Q1 2025 Usio Inc Earnings Call

Speaker Change: [music].

Hello, and welcome to U C. As first quarter fiscal 2025 earnings conference call. All participants will be in a listen only mode. After today's presentation. There will be an opportunity to ask questions. Please note. Today's event is being recorded now I would like to turn the conference over to your host.

Paul mainly please go ahead, Sir thank you operator, and thank you everyone for joining our call today welcome to <unk> first quarter fiscal 2025 conference call. The earnings release, which we issued today. After the market closed is available on our website at <unk> Dot com under the Investor Relations tab.

Operator: Thank you, Operator, and thank you, everyone, for joining our call today.

Paul Manley: Welcome to UCO's first quarter fiscal 2025 conference call. The earnings release, which we issued today after the market closed, is available on our website at uco.com under the investor relations tab.

Paul Manley: On this call with me today are Louis Hoch, our Chairman and CEO, and Greg Carter, Executive Vice President of Payment Acceptance and our Chief Revenue Officer.

Louis Hoch: On this call with me today are Louis Hoch, our chairman and CEO and Greg Carter Executive Vice President of payment acceptance and our Chief revenue Officer Michael.

Paul Manley: Michael White, Senior Vice President and Accounting Officer, Jerry Uffner, Head of Card Issuing, and our Chief Product Officer, Houston Frost, will be available during the question and answer session at the end of the call.

Louis Hoch: Michael White Senior Vice President and accounting Officer, Jerry Elsner had a card issuing and our chief product Officer, Houston Frost will be available during the question and answer session at the end of the call let.

Paul 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 and as more fully discussed in our press release and in our findings with the SEC.

Speaker Change: Let me remind our listeners that certain statements today 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.

Louis Hoch: As more fully discussed in our press release and in our filings with the SEC.

Paul Manley: Let me start off today's call with a summary of the highlights from this afternoon's release. We are very pleased to report record numbers in first quarter revenues, a significant increase in processing volume, solid profitability, and strong cash flow. We are equally pleased to report another increase in our cash These results reflect the increasing receptivity to our products in the market together with the success of our commitment to better leverage our infrastructure to improve profitability. Total processing volume was up 34%, with record volume in card, driven by another outstanding quarter at pace. ACH continues its string of strong growth, with processing volume up a handsome 36% in the This strong processing volume growth led to a 5% increase in revenues, 6% excluding net income, which was down in the quarter from a year ago.

Louis Hoch: Let me start off today's call with a summary of the highlights from this afternoon's release.

Louis Hoch: We are very pleased to report record numbers in first quarter revenues is significant increase in processing volume solid profitability and strong cash flow. We are equally equally pleased to report another increase in our cash position. These.

Louis Hoch: These results reflect the increasing receptivity to our products in the market together with the success of our commitment to better leverage our infrastructure to improve profitability.

Louis Hoch: Total processing volume was up 34% with record volume and card driven by another outstanding quarter at pay it back.

Louis Hoch: E C. H continues its string of strong growth with processing volume up a handsome 36% in the quarter. This strong processing volume growth led to a 5% increase in revenues, 6%, excluding net income which was down in the quarter from a year ago gross profits were little changed from a year ago.

Paul Manley: Gross profits were a little changed from a year ago, although margins were somewhat softer due to the revenues. Outside of product mix, we are seeing efficiency and productivity improve across our organization, which support our overall corporate margin aspirations of the mid-20s. Our selling, general, and administrative expenses were relatively unchanged from that of a year ago and down sequentially from the fourth quarter of last year. In fact, headcount to date is below that of a year ago, which is a further reflection of our commitment to improve operating life. All of this led to a sequential improvement in profitability with adjusted EBITDA rising to $700,000 in the quarter, up from $500,000 in the fourth quarter of 2024.

Louis Hoch: Although margins were somewhat softer due to the revenue mix.

Louis Hoch: Our product mix, we are seeing efficiency and productivity improve across our organization, which support our overall corporate margin aspirations of the mid twenties, our selling general and administrative expenses were relatively unchanged from that of a year ago and down sequentially from the fourth quarter of last year in <unk>.

Louis Hoch: Head count today is below that of a year ago, which is a further reflection of our commitment to improve operating leverage all of this led to a sequential improvement in profitability with adjusted EBITDA rising to $700000 in the quarter up from $500000 in the fourth quarter of 2020.

Louis Hoch: For <unk>.

Paul Manley: Cash rose again to $8.7 million at quarter end as we generated $700,000 of cash in the quarter. Ending cash is net of approximately $1.2 million used in the quarter to reduce to reduce accrued expenses and accounts payable, and to also repurchase $350,000 of our share.

Louis Hoch: Cash rose again to $8 7 million at quarter end as we generated $700000 of cash in the quarter.

Louis Hoch: Ending cash is net of approximately $1.2 million used in the quarter to reduce.

Louis Hoch: To reduce accrued expenses and accounts payable and you also repurchased $350000 of our shares.

Paul Manley: This is just the start of what we expect to be a year where we see revenue growth significantly picking up in the second half of the year. Growth is expected to accelerate through the ramp-up of our UCO-1 implementation and the benefit of more favorable year-over-year comparisons as the impact of prior New York City COVID-related revenues phase out. To conclude, we are generating strong processing volume growth, consistently cash flow positive, improving productivity, and putting plans and processes in place to better leverage our products, infrastructure, and technology. We are also pursuing a dual mandate to not only grow the business, but to effectively lever our infrastructure to drive an ever-improving bottom line to deliver value for our shareholders.

Louis Hoch: This is just the start of what we expect to be a year, where we see revenue growth revenue growth significantly picking up in the second half growth is expected to accelerate through the ramp up of our U C. O one implementation and the benefit of more favorable year over year comparisons and the impact of prior New York City Covid related.

