Usio, Inc. Q1 FY2025 earnings call

• Record first quarter revenues, processing volume growth, solid profitability, and strong cash flow.
• Total processing volume up 34%, ACH up 36%, revenues up 5%.
• Gross profits little changed, margins softer due to revenue mix. Efficiency and productivity improving across the organization.
• Launch of Usio ONE initiative in April, with 12 quota-bearing salespeople, move to standardized CRM (HubSpot), and cross-selling efforts.
• ACH revenues up 33%, Output Solutions revenues up 12% sequentially, card issuing pipeline strong.
• Development of Consumer Choice product and biometrics AI-driven application for payment solutions.

Total processing volume was up 34%, with card processing volume up 34% driven by PayFac, and ACH processing volume up 36%. Revenues increased 5%, with PayFac revenues up 25% year-over-year. Output Solutions revenues were up 12% sequentially. Card issuing revenues were slightly down year-over-year due to the New York City COVID program but had a strong pipeline. ACH, a high-margin business, contributed to growth but margin was softer due to revenue mix. PayFac now accounts for approximately 59% of total card revenues.

• Reiterates 14% to 16% top line revenue growth for the year.
• Expect revenue growth to accelerate in the second half due to Usio ONE implementation and favorable year-over-year comparisons as prior NYC COVID-related revenues phase out.
• Anticipates Q3 and Q4 to benefit from deals in implementation providing significant value.

Q: Clarifying organic revenue growth, mentioning $1 million spoilage revenue last year A: Louis Hoch states the $1 million was spoilage revenue from NYC and it's the last quarter with comp issues Q: About Usio ONE, sales team composition, initial cross-selling opportunities A: Greg Carter says there are 12 quota-bearing salespeople, moved to HubSpot CRM, and sees opportunities for cross-selling between issuing, acquiring, and output Q: Gross margin decline explanation A: Louis Hoch and Michael White explain $1 million spoilage revenue was no margin and interest revenue related to customer funds held decreased Q: Gross margin target, OpEx, M&A criteria A: Louis Hoch says goal is mid-20s gross margin, OpEx down, headcount tied to revenue; Greg Carter details M&A criteria of synergies, correct multiple, and post-acquisition self-sufficiency Q: Revenue growth vs processing volume, PayFac revenue, Consumer Choice product A: Louis Hoch explains revenue basis (dollars vs transactions), PayFac revenue up 25%, Houston Frost details Consumer Choice as a solution for fund dispersal with multiple methods Q: Filtered spend cards' potential use A: Louis Hoch says filtered spend cards could be for government assistance but primarily healthcare related