Priority Tech (PRTH) Q1 2026 Earnings Transcript

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DATE

Monday, May 11, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer — Thomas Priore
• Chief Financial Officer — Timothy O’Leary
• Managing Director, ICR — Meghna Mehra

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TAKEAWAYS

• Net Revenue -- $249.6 million, marking an 11% increase attributable to both organic growth and recent acquisitions.
• Adjusted Gross Profit -- $98.8 million, up 13%, driven by higher Payables and Treasury Solutions contributions, and margin-accretive acquisitions.
• Adjusted EBITDA -- $58.1 million, a 13% increase from the prior year.
• Adjusted EPS -- $0.28, representing a 27% year-over-year increase.
• Commerce Platform Accounts -- 1.8 million total customer accounts, rising by 50,000 over the prior year.
• Annual Transaction Volume -- $153 billion, up $3 billion since year-end.
• Average Account Balances Under Administration -- $1.8 billion, up over $100 million from year-end.
• Payables Segment Revenue -- $32.4 million, up 35.6% with buyer-funded revenue at $25.4 million (up 37.1%), and supplier-funded revenue at $7 million (up 30.6%).
• Payables Segment Adjusted EBITDA -- $5.5 million, a 55.1% increase, reflecting operational leverage and a three percent reduction in segment operating expenses before D&A.
• Payables Segment Gross Margin -- 28.4%, declining by 210 basis points mainly due to mix shift toward lower-margin, buyer-funded revenues.
• Treasury Solutions Segment Revenue -- $58.8 million, an increase of 17.5% driven by client enrollment and growth in integrated partners.
• Treasury Solutions Segment Adjusted Gross Profit -- $52.9 million, up 12.8% with gross margin at 89.8%, down 370 basis points due to revenue mix shift toward lower-margin ventures.
• Treasury Solutions Adjusted EBITDA -- $46.7 million, up 10%, supported by CFTPay and Passport program growth.
• Merchant Solutions Segment Revenue -- $161.8 million, up 6.7%, with organic growth of 3.9%, and card volume at $18.1 billion (up 2.5%).
• Merchant Solutions Adjusted Gross Profit -- $36.7 million (up 10.8%), and adjusted EBITDA of $27.7 million (up 7.9%).
• Merchant Solutions Gross Margin -- 22.7%, up 80 basis points due to acquisitions, partially offset by "higher-than-normal credit losses."
• Payables and Treasury Contribution -- 63% of total consolidated adjusted gross profit for the quarter, or 66% excluding acquisitions.
• Gross Margin Trends -- Overall adjusted gross profit margin was 39.6%, up 70 basis points; gross profit from recurring revenue increased 90 basis points, exceeding 63%.
• Operating Expenses -- Salaries and benefits of $28.5 million increased 10.7%, while SG&A rose 27.4%, primarily due to cloud, software, and transaction expenses.
• Free Cash Flow -- $28 million generated using adjusted EBITDA less $5.5 million CapEx, $21 million interest, and $3.6 million taxes.
• Net Debt and Leverage -- Net debt was $927.8 million with a reported net leverage of four times, improving from 4.2 times; pro forma net leverage would have been 3.8 times including run-rate EBITDA from acquisitions.
• Liquidity -- Ended the quarter with over $192 million in available liquidity, including $92.2 million in cash, and full availability of a $100 million revolving credit facility.
• Full-Year Guidance -- Maintained forecasts of $1.01 billion to $1.04 billion in revenue, and $230 million to $245 million adjusted EBITDA, citing "strong momentum across our business segments," and "high visibility into continued performance."
• Strategic Segment Commentary -- Management indicated larger enterprise customers, and growth in working capital solutions are driving Payables results, with cited intention to broaden the recurring contribution of Payables and Treasury business.
• Hardware Cost Impact -- CFO Timothy O’Leary said, "some of the POS equipment—we did see price increases and some of the tariffs that impacted that segment. That is a relatively small revenue stream for us. We got ahead of some of that."
• Merchant Sector Trends -- CFO noted ongoing "softness in restaurants," continued softness in construction and legal services, but strength in real estate, grocery, and auto retail trade, with inflation and gas prices supporting results in certain subsegments.
• Recurring Revenue Proportion -- Management confirmed the combined contribution from Payables and Treasury is expected to grow further as these segments outpace Merchant Solutions growth.
• Revenue Recognition Policy Impact -- Payables’ buyer-funded revenues are recognized on a gross versus net basis due to GAAP requirements, affecting reported segment margins.

