Q4 2021 Usio Inc Earnings Call
Ladies and gentlemen, thank you for standing by the conference will begin shortly please continue to hold and thank you for your patience.
[music].
Good morning, and welcome to <unk> earnings Conference call for the fourth quarter ended December 31st 2021.
All participants will be in a listen only mode.
After today's presentation there'll be an opportunity to ask questions.
To ask a question you May Press Star then one on your Touchstone P pack.
Tal your questions. Please press Star then two.
Participants of this call advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes.
A replay will be available shortly after the end of the call through April 2022.
I would now like to turn the conference over to Mr. Zhu Hoffman Investor Relations. Please go ahead.
Thanks, operator, and thank you everyone for participating today welcome to use U S fourth quarter and fiscal 2021 financial results Conference call. The earnings release, which UCL issued yesterday. After market closed is available on the company's Investor Relations website at <unk> Dot Com backslash investors under news.
On this call today are Louis Hoak, President and CEO , Tom Jewell Senior Vice President and Chief Financial Officer, Greg Carter Executive Vice President of payment acceptance and Houston Frost Senior Vice President of prepaid services management will provide prepared remarks, and then we will open the call to your questions before we begin please remember.
The 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 forward 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, including 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 compliance with complex federal state and local law.
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 are expressly disclaims any obligation or undertaking to update or revise any forward looking statements made today to reflect.
Any change in <unk> expectations with regard there to or any other changes in 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 and with that I would now like to turn the call over to Lewis Lewis.
Please begin thank you.
Yes.
Thank you Joe and welcome everyone I am pleased to report it was another record quarter that led to another record year for Ucs.
For the quarter revenues were a record $17 4 billion in.
And 86% increase from a year ago, and we achieved our fifth consecutive quarter of positive adjusted EBITDA of $1 3 million.
We ended the year with record revenues up 92% to 62 million exceeding our recent the most recent guidance.
And leading to adjusted EBITDA.
$4 million.
Which is an increase of nearly $5 million during fiscal 2020.
We concluded the year with one of the strongest balance sheets of it.
With cash over $7 2 million representing the increase.
Over $2 million in 2021.
Once again, we experienced outstanding growth across all of our business segments.
Card processing prepaid card issuing and output solutions.
As a result total dollars processed in the fourth quarter was $2 9 billion.
215% compared to the same period last year, while total transactions were $11 3 million.
Both transactions and dollars processed achieved new quarterly records.
For the year total dollars processed nearly tripled up 184% to $9 5 billion, while transactions were up 94%.
235.
$35 3 billion again, both transactions and dollars processed were our annual records for our company.
We have on boarded a lot of new clients this year and by layering in these new newly acquired processing customers on top of our existing reoccurring revenues.
We're achieving scale and better leveraging our leading technology and efficient operational infrastructure.
<unk> remains to build a strong to build strong relationships and lever our multichannel distribution strategy to serve diverse end markets to expand the UCL franchise and build value for our shareholders.
We have a strategy of being a diverse and the industries, we serve as well as in the payment channels we provide.
And that and that strategy has generated a lot of growth and it served us very well and has also created a strategic advantage over other payment companies that serve specific industries or have less payment channels.
Additionally, we're nimble we executed at a high level and they're focused on customer relationships. Our target segments are those where we can add value and develop lastly in long term relationships, primarily in industries with non discretionary spending and reoccurring revenue.
So in addition to scale, we picked up momentum let.
Let me offer some high level comments by business line.
<unk> had a record year.
Great.
Sequential recovery in volumes in the fourth quarter as the cryptocurrency market.
Rebounded.
We added many new accounts and we saw uptake interactivity in our consumer lending industry segment.
Revenues in the quarter were up 93%.
Impaired to the same last same period last year with ACA H electronic transaction volume up 108% and return transactions processed up 94%.
The electronic check dollars processed.
200 <unk>.
271% for the year revenue was up 82% as electronic check volume was up 93% with a return check transactions process.
81% and electronic check dollars processed up 238%.
We expect another strong year in 2022 on the strength of our penetration of the cryptocurrency market, new accounts and steady recovery in the consumer lending industry, especially again in the first quarter of this year.
Quarterly growth could be a little uneven, especially into second quarter, when comparing versus a very strong quarter of a year ago, which was fueled by tremendous enthusiasm in the cryptocurrency industry.
