Q1 2024 Usio Inc Earnings Call
Ken: [music].
Hello, and welcome to the <unk> first quarter fiscal 2024 earnings conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity.
Hello and welcome to the Usio first quarter fiscal 2024 earnings conference call. All participants will be in a listen only mode.
Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touchtone phone. To withdraw your question, please press star, then two. Please note, today's event is being recorded. Now, I would like to turn the conference over to your host, Paul Manley. Please go ahead, sir.
To ask questions to ask a question you May Press Star then one on a touchtone phone.
Paul M. Manley: To withdraw your question. Please press Star then two please note today's event is being recorded now I would like to turn the conference over to your host Paul <unk>. Please go ahead Sir.
Paul: Thank you operator, and thank you everyone for joining our call today welcome to use yours first quarter fiscal 2024 conference call the.
Paul M. Manley: Thank you, operator, and thank you, everyone, for joining our call today. Welcome to UCO's first quarter fiscal 2024 conference call. The earnings release, which we issued after the market closed today, is available on our website at usio.com under the Investor Relations tab. On this call today are Louis Hoch, our Chairman and CEO, Greg Carter, Executive Vice President of Payment and Acceptance, and Houston Frost, Chief Product Officer. Michael White, Senior Vice President and Chief Accounting Officer, will also be available for the Q&A.
Speaker Change: The earnings release, which we issued after the market closed today is available on our website.
Speaker Change: Com under the Investor Relations tab.
Speaker Change: On this call today are Louis Hoch, our chairman and CEO, Greg Carter Executive Vice President of payments and acceptance and Houston Frost Chief product Officer Michael.
Speaker Change: Michael White Senior Vice President and Chief Accounting Officer will also be available for the Q&A.
Paul M. Manley: Let me remind our listeners that certain statements made today during the call constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities and Litigation Act of 1995, as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed.
Speaker Change: Let me remind our listeners that certain statements made today during the call constitute forward looking statements made pursuant to the safe Harbor provisions of the private Securities Litigation Act of 1995 as amended.
Speaker Change: Forward looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties are described in our earnings press release and in our filings with the SEC. The forward looking statements made today are as of the date of this call and we do not undertake any.
Paul M. Manley: These risks and uncertainties are described in our earnings press release and in our filings with the SEC. The forward-looking statements made today are as of the date of this call, and we do not undertake any obligation to update these forward-looking statements. During the call today, we will refer to non-GAAP financial measures such as adjusted EBITDA, and our earnings release includes a reconciliation of adjusted EBITDA to GAAP operating income. Management will provide prepared remarks, and then we will open the call to your questions.
Speaker Change: Obligation to update these forward looking statements during.
Speaker Change: During the call today, we will refer to non-GAAP financial measures such as adjusted EBITDA and our earnings release includes a reconciliation of adjusted EBITDA to GAAP operating income.
Speaker Change: Management will provide prepared remarks, and then we will open the call to your questions.
Paul M. Manley: Let me start off with some highlights from this afternoon's release. It's been a good start to the new year with volumes up in almost all of our businesses, and first quarter financial performance is helping us to be on track to meet our full year top and bottom bottom line 2024 guidance. We remain in excellent financial condition with positive cash flow and over $7 million in cash at quarter end.
Speaker Change: Let me start off with some highlights from this afternoon's released.
Speaker Change: It's been a good start to the new year with volumes up in almost all of our businesses and first quarter financial performance is helping us to be on track to meet our full year top and bottom bottom line 2024 guidance, we remain in excellent financial condition with positive cash flow and over $7 million in cash at quarter end.
Speaker Change: Once again aided by strong interest income.
Paul M. Manley: Once again, aided by strong interest income, our ability to deliver innovative solutions has been gaining increased market attention, which has and continues to create a robust pipeline. These efforts are now being rewarded as our card business today announced that they have signed what could potentially be the largest single contract in our history. Greg and Louis will go into these exciting details, but this program offers the opportunity for card processing to double its annual volume very quickly, in as little as a couple of years. Just a few additional comments on our financial results. Margins were down in the quarter, largely due to the winding down of our New York City COVID incentive program.
Speaker Change: Our ability to deliver innovative solutions has been gaining increased market attention, which has and continues to create a robust pipeline. These efforts are now being rewarded as our card business today announced that they have signed what could potentially be the largest single contract in our history, Greg Lewis will go into.
