Usio Q4 2024 Earnings Results & Report

Usio EPS Results

• Actual EPS: $0.02
• Consensus EPS: $0.01
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: N/A
• EPS Beat Rate: 3 of last 8 quarters

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 (NASDAQ:USIO), Inc. is a financial technology company that provides electronic payment processing services to businesses and other organizations. Its offerings include credit and debit card processing, automated clearing house (ACH) and other electronic bank payments, and prepaid card programs.

The company’s payment platform serves merchants, billers, payment facilitators, software providers and organizations seeking to accept or send electronic payments. Usio is based in San Antonio, Texas, and primarily serves customers in the United States.

Usio was formerly known as Payment Data Systems and adopted the Usio name in 2020, reflecting its broader focus on payment technology and services.

Usio Q4 2024 Earnings Call Transcript

Key Takeaways

• In Q4, revenue (ex‐interest) rose 3%, margins improved sequentially, and the company posted its third consecutive quarter of positive GAAP net income of $0.02 per share on record total transaction volume (up 36% to $1.9 billion).
• The new UCO ONE initiative will unify all products and teams under one brand, introduce a single onboarding application and AI‐driven tools, and aims to boost cross‐selling and operational efficiency.
• Card processing remained a growth engine, with total card dollar volume up 15% and PayFac segment volume surging 44% in the quarter (now representing 54% of card activity).
• ACH and Output Solutions saw accelerated growth, with ACH electronic transaction volume up 34% in Q4 and Output electronic document processing up 86%, driving higher‐margin recurring revenue.
• Operating cash flow totaled $2.9 million in 2024 (including $0.9 million in Q4), ending the year with over $8 million in cash and a new $4 million share repurchase authorization to support shareholder value.

Presentation

[Operator]

Hello, and welcome to Usio's fourth quarter and fiscal year-end 2024 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 of Investor Relations at Usio]

Thank you, Operator, and thank you, everyone, for joining our call today. Welcome to Usio's fourth quarter and fiscal year-end 2024 conference call. The earnings release, which we issued today after the market closed, is available on our website at usio.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; Jerry Uffner, Head of Card Issuing; and our Chief Product Officer, Houston Frost, will be available during the question-and-answer session.

[Paul Manley, SVP of Investor Relations 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 Litigation Reform 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 imputed 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. Expenses were relatively flat, and we reported GAAP net income of $600,000 or 2 cents per share, which included a $1.5 million ERC benefit.

[Paul Manley, SVP of Investor Relations at Usio]

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 $1.9 billion in the fourth quarter, a 36% increase from a year ago. For the full year 2024, total dollars processed were up a very strong 33% to a record $7.1 billion. We also continue to generate positive cash flow, and in 2024, we generated $2.9 million 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. In the year, we repurchased nearly $1.5 million of stock. Even with these purchases and a modest year-over-year increase in capital expenditures, our cash position rose to over $8 million at year-end, and we expect cash to increase again this year.

[Paul Manley, SVP of Investor Relations at Usio]

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 it today. This was a solid conclusion to a year we aggressively pursued new stable and recurring revenue to replace nearly $12.1 million 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. 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, Founder, 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 Usio's full potential and value, and we call it Usio One. Usio One will unite and integrate all of our products, services, and resources under one brand.

[Louis Hoch, Founder, Chairman, and CEO at Usio]

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 Usio 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 a seamless sales support and onboarding process. One Usio brand with one unified IT team, one risk and compliance team, one sales team, one support team, and one marketing team. Already, Usio One Initiative has developed a new client onboarding system that has a single universal application that can be used across all of our product platforms.

[Louis Hoch, Founder, Chairman, and CEO at Usio]

This should improve cross-selling success by making it easier for an existing client to add additional Usio products. For instance, although we have many card-issuing clients that do funds disbursing, only four of them use Usio for ACH. Another Usio One initiative will shortly launch 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 Usio One. 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 an 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.

[Louis Hoch, Founder, Chairman, and CEO at Usio]

As one of my first actions implementing this new initiative, I've named Greg Carter to the newly created position of Chief Revenue Officer. All of our sales and marketing resources are now under Greg's direction, and his job will begin us pointed in the same direction. I'm very excited to get this new initiative underway, and I'm even more pleased to have Greg leading it. I will now turn the call over to Greg.

