Priority Technology Holdings PRTH Form 10-Q filing Q2 FY2026

Commonly Used or Defined Terms

Priority Technology Holdings, Inc.

Unaudited Consolidated Balance Sheets

(in thousands, except share data)

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

See Notes to Unaudited Consolidated Financial Statements.

Priority Technology Holdings, Inc.

Unaudited Consolidated Statements of Operations and Comprehensive Income

(in thousands, except per share data)

See Notes to Unaudited Consolidated Financial Statements.

Priority Technology Holdings, Inc.
Unaudited Consolidated Statements of Changes in Stockholders' Deficit and Non-Controlling Interest
(in thousands)

Priority Technology Holdings, Inc.
Unaudited Consolidated Statements of Changes in Stockholders' Deficit and Non-Controlling Interest
(in thousands)

See Notes to Unaudited Consolidated Financial Statements.

Priority Technology Holdings, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)

Priority Technology Holdings, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)

See Notes to Unaudited Consolidated Financial Statements.

Priority Technology Holdings, Inc.

Notes to Unaudited Consolidated Financial Statements

1. Basis of Presentation and Significant Accounting Policies

Business, Consolidation and Presentation

Priority Technology Holdings, Inc. and its consolidated subsidiaries are referred to herein collectively as "Priority Commerce," the "Company," "we," "our" or "us," unless the context requires otherwise. Priority Commerce delivers payments and banking solutions that power connected commerce. Through a unified platform of payables, merchant services, and banking and treasury, Priority Commerce helps businesses manage money more effectively and unlock growth. The Priority Commerce Engine accelerates cash flow, improves working capital, reduces costs, and creates new revenue opportunities.

The Company operates on a calendar year ending each December 31 and reports quarterly results on four calendar quarters ending on March 31, June 30, September 30 and December 31 of each year. Results of operations reported for interim periods are not necessarily indicative of results for the entire year.

The accompanying Unaudited Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. These Unaudited Consolidated Financial Statements have been prepared in accordance with GAAP for interim financial information pursuant to the rules and regulations of the SEC. The Consolidated Balance Sheet as of December 31, 2025 was derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 but does not include all disclosures required by GAAP for annual consolidated financial statements.

NCI represents the equity interest in certain consolidated entities in which the Company owns less than 100% of the profit interests. Changes in the Company's ownership interest while the Company retains its controlling interest are accounted for as equity transactions. As of June 30, 2026, there was no income attributable to NCI in accordance with the applicable operating agreements.

In the opinion of the Company's management, all known adjustments necessary for a fair presentation of the Unaudited Consolidated Financial Statements for interim periods have been made. These adjustments consist of normal recurring accruals and estimates that affect the carrying amounts of assets and liabilities. These Unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025.

Certain amounts from prior periods have been reclassified to conform to the current period’s presentation. The effect of these reclassifications on our Company’s previously reported consolidated financial statements was not material.

Segment Renaming

During the year ended December 31, 2025, the Company renamed its segments to align with the services offered. SMB Payments was renamed to Merchant Solutions, B2B Payments was renamed to Payables and Enterprise Payments was renamed to Treasury Solutions. There was no other change to the segments, see further information at Note 14. Segment Information.

Use of Estimates

The preparation of Unaudited Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Unaudited Consolidated Financial Statements and the reported amounts of revenues and expenses during the reported period. Actual results could materially differ from those estimates.

Foreign Currency

The Company's reporting currency is the U.S. dollar. The functional currency of the Indian subsidiary of the Company is the Indian Rupee. The functional currency of the Canadian subsidiaries of the Company is the Canadian Dollar. Accordingly, assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the current exchange rate on the last day of

the reporting period. Revenues and expenses are translated using the average exchange rate in effect during the reporting period. Translation adjustments are reported as a component of accumulated other comprehensive income.

Allowance for Expected Losses

A reconciliation of the beginning and ending amount of allowance for expected losses is as follows:

The Company has elected not to measure expected losses for accrued interest on notes receivable but instead recognize losses for accrued interest within the period losses are determined to be uncollectible.

Recently Adopted Accounting Standards

Measurement of Credit Losses for Accounts Receivable and Contract Assets ASU 2025-05

In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326) ("ASU 2025-05") providing a practical expedient when estimating expected credit losses which assumes current conditions as of the balance sheet date do not change for the remaining life of the accounts receivable and contract asset. The ASU is effective for fiscal years beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Adoption of this standard did not have any material impact on results of operations, financial position, cash flows or disclosures.

Recently Issued Accounting Standards Pending Adoption

Disaggregation of Income Statement Expenses ASU 2024-03

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) ("ASU 2024-03") requiring additional disaggregated disclosures in the notes to financial statements for certain categories of expenses that are included on the face of the income statement. The ASU is effective for fiscal years beginning after December 15, 2026 and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company will adopt this guidance for the year ended December 31, 2027. This guidance is expected to only impact the disclosures with no impact on the results of operations, financial position or cash flows.

Accounting for Internal-Use Software ASU 2025-06,

In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40) ("ASU 2025-06") for targeted improvements to the accounting for internal-use software. The amendment updates guidance to consider different methods of software development, updating the requirements for capitalization of software costs. This ASU is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements.

Interim Reporting ASU 2025-11

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270) ("ASU 2025-11") provides clarity about the current requirements for a comprehensive list of interim disclosures and also requires the Company to disclose events since the end of the last annual reporting period which have a material impact on the Company. This ASU is effective for interim

reporting periods within annual reporting periods beginning after December 15, 2027 and early adoption is permitted. The Company is currently evaluating the impact this ASU will have on its interim consolidated financial statements and disclosures.

2. Acquisitions

Acquisitions that occurred in prior years

Payslate

On January 21, 2025, Priority Commerce’s wholly owned subsidiary, Priority Canada Acquisition Company, Inc., acquired 100% of the equity interest in Payslate Inc. (Canada), and its subsidiary Rentmoola Payment Solutions Ltd (United Kingdom) (jointly referred as "Letus business"). The Letus business is engaged in processing of rent payments for property management companies in the United States and Canada. The acquisition offers synergy opportunities to the Company's Treasury Solutions rent payment business and expand Priority Commerce's services in Canada. The acquisition was accounted for under the acquisition method of accounting in accordance with ASC 805, Business Combinations. The total purchase consideration was $8.8 million, consisting of $4.4 million in cash consideration funded by the Company’s cash flows, deferred consideration of $4.3 million and contingent consideration of $0.1 million.

The deferred consideration of $4.3 million was recorded at the fair value on the acquisition date. The deferred consideration is paid monthly equal to 40% of gross profit under the agreement and total payments will not exceed $6.5 million. Any amount remaining but unpaid will be paid in full by January 21, 2030. The Company continues to accrete interest expense on the deferred consideration throughout the period.

The final purchase price allocation is set forth in the table below:

(1) Cash at closing net of adjustments from estimated net working capital to actual working capital.

(2) The fair value of the deferred consideration was determined utilizing a Monte Carlo simulation. The payments were calculated based on the path for the simulated metrics and the contractual terms of the deferred consideration payments

and were discounted to present value at a rate reflecting a risk associated with the payoffs. The fair value was estimated to be the average present value of the deferred consideration payments over all iterations of the simulation.