Greg Lewis: These exciting details, but this program offers the opportunity for card processing to double its annual volume very quickly as little as a couple of years.
Paul M. Manley: The revenues from breakage and spoilage added considerably to our card gross margins last year. However, margins were also impacted by a large plastic card order with low margins, which Houston will discuss. However, this was offset by a growth in our highly profitable ACH business, which this year will no longer be fighting the tough comps of a large cryptocurrency ACH customer. SG&A was up slightly. But by the end of the year, we expect to once again achieve our goal to keep overhead spending growth below that of revenue growth.
Greg Lewis: Just a few additional comments on our financial results margins were down in the quarter and largely attributed to the wind down of our New York City corporate incentive program. The revenues from breakage and spoilage pet added considerably to our car to gross margins last year.
<unk> were also impacted by a large plastic card order with low margins, which Houston will discuss.
Greg Lewis: However, this was offset by growth in our highly profitable E. C. H business, which this year will no longer be fighting a tough comps I'll be large crypto currency a C H customer.
Greg Lewis: SG&A was up slightly but by the end of the year, we expect to once again achieve our goal to keep overhead spending growth below that of revenue growth.
Paul M. Manley: This, together with scaling our business, will be helpful in meeting our objectives of improving operating leverage and generating a significant increase in adjusted EBITDA and positive gap earnings this year. In summary, a solid start to the year with strong momentum, a solid pipeline, and incredible growth opportunities in all of our businesses that we are confident will enable us to achieve our financial objectives. Now, I'd like to turn the call over to Greg Carter.
Greg Lewis: Together with scaling our business will be helpful. In meeting our objectives of improving operating leverage and generating a significant increase in adjusted EBITDA and positive GAAP earnings this year.
Greg Lewis: In summary, a solid start to the year with strong momentum a solid pipeline and incredible growth opportunities in all of our businesses that we are confident will enable us to achieve our financial objectives. This year.
Greg Lewis: Now I'd like to turn the call over to Greg Carter.
Gregory Mark Carter: Thank you Paul and good afternoon, everyone card set an all time quarterly records for both transactions and dollars processed once again led by payback. We're processing volumes were up 12% transaction volumes were up 12% and revenues were up 14%. So payback continues its strong growth.
Gregory Mark Carter: Thank you, Paul, and good afternoon, everyone. CARD set an all-time quarterly record for both transactions and dollars processed, once again led by PAYFAC, where processing volumes were up 12%. Transaction volumes were up 12%, and revenues were up 14%. So Payback continues its strong growth. For the card operation as a whole, dollars processed and transactions were an all-time record. Keep in mind that 100% of our efforts are focused on PAYFAC. As a result, we expect our legacy singular ISO portfolio to gradually attrit.
Gregory Mark Carter: The card operation as a whole dollars processed and transactions were all time records Keith.
Paul: Keep in mind that 100% of our efforts are focused on paper as a result, we expect our legacy singular ISO portfolio gradually a trip with all of our growth coming from payback inevitably results for the entire business should be more reflective of the better performance we are seeing in paper.
Gregory Mark Carter: With all of our growth coming from PAYFAC, inevitably, results for the entire business should be more reflective of the better performance we are seeing in PAYFAC, and we expect KFAC performance to only improve. Today, we announced that we believe we're on the verge of a major inflection point that will significantly alter our growth trajectory. We've just signed an agreement with a leading web-based ERP ISD to provide our integrated payment platform. ISD has over $1 billion in annual credit card processing volume, so this program has the potential to double our credit card processing volume and generate over $20 million of annual recurring revenue. This program is live right now and moving along with the implementation integration process.
Paul: And we expect payback performance to only improve today, we announced that we believe we're on the verge of a major inflection point that will significantly alter our growth trajectory.
Speaker Change: We've just signed an agreement with a leading web based ERP ISP to provide our integrated payment platform.
Speaker Change: <unk> has over $1 billion in annual credit card processing volume. So this program has the potential to double our credit card processing volume and generate over $20 million of annual reoccurring revenue.
Speaker Change: This program is why right now and moving along with the implementation integration process. Later this month, we anticipate boarding a small set of merchants. So we can run some tests transactions at that point, the ISP will start sending out enrollment links the merchants can use to convert from their existing processor to our payments processing platform.
