Priority Technology (PRTH) Q2 2025: B2B EBITDA Jumps 146% as Recurring Revenue Hits 62%
Priority Technology’s Q2 2025 results spotlight a strategic pivot to recurring, higher-margin segments, with B2B and enterprise now driving the profit engine. The company’s business mix continues to shift toward embedded finance and bundled services, outpacing macro headwinds and setting a foundation for durable margin expansion. Management’s upwardly revised guidance and recent refinancing underscore confidence in both near-term growth and long-term platform leverage.
Summary
- Recurring Revenue Surges: Over 62% of gross profit now stems from recurring, non-transactional sources.
- B2B and Enterprise Outperform: These segments delivered double-digit growth and drove overall margin expansion.
- Guidance Tightened Upward: Leadership raised the lower end of revenue and EBITDA guidance, signaling conviction in accelerating second-half performance.
Performance Analysis
Priority Technology’s Q2 results validated its business model shift toward software-driven, embedded finance solutions, with consolidated net revenue up 9% year over year. Adjusted gross profit rose 13%, and adjusted EBITDA increased 9%, reflecting both robust top-line growth and disciplined cost management. The company ended the quarter with over 1.6 million active accounts and annual transaction volume reaching $140 billion, a $5 billion sequential increase.
The B2B and enterprise segments were the clear standouts, with B2B revenue up 14.4% and enterprise revenue up 20.6%. This mix shift is materially improving profitability—over 60% of adjusted gross profit now comes from these higher-margin segments, and adjusted gross profit margin expanded 135 basis points. The SMB segment, while still growing in its core, faced headwinds from attrition in legacy portfolios and specialized acquiring, but these are expected to moderate in the second half.
- B2B Operating Leverage: B2B adjusted EBITDA rose 146%, driven by margin expansion and a 13% reduction in operating expenses.
- Enterprise Margin Strength: Enterprise segment gross margins reached 94.4%, underpinned by strong CFTPay and PASQOR performance.
- SMB Core Resilience: Core SMB portfolio grew 9.5%, offsetting declines in legacy and specialized acquiring.
Cost structure was impacted by higher salaries and SG&A tied to stock comp, headcount, and cloud migration, but overall margin expansion and cash flow remained healthy. The company closed the quarter with $120.6 million in liquidity and reduced net leverage to 4.1x, aided by a favorable debt refinancing.
Executive Commentary
"Our confidence comes from the adoption we continue to experience for our connected commerce platform, combining payments and banking capabilities to streamline collecting, storing, lending and sending money to create revenue and operational success for our customers."
Tom Priori, Chairman and CEO
"The strong growth in those segments also allowed for overall margin expansion as adjusted gross profit margins improved by 135 basis points from Q2 last year. Consistent with Q1 and as shown in the charts, the adjusted gross profit from our B2B and enterprise segments represented over 60 percent of the total for the quarter."
Tim O'Leary, Chief Financial Officer
Strategic Positioning
1. Embedded Finance and Platform Bundling
Priority’s connected commerce engine, a unified API-based platform for payments and banking, is increasingly central to its value proposition. The company’s focus on embedding finance into partner workflows—across verticals such as sports management, property tech, and debt resolution—enables both deep integration and partner stickiness. This model is driving the shift to recurring revenue, as clients leverage multiple services within a single relationship.
2. Margin Mix Shift and Recurring Revenue
The transition toward B2B and enterprise segments is structurally raising profitability. Recurring revenue now represents 62% of adjusted gross profit, with B2B and enterprise up 31% and 23% respectively in this metric. This recurring base is less exposed to transaction volume swings, providing greater earnings visibility and resilience through cycles.
3. Capital Allocation and M&A Discipline
Recent refinancing—securing a $1 billion term loan and upsized revolver— has extended maturities and cut annual interest expense by nearly $7 million. Management is committed to further de-leveraging while remaining opportunistic on tuck-in acquisitions, particularly in payroll, benefits, and property tech, where integration into the core platform can unlock new profit pools.