Our pay Sac business fueled another record quarter and year and our card business as we achieved our first $1 billion plus year card processing volume.
In the fourth quarter overall credit card revenue was up 33%.
As dollars processed were up.
41% on a 47% increase in transactions.
<unk> card growth engine.
6% for the quarter and for the year overall credit card revenues were up 29% as dollars processed were up 42%.
76% increase in transactions.
We expect to see continued growth in our paper business as we continually add new Isps.
And those integrated software vendors, bringing on new merchants and those merchants continue to grow their individual businesses.
Prepaid continues to double.
Revenue was up 151% for the quarter and 107% for the year.
For the quarter card load volume for prepaid was up 32% or an increase of 200, 205% in transaction volume and a 55% increase in card purchase volume.
Total dollars loaded on prepaid cards exceeded $65 million.
For the year card load volume was up 32% on a 135% increase in transaction volume.
And a 41% increase in card purchase volume.
Total dollars loaded on prepaid cards exceeded a $184 million all record results for our company.
Prepaid continues to engage it.
With a growing number of various government municipal nonprofit and related entities to support programs ranging from cash for trash to the Compton pledge and similar guaranteed income programs, where now the processor and program manager for well over 200 of these card programs.
On the Horizon is a very exciting new card program with words, Voyager digital which has just announced the introduction of their prepaid debit card today, we process their AC H phases, and we're on the cusp of launching the voyage or prepaid card for them.
Mastercard that actually settles in U S D C, which is a crypto currency stable coin.
Currently Voyager has 3 million active users with dialysis on their account.
And we are overlaying that prepaid mastercard on those.
All of those customers.
So they can move money in and out of their crypto accounts.
Yeah.
We utilized to make purchases and interact with Atms.
Anywhere in the World Mastercard is accepted he.
Houston Frost will talk about this and other new prepaid card programs in just a minute.
Finally output solutions had another strong quarter, leading to a record year in which they far exceeded our internal expectations.
We continue to integrate output solution services into our electronic payment capabilities as we look to leverage our ability to provide customers with a full suite of payment capabilities from paper to electronic.
More recently, we've been successful in capturing a lot of large onetime print jobs, including printing new voter registration cards, where the state of Texas.
And we are driving this growth to the bottom line margins in both quarter and the quarter and the year were up.
From the comparable years a year ago.
While overhead was up in both periods were investing in our organization to support both our current and anticipated growth.
In 2022, we intend to keep the rate of our overhead below that of revenue.
And keep in mind that our customer acquisition costs are very <unk>.
Very low and as most of these costs are incurred by our customers such as the integrated software vendors we serve.
By maintaining low customer acquisition costs, we're investing these savings in human capital and technology needed to strength strengthened our infrastructure.
Currently we are investing in our growth and strategically adding to our cash position. So we remain more than sufficiently funded to support various ongoing initiatives in the fourth quarter, Voyager and innovative fast growing company and a great partner.
Reinforced our relationship with <unk>.
A million dollar direct stock investment in Louisiana.
Together with our own positive cash flow, we have increased our cash position to.
To over $7 billion, the highest in recent history with virtually no debt this should provide sufficient capital.
To implement our growth plans for 2022.
Our growing portfolio of reoccurring revenue provides an incredible amount of visibility into 2022, primarily due to our diversification strategy.
And large balances on prepaid cards, where we have visibility into the into future spoilage revenue.
Therefore, after raising guidance through fiscal 2000 and all throughout 2021.
Company continues to expect strong 18% to 20% growth in revenue in 2022, while we anticipate a continued positive operating cash flows and adjusted EBITDA.
Guidance is conditioned.
On their continued enthusiasm and the Fintech lending.
Crypto currency industries, and a favorable economy.
These are exciting times in <unk>, reflecting the success of our hard work and entrepreneurial spirit that has enabled us to rise to a new level of performance built the foundation for even.
Greater future success.
We have now strung together, two very strong years of growth and improving profitability with adjusted with positive adjusted EBITDA and cash flow for this past year most of our revenue is reoccurring.
This illustrates not only how we are generating sustainable growth.
But also that we are that we've reached scale and we're expecting we can expect earnings to closely follow up with our growth.
I would like to now turn over the call to Houston Frost, our senior Vice President of prepaid services.
Thank you Louis and thanks, everyone for participating in our call. This morning.
