Usio, Inc.

Hello, and welcome to the UCO Third Quarter 2023 Earnings Conference Call. All participants will be in the Sun 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 the star, then one, on your touch-tone phone. To withdraw your question, please press the star, then two. Please note, today's event is being recorded. Now I turn the conference over to your host today, Paul Manley. Please go ahead, sir.

Thank you, Operator, and thank you, everyone, for joining our call today. Welcome to UCO's third quarter fiscal 2023 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 Card Issuing. 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 maturely 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. During today's call, we will refer to non-GAAP financial measures, such as adjusted EBITDA. Our earnings release includes a reconciliation of adjusted EBITDA to GAAP operating income. Management will provide prepared remarks, then we'll have a question-and-answer session. So let me start off with some highlights from this afternoon's release. I am pleased to report another quarter of strong growth with revenue up 25%, our 13th consecutive quarter of revenue growth. We also are reiterating our guidance of 18% to 20% revenue growth for the year. In our release, we announced a number of exciting developments across our entire organizations. This includes an investment in output solutions that should increase capacity by 50%, our largest ever quarter of prepaid card load volumes, our strongest ever card pipeline, and the expectation that ACH volumes will start to grow again in the fourth quarter. In addition, we continue to be in excellent financial condition with strong cash flow this quarter, in part supported by record interest income, which we expect will add over $1 million to our cash position over the second half of this year. In total, this has enabled us to add nearly $2 million of cash to our balance sheet over the first nine months of the year. So at a time when many companies are forecasting slowdowns in their business, UCO continues to charge ahead. Now I will turn the call over to Louis.

