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Priority Technology Holdings, Inc. (PRTH)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered diversified growth with Revenue $224.6M (+9.2% y/y), Adjusted Gross Profit $87.3M (+14.2% y/y), Adjusted EBITDA $51.3M (+10.7% y/y), and Adjusted EPS $0.22 (+$0.19 y/y), driven by momentum in Enterprise (+22% revenue) and B2B (+12%) segments .
  • Guidance reaffirmed: FY25 Revenue $965M–$1.00B, Adjusted Gross Profit $360M–$385M, Adjusted EBITDA $220M–$230M; management expects sequential growth through the year and leverage <4x by year-end at guidance midpoint .
  • Management highlighted mix shift toward higher-margin, recurring revenues (62% of adjusted gross profit in Q1) and countercyclical exposure (CFTPay, automated payables), positioning the model well against tariff/macro uncertainty and lower rates .
  • Balance sheet actions and execution are catalysts: $10M term loan prepayment in Q1; liquidity $117.6M; Moody’s upgraded credit rating to B1 citing deleveraging and improved cash flow generation .
  • Strategic wins (e.g., Minnesota Wild ticketing/Passport opportunity) and a target-rich embedded finance/BaaS environment should support Enterprise deposits and partner adds; these are potential near-term stock reaction drivers on narrative strength rather than estimate beats/misses (consensus unavailable) .

What Went Well and What Went Wrong

What Went Well

  • Enterprise Payments growth was robust: Revenue $50.1M (+22% y/y), Adjusted EBITDA $42.4M (+22%), with sustained 93.6% adjusted gross profit margin; higher balances largely offset 2024’s 100 bps Fed cuts .
  • B2B Payables accelerated: Revenue +12% y/y, Adjusted EBITDA +101% y/y on operating leverage; supplier-funded revenues +35% y/y, buyer-funded +7% as clients optimize working capital amid tariffs .
  • Management reiterated the platform thesis: “The blend of the diverse and counter-cyclical aspects of our platform combined with relentless execution… positioned us to excel through the remainder of 2025” (CEO) .
  • Liquidity and deleveraging: $10M term loan prepayment; net leverage 4.2x LTM as of Q1, with a path below 4x by year-end on guidance midpoint .

What Went Wrong

  • SMB margin headwinds persisted y/y (21.8% adjusted gross profit margin, down 30 bps y/y), impacted by reseller mix, specialized acquiring risk pairing, and attrition of historical residual portfolio purchases; though sequential margins recovered vs Q4 .
  • OpEx mix shift: Salaries & Benefits +16% y/y and SG&A +37% y/y on public cloud migration, marketing, and non-recurring legal/transaction costs; cloud migration converts CapEx to OpEx, pressuring near-term EBITDA growth .
  • S&P Global consensus for Q1 was not available via our data pull, limiting formal beat/miss assessment; management maintained FY guidance but acknowledged rate path sensitivity for Enterprise interest income .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$227.0 $227.1 $224.6
Adjusted Gross Profit ($USD Millions)$86.0 $83.9 $87.3
Adjusted EBITDA ($USD Millions)$54.6 $51.7 $51.3
Gross Profit Margin (%)36.0% 35.0% 36.8%
Adjusted Gross Profit Margin (%)37.9% 37.0% 38.9%
Diluted EPS (GAAP, $)$0.07 $(0.05) $0.10
Adjusted EPS (Diluted, $)N/A$0.18 $0.22

Segment breakdown (Revenue, Adjusted Gross Profit, Adjusted EBITDA):

Segment MetricQ1 2024Q1 2025
SMB Revenue ($USD Millions)$144.0 $151.7
SMB Adjusted Gross Profit ($USD Millions)$31.9 $33.1
SMB Adjusted EBITDA ($USD Millions)$25.0 $25.7
B2B Revenue ($USD Millions)$21.3 $23.9
B2B Adjusted Gross Profit ($USD Millions)$6.2 $7.3
B2B Adjusted EBITDA ($USD Millions)$1.7 $3.5
Enterprise Revenue ($USD Millions)$41.0 $50.1
Enterprise Adjusted Gross Profit ($USD Millions)$38.3 $46.9
Enterprise Adjusted EBITDA ($USD Millions)$34.7 $42.4

