Usio Q4 2024 Earnings Report

Usio EPS Results

• Actual EPS: $0.02
• Consensus EPS: $0.01
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: N/A

Usio Revenue Results

• Actual Revenue: $20.56 million
• Expected Revenue: $21.10 million
• Beat/Miss: Missed by -$536.00 thousand
• YoY Revenue Growth: N/A

Usio Announcement Details

• Quarter: Q4 2024
• Date: 3/26/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, March 26, 2025
• Conference Call Time: 4:30PM ET

Usio (NASDAQ:USIO), together with its subsidiaries, provides integrated electronic payment processing services to merchants and businesses in the United States. The company offers various types of automated clearing house (ACH) processing; and credit, prepaid card, and debit card-based processing services. Its ACH transaction processing services include Represented Check and Check Conversion for electronic payment facilitation. In addition, the company offers merchant account services for the processing of card-based transactions through the VISA, MasterCard, American Express, Discover, and JCB networks, including online terminal services accessed through a website or retail services accessed through a physical terminal. Further, it provides a proprietary web-based customer service application that allows companies to process one-time and recurring payments through e-checks or credit cards; and an interactive voice response telephone system to companies, which accept payments directly from consumers over the telephone using e-checks or credit cards. Additionally, the company offers prepaid and incentive card issuance services; and operates a prepaid core processing platform, as well as provides additional services, such as electronic bill presentment, document composition, document decomposition, and printing and mailing services for various industry verticals, including utilities and financial institutions. It markets and sells ACH products and services primarily through resellers; and prepaid card program directly to government entities, corporations, and to consumers through the internet. The company was formerly known as Payment Data Systems, Inc. and changed its name to Usio, Inc. in June 2019. Usio, Inc. was incorporated in 1998 and is headquartered in San Antonio, Texas.

Usio Q4 2024 Earnings Call Transcript

Key Takeaways

• In Q4, revenue (ex-interest) rose 3% with improved margins, flat expenses, and a GAAP net income of $0.6 M ($0.02/share), marking the third straight positive quarter.
• Total processing volumes hit a record $1.9 B in Q4 (+36% YoY) and $7.1 B for FY24 (+33%), generating $2.9 M of operating cash flow, raising cash to over $8 M and enabling $1.5 M of stock buybacks with a new $4 M repurchase authorization.
• The launch of UCO ONE will unify all products under one brand with a single sales, IT, risk, compliance and support organization, featuring a universal onboarding application, AI-driven fraud protection and a proprietary checkout tool to drive cross-selling.
• Card and PayFac processing accelerated, with Q4 card dollars up 15% and transactions up 34%, while PayFac volumes soared 44% to represent 54% of card activity, supported by 15 new ISV programs in the implementation pipeline.
• All key business units showed robust growth: ACH transaction volume surged 34% (dollars processed +44%), output solutions grew electronic document processing by 86%, and prepaid card load volumes exceeded $100 M per quarter, up 35% for the year.

Presentation

[Operator]

Hello, and welcome to the UCO's Fourth Quarter and Fiscal Year End twenty twenty four Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please also note today's event is being recorded. Now, I'd like to turn the conference call over to your host, Paul Manley. Please go ahead, sir.

[Paul Manley, SVP, IR at Usio]

Thank you, operator, and thank you, everyone, for joining our call today. Welcome to UCO's fourth quarter and fiscal year end twenty twenty four conference call. The earnings release, which we issued today after the market close, is available on our website at uco.com under the Investor Relations tab. On this call with me today are Louis Hoch, our Chairman and CEO and Greg Carter, Executive Vice President of Payment Acceptance and our newly appointed Chief Revenue Officer. Michael White, Senior Vice President and Chief Accounting Officer Gerry Uffner, Head of Card Issuing and our Chief Product Officer, Houston Frost, will be available during the question and answer session.

[Paul Manley, SVP, IR at Usio]

Let me remind our listeners that certain statements made during the call today constitute forward looking statements made pursuant to the Safe Harbor provisions of the Private Securities and Litigation Act of 1995 as amended and as more fully discussed in our press release and in our filings with the SEC. Let me start off the call today with some highlights from this afternoon's release. As expected, our fourth quarter performance was consistent with our third quarter. Excluding interest income inputted to each of our business units, total revenue was up 3% for the quarter with growth in each card, ACH and output solutions. Margins were up sequentially from the third quarter, primarily attributed to productivity and efficiency enhancements in both card and output solutions.

