Usio Announces Record First Quarter 2023 Financial Results

Revenue of $21.4 million, up 18%; 11th Consecutive Quarter of Revenue Growth

Second Consecutive Quarter of More than $1 Million of Adjusted EBITDA¹

Record Gross Profits

SAN ANTONIO--(BUSINESS WIRE)-- Usio, Inc: (Nasdaq:USIO), a leading FinTech company that operates a full stack of integrated, cloud-based electronic payment and embedded financial solutions, today announced financial results for the first quarter, which ended March 31, 2023.

Louis Hoch, President and Chief Executive Officer of Usio, said, “I am extremely pleased to report that we have started the new year with the highest revenue quarter in the history of the Company, with revenue up 18% in the quarter as compared to the same quarter in 2022. More importantly, this growth led to record gross profits, over $1 million in adjusted EBITDA¹ for the second consecutive quarter, over $1 million in adjusted operating cash flow¹ as well as positive net income and earnings per share. Momentum has been building, and I believe this will enable us to not only achieve our financial objectives for the year, but open new growth markets and establish new relationships that will set the stage for success over the long-term.”

First quarter results were led by a 74% increase in Prepaid revenues, on pace to almost double in 2023 compared to 2022 as we anticipate generating approximately $10-12 million of revenue in 2023 from spoilage fees from expired card programs. In addition, Prepaid remains a leader in guaranteed income programs, is expanding its footprint in corporate expense and healthcare markets and has established a relationship with Movie Pass in an exciting new opportunity to grow with a dynamic company. Revenues in Output Solutions were up 26%, all organic, and the fastest quarter of revenue growth since the business was acquired. Output Solutions continues to add new clients, expand with existing clients and benefit from new business opportunities with other Usio clients, especially clients in need of efficient and effective disbursement solutions. Card revenues continue to grow, led by a 27% increase in our flagship PayFac business, where transactions in the quarter were up 30% as compared to the first quarter of 2022. Card’s new integration with Suite Engine is an exciting new opportunity to expand into their primarily larger enterprise customers who can now access our payments technology directly from Microsoft's Dynamics 365 Business Central system. The ACH business is ramping up after experiencing disruption to what was otherwise strong momentum in 2022. Excepting Voyager volume, ACH volumes would have been up in the quarter, and it is expected that ACH revenues, which carry our highest margins, will grow in the second half of this year.

Gross profits for the first three months of fiscal 2023 were a quarterly record $4.9 million and gross margins expanded over 3.7% from the first quarter of 2022. Margins were driven by a favorable sales mix, including higher margin residual revenues in Prepaid as well as efficiency and productivity enhancements across the company. Selling, general and administrative expenses in the quarter were up just 2% from a year ago while revenues were up 18%, reflecting the Company’s disciplined cost control efforts. GAAP profitability in the quarter increased significantly compared to a year ago, with positive net income of $14,833 compared to a net loss of over $1.6 million in the first quarter of fiscal 2022. Adjusted EBITDA¹ was $1.0 million, a $1.3 million improvement from the negative $0.3 million in Adjusted EBITDA¹ a year ago, and the second consecutive quarter in which the Company has reported over $1 million in quarterly Adjusted EBITDA¹. The Company’s financial position also continued to improve, with $1.1 million in cash added to the balance sheet over the first three months of the year.

Mr. Hoch continued, "In addition to our outstanding results, in the first quarter we made significant progress building out our franchise with potentially transformative new opportunities and programs. Output Solutions is ramping up their large L.A. County program, the success of which is attracting interest from similar entities around the country. This communication, disbursement and payment processing program is an example of how we can weave our various businesses together to provide a comprehensive solution in one place. Card just announced an agreement with Suite Engine, which will integrate our proprietary PayFac technology into their Microsoft CRM solution that is being used by numerous Fortune 500 and similar large enterprises. Fortunately, we operate primarily in recession resistant markets and our sales pipeline remains very strong - factors which strengthen our confidence in achieving our financial objectives for the year. The team has worked hard to achieve the progress to date, and we look forward to building on that momentum to drive value for our shareholders."

Quarterly Processing and Transaction Volumes

Total payment transactions processed in the first quarter of 2023 were 8.6 million, a decrease of 18% over the same quarter of last year. Total payment dollars processed through all payment channels in the first quarter of 2023 were $1.23 billion, down compared to last year’s first quarter, mainly attributable to our exit from the crypto currency market.