Gregory Mark Carter: Later this month, we anticipate boarding a small set of merchants so we can run some test transactions. At that point, the ISB will start sending out enrollment links that merchants can use to convert from their existing processor to our payments processing platform. As Merchants Board, we believe the implementations and associated revenue streams will become more meaningful during the later quarters of this year and into 2025. I think we'll get the lion's share of the merchants because of the ease of integration we are offering and the overall positive commitment of the ISV.
As merchants board, we believe the implementations and associated revenue streams will become more meaningful during the later quarters of this year and into 2025.
Speaker Change: We will get the lion's share of the merchants because of the ease of integration, we are offering and the overall positive commitment of the IFC.
Gregory Mark Carter: Over time, with similar but smaller ISDs such as PracticeWeek, we have been seeing about a 60% conversion rate, but we are targeting better penetration here. I'm proud of the team that successfully competed for this business. This is a large ISP. In total, their merchants have aggregate revenues of approximately $6 billion. So this is only a fraction of the dollars that pass through the hands of these merchants every year.
Speaker Change: Overtime with similar but smaller Isps such as practice suite, we've been seeing about a 60% conversion rate we are targeting better penetration here.
Speaker Change: I am proud of the team that successfully competed for this business. This is a large IFC and.
Speaker Change: In total there are merchants have aggregate revenues of approximately $6 billion.
Speaker Change: This is only a fraction of the dollar of the pass through the hands of these merchants every year.
Gregory Mark Carter: We were able to demonstrate to them that our technology allows ISVs to easily integrate flexible payment capabilities into their applications, enabling merchants to process all manner of electronic payments. We won this business because our payback is easy to use, has a strong payment network, offers the industry's best white glove customer service, and the platform is extremely flexible. This opportunity would never have arisen if not for the numerous successful implementations that are leading to additional awareness and building confidence in the UCO Payback Solution throughout the industry.
Speaker Change: We were able to demonstrate to them that our technology allows isps to easily integrate flexible payment capabilities into their applications, enabling their merchants to process all manner of electronic payments. We won this business because our payback is easy to use as a strong payment network.
Speaker Change: The industry's best White glove customer service and the platform is extremely flexible.
Speaker Change: This opportunity would have never had arisen if it not for the numerous successful implementations that are leading to additional awareness and building confidence and they use your payback solution throughout the industry.
Gregory Mark Carter: Quickly reviewing some other first quarter accomplishments, we had an educational ISV go live, and we are now processing for three universities with a fourth expected to be added soon. And there's still a number of ISVs in various stages of implementation, as well as a still robust pipeline. It was also a quarter of heavy industry and market vertical trade association meetings, which has recently been the primary source of our pipeline.
Speaker Change: Quickly reviewing some other first quarter accomplishments, we had in educational ISP go lives. We're now processing for three universities with a force expected to be added soon and there is still a number of Isps in various stages of implementation as well as still a robust pipeline.
Speaker Change: It was also a quarter of heavy industry end market vertical trade show Association meetings. This has recently been the primary source of our pipeline.
Speaker Change: Our performance in marketing strategy are producing results improving our recognition, helping establish more relationships and help us move upmarket to larger opportunity such as the large ISP welcome this quarter it's up.
Gregory Mark Carter: Our performance and marketing strategy is producing results, improving our recognition, helping establish more relationships, and helping us move up the market to larger opportunities, such as the large ISB welcome this quarter. It's a plan that's working, we've stuck to it, and we're going to continue to stick to it. Now I'd like to turn the call over to Houston Frost, Chief Product Officer, to talk about our card issuing business. Thank you, Greg, and thank you to everyone participating in our call this afternoon. Card issuing had a great start to the new year. Card loads more than doubled and exceeded $100 million for the third consecutive quarter, setting an all-time quarterly record.
Speaker Change: Planets working we've stuck to it and we're going to continue to stick to it now.
Houston Korth Frost: Now I would like to turn the call over to Houston Frost, Chief product officer to talk about our card issuing business.
Houston Korth Frost: Thank you, Greg and thank you to everyone for participating in our call. This afternoon.
Houston Korth Frost: The momentum and our card load growth. We also saw growth in total transaction volume, including cash withdrawals, which were up 26%. Total card purchase volume was up 42%. If you remove the often mentioned New York City program wind down, revenue in the quarter would have been up 21%.
