Usio, Inc. (NASDAQ:USIO) Q1 2026 Earnings Call Transcript

Usio, Inc. (NASDAQ:USIO) Q1 2026 Earnings Call Transcript May 13, 2026

Usio, Inc. beats earnings expectations. Reported EPS is $0.0044, expectations were $-0.01.

Operator: Hello, and welcome to the Usio First Quarter Fiscal 2026 Earnings Conference Call. [Operator Instructions] 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.

Paul Manley: Thank you, operator, and thank you for joining our call today. Welcome to Usio’s First Quarter Fiscal 2026 Conference Call. The earnings release, which we issued today after the market closed, is available on our website at usio.com under the Investor Relations tab. On this call with me today are Louis Hoch, our Chairman and CEO; Greg Carter, Executive Vice President of Payment Acceptance and our Chief Revenue Officer; and Michael White, Senior Vice President and Chief Accounting Officer. In addition, Houston Frost, our Chief Product Officer; and Jerry Uffner, Head of Card Issuing, will be made available during the question-and-answer session at the end of our call. 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.

Following our prepared remarks, there will be a question-and-answer session for those who registered as a financial professional. In addition, please note that we will be demonstrating our new platform PostCredit on a webinar that we are planning for the investment community. Stay tuned for an announcement with all the details. Let me just offer a few brief comments on our exciting quarter before turning it over to the team. It was a record quarter for Usio with very strong growth leading to record processing volumes and quarterly revenues. We also saw similar records achieved across many of our business units. On the bottom line, we achieved adjusted — we achieved positive adjusted EBITDA and GAAP net income. We also generated positive operating cash flow.

We are executing on all of our objectives and remain on pace to achieve our guidance for the year as we continue to succeed in converting pipeline to implementations, implementations to volumes and volumes into revenue. Now I’d like to introduce Michael White, Senior Vice President and Chief Accounting Officer, to provide more insight into the quarter’s financial performance.

Michael White: Thank you, Paul, and good afternoon. It’s nice to be with you today. As you heard from Paul, it was a record quarter. Revenue increased 16% year-over-year, resulting in the highest quarterly revenue in the company’s history. ACH and complementary services continued its stellar run with revenue up 25%, while card was up an equally impressive 23%. Output Solutions is also off to a good start this year with revenue growth accelerating to 19% in the quarter from 8% last quarter. And while down this quarter, we expect card issuing revenues to grow this year. Excluding the impact of interest revenue, growth at the business unit level was an even greater 17%. All in all, a strong start to what we expect to be a very solid and potentially extraordinary year.

Results were driven by record first quarter processing and transaction volume with total payment dollars processed up 28% and total payment transactions processed increasing 22%. Once again, the majority of the quarter’s revenue was recurring in nature with no one client accounting for more than 10% of total revenue. Client retention remains high. Compared to the prior year quarter, margins were somewhat lower, driven in part by the decrease in top line interest income, which has 100% gross margins. As always, revenue mix was also a factor. Our expectation is for margin to improve over the balance of the year. On a sequential basis, overhead was down nearly $700,000 to $4.4 million for the quarter ended March 31, 2026, although modestly higher from the prior year quarter.

Reflecting the operating leverage in our model, our goal this year is to keep overhead relatively flat. Depreciation and amortization declined as the intangible assets associated with the acquisition of Output Solutions have now been fully amortized. For the quarter, we reported positive operating income, adjusted EBITDA, net income and earnings per share. All of these key performance indicators were also up from the comparable year-ago quarter. We also reported positive operating cash flow in the quarter, which after adjusting for the large tax refund received in the first quarter of last year would have been up from the year-ago quarter. Net income in the quarter ended March 31, 2026, was approximately $130,000 and did not benefit from any extraordinary items.

