Usio, Inc. Q2 FY2026 earnings call

Overall Company Performance

• UCO met or beat all analyst top and bottom line expectations for the quarter, marking the second consecutive quarter of positive GAAP net income.
• Total company revenue grew 19% year-over-year, accelerating from 15% growth in the first quarter; three of four segments achieved over 20% year-over-year revenue growth.
• Total payment dollars processed and total transactions processed both grew 27% year-over-year, setting new company records.
• Gross profit grew 12% year-over-year, with gross margins improving sequentially from the first quarter. Adjusted EBITDA hit $1.1 million, more than doubling the year-ago quarter. Positive GAAP net income was $280,000 (one cent per share), with no one-time or non-recurring items included.
• The company maintains a disciplined cost structure: total SG&A expenses decreased ~$190,000 year-over-year, enabling operating leverage as revenue grows.

Growth Initiatives and Product Updates

• PayFact's growth flywheel is accelerating: adding new independent software vendors (ISVs), who then grow their own merchant bases, automatically adding new payment merchants to UCO's platform. Merchant count grew 34% in the first half of the year.
• Real-Time Payments (RTP): UCO now processes RTP for 12 accounts (up from 0 last year). RTP generates higher margins than pinless debit, offsetting a modest negative impact on top-line revenue from customer transaction shifts away from pinless debit to RTP.
• Card Issuing: Large school voucher programs across 5-6 U.S. states are launching, with total expected disbursement volume of ~$1.5 billion. UCO will also begin distributing university loan refunds for 30 universities via a FinTech strategic partner in the second half of the year, representing a large new volume opportunity.
• Output Solutions: A new four-times faster, higher-resolution high-speed printer was brought online, which will reduce labor, maintenance, and ink costs while expanding production capabilities. 11 new contracts were signed in the quarter, including a large contract with a top Texas alternative electric provider.
• UCO Ion (post-credit): The new cross-platform product is in late development, with strong positive feedback from existing clients. It will function as an aggregated expense management and fund holding platform that leverages all of UCO's existing payment rails.

1. Card (Payment Acceptance / CARD): Revenue increased 28% year-over-year to $9 million, contributing ~38% of total UCO revenue. PayFact, which accounts for over 75% of CARD segment revenue, grew 43% year-over-year. Total dollars processed rose 13%, and total transactions processed rose 19% year-over-year. 2. ACH: Revenue increased 21% year-over-year, with total transactions up 34%, dollar volume up 28%, and return check processing up 35%. July 2026 set a new monthly ACH transaction record, putting the segment on track for its sixth consecutive quarter of transaction growth. 3. Card Issuing: Delivered an approved quarter despite continued revenue headwinds. Purchase volume rebounded 11% year-over-year, while card loads remained flat and total transactions declined slightly (with sequential improvements over the first quarter). 16 new clients were signed in the quarter, with over 20 total clients in implementation or volume scaling. 4. Output Solutions: Revenue increased 22% year-over-year (accelerating from 19% first quarter growth), contributing ~20% of total UCO revenue. Pieces processed/mailed rose 43%, and electronic documents processed/delivered rose 49% year-over-year. The segment set consecutive new monthly revenue records in the first half of fiscal 2026, marking its strongest second quarter on record.

• Management raised full-year 2026 revenue growth guidance to 14-16%, up from the prior guidance range of 10-12%.
• The company reaffirmed expectations for continued positive adjusted EBITDA, with a focus on expanding operating leverage and improving profitability as the business grows.
• Management expects strong ACH growth momentum to continue through the second half of 2026, with early volume from school voucher programs starting in August/September, with disbursements spread across the full school year.

The earnings call did not include discussion of material operational failures or new, material risks facing the business. All noted risks are inherent to growth and new product rollout, with no unplanned negative events disclosed.

Q: Analyst Neil Cataldi asks for explanation of the PayFact growth flywheel and why it is accelerating now. / A: The flywheel model works by adding new ISV partners; each ISV grows its own merchant base over time, and all those new merchants automatically become UCO payment processing clients. Years of steady ISV addition have now compounded to create accelerating growth, with 34% merchant count growth in the first half of 2026. The model is inherently cumulative, and years of consistent investment are now paying off.

Q: Cataldi asks if gross margins can rise above the 23-25% target range in coming quarters due to new programs. / A: UCO Ion is the main catalyst for pushing margins above 25%. Ion generates most of its revenue from 100% margin interest income on customer fund balances, so a successful full launch will directly drive margin expansion across the company.

Q: Cataldi asks how the growth of AI in SaaS will impact UCO's embedded payment opportunity. / A: AI lowers barriers to software development, making it easier for new SaaS platforms to enter the market. This means SaaS companies increasingly need new ways to differentiate and add value to their platforms, and embedded payments are the most popular high-value addition. This trend will create more opportunities for UCO's PayFact embedded offering, benefiting both the CARD and ACH segments.

Q: Analyst Barry Sign asks how UCO Ion, acquired from a small Hollywood expense platform, became a major growth catalyst. / A: UCO Ion leapfrogged 12-18 months of internal product development, allowing the company to bring a cross-platform product to market much faster than planned. Ion sits across all UCO business segments, holding customer funds from ACH, card issuing, and output solutions, generating significant 100% margin interest income, and could eventually hold $300 million in daily customer balances, delivering substantial new profit.

Q: Analyst Chris Tuttle asks what drove sequential lower interest income in the quarter. / A: Interest income fluctuates based on the amount of customer funds UCO holds in pre-funded balances day-to-day, and there was no change in rates or core business model driving the decline. The rollout of UCO Ion is expected to significantly increase customer funds held and grow interest income going forward.