Thank you, Paul, and welcome, everyone. It was another quarter of strong growth. Consequently, I am pleased to reiterate our guidance for revenue to be between 18 and 20% for the year. Results once again reflect our diversified business strategy, diversified in the markets we serve and the payment channels that we offer. This quarter, results were led by a strong performance at prepaid, where revenues were up 197%. As a sign of prepaid's growing momentum, the third quarter was the first quarter in the company's history in which the volume loaded onto prepaid cards exceeded $100 million. Fourth quarter, prepaid continued to have solid growth, not just in load volumes, but in transactions process and purchase dollars process. While residual revenues from expiring card programs were certainly a contributor to our strong revenue growth, load volumes, transactions, and purchase dollars process were all generated from ongoing programs. Consequently, these record amounts provide a clear indication of the strength of our prepaid business beyond any reliance on expired cards. Houston will discuss new accounts and the strong growth with the long-term corporate expense and disbursement clients. But let me quickly touch on one of his most significant accomplishments. As recently announced, We want our first state-administered program. This is totally new, a very large market opportunity for us. So we believe prepaid is building a solid foundation of reoccurring revenue programs as a solid base on which we can grow, evidenced by the increasing load dollars. Loaded dollars on the cards is a leading indicator of future revenues, creating either revenue from spend or revenue from spoilage. Both revenue and margins were up again at Output Solutions this quarter as Cy Green and his team continue to utilize every ounce of available capacity. For that reason, we're investing approximately $1 million in new technology at Output Solutions that should increase our capacity by 50 percent. At the same time, This should also increase the speed of production and reduce costs. This new system will increase our flexibility, including the ability to handle mail run data files, which is a key requirement for large projects where we were previously less competitive. Last quarter, we noted that we had hired a seasoned print and mail sales executive. So combining his contacts throughout the industry, with the expanded capacity will make us a formidable competitor for larger, more lucrative programs. Ultimately, this should lead to what we believe will be both a better top and bottom line. We continue to expand our relationship with LA County, handling their check disbursements needs for fees and fines that were overpaid. We mailed 142,000 letters and 27,000 checks for LA County in the third quarter. We also took on additional cities in the quarter, handling their utility bill printing. For the quarter in total, we sent out a record 900,000 checks. Developments and output continue to be representative of the transformation and the integration taking place across UCO. Output recently launched with a toll road customer for disbursement of bill-by-plate toll bills. The bills have a QR code that the recipient scans, which takes them to a payment portal built and operated by UCO. There is strong interest among government agencies and utilities in these scan-to-pay options. Not only is it easier to set up than creating a more traditional customer portal, it also seems to drive payments early. We also continue to attract new accounts, which are completely electronic with no print or mail service. Such accounts involve the creation of e-bills that are emailed to customers and then directed to a UCO managed payment portal. This is obviously higher margin business. Turning the card, payback continues to generate strong growth, 27% for the quarter. As Greg will discuss, it's been a busy quarter of increasing penetration with existing ISVs, implementing new ISVs, and building a strong pipeline, including three significant new opportunities, which we are aggressively targeting. In the ACH, total revenues were up on the strength of associated services, such as pinless debit and account inquiry. We expect this to be the last quarter of which volumes are below year-ago levels, as this is the last year-ago quarter that included meaningful Voyager volumes. This, in turn, should help us improve overall segments revenue growth and profitability. Margins were up in the quarter due to this highly profitable ACH revenue growth, as well as due to spoilage revenues from our prepaid segments. Our business will always include some spoilage from expiring cards. In the immediate term, the majority has been generated on the New York City COVID incentive program, which will be winding down further in upcoming quarters. In the third quarter, we did see an increase in our selling, general, and administrative expenses. Many were one time in nature. We expect these expenses to trend down in the fourth quarter, but probably not to the levels we experienced in the first and second quarter of the year. Having grown revenues 25 percent over the first three quarters of the year, costs are understandably up to support this rapid expansion. Our goal is to keep the rate of overhead expense growth below that of revenues in order to realize the significant operating leverage our business model can deliver. And we expect to see that improve as we move forward. The net result is an increase in operating income, adjusted EBITDA EPS from a year ago, although each was down sequentially from the second quarter, which we called out on our last quarter conference call. Cash was a good story as we generated nearly $750,000 of cash over the last three months. Some of that was the product of over $500,000 in interest income in the third quarter. we anticipate another significant increase in interest income in the fourth quarter. In summary, prepaid is positioned for the future with its high loans on cards. The card is sitting on some of the potentially largest new ISBs in our history. ACH is rebounding, and we are increasing our capacity at output by 50 percent due to strong demand. Another solid quarter with strong top-line growth, internal investments to sustain that growth and improve operating leverage over time. Consequently, as Paul noted, we are reiterating our guidance for the year. And now I'd like to turn over the call to Houston Frost.

Thank you, Louis, and thank you to everyone participating on our call this afternoon. As Louis noted, prepaid had an exceptional quarter, with strong revenue growth in our first-ever quarter with over $100 million in card loads. It is important to remember that card loads are a forward-looking metric, providing a measurement of clients. These loaded funds will generate interchange and transaction fee revenue over the ensuing months, as well as inactivity fees and breakage beginning 12 months after the loads occur. As such, our record Q3 card load results are particularly exciting for the impact they could have on 2024 revenue, considering the roll off and inactivity fees generated from vaccine incentive programs from 2021 and 2022. Perhaps more importantly, the record load volumes demonstrate the card issuing businesses continued growth and strength even in the complete absence of any pandemic-related card programs. Our client base is increasingly diverse. Today, six of our 10 largest clients are expense management or disbursement programs with private enterprises. Equally important, many of these are long-term, growing clients we've been serving for years. Among them are fintechs, such as ClassWallet and MoviePass, which we've mentioned on previous calls. While our government clients are drawn to the transaction restrictions and controls, virtual cards and or consumer choice offerings, the FinTech market appreciates our ability to integrate our external authorization feature with their technology. Our ability to offer technology that appeals to both government and private sector are essential in attracting new customers as well as retaining existing clients over the long term. As these organizations grow or programs expand, we are growing right alongside them. We also continue to board new clients. Most recently, we won our first state-administered program. This program actually arose from the recommendation of a very happy, smaller government entity, UCO Customer, within the state. We are extremely proud that the Card Issuing Division continues to receive introductions like this, as it illustrates the customer satisfaction on which we pride ourselves. This steady stream of referral business also enables us to run a lean sales and marketing organization with the attendant benefits to our profitability. Our success continues to be built on operational execution, the flexibility and capabilities of our proprietary processing platform, and our relentless focus on the client relationship. As we look to the future, we will continue to focus on increasing the diversity of our client base, and the card programs we support, and continue to seek out opportunities that generate recurring revenue. With that, I'd like to turn the call over to Greg Carter.