In the quarter, we used approximately $235,000 in cash for stock repurchases. Cash was also used for strategic growth investments. We ended the quarter with operating cash of over $7.7 million, up about $300,000 since the end of 2025. There is only one small term loan outstanding. We continue to generate cash and maintain sufficient liquidity to support both our organic and strategic growth objectives. As Paul stated, a record start to a year, we believe, holds great promise. Now I’d like to turn the call over to Greg Carter.

Greg Carter: Thank you, Michael, and good afternoon, everyone. It was another record quarter for card. We reported all-time record quarterly revenue, transactions and dollar volume processed. As a result, card revenue was up 23% year-over-year to a record $9.7 million, not only our best revenue quarter ever, but more importantly, the strongest quarterly revenue growth in recent years. We continue to succeed in completing implementations, new accounts are boarding and ISVs are adding new merchants. With PayFac quickly becoming the predominant source of overall card results as it now represents 78% of card revenues, the business unit’s overall performance increasingly reflects that of PayFac. And as PayFac has been achieving rapid growth, card is now showing similar growth rates, although these programs are typically enterprise-level accounts.

We now expect overall card results to more closely track those of PayFac, which again has been growing at a better than 20% rate for some time. In the past, we’ve noted the growing backlog of implementations. And recently, we’ve had success with several meaningful new implementations, both PayFac and Enterprise. In particular, we had our first full quarter of processing volume from 2 newly recently implemented enterprise accounts, a multi-location building supply organization and an online specialty sporting goods retailer. This is all recurring volume that is making a meaningful contribution to our revenues. We’re also seeing nice growth in our filtered spend program. What’s encouraging about this program is that this volume comes from only a small fraction of the thousands of merchants we’ve already boarded.

New merchants are actively activating practically every day as word spreads quickly throughout this community, virtually providing us with viral marketing. At the same time, we are continuing to board new merchants, further penetrating this market of nearly 10,000 locations as the program expands geographically from the Northeast into other regions across the country. We are now seeing more opportunities for more channels than ever before. New leads are now arising from online influencer reference sites like G2 from our own SEO and online marketing, from strategic trade show participation and from the increased success of our Usio One cross-selling marketing strategy. An interesting Usio One case study is a custom payout solution provider. They initially came to us in search of a disbursement solution.

So in their mind, the logical point of entry was card issuing. However, the team quickly identified this as an opportunity for both real-time payments and output solutions. Now that we have them onboarded for those solutions, we will soon be implementing a Usio prepaid card. This is an example of how we’ve shifted the mindset from asking if they have a disbursement or a prepaid requirement to asking what are your needs and talking about our capabilities, something I’m not sure would have happened prior to Usio One. It’s not consequential that we had announced the Usio One initiative a year ago. And now less than 12 months later, after putting the plans, procedures and process in place, it’s producing results. Now I’d like to turn the call over to Louis.

Louis Hoch: Good afternoon, and welcome, everyone. After a record 2025, this year is off to a record start. In the first quarter, we reported record transactions, record processing volume and record revenues. On the bottom line, we generated positive GAAP earnings as well as positive operating cash flow and adjusted EBITDA. We are meeting the objectives we set for ourselves as well as those of the Street. Let me jump into a quick review of our business unit results. On card, just quickly adding to Greg’s comments, it is rewarding to see a better than 20% revenue growth as their results are increasingly being driven by PayFac. We should see this trend lead to better sustainable growth rates in card as a whole. In ACH, we had record transaction volumes and dollars processed and return check transactions processed.

In addition, PINless debit continues to grow at a better than a 50% rate. Consequently, revenues were up once again strongly for ACH and complementary services. April was ACH’s best ever month for transactions processed. And as a result, it appears that ACH could have a record second quarter. Our growth is attributed to both existing and new customers across a diverse set of industries. We’re also benefiting from cross-selling, particularly as part of our disbursement solutions such as consumer choice. An emerging new growth opportunity is real-time payments, which we call RTP. In January of this year, we processed only 2,000 transactions. This past month, we processed over 200,000 transactions. And what’s interesting is we initially thought RTP would pull volume from ACH.

