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Usio Announces Second Quarter 2022 Financial Results

USIO

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 +1-844-883-3890. International callers should call +1-412-317-9246. 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 +1-877-344-7529 (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

%

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