SUMMARY

Priority Technology Holdings (NASDAQ:PRTH) delivered double-digit organic and reported revenue growth, driven primarily by Payables and Treasury Solutions, resulting in higher consolidated margins and significant increases in adjusted gross profit, EBITDA, and EPS. The segment breakdown revealed Payables and Treasury Solutions now account for a majority of margin generation, while Merchant Solutions growth was positive but partially constrained by sector-specific weakness and higher credit losses. Leverage and liquidity metrics improved sequentially, reinforcing the company's maintained full-year revenue and EBITDA guidance, and management's confidence in continued recurring revenue contribution from non-Merchant segments.

• The reported growth in enrolled clients for CFTPay, and integrated partners underpinned Treasury Solutions’ revenue and profit expansion, even as reduced interest rates affected part of the segment.
• Management stated that recent acquisitions, and larger-enterprise customer wins in Payables, and the deposit-focused strategy should provide a "substantial catalyst" to expanding the company’s recurring revenue base.
• SG&A increases were attributed to higher cloud and software spending, and nonrecurring transaction-related costs, reflecting ongoing investment in the company's operations and growth initiatives.
• Adjusted EBITDA growth outpaced revenue in Payables due to disciplined expense management, with buyer-funded volumes driving lower segment margins per GAAP requirements.
• Merchant Solutions organic volume growth was described as "a normalized level," with management guidance indicating low single-digit organic card volume growth aligns with annual projections.

INDUSTRY GLOSSARY

• B2B Payments: Electronic payment solutions for transactions between businesses, often encompassing automated payables and receivables processes.
• CFTPay: Priority Technology Holdings' treasury platform for client funds transfer, enabling account and payment management.
• Buyer-Funded Revenues: Payment facilitation where the transaction cost is borne by the purchasing business, typically resulting in lower margin for the platform due to GAAP gross revenue reporting.
• Supplier-Funded Revenues: Transactions where the supplier pays a fee as a percentage of invoices, often reported on a net revenue basis with higher segment margins.
• Passport Program: A managed service offering by Priority Technology Holdings within Treasury Solutions, facilitating embedded banking and payments for industry-specific partners.
• DMS/BOOM/BOOMCommerce: Recent acquisitions by Priority Technology Holdings driving Merchant Solutions growth and margin expansion.

Full Conference Call Transcript

Operator: Greetings. Welcome to Priority Technology Holdings, Inc. First Quarter 2026 Earnings Call. The question and answer session will follow the formal presentation. Please note that this conference is being recorded. At this time, I will now turn the conference over to Meghna Mehra, Managing Director of ICR. Thank you, Meghna. You may now begin.

Meghna Mehra: Good morning, and thank you for joining us. With me today are Thomas Priore, Chairman and Chief Executive Officer of Priority Technology Holdings, Inc., and Timothy O’Leary, Chief Financial Officer. Before giving 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. Before I turn the call over to Tom, I would like to say that on today's call, we will only be discussing Priority Technology Holdings, Inc.’s financial and operational results and we will not be commenting on or answering questions related to the special committee's ongoing evaluation of the take-private proposal. Please continue to refer to the company's prior press releases for the latest on that topic.

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

Thomas Priore: Thank you, Meghna, and thanks to everyone for joining us this morning. I will cover our aggregate first quarter performance and outlook before handing the call over to Tim, who will provide segment-level performance, key trends, and developments across our business segments and Priority Technology Holdings, Inc. overall. This morning, we reported strong growth in both revenue and profits for the first quarter. As summarized on slide three, Priority Technology Holdings, Inc. had a solid Q1 by every key financial metric, growing net revenue by 11%, generating adjusted gross profit and adjusted EBITDA growth of 13% each, and increasing adjusted EPS by 27% year-over-year to $0.28.

