Usio, Inc.

Good afternoon and welcome to the UTO earnings conference call for the first quarter ended March 31st, 2021. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Participants of this call are advised that the audio of this conference call is being broadcast live over the internet and is also being recorded for playback purposes. A replay of it will be available shortly after the end of the call through May 28, 2021. I would now like to turn the conference over to Joe Hassett, Investor Relations. Please go ahead.

Thanks, Matt, and thank you, everyone, for participating today. Welcome to UCO's first quarter 2021 financial results conference call. The earnings release, which UCO issued yesterday after market closed, is available on the company's Investor Relations website at uco.com backslash investors under news. On this call today are Louis Hope, President and CEO, Greg Carter, Senior Vice President of Payment Facilitations, Tom Jewell, Senior Vice President and Chief Financial Officer, and Houston Frost, Senior Vice President of Business Development and Prepaid Products. Management will provide prepared remarks, and then we will open the call to your questions. Before we begin, please remember the comments on today's call include forward-looking statements. Forward-looking statements can be identified by the use of such words as estimate, anticipate, expect, believe, intend, may, will, should, seek, approximate, or plan for the negative of these words and other similar words and phrases. Forward-looking statements by their nature involve estimates, projections, goals, forecasts, and assumptions and are subject to risks and uncertainties that could cause actual results or outcomes that differ materially from those expressed in the forward-looking statements. including risks related to the COVID-19 pandemic and its effect on the economy, the realization and the opportunities from the IMS acquisition, management of the company's growth, the loss of key resources, the relationships with the automated clearinghouse network, bank sponsors, third-party card processing providers and merchants, the volatility of stock price, the loss of key personnel, growing competition in the electronic commerce market, the security of the company's software, hardware, and information, compliance with complex federal, state, and local laws and regulations, and other risks detailed in the company's filings with the SEC. These forward-looking statements speak only as of the date of this Congress call and should not be relied upon as predictions of future events. UCO expressly disclaims any obligations or undertaking to update or revise any forward-looking statements made today to reflect any change in UCO's expectations with regard thereto or any other changes in the events, conditions, or circumstances on which any such statement is based. except as required by law. Please refer to the company's SEC filings on its investor relations website for additional information. And with that, I would now like to turn the call over to Louis. Louis.

Louis Williams Thank you, Joe, and welcome, everyone. The first quarter was another record quarter with record processing volumes and record revenue growth. After four consecutive years of revenue growth and a strong recovery over the second half of last year, We are pleased that we have carried that momentum into the new year. Revenues were up 73% to $13.5 million, with strong growth in all of our business lines. We achieved record transaction processing volumes in the quarter, with total dollars processed nearly $1.9 billion, an increase of 113% from a year ago. And more importantly, more than double the processing volume of any prior quarter in the company's history. This led to a 15% increase in card revenue, a 38% increase in ACH revenue, and a 61% increase in prepaid services. In addition, our first full quarter of ownership of IMS which we have rebranded UCO Output Solutions, contributed revenue for the first three months of the year that exceeded our acquisition assumptions. Consequently, the second consecutive quarter, we reported positive adjusted EBITDA. Without question, we experienced an outstanding growth quarter across all of our business lines, including the bottom line. We believe these results clearly demonstrate that our growth trajectory has inflected. Once again, we attribute our success to our strategy to offer to the growing electronics payment market a diverse portfolio of payment channel solutions, including ACH, prepaid, card processing, and now output solutions. To improve transparency, we provide business line revenue reporting, so let me offer some high-level comments by business lines. I'm particularly pleased with ACH, which had its best quarter ever after battling through a year of coronavirus-induced headwinds. There is no other way to describe it other than as remarkable growth. The strategic actions we initiated as these headwinds arose, have resulted in a broader portfolio of products serving more diverse end markets that provides an even stronger, more dynamic foundation for future growth. One of our early actions that is now contributing significantly to our growth is our foresight in recognizing the potential of the cryptocurrency market when it was in its infancy. Growth and volumes in this market are now exploding. In part due to our success in this market, ACH is on pace for a record year and remains our most profitable business line. In addition, we are seeing strong growth from new products such as pinless debit and account inquiry. ACH is off to a great start in the second quarter with no current signs of any let up from the first quarter's momentum. which could lead to another record quarter for ACH volumes and the associated revenues. Our card business also had a breakout quarter where momentum is picking up. Dollar process were up 30% while transactions process were more than double. We've consistently been investing in our PayPak platform as a strategy to accelerate growth. And we are now experiencing a rapid adoption of this technology by many integrated software vendors with whom we have been partnering. Greg will review our performance in more detail, but I believe we have reached an inflection point in our car business. The pace of ISVs implementing our technology is on the rise, and we have become a leader in certain industries, such as software for bankruptcy attorneys, and we are getting larger deals, such as our first, ever potentially $100 million plus per year ISV. There is no question that we have so much momentum that we should see sequential improvement over the balance of this year. Like ACH, our car business is off to a great start in the second quarter and is likely to achieve another quarter of record volumes in revenues. After doubling in fiscal 2020, Prepaid load volume doubled again in the first quarter, driving a 61% increase in revenues. As Houston will discuss in a minute, our prepaid business is now branching out within many government, municipal, and other similar organizations that originally turned to us for prepaid solutions for their COVID relief programs. The strong relationships we built with these nearly 100 organizations under these programs are leading to it a wealth of new opportunities within the organizations to grow our prepaid solutions. I'm very pleased with the growth of prepaid over the past year, and I believe 2021 could be another year of rapid growth. As I briefly mentioned, after just four months as part of the UCO family, output solution is already exceeding our expectations. I attribute this to the smooth integration into the UCO family where we experienced no disruption in operations and created numerous synergies. I remain optimistic output solutions will be accretive to our 2021 earnings as contemplated in our original acquisition expectations. We ended the quarter in solid financial condition with only a modest use of cash to support the nearly doubling of our business. And with the expectation to be cash flow by the end of the year, we believe we are more than sufficiently funded to support our growth initiatives over the next 12 months. With a solid first quarter in the book, we have now generated steady, if not even more recent spectacular, sequential improvement in our performance for nearly two years. And with the exception of last year's COVID-influenced second quarter, already the second quarter of 2021 is shaping up to be another strong quarter. As of yesterday, the midpoint for the second quarter, we've already processed over $1.4 billion in volume. That is nearly 75% of the quarterly record $1.9 billion we processed in the entire first quarter, which in itself was twice that of our previous record. Furthermore, on a year-to-date basis, we're nearly at the same level as for all of 2020, with seven months left in the year. That's impressive progress. As for guidance, we are obviously experiencing a growth rate that demonstrates our previous estimate of 50 million in revenue for 2021 should be exceeded. And as a result, we have exceeded our internal projections. This acceleration is so dramatic that we're refining our internal projections almost daily. Soon we will provide more clarity, but we are forecasting a revenue range of 53 to 56 million for 2021, with being adjusted EBITDA positive and the range being contingent on continued improvement in overall economy, continued excitement in the cryptocurrency marketplace, and the recovery of the consumer lending industry. Finally, I'd like to remind everyone that we will be hosting our annual shareholder meeting on June 10th. The meeting will be held in person and virtually to allow for ease of participation. With that, I'd like to now conclude my opening remarks and turn the call over to Houston Frost, our Senior Vice President of Prepaid Services.