Louis Hoch: Revenues phase out too.

Louis Hoch: To conclude we are generating strong processing volume growth consistently cash flow positive, improving improving productivity and putting plans and processes in place to better leverage our products infrastructure and technology. We are also pursuing a dual mandate to not only grow the business but to effectively.

Louis Hoch: <unk> lever our infrastructure to drive an ever improving bottom line to deliver value for our shareholders. Consequently, we are reiterating as we reiterated in our press release, we remain very comfortable with our expectation for 14% to 16% top line revenue growth this year.

Paul Manley: Consequently, we are reiterating, as we reiterated in our press release, we remain very comfortable with our expectation for 14 to 16 percent top line revenue growth.

Gregory Carter: Now at this time, I'd like to turn the call over to Greg Carter. Thank you, Paul, and good afternoon, everyone. Let me begin with a few comments about the exciting launch of our UCO1 initiative. In April, we officially introduced the company-wide initiative called Usio One with a meeting here in San Antonio. This brought together key business development, marketing, and sales representatives from our three business units. While this marked the official launch of UCO1, our sales representatives have been actively cross-selling with a few wins already in the books. For instance, through their strong customer relationship, our card issuing team sold a large deal where Output Solutions has been chosen to print nearly 1.5 million physical checks.

Greg Carter: Now at this time I'd like to turn the call over to Greg Carter.

Greg Carter: Thank you Paul and good afternoon, everyone. Let me begin with a few comments about the exciting launch of our UC One initiative.

Greg Carter: In April we officially introduced a company wide initiative called UC or one with a meeting here in San Antonio.

Greg Carter: This brought together key business development marketing and sales representatives from our three business units.

Greg Carter: While this marked the official launch of UC, one our sales representatives have been actively cross selling with a few wins already on the books.

Greg Carter: For instance through their strong customer relationship our card issuing team sold a large deal where output solutions has been chosen to print nearly 1.5 million physical checks.

Gregory Carter: The meeting was a great exercise in team building and education, as we equipped the team with the tools they need to introduce Usio's entire suite of capabilities to entities with whom we already have relationships, as well as future customers. The expectation is to increase the acceptance of the UCO suite of services to as many current customers as we can over the next two quarters, while also exposing the suite of services to new customers. The team is off to a great start, and we expect the synergies from this new initiative to really start to produce results in the second half of the year.

Greg Carter: The meeting was a great exercise in team building in education as we equip the team with the tools they need to introduce <unk> entire suite of capabilities to entities, with whom we already have relationships as well as future customers.

Greg Carter: The expectation is to increase the acceptance of the use your suite of services. So as many current customers as we can over the next two quarters, while also exposing the suite of services to new customers.

Greg Carter: The team is off to a great start and we expect the synergies from this new initiative to really start to produce results in the second half of the year.

Gregory Carter: Meanwhile, CARD remains on its growth trajectory led by PAYFAC. Total processing dollars were up 17%, and transactions processed were up 65% in the quarter. Again, CARD remains focused on growing our PAYFAC business, where dollars processed were up 33% in the quarter, leading to another quarter of outstanding PAYFAC growth with revenue up 25%. Payback now accounts for approximately 59% of total card revenue. Our success continues to stem from the steady drumbeat of new implementations with 17 new ISVs currently in various stages of implementation. In order to support future growth, we have tasked our Director of Sales Operations to streamline, accelerate, and improve implementations across all UCO business lines.

Greg Carter: Meanwhile, card remains on its growth trajectory led by paid back.

Greg Carter: Total processing dollars were up 17% and transactions processed were up 65% in the quarter again card remains focused on growing our payback business, where dollars processed were up 33% in the quarter, leading to another quarter of outstanding payback growth with revenue up 25%.

Greg Carter: Papac now accounts for approximately 59% of total card revenues.

Greg Carter: Our success continues to stem from the steady drumbeat of new implementations with 17, new Isps currently in various stages of implementation.

Greg Carter: In order to support future growth, we have tasked our director of sales operations to streamline accelerate and approved implementations across all your steel business lines.

Gregory Carter: Consequently, I can confidently reiterate today my previous expectation that CARD will grow nicely in 2025. Our confidence is twofold. First, growth with and within our existing account. For instance, one of our large healthcare ISV has been authorized by a major manufacturer to begin selling a larger range of products, which should naturally add incremental processing volume beginning this month. There are several other LAN and EXPAND opportunities that should mirror this ISV and we remain optimistic that processing volumes within these existing accounts will increase. We're also ramping up a new filtered spend program for small retail merchants.

Speaker Change: Sequentially I can confidently reiterate today in my previous expectation the card will grow nicely in 2025.

Greg Carter: Our confidence is twofold.

Speaker Change: First growth with and within our existing accounts.

Speaker Change: Instance, one of our large health care ISP has been authorized by a major manufacturer to begin selling a larger range of products, which should naturally add incremental processing volume beginning this month.

Speaker Change: There are several other land and expand opportunities that should mirror. This IFC and we remain optimistic that processing volumes within these existing accounts will increase.

Speaker Change: We're also ramping up a new filtered spend program for small retail merchants.

Gregory Carter: Filtered spend is a program that allows cardholders to spend funds for specific approved items or services as defined by the card issuing organization. It's a more targeted way to control spending than a general purpose prepaid card. Organizations can use filtered spend cards to encourage specific purchasing behaviors such as healthy eating or purchasing certain health care supplies. New terminals are going in at hundreds of locations, and we will begin processing the payments as they are activated. Second, I am confident we will continue to see the steady pipeline conversion that is already driving our strong pay fat growth.

Speaker Change: Filter spend is a program that allows cardholders to spend funds for specific approved items or services as defined by the card issuing organization.