(3) The contingent consideration represents the fair value of the share of net operating loss carryforwards owed to the seller in the future.

(4) Includes deferred tax asset of $3.8 million which has a full valuation allowance.

Goodwill of $6.1 million arising from the acquisition primarily consists of the expected synergies and other benefits from combining operations. There was no goodwill deductible for income tax purposes. The goodwill was 100% allocated to the Company's Treasury Solutions reportable segment.

Sila

On August 26, 2025, Priority Commerce's wholly owned subsidiary, Priority Tech Ventures, LLC, through its merger subsidiary, acquired total outstanding shares including all voting interests in Sila Inc. ("the "Sila business" or "Sila"). Sila is a payment platform that enables ACH transfers, instant settlement, digital wallets and built-in compliance through a simple application programming interface. Technology acquired in this transaction supplements Priority Commerce's Treasury Solutions reportable segment. The acquisition was accounted for under the acquisition method of accounting in accordance with ASC 805, Business Combinations. The total purchase consideration was $7.2 million, consisting of $3.4 million in cash consideration funded by the Company's cash flows, and contingent consideration of $3.9 million for contractual earn-outs and additional contingent consideration. Earn-outs will be paid as a percentage of gross profit when certain thresholds are met and additional contingent considerations will be paid based on utilization of the seller's carryforward tax losses. The purchase price is considered preliminary pending finalization of customary adjustments from timing differences.

The contingent consideration for the contractual earn-outs was recorded at the fair value of $3.9 million on the acquisition date. The contingent consideration will be paid quarterly subject to terms and conditions noted within the agreement over a period of seven years and total payments will not exceed $17.0 million.

The preliminary purchase price allocation is set forth in the table below:

(1) Cash at closing net of adjustments from estimated net working capital and closing cash.

(2) The fair value of the contingent consideration was determined utilizing a Monte Carlo simulation. The payments were calculated based on the path for the simulated metrics and the contractual terms of the contingent consideration

payments and were discounted to present value at a rate reflecting a risk associated with the payoffs. The fair value was estimated to be the average present value of the contingent consideration payments over all iterations of the simulation. The contingent consideration represents the fair value of the contractual earn-outs and the share of net operating loss carryforwards owed to the seller in the future.

(3) Includes a deferred tax asset of $9.5 million.

(4) During the fourth quarter of 2025, the Company recorded measurement period adjustments due to additional information received that existed on the acquisition date.

The fair value of acquired assets and assumed liabilities exceeded the consideration paid, resulting in a bargain purchase gain. The Company reviewed its acquisition accounting methods, confirmed all assets and liabilities were properly identified, and ensured measurements reflected all consideration as of the closing date. The gain was primarily due to recognizing a deferred tax asset recorded in accordance with ASC 740 related to Sila's historical net operating losses. The bargain purchase gain is recorded in other income, net, in the Unaudited Consolidated Statements of Operations and Comprehensive Income.

DMS (doing business as Priority Commerce Automotive)

On October 1, 2025, Priority Commerce's subsidiary, Priority DMS, LLC, entered into the asset purchase and contribution agreement with DMSJV, LLC ("DMS"), to acquire substantially all of the assets of DMS. DMS provides credit card processing solutions to automotive dealerships via marketing and selling card and ACH processing services and ancillary services including POS systems, payment gateways, payment processing and authorization, clearing, and settlement for credit card, debit and ACH transactions, which supplements the Company's services within the Merchant Solutions reportable segment. The acquisition was accounted for under the acquisition method of accounting in accordance with ASC 805, Business Combinations. The total purchase consideration was $57.9 million, consisting of $31.5 million in cash consideration funded by the Company's term loan facility, deferred consideration of $2.8 million, contingent consideration of $17.1 million for contractual earn-outs and $6.6 million in non-voting subsidiary shares issued to the sellers. Earn-outs will be paid as a percentage of gross profit when certain thresholds are met. The purchase price is considered preliminary pending finalization of customary adjustments from timing differences.

The contingent consideration for the contractual earn-outs was recorded at the fair value of $17.1 million on the acquisition date. The contingent consideration will be paid when an initial cumulative threshold for gross profit is met, subject to terms and conditions noted within the agreement, over a period of at least four years and total payments will not exceed $22.5 million.

The preliminary purchase price allocation is set forth in the table below:

(1) The deferred consideration represents the fair value of the amount to be remitted upon direction of the seller no later than four years from the acquisition date.

(2) The fair value of the contingent consideration was determined utilizing a Monte Carlo simulation. The payments were calculated based on the path for the simulated metrics and the contractual terms of the deferred consideration payments and were discounted to present value at a rate reflecting a risk associated with the payoffs. The fair value was estimated to be the average present value of the contingent consideration payments over all iterations of the simulation.

(3) The fair value determination for the Class B units utilized an option pricing model. The seller may request to convert 50% of the Class B Units to shares in the Company no later than five years from the acquisition date.

Goodwill of $34.2 million arising from the acquisition primarily consists of the expected synergies and other benefits from combining operations. There was no goodwill deductible for income tax purposes. The goodwill was 100% allocated to the Company's Merchant Solutions reportable segment.

Other Acquisitions

Boom Commerce

On August 18, 2025, Priority Boom, LLC, a subsidiary of Priority Commerce, completed its acquisition of certain residual portfolio rights for a purchase price of $73.5 million in cash, $13.5 million in Common shares of Priority Commerce and earn-out payments not to exceed $17.0 million based on meeting certain thresholds over a three-year period from the date of acquisition. The transaction did not meet the definition of a business; therefore, it was accounted for as an asset purchase under which the cost of the acquisition was allocated to the acquired assets based on relative fair values. As an asset purchase, additional purchase price (in the form of earn-outs) is accounted for when payment to the seller becomes payable and is added to the carrying value of the asset, as long as it does not meet the definition of a derivative.

3. Revenues

Disaggregation of Revenues

Total revenues include contracts with an original duration of one year or less and variable consideration under a stand-ready series of distinct days of service. The aggregate fixed consideration portion of customer contracts with an initial contract duration greater than one year is not material.

The following table presents a disaggregation of our consolidated revenues by segment:

(1) Approximately $15.4 million of interest income on customer funds is included in outsourced services and other services revenue in the table above and approximately $1.4 million of interest income on corporate funds is included in other income, net on the Company's Unaudited Consolidated Statements of Operations and Comprehensive Income and is not reflected in the table above for the there months ended June 30, 2026.

(1) Approximately $30.2 million of interest income on customer funds is included in outsourced services and other services revenue in the table above and approximately $2.4 million of interest income on corporate funds is included in other income, net on the Company's Unaudited Consolidated Statements of Operations and Comprehensive Income and is not reflected in the table above for the six months ended June 30, 2026.

(1) Approximately $14.1 million of interest income on customer funds is included in outsourced services and other services revenue in the table above and approximately $1.0 million of interest income on corporate funds is included in other income, net on the Company's Unaudited Consolidated Statements of Operations and Comprehensive Income and is not reflected in the table above for the three months ended June 30, 2025.

(1) Approximately $26.7 million of interest income on customer funds is included in outsourced services and other services revenue in the table above and approximately $2.1 million of interest income on corporate funds is included in other income, net on the Company's Unaudited Consolidated Statements of Operations and Comprehensive Income and is not reflected in the table above for the six months ended June 30, 2025.

