Usio, Inc.

Good afternoon, everyone, and welcome to the UCU earnings conference call for the fourth quarter and fiscal year ended December 31, 2022. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touchstone phone. To withdraw your question, please press star then two. All participants on this call are advised that the audio of the 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 March 22, 2023. I would now like to turn the conference over to Paul Manley, Senior Vice President, Investor Relations. Please go ahead, sir.

Thank you, and thank you, everyone, for joining our call today. Welcome to UCO's fourth quarter and fiscal 2022 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. On this call today are Louis Hoke, our Chairman and CEO, Tom Jewell, Senior Vice President and Chief Financial Officer, Greg Carter, Executive Vice President of Payment and Acceptance, and Houston Frost, Senior Vice President of Prepaid Services. Let me remind our listeners that certain statements made during the call today constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities and Litigation Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties are described in our earnings press release and in our filings with the SEC. The forward-looking statements made today are as of the date of this call, and we do not undertake any obligation to update these forward-looking statements. Management will provide prepared remarks, then we will have a question and answer session. But let me lead off with the highlights from this afternoon's release. We reported both record quarterly and full-year revenue for the period ended December 31st, 2022. Revenue was up 7% for the quarter, our 10th consecutive quarter of growth, and up 12% for the year, which is our sixth consecutive year of record revenue. For the quarter, we reported $1 million in adjusted EBITDA. So EBITDA was down for the year primarily due to a shift in our revenue mix, driven essentially by the decrease of our highly profitable ACH business. Adjusted EBITDA and EBITDA are non-GAAP financial measures. Our 10K and earnings release both include a reconciliation of these measures to the GAAP measures of operating income. As you will hear on today's call, we feel we are exiting 2022 with significant momentum, which is clearly communicated in our strong guidance that we gave today. And we are in excellent financial condition to support our aggressive growth objectives for the year. Now, with all that, I will turn the call over to Louis.

Thank you, Paul, and welcome, everyone. As Paul noted, I'm pleased to report another record quarter and year. We finished the year on a high note led by strong growth in our prepaid card and output solution businesses. It was a profitable end to the year with the highest quarterly gross profit in the company's history. leading to $1 million of positive adjusted EBITDA. On the strength of this finish, we met our top line guidance for the year, growing card, prepaid, and output solutions revenue, while ACH was down due to our exit from the cryptocurrency market. Once again, we demonstrated the benefits of our diversified business strategy, the markets we serve, and the payment channels that we offer. In addition, we are now capitalizing on our unique and proprietary full stack of integrated payment and embedded finance solutions where we can offer a broad array of technology and related services. These are strengths not only powered our fiscal 2022 performance, but offered significant competitive advantages that will enable us to accelerate our future growth. There are a number of other significant developments in the past year, which we believe broaden our foundation for continued growth. For instance, Output Solutions had a breakout year with revenues up 27% for the quarter and 24% for the year. Output Solutions profitability correspondingly improved with gross margins. expanding from roughly 13% in Q1 of 2022 to finishing the year at 19% gross margins in Q4 of 2022. The RAND point on our large contract with LA County, which we believe will not only help propel outputs 2023 growth, but because it's integrated across our organization, will also grow our card and prepaid revenues. This is a great example of the advantage of our diversification and integration strategy. We're investing in output solutions, implementing new technology that adds additional legs to the stool, such as electronic bill presentment and payment, so we expect their growth to continue. As expected, prepaid had a great quarter. revenues were up strongly, led by the increase in breakage and spoilage on expiring and unused cards. Now that large, that the large New York City contract has ended, we expect to recognize significant breakage revenue on this and other card programs in 2023. And with excitingly potentially very large new programs beginning with highly recognizable brands like MoviePass. We see a path to potentially almost doubling prepaid revenues in 2023. Houston Frost will provide additional information, additional details in just a minute. We also expect to see a recovery in our ACH business. Fiscal 2022 was extremely disruptive year with the disappointing news about our large cryptocurrency customer entering bankruptcy. But we've bounced back. For instance, return check transactions process for the year were up 31%, while we saw even better growth in our pin list debit revenues with transactions up 107% year over year. For many non-bank consumers and fintech lending customers, ACH is basically countercyclical. So, a weak economy could be a reason to be optimistic for a rebound in ACH revenues, with the opportunity to resume growth in the second half of this year. What's missing from this afternoon's numbers, but has me the most excited, is a pipeline of opportunities across the organization that we expect to contribute in 2023 and beyond. At the heart of these opportunities is the continued innovation we are demonstrating in helping simplify payments for our customers. I am also confident that we will continue to generate positive operating cash flows and adjusted EBITDA in 2023 as we lever up our top-line growth through disciplined cost management. Selling general and administrative expenses in the fourth quarter were essentially in line with the third quarter as costs have flattened out. And we expect more of the same in 2023. We also ended the year in a strong financial condition with cash on hand of 5.7 million as we generated 1.2 million in cash in the fourth quarter of 2022. Note that the end cash is net of the approximately 1 million used to repurchase over 500,000 of our shares in fiscal 2022. We will be opportunistic in using this buyback authorization as a means to show continued confidence in our business and create value for our shareholders. I'm going to stop here and turn over the call to the team. and conclude in a moment with our outlook for 2023. And now I'd like to turn the call over to Houston Frost.