Q1 2020 Earnings Call
[music].
All participants will be in listen only mode.
After today's presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad.
To withdraw your question. Please press Star then too.
Participants on this call are advised that the audio this conference call is being broadcast live over the Internet and it's also being recorded for playback purposes, a replay will be available. Shortly after the ended the call through May 20, Eightth 2020.
I would now let's turn the conference over to Joe has it Investor Relations. Please go ahead.
Thanks, Gary Thank you everyone for participating today.
Welcome to you see as first quarter 2020 financial results Conference call. You already is really what do you see all issued earlier. This afternoon 'cause available in the company's Investor Relations website, USIO Dot com Black box slashing, the best or under news.
On the call today, our lose hope President CEO Redcard senior Vice President of payment facilitation, Tom Jewel Senior Vice President and Chief Financial Officer and used across.
Your vice President of prepaid services.
We will provide prepared remarks, then we'll open the call to your questions.
Before we begin please remember the comments on todays call include forward looking statements.
Looking statements can be identified by the use of such words as estimate anticipate expect but we intend may will should seek approximate a plant or the negative these words and other similar words and phrases.
Forward looking statements by their nature involve estimates projections goals forecasts and assumptions are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward looking statements.
Including risks related to the cobot nice you pandemic and its effect on the economy the realization the opportunities from single or acquisition management of the company's gross loss, Okay resellers.
Relationships with the automated clearing house not work. Thank sponsors third party card processing providers and merchants the volatility of stock price loss of key personnel wrong competition, the electronic commerce market.
Security of the company software hardware and information applies with complex federal state and local laws and regulations and other risks detailed in the company's filings with the FCC.
These forward looking statements speak only as of the beat up this conference call and should not be relied upon as predictions of future events USIO expressly disclaims any obligations are undertaking to update or revise any forward looking statements made today to reflect any change you see those expectations with regard there too.
Two or any other changes in the event conditions or circumstances on the which any such stateless pay except as required by law.
Please refer to the company's that's this is probably going its investor relations website for additional information.
Now I would like all over to <unk> Louis.
Thank you Joe and welcome everyone.
I can think of no better way to follow up three consecutive years of record performance. Then when then with a record first quarter.
I'm pleased to report that we recorded our all time best quarterly revenues.
And a significant improvement in profitability.
Revenue growth accelerated for a second quarter rising 18% in the first quarter versus the comparable period in the prior year.
Which is a nice sequential improvement from 50% growth in the fourth quarter of 2019.
We promised that we would enhance revenue transparency in 2020.
And in Q1, we delivered segment segmented revenue reporting.
Due to this new public information I can report.
That both credit card and prepaid card divisions revenues in the first quarter rose sharply.
From the same quarter a year ago.
With credit card revenue up 20%.
And prepaid card revenue up 69%.
Credit card processing growth was led by our Payfac Division, where volumes were up 52% sequentially from the fourth quarter.
Fiscal 2019.
That is our third consecutive quarter of sequential payfac processing volume growth.
Adjusted EBITDA was greatly improved.
Reflecting strong topline growth expanding gross margins and a flattening of expenses.
And with our balance sheet remains strong and our cash burn decreasing and the influx of over the influx of 813500 and cash in April from our TPP loan application as previously disclosed.
We have the financial street to support operations into continue to invest in our growth strategies.
All of our segments are off to a great start this year.
C H continues to generate strong margins and cash flow.
Which are which we are electively investing back into both prepaid and pay pack payback divisions.
Our new remote check capture service and Pinless debit products, both had a very strong first quarter.
There are part of our expanding portfolio products that leverage our notches certification tier one processor designation, which includes direct access to the federal reserve.
On a dedicated bank routing number.
Hey, CH did feel the impact of its grown a virus.
Over the second half the March.
Which impacted gross somewhat offset by.
The 30, new accounts onboard in the same two weeks.
So there is underlying strength in the AC h. business. It is being overshadowed by the temporary impacts of the market verticals create a created by the krona virus.
The edge is growing it's a highly process, it's highly profitable an integral part of our.
Suite of electronic transaction processing services, both in the Standalone product as well as our integrated electronic payment solution.
And our prepaid.
Business revenue was almost double and profitability improved significantly into first quarter earlier. This week, we know we announced an exciting new prepaid program supporting government and charitable organizations and their effort.
