Q3 2021 Usio Inc Earnings Call
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Good morning, and welcome to the U C O earnings conference call for the third quarter ended September 32021.
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A replay will be available shortly after the end of the call through September 25th 2021.
I would now like to turn the conference.
Hi, Beth.
Our relations. Please go ahead.
Thanks, Sarah and thank you everyone for participating today.
Welcome to <unk> third quarter 2021 financial results Conference call.
The earnings release, which <unk> issued yesterday after market close is available on the company's Investor Relations website.
Oh Dot com.
Investors under news on this call today are Louis Hoch, President and CEO, Tom Jewell, Senior Vice President and Chief Financial Officer, and Houston Frost Senior Vice President of prepaid services.
Management will provide prepared remarks, and then we'll open the call to your questions.
Before we begin please remember that comments on today's call include forward looking statements forward looking statements can be identified by the use of such words as estimate anticipate expect believe intend may will should seek approximate or plan or the negative of these words and other similar words and phrases.
Looking statements by their nature involve estimates projections goals forecasts and assumptions and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward looking statements.
Cleaning risks related to the COVID-19, pandemic and its effect on the economy, the realization and the opportunities from the IMS acquisition management of the company's growth the loss of key resellers.
The relationships with the automated clearing House network Bank sponsors third party card processing providers and merchants the volatility of stock price the loss of key personnel growing competition in electronic commerce market. The security of the company's software hardware and information.
Clients with complex federal state and local laws and regulations and other risks detailed in the company's filings with the SEC.
These forward looking statements speak only as of the date of this conference call and should not be relied upon as predictions of future events, you see oh expressly disclaims any obligation or undertaking to update or revise any forward looking statements made today to reflect any changes in <unk> expectations with regard there to or any other changes in the events conditions or.
Circumstances on which any such statement is based except as required by law.
Please refer to the company's SEC filings on its Investor Relations website for additional information with that I would now like to turn the call over to Louis Lewis.
Okay.
Yeah.
Thank you Joe and welcome everyone.
Greg Carter senior Vice President of payment facilitation.
Is unfortunately, unable to join US this morning, due to having minor back surgery today.
He will be back for our next call in the courses available next week for any follow up questions you may have.
It was another record quarter with record revenues and we generated positive cash flow and profits for our second consecutive quarter.
Revenues for the quarter were up 94% to $15 $8 million compared to the same period last year. This was our fifth consecutive quarter of sequential growth.
Revenues were up strongly in all of our business lines with prepaid more than doubling.
And the age of 81% and card growing 28% compared to last year adjusted.
Adjusted EBITDA was.
$1 2 million in the quarter, which was our fourth consecutive quarter of positive adjusted EBITDA clearly revenues have scale and we have achieved operating leverage to the point where were we.
We are now generating positive EBITDA on a consistent basis.
Furthermore, another quarter of positive operating cash flow, we are now able to build our cash balances while simultaneously investing in our growth initiatives.
With three strong quarters in the book for 2021.
We are we are once again, raising our guidance for the year and are now expecting revenue to exceed 60 million for this year.
With an increase of at least 88% over fiscal 'twenty 'twenty.
With the growth.
Growth in the quarter growth in the quarter was attributed to strong transaction processing volumes.
Total dollars processed were $2 1 billion up 145% from a year ago.
And was our second highest quarter ever.
Transaction dollars.
Volumes have already doubled.
Have already more than doubled last year's total.
And we are well on our way to process nearly $9 billion for the year in.
In fact, our three highest quarters of processing volumes, where all of this year.
We are doubling down here growing our sales force to capitalize on the growth opportunities before us and maintained the strong momentum.
And as.
As an up and coming growth oriented Fintech company, we are attracting some of the industry's most talented and experienced salespeople.
In card both dollars processed in transactions set all time records as well as total dollars loaded on prepaid cards.
<unk> results were primarily attributed to strong performance in our paper business line.
A C. H also had a great quarter with electronic checked dollars processed.
<unk> hundred 82% compared to last year.
And in our output solutions revenue.
Was $3 6 million in the quarter continued to run well above what we expected headed into this year.
Since adopting our multichannel distribution strategy focused on serving diverse end markets. Our performance has been steadily improving.
This was another quarter, where we were able to generate attractive returns by growing the business.
All while keeping a tight rein on costs.
Our goal to continue to leverage our increasing scale into greater returns.
We provide business line reporting so let me offer some high level comments by business lines.
