Usio, Inc.

Hello and welcome to the UCO Third 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, this 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 third quarter fiscal 2024 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 with me are Louis Hoke, our Chairman and CEO, and Greg Carter, Executive Vice President of Payment Acceptance. Michael White, Senior Vice President and Chief Accounting Officer, Jerry Uffner, Head of Card Issuing, and our Chief Product Officer, Houston Frost, will also be available during the question and answer. 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 and as more fully discussed in our press release and in our filings with the SEC. Let me start off with some great highlights from this afternoon's release. Momentum remains strong, with results in the third quarter generally in line with expectations and with GAAP earnings significantly better than expected. GAAP earnings this quarter include an income tax benefit as we increase our deferred tax asset, reflecting our projections for higher taxable income. For the quarter, total payment dollar processing volume growth accelerated to 46% from 24% last quarter, while transactions processed were up an equally impressive 31%. And once again, all of our electronic transaction processing businesses grew with prepaid setting new all-time records for card loads, processing, and transaction volumes. In addition, we have the strongest pipeline of signed deals and the largest backlog of pending implementations in the company's history. While revenue growth was modest, it is important to note that we are replacing nearly $12 million in annualized revenue from the New York City COVID Incentive Program, which ended earlier this year with new stable recurring revenue. Including the income tax benefit, we reported positive GAAP net income and earnings per share for the second consecutive quarter, and we are on pace for a profitable full year on a GAAP basis. Furthermore, we reported nearly $800,000 of adjusted EBITDA for the quarter, more than double that of a year ago, highlighting the ongoing improvement in our operational profitability. Notably, cash was up again this quarter, even after buying back approximately $200,000 of our stock as we continue to utilize our share repurchase authorization to the fullest extent possible. Our cash position was powered by $2.4 million of adjusted operating cash flows over the first nine months of 2024. Adjusted operating cash flow is defined in our press release. Margins have typically remained a function of revenue mix, but with initiatives both at output solution and prepaid driving efficiencies, their improved margins are now contributing as well. Together with the renewed growth of our ACH, which is our most profitable segment, we expect margins to gradually improve as we move into the fourth quarter of this year and into 2025. SGA was down in the quarter, and is now up only $200,000 through the first nine months of the year. We believe our ability to drive costs down while improving revenues higher this quarter is a strong testament to our commitment to improving the overall profitability at UCO. To conclude, we are gap net income positive, generating cash to invest in our growth initiatives, buying back our own stock, and have the largest signed backlog of pending implementations and strongest pipeline in the company's history. We are unquestionably very well positioned in each business unit for the long-term growth, now more than ever before. At this time, I'd like to turn the call over to Greg Carter.

Thank you, Paul, and good afternoon, everyone. CARD had another solid quarter. Transactions process were up a very healthy 22%, dollars processed up 7%, and we recorded another quarter of significant payback revenue growth up 27%. Keep in mind that while we continue to support our legacy portfolios, all of our efforts are focused on payback so that revenues for the card segment are net of the natural anticipated attrition of a service we no longer market. In contrast, we are experiencing virtually no attrition in the payback portfolio. Let me start with a quick update on the large leading web-based ERP ISV recently signed. we continue to make progress with their non-franchisee merchants, and those are getting boarded with several already processing reasonable volumes. The largest opportunity is with their franchisees, where they continue to push out the start of their pilot. So while implementations have been slower than anticipated, we continue to make progress and support their efforts for a wider implementation. More importantly, we've had a very robust onboarding quarter with respect to legacy or existing ISVs with our merchant conversion from the entire ISV base remaining very strong. Right now, there are over 20 new ISVs that are working with us in some stage of implementation. One of the most encouraging is an association management software company that has extensive customers in the legal space. What has me excited about this new customer is the rapid pace at which they've implemented and the unbelievable relationship we've already developed with them. They've already provided their customer list, and we're bringing on their customers much sooner than is typical. This is an excellent case study. They chose UCO for many of the same reasons we see with all of our ISV clients. Our economic solution was attractive. They appreciated our general responsiveness. They met our chief architect who designed the system. They met the director of sales operations and the vice president of client services. In contrast to competitors who automate the process or tier it depending on your size, We inundate our prospects with resources and expertise, and I think they like that. They know we care. In fact, they were so pleased with the process, they've already expanded our relationship to include ACH, which is a big part of their business. So I'm very optimistic that this is going to have an impact to our revenue stream going forward. We are also seeing an increase in the rate at which merchants from our existing portfolio are boarding. From only a handful just a few years back, we're now seeing 20 new merchants boarded every week, You've heard me talk about BoosterHub before. When we brought them on, they were just a startup. Today, through this constant onboarding of more of their merchants, they are now among our top 10 ISVs. This illustrates the potential from our growing portfolio of ISVs. In today's competitive market, our success starts with these legacy ISVs who we've brought on and bring us business now and into the future. I believe that had we started PayFac in 2024, we could never have achieved the success we are now experiencing. We were early adopters and today we're getting rewarded as the ISV signed two, three, and four years ago are still producing results. I'm also excited that the marketing groundwork of the past few years is paying dividends. We've implemented a three-pronged marketing strategy. In addition to a direct sales effort, we've got a referral model and we have our newest channel, a software development referral model. These are firms that ISVs use for technical assistance. We are making significant inroads with these software development companies. We now have four or five of these development firms sending us referrals. In conclusion, CARD continues to pound out solid quarters while building a record backlog of potential new business and growing our pipeline of exciting new opportunities. Now, I'd like to turn the call over to Louis Oak, Chief Executive Officer, to talk about our other businesses.