Q2 2025 Usio Inc Earnings Call
Any mode.
After todays presentation, there will be an opportunity to ask questions. Please.
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.
Thank you operator, and thank you everyone for joining our call today welcome to use your second quarter fiscal 2025 conference call the.
Speaker #4: Ladies and gentlemen, this is the conference operator. Thank you for standing by. The call will begin in a few moments. Again, this is the conference operator.
Speaker #4: Thank you for standing by. The call will begin in a few moments. Thank you.
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.
On this call with me today are Louis Hoch, our chairman and CEO and Greg Carter Executive Vice President payment acceptance and Chief revenue Officer.
<unk> White senior Vice President Chief Accounting Officer, Jerry <unk> head of card issuing Houston Frost, our Chief product Officer will also be available during the question and answer session.
Let me remind our listeners that certain statements made during the call today.
Forward looking statements made pursuant to the safe Harbor provisions of the private Securities and Litigation Act of $19 95, as amended and as more fully discussed in our press release and in our filings with the SEC.
Let me start off today's call with some highlights from this afternoon's release we.
We are very pleased to report solid results across our key performance metrics, including continued strong growth in processing volume and a significant improvement in margins.
It is important to note that we have been working diligently to improve the leverage in our model.
And it is encouraging to see those efforts rewarded by two of our strategic imperatives as we reported another quarter of both positive adjusted EBITDA and cash flow.
Speaker #5: Hello. And welcome to the Usio's. Second 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.
At our current level of total revenues, while total revenues were down slightly we generated especially robust growth in our most profitable business.
<unk>, where revenues were up over 30% for the second consecutive quarter.
Speaker #5: Now, I would like to turn the conference over to your host, Paul Manley. Please go ahead, sir.
Card issuing and output were nominally down in the quarter, though up for up for the year to date on.
Speaker #6: Thank you, operator. And thank ou, everyone, for joining our call today. Welcome to Usio's second quarter, Fiscal 2025 conference call. The earnings release, which we issued today after the market closed, is available on our website at usio.com under the Investor Relations tab.
On a total company basis revenues were impacted by weakness in card issuing as well as a decrease in interest income.
This is a unique situation that has transpired at card issuing where one of our good accounts lost one of their better downstream customers through a corporate takeover, which happened suddenly and it was a surprise to both our clients and us.
Speaker #6: On this call with me today are Louis Hoch, our Chairman and CEO, and Greg Carter, Executive Vice President, Payment Acceptance, and Chief Revenue Officer.
For the quarter total payment dollars processed were up 15% to $1 9 billion.
Speaker #6: Michael White, Senior Vice President, Chief Accounting Officer, Jerry Uffner, Head of Card Issuing, Houston Frost, our Chief Product Officer, will also be available during the question and answer session.
Led by ACTH $1 processed were up 19%.
Card also maintained its strong momentum with total dollars processed up 9%, but more importantly, pay fact volume up 17%.
Speaker #6: Let me remind our listeners that certain statements made during the call today count. 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 filings with the SEC.
Volume and card issuing were down for the quarter, primarily due to the aforementioned lost account.
Bottom line most of our processing volumes remain on a healthy growth trajectory indicative of our success in the market.
Speaker #6: Let me start off today's call with some highlights from this afternoon's release. We are very pleased to report solid results across our key performance metrics, including continued strong growth in processing volume and a significant improvement in margins.
During the second quarter gross margins widened 185 basis points to 25, 8%. This is a function of both mix, especially the strong growth of our highly profitable <unk> business efficiency and productivity improvements as well as some one time items.
Speaker #6: It is important to note that we have been working diligently to improve the leverage in our model. And it is encouraging to see those efforts rewarded by two of our strategic imperatives as we reported another quarter of both positive adjusted EBITDA and cash ow, at our current level of total revenues.
Key to achieving our profitability objectives is to enhance margins as a result of the margin improvement our gross profits increased $350000 to $5 1 million.
Selling general and administrative expenses were temporarily elevated in the second quarter due to a number of discrete non reoccurring items, including an increase in insurance costs marketing expenses and compensation.
Speaker #6: While total revenues were down slightly, we generated especially robust growth in our most profitable business, ACH, where revenues were up over 30% for the second consecutive quarter.
Speaker #6: Card issuing and output were nominally down in quarter, though up for the year to date. On a total company basis, revenues were impacted by weakness in card issuing as well as a decrease in interest income.
Except for insurance costs. All of these expenses are expected to decrease in future quarters, and we expect to implement additional cost reductions over the coming quarters again, we are committed to improving operating leverage.
Speaker #6: This is a unique situation that is transpired at card suing, where one of our good accounts lost one of their better downstream customers through a corporate takeover, which happened suddenly and was a surprise to both our client and us.