Thank you, Houston, and good afternoon, everyone. Card revenues were up again with year-over-year growth in our PayFact business accelerating sequentially to 27% in the third quarter. Both dollars and transactions processed were up from a year ago, with payback on target for three-quarters of a billion of processing volume in what is shaping up to be a record year. While the third quarter is typically a slower time, this year we onboarded a record number of new merchants from our existing ISV relationships, up substantially compared to any previous quarters, with an average of more than 100 new onboards a month compared to 60 recently. I attribute this steady improvement to our business strategy where we keep adding new ISVs and they, in turn, continue to penetrate their account bases. As our base of ISVs grows, this is a natural result of our disciplined processes. What is even more exciting is the number of ISVs that are mandating their users adopt our PayFax solution. One example is a new fitness exercise practice management ISV we recently implemented. This ISV is rapidly transitioning all of their users from brain-free to UCO. Once adopted by their entire client base, this ISV could be one of our largest. There's been a recent industry development that is providing an additional tailwind. It's becoming much harder to become a registered paid FAC. The requirements are much more stringent, and many ISVs simply don't have the experience or resources to justify building the necessary infrastructure themselves. Consequently, this is making our payback as a service value proposition increasingly attractive to ISVs who want to monetize payments. Lewis alluded to a number of large prospects in our pipeline, which we attribute to both our digital marketing efforts, but also in part due to these new complexities and challenges. The third quarter is always a great time for prospecting. It's the boring part of sales involving a lot of spade work, but it sets us up to have a strong pipeline for the fourth quarter and on into the new year. We attended several different conferences this quarter, especially in the lending industry. For instance, we attended Lend360, which is probably the biggest lending conference for the subprime and alternate lending channels. We are seeing increased activity in the tribal lending space. We've always been in that space, but we're becoming more visible, and that is yielding new agreements directly with the tribes. It's a good market that contributes to ACH both ways, both in funding and in servicing of the loans. In the third quarter, we also attended a tribal lending conference in California. Pinless Debit is also doing very well. It's a less expensive alternative to credit card and is becoming very popular with fintech lenders and loan servicers. Revenue growth in this product line has been outstanding, and we intend to capitalize on the momentum being created by its more widespread adoption today. So, the third quarter can be characterized by strong growth in onboarding new merchants, driven by growth in our existing ISV relationships and the recent implementation of other ISVs that have had an immediate impact. We have a solid pipeline of new ISVs in various stages of implementation. We are doing the spade work now to build our prospect pipeline for the future. I remain very optimistic for the balance of this year and for 2024 in general. With that, I'd like to conclude my remarks and turn the call over to Tom Jewell, our Senior Vice President and Chief Financial Officer, to discuss our financial results.

