Tim O Leary
Thank you, Tom, and good morning, everyone. As Tom mentioned, we had strong financial performance across the business in the fourth quarter and for the full year. For the full year, reported revenue growth of 16.4% compares to 17.1% of organic growth if you exclude the impact of the grow over from the partial year of Plastiq in 2023 combined with large resellers diversification effort in the first half of 2023. Adjusted gross profit growth of 19.2% included 17.6% organic growth and adjusted EBITDA growth of 21.3% included organic growth of 20.6%. So whether you look at the results on a reported basis or an organic basis, we are proud to deliver another year of excellent results in 2024 for our stakeholders.
Adjusted gross profit from our B2B and Enterprise segments represented 59% of the total for the year, while for the fourth quarter, they combined to represent 62%. Recall that for the full year 2023, the combined adjusted gross profit of B2B and enterprise was right at 50% of total. So we've seen an almost 10 percentage point increase in the last 12 months, and we exited 2024 at an even higher mix of profits coming from our higher growth, higher-margin B2B in enterprise segments. As a direct result of the growth in these segments, the highly visible and recurring nature of our business model continues to gain momentum as over 63% of adjusted gross profit in Q4 came from recurring revenues that are not dependent on transaction counts or bank card volume.
The percentage of adjusted gross profit from recurring revenues has nearly doubled since the beginning of 2022. When you combine strong organic growth with the continued favorable shift in the business mix and the increasingly recurring nature of our profits, along with the diverse revenue streams, including certain countercyclical aspects, we believe Priority is an undervalued business compared to similarly positioned industry participants.
I'll now move to the segment level results for the fourth quarter and start with the SMB segment on slide 8. SMB generated Q4 revenue of $155.7 million, which is $15.5 million or 11.1% higher than the prior year's fourth quarter. Bank card dollar volume in SMB was $15.5 billion for the quarter, which is up 6.6% from $14.6 billion in the prior year. Total card dollar volume, which includes bank card dollar volume but also includes debit, gift and loyalty cards, Discover and certain Amex volume, totaled $18.1 billion for the quarter, which is up 6.9% from $16.9 billion in Q4 of the prior year.
Going forward, we will plan to provide the more comprehensive total card dollar volume figure as a key metric in place of bank card dollar volume. From a merchant standpoint, we averaged over 177,000 accounts during the quarter and new merchant boards averaged 3,750 per month during the period. Adjusted gross profit in SMB for the fourth quarter was $32 million, which is up 0.4% from $31.8 million in last year's fourth quarter. The quarter was negatively impacted by the write-off of certain obsolete inventory and the maturation of prior portfolio purchases. Gross margins of 20.5% in the quarter are down from 22.7% last year for the same reasons. However, if you were to adjust for the impact of the inventory write-off, margins would have been relatively flat on a year-over-year basis.
Lastly, for SMB, quarterly adjusted EBITDA of $26.6 million represents a $1.6 million or 6.4% increase from $25 million in the prior year's fourth quarter. Growth in adjusted EBITDA outpaced adjusted gross profit as we gained operating leverage through continued expense discipline during the quarter and the full year. Moving to B2B. Revenue of $23.7 million was an increase of $2.3 million or 10.9% from the prior year. Plastiq contributed $18.9 million of revenue during the quarter, up almost 8% from $17.5 million in the prior year, while CPX grew by $1 million or 26% on a year-over-year basis to $4.9 million of revenue in the quarter.
Adjusted gross profit in B2B increased to $6.4 million or 24% growth from $5.1 million in the prior year. Q4 gross margins of 26.8% compared to 24% last year as a result of higher gross margins at Plastiq, combined with strong growth in the higher-margin CPX product suite. The B2B segment produced $2.4 million of adjusted EBITDA during the quarter, which is a $2 million increase from the prior year, resulting from higher gross profit combined with lower operating expenses on a comparative basis.
Moving to the Enterprise segment. Q4 revenue of $48.7 million was an increase of $10.4 million or 27% from $38.3 million in the prior year. Revenue growth was driven by continued strong enrollment trends, an increase in the number of billed clients in CFTPay and an increase in the number of integrated partners or program managers across the Enterprise segment. In addition, higher account balances were able to largely offset the impact of lower interest rates in the fourth quarter. As a result of those factors, adjusted gross profit for the Enterprise segment increased by 27% to $45.6 million, while adjusted gross profit margins remained relatively constant at 93.6% for the quarter. Adjusted EBITDA was $42 million for the quarter, which is an increase of 27% from $33 million in the prior year.
