Priority Technology Holdings ((PRTH)) has held its Q1 earnings call. Read on for the main highlights of the call.
Priority Technology Holdings’ recent earnings call painted a picture of robust financial growth, coupled with some operational challenges. The company reported significant increases in customer accounts and transaction volumes, reflecting a positive sentiment overall. However, concerns were raised about rising operating expenses and the potential impact of fluctuating interest rates. Despite these hurdles, Priority Technology Holdings expressed confidence in meeting its 2025 financial targets.
Strong Financial Performance
Priority Technology Holdings showcased a strong financial performance in Q1 2025, with a 9% increase in net revenue. The company also reported a 14% increase in adjusted gross profit, reaching $87.3 million, and an 11% improvement in adjusted EBITDA, totaling $51.3 million. These figures highlight the company’s solid financial footing and effective management strategies.
Growth in Customer Accounts and Transaction Volume
The company ended Q1 2025 with over 1.3 million customer accounts, an increase from 1.2 million at the end of 2024. Additionally, the annual transaction volume surged by $5 billion, surpassing $135 billion. This growth underscores Priority Technology Holdings’ expanding market presence and successful customer acquisition strategies.
B2B and Enterprise Segment Growth
Priority Technology Holdings reported impressive growth in its B2B and enterprise segments, with B2B revenue increasing by over 12% and enterprise revenue growing by over 22% year-over-year. These segments now contribute 62% of the company’s total adjusted gross profit, indicating a strategic focus on high-growth areas.
Debt Reduction and Improved Liquidity
The company made strides in reducing its debt levels, which declined to $935.5 million following a $10 million prepayment. Available liquidity was reported at $117.6 million, reflecting improved financial flexibility and a commitment to strengthening the balance sheet.
Impact of Day Count on SMB Segment
The SMB segment experienced a 2% revenue growth drag due to the day count for Q1 2025, which had fewer processing days. This factor slightly tempered the segment’s performance but is expected to normalize in subsequent quarters.
Increased Operating Expenses
Operating expenses saw an uptick, with salaries and benefits rising by 16.4% compared to Q1 2024. SG&A expenses also increased by $4.1 million, driven by higher software expenses and nonrecurring legal costs. These rising costs present a challenge that the company will need to address moving forward.
Potential Interest Rate Impact
The company acknowledged that significant changes in interest rates could affect the high-margin interest income generated from permissible investments. This potential impact remains a key consideration for Priority Technology Holdings as it navigates the current economic landscape.
Forward-Looking Guidance
Looking ahead, Priority Technology Holdings aims for a 10% to 14% top-line revenue growth, targeting between $965 million and $1 billion, with adjusted EBITDA projected to be between $220 million and $230 million in 2025. The company also plans to continue focusing on reducing leverage, with a net debt of $887.9 million and a net leverage ratio of 4.2 times at the end of the quarter.
In summary, Priority Technology Holdings’ earnings call reflected a positive sentiment with strong financial growth and expansion in key segments. While challenges such as increased operating expenses and potential interest rate impacts were noted, the company remains optimistic about achieving its financial goals for 2025. Investors and market watchers will be keen to see how the company navigates these challenges while capitalizing on growth opportunities.