However, instead, it’s pulling from PINless, yet PINless still is experiencing record performance. Compared to PINless, RTP services generate less revenue per transaction, but has a more lucrative margin profile. Prepaid had a busy quarter. They implemented 27 new accounts that are expected to scale and prepaid also processed over $80 million in card loads in the first quarter. Card issuing made progress on a number of new opportunities as they signed an agreement with a large regional bank to be a new sponsor and strategic partner. The bank was looking for a new partner to roll out programs quicker and had superior technology and also to add vendor redundancy to their existing card issuing programs. And an existing client continues to be on track to launch 2 state-sponsored school choice voucher programs that will utilize both Usio card issuing and ACH.

We expect those distributions to exceed $1 billion in disbursements. During the quarter, card issuing introduced our private label gift card program and made numerous enhancements to consumer choice and virtual card platforms. Card issuing should grow this year, potentially starting as soon as this quarter. Output Solutions is off to a record start to the new year. Pieces processed and mailed were up 31%, while electronic documents processed and delivered were up 41% in the first quarter and revenue growth in the quarter accelerated on a sequential basis from the preceding quarter. In the quarter, Output added 6 new cities, 2 county governments and 4 other new customer accounts. All but 2 of them represented new reoccurring revenue. The second quarter is also off to a good start, with April total activity up 50% as compared to April of last year.

This should continue the momentum Output needs to be up for the year. In addition, Output’s new printer is scheduled to be installed in June. This technologically advanced machine is 4x faster than our existing equipment. It’s cheaper to maintain and consumes less supplies. This will significantly increase our capacity and expand our capabilities. To capitalize on these new capabilities, we implemented an organization-wide dedicated output marketing campaign, leveraging the cross-selling skills developed through Usio One. Output has also implemented a highly effective SEO strategy. As a result, we are creating a growing number of new opportunities for Output, both in their existing verticals as well as in new industries. Among our strategic priorities is to grow through wallet share gains.

We have noted Usio One’s progress in cross-selling. In the near future, we plan to launch what we believe will be one of our most effective tools to achieve that objective, a real difference in the market, and that is what we call today, PostCredit. Implementation is rapidly progressing, and we expect it to be market-ready in the upcoming months. Among PostCredit’s most appealing features and functionality, it will enable the elimination of multiple depository accounts while allowing users to move funds back and forth without separate wires from separate banks. Users will actually settle through a Usio-managed account. So it’s faster. And it’s more efficient and it’s easier to use. And once it’s live, all new card, ACH, prepaid and other clients will automatically receive a PostCredit account.

The longer-term goal is to roll out to all of our existing clients. We’re working on a PostCredit demonstration webinar for financial professionals and should be announced soon. In summary, one of the best starts to a new year in recent memory, a record start. We have read the reports concerning inflation, higher prices, potentially higher interest rate. And it only reminds us why we’ve intentionally avoided retail merchants. We have every reason to be optimistic about 2026, and we currently are. At the same time, we also believe it’s prudent to be cautious early in the year. For that reason, we’re reiterating our guidance. We expect 10% to 12% revenue growth in 2026, while also anticipating continued positive adjusted EBITDA. Shareholders can be assumed we are — assured we are committed to our mission to deliver secure, scalable, integrated electronic payment and embedded financial solutions to the market.

This is a strategy that can optimize the value of our franchise. I thank our shareholders for their trust and support. We remain committed to building a stronger, more innovative and more valuable Usio. Operator, you can now open the call to questions.

Operator: [Operator Instructions] Our first question comes from Barry Sine from Litchfield.

Q&A Session

Barry Sine: Wow, what a change, great quarter, great results, great guidance, and you gave us that nice Rigoletto opera music for the hold music. So altogether, very good. I want to start off with just making sure that I jotted down all the different points you’ve given in terms of guidance. So here’s what I have, and correct me if I’m wrong, double-digit revenue growth, up 10% to 12%. You expect to be profitable and EBITDA positive. Cash SG&A for the rest of the year roughly flattish. And then I think I heard in Michael’s comments that prepaid should return to growth for the full year. Did I get all that right?