Moving to consolidated operating expenses on slide 11. Salary benefits of $23.2 million increased by only $1.5 million or 6.9% from Q4 of last year and was driven by the overall growth of the company. We finished the quarter and year with just over 1,000 employees which compares to approximately 980 at the end of '23. SG&A of $12.8 million decreased by $1.3 million from $14.1 million. The year-over-year decrease was due primarily to the nonrecurring restructuring charge in Q4 of 2023, which was partially offset in 2024 by higher software, legal and marketing expenses.
Moving to the next slide. Adjusted EBITDA for the quarter was $51.7 million, which is an increase of $7.1 million or 15.9% from $44.6 million in Q4 of 2023. Interest expense of $23.1 million for the quarter increased $2.5 million from the prior year as a result of higher comparative debt levels in the quarter due to the redemption of the preferred stock in 2024.
Moving to the capital structure and liquidity overview on slide 13. Debt levels during the quarter increased to $945.5 million gross and $886.9 million net, which was driven by the issuance of $115 million of incremental term loan borrowings during the quarter. Proceeds from the issuance were used to redeem the remaining balance of the preferred stock. From a liquidity standpoint, we ended the quarter with all $70 million of borrowing capacity available under our revolver and $58.6 million of unrestricted cash on the balance sheet.
For the LTM period ended December 31, adjusted EBITDA of $204.3 million represents 21.3% of year-over-year growth. The preferred stock on our balance sheet was redeemed in full during the quarter, which resulted in a fourth quarter preferred dividend of only $2.65 million consisting of $1.55 million paid in cash and $1.1 million of a PIK component. Given the redemption, we accelerated the accretion of the unamortized original issuance discount, which had a $5.6 million impact and we also paid $2.7 million in excise taxes on the redemption.
Before turning the call back over to Tom, I want to take a minute to address a few other items. First, I wanted to note that subsequent to quarter end, we used $10 million of our excess cash balances to make a prepayment on the term loan balance. So you'll see the impact of that on our March 31 balance sheet when we file our Q1 results in early May. Consistent with our efforts in 2024, we will continue to evaluate opportunities in 2025 to further reduce our cost of capital and delever the balance sheet. On that point, even if you were to assume that there was no further debt pay down throughout the year, we would be under 4 times net leverage by year-end if you use the midpoint of our 2025 adjusted EBITDA guidance.
The next item relates to our 2024 audit and 10-K. In those filings, you'll note that we disclosed the material weakness in our internal controls over financial reporting. The material weakness relates to the design and operating deficiencies in certain automated controls around ingestion and validation of third-party processors data and our control environment, which is used in revenue and commissions processes and deficiencies in certain IT general controls around the privileged access to certain users. The deficiency related to privileged user access impacted one of our applications and our investigation found no evidence of inappropriate use of those privileges. The access issue has already been remediated, but it was not an effective control at year-end.
The management team and our Board of Directors take these matters seriously, and we are actively working to promptly remediate the automated control deficiency and will provide updates on our progress and related testing throughout the year. Importantly, I want to highlight that the material weakness did not result in a restatement or any change to our consolidated financial results. We remain confident that our consolidated financial statements present fairly in all material respects, the financial condition of our business, and our auditors have also issued an unqualified opinion on our financial statements. The last item I'd like to touch on is our financial guidance for the full year.
Based on continued strong growth trends in the business, we're forecasting 10% to 14% organic growth in revenue to a range of $965 million to $1 billion for the year. Adjusted gross profit is forecast to range from $360 million to $385 million, representing year-over-year growth of up to 17% at the high end of the range. Lastly, adjusted EBITDA is forecast to range from $220 million to $230 million, representing year-over-year growth up to 13% at the high end of the range. The lower EBITDA growth expected in 2025 is driven by higher expenses resulting from the continued migration of certain platforms to the cloud, which converts CapEx to OpEx, but over time, we'll provide incremental platform efficiencies. Along with increased accounting costs related to SOX compliance, including the remediation effort. However, we will continually evaluate ways to create additional operating leverage in the business and will strive to reduce the impact of these efforts through further expense reductions in the coming quarters.
