Priority Technology (PRTH) - 2025 Q2 - Quarterly Results

Executive Summary Priority Technology Holdings, Inc. presents its strong Q2 2025 financial results and updated full-year 2025 guidance Second Quarter 2025 Consolidated Financial Highlights Priority Technology Holdings, Inc. reported strong second-quarter 2025 financial results, driven by performance across its Unified Commerce Platform - The company's strong Q2 2025 results are attributed to the continued success of its Connected Commerce platform, with over 9% revenue growth and 13% adjusted gross profit growth[2] - Adjusted gross profit from recurring revenue represents 62% of total, indicating a stable and predictable revenue base[2] Q2 2025 Consolidated Financial Highlights | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change (%) | | :-------------------------- | :------------------ | :------------------ | :--------- | | Revenue | $239.8 | $219.9 | 9.1% | | Adjusted Gross Profit | $92.4 | $81.7 | 13.0% | | Adjusted Gross Profit Margin | 38.5% | 37.2% | +135 bps | | Operating Income | $37.4 | $33.2 | 12.6% | | Adjusted EBITDA | $56.0 | $51.6 | 8.7% | | Adjusted EPS | $0.26 | $0.11 | 136.4% | Full Year 2025 Financial Guidance Update Priority Technology Holdings, Inc. updated its full-year 2025 financial guidance, narrowing ranges for revenue and adjusted EBITDA - The company expects an acceleration of organic growth in the second half of 2025 due to sales pipeline timing, year-over-year comparatives, and moderating headwinds[4] Full Year 2025 Financial Guidance | Metric | New FY 2025 Guidance (Millions) | Original FY 2025 Guidance (Millions) | Growth Rate (vs FY 2024) | | :-------------------- | :----------------------------- | :---------------------------------- | :----------------------- | | Revenue | $970 - $990 | $965 - $1,000 | 10.2% - 12.5% | | Adjusted Gross Profit | $365 - $380 | $360 - $385 | N/A | | Adjusted EBITDA | $222.5 - $227.5 | $220 - $230 | N/A | Conference Call Details Priority Technology Holdings, Inc. will host a conference call on August 7, 2025, to discuss its second-quarter financial results - A conference call to discuss Q2 2025 financial results will be held on Thursday, August 7, 2025, at 10:00 a.m. EDT[5] - Access to the live webcast and accompanying slide presentation is available via the company's investor relations website[6] - An audio replay of the call will be available until August 21, 2025[7] Non-GAAP Financial Measures This section defines and reconciles key non-GAAP financial measures used by the company to assess performance Non-GAAP Measures Introduction The company uses non-GAAP financial measures like Adjusted Gross Profit and Adjusted EBITDA to evaluate business trends and performance - Non-GAAP measures are used to evaluate business and trends, measure performance, prepare financial projections, allocate resources, and make strategic decisions[8] - These non-GAAP measures are intended to complement GAAP measures and illustrate underlying financial and business trends, but are not superior to or a substitute for GAAP[8] Adjusted Gross Profit and Adjusted Gross Profit Margin Reconciliation Adjusted gross profit, defined as revenues less cost of revenue (excluding D&A), is reconciled for Q2 and H1 2025 and 2024 - Adjusted gross profit excludes depreciation and amortization from cost of revenue to evaluate underlying profit trends[10] Adjusted Gross Profit and Margin Reconciliation | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :--------------------------------- | :--------------------------------- | :------------------------------- | :------------------------------- | | Revenues | $239,812 | $219,867 | $464,442 | $425,586 | | Cost of revenue (excluding depreciation and amortization) | (147,399) | (138,118) | (284,752) | (267,416) | | Adjusted gross profit | $92,413 | $81,749 | $179,690 | $158,170 | | Adjusted gross profit margin | 38.5% | 37.2% | 38.7% | 37.2% | | Depreciation and amortization of revenue generating assets | (4,911) | (3,941) | (9,597) | (7,842) | | Gross profit | $87,502 | $77,808 | $170,093 | $150,328 | | Gross profit margin | 36.5% | 35.4% | 36.6% | 35.3% | EBITDA and Adjusted EBITDA Reconciliation EBITDA and Adjusted EBITDA, which excludes non-cash and non-recurring items, are reconciled for Q2 and H1 2025 and 2024 - Adjusted EBITDA starts with EBITDA and excludes non-cash costs (e.g., stock-based compensation) and non-recurring expenses (e.g., acquisition integration, litigation settlements) to provide a clearer view of operational performance[11] EBITDA and Adjusted EBITDA Reconciliation | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :--------------------------------- | :--------------------------------- | :------------------------------- | :------------------------------- | | Net income | $10,879 | $994 | $19,147 | $6,187 | | Interest expense | 23,054 | 21,710 | 46,230 | 42,590 | | Income tax expense | 4,423 | 2,515 | 6,673 | 5,097 | | Depreciation and amortization | 14,093 | 15,244 | 27,870 | 30,497 | | EBITDA | $52,449 | $40,463 | $99,920 | $84,371 | | Debt modification and extinguishment expenses | — | 8,623 | 38 | 8,623 | | Selling, general and administrative (non-recurring) | 395 | 636 | 2,594 | 1,435 | | Non-cash stock-based compensation | 3,206 | 1,829 | 4,792 | 3,462 | | Adjusted EBITDA | $56,050 | $51,551 | $107,344 | $97,891 | Adjusted Earnings Per Share (Adjusted EPS) Reconciliation Adjusted EPS, a performance measure excluding non-recurring and non-cash items, is reconciled for Q2 and H1 2025 and 2024 - Adjusted EPS is calculated by adjusting net income for items such as accelerated accretion expense, debt extinguishment costs, stock-based compensation, other non-recurring expenses, and amortization of acquisition-related intangible assets, along with their tax impact[13][14][15] Adjusted Earnings Per Share Reconciliation | (in thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :--------------------------------- | :--------------------------------- | :------------------------------- | :------------------------------- | | Net income (loss) attributable to common shareholders | $10,879 | $(17,629) | $19,147 | $(25,679) | | Accelerated accretion expense and excise tax attributable to redeemable senior preferred stockholders | — | 9,549 | — | 9,549 | | Debt extinguishment and modification costs | — | 8,623 | 38 | 8,623 | | Stock based compensation | 3,206 | 1,829 | 4,792 | 3,462 | | Other non-recurring expenses | 395 | 636 | 2,594 | 1,435 | | Amortization of acquisition related intangible assets | 9,417 | 11,425 | 18,731 | 23,117 | | Tax impact of adjustments | (3,244) | (5,855) | (6,800) | (9,526) | | Adjusted net income attributable to common shareholders | $20,653 | $8,578 | $38,502 | $10,981 | | Weighted average common shares outstanding (diluted) | 79,837 | 78,139 | 79,968 | 78,180 | | Adjusted earnings per common share (Diluted) | $0.26 | $0.11 | $0.48 | $0.14 | Forward-Looking Non-GAAP Measures Disclosure The company does not reconcile forward-looking non-GAAP measures to GAAP due to the difficulty in estimating future reconciling items - Reconciliation of forward-looking non-GAAP measures to GAAP is not provided due to the unreasonable effort required to estimate future reconciling items like stock-based compensation expense[16] - The company primarily plans, forecasts, and analyzes future periods on a non-GAAP basis[16] About the Company Priority Technology Holdings, Inc. provides a unified commerce engine offering payments and banking solutions for businesses - Priority provides a unified commerce engine that combines payables, merchant services, and banking and treasury solutions[19] - The platform helps businesses accelerate cash flow, optimize working capital, reduce costs, and unlock new revenue opportunities[19] Forward-Looking Statements Disclaimer This press release contains forward-looking statements subject to risks and uncertainties, and actual results may differ materially - The press release includes forward-looking statements regarding future financial and operating results, plans, objectives, and intentions[21] - These statements are subject to significant business, economic, and competitive risks and uncertainties that could cause actual results to differ materially[21] - Readers are cautioned not to place undue reliance on forward-looking statements, and the company disclaims any obligation to publicly update or revise them[23] Investor Relations Contact Investor inquiries for Priority Technology Holdings, Inc. can be directed to the provided email address - Investor inquiries should be sent to priorityIR@icrinc.com[24] Consolidated Financial Statements (Unaudited) This section presents the unaudited consolidated statements of operations, balance sheets, and cash flows for the reported periods Consolidated Statements of Operations and Comprehensive Income (Loss) The unaudited consolidated statements of operations show increased net income for Q2 and H1 2025, driven by revenue growth Consolidated Statements of Operations and Comprehensive Income (Loss) | (in thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :--------------------------------- | :--------------------------------- | :------------------------------- | :------------------------------- | | Revenues | $239,812 | $219,867 | $464,442 | $425,586 | | Total operating expenses | 202,462 | 186,693 | 394,467 | 364,389 | | Operating income | 37,350 | 33,174 | 69,975 | 61,197 | | Income before income taxes | 15,302 | 3,509 | 25,820 | 11,284 | | Net income | 10,879 | 994 | 19,147 | 6,187 | | Net income (loss) attributable to common stockholders | 10,879 | (17,629) | 19,147 | (25,679) | | Basic EPS | $0.14 | $(0.23) | $0.24 | $(0.33) | | Diluted EPS | $0.14 | $(0.23) | $0.24 | $(0.33) | Consolidated Balance Sheets The consolidated balance sheets show an increase in total assets and liabilities as of June 30, 2025, primarily due to settlement activities Consolidated Balance Sheets | (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------------------ | :-------------- | :---------------- | | Assets | | | | Cash and cash equivalents | $50,564 | $58,600 | | Settlement assets | 1,125,934 | 940,798 | | Total current assets | 1,305,885 | 1,105,085 | | Goodwill | 382,497 | 376,091 | | Intangible assets, net | 225,035 | 240,874 | | Total assets | $2,027,420 | $1,826,860 | | Liabilities, Stockholders' Deficit and NCI | | | | Settlement obligations | 1,127,266 | 940,213 | | Total current liabilities | 1,229,171 | 1,051,671 | | Long-term debt, net | 917,017 | 920,888 | | Total liabilities | $2,171,554 | $1,991,885 | | Total stockholders' deficit | (144,134) | (165,025) | Consolidated Statements of Cash Flows The consolidated statements of cash flows indicate decreased operating cash flow but increased financing cash flow in H1 2025 Consolidated Statements of Cash Flows | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | | Net cash provided by operating activities | $27,080 | $42,007 | | Net cash used in investing activities | $(21,145) | $(20,598) | | Net cash provided by financing activities | $178,091 | $18,149 | | Net increase in cash and cash equivalents, and restricted cash | $184,026 | $39,558 | | Cash and cash equivalents and restricted cash at end of period | $1,177,890 | $835,781 | - The significant increase in net cash provided by financing activities in H1 2025 was largely driven by settlement obligations, which provided $190,863 thousand[30] Reportable Segments' Results (Unaudited) This section details the unaudited financial performance of Priority's SMB, B2B, and Enterprise Payments segments Segment Performance Overview (SMB, B2B, Enterprise) Priority's SMB, B2B, and Enterprise Payments segments show diversified performance in revenue and Adjusted EBITDA for Q2 and H1 2025 Segment Performance Overview Three Months Ended June 30, 2025 vs 2024: | Segment | Q2 2025 Revenue (Thousands) | Q2 2024 Revenue (Thousands) | Revenue Change (%) | Q2 2025 Adj. EBITDA (Thousands) | Q2 2024 Adj. EBITDA (Thousands) | Adj. EBITDA Change (%) | | :---------------- | :-------------------------- | :-------------------------- | :----------------- | :------------------------------ | :------------------------------ | :--------------------- | | SMB Payments | $163,230 | $155,101 | 5.2% | $27,749 | $28,597 | -3.0% | | B2B Payments | $25,033 | $21,881 | 14.4% | $3,770 | $1,530 | 146.4% | | Enterprise Payments | $52,658 | $43,670 | 20.6% | $45,558 | $37,244 | 22.3% | Six Months Ended June 30, 2025 vs 2024: | Segment | H1 2025 Revenue (Thousands) | H1 2024 Revenue (Thousands) | Revenue Change (%) | H1 2025 Adj. EBITDA (Thousands) | H1 2024 Adj. EBITDA (Thousands) | Adj. EBITDA Change (%) | | :---------------- | :-------------------------- | :-------------------------- | :----------------- | :------------------------------ | :------------------------------ | :--------------------- | | SMB Payments | $314,920 | $299,105 | 5.3% | $53,454 | $53,620 | -0.3% | | B2B Payments | $48,951 | $43,225 | 13.2% | $7,286 | $3,276 | 122.4% | | Enterprise Payments | $102,746 | $84,660 | 21.4% | $88,001 | $71,971 | 22.3% | - Enterprise Payments showed strong growth in average CFTPay billed clients (992,279 in Q2 2025 vs 762,873 in Q2 2024) and monthly new enrollments (57,818 in Q2 2025 vs 55,416 in Q2 2024)[32] - B2B issuing dollar volume decreased in both Q2 and H1 2025 compared to 2024, despite revenue and Adjusted EBITDA growth in the segment[32] Reconciliation of Adjusted EBITDA to GAAP Measure by Segment Detailed reconciliations of Adjusted EBITDA to GAAP Income (loss) before taxes are provided for each reportable segment and corporate overhead - The reconciliation tables provide a detailed breakdown of adjustments from Adjusted EBITDA to Income (loss) before taxes for each segment and the corporate overhead[34][36] - Corporate expenses, including interest, depreciation, non-recurring SG&A, and stock-based compensation, significantly impact the consolidated income before taxes[34][36]