Speaker Change: It's a more targeted way to control spending and a general purpose prepaid card organs.

Speaker Change: Organizations can use filter spend cards to encourage specific purchasing behaviors, such as healthy eating our purchasing certain health care supplies.

Speaker Change: New terminals are going in hundreds of locations and we will be begin processing the payments as they are activated.

Speaker Change: Second I am confident we will continue to see the steady pipeline conversion. It is already driving our strong payback growth.

Gregory Carter: We are having better success with our social marketing and SEO efforts, which is getting us to the top of more relevant search pages than ever before. As I've said all along, it's a matter of taking a disciplined approach to the fundamentals and executing every day. Let me just wrap up by reiterating how excited I am to be leading our collective sales efforts and our new UCO1 initiative.

Speaker Change: We're having better success with our social marketing in S. C O efforts, which is getting us to the top or more relevant search pages than ever before.

Speaker Change: As I've said, all along it's a matter of taking a disciplined approach to the fundamentals and executing every day.

Speaker Change: Let me just wrap up by reiterating how excited I am to be leading our collective sales efforts and our new use you seal one initiatives.

Gregory Carter: While it may take some time for this program to reach its full potential, I remain confident in our sales and support teams to meet or exceed this year's financial targets.

Louis Hoch: And while it may take some time for this program to reach its full potential I remain confident in our sales and support teams to meet or exceed this year's financial targets now I'd like to turn the call over to Lewis.

Louis Hoch: Now, I'd like to turn the call over to Louis. Thank you, Greg, and welcome, everyone. First, a big shout out to Greg for taking the reins of the UCO-1 initiative, a potential game-changing initiative, and getting it off to a running start. At the kickoff meeting, I was encouraged to hear our team already shifting how we talk about our business, moving product-centric language like ACH to solution-oriented conversations such as disbursements and acceptance. While it may seem subtle, I believe this marks the beginning of a meaningful paradigm shift. a reflection on how we're evolving our thinking to focus on leveraging our technology to deliver greater value to our clients.

Lewis Hoch: Thank you, Greg and welcome everyone.

Lewis Hoch: First the big Shout out to Greg for taken the reins of the UCL One initiative, a potential game changing initiative and getting it off to a running start.

Lewis Hoch: At the kickoff meeting I was encouraged to hear our team already shifting how we talk about our business moving product centric language like a C. H two solution oriented conversations such as disbursements and acceptance while it may seem subtle I believe this mark.

Lewis Hoch: So at the beginning of a meaningful paradigm shift a.

Lewis Hoch: A reflection on how we're evolving our thinking to focus on leveraging our technology to deliver greater value to our clients.

Louis Hoch: Although these types of cultural and strategic shifts may be difficult to quantify, it can also be transformative. And while it's still early, the winds we have heard today already suggest that UCO1 is becoming a powerful catalyst in capturing a larger share of our customers' electronic payment volume and associated services.

Lewis Hoch: Although these types of cultural and strategic shifts may be difficult to quantify it can also be transformative.

Lewis Hoch: And while it's still early the wins, we have heard today already suggests at UCL, one is becoming a powerful catalyst and capturing a larger share of our customers' electronic payment volume and associated services.

Louis Hoch: Now my thoughts on the quarter. After a strong end of the year, ACH and complementary services growth accelerated in the first quarter. For the first three months Ending March 31, 2025, ACH revenues were up 33%, as electronic transaction volumes were up 36%. our sixth consecutive quarter of growth. return check transactions processed were up 24% and electronic check dollars processed up 42% Penliss Deavitt. RCC remain strong contributors to the growth of our complementary services. Although somewhat modestly lower margins in our core ACH business, we continue to outpace the industry growth. ACH has proven. an attractive add-on to many of our existing accounts.

Speaker Change: Now my thoughts on the quarter.

Speaker Change: After a strong end of the year, a C H and complementary services growth accelerated in the first quarter for the first three months.

Speaker Change: The March 31, 2025, a C. H revenues were up 33% as electronic transaction volumes were up 36% or six consecutive quarter of growth.

Speaker Change: Our return check transactions processed were up 24% and electronic check dollars processed up 42%.

Speaker Change: Pin less debit.

Speaker Change: In RCC remain strong contributors to the growth of our complementary services.

Speaker Change: Although somewhat modestly lower margins in our core ACTH business, we continue to outpace the industry growth.

Speaker Change: A C H is proven.

Speaker Change: Attractive add on too many of our existing accounts and we expect to expand our presence with a more accounts as UCL one rolls out.

Louis Hoch: and we expect to expand our presence within more accounts as UCL1 rolls out.

Louis Hoch: Output Solutions had another strong quarter. with revenues increasing 12% sequentially and also up from last year's especially strong first quarter. electronic documents process were up 5% while total pieces mailed exceeded 6.7 million pieces. With our emphasis on transitioning to the more profitable electronic document processing, it's encouraging to note another strong quarter of growth, with electronic-only documents delivered exceeding $20.5 million in the quarter. The increase in electronic-only documents also boosts margins. output. new business pipeline remains strong, highlighted by the recent cross-sell win with card issuing that Greg referenced earlier. With the acceleration of marketing efforts, output will prove a strategic resource, offering a competitive advantage for what we believe will be a robust marketing for integrated solutions.

Speaker Change: Output solutions had another strong quarter.

Speaker Change: With revenues, increasing 12% sequentially and also up from last year's especially strong first quarter.

Speaker Change: Electronic documents process were up 5%, while total pieces mailed exceeded 6.7.

Speaker Change: 7 million pieces.

Speaker Change: With our emphasis on transitioning to the more profitable electronic document processing.

Speaker Change: It is encouraging to note another strong quarter of growth with electronic only documents delivered exceeding $25 million in the quarter.

Speaker Change: The increase in electronic only documents also boosts margins output.

