Usio Announces Record Second Quarter 2020 Financial Results

Card Processing, PayFac, Prepaid all Show Growth in the Quarter, with Prepaid Tripling over last several months

Balance Sheet Strengthens

SAN ANTONIO, Aug. 13, 2020 (GLOBE NEWSWIRE) -- Usio, Inc. (Nasdaq: USIO), an integrated electronic payment solutions provider, today announced financial results for the second quarter of 2020, which ended June 30, 2020.

“We are entering the second half of 2020 in a strong position, as our business model has proven its resilience in one of the worst economic quarters in recent memory," commented Louis Hoch, President and Chief Executive Officer of Usio. “Our Card Processing and Prepaid business revenues were up 4% and 58%, respectively in the quarter and as compared to the same period of 2019, reflecting the continued strong demand for our innovative payment solutions.  The performance of these businesses is particularly heartening and further validates that our strategy to serve a diversity of payments markets provides a foundation for continued growth and justifies our continued investment into both our Prepaid and PayFac business lines. Our ACH business continues to fight the headwinds of a soft consumer lending market from the effects of COVID-19 which generated generous forbearance agreements and government support programs that are dampening transaction volume. Conversely, ACH's remote check capture (RCC) and PINless debit continued their steady growth in the quarter."

"Exiting the quarter, both our Card Processing and Prepaid businesses had returned to virtually the same volume levels they had enjoyed prior to the onset of the pandemic, with continued, steady improvement in operational results. We have several PayFac Integrated Software Vendors (ISV’s) currently in the implementation and on-boarding phase and anticipate continued growth from this segment.  Funds loaded on prepaid cards, which is a leading indicator of future revenue, has tripled in just the last few months.  We now have five of the ten largest cities in the United States, including the New York Immigration Coalition and the Mayors Fund of Los Angeles, using our prepaid platform to distribute government assistance funds. Furthermore, with our recent capital raise, we have liquidity to support our operations and strategic initiatives. As the consumer lending market returns to normal, this will add to the improvements that are now driving our business forward and help resume the momentum that had been built prior to the onset of the pandemic."

“As always, the health and safety of our employees as well as those around us remains a priority in everything we do.”

Second Quarter 2020 Financial Summary

Revenues for the quarter ended June 30, 2020 decreased 3% to $7.0 million compared to the same period last year, primarily as a result of the softness in our consumer lending ACH business. Gross profits decreased by 18% to $1.3 million versus the same period last year and gross margins contracted by 3.4% to 18.5% for the quarter ended June 30, 2020, primarily driven by a shift in product mix.

Other selling, general and administrative expenses decreased by 6% to $1.9 million for the quarter ended June 30, 2020 compared to the same period last year.  The lower expenses were a result of restricted travel and other costs due to COVID-19 restrictions coupled with a lack of significant one-time expenses. For the second quarter of 2020, the operating loss was $1.3 million, flat compared to a year ago.

Adjusted EBITDA was a loss of $571,258 compared to a loss of $404,710 in the second quarter of 2019.  The major driver of the incremental loss was the lower gross profits related to COVID-19 revenue impacts.

The Company reported a net loss of $1.3 million ($0.10 per share) for the quarter ended June 30, 2020, flat versus a net loss of $1.3 million ($0.10 per share) for the same period in the prior year.

Six Months Ended June 30, 2020 Financial Summary

Revenues for the six months ended June 30, 2020 were $14.7 million, up 7% from $13.7 million from the same period last year. The revenue growth in 2020 is all organic. Gross profits in the first six months of the year were $3.2 million up 11% from $2.9 million in the comparable period of 2019.  Gross margins over the first half of 2020 increased by 0.7% to 21.8% from 21.1% over the first half of 2019.

Other selling, general and administrative expenses increased by 10% to $4.0 million compared to $3.6 million for the same period last year reflecting our continued investment in our PayFac and Prepaid growth initiatives. 