To provide relief.
Two victims of Cobot 19.
This is just one of the many exciting developments in prepaid illustrate in both the ability to innovate.
And our capabilities of our technology.
Houston Frost will be on shortly to provide additional insight.
Yesterday, we announced leadership changes within our payment facilitated facilitation division.
On a thing Greg Carter for joining USIO and we're excited about him, leaving our innovative high growth Payfac business unit.
We are glad that.
We have grade with his extensive transaction processing experience on board and ready to step into this new role.
Our card business pay fact is hitting its stride.
Both revenues and profitability are up from a year ago.
As pay type volumes continue to trend steadily higher.
Later grade Carter to is replacing evaded will go through our card business in more detail.
Well, we're certainly sorry to see they didn't go we understand his entrepreneurial spirit and wish him well.
In the case of both pre pay them tape at the recent improvement in performance is extremely rewarding.
We believe the best is yet to come.
As we all know the current of viruses that affected the economy and how we all go about our daily lives.
You see it wasn't a quick to add to ensure the health and safety of our employees and those around US we are hearing to all the regulations governing our operations many of our employees, whereas states with strict shelter in place and social distancing goals, but from an operational standpoint works and.
Home had little impact on our productivity.
Unfortunately, some of those restrictions are beginning to east and all USIO offices are now open however, we value our employee safety and up implement a policies to achieve safe social distancing.
And other safety measures.
We've had we've had a great success and transition or employees to work at home model and their productivity.
And either home.
Or office continues to meet our expectations.
However, as we anticipate it last quarter, the economic cleanse consequences of the Corona.
Chris impacted some of our markets for instance.
One of our legacy card portfolios, which is comprised of a number of Dennis veterinarians optometrists, all those who have been forced to rely exclusively on telemedicine revenues.
And our AC H. business the increase in lending that we anticipate it has not occurred.
It has been almost the opposite our financial services customers.
Or not writing new loans and.
Or granting borrowers payment deferrals.
Which reduced the amount of a stage transactions we process.
These trends became even more evident in April.
As a restrictions are eastern businesses open back up we believe in the late.
Late weeks in May and the month of June should be better in fact, many of our business lines were actually up in April as compared to March, including our prepaid RCC and Pinless debit and non healthcare legacy card portfolios.
On balance however, we believe the second quarter will be down from the first quarter.
Before the Corona virus, we're feeling good about the direction of our business and the first quarter suggest our confidence was well founded.
And we continue to feel confident about the success of all of our businesses.
Although certain business segments volumes may feel the impact we have not been losing customers. In fact, all of our businesses have active sales pipelines and we continue to implement new clients. During this work from home period.
Consequently, once krona viruses pass we believe will come.
Out of this on a strong growth trajectory.
With that I'd like to conclude my opening remarks ill turn the call over to Houston for US are ahead of prepaid services to talk a little more about that sub segment.
Thank you Lewis and Hello to everyone on the call.
Over the past year, the prepaid line of business has evolved dramatically.
We have continued to refocus our efforts on distribution of our cards through business sales and partnerships.
In December of last year, we see direct consumer card enrollments for the Akimbo website.
In addition, we have shifted our sales strategy to prioritize opportunities and relationships that leverage our more scalable solutions for example, disbursement and expense cards for organizations.
We have learned that they a custom card programs, we launched for clients in the past screen ongoing challenges with operational complexity and scalability.
The timelines involving our sales and implementation cycle required some patients before the results of our updated strategy could be recognized but the outcome is clear and our Q1 2020 performance.
The prepaid CICT segment has experienced continued growth in revenue and a dramatic increase in gross margin thats compared to the same period last year.
In fact, the improvements in the prepaid segment's margin was a major contributor to the increase in the Companys gross margin this quarter.
To briefly address the ongoing impact of the covered 19 pandemic in respect to prepaid products. I believe we have reason to be relatively optimistic to be sure. We initially saw depth and car orders and loads for our promotional and incentive products.
That said consumer loans, both of the Akimbo program and for our custom quiet programs experienced a typical Q1 boost from individual filing taxes early.
However, beginning in April we have experienced a dramatic upkeep uptick in disbursements sales related to covert relief programs.
We are still determining just how much in terms of load volume and card or orders. These programs will generate but we believe it could more than double the activity we had projected over the next two quarters.