Houston Korth Frost: <unk> had a great start to the new year.
Houston Korth Frost: Card loads more than doubled and exceeded $100 million for the third consecutive quarter.
Houston Korth Frost: Setting an all time quarterly record.
Houston Korth Frost: The momentum in our card loan growth continues.
Houston Korth Frost: We also saw growth in total transaction volume, including cash withdrawals, which were up 26%.
Houston Korth Frost: Total card purchase volume was up 42%.
Houston Korth Frost: If you remove the all mentioned in New York City program Wind Downs revenue in the quarter would have been up 21%.
Houston Korth Frost: I'll mention again the card loads are an important forward looking metrics they.
Houston Korth Frost: I'll mention again that card loads are an important forward-looking metric. They are a precursor to interchange, transaction fee, and breakage revenue. And the trend in these operating metrics has been very positive. I expect an acceleration in load volumes beginning this quarter, but even more so in the third and fourth quarters. We're going to have more dollars running through our cars. As I've mentioned before, our strategy is to build a portfolio of corporate expense and other long-term programs that offer recurring revenue. We will retain a relentless focus on our growth margin.
Houston Korth Frost: They are a precursor to interchange transaction fee and breakage revenue.
Houston Korth Frost: And the trend in these operating metrics has been very positive.
Houston Korth Frost: I expect an acceleration in load volumes, beginning this quarter, but even more so in the third and fourth quarters.
Houston Korth Frost: We're gonna have more dollars running through our cars.
Houston Korth Frost: As I have mentioned before our strategy is to build a portfolio of corporate expense and other long term programs that offer recurring revenue.
Houston Korth Frost: We will retain a run of letting let's focus on our gross margins.
Houston Korth Frost: Recently, we announced the expansion of our relationship with mobile money.
Houston Korth Frost: Recently, we announced the expansion of our relationship with mobile money. They are launching a new instant issue general purpose reloadable card program, providing their clients and customers with new features and increased flexibility. They recently signed a contract with an operator of dozens of amusement parks, water parks, and resorts, all of which will be loaded with this new GPR.
Houston Korth Frost: They are launching a new incident issue general purpose reloadable card program, providing their clients and customers with new features and increased flexibility.
Houston Korth Frost: They recently signed a contract with an operator of dozens of amusement parks water parks and resorts.
Houston Korth Frost: All of which will be loaded with this new G. P. R. Carney.
Houston Korth Frost: Our relationships continue with numerous government and related entities, including International Rescue Committee.
Houston Korth Frost: Our relationships continue with numerous government and related entities, including the International Rescue Committee, which has issued 47,000 cards and loaded $75 million since program launch. Our external authorization tool continues to attract new commercial accounts. In health care, we are growing with a new account that enables employers to make tax-advantaged contributions to employees that have their own individual health benefits. We continue to consider health care a growth vertical.
Houston Korth Frost: Issued 47000 cars and loaded $75 million since program launched.
Houston Korth Frost: Our external authorization tool continues to attract new commercial accounts and.
Houston Korth Frost: In health care, we are growing with a new account that enables employers to make tax advantaged contribution to employee.
Houston Korth Frost: And their own individual health benefit plans.
Houston Korth Frost: We continue to consider health care a growth vertical.
Houston Korth Frost: We're also working on new functionality and features such as in our provisioning on Android integrating the fed now and adding debit networks consumer loading capabilities on our akimbo card.
Houston Korth Frost: We are signing new agreements our pipeline is robust and on the operational side, we are working on strategies to increase recurring revenue and improve margins.
Speaker Change: I continue to remain positive and excited about the future of the card issuing division at UCF and with that I'd like to turn the call over to our chairman and Chief Executive Officer Lewis out.
Houston Korth Frost: We're also working on new functionality and features, such as in-app provisioning on Android, integrating with FedNow, and adding debit network consumer loading capabilities on our Akimbo. We are signing new agreements, our pipeline is robust, and on the operational side, we are working on strategies to increase recurring revenue and improve margins. I continue to remain positive and excited about the future of the card-issuing division at UC. And with that, I'd like to turn the call over to our Chairman and Chief Executive Officer, Louis Hoch. Thank you, Houston, and welcome, everyone.
Lewis: Thank you Houston and welcome everyone.