4. Settlement Assets and Obligations

Settlement assets and obligations include, 1) funds due from merchants arising from settlement of funds for sales and credits between card issuers, merchants, 2) card settlement funds due from networks due to timing and its related obligations, and 3) Customer/Subscriber account balances and related obligations resulting from licensed money transmitter services.

Card settlements due from merchants, net

The merchant solution services of the Company include settlement of funds for sales and credits between card issuers, card networks and merchants. The standards of the card networks require possession of funds during the settlement process by a member bank which controls the clearing transactions. Since settlement funds are required to be in the possession of a member bank until merchants are funded, these funds are not assets of the Company, and the associated obligations are not liabilities of the Company. Therefore, neither is recognized in the Company's Unaudited Consolidated Balance Sheets.

Exception items that the Company is still attempting to collect from the merchants through the funds settlement process or merchant reserves are recognized as settlement assets in the Company's Unaudited Consolidated Balance Sheets, with an offsetting reserve for those amounts the Company estimates it will not be able to recover. Exception items that the Company has deemed uncollectible are recorded as merchant losses, a component of cost of revenue in the Company's Unaudited Consolidated Statements of Operations and Comprehensive Income. Expenses for merchant losses, net of recoveries for the three and six months ended June 30, 2026 were $2.2 million and $5.5 million, respectively. Expenses for merchant losses were $0.2 million and $1.9 million for the three and six months ended June 30, 2025, respectively.

Card settlements due from networks and Dues to Customers’ Payees

As part of the Payables service offering:

• Priority Commerce accepts card payments for its customers and processes disbursements to their vendors (customers’ payees). The time lag between authorization and settlement of card transactions creates certain receivables (from card networks) and payables (to the vendors of customers). These receivables and payables arise from the settlement activities that the Company performs on behalf of its customers and therefore, are presented as settlement assets and related obligations.
• Priority Commerce processes payments to the customers’ payees wherein customers funds are received either in Company-owned bank accounts controlled by the Company or bank-owned FBO accounts controlled by the banks, until such time that the transactions are settled with the customers’ payees. Balances in the bank-owned FBO accounts and related obligations are not considered assets and obligations of the Company. Therefore, neither is recognized in the Company's Unaudited Consolidated Balance Sheets. Amounts due to customers’ payees that are held in Company-owned bank accounts are included in restricted cash in the Company's Unaudited Consolidated Balance Sheets and related obligations are presented as due to customers’ payees.

MTL Customer cash and cash equivalents (restricted in nature), short-term investments and MTL Customer account obligations

The Company provides treasury solutions to its customers either through its money transmission licenses in 46 states, the District of Columbia, and 2 territories of the United States or through agency relationships with banks. These services include the acceptance and disbursement of funds. While waiting for disbursement, these funds are held in bank accounts maintained by the Company on behalf of its customers. Per the money transmission regulations, the Company is allowed to invest available balances in these accounts in certain permitted investments, and returns on such investments contribute to the Company's net cash inflows. As such, the Company recognized these balances and related obligations on its balance sheet. Considering these balances are payable on demand and are related to settlement activities, they are presented as settlement assets (as part of the current assets) and the related obligations as settlement obligations (as part of the current liabilities) in the Company's Unaudited Consolidated Balance Sheets. The nature of these MTL Customer cash and cash equivalent are restricted in nature and therefore these balances are presented as restricted cash on the Company's Unaudited Consolidated Statements of Cash Flows. The MTL Short-term investments are included within other investing activities on the Company's Unaudited Consolidated Statements of Cash Flows.

The Company's consolidated settlement assets and obligations were as follows:

(1) Allowance for estimated losses were $5.5 million and $7.1 million as of June 30, 2026 and December 31, 2025, respectively.

(2) Excludes merchant funds held at member banks of $117.3 million and $103.9 million on June 30, 2026 and December 31, 2025, respectively.

(3) Excludes funds held under agency arrangement with member banks, balances remain under the control of the member banks (therefore not the assets or obligations of the Company). Agency owned accounts held $58.0 million and $50.3 million at June 30, 2026 and December 31, 2025, respectively.

(4) Includes $15.6 million and $16.1 million as of June 30, 2026 and December 31, 2025, respectively, of card settlements due from networks and the remainder is included in restricted cash on our Unaudited Consolidated Balance Sheets.

(5) Excludes amounts due to customer payees that are held in bank-owned FBO accounts which are not assets of the Company, and the associated obligations are not liabilities of the Company. Therefore, neither is recognized in the Company's Unaudited Consolidated Balance Sheets. Bank-owned FBO accounts held funds of $144.5 million and $151.8 million at June 30, 2026 and December 31, 2025, respectively.

5. Notes Receivable

The Company had notes receivable of $22.7 million and $19.7 million as of June 30, 2026 and December 31, 2025, respectively, which are reported as current portion of notes receivable and notes receivable less current portion on the Company's Unaudited Consolidated Balance Sheets. The notes receivable carried weighted-average interest rates of 12.3% and 13.6% as of June 30, 2026 and December 31, 2025, respectively. The notes are receivables from ISOs and ISVs, which are made with a term of 1-5 years. Under the terms of the agreements, the advances are secured by residual payments due to the ISOs and ISVs and apply such residuals against future payment due to the Company. As of June 30, 2026 and December 31, 2025, there were no allowance for expected losses on notes receivable.

The following table provides a reconciliation for activity within the notes receivable as of June 30, 2026:

As of June 30, 2026, the principal payments for the Company's notes receivable are due as follows:

6. Property, Equipment and Software

A summary of property, equipment and software, net was as follows:

Computer software represents purchased software and internally developed software that is used to provide the Company's services to its customers.

Fully depreciated assets are retained in property, equipment and software, net, until removed from service. No fully depreciated assets were removed from service during the three months ended June 30, 2026. Certain fully depreciated assets were removed from service during the six months ended June 30, 2026 and three and six months ended ended June 30, 2025.

7. Goodwill and Intangible Assets

Goodwill

The Company's goodwill relates to the following reportable segments:

The following table summarizes the changes in the carrying value of goodwill:

As of June 30, 2026, the Company is not aware of any triggering events for impairment that have occurred since the last annual impairment test.

Intangible Assets

Intangible assets consisted of the following:

(1) These assets have an indefinite useful life.

(1) These assets have an indefinite useful life.

(1) Included in amortization expense is $0.6 million and $1.2 million for the three and six months ended June 30, 2026, respectively, and $0.6 million and $1.2 million for the three and six months ended June 30, 2025 respectively, related to the amortization of certain contract acquisition costs.

As of June 30, 2026, there were no impairment indicators present.

8. Debt Obligations

Outstanding debt obligations consisted of the following:

Interest Expense and Amortization of Deferred Loan Costs and Discounts

Deferred financing costs and debt discounts are amortized using the effective interest method over the remaining term of the respective debt and are recorded as a component of interest expense. Unamortized deferred financing costs and debt discounts are included in long-term debt on the Company's Unaudited Consolidated Balance Sheets.