And our recent press release, we announced a few other organizations, we've been working with including care USA.
New York Immigration coalition and the Mayor's office of Los Angeles, We're working with several additional municipalities are nonprofits that we aren't able to announce at this time.
It's wonderful to be able to participate in these covert relief efforts and the increase activity will be a positive for the company that said I want to mentioned that card sales related to these relief efforts will be slightly lower margin as compared to typical incentive and promotional sales to business.
Well the kobin related programs could be assumed to provide.
Ill provide a temporary boost in activity, we have made substantial strides in terms of our visibility in the industry and our reputation in general with key partners like Mastercard.
We are confident that our involvement in these programs will have lasting benefits, we're becoming known in the market as a very responsive flexible and capable partner when it comes to implementing prepaid solutions.
I'm, particularly proud of the way to prepay team has responded to the increased activity in workload and wanted to share my appreciation of our team members on this call.
With that I'd like to conclude my opening remarks, and turn the call over to Tom Jewel, Our senior Vice President and Chief Financial Officer to discuss financial results in greater detail.
Thank you Houston exciting progress welcome everyone. Thanks for joining our call today and your interest and USIO I'm going to provide a brief review our financial results before turning the call over to Greg.
As mentioned by Louis we achieved record revenues in the first quarter.
Revenues for the quarter increased 18% to $7.8 million versus the comparable periods in the prior year revenues were up 69% in our prepaid category.
28% and our credit card category, well AC age revenues were relatively flat in the credit card category Payfac had a strong quarter and was a major contributor to growth. This is the second consecutive quarter, which are Payfac growth initiative has been a primary catalyst behind this.
Terrific and increase in credit card revenues.
Gross profit indicated increased 44% to 1.9 million and gross margins expanded 450 basis points to 24.8% for the quarter. The improvement in gross Pravin profits was driven by improving the profitability of our credit card and prepaid categories.
It was a function of strong revenue growth and the prepaid initiatives that Houston discussed after recently finding these two growth initiatives with cash flows from or AC age business. It was great to see both initiatives delivered both topline revenue growth and expanding margins others selling general.
And administrative expenses in first quarter was 2.1 million, which was flat to fourth quarter 2019 operating expense levels. The expense increases to drive incremental revenues in our growth initiatives has leveled off and we expect expenses to remain in this approximate range over the balance of the year.
Other SGN a expenses again included approximately $100000 a onetime expenses for recently concluded M&A activities.
The quarter represented an improvement in adjusted EBITDA operating losses to a loss of 200000 approximately for the quarter adjusted EBITDA approved for improved $400000 from the fourth quarter of 2019 and was $100000 better than Q1 2019.
Overall, we reported a net loss of point 8 million or six cents per share for the quarter as compared to a net loss of 1.1 million or nine cents a share for the same period in the prior year and an improvement from the loss of 1.2 million or nine cents per share in Q4 2019.
We continue to have a saw solid balance sheet with a cash balance of 1.7 million and no debt at quarter end, we did see a cash burn a $400000 for the quarter that was a combination of an operating loss and capital expenditures are $150000 subsequent to the end of the.
Quarter, we secured $813500 in funding through the Paycheck protection plan as a part of the recently enacted Corona virus aid relief and economic Security Act.
Roughly the care sacked administrated by the U.S. small business administration.
Alone subject to the turns and physicians applicable to was administered by the U.S. small business administration under the cares at the company is not determine how much of the loan if any may be subject to forgiveness.
In conclusion. This year is off to a strong start and we are gaining momentum in our prepaid and credit card categories revenue growth accelerated for the second consecutive quarter versus the comparable prior year period and cost controls allowed us to reduce our adjusted EBITDA cash for.
Let me go momentum is being interrupted by covert 19 in the second quarter as Louis discussed in detail. Despite the challenging times, we are confident the fundamental drivers of our business remain intact.
And as restrictions are gradually lifted we will be able to resume our growth trajectory and create value for our shareholders. At this time, we'd like to turn the call over to Greg Greg.
Thank you Tom and welcome everyone I'm pleased to have joined USIO and to head up our card and pay fact unit and I think Lewis and the board for their confidence.
Back is making great progress I believe my experience in high volume transaction environments will help me maintain and hopefully even accelerate that momentum.
The card business got off to a great start in fiscal 2020 fueled by the momentum that began to build in the back half of 2019.