[Greg Carter, EVP, Payment Acceptance, and Chief Revenue Officer 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 $1.5 billion, an increase of 10% from fiscal 2023. 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. As Card's 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.

[Greg Carter, EVP, Payment Acceptance, and Chief Revenue Officer at Usio]

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 hand so we are always undertaking new implementations, a great path to rapid growth. 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.

[Greg Carter, EVP, Payment Acceptance, and Chief Revenue Officer at Usio]

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 Usio 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. Before concluding my remarks, I want to thank Louis for his confidence in appointing me as Usio'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.

[Greg Carter, EVP, Payment Acceptance, and Chief Revenue Officer at Usio]

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

[Louis Hoch, Founder, 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 have quickly returned to being one of our best-performing products. For the three months ending December 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 processed was up 44%. 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.

[Louis Hoch, Founder, Chairman, and CEO at Usio]

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 Usio One. Output Solutions followed up its rebound in third quarter with even stronger growth. The electronic documents processed were up 86%, while total pieces mailed exceeded 5.4 million. Electronic-only documents delivered exceeded 20 million 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 million. This increasing proportion of electronic documents processing and delivery is an important driver, as electronic documents are more profitable than print and mail.

[Louis Hoch, Founder, Chairman, and CEO at Usio]

Not only does Output Solutions 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 are also simultaneously increasing the amount of electronic document delivery clients. At the same time, last year, investing in new equipment has enabled Output Solutions to grow revenues while concurrently reducing costs. This combination of higher margin revenue and reduced costs is showing up in significant profit improvement. Card Issuing made tremendous progress in 2024, backfilling much of the roughly $12.1 million one-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 recurring revenue. Many of our larger client partners are implementing general-purpose reloadable gift healthcare and funds distribution programs.

[Louis Hoch, Founder, Chairman, and CEO at Usio]

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 million, with transactions processed up 36% and purchase volume up 7%. 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. Through a number of new initiatives, Card issuing's margins continue to improve. Before concluding today's remarks, I'm pleased to announce that the Board of Directors of Usio has approved a new share repurchase program, adding another $4 million to the original authorization and allowing the company to purchase shares in the open market, private transactions, and through other avenues.

[Louis Hoch, Founder, Chairman, and CEO at Usio]

We made significant progress in 2024, and we believe it will lead to further growth in 2025, with organic revenue expected to increase 14%-16%, with steady improvement in our bottom line and financial position. I'm particularly excited about our new Usio One Initiative, and the Board shares our confidence authorizing an increase and extension of our share repurchase agreement. We appreciate your support as we continue to build value for our shareholders. I would like to turn the call back to the operator to conduct our question-and-answer session.

[Operator]

Ladies and gentlemen, at this time, we'll begin that question-and-answer session. To ask a question, please press Star and then One to join the question queue. To withdraw your questions, you may press Star and Two. Once again, that is Star and then One to join the question queue. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Our first question today comes from Scott Buck from H.C. Wainwright. Please go ahead with your question.

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

Hi, good afternoon, guys. Thanks for taking my 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, Founder, Chairman, and CEO at Usio]

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

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

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

[Louis Hoch, Founder, Chairman, and CEO at Usio]

Widespread.

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

Perfect. Thank you. The second one, just on the repurchase authorization, how are you prioritizing repurchases versus reinvestment in the business or even potentially M&A?

[Louis Hoch, Founder, Chairman, and CEO at Usio]

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

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

Great. 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, and Chief Revenue Officer at Usio]

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

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

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

[Louis Hoch, Founder, Chairman, and CEO at Usio]

Thanks, Scott.

[Greg Carter, EVP, Payment Acceptance, and Chief Revenue Officer at Usio]

Thanks, Scott.

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

Thank you very much.

[Operator]

Ladies and gentlemen, ensuring no additional questions, we will 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 line.

Participants

Executives

• Paul Manley, SVP of Investor Relations
• Greg Carter, EVP, Payment Acceptance, and Chief Revenue Officer
• Louis Hoch, Founder, Chairman, and CEO

Analysts

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