SMB Acquiring, B2B Payables Fuel Priority’s 9% Q2 Top-Line Jump

Growth in small to medium-sized business (SMB) acquiring, B2B payables management and enterprise payments helped boost Priority Technology Holdings’ second-quarter results, while management also increased guidance for its near-term results.

The stock popped 6% in early trading on Thursday (Aug. 7) after results were announced.

During the conference call with analysts, CEO Tom Priore said that the growth came despite “lingering economic uncertainty over the impact of tariffs and government cuts that extended into the second quarter.”

The investor presentation materials noted that net revenues were up by 9% to just under $240 million. Drilling down into the segment-by-segment results, the SMB segment posted 5% growth in sales, as card volumes were up 2% to $18.7 billion.

B2B Grows as Percentage of Revenues

The B2B segment grew by 14% in terms of revenues and now represents about 10.4% of the consolidated top line, where that contribution had been 3.3% in fiscal year 2021.

In business tied to enterprises, revenues surged by 21% year on year, to $52.7 million. With a nod to the banking and payments platform CFTPay, average new monthly enrollments, the company said, were up 4% year on year at 58,000. Later in the call the CEO noted that the enterprise partner experience for the commerce links payments orchestration and payables management, among other functionalities, at a single part of contact.

Added Priore, “we ended the second quarter with over 1.6 million total customer accounts operating on our commerce platform, up from 1.3 million at the end of last quarter.” Annual transaction volumes in the trailing 12-month period, he told analysts, increased by $5 billion from Q1 to $140 billion as measured in the latest quarter.

“Importantly, this framework is consistently applied whether the partner is a sports management software company, a debt resolution provider leveraging CFTPay, a vertically focused software provider or property management technology company,” said the CEO, who added that “customers connect and can access all routes for digital payment acceptance, as well as lockbox for checks, create FDIC eligible pass through, insured, full-featured virtual bank accounts, with both virtual and physical card issuing, bill payment, and automated payables options.”

Looking at Guidance

“Based on strong growth trends and a continued favorable shift in our business mix, I’m confident that priority can achieve 10% to 12.5% percent top line revenue growth, which is why we’re increasing the low end of our revenue expectations,” he said. “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.”

CFO Tim O’ Leary said on the call that the growth in the enterprise and B2B segments also helped boost margins, and noted that these segments are marked by recurring revenue streams. Recurring revenue now represents about 62% of total adjusted gross profit, according to management commentary on the call.

Asked in the call where client firms are seeing particular momentum, Priore told analysts that “we’re continuing to see very strong growth in our larger ISOs. They continue to perform very well, adding a lot of volume,” where the volume growth has been higher than 10%. And within the SMB segment, there’s been what Priore termed “resilience” in retail and subcomponents such as liquor stores and gas stations.