[Paul Manley, SVP, IR at Usio]

Expenses were relatively flat and we reported GAAP net income of $600,000 or $0.02 per share, which included a $1,500,000 ERC benefit. This was our third consecutive quarter of positive GAAP net income. All of our electronic transaction processing businesses grew leading to another quarter of record total dollars processed, which exceeded $1,900,000,000 in the fourth quarter, a 36% increase from a year ago. And for the full year 2024, total dollars processed were up a very strong 33% to a record $7,100,000,000 We also continue to generate positive cash flow and in 2024 we generated $2,900,000 of operating cash flow including over $900,000 in the fourth quarter. We used some cash to repurchase stock during the year including nearly $500,000 in the fourth quarter alone.

[Paul Manley, SVP, IR at Usio]

And in the year, we repurchased nearly $1,500,000 of stock. Even with these purchases and a modest year over year increase in capital expenditures, our cash position rose to over $8,000,000 at year end and we expect cash to increase again this year. Louis will talk more about this and what it means about our confidence in our strategy as well as the new share repurchase authorization the Board approved as we announced today. This was a solid conclusion to a year we aggressively pursued new stable and recurring revenue to replace nearly $12,100,000 in annualized revenue, which we lost from our large COVID incentive program, which expired earlier this year. We are also committed to improving profitability through better margins and operating leverage, as well as continuing to fund operations through positive cash flow.

[Paul Manley, SVP, IR at Usio]

All of this progress puts us in a very solid position for 2025. At this time, I'd like to turn the call over to Louis Hoch.

[Louis Hoch, Chairman and CEO at Usio]

Thank you, Paul, and welcome, everyone. As I reflect on last quarter, I've come to realize that our real story is not only in the current financial results. The real story is in the increasing strength of our organization, the steady improvement in our financial condition, and most importantly, the unique capabilities we have both in terms of innovative technology behind our products and solutions, as well as an organization that is uniquely positioned with a portfolio of diversified electronic payment solutions. Consequently, it should come as no surprise today that I'm happy to announce a new initiative that leverages our competitive strengths to further unlock UCO's full potential and value. And we call it UCO ONE.

[Louis Hoch, Chairman and CEO at Usio]

UCO ONE will unite and integrate all of our products, services and resources under one brand. This will enable us to better leverage our innovative technology and extensive capabilities to gain an increasing share of our customers electronic payment spend. Instead of individually selling ACH card or prepaid, we will now be selling UCO as a comprehensive solutions provider that offers a multitude of products and services to meet a wide range of customers' needs. Our unified brand will make it easier for customers to understand our value proposition and will be supported by seamless sales support and onboarding process. One UCL brand with one unified IT team, one risk and compliance team, one sales team, one support team and one marketing team.

[Louis Hoch, Chairman and CEO at Usio]

Already, UCO1 initiative has developed a new client onboarding system that has a single universal application that can be used across all of our product platforms. This should improve cross selling success by making it easier for an existing client to add additional UCO products. For instance, although we have many card issuing clients that do funds disbursing, only four of them use UCO for ACH. Another UCO ONE initiative will shortly launch as a proprietary checkout page tool, which will enable merchants to upload and send invoices. There are other new initiatives underway to complement and capitalize on UCO1.

[Louis Hoch, Chairman and CEO at Usio]

For example, we have consolidated our risk and compliance teams and are adopting AI for processes like fraud protection, improving marketing and sales efficiency, as well as increasing our own efficiency and productivity. As example, we are using AI driven analysis as a means to improve merchant conversion rates. In addition, one of my personal goals is to test a biometrics AI driven application by the end of this year. As one of my first actions implementing this new initiative, I've named Greg Carter to newly created position of Chief Revenue Officer. All of our sales and marketing resources are now under Greg's direction and his job will be get us pointed in the same direction.

[Louis Hoch, Chairman and CEO at Usio]

I'm very excited to get this new initiative underway and I'm even more pleased to have Greg leading it. So now I will turn the call over to Greg.