As mentioned last call center in our recent performance. We believe we are entering the scale phase of our payback business.
Volumes processed during Q1 was strong again and up on a sequential basis, what payback volume increasing 52% in the first quarter compared to the fourth quarter 2019.
This is built on sequential growth and volumes of 24% and 134% and a third and fourth quarter last year respectfully.
Year over year revenues in part were up 28% nor category gross profits more than doubled.
Overall card volumes, which includes the legacy singular business were up 21% in the first quarter also a nice sequential acceleration from 17% in the fourth quarter.
The sustained its momentum we continue to sign new clients in our lead generation efforts are starting to produce healthy flow of new qualified inbound inquiries.
This has us very excited about our near and long term growth prospects.
To provide a brief overview of the many opportunities in our pipeline with the greatest potential for near term impact the hail from a variety of industries. This includes a large property management platform where were nearly two weeks into an initial beta test.
Well software, where we've had a number.
A recent significant wins that we expect once fully implemented will establish USIO as a leader within this vertical and finally growth from partnerships in which we have invested substantial time such as E visit.
Even as a pioneer and the rapidly evolving telemedicine industry.
In recent months since the Corona virus pandemic turn the world on its head.
As it has been on an exponential growth trajectory as fish physicians using E visit increased dramatically in March compared to February.
This made at critical for them to align with the technology partner, who could scale along with them.
This highlights an inherent benefit of our leveraged distribution model as our customers enjoy success, adding new customers, we experienced organic growth without any direct selling expense or associated burden.
Corona viruses forced many merchants to develop strategies to take their business into the virtual payments world and for many organizations that means developing innovative ways to make that electronic payment experience as transparent as panels as possible.
Let's move forward and payments technology is playing right into our hands.
We believe that as the economy returns to normal we're positioned to take advantage of the corresponding increase in demand for our services.
Let me conclude with some independent perspective regarding payfac potential.
At a payment summit hosted by Jefferies. This February they concluded that the trend of software led distribution of payments is becoming more pronounced the trend of is these leveraging payment facilitation as a service is expected to accelerate with over 208000 software companies worldwide processing aggregate two trillion pay.
Payment volume, which represents a potential 20 billion and payment processing revenue.
Presently this market is only served by 1075 unique payment facilitators, but they forecast that number to grow to over 4000 by 2025.
So we're excited that well this land grab is underway, we're uniquely positioned to participate in the unfolding growth story.
We expect Payfac to continue its growth trajectory.
While it's too early to tell how the virus will impact our business in Q2, we continue to have good success in terms of signing new ice these but some of our implementations in industries most impacted by co that have been slowed.
With that said, we are confident that second half of the or we'll see further acceleration such that we now believe that we're on pace to exceed previous estimate of 200 million in volume for the year and will be heading into 220 21 on even a better trajectory at this time, we would like to open up the call for questions.
We will now begin the question and answer session.
To ask a question you mean press Star then one on your telephone keypad.
If you were using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then too.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Gary Prestopino with Barrington Research. Please go ahead.
Hey, good afternoon, everyone.
Yes, I just wanted to just want to make sure I got these numbers right did you say the prepaid sales growth was 69% and the total credit card sales growth was 28% in the quarter.
That's correct revenue okay.
Okay.
Great. Thank you so a couple of questions here number one.
Projecting a down quarter.
Obviously.
What's going on here, which is understandable, but I think Tom you know you said basically that the expenses would stay about this rate.
For.
The rest of the year on quarterly basis, so given the impact of like a lot of companies have really done some things here to cut some costs are I assume that you are not going to be and that kind of oh stature here in the quarter, you're just going to let things play out and then hopefully things will reinvigorate as we get through the.
Back after the year.
Hey, Gary we parts of our business is up and and.
Parts of our business is down right. We haven't we don't have any retail exposure other than Dennis enough to have Tom interesting veterinarians and.
That part of our business you know that's going to get flip back to one and we think thats going to occur in short order and it's already starting to occur in some states. So are you know we're not a processor that has terminals out there on the street that we have to worry about.
A winner restaurants and to get back to full steam we don't we don't have any so right. We know that parts of our businesses continue to grow we know that only two parts of our businesses is being affected.
In both cases, those the unaffected we know that once things flip we're going to be fine. Meanwhile, we're not traveling.
We've instituted no no new hires.