Louis A. Hoch: I'm proud of our team and the achievements that they have accomplished. And in the first quarter, they kept us on track to meet both our top and bottom line guidance for the year. Let me quickly go through a couple of our business lines. Output Solutions had a solid start to the year with strong volume, both in mailings and electronic document delivery, and increased profits in the Quarter. Pieces mailed in the quarter were $8 million, and electronic documents delivered exceeded $19 million.
Lewis: I'm proud of our team and then shipments that they have accomplished.
And in the first quarter kept us on track to meet both our top and bottom line guidance for the year.
Speaker Change: Let me quickly go through a couple of our business lines.
Speaker Change: Output solutions.
Solid start to the year with strong volume both in mailings and electronic document delivery.
Speaker Change: And increased profits in the quarter Pizza is mail in the quarter were $8 million and electronic documents delivered exceeded 19 million hell ever a lot of the volume goes on lower price per unit jobs. So revenues were understandably lower than the same quarter last year.
Louis A. Hoch: However, a lot of the volume was for lower-priced per-unit jobs, so revenues were understandably lower than the same quarter last year, where revenues were unusually strong due to a lot of one-time jobs. As we noted on our last call, our capabilities have been greatly enhanced by the investment in new printing and sorting machines and associated processes. This new equipment is one reason. We once again delivered more electronic than paper documents for the second consecutive time in the first quarter, helping increase volume while decreasing the cost of goods sold.
Speaker Change: Revenues were unusually strong due to a lot of one time jobs.
Speaker Change: As we noted on our last call our capabilities have been greatly enhanced by the investment of new printing and sorting machines and associated processes.
Speaker Change: This new equipment is one reason.
Speaker Change: We once again delivered more electronic and paper documents for the second consecutive time.
Speaker Change: In the first quarter.
Speaker Change: Helping to increase the volume while decreasing the cost of goods sold.
Speaker Change: Silence team have been breaking and the need machining, while refining our processes to capitalize on the speed of the new machine and optimize overall efficiency and productivity.
Louis A. Hoch: Scientists have been breaking in the new machine while refining our processes to capitalize on the speed of the new machine and optimize overall efficiency and productivity. This will further position output to capitalize on its increased capacity and processing speed. I expect output to resume its growth in the second quarter while also continuing to reduce cost. Turning to ACH, we saw a third consecutive quarter of recovery with electronic check transaction volume up 4%, return check transactions processed up 9%, and electronic check dollars processed up 22%, all compared to the first quarter of 2023. Pennless Debit also continues to exhibit strong growth. In 2024, our year over year comparisons will be normalized since there is no longer any voyage or cryptocurrency noise in the comparable 2023 month number.
Speaker Change: Further position output to capitalize on its increased capacity and processes.
Speaker Change: I expect output to resume its growth in the second quarter, while also continuing to reduce costs.
Speaker Change: Turning to a C. H, we saw a third consecutive quarter of recovery with electronic.
Speaker Change: Check transaction volume up 4% return check transactions process up 9% and electronic check dollars processed up 22%.
Speaker Change: All compared to the first quarter of 2023.
Speaker Change: Pin less debit also.
Speaker Change: Continues to exhibit strong growth.
Speaker Change: In 2024 or year over year comparisons will be normalized since there is no longer any voyager crypto currency noise in the comparable 2023.
Speaker Change: Numbers. This would provide a clear view into the ongoing success of H D. H, where we have historically outperformed the industry growth rate.
Louis A. Hoch: This will provide a clearer view into the ongoing success of ACH, where we have historically outperformed the industry growth rate. But the real acceleration of ACH will come when we get our fed now and the clearinghouse products in the market. We're not quite live yet, but it's something that we're very close to, and just like every other part of our business.
Speaker Change: But the real acceleration that ACTH will come when we get our fed now in the clearinghouse products in the market.
Speaker Change: We're not quite wise, yet, but it's something that we're very close to.
And just like every other part of.
Speaker Change: Our business.
Louis A. Hoch: The sales pipeline and ACH is rich, and there are abundant opportunities. And finally, I wanted to congratulate Greg and his team for landing what could turn out to be the largest single program in the company's history. This is a large, exceptionally well-run ISV that has proprietary ERP systems installed in hundreds of small, medium-sized, and enterprise-level businesses. While these businesses collectively generate over $6 billion a year in revenue, we believe that it only accounts for about 23% of debit and credit card payment.