To provide some color on the guidance by segment, we expect high single-digit revenue growth in SMB as we continue to add new resellers and benefit from the impact of new merchant boards with our existing partners. B2B's top line growth in 2025 is expected to be in the low double-digit range, which is lower on a comparative basis to 2024 as reported growth, given the full year effect of Plastiq, which only had five months of results in 2023 but we also expect our supplier-funded strategies to have continued growth of over 20%. Lastly, Enterprise is expected to continue its momentum. Although we have moderated our growth percentage expectations in '25 to account for the strong growth already experienced in 2023 and '24, along with a simple math of a larger denominator.
With that, I'll now turn the call back over to Tom for his closing comments.
Thomas Priore
Thank you, Tim. During the closing segment of our earnings call, I'd like to discuss a few of the more critical strategic accomplishments of 2024 to orient our stakeholders around developing opportunities in the year ahead.
During past calls, I've often noted that we work relentlessly to see around corners, to have foresight and operate with intention and clear planning. Whether that is engineering our highly curated technology platform or the design of our business segments to be sustainable in varying macroeconomic environments. I've highlighted the disciplined acquisitions and their contributions to our performance that reflect our unified commerce vision so that our current and future stakeholders might be convinced by the strength of our compound annual adjusted EBITDA growth of 19.8% from 2018 to 2024 and the reduction of our debt-to-EBITDA ratios by over two turns since 2021.
Priority routinely stays ahead of market trends and its technology, operations, and decision-making are geared for the future of payments. That future for the Priority team has always been to complement our consistent market-leading organic growth with the ability to be a consolidating platform for payments and financial technology opportunities that may be struggling with legacy tech, inefficient operational execution or undisciplined investing in products or vertical SaaS properties, simply put to be opportunistic. That's why we were ruthlessly focused on retiring our preferred debt in 2024 and enabling greater liquidity in our equity currency, which we accomplished through our recent secondary offering that roughly doubled our tradable float. We believe that these important accomplishments would accrue to our share price and it might better reflect the fundamental value of our platform.
While we are presently a good distance from what we think is a more appropriate valuation in line with the slower growing peers at 10 times to 12 times pro forma 2025 adjusted EBITDA, we're optimistic that the combination of our consistent financial results, increasing exposure to and support from our shareholders and continued debt paydown similar to the $10 million prepayment that Tim referenced in his earlier comments, will create a currency that can be successfully used for accretive acquisitions. In the current environment, a proportionally stronger currency will be key to driving outsized investment returns via under-optimized assets in payments, vertical market software and Banking-as-a-Service technology.
Whether organically or through synergizing acquisitions, our tech-enabled service platform is delivering on the promise of a personalized financial tool set that unlock value for our partners, whether those are businesses enhancing their profitability through better cash flow visibility and working capital solutions, ISVs and FIs, adding our financial solutions to enhance their customers' experience, retention and margins or resellers, building their success by delivering our modern commerce solutions to their existing and growing portfolio of merchants. Its success is evident in the top and bottom line financial performance and improving margins, which have meaningfully outpaced our peers for several quarters now.
We believe we have the team, the technology and the grit to continue to organically deliver industry-leading results, but we also believe the further strength of our public currency will position Priority for transformative, highly accretive opportunities emerging in today's market.
Before concluding, I want to take a moment to recognize and thank my brother, John, who is transitioning from his role as a Board member and being replaced by Clayton Main, who brings a wealth of experience in leveraged finance and vertical software and payments investing as well as highly relevant relationships to Priority.
While John's future support for Priority may be less obvious, I know he will always be an ardent advocate. John, it's been an amazingly fun and rewarding journey together these past 20 years. Building something that lasts beyond oneself is truly unique, and you've done that. As you look back, I hope you take great pride in all of your contributions to where Priority stands today and importantly, where it is poised to go in the future. I love you.
As always, I want to thank my colleagues at Priority who continue to work incredibly hard to deliver industry-leading results. Your commitment and dedication to continuing to improve everything we do is clear, providing our partners and customers with constant reminders that they made the right choice to partner with Priority.
Last, we continue to appreciate the ongoing support of our investors and analysts and for those in attendance who are new to Priority, for taking the time to participate in today's call.
Operator, we'd now like to open the call for questions.
Operator
(Operator Instructions) Jacob Stephan, Lake Street Capital Markets.