Tom Jewell Thanks, Greg, and welcome, everyone. Thanks again for joining our call today and for your interest in UCO. Let me quickly provide some highlights around this quarter's results before opening the call to questions. Revenues for the quarter were up 25% to $20.5 million, driven by growth in all of our segments, especially prepaid. I also note that ACH revenues were up year over year in the quarter after being down in the first half of the year. Output Solutions was also up nearly double digits Once again, while credit card revenues were up 5% as our PayFax business continues to grow at a faster rate than the wind down of our legacy traditional payment processes. Gross profits were $4.1 million and margins were up 170 basis points from the year ago quarter. Gross margin improvement reflects a higher contribution from breakage and spoilage and better margins at output solutions. Gross profits and gross margins were down compared to the second quarter, principally due to a sequential decrease in prepaid profits and gross margins as our share of the New York City COVID incentive breakage and spoilage stepped down. As our share of New York City breakage and spoilage profits are sequentially reduced, we expect prepaid profits and margins to contract further in the fourth quarter. Our long-term strategy remains to manage strong growth in gross profit dollars, although potentially at lower margins. Selling, general, and administrative costs were up from a year ago, reflecting increases in marketing and professional fees. Since some of the increase in the quarter was from non-recurring expenses, we expect fourth quarter SG&A to trend lower. As Louis stated, over the long term, we expect to improve the operating leverage in our model by keeping the rate of overhead growth below that of revenues. We reported an adjusted EBITDA loss of just under $100,000, which was a $400,000 improvement from the year-ago quarter, although down from the last three quarters. For the quarter, we reported a net loss of $700,000, or 4 cents per share, which was a big improvement over the net loss of $1.8 million, or 9 cents per share, a year ago, but again, down sequentially. Non-GAAP adjusted operating cash flows, as defined in our SEC filings, was $2.4 million for the first nine months of the year. Our cash position at the quarter end was $7.4 million, or approximately $1.7 million higher than at the beginning of the year. A contributing factor was the over $500,000 of interest income in the quarter, and we expect another quarter of strong interest income in the fourth quarter. Transitioning to year-to-date results, for the first nine months of the year, revenues were up 25 percent, gross margin has expanded 290 basis points, and SG&A was up just 7 percent. From a profitability perspective, Adjusted EBITDA was 2.1 million compared to a loss of 1.4 million in the first nine months of last year. Again, this reflects my previous comment about the significant improvement in profitability this year compared to last year. As Louis noted, we expect to meet our revenue guidance for the year, but expect to see a slight slowdown in revenue growth and gross profits in the fourth quarter due to declining breakage and other items. With that, I will turn the call back to the operator to conduct our question and answer session.

Yes, thank you. At this time, we will begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble the roster. And the first question comes from Scott Buck with A.C. Wainwright. Hi, good afternoon, guys.

Thanks for taking my questions. I was hoping to get a little bit more color on the new state card program. I guess what I'm trying to figure out is whether or not there's an opportunity for this program to be renewed 12 months from now or if this is more of a one-and-done type deal.

Well, the program that we're supporting is, you know, it's got a fixed amount of funds. What I will say is that, you know, as of end of Q3, it was less than a third deployed. So it's going to be deployed over time. But it is a fixed amount of funds. That being said, you know, we obviously could continue to have, you know, additional opportunities from other, you know, state programs like this. So does that help with your question? The particular one we're talking about is a huge fund.

Yeah, and they have told us that they're going to put out $95 million on the cards. Okay.

Yeah, no, that's helpful. And I guess, Louis, can you talk a little bit about the flow of funds? I mean, I think it probably has a little something to do with the high level of interest income in the quarter. But do they give you all of that money up front and you load it, you know, incrementally over time onto cards? Or how does that, how does exactly does that work?

Yes. And, you know, anytime we send a credit out, At our company, our customer base has to send us good funds before we initiate that credit. So the cards are no different. To date, they've sent us $80 million of the $95 billion. And, you know, we're about $35 million has been loaded on the cards. The rest of it is sitting in our bank account.

Okay, perfect. That's great. And then I wanted to ask you about output solutions and the new capacity you're bringing on. When does that become available? And kind of as a follow-up or second piece of that, have you guys lost business or turned away business due to the capacity constraints you're under currently?

Yeah. So we are investing in a new machine that will increase our capacity by 50%. And output solutions has amazing capabilities. pipeline of business from internal sales and from cross-selling across our divisions and we know that there's business out there that we can have. Right now we're running two shifts or 16 hours a day. We could be filling up another shift if we could find people that work at night but that's kind of impossible. So we believe there's a lot of business for us to capture and we're able to to get a bank loan, a very favorable one, to purchase that equipment.