Our prepaid business had another great quarter with revenue up one one.
51% compared to the same period last year.
Growth sequentially accelerated each quarter this year.
61% in the first quarter to 82% in the second 101% in the third and now have 151% in the fourth.
Corner.
Card purchase volumes were up 5% in the first quarter.
While card transactions more than tripled.
In total dollars loaded onto prepaid cards in the fourth quarter exceeded 65 more than a new quarterly record.
For the year load volumes were up 32% card transaction volume up 135% and card purchase volume up 41% total dollars lovable prepaid cards exceeding the $184 million for the year.
And revenue more than doubled in fiscal 2021.
Growth continues to be driven by our position as the leader in supporting various funds disbursement needs of governmental municipal social charitable and related entities.
I can give them a prepaid program manager on approximately 200 of these types of programs.
Which we believe could be over 300 by the end of the year.
Earlier growth was driven by some of the lead programs.
Others have now shifted to.
Covid vaccine incentive programs such as <unk>.
New York City.
While there may be some more vaccines in the program's coming our way and we are continuing to add new programs.
Not many.
Many of which are potentially larger and of longer duration.
What kind of a vaccine programs drove a lot of our fourth quarter growth is exciting to see that the growth in early 2022 are being driven by guaranteed income programs as well as program sponsored by for profit entities.
Vaccine until that program have generally comprised of large number of small nomination card loads.
For the duration.
In contrast, and guaranteed income programs tend to have fewer cards potentially unlimited duration with larger loads, sometimes 10 to 20 times as much of a vaccine and pull them call them.
Consequently, consequently, consequently, the management.
Operation for these programs.
It's less complicated.
These programs include.
We have previously not mentioned in major metropolitan areas, such as Phoenix.
The city of Oakland as well as Washington D. C. While prepaid cards are being used for being used by <unk> five year pilot to provide a guaranteed income.
<unk> thousand dollars per month from 75 hospitality workers in the region, who lost jobs because of bank team.
As I mentioned last quarter, we recently added some sales professionals as part of our growth efforts.
We've been successfully adding new for profit customers driving volume and diversify.
Our end markets.
For instance in more as a new client a leaner in the AD Tech space with a fortune 5000 clientele.
Currently they tried several million rebate checks each year, we are working with them to begin to convert check disbursements to virtual prepaid cards that allow for a variety of funds withdrawal methods, including checking ACTH.
Another example is quick global which is.
Our platform that delivers streamlined outbound.
<unk> payments.
They weren't.
Yeah.
And set up on both physical and virtual prepaid cards on behalf of our clients.
And in the continuing evolution of our Mastercard relationship. We are involved in their civic assist program, which was developed jointly with Oracle to provide choice flexibility and convenience.
<unk> recipients and select their preferred method of payment.
Multichannel electronic payment strategy is ideally suited for liquids firsthand aspect of this program, which can be used for scholarships unemployment.
Subsidies as well.
Pension pension and health care payments.
As an example, using the Mastercard platform and Bernardino County the.
Micro bolus COVID-19 relief program to them.
War eligible businesses with less than five employees, a 2500 dollar award to help offset the negative impacts from the pandemic.
You feel is handling even starts once again, whether through virtual or physical prepaid cards or to the recipients debit cards Mastercard send.
The Voyager program has yet to officially launch, but we are very close to the initial beta release.
Based on the early adopters, who have signed up to receive a voyage of Mastercard. Upon launch we expect substantial activity in volume driven by that program in the second half and we'll see.
Sure.
To support our growth we've been strengthening our engineering customer service and operations teams, which has enabled us to both manage our existing growth as well as prepare for the growth we had such a bulk of this year.
Despite this investment prepaid profitability is on the rise.
It was another year of strong growth in our prepaid business not only on the topline but throughout the entire organization. We continue to deepen our penetration of the government municipal functional charitable and related markets, while diversifying into before profit markets. Our success is based on the strong relationships. We have built will be working on inflation as well.
Innovative products and services, we are delivering to the market.
I am confident 2022 will be another year of growth.
The prepaid business.
With that I'll, then conclude my remarks, and turn the call over to Greg Carter Executive Vice President payment acceptance.
Yeah.
Thank you Houston and let me begin by echoing Louis' earlier comments 2021 was a breakout year for our payback business line. This drove a record year for our card business with total processing volume of $1 2 billion. Our first year of one plus 1 billion process and we expect many more.