4. Counter-Cyclical Business Lines
Priority has intentionally built out segments that perform in tougher macro conditions. B2B payables and CFTPay, for example, tend to accelerate when working capital is tight or consumer stress rises, offsetting any softness in SMB. This structural counterbalance is a core differentiator for the business model.
5. Operational Execution and Partner Enablement
The company’s “choose your adventure” technology suite gives reselling partners flexibility to tailor solutions—ranging from point of sale to cashflow management—driving both volume and loyalty. High-touch customer service further differentiates Priority in a fragmented market.
Key Considerations
Priority’s Q2 performance underscores a business in transition, with the profit engine shifting from legacy SMB acquiring toward recurring, platform-based services. The following considerations frame the evolving investment case:
Key Considerations:
- Business Mix Transformation: The recurring revenue base is now the primary driver of profit, reducing volatility and increasing predictability.
- Margin Expansion Potential: Further growth in B2B and enterprise segments could structurally lift margins and cash flow.
- Capital Structure Flexibility: Recent refinancing enables both de-leveraging and selective M&A, supporting disciplined growth.
- Macro and Policy Sensitivity: While SMB is resilient, headwinds from tariffs and same-store sales persist, though offset by counter-cyclical segments.
- Execution on Integrations: Success of recent and upcoming tuck-in acquisitions will be key to sustaining momentum in platform adoption and profit growth.
Risks
Priority faces ongoing headwinds from macro uncertainty, including potential further deterioration in SMB same-store sales and the unpredictable impact of tariffs. While the recurring revenue shift insulates the business, integration risk from acquisitions and execution on platform cross-sell remain. The company is still finalizing remediation of a material weakness in automated controls, though no restatements were required. Investors should monitor for any signs of margin pressure from rising costs or competitive pricing in core segments.
Forward Outlook
For Q3 and Q4 2025, Priority Technology guided to:
- Accelerating revenue growth in the second half, with moderating SMB headwinds and ramping contributions from recent customer wins.
- Continued margin expansion as B2B and enterprise segments gain share of profit.
For full-year 2025, management raised and narrowed guidance:
- Revenue of $970 million to $990 million (prior $965 million to $1 billion).
- Adjusted EBITDA of $222.5 million to $227.5 million (centered on prior midpoint).
Management highlighted several factors that support the outlook:
- Large customer wins and ISV integrations not yet reflected in results could provide upside.
- Assumptions include two rate cuts and further deposit balance growth; faster ramp in these could push results to the high end.
Takeaways
Priority Technology is executing a deliberate shift toward higher-quality, recurring revenue streams, with B2B and enterprise now central to profitability and growth. Margin expansion, platform adoption, and a strengthened balance sheet position the company to navigate macro headwinds and capitalize on embedded finance trends.
- Structural Margin Uplift: The mix shift to recurring, high-margin business is translating into visible, sustainable profit growth.
- Platform Leverage: Success in cross-selling and integrating new verticals will be the key to unlocking further upside.
- Watch for Integration Execution: The impact of recent and planned acquisitions, and the speed of customer ramp, will determine if Priority can consistently outperform guidance.
Conclusion
Priority Technology’s Q2 confirms the business model pivot is working, with recurring revenue and platform services driving both growth and resilience. The company’s strategic focus on embedded finance, margin mix, and capital flexibility sets a foundation for continued outperformance, though execution on integration and macro vigilance remain critical watchpoints.
Industry Read-Through
Priority’s results reinforce the accelerating industry trend toward embedded finance and bundled platform services, echoing recent high-profile transactions in the fintech sector. The company’s ability to combine payments, banking, and core business applications in a single relationship is increasingly a competitive necessity. As more software and payments providers seek to deepen integration and capture recurring revenue, expect further consolidation and a premium on platforms that can deliver operational flexibility and partner enablement. The counter-cyclical value of B2B payables and financial wellness solutions also signals that diversified fintechs may outperform in volatile macro environments.