Jacob Stephan
Congrats on the strong year, the balance sheet progress and special congratulations to John on his retirement. Just first, I want to touch on the capital allocation priority. You guys noted another $10 million worth of debt paydown in Q1. But how do you think about overall strategy between balancing kind of that principal paydown with maybe increased CapEx or SG&A spend on the income statement?
Tim O Leary
Sure. Thanks, Jacob. So similar to past quarters, we're going to continue to evaluate the best use of capital from a shareholder value standpoint. So debt paydown is obviously a key focus for us. We continue to hear from investors that leverage is something they're focused on. So we'll continue to naturally delever both with growing EBITDA as well as using our free cash flow to reduce our debt balances.
But we balance that by looking at M&A, right? We see a lot of opportunities in the market. Tom referenced what we're seeing out there from a lot of dislocation on certain other assets. So there's opportunities to be a consolidator, but we're going to balance that against leverage and how we use our capital.
From an internal capital allocation standpoint, we've talked about converting some of our CapEx to OpEx as we move more and more of our platforms to a common cloud basis, which puts burden on EBITDA in the short term, but over time, it is going to add efficiencies as we get to a common back-end structure from a technology standpoint and development standpoint across all those platforms and you get better efficiencies across your developer team.
Jacob Stephan
Got it. Very helpful. And then I think the most recent rate cut forecast calls for three cuts in 2025. Just kind of looking at your guidance, wondering how that factored in, if at all?
Tim O Leary
It does. We factor in the Fed dot plot and looking at the interest rate curves and try to come up with what we feel is the right approximation. We tend to play things on the conservative end, certainly at the beginning of the year as we think about what the markets could hold for us.
And if you look at just the impact from Q3 to Q4 you had 100 basis points of Fed rate cuts between September and the end of the year. If you look at the average effective Fed funds rate in those two quarters, it averaged out to 61 basis points of a delta between those two quarters. So that has an impact as well just quarter-to-quarter, but we did factor that into our '25 guidance.
Thomas Priore
And Jacob, maybe on that point, we've taken a pretty conservative view of deposit growth. So a lot of our expectation is, I'll just say, based on a stable base, not a growing base of deposits. And we've seen a healthy -- just based on our win rate, we're seeing a healthy growth in deposit balance. So we think there's just a conservative measure to its impact.
The other thing I would just note as it relates to your question on use of capital for deleveraging or strategic opportunities, there's a lot of interesting dislocation occurring. Venture funding to, call it, subscale SaaS really hasn't turned around. So there's some really interesting opportunities that we'll consider in sectors where we already play in, consumer-directed benefits, construction, real estate and property tech that we've historically done well. So -- but it will be very opportunistic.
And I think you guys probably already know, you're following it every day. There's the emerging challenges on some of the peer set in -- within payments is becoming apparent. And it's something we -- for what it's worth, we reflected was more than likely. So we're going to keep on charging ahead. And we're going to be really eager for your support with investors, understand the Priority story is just differentiated because the value of our currency relative to our peer set, really increases the opportunities to do transformative things.
Operator
Brian Kinstlinger, Alliance Global Partners.
Brian Kinstlinger
Sorry, one second. Can you hear me?
Thomas Priore
We got you, Brian. We can.
Tim O Leary
Yes, you're good, Brian.
Brian Kinstlinger
Yes. So it's great to see you taking care of the liquidity overhang that we've discussed for a long time. And I'm glad to hear deleveraging is a key focus. While I know your consumer segment generally does not have a lot of retail and consumer product businesses you serve, still do you see any impact from tariffs on some of the businesses you're working with, basket sizes, demand in any other way? And if so how would it all did you handicap this in your guidance?
Thomas Priore
Yes. Great question. And look, it's something we have been setting up for, to be quite honest with you benefit from. We don't see a lot of impact in the -- on the acquiring side of the business because there, the utilization of card, it actually increases the probability because buyers are now -- they're looking to pay on card to preserve working capital. So not only will the impact of tariffs sort of create inflation, the probability of utilization of digital payments actually increases, and that's what we've seen. The area where we're most excited about, candidly, is actually on the B2B side because working capital is now getting constrained in that segment.