Bottom line it was another profitable quarter as measured by adjusted EBITDA, which came in at just over $500000.
Cash generation remains a strength that you'll see our quarter end cash position is net of several large cash outlays, including a large insurance renewal and $350000 used to repurchase our shares. We are confident we will continue to generate strong cash flow over the balance of the year.
Speaker #6: For the quarter, total payment dollars processed were up 15% to $1.9 billion. Led by ACH, where dollars processed were up 19%. Card also maintained strong momentum with total dollars processed up 9%, but more importantly, Payfax volume up 17%.
With a corresponding increase in our liquidity.
Finally, with the aggressive rollout of <unk>, one that started in the first half of the year, we are beginning to see improvement and new account signings.
Speaker #6: Volume in card issuing was down for the quarter, primarily due to the aforementioned lost account. Bottom line, most of our processing volumes remained on a healthy growth trajectory, indicative of our success in the market.
Greg and Louis will elaborate more on this.
In the second quarter, we made further strides refining our operating model and implementing an aggressive new marketing strategy that better leverages, our technology and experience.
Speaker #6: During the second quarter, gross margins widened 185 basis points to 25.8%. This is a function of both mix, especially the strong growth of our highly profitable ACH business, efficiency, and productivity improvements as well as some one-time items.
<unk> were consistent with these efforts to grow in the near term while also heavily investing our time and energy in building a better business all with an eye on achieving consistent profitability over the long term we.
We are excited to drive even better bottom line results through a more concerted growth effort over the second half of 2025 and into next year.
Speaker #6: A key to achieving our profitability objectives is to enhance margins. As a result of the margin improvement, our gross profits increased $350,000 to $5.1 million.
Prolonged customer caused implementation delays at two large national accounts, we are adjusting our revenue guidance expectations, the 5% to 12% growth. This year with continued positive adjusted EBITDA one of the large national accounts is a multi location building materials supplier.
Speaker #6: Selling general and administrative expenses were temporarily elevated in the second quarter due to a number of discrete non-reoccurring items. Including an increase in insurance costs, marketing expenses, and compensation.
Which has started to process payments with your steel, but only at limited store locations at this time I'd like to turn the call over to Greg Carter.
Speaker #6: Except for insurance costs, all these expenses are expected to decrease in future quarters, and we expect to implement additional cost reductions over the coming quarters.
Thank you Paul and good afternoon, everyone. Let me begin with an update on our <unk> initiative.
Speaker #6: Again, we are committed to improving operating leverage. Bottom line, it was another profitable quarter, as measured by adjusted EBITDA, which came in at just over $500,000.
Call that <unk> is being implemented as a means to capture a greater share of our customers' electronic payment and printing volume.
In order for this strategy to succeed we needed to make our client facing business development team well versed in our various product offerings from AC H to payback to output solutions and prepaid.
Speaker #6: Cash generation remains a strength at Usio. Our quarter-end cash position is net of several large cash outlays, including a large insurance renewal and $350,000 used to repurchase our shares, we are confident we will continue to generate strong cash flow over the balance of the year, with a corresponding increase in our liquidity.
Historically, each business has its own sales and marketing resources.
<unk> almost exclusively on their products.
So one of the first things we are doing is immersing our team and our vast capabilities. So they can become proficient in all of our businesses.
Speaker #6: Finally, with the aggressive rollout of Usio One that started in the first half of the year, we are beginning to see improvements in new account signings.
This effort to educate our team is progressing and in the quarter. We had several existing clients add a second or third UCL product line and it was for many different industries, such as healthcare financial services and Association management.
Speaker #6: Greg and Louis will elaborate more on this. In the second quarter, we made further strides refining our operating model and implementing an aggressive new marketing strategy that better leverages our technology and experience.
We expect performance to improve as the team's knowledge improves.
Now turning to second quarter card results, we had another quarter of good growth in many of our key performance indicators with transactions up 69% in dollar volume up 9%.
Speaker #6: Results were consistent with these efforts to grow in the near term, while also heavily investing our time and energy in building a better business, all with an eye on achieving consistent profitability over the long term.
All of the growth is in our payback portfolio were $1 processed were up 17% and revenue was up 10%.
Speaker #6: We are excited to drive even better bottom-line results through a more concerted growth effort over the second half of 2025 and into next year.
We now have 20, new Isps currently in various stages of implementation, which is up from 17 last quarter. This.
This includes a new large enterprise merchant with the potential to generate $100 million of annual processing volume and that account is just starting to ramp.
Speaker #7: Due to prolonged customer costs, implementation delays at two large national accounts, we are adjusting our revenue guidance expectations to 5 to 12 percent growth this year, with continued positive adjusted EBITDA.
