Usio Announces Second Quarter 2022 Financial Results

SAN ANTONIO--(BUSINESS WIRE)--Usio, Inc. (Nasdaq: USIO), a leading FinTech integrated payment solutions provider, today announced financial results for the second quarter, which ended June 30, 2022.

Louis Hoch, President and Chief Executive Officer of Usio, said, “I am pleased to report another quarter of revenue growth, our eighth consecutive quarter of year-over-year revenue growth. Revenue growth in the quarter was driven by new all-time quarterly records in credit card dollars and transactions processed, strong year-over-year growth in prepaid card volumes and transactions, as well as a double-digit increase in total transaction/pieces processed at Output Solutions. While up sequentially, ACH electronic check transactions and dollars processed in the quarter were down from last year’s record volumes, while returned check transactions in the quarter increased 39%. Results once again demonstrate the strength of our diversification strategy as we achieved growth despite weakness in one of our end markets, cryptocurrency."

"Based upon our strong year to date performance, our new business pipeline, and the prepaid card spoilage anticipated to be earned in the third and fourth quarters, offset by an anticipated 25 - 30% reduction in third quarter ACH transactions as compared to the same period in 2021, resulting from the loss of the Voyager ACH business, we are revising our expectations for full year 2022 revenue growth to 12% - 18%, conditioned on the continued enthusiasm in the fintech lending industry and favorable economic conditions. Our pipeline for ACH, like all our business lines is rich, and we believe we will be able to, over time, replace the lost revenue from Voyager through new sales. For instance, we are seeing an increase in consumer lending, which we believe could lead to as much as 50% growth in third quarter 2022 returned check transactions as compared to the same period in 2021. We expect that there are other similar opportunities, not only in ACH, but across our entire portfolio.”

"Revenues for the first three and six months of the year are up in each of our business lines except for ACH when compared to those periods last year. For the quarter, ACH was competing against an outsized year ago quarter when cryptocurrency activity was at its peak. Prepaid was our fastest growing business line for both the quarter and first half of the year on a percentage basis. We expect our strong relationships, growing number of programs served and cards in circulation to lead to continued growth over the second half of the year, as well as beginning to generate revenue from card spoilage. Output Solutions continues to outperform management's expectations. This business is benefitting from the synergies generated within the various Usio business lines, and is set to have another strong second half. Credit card revenues were up 5%, where we achieved record volumes primarily due to the growth of our PayFac business. The PayFac business has one of our strongest new business pipelines and has the potential to dramatically change its growth trajectory."

Over the past few months Usio has undertaken a number of strategic actions to strengthen the business and build shareholder value. During the second quarter the Board authorized a $4 million share repurchase program, and through June 30, 2022, we repurchased over 180,000 shares at a cost of approximately $450,000. In addition, we welcomed Michelle Miller to our Board of Directors, where she will serve as a member of the Company’s Audit and Compensation Committees and expand the size of the Board to six. We are pleased to welcome Mrs. Miller to the Board as we will benefit from her wealth of banking and business development experience as well as her vast knowledge that complements the skills of our existing Board members. With our strong balance sheet, aggressive marketing strategy, and growing reputation for outstanding service in all our business lines, we believe we have a plan in place that will enable us to achieve our growth objectives of continued year-over-year revenue growth.

Second Quarter 2022 Revenue Detail

Revenues for the quarter ended June 30, 2022, increased 6% to $16.2 million, reflecting growth in the Credit Card, Prepaid and Usio Output Solutions lines of business.

	Three Months Ended June 30, 2022
	2022		2021		$ Change			% Change
ACH and complementary service revenue	$	3,899,612	$	4,001,897	$	(102,285	)		(3	)%
Credit card revenue		6,885,697		6,558,076		327,621			5	%
Prepaid card services revenue		1,388,110		1,077,531		310,579			29	%
Output solutions revenue		4,042,267		3,595,637		446,630			12	%
Total Revenue	$	16,215,686	$	15,233,141	$	982,545			6	%

	Six Months Ended June 30, 2022
	2022		2021		$ Change		% Change
ACH and complementary service revenue	$	7,742,928	$	7,080,353	$	662,575		9	%
Credit card revenue		13,653,919	$	12,281,785		1,372,134		11	%
Prepaid card services revenue		4,156,557	$	1,964,107		2,192,450		112	%
Output solutions revenue		8,773,625		7,368,446		1,405,179		19	%
Total Revenue	$	34,327,029	$	28,694,691	$	5,632,338		20	%

Gross profits for the quarter were $3.3 million while gross margins were 20.1%. Margins reflect revenue mix in the quarter, primarily a slight decrease in our highest margin, ACH business, and an increase in the revenue from lower margin business lines.

