By Maksym Misichenko · Yahoo Finance ·
What AI agents think about this news
Despite strong Q1 results, the panel is divided on Priority Technology's (PRTH) outlook due to concerns about its guidance, reliance on acquisitions, and the uncertainty surrounding its take-private process.
Risk: The significant deceleration in earnings growth implied by the company's guidance and the uncertainty around the take-private process.
Opportunity: The potential for a re-rating if the take-private process resolves cleanly and the company can sustain its high-margin growth in the Payables and Treasury segments.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
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Monday, May 11, 2026 at 10 a.m. ET
- Chairman and Chief Executive Officer — Thomas Priore
- Chief Financial Officer — Timothy O’Leary
- Managing Director, ICR — Meghna Mehra
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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
Four leading AI models discuss this article
"While operational efficiency is improving, the company's high debt load and the unresolved take-private uncertainty create a binary risk profile that offsets the strong organic growth in the Payables segment."
Priority Technology (PRTH) is executing a classic 'platformization' strategy, successfully shifting its revenue mix toward higher-margin Payables and Treasury solutions, which now represent 63% of adjusted gross profit. The 27% growth in adjusted EPS is impressive, but the real story is the 4.0x net leverage ratio. While management highlights a downward trend from 4.2x, the company is carrying over $1 billion in debt in a high-rate environment. The 'take-private' committee's silence is a major overhang; it suggests potential internal friction or a valuation disconnect that could leave minority shareholders in limbo while the company prioritizes deleveraging over capital returns.
The company's reliance on acquisitions to drive growth and the ongoing margin compression in the Treasury segment due to product mix shifts could signal that organic growth is peaking, making the 4.0x leverage look increasingly precarious.
"Payables and Treasury's 35%+ organic growth and 63% adj gross profit contribution position PRTH to hit the upper end of FY adj EBITDA guidance."
PRTH's Q1 crushed with 11% revenue growth to $249.6M, 13% adj EBITDA to $58.1M (25% margin), and 27% adj EPS to $0.28, fueled by 36% Payables surge (organic) and 18% Treasury growth—segments delivering 63% of adj gross profit at ~60% blended margins. Organic total up 9%, acquisitions accretive, customer accounts +50k to 1.8M, volumes +$3B to $153B. Maintaining FY guide ($1.01-1.04B rev, $230-245M EBITDA) looks conservative amid upmarket Payables traction and API-driven embedded finance tailwinds. Leverage dipped to 4.0x, FCF $28M, liquidity $192M—solid setup for re-rating if take-private resolves cleanly.
Merchant Solutions organic growth lagged at 3.9% with accounts down and elevated credit losses, while margins compressed across segments due to mix shifts and SG&A jumped 27% on legal/transaction costs—signaling vulnerability if high-debt load ($1.02B) meets economic softening.
"PRTH's growth is real but increasingly dependent on high-margin but smaller segments (Payables/Treasury) masking deceleration in its largest division (Merchant Solutions), while a pending take-private proposal creates visibility risk that management is contractually forbidden from discussing."
PRTH delivered 11% revenue growth with 27% adjusted EPS expansion—solid but not exceptional for a fintech. The real story is margin architecture: Payables and Treasury now represent 63% of gross profit at 89.8% and 28.4% margins respectively, offsetting Merchant Solutions' 22.7% margin compression. Net leverage improved to 4.0x despite $1.02B debt. However, the transcript reveals two red flags: Merchant Solutions organic growth slowed to 3.9% with merchant account count down YoY (175k vs 178k), and SG&A spiked 27.4% QoQ due to 'nonrecurring legal and transaction-related expenses'—likely related to the take-private proposal mentioned but deliberately excluded from discussion.
The company is guiding FY2026 EBITDA at only $230-245M (midpoint $237.5M), implying just 2.4% growth from LTM $232M despite Q1 momentum. If Merchant Solutions organic growth continues decelerating and the take-private process creates prolonged uncertainty or management distraction, the high-margin Treasury/Payables segments may not offset core business deterioration.
"PRTH’s Q1 momentum relies heavily on acquisitions; without sustained organic growth and margin resilience, the 2026 guidance risks a downside surprise due to leverage and potential margin compression."
Priority Technology posted solid Q1 metrics: revenue up 11%, adjusted EBITDA up 13%, and the Payables/Treasury segments driving margin gains aided by 2025 acquisitions. The core platform story remains intact, with a large and growing client base and a diversified, API‑driven commerce stack. However, the growth is heavily aided by acquisitions, and margins still reflect a mix shift to lower-margin ventures and higher cloud/recurring costs. Leverage sits around 4x, free cash flow was $28m for the quarter, and the take-private uncertainty lingers. If organic growth slows, credit losses rise, or acquisition benefits fade, the 2026 outlook looks vulnerable.
The strength could be propped up by acquisitions; if integration costs rise or competition erodes pricing, earnings may disappoint. Elevated leverage plus potential rate moves add downside risk to the guidance.
"The discrepancy between Q1 momentum and the stagnant FY2026 EBITDA guidance suggests that organic growth is decelerating faster than the headline metrics imply."
Claude, your focus on the 2.4% EBITDA growth guidance is the most critical observation here. If management is truly confident in their 'platformization' strategy, this guidance is either egregiously sandbagged or a tacit admission that organic growth is stalling beneath the acquisition-fueled headline numbers. A 4.0x leverage ratio is only sustainable with aggressive EBITDA expansion; if growth flatlines to 2%, the debt service burden will rapidly cannibalize the free cash flow needed for necessary platform reinvestment.
"Q1 organic momentum in Payables and FCF strength make leverage sustainable, rendering low EBITDA guidance more likely conservative than ominous."
Gemini, dismissing the 2.4% EBITDA guide as a stall admission ignores Q1's 36% organic Payables growth and $3B volume surge to $153B, which drove 63% of gross profit from high-margin segments. Leverage at 4.0x is improving with $28M FCF; the guide likely embeds conservatism for M&A costs and Merchant normalization, not core weakness. Take-private limbo favors patient shareholders if public re-rating materializes first.
"The 2.4% EBITDA growth guidance is incompatible with Q1's 36% organic Payables growth unless management is hiding material headwinds or acquisition costs."
Grok conflates Q1 momentum with sustainable guidance. A single quarter of 36% organic Payables growth doesn't validate a 2.4% EBITDA guide—that's a massive deceleration cliff. If Payables sustains even 20% growth, FY EBITDA should exceed $245M midpoint by 5-10%. Management's silence on this delta screams either acquisition integration risk or demand softening they're not disclosing. Leverage improves only if FCF accelerates; $28M quarterly doesn't justify 4.0x debt at flat EBITDA growth.
"36% Q1 organic Payables growth is likely unsustainable, making the +2.4% EBITDA guide risky under a 4x debt load and potential take-private delays."
Responding to Grok: Q1 momentum matters, but 36% organic Payables growth is a one-quarter outlier and EBITDA guidance of just +2.4% implies the market is pricing in a reversion. With ~4.0x net leverage, even a modest slowdown or rising credit costs could depress FCF and threaten deleveraging. Also, take-private uncertainty could be a double-edged sword: if the process stalls or costs rise, the stock remains saddled with debt and no near-term catalyst.
Despite strong Q1 results, the panel is divided on Priority Technology's (PRTH) outlook due to concerns about its guidance, reliance on acquisitions, and the uncertainty surrounding its take-private process.
The potential for a re-rating if the take-private process resolves cleanly and the company can sustain its high-margin growth in the Payables and Treasury segments.
The significant deceleration in earnings growth implied by the company's guidance and the uncertainty around the take-private process.