Along with the increase in active implementations conversion rates are also improving.
Speaker #7: One of the large national accounts is a multi-location building material supplier which has started to process payments with Usio, but only at limited store locations.
New business is benefiting from a number of new different initiatives. This includes our land and expand strategy to increase penetration of existing Isps to the success of custom programs such as filtered spin.
Speaker #7: At this time, I'd like to turn the call over to Greg Carter.
Consequences I will once again confidently reiterate my expectation the card will grow nicely in 2025.
Speaker #8: Thank ou, Paul, and good afternoon, everyone. Let me begin with an update on our Usio One initiative. Recall that Usio One is being implemented as a means to capture a greater share of our customers' electronic payment and printing volume.
And while we have many balls in the air as with all of the <unk> businesses. One of our priorities is to continue to aggressively implement actions to both reduce costs and improve productivity to improve profitability.
Speaker #8: In order for this strategy to succeed, we need to make our client-facing business development team well-versed in our various product offerings, from ACH to Payfax to output solutions and prepaid.
As I mentioned last quarter I am excited to be leading our new UC, one initiative and our Reenergized card business.
In my New role is giving me a better appreciation for the sophistication of our technology and the depth and breadth of the talent that is putting it into action.
Speaker #8: Historically, each business had its own sales and marketing resources focused almost exclusively on their products. So one of the first things we are doing is immersing our team and our vast capabilities so they can become proficient in all of our businesses.
We're basically a reoccurring revenue business and with a strong portfolio of existing clients numerous initiatives and opportunities being work.
The new implementations that are just beginning to ramp I believe we have all the ingredients for a strong second half of the year.
Speaker #8: This effort to educate our team is progressing. And in the quarter, we had several existing clients add a second or third Usio product line.
Now I'd like to turn the call over to Lewis.
Speaker #8: And it for many different industries, such as healthcare, financial services, and associated management. We expect performance to improve as the team's knowledge improves. Now, turning to second quarter card results, we had another quarter of good growth in many of our key performance indicators, with transactions up 69% and dollar volume up 9%.
Thank you, Greg and welcome everyone.
Let me begin by saying that I am encouraged by our performance over the first half of the year.
We've been tackling many initiatives.
I want to commend the team for their outstanding effort.
One initiative that particularly stands out as UCL, one, which I believe will help accelerate our growth both in the near and long term at the same time I believe some of the new technological innovations, we have or will soon be introducing combined with a favorable <unk>.
Speaker #8: All of the growth is in our Payfax portfolio, where dollars processed were up 17% and revenue was up 10%. We now have 20 new ISVs currently in various stages of implementation, which is up from 17 last quarter.
Speaker #8: This includes a new large enterprise merchant with the potential to generate $100 million of annual processing volume and that account is just starting to rank.
In a market.
All have the potential to change our growth trajectory.
Now my thoughts on the quarter.
Speaker #8: Along with the increase in active implementations, conversion rates are also improving. New business is benefiting from a number of new, different initiatives. This includes our land and expand strategy to increase penetration of existing ISVs to success of custom programs such as filtered spend.
Acha complementary services sustained its strong growth with revenues up 32% in the second quarter.
All of the underlying metrics were equally impressive with electronic check transaction volume up 33%.
Electronic check dollars processed up 19% and return check transactions processed up.
Speaker #8: Consequently, I will once in confidently reiterate my expectation that card will grow nicely in 2025. And while we have many balls in the air, as with all the Usio businesses, one of our priorities is to continue to aggressively implement actions to both reduce costs and improve productivity to improve profitability.
32%.
Our pin less debit business virtually doubled in the quarter and other ancillary products such as RCC are also increments, Italy, adding to our growth.
Speaker #8: As I mentioned last quarter, I'm cited to be leading our new Usio One initiative in our re-energized card business. My new role has given me a better appreciation for the sophistication of our technology and the depth and breadth of the talent that is putting it into action.
<unk> has also been the beneficiary of UCL ones early successes, where substantial card processing client has now become a <unk>.
<unk> user as well.
Speaker #8: We're basically a reoccurring revenue business, and with a strong portfolio of existing clients, the numerous initiatives and opportunities being worked, the new implementations that are just beginning to ramp, I believe we have all the ingredients for a strong second half of the year.
We were thrilled to see that in July <unk> experienced our highest volumes for any months of this year.
Very exciting.
Output solutions had another quarter of steady performance.
Mail pieces process and delivered in Q2 exceeded $5 4 million pieces and electronic only documents delivered.
Speaker #8: Now, I'd like to turn the call over to Louis.
Speaker #9: Thank you, Greg. And welcome, everyone. Let me begin by saying that I'm encouraged by our performance over the first half of the year. We've been tackling many initiatives, and I want to commend the team for their outstanding effort.