A C H is on record record pace.
As expected volumes were down somewhat.
<unk> this quarter due to anticipated softer crypto currency market.
Revenues were nevertheless, up 81% compared to the same period last year as electronic transaction volumes.
Was up 86% return check transactions processed was up 100% and electronic check dollars process rose, 182% compared to last year.
Which continues to be one of our most profitable businesses and we now expect it to grow over 85% this year.
In the first six weeks of this.
Fourth quarter, we have seen the crypto currency market again heat up to the levels. We experienced in the second quarter. We were hopeful that the current enthusiasm leads a C. H to post record results in Q4 in the past we've mentioned our expanding relationship with the Voyager did.
<unk> a leader in the crypto currency market earlier this year, we announced the partnership with them to offer UCL merchants the ability to accept crypto as a payment.
Life UCL Voyagers innovative company a great example is our recent partnership with Mark Cuban Dallas Mavericks, which led to tens of thousands of new accounts, all being funded through E. C O technology.
We have many exciting new partnerships planned with the fast growing Voyager and it's not just an AC H so stay tuned.
Our credit card business also had a record quarter card transactions processed were up 76% while dollars process rose, 43% compared to the same quarter of last year with payback, leading the way.
We believe this will be our first 1 billion.
Year in processing volume for our card business.
In some ways prepaid was the star of the quarter growing revenues by 101% compared to the same period last year and setting a new quarterly load volume record at $57 million.
Over the last year and nine months prepaid is engaged with nearly 200 government municipal charitable and related entities to support programs ranging from cash to cash for trash to constant pledge and similar guaranteed income programs to the new.
Covid incentive programs in major cities, such as New York, Houston and others.
In fact, the new.
New York City Covid incentive program has now dispersed over $50 million.
850% increase from the original $20 million budget.
Houston Frost will talk about some of these new programs as.
As well as some innovative new technologies, we'll be introducing in just a minute.
Finally output solutions had another strong quarter not unlike our other businesses is now clear that output solutions will have a record year far exceeding our original expectations.
Our bottom line is doing equally well, we generated $1 $2 million and adjusted EBITDA and delivered positive adjusted cash flow this quarter and just the last two quarters, we've generated $2 $5 million and adjusted EBITDA and more than $1 $6 million in positive cash flow as we continue to scale.
We believe we can drive healthy contribution margins that we can leverage into attractive returns through disciplined.
Expense management.
While we are investing in some of this cash to build the businesses add talented engineers sales professionals in strengthening our customer support functions.
For a large upcoming prepaid card program, which we have yet to announce.
We are strategically adding to our cash position. So that we remain more sufficiently funded to support our ongoing growth initiatives.
These are exciting times at UCL, where we're well on our way to record a year, where we were almost doubling the size of the business, while delivering significant bottom line improvement. This is creating a wealth of opportunities in this dynamic fintech payment industries of course as always I must caution to you.
Are you that the results are contingent on the contingent continued improvement in the overall economy and measurable sustainable a measure of sustainable or renewed excitement in the crypto currency marketplace and the recovery of the consumer lending industry.
Those precautions aside we turned from a from a face facing a stiff headwind to enjoin the brisk tailwind in all of our businesses.
Our strategy to provide diverse payment channels like a C. H card processing prepaid and other services enables us to capitalize on the industry growth opportunities, while effectively mitigating any weaknesses that may arise in any one of any one market.
That's been a key to our success now we intend to continue to scale our businesses.
And take advantage of the operating leverage that we've created to strengthen our franchise and build value for our shareholders.
Now since Greg is not able to join us on the call today.
Give you more details on his business unit.
Looking at our card segment. It was another record quarter total dollars processed for the quarter were up 43% with transactions processed up 76% compared to the same period last year. This led to a 28% increase in revenues growth was especially strong.
And pray fact, where revenues were up 121% year over year.
I am pleased that our card business was profitable for the second quarter, the second consecutive quarter with three quarters of the year in the books, we believe that for the first time ever.
Annual card transaction volume.
Will exceed $1 billion and will increase approximately 45% over 2020.
Furthermore October was our best month ever in terms of transaction volumes processed and we expect that acceleration to carry forward.
Success continues to be driven by our winning formula our three growth engine strategy, we are adding new Isps those Isps are growing organically and are continuing to further penetrate their merchant base and as those merchants are growing year over year now more.