And so we're actually experiencing less expenses during this time period.
Okay, I'm, just trying to get an idea of what what to expect in Q2.
Also our EBITDA would have been around $50000 losses this quarter.
If if or when you read the Q, you'll see that we.
We went ahead and took some items out a prepaid.
That were related to an acquisition that we're working on that we stopped during cold and so you know so we were actually in a lot better shape in Q1.
Then it once you take out the onetime transaction sometime hit.
Okay, maybe maybe.
Let me just see here I mean.
Maybe I could approach it another way then in terms of.
A lot of comedies are saying that things hit the wall and start to hit the wall in March really really fell out of bed in April but towards the end of April and into May they started to see some.
Some kinda lift on their sales weekly basis or are you kind of experiencing that now and could you maybe share some of that magnitude or what happened in March what happened in the first two weeks of April and subsequently where you are what's what's transpired since then.
Yeah March the the last two weeks of March.
You know were.
Not as visible because we had such a great quarter going up into those two weeks.
April is when we really started getting some some really good data.
AC age in April.
Was down 7% as compared to last year on the transactions, but 40% down on returns which.
You know.
[music].
Which equates to probably about 15% less revenue.
Tracy age.
The thing the.
Dennis portfolio, we were experienced $10 million lesson processing.
In April.
Which is about 200 to $250000 in revenue.
Okay.
And so.
No. It's not anything is really scary, because we know what it's going to be turned right back one.
And again, we're being.
We're very cost conscious with our money on during this time here.
Okay and then just a question for Greg are you going to be running the payfac out of San Antonio or you're going to be moving up to Nashville.
No I physically will or reside in San Antonio all be managing that business unit from here with Oh frequently and visits as necessary, but it's a this is where all office from.
Okay, Gary don't can hit the payback operations always been at San Antonio just sales and marketing has been.
Nashville, Okay. So the so that's what that's what my next question is gonna be in terms of your sales and marketing.
Who has the relationship with the I asked me that you're selling to is it your individual salespeople.
Yes, and then partners that we work with that we have relationships with as well.
Okay. Thank you I'll, let somebody else.
The next question is from Brian Kinstlinger with Kinstlinger. Please go ahead.
Oh, Hi, everyone. This is Jay.
Volumes during April and early may compared for pay back and separately the entire business.
Well, jackup, where you're from AGP not from Kinstlinger, but I'm pretty sure.
So your question is Payfac volumes March versus April.
Yeah, sorry no.
<unk> April versus early May.
Well it is.
We really don't have much early data represent may but I can tell you. The April was almost identical to May I mean April was almost identical to March and payback.
Okay.
And right and then can you speak to the pipeline for pay back and how coven 19 may lead to delayed customer decisions installation.
Yeah, there are certain I ask fees that are on track for full implementation, but those for example on a property management role. We've got one that manages inner city parking and obviously, that's being majorly affected so about implementation well.
Structurally is happening monetizing that implementation is gonna be slower so that'd probably be though the best example, I could use but as I referenced earlier the E visit or the telemedicine is.
It's going on very well now.
Okay, and you talked a bit about dentist optometrists being particularly hit hard in terms of transaction volumes can you talk little bit about other segments that might offset this.
Well, there's there's only four segments that got hit that we have.
Any type exposure to.
First collectively in our credit card processing.
It is optometrists and veterinarians.
Those are retail customers were cards are present this wipe them there.
And those businesses were primarily close some of them.
Did have telemedicine veterinarians.
Still open on a partial basis, but the net effect of it was to in April we process $10 million less than we did in March.
For that segment.
The other segment was in our financial institutions.
Usually in bad times, there's more consumer loans that occur and that's what we had predicted.
This case they came to a stop.
And not only the they're not initiating new loans.
They offer deferrals on payments.
So because of that are a CH volumes were down.
Like I, just told Gary they were down 7% April as compared to last year.
Yeah, and then any other segments that maybe offset this that had been is yes.
Yes, prepaids up RCC remote check capture is up Pinless debit is up.
In the case of RCC in Pinless debit those are kind of AC h. alternative products and both of them or had nice gains in April over over March.
Okay, and a as payfac volumes grow should we expect gross margin or revert closer to 20% Kevin critic yet in the margin credit card processing to courtesy H. and other services.
The payback.
Our any credit card volumes.