Interest expense for outstanding debt, including fees for undrawn amounts and amortization of deferred financing costs and debt discounts was as follows:

(1) Included in interest expense is $0.3 million and $0.7 million related to the accretion of deferred consideration from acquisitions for the three and six months ended ended June 30, 2026, respectively, and $1.0 million and $2.0 million for the three and six months ended ended June 30, 2025, respectively.

(2) Interest expense included amortization of deferred financing costs and debt discounts of $0.4 million and $0.9 million for the three and six months ended ended June 30, 2026, respectively, and $0.5 million and $0.9 million for the three and six months ended June 30, 2025, respectively.

Debt Covenants

The 2024 Credit Agreement contains representations and warranties, financial and collateral requirements, mandatory payment events, events of default and affirmative and negative covenants, including without limitation, covenants that restrict among other things, the ability to create liens, pay dividends or distribute assets from the loan parties to the Company, merge or consolidate, dispose of assets, incur additional indebtedness, make certain investments or acquisitions, enter into certain transactions (including with affiliates) and to enter into certain leases.

If the aggregate principal amount of outstanding revolving loans and letters of credit under the 2024 Credit Agreement exceeds 35% of the total revolving credit facility thereunder, the Company is required to comply with certain restrictions on its Total Net Leverage Ratio. If applicable, the maximum permitted Total Net Leverage Ratio is: 1) 6.90:1.00 at each fiscal quarter ended September 30, 2025 through March 31, 2026; 2) 6.40:1.00 at each fiscal quarter ended June 30, 2026 and each fiscal quarter thereafter.

The Residual Finance Credit Facility contains customary representations and warranties, financial and collateral requirements, mandatory payment events, events of default and affirmative and negative covenants, including without limitation, covenants that restrict among other things, the ability to create liens, pay dividends or distribute assets from the loan parties to the Company, merge or consolidate, dispose of assets, incur additional indebtedness, make certain investments or acquisitions, and enter into certain transactions (including with affiliates).

The Residual Finance Credit Facility requires the Company to comply with certain restrictions including minimum liquidity of $2.0 million, minimum tangible net worth of $5.0 million, maximum default ratio of 2.5%, maximum delinquency ratio of 5.0%, and a minimum excess spread ratio of 1.00 to 1.00.

9. Income Taxes

The Company's consolidated effective income tax rate for the three and six months ended June 30, 2026 was 27.7% and 27.4%, respectively, compared to a consolidated effective income tax rate of 28.9% and 25.8% for the three and six months ended June 30, 2025, respectively. The effective rates differed from the statutory rate of 21.0% primarily due to certain forecasted nondeductible expenses.

Valuation Allowance for Deferred Income Tax Assets

The Company considers all available positive and negative evidence to determine whether sufficient taxable income will be generated in the future to permit realization of the existing deferred tax assets. In accordance with the provisions of ASC 740, Income Taxes, the Company is required to provide a valuation allowance against deferred income tax assets when it is "more likely than not" that some portion or all of the deferred tax assets will not be realized.

Based on management's assessment, as of June 30, 2026, the Company continues to record a full valuation allowance against certain transaction costs, and net deferred tax assets acquired as part of the Payslate acquisition. The Company will continue to evaluate the realizability of the net deferred tax asset on a quarterly basis and, as a result, the valuation allowance may change in future periods.

10. Stockholders' Deficit

The Company is authorized to issue 100,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. As of June 30, 2026 and December 31, 2025, the Company has not issued any shares of preferred stock.

Share Repurchase Program

In 2022, Priority Commerce's Board of Directors authorized a general share repurchase program under which the Company may purchase up to 2,000,000 shares of its outstanding Common Stock for a total of up to $10.0 million. Under the terms of this plan, the Company may purchase shares through open market purchases, unsolicited or solicited privately negotiated transactions, or in another manner so long as it complies with applicable rules and regulations. The Company has purchased 1,309,374 shares for $5.8 million under this plan. On May 5, 2025, the Company's Board of Directors amended the program to increase the authorization to 5,000,000 shares of its outstanding common stock for a total of $40.0 million. There have been no shares repurchased under this plan since the year ended December 31, 2022.

11. Stock-based Compensation

Stock-based compensation expense, which is included in salary and employee benefits within the Unaudited Consolidated Statements of Operations and Comprehensive Income, was as follows:

Income tax expense for stock-based compensation was immaterial for the three and six months ended June 30, 2026. Income tax benefit for stock-based compensation was $0.1 million and $0.8 million, respectively, for the three and six months ended June 30, 2025. No stock-based compensation has been capitalized in any period presented. Awards granted during the three and six months ended June 30, 2026 and 2025, were not material.

2018 Plan

The Company's 2018 Plan initially provided for the issuance of up to 6,685,696 shares of the Company's Common Stock. On March 17, 2022, and February 5, 2026, the Company's Board of Directors unanimously approved amendments to the 2018 Plan which was subsequently approved by our shareholders to increase the numbers of shares authorized for issuance under the plan by 2,500,000 and 8,000,000 shares respectively, resulting in 17,185,696 shares of the Company's Common Stock authorized for issuance under the plan.

As of June 30, 2026, the Company had 9,224,615 shares available for issuance under the 2018 Plan.

2021 Employee Stock Purchase Plan

The 2021 Employee Stock Purchase Plan ("ESPP") provides for up to 200,000 shares to be purchased under the plan. Shares issued under the plan may be authorized but unissued or reacquired shares of Common Stock. All non-executive employees based in the United States who work more than 20 hours per week and have been employed by the Company for at least 30 days may participate in the ESPP.

Under the ESPP, participants are offered, on the first day of the offering period, the option to purchase shares of Common Stock at a discount on the last day of the offering period. The offering period shall be for a period of three months and the first offering period began on January 10, 2022. The ESPP provides eligible employees the opportunity to purchase shares of the Company's Common stock at 95% of the lesser of the fair value on the first and last trading day of each offering period. The ESPP was amended by shareholder approval on June 13, 2025, to increase the number of shares available by 200,000.

As of June 30, 2026, the Company had 156,437 shares available for issuance under the 2021 Stock Purchase Plan.

Non-voting Incentive Units

The Company issued non-voting incentive units to certain employees and partners in seven subsidiaries. These non-voting incentive units were determined to be equity and are accounted for under ASC 718, Compensation - Stock Compensation. The non-voting incentive units are either fully vested when granted, or vest according to the service period and/or performance measure noted in the grant agreement. As the non-voting incentive units are vested, they are recognized as NCI to the Company, who is the majority owner of the subsidiaries.

12. Commitments and Contingencies

Minimum Annual Commitments with Third-party Processors

The Company has multi-year agreements with third parties to provide certain payment processing services to the Company. The Company pays processing fees under these agreements that are based on the volume and dollar amounts of processed payment transactions. Some of these agreements have minimum annual requirements for processing volumes. Based on existing contracts in place at June 30, 2026, the Company is committed to pay minimum processing fees under these agreements as noted below:

Other Commitments

As of June 30, 2026 and December 31, 2025, the Company had a capital contribution commitment of $1.4 million and $3.2 million respectively, to fund operations of certain subsidiaries. The Company is obligated to make the contributions within 10 business days of receiving notice for such contribution from the subsidiary.

