Priority Technologies continued its financial trajectory in the first fiscal quarter of 2024 with robust growth across all business segments and an overall 21.2% increase in adjusted gross profits. The fintech company’s results highlight how its unified commerce platform is resonating with customers who want to optimize cash flow and working capital, according to chairman and CEO Thomas Priore.
The earnings report followed a strong financial performance by Priority in 2023. In addition to the increase in adjusted gross profits for Q1 2024, Priority also reported an 11.2% surge in revenue. The company continues to diversify its revenue streams, with profits growing in the B2B payables and enterprise payments segments. Combined, they represented almost 59% of the company’s adjusted gross profit.
While the numbers are impressive, Thomas Priore said they have their roots in a powerful business idea built on leveraging technology to better meet the needs of business owners. Priority continues to expand and improve upon its vision of providing a unified commerce experience for clients that includes an innovative suite of payments and banking services as well as an accelerated commerce engine.
“Our unwavering focus on delivering the best products and service in the industry drove record first quarter results that place Priority on a strong financial trajectory for 2024,” Thomas Priore said in an earnings call with analysts and investors. He added that Priority is “maintaining the momentum we established throughout 2023.”
What Is Driving the Growth at Priority?
In the earnings call, Thomas Priore reported total revenue increased 11.2% year over year to $205.7 million, while adjusted EBITDA soared 23.1% to $46.3 million. This marked a new quarterly record for adjusted EBITDA at Priority.
Thomas Priore said the company’s unified commerce vision “continues to resonate with our customers” and that growth has been accelerated by the strength of the company’s diverse business lines.
Priore highlighted several drivers leading Priority’s strong first quarter performance. They included record transaction volume of more than $120 billion annually, average daily deposits of $980 million, and over $1 million total customer accounts operating on the platform. The company’s growth was well distributed across its small and midsize business acquiring, B2B payables, and enterprise payments segments.
While the SMB merchant acquiring segment faced headwinds from a large reseller partner diversifying its processing activity, revenues still grew organically by 8% year over year when excluding that impact. Monthly new merchant boardings averaged 43,000.
Enterprise Payments and Business Payables Shine for Priority
The enterprise payments business was Priority’s shining star for the quarter. Segment revenue skyrocketed 50% from the prior year to $40.9 million, fueled by new client acquisitions, increased banking deposit balances, and a stable interest rate environment. Enterprise adjusted gross profit surged 50% and maintained a 94.5% adjusted gross profit margin.
Priority’s B2B payables business provided another key growth driver, boosted by acquisition of Plastiq in August 2023. Plastiq contributed $17.3 million of the $18.3 million year-over-year revenue increase in B2B. In the earnings call, management indicated Plastiq is integrating smoothly and already tracking toward becoming adjusted EBITDA positive in the double-digit millions by year-end.
“We’re seeing larger enterprise customers doing $10 million, $20 million, up to $50 million in payments using our financed payment strategies enabled by Plastiq’s technology as a complement to our broader payables offering,” Thomas Priore said.
Priore and Priority CFO Tim O’Leary also discussed plans to recapitalize and optimize the company’s balance sheet. Priority announced commitments for an upsized $835 million debt facility that will lower its interest costs while allowing it to redeem around $170 million of higher-cost preferred equity.
“We’re optimistic this refinancing will further accelerate our already robust free cash flow generation,” O’Leary said. He projected over $60 million in free cash flow for 2024 post-refinancing, up from an estimated $50 million previously.
O’Leary also said he expects $11 million in annual cash savings from lower preferred dividend payments. He added that the company will evaluate the best uses of its capital, whether that’s pursuing attractive M&A opportunities, further paying down preferred equity, or reinvesting for growth.
Thomas Priore Optimistic About Priority’s Future
With its unified payments and banking platform driving record results, a cleaner capital structure on the horizon, and rapidly growing free cash flow, Priority is positioned to continue its growth into 2024. In the earnings call, Priority reiterated its full-year 2024 guidance for 16% to 18% revenue growth, reaching $875 million to $890 million. The company also projects a 15% to 18% increase in adjusted EBITDA over 2023, or $193 million to $198 million.
“We delivered record results in the first quarter on strong performance in each business segment of our unified commerce platform,” Thomas Priore said in a news release on the earnings report. “Our growth in the quarter and ongoing consistency reinforces the unique attributes of our operating infrastructure, diversity of our business segments and robust demand for our products.”
Thomas Priore added that Priority remains focused on continued innovation of its services and meeting the evolving needs of customers and enterprise partners. “I would like to thank everybody for taking the time to allow us to reflect on the first quarter 2024,” he said at the end of the earnings call. “As you can see, it was quite a successful one. I feel like the business is set up to continue to perform at that rate through the remainder of the year.”
