Usio, Inc.

Hello and welcome to the UCO third quarter fiscal 2025 earnings conference call. All participants will be in a listen-only mode. After today's presentation, there'll be an opportunity to ask questions. 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. Good afternoon and thank you for joining UCO's third quarter fiscal 2025 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 with me today are Louis Hoke, our chairman and CEO, and Greg Carter, executive vice president, payment acceptance, and our chief revenue officer. Michael White, our Chief Accounting Officer, Jerry Uffner, Head of Card Issuing, and Houston Frost, our Chief Product Officer, will be available during the question and answer session later. Please 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. I'd like to start off today's call with some highlights from this afternoon's release. Q3 was a solid quarter and in line with our commitment to deliver a stronger second half of the year. These results were achieved on the strength on the strength of strong across-the-board processing volumes with seven quarterly processing volume records set in the period, including a record quarterly overall transaction volume of 16.2 million, up 8% year over year. This resulted in a $1.2 million sequential increase in revenues impressively led by ACH, which was up strongly from the second quarter and for the third consecutive quarter, up 30% from the year-ago quarter. While total revenues were relatively unchanged from the year-ago quarter, our strong sequential momentum positions UCO for a return to top-line growth in the fourth quarter and for the full year 2025. As discussed last quarter, our total revenues this period were again adversely impacted primarily by continued weakness in card issuing along with a decline in interest income. We expect this to mark the final quarter of difficult card issuing comparisons with performance improving going forward. One of the key themes this quarter is most of our new and total revenue are recurring in nature. This is an important milestone and one you'll hear reflected throughout our discussion today. Margins in the quarter improved year over year, driven by strong growth of our high margin ACH business, as well as further efficiency and productivity enhancements. While salary adjustments and other costs led to an increase in SG&A, we do expect overhead to remain stable for the balance of the year. Our third quarter was another quarter of positive profits and cash flow. Adjusted EBITDA in the quarter was $368,000, down just incrementally on a sequential basis from $500,000 in the second quarter and also down from a year ago. Operating cash flow for the quarter was $1.4 million, reflecting the continued strength of our business. Our cash was up over $200,000 over the past three months to over $7.8 million at quarter end. We anticipate continued cash growth through the remainder of fiscal 25, positioning us to invest both in organic expansion and potentially into opportunistic strategic acquisitions. In the quarter, we used approximately $60,000 for share repurchases, bringing our total year-to-date repurchases to $750,000, or just over 500,000 shares. The third quarter represented an important inflection point for UCO with record processing and transaction volumes, solid sequential recurring revenue growth, and sustained profitability and cash flow. In addition, we completed or made significant progress on a number of our larger new implementations while continuing to build a growing pipeline of attractive opportunities. From an organizational standpoint, technology upgrades, New product launches and ongoing productivity gains are positioning UCO for what we believe will be a new period of accelerated growth. At this time, I'd like to turn the call over to Greg Carter.

Thank you, Paul, and good afternoon, everyone. September was a record quarter for CARD as we reported an all-time quarterly record of transactions processed and the second highest volume of CARD dollars processed in any quarter. Led by our continued focus on the payback business, our credit card segment continues to grow, with dollars processed up 12% and transactions processed up 75% from a year ago. While card revenues were correspondingly up both sequentially and on a year-over-year basis, key payback revenues were up 32%, continuing their double-digit year-over-year growth as a result of net new client implementations. There are currently 16 new ISVs in various stages of implementation. And from last quarter's implementations, I'm pleased to report that the largest of these new enterprise merchants has now been implemented and has been processing with us over the past few months. That's really the theme of the third quarter, this virtuous cycle of a strong pipeline leading to implementations that then lead to volume and ultimately reoccurring revenue. We are starting to see the fruits of that now and into the fourth quarter, setting up for a really solid 2026. We've also been seeing existing customers adding new business. For example, we have a longtime ISV that just added a new innovative prepaid program. The current customer base continues to evolve and grow through new programs and new merchant acquisitions. All along, referenceability has always been a key. Our capability and our unique products have attracted several referral entities that are sending larger opportunities our way as they've been impressed with our performance in the market. So in addition to our sales team, we are cultivating referral agents that can send us meaningful opportunities. This is paying dividends for us as, for instance, the large account recently implemented was from a referral entity. I should also mention that this account is not an ISV using our payback. so our traditional processing capabilities remain another growth channel. Another unique application where we've been able to win business is because of our willingness to provide customization that many of our competitors won't. One of these programs is our new filtered spend client. There are over 1,000 merchants that have already gone through underwriting and are on the program, so when it goes live, it could be meaningful. This is a new concept in the market we are helping to pioneer with the expectation that we could become a market leader. You may have seen Houston Frost on LinkedIn recently demonstrating one of our new wearables. This is just one of the many wearables we are exploring and developing, whether that be wristbands, tap-to-pay, or similar products. It's another area on which to keep an eye. Finally, let me provide a quick update on our UCO1 initiative. Recall that UCO1 is being implemented as a means to capture a greater share of our customers' electronic payment and printing volume. As of today, UCO is essentially integrated into one unified entity. We've rolled out a platform for boarding of all of our customers on a centralized site. In addition, most of our sales team has been trained up and has a strong functional knowledge and understanding of all of our products. An example of how this is working is a salesperson that was originally selling legacy card processing recently sold a large print and mail program. I expect the productivity of UCO1 to accelerate throughout 2026. Now, I'd like to turn the call over to Louis.