And fast payback payback revenue doubled in the fourth quarter, leading to 33% quarter over quarter growth in total card revenue as growth in dollars processed increased 41% and transactions were up 47%.
<unk> operations were also profitable for the third consecutive quarter.
For the year card revenues were up 29% with dollars processed were up 42% on a 76% increase in transactions.
Going into 2022, we expect to see continued growth in our payback business, we're continuing to sign new Isps with several agreements already executed in 2022.
We anticipate a solid spring with these new Isps onboard Patricia.
Nutrition in our portfolio is continuing to ramp remains well below industry averages, reflecting our strong value proposition, we provide an elegant solution to a common challenge with the added bonus of an incremental revenue stream.
Talked about the success of our efforts to improve the.
Penetration of our <unk> customer base, which continues to progress.
Currently we are closing in on the 60% Mark in an industry that considers 20% a resounding success over.
Over the past month, we've distributed partner scorecards, what I previously described as a tool to attract the number of and Isps merchants, we on boarded and our processing to their entire merchant universe.
Tool clearly demonstrates to our isds the revenue they are leaving on the table in an underpenetrated merchant portfolio.
The opportunity squarely presented to them. Our ISP has worked with us to craft communication campaigns that increases merchant where penetration and yields incremental revenue.
We expect more Isps to engage with us for these campaigns as we prove our best practices are effective.
There are several key initiatives now in place or plan throughout 2022 to further drive card growth.
We've implemented a new account management strategy in both sales and support.
While it may not seem obvious very strong infrastructure is one key to growth.
And we've been investing in our infrastructure to not only support our existing portfolio, but with our strategy to enhance our sales efforts with the team that is responsible for onboarding, new Isps and helping them increase the number of merchants on the platform.
In addition, there's now multiple levels of supported our San Antonio office, So on ISP or merchant as a personal contact making trust.
Believes this will build even greater loyalty and continue to drive down our already industry, leading attrition rates something that our competitors really discuss but one that plagued the industry.
Organic product development activity continues as we look to introduce complementary blue ocean products that utilize our resources and expertise across the entire payments ecosystem.
As an example, we are developing a consumer choice disbursement initiatives that can serve many different vertical markets think about the settlement of class action lawsuits, where there are potential disbursements to hundreds if not thousands of individuals.
You see we will be able to disturb disperse funds to this group through either <unk> or virtual or plastic prepaid card, where even if printed check if desired.
We plan to launch appointed still credit option for Paypal merchants can extend buy now pay later instant credit to their customers.
Will be an exciting extension to the payback services, we offer through our Isps.
We are in the early stages of rolling out a beta test.
We are returning to attending in person industry events in 2022.
Personally attended the American Bar Association Technology show, a few weeks ago and the energy marketing conference in Houston is coming up shortly.
We plan to have an in person presence at close to 20 shows over the course of the year.
It's an opportunity for our sales team to get out there again start pounding the pavement and really have an opportunity to meet people and put a face with the name which has historically been our best source of new business.
Echoing that same theme, where meeting face to face with many of the Isps and partners that we've signed over the pandemic that we haven't yet met in person to establish a strong and lasting relationships.
Our new account management focus will also about giving our Isps and merchants are trusted point of contact.
Finally, we continue to enhance our technology.
While many other purported paybacks are simply Frumps for technology, they purchase where license we own and control all of our <unk> technology. This is a competitive differentiator for us in so many ways from the standpoint of just being nimble and being able to be responsive to the customer needs to functionality, we can quickly build.
We can serve the customer in ways our competition can't.
As a result, we are winning business from some large incumbents in the end we continue to do what we do day in and data. This disciplined commitment to our growth strategy is showing results and now we're making the mousetrap, even better with new features and functionality, creating even greater growth opportunities. It's about accessibility service.
And our agility and ability to meet deadlines. That's the key differentiator that we continue to leverage I also want to recognize the hard work of the many <unk> employees and how they've been a primary reason for our success.
We still think we're in the early days of an industry that rewards innovation service and responsiveness, we look forward to continuing to aggressively growing the business with the white glove service for which we are becoming now with that I'd like to conclude my remarks, and turn the call over to Tom Jewell Senior Vice President and Chief Financial Officer.