Adjusted EBITDA for the first half of 2020 was a loss of $765,080 compared to a loss of $730,718 in for the same period of 2019.  

The Company reported a net loss of $2.1 million ($0.16 per share) for the six months ended June 30, 2020, compared to a net loss of $2.3 million ($0.18 per share) for the same period in the prior year.

Usio continues to be in solid financial condition with $1.8 million in cash and cash equivalents at June 30, 2020. Subsequent to June 30, 2020, the Company received cash proceeds of $3,000,000 from a private placement with Topline Capital Partners, LP, an institutional investor that is focused on the long term.

Conference Call and Webcast

Usio, Inc.'s management will host a conference call with a live webcast on Friday, August 14, 2020 at 11:00 am Eastern time to provide a business update.  To listen to the conference call, interested parties within the U.S. should call +1-844-883-3890. International callers should call +1-412-317-9246. All callers should ask for the Usio conference call. The conference call will also be available through a live webcast, which can be accessed via the company’s website at www.usio.com/invest.

A replay of the call will be available approximately one hour after the end of the call through August 28, 2020. The replay can be accessed via the Company’s website or by dialing +1-877-344-7529 (U.S.) or +1-412-317-0088 (international). The replay conference playback code is 10146617.

About Usio, Inc.

Usio, Inc. (Nasdaq:USIO), a leading integrated payment solutions provider, offers a wide range of payment solutions to merchants, billers, banks, service bureaus, and card issuers. The Company operates credit, debit/prepaid, and ACH payment processing platforms to deliver convenient, world-class payment solutions and services to their clients. The strength of the Company lies in its ability to provide tailored solutions for card issuance, payment acceptance, and bill payments as well as its unique technology in the prepaid sector. Usio is headquartered in San Antonio, Texas, and has offices in Austin, Texas, and Franklin, Tennessee, just outside of Nashville. Websites: www.usio.com, www.singularpayments.com, www.payfacinabox.com, www.akimbocard.com, and www.ficentive.com. Find us on Facebook® and Twitter.

About Non-GAAP Financial Measures
This press release includes non-GAAP financial measures, EBITDA and adjusted EBITDA, as defined in Regulation G of the Securities and Exchange Act of 1934, as amended. The Company reports its financial results in compliance with GAAP, but believes that also discussing non-GAAP measures provides investors with financial measures it uses in the management of its business. The Company defines EBITDA as operating income (loss), before interest, taxes, depreciation and amortization of intangibles. The Company defines adjusted EBITDA as EBITDA, as defined above, plus non-cash stock option costs and certain non-recurring items, such as acquisitions. These measures may not be comparable to similarly titled measures reported by other companies. Management uses EBITDA and adjusted EBITDA as indicators of the Company's operating performance and ability to fund acquisitions, capital expenditures and other investments and, in the absence of refinancing options, to repay debt obligations.

Management believes EBITDA and adjusted EBITDA are helpful to investors in evaluating the Company's operating performance because non-cash costs and other items that management believes are not indicative of its results of operations are excluded. EBITDA and adjusted EBITDA are supplemental non-GAAP measures, which have limitations as an analytical tool. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Non-GAAP financial measures do not reflect a comprehensive system of accounting, may differ from GAAP measures with the same names, and may differ from non-GAAP financial measures with the same or similar names that are used by other companies. For a description of our use of EBITDA and adjusted EBITDA, and a reconciliation of EBITDA and adjusted EBITDA to operating income (loss), see the section of this press release titled "Non-GAAP Reconciliation."