Okay, great. That's all I had, guys. I appreciate the time. Thank you. Thanks.

Thank you. And the next question comes from John Hickman with Lattenburg. Hi.

I have a couple questions. The new machine, is it smaller than your other one? Is that why it's only 50% and not double?

No, it's this big, John, but it's not a new printer. It's a different way to fold and insert and cut paper that will remove some other folding than the existing machines. It also takes less labor to operate, so we'll see some savings there. But it just increases the speed of the overall process from the beginning of receiving a data file to the point where it actually gets put in the postal service.

So it's not a printer. It's a supplemental printer. Improvement. Okay. Thanks. Then can you elaborate on the one-time expenses? How much were one-time expenses in the quarter? About $250,000. Okay. Thanks. That's it for me.

Thanks, John. Thank you.

And the next question comes from Michael Diana with Maximum Group.

Okay. Thank you. Greg, I think you referred to some of the ISVs not being large enough to be, I think you used the word registered, pre-tax. If I got the word wrong, you can tell me the right word. What is that all about? I'm not familiar with that.

A registered payback is with the card brands themselves, so it's a level of diligence and capabilities that you have to display before you become a registered payback. And what we offer is payback as a service, so our ISVs don't have to go through that diligence review or that process to become registered with the card brands themselves.

I see. Okay. So that's a competitive advantage, basically.

Absolutely. Speed to market could be as much as two to two and a half years faster by using UCO rather than trying to embark upon that yourself as the ISV.

Right. Okay. And you also mentioned a fitness ISV. Can you give us any more color on where that is and being rolled out or or their end customers actually using it?

Oh, absolutely. They have in excess of 300 merchants or facilities online now. The owner of that ISV is a practice management software for that industry, and they are going to require everyone to be using the payment component by the end of this year. The good news is when they went live, most of their or a large part of their merchants went live with the processing capabilities of UCO. So, we'll see some additional uptick this month and then into December. Beginning in January, then, all existing fitness studios and all net new will be using the payments solution powered by UCO.

Okay, great. Then, I think you mentioned tribal lending. What, how, how do you interface with, I mean, who exactly are you providing services to there? Middleman or something, right?

Yeah, there's really two components to that. Traditionally, the tribes themselves are sovereign nations or they're sovereign entities that use loan servicers as an intermediary for processing or issuing those loans. But most recently, several tribes have taken that servicing capability upon themselves. So now we can deal directly with the tribe and not with a third party entity that is providing services to the tribe. If that's, hopefully that's clear. Yeah, okay, great.

All right, that's it for me. Thank you very much.

Thank you. Thank you. And once again, as a reminder, please press star then one if you would like to ask a question. And the next question comes from Gary Prestapino with Barrington Research.

Gary Prestapino Hey, good afternoon, everyone. A couple of questions. First of all, Greg, you said the payback growth was up 27 percent. Is that processing volume or revenues? Greg Schleusner Revenue. Greg Schleusner Okay. So, I guess, and I've always asked this question, but, you know, your card revenues are only up 4.8 percent in the quarter, yet payback, you know, was generated, you know, there's a really big delta there. What percentage of the card revenues are generated by PayFact? Because it's got to be that that legacy portfolio keeps it trading. And that's what keeps this from, you know, really showing pretty strong revenue growth in your segment.

No, that's exactly correct. I mean, we added an additional $45 million in processing volume through the first nine months of net new processing volume on the payback platform. And the legacy singular portfolio is a trading faster than it has historically. So, you know, making up for that, it's kind of, you know, we've got to sell or we've got to process twice as much just to show that growth curve.

How much of the portfolio singular is left then?

There's a meaningful amount. We have two legacy portfolios, one from PDS and Singular that's about, if you add those two up, it's about 60% of our card business. But the increase that we saw, the $1.1 million increase over the first nine months is 100% payback.

Okay. So this is still going to be something that is going to continue to impact the growth in card for quite some time.