Thank you, Greg and welcome everyone. Thanks for joining our call today and your interest in Ucs.
Going to conclude today's prepared remarks with a brief review of our fourth quarter and annual financial results before opening the call to questions.
Revenues for the quarter ended December 31, 2021 were up $17 4 million.
Up 86% compared to $9 4 million in the same period last year on an organic basis revenues increased 65%.
We had a great quarter of growth in AC H and complementary services, where revenue was up $2 2 million or 93% on the strength of a rebound in both crypto currency and consumer lending markets, where we have the highest gross margin percentage within acha complementary services HCA.
Revenues were up 118% for the quarter and our pin less debit product revenues were up 72%.
Revenues from our output solutions business line added an incremental $2 $7 million of revenues versus the same period last year.
Prepaid had an outstanding quarter with revenues up $1 5 million at an outstanding 151% growth rate from the same period, a year ago quarter, driven by a more than tripling in the transaction volume as well as strong card loans and purchase volume growth.
Revenues in our credit card line were up $1 6 million or 33% led by a 106% increase in payback revenues.
Growth in both volume and transactions processed continue to show steady improvement and drive credit card revenue growth.
Gross profit in the quarter were up $2 1 million or <unk>, 87% to $4 6 million as gross margins expanded to 20 to 26, 2% up from 26% in Q4 2020.
Primarily reflecting an increase in the proportion of revenues from our <unk> and complimentary services businesses and overall profit improvement within all business lines.
For the quarter totaled other selling general and administrative costs were $3 3 million versus $2 2 million in the prior year period, reflecting incremental output solutions overhead continued investment in our prepaid and payback growth initiatives growth in customer service costs.
And payroll increases as we both added staff and made other compensation adjustments commensurate with current employment conditions, especially in our highly competitive tech community.
You can expect to see further overall cost increases in SG&A expenses as we continue to staff up to handle continuing revenue growth and customer service requirements in 2022 as well as stated previously we intend to keep the rate of over head growth below the rate of Rev.
<unk> growth.
The year over year increase in depreciation and amortization continues to reflect the amortization of customer lists acquired in the purchase of output solutions plus other capital expenditures in 2021.
For the quarter, our operating loss was $1 $500 versus an operating loss of approximately 700000 in the same period last year.
Adjusted EBITDA was a positive $1 3 million in the quarter versus a positive 300000 last year and.
An improvement of over $1 million.
This led to an adjusted EBITDA margin of seven 2%.
This was our fifth consecutive quarter of positive adjusted EBITDA.
The company generated positive net income with approximately $40000 for the fourth quarter compared to 153000, a year ago with EP earnings per share in the current period.
At flat zero per share compared to <unk> per share for the same period last year.
In the year ago quarter, the company recognized a one time $800000 financial benefit from the forgiveness of our PPP loans.
<unk> continues to be in solid financial condition with over $7 2 million in cash and cash equivalents and no significant debt at December 31 2021.
<unk> for a second to annual cash flow results, we recorded positive adjusted operating cash flow in the quarter and generated $2 6 million of positive adjusted operating cash flows in 2021 compared to net cash used by operating activities of $400000 in the prior year.
Our period.
The adjusted operating cash flows exclude non operational changes in merchant reserve tonnes prepaid card load assets settlement processing bonds customer deposits and net operating lease assets and liabilities.
Looking quickly at the results for the full year 2021, it was our fifth consecutive year of revenue growth.
Revenues were $61 9 million up $29 7 million or 92% over the same period last year.
Organic growth, which excludes outfit solutions revenues was up 52%.
ACTH and complementary services were up 7 million or 82%.
Service revenues were up $5 7 million or 29% pre.
Prepaid revenues were up $3 4 million or 107% and output solutions contributed an incremental $13 6 million.
On an annual basis payback revenues increased 91%.
Gross profits for the year were $15 6 million versus $7 4 million in the prior year period, an improvement of $8 2 million or 111%.
Gross margins for 2021 to 25, 2% up 230 basis points compared to 22, 9% in 2020.
Looking forward to 2022, we expect gross margins to be in the range of 25, 5% to 27% range fluctuating based upon product mix.
Adjusted EBITDA for the year ended December 31, 2021 was a positive $4 million and almost $5 million improvement compared to a loss of $800000 in same period in the prior year.
The net loss for the year.
