Priority Technology Holdings Q4 2025 Earnings Call - High-margin Treasury and Payables Fuel Margin Expansion, 2026 Guide Targets $230M-$245M EBITDA

Operator: Good day, and welcome to the Priority Technology Holdings Fourth Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Meghna Mehra, Managing Director of Investor Relations. Please go ahead.

Meghna Mehra, Managing Director of Investor Relations, Priority Technology Holdings: Good morning, and thank you for joining us. With me today are Tom Priore, Chairman and Chief Executive Officer of Priority Technology Holdings, and Tim O’Leary, Chief Financial Officer. Before giving our prepared remarks, I would like to remind all participants that our comments today will include forward-looking statements, which involve a number of risks and uncertainties that may cause actual results to differ materially from our forward-looking statements. The company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events, or otherwise. We provide a detailed discussion of the various risk factors in our SEC filings, and we encourage you to review these filings. Additionally, we may refer to non-GAAP measures, including but not limited to EBITDA and adjusted EBITDA, during the call.

Reconciliations of our non-GAAP performance and liquidity measures to the appropriate GAAP measures can be found in our press release and SEC filings available in the Investors section of our website. Before I turn the call over to Tom, I would like to say that on today’s call, we will only be discussing Priority’s financial and operational results and outlook. We will not be commenting or answering questions related to the special committee’s ongoing evaluation of the take-private proposal. Please continue to refer to the company’s prior press releases for the latest on that topic. With that, I would like to turn the call over to our Chairman and CEO, Tom Priore.

Tom Priore, Chairman and Chief Executive Officer, Priority Technology Holdings: Thank you, Meghna, and thanks to everyone for joining us for our fourth quarter and full year 2025 earnings call. I’ll begin today’s call by highlighting our aggregate fourth quarter and full year 2025 performance, discuss full year financial guidance for 2026, and provide an overview of key strategic updates. I’ll then hand the call over to Tim, who will provide segment-level performance, key trends, and developments across our business segments and Priority overall. As summarized on slide three, Priority grew net revenue for the year by 8%, generated adjusted gross profit and adjusted EBITDA growth of 14% and 10% respectively, and increased adjusted EPS by $0.52 or 102% year-over-year to $1.03 for fiscal 2025.

We ended the year with 1.8 million total customer accounts operating on our commerce platform, up from 1.2 million at the end of last year. Annual transaction volume in 2025 increased by $20 billion to $150 billion, and average account balances under administration improved by $500 million from the prior year to $1.7 billion. Tim will provide more context on the full year 2026 guidance specifics later in the call. I can reflect that the value our diverse partners and customers see in our unified commerce platform and elegant product solutions provides confidence that we will sustain the momentum in our Merchant Solutions, Payables, and Treasury Solutions segments.

We anticipate achieving 6%-9% top-line revenue growth to a range of $1.01 billion-$1.04 billion and generating adjusted EBITDA of $230 million-$245 million in 2026, despite headwinds related to lower interest rates, a challenging macroeconomic and consumer spending environment, and the continued investment in early-stage growth opportunities within Priority Tech Ventures. Turning our attention to our aggregate Q4 results on slide four, revenue of $247.1 million increased 9% from the prior year. This led to a 19% increase in adjusted gross profit to $100.2 million and a 16% improvement in adjusted EBITDA to $60.1 million.

Adjusted gross profit margin of 40.6% increased 360 basis points from the prior year’s fourth quarter, reflecting the ongoing performance of our diverse high-margin Payables and Treasury Solutions segments, combined with the accretive impact of acquisitions completed in the second half of 2025. Now for those of you who are new to Priority, slides six and seven highlight our vision for Connected Commerce. The Priority Commerce platform is purpose-built to streamline collecting, storing, lending, and sending money. It delivers a flexible financial toolset for merchant acquiring, Payables, and Treasury Solutions designed to accelerate cash flow and optimize working capital for businesses.