At the macro level, that's correct. I mean, card in general, we're not selling into those portfolios any longer. You know, we're doing our best to manage the attrition. So, you know, obviously the sales efforts are on new ISVs exclusively.

Have you, I mean, have you given any effort to just thinking about selling those portfolios and then you just, you know, have a pure payback comparison there?

No, we don't want to sell the portfolios. I mean, the majority of those portfolio customers are integrated with us, which makes it a hard portfolio to sell. And that portfolio is still generating quite a bit of revenue for us.

Okay.

And then, Tom, I was writing down what you were saying. Did I hear you right that we're going to? see a step down in gross margin in Q4 or a decline in gross profit in Q4. I couldn't quite get that because you were talking about that prepaid spoilage coming down.

It's definitely going to depend on what the mix is on product lines, but we will know that we're going to be paying New York the majority of the spoilage. in the fourth quarter and first quarter and second quarter of next year. And, you know, so we're anticipating it. The quarter should look very similar to this quarter.

Okay. So similar quarter and a step down in SG&A, right?

Yes. Yeah, because we won't have as many one-time things as we have this quarter. Okay.

And then with the state program that you signed up, is that a guaranteed income program, or is that an employment program, or what exactly is that, Houston?

Can you elaborate? It's the state of California disaster relief. Yeah. It's funded partly from federal funds from the USDA with the state of California administering it. You know, they told us that there's 95 million that will go out with cards, and we've only loaded about 35 million today. So that program will continue until the money's all exhausted. And, you know, knowing the state of California, they'll probably add more money to it too.

So that would deal with things like fires, earthquakes that they have out there, that money would be – released at that point, or is it?

No, well, it's released from the floods that occurred. So it was already, it was a disaster that's already occurred.

And people have to apply for the relief. And they apply on the sign. There's so many disasters out there. Okay, so this dealt with the floods that were last year, right?

Yeah. And we won this business because of our success with L.A. County. Great. Thank you.

Thank you. And the next question comes from Steve Wagner with Integrity Wealth Advisors.

Hey, guys. Great work in the quarter and the year so far. Just a quick follow-up on the last gentleman's question about the next quarter. Louis, I think you said that it's going to be similar, very similar to this one. with the exception that those one-time charges won't be in there. So is that – am I understanding that correct?

Yes, and interest income will be up dramatically.

Okay. So on an adjusted EBITDA basis, we'll have a profit then because, I mean, this – we only had a $100,000 adjusted EBITDA loss in the quarter. So if the expenses are down and the interest is up, that should be a really good look for us. Am I reading that correctly? Yes.

I'm not going to provide guidance there, but I can see where you're going.

It's just simple math, I guess. So I just wanted to make sure I heard it right. The other thing is, you know, congratulations on the state, whether it's one time or not, it's a good new market. You mentioned it was a new market. Can you talk about any other new markets that you're getting in or you're looking at getting in, any expansion of what you're going to be able to do, especially after the million-dollar investment into the capacity?

Well, with Output's new machinery, we're going to be able to have some technology implemented that will allow us to take on larger print jobs that require each item in the envelope to be monitored. We do some of that today, but we can't do it at high volumes, and we're soon to be able to do it at high volumes. We know that there's cross-selling business out there that we haven't got because we haven't tried to close it because we didn't have the capacity. We are hitting the ball out of the park with our check production. We've hit a new niche with bankruptcy distributions. And, you know, last year we printed like a million checks all year for Spectrum, Verizon, AIG, you know, and DirecTV. And this year, I think we're going to do over 3 million checks. And for us to print 900,000 checks last quarter, I mean, it gives you an idea of that niche that we're starting to develop with bankruptcy distributions does have some legs.

That is remarkable. Yeah, good work. I guess the other question, Paul, would, or before I get to Paul, MoviePass, can you give us an update on that business?

You know, I can't give any specific metrics, but, you know, we're continuing to see, you know, current activity there. We do know that they're kind of in the middle of another financing round, I believe, and so we'll probably see additional marketing efforts and promotional efforts by MoviePass. But, yeah, can't really share much more beyond that.

