Usio Inc. Q1 2023 Earnings Call
Speaker 1: in the first half of last year. However, our relationship with Voyager is essentially being completely wound down to their bankruptcy. Adjusting for Voyager, ACH would have shown a year over year growth in the first quarter, and we expect outright ACH growth in the second half of the year. Our output solutions business grew 26% in the quarter, and $1 million sequentially, and it was all organic. We believe that output solutions can continue to deliver strong growth by focusing on programs that offer attractive reoccurring revenue characteristics like printing and distributing statements, as well as selling more integrated disbursement solutions through check-creating that is required for our consumer choice. Disbursement platform.
Speaker 1: In particular, I think there is a tremendous opportunity in expanding our electronic bill presentment and payment capabilities. And we are working on strategies to more aggressively pursue these opportunities. Now that our prepaid incentive programs sold in previous years are coming to expiration, we are now earning enhanced breakage and spoilage. This has been beneficial to our overall effort to improve profitability.
Speaker 1: In the first quarter, margins were up over 300 basis points, while S-GNA was up less than $100,000 compared to the first quarter a year ago.
Speaker 1: This enabled us to sustain positive adjusted EBITDA, generate strong cash flow.
Speaker 1: and reach positive gap earnings per share.
Speaker 1: Since we primarily serve recession-resistant markets, we're not overly concerned about in the economic so-down.
Speaker 1: In fact, if the economy slows, many of our businesses could generate even better growth. Our pipeline across all segments continues to be the strongest in the company's history.
Speaker 1: We have large opportunities in prepaid, LA County type opportunities with other municipalities and output solutions, and new pay-back deals such as recently announced integration with Microsoft's Business Central Platform which have great revenue potential.
Speaker 1: This is one of the best quarters in Newseos history, not only from record financial performance, but also because of the success of penetrating new markets and building new relationships across all of our businesses.
Speaker 1: This is going to be extremely exciting here.
Speaker 1: in which we believe we will achieve our top line guidance and expand our foundation in these rapidly growing markets for even greater success in the future.
Speaker 1: And now I'd like to turn the call over to Houston Frost.
Speaker 1: Thank you, Louis, and thank you to everyone participating in the call this afternoon. The first quarter card issuing revenues were up 74%, primarily attributable to the breakage revenue earned on the New York City COVID incentive program.
Speaker 1: In the year ago quarter, we were in the heart of this program, which is why our year-over-year volume transaction and purchase activity was down.
Speaker 1: Importantly, on a sequential basis compared to the fourth quarter, both load and purchase volume were up as we continue to build our underlying business.
Speaker 1: The card-issuing business continues to grow and solidify its relationships.
Speaker 1: We are keeping up with our clients launching General Fund's Disbursement Programs, Guaranteed Income Programs, and Corporate Expense Programs.
Speaker 1: The implementation team has been particularly busy with clients employing our remote authorization service.
Speaker 1: The service power's deeply integrated fintech, enabling card programs like MoviePass.
Speaker 1: Speaking of movie pass, their beta customer transactions have been ramping up and we are expecting their public launch this summer. True Hollywood style, the paparazzi published an unofficial piece discussing a potential Walmart movie pass partnership. The reiterate Lewis's comments earlier.
Speaker 2: Demand for solutions that offer recipients additional choice in how they receive their fund continues to increase. Our team is refining the service which currently offers physical and virtual debit cards, ACH, Push to Devit, and checks.
Speaker 2: It is a flexible and powerful solution that leverages UCO's diverse payment services. With that, I'd like to turn the call over to Greg Carter.
Speaker 1: Thank you Houston and good afternoon everyone. It was another record quarter in part with revenues up 8% on a similar 8% increase in dollars processed and a 24% increase in transactions.
Speaker 1: Results, we're once again led by the strength of our flagship payback business. We're revenues advanced, 27% on a 30% increase in volume and a 31.4% increase in transactions process.