Speaker Change: Sales pipeline is rich and there are abundant opportunities.
Speaker Change: And finally, I wanted to congratulate Greg and his team for landing what could turn in.
Speaker Change: To be the largest single program in the company's history.
Speaker Change: This is a large exceptionally well run ISP that has proprietary.
<unk> system installed in hundreds of small medium sized and enterprise level businesses. While these businesses collectively generated over $6 billion a year in revenue we believe that.
Speaker Change: Only accounts for about 23%.
Speaker Change: Debit and credit card payments.
Louis A. Hoch: They also offer ACH payments, so that will be another opportunity for Usio. The processing has the potential to double our annual card processing volume while adding $20 million or more in annual recurring revenue. Initial conversions are already underway, and as Greg has discussed, we should start to see the program contribute to our results soon, with a significant ramp-up beginning later this year. We won this business by demonstrating our ability to develop a program custom tailored to specifically meet their needs. As a result, ISB will be notifying its merchants of this superior capability and providing them with an easy, convenient means to change their payment processing from their existing provider, which in many cases is striped.
Speaker Change: They also offer H H H H payments, so that's another opportunity for ECS.
The processing has a potential to double our annual card processing volume, while adding $20 million or more.
Speaker Change: Youll reoccurring revenue.
Speaker Change: Initial conversions are already.
Greg: On your way as Greg discussed.
Greg: Since the start.
Greg: The program contributed to our results and with the significant ramp beginning later this year.
Greg: We won this business by demonstrating our ability to develop a program test them tailored to specifically meet their needs as a result of the ISP.
Greg: We'll be notifying their merchants.
Greg: There are capability and providing them with an easy convenient means to convert their payment processing from their existing provider.
Greg: In many cases.
Greg: Right.
Greg: Two years ago.
Greg: Also.
Louis A. Hoch: I also note that our strong financial position with over $7 million in cash at the end of the quarter, we're able to maintain our cash position over three months while significantly reducing payables and accruals. This will provide us with the resources we need to make necessary investments to support our growth. So overall, we had a very good start to the year, the first quarter came in essentially where we had internally projected it, with prepaid down, as previously communicated, but strong volumes across the board, and a new program added that could potentially be the largest in the company's history, and the pipeline remains rich, including a few mega deal prospects, which are all equated to $5 million or more in annual recurring revenue potential.
Greg: Note that our strong financial position with over $7 million in cash at the end of the quarter, we were able to maintain our cash position over a three months while significantly reducing.
Greg: Payables and accruals.
Greg: This will this provides us with the resources, we need to make necessary investments.
Greg: To support our growth.
Greg: So overall, we had very good start to the year. The first quarter came in essentially where we had internally projected it.
Greg: With prepaid down as previously as previously communicated.
Strong volumes across the board.
Greg: And a new program added.
Greg: Could be to potentially be the largest in the company's history.
Greg: And the pipeline remains rich, including a few mega deal prospects.
Greg: Which.
Greg: Sure.
Greg: Equate to $5 million or more in annual recurring revenue.
Greg: Potential.
Louis A. Hoch: Consequently, I'm pleased to reaffirm our 2024 guidance; we expect revenue to be up between 10% and 12% for 2024. With the focus on enhancing operating leverage, we expect adjusted EBITDA to be between approximately $4 million and $4.5 million. In addition, we believe we will generate positive Gap EPS in fiscal 2024. With that, I would like to turn the call back to the operator to conduct our question and answer session.
Greg: Consequently, I am pleased to reaffirm our 2024 guidance, we expect revenue to be up between 10% and 12% for 2024 with a focus on enhancing operating leverage we expect adjusted EBITDA to be between approximately 4 million.
Greg: To $4 5 million.
Greg: In addition, we believe we will generate.
Speaker Change: Positive GAAP EPS in fiscal 2024 with that I will like to turn the call back to the operator to conduct our question and answer session.
Operator: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been answered and you would like to withdraw your question, please press star, then 2.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two alright.
Speaker Change: Our first question comes from Scott Buck with H C. Wainwright. Please go ahead.
Operator: Please go ahead. Good afternoon, everybody. Thanks for taking the time to join us today.
Scott Christian Buck: Hi, good afternoon, everybody. Thanks for taking my questions first one is probably for Greg on this morning's announcement it sounds like 60%.
Scott Christian Buck: Thank you for taking my questions. The first one is probably for Greg.