Other selling, general and administrative expenses were $3.8 million for the quarter ended June 30, 2022, up 35% compared to $2.8 million in the prior year period. The increase reflects continued investments in our ACH, PayFac, Prepaid and Output Solutions business lines, a substantial portion of which represents an investment in strengthening our infrastructure to not only support our current growth, but specifically to assure we can provide the service levels in customer support for anticipated new cardholders and other clients. Beginning in the third quarter, we believe expenses should start to decrease due to a reduction in customer service and other prepaid services expenses attributable to the loss of any existing or anticipated Voyager card programs.

We reported an operating loss of $1.9 million for the quarter and an Adjusted EBITDA loss of $0.6 million in the quarter. We reported a net loss of $1.9 million, or ($0.10) per share, for the quarter ended June 30, 2022, compared to a net income of $0.2 million, or $0.01 per share, for the same period in the prior year. Contributions to this loss include increased revenue contribution from lower margin lines of business and continued investments to support our current growth, customer support service levels, security and IT infrastructure, as well as staffing and employee retention.

Adjusted Operating Cash Flows (excluding merchant reserve funds, prepaid card load assets, customer deposits and net operating lease assets and obligations) used was $1.2 million for the six-month period ended June 30, 2022. Cash flows used by operating activities was ($22.1) million for the quarter, compared to cash flows provided by operating activities of $2.6 million in the same period a year ago, primarily due to timing differences between periods.

We continue to be in solid financial condition with $5.1 million in cash and cash equivalents on June 30, 2022.

Conference Call and Webcast

Usio, Inc.'s management will host a conference call on Friday, August 12, 2022, at 11:00 am Eastern time to review financial results and provide a business update. To listen to the conference call, interested parties within the U.S. should call [phone]. International callers should call [phone]. All callers should ask for the Usio conference call. The conference call will also be available through a live webcast, which can be accessed via the company’s website at www.usio.com/investors.

A replay of the call will be available approximately one hour after the end of the call through August 26, 2022. The replay can be accessed via the Company’s website or by dialing [phone] (U.S.) or 1-412-317-0088 (international). The replay conference playback code is 5469449.

About Usio, Inc.

Usio, Inc. (Nasdaq: USIO), a leading FinTech integrated payment solutions provider, offers a wide range of payment solutions to merchants, billers, banks, service bureaus, crypto exchanges, and card issuers. The Company operates credit, debit/prepaid, and ACH payment processing platforms to deliver convenient, world-class payment solutions and services to their clients. With the acquisition of the assets of IMS in December 2020, the Company now offers additional services relating to electronic bill presentment, document composition, document decomposition and printing and mailing services. The strength of the Company lies in its ability to provide tailored solutions for card issuance, payment acceptance, and bill payments as well as its unique technology in the prepaid sector. Usio is headquartered in San Antonio, Texas, and has offices in Austin, Texas and Franklin, Tennessee, just outside of Nashville.

Websites: www.usio.com, www.payfacinabox.com, www.akimbocard.com and www.usiooutput.com. Find us on Facebook® and Twitter.

About Non-GAAP Financial Measures

This press release includes non-GAAP financial measures, EBITDA and adjusted EBITDA, as defined in Regulation G of the Securities and Exchange Act of 1934, as amended. The Company reports its financial results in compliance with GAAP, but believes that also discussing non-GAAP measures provides investors with financial measures it uses in the management of its business. The Company defines EBITDA as operating income (loss), before interest, taxes, depreciation and amortization of intangibles. The Company defines adjusted EBITDA as EBITDA, as defined above, plus non-cash stock option costs and certain non-recurring items, such as acquisitions. These measures may not be comparable to similarly titled measures reported by other companies. Management uses EBITDA and adjusted EBITDA as indicators of the Company's operating performance and ability to fund acquisitions, capital expenditures and other investments and, in the absence of refinancing options, to repay debt obligations.