It was $300000 or <unk> <unk> per share compared to a net loss of $2 9 million or <unk> 19 per share in the same period last year again. The 2020 results included $800000 benefit from the forgiveness of the PPP.
Good luck.
I would like to note that we had positive taxable income for the year, reflecting timing differences between book and tax income annually.
You are deferred tax asset.
Selecting the attack positive taxable income in 2021, we were able to reduce the deferred tax.
<unk> accounts and increase the deferred tax asset by $110000 and recorded a federal income tax credit in the P&L in the same amount.
It was a record year IUCN with revenue increasing at the fastest rate ever at.
Achieving our fifth consecutive year of topline growth we have now.
<unk> reported five consecutive quarters of positive adjusted EBITDA and had been consistently strengthening our balance sheet at the same time, we've been investing in the business and strengthening our infrastructure, adding experienced and talented professionals throughout the organization to support the further growth.
As Lewis previously articulated that.
The best is yet to come.
This concludes our prepared remarks for today, we would now like to open up the call for any questions.
We will now begin the <unk>.
Quick question.
Then on your question.
Using a speakerphone please pick up ahead.
Please.
Brian . This question has been at this time I would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first okay.
That's correct.
Please go ahead.
Hey, good morning.
My first question is on the increase in the quarter on SG&A expenses, and you talked a little bit about that in the K. It looks like personnel are up about 19 head count versus a year ago. When you talked about adding salespeople engineering customer service could you give us any more color.
What youre doing with SG&A, what products youre going to focus on and what the impact of that might be.
Well the.
The biggest impact right now is we're expanding our call center operations.
Just because of the dramatic increase in current activity for prepaid cards.
Which we provide customer service for.
But we're also more importantly, gearing up for the Voyager digital program, which will have substantial volumes.
<unk>.
<unk> increased our internal staff, we've taken on more space.
And.
In our current building and we.
Dramatically increased our outsourced ORC.
Offshore call Center.
As well.
Also we've added sales staff.
As we can.
Previously communicated.
No.
Okay. My second question is around the guidance that you guys have given 18% to 20% revenue growth how much of that if any is as a result of continuing recovery.
From Covid and then apart from that what products do you look to be the strongest drivers you've called out papac you've called out.
Voyager anything else.
In there to drive that 18% to 20%.
Well.
Firstly, all business lines are doing well and as we previously communicated our growth engines for the future are prepaid and paid back.
So you'll see growth across all business lines.
Prepaid and payback will grow the fastest.
Prepaid.
We talked about visibility coming into this year and prepaid is a big part of that visibility.
Today, we have.
Over $41 million sitting on cards balances.
We know a certain percentage of that is going to spoil this year.
And that gives us a lot of visibility.
The launch of the Voyager program will be substantial for a company.
And in prepaid has added a lot of more business and we're really excited about our new customer anymore.
Which if youre not familiar with that company I'm going to get some of the percentages wrong, but they are the leader in grocery couponing.
We're the leader in prescription.
When you fill a prescription.
<unk>.
Turning that into cash for the pharmacies and the drug companies.
And I think they own about 80% of those both of those markets.
And because of that they had come to relationships with fortune 5000 companies and Theyre, turning those relationships into a lot of.
Newer products, including promotions.
Which should have a big impact for us.
Guaranteed income programs continued to grow across the United States.
We are the de facto leader in that space, because we're the only one doing it right now.
And we should we should be able to attract.
Most if not all of those programs as they come alive.
And my last question is around the buyback.
Activity, if I look at the results of the quarter in both absolute terms and then relative to what analysts expectations were very very strong quarter.
The stock has been weak even down today, which is kind of ridiculous you have buyback capability in place.
What's the board's philosophy on perhaps stepping that up and using it, especially now that youre guiding to positive free cash flow for the year.
Yes, I would tell you that the board looks at that.
The.
We believe the stock is down.
Since the peak last year because of a fund.
They have made.
Mandatory redemptions and Theyre actually out of the stocks.
Stocks now.
That cause that to occur.
There was some industry pressure.
That was related to the reoccurring with Covid.
Inflationary pressure.
Those two.
Factors really don't affect us as we've proven we grew revenues during COVID-19 .
Inflation.
A little bit of inflation doesn't really hurt us because we are in mostly non discretionary spending accounts.
Healthcare taxes and ensure.