Scott Buck: Conversion.
Speaker Change: It is kind of the standard what's the timeframe for for that been historically.
Scott Christian Buck: On this morning's announcement, it sounds like 60% conversion is kind of the standard. What's the timeframe for that been historically? Just to give you some context, back in 2020, the conversion rate was around 30%, 27 to 30%. We've, through our back office and client support services, gotten that to 60%. But with this particular ISV, I think we're going to target the conversion at a much higher rate, as I said, because of the commitment of the ISV and the unique nature of their ERP software.
Speaker Change: Just to give you some context back in 2020, the conversion rate was around 30% 27% to 30%.
Speaker Change: Through our back office and client support services have gotten up to 60%, but with this particular Isd I think we're going to target the conversion at a much higher rate as I said because of the commitment of the ISP.
Speaker Change: The unique nature of their ERP software. So it's really just going to be a matter of phasing those those customers in and that will start.
Scott Christian Buck: So it's really just going to be a matter of phasing those customers in, and that will start. That specific, one of their larger customers will be in the third quarter, but we'll start boarding some of their other merchants from different companies later this month.
Speaker Change: That specific while theyre, specifically large customers will be in the third quarter, but we will start boarding some of their other merchants from different companies later this month.
Speaker Change: And how does the cadence of Onboarding a historically go I mean is it you get 20 or 30% right away and then it.
Gregory Mark Carter: And how does the cadence of onboarding historically go? I mean, is it you get 20 or 30% right away, and then it's, you know, kind of pulling teeth to max it out? Or is it more of a slow climb? And you know, six months, 12 months, 18 months later, that's where you get, you know, the majority of conversion. That's a great question.
Kind of.
Speaker Change: Pulling teeth to to the Max it out or is it more of a slow climb in and you know six months 12 months 18 months later, that's where you get the majority of convergence.
Speaker Change: That's a great question. There is really no set answer and we've had some isps that convert in mass and we've got others that converted and there was an initial surge of 20% to 30% and then the others follow so unfortunately, there's not a standard or a uniform answer to that.
Gregory Mark Carter: There's really no set answer, and we've had some ISDs that convert in mass. We've had others that convert, and there's an initial surge of, you know, 20 to 30 percent, and then the others follow. So, unfortunately, there's not a standard or a uniform answer to that. But, again, given the support that we provide in the various marketing and outreach campaigns that we provide, we're doing substantially better at getting those merchants converted sooner rather than later.
Speaker Change: But again given the support that we provide in the various.
Speaker Change: Marketing and outreach campaigns that we provide we're doing substantially better getting those merchants converted sooner rather than later, but I can't give you that.
Gregory Mark Carter: But I can't give you a specific answer because it's always ISD-dependent.
Speaker Change: Specific answer there can always be dependent.
Gregory Mark Carter: That's understandable, and congrats on the deal.
No that's understandable and congrats on the deal.
Scott Christian Buck: [inaudible]
Houston on the prepaid prepaid load volumes is there a single program or a couple of programs that are responsible for the expected acceleration through the end of the year or is it more widespread.
Scott Christian Buck: Houston, on the prepaid load volumes, is there a single program?
Houston Korth Frost: Is there a single program or a couple of programs that are responsible for the expected acceleration through the end of the year, or is it more widespread? There's a handful. I would say, you know, these numbers are a little bit off my head, but I'd say, you know, three to five of them will be responsible for a large portion of the growth.
Houston: Theres a handful.
Houston: I would say.
Houston: These numbers are a little bit off my head, but I would say.
Houston: Three to five of them will be responsible for a large portion of the growth.
Houston: And we've mentioned we've mentioned these days in the past class wallet.
Houston Korth Frost: And we've mentioned these names in the past, class wallet, mobile money. And then we do have a handful of recurring loading government programs. We mentioned the International Arresting Committee on the call today. So you know, it's not a single program, it's not two programs, but it's not 30 programs. Unknown Speaker Yeah, no, that's fair. And just the
Houston: Mobile money.
Houston: And then we do have a handful.
Houston: Currently loading government programs.
Houston: We mentioned international Rescue Committee on the call today so.
Houston: It's not a single program, it's not two program, but it's not 30 programs.
Houston: Yes, no that's fair and just the pace at which <unk>.