Speaker Change: New business pipeline remains strong highlighted by the recent cross sell win with card issuing that Greg referenced earlier.

Speaker Change: With the acceleration of marketing efforts output will prove prove a strategic resource offering a competitive advantage for what we believe will be a robust robust marketing for integrated solutions.

Louis Hoch: Card issuing also had a strong start to the year, narrowly missing the continuation of its streak of 100 million in quarterly card load. As new programs go live, we should exceed that level soon. For the quarter, revenues were slightly down in comparison to the prior year's quarter due to the New York City COVID program, which provided over a million dollars in revenue that quarter. However, this will be the last quarter where the New York City COVID program will affect prepaid costs. Our sales pipeline is especially strong, with numerous implementations completed and others in various stages of implementation.

Speaker Change: Card issuing also had a strong start to the year narrowly missing the continuation of its streak of $100 million in quarter quarterly card loads.

Speaker Change: As new programs go lives, we should exceed that level soon.

Speaker Change: For the quarter revenues were slightly down in comparison to the prior year's quarter due to the New York City, Covid program, which provided over $1 million in revenue that quarter.

Speaker Change: However, this will be the last quarter, where where the New York City Covid program will affect.

Speaker Change: Prepaid card accounts.

Speaker Change: Our sales pipeline is especially strong with numerous implementations completed and others in various stages of implementation.

Louis Hoch: Our volume is positioned to ramp significantly. to better leverage our unique capabilities and extensive infrastructure. Card Issuing has recently hired a new sales executive with extensive industry experience and broad connections in target markets, such as legal settlements, rebates, incentives, and rewards. Because many of these markets serve a broad spectrum of customers, including banked and unbanked. There's a strong demand for a single solution capable of meeting diverse payment needs and preferences. That's why we're putting more resources behind our proprietary product called Consumer Choice, a branded solution, which has a proven track record of offering integrated payment disbursement solutions that these markets are increasingly demanding.

Speaker Change: Our volume is positioned to ramp significantly too.

Speaker Change: To better leverage our unique capabilities.

Speaker Change: An extensive infrastructure.

Speaker Change: Card issuing has recently hired a new sales executive with extensive industry experience and broad connections in target markets, such as legal settlements rebates incentives and rewards.

Speaker Change: Because many of these markets serve a broad spectrum of customers, including banked and Unbanked.

Speaker Change: There is a strong demand for our single solution capable of meeting diverse payment needs and preferences.

Speaker Change: That's why we're putting more resources.

Speaker Change: Behind our proprietary.

Speaker Change: Called consumer choice.

Speaker Change: Branded solution, which has a proven track record of offering the integrated payment disbursement solutions that these markets are increasingly demanding.

Louis Hoch: While the sales pipeline includes some meaningful opportunities, we're strategically focused on the steady reoccurring revenue of the small to medium business market. as we have built a strategic roadmap to leverage our technology and greatly diversify our account base. One of the first steps is to add a payroll card offering to our portfolio as another opportunity to ease cross-selling.

Speaker Change: While the sales pipeline includes some meaningful opportunities where strategic really focused on the steady reoccurring revenue of the small to medium business market as.

Speaker Change: As we have built a strategic road map to leverage our technology and greatly diversify our account base.

Speaker Change: One of the first steps is to add a payroll card offering to our portfolio as another opportunity to ease cross selling.

Louis Hoch: The tenor of our business is good as we look forward to the strong second half of the year. Longer term, we are levering up our technology advantages. For instance, we're moving closer to a demonstration of our biometric. AI-driven application. This new technology uses biometrics to eliminate the need for a physical card. At checkout, it uses AI to automatically select the payment method that delivers the greatest value, whether it be rewards, cash back, or many other proprietary incentives. We think this could be revolutionary. So we look for our demo. So look for our demo in the near future.

Speaker Change: The tenure of our business as good as we look forward to a strong second half of the year.

Speaker Change: Longer term, we are levering up our technology advantages for exit for instance, we're moving closer to a demonstration of our biometrics.

Speaker Change: AI driven application this new technology uses biometrics to eliminate the need for a physical card at checkout. It uses AI to automatically select the payment method that delivers the greatest value whether it be rewards cashback or many other proprietary.

Speaker Change: Incentives.

Speaker Change: We think this could be revolutionary so we look for our demo.

Speaker Change: So look for a demo in the near future. We will also utilize this technology for events, where consumers can utilize their retina as their ticket to enter the advent and pay for items while in attendance.

Louis Hoch: We also utilize this technology for events where consumers can utilize their retina as their ticket to enter the event and pay for items while in attendance.

Louis Hoch: It was another quarter of growth and further strengthening of our organization, top to bottom. I'm extremely excited by the promise of UCO1 to deliver accelerated growth as soon as the second half of this year. Furthermore, we are steadfast in our focus on efficiency and productivity efforts to improve gross and EBITDA margins, which is a key corporate strategic initiative. Our cash balance and our ability to generate positive cash flow remains a great story. This not only provides us with financial resources to fund our internal growth initiatives, but also gives us the flexibility to evaluate acquisitions that would be both strategic and accretive.

Speaker Change: It was another quarter of growth and further strengthening of our organization top to bottom I am extremely excited by the promise of <unk> to deliver accelerated growth as soon as the second half of this year.

Speaker Change: Furthermore, we are steadfast in our focus on efficiency and productivity efforts to improve gross and EBITDA margins, which is a key corporate strategic initiatives.

Speaker Change: Our cash balance and our ability to generate positive cash flow remains a great story.

Speaker Change: This not only provides us with financial resources to fund our internal growth initiatives, but also gives us the flexibility to evaluate acquisitions that would be both strategic and accretive.

Louis Hoch: and we are seeing more opportunities in M&A.