In our Card segment, dollars processed were up 8% and transactions processed were up 24% from a year ago. Prepaid Card Load Volume was down 19%, transactions processed were down 46% and purchase dollars processed were down 10% from the same quarter a year ago, as government assistance programs for the COVID-19 pandemic have begun to wind down from their record high's a year ago. ACH electronic check transaction volume was down 25%, electronic check dollars processed were down 54% and return check transactions processed were down by 8% compared to a year ago.

First Quarter 2023 Revenue Detail

Revenues for the quarter ended March 31, 2023 increased 18% to $21.4 million, reflecting growth in the Prepaid, Usio Output Solutions, and Credit Card lines of business.

		Three Months Ended March 31,
		2023				2022				$ Change				% Change
ACH and complementary service revenue		$	3,340,722			$	3,843,316			$	(502,594	)			(13	)%
Credit card revenue			7,339,898				6,768,222				571,676				8	%
Prepaid card services revenue			4,807,404				2,768,447				2,038,957				74	%
Output solutions revenue			5,958,220				4,731,358				1,226,862				26	%
Total Revenue		$	21,446,244			$	18,111,343			$	3,334,901				18	%

Gross profits for the quarter were $4.9 million while gross margins were 22.9%, up over 3.7% from the same period a year ago. This rise in gross profits reflects an increase in margins in our prepaid business from residual revenues and in Output Solutions as a result of revenue growth.

Other selling, general and administrative expenses were $3.9 million for the quarter ended March 31, 2023, up just 2% compared to the prior year period despite an 18% increase in revenues reflecting a focus on expense control.

We reported an operating income of $5,993 for the quarter and Adjusted EBITDA¹ of $1.0 million in the quarter, an improvement of $1.3 million from an Adjusted EBITDA¹ loss of $0.3 million a year ago. Net income for the quarter was $14,833, or $0.00 per share, compared to a net loss of $1.6 million, or ($0.08) per share, for the same period in the prior year. Operating income, Adjusted EBITDA¹, net income and earnings per share in the quarter all improved from the same quarter a year ago due to increased revenues, record gross profits and disciplined expense control.

Adjusted Operating Cash Flows¹ (excluding merchant reserve funds, prepaid card load assets, customer deposits and net operating lease assets and obligations) was $1.3 million for the three months ended March 31, 2023. Cash flows used by operating activities was $0.2 million for the three months ended March 31, 2023, compared to cash flows used by operating activities of $7.2 million in the same period a year ago.

We continue to be in solid financial condition with $6.8 million in cash and cash equivalents on March 31, 2023 reflecting a $1.1 million improvement in cash balances as of March 31, 2023.

¹ Please see reconciliation of GAAP to Non-GAAP Financial Measures

Conference Call and Webcast

Usio, Inc.'s management will host a conference call on Wednesday, May 3, 2023 at 4:30 pm 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 May 17, 2023. 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 4947465.

About Usio, Inc.

Usio, Inc. (Nasdaq: USIO), is a leading Fintech that operates a full stack of proprietary, cloud-based integrated payment and embedded financial solutions in a single ecosystem to a wide range of merchants, billers, banks, service bureaus and card issuers. The Company operates credit/debit and ACH payment processing platforms, as well as a turn-key card issuing platform to deliver convenient, world-class payment solutions and services to their clients. The company, through its Usio Output Solutions division offers 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 a development office in Austin, Texas.

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, as defined in Regulation G of the Securities and Exchange Act of 1934, as amended of EBITDA, adjusted EBITDA, adjusted EBITDA margins and adjusted operating cash flows. The Company reports its financial results in compliance with GAAP, but believes that also discussing non-GAAP financial 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 costs related to acquisitions. The Company defines adjusted EBITDA margins as the adjusted EBITDA, as defined above, divided by total revenues. The Company defines adjusted operating cash flow as net cash provided (used) by operating activities, less changes in prepaid card load obligations, customer deposits, merchant reserves and net operating lease assets and obligations. These adjustments to net cash provided (used) by operating activities are not inclusive of any regular expense items, and only include changes in our assets and liabilities accounts on our consolidated balance sheet. These measures may not be comparable to similarly titled measures reported by other companies. Management uses EBITDA, adjusted EBITDA, adjusted EBITDA margins and adjusted operating cash flows 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, adjusted EBITDA, adjusted EBITDA margins and adjusted operating cash flows 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, adjusted EBITDA, adjusted EBITDA margins and adjusted operating cash flow should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. They are not measurements of our financial performance under GAAP and should not be considered as alternatives to revenue, net income, or cash provided (used) by operating activities, as applicable, or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other businesses. EBITDA, adjusted EBITDA, adjusted EBITDA margins and adjusted operating cash flow have limitations as analytical tools and you should not consider these Non-GAAP measures in isolation or as a substitute for analysis of our operating results as reported under GAAP.