Segment margins (Adjusted Gross Profit Margin):

SegmentQ1 2024Q1 2025
SMB (%)22.1% 21.8%
B2B (%)29.0% 30.5%
Enterprise (%)93.6% 93.6%
Consolidated Adjusted GP Margin (%)37.1% 38.9%

KPIs (selected):

KPIQ1 2024Q1 2025
SMB Merchant Bankcard Processing ($USD Millions)$14,788,095 $15,294,133
SMB Total Card Processing ($USD Millions)$17,098,758 $17,685,491
B2B Issuing Dollar Volume ($USD Thousands)$227,811 $237,290
B2B Issuing Transaction Count (units)211,240 —
Enterprise Avg Billed Clients (units)703,887 940,463
Enterprise Avg Monthly New Enrollments (units)53,551 55,946

Q1 2025 vs Wall Street consensus (S&P Global): Consensus unavailable from our data pull; formal beat/miss not determinable (Values retrieved from S&P Global attempted, but consensus unavailable).

Guidance Changes

MetricPeriodPrevious Guidance (Q4 2024)Current Guidance (Q1 2025)Change
Revenue ($USD Millions)FY 2025$965–$1,000 $965–$1,000 Maintained
Adjusted Gross Profit ($USD Millions)FY 2025$360–$385 $360–$385 Maintained
Adjusted EBITDA ($USD Millions)FY 2025$220–$230 $220–$230 Maintained

Management expects sequential revenue and profit growth through FY25 and forecasts leverage under 4x at year-end using guidance midpoint .

Earnings Call Themes & Trends

TopicQ3 2024 (Previous Mentions)Q4 2024 (Previous Mentions)Q1 2025 (Current Period)Trend
Mix shift to recurring/higher-marginRecurring adjusted GP rising; Enterprise/B2B mix climbing Recurring adjusted GP 63% in Q4; mix up ~10 pts y/y Adjusted GP: 62% recurring; B2B+Enterprise ~62% of adjusted GP Improving recurring visibility
Interest rate sensitivityRates cut in late 2024 partially offset by balances Modeled 3 Fed cuts into 2025 guidance Assumes 3 cuts; Enterprise interest income sensitive to rate path Manageable, deposit growth offsets
SMB portfolio/marginsStrong volume; margin impacted by write-down, residual runoff CapEx→OpEx migration; operating discipline Core growth +10% offset by risk pairing and residual attrition; sequential margin recovery Stabilizing sequentially
Countercyclical demand (CFTPay, B2B)Enterprise/CFTPay growth; offsets rate impact CFTPay billed clients up; Enterprise momentum Debt resolution demand likely to rise; B2B buyer/supplier funded growth amid tariffs Strengthening
Capital structure & deleveragingPreferred redemptions planned Preferred fully redeemed; $10M prepay in Q1; leverage path <4x $10M prepay executed; liquidity $117.6M; Moody’s upgrade to B1 Improving credit profile
Cloud migration/OpExNoted SG&A non-recurring in Q3 CapEx→OpEx shift underway; ~ $4M OpEx impact in 2025 SG&A +37% y/y incl. cloud; normalized SG&A +26% y/y; ~ $1M cloud impact Q1 Transitional, efficiency later
Embedded finance/BaaS opportunityPartner adds; Enterprise integrations rising Cross-sell strategy; Plastiq+CPX bundling BaaS dislocation (Synapse/Solid) creating wins; stable bank partners/compliance rigor Pipeline tailwinds

Management Commentary

  • “Strong first quarter growth in revenue and profits continues to demonstrate the value of our Priority Commerce Engine… positioned us to excel through the remainder of 2025 and beyond despite an uncertain macro-economic environment.” (CEO) .
  • “Adjusted gross profit margins improved by over 170 basis points… B2B and enterprise now represent 62% of adjusted gross profit… 62% of adjusted gross profit in Q1 came from recurring revenues not dependent on transaction counts or card volumes.” (CFO) .
  • “It’s a target-rich environment [in embedded finance]… we’re positioned to benefit from fallout of some BaaS providers… stability of our bank partners… and rigor around our compliance.” (CEO) .
  • “During Q1 2025, used excess cash to repay $10 million of outstanding Term Loan… ample liquidity of $117.6 million… net leverage ratio 4.2x LTM.” (Slides/CFO) .
  • “We expect to grow revenue and profits sequentially each quarter as we move through the year.” (CFO) .