Exceeded 20 million.
Transactions.
Pieces processed.
<unk> were up 3%, while electronic documents processing delivered were down very slightly from a year ago.
Speaker #9: One initiative that particularly stands out is Usio One. Which I believe will help accelerate our growth both in the near and long term. At the same time, I believe some of the new technological innovations we have or will soon be introducing combined with a favorable M&A market all have the potential to change our growth trajectory.
One thing I should note is the price that we charge to process a document electronically is less than the comparable recharged to mail to print and mail. The same document consequence really of the underlying business can grow.
It may not be reflected in a corresponding increased revenues. However, since electronic document processing is more profitable than printing mill. This transition to a greater proportion of electronic document processing should boost margins. So while revenues may not be growing.
Speaker #9: Now, my thoughts on the quarter. ACH and complementary services sustained its strong growth with revenues up 32% in the second quarter. All of the underlying metrics were equally impressive, with electronic check transaction volume up 33%, electronic check dollars processed up 19%, and return check transactions processed up 32%.
As rapid profitability is.
Improved profitability is a strategic corporate initiative at UCL.
And while new account activity in June quarter was steady.
In July outputs already closed.
Speaker #9: Our penless debit business virtually doubled in the quarter and other ancillary products such as RCC, are also incrementally adding to our growth. ACH has also been the beneficiary of Usio One's early successes, where a substantial card processing client has now become a Usio ACH user as well.
More new business in all of Q2 include.
Including the contract to handle both the print and mailing.
A utility bills for the city of Pasadena, Texas, and deliver and manage their electronic bill delivery and payback platform output also seems to be as a business.
That is least initially getting the most out of.
<unk> one <unk>.
They've closed deals with both existing card issuing healthcare and financial service clients there.
Speaker #9: We are thrilled to see that in July, ACH experienced our highest volumes for any month of this year. It's very exciting. The output solutions had another quarter of steady performance.
They are seeking.
Bound and AD hoc work, which can be meaningful portion of our clients' revenue.
Speaker #9: Total mail pieces processed and delivered in Q2 exceeded 5.4 million pieces. And electronic-only documents delivered exceeded 20 million. Transactions pieces processed mailed were up 3%, while electronic documents processed and delivered were down very slightly from a year ago.
But which has recently been soft.
A return to more typical AD hoc requests will be another tailwind when two outputs growth.
Output historically had a very successful check printing business pretty checks for companies like T mobile and AIG and Verizon and spectrum.
It is one of the reasons why our customer choice product has been growing well.
Speaker #9: One thing I should note is the price that we charged to process a document electronically is less than the comparable price we charged to mail to print and mail the same document.
We believe there are opportunities for growth in heavily check dependent use cases, such as bankruptcy and government distributions for.
For that reason, we're quadrupling our check printing capacity this year.
Speaker #9: Consequently, the underlying business can grow, but it may not be reflected in corresponding increased revenues. However, since electronic document processing is more profitable than print and mail, this transition to a greater proportion of electronic document processing should boost margins.
And finally, thanks to both the better margins on electronic documents.
Automation and efficiency enhancements profits at output are on the rise.
Card issuing continues to make progress on fine tuning the organization to reduce cost and improve productivity. So that anticipated acceleration in revenue growth can be translated into even greater profitability.
Speaker #9: So while revenues may not be growing as rapid and profitability is, and improved profitability is a strategic corporate initiative, at Usio. And while new account activity in June quarter was steady, in July, output's already closed more new business in all of Q2.
Despite the decrease in revenue in the quarter card issuing margins and adjusted EBITDA were much improved year over year.
In addition to the concentrated effort to improve leverage card issuing profitability is benefiting from initiatives to generate more revenue and margin from existing clients.
Speaker #9: Including a contract to handle both the print and mailing of a utility bills for the city of Pasadena Texas and deliver and manage their electronic bill delivery and payment platform.
However, these efforts were overshadowed by one of our clients unfortunate loss of their large.
Speaker #9: Output also seems to be the business's that is least initially getting the most out Usio One. They have closed deals with both existing card issuing healthcare and financial service clients.
Account multi location.
<unk> Park.
Since as clients accounts business typically peaks in the summer.
Speaker #9: They're eking a rebound in ad hoc work, which can be meaningful portion of a client's revenue. But which has recently been soft. A return to more typical ad hoc requests will be another tailwind to output's growth.
We will see this effect spillover into the third quarter.
Fortunately we are quickly back filling these lost revenues.
Card issuing closed 15, new agreements in Q2 that are currently in some stage of implementation.
And now we have a total of 20 client partners beginning to scale.
Speaker #9: Output historically had a very successful check printing business. Printing checks for
The expected card loads from this group of clients could be significant.