Sponsorship Commitments

The Company entered into various sponsorship agreements with sports and entertainment organizations in exchange for certain advertisement opportunities.The Company committed to paying the amounts in the table below:

Contingent/Deferred Consideration

The following table provides a reconciliation of the beginning and ending balance of the Company's deferred and contingent consideration liabilities related to completed business acquisitions:

Earn-outs/additional considerations from asset purchase transactions are considered as contingent liabilities until it becomes payable or paid. As of June 30, 2026, and December 31, 2025, the total contingent liabilities related to our asset purchases are $27.2 million.

Legal Proceedings

The Company is involved in certain legal proceedings and claims which arise in the ordinary course of business. In the opinion of the Company and based on consultations with internal and external counsel, the results of any of these matters, individually and in the aggregate, are not expected to have a material effect on the Company's results of operations, financial condition or cash flows. As more information becomes available, and the Company determines that an unfavorable outcome is probable on a claim and that the amount of probable loss that the Company will incur on that claim is reasonably estimable, the Company will record an accrued expense for the claim in question. If and when the Company records such an accrual, it could be material and could adversely impact the Company's results of operations, financial condition and cash flows.

Concentration of Risks

The Company's revenue is substantially derived from processing Visa and Mastercard bankcard transactions. Because the Company is not a member bank, to process these bankcard transactions, the Company maintains sponsorship agreements with member banks which require, among other things, that the Company abide by the by-laws and regulations of the card association.

A majority of the Company's cash and restricted cash is held in certain FIs, substantially all of which is in excess of FDIC limits. The Company does not believe it is exposed to any significant credit risk from these transactions.

13. Fair Value

Fair Value Disclosures

The Company's contingent and deferred considerations were derived from business combinations occurring during the year ended December 31, 2025 (refer to Note 2. Acquisitions). The contingent considerations are classified within Level 3 of the fair value hierarchy due to the uncertainty of the fair value measurement created by the absence of quoted market prices, the inherent lack of liquidity and unobservable inputs used to measure fair value which require judgment. The Company uses valuation techniques including Monte Carlo simulations to estimate fair value based on projection period and assumed growth rates. A change in inputs in the valuation techniques used might result in a significantly higher or lower fair value measurement than what is reported. Contingent and deferred consideration liabilities are uncertain due to the utilization of unobservable inputs and management's judgment in determining the likelihood of achieving criteria required by the respective agreements. The contingent and deferred considerations have a fair value of $28.9 million at June 30, 2026, $1.2 million included in accounts payable and accrued expenses and $27.7 million included in other noncurrent liabilities on the Company's Unaudited Consolidated Balance Sheets.

Notes Receivable

Notes receivable are carried at amortized cost. Substantially all of the Company's notes receivable are secured, and the Company provides for allowances when it believes that certain notes receivable may not be collectible. The carrying value of the Company's notes receivable, net, approximates fair value and was approximately $22.7 million and $19.7 million at June 30, 2026 and December 31, 2025, respectively and is within Level 3 of the fair value hierarchy.

Investment in Unconsolidated Entities

The Company's investment in unconsolidated entities are carried at cost minus any impairment, if any. The carrying value of the investments approximate fair value and was $10.1 million and $8.6 million at June 30, 2026 and December 31, 2025, respectively, within other noncurrent assets on the Company's Unaudited Consolidated Balance Sheets. The investments in unconsolidated entities are within Level 3 of the fair value hierarchy.

Debt Obligations

Outstanding debt obligations (see Note 8. Debt Obligations) are reflected in the Company's Unaudited Consolidated Balance Sheets at carrying value since the Company did not elect to remeasure debt obligations to fair value at the end of each reporting period.

The fair value of the term facility under the 2024 Credit Agreement was estimated to be $1,004.7 million and $998.3 million at June 30, 2026 and December 31, 2025, respectively. The fair value was estimated using binding and non-binding quoted prices in an active secondary market, which considers the credit risk and market related conditions, and is within Level 2 of the fair value hierarchy.

During the three and six months ended June 30, 2026, there were no transfers into, out of, or between levels of the fair value hierarchy.

Long term incentive award

The Company has established a long-term incentive award for the Chief Executive Officer, which is subject to specified performance conditions. Upon satisfaction of these performance criteria, the Chief Executive Officer becomes entitled to a predetermined amount of incentive compensation, which may be settled either in cash or in shares of the Company's Common Stock. Consequently, this arrangement is accounted for as a liability award in accordance with applicable accounting standards. The fair value of these awards is remeasured at each reporting date utilizing Level 3 inputs, which encompass management's estimates regarding the anticipated achievement of relevant financial metrics. The fair value of these awards as of June 30, 2026 was $2.8 million, $1.6 million included in accounts payable and accrued expenses and $1.2 million in other noncurrent liabilities on the Company's Unaudited Consolidated Balance Sheets.

14. Segment Information

The Company's three reportable segments included Merchant Solutions, Payables and Treasury Solutions:

• Merchant Solutions: Provides full-service acquiring and payment-enabled solutions for B2C transactions, leveraging Priority Commerce's proprietary software platform, distributed through ISO, direct sales and vertically focused ISV channels.
• Payables: Provides market-leading AP automation solutions to corporations, software partners and industry leading FIs in addition to improving cash flows by providing instant access to working capital.
• Treasury Solutions: Provides embedded finance and treasury solutions to customers to modernize legacy platforms and accelerate software partners' strategies to monetize payments.

Corporate items includes costs of corporate functions and shared services not allocated to our reportable segments.

The Company's chief operating decision makers ("CODM") are our CEO and CFO. The CODM uses adjusted earnings before interest, income tax, depreciation and amortization expenses ("Adjusted EBITDA") as the measure of segment profit or loss to allocate resources. Adjusted EBITDA represents EBITDA (i.e. earnings before interest, income tax, depreciation and amortization expenses) adjusted for certain non-cash costs, such as stock-based compensation and the write-off of the carrying value of investments or other assets, as well as debt extinguishment and modification expenses and other expenses and income items considered non-recurring, such as acquisition integration expenses, certain professional fees, and litigation settlements.

Segment level assets information is not provided or subject to review by the CODM and therefore not provided.

Information on reportable segments and reconciliations to income before income taxes are as follows:

(1) The significant expense categories and amounts align with the segment level information regularly provided to the CODM.

(2) Other operating expenses including salary and employee benefits, and selling, general and administrative expenses.

(3) Other segment items for each reportable segment include other income, net, and stock-based compensation expense.

(4) Adjustment for corporate items include:

(5) Other items include other income net, stock-based compensation expense, and selling general and administrative (non-recurring expense).

(1) The significant expense categories and amounts align with the segment level information regularly provided to the CODM.

(2) Other operating expenses including salary and employee benefits, and selling, general and administrative expenses.

(3) Other segment items for each reportable segment include other income, net, and stock-based compensation expense.

(4) Adjustment for corporate items include:

(5) Other items include other income net, stock-based compensation expense, and selling general and administrative (non-recurring expense).

(1) The significant expense categories and amounts align with the segment level information regularly provided to the CODM.

(2) Other operating expenses including salary and employee benefits, and selling, general and administrative expenses.

(3) Other segment items for each reportable segment include other income, net, and stock-based compensation expense.