Speaker 3: All were record performances.
Speaker 3: So we had a really good first quarter with good trajectory into the second quarter.
Speaker 3: It's just a continuation of what we've talked about before. Our efforts and model deliver the steady growth we have been discussing.
Speaker 3: In the call just a few short weeks ago, we mentioned that we had both a strong January and February driven by ISV growth as well as the addition of new ISVs that began processing immediately. Subsequent lady, it was also a record march.
Speaker 3: We also have 38 ISPs and implementation at the beginning of the year.
Speaker 3: And we are focused on industries such as healthcare, legal, and certain field service applications, which are generally recession-resistant, and as the results demonstrate, have strategically paid off. I'm very excited about the relationship we just announced with Sweet Engine, an important element of the Microsoft Dynamics Environment.
Speaker 3: Essentially, Microsoft CRN solution.
Speaker 3: This program provides large, sophisticated enterprise customers the ability to facilitate payments without having to leverage a third-party payments application outside the MS Dynamics environment.
Speaker 3: We were introduced to Sweet Engine by one of our customers at a trade show last year who was using technology from both companies.
Speaker 3: And sweet engine said, if we can do the same for them, then they want to be a UCO ISP partner.
Speaker 3: So even though they are considerably larger than our average ISV serving Fortune 500 clients
Speaker 3: They selected the ECO for the same reasons as everyone else.
Speaker 3: our technology, our customer service, and our ability to turn the electronic payments traversing their system into a revenue stream.
Speaker 3: Clearly, participation in trade shows is paying dividends, and my team and I continue to have a significant presence at these events.
Speaker 3: We continue to invest to broaden and strengthen our offering.
Speaker 3: For instance, we will be adding another physical terminal for viral, as well as another back-end processing partner to serve a more diverse set of merchant category codes.
Speaker 3: All in all, it's been a strong start to the new year. We are looking forward to the addition of sweet engine and the imminent completion of our other in-process implementations.
Speaker 3: With that, I'd like to include my remarks and turn the call over to Tom Jewel, our Senior Vice President and Chief Financial Officer to discuss our financial results.
Speaker 2: Thanks Greg and welcome everyone. Thanks again for joining our call today and for your interest in UCO.
Speaker 1: In summary, revenues were up 18% driven by strong growth and prepaid and output solutions.
Speaker 1: Critic card revenues were up and ACH and complimentary services were down primarily as a result of the Voyager Bankruptcy.
Speaker 1: Gross profits were a quarterly record for the second consecutive quarter and margins expanded 370 basis points from a year ago.
Speaker 2: The gross margin improvement reflects a higher contribution from breakage and spoilage as well as strong margins from output solutions.
Speaker 1: Selling general administrative costs were up 2% from the year ago period.
Speaker 2: For the second consecutive quarter, we generated over $1 million in non-gap adjusted eva-da.
Speaker 2: Non-GAP-adjusted operating cash flows as reflected in our earnings release in 10Q.
Speaker 1: was 1.3 million for the quarter up from 0.5 million in the same year adult period.
Speaker 2: Our cash increase by 1.1 million in the quarter reaching 6.7 million as of March 31, 23.
Speaker 2: With that, I will turn the call back to the operator to conduct our question and answer session.
Speaker 4: We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad.
Speaker 4: If you are using a speaker phone, please pick up your hand flip before pressing the keys.
Speaker 4: If you withdraw your question, please press star then two. At that time, we will pause momentarily to assemble the roster.
Speaker 4: And our first question comes from John Hickman of Latinburg. Please go ahead.
Speaker 5: Hi. Can you hear me okay?
Speaker 5: Hi, John . Great quarter. Thanks for beating my numbers. Could you tell me a little bit? OpEx was pretty flat. You expected to be pretty flat for the rest of the year. What was that? OpEx.
Speaker 5: By the end of the year.
Speaker 6: By the end of the year.
Speaker 6: By the end of the year.
