Investing.com -- S&P Global Ratings has revised its outlook on Priority Technology Holdings Inc. to positive from stable, while affirming the company’s ’B’ rating and assigning a ’B’ rating to its new debt.

The revision follows Priority’s strengthening credit metrics driven by higher revenue and earnings. The company maintained solid growth in its merchant acquiring segment focused on small and midsize businesses, while experiencing more rapid expansion in its higher-margin business-to-business and enterprise segments.

For the three-month period ended March 31, 2025, Priority’s revenue increased 9.2% year over year. The company has benefited from operating leverage improvement, higher interest income, and lower costs to service its unified commerce platform.

S&P Global Ratings-adjusted EBITDA margins reached 19.9% for the trailing 12 months ended March 31, improving 90 basis points from the same period last year.

With revenue and margin improvements boosting EBITDA, S&P Global Ratings-adjusted debt to EBITDA for the trailing 12 months ended March 31 was 5.3x, down from 6.2x in the same period last year.

For full-year 2025, S&P projects approximately 10% revenue growth and margin expansion of about 110 basis points, which should reduce leverage to around 4.9x by year-end.

S&P views Priority’s in-market transaction as leverage neutral. The company plans to use a portion of the transaction proceeds to pay off contingent considerations, which S&P treats as debt. Priority will also acquire a partner independent sales organization that S&P believes will be accretive to EBITDA.

Cash flow is expected to benefit from a lower interest rate environment and improving spreads on new debt, leading to a projected total interest expense of about $85 million for 2025, down approximately $15 million from last year, despite a modest increase of about $65 million in debt.

As the company continues to expand EBITDA while capital expenditure remains moderate at $20-25 million, S&P expects free operating cash flow (FOCF) of about $100 million, up from $56 million in 2024, leading to FOCF to debt of 10% versus 6.1% previously.

S&P could raise its rating on Priority if leverage continues to decline and the company’s financial policy supports leverage sustained below 5x.

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