FORWARD-LOOKING STATEMENTS DISCLAIMER

Except for the historical information contained herein, the matters discussed in this release include forward-looking statements which are covered by safe harbors. Those statements include, but may not be limited to, all statements regarding management's intent, belief and expectations, such as statements concerning our future and our operating and growth strategy. These forward-looking statements are identified by the use of words such as "believe," "intend," "continue," "anticipate," "schedule,” and "expect" among others. Forward-looking statements in this press release are subject to certain risks and uncertainties inherent in the Company's business that could cause actual results to vary, including risks related to the COVID-19 pandemic and its effect on the economy, risks related to the realization of the anticipated opportunities from the Singular acquisition, the management of the Company's growth, the loss of key resellers, the relationships with the Automated Clearinghouse network, bank sponsors, third-party card processing providers and merchants, the security of our software, hardware and information, the volatility of the stock price, the need to obtain additional financing, risks associated with new tax legislation, and compliance with complex federal, state and local laws and regulations, and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission including its annual report on Form 10-K for the fiscal year ended December 31, 2019. One or more of these factors have affected, and in the future, could affect the Company’s businesses and financial results in the future and could cause actual results to differ materially from plans and projections. The Company believes that the assumptions underlying the forward-looking statements included in this release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the objectives and plans will be achieved. All forward-looking statements made in this release are based on information presently available to management. The Company assumes no obligation to update any forward-looking statements, except as required by law.

Contact:
Joe Hassett, Investor Relations
joeh@gregoryfca.com
610-228-2110

  

USIO, INC.
CONSOLIDATED BALANCE SHEETS

		June 30, 2020				December 31, 2019
		(Unaudited)
ASSETS
Cash and cash equivalents		$	1,793,252			$	2,137,580
Accounts receivable, net			1,124,207				1,274,001
Settlement processing assets			27,002,450				38,906,780
Prepaid card load assets			19,281,293				528,434
Prepaid expenses and other			187,614				183,575
Current assets before merchant reserves			49,388,816				43,030,370
Merchant reserves			8,430,339				10,016,904
Total current assets			57,819,155				53,047,274
Property and equipment, net			1,624,269				1,557,521
Other assets:
Intangibles, net			2,176,426				2,676,427
Deferred tax asset			1,394,000				1,394,000
Operating lease right-of-use assets			2,366,775				2,480,902
Other assets			428,623				404,055
Total other assets			6,365,824				6,955,384
Total Assets		$	65,809,248			$	61,560,179
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	262,363			$	419,849
Accrued expenses			1,378,289				1,360,551
Operating lease liabilities, current portion			233,738				356,184
Settlement processing obligations			27,002,450				38,906,780
Prepaid card load obligations			19,281,293				528,434
Deferred revenues			97,059				123,529
PPP Loan payable, current portion			383,738				—
Current liabilities before merchant reserve obligations			48,638,930				41,695,327
Merchant reserve obligations			8,430,339				10,016,904
Total current liabilities			57,069,269				51,712,231
Non-current liabilities:
PPP Loan payable, non-current portion			429,762				—
Operating lease liabilities, current portion			2,291,334				2,279,613
Total liabilities			59,790,365				53,991,844
Stockholders' equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized; -0- shares outstanding at
June 30, 2020 (unaudited) and December 31, 2019, respectively			—				—
Common stock, $0.001 par value, 200,000,000 shares authorized; 19,776,121 and
18,224,577 issued, and 18,595,358 and 17,104,998 outstanding at June 30, 2020
(unaudited) and December 31, 2019, respectively			188,207				186,656
Additional paid-in capital			78,773,990				77,055,273
Treasury stock, at cost; 1,180,763 and 1,119,579 shares at June 30, 2020 (unaudited) and
December 31, 2019, respectively			(1,967,900	)			(1,885,452	)
Deferred compensation			(6,700,248	)			(5,636,154	)
Accumulated deficit			(64,275,166	)			(62,151,988	)
Total stockholders' equity			6,018,883				7,568,335
Total Liabilities and Stockholders' Equity		$	65,809,248			$	61,560,179

 

USIO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)