We ended the first quarter with 1.8 million total customer accounts operating on our commerce platform, which is up 50,000 from 2025. Annual transaction volume increased by $3 billion from year-end to $153 billion, and average account balances under administration improved by over $100 million from year-end to $1.8 billion. Tim will provide more context on the full-year outlook later in the call, but I can reflect that the value our diverse partners and customers see in our unified commerce platform and elegant product solutions provides continued confidence that we will sustain the momentum in our Merchant Solutions, Payables, and Treasury Solutions segments.

Turning our attention to aggregate Q1 results on slide four, revenue of $249.6 million increased 11% from the prior year. This led to a 13% increase in adjusted gross profit to $98.8 million and a 13% improvement in adjusted EBITDA to $58.1 million. Adjusted gross profit margin of 39.6% increased 70 basis points from the prior year's first quarter, reflecting the ongoing performance of our diverse, high-margin Payables and Treasury Solutions segments combined with the accretive impact of acquisitions completed in 2025. For those of you who are new to Priority Technology Holdings, Inc., slides five and six highlight our vision for Connected Commerce. The Priority Commerce platform is purpose-built to streamline collecting, storing, lending, and sending money.

It delivers a flexible financial toolset for merchant acquiring, payables, and treasury solutions designed to accelerate cash flow and optimize working capital for businesses. I would encourage you to play the short one- to two-minute videos embedded in the product links on the slide to gain a deeper appreciation of why customers are consistently partnering with Priority Technology Holdings, Inc. to reach their commerce goals and why we are emerging as a go-to solution provider for embedded commerce and finance solutions. Slide six highlights a typical partner experience with our commerce APIs’ orchestration capabilities for payments and treasury solutions. This enables partners to use a single API tailored to their specific objectives.

Customers connecting via our API can access all routes for digital payment acceptance, create traditional and virtual bank accounts, issue physical and virtual debit cards, enable lockbox for checks, configure single vendor and advanced bulk vendor payments, and many other commerce options that create new revenue opportunities and operating efficiency. We continue to standardize payment operations and key operational workflows across diverse industry segments where money movement and treasury tools are critical to the value chain to broaden and diversify our revenue sources while maintaining our cost discipline. This vision explains why Priority Technology Holdings, Inc. has consistently performed across varying economic cycles.

Our customers and current market conditions, particularly the accelerating narrative of AI's impact on SaaS providers, reinforce our belief that systems connecting payments and treasury solutions to accept and distribute funds in multi-party environments will be critical as businesses put greater demand on software and payment solution providers to deliver a full suite of core business solutions in a single relationship. At this point, I would like to hand the call over to Tim, who will provide further insights into the health of our business segments along with current trends in each that factored into our first quarter results and our confidence for sustained performance in 2026.

Timothy O’Leary: Thank you, Tom, and good morning, everyone. We had solid overall financial performance in the first quarter on a consolidated basis and across each of our operating segments. Q1 reported revenue growth of 11.1% included organic growth of 9.1% fueled by strong 35.6% growth in Payables and 17.5% growth in Treasury Solutions, complemented by 6.7% reported growth in Merchant Solutions, which included 3.9% organic growth. As shown on slide eight, adjusted gross profit from our Payables and Treasury Solutions segments represented 63% of the total for the quarter and 62% on a trailing twelve-month basis.

As an organic comparison to prior data points, if you exclude the impact of acquisitions, those percentages would have been 66% for the quarter and 65% for the trailing twelve-month period. Strong growth in Payables and Treasury Solutions combined with the impact of acquisition-related activity also allowed for overall margin expansion, as adjusted gross profit margins improved by over 70 basis points from 2025, and gross profit from recurring revenue increased 90 basis points to over 63% in the first quarter. I will move now to the segment-level results and start with Merchant Solutions on slide nine. Merchant Solutions generated Q1 revenue of $161.8 million, which is $10.1 million or 6.7% higher than last year's first quarter.