Speaker Change: And we are seeing more opportunities in M&A.

Speaker Change: Yeah.

Louis Hoch: UCO succeeds because of the unique nature of our organization. Right now, many companies are trying to ward off the impact of terrorists. and possible consumer recession. because we offer a diversified portfolio of products to a wide range of end markets. We are highly insulated from the impact of many of these potentially macroeconomic challenges. That's why we remain confident and steadfast in our guidance we issued earlier this year that revenues will increase 14 to 16 percent.

Speaker Change: UCL succeeds because of the unique nature of our organization right now many companies are trying to ward off the impact of terrorists and possible a consumer recession, because we have offer a diversified portfolio of products to a wide range of end markets.

Speaker Change: We are highly insulated from the impact of many of these potentially the macro economic challenges as well.

Speaker Change: Why we remain confident and steadfast in our guidance we issued earlier this year that revenues will increase 14% to 16%.

Louis Hoch: We appreciate your support while we continue to build value for our shareholders.

Speaker Change: We appreciate your support while we continue to build value for our shareholders.

Operator: And with that, I'd like to turn the call back to the operator to conduct our question and answer session. We will now begin the question and answer session. ask a question, you may press star. Thank you. to all your questions. Press Star. At this time, we will pause momentarily to assemble our...

Speaker Change: And with that I'd like to turn the call back to the operator to conduct our question and answer session.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Barry Sine: And your first question comes from Barry Sine with Litchfield Hills Research. Please go ahead.

Scott Buck: Go ahead. Hey, good afternoon. Congratulations on the quarter.

Barry Sine: Hey, good afternoon.

Barry Sine: Congratulations on the quarter first is just a minor a clarifying point on organic revenue growth I believe and correct me if I'm wrong, you said in the year ago period, there was $1 million in spoilage revenue. So if you adjust that out I think the growth rate in the quarter was <unk>.

Scott Buck: First is just a minor clarifying point on organic revenue growth. I believe, and correct me if I'm wrong, you said in the year ago period there was $1 million in spoilage revenue. So if you adjust that out, I think the growth rate in the quarter was over 10% organically. Am I on the right track there? It was a million, a little more than a million.

Barry Sine: Over 10% organically and I on the right track there.

Barry Sine: Yes, it was a million a little more than $1 million.

Scott Buck: And it's also the last quarter that we'll have any competition. Okay, and that's that's therefore the guidance for revenue acceleration the second half of the year and the 14 to 16 percent full year revenue guidance number, correct? Well, the number of deals that we have in implementation are likely to implement and provide a lot of value in Q3 and Q4. Okay.

Barry Sine: It's also the last quarter that we'll have any comp issues.

Barry Sine: Okay and that's that's therefore the guidance for revenue acceleration in the second half of the year and the 14% to 16% full year revenue guidance number correct.

Barry Sine: Hello.

Barry Sine: The number of deals that we have an implementation.

Barry Sine: Akeley to implement and provide a lot of value in Q3 and Q4.

Scott Buck: And then maybe for Greg, you talked about the UCO1, the kickoff meeting was only recently in April. So it sounds like the benefits of that are to come.

Barry Sine: Okay, and then maybe for Greg you talked about E C O one.

Speaker Change: The kickoff meeting was only recently in April so it sounds like.

Barry Sine: The benefits of that article.

Gregory Carter: You know, now that you've kind of changed your focus, Greg, if you could talk about the composition of the sales team, how many quota-bearing sales reps do you have? Where are you seeing initial opportunities in cross-selling? What product to what product? And what else can you tell us about the early going on the UCO1 sales? Sure. Barry, we have 12 quota-bearing salespeople across the enterprise. In previous to UCO1, they all had expertise in one of our business lines, whether that be ACH, PAFAC, issuing or acceptance, and output as well. So as a part of that meeting, we are now having consolidated sales meetings.

Greg Carter: Now that you've kind of changed your focus Greg if you could talk about the composition of the sales team how many quota bearing sales reps do you have where are you seeing initial opportunities in cross selling what product to what product and what else can you tell us about.

Greg Carter: Early going on the U C O one sales initiative.

Greg Carter: Sure Barry.

Greg Carter: Have 12 quota bearing salespeople across the enterprise and previous UCL one they all had expertise in one of our business lines, whether that be a payback issuing or acceptance.

Greg Carter: But as well so as a part of that meeting we are now having consolidated sales meetings, we've moved to a standardized CRM. For example, the issuing side had Mike are they have a dynamics platform, we're all moving to.

Gregory Carter: We've moved to a standardized CRM. For example, the issuing side or they had a dynamics platform. We're all moving to HubSpot. So it's really just a decisive move to a one voice, one effort. We have teams at various trade shows as we speak. So I'm very confident that that initiative is going to really facilitate more cross sales. In that light as well, we are running parallel pipeline type meetings, meaning new opportunities, net new logos, as well as existing accounts and where those could be. Clearly, there's more opportunity for our issuing side and our acquiring side to introduce print.

Scott: Scott So it's really just a.

Scott: A decisive move to one voice one effort we have teams at various trade shows as we speak so I'm very confident that that initiative is going to.

Scott: So it really facilitate more cross sales.

Scott: That light as well we are running parallel pipeline type.

Scott: Meetings, meaning new opportunities net new logos as well as the existing accounts and where those could be.

Scott: There's more opportunity for our issuing side in our acquiring side to introduce print and then from the issuing side.

Scott Buck: And then from the issuing side, expose that those customers to our ACH capabilities. So, yes, I'm very bullish and optimistic on what what we're going to do with UCO1 on the sales side. Okay, great.

Scott: Expose that those customers to our hgh capabilities. So, yes, I'm very bullish and optimistic on what what we're going to do if you see one on the sales side.

Scott: Okay, Great and then lastly.