¹ See reconciliation of non-GAAP financial measures below

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," "should," "intend," "look forward," "anticipate," "schedule,” 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, 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, 2022. 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. The Company believes that the assumptions underlying the forward-looking statements included in this release will prove to be accurate. 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
		March 31, 2023				December 31, 2022
		(Unaudited)
ASSETS
Cash and cash equivalents		$	6,763,813			$	5,709,117
Accounts receivable, net			5,218,249				4,371,640
Settlement processing assets			42,586,985				49,737,068
Prepaid card load assets			18,812,954				20,170,761
Customer deposits			1,575,075				1,554,122
Inventory			494,457				507,355
Prepaid expenses and other			461,005				450,389
Current assets before merchant reserves			75,912,538				82,500,452
Merchant reserves			4,744,615				4,909,501
Total current assets			80,657,153				87,409,953
Property and equipment, net			3,139,932				3,222,816
Other assets:
Intangibles, net			2,407,393				2,625,360
Deferred tax asset, net			1,504,000				1,504,000
Operating lease right-of-use assets			2,826,942				2,795,483
Other assets			355,358				355,357
Total other assets			7,093,693				7,280,200
Total Assets		$	90,890,778			$	97,912,969
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	851,824			$	858,622
Accrued expenses			4,856,157				3,721,108
Operating lease liabilities, current portion			537,034				617,319
Equipment loan, current portion			57,380				56,429
Settlement processing obligations			42,586,985				49,737,068
Prepaid card load obligations			18,812,954				20,170,761
Customer deposits			1,575,075				1,554,122
Current liabilities before merchant reserve obligations			69,277,409				76,715,429
Merchant reserve obligations			4,744,615				4,909,501
Total current liabilities			74,022,024				81,624,930
Non-current liabilities:
Equipment loan, non-current portion			-				14,994
Operating lease liabilities, non-current portion			2,423,780				2,338,947
Total liabilities			76,445,804				83,978,871
Stockholders' equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized; -0- shares outstanding at March 31, 2023 (unaudited) and December 31, 2022, respectively			—				—
Common stock, $0.001 par value, 200,000,000 shares authorized; 28,466,150 and 27,044,900 issued, and 26,514,903 and 25,097,963 outstanding at March 31, 2023 (unaudited) and December 31, 2022, respectively			196,892				195,471
Additional paid-in capital			96,687,132				94,048,603
Treasury stock, at cost; 1,951,247 and 1,946,937 shares at March 31, 2023 (unaudited) and December 31, 2022, respectively			(3,757,556	)			(3,749,027	)
Deferred compensation			(7,833,278	)			(5,697,900	)
Accumulated deficit			(70,848,216	)			(70,863,049	)
Total stockholders' equity			14,444,974				13,934,098
Total Liabilities and Stockholders' Equity		$	90,890,778			$	97,912,969

USIO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
		Three Months Ended March 31,
		2023				2022
Revenues		$	21,446,244			$	18,111,343
Cost of services			16,544,429				14,602,214
Gross profit			4,901,815				3,509,129
Selling, general and administrative:
Stock-based compensation			504,574				550,682
Other SG&A expenses			3,873,219				3,795,146
Depreciation and amortization			518,029				714,935
Total selling, general and administrative expenses			4,895,822				5,060,763
Operating income (loss)			5,993				(1,551,634	)
Other income and (expense):
Interest income			92,928				581
Interest expense			(662	)			(1,217	)
Other income and (expense), net			92,266				(636	)
Income (Loss) before income taxes			98,259				(1,552,270	)
Income tax expense			83,426				70,000
Net income (Loss)		$	14,833			$	(1,622,270	)
Income (Loss) Per Share
Basic income (loss) per common share:		$	0.00			$	(0.08	)
Diluted income (loss) per common share:		$	0.00			$	(0.08	)
Weighted average common shares outstanding
Basic			20,122,972				20,280,575
Diluted			26,508,872				20,280,575