So than ever as inflation drives up almost all dollar transactions on the new account side, we continued to add new Isps and related merchants.
An example is booster hub and ASB catering to school booster clubs.
What makes booster hub such an attractive addition to our portfolio as it is a greenfield opportunity, where we're where we are they are integrated electronic payments partner. So every school that implements booster hub will automatically.
Be processing their payments with us. This is a perfect example of our leveraged distribution one too many sales model.
One sale to booster hub could effectively result in sales to thousands of schools around the country.
Driving more ISP relationship ships is still one of our top priorities and we've made.
Some significant progress in creating opportunities.
One that has continued to strengthen our professional business development team marketing is continuing to improve effectiveness through search engine optimization inbound lead generation outbound productivity and lead nurturing for instance, our CEO and brand awareness is showing up.
Showing the dramatic improvement so far this year visits to our website are up 135% with page views, increasing 60% to 61% over the same period last year, our payment facilitation page is the most visited page on our website.
Providing further validation that what we provide is desired by the ISP community to solve the pain points related to payments that they are experiencing.
So our brand and the product level visibility is greatly improved and just the last year.
Let alone compared to several years ago.
We are also achieving our success in penetrating the merchant base.
Existing Isps.
What we have we have come to term.
Conversion rates. This has increased 57% a substantial improvement from a year ago more than a double impact as an example, a large healthcare organization that originally signed with us years ago.
Had long been dormant.
Sure.
Due to their internal priorities.
Over the last several months due to our convergent and the initiative.
We have seen them board as much as 75, new merchants each month.
Another example is app close the relationship we announced earlier this year activity was very slow after the initial implementation.
At close has been a focus of our efforts.
That we've been telling you about to encourage merchant engagement and adoption.
And then last for weeks, they've they boarded a significant number of new legal offices.
That are actually processing to the point, where it's become and viral.
Finally, with the economy growing again can we expect merchant volumes to naturally increase.
Furthermore, if their pricing just keeps up with inflation theres a good chance that we will naturally drive inherent at 3% to 5% increase in and dollars processed across the entire portfolio with associated increase in revenues one of the most attractive aspects of our business is reoccurring reoccurring nature.
Once a merchant processes and if you serve them well the attrition is decision essentially non existent that is why we're also strengthening our customer support support capabilities were consolidating what had been separate customer support organizations for our various business lines into one.
Unified supports service. The end result is more robust more effective and more efficient back office. This is another illustration of our continued maturation of <unk> and how we're ensuring to meet our own service delivery commitments.
Finally, we remain encouraged by the progress we've been achieving with our new electronic Bill Presentment and payment solution. We've developed in conjunction with UCL output solutions.
The sales professionals, we recently hired to target enterprise level opportunities are uncovering strong interest and have already signed several agreements we expect to bear fruit in the near near feature.
<unk> has been a leader in this space.
Since the emergence of payment facilitation as a service model, having introduced the payback in a box back.
Back in 2015. Since then we have tested and galvanize the platform fully commercialized it and launched it over a little little over two and a half years ago long before anybody else. In fact, many competitors are discovered is just too difficult to convince Isps to become registered.
Paybacks. So they are now offering what analysts like credit Suisse call payback light or manage payback versions. Again. This is this was our strategy from day, one to provide integrated turnkey payback platform for Isps seeking to monetize paper to monetize payments blow.
Through their software applications without any of the upfront costs and the risks associated with becoming their own payment facilitator compared to the market as a whole we've had a head start on on the learnings key findings and best practices are implementation experience has taught us what what breed <unk>.
SaaS and what yields success, we've made the mistakes and we have learned from those mistakes. The competition just does not have the experience or the knowledge we do.
And while there are many that are intimidating.
Emit imitating what we have built and brought to the market.
We have always been innovators blazing the trail with our recent introduction of crypto currency as a form of payment being the latest example of that pioneering spirit.
Like our business as a whole we recognize the ongoing.
Risks that Covid represents.
So it's been another quarter of steady progress as we stick to our game plan and we continue to implement our strategy. Our car business is firing on all cylinders in gaming and scale that will facilitate even greater innovation and improved leverage the hard work invested over the few past years is now.
Bearing fruit and is our intention to build on that success and achieve even greater accomplishments with that I'd like to conclude my opening remarks, and turn the call over to Houston Frost Senior Vice President of prepaid services.
Thank you Louis and thanks, everyone for participating in our call. This morning.