<unk> mortgage and things like that so.
The industry pressures I think that people will understand that we're not really involved in that.
And.
And having that fund out.
As obviously relieves a lot of pressure.
But the board.
As always reviewing.
Potential for stock buyback activity.
Okay.
Okay. Thank you for taking my questions.
Thank you Barry.
Our next question comes from Gary <unk> with Barrington Research. Please go ahead.
Hey, good morning, everyone.
Good morning, good series of questions here.
Greg could you maybe give us some idea of I think you said your conversion is now at about 60%.
Where were you last year at this time.
So last year at this time, we are right at 50% and Thats up from 24%.
All of it.
July of 2020.
Okay, So definitely on an uptrend there.
Have you.
Could you give us some idea of how much your ISP count has increased.
Sure.
2021, we signed 26, new Isd agreements now not all those were have been implemented but we did implement 27 Isps in the course of 2021. So that's inclusive of some of that number and then some carryover from 2020 so.
Total number of executed versus processing iOS users. So I should say implemented Isps is right around that 36, Mark that I would consider fully implemented.
Processing.
Okay implemented in processing, India can you give me some idea of where you were at the end of 2020.
I believe that number was closer to 22.
Okay, great. Thanks, and then.
Some of these Isps that youre signing up are they targeting any new vertical markets.
Yes, we do have another one that just came online that's targeting believe it or not golf courses.
It's a software that powers Tee times, so we're seeing a little bit more of a resurgence of activity that were temporarily suspended because of COVID-19 . So mhm.
Another ISP is called booster hub and they work with schools and various teams organizations within those schools can do fund raising and Thats.
An interesting vertical.
As I said in my remarks that the American Bar Technology show.
A couple of weeks ago in Chicago, So we did talk to some other associated.
Software vendors that provide support to the legal industry.
So it really is just.
A variety of different sources that were that were contracting.
Okay and then.
In terms of the.
When you're talking about SG&A expense, that's categorized under other expenses.
On your income statement.
Yes.
Okay.
So.
That's going to be below the growth in revenues what about I mean.
Would you would it be safe to say that.
Total opex would kind of mirror.
What you guys are thinking for <unk> SG up through the SG&A.
In terms of.
Being below revenue growth that would kind of hold there as well.
Yes, I mean, we've been pretty consistent in the last two years in that.
We're just going to.
A lot of internal use software capitalization going on.
To advance our technology and then in addition to that particularly as we add space tenders.
Additional requirements for office <unk> office.
Seating and then.
Obviously additional computers as we bring on additional staff.
Those are the kind of components.
Okay and then.
Some questions on the prepaid, particularly the Voyager this is going to start really rolling out and hitting the.
The P&L in the back half of the year is that an assumption we should make in our modeling.
Yes.
Yeah.
Well just to chime in here you certainly have not seen any revenue.
From that program you shouldn't you would not expect to see anything in the first quarter of this year.
You know the timing and how they scale up the program is going to be largely up to Voyager.
But we're.
All indications seem to be that it should be running fairly full strength by the southern half of them yourself.
Faithful.
It's a fair assumption.
However, just keep in mind that.
It really won't be up to Voyager in terms of the speed in which they rollout cards too.
Customers will have a question.
Our corporate accounts.
Okay and on what Youre doing with Voyager Youre going to get program management fees, plus interchange fees ATM fees things of that nature.
Yes, and customer service revenue.
Okay.
I mean, typically what we're learning is <unk> right.
What's the range or so and then what portion of interchange, but there's obviously a revenue share on it.
We are substituting card accounts.
But.
Transaction.
<unk>, including customer service transactions or customer service interactions.
Okay.
So with what you're doing with Voyager when when you start getting these cards out and getting these cards loaded up.
From the Voyager accounts, so I would assume does that also positively impact what youre doing for Voyager on the a C. H I guess the question I'm, having is as there is a transfer of money from Voyager accounts to these prepaid cards is that an AC H transaction for you as well.
Yes.
But more importantly, okay.
Yes, so the money has got to get into their account before they can spend it right right. So we're moving.
Moving money in and out.
Okay void.
There is one big marketing machine.
And they're using their card to attract new users.
So we think the card is going to help them grow their business.
And that will obviously help our business because we do all of their payments.
And we're just really really excited about this program Houston that mentioned you know we're not.