Speaker #9: companies like T-Mobile
Speaker #9: and AIG and
Speaker #9: Verizon and
In addition in the second quarter, we made upgrades to our consumer choice product this quarter wearable prepaid product will be live and available.
Speaker #9: It is one of the reasons why our
Speaker #9: ustomer choice product has
Speaker #9: growing. We believe there are
Speaker #9: opportunities for growth
Speaker #9: check-dependent use cases
<unk>.
Our initially targeting large incentive and promotional markets, we expect to release, our payroll product this quarter while.
Speaker #9: For that reason, we
Speaker #9: check printing
Speaker #9: capacity this
Speaker #9: year.
Speaker #9: And another finally, thanks
Our merchant funded offers.
Speaker #9: margins on electronic
Partnership with Mastercard.
Speaker #9: documents
Speaker #9: automation and
It should launch.
Speaker #9: efficiency
By the end of the year.
Speaker #9: enhancements profits at
At the corporate level, we recently tested our biometric merchant payment system and tie to token generated from the human Iris with a payment wallet and signet successfully initiated payments.
Speaker #9: output are on the
Speaker #9: Card issuing continues to make progress and fine-tuning the...
Speaker #9: organization to
Speaker #9: productivity so that
Speaker #9: anticipated acceleration
Speaker #9: in revenue growth can be
We're hoping to have a promotional demonstration video of this new technology available for you later this year.
Speaker #9: translated
Speaker #9: into even greater
Speaker #9: profitability.
Speaker #9: So despite the
Speaker #9: decrease in revenue in the
Speaker #9: quarter, card
While it's still in the early stages of our work on this cutting edge system as well as the introduction of functioning Wearables is representative of our innovative use of technology that are at heart.
Speaker #9: much improved year over year. In
Speaker #9: addition to the
Speaker #9: concentrated effort to
Speaker #9: improve leverage, card
Speaker #9: issuing profitability
Speaker #9: is benefiting from initiatives to generate more revenue and
What is <unk>.
I am pleased with the ongoing evolution of our diversified business strategy for one it keeps us effectively insulate it from the risks associated with the macro economy.
And now with UCL, one we're building a single platform to host and integrate all of our businesses, making it easier to do business with us as well as to better leverage our technology and resources.
We have set out to improve profitability and with another quarter of positive adjusted EBITDA. We are demonstrating that we have downsized the organization to consistently achieve this objective.
In the near term this is building our liquidity and we've been using this to create value through consistent stock repurchases.
And internal investments.
And with the recent pickup with industry acquisition activity. It also provides us with the resources to act quickly on opportunities that meet our stringent acquisition criteria.
All in our focus we are creating a more efficient business that is able to leverage top line growth.
Even better bottom line.
We appreciate your support as we continue to build value for our shareholders.
And with that I'd like to turn the call back to the operator and conduct our question and answer session.
Thank you at this time, we will conduct a question and answer session. If you would like to ask a question. Please press star and one on your phone now and you will be placed into the queue in the order received.
Once again to ask a question. Please press star and one on your phone now.
And our first question comes from Barry Sine of Litchfield Hills, Litchfield Hills research.
Hey, good afternoon, gentlemen, can you hear me.
Hi, Barry.
Hey.
I wanted to zero in on a sentence in your release, saying there are now more new programs in implementation.
Any time in history, and I'm, hoping you can maybe expand on that and quantify it a little bit high.
How many programs what does that compare to <unk>, where a year ago, what does that mean in terms of dollar volume and what products are you seeing the strengthening.
So it sounds like Youre talking about overall for the whole company, specifically that sentence was about.
Card issuing programs that are in the implementation, which is 'twenty growth yes.
And.
We don't have the dollars associated with those programs.
Okay, and then on the UC one initiatives.
Could you talk about.
Maybe give a sense of new programs across the board and how much of that is.
More than one product.
Hello.
The first big win that we announced last quarter was a check processing deal for card issuing client.
We also had a large.
Deal for.
Our card Italy.
Client.
Okay.
Working on a C Moore.
We think that we can get a lot of our clients on at least two of our products.
Not all of our clients will have the need for Ford.
But we have a lot of clients that are just on one so that creates a lot of opportunities to cross sell.
Speaker #2: And with that, I'd like to turn the call back to the operator and conduct our question-and-answer session.
And then my last question the cash balances, obviously still very strong.
Speaker #3: Thank you. At this time, we will conduct the question and answer session. If you would like to ask a question, please press star and one on your phone now.
And you made a comment about M&A activity I'm not sure if youre seeing a change.
In the environment of opportunities and perhaps youre trying to signal, it's more likely we.
Speaker #3: And you will be placed into the queue in the order received. Once again, to ask a question, please press star and one on your phone now.