(4) Adjustment for corporate items include:

(5) Other items include other income net, stock-based compensation expense, and selling general and administrative (non-recurring expense).

(1) The significant expense categories and amounts align with the segment level information regularly provided to the CODM.

(2) Other operating expenses including salary and employee benefits, and selling, general and administrative expenses.

(3) Other segment items for each reportable segment include other income, net, and stock-based compensation expense.

(4) Adjustment for corporate items include:

(5) Other items include other income net, stock-based compensation expense, and selling general and administrative (non-recurring expense).

15. Earnings per Common Share

The following tables set forth the computation of the Company's basic and diluted earnings per common share:

Anti-dilutive securities that were excluded from the Company's earnings per common share are as follows:

(1) Granted under the 2018 Plan.

16. Subsequent Events

The Company’s management evaluated subsequent events through the date of the issuance of the unaudited consolidated financial statements. There have been no subsequent events that occurred during such period that would require disclosure in, or would be required to be recognized in the unaudited consolidated financial statements as of and for the quarter ended June 30, 2026.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Audited Consolidated Financial Statements and related Notes and the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025. Certain amounts in this section may not add mathematically due to rounding.

Results of Operations

This section includes certain components of our results of operations for the three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025. We have derived this data, except the key indicators, from our Unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q and our Audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2025.

Revenues

For the three months ended June 30, 2026, our consolidated revenue of $262.3 million increased by $22.4 million, or 9.4%, from $239.8 million for the three months ended June 30, 2025. This overall increase was mainly driven by increase in total card processing dollar value which was partially offset by lower total card transaction count in our Merchant Solutions segment, increases in buyer funded card processing dollar value, and supplier funded issuing dollar value which was partially offset by lower ACH transactions count in our Payables Segment, and, an increase in number of billed clients and higher interest income which is partially offset by lower new enrollments in our Treasury Solutions segment.

For the six months ended June 30, 2026, our consolidated revenue of $511.8 million increased by $47.4 million, or 10.2%, from $464.4 million for the six months ended June 30, 2025. This overall increase was mainly driven by increase in total card processing dollar value in our Merchant Solutions segment, increases in buyer funded card processing dollar value, supplier funded issuing dollar value, incentive income, and ACH transactions count in our Payables Segment, and, an increase in number of billed clients and higher interest income which was partially offset by lower new enrollments in our Treasury Solutions segment.

The following table presents our revenues by type:

Merchant card fees

Merchant card fees revenue for the three months ended June 30, 2026, was $199.1 million an increase of $18.6 million or 10.3%, from $180.5 million for the three months ended June 30, 2025. The increase was primarily driven by an increase in total card dollar value which was partially offset by lower total card transaction count processed by the Company.

Merchant card fees revenue for the six months ended June 30, 2026, was $385.0 million an increase of $37.5 million or 10.8%, from $347.6 million for the six months ended June 30, 2025. The increase was primarily driven by an increase in total card dollar value.

Money transmission services

Money transmission services for the three months ended June 30, 2026, was $42.0 million, an increase of $2.7 million, or 6.9%, from $39.3 million for the three months ended June 30, 2025. This increase was primarily driven by an increase in average billed clients which was partially offset by lower new customer enrollments.

Money transmission services for the six months ended June 30, 2026, was $83.7 million, an increase of $7.0 million, or 9.1%, from $76.7 million for the six months ended June 30, 2025. This increase was primarily driven by an increase in average billed clients which was partially offset by lower new customer enrollments.

Outsourced services and other services revenue

Outsourced services and other services revenue of $18.9 million for the three months ended June 30, 2026, increased by $2.0 million, or 11.9%, from $16.9 million for the three months ended June 30, 2025, primarily due to growth in interest income from higher balances of permissible investments driven by higher account balances offset by reduction in interest rates.

Outsourced services and other services revenue of $38.7 million for the six months ended June 30, 2026, increased by $4.8 million, or 14.3%, from $33.9 million for the six months ended June 30, 2025, primarily due to growth in interest income from higher balances of permissible investments driven by higher account balances offset by reduction in interest rates.

Equipment

Equipment revenue of $2.3 million for the three months ended June 30, 2026, decreased by $0.9 million, or 27.6% from $3.2 million for the three months ended June 30, 2025. The decrease was primarily due to lower point-of-sale equipment sales caused by a decrease in demand from merchants.

Equipment revenue of $4.4 million for the six months ended June 30, 2026, decreased by $1.9 million, or 30.7% from $6.3 million for the six months ended June 30, 2025. The decrease was primarily due to lower point-of-sale equipment sales caused by a decrease in demand from merchants.

Operating expenses were as follows:

Cost of revenue (excludes depreciation and amortization)

Cost of revenue (excludes depreciation and amortization) of $162.4 million for the three months ended June 30, 2026, increased by $15.0 million, or 10.1%, from $147.4 million for the three months ended June 30, 2025, primarily due to the corresponding increase in revenues.

Cost of revenue (excludes depreciation and amortization) of $313.1 million for the six months ended June 30, 2026, increased by $28.4 million, or 10.0%, from $284.8 million for the six months ended June 30, 2025, primarily due to the corresponding increase in revenues.

Salary and employee benefits

Salary and employee benefits expense of $29.2 million for the three months ended June 30, 2026, increased by $2.1 million, or 7.7%, from $27.1 million for the three months ended June 30, 2025, primarily due to merit increases, and increased headcount to support overall growth of the Company and from the acquisition related activity.

Salary and employee benefits expense of $57.7 million for the six months ended June 30, 2026, increased by $4.8 million, or 9.2%, from $52.8 million for the six months ended June 30, 2025, primarily due to merit increases, and increased headcount to support overall growth of the Company and from the acquisition related activity.

Depreciation and amortization expense

Depreciation and amortization expense of $20.9 million for the three months ended June 30, 2026, increased by $6.8 million, or 48.3%, from $14.1 million for the three months ended June 30, 2025, primarily due to the addition of intangible assets from the acquisition related activity and software capitalization.

Depreciation and amortization expense of $38.5 million for the six months ended June 30, 2026, increased by $10.6 million, or 38.2%, from $27.9 million for the six months ended June 30, 2025, primarily due to the addition of intangible assets from the acquisition related activity and software capitalization.

Selling, general and administrative

Selling, general and administrative expenses of $16.8 million for the three months ended June 30, 2026, increased by $2.9 million, or 20.8%, from $13.9 million for the three months ended June 30, 2025, primarily due to increase in legal fees related to the Company's on-going special committee process, and increased marketing, telecommunications and software expenses to support overall growth and cloud migration, which was partially offset by decreased accounting expenses.

Selling, general and administrative expenses of $36.1 million for the six months ended June 30, 2026, increased by $7.0 million, or 24.3%, from $29.0 million for the six months ended June 30, 2025, primarily due to increase in professional and legal charges related to the Company's on-going special committee process, increased marketing, telecommunications and

software expenses to support overall growth and cloud migration, expenses related to acquired businesses and assets, which was partially offset by decreased accounting expenses.

Other Expense, net

Other expense, net were as follows:

Interest expense

Interest expense of $21.1 million for the three months ended June 30, 2026, decreased by $2.0 million, or 8.7%, from $23.1 million for the three months ended June 30, 2025, due to decreased SOFR rates and beneficial changes in margin from the recent refinancing which was partially offset by increased outstanding balances of the 2024 Credit Agreement and the Residual Finance Credit Facility established during the quarter ended September 30, 2025.