Michael White: That’s correct.

Barry Sine: Okay. And the other points for all, correct?

Michael White: Yes, sir.

Barry Sine: So the sales funnel, I don’t know if you quantify it or if you use a CRM system. Can you give us a bigger picture or a numeric picture of what the sales funnel is looking like? And from the script, it sounds like you have a pretty good balance among products. Is there any — are there any 1 or 2 products that are leading in that sales funnel before you start the cross-sale process?

Greg Carter: No, Barry, as I’ve said along, last couple of years, our pipeline has been very robust and fairly consistent across all of our business lines. As I said, we are entertaining more initial inquiries on a specific product, which leads to other opportunities at Usio. And that’s been kind of a dynamic of Usio One. But with respect to quantifying the pipeline, it’s — there’s — in total processing volume, there’s billions of dollars. But all along, it’s always been an issue of implementation and processing — actual processing, and we finally broke through some of those challenges. And I remain optimistic for all business lines for the balance of 2026.

Barry Sine: And just specifically on PayFac, we didn’t talk much about it in the script, but historically, one of the challenges has been the tempo of getting folks who are onboarded to start activating. How are we doing on that? And did that have an impact in the very positive credit card results for the quarter?

Greg Carter: It does. And as I said in my remarks, it’s been a nice combination of both enterprise and new additions to existing PayFac or ISV customers. It’s been really a combination of both. But our legacy ISVs, as I said, continue to add merchants virtually every week. We’re adding new ISVs that are also adding new merchants. And then when you add on top of those, these larger enterprise accounts that are less reliant on boarding of merchants and more reliant on just flash cut or full implementation, that’s what we’ve experienced late 2025 and then obviously, in the first quarter of ’26.

Barry Sine: And then a question on cross-selling into the existing customer base. It’s been said it’s often a lot easier to sell new products to your existing satisfied customers than to win existing — to win new customers. How many of your customers are still only taking a single product from you, so implying opportunity for cross-sell? And roughly what percent have the quadfecta of all 4 product lines today where you’re in good shape there?

Greg Carter: Well, obviously, any one customer consuming all Usio products is a smaller number. I think it’s fair to say that we’ve exhausted or interrogated more than 50% of our existing base, meaning they’ve been informed and notified of all of our offerings. We’ve had some one-off specific focused sales campaigns. For example, we had the entire sales force make some outbound calls to tax assessors or collectors to the contiguous states of Texas that yielded a number of proposal opportunities that had we not done that, would have delayed. So we’re employing that strategy across all of our business lines. Our next initiative will be a prepaid or an issuing sales campaign. So we’re using our salespeople, I think, on a more surgical basis rather than a more siloed basis. I hope that answers the question.

Barry Sine: No, that’s great. My last question is around the outlook for margins. So I want to ask it from 2 perspectives. First of all, on the gross margin, the low-hanging fruit I see there would be for Output to continue to move the mix towards digital, which I believe has a higher gross margin. And then the total operating margin. And again, my sense is that you guys have a relatively fixed cost base like a SaaS company. You’ve already talked about flattish cash SG&A for the rest of the year. If you can continue to grow at double-digit rates, the bottom line net income and EBITDA contribution should be better than the top line. So what is the outlook for both gross margin and operating margin improvement?

Louis Hoch: Well, one of the things that we’re really excited about that happened this quarter that we talked about was our volume in real-time payments. And we saw existing customers pull PINless traffic and put it on the real-time payments. And real-time payments has a higher margin than PINless debit. PINless debit has higher revenue, but the margins will increase as those — as we move traffic from PINless to real-time payments. Obviously, we’re very excited about any electronic presentments that we can do through Output. And you’re right, the margins on that are almost 100%. And we’d like to see continued growth there, and it was a lot of growth this quarter. Sometimes we bundle electronic with print and mail. So it goes together in a bundled price.