Revenue growth was a mix of 3.9% organic growth complemented by the BOOM and DMS acquisitions completed in 2025. Total card volume in Merchant Solutions was $18.1 billion for the quarter, which is up 2.5% from the prior year. From a merchant standpoint, we averaged 175,000 accounts during the quarter, which is down from 178,000 last year, while new monthly boards averaged 2,800 during the quarter. Adjusted gross profit for the first quarter was $36.7 million, which is up $3.6 million or 10.8% from Q1 of last year.

Gross margins of 22.7% are over 80 basis points higher than the comparable quarter last year due to the BoomCommerce and DMS acquisitions, partially offset by the impact of certain higher-than-normal credit losses during the quarter. Lastly, adjusted EBITDA was $27.7 million, which is up $2 million or 7.9% compared to last year. Moving to the Payables segment, revenue of $32.4 million was 35.6% higher than last year's Q1. Buyer-funded revenues grew 37.1% year-over-year to $25.4 million, while supplier-funded revenues grew 30.6% year-over-year to $7 million. Adjusted gross profit was $9.2 million in the quarter, which is a 26.4% increase over the prior year.

For the quarter, gross margins were 28.4%, which is down 210 basis points compared to last year's first quarter. This decline is largely due to continued shift in revenue mix, with buyer-funded revenues reported at lower gross margins given GAAP requirements to recognize revenue on a gross versus net basis. The Payables segment contributed $5.5 million of EBITDA during the quarter, which is a $2 million or 55.1% year-over-year increase. The acceleration of adjusted EBITDA growth compared to revenue and adjusted gross profit was driven by continued strong operating leverage in the segment, including a 3% year-over-year reduction in operating expenses before D&A.

Moving to the Treasury Solutions segment, Q1 revenue of $58.8 million was an increase of $8.8 million or 17.5% over the prior year's first quarter. Revenue growth was driven by continued strong enrollment trends and an increase in the number of billed clients enrolled in CFTPay to over 1.1 million, combined with a 28% year-over-year increase in the number of integrated partners and organic same-store sales growth from existing Passport program managers. Higher account balances in both CFTPay and Passport were able to more than offset the impact of lower interest rates in the quarter compared to Q1 of last year.

As a result of those factors, adjusted gross profit for the segment increased by 12.8% to $52.9 million, while adjusted gross profit margins were 89.8% for the quarter. Gross margins were approximately 370 basis points lower than the prior year's first quarter due to mix shift resulting from over 140% revenue growth and 170% revenue growth in Priority Tech Ventures, both of which operate at lower gross margins than the CFTPay platform where margins have remained very stable. Adjusted EBITDA for the quarter was $46.7 million, an increase of $4.2 million or 10% year-over-year.

Overall profitability in Treasury Solutions was driven by low double-digit revenue growth in CFTPay, combined with strong and profitable growth in Passport, which offset investments we continue to make in newer software vertical assets within Priority Tech Ventures. Moving to consolidated operating expenses, salaries and benefits of $28.5 million increased by $2.7 million or 10.7% compared to Q1 of last year, and was down slightly on a sequential basis compared to Q4. The year-over-year increase was primarily driven by an increase in stock compensation expense combined with acquisition-related headcount additions.

SG&A of $19.2 million increased by $4.1 million or 27.4% compared to Q1 of last year because of higher cloud and software expenses combined with an increase in nonrecurring legal and transaction-related expenses. With respect to our capital structure on page 13, debt at the end of the quarter was $1.02 billion, and we ended the quarter with over $192 million of available liquidity, including all $100 million of borrowing capacity available under our revolving credit facility and $92.2 million of cash on the balance sheet.