Okay. Can you share if you're generally pleased with the way things are progressing with them?

We love them. And, you know, their transaction volumes continue to go up.

That's all I'm asking. Yeah, because I know your profit percentage is much better with MoviePass than with some of the alternatives. So I guess the other question I would have, Paul, for you is, you know, as you look, obviously we're in a terrible – small cap, micro cap bear market. You guys are trading for well less than one time sales. You're generating cash. What are you hearing? What are investors telling you as to what they're looking for, what they're waiting for in order to get more aggressive with your stock, with your company?

Well, we talk to funds all the time and you're aware of that. And, you know, we go to conferences, we do non-bill roadshows. We're definitely committed to educating these funds. They all, almost all of them love the story. The other ones that don't, just don't have the capacity to understand technology and they admit it. But, you know, investment decisions are the funds and, You know, they all have different reasons why they haven't pulled the trigger or they haven't increased their position. We have seen some very positive activity with a few funds that we've been working with. And hopefully, us telling the story on a regular basis will increase that activity.

And I would just add, Steve, that a few of the funds They just want to see us maybe execute for a couple more quarters and get into 2024. So like Louis said, we're planting a lot of seeds right now. We're meeting in a lot of falls. So I'm excited about the pipeline of people that we're meeting with that can pull the trigger.

Fantastic. Keep up the good work. We'll be in touch soon. Have a good afternoon.

Thank you, Steve.

Thank you. And we have a follow-up question for Gary Christopina with Barrington Research.

Yeah, I just wanted to ask, you know, you say you're investing in marketing and sales. I mean, does PayFac have its own dedicated sales force yet to go to ISVs? Have you expanded that in a big way? And where are you putting this sales muscle into the company?

Yes, we've always had a dedicated ISV or PayFac sales team, and we still do to this day. in addition to a proxy sales force of referral agents and referral partners. So they are quota-bearing. They are very active in the industry, and they're exclusively targeting ISVs. So our marketing support around that, generally marketing supports the entire enterprise, all three business units. But the short answer to your question is, By all means, we have a dedicated sales force just for Payback.

It's our largest sales force, Terry, because we realize that Payback is our main growth engine. And interesting enough is that seasoned industry salespeople have come to us because we have a unique product, and they know that there's a need for it.

Have you given any thought to extending the sales force into going after markets that maybe the ISVs are not going after, or is that just not applicable, you know, within the industry?

Well, I mean, the return on our investment on the headcount obviously is maximized when we sign ISVs that can bring hundreds, if not thousands of merchants with one sale, but we don't ignore standalone certain enterprise opportunities as well. So, you know, we've got two individuals that kind of span not only PayFact, but the acquiring ACH side, and they can go after the markets that you're talking about. So they're, you know, ACH, you know, single standalone processing merchants as well.

And Gary, the pipeline for PayFact is, It's bigger than it's ever been. And there's three deals in that pipeline that what we would call mega-deals. And, you know, hopefully we're able to close some of those.

Well, yeah, I mean, if I'm reading this right, what you're saying is it's going to be very difficult for others to become a registered PayFact because of, you know, I guess regulations or whatever. So there's going to be a very natural lack of supply on the payback side for the market. So it should lead to much more frequent growth, much more explosive growth for you guys versus what you have had, although you've had good growth overall. So that's why I'm bringing it up.

Yeah. Yeah, you're reading it right, Gary. I mean, the hurdle to become a pay fact is, you know, very largely financial, but it is also technology and risk management. Because when you're a pay fact, you take 100% risk on all your traffic. And so it's hard for, you know, companies to qualify even on just that first metric. And so, you know, and then you've got to have a bank that sponsors them. And, you know, those banks are timid. And, you know, us being around 25 years and generating cash, you know, is very important. Okay. Thank you.

Sure. Thank you. And this concludes the question and answer session as well as the call itself. Thank you so much for attending today's presentation. And now let's connect your lines.