We might see your spend on acquisitions and at the same time and alternative possible use of that is share buybacks and yes with the cut in the guidance.
Speaker #3: And our first question comes from Barry Sine of Litchfield Hills Research.
The stock is a little weak in the aftermarket so <unk> got a great opportunity to step up your buyback activity. So.
Where might we expect to see you utilize some of that cash on the books in the next for the <unk>.
Speaker #4: Hey, good afternoon, gentlemen. Can you hear me?
Speaker #1: Hi, Barry.
Rest of this year.
Speaker #4: Hey, I want zero in on a sentence in your release saying there are now more new programs in implementation than at any time in history.
Well regarding stock buybacks.
We've been buying back every quarter.
In recent quarters.
Speaker #4: And I'm oping you could be, expand on that and quantify it a little bit. How many programs? What does that compare to one queue or a year ago?
We will continue that activity.
M&A.
Activity is definitely more active now than it has been in previous years.
Speaker #4: What does that mean in terms of dollar volume? And what products are you seeing the strength in?
And we're seeing more deals.
Fit our criteria.
<unk>.
Speaker #1: It sounds like you're king about, overall for the whole company. It was specifically that sentence was about, card issuing programs that are in implementation, which is 20, right?
And a handful of deals that would be we'd be able to fund.
With our cash on hand.
And on the criteria.
Does that also mean the valuation levels that youre seeing for deals because you guys had been pretty.
Speaker #4: Yes.
Speaker #1: And, we don't have the dollars associated with those programs.
Focused in terms of what you are what youre not willing to pay or you see deals that are in your valuation range.
Speaker #4: Okay. And then, on, the Usio One initiative, could you talk about, you know, maybe give a sense of new programs across the board and, you know, how much of that is, more than one product?
Definitely.
To reiterate our criteria.
First point is that.
An acquisition has to have some type of strategic.
Value to us that could be people technology.
Speaker #1: Well, the first big win, that we announced last quarter was a check processing deal for a card issuing client. we also had a large ACH deal, for a card issuing, client.
Industry vertical.
It could be simply software that.
We're thinking of building that.
We can buy faster than later.
Build it ourselves.
Secondly.
We've got to be able to buy it right and buy it right.
Speaker #1: and, working on a few more. we're we think that we can get a lot of our clients on at least two of our products.
Pegging.
What were valued at the multiples are less.
And third.
Which was pretty.
Speaker #1: not all of our clients will have the need for four. but we have a lot of clients that are just on one. So that creates a lot of opportunities to cross-sell.
Previously the biggest hurdle.
Whatever we're buying.
Sure.
We need to be able to take care of itself.
We try to fix anybody else's problems.
And.
Speaker #4: And then my last question, the cash balance is obviously still very strong. and you, you made a comment about M&A activity. I'm not sure if you're seeing a change in the, environment of opportunities and perhaps you're trying to al it's more likely we might see you spend on an acquisition.
Okay.
We remove our focus on our organic growth opportunities that we have.
Okay. Those are my questions. Thank you very much.
Thank you.
And our next question comes from Scott Buck of H C. Wainwright.
Speaker #4: And at the same time, an alternative possible use of that is share buybacks and, you know, with the cut in the guidance, the, you know, the stock is a little weak in the aftermarket.
Hi, Good afternoon, guys. Thanks for taking my questions.
Louis Im curious the improvement in gross margins in the quarter, what should we be attributing to just mix versus maybe some efficiency gains or improvement that you guys have made in the business itself.
Speaker #4: So you've got a great opportunity to step up your buyback activity. So where might we expect to see you utilize some of that cash on the books in the next for the rest of this year?
The answer is yes to all but the biggest gain is obviously the huge gains in <unk> H.
Speaker #1: Well, regarding stock buybacks, we've been buying back every quarter, you know, in recent quarters. we'll continue that activity. M&A, activity is definitely more active now than it has been in previous years.
We're experiencing.
Also.
Amazing ramp that were experienced in all the pin less debit, which has higher margins also a lot of electronic documents being presented by <unk>.
Speaker #1: and we're seeing more deals that fit our criteria. and, you know, a handful of deals that would be, ou know, would be able to fund, with our cash on hand.
<unk> output has increased their margins.
And.
Our focus on keeping.
Expenses tight.
That's helpful on Opex some of the adjustments you guys are making or tax.
Speaker #4: And on the criteria, does that also mean the valuation levels that you're seeing for deals? Because ou guys have been pretty, focused in terms what you are and what you're not willing to pay.
A little more granular on what you guys are looking at and what potential savings could be on a quarterly basis or an annual basis.
Speaker #4: Are you seeing deals that are in your valuation range?
Yes, well.