The prepaid business had another great quarter with revenue up 101% compared to the same period last year accelerating from 82% in the second quarter and 61% in the first quarter.
In the third quarter card purchase volumes were up 18% and card transaction volume card transactions.
A very strong 115% versus last year.
In the third quarter total dollars loaded on prepaid cards exceeded $57 million.
A new quarterly record and October was also another very strong month.
As you've heard before.
Yes.
For me and from Louis This morning, we'd become the leader in supporting the various funds disbursement needs of numerous numerous governmental municipal social charitable and related entities.
Since the start of the pandemic, we have been a prepaid program manager on approximately 200 programs, which is a nice increase.
From the 150 plus programs, we've reported to you last quarter.
In contrast to last year's heavy concentration of pandemic relief program. These same cities municipalities and other.
Nonprofit and governmental entities are now turning to us for a host of other needs, including a number of high profile covenant incentive and guaranteed income programs for the largest cities in the country, including the city of New York.
Houston and many others.
The strong relationships forged with these organizations during the early stages of the pandemic has opened up opened up myriad new opportunities supporting the many other funds disbursement needs. They manage and these tend to be longer duration programs that can grow over time.
For example, the New York covered incentive program, which initially started out is $20 million has already surpassed $50 million. This is one of the reasons, we had record card mud in the third quarter and a strong October.
One of the main.
Reasons. These organizations keep coming back to us for additional programs is because they really appreciate the flexibility convenience and efficiency of our virtual card.
For that reason, we are developing new product enhancements to create an industry, leading consumer choice platform, leveraging <unk> broad product portfolio from AC H, two physical and virtual card and even a physical check.
We want to capitalize on all of our rails to offer our users the ability to choose a payment channel that best suits their needs.
This is just the latest example of our emphasis on leveraging our proprietary technology.
And combined services to stay ahead of the competition.
We also want to build a presence in other markets and have recently added new business development staff to capitalize on the unique prepaid solution. We can bring to the fore prop for profit in other markets. There are already some interesting opportunities in the pipeline that would help us establish a broader found.
Nation in these markets.
Beginning in the spring of this year, we began recognizing in activity fees and breakage on cards issued and loaded last year and as our portfolio grows we expect to see a steady stream of older programs essentially maturing quarter after quarter.
These fees and revenue following suit pre.
Prepaid is on a record pace through the first nine months of 2021 and contracts that are generally short duration of our 2020 pandemic relief programs.
And again as illustrated by the growth of the New York City Covid incentive program. Many of our newer programs have the potential to be bigger and last longer.
More importantly, there has been.
<unk>.
A dramatic increase in our opportunities with many of our existing relationships and we are also investing in growth outsource outside this core market and new solutions.
For example, the consumer choice platform I mentioned earlier.
The market opportunity is vast and dynamic which is the perfect environment for a nimble innovative organizations such as <unk>.
With that I'd like to conclude my remarks, and turn the call over to Tom Jewell, Our senior Vice President and Chief Financial Officer to discuss financial.
Results in greater detail Tom.
Yeah.
Thanks, Jason and welcome everyone. Thanks, again for joining our call today and your interest in UCL I'm going to conclude today's prepared remarks with a brief review of our third quarter financial results before opening the call to questions in summary revenues for the quarter ended September 32000.
21 were $15 8 million, an increase of 94% compared to the same period last year on an organic basis revenues increased 51%.
Again prepaid was our fastest growing business in the quarter with revenues up 101% from the same quarter last year, driven by a 115% increase in transaction volume. We also generated rapid growth in <unk> and complimentary services, which was up 81% as electronic check transaction.
Volume was up 86% recurrent return check transactions processed doubled and electronic check dollars process rose, 182% all compared to last year.
Revenues in our credit card line were up 828% with card transactions processed in the quarter up 76% from a year ago, while dollars processed rose, 43% growth was especially strong in payback, where revenues were up 121% year over year.
And the December 2020 acquisition of output solutions contributed $3 $6 million to revenues in the quarter.
Gross profit in the quarter were up 134% to $4 million with gross margins expanding 430 basis points to 25, 5% from 21, 2% in the same period a year ago gross margins are benefiting from our growth, which better leverages, our direct fixed <unk>.
<unk> as well as a more favorable mix of our more profitable businesses, especially ACTH, which is our most profitable business segment.
