Priority technology holdings maintains 2025 revenue guidance of $965M-$1B with focus on growth in enterprise and B2B segments

Earnings Call Insights: Priority Technology Holdings (PRTH) Q1 2025

Management View

  • CEO Tom Priore highlighted strong financial results for Q1 2025, with revenue reaching $224.6 million, reflecting a 9% year-over-year increase. Adjusted gross profit grew 14% to $87.3 million, and adjusted EBITDA rose 11% to $51.3 million. The company ended the quarter with over 1.3 million customer accounts and $135 billion in annual transaction volume.
  • Priore reaffirmed the company's 2025 guidance of 10%-14% revenue growth, targeting a range of $965 million to $1 billion, and adjusted EBITDA guidance of $220 million to $230 million. He emphasized the company's unified commerce platform as a key growth driver.
  • CFO Tim O'Leary reported that the B2B and enterprise segments contributed 62% of adjusted gross profit in Q1, driven by 12% growth in B2B revenue and 22% in enterprise revenue. Adjusted gross profit margins for these segments also showed improvement.
  • O'Leary mentioned that the company reduced its net leverage to 4.2x and made a $10 million term loan prepayment during the quarter.

Outlook

  • Management maintained its full-year 2025 revenue guidance of $965 million to $1 billion and adjusted EBITDA guidance of $220 million to $230 million.
  • Priore highlighted that growth would be supported by continued momentum in SMB acquiring, B2B payables, and enterprise payment segments, alongside favorable shifts in business mix and strong customer adoption of embedded finance solutions.
  • O'Leary noted that interest rate changes and macroeconomic factors, including inflation and tariff impacts, could influence performance but are factored into guidance.

Financial Results

  • Q1 2025 revenue was $224.6 million, a 9% increase year-over-year. Adjusted gross profit grew 14% to $87.3 million, while adjusted EBITDA rose 11% to $51.3 million.
  • B2B revenue grew 12% year-over-year to $23.9 million, with adjusted gross profit margins increasing by 150 basis points to 30.5%. Supplier-funded revenues rose by 35%.
  • Enterprise revenue rose 22% to $50.1 million, with gross profit margins remaining stable at 93.6%. Growth was driven by strong enrollment trends and increased client activity in CFTPay.
  • SMB revenue increased 5.3% year-over-year to $151.7 million, although gross margins experienced minor fluctuations due to historical residual portfolio attrition and risk pairing strategies.

Q&A

  • Hal Goetsch, B. Riley Securities: Asked about the recent increase in SG&A and salary expenses and the impact of cloud migration. CFO O'Leary explained that non-recurring expenses and the transition to public cloud contributed to the rise but noted expected future efficiencies.
  • Brian Bergen, TD Cowen: Inquired about segment-specific growth expectations for the remainder of 2025. Management stated that enterprise and B2B segments are expected to drive growth, supported by customer demand for working capital optimization and embedded finance solutions.
  • Tim Switzer, KBW: Asked about the impact of tariffs and economic uncertainty on small business customers. Priore noted resilience in their customer base, with strong demand for digital and automated payment solutions.
  • Jacob Stephan, Lake Street Capital Markets: Raised questions about countercyclical segments and their performance. Priore highlighted CFTPay as a key growth area due to rising consumer debt resolution needs.

Sentiment Analysis

  • Analyst sentiment was focused on understanding growth drivers and cost management. Analysts showed interest in revenue contributions from enterprise and B2B segments and the impact of macroeconomic factors.
  • Management displayed confidence in their guidance, emphasizing the resilience of their business model and the potential for growth in embedded finance.
  • Compared to the previous quarter, management maintained a consistent tone of optimism, emphasizing strategic investments and operational efficiencies.

Quarter-over-Quarter Comparison

  • Revenue grew sequentially from $227.1 million in Q4 2024 to $224.6 million in Q1 2025, reflecting steady performance despite fewer processing days.
  • Adjusted gross profit margins improved by 170 basis points year-over-year, driven by favorable shifts in the business mix towards higher-margin segments.
  • Guidance remained consistent with projections from the previous quarter, reaffirming confidence in achieving targets.

Risks and Concerns

  • Management acknowledged potential risks from lower interest rates, macroeconomic volatility, and regulatory changes impacting specialized e-commerce and other segments.
  • Tariff impacts and inflationary pressures were cited as influencing customer behavior in the B2B segment, but these are expected to drive demand for working capital optimization solutions.
  • The company is actively addressing a material weakness related to automated controls and expects full remediation by the end of fiscal 2025.

Final Takeaway

Priority Technology Holdings demonstrated strong financial performance in Q1 2025, with significant contributions from the B2B and enterprise segments. Management reaffirmed full-year guidance, emphasizing the resilience of its unified commerce platform and growth opportunities in embedded finance solutions. Continued focus on cost efficiencies, debt reduction, and strategic investments positions the company to navigate macroeconomic challenges and deliver sustainable growth.

Read the full Earnings Call Transcript

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