I would encourage you to play the short one to two minute videos embedded in the product links to gain a deeper understanding and appreciation for why customers are consistently partnering with Priority to reach their commerce goals and why we are emerging as a go-to solution provider for embedded commerce and finance solutions. Slide seven highlights a typical partner experience with our commerce APIs, orchestration capabilities for payments, and Treasury Solutions. This enables partners to use a single API tailored to their specific objectives. Customers connecting via our API can access all routes for digital payment acceptance, create traditional and virtual bank accounts, issue physical and virtual debit cards, enable lockbox for checks, configure single vendor and advanced bulk vendor payments, and many other commerce options at their own pace. Given our expanding customer base and segments, our commerce platform creates two important benefits for Priority’s long-term success.

First, it enables our partners to develop their offering to seize new opportunities and respond to emerging trends as they add features and embedded solutions. Both parties maintain clear visibility into quantifiable revenue growth opportunities, building customer confidence and driving mutual success. Second, by standardizing operational workflows across diverse industry segments where money movement and treasury tools are critical to the value chain, we can identify and refine key operational metrics in compliance, payment operations, risk, and application support. This enables us to scale efficiently, maintain cost discipline, and ultimately improve profitability. This vision explains why we’ve been able to evolve Priority into a consistently high-performing payments and banking financial technology company with strong recurring revenue prospects.

Our customers and current market conditions, particularly the accelerating narrative of AI’s impact on SaaS providers, reinforce our belief that systems connecting payments and treasury solutions to accept and distribute funds in multi-party environments will be critical as businesses put greater demands on software and payment solution providers to deliver a full suite of core business services in a single relationship. At this point, I’d like to hand it over to Tim, who’ll provide further insights into the health of our business segments, along with current trends in each that factored into our fourth quarter results and our confidence for sustained performance in 2026.

Tim O’Leary, Chief Financial Officer, Priority Technology Holdings: Thank you, Tom, and good morning, everyone. As Tom mentioned, we had solid overall financial performance in the fourth quarter and for the full year. For the full year, consolidated revenue growth of 8.3% included 7.7% of organic growth, excluding the impact of acquisitions. For the fourth quarter, reported revenue growth of 8.8% included organic growth of 6.8%, fueled by strong 13% growth in Payables and 18% growth in Treasury Solutions, complemented by 6% reported growth in Merchant Solutions, which included 3% organic growth. As shown on slide nine, adjusted gross profit from our Payables and Treasury Solutions segments represented 62% of the total for the year. While for the fourth quarter, they combined to represent 60%.

For easier organic comparison to prior data points, if you exclude the impact of acquisitions, those respective percentages would have been 63% for the full year and 65% for the quarter. The 3-percentage point year-over-year organic increase in Q4 is indicative of our continued investment in higher growth, higher margin operating segments. Strong growth in Payables and Treasury Solutions, combined with the impact of acquisition-related activity, also allowed for overall margin expansion as adjusted gross profit margins improved by nearly 360 basis points from Q4 2024 and over 130 basis points sequentially from Q3. If you normalize for the non-recurring inventory write-off in Q4 of 2024, which negatively impacted gross margins in that period, the year-over-year gross margin expansion is still a very healthy 210 basis points.

I’ll move now to the segment-level results and start with Merchant Solutions on slide 10. Merchant Solutions generated Q4 revenue of $165.3 million, which is $9.6 million or 6.2% higher than last year’s fourth quarter. Revenue growth was a mix of 3% organic growth in the core portfolio, combined with just over 3% revenue growth in the quarter contributed by the Boom Commerce and DMS acquisitions. Slower growth in the core portfolio compared to the first half of the year was a trend we discussed on our Q3 earnings call and was largely attributable to a few key industry verticals, including restaurants, construction, and certain retail trade markets, including home furnishings and building materials. Total card volume was 18.5 billion for the quarter, which is up 2.3% from the prior year.

From a merchant standpoint, we averaged 179,000 accounts during the quarter, which is up from 177,000 last year, while new monthly boards averaged 3,000 during the quarter. Adjusted gross profit for the fourth quarter was $40.1 million, which is up $8.1 million or 25.5% from Q4 of last year. Gross margins of 24.3% are 370 basis points higher than the comparable quarter last year due to the Boom Commerce and DMS acquisitions. If you exclude the impact of acquisitions, organic gross profit was flat and gross margins were 60 basis points lower than the prior year’s fourth quarter.