Program is as alive in the sense that we're actually generating transactions test transactions today, so like the executive team of Voyager has cards and they are using it.
They also produce their initial card order.
For Q1 was.
About $250000 in revenue.
But please note that we don't we don't.
We don't markup.
Their cards so.
But.
It shows a substantial commitment from them for the early stages.
Okay. Thank you.
Yes.
Our next question comes from Jon Hickman with Ladenburg Thalmann. Please go ahead.
Hi can you hear me.
We hear you well Jeff.
Okay.
I wanted to ask about the sponsorship for the announced car.
I envision you guys. She is basically a <unk> company and I was just wondering if you can elaborate on how.
To your consumer focus there with that campaign is going to.
<unk> business.
Well first thing is.
Sure.
We're doing it in conjunction with Voyager voyage your sponsorship for all year.
We're only helped out a little bit.
So we only have the car for two races of the whole season. So it's.
It's small in that consideration.
And we are using it to drive shareholder awareness.
So the car actually has our stock symbol on it.
And in voyage or asked us to do this so.
It's.
It's the co marketing deal.
Okay that makes sense.
My other questions were surrounding.
The opex.
<unk> SG&A.
Growth would be slower than revenue, but could you peg that foreigners to expect 5% 5% to 10%.
Any help there would be great.
Okay.
Yes, I don't think we have those numbers for you on this call John I can tell you that.
We're focused on making sure it grows slower than revenue growth.
But we are going to be spending cash.
Got a lot of business that we need more people for.
And especially when the call center, but understanding the call center for US is is not expense.
It's a revenue creating.
Great.
So.
When we add head count there.
You're going to receive.
Uh huh.
So a lot of revenue associated with each head count.
Okay. Thanks.
Yes.
As a reminder, if you have a question. Please press star then one can be joined into the queue.
Your next question comes from Michael Diana with Maxim Group. Please go ahead.
Thank you I'd like to go back to the guaranteed income.
<unk> programs.
Houston, you were saying I think that they tend to be bigger than some of the other programs less complicated and last potentially in a way sort of much longer.
That sounds like much better profitability compared to some of your other programs can you just comment on that.
So yes, I mean, you can imagine.
Yes.
Example of vaccine program, we had.
Nearly a million cards.
Go out.
Just one of those cities and.
Thats a million individuals.
It may be contacting us, but we need to essentially serve once those cards in the mail.
And so you've got $100 on a million cards.
$100 million and low volume, but.
But we're able to prop up spot.
That will help the process through our system.
If instead, you got a thousand cards.
Being loaded with a thousand dollars each per month.
Yeah.
Let's say 10000 cards, a lot with $1000 each per month.
Well over $100 million running through our system.
10000 cardholders.
So a million cardholders, so just that will lap itself the way that math works out.
The beans.
Longer term and larger dollar value guarantee that some programs are much more efficient to operate.
Now keep in mind there is.
Little bit of a trade off in the sense that.
A larger percentage of funds on smaller incentive programs or any type of them was first of all programs will be captured in terms of that activity fees or breakage. So you do have kind of a mechanism.
Ill cover those expenses on the smaller programs.
In general when you're talking about.
Dollars.
<unk> process.
10000 cardholder responses.
It's going to be a lot.
Less operationally complex.
Compensated and gain a lot of efficiencies and therefore.
Yes margin out of that type of program.
Okay, great. Thank you and Greg you talked about.
Youre in a beta test on buy now pay later.
That's been a huge area over the last two years or so could you could you talk a little more about that.
Sure.
We've got some.
And a technology that we're using with some another.
Another partner <unk> to power that solution so essentially.
We're going to be able to offer that buy now pay later in a couple of different flavors, whether that's in four installments, whether thats over a course of a year or 18 months.
And we believe that's going to be very attractive to some of our Isps on the professional services side for example physician offices Dennis offices.
I think everyone knows that most of our Isps or card not present service oriented and traditionally buy now pay later, it's been targeted towards brick and mortar.
Consumer related goods. So we believe this will be.
A nice complementary offering for those Isps.
And Michael.
And to note that.
We won't be carrying any of the notes very important.
These transactions.
So we will get paid origination fee.
But we will not be carrying any of the risk associated with those.
Yes.
Yes, okay great.
Yes.
Okay. Thank you very much.
Thank you Mike.
A question and answer session.
<unk> has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
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