Will cause gross margins to go down.
But as prepaid goes increases that caused the margins to go up.
Our IC age businesses like 60% gross margins so any taken that so it really depends on the mix, but if we were.
To give you.
For example, if we were at a double a credit card traffic next quarter, which.
Actually isn't going to happen.
Those margins would degrees and they would be closer to 20.
And I would just add that you know really.
We did see some significant improvements in prepaid margins, which.
You know typically you would expect to see some.
Pressure from incremental credit card business, but in this quarter. We you know clearly offset that with increases in prepaid margins.
Okay, just two more permit I can you talk to.
Can you speak about liquidity on the balance sheet I know you've received government loan is there any other plan.
Just to strengthen.
We are you know if we look at acquisitions, we potentially raise money, there's a lot of properties out there.
As you can imagine.
And we're looking at some.
All right and lastly, Baden with a visionary buying a fact bridges murders is solid catalyst for your company can you talk about what gives you and should give investors confidence that Greg is the right person to lead the next phase of growth.
Yes.
That's a fun question. So first thing is the company has got to handle on it and then Payfac was built in San Antonio and it continues to be operating in San Antonio.
They know is definitely a visionary and we love them.
But it's he got it to a point, where he was able to handed off to us and Greg is a very seasoned leader and he is going to help excelled in Nashville team to the next level.
Greg is run companies, a lot bigger than our company and Anna and as a public exactly.
Perfect. Thanks, everyone.
Okay.
The next question is from Barry Sine was Barton capital Securities. Please go ahead.
Hey, good evening, gentlemen, I dialed in.
So hopefully I'm not repeating anything first of all I wanted to zero can a bit more on E.
And the question Yeah round the question I'm thinking about a potential severe weakness coming up in the economy with unemployment levels, 15%. So I'm assuming that return checks all have much I believe that has much higher revenue.
Our transaction, obviously that down in the March quarter down even more going forward.
Hi return checks.
Trend.
Compared to result in the economy does a weaker economy and do see higher return Jack transaction, and maybe you could that kind of update us on your economics. When you do a return check transaction.
Yes.
Weaker economies do create more NSS I mean, it's just it's obvious right.
What didn't occur in April.
[music].
Was that the our financial institutions, we're offering deferrals, if they didn't offer deferrals.
But can almost guarantee you that our return check processing would have been higher than it was last year.
The economics on a return check.
You know.
We.
On average charge about $2 something $3 and it cost us about 50 cents. So.
It's really good margin business.
Any other parts of the business that perform well inversely to the economy.
Yes, and so our return.
Return check conversion processing business is already experienced nice growth, that's where lenders that want to process payments outside of they see age.
They're worried about the transactions coming back so.
Part of our business going really well pinless debit as an alternative to AC age where they they accept payments for loans.
On debit cards only.
It's been doing really well and.
And you know prepaids been doing really well as well.
Okay, and then I wanted to switch gears any question on liquidity you talked a for a second about acquisitions. It sounded like there was something you were kicking the tires on in the first quarter you decided not to go forward on could you update us on what.
Sure for any financial parameters are in terms of looking at acquisitions and they have to be accretive would you take on that and so on and the strategically are you looking for areas of the business you're already in other areas of the.
Payments processing, the you're not in potentially that you're looking at getting into how should investors think about your profile for M&A, you're still open the M&A, what what has changed and what your profile.
Yeah, what does the deal we were looking at was was accretive as profitable company.
And it was within our industry and.
You know how to cash component of stock from Boenning.
[music].
And that business just got affected by cobot, so that when they re vive one day.
But.
Right now we assign the probability that it probably isn't so we went ahead and accelerated the prepaid or the depreciation on the acquisition, but anything we do is going to be accretive it's going to have synergy through people's people were products or or industry vertical.
And that will be complimentary to our existing business lines that we can cross sell into.
Okay, Great update thank you gentlemen.
Thank you Barry.
Your next question is from Jon Hickman with Ladenburg. Please go ahead.
Hi.
Hi, John.
Hi, I guess.
Wondering if I could follow up a little bit.
Leadership team.
For you to come up with somebody so quickly with its in the works for a number of months.
No.
We Greg we're already at the company and he was helping us with that acquisition that we stopped.
And he was going to leave that company.
And.
He was available when we needed.
Okay. Thank you all my other questions have been asked and answered thanks.