For the quarter total other selling and general administrative expenses were $2 8 million essentially flat with the second quarter of this year and up 44% from the year ago quarter, reflecting the incremental output solutions overhead and our continued investment in prepaid and payback growth initiatives.
Other SG&A expenses should be at a moderately higher level in the fourth quarter, reflecting continued investment in the business to support our growth and maintain our high service levels. The.
The year over year increase in depreciation and amortization in the quarter reflects the amortization of the customer list acquired in the purchase of output solutions.
In the third quarter, we had positive operating income for the second consecutive quarter with operating income increasing $1 1 million from the same quarter a year ago.
Again this was our fourth consecutive quarter of positive adjusted EBITDA, which was $1 2 million in the quarter, a $1 4 million dollar improvement over the third quarter of 2020.
We also recorded positive adjusted operating cash flow in the quarter and now have generated $2 million of positive adjusted operating cash flow over the first nine months of.
2021.
Adjusted operating cash flow excludes.
Excuse me non operational changes in merchant reserve funds prepaid card load assets customer deposits and net operating lease assets and liabilities.
For the quarter, we reported GAAP net income of 141000 or <unk> <unk> per share compared to a net loss of $900000 or a negative <unk> <unk> per share in the third quarter of last year. The company remains in strong financial position cash and cash equivalents assets.
September 32021 totaled $5 9 million up $900000 over the first nine months of the year providing.
Providing a quick snapshot of year to date results revenues were $44 5 million up 95% from $21 6 million from the same period last year all lines of business were up double digits on top of incremental revenues from output solutions of $10 9 million organic.
For the period was 47%.
Gross profits were $11 1 million up 127% from $4 9 million in the prior year period.
Gross margins for the first nine months of 2021 were 24, 9% versus 21 six in the prior period and above our original estimates that margins would be in the low twenties range. This year.
Adjusted EBITDA for the first nine months of 2021 was $2 7 million versus the prior year loss of 1 million an improvement of $3 7 million on the bottom line. The net loss for the first nine months of the year was 360000 compared to a prior year loss of $3 1 million and improved.
<unk> of $2 7 million.
We've had three strong quarters, resulting in a record year to date results revenues are almost double those of a year ago and profitability has significantly improved this should provide the liquidity and financial strength to support ongoing investment in our growth initiatives to fund the operations.
And to undertake selective accretive acquisitions consistent with our growth strategy.
It's been a great first nine months of the year.
That concludes our prepared remarks for today.
Wed now like to open up the call for any questions.
Thank you we will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If youre using a speakerphone please pick up your handset before pressing the keys.
John Your question, Please press star and Tam.
At this time, we will pause momentarily to assemble our roster.
Okay.
Our first question comes from Gary <unk> with.
Barrington Research. Please go ahead.
Good morning, everyone.
Several questions here and jumping around a little bit. Louis you said you were going to be adding to your sales force did I get that right.
And very early in your opening remarks, and if you are how many are you, adding and what segments are you going to add them.
So.
We've added four salespeople.
<unk>.
So this quarter and they are all industry.
Our experienced people.
And we're going to be.
Announcing some in the near future and give you some more clarity on where they came from.
But.
They are all three.
Three out of the four will be focused on the payback.
And one will be focused more on prepaid and kind of emerging markets.
Okay.
Alright, so so.
Going forward that as these people start getting ramped up that's definitely going to be impacting the.
Actually what you call other expenses correct, because you're adding four people there is that a correct assumption.
Well it'll be SG&A, but but if they do their job, it's gonna be hopefully impacting topline and bottomline right.
Sure No I was just trying to get an idea.
The magnitude of that.
In terms of.
The credit card revenue.
What percentage of that is now.
Generation by payback.
Yeah, we haven't released that number Gary I can tell you that we don't we don't add any traditional credit card processing, we'd have an engineer so.
Almost all of the new revenue generated by.
Credit cards as payback related.
Right.
And then lastly, and I'll, let somebody else get in.
Given what you're doing for Voyager.
How are you working on other relationships with crypto exchanges.
Yes, but we havent announced any.
Okay. So nothing nothing has really been signed as of yet you're just working on them right.
That's.
Yeah, we haven't announced anything yet.
Okay. Thanks.
Our next question comes from Barry Sine with Spartan Capital Securities. Please go ahead.
Hey, good morning, and congratulations on the quarter.
During this quarter as our earning season.
It's very surprised Mastercard called you guys outlined the amount of projects that they're working on and so I know normally you wouldn't comment but now that they have.
