Priority Technology Holdings, Inc. (NASDAQ:PRTH) Q1 2026 Earnings Call Transcript

Priority Technology Holdings, Inc. (NASDAQ:PRTH) Q1 2026 Earnings Call Transcript May 11, 2026

Priority Technology Holdings, Inc. beats earnings expectations. Reported EPS is $0.28, expectations were $0.22.

Operator: Greetings. Welcome to Priority Technology Holdings First Quarter 2026 Earnings Call. [Operator Instructions] Please note that this conference is being recorded. At this time, I’ll 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 Tom Priore, Chairman and Chief Executive Officer of Priority Technology Holdings; and Tim 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’s financial and operational results and outlook. 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, Tom Priore.

Thomas Priore: Thank you, Meghna, and thanks to everyone for joining us this morning. I’ll cover our aggregate first quarter performance and outlook before handing the call over to Tim, who’ll provide segment-level performance, key trends and developments across our business segments and priority overall. This morning, we reported strong growth in both revenue and profits for the first quarter. As summarized on Slide 3, Priority 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 the end of 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 4. 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 the second half of 2025. And for those of you who are new to Priority, Slides 5 and 6 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 tool set for merchant acquiring, payables and Treasury Solutions designed to accelerate cash flow and operate working capital for businesses. I would encourage you to play the short 1- to 2-minute videos embedded in the product links on the slide to gain a deeper appreciation of why customers are consistently partnering with Priority to reach their commerce goals and why we’re emerging as a go-to solution provider for embedded commerce and finance solutions.

Slide 6 highlights the typical partner experience with our commerce API’s 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 enabled 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 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 on a single relationship. At this point, I’d 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.

Tim 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 8, adjusted gross profit from our payables and Treasury Solutions segments represented 63% of the total for the quarter and 62% on a trailing 12-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 12-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 Q1 of ’25, and gross profit from recurring revenue increased 90 basis points to over 63% in the first quarter. I’ll move now to the segment level results and start with Merchant Solutions on Slide 9. 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 the second half of 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 Boom Commerce 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 payable segment. Revenue of $32.4 million was 35.6% higher than last year’s Q1. And 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 of lower gross margins giving GAAP requirements to recognize revenue on a gross versus net basis. The payables segment contributed $5.5 million of adjusted 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 build 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 in Passport and 170% revenue growth in priority Tech Ventures, both of which operate at lower gross margins in 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 and 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. 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 4x 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 a 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’ll 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 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. Operator, we would now like to move the call to the Q&A portion.

Operator: [Operator Instructions] And our first question is from Vasu Govil with KBW.

Vasundhara Govil: I want to maybe start with the Payable 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 onetimers that we should be mindful of as we think about modeling into the rest of the year?

Thomas Priore: Sure. We’ve had a view when we acquired the business that this was really well situated to move upmarket towards really market more as a working capital solution for larger organizations. And that’s just starting that the numbers you’re 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 revolver. And we think there’ll be more to come.

Q&A Session

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

Thomas Priore: I wouldn’t — first of all, yes, I mean that’s always a focus, I’ll just say, but not due to hardware. I’ll just say payments generally, of course, as it continues to commoditize in certain respects, it’s why the kind of the breadth of our platform to add Payables and other treasury-oriented tools is becoming the differentiator on platforms. So it’s definitely not hardware related, but it’s a condition that we feel really comfortable about mitigating and — but the devil be in the details and the work that gets done. Tim, anything you feel you want to add just from a statistical standpoint, what you’re seeing.

Tim O’Leary: Yes. The only thing I’d say is some of the POS equipment, we did see price increases and some of the tariffs that impacted that segment. That’s 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’s really not a big impact on the P&L. Most of the margin compression we’ve seen has been just from a continued mix shift within the business.

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

Jacob Stephan: Maybe just looking at the EBITDA number this quarter, it 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 breakdown over the remainder of the year?

Tim O’Leary: Sure. yes. I think our pattern is going to be consistent. I think we’re 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’ll expect continued progression through the year. Obviously, we’ve 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 Stephan: Got it. 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’s a natural kind of ceiling as to how high the consolidated number could be? Or do you see a path to even further kind of expanding on that.

Tim O’Leary: I think you’ll continue to see that number expand. Obviously, the growth we saw this quarter in payables helped add to that. that figure, with 35.6% growth in payables, you’ll continue to see that percentage coming from payables and Treasury Solutions grow over time. 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, right, that’s very intentional that we are focused on segments where I said we’re 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, and that money remains in the network and creates earnings streams for ourselves and all our partners — that will be a substantial catalyst to the continued recurring contribution growth of those 2 segments.

Operator: [Operator Instructions] The next question is from the line of Bryan Bergin with TD Cowen.

Bryan Bergin: So I’ll go on the Merchant side and see your macro perspective here. So just give us a perspective on what you’re seeing across the various industry sectors any signs of change or inflection in any of those SMB markets that you flagged in the last quarter or 2 that were slower and as you think about in that business, too, just the total card volume growth, what’s the reasonable run rate expectation on card volume growth relative to the trajectories discussed by the networks?

Thomas Priore: Sure. Thanks, Brian. Yes, I think some of the trends have been consistent from what we had the last couple of quarters, right? We continue to see a little bit of softness in restaurants not as much as we had over the last 2 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 Construction was also still a little bit soft and the 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 continue to see growth there, which I would argue is more us taking share than it is the market necessarily continue to grow in real estate.

So I think that’s 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 Bergin: Okay. And as far as that card volume growth level, the 2.5% relative to kind of what Visa and Mastercard talked about, what’s a reasonable as we kind of build models and think about run rate expectations? Where do you feel like that can go?

Thomas Priore: I think that’s a normalized level of organic growth from a card volume standpoint, I think we’ve 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 a volume growth compared to where some of the other acquirers are showing volume growth. So I think our numbers are relatively normalized. Organically, we’re a little north of 2%, right? The delta there is the acquisitions late last year. But I think we’re modeling something in that same kind of low single-digit organic volume growth range as we got to our guidance for the year.

Bryan Bergin: And then on payables. So really strong growth there. Curious if the underlying activity you’re seeing is signaling anything to you in the customer base or if it’s really just that movement up market that’s really driving that strength. And as you start the year strong from the guide, I think you were thinking that segment would be like an 8% to 10% grower. Any caveat there as you move to the balance of the year for Payables?

Thomas Priore: I think the growth there is — it’s twofold. It’s continued solid growth in our historical core in that business combined with Tom’s point earlier, the upside we’re starting to see from some of these large enterprise-sized customers that we’ve onboarded here more recently. It took some time to get those relationships integrated and up and running, but now that we’re seeing the benefit of that, the growth rate here has definitely improved. I don’t think — there’s nothing really in those numbers that is onetime in nature. We did have a solid quarter relative to some of our supplier enablement business, but that’s going to continue to have a solid trend line as well.

Operator: Thank you. At this time, I’ll turn the floor back to Tom for closing remarks.

Thomas Priore: Operator, I think that’s…

Operator: Yes, please go ahead, Tom, with your closing comments.

Thomas Priore: We can end the call there, operator.

Operator: Thank you. Thank you, everyone, for joining us today. This will conclude today’s conference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.