So we're seeing a nice level of demand for buyer funded strategies and other efficiencies that are able to get created through automated payables just because now the necessity continues to get greater. So that's where we're seeing actually the impact. And I hate to state the obvious and keep pounding away on it, but that's why we're not a monoline payments enterprise. We've created opportunities that are countercyclical and this is just one of them. So that's what we're seeing thus far. But obviously, we feel like we've created a level of conservatism in the view of the -- our financials for the year. So if we see adjustments, we'll be able to react --
Brian Kinstlinger
Great. That's helpful. Now while management really has built a solid resume of execution in the years I've covered Priority. Can you explain why over the last two years, the gross margin percentage for consumer payments has seen a steady decline I think I heard for fourth quarter, something about -- excuse me, inventory write-offs, what was the size of that? And what is an inventory write-off in payment processing for SMBs? I'm not quite sure I understand.
Thomas Priore
Sure. Let me just get a couple of questions in there. I'm going to hit the margin. Actually, we've seen organic margins actually increase. And I'll have Tim kind of speak to some of the details.
But we had some residual purchases early on in our history as a public company. And as those purchases of portfolios begin to run off, that's really been the catalyst for where you see kind of margin decline. So it's actually a bit artificial because when you look at the remainder of the organic business and the way it's growing, it's actually that margin is expanding, and Tim will speak to the particular details.
Brian Kinstlinger
Before Tim goes, could you then touch on what is sustainable gross margin for that sector as you see that if there's still a portfolio runoff, is it 20%? Is it 21%? I mean what do you think is sustainable?
Thomas Priore
Look, certainly, where we -- mid- to upper 20s. The other thing, and this is what could influence it, and we've been super conservative. We have not projected anything in terms of the cross-selling that has begun of payables and banking into that segment but that can have a dramatic effect on margin expansion, increasing it by tens of percentage points. So that's why we're on that journey. That's why we're on that journey.
But as of today, until we feel like we have proper adoption stats, we'll be conservative about projections. But let me let Tim speak to some of the specifics on the latter question, and then we can kind of talk about the onetime write-down.
Tim O Leary
Sure. Brian, to give you a few more data points. So the onetime write-down, we had prepurchased certain licenses to cross-sell through our reseller base into the end merchant base. So we prepurchased those. And ultimately, just candidly didn't do an effective job in selling those into the market. So those are coming up in expiration.
So we took the write-off in the fourth quarter, it's listed on the 10-K from a dollar amount standpoint, but it was a $3.5 million write-down of that inventory. So if you normalize for that nonrecurring item, margins were actually flat quarter-to-quarter, right? So to Tom's point, we've actually seen some margin expansion in other areas, but those historical residual purchases as those attrit off over time, you're effectively losing 100% margin business as that runs down.
So that puts an additional headwind on the margins overall. If you normalize for both of those two items, the inventory write-off and if you also backed out the impact of the residual purchases running down, we actually saw our core margins in the SMB business expand by 120 basis points. And if you looked at just the Q4 of this year versus Q3 -- or Q4 of last year and you compared those same normalized numbers, that incremental revenue flowed through at a nearly 29% gross margin, right? So obviously, the aggregate margins aren't that high, but the incremental revenue we're bringing on is coming in at a higher margin, it's just being a little bit distorted in the financials by, one, the write-down of the inventory; and two, the historical residual purchases running down.
Brian Kinstlinger
Great. That's super helpful. Last question for you, Tim, another numbers question. You mentioned some shift of CapEx to OpEx that is going to weigh a little bit on expenses or cause a little bit of otherwise more growth in expenses. Could you just kind of highlight what those are?
Tim O Leary
Sure, it's really migrating from some of our hybrid cloud environments. We're operating our own data centers or operating our cloud environment into more of a public cloud. So going from CapEx to OpEx, right, paying as you eat in the public cloud environment. So that's going to have an impact on the year. We already started to see some of that in '24 and it rolled into Q3 and Q4. That will continue to accelerate a little bit into '25 as we make that full transition. But then by the end of '25, that should be fully run through, and we'll get to a normalized level of OpEx.
Thomas Priore
Brian, just to put like a fine point on this because we have been very intentional about maintaining a single platform because we know the risks of not maintaining that discipline. Our ability to move from what was, I'll call it, semi-private cloud, right, where we had some of our apps on private cloud environments that we developed early on, those are being retired and consolidated to a single application, which is why the migration. And then as we do that, it allows us to really more efficiently manage engineering costs going forward because we're not maintaining those legacy setups and they're more in line with what I would just say is a modern engineering framework where most engineers are trained.