Management believes EBITDA and adjusted EBITDA are helpful to investors in evaluating the Company's operating performance because non-cash costs and other items that management believes are not indicative of its results of operations are excluded. EBITDA and adjusted EBITDA are supplemental non-GAAP measures, which have limitations as an analytical tool. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Non-GAAP financial measures do not reflect a comprehensive system of accounting, may differ from GAAP measures with the same names, and may differ from non-GAAP financial measures with the same or similar names that are used by other companies. For a description of our use of EBITDA and adjusted EBITDA, and a reconciliation of EBITDA and adjusted EBITDA to operating income (loss), see the section of this press release titled "Non-GAAP Reconciliation."

FORWARD-LOOKING STATEMENTS DISCLAIMER

Except for the historical information contained herein, the matters discussed in this release include forward-looking statements which are covered by safe harbors. Those statements include, but may not be limited to, all statements regarding management's intent, belief and expectations, such as statements concerning our future and our operating and growth strategy. These forward-looking statements are identified by the use of words such as "believe," "intend," "look forward," "anticipate," "continue,” "potential," and "expect" among others. Forward-looking statements in this press release are subject to certain risks and uncertainties inherent in the Company's business that could cause actual results to vary, including such risks related to an economic downturn as a result of the COVID-19 pandemic, or overall economic challenges including performance of the cryptocurrency industry, supply chain disruptions, risks related to retaining and hiring qualified employees, the realization of opportunities from the IMS acquisition, the management of the Company's growth, the loss of key resellers, the relationships with the Automated Clearinghouse network, bank sponsors, third-party card processing providers and merchants, the security of our software, hardware and information, the volatility of the stock price, the need to obtain additional financing, risks associated with new legislation, and compliance with complex federal, state and local laws and regulations, and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission including its annual report on Form 10-K for the fiscal year ended December 31, 2021. One or more of these factors have affected, and in the future, could affect the Company’s businesses and financial results in the future and could cause actual results to differ materially from plans and projections. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the objectives and plans will be achieved. All forward-looking statements made in this release are based on information presently available to management. The Company assumes no obligation to update any forward-looking statements, except as required by law.

USIO, INC. CONSOLIDATED BALANCE SHEETS
	June 30, 2022			December 31, 2021
	(Unaudited)
ASSETS
Cash and cash equivalents	$	5,102,061		$	7,255,321
Accounts receivable, net		3,854,077			4,979,493
Settlement processing assets		36,927,255			63,824,646
Prepaid card load assets		15,104,808			36,590,893
Customer deposits		1,471,214			1,364,193
Inventory		488,382			434,532
Prepaid expenses and other		829,902			426,963
Current assets before merchant reserves		63,777,699			114,876,041
Merchant reserves		6,815,073			6,381,153
Total current assets		70,592,772			121,257,194
Property and equipment, net		3,432,039			3,607,157
Other assets:
Intangibles, net		3,227,962			4,163,894
Deferred tax asset, net		1,504,000			1,504,000
Operating lease right-of-use assets		3,083,555			2,802,113
Other assets		345,357			345,357
Total other assets		8,160,874			8,815,364
Total Assets	$	82,185,685		$	133,679,715
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	719,379		$	1,400,100
Accrued expenses		2,177,000			2,325,665
Operating lease liabilities, current portion		579,442			504,027
Equipment loan, current portion		43,386			54,760
Settlement processing obligations		36,927,255			63,824,646
Prepaid card load obligations		15,104,808			36,590,893
Customer deposits		1,471,214			1,364,193
Deferred revenues		—			17,647
Current liabilities before merchant reserve obligations		57,022,484			106,081,931
Merchant reserve obligations		6,815,073			6,381,153
Total current liabilities		63,837,557			112,463,084
Non-current liabilities:
Equipment loan, non-current portion		55,698			71,434
Operating lease liabilities, non-current portion		2,690,378			2,476,291
Total liabilities		66,583,633			115,010,809
Stockholders' equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized; -0- shares outstanding at June 30, 2022 (unaudited) and December 31, 2021, respectively		—			—
Common stock, $0.001 par value, 200,000,000 shares authorized; 26,837,978 and 26,807,145 issued, and 25,295,875 and 25,473,453 outstanding at June 30, 2022 (unaudited) and December 31, 2021, respectively		195,250			195,235
Additional paid-in capital		93,468,139			93,100,129
Treasury stock, at cost; 1,542,103 and 1,333,692 shares at June 30, 2022 (unaudited) and December 31, 2021, respectively		(2,951,047	)		(2,404,458	)
Deferred compensation		(6,167,870	)		(6,842,195	)
Accumulated deficit		(68,942,420	)		(65,379,805	)
Total stockholders' equity		15,602,052			18,668,906
Total Liabilities and Stockholders' Equity	$	82,185,685		$	133,679,715