Are you talking about what we.
Speaker #1: Definitely. And, you ow, to reiterate our criteria, the first point is that an acquisition has to have some type of strategic value to us.
Adjusted it out of cash.
Sure.
Just on both counts.
Okay.
Got it.
Yeah, while we're experiencing.
Speaker #1: That could be people, technology, industry vertical, it could be simply software that we're thinking of building that, we can buy faster than we can build it ourselves.
Savings in SG&A in our outlet division due to new machinery efficiencies.
As faster we need less people.
We are.
Focusing on efficiencies within our card issuing division, which has caused us not to have too.
Speaker #1: secondly, we got to be able to buy it right and buy it right means paying, what we're valued at the multiples or less. And third, which was previously the biggest hurdle, is whatever we're buying needs to be able to e care of itself.
Higher more and in some cases when people retire they believe.
We're not even replacing those people because the efficiencies.
And.
We've got the increased volumes right. So in some cases, we've gone back to bank sponsors and other partners.
Speaker #1: we 't want to try to fix anybody else's problems and, remove our focus on our organic growth opportunities that we have.
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And negotiated better deals because we have a lot of volume down a lot of places.
Speaker #4: Okay. Those are my questions. Thank you y much.
Perfect.
That's helpful and then just the last one.
Speaker #1: Thank you.
Pardon me.
How should we think about the difference between the low end and the high end of the New guide NDA do you control any of that or is that really just comes down to timing of that.
Speaker #3: And our next question comes from Scott Buck of HC Wainwright.
Speaker #5: Hi. Good afternoon, guys. Thanks for taking my estions. Louis, I'm curious, the improvement in gross margins in the quarter, what should we be attributing to just mix versus maybe some efficiency gains or improvements that you guys have made in the business itself?
Implementations, which are.
Largely your customers.
Timeline.
The one thing we can do Barry that accelerate this company that we haven't figured out.
Is to get to our customers to implement quickly after we execute an agreement with them.
Speaker #1: The answer is yes to all, but the biggest gain is obviously the huge gains in ACH. that we're experiencing. also, the amazing ramp that we're iencing on paying those debit, which is our margins.
The Perfect example is the reason why this quarter is flat.
Is because we had a large one.
Building supply multiyear retail location in United States.
Speaker #1: Also, a lot of, electronic documents being presented by, Usio Output has increased their margins. and, you know, our focus on keeping expenses tight.
It was supposed to go live early in the second quarter.
Just recently went live but it is going very slow implementing each one of those stores.
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Okay.
We lost three months, maybe even greater on.
Speaker #5: That's helpful. On OpEx, some of the, adjustments you guys are making or cuts, do you get a little more granular on on what you guys are looking at and and what potential savings could be on a quarterly basis or an annual basis?
On that one deal.
And we have another one that's very similar to this.
Got a lot of merchants that are already signed up already implemented but they haven't started pushing traffic through us and we thought that would occur earlier.
Speaker #1: Yeah. Well, are you talking about what we adjusted out of cash? Or just?
It's both of those accounts turn up very quick.
Then we'll be at the high end, if they don't we're going to be at the low end.
Speaker #5: Yes. On OpEx, it sounds like you guys are making some some cuts.
Okay.
Speaker #1: Yeah. Well, we're iencing, savings in SGNA and in our output division due to new machinery efficiencies. it's faster; we need less people. we are, focusing on efficiencies within our card issuing division, which is caused us not to have to, hire more, and in some cases, when people retire or they leave, we're even replacing those people because of the efficiencies.
Great I appreciate that color and if I can squeeze one more in.
Given.
What we saw in the job the revisions to the recent jobs reports.
Last few months the conversation on the strength of the economy is kind of.
Perhaps back into it.
Two to my.
Patients at least can you remind us is there any retail exposure or any meaningful retail exposure Lewis or.
I was just trying to trying to understand how susceptible you maybe two.
A more broad slowdown in India.
In the economy.
Well I mean as part of our strategy not to be in retail and.
Speaker #1: and, you know, we've got the increased volumes, right? So in some cases, we've gone back to banks, sponsors, and, other partners in our ecosystem and negotiated better deals because we have a lot of volume now in a lot of places.
Even this building supplies company that we're working with.
As b to B right. So they are selling to contractors, primarily it's not.
It's not like a home depot type of model.
So we think that will be fine.
Speaker #5: Perfect. That's, that's helpful. And then just the last one, from from me. How should we think about the difference between the low end and the high end of the new guide?
Could be affected by construction.
As construction.
Stays where its at or gets worse.
But I mean.
We've kind of take that jobs report with the grain of sand and focus more on GDP, but again.
Speaker #5: Do you control any of that, or is that really just come down to timing, of of implementations? which are, you ow, largely your your customers, you know, timeline?