Speaker 5: So I'm a little bit confused about movie patch. Is there, do they have a deal with Walmart or was that just?
Speaker 5: Somebody jump and garner.
Speaker 5: We got a potential dealer built yet.
Speaker 5: We got a potential new or real deal. What?
Speaker 2: announcement. So we'll just leave it at that. It's obviously movie patches.
Speaker 5: business and we'll wait for their official announcement.
Speaker 5: OK. I take it.
Speaker 5: As long as I'm talking to Mr. Fron. Could you give it a little more guidance about?
Speaker 5: Mr. Fron, could you give us a little more guidance about?
Speaker 5: Like how you're making what the pipeline looks like for how you're making up for the, you know, those one-time program like the New York.
Speaker 5: session.
Speaker 5: Because yeah, if you do, if you do 10 million in like, visit, it will be at home.
Speaker 5: How do you make that up next year? Well, we continue to sell cartograms, both repurring and one time low cartograms. We also continue to add...
Speaker 2: new relationships. So then you go back to kind of...
Speaker 2: 2020-2021, those were years where we added just around 100 clients, I think we even exceeded that in 2020. And then we were around the same number last year. So we've been adding around 100 clients a year.
Speaker 2: We'd like to keep that taste. It's a wide range in terms of revenue against clients. I think that's a wonder.
Speaker 2: We're going to bring in 20,000 in annual revenue, or then we end up with another client that could do 1 million in annual revenue. The diversity of the program has continued to increase, so guaranteed income programs has been won. We hope to have some announcements on some health-carrelated programs. Thank you.
Speaker 2: 20,000 in annual revenue, or then we end up with another client that could do 1 million in annual revenue. The diversity of the program is continuing to increase, so guaranteed income programs has been won. We hope to have some announcements on some health-carrelated programs. We've also seen a...
Speaker 2: a substantial noticeable increase.
Speaker 2: In the volume and activity on our corporate expense pens.
Speaker 2: which is exciting because that's actually in health with margins. We earn higher interchange on the volume on this corporate expense pens.
Speaker 2: So I think you got a really good pipeline, but we can see to build a base of this business.
Speaker 2: And...
Speaker 2: that we sure hope the results will show that.
Speaker 2: Yeah, we're likely to see a bit of a peak in that fiend time. I think this quarter next quarter.
Speaker 2: you know, we're likely to see a bit of a peak in that see income, I think this quarter and next quarter. But, you know.
Speaker 2: By and large, the line of business is growing every month and every week with new implementations and programs.
Speaker 1: Yeah, and John , don't forget that residual spoilage income is part of our business model.
Speaker 1: and it's a grown year over year, every year for the last five years.
Speaker 1: year over year, every year for the last five years. So, you know.
Speaker 2: It's something we're focused on. Yeah, the card issuing a free paid business is really matured over the last few years. And it's a real business and it continues to mature. You know, like I said, every month with new implementations and partnerships.
Speaker 5: Okay, Louis, just one last question. So you've entered Wall Street's wait for issue from last spring now.
Speaker 5: Okay, Lewis just one last question. So you've an anniversary wait for the issue from last spring now. Is that true?
Speaker 5: I'm sorry you broke up again. Can you ask the question? Is it true that you can anniversary the voidurfing from the HCH side?
Speaker 5: now that you're into the second quarter of 2023?
Speaker 1: So, a Voyager file bank for example, leave January 1st.
Speaker 1: of last year and
Speaker 1: So they stopped processing about that same time. We did some residual stuff for them, but that was minor.
Speaker 5: Yeah, so on a year over your basis, that should be behind us, right?
Speaker 5: So on a year-over-year basis, that should be behind us, right? After Q2. So on a year-over-year basis, that should be behind us, right?
Speaker 5: After Q2, okay. Okay. Okay, thanks.
Speaker 5: Okay. Okay. Thanks. That's it for me. Thank you.