Lastly, adjusted EBITDA was $30.6 million, which is up $4 million or 14.9% from last year as inorganic EBITDA more than offset the impact of lower EBITDA from specialized acquiring in the core portfolio. Moving to the payables segment, revenue of $26.8 million was 12.7% higher than Q4 of last year. Buyer funded revenues grew 10.9% year-over-year to $20.9 million, while supplier funded revenues grew 20% year-over-year to $5.8 million. Adjusted gross profit was $7.4 million in the quarter, which is a 15.9% increase over the prior year. For the quarter, gross margins were 27.6%, which is over 70 basis points favorable to last year’s comparable quarter.

The Payables segment contributed $3.9 million of adjusted EBITDA during the quarter, which was a $1.5 million or 60.8% increase year-over-year. The acceleration of adjusted EBITDA growth compared to revenue and adjusted gross profit was driven by continued strong operating leverage in the segment, including an almost 9% year-over-year reduction in operating expenses before D&A. Moving to the Treasury Solutions segment, Q4 revenue of $57.3 million was an increase of $8.7 million or 17.8% over the prior year’s fourth quarter. Revenue growth was driven by continued strong enrollment trends and an increase in the number of billed clients enrolled in CFTPay to over 1.1 million, combined with a 30% year-over-year increase in the number of integrated partners and organic same-store sales growth from existing Passport program managers.

Higher account balances in CFTPay and Passport were able to more than offset the impact of lower interest rates in the quarter compared to Q4 of last year. As a result of those factors, adjusted gross profit for the segment increased by 15.7% to $52.7 million, while adjusted gross profit margins were 91.9% for the quarter. Gross margins were approximately 170 basis points lower than the prior year’s fourth quarter due to mix shift resulting from strong 110% revenue growth in Passport and over 200% revenue growth in Priority Tech Ventures, both of which operate at lower gross margins than the CFTPay platform. Adjusted EBITDA for the quarter was $47.6 million, an increase of $5.5 million or 13.2% year-over-year.

Overall profitability in Treasury Solutions was driven by low teens revenue growth in CFTPay, combined with strong profitable growth in Passport, which offset investments we continue to make in newer vertical software assets within Priority Tech Ventures. While many of these investments are still scaling and not yet profitable, we view them as highly compelling opportunities to enhance Priority’s already comprehensive product suite and expand further into both new and existing markets, including construction, payroll and benefits, asset management, and sports and entertainment, including the NIL marketplace. Moving to consolidated operating expenses. Salaries and benefits of $28.8 million increased by $5.6 million or 24.2% compared to Q4 of last year. The year-over-year increase was primarily driven by a $2.4 million dollar increase in stock compensation expense, combined with a $2.1 million dollar increase related to acquisition activity.

SG&A of $17.7 million increased by $5 million or 38.8% compared to Q4 of last year as a result of increased accounting and SOX related expenses, combined with higher cloud and software expenses. With respect to our capital structure on page 14, debt at the end of the quarter was $1.02 billion, and we ended the quarter with $177 million of available liquidity, including all $100 million of borrowing capacity available under our revolving credit facility and $77 million of unrestricted cash on the balance sheet. With respect to free cash flow, we generated $28 million of free cash flow in the quarter based on adjusted EBITDA of approximately $60 million, minus $6 million of CapEx, $22 million of interest expense, and just over $4 million of income taxes.

On a run rate basis, that same metric totals approximately $112 million, which equates to almost $1.34 of free cash flow per diluted share. For the LTM period ended December 31, adjusted EBITDA of $225.2 million, combined with net debt of $945.4 million, resulted in net leverage of 4.2x at quarter end, which is down from 4.4x at the end of Q3, with increased EBITDA and free cash flow contributing to lower net debt. For further comparison, if you were to include the run rate EBITDA impact of acquisitions, pro forma net leverage would have been 3.9x at year-end. Page 15 highlights our financial guidance for the full year.