Interest expense of $42.1 million for the six months ended June 30, 2026, decreased by $4.2 million, or 9.0%, from $46.2 million for the six months ended June 30, 2025, due to decreased SOFR rates and beneficial changes in margin from the recent refinancing which was partially offset by increased outstanding balances of the 2024 Credit Agreement and the Residual Finance Credit Facility established during the quarter ended September 30, 2025.

Income tax expense

Income tax expense was as follows:

We compute our interim period income tax expense by using a forecasted EAETR and adjust for any discrete items arising during the interim period and any changes in our projected full-year business interest expense and taxable income. The EAETR for 2026 is 27.7% and includes the income tax provision on pre-tax income. The effective tax rate for 2026 changed primarily due to a year over year change in the discrete tax benefit associated with stock-based compensation vestings.

Our consolidated effective income tax rates differ from the statutory rate due to timing and permanent differences between amounts calculated under GAAP and the U.S. tax code. The consolidated effective income tax rate for 2026 may not be indicative of our effective tax rate for future periods.

Segment Results

The CODM's review of segment performance and allocation of resources are based on Adjusted EBITDA (a non-GAAP financial measure). Adjusted EBITDA at each segment level includes revenues of the segment, less costs of revenue (excluding

depreciation and amortization) and operating expenses that are directly related those revenues. Operating overhead and shared costs are managed centrally and included in corporate segment.

This non-GAAP financial measure helps to illustrate the underlying financial and business trends relating to results of operations of the Company and therefore used as a measure of segment profit or loss for the purposes of evaluation of segment performance and allocation of resources.

Merchant Solutions

Revenues

Revenue from our Merchant Solutions segment was $175.8 million for the three months ended June 30, 2026, compared to $163.2 million for the three months ended June 30, 2025. The increase of $12.5 million, or 7.7%, was primarily driven by acquisition related activity, an increase in merchant card fee rate, and increased total card processing dollar value which was partially offset by a decrease in total card transaction count. The Company's merchant card fee revenue from the Merchant Solutions segment ($171.9 million for three months ended June 30, 2026 and $158.8 million for the three months ended June 30, 2025) as a percentage of total card processing dollar value during the three months ended June 30, 2026 increased to 0.88% from 0.84% as compared to the three months ended June 30, 2025.

Revenue from our Merchant Solutions segment was $337.6 million for the six months ended June 30, 2026, compared to $314.9 million for the six months ended June 30, 2025. The increase of $22.6 million, or 7.2%, was primarily driven by acquisition related activity, an increase in merchant card fee rate, and increased total card processing dollar value. The Company's merchant card fee revenue from the Merchant Solutions segment ($330.4 million for six months ended June 30, 2026 and $306.3 million for the six months ended June 30, 2025) as a percentage of total card processing dollar value during the six months ended June 30, 2026 increased to 0.87% from 0.84% as compared to the six months ended June 30, 2025.

Adjusted EBITDA

Adjusted EBITDA from our Merchant Solutions segment was $30.9 million for the three months ended June 30, 2026, compared to $27.7 million for the three months ended June 30, 2025. The increase of $3.1 million, or 11.3% was primarily driven by an increase in revenue and the Boom Commerce acquisition, which was partially offset by mix related margin compression, and increase in other operating expenses.

Adjusted EBITDA from our Merchant Solutions segment was $58.6 million for the six months ended June 30, 2026, compared to $53.5 million for the six months ended June 30, 2025. The increase of $5.2 million, or 9.7% was primarily driven by an increase in revenue and the Boom Commerce acquisition, which was partially offset by mix related margin compression, and increase in other operating expenses.

Payables

Revenues

Revenue from our Payables segment was $30.4 million for the three months ended June 30, 2026, compared to $25.0 million for the three months ended June 30, 2025. The increase of $5.4 million, or 21.6% was primarily driven by increased buyer funded card processing dollar value, supplier funded issuing dollar value, and interest from higher account balances which was partially offset by a decrease in ACH transaction count.

Revenue from our Payables segment was $62.9 million for the six months ended June 30, 2026, compared to $49.0 million for the six months ended June 30, 2025. The increase of $13.9 million, or 28.4% was primarily driven by increased buyer funded card processing dollar value, certain incentive income, ACH transaction count, supplier funded issuing dollar value, and interest from higher account balances.

Adjusted EBITDA

Adjusted EBITDA from our Payables segment was $3.1 million for the three months ended June 30, 2026, compared to $3.8 million for the three months ended June 30, 2025.The decrease in Adjusted EBITDA of $0.7 million or 17.5% was contributed by $0.8 million in the buyer funded business, driven by mix related margin compression, which was partially offset by increased processing volume. The decrease in Adjusted EBITDA was partially offset by a $0.1 million increase in the supplier funded business, driven by increase in operating income.

Adjusted EBITDA from our Payables segment was $8.6 million for the six months ended June 30, 2026, compared to $7.3 million for the six months ended June 30, 2025.The increase in Adjusted EBITDA of $1.3 million or 17.5% was contributed by $2.3 million in the supplier funded business, driven by increase in revenues and operating income, which was partially offset by a decrease of $1.0 million in the buyer funded business, driven by mix related margin compression partially offset by increased processing volume.

Treasury Solutions

(1) This represents the average total account balance in the Treasury Solutions segment, and excludes the deposits maintained in the Merchant Solutions and Payables segments. The total account and deposit balances as of June 30, 2026 and 2025, were $1.8 billion and $1.4 billion, respectively.

Revenues

Revenue from our Treasury Solutions segment was $60.5 million for the three months ended June 30, 2026, compared to $52.7 million for the three months ended June 30, 2025. The increase of $7.9 million, or 14.9%, was primarily driven by an increase in average billed clients and average total account balances, the acquisition of Sila, and growth in interest income due to higher balances of permissible investments offset by a reduction in interest rates and decreased average monthly enrollments.

Revenue from our Treasury Solutions segment was $119.4 million for the six months ended June 30, 2026, compared to $102.7 million for the six months ended June 30, 2025. The increase of $16.6 million, or 16.2%, was primarily driven by an increase in average billed clients and average total account balances, the acquisition of Sila, and growth in interest income due to higher balances of permissible investments offset by a reduction in interest rates and decreased average monthly enrollments.

Adjusted EBITDA

Adjusted EBITDA from our Treasury Solutions segment was $47.5 million for the three months ended June 30, 2026, compared to $45.6 million for the three months ended June 30, 2025. The increase of $2.0 million, or 4.3%, was primarily driven by increases in revenues.

Adjusted EBITDA from our Treasury Solutions segment was $94.2 million for the six months ended June 30, 2026, compared to $88.0 million for the six months ended June 30, 2025. The increase of $6.2 million, or 7.0%, was primarily driven by increases in revenues.

Critical Accounting Policies and Estimates

Our Unaudited Consolidated Financial Statements have been prepared in accordance with GAAP for interim periods, which often require the judgment of management in the selection and application of certain accounting principles and methods. Our critical accounting policies and estimates are discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes to these critical accounting policies and estimates as of June 30, 2026.

