Business Overview and History
Priority Technology Holdings, Inc. (PRTH) is a payments and banking fintech that has been at the forefront of streamlining the collection, storage, lending, and sending of money through its innovative Priority Commerce Engine (PCE). The company's mission is to provide businesses with a personalized financial toolset that accelerates cash flow and optimizes working capital, offering a comprehensive suite of merchant services, payables, and banking treasury solutions.
Priority was established in 2005 as a founder-financed technology startup with the vision of advancing the convergence of software and payments. Over the years, the company has grown from a modest startup to become the 6th largest non-bank merchant acquirer in the U.S. by volume, according to the 2024 Nilson Report.
The company's foundational strength lies in its native technology platform, which provides a full suite of payment services, including card acquiring and issuing, ACH, check, and wire processing, as well as embedded finance solutions. This comprehensive platform serves customers of all sizes, from SMBs to enterprises, and is delivered through a network of independent sales organizations (ISOs), direct sales, and vertically focused independent software vendor (ISV) channels.
Priority has built a global business platform with over 1,000 employees operating from its headquarters in Alpharetta, GA and regional offices in other locations. Throughout its history, the company has faced various challenges common to rapidly growing technology companies, including navigating the complex regulatory environment of the payments industry and ensuring compliance with card association and network rules. Priority has also had to build robust risk management systems to mitigate the risks associated with merchant credit and fraud.
Despite these challenges, Priority has achieved several significant milestones. In 2018, the company went public and listed its shares on the Nasdaq Capital Market, providing additional capital to fund its growth initiatives, including strategic acquisitions. A notable acquisition was the 2023 purchase of Plastiq, a leading B2B payments company, which complemented Priority's existing capabilities in the commercial payments market.
Priority's three reportable segments – SMB Payments, B2B Payments, and Enterprise Payments – cater to the diverse needs of its customer base. The SMB Payments segment provides full-service acquiring and payment-enabled solutions for B2C transactions, leveraging the company's proprietary software platform. The B2B Payments segment offers market-leading accounts payable (AP) automation solutions to corporations, software partners, and industry-leading financial institutions (FIs), while also improving cash flows by providing instant access to working capital. The Enterprise Payments segment provides embedded finance and banking-as-a-service (BaaS) solutions to customers, enabling them to modernize legacy platforms and accelerate software partners' strategies to monetize payments.
Financial Performance and Ratios
In the most recent fiscal year (2024), Priority reported total revenue of $879.7 million, representing a 16.4% increase from the prior year. The company's net income for the year stood at $24.0 million, with a net profit margin of 2.73%. Priority's operating cash flow for the year was $85.6 million, and its free cash flow was $63.9 million.
The company's financial ratios paint a picture of its financial health and efficiency. As of the end of 2024, Priority's current ratio was 1.05, indicating a solid ability to meet its short-term obligations. The debt-to-equity ratio stood at -5.26, suggesting a conservative capital structure with a low reliance on debt financing. The return on assets (ROA) and return on equity (ROE) were 1.31% and -50.66%, respectively, reflecting the company's ongoing efforts to optimize its asset utilization and capital allocation.
Breaking down the performance by segment, the SMB Payments segment generated revenues of $613.6 million in 2024, representing approximately 70% of Priority's total consolidated revenues. This segment's adjusted EBITDA was $108.9 million. Key performance indicators for the SMB Payments segment include merchant bankcard processing dollar value of $61.7 billion and merchant bankcard transaction count of 756,000 for the year.
The B2B Payments segment reported revenue of $89.1 million for 2024, an increase of 116.5% compared to the prior year. Adjusted EBITDA for this segment was $7.6 million. Key performance metrics include B2B issuing dollar volume of $977.3 million and B2B issuing transaction count of 974,000.
The Enterprise Payments segment generated revenue of $180.5 million in 2024, an increase of 36.6% compared to the prior year. Adjusted EBITDA for this segment was $154.9 million. Key performance indicators include average billed clients of 797,570 and average new enrollments of 56,070.
Liquidity
Priority's liquidity position remains strong, as evidenced by its healthy cash flow generation and solid current ratio. The company's operating cash flow of $85.6 million and free cash flow of $63.9 million in 2024 demonstrate its ability to generate substantial cash from its operations. This strong cash flow generation provides Priority with the flexibility to invest in growth initiatives, pursue strategic acquisitions, and maintain a stable financial position.
As of December 31, 2024, Priority had cash and cash equivalents of $58.6 million. The company also had access to a $70.0 million revolving credit facility, further bolstering its liquidity position. The current ratio of 1.05 and quick ratio of 1.05 indicate that the company has sufficient short-term assets to cover its short-term liabilities.
Recent Developments and Guidance
In the fourth quarter of 2024, Priority reported strong financial results, with revenue increasing by 14.1% year-over-year to $227.1 million. Net income for the quarter was $7.9 million. Adjusted gross profit grew by 15% to $83.9 million, and adjusted EBITDA rose by 16% to $51.7 million. The company's adjusted gross profit margin expanded by 40 basis points to 37% during the quarter.
For the full year 2024, Priority exceeded its previous guidance, reporting 16% revenue growth to $879.7 million, 19% adjusted gross profit growth to $328.1 million, and 21% adjusted EBITDA growth to $204.3 million.
Looking ahead to 2025, Priority has provided the following guidance:
- Revenue is expected to range from $965 million to $1 billion, representing 10% to 14% organic growth. - Adjusted gross profit is projected to be between $360 million and $385 million, representing up to 17% growth. - Adjusted EBITDA is forecasted to be in the range of $220 million to $230 million, representing up to 13% growth.
The company noted that the lower EBITDA growth expected in 2025 is due to higher expenses from the migration of certain platforms to the cloud and increased accounting costs related to SOX compliance.
At the segment level, Priority expects the SMB segment to see high single-digit revenue growth, the B2B segment to experience low double-digit revenue growth, and the Enterprise segment to continue its momentum, though growth rates may moderate compared to 2023 and 2024 given the strong growth already experienced.
Key Risks and Challenges
Like any company in the payments and financial technology industry, Priority faces a number of risks and challenges. These include potential unauthorized access to its systems, which could expose the company to liability and reputational damage, as well as the risk of increased competition and pricing pressure in the highly competitive merchant acquiring market.
Additionally, the company is subject to extensive government regulation, which could lead to increased compliance costs and operational disruptions if new laws or regulations are introduced. Macroeconomic factors, such as changes in interest rates and economic conditions, could also impact Priority's financial performance.
Industry Trends
The payments processing industry continues to experience growth, driven by wider acceptance and increased use of electronic payments, advances in payment technology, and disruption from fintech providers. The B2B payments market, in particular, represents a large and fast-growing segment as businesses look to improve efficiency and reduce costs by transitioning from check and paper-based payments to electronic payments.
Priority's focus on providing comprehensive payment and embedded finance solutions has enabled it to capitalize on these industry trends, serving the growing demand for digital payments and financial technology services from businesses of all sizes.
Conclusion
Priority Technology Holdings, Inc. (PRTH) has established itself as a leading payments and banking fintech, leveraging its innovative Priority Commerce Engine to streamline the collection, storage, lending, and sending of money for businesses of all sizes. With a diversified business model, strong financial performance across its three segments, and a clear vision for the future of unified commerce, Priority appears well-positioned to capitalize on the ongoing transformation of the payments and financial technology landscape. The company's solid guidance for 2025 and its ability to exceed previous targets demonstrate its potential for continued growth and value creation in the evolving fintech sector.