[Greg Carter, EVP, Payment Acceptance at Usio]

Thank you, Louis, and good afternoon, everyone. Card remains on its growth trajectory led by PayFac. Total card processing dollars were up 15% and transactions processed were up 34% in the quarter, leading to a record full year processing volume of over $1,500,000,000 an increase of 10% from fiscal twenty twenty three. Again, card remains focused on growing our PayFac business where dollars processed were up 44% in the quarter leading to another quarter of outstanding PayFac growth with revenue up 29%. For the full year, PayFac volume was up 28% so that you can see the acceleration in PayFac growth over the course of the year.

[Greg Carter, EVP, Payment Acceptance at Usio]

As cards growth engine, PayFac now accounts for approximately 54% of total card activity. Our success continues to reflect our growing scale economies as the increase in new ISV programs naturally leads to more new implementations. We are enjoying success signing new ISV agreements and this has benefited from our new marketing initiatives, especially digital. The steady flow of new accounts has enabled us to greatly offset the variability in our performance previously resulting from the timing of implementations. Now, even if some ISVs delay implementation, there are sufficient deals in hands that we are always undertaking new implementations, a great path to rapid growth.

[Greg Carter, EVP, Payment Acceptance at Usio]

So for instance, as of today, we have 15 new ISVs that are in various stages of implementation, which is consistent from this time a year ago. This year has been an all time high, so I can safely say CARD will grow nicely again in 2025. PracticeSuite, which I have mentioned before, as well as another ISV that caters to associations and is strong in the legal vertical are two clients where we have developed strong relationships that are helping power growth. These are prime examples of how UCO can land and expand as these ISVs are now adding our ACH capability as another payment option for their merchants. Our second growth engine, the boarding of the ISV merchants is also benefiting from increased scale.

[Greg Carter, EVP, Payment Acceptance at Usio]

Before concluding my remarks, I want to thank Louis for his confidence in appointing me as UCO's Chief Revenue Officer. I just recently attended a conference where I met with some of our clients that were using one of our solutions. I was somewhat surprised to learn they were not familiar with our other capabilities. Now with UCO1, as we speak with a single collective voice and work as one cohesive unit, there is tremendous opportunity to better leverage our various capabilities both on the front and the back end. I think we can all also hold ourselves to a higher standard.

[Greg Carter, EVP, Payment Acceptance at Usio]

As I've said many times, UCO is the industry's best kept secret. I'm excited to continue to build on this very solid foundation and to lead the UCO1 sales and business development efforts to accelerate growth. Now, I'd like to turn the call back to Louis.

[Louis Hoch, Chairman and CEO at Usio]

Thanks, Greg. Now that Paul and Greg have done a good job in reviewing many of the high level results for the quarter, let me just add a few additional thoughts. ACH and complementary services are now in full growth mode and has quickly returned to being one of our best performing products. For the three months ending 12/31/2024, ACH electronic transactions volumes were up 34%. Its fifth consecutive quarter of growth, while return checks transactions processed was up 27% and electronic check dollars process was up 44%.

[Louis Hoch, Chairman and CEO at Usio]

And for the year, electronic check transaction volume was up 18%, while return check transaction processed was up 17%, and the electronic check dollars processed was up 42%. Clearly, you can see how growth accelerated in the fourth quarter. As I mentioned last quarter, ACH has been one of the first beneficiaries of our integrated sales and marketing approach with increased transactions volumes from cross selling adding to our growth rate in the quarter. Our goal is to achieve the same kind of synergy across the entire organization from the implementation of the UCO1. Output Solutions followed up its rebound in the third quarter with even stronger growth.

[Louis Hoch, Chairman and CEO at Usio]

The electronic documents processed were up 86%, while total pieces mailed exceeded $5,400,000 electronic only documents delivered exceeded $20,000,000 in the quarter. Consequently, output had a record year with electronic documents processed and delivered more than doubling, while electronic only documents processed and delivered exceeded $80,000,000 This increasing proportion of electronic documents processing and delivery is an important driver as electronic documents are more profitable than print and mail. So not only does Output continue to add more of its bread and butter utility, financial institutions and governmental entities clients to its roster, adding to its growing base of recurring revenues, they're also simultaneously increasing the amount of electronic document delivery clients. At the same time, last year, investing in new equipment has enabled output to grow revenues while concurrently reducing costs. This combination of higher margin revenue and reduced costs is showing up in significant profit improvement.