As Tom highlighted earlier, we are forecasting 6%-9% top line growth, inclusive of 4%-7% organic growth for the full year to a revenue range of $1.01 billion-$1.04 billion. Adjusted gross profit is expected to range from $405 million-$425 million, with gross margins expanding by 75-100 basis points from full year 2025 levels. Lastly, adjusted EBITDA is forecast to range from $230 million-$245 million. To provide some color on the guidance by segment, we expect 6%-8% revenue growth in Merchant Solutions, inclusive of approximately 3%-4% organic growth as we continue to add new resellers and win new large enterprise customers, while also inorganically benefiting from the impact of acquisitions made in 2025.

Payables organic top line growth in 2026 is expected to be in the 8%-10% range, which is lower on a comparative basis to 2025’s reported growth, given certain market headwinds, including the impact of lower interest rates and certain card network changes. Lastly, Treasury Solutions is expected to continue its momentum, although we have moderated our growth expectations in 2026 to low double-digit percentages to account for the impact of lower interest rates combined with strong growth already experienced in the past three years, contributing to the simple math of a larger denominator. If you take those segment-level growth rates and then factor in an estimated $10 million of intercompany eliminations at the consolidated level, that brings you to the 6%-9% guidance range for revenue growth for the full year.

Lastly, and separate from guidance, I’m pleased to announce that as of December 31, 2025, the company successfully remediated the material weakness in its internal controls over financial reporting that was identified on December 31, 2024. Further, our internal assessments and external audits have confirmed that the company maintained effective internal controls over financial reporting as of the end of the 2025 fiscal year. With that, I’ll now turn the call back over to Tom for his closing comments.

Tom Priore, Chairman and Chief Executive Officer, Priority Technology Holdings: Thank you, Tim. Before concluding, I wanted to offer our perspective on widely publicized research about the impact of AI on SaaS business models and how the plummeting cost of app development is influencing Priority. To put it simply, we are and have been fully bought in and have been positioning for this eventuality for some time. Our expectations of how vertically specialized applications could and would be built and deployed has informed our strategy to, one, maintain a highly disciplined tech expense structure framework with CapEx consistently representing approximately 10% of EBITDA. Two, establishing the Priority Tech Ventures platform to drive growth in new verticals with large addressable TAMs and executing through nimble application teams that could self-test the usability of the Priority Commerce Engine.

Three, prioritizing the optimization of the Priority Commerce Engine and its API as a foundational moat for emerging SaaS providers to connect to Priority for all modalities of payments and sophisticated banking and treasury tools without the burdens required to manage compliance, regulatory requirements, or risk responsibilities. These capabilities are important distinctions because while AI tools can dramatically affect the proliferation of app development and drive operating cost efficiency, they cannot replace money transmission licenses or regulatory requirements or critical payment operations connections that influence the profitability of SaaS platforms. Last, I want to reflect on the ultimate bear story that AI will displace an overwhelming number of white-collar professionals, spike unemployment, and accelerate a transition to lower-paying jobs. Deep downside economic risks or potential outliers are why we continue to invest in defensive and early digital cycle segments like real estate, sports entertainment, healthcare, and auto.

Perhaps more compelling to consider is that the population of workers potentially considered most at risk from broad AI adoption is arguably the most likely segment to benefit from the services of CFTPay during a period of debt resolution or credit improvement. I would not call these predictions, but rather our purposefully positioned hedges to preserve long-term stability and consistent performance at Priority. As always, I want to thank all of my colleagues at Priority for continuing to work incredibly hard to deliver results. Your commitment and dedication to improving everything we do is clear, providing our partners and customers with a consistent reminder that they made the right choice to partner with Priority. Finally, we continue to appreciate the ongoing support of our investors and analysts and for those in attendance who are new to Priority for taking the time to participate in today’s call.

Operator, we would now like to open the call for questions.

Operator: Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question today comes from Vasu Govil with KBW. Please go ahead.