Speaker 4: The next question comes from Gary Presso, panel of Barrington Research. Please go ahead.
Speaker 2: Okay, good afternoon all. Could you, do you have what the total payment dollars process were last year in Q2?
Speaker 5: I'm sorry, Q1, I'm sorry, I'm ahead of myself here. I'm just, you'd say it was down to 1.2, 3 billion this quarter, but what was it last year's Q1? I don't know, I don't know.
Speaker 5: I'm sorry, Q1, I'm sorry, I'm ahead of myself here. I'm just, you'd say it was down to 1.2, 3 billion this quarter, but what was it last year's Q1? I don't know. Yeah.
Speaker 1: I mean, we can pull that number and send it to you. Okay. The Q1 number of last year was obviously inflated by crypto processing.
Speaker 1: Prithoing payments average ticket is $500.
Speaker 1: So they were part of those dollars. So you got to be careful when you're looking at dollars because, you know, our metrics, financial metrics can still do well.
Speaker 1: If dollars go down, but transactions go up. And that's what we saw last year. Overall, dollars for the year were down, but transactions were up. And of course, we did really well, grow into company. Yeah, no, I just, I just as a frame of reference there. And then I just wanted to get an idea when you're talking about.
Speaker 1: ACH switch transactions for Voyager. I don't see the difference between what you just described. Maybe I'm missing your question, but all we did for Voyager was ACH. We would debit checking the savings accounts and fund the Voyager. You're welcome.
Speaker 1: So it's in the ACH numbers. Now ACH is growing year over year if you take out the Voyager traffic.
Speaker 5: Okay, it must just be some edits with how what I'm thinking and what you're actually putting in here. No problem there. Greg, did you give the growth and the payback revenue in the quarter?
Speaker 3: I tried to write down what you said and I couldn't get it all. So it's 27%.
Speaker 5: We'll pay for our car. That's great.
Speaker 2: And then maybe could you elaborate a little bit on this new relationship with Microsoft?
Speaker 1: I'm unfamiliar with this. I really want to understand it because obviously the reach of Microsoft is very large. And how does this work? And could this be something where you're just going to get a ton of processing volume once this thing starts running up? Yeah, so sweet engine essentially facilitates a plug.
Speaker 3: their speed to paint and processing is substantially reduced by using that plug-in that sweet engine facilitates.
Speaker 1: Microsoft is central is like QuickBooks, except it's on steroids. It's used by bigger organizations. So you can go to the Plug-in Library, now and choose UCOs as a payment option.
Speaker 3: Unfortunately, we have a pipeline of accounts that are in queue as a result of that technology in relationship. So we're real excited about that.
Speaker 2: Okay, and then maybe I'll talk to you about this offline because again, I don't I've never heard of this. I don't understand it. I'm trying to understand it. I'm sure I'm happy to do so.
Speaker 1: what it can bring to you, it just seems large. And then lastly, Louis, you did say you expanded your engagement with LA County. Could you elaborate a little bit on that please?
Speaker 1: Yeah, so we've been printing notices for fees and fines. I had a lot of success with that. And they came back to us and said, hey, we've got all these overpayments.
Speaker 1: So when somebody has a hundred dollar parking fine and they send us a hundred to ten dollars, we got to send them back to ten dollars.
Speaker 1: and they said the only efficient way we can do that is be a check.
Speaker 1: And so we're printing a whole bunch of checks now for LA County.
Speaker 1: Okay, so it's just it's a nice shot of incremental business from what you're doing right now with LA County. It is and it shows the trust that we've earned, you know, in a few months of doing business with them.
Speaker 4: Okay, thank you. Thanks. Once again, if you would like to ask a question, please press star, then one.
Speaker 4: Okay, thank you. Thanks. Once again, if you would like to ask a question, please press star, then one.astronome?? one.
Speaker 4: That will conclude our question and answer session. Conference has also concluded. Thank you for attending today's presentation and you may now disconnect. So
Speaker 7: F.