Mentioned, you buy any can you give us any background or color on obviously mastercard.
Knows this industry pretty well so that's a pretty.
Important endorsement for them to a select few and then publicly disclose it.
Yeah.
Don't want to give too much detail on that yet because.
They didn't give too much detail, but.
They've definitely reached out to us and we're going to have for.
For engagement and and Mastercard chose us because of our partnership with them.
And that is a.
<unk> city.
The initiative.
So <unk>.
Fitness city.
So what they liked and us and they're going to be leveraging payments to us.
Leveraging.
Yes.
They announced that the magic of our maintenance related to.
Our.
Got.
Integration with <unk>, which is one of their new products. So that's a product they are quite excited about.
And I mean in general I would say our partnership with Mastercard continues to strengthen I mean a lot.
The visibility that.
Card issuing a prepaid card issuing liner business has seen.
<unk> has been related to.
Our very strong partnership with Mastercard and its now across.
Yes.
Several mastercard initiatives Youre going to continue to hear I think similar announcements.
Related to our strong partnership with Mastercard.
Also announced the city possible partnership I think.
A couple of quarters ago.
We really appreciate that relationship and we appreciate them mentioning us.
Related to the finish any integration.
So just to follow up on that sitting here as an analyst with an excel spreadsheet in front of me.
How should I think about revenue and then timing from that business. I mean, Mastercard is obviously very large and this is an important initiative for them any any help you can give us I'm assuming that at some point next year. One of your earnings calls you're going to call that out as a driver.
Revenue growth.
Well, Barry let me, let me be clear on it.
I'm not 100% sure on exactly what youre talking about but they did mention us.
<unk>.
Integrating <unk> product, that's not technically going to be a driver of revenue.
For us.
Youre going to hear about other partnerships hopefully in the near term or medium term that will be revenue drivers for us. So it's really hard for me to give you any guidance on that.
The very specific mentioned Youre talking about it had really a revenue driver per se.
If a product enhancement.
Then it's going to drive but there are several.
We are on we speak with Mastercard multiple times, a week and so it is a very strong relationship.
And.
We continue to be grateful for their support and their.
Our enthusiasm about our platform and I don't really have any sort of guidance I can give you related to.
Any mastercard comments at this time other than to say, it's a very strong and healthy partnership between the two organizations.
Okay, I think I've asked that pretty thoroughly thank you very much gentlemen.
Thanks Blair.
Our next question comes from John Heckman with lab.
Go ahead.
Okay.
I was wondering or Tom if you would elaborate a little bit on the gross margin.
Dynamics here you have <unk>.
<unk>, which is picking up and that's your highest margin business.
But then.
It seems like prepaid has really taken off.
Which maybe it's a little lower margin business, but now you're starting to get some maybe breakage there.
So what do you expect going into next year.
So gross margin line.
I mean, we're very fortunate with the.
Continued growth in <unk> H.
We've been hoovering around kind of the.
Pretty consistent 25%.
I think we will.
We will kind of be in that area and just as the mix suggests it will go up a little and potentially we could have a couple of quarters, where it might drop just a little bit, but I think I think we're in that range right now that.
That should continue.
Okay.
Thanks.
Thanks, John.
Again, if you'd like to ask a question. Please press Star then one our next question comes from Michael Diana with Maxim Group. Please go ahead.
Okay. Thank you.
Two questions for Houston, I'm prepaid one.
Louis said, you have more than 200 municipal and government programs.
Big number.
Can you give us some granularity on that have some of it Mike.
Damn different categories different types of programs and then secondly could you just remind us I mean your book.
I think it was 57 loads.
Two 7 million of loans this quarter.
What's sort of the lag.
Tween the time that shows up.
In the income statement.
And possibly breakage.
Yes, great great questions Michael.
The first part of your question just to clarify or using that 200 figure we're really talking about.
Municipalities counties.
Some stable.
Agency and nonprofits as well so we're lumping really all of those together and the general theme of what those organizations.
Using us for our direct cash assistance.
Programs and they really kind of.
Span the gamut of all types.
Cash assistance so.
A lot of US obviously got started with the pandemic, but the biggest growth area, we're seeing now.
Italy unrelated to that which are.
Guaranteed income programs in several of our programs of that nature.
A lot of these are pilot size and scale today are still big dollars in.
And there are also recurring dollar setup.
Family that can follow these programs will be on our two three even more years.
So I.