USIO, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Revenues	$	16,215,686		$	15,233,141		$	34,327,029		$	28,694,691
Cost of services		12,955,782			11,105,696			27,557,996			21,660,009
Gross profit		3,259,904			4,127,445			6,769,033			7,034,682
Selling, general and administrative:
Stock-based compensation		473,701			317,285			1,024,383			645,000
Other SG&A expenses		3,848,696			2,845,213			7,643,842			5,505,247
Depreciation and amortization		807,934			627,149			1,522,869			1,249,356
Total selling, general and administrative expenses		5,130,331			3,789,647			10,191,094			7,399,603
Operating income (loss)		(1,870,427	)		337,798			(3,422,061	)		(364,921	)
Other income and (expense):
Interest income		1,166			2,169			1,747			4,636
Interest expense		(1,084	)		(1,484	)		(2,301	)		(1,484	)
Other income and (expense), net		82			685			(554	)		3,152
Income (Loss) before income taxes		(1,870,345	)		338,483			(3,422,615	)		(361,769	)
Income tax expense		70,000			120,000			140,000			140,000
Net income (Loss)	$	(1,940,345	)	$	218,483		$	(3,562,615	)	$	(501,769	)
Income (Loss) Per Share
Basic income (loss) per common share:	$	(0.10	)	$	0.01		$	(0.18	)	$	(0.03	)
Diluted income (loss) per common share:	$	(0.10	)	$	0.01		$	(0.18	)	$	(0.03	)
Weighted average common shares outstanding
Basic		20,316,572			19,993,387			20,298,573			19,962,661
Diluted		20,316,572			24,962,389			20,298,573			19,962,661

USIO, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
	Six Months Ended
	June 30, 2022			June 30, 2021
Operating Activities
Net (loss)	$	(3,562,615	)	$	(501,769	)
Adjustments to reconcile net (loss) to net cash provided (used) by operating activities:
Depreciation		586,936			313,423
Amortization		935,933			935,933
Bad debt		—			86,402
Non-cash stock-based compensation		1,024,383			645,000
Amortization of warrant costs		17,970			17,970
Changes in operating assets and liabilities:
Accounts receivable		1,125,416			(383,213	)
Prepaid expenses and other		(402,939	)		(130,662	)
Operating lease right-of-use assets		(281,442	)		(367,654	)
Other assets		(53,850	)		(38,452	)
Inventory		—			(45,883	)
Accounts payable and accrued expenses		(829,390	)		177,315
Operating lease liabilities		289,502			377,957
Prepaid card load obligations		(21,486,085	)		1,547,277
Merchant reserves		433,920			(164,402	)
Customer deposits		107,021			105,311
Deferred revenue		(17,647	)		(22,454	)
Net cash provided (used) by operating activities		(22,112,887	)		2,552,099
Investing Activities
Purchases of property and equipment		(411,818	)		(533,854	)
Net cash (used) by investing activities		(411,818	)		(533,854	)
Financing Activities
Proceeds from equipment loan		—			165,996
Payments on equipment loan		(27,110	)		(13,221	)
Purchases of treasury stock		(546,589	)		(79,264	)
Net cash provided (used) by financing activities		(573,699	)		73,511
Change in cash, cash equivalents, prepaid card loads, customer deposits and merchant reserves		(23,098,404	)		2,091,756
Cash, cash equivalents, prepaid card loads, customer deposits and merchant reserves, beginning of year		51,591,560			22,192,225
Cash, Cash Equivalents, Prepaid Card Loads, Customer Deposits and Merchant Reserves, End of Period	$	28,493,156		$	24,283,981
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest	$	2,301		$	—
Income taxes		—			92,850
Non-cash transactions:
Issuance of deferred stock compensation		12,330			—