But it all comes down to the mix of our products. This quarter, we also got affected by interest rates, the interest income that was last year booked as revenue into certain business segments and those volumes just decreased and we earned less interest that we could book as revenue. Obviously, interest income is 100% margin. So those factors caused it to pull down a little bit. We expect our balances to be higher, which would earn us more cumulative interest in the future and especially as we bring some of these larger card programs online that will increase balances. But I feel that we’ve hit the bottom on the gross margins this quarter, and we should be able to get back to 23% to 25% in the short term.

Operator: Our next question comes from Jon Hickman with Ladenburg.

Jon Hickman: My question was just answered about the gross margin. Now I have one more. Could you talk a little bit about this comment that prepaid is going to start growing again?

Louis Hoch: Can you ask your question again? You’re breaking up.

Jon Hickman: I’m sorry. Can you elaborate on the comment about prepaid growth year-over-year? Like what gives you confidence? And where is that coming from?

Louis Hoch: Well, one of them is the school voucher program that we discussed that’s going to distribute mostly on cards. We’ve been told that as much as $1 billion is going to be distributed through us for 2 different states in the United States. And we’re not sure how the — if it all goes on cards, that’s going to be huge. But part of it is going to go on ACH. And so those volumes are substantial. So — that’s part of it. And then we have another 2 card deals that Jerry, do you want to talk about?

Jerry Uffner: Yes. We are implementing a large regional bank strategic partnership that comes with multiple programs, and that’s on track to roll out in Q3. And then we’ve got a number of deals with a strategic fintech partnership that are being implemented now that will roll out no later than June. So besides that, we’ve got several other deals that we’re implementing and — of a material size. And then we’ve implemented 27 new accounts in Q1 that will contribute to the growth.

Jon Hickman: Okay. And then just one more question. The comment about that PayFac is generating 78% of credit revenues — or card revenues. So the drag from the legacy stuff is pretty much behind you now?

Greg Carter: Yes, we think so. I mean, the attrition primarily comes from our legacy singular portfolio. So yes, I think that those — the worst of those days are behind us, yes.

Jon Hickman: And so going forward, the growth in card is going to match — or the growth in PayFac is going to match the growth in cards. Is that what you meant? I mean in credit cards, sorry.

Louis Hoch: The growth in PayFac is going to be higher than in the attrition.

Greg Carter: Right.

Jon Hickman: Okay. Okay. And then — so didn’t you also say that next quarter ACH is — there might be a potential for that to be even better than Q1?

Louis Hoch: What we said was April was our best month for ACH transactions originated, which was very exciting to us coming off our third quarter in a row of setting records for ACH. So we’re hopeful that, that trend will continue for this current quarter.

Jon Hickman: And is ACH still the highest gross margin product?

Louis Hoch: Yes.

Jon Hickman: Okay. That’s it for me. And nice quarter. It’s really good to see the change in revenue growth.

Operator: Our next question comes from Michael Diana with Maxim Group.

Michael Diana: Okay. The card revenue growth was very impressive. Greg, you didn’t talk much, I don’t think, about specific ISV programs that you’re excited about or your biggest ones. Maybe you could mention a few that are most prominent right now?

Greg Carter: Most of them are member-oriented like we have a legal association, state bar association. So everything that’s associated with that, virtually all 50 states. So those board frequently. We’ve got some other recreational type ISVs, camping, for example, that they’re reserving camping spots, pads, et cetera. We’ve got insurance, health care and education type ISVs. So it really is a gamut of various industry verticals that are contributing to this growth.

Michael Diana: Got it. And which ones seem to be boarding most quickly now?

Greg Carter: Typically, the member-associated, the legal and health care, those 2 industry verticals are fast growing.

Operator: This concludes our question-and-answer session as well as today’s conference call. You may now disconnect your lines. Thank you for participating, and have a great day.