With respect to free cash flow, we generated $28 million of free cash flow in the quarter, based on adjusted EBITDA of $58.1 million less $5.5 million of CapEx, $21 million of interest expense, and $3.6 million of income taxes. For the LTM period ended March 31, adjusted EBITDA of $232 million combined with net debt of $927.8 million resulted in net leverage of 4.0x at quarter end, which is down from 4.2x at the end of Q4. For further comparison, if you were to include the run-rate EBITDA impact of acquisitions, pro forma net leverage would have been 3.8x at quarter end.

Based on strong momentum across our business segments, combined with high visibility into continued performance for the remainder of the year, we are maintaining our full-year financial outlook with revenue forecast to range between $1.01 billion to $1.04 billion and adjusted EBITDA forecast to range between $230 million to $245 million. With that, I will now turn the call back over to Tom for his closing comments.

Thomas Priore: Thank you, Tim. In conclusion, I want to thank all of my colleagues at Priority Technology Holdings, Inc. for continuing to work incredibly hard to deliver results. Your commitment and dedication to improving everything we do is clear, providing our partners and customers with a consistent reminder that they made the right choice to partner with Priority Technology Holdings, Inc. We will now open the call for questions. Operator, we would now like to move the call to the Q&A portion.

Operator: Thank you. For participants that are using speakerphone, it may be necessary to pick up your handset before pressing the star keys. Thank you. And our first question is from Vasundhara Govil with KBW. Please proceed with your questions.

Vasundhara Govil: Hi. Thank you for taking my question. I want to maybe start with the Payables segment. It was really strong growth there, nice acceleration from last quarter even. Can you maybe just drill down on what drove the strength there? And if any one-timers that we should be mindful of as we think about modeling it for the rest of the year? Thank you.

Thomas Priore: Sure. We have had the view when we acquired the business that this was really well situated to move upmarket towards really marketing more as a working capital solution for larger organizations, and that is just starting. What the numbers you are seeing is that manifesting. So larger customers, larger volumes, utilizing it for both domestic and cross-border opportunities as a very viable working capital solution that is better priced than a revolver. We think there will be more to come. Thank you.

Vasundhara Govil: And if I could just ask a quick follow-up. I know some of your peers have been calling out some margin pressure due to higher memory chip costs for hardware. Just wondering if that is an issue or that is a concern for you. And if so, is that baked into the outlook? Thank you.

Thomas Priore: I would not—first of all, yes, I mean, that is always a focus. I will just say, but not due to hardware. Payments generally, of course, as it continues to commoditize in certain respects, it is why the breadth of our platform to add payables and other treasury-oriented tools is becoming the differentiator on platform. So it is definitely not hardware-related. But it is a condition that we feel really comfortable about mitigating, and the devil will be in the details and the work that gets done. Tim, anything you feel you want to add just from a statistical standpoint?

Timothy O’Leary: The only thing I would say is some of the POS equipment—we did see price increases and some of the tariffs that impacted that segment. That is a relatively small revenue stream for us. We got ahead of some of that with some equipment purchases before the tariffs kicked in with the last price increase, but overall, it is really not a big impact on the P&L. Most of the margin compression we have seen has been just from a continued mix shift within the business.

Vasundhara Govil: Got it. Thank you for the color.

Operator: Our next questions are from the line of Jacob Michael Stephan with Lake Street. Please proceed with your questions.

Jacob Michael Stephan: Yes. Hey, guys. Appreciate you taking the question. Maybe looking at the EBITDA number this quarter, it has typically trended above where historically Q1 is as a percentage for the balance of the year. Just wondering if you could kind of touch on how you see the quarterly cadence kind of break down over the remainder of the year.

Timothy O’Leary: Sure. Hi, Jacob. I think our pattern is going to be consistent. We are obviously continuing to see growth in the business on the top line, seeing the benefit of some of the acquisitions from last year along with just strong organic performance. So we will expect continued progression through the year. Obviously, we have maintained our guidance, and if you take the midpoint of that guidance and do your own extrapolation, you would expect to see some growth in EBITDA as you move through the year to get to those numbers.

Jacob Michael Stephan: And maybe just on the recurring piece of the business—Payables plus Treasury—I think at this point, it was 65% excluding acquisitions. Do you feel like there is a natural kind of ceiling as to how high the consolidated number could be, or do you see a path to even further expanding on that?

