Usio, Inc.

Hello, and welcome to the UCO second quarter fiscal 2024 earnings conference call. 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 touch-tone phone. To withdraw your question, please press star then two. Please note, today's event is being recorded. Now, I would like to turn the conference over to your host, Paul Manley. Please go ahead, sir.

Thank you, operator, and thank you, everyone, for joining our call today. Welcome to UCO's second quarter fiscal 2024 conference call. The earnings release, which we issued today after the market closed, is available on our website at uco.com.us. under the Investor Relations tab. On this call today are Louis Hoke, our Chairman and CEO, Greg Carter, Executive Vice President of Payment and Acceptance, Michael White, Senior Vice President and Chief Accounting Officer, Jerry Uffner, Head of Carditioning, and newly named Chief Product Officer, Houston Frost, will be available during the Q&A. 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. Let me start off with some highlights from this afternoon's release. Momentum remains strong into the second quarter with total payment dollar processing volume growth accelerating to 24% as all of our electronic transaction processing businesses generating double digit growth across all their key processing metrics. Once again, second quarter results were in line with our expectations. Reflecting on our profit prioritization mandate, we reported positive gap net income and earnings per share for the quarter. Additionally, cash was up this quarter even after expending $105,000 to repurchase 65,519 shares of our stock at an average price of $1.60. In keeping with a practice being adopted in the payments industry, as noted in a press release, interest earned on merchant funds held for payment processing and reserves are now classified as revenue. This change recognizes that interest income is a key component of our company's core operations. The interest earned on our corporate cash account continues to be classified as interest income below the line. So we are gap net income positive, generating cash to continue to invest in our growth initiatives, buying back our own stock, and building a backlog. All great signs of a healthy, thriving enterprise. Just a few more comments on our financial results. The slight year-over-year revenue decrease was due to the planned wind-down of the New York City COVID program. Without this contract, revenues would have shown an increase. Margins continue to reflect the changes in our revenue mix, and second quarter margins primarily reflect the impact of the New York City COVID initiative program, which were better than a year ago. However, the renewed growth of our most profitable segment, ACH, as well as significant improvement in the profitability of prepaid are certainly encouraging developments. We expect to help buoy margins. Additionally, on a sequential basis, a more accurate comparison since the New York City program was winding down in both quarters, margins have improved. SG&A was up slightly due to an increased employee compensation and some incremental marketing investment. I'd like to reiterate that our goal for 2024 is to keep our overhead spending growth rate below that of revenue, and we fully expect to meet this objective. This is an integral element of our strategy to increase operating leverage to improve UCO's overall profitability. In summary, another fundamentally solid quarter that did not benefit from any individually large programs. We continue to be optimistic as our base of recurring business is growing and represents a solid foundation on which to layer some recently signed new business that we expect to ramp, potentially representing a step change for UCO. Due to the success of our profitability-focused initiatives, we are raising our full-year adjusted EBITDA guidance to a range of $4.25 to $5.0 million and expect continued improvements in our liquidity. We believe we will increase full-year 2024 bottom-line profitability compared to 2023, and that has been our top priority while setting the table for even greater future performance. Now, with that, I'd like to turn the call over to Greg Carter.

Thank you, Paul, and good afternoon to everyone. CARD once again set an all-time quarterly record for transactions process and achieved our second highest all-time record for processing volumes, which were up 10% with transaction volumes up 19%. All of our growth is in payback as our legacy non-ISV portfolio continues to trip in line with our overall CARD strategy. We continue to grow organically, and there are a number of ISVs currently in implementation. For instance, we just implemented a company that provides operating software for independent headhunters. This gets us into a new industry vertical, and I feel very optimistic that this will be a meaningful account, not just for CARD, but in this case for ACH as well, another illustration of our cross-selling success. Another ISV that has been implemented and is up and running is a company that is similar to our current client, Fitly. They provide software management systems for gyms and fitness facilities. In all, there are 20 ISVs that are in various stages of implementation that will contribute to future revenues. I should also note that Payback continues to see virtually no attrition. That supports our organic growth strategy in that as this stable portfolio of merchants grow, our processing volume naturally grows with them. I'm also pleased with the progress and improvements we are achieving in our marketing activities. We remain strong on social media, We've revamped our website, and we've added some new marketing resources. As a result, the pipeline remains strong. Last quarter, we announced that we signed an agreement with a leading web-based ERP ISV whose customers process over $1 billion in annual credit card volume. That program is live and moving through the implementation and integration process. Right now, we are making progress with our non-franchisee merchants, Two of these merchants have completed the enrollment process and are awaiting the integration phase with the ISV. And we are in the process of boarding a janitorial sanitation supply company, which we expect to be our first customer officially processing with us through this ISV. We continue to operate and execute towards the plan. This program should ramp over time, but it's rolling out a little slower than they indicated it would. For some perspective, one of our larger ISV customers, PracticeSweep, went through a similar digestion period, and is now in our top five highest-performing ISVs. It's an integration, and it takes time. So we'll provide additional information as it becomes available. KFAC has been growing at a double-digit rate without a single large account, and we believe our activity levels support our goal to sustain our growth with the expectation that when this ISV ramps, it will contribute significant incremental processing volume. Now I'd like to turn the call over to Louis Hoke, Chief Executive Officer, to talk more about our other businesses.