		Three Months Ended June 30,								Six Months Ended June 30,
		2020				2019				2020				2019
Revenues		$	6,960,553			$	7,157,379			$	14,732,232			$	13,745,411
Cost of services			5,674,887				5,591,534				11,518,282				10,843,835
Gross profit			1,285,666				1,565,845				3,213,950				2,901,576
Selling, general and administrative:
Stock-based compensation			348,393				356,103				636,103				639,511
Other expenses			1,856,924				1,970,555				3,979,030				3,632,294
Depreciation and amortization			382,244				496,994				770,039				983,542
Total operating expenses			2,587,561				2,823,652				5,385,172				5,255,347
Operating (loss)			(1,301,895	)			(1,257,807	)			(2,171,222	)			(2,353,771	)
Other income:
Interest income			1,487				22,620				12,643				45,694
Other income (expense)			38				(424	)			726				(423	)
Other income and (expense), net			1,525				22,196				13,369				45,271
(Loss) before income taxes			(1,300,370	)			(1,235,611	)			(2,157,853	)			(2,308,500	)
Income tax expense (benefit)			(12,201	)			40,000				(34,675	)			40,000
Net (Loss)		$	(1,288,169	)		$	(1,275,611	)		$	(2,123,178	)		$	(2,348,500	)
Earnings (Loss) Per Share
Basic earnings (loss) per common share:		$	(0.10	)		$	(0.10	)		$	(0.16	)		$	(0.18	)
Diluted earnings (loss) per common share:		$	(0.10	)		$	(0.10	)		$	(0.16	)		$	(0.18	)
Weighted average common shares outstanding
Basic			13,173,009				13,041,799				13,150,119				12,831,828
Diluted			13,173,009				13,041,799				13,150,119				12,831,828

USIO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

		Six Months Ended
		June 30, 2020				June 30, 2019
Operating Activities
Net (loss)		$	(2,123,178	)		$	(2,348,500	)
Adjustments to reconcile net (loss) to net cash provided (used) by operating activities:
Depreciation			270,038				483,542
Amortization			500,001				500,000
Non-cash stock-based compensation			636,103				639,511
Amortization of warrant costs			17,973				17,970
Changes in operating assets and liabilities:
Accounts receivable			149,794				(354,550	)
Prepaid expenses and other			(4,039	)			(99,853	)
Operating lease right-of-use assets			114,127				(2,614,006	)
Other assets			(24,568	)			(6,023	)
Accounts payable and accrued expenses			(139,748	)			31,156
Operating lease liabilities			(110,725	)			2,766,034
Prepaid card load assets			18,752,859				105,616
Merchant reserves			(1,586,565	)			(1,570,912	)
Deferred revenue			(26,470	)			130,000
Deferred rent			—				(79,748	)
Net cash provided (used) by operating activities			16,425,602				(2,399,763	)
Investing Activities
Purchases of property and equipment			(334,688	)			(333,205	)
Net cash (used) by investing activities			(334,688	)			(333,205	)
Financing Activities
Proceeds from PPP Loan Program			813,500				—
Proceeds from public offering, net of expenses			—				1,793,905
Purchases of treasury stock			(82,448	)			(50,515	)
Net cash provided by financing activities			731,052				1,743,390
Change in cash, cash equivalents, prepaid card load assets and merchant reserves			16,821,966				(989,578	)
Cash, cash equivalents, prepaid card load assets and merchant reserves, beginning of year			12,682,918				15,340,980
Cash, Cash Equivalents, Prepaid Card Load Assets and Merchant Reserves, End of Period		$	29,504,884			$	14,351,402
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest		$	—			$	—
Income taxes			—				—
Non-cash transactions:
Issuance of deferred stock compensation			1,559,520				—

USIO, INC.
STATEMENT OF CHANGES in STOCKHOLDERS' EQUITY
(UNAUDITED) 