[Louis Hoch, Chairman and CEO at Usio]

Card issuing made tremendous progress in 2024, backfilling much of the roughly $12,100,000 1 time revenue recognized in 2023 from the expired COVID incentive programs. Card Issuing added nearly 70 new client partner agreements with a focus on longer duration clients, so that there is now more volume arising from reoccurring revenue. Many of our larger client partners are implementing general purpose reloadable gift, healthcare and funds distribution programs. In addition, we implemented over 75 new card programs in 2024. Consequently, for the sixth consecutive quarter, prepaid dollars loaded in the quarter were over $100,000,000 with transactions processed up 36% and purchase volume up 7%.

[Louis Hoch, Chairman and CEO at Usio]

With a strong finish prepaid card load volume was up 35% for the year and transaction volume was up 45% and purchase volume was up 26%. Both total dollars loaded and purchase volume were all time yearly records. And through a number of new initiatives, card issuings margins continue to improve. Before concluding today's remarks, I'm pleased to announce that the Board of Directors of UCO has approved a new share repurchase program, adding another $4,000,000 to the original authorization and allowing the company to purchase shares in the open market, private transactions and through other avenues. We made significant progress in 2024 and we believe it will lead to further growth in 2025 with organic revenue expected to increase 14% to 16% with steady improvement in our bottom line and financial position.

[Louis Hoch, Chairman and CEO at Usio]

I'm particularly excited about our new UCO1 initiative and the Board shares our confidence authorizing an increase in the extension of our share repurchase agreement. We appreciate your support as we continue to build value for our shareholders. And with that, I'd like to turn the call back to the operator to conduct our question and answer session.

[Operator]

Our first question today comes from Scott Buck from H. C. Wainwright. Please go ahead with your question.

[Scott Buck, Managing Director & Senior Technology Analyst at H.C. Wainwright & Co., LLC]

Hi, good afternoon guys. Thanks for taking my call questions. I guess, Louis, the first question I have is on the guide. Curious what your visibility looks like through 2025 and how should we think about revenue cadence through the year? Do we build to a stronger second half or is the strength kind of spread throughout the year?

[Louis Hoch, Chairman and CEO at Usio]

It's definitely unloaded as these implementations start to come live. And our visibility for 2025 has changed a little bit, but we're still expecting great growth.

[Scott Buck, Managing Director & Senior Technology Analyst at H.C. Wainwright & Co., LLC]

Great. And are we relying on a single or maybe two large customers to meet that 14% to 16% growth or is it more widespread?

[Louis Hoch, Chairman and CEO at Usio]

Widespread.

[Scott Buck, Managing Director & Senior Technology Analyst at H.C. Wainwright & Co., LLC]

Perfect. Thank you. And then second one, just on the repurchase authorization, how are you prioritizing repurchases versus reinvestment in the business or even potentially imminent?

[Louis Hoch, Chairman and CEO at Usio]

Yes. Well, repurchases, we're authorized to do up to $4,000,000 The Board has given us that. And we will be making purchases in the market if the market conditions allow for that. And we're always looking at M and A deals and we're just very picky on who we acquire. So we continue to generate cash and we could put that cash to work in many different ways and M and A is one of them.

[Scott Buck, Managing Director & Senior Technology Analyst at H.C. Wainwright & Co., LLC]

Great. And then last question for me. Just curious if you guys are seeing any change in your kind of sales conversations with maybe local or state governments, just given the change in the administration at the federal level?

[Greg Carter, EVP, Payment Acceptance at Usio]

From a PayFac side, not really not affected, but from the potential in the disbursement space, I think that might open some doors. But nothing I mean, nothing that we can really comment on now.

[Scott Buck, Managing Director & Senior Technology Analyst at H.C. Wainwright & Co., LLC]

Okay. I appreciate that. Thanks for the added color guys.

[Louis Hoch, Chairman and CEO at Usio]

Thanks Scott.

[Greg Carter, EVP, Payment Acceptance at Usio]

Thanks Scott.

[Scott Buck, Managing Director & Senior Technology Analyst at H.C. Wainwright & Co., LLC]

Thank you very much.

[Operator]

And ladies and gentlemen, ensuring no additional questions, we'll be ending today's question and answer session as well as today's presentation. We do thank everyone for joining. Please have a pleasant day. You may now disconnect your lines.

Participants

Executives

• Paul Manley, SVP, IR
• Louis Hoch, Chairman and CEO
• Greg Carter, EVP, Payment Acceptance

Analysts

• Scott Buck, Managing Director & Senior Technology Analyst at H.C. Wainwright & Co., LLC