Scott Christian Buck: Unknown Speaker 05.01.15 Consumers utilize the cards once they've been loaded. Is that different across
Houston: Tumors utilize the cards once they've been loaded is that different across programs or is it fairly universal.
Houston Korth Frost: [inaudible] Unknown Speaker No, I mean, it actually varies, based on a few different factors. So, Recurring loading programs, especially those with higher dollar amounts. Unknown Speaker You see very, you know, Very substantial spend rates, 90 to 95% plus of the dollar will be spent on those cards. If I go to the other extreme, let's call it a $20 single loan promotional card, you may only see 30-40% of those dollars. But so, you know, one thing that's kind of interesting about that is that while, if you think about a recurring loading program and you only have a small percentage that is unspent, you know, it's $1,000 and 3% is unspent, well, that's $30 remaining on the card, and that's a certain, you know, percent of dollars, but it's a dollar amount that might even be higher than a single low $20 program where less than 50% is spent and we're only making $10 a card.
Houston: No I mean, it actually varies.
Houston: Uh huh.
Houston: Based on a few different factors so.
Houston: Recurring loading programs, especially those with higher dollar amounts.
Houston: You see very.
Houston: No.
Houston: Very substantial spin rates, 90% to 95% plus of the dollars will be spent on those cars.
Houston: If I go to the other extreme let's call. It a 20 dollar single loan promotional card.
Houston: You may only see 30% to 40% of those dollar spent.
Houston: But so.
Houston: One of them is kind of interesting about that is that while if you think about our recurring loading program in <unk>.
Houston: And you only had to call it a small percentage it is understand.
Houston: It's $1000 at 3% well that's $30 remaining on the car.
Houston: And that's a certain percent.
Houston: But if it's a dollar in battles.
Might even be higher than a single low $20 program.
Houston: We're less than 50% of spend and we're only making $10 a car so.
Houston Korth Frost: So, you know, in some ways, the dollar amount evens out. Unknown Speaker And there's a little bit more content. But when you're talking about the kind of percent of funds left on cards or left unspent, that varies dramatically depending on the type of the program.
Houston: Some ways the dollar amount either Val.
Houston: And there is a little bit more constant, but when you're talking about kind of percent of funds left on cars or less time spent that.
Houston: That varies dramatically depending on the type of the program.
Scott Christian Buck: No, that makes sense. And then, last one for me, guys, on ACH. Unknown Speaker 0
Speaker Change: Yeah, no that makes sense and then last one for me guys on E C H.
Scott Christian Buck: I'm just curious, what exactly it is that's driving the incremental growth and is whatever that sustainable? Unknown Speaker I'm just curious, what exactly it is that's The incremental volume associated revenue with ACH is, you know, not only ACH's complimentary service, which includes pendant debit, but, and in the future, it will include the Clearinghouse and FedNow. And, you know, we're closing more deals. There are not many providers that do penless debit.
Speaker Change: I'm just curious what what exactly it is that's driving the incremental.
Speaker Change: Roast and N is whatever that is sustainable.
Speaker Change: But the incremental volume associated revenue with AC agents.
Speaker Change: Not only ACTH its complimentary service, which include dependents debit, but and in the future. It will include the clearing house and the fed now.
Speaker Change: And you know.
Speaker Change: We're closing more deals so.
Speaker Change: There's not many providers do pin less debit.
Louis A. Hoch: It's very complicated. And so, we're closing more deals with Pemliss Debit. And our ACH volumes, you know, are starting to go up in sales as well. And just to add to that, as we add more ISVs, that also contributes to ACH volume. And that's becoming a meaningful number now.
Speaker Change: It's very complicated.
Speaker Change: And so we're.
Speaker Change: We're closing more deals of pin less debit.
Speaker Change: And our hgh volumes.
Stacy: Are you starting to go up in new sales as well and just to add to that as we add more Isps that also contributed Stacy H volume.
Stacy: And that's become a meaningful number.
Stacy: Yeah.
Speaker Change: Great I appreciate that and thanks again for the time guys.
Louis A. Hoch: Great, I appreciate that. And thanks again for the time, guys. Thank you.
Donna: Thank you thanks Donna.
Speaker Change: Again, if you have a question. Please press star and then one.
Scott Christian Buck: Again, if you have a question, please press star and then one. There are no further questions. This concludes our question and answer session. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: There are no further questions. This concludes our question and answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.