Scott Buck: And then lastly, a financial question in terms of the gross margin that declined year over year a little bit, which a little surprised because ACH is your highest margin business. That was the fastest growing.

Scott: Lastly, our financial question in terms of the gross margin declined year over year, a little bit which are a little surprised because E. C. H is your highest margin business that was the fastest growing however, as we discussed a year ago had the million plus in <unk>.

Michael White: However, as we discussed a year ago, had the million plus in spoilage, which is probably even higher a margin. So I assume that's the answer to why the margin was down a little bit year over year. Well, last year, the million in spoilage, we gave back all that money to City of New York. So that was no margin revenue.

Scott: Spoilage, we should probably even higher margin. So I assume that's the answer to why the margin was down a little bit year over year.

Scott: Well last year, the $1 billion and spoilage, we gave back all of that money to city of New York. So that was no margin revenue. Yes. This is Mike I'll jump in here.

Michael White: Yeah, this is Michael.

Michael White: I'll jump in here. If you are our interest revenue related to funds held for our customers was actually down for Q1 of 2025. So compared to Q1 of last year, our basically balances for a customer fund had decreased. So resulting in a decrease in interest income, which was basically 100% revenue to the top line. Okay, that's helpful, Michael. And then obviously, there's no expenses associated with it. and so on and so forth. Got it. OK. Yes.

Speaker Change: If you are our interest revenue related to funds held for our customers was actually down.

Speaker Change: For Q1 of 2025, so compared to them.

Speaker Change: Q1 of last year our.

Speaker Change: Basically balances for our customer.

Speaker Change: Customer upon had decreased.

Speaker Change: So it really are resulting in a decrease in interest income which was basically 100%.

Speaker Change: Revenue top line.

Speaker Change: Okay. That's helpful. Michael and then obviously theres no expenses associated with the interest revenue so that drives market.

Speaker Change: Okay, Yes.

Scott Buck: Those are my questions.

Scott Buck: Thank you.

Speaker Change: My questions. Thank you.

Scott Buck: Thanks.

Speaker Change: Thanks.

Speaker Change: And your next question comes from Scott Buck with H C. Wainwright. Please go ahead.

Jon Hickman: This question comes from Scott Buck.

Jon Hickman: Hey, good afternoon, guys. Thanks for taking my questions. First one, kind of piggybacking off of Barry's question there on gross margin. Where do you think you can take gross margins back to, understanding that there are some mixed and mechanic issues during the first quarter? But can we get back to kind of mid-20s as revenue scales here through the year? But it does depend on the mix, right? But our goal is 25% or so gross margins.

Scott Buck: Hey, good afternoon, guys. Thanks for taking my questions first of all I'm kind of piggybacking off of Barry's question there on gross margin.

Scott Buck: Where do you think you can take gross margins back to understanding that there are some mixed and mechanic issues. During the first quarter, but can we get back to kind of mid twenties as revenue scales here through the year.

Speaker Change: Well it does depend on the mix right, but you know our goal is 25% or so gross margins.

Louis Hoch: Our long-term goal for EBITDA margins is 8% to 10%, which we think we can get to 10%. Great, I appreciate that, Louis.

Speaker Change: Our long term goal for EBITDA margins is 8% to 10%.

Speaker Change: Which we think we can get to 10%.

Speaker Change: Great I appreciate that Louis and then it looks like revenue was up 5% Opex was down 2% year over year.

Louis Hoch: And then look, revenue was up 5%, OpEx was down 2% year over year. How much capacity do you have to grow given the current cost infrastructure? When do you need to start layering in kind of more cost to support that growth in the second half? Well, our technology and infrastructure can support tons and tons more transactions. We might have to add some people to support those new accounts, but it's, you know, that the expense associated with that is on a percentage basis will be far less than the revenue and the associated margins. Okay, so any kind of headcount ads are directly tied to revenue, I guess.

Speaker Change: How much capacity do you have to grow.

Speaker Change: Given the current.

Speaker Change: Cost infrastructure, what when do you need to start layering in kind of more cost to support that growth in the second half.

Speaker Change: Well, our technology and infrastructure can support tons and tons more transactions.

Speaker Change: Yeah, we might have to add some people to support those new accounts, but it's.

Speaker Change: The expense associated with that is on a percentage basis will be far less than.

Speaker Change: The revenue and associated margins.

Speaker Change: Okay. So any kind of head count adds are directly tied to tied to revenue I guess.

Louis Hoch: Yeah, we're truly at the point of having operating leverage. We can load a whole bunch of traffic on our platform. That's great.

Speaker Change: Yeah, Okay, and then like truly at the point.

Speaker Change: Having operating leverage.

Speaker Change: We can load a whole bunch of traffic on our platform.

Speaker Change: That's great.

Louis Hoch: And then last one, you brought up M&A, and you're starting to see some, you know, new or more opportunities in the market.

Speaker Change: And then last one you brought up M&A and you're starting to see some.

Speaker Change: New or more opportunities in the market can you kind of run us through what what it would be that you'd be looking for what what the M&A criteria looks like.

Louis Hoch: Can you kind of run us through what it would be that you'd be looking for, what the M&A criteria looks like? Yeah, well, I talked about this a few times. Our criteria is strict and we've been successful in every acquisition we've done. First, we've got to identify a company that has synergies. Synergies can be technology, can be people, can be industries that we're not in today. Secondly, we need to be able to buy the company correctly, you know, at a multiple that's less than what we're trading at. And then thirdly, the company's got to be able to take care of itself, you know, post acquisition, we don't want to buy somebody else's problem and try to fix it.

Speaker Change: Yeah well.

Speaker Change: Talked about this a few times.

Speaker Change: Our criteria is correct.

Speaker Change: And we've been successful in every acquisition we've done.