USIO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
		Three Months Ended March 31,
		2023				2022
Operating Activities
Net income (loss)		$	14,833			$	(1,622,270	)
Adjustments to reconcile net income (loss) to net cash (used) by operating activities:
Depreciation			300,061				246,968
Amortization			217,968				467,967
Stock-based compensation			504,574				550,682
Amortization of warrant costs			—				8,985
Changes in operating assets and liabilities:
Accounts receivable			(846,609	)			802,999
Prepaid expenses and other			(10,616	)			(254,507	)
Operating lease right-of-use assets			(31,459	)			118,719
Other assets			(1	)			4,247
Inventory			12,898				—
Accounts payable and accrued expenses			1,128,251				299,720
Operating lease liabilities			4,548				(122,594	)
Prepaid card load obligations			(1,357,807	)			(7,743,913	)
Merchant reserves			(164,886	)			5,000
Customer deposits			20,953				27,272
Deferred revenue			—				(13,235	)
Net cash (used) by operating activities			(207,292	)			(7,223,960	)
Investing Activities
Purchases of property and equipment			(217,735	)			(72,069	)
Net cash (used) by investing activities			(217,735	)			(72,069	)
Financing Activities
Payments on equipment loan			(13,488	)			(13,488	)
Purchases of treasury stock			(8,529	)			(66,494	)
Net cash (used) by financing activities			(22,017	)			(79,982	)
Change in cash, cash equivalents, prepaid card loads, customer deposits and merchant reserves			(447,044	)			(7,376,011	)
Cash, cash equivalents, prepaid card loads, customer deposits and merchant reserves, beginning of period			32,343,501				51,591,560
Cash, Cash Equivalents, Prepaid Card Loads, Customer Deposits and Merchant Reserves, End of Period		$	31,896,457			$	44,215,549
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest		$	662			$	1,217
Income taxes			13,426				—
Non-cash transactions:
Issuance of deferred stock compensation			2,444,054				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, 2022			27,044,900			$	195,471			$	94,048,603			$	(3,749,027	)		$	(5,697,900	)		$	(70,863,049	)		$	13,934,098
Issuance of common stock under equity incentive plan			1,421,250				1,421				2,638,529				—				(2,444,054	)			—				195,896
Deferred compensation amortization			—				—				—				—				308,676				—				308,676
Purchase of treasury stock costs			—				—				—				(8,529	)			—				—				(8,529	)
Net income for the period			—				—				—				—				—				14,833				14,833
Balance at March 31, 2023			28,466,150			$	196,892			$	96,687,132			$	(3,757,556	)		$	(7,833,278	)		$	(70,848,216	)		$	14,444,974
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

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
		Three Months Ended March 31,
		2023				2022
Reconciliation from Operating income (Loss) to Adjusted EBITDA:
Operating income (Loss)		$	5,993			$	(1,551,634	)
Depreciation and amortization			518,029				714,935
EBITDA			524,022				(836,699	)
Non-cash stock-based compensation expense, net			504,574				550,682
Adjusted EBITDA		$	1,028,596			$	(286,017	)
Calculation of Adjusted EBITDA margins:
Revenues		$	21,446,244			$	18,111,343
Adjusted EBITDA			1,028,596				(286,017	)
Adjusted EBITDA margins			4.8	%			(1.6	)%

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
		March 31, 2023				March 31, 2022
Reconciliation from net cash (used) by operating activities to Non-GAAP Adjusted Operating Cash Flow (used):
Net cash (used) by operating activities		$	(207,292	)		$	(7,223,960	)
Operating cash flow (used) adjustments:
Prepaid card load obligations			1,357,807				7,743,913
Customer deposits			(20,953	)			(27,272	)
Merchant reserves			164,886				(5,000	)
Operating lease right-of-use assets			31,459				(118,719	)
Operating lease liabilities			(4,548	)			122,594
Total adjustments to net cash (used) by operating activities		$	1,528,651			$	7,715,516
Adjusted operating cash flows (used)		$	1,321,359			$	491,556

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230503005835/en/

Paul Manley

Senior Vice President, Investor Relations

paul.manley@usio.com

612-834-1804

Source: Usio, Inc