Liquidity and Capital Resources

Liquidity and capital resource management is a process focused on providing the funding we need to meet our short-term and long-term cash and working capital needs. We have used our funding sources to build our merchant portfolio, for technology solutions and to make acquisitions with the expectation that such investments will generate cash flows sufficient to cover our working capital and other anticipated needs, including our acquisition strategy. We anticipate that cash on hand, funds generated from operations and available borrowings under our revolving credit facility are sufficient to meet our working capital requirements for at least the next 12 months.

Our principal uses of cash are to fund business operations and administrative costs, and to service our debt.

Our working capital, defined as current assets less current liabilities, was $151.8 million at June 30, 2026 and $76.7 million at June 30, 2025. As of June 30, 2026, we had cash totaling $120.3 million compared to $50.6 million at June 30, 2025. These cash balances do not include restricted cash of $17.4 million and $14.2 million at June 30, 2026 and June 30, 2025, respectively, which reflects cash accounts holding customer settlement funds, cash reserves for potential losses and other contractual restricted cash balances. The current portion of long-term debt included in current liabilities was $3.1 million and $4.3 million at June 30, 2026 and June 30, 2025, respectively. At June 30, 2026, we had availability of approximately $100.0 million under our revolving credit facility.

The following table and discussion reflect our changes in cash flows for the comparative six month periods.

Cash Provided by Operating Activities

Net cash provided by operating activities was $55.3 million for the six months ended June 30, 2026 compared to $27.1 million for the six months ended June 30, 2025. The $28.2 million increase was driven by an increase in net income and favorable non-cash adjustments and changes in the operating assets and liabilities.

Cash Used in Investing Activities

Net cash used in investing activities was $203.0 million for the six months ended June 30, 2026, compared to $21.1 million of cash used in investing activities for the six months ended June 30, 2025. For the six months ended June 30, 2026, investing activities included the $12.6 million additions to property, equipment and software, $3.0 million related to net funding of new loans to ISOs and ISVs, $185.0 million net short-term investments of MTL funds, and $2.4 million related to residual purchases and investments in unconsolidated entities. For the six months ended June 30, 2025, net cash used in investing activities included additions to property, equipment and software of $13.0 million, $1.4 million related to net funding of new loans to ISOs and ISVs, $4.5 million related to the acquisition of a business and $2.3 million investments in unconsolidated entities.

Cash Provided by Financing Activities

Net cash provided by financing activities was $83.2 million and $178.1 million for the six months ended June 30, 2026 and 2025, respectively. The net cash provided by financing activities for the six months ended June 30, 2026, included borrowings under the Residual Finance credit facility of $7.7 million and changes in the net obligations for funds held on the behalf of customers of $77.4 million, offset by $0.2 million of cash used for the repayment of the Residual Finance credit facility, $1.5 million of cash used to purchase shares withheld for taxes, and $0.1 million for a deferred consideration payment. The net cash used in financing activities for the six months ended June 30, 2025, included changes in the net obligations for funds held on the behalf of customers of $190.9 million and proceeds from the exercise of stock options of $0.3 million offset by $10.0 million of cash used for the unscheduled repayment of the term loan principal, $2.3 million of cash used to purchase shares withheld for taxes and $0.8 million for payments of deferred consideration.

Long-term Debt

As of June 30, 2026, we had outstanding debt obligations, including the current portion and unamortized debt discount of $1,062.9 million, compared to $1,055.4 million at December 31, 2025, resulting in an increase due to net borrowings from the Residual Finance credit facility. The debt balance at June 30, 2026 consisted of $1,020.0 million outstanding under the 2024 Credit Agreement's (as amended) term facility and $42.9 million under the Residual Finance Credit Facility's term facility offset by $15.1 million of unamortized debt discounts and issuance costs.

Minimum amortization of the 2024 Credit Agreement's term facility are equal quarterly installments in aggregate annual amounts equal to 1.0% of the original principal, with the balance paid upon maturity. The term facility matures on July 31, 2032 and the revolving credit facility matures on July 31, 2030.

The 2024 Credit Agreement and Residual Finance credit facility both contain representations and warranties, financial and collateral requirements, mandatory payment events, events of default and affirmative and negative covenants, including without limitation, covenants that restrict among other things, the ability to create liens, pay dividends or distribute assets from the loan parties to the Company, merge or consolidate, dispose of assets, incur additional indebtedness, make certain investments or acquisitions, enter into certain transactions (including with affiliates) and to enter into certain leases.

Effect of New Accounting Pronouncements and Recently Issued Accounting Pronouncements Not Yet Adopted

From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that may affect our current and/or future consolidated financial statements. See Note 1, Basis of Presentation and Significant Accounting Policies, to our Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, for a discussion of recently issued accounting pronouncements not yet adopted.

Item 3. Qualitative and Quantitative Disclosures about Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For quantitative and qualitative disclosures about market risk, see Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," of our Annual Report on Form 10-K for the year ended December 31, 2025. Our exposures to market risk have not changed materially since December 31, 2025.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, designed to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized or reported within the time periods specified in SEC rules and regulations and that such information is accumulated and communicated to our management, including our principal executive officer (CEO), our principal financial officer (CFO) and, as appropriate, to allow timely decisions regarding required disclosures.

Management, with the participation of the CEO and CFO, has evaluated the effectiveness of the Company's disclosure controls and procedures as of June 30, 2026. Based on that evaluation, the Company's CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of June 30, 2026.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company's internal control over financial reporting during the three months ended June 30, 2026, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in certain legal proceedings and claims, which arise in the ordinary course of business. In the opinion of the Company, based on consultations with internal and external counsel, the results of any of these ordinary course matters, individually and in the aggregate, are not expected to have a material effect on our results of operations, financial condition, or cash flows. As more information becomes available and we determine that an unfavorable outcome is probable on a claim and that the amount of probable loss that we will incur on that claim is reasonably estimable, we will record an accrued expense for the claim in question. If and when we record such an accrual, it could be material and could adversely impact our results of operations, financial condition and cash flows.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in our Annual Report under Part I, Item 1A "Risk Factors" because these risk factors may affect our operations and financial results. The risks described in the Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition and operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Issuer Purchases of Equity Securities

The Company's purchases of its Common Stock during the three months ended June 30, 2026 were as follows:

(1) Represents shares (in whole units) withheld to satisfy employees' tax withholding obligations related to the vesting of restricted stock awards, which was determined based on the fair market value on the day prior to the vesting date.

Item 3. Defaults Upon Senior Securities

N/A

Item 4. Mine Safety Disclosures

N/A

Item 5. Other Information

Rule 10b5-1 Director and Officer Trading Arrangements

On March 11, 2025, Sean Kiewiet, an officer of the Company as defined in Section 16 of the Exchange Act, adopted a Rule 10b5-1 trading arrangement as defined in Item 408(a) of the SEC's Regulation S-K.

Officer or Director Name and Title Action Plan Type Date Number of Shares to be sold Expiration

Sean Kiewiet, Chief Strategy Officer Adopted Rule 10b5-1 March 11, 2025 600,000 August 31, 2026

Item 6. Exhibits

• Filed herewith.

** Furnished herewith.

† Indicates exhibits that constitute management contracts or compensation plans or arrangements.