So it allows us more versatility and the expertise of the people that join Priority on the engineering side. So it's actually an important evolution, and I just want to give you some context around understanding why the timing is now. It will ultimately reduce a good bit of CapEx on the back end.
Operator
Tim Switzer, KBW.
Tim Switzer
The first question I have is on the guidance you guys provided, I appreciate the segment by segment level. What are some of the factors that would drive you to the higher low end of the guide outside of the macro here? And is the enterprise segment primarily going to be the primary driver on which in the guide you hit.
Thomas Priore
I think I'll let Tim speak to a handful of items. It's not going to be driven just by Enterprise now. I would say the things that will influence towards the top end of the range will be as we start to get a sense of the impact of cross-sell in the SMB space as Tim already noted, we're actually seeing good margin expansion on an organic basis.
Once you factor in, I'll call legacy portfolio acquisitions from back in 2018. Just to give you some context, many of those acquisitions were resellers who said, hey, I want to be part of Priority's go forward and took shares as part of their acquisition, right? So as those run off, the cross-sell is really just beginning. That will impact us to the higher end of the range.
The other is noting the B2B pickups we're seeing in both buyer and supplier funded strategies. Those will be impactful. And then lastly, your observation on Enterprise is, it is not wrong. As you see, it is the highest margin business because it's just -- it creates such a dynamic relationship with the customer that uses all aspects of our business, from payments to banking or call it money at rest as well as other opportunities to monetize payouts through card strategies, debit card, what have you.
Those segments are -- they're really just now picking up momentum in a major way. So higher win rate, faster conversions, they could definitely pull forward the revenue projections in a very, very meaningful way. So in an effort not to I'll say, predict timing. We've been real conservative in the way we reflected what the business can do and I have high confidence in the numbers you see.
Tim Switzer
Okay. Great. That was helpful. And you guys have talked about before how you're now going to market in the B2B segment with Plastiq bundled with CPX. What has been the customer reaction to that? And has it helped improve sale activity?
Thomas Priore
It has. And let me let Tim speak to just some of the recent statistics on the increases we've seen in volume and activity. But look, as you might imagine, if I'm looking to extend working capital, as a company which I think we can all appreciate in the current environment is becoming more of a need, not less. Having more tools to do it is better. So we're seeing pickup in a couple of interesting ways.
Just number one, we're seeing customers that are already on platform using more of the tools. So FIs that are using us for buyer funded are now starting to explore other areas of our supplier-funded tools and how to work together. We're seeing other B2B payments business that just have gaps in their stack and maybe don't do supplier and enrollment quite as well and need other strategies that complement their largely ACA-driven platforms coming to us and using our card strategies.
So that's been an interesting development. So I would expect that to occur more, not less through the year, particularly as the impact of tariffs become more clear to everybody. Tim, maybe you want to highlight some of the volume over the Q4 to kind of where we're trending or some of the recent trends, I'll say that we can speak to.
Tim O Leary
Yes. I think the volume trends Tim, are pretty consistent with what you've seen from a revenue standpoint in B2B. So we had nice growth year-over-year and certainly quarter-to-quarter. The buyer funded model by Plastiq, if you think about historically, using that nomenclature. That business is continuing to grow.
Yes, over the last year, it was probably a little bit slower growth than what we wanted it to be, but we found a nice cadence now, including going upmarket in a lot of cases with enterprise-level customers and adding on some larger banks and to Tom's earlier point, it's tough to predict the ramp and how fast those businesses will accelerate, but we've won those new logos, if you will, and we're starting to see the benefits of that. So some of the numbers in December and January are indicative of that. And we built that into our guidance for the year as you think about what we're predicting for the B2B segment.
Operator
Bryan Bergin, TD Cowen.
Bryan Bergin
Wanted to start on enterprise first and hoping to dig in on CFTPay and some of those countercyclical attributes. Can you talk about how you're projecting maybe the pace of billed client adds here in Enterprise as you move through '25? Understand you have a growing base in the business here. But are you expecting anything in terms of pickup, given where overall revolving credit outstanding balances are? And just anything important when we think about things like charge-offs?
