Priore -- Chief Executive Officer

Our attrition trends on a static pool basis across our aggregate book is, it varies to about 11%, 12-ish percent. We've seen a little bit of spike because of the subscription e-commerce and that was sort of forced attrition, if you will. But they generally run around 10% to 12%. Now if you look at our -- if we break that down into this segment of our MX merchant portfolio base, or those that are consistently using our MX tools, that attrition drops usually on an LTM static pool basis sort of for any given month about 8% to 9%. For merchants that are using more than one application within MX merchant consistently, that drops that drops down to closer to 5% to 6%.

Now across our book that volume, these are -- this is, we really recently started tracking this in kind of more recent years as we've really pushed the sales initiatives in these segments. But we've seen that book -- that component of our book in aggregate using integrated or semi-integrated solution, go from the high '60s probably two years ago to now it's pushing up into low to mid-'70s on a consistent basis.

Eric Spector -- Fortress Investment -- Analyst

Okay. And then --

Thomas C. Priore -- Chief Executive Officer

Of course, one of the big drivers of that, and that's one of the reasons why we've established these defined verticals within our Integrated Partners channels, right, those -- 100% of that volume is integrated. And let me just mention again those statistics, right? Because it gives -- and also I think it will kind of put your overarching questions into focus.

Our overall organic growth, and let's just carving out the subscription e-commerce, carving out the impact of acquisitions, was 9.7% on an LTM basis recurring net revenue. e-Tab year-over-year, right fully integrated order ahead and grew by 55%. Priority PayRight, which is again fully integrated healthcare solutions grew by over 180%, right. Just in the short period we've been able to take on the real estate assets in this more holistic approach, since April, we've seen a 10% increase in recurring net revenue on that business. So those are starting to have more meaningful impact on the aggregate. But I say this with the full appreciation that in total approximately north of $40 billion of Payments, right. So these components are growing as a contributor to an overall pretty substantial number.

Eric Spector -- Fortress Investment -- Analyst

That makes sense. And then my last question is, when you're on-boarding new merchants, what percentage of them sort of fall into the Integrated camp. And are you going back and mining the existing existing base to try to get them to subscribe to some of these -- to the MX platform. I'm just trying to get a sense of how that, it's gone from high-'60s to low to mid-'70s, and how do we expect that to trend in the future. And if we think, it's going to drive improving attrition levels over time.

Thomas C. Priore -- Chief Executive Officer

Yeah. Great question, I mean, one -- we've already -- we've seen improved attrition levels, albeit we already had relatively low attrition by industry standards. I think, if you talk to most folks in the industry or you grab some of the industry research, you'll see that, it's largely in the low to mid-20% attrition rate. So we're already well below that and we expect to maintain that trend.

We do have direct sales initiatives. And maybe I'll tie a few things together just to offer some strategic insight. One of the reasons why we went out and acquired some of our resellers in July and August of last year, one was Priority Payments Northeast, the other Priority Technology Partners, these were both sales channels that had a skill at selling integrated product and selling into more ISV-oriented channels. So that has enabled us to open up more of an approach to not only sell into our existing merchant base, but -- and we do that in partnership with our resellers, our other independent resellers, where these folks help our resellers sell into their existing book, integrated product solutions and act as a resource for those resellers to sell to new merchants.

So, again the mix to integrating -- to integrated and semi-Integrated solutions is increasing, just as we see that uptick in overall volume being connected in that. But again it's on a large existing base. But you've pinpointed a trend that Priority that we've brought in sales resources from existing partners who've done well in these segments to help us as an organization get better at it and jump-start those initiatives.

Eric Spector -- Fortress Investment -- Analyst

Thank you.

Operator

Thank you. And I'm not showing any further questions at this time. at this time. I would now like to turn the call back over to CEO, Tom Priore for any further remarks.

Thomas C. Priore -- Chief Executive Officer

Well, thank you very much for your attendance today. And of course, we'll be available as any further questions come up offline. And we hope everyone has a great day. Thank you. We look forward to closing the year strong here in the fourth quarter.

Operator

[Operator Closing Remarks]

Duration: 44 minutes

Call participants:

Chris Kettmann -- Investor Relations

Thomas C. Priore -- Chief Executive Officer

Michael Vollkommer -- Principal Financial and Accounting Officer

George Mihalos -- Cowen -- Analyst

William Gibson -- ROTH Capital Partners -- Analyst

Eric Spector -- Fortress Investment -- Analyst

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