Priority Technology Q2 Earnings Call Highlights

Key Points

• Priority Technology reported solid Q2 growth: Revenue rose 9% year over year to $262.3 million, while Adjusted EBITDA increased 6% to $59.4 million and adjusted EPS climbed 12% to $0.29. Customer accounts, transaction volume and balances under administration also grew.
• Payables and Treasury Solutions drove segment growth, with revenue increases of 21.6% and 14.9%, respectively. However, both segments faced margin pressure from customer mix shifts, lower-margin businesses and higher card-network and interchange costs.
• The company maintained its 2026 outlook and expects to finish near the high end of its $1.01 billion-$1.04 billion revenue range, but near the low ends of its Adjusted Gross Profit and EBITDA targets. Priority generated $27.4 million in quarterly free cash flow and reduced net leverage to 3.8 times while prioritizing further deleveraging.

Priority Technology NASDAQ: PRTH reported second-quarter 2026 revenue and profit growth, supported by gains across its Merchant Solutions, Payables and Treasury Solutions businesses, while maintaining its full-year outlook.

Chairman and Chief Executive Officer Tom Priore said the company generated second-quarter revenue of $262.3 million, up 9% from the prior-year period. Adjusted gross profit increased 8% to $99.9 million, while Adjusted EBITDA rose 6% to $59.4 million. Adjusted earnings per share increased 12% year over year to $0.29.

The company ended the quarter with 1.8 million customer accounts on its commerce platform, an increase of nearly 13% from a year earlier. Annual transaction volume rose 8% to $151 billion, and average account balances under administration increased 26% to $1.8 billion.

For the first six months of 2026, Priority reported revenue of $511.8 million, up 10% from the comparable period last year. Year-to-date adjusted gross profit rose 11% to $198.7 million and Adjusted EBITDA increased just over 9% to $117.5 million.

Segment growth led by Payables and Treasury

Chief Financial Officer Tim O’Leary said consolidated revenue increased 9.4% in the quarter, including 7.2% organic growth. Payables revenue increased 21.6%, Treasury Solutions revenue grew 14.9%, and Merchant Solutions revenue rose 7.7%, including 4.5% organic growth.

O’Leary said Payables and Treasury Solutions represented 66% of total adjusted gross profit on an organic trailing-12-month basis.

Merchant Solutions generated $175.8 million in second-quarter revenue, up $12.5 million from the prior year. The increase included organic growth as well as contributions from the Boom and DMS acquisitions completed in the second half of 2025.

Total card volume in Merchant Solutions rose 3.6% to $19.5 billion. The company cited strength in wholesale trade and retail, including convenience stores, gas stations and food stores. Home furnishings and building materials declined, while construction and restaurants remained soft year over year, though construction and restaurant trends improved from the first quarter.

Merchant Solutions adjusted gross profit increased 12.4% to $39.8 million, and adjusted gross margin rose by more than 100 basis points to 22.7%. O’Leary attributed the improvement to the Boom and DMS acquisitions, partly offset by higher residual expenses. Segment Adjusted EBITDA rose 11.3% to $30.9 million.

Payables revenue increased 21.6% to $30.4 million. Buyer-funded revenue rose 26.3% to $25.3 million, while supplier-funded revenue increased 2.6% to $5.1 million. However, adjusted gross profit declined 10.4% to $6.9 million, and gross margin fell 760 basis points to 21.4%.

O’Leary said the margin decline reflected a greater mix of larger enterprise customers with lower initial margin profiles, higher card-network and interchange expenses, and the increasing share of buyer-funded revenue. He said buyer-funded revenue is reported on a gross basis under GAAP because the company is the merchant of record, resulting in a lower reported gross margin.

“As that business becomes a more and more meaningful portion of Payables on a revenue basis, it’s going to run at lower margins because of that accounting aspect,” O’Leary said during the question-and-answer session.

Payables Adjusted EBITDA declined 17.5% to $3.1 million, primarily due to lower gross margin in the buyer-funded business.

Treasury growth offsets lower interest rates

Treasury Solutions revenue increased 14.9% to $60.5 million. O’Leary cited stable, though slower, new enrollment trends in CFTPay; a 15% increase in billed clients to more than 1.1 million; a 30% increase in integrated partners; and growth from existing Passport program managers.

Higher account balances in CFTPay and Passport more than offset lower interest rates compared with the prior-year quarter, according to the company. Treasury Solutions adjusted gross profit rose 7.7% to $53.6 million, while gross margin declined about 590 basis points to 88.5%.

O’Leary said the margin pressure was driven by the growth of Passport and Priority Tech Ventures, which operate at lower gross margins than the CFTPay platform. Passport revenue increased more than 125% year over year, while Priority Tech Ventures revenue rose nearly 400%.

“The CFTPay margins have remained very constant,” O’Leary said. “It’s a mix shift with Passport and Priority Tech Ventures broadly.” He said those newer Treasury Solutions businesses generally have gross margins in the 30% to 40% range, and that Treasury Solutions margins could move closer to 80% over time as those operations expand.

Liquidity, leverage and outlook

Priority ended the quarter with $1.02 billion in debt and more than $220 million in available liquidity, including $120.3 million in cash and the full $100 million of borrowing capacity under its revolving credit facility.

The company generated $27.4 million of free cash flow during the quarter. Net leverage was 3.8 times at June 30, down from four times at the end of the first quarter. O’Leary said Priority intends to focus on continued deleveraging during the remainder of 2026 while continuing to evaluate tuck-in acquisitions in attractive verticals or markets.

Priority maintained its 2026 revenue guidance of $1.01 billion to $1.04 billion and said it expects to finish at the high end of that range. It also reaffirmed its adjusted gross profit outlook of $405 million to $425 million and Adjusted EBITDA outlook of $230 million to $245 million, while expecting results at the low end of both ranges.

The company cited mix-related margin pressure across all three segments, higher residual expenses, increased card-network and interchange costs, and investment in Priority Tech Ventures. Priore added that Mastercard and Visa implemented interchange price increases during the quarter, creating additional cost-of-goods-sold pressure.

Priore also highlighted new vertical-market activity, including the Pittsburgh Steelers as Priority Commerce Sports’ first National Football League franchise and the Texas Rangers in Major League Baseball. He said Priority Commerce Automotive is now endorsed by 19 state automotive dealership associations, with Florida and California recently announcing support.

The company did not discuss or take questions regarding the special committee’s ongoing evaluation of a take-private proposal.

About Priority Technology (NASDAQ:PRTH)

Priority Technology Acquisition Corp is a special purpose acquisition company formed to effect a merger, capital stock exchange, asset acquisition, stock purchase, recapitalization or similar business combination with one or more businesses in the technology sector. As a blank-check company, it does not conduct any operations of its own and holds the proceeds from its initial public offering in a trust account pending the identification and completion of a business combination.

The company’s management team is focused on evaluating target businesses that offer scalable technology products or services, including software, digital platforms and related infrastructure.

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