Thomas Priore
As you noted, right, this is, I'll call it, it's countercyclical to overall kind of the consumer spending. Look, there's been some interesting developments when you look at charge-offs and the tiering of just credit generally, right, who's spending and who's not. Sharing what I can, boarding trends have been very consistent coming out of the -- going into the new year and what we've seen through Q4 -- Q3 and Q4. So if anything, we probably aired more to the conservative side of our modeling of boarding trends.
Look, they're at a historically high level, I don't think they come off that level. But we've been judicious in the way we've projected it, perhaps not to remain quite so high. But based on the economic environment, it certainly doesn't appear a letup is likely.
I also think this segment, what I'll define broadly as consumer wellness has systemically changed where there will be more customers eligible for resolution products to help them merge from debt issues. And that's just because the environment has changed for credit counseling and other kind of consumer wellness-oriented products, which is driving a larger base of consumers to a resolution partner. So that's -- I think that's permanently going to benefit the sector to be candid. But that optimism is -- I would say that optimism is not things we've built into our projections. So to the extent we're right, it will accrue to the upside.
Bryan Bergin
Okay. Understood. That's helpful. And then, Tim, just on the 2025 OpEx dynamics, it was asked earlier, I was hoping you can give us a sense of the magnitude of that CapEx to OpEx shift, just to have a sense of the underlying profitability and I don't know it's easier to bridge what the impact was as you started to experience this shift in the second half of '24 into '25? Just any way to frame that impact rolling through OpEx.
Tim O Leary
Sure. So I think for '25, it's a ballpark, call it, a $4 million impact from an OpEx standpoint, plus or minus, depending on some of the timing of it and when we make some of those conversions. But that's a good ballpark to use for '25 with that conversion to OpEx.
Bryan Bergin
Okay. And then just any other -- as we think about free cash flow, any important considerations and expectations around free cash flow conversion in '25?
Tim O Leary
Look, obviously, interest rates have an impact. So if you think about our business today, we're pretty effectively hedged from a cash flow standpoint, right? Obviously, our debt is floating rate. The income we generate on the permissible investments from our balances are, for the most part, floating rates, effectively tied to Fed funds type rates. So as rates come down, we'll see some pressure on EBITDA, but we also see our interest rates come down and our debt as well.
So cash flow is somewhat neutral there. If rates stay higher for longer, that's going to benefit the P&L. And coming back to maybe the earlier question, somebody else asked around what's upside to the guidance range. If rates stay higher for longer, that's a benefit to the P&L. But no other meaningful changes from a cash flow standpoint in '25.
CapEx will be pretty consistent and most of our CapEx is capitalized software development for new products to go generate new revenue. M&A, some tuck-in M&A activity will be relatively small. And I think transformative, obviously, will be a change in the capital structure, but no other meaningful shifts.
Operator
(Operator Instructions) [Bella Hondros], [BCA Group].
I see that you included an adjusted EPS figure in your earnings release, but it wasn't something that you discussed in your prepared remarks. Is that a figure you're going to continue to provide going forward? And is there any guidance you can offer on 2025 expectations?
Tim O Leary
Thanks. No, good question. So it's -- we put out adjusted EPS this quarter. Obviously, the GAAP EPS was impacted by a couple nonrecurring items, including debt modification costs as we took out the preferred equity during the year, and we raised incremental capital to do that. And then there was also the acceleration of the unamortized discount on the preferred equity so that had an impact which is why we ultimately show the adjusted EPS, which for the quarter was $0.18 and $0.51 for the full year. We'll continue to provide that figure as our tax rate start to normalize. We had a 35% effective tax rate this quarter.
Over time, as we continue to become higher profitability and start to work through some of the allowances against that with 163J and other items. That tax rate will more closely approximate to 30% so I think EPS becomes a more relevant factor for us. We haven't put out official guidance for '25 from an EPS standpoint, but we finished '24 with $0.51. And I think you could easily see that number doubling closer to $1 a share based on just kind of normal course growth from $0.18 to Q1 and Q2 of '25. So I think $1 a share is a good approximation for where we would see it.
Operator
This concludes our question-and-answer session. I would like to turn the conference back over to Tom Priore for any closing remarks. Please go ahead.
Thomas Priore
All right. Thank you very much. We want to thank everybody for taking the time to participate. And we're looking forward to what the 2025 year is going to hold for Priority. Everyone is focused on execution. So we look forward to gathering again in a couple of months to discuss how we did in Q1. Thanks, everyone.
Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