Vasu Govil, Analyst, KBW: Hi. Thank you for taking my question. I guess just the first one on the macro environment. I know you’ve called out the pullback in restaurants, construction, and some other verticals. Just curious if you are seeing a stabilization in that trend versus last quarter and sort of what’s baked into your guide with respect to the macro environment? Thank you.

Tim O’Leary, Chief Financial Officer, Priority Technology Holdings: Hi, Vasu. Thanks for the question. Yeah, I think we’ve seen Q4 stabilize from what we saw in Q3. Obviously, Q3, you know, caught us by a little bit of surprise as we moved through the quarter, which, you know, caused us to update our guidance for the full year. But I’d say Q4 came right in line with what we expected, from a volume standpoint and how we expected the macro environment to operate. I think as we think about the 2026 guidance, we’ve assumed a similar macro environment to what we’re operating in now. We haven’t assumed any changes to the positive or the negative. We really looked at some of the current trends we’ve seen from Q3 and Q4.

Obviously, we saw a little bit of a slowdown in our core organic growth in the Merchant Solutions business in the second half of the year. Our guide reflects that in 2026, as you think about the organic along with the total growth rates on Merchant Solutions. You know, we also have you know expected interest rate declines, which have some headwinds to the business overall, which we’ve also called out on some of the growth rates for the Payables and Treasury Solutions platforms.

Vasu Govil, Analyst, KBW: Thank you very much. I wanted to ask about the enterprise business pipeline as well. I know in the past you’ve talked about how the pipeline’s really strong, but particularly in the ISV space, but it can take some time as customers convert. The timelines can be variable. Just looking for an update on both on the pipeline and what you’re seeing in terms of timelines for ramping within the customers. Thank you.

Tom Priore, Chairman and Chief Executive Officer, Priority Technology Holdings: Yeah, I think, well, first off, the pipeline remains strong and in the verticals we’ve reflected in the past. Real estate, we’re seeing, you know, very good adoption, but converting, you know, renters over, for instance, or, you know, property-level conversion just, you know, takes time and goes step by step. Sports and entertainment, you know, kind of very similar circumstance. And then, you know, ISV adoption, you go through the process of integration and release and then, you know, work your way through the population of customers. Those sales cycles and conversion cycles are longer or because it’s less predictable. You know, we’ve tried to be conservative in the way we’ve reflected that in guidance.

Nothing has changed in terms of the dynamic of adoption. If anything, it’s reinforced our belief in investing in the commerce platform. I’ll say all of those dynamics are kind of what informs, you know, our outlook for 2026 and how we best manage it.

Vasu Govil, Analyst, KBW: Appreciate the color. Thank you.

Operator: The next question comes from Jacob Stephan with Lake Street Capital Markets. Please go ahead.

Jacob Stephan, Analyst, Lake Street Capital Markets: Hey, good morning, guys. Thanks for taking the questions. Maybe just to start out on average CFTPay monthly enrollments. I know I saw a sequential down increase in Q3 to Q4. Nothing kind of out of the ordinary in terms of seasonality, but I’m wondering if you know you can kind of correlate that with the significant ramp in partners? And you know also, is there a potential to accelerate that average monthly enrollments number?

Tim O’Leary, Chief Financial Officer, Priority Technology Holdings: Sure. Thanks, Jacob. Good morning. Yeah, as you noted, the slowdown in new enrollments in Q4 compared to Q3 is seasonal. That’s a predictable pattern we see every year, and you should see an uptick in Q1 as people come out of the holiday season and look to resolve some of their debts and their consumer wellness. So we’ll continue to see those types of trends. As you think about the broader environment for that platform, you know, Tom noted, you know, potentially, you know, some upside there as you see, you know, any uptick in unemployment, as AI continues to have an impact on the white collar employee base. But overall, you know, we’re just projecting, you know, very steady, you know, type growth, right?

We’re not projecting any large uptick in enrollments till we see a change in the macro environment. Most of the new integrated partners that you’re referencing that was disclosed in the earnings presentation that’s really coming on the non-CFTPay side of the business. As you think about how we continue to build the Treasury Solutions platform and the success we’re having on the embedded finance side and working across the Connected Commerce Engine most of the new increase in partners is coming there, which is why you’re seeing you know very high growth rates on you know the Passport side and even on the Priority Tech Ventures side, where those are triple-digit type growth rates year-over-year. That’s where we continue to add a lot of new partners.

