Priority Technology Holdings Balances Growth With Rising Risks

Priority Technology Holdings ((PRTH)) has held its Q4 earnings call. Read on for the main highlights of the call.

Priority Technology Holdings’ latest earnings call struck a cautiously upbeat tone, blending strong financial execution with clear acknowledgment of mounting headwinds. Management highlighted robust revenue growth, margin expansion, and surging customer activity, yet tempered enthusiasm with warnings about softer organic growth, higher costs, rate pressure, and elevated leverage.

Full-Year Revenue and Profit Growth

Net revenue for fiscal 2025 rose about 8.3% year over year, underscoring solid demand and execution across the portfolio. Adjusted gross profit climbed 14% and adjusted EBITDA increased 10%, signaling healthy operating leverage despite a tougher macro backdrop.

Adjusted EPS Doubled

Profitability per share improved sharply, with adjusted EPS jumping 102% to $1.03 for the year. The expansion reflects both higher earnings and disciplined financial management, a key datapoint for investors focused on returns rather than just top-line growth.

Significant Customer and Volume Expansion

Priority’s scale continues to build, with total customer accounts reaching 1.8 million versus 1.2 million a year ago, an increase of roughly 50%. Annual transaction volume advanced by $20 billion to $150 billion, representing growth of about 15.4% and reinforcing the company’s processing footprint.

Strong Q4 Revenue and Margin Improvement

Fourth-quarter revenue came in at $247.1 million, up 9% year over year, capping a solid finish to the fiscal year. Adjusted gross profit jumped 19% to $100.2 million and adjusted EBITDA rose 16% to $60.1 million, driving gross margin up roughly 360 basis points to 40.6%.

High-Margin Treasury Solutions Momentum

Treasury Solutions delivered standout profitability, with Q4 revenue of $57.3 million up 17.8% and adjusted gross profit of $52.7 million up 15.7%. The segment maintained a striking 91.9% gross margin, while CFTPay billed clients exceeded 1.1 million and Passport and Tech Ventures continued to add partners and enrollments.

Payables Segment Operating Leverage

The Payables business showcased strong operating leverage with Q4 revenue of $26.8 million, up 12.7% year over year. Adjusted gross profit grew 15.9% to $7.4 million and adjusted EBITDA surged 60.8% to $3.9 million, helped by about a 9% reduction in operating expenses before depreciation and amortization.

Merchant Solutions Scale and Acquisition Benefits

Merchant Solutions generated Q4 revenue of $165.3 million, up 6.2% year over year, split roughly evenly between organic growth and contributions from the Boom Commerce and DMS acquisitions. Card volume increased 2.3% to $18.5 billion, while adjusted gross profit jumped 25.5% to $40.1 million, driven largely by deal synergies and improved mix.

Cash Flow, Liquidity and Deleveraging Progress

Priority turned in another quarter of solid cash generation, with free cash flow of $28 million and an implied annual run rate of about $112 million, or roughly $1.34 per diluted share. Net leverage improved to 4.2x from 4.4x, or about 3.9x pro forma for acquisitions, and quarter-end liquidity stood at $177 million including cash and revolver availability.

Remediation of Material Weakness

The company reported that as of year-end 2025 it had fully remediated a previously disclosed material weakness in internal controls over financial reporting. Management emphasized that controls were effective for the fiscal year, removing a governance overhang that had concerned some investors.

Slower Organic Growth in Core Merchant Portfolio

Despite overall growth, organic performance in core Merchant Solutions cooled in the back half of the year, particularly in restaurants, construction, and select retail segments such as home furnishings and building materials. In Q4, Merchant Solutions organic revenue growth was around 3% and organic gross profit was essentially flat once acquisitions are excluded.

Headwinds from Lower Interest Rates

Lower interest rates weighed on revenue and margins in Payables and Treasury Solutions, where yields on balances are a key earnings driver. Management built these pressures into its outlook and moderated Treasury growth expectations to low double digits in 2026 to reflect the rate backdrop.

Rising Operating Expenses

Operating costs moved higher as Priority invested in talent and integrated acquisitions, putting some pressure on margins. Salaries and benefits rose 24.2% year over year in Q4 to $28.8 million, while SG&A climbed 38.8% to $17.7 million, partly driven by higher stock-based compensation and deal-related costs.

Investments in Early-Stage Ventures Not Yet Profitable

Priority Tech Ventures and newer vertical software platforms are still in investment mode and operating below the company’s core margin profile. These early-stage efforts contributed to a roughly 170 basis point year-over-year decline in Treasury gross margin in Q4 due to mix shift, even as management framed them as long-term growth engines.

High Absolute Debt Level

While leverage metrics are improving, Priority’s balance sheet remains highly geared, with total debt of about $1.02 billion at quarter end. Quarterly interest expense of roughly $22 million represents a significant cash drain, keeping deleveraging and refinancing risk firmly on investors’ radar.

Seasonality and Slowdowns in CFTPay Enrollments

CFTPay, a key driver within Treasury, saw new enrollments slow in Q4 due to seasonal factors. Management does not anticipate a sharp near-term reacceleration unless macro conditions deteriorate in ways that would paradoxically support more enrollments, instead projecting steady but unspectacular growth.

Supplier-Funded Volume Disruption from Channel Partner Transition

Supplier-funded issuing volume declined year over year in absolute terms because one bank channel partner paused activity following an acquisition. Even so, revenue on supplier-funded products rose about 20% as balances grew elsewhere, suggesting the disruption is more about volume mix than structural demand.

Guidance Moderation vs. Recent Momentum

Looking ahead, management framed its 2026 outlook as intentionally conservative compared with recent performance, reflecting macro caution. Segment guidance calls for Merchant Solutions growth of 6%–8% with 3%–4% organic, Payables organic growth of 8%–10%, and low double-digit growth in Treasury, all below some of the faster recent run rates.

2026 Outlook and Forward Guidance

For fiscal 2026, Priority is targeting 6%–9% revenue growth to $1.01 billion–$1.04 billion, including roughly 4%–7% organic expansion, along with adjusted gross profit of $405 million–$425 million and 75–100 basis points of margin expansion. Adjusted EBITDA is projected at $230 million–$245 million, with guidance factoring in lower interest rates, a softer consumer environment, ongoing tech and venture investments, and capital spending near 10% of EBITDA.

Priority’s earnings call painted the picture of a payments platform still growing and expanding margins, but doing so in a more measured fashion as economic and rate headwinds build. For investors, the story now hinges on execution: harvesting acquisition synergies, scaling new ventures to profitability, and steadily reducing leverage while sustaining mid‑single to high‑single-digit growth.