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    PRTH
    Earnings call· Jun 2026(Q2 FY26)

    Priority Technology Holdings Q2 FY26 earnings call PRTH

    Aug 6, 2026 Source

    Executive summary

    Priority Commerce Q2 FY26 — Solid Growth Amidst Margin Pressures

    Priority Commerce delivered solid Q2 FY26 results with strong revenue and customer account growth, driven by its Payables and Treasury Solutions segments. However, the company faced significant gross margin pressures across all segments due to business mix shifts, higher residual expenses, and increased card network costs, leading to expectations at the lower end of full-year profit guidance. Management remains focused on deleveraging and leveraging its platform for cross-sell opportunities to stabilize margins.

    Highlights

    5

    • Net revenue grew over 9% to $262.3 million.

    • Adjusted EPS increased by 12% year-over-year to $0.29.

    • Total customer accounts reached 1.8 million, up almost 13% year-over-year.

    • Payables revenue grew 21.6% and Treasury Solutions revenue grew 14.9%.

    • Net leverage improved to 3.8x at quarter-end, down from 4.0x in Q1.

    Concerns

    5

    • Adjusted gross profit growth of 8% and adjusted EBITDA growth of 6% lagged revenue growth.

    • Payables adjusted gross profit decreased by 10.4% to $6.5 million, with gross margins down 760 basis points to 21.4%.

    • Treasury Solutions gross margins were down 590 basis points to 88.5% due to mix shift.

    • Full-year gross profit and adjusted EBITDA guidance expected to be at the lower end of the ranges due to margin pressures.

    • SG&A increased by 20.8% year-over-year to $16.8 million due to higher cloud/software, marketing, and non-recurring legal expenses.

    Guidance & targets

    5
    CategoryTargetConfidence
    Full-year Revenue
    higher end of $1.01 billion to $1.04 billion
    high materiality
    High
    Full-year Adjusted Gross Profit
    lower end of $405 million to $425 million
    high materiality
    Medium
    Full-year Adjusted EBITDA
    lower end of $230 million to $245 million
    high materiality
    Medium
    Merchant Solutions Organic Growth Rate
    3% to 4%
    medium materiality
    High
    Treasury Solutions Gross Margin
    closer to 80%
    medium materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Consolidated
    Solid overall financial performance, with organic growth contributing significantly.
    Organic growth: 7.2%
    		$262.3 million9.4%——
    Merchant Solutions
    Revenue growth included 4.5% organic growth and contributions from Boom and DMS acquisitions. Gross margins improved by over 100 basis points due to acquisitions, partially offset by higher residual expenses. Saw mixed bag in retail, softness in construction and restaurants.
    Organic growth: 4.5%Total card volume: $19.5 billionTotal card volume growth: 3.6%Gross margins: 22.7%Adjusted EBITDA: $30.9 million
    		$175.8 million7.7%—Adjusted Gross Profit: $39.8 million
    Payables
    Revenue growth was strong, but adjusted gross profit decreased by 10.4% and gross margins were down 760 basis points. This was due to mix shift towards lower-margin buyer-funded revenues, larger enterprise customers with lower initial margins, and increased card network/interchange expenses.
    Gross margins: 21.4%Adjusted EBITDA: $3.1 million
    		$30.4 million21.6%—Adjusted Gross Profit: $6.5 million
    Treasury Solutions
    Revenue growth driven by stable new enrollment trends in CFTPay, increased billed clients and integrated partners, and higher account balances offsetting lower interest rates. Gross margins were down 590 basis points due to mix shift from rapid growth in lower-margin Passport (125% revenue growth) and Priority Tech Ventures (400% revenue growth).
    Billed clients: 1.1 millionBilled clients growth: 15%Integrated partners growth: 30%Gross margins: 88.5%Adjusted EBITDA: $47.5 million
    		$60.5 million14.9%—Adjusted Gross Profit: $53.6 million