There’s not a lot of new partners to add on the CFTPay side. We have, you know, leading market share there and continue to add small partners. Most of the growth is coming from, you know, the non-CFTPay side of Treasury Solutions as you think about the new integrated partners.

Jacob Stephan, Analyst, Lake Street Capital Markets: Okay. Got it. That’s helpful. Then maybe supplier-funded issuing dollars was down year-over-year on an absolute dollar basis. But you guys said that revenue was, you know, up 20% there. Wondering if you can kind of put some context behind those two data points?

Tim O’Leary, Chief Financial Officer, Priority Technology Holdings: Sure. Yeah. Two components there moving against each other. The dollar volume, as you noted, was down largely due to one of our bank channel partners. You know, one of the avenues we go to market there is through bank partners who use our automated payables platform on a white label basis. One of those bank channel partners was acquired, so that contract was put on hold for a while. We’ve since re-won that contract with the larger bank that acquired them. We’re optimistic about that business overall still, but that did put a slowdown in some of the volume last year while they worked through that integration on the acquisition. The uptick though overall on the supplier funded side was also from some of the balances we manage. Right?

We have an ACH.com business that sits within our Payables platform, and balances there continue to grow as we continue to expand the ACH business and benefited from those larger float balances. That was really the largest driver of the revenue growth on the supplier funded side.

Jacob Stephan, Analyst, Lake Street Capital Markets: Okay, great. I appreciate all the color. Thanks, guys.

Operator: The next question comes from Brian Kinstlinger with Alliance Global Partners. Please go ahead.

Brian Kinstlinger, Analyst, Alliance Global Partners: Great. Thanks, guys. Can you highlight the key strategic priorities and/or investments for 2026, especially as it relates to the growth ventures piece? Maybe separately expand on how you’re attacking the NIL sports and entertainment and other key markets, and touch on the competitive landscape in these markets right now.

Tom Priore, Chairman and Chief Executive Officer, Priority Technology Holdings: Yes, sure. From a standpoint of where we’ll invest, I think those, you know, those investments have been made to establish platforms and, you know, just taking a, I’ll just call it a maybe a macro thesis sort of step back each of them and where we will deploy are segments where, you know, collecting, storing, sending money is an important part of the value chain. You know, particularly, I would say benefiting from storing money, as it gets repositioned, in the commerce environments that they serve. You know, those are real estate, healthcare, as you mentioned, you know, the NIL and college sports arena.

I would say also, you know, we see some opportunities in international remittance that we’ll continue to just go deep into those verticals. Most of those are sitting on legacy systems and legacy software providers. You know, kind of tie in a little bit of the AI theme that everyone’s spoken about. You know, we think we’ve been, you know, ahead of the game in sort of building nimble platforms that are more comprehensive, provide more solutions into operators in that space and, you know, can do so at a better price point because they’re just, you know, they’re built on more modern technology stacks and are not burdened by a lot of redundant expense.

Our guidance reflects that, you know, we’ll continue to invest in those high growth areas. We’re already seeing, you know, we’re seeing the benefits of those where, you know, conversion of larger players in real estate, you know, specifically to your question on NIL, you know, that environment is. We were on with a very large university. Their comment was, "This is the best NIL platform, most comprehensive NIL platform I’ve seen." Look, we know we have the right tool set. Now it’s about driving adoption and distribution. You know, a lot of our construction work is done. It’s now about sales. Those sales cycles are longer, just given the nature of, you know, who the constituent is.

You’re going through, you know, either large institutions that are private institutions or, you know, public institutions. Just by the very nature of a state university, right? It takes time. Maybe it’s going through an RFP, right? There are processes to get to the end game that we’re really well positioned to win, but they take time to win. We’ve, you know, we’re—we feel really confident about, you know, where we’re set. Now it’s just about being relentlessly focused on execution as we have in the past.