		Common Stock								Additional Paid- In				Treasury				Deferred				Accumulated				Total Stockholders'
		Shares				Amount				Capital				Stock				Compensation				Deficit				Equity
Balance at December 31, 2019			18,224,577			$	186,656			$	77,055,273			$	(1,885,452	)		$	(5,636,154	)		$	(62,151,988	)		$	7,568,335
Issuance of common stock under
equity incentive plan			51,000				51				59,440				—				—				—				59,491
Warrant compensation costs			—				—				8,985				—				—				—				8,985
Deferred compensation amortization			—				—				—				—				228,219				—				228,219
Purchase of treasury stock			—				—				—				(26,629	)			—				—				(26,629	)
Net (loss) for the period			—				—				—				—				—				(835,009	)			(835,009	)
Balance at March 31, 2020			18,275,577			$	186,707			$	77,123,698			$	(1,912,081	)		$	(5,407,935	)		$	(62,986,997	)		$	7,003,392
Issuance of common stock under
equity incentive plan			1,500,544				1,500				1,641,304				—				(1,559,520	)			—				83,284
Warrant compensation costs			—				—				8,988				—				—				—				8,988
Deferred compensation amortization			—				—				—				—				267,207				—				267,207
Purchase of treasury stock			—				—				—				(55,819	)			—				—				(55,819	)
Net (loss) for the period			—				—				—				—				—				(1,288,169	)			(1,288,169	)
Balance at June 30, 2020			19,776,121			$	188,207			$	78,773,990			$	(1,967,900	)		$	(6,700,248	)		$	(64,275,166	)		$	6,018,883
Balance at December 31, 2018			17,129,680			$	185,561			$	74,568,627			$	(1,813,546	)		$	(6,270,675	)		$	(57,036,241	)		$	9,633,726
Issuance of common stock, public offering			769,230				769				1,793,136				—				—				—				1,793,905
Issuance of common stock under equity incentive plan			62,222				62				58,551				—				—				—				58,613
Warrant compensation cost			—				—				8,985				—				—				—				8,985
Deferred compensation amortization			—				—				—				—				224,795				—				224,795
Purchase of treasury stock			—				—				—				(21,822	)			—				—				(21,822	)
Net (loss) for the period			—				—				—				—				—				(1,072,889	)			(1,072,889	)
Balance at March 31, 2019			17,961,132			$	186,392			$	76,429,299			$	(1,835,368	)		$	(6,045,880	)		$	(58,109,130	)		$	10,625,313
Issuance of common stock under equity incentive plan			53,445				53				133,462				—				—				—				133,515
Warrant compensation cost			—				—				8,985				—				—				—				8,985
Deferred compensation amortization			—				—				—				—				222,585				—				222,585
Reversal of deferred stock compensation that did not vest			(6,000	)			(6	)			(13,254	)			—				13,260				—				—
Purchase of treasury stock			—				—				—				(28,693	)			—				—				(28,693	)
Net (loss) for the period			—				—				—				—				—				(1,275,611	)			(1,275,611	)
Balance at June 30, 2019			18,008,577			$	186,439			$	76,558,492			$	(1,864,061	)		$	(5,810,035	)		$	(59,384,741	)		$	9,686,094

USIO, INC
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED)

		Three Months Ended June 30,								Six Months Ended June 30,
		2020				2019				2020				2019
Reconciliation from Operating (Loss) to Adjusted EBITDA:
Operating (Loss)		$	(1,301,895	)		$	(1,257,807	)		$	(2,171,222	)		$	(2,353,771	)
Depreciation and amortization			382,244				496,994				770,039				983,542
EBITDA			(919,651	)			(760,813	)			(1,401,183	)			(1,370,229	)
Non-cash stock-based compensation expense, net			348,393				356,103				636,103				639,511
Adjusted EBITDA		$	(571,258	)		$	(404,710	)		$	(765,080	)		$	(730,718	)
Calculation of Adjusted EBITDA margins:
Revenues		$	6,960,553			$	7,157,379			$	14,732,232			$	13,745,411
Adjusted EBITDA			(571,258	)			(404,710	)			(765,080	)			(730,718	)
Adjusted EBITDA margins			(8.2	)%			(5.7	)%			(5.2	)%			(5.3	)%