Usio, Inc.

Good afternoon and welcome to the UZO earnings conference call for the second quarter ended June 30th, 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 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 just a point of clarification, the replay will be available until the end of August. And thanks, everyone, for participating. Welcome to UCO's second 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 slash investors under news. On this call today are Lewis Hope, President and CEO, Greg Carter, Senior Vice President of Payments Facilitation, 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 that comments on today's call include overlooking statements. Overlooking statements can be identified by the use of such words as estimate, anticipate, expect, believe, intend, may, will, should, seek, approximate, or plan, or the negative of these words and other similar words and phrases. Overlooking statements by their nature involve estimates, projections, goals, forecasts, and assumptions that 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 resellers, 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 conference 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 UCL'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.

Thank you, Joe, and welcome, everyone. The second quarter was another record quarter with record processing volumes and record revenue growth. Revenues for the quarter were up 119% to $15.2 million, with revenues for ACH up 125%. Adjusted EBITDA was $1.3 million for the second quarter, which was our third consecutive quarter of positive adjusted EBITDA. And our positive operating cash flow increased our cash balance by $1.3 million to $5.6 million at June 30th, from $4.3 million at the end of the first quarter and up $600,000 since the end of 2020. As a result of this strong first half of 2021, we're increasing our revenue guidance for the year to be in the range of $56 to $59 million. which represents a growth of 73% to 83% over 2020 revenue growth. We still expect positive EBITDA, adjusted EBITDA for the year. It was another quarter of record transaction processing volume with total dollars processed, a record of $2.73 billion, topping the previous all-time record of $1.87 billion. that was set in the first quarter of 2021. More ACH transactions were processed in the second quarter of 2021 than any previous quarter in the company's history. Card processing, including Payfax, set another all-time quarterly record for both transactions and dollar process. And May was our first ever $1 billion processing month. This was our third consecutive quarter of record electronic payments in transaction processing volume. In addition, output solutions revenue was $3.6 million for the quarter, a run rate that is well above the assumptions we made for the IMS acquisition. We're on a rapid growth trajectory fueled by our innovative technology multi-channel distribution strategy and a focus on serving and diversity of end markets. The UCL franchise has never been stronger, and this quarter was a testament to the scalability of our systems and associated products and services. We continue to innovate. We recently announced a partnership with Voyager Digital, the fast-growing cryptocurrency app and platform, to enable our merchants to accept electronic payments in as many as 60 cryptocurrencies via our payment processing gateway. This exciting solution should be launched later this year. We provide business line revenue reporting, so let me offer some high-level comments by business line. ACH continues to set records with electronic check dollars processed almost quadrupling this quarter. ACH revenues were up 125% in the quarter, and ACH continues to be one of our most profitable businesses. While ACH is broadly growing, it's been fueled especially by the rapid expansion of the cryptocurrency market. Our success in this industry leading to new opportunities, such as with Voyager Digital, where our relationship keeps expanding. Together with our newly introduced pinless debit and account inquiry products, we remain one of the fintech industry's leading innovators. While we experienced triple-digit growth for ACH in comparison to the second quarter of 2020, which was affected mostly by COVID, we expect ACH to continue to grow year over year in the back half of this year. Based upon our expectations of somewhat softer crypto market, we see that ACH transactions growing over 70% this year to a new record high. Our card business has also had a record quarter. Momentum continues to build as growth in dollars process rose 55% this quarter, accelerating from 30% growth last quarter. Transactions processed in the quarter doubled after doubling last quarter. And our card division generated profits this quarter. Greg will review the performance in more detail, but it's clear that card has reached an inflection point and its growth is accelerating. It now appears we're on pace to generate over a billion dollars in card processing volume this year, which represents another milestone. Card processing continues to set records and is experiencing sequential growth each quarter. We expect to see that continue over the balance of the year as we grow card through its three growth channels. New ISVs, increased penetration of the ISV merchants, and organic processing volume growth at the individual merchant level. Card is also innovating new products with the global Voyager crypto processing agreement, also expected to bolster card volume. Prepaid load volume was up 65% in the quarter, while revenues were up 82%, consistent with the expectations established last quarter. Prepaid continues to further strengthen its position in government, municipal, charitable, and related markets. Without stealing Houston's thunder, I want to quickly mention our recent win with the New York City Economic Development Corporation's new COVID vaccination program, where the city is dispersing $100 to eligible residents that get vaccinated. This highly visible program is a testament to the strength of our relationship with various New York City agencies built through numerous COVID economic relief programs already supported by our prepaid technology. It also recognizes our ability to respond rapidly and provide innovative solutions, which in this case required both a physical and virtual card solutions. It is this combination of innovative technology and strong relationships that has us confident that prepaid will continue on its pace of record results again for 2021. Finally, Output Solutions continues to exceed our expectations. Their integration continues to progress and now extends to successfully earning business from our card customers that have a need for high-quality print and mail solutions. We're also making inroads with electronic bill presentment payment program which we can now claim a top five credit union as our latest customer. As I briefly mentioned, we generated over $1.3 million in adjusted EBITDA and positive cash flow for the quarter. With the year to date, adjusted EBITDA is now over $1.5 million and is the primary driver over $600,000 increase in our cash balances since the end of 2020. Consequently, we believe that we are more sufficiently funded to support our current growth initiatives over the next 12 months. It's been a record first half of the year. Dollars processed volumes this year have already surpassed what we did for all of fiscal 2020. We have turned cash flow positive. Revenue growth is up 95% for the first half of the year versus prior year period, which enabled us to raise guidance for the full year. Of course, the results are contingent on the continued improvement of the overall economy, the continued excitement in the cryptocurrency marketplace, and the recovery of the consumer lending industry. With that, I'd like to conclude my opening remarks and turn the call over to Houston Frost, our Senior Vice President of Prepaid Products.