Brian Kinstlinger, Analyst, Alliance Global Partners: Great. My second question, my follow-up is, you obviously gave EBITDA guidance.

Tom Priore, Chairman and Chief Executive Officer, Priority Technology Holdings: Can I make one other comment before you move to your next question?

Brian Kinstlinger, Analyst, Alliance Global Partners: Of course, you can.

Tom Priore, Chairman and Chief Executive Officer, Priority Technology Holdings: A good indicator.

Brian Kinstlinger, Analyst, Alliance Global Partners: It’s your platform. Yep.

Tom Priore, Chairman and Chief Executive Officer, Priority Technology Holdings: I now would just say, all of those deposits, right? Where you see that growth within Passport that Tim commented on, a lot of that, he made the observation that’s coming through the tech ventures channel, right? You know, think about that NIL environment you mentioned. Money comes in to a student-athlete, it sits there, you know, they’re gonna then use that to, you know, to manage their life, you know, whether that’s, you know, using the debit card to order food on Uber Eats or, you know, whatever’s next as a college student. You’ll see those balances. You’ll see growth reflected in the earnings on those balances.

Brian Kinstlinger, Analyst, Alliance Global Partners: Great. My follow-up on the EBITDA guidance, what does that equate to operating cash flow? How should we think about the cash or excess cash being used as it relates to paying down debt?

Tim O’Leary, Chief Financial Officer, Priority Technology Holdings: Sure. Thanks, Brian. Yeah, we if you think about operating cash flow, we did $36 million of operating cash flow in Q4, right? As I look at it from an EBITDA walk down to free cash flow, it was $28 million, right? Taking out some of the working capital changes which I know we’ve spoken about are, in our minds, somewhat, you know, timing issues since we’re not a working capital-intensive business. If I take that $28 million of free cash flow in Q4, there’s no reason that should come down going into 2026. You know, if you annualize that, you’re north of $110 million of free cash flow. I think that number will grow from where we finished out on Q4, right? We’re a very cash flow positive business.

We have $77 million of cash on the balance sheet at quarter end from last year. You know, we’ve got plenty of liquidity, and you know, we’ll continue to look at opportunities to pay down the debt. We’ve kept the balance sheet you know, liquid right now, but we obviously generate a lot of cash flow, so we can continue to address the debt you know, this year.

You know, I made the comment in my prepared remarks, but just to emphasize it, if if you look at our leverage on a pro forma basis, so if you include a full year effect of the acquisitions, we actually finished under 4x leverage, right? We’re 3.9x if you give us a full year credit for the acquired EBITDA. Obviously, that debt’s already on the balance sheet. You know, we feel like we’re in a very good position to continue to delever the balance sheet between free cash flow and just EBITDA growth.

Brian Kinstlinger, Analyst, Alliance Global Partners: Great. Thanks, guys.

Operator: The next question comes from Bryan Bergin with TD Cowen. Please go ahead.

David Duke, Analyst, TD Cowen: Good morning. This is David Duke on for Bryan Bergin at TD Cowen. Just on overall strategy, as you look at the year ahead, are there any meaningful shifts in priorities, whether that’s organic investment, M&A or, you know, investing in those high-margin segments?

Tom Priore, Chairman and Chief Executive Officer, Priority Technology Holdings: No strategic shifts. I mean, what we’ve reflected in the past is, you know, what we expect to continue. We’ll look at some M&A opportunistically. You know, I think as Tim likes to note, you know, we’ve got a broad funnel but very narrow filter for what comes through and, you know, we think is additive and accretive. We’re very discerning on M&A. You know, from a SaaS standpoint, I think particularly now, you know, we’ve historically been very judicious and we have conviction around where we invest and why and that is, you know, I think performance in that regard speaks for itself.

You know, we’re acutely focused on maintaining that discipline, you know, particularly in an environment where AI is changing the landscape, you know, so quickly. I’d say if anything, we’re gonna become, you know, more discerning and more, you know, we’ll kind of be more value-seeking, you know, to be candid.

David Duke, Analyst, TD Cowen: Okay. That’s helpful. Thank you.