Speaker Change: Firstly, we've got identified somebody that has synergies synergies can be.

Speaker Change: Technology. It can be people can be industries that we're not in today.

Speaker Change: Secondly.

Speaker Change: We need to be able to buy the company.

Speaker Change: Hmm.

Speaker Change: Correctly at a multiple that's less than what we're trading at and then thirdly. The company is going to be able to take care of itself.

Speaker Change: Post acquisition.

Speaker Change: We don't want to buy somebody else's problem and try to fix it so.

Louis Hoch: So we are seeing some opportunities. And that's about all I can say right now.

Speaker Change: We are seeing some opportunities.

Speaker Change: And that's about all I can say right now.

Jon Hickman: I could sneak one more in. The stock is up year-to-date, which is, you know, somewhat rare among small caps this year.

Speaker Change: If I could sneak one more in.

Speaker Change: The stock is up year to date, which is you know somewhat rare among small caps. This year I'm curious if the conversations that you and your team had been having with investors, whether you've noticed a change in tone or something in the story, that's resonating better with folks.

Louis Hoch: I'm curious if the conversations that you and your team have been having with investors, whether you notice a change in tone or something in the story that's resonating better with folks. I'll let Paul answer the second part of this, but, you know, us having earnings per share, generating positive cash flow like we have been, you know, a tremendously healthy balance sheet, you know, the quant funds have found us. They generated a lot of volume for us in January. In fact, in January, we generated, well, three days in January, we generated more volume than we had all last year.

Speaker Change: I'll, let Paul answer the second part of this.

Speaker Change: US having earnings per share.

Speaker Change: Generating positive cash flow like we have been.

Speaker Change: It tremendously healthy balance sheet.

Speaker Change: The quant funds have found us there.

Speaker Change: They generated a lot of volume for us in January in fact in January we generated <unk> three days in January we generated more volume than we.

Speaker Change: We had all last year.

Louis Hoch: So, quant funds is definitely a plus for us.

Speaker Change: So.

<unk> funds is definitely a plus for us.

Paul Manley: Paul?

Paul Manley: Yeah, I think, Scott, this is Paul Manley. I think they're also just looking at us and seeing the valuation basically on any kind of metric and the risk reward to take a position here is very well, very nice. And I think they see that the growth that we have potentially going forward will be really nice and they'll be rewarded for initiating positions here.

Speaker Change: Paul and I think Scott is permanently I think there are also just looking at us and seeing the valuation basically on any any kind of metric and the risk reward to take a position here.

Speaker Change: It's very well very nice and I think you'll see that the growth that we have potentially going forward.

Speaker Change: We'll be really nice so there'll be rewarded for their initiating positions here.

Jon Hickman: Perfect.

Jon Hickman: Well, I appreciate the time today, guys. Thanks for the added color. Thanks, guys.

Speaker Change: Perfect well I appreciate it appreciate the time today guys. Thanks for the added color.

Scott Buck: Thanks Scott.

Speaker Change: And your next question comes from Jon Hickman with Ladenburg. Please go ahead.

Jon Hickman: Question comes from Jon Hickman with Latin Hey, um, Louis, can you help us understand the relationship between 13% or 36% processing growth and 5% revenue growth? Yeah, the 36% is based upon the dollars that we've processed through the system. Some of our products, we don't earn revenue based upon dollars. You know, on PAYFAC we do, ACH we do not, and a lot of those dollars increased occurred in ACH. Okay, so So sometimes you earn on dollars and sometimes you earn on transactions. That's correct. Okay, so Cardi's, okay, Cardi's link payback is dollars. ACH, and output solution is transaction-based.

Scott Buck: Okay.

Speaker Change: Louis can you help us understand.

Speaker Change: Relationship between 13% or 36%.

Speaker Change: Processing growth.

Speaker Change: And 5% revenue growth.

Speaker Change: Yes, it's 36% is based upon the dollars that we process through the system some of our some of our products. We don't earn revenue based upon dollars.

Speaker Change: Yeah, Oh payback, we do.

Speaker Change: We do not.

Speaker Change: And a lot of those dollars increase.

Speaker Change: Occurred in AC H.

Speaker Change: Okay. So.

Speaker Change: So sometimes you have $9 and some things that are non transactions.

Speaker Change: That's correct.

Speaker Change: And so so Carter's card issuing PE fact is dollars.

Speaker Change: H.

Speaker Change: <unk> and output solutions as transaction days.

Jon Hickman: Okay, then I have a question on PAYFAC. I think you said that PAYFAC Revenues were up 25%. Good afternoon, everyone Is that correct? Can I hear that correctly? Yes. Yes, that's correct. Okay.

Speaker Change: Okay. Then my other question on payback.

Speaker Change: I think you said that in APAC.

Speaker Change: Revenues were up 25%.

Speaker Change: Year over year.

Speaker Change: Is that correct kind of hear that correctly.

Speaker Change: Yes.

Speaker Change: Yes, Thats correct okay.

Jon Hickman: So if you combine TASAC and the legacy card business, what was the, was there revenue growth? I don't have that. I don't have that number in front of me. I believe it was four percent four percent. Yeah Okay, thank you.

Speaker Change: So what was if you combine take back in the legacy card business what was the.

Speaker Change: Their revenue growth.

Speaker Change: Yeah.

Speaker Change: Year over year.

Speaker Change: I don't have that number in front of me I believe it was 4% 4%.

Okay.

Speaker Change: Thank you.

Jon Hickman: And then can you elaborate again on this consumer choice product? You were talking fast. I think I missed some.

Speaker Change: And then can you elaborate again on this consumer choice.

Speaker Change: You were talking past Penguin.

Speaker Change: I think I missed some of it.