In the diverse markets, even when things tend to go bad in the economy.
Most cases that benefits us.
Speaker #5: You know.
Speaker #1: The one thing we could do, Barry, the accelerate this company, that we haven't figured out, is to get to, our customers to implement quickly after we execute an agreement with them.
Because the government's handout more money.
We'll take more logos and both of those are big segments for us.
Perfect well I appreciate the added color guys. Thank you very much.
Thank you.
Speaker #1: the perfect example is the reason why this quarter is flat, is because we had a large building supply multi-retail location. In the United States, that was supposed to go live early in the second quarter.
Okay.
As a reminder, if you would like to ask a question. Please press Star then one on your telephone keypad.
And our next question comes from Jon Hickman of Ladenburg Thalmann.
Speaker #1: just recently went live, but it is going very slow implementing each one of the stores. So you know I mean, we lost three months, maybe even greater on on on that one deal.
Hello, Ken.
Can you hear me okay.
Hi, John.
Hi.
I have two questions first of all can you elaborate on kind of.
Speaker #1: and and we have another one that's very similar that's got a lot of merchants that are already signed up, already implemented, but they haven't started pushing traffic through us.
The amount.
The.
Losses from a park like what did that cost you in the quarter.
Speaker #1: And we thought that would occur earlier. if both of those accounts turn up very quick, then we'll be at the high end. If they don't, we're going to be at the low end.
Revenue wise.
Alright.
Yes answered.
Approximately $2 million in the quarter.
Of revenue.
Okay.
And then on the operating expense side.
Speaker #5: Great. I appreciate that, Colin. If I can squeeze one more in. Given, what we saw in the job, the revisions to the recent jobs report, the last few months, the the conversation on the strength of the economy has kind of crept back into my conversations at least.
Neither of those one time items insurance and other things.
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It was like.
Maybe like 400000 or.
So kind of above what Q1 was.
Out of those.
Out of that amount how much.
Speaker #5: Can you remind us, is there any retail exposure or any meaningful retail exposure, Louis, or, you ow, I'm just trying to trying to understand how susceptible you may be to a more broad slowdown in the in the economy.
Should we carry going forward that's kind of.
You know either come off of Q2's number.
I would say about a fourth of that increase.
And as micro seating.
Speaker #1: Well, I an, it's part of our strategy not to be in retail. And you know even this building supply company that we're working with, is is B2B, right?
I'm, sorry, I didn't hear your response.
This is Michael I would say about a quarter of that increase carried over.
Speaker #1: So it's they're selling to contractors, primarily. It's not, you ow, it's not like a Home Depot type of model. so we fine. it could be affected by construction.
Okay. Thank.
Thank you that's helpful.
That's it for me appreciate it.
Thanks, John.
Okay.
Speaker #1: think that one will be good segments for us.
Okay.
Speaker #1: if construction, you ow, stays where it's at or gets worse, but you know, I mean, we kind of take that jobs report with a grain of sand and focus more on GDP.
And this does conclude our question and answer session.
The conference has now concluded thank.
Thank you for attending today's presentation.
Speaker #1: But again, we're in the diverse markets, and even when things tend to go bad in the economy, that in cases, that benefits us. because the government's hand out more money, people take more loans.
You may now disconnect.
Speaker #5: Perfect. Well, I appreciate the added color, guys. Thank you very much.
Speaker #1: Thank you.
Speaker #3: As a reminder, if you would like to ask a question, please press star, then one on your telephone keypad. And our next question comes from John Hickman of Ladenburg Thalman.
Speaker #6: Hello. Can you hear me okay?
Speaker #1: Hi, John.
Speaker #6: Hi. I have two questions. First of all, can you elaborate on kind of the, the amount or of the loss of the amusement park?
Speaker #6: Like, what did that cost you in the quarter? Revenue-wise.
Speaker #1: Yeah. Yeah, answer it. Yeah. approximately $2 million a quarter. Of revenue.
Speaker #6: Okay. And then, on the operating expense side, out of those one-time items insurance and other things, it was like maybe like $400,000 or so kind of above what Q1 was.
Speaker #6: Out of those, out of that amount, how much should should we carry going forward that's going to, you know, either it come off of Q2's number?
Speaker #1: I would say about a fourth of that increase is Michael City.
Speaker #6: I'm sorry. I don't understand your response.
Speaker #1: This is Michael. I would say about a quarter of that increase carried over.
Speaker #6: Okay. Thank you. That's helpful. that's it for me. Appreciate it.
Speaker #1: Thanks, John.
Speaker #6: Okay.
Speaker #3: And this does conclude our question and answer session. The conference has now concluded. Thank you for attending today's presentation. You may now. Disconnect.