    Operational metrics

    31
    Total customer accounts
    1.8 millionup almost 13% year-over-year
    Q2 FY26
    Annual transaction volume
    $151 billionincreased by 8%
    Q2 FY26
    Average account balances under administration
    $1.8 billiongrew by 26% year-over-year
    Q2 FY26
    Adjusted Gross Profit
    $99.9 millionup 8%
    Q2 FY26
    Adjusted EBITDA
    $59.4 millionup 6%
    Q2 FY26
    Adjusted EPS
    $0.29up 12% year-over-year
    Q2 FY26
    Year-to-date Revenue
    $511.8 millionup 10%
    YTD Q2 FY26
    Year-to-date Adjusted Gross Profit
    $198.7 millionup 11%
    YTD Q2 FY26
    Year-to-date Adjusted EBITDA
    $117.5 millionup over 9%
    YTD Q2 FY26
    Consolidated Organic Revenue Growth
    7.2%
    Q2 FY26

    Part of the overall 9.4% reported revenue growth.

    Adjusted Gross Profit Contribution from Payables and Treasury
    66%
    Trailing 12 months

    Strong continued growth in payables and treasury solutions resulted in this contribution.

    Payables Buyer-Funded Revenue Growth
    26.3%year-over-year
    Q2 FY26

    Buyer-funded revenues reached $25.3 million.

    Payables Supplier-Funded Revenue Growth
    2.6%year-over-year
    Q2 FY26

    Supplier-funded revenues reached $5.1 million.

    Payables Adjusted EBITDA Decrease
    $660,00017.5% decrease year-over-year
    Q2 FY26

    Resulted from lower gross margin in the buyer-funded business unit.

    Passport Revenue Growth
    over 125%year-over-year
    Q2 FY26

    Contributed to mix shift and lower gross margins in Treasury Solutions.

    Priority Tech Ventures Revenue Growth
    almost 400%year-over-year
    Q2 FY26

    Contributed to mix shift and lower gross margins in Treasury Solutions.

    Salaries and Benefits
    $29.1 millionincreased by 7.7% year-over-year
    Q2 FY26
    SG&A
    $16.8 millionincreased by 20.8% year-over-year
    Q2 FY26

    Down sequentially compared to Q1.

    Debt
    $1.02 billionremained flat
    Q2 FY26

    Debt at the end of the quarter.

    Available Liquidity
    $220 million
    Q2 FY26
    Cash on Balance Sheet
    $120.3 million
    Q2 FY26

    Part of available liquidity.

    CapEx
    $7.1 million
    Q2 FY26

    Component of free cash flow calculation.

    Interest Expense
    $21.1 million
    Q2 FY26

    Component of free cash flow calculation.

    Income Taxes
    $3.8 million
    Q2 FY26

    Component of free cash flow calculation.

    Net Leverage
    3.8xdown from 4.0x at Q1 end
    Q2 FY26

    Proforma net leverage including run-rate impact of acquisitions would be 3.75x.

    LTM Adjusted EBITDA
    $235.3 million
    LTM Q2 FY26

    Used in net leverage calculation.

    Net Debt
    $899.7 million
    Q2 FY26

    Used in net leverage calculation.

    Proforma Net Leverage
    3.75x
    Q2 FY26
    Gross Margin for Passport and Priority Tech Ventures
    30% to 40%
    Q2 FY26

    These businesses operate at meaningfully lower gross margins than CFTPay.

    Merchant Solutions Revenue Growth from Acquisitions
    350 bps
    Q2 FY26

    Contributed to the 8% revenue growth in Merchant Solutions.

    Merchant Solutions Organic Growth (Prior Year)
    3%
    H2 FY25

    Organic growth was down in this range due to macro slowdown.

    Industry KPIs

    3
    MetricValueDetails
    Capital returnsFocus on continued deleveraging
    Active consumers1.8 millionaccounts
    Payments volume gdv$151 billionUSD

    Product announcements

    2
    ProductTypeDetails
    Priority Commerce Sportsexpansion
    Priority Commerce Automotiveexpansion

    Deals & partnerships

    3
    Pittsburgh SteelersFirst NFL franchise to use Priority Commerce platform for payments and treasury orchestration.

    Uses the platform for connected financial operations, combining payments technology and Passport treasury orchestration.

    Texas RangersMajor League Baseball team using Priority Commerce platform.

    Part of the expansion of Priority Commerce Sports.

    19 state automotive dealership associationsEndorsement of Priority Commerce Automotive platform.

    Includes recent support from Florida and California associations.