Timothy O’Leary: I think you will continue to see that number expand. Obviously, the growth we saw this quarter in Payables helped add to that figure, with 35.6% growth in Payables. You will continue to see that percentage coming from Payables and Treasury Solutions grow over time. And, obviously, Merchant Solutions continues to grow as well, and we had nice organic and overall growth in that segment. But just that higher growth coming from Payables and Treasury is going to continue to have that mix shift towards those higher-value segments.

Thomas Priore: One other thing I would just point to, Jacob, is if you look at the continued growth in our deposit base—that is very intentional. We are focused on segments where, as a collect, store, and send platform, that storage piece is a differentiator. So the more and more we are attaching to segments where storing money is an important part of the value chain, that money remains in the network and creates earning streams for ourselves and all our partners. That will be a substantial catalyst to the continued recurring contribution growth of those two segments.

Jacob Michael Stephan: Got it. Thank you.

Operator: As a reminder, to ask questions today, you may press 1. The next questions are from the line of Bryan C. Bergin with TD Cowen. Please proceed with your question.

Bryan C. Bergin: Hey, guys. Good morning. So I will go on the merchant side and seek your macro perspective here. Just give us perspective on what you are seeing across the various industry sectors. Any signs of change or inflection in any of those SMB markets that you flagged the last quarter or two that were slower? And as you think about in that business, too, just the total card volume growth, what is a reasonable run-rate expectation on card volume growth relative to the trajectories discussed by the networks?

Timothy O’Leary: Sure. Thanks, Bryan. I think some of the trends have been consistent from what we had the last couple quarters. We continue to see a little bit of softness in restaurants—not as much as we had over the last two quarters on a year-over-year basis if you think about the change year-over-year—but certainly down a little bit from last year, and then down a little bit from Q4 as well just given some of the seasonality you get with restaurants in Q4. Construction was also still a little bit soft, and then legal services was down as well. Where we saw strength was real estate.

As we continue to expand some of our property management solutions and real estate tech, we continue to see growth there, which I would argue is more us taking share than it is the market necessarily continuing to grow in real estate, so I think that is a positive for us. And then we also saw very strong growth and nice improvement in retail trade, specifically with areas like auto and gas with gas prices being up, as well as into food stores and grocery with inflation having a benefit there as well.

Bryan C. Bergin: And as far as that card volume growth level—the 2.5%—relative to what Visa and Mastercard are talking about, what is reasonable as we build models and think about run-rate expectations? Where do you feel like that can go?

Timothy O’Leary: I think that is a normalized level of organic growth from a card volume standpoint. I think we have seen in the last several quarters probably a little bit of a delta between what even some of the banks are reporting from issuing volume and what the networks are reporting from volume growth compared to where some of the other acquirers are showing volume growth. So I think our numbers are relatively normalized. Organically, we are a little north of 2%. The delta there is the acquisitions. Low single-digit organic volume growth ranges get you to our guidance for the year.

Bryan C. Bergin: And then on Payables—really strong growth there. Curious if the underlying activity you are seeing is signaling anything to you in the customer base, or if it is really that movement upmarket that is really driving that strength. And you start the year strong, you affirm the guide. I think you were thinking that segment would be like an 8%–10% grower. Any caveats there as you move to the balance of the year for Payables?

Timothy O’Leary: I think the growth there is twofold. It is continued solid growth in our historical core in that business combined with Tom's point earlier—the upside we are starting to see from some of these large enterprise-size customers that we have onboarded more recently. It took some time to get those relationships integrated and up and running, but now that we are seeing the benefit of that, the growth rate here has definitely improved. I do not think there is anything really in those numbers that is one-time in nature. We did have a solid quarter relative to some of our supplier enablement business, but that is going to continue to have a solid trend line as well.

Operator: At this time, I will turn the floor back to Tom for closing remarks.

Thomas Priore: Thank you, everyone, for joining us today.

Operator: This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful day. I am sorry.

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