Tim O’Leary, Chief Financial Officer, Priority Technology Holdings: The only thig I’d add to that, though, is it’s not a change in strategy, but we’re gonna continue to emphasize growth going through, you know, direct sales on, you know, large enterprise-type customers. We’ll continue to add top sales talent, you know, to attack that market. We continue to support wholeheartedly the reseller community across Merchant Solutions, but as we continue to go up market on some of these enterrprise sales.

We’ll continue to add top sales talent there, which, you know, as you think about the EBITDA guidance for the year, you know, that’s part of the reason you see the guide we have out, is we know we’re gonna continue to invest in the overall platform and team to continue to have the right type of pipeline from a future growth standpoint.

David Duke, Analyst, TD Cowen: Got it. Thank you for the extra color there.

Tom Priore, Chairman and Chief Executive Officer, Priority Technology Holdings: If I can just point something out for you, and Tim, that’s a really just great observation. If you look at some of the announcements you heard from, you know, peers, they’re jettisoning talent. So, you know, we’ve been very intentional about kind of the way we’ve built the business, you know, looking for these opportunities to emerge. So this is a year to capitalize on them for sure. That’s gonna require some investment.

David Duke, Analyst, TD Cowen: My follow-up to that is just on the 2026 guide. Can you help us bridge the gap between gross profit and EBITDA growth? I know that you guys just touched on it there, but specifically how much of that divergence is from the interest rate headwind and the investments?

Tim O’Leary, Chief Financial Officer, Priority Technology Holdings: I think it’s mainly from the investments in the business, both personnel from a sales talent standpoint, continue to add to the development team. We’ve also got a little bit lower capitalization rates, right? As Tom mentioned, right, the construction is largely done, now it’s execution. As you go from construction mode to execution mode, you have less ability to capitalize, you know, certain development costs there. That’s part of the impact as you go from gross profit to EBITDA. It’s less about the interest rate headwind ’cause that’s gonna be a headwind in gross profit as well. Obviously, it flows straight through, so it does have some impact there. Most of the headwind you see on the interest rates is flowing through at the gross profit level also.

It’s mainly about investing in the business from a personnel and a technology standpoint.

David Duke, Analyst, TD Cowen: Thank you for answering my questions.

Operator: Again, if you have a question, please press star then one. The next question comes from Dylan Hinds with B. Riley Securities. Please go ahead.

Dylan Hinds, Analyst, B. Riley Securities: Hey, I’m on for Hal Goetsch. Thanks for taking the question. I was wondering about Payables. You know, Payables EBITDA up 61% in 4Q on 13% revenue growth, which is, you know, very impressive operating leverage. I was wondering how sustainable is that trajectory? Like, is there a natural margin ceiling for Payables? If the trajectory can hold, would it be from continued cost takeout or revenue scale?

Tim O’Leary, Chief Financial Officer, Priority Technology Holdings: We’ll continue to be very efficient in that business. There’s not a lot of incremental personnel added to that from an operational side. It’s really sales talent to continue to go after additional distribution channels. You also have the benefit in 2025 of, you know, the increase in balances on the ACH business, which I mentioned earlier, that flows through at a very high margin. I think you’ll see EBITDA growth more closely correlate with revenue growth going forward. I don’t think there’s a big margin shift to be had in the Payables segment right now.

As we add some of the larger enterprise customers coming on for Payables, whether it’s using buyer-funded or supplier-funded, you know, some of those are coming on at larger volumes, but, you know, a little bit lower margins, right? I think you’ll have an offset there between the two. I think operating efficiencies will offset some of the margin pressure you maybe see from larger customers, but, I think you’ll see that growth rate, you know, more closely correlate with revenue growth.

Dylan Hinds, Analyst, B. Riley Securities: Got it. Thank you.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Tom Priore for any closing remarks.

Tom Priore, Chairman and Chief Executive Officer, Priority Technology Holdings: Thank you very much. We’d like to just express our appreciation to all of our investors and analysts who continue to support Priority. Hope everyone has a great remainder of the week and the markets treat you well. Thank you and have a great day.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.