    Risks & headwinds

    5
    Mix-related margin pressureQ2 FY26, expected to continue through FY26

    Payables gross margins down 760 bps to 21.4%; Treasury gross margins down 590 bps to 88.5%

    Mitigation: Leveraging cross-sell opportunities with larger enterprise customers; long-term success of lower-margin growth businesses (Passport, Priority Tech Ventures)

    Increased card network and interchange expensesQ2 FY26, occurred last quarter, impacting H2 FY26

    Cost of goods sold went up because of interchange increases

    Mitigation: Reconciliation of pricing strategies in the second half of the year

    Continued investments in new vertical software assets and Priority Tech VenturesOngoing

    Partially offset high single-digit growth in CFTPay

    Mitigation: Viewed as positive long-term growth drivers despite initial margin compression

    Macroeconomic slowdown impacting Merchant SolutionsQ2 FY26, improved from Q1 but still down year-over-year

    Softness in construction and restaurants, home furnishings and building materials down

    Mitigation: Continued execution in the market, organic growth at 4.5% in Q2

    Special committee's ongoing evaluation of take-private proposalOngoing

    Not commented on during the call

    Mitigation: Refer to company's prior press releases for latest updates

    What to watch in Q3 FY26

    5

    Full-year guidance update

    Q3 earnings call
    CurrentHigher end of revenue range, lower end of gross profit and adjusted EBITDA ranges
    TargetRevised full-year guidance

    Why it matters

    Provides updated financial outlook and reflects management's latest assessment of margin pressures and revenue trends.

    As we move through Q3 and have enhanced visibility into our full year results, we will provide further guidance on our Q3 earnings call.

    Q&A highlights

    5

    How should gross margins evolve in Payables and Treasury Solutions as these businesses scale, particularly given the current intensity of pressure?

    Payables margin pressure is due to mix shift towards lower-margin buyer-funded revenue (GAAP gross reporting) and larger enterprise customers with lower initial margins, with optimism for stabilization through cross-sell. Treasury margin compression is due to the rapid growth of lower-margin Passport and Priority Tech Ventures, expecting margins to trend towards 80% over time.

    “So I think over time, you'll see that business get closer to 80% gross margins, but that's going to be on the success of what we're seeing in priority tech ventures and Fastport.”

    asked by Vasundhara Govil from KBW · answered by Tim O’Leary

    2 min read5 chapters

    Detailed Narrative

    01

    Unified Commerce Platform Strategy

    Priority Commerce's platform is designed to streamline money movement, offering a flexible financial toolset for merchant acquiring, payables, and treasury solutions. The platform aims to accelerate cash flow and optimize working capital for businesses by providing a single view and total command of their financial environment, leveraging API orchestration capabilities for digital payment acceptance, virtual bank accounts, debit card issuance, and advanced vendor payments.

    02

    Strategic Vertical Expansion

    The company is actively expanding its presence in key industry verticals, including sports and automotive. Recent wins include the Pittsburgh Steelers and Texas Rangers in sports, and endorsements from 19 state automotive dealership associations. These partnerships highlight the platform's appeal in standardizing payment operations and treasury tools for diverse industry segments, broadening revenue sources while maintaining cost discipline.

    03

    Margin Dynamics and Investment Focus

    Priority is experiencing margin pressures across all segments, primarily due to business mix shifts towards lower-margin offerings like buyer-funded payables and high-growth Passport/Priority Tech Ventures in Treasury. Additionally, higher residual expenses and increased card network/interchange costs are impacting gross margins. The company continues to invest in new vertical software assets and Priority Tech Ventures, viewing these as long-term growth drivers despite initial margin compression.

    04

    Capital Allocation and Deleveraging

    The company's capital allocation strategy for the remainder of 2026 focuses on continued deleveraging. Despite this, management will also evaluate tuck-in acquisitions in attractive verticals or new markets to complement organic growth. Net leverage improved to 3.8 times at quarter-end, down from 4.0 times in Q1, demonstrating progress on this front.

    05

    Special Committee and Take-Private Proposal

    Management explicitly stated that they would not be commenting on or answering questions related to the special committee's ongoing evaluation of the take-private proposal during the call. They directed participants to refer to prior press releases for the latest information on this topic, indicating it remains an active, unaddressed item for investors.

    AI-generated summary of the company’s earnings call. Not investment advice.