USIO, INC. STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
	Common Stock						Additional Paid- In			Treasury			Deferred			Accumulated			Total Stockholders'
	Shares			Amount			Capital			Stock			Compensation			Deficit			Equity
Balance at December 31, 2021		26,807,145		$	195,235		$	93,100,129		$	(2,404,458	)	$	(6,842,195	)	$	(65,379,805	)	$	18,668,906
Issuance of common stock under equity incentive plan		61,600			62			267,856			—			(12,330	)		—			255,588
Warrant compensation costs		—			—			8,985			—			—			—			8,985
Deferred compensation amortization		—			—			—			—			295,092			—			295,092
Purchase of treasury stock costs		—			—			—			(66,494	)		—			—			(66,494	)
Net (loss) for the period		—			—			—			—			—			(1,622,270	)		(1,622,270	)
Balance at March 31, 2022		26,868,745		$	195,297		$	93,376,970		$	(2,470,952	)	$	(6,559,433	)	$	(67,002,075	)	$	17,539,807
Issuance of common stock under equity incentive plan		54,233			52			258,636			—			—			—			258,687
Warrant compensation costs		—			—			8,985			—			—			—			8,985
Reversal of deferred compensation amortization that did not vest		(85,000	)		(85	)		(176,465	)		—			97,621			—			(78,929	)
Deferred compensation amortization		—			—			—			—			293,942			—			293,942
Purchase of treasury stock costs		—			—			—			(480,095	)		—			—			(480,095	)
Net (loss) for the period		—			—			—			—			—			(1,940,345	)		(1,940,345	)
Balance at June 30, 2022		26,837,978		$	195,264		$	93,468,126		$	(2,951,047	)	$	(6,167,870	)	$	(68,942,420	)	$	15,602,052
Balance at December 31, 2020		26,260,776		$	194,692		$	89,659,433		$	(2,165,721	)	$	(5,926,872	)	$	(65,058,171	)	$	16,703,361
Issuance of common stock under equity incentive plan		51,000			51			120,484			—			—			—			120,535
Warrant compensation costs		—			—			8,985			—			—			—			8,985
Cashless warrant exercise		19,795			19			(19	)		—			—			—			—
Reversal of deferred compensation amortization that did not vest		(17,111	)		(17	)		(48,599	)		—			5,994			—			(42,622	)
Deferred compensation amortization		—			—			—			—			249,801			—			249,801
Purchase of treasury stock costs		—			—			—			(49,454	)		—			—			(49,454	)
Net (loss) for the period		—			—			—			—			—			(720,252	)		(720,252	)
Balance at March 31, 2021		26,314,460		$	194,745		$	89,740,284		$	(2,215,175	)	$	(5,671,077	)	$	(65,778,423	)	$	16,270,354
Issuance of common stock under equity incentive plan		61,556			61			150,481			—			—			—			150,542
Warrant compensation costs		—			—			8,985			—			—			—			8,985
Reversal of deferred compensation amortization that did not vest		(115,000	)		(115	)		(237,085	)		—			158,096			—			(79,104	)
Deferred compensation amortization		—			—			—			—			245,847			—			245,847
Purchase of treasury stock costs		—			—			—			(29,810	)		—			—			(29,810	)
Net income for the period		—			—			—			—			—			218,483			218,483
Balance at June 30, 2021		26,261,016		$	194,691		$	89,662,665		$	(2,244,985	)	$	(5,267,134	)	$	(65,559,940	)	$	16,785,297

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Reconciliation from Operating income (Loss) to Adjusted EBITDA:
Operating income (Loss)	$	(1,870,427	)	$	337,798		$	(3,422,061	)	$	(364,921	)
Depreciation and amortization		807,934			627,149			1,522,869			1,249,356
EBITDA		(1,062,493	)		964,947			(1,899,192	)		884,435
Non-cash stock-based compensation expense, net		473,701			317,285			1,024,383			645,000
Adjusted EBITDA	$	(588,792	)	$	1,282,232		$	(874,809	)	$	1,529,435
Calculation of Adjusted EBITDA margins:
Revenues	$	16,215,686		$	15,233,141		$	34,327,029		$	28,694,691
Adjusted EBITDA		(588,792	)		1,282,232			(874,809	)		1,529,435
Adjusted EBITDA margins		(3.6	)%		8.4	%		(2.5	)%		5.3	%