I guess, the general vein as direct cash assistance and when you when you kind of dive into more of the detail.
Of those it can be.
For a number of reasons right and you even consider in some ways the COVID-19 instead.
Programs that kind of direct cash.
And our sense as well, but.
Some of these are very specific so we have one organization that is supporting.
Single mothers that are enrolled in community college or.
State College, and they're actually running studies to see if it improves graduation rates.
So theres a lot of kind of R&D being done and it started with a nonprofit side of it and we really had the pioneer nonprofit.
But for guaranteed income come to us and so there's been a lot of were announced through that relationship and the comp implied but now the cities are moving into it and they are running pilot programs. So.
That's what that's what that 200.
Organizations are doing it's not it's not.
All for one reason like a covert incentive or anything like that but it's generally cash assistance going directly to an individual.
And we're seeing that.
These programs are becoming.
More and more popular for nonprofits in cities as sponsor and run.
And we hope and we really expect a lot of the data that's being collected right now on on these guaranteed income programs are going to are going to show that they are quite effective. So we think it's going to continue to grow I think it's a great space for us to be building our mainland.
And I mean I.
I can give you examples of those types.
Could I just ask you one follow up on that.
Anything that's been passed in Washington already or that might be passed.
Could that increase these programs.
Yes.
It would be a trickle down type effect, meaning it would be federal dollars going to states state dollars going to <unk> and then going into these types of programs.
B, because what you're really seeing at least at this time.
They're very local.
Sense that it's a city wanting to support a very specific community within the city, so they're not being run by <unk>.
States or the federal government. So the answer is yes, but it's $1 get trickled all the way down you have half through the governmental hierarchy. If you will.
So it's not really a clear answer there, but right now these programs are really kind of focused at the nonprofit and steady maybe counting level.
They may expand in.
We will see where that goes but I think there's a lot that's going to be done more of a local level for the time being right.
Well, even to trickle from the sort of numbers that we're talking about could be big.
Yes, absolutely.
And about the lag between.
As noted in.
Yes, its generally.
13 to 15 months is when you start seeing that type of.
Revenue come in so.
When you look at our Q3 of 2020 was our best quarter in load volumes last year.
It was our best quarter ever until this quarter and so that's why the comp is kind of difficult we still saw an increase of 2% but.
A lot of the revenue growth was.
It was driven by last year's volume.
I'm not saying the majority because we didn't have a lot of card orders come from the city of Houston, and New York et cetera.
But.
Point being is that that income that fee income. If you will was generated by Q3 of last year. So.
It's 13 to 15 months is when you really start seeing that those dollars kick in okay. Great. Thank you very much.
Michael before you get off low dollars are important because.
We do generate a lot of money from spin.
Right. So right you have our money on the cards to get spent a lot of it gets spent but a lot of it gets put away for what what.
Houston was describing for 13.
<unk> thousand 14 to 15 months later, so getting money on the cards as kind of step one and then.
It's very exciting to see and all of that money go on the cards and knowing that we're putting some away for next year and we are.
Already experienced that this quarter from last year and and.
So you want to see those LOE dollars fees as much as possible yes.
Our data for <unk>.
Q3 was our biggest quarter on spend dollars and that does generate significant revenue for a settlement.
It's less than 50% of revenue from card activity is going to happen.
13% to 15 months out, but I would say more than maybe 30% to 40% happens so youre still getting.
A good amount of revenue from the activity that occurs today.
Okay, great. Thanks, Houston Thanks Louis.
Thanks, Michael.
Your next question is a follow up from Gary <unk> with <unk>.
Research. Please go ahead.
Yes.
Houston in terms of when you are talking about breakage does that mean that the cards have expired.
And you are taking whatever level of funds are still on that card into your revenue.
That's accurate and that's really it's up to the client whether they watched that type of firms.
And so theres.
Theres breakage, and then theyre kind of inactivity fees.
And generally.
Yes.
With breakage, we are sharing a sizeable portion of that with.
With the client.
It's not necessarily 100%.
Gross margin or anything of that nature, there, but depending if it's a breakage car expiring car all the funds are debited from that account.
The first day of the month after it expires.
So that's what I was getting at it.
It is an actual event once the card expires youre not estimating any youre not doing any kind of estimate of what breakage could be and booking that.
No were never doing that we're always looking at as we take it and okay. Thank you.
That's been about that.
Thank you that's why I wanted to find out thanks.
Okay.
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