Houston Frost: Yeah, you know, I'll let Houston talk about that. Houston is a designer of that product. So, the Consumer Choice product is a solution for clients that are dispersing funds, whether it be cash assistance or incentives or promotions. And what it allows for is really a combination of multiple UCO services in a single solution. So, this is kind of part of that UCO1 initiative. The consumer, when they receive funds with a Consumer Choice account, if you will, can use those funds with a virtual card. They can order a physical card. They can request an ACH to their bank.

Speaker Change: Yeah, I'll, let Houston that Houston is a designer of that product.

Speaker Change: So the consumer choice product is a solution for clients that are.

Speaker Change: Disbursing funds, whether it be cash assistance or incentives or promotions.

Speaker Change: And what it allows for is.

Speaker Change: Really a combination of multiple you see our services in a single solution. So this is kind of part of that DCF One initiative.

Speaker Change: The consumer when they receive funds with a consumer choice account. If you will can you use those funds with the virtual card. They can order a physical car. They can request an AC H to their bank. They can request a paper check that'll be planted by output solutions.

Houston Frost: They can request a paper check that will be printed by Outlook Solutions. There's also other options, push-to-debit. So, it gives the consumer the choice of a variety of methods to receive the dollars that the client is dispersing. And then each one of those methods actually has a fee associated with it that is either charged to the client or to the consumer, depending on the contact we have with the client. So, regardless of the method that is chosen, we're obviously generating revenue. And again, what it really highlights is how we can build products that essentially cross-sell all of UCO services for us.

Speaker Change:

Speaker Change: There's also other options pushed to debit.

Speaker Change: So it gives the consumer the choice of a variety of methods to receive the dollars that the client is dispersing and then each one of those methods actually has a fee associated with it that is either charged to the client or to the consumer depending on the.

Speaker Change: Contact we have declined so regardless of the method that has chosen we're obviously generating revenue and again, what it really highlights just how we can build products and essentially cross sell all Dcs services for us.

Houston Frost: And it's a philosophy that we're going to have, I think, moving forward with a number of our products. So that's primarily, right now, that's primarily a prepaid card.

Speaker Change: It's a philosophy that we're going to have I think moving forward with a number of our products.

Speaker Change: So that's primarily right now thats primarily.

Speaker Change: Prepaid card.

Houston Frost: Fredrick, sir. Thank you. Well, it is an offering that has been attractive to clients of the card issuing division. And this is really, you know, what Greg was mentioning as well, you know, a large percentage of our clients in card issuing need or leverage ACH services with another provider. So one of our biggest opportunities in UCO1 is cross-selling ACH as well as penless debit services to our card issuing clients. So again, this goes back to that UCO1 initiative where what we really should be focused on is the solution of funds disbursement to our clients. And in that sense, our sales guys will be selling all of our funds disbursement solutions, ACH, penless debit, and cards to the clients that need those solutions.

Speaker Change: Or offering.

Speaker Change: Well.

Speaker Change: It is a offering that has been attractive to clients.

Speaker Change: Card issuing division.

Greg Carter: This is really you know what Greg was mentioning as well.

Greg Carter: A large percentage of our clients and card issuing.

Greg Carter: Need or leverage ACTH services.

Greg Carter: With another provider so one of our biggest opportunities and usually a one is cross selling ACTH as well as 10 loss debit services to our card issuing clients. So again. This goes back to that you see of one initiative, where what we really shouldn't be focused on is the solution of funds disbursement to our clients.

Greg Carter: And access our sales guys will be selling all of our funds disbursement solutions ACTH painless debit and cars to the clients that need those solutions. So I don't know if that answers your question directly but it's not really just a prepaid card account, but it is.

Jon Hickman: So, you know, I don't know if that answers your question directly, but it's not really just a prepaid card account, but it is something that our card issuing clients, that it's in demand from our card issuing clients. Okay, thanks. Appreciate it. Bye. Thanks, Jon.

Greg Carter: Something that our card issuing clients. There is it's in demand from our partnership with clients.

Speaker Change: Okay. Thanks I appreciate it.

Greg Carter: Okay.

Greg Carter: Thanks, Joe.

Speaker Change: And your next question comes from Michael Diana with Maxim Group. Please go ahead.

Mike: Next question comes from Mike ahead. Okay, thank you. You mentioned filtered spend cards. Would these be of interest to government assistance programs? Would that be the main use or who would other customers be? It certainly could be.

Michael Diana: Okay. Thank you.

Michael Diana: You mentioned filtered spin cards would these be of interest to government assistance programs would that be the main use or what.

Michael Diana: Who would have other customers.

Michael Diana: Okay.

It certainly could be I mean filter spend really is just that.

Mike: I mean, filter spend really is just a way to control certain products or services within a retail environment, so I'm certain it could extend into that market segment, but for this, it's primarily health care related items with the program that we're managing. Okay, great. Thank you. Again, if you have a question, please press star, then 1. Your next question. Your line is up for... Yeah.

Michael Diana: A way to control certain products or services within a retail environment. So I'm certainly it could extend into that market segment, but for this it's primarily healthcare related items with the program that we're managing.

Michael Diana: Okay, great. Thank you.

Michael Diana: Mhm.

Speaker Change: Again, if you have a question. Please press Star then one.

Gordon Homes: Your next question comes from Gordon homes with look outrage. Please go ahead.

Gordon your line up for questions.

Gordon Homes: Yeah.

Gordon Homes: Yeah.

Operator: Seeing no further questions, this concludes our question and answer session and today's conference call. Thank you for attending today's presentation. You may now disconnect. Vinnie P.

Gordon Homes: Right.

Further questions. This concludes our question and answer session and today's conference call. Thank you for attending today's presentation. You may now disconnect.

Gordon Homes: Sure.

Gordon Homes: [music].

Vinnie P.: who

Gordon Homes: Yeah.

Gordon Homes: [music].