Thanks, John.
The next question is a follow up from Gary Prestopino with Barrington Research. Please go ahead.
Yeah.
I don't know this question May have been asked I've been writing down stop talking but in terms of your your cash burn was $400000 in the quarter.
As you go through the rest of the year, you're still investing and pay back in a lot.
You know you basically with the cash that you have on a trailing 12 month basis you'd be out of money out of cash on the balance sheet. So maybe can you address or what you think your cash flow your cash usage would be as we go through the year here.
Yeah first thing, where we had some onetime stuff in Q1 that we do you know we're talking about that acquisition the didn't go through.
Right.
In Q1 is also a higher expense for us just because we have our audit that we go through so we have tons right Eagle and other expense. So Q1 is not our our baseline.
I'm sure.
And Tom do you want to provide a little more tailored to the.
Yes, I mean, I guess you know the good news is you know we got the loan from the PPP and you know obviously, there's the potential for some of that too.
Yeah, you forgive which will help us from a liquidity perspective, and I think you know the first quarter really bodes well for us in the sense that you know we saw significant improvements in prepaid margins you know Houston is signing in lot of new you know new deals that.
You know should continue to drive that revenue up and.
So that thatll be helpful. And then you know the expectation is that a you know payfac volumes will continue to increase which again, we saw all you know very nice.
You know improvement in gross margins. There. So you know we're we're obviously you know doing the right. The things that we can share you know get near that cash flow breakeven or two to turn positive.
Okay could you just maybe explain for us the mechanics of that PPP.
Loan my understanding is that if you pay you 75% of that loan.
Hey payroll.
Forget is that correct.
Yeah, Gary it's just it's way more complicated than I can as simplify and just a few minutes, but there is a cap that.
Payroll has to be at least 75% there's some other kickers.
I think I think we did it we did good job of you know estimating it and.
We you know, although we haven't really fully determined because it's over an eight week period, but are you know we still relatively comfortable that you know there's the potential for you know significant percentage of that loan to be.
You know potentially forgiven, obviously yesterday there was a some additional disclosures came out that or you know said that you know our loan was under $2 million and <unk>.
And then stages provisions that came out as a part of that will you know will play by the rules.
I will document everything that we do and.
Hopefully that'll turn out that.
You know there there will be a positive impact for the company.
Yes, that's that's what I'm kind of getting out of that Dr. from the standpoint of how you book this on the income statement.
Obviously, the loan is for given that it.
Could be either it.
Actually reduces your estimate today or is there a contra a addition to through rapid you up or whatever you have for payroll expenses that are coming from the PPP.
Gary I'll be I'll be honest with you I've listened in on a lot of ER and and actually Houston may have some information on that not particularly as it relates to I mean, obviously the accountants are no discussing that regularly and what I would say, it's like I don't know maybe I'm being opt.
Mystique that it's only a three stage process, but the first thought process is getting along the second process is figuring out how the.
You know reporting and given this works and the Accountants are you know keeping up with all that and you know they really haven't provided me the guidance. It I can say one way or another in terms of okay. That's all that that will be reported at this point you know the they seem to have flipped that in what they're saying is.
That you know if there is forgiveness you can't take you can't reduce the you know.
You have to pay taxes on what is forgiven and they haven't really got into you know what is what's the accounting aspects of that.
Okay.
And then lastly for Usten.
What.
You see would be impacted the fan card business that you have.
What we're hearing is that there's real potential that either college football season will be cancelled and or college football season will occur, but there'll be no. One in the stadiums you'd have you given it any thought.
You know I have to be perfectly honest with you the.
Portion of our revenue that's for late into the Sandguard program.
You know is not necessarily significant.
Okay.
So yes.
It wouldn't impact.
Mr that way as the short answer and then.
The other side of that is that you know our contract you know on these custom programs.
You know ensures that we're going to receive a minimum amount of revenue even if they are activity goes down and that's because you know these programs. These kinds of programs are you know operationally intensive or to maintain advantage. So.
Yes, there's there's kind of a floor on that anyway in terms of us in terms of our revenue on on a program like that okay. Thanks, a lot guys.
Thanks, Gary Thanks, Gary.
Thank you Gary.
This concludes our question and answer session and the conference is also now concluded. Thank you for attending today's presentation. You may now disconnect.
[music].
Oh.
[music].
Oh.