Q&A Highlights

  • Expenses: SG&A normalized +26% y/y after backing out non-recurring items; ~+$1M y/y from public cloud migration; Salaries & Benefits step-up from prior-year headcount additions; guidance remains intact .
  • Segment mix/recurring: 62% of adjusted GP from B2B+Enterprise; 62% of adjusted GP is recurring across segments .
  • Strategic win: Minnesota Wild ticketing—Priority’s combined payments and banking tools improve reconciliation and cash flow; pipeline of similar stadium/sports franchise opportunities .
  • Rate path assumptions: Guidance assumes three Fed cuts in 2025; Enterprise interest income is rate-sensitive, but deposit growth and partner adds help offset .
  • SMB risk pairing/residual attrition: Majority of impact in Q1 from risk pairing vs residual runoff (~2:1+ ratio); actions taken ahead of tighter network e-commerce program management should benefit long-term .
  • Material weakness remediation: Automated controls around third-party data ingestion undergoing testing; remediation to be completed and audited in FY25 cycle; no restatement or financial impact .
  • Free cash flow: ~$20M in Q1 and $80M+ for FY25 expected, subject to working capital timing; capital deployment balanced between deleveraging and opportunistic M&A .

Estimates Context

  • We attempted to retrieve S&P Global consensus for Q1 2025 revenue and EPS, and for upcoming quarters; consensus data was unavailable in our pull, preventing beat/miss classification (Values retrieved from S&P Global; consensus unavailable).
  • Given maintained FY25 guidance and management’s sequential growth outlook, sell-side models may need to reflect stronger Enterprise deposits/partner momentum and B2B supplier-funded expansion offsetting SMB risk pairing and cloud OpEx .

Key Takeaways for Investors

  • Mix shift to higher-margin, recurring segments is intact; Enterprise and B2B drove margin expansion and underpin visibility despite macro uncertainty and lower rates .
  • Guidance reaffirmation and sequential growth cadence support near-term positioning; leverage trajectory below 4x by year-end is a tangible de-risking milestone .
  • Cloud migration OpEx headwind is temporary; expect operating efficiencies in subsequent quarters as engineering consolidates on public cloud .
  • Countercyclical exposure (CFTPay/automated payables) and BaaS dislocation are tailwinds; watch for deposit growth, integrated partner additions, and stadium/sports franchise wins (e.g., Minnesota Wild) .
  • Free cash flow generation ($80M+) creates flexibility for debt reduction and tuck-in M&A; Moody’s upgrade to B1 validates improving credit profile .
  • SMB core revenue +10% y/y (ex-runoff/risk pairing) and sequential margin recovery suggest stabilization; network program changes may favor stronger players over time .
  • Near-term trading: absent consensus beats data, narrative catalysts include maintained guidance, mix/recurring strength, deleveraging, and embedded finance wins; medium-term thesis hinges on sustained Enterprise/B2B growth and OpEx normalization .

Non-GAAP adjustments and impact

  • Adjusted EPS reconciliation in Q1 includes amortization of acquisition-related intangibles ($9.314M), stock-based comp ($1.586M), non-recurring SG&A ($2.199M), and tax impact (-$3.556M), yielding Adjusted EPS $0.22 vs GAAP diluted EPS $0.10 .
  • Adjusted EBITDA excludes debt modification costs and certain legal/professional fees; Q1 Adjusted EBITDA $51.3M vs EBITDA $47.5M .

Additional relevant Q1 press releases

  • Minnesota Wild partnership: improved ticketing payments and potential Passport deployment for instant settlement and cash utilization .
  • Moody’s upgrade to B1: cites revenue growth, lower-cost capital structure, and ongoing deleveraging .
  • Rollfi acquisition (Jan 24): adds payroll/benefits APIs to strengthen working capital solutions and embedded fintech routes .