Usio Announces Third Quarter Results

/EIN News/ -- Quarterly Volume an All-time Record $915 Million

Card, Prepaid Drive Quarterly Revenue Growth of 10%

SAN ANTONIO, Nov. 14, 2019 (GLOBE NEWSWIRE) -- Usio, Inc. (Nasdaq: USIO), an integrated electronic payment solutions provider, today announced financial results for the third quarter of 2019, which ended September 30, 2019.

Louis Hoch, President and Chief Executive Officer of Usio, said, “Usio achieved record transaction processing volume in the third quarter, processing $915 million in electronic payments on our various platforms. Another quarter of record processing volume once again reflects the value that our comprehensive, industry-leading integrated technology offers our merchants, financial institutions, and independent software vendor partners. Revenues grew faster than transaction volumes, up 10% this quarter on the strength of the continued improvement in our card and prepaid businesses. It is encouraging to note volume growth in both PayFac and Prepaid, growth initiatives in which we have been heavily investing. Both business lines are showing nine-month volumes exceeding the volume levels of the prior year. We are optimistic the sequential improvements we have recently experienced in these businesses are the beginning of the strong growth we anticipate in these exciting and rapidly evolving markets. The third quarter represented another milestone in the evolution of Usio, when we changed our name as means to delineate a new beginning to represent the strength of the broad FinTech platform we have built and the wide range of integrated electronic payments solutions we provide. We have built a solid platform in healthy, growing markets where our ability to offer a comprehensive electronic payments solution will resonate strongly.”

Financial Results for the Third Quarter Ended September 30, 2019

Revenues increased 10% in the third quarter to $7.1 million, primarily due to increases in credit card and prepaid portfolios.

Gross profits were $1.5 million, up 6% from $1.5 million in the third quarter a year ago. Gross margins were 21.8% versus margins of 22.5% in the third quarter last year. Profits and the gross margin percentages were primarily due to results of our highly profitable ACH business lines as a mix of total revenues.

The operating loss was $1.2 million, up from the operating loss of $.8 million in the same quarter a year ago, but an improvement sequentially from the $1.3 million loss in the second quarter of this year. The operating loss reflects our continued commitment to investing in our growth initiatives, PayFac and Prepaid.

Adjusted EBITDA was a loss of approximately $420,000, up from the year ago loss of $61,000, and up slightly from the Adjusted EBITDA loss of $400,000 in the second quarter of this year.

Net loss for the quarter was $1.2 million, or ($0.09) per share, compared to a net loss of $800,000, or ($0.07) per share in the third quarter of 2018. The net loss from the third quarter improved sequentially from the loss of $1.3 million, or ($0.10) per share, recorded in the second quarter of this year.

Total dollars processed in the quarter were up 3% to a quarterly record $915 million.

Usio continues to be in solid financial condition. Cash and cash equivalents at September 30, 2019 were $2.6 million and the Company remains debt free.

Financial Results for the First Nine Months of Fiscal 2019

Revenues for the nine months ended September 30, 2019, increased 12% to $20.8 from the same period of 2018. All of the growth in 2019 is organic growth. Gross profits for the first nine months of 2019 were $4.4 million, up 10% from the first three quarters of 2018. The increase in gross profits was primarily attributable to the strong growth of our highly profitable ACH business over the first nine months of the year. The operating loss for the first nine months of 2019 was $3.6 million, compared to $2.9 million for the first nine months of 2018. Adjusted EBITDA for the first nine months of 2019 was a loss of $1.2 million, up from a loss of $0.6 million for the comparable period in 2018. The net loss for the nine months ended September 30, 2019, was $3.6 million or ($0.28) per share compared to a net loss of $2.9 million or ($0.24) per share for the first three quarters of 2018.

Conference Call and Webcast

Usio’s management will host a conference call with a live webcast on Thursday, November 14, 2019 at 5:00 p.m. Eastern time to provide a business update. To listen to the conference call, interested parties within the U.S. should call 1-844-883-3890. International callers should call +1-412-317-9246. All callers should ask for the Usio conference call. The conference call will also be available through a live webcast, which can be accessed via the company’s websites: www.usio.com/invest.

A replay of the call will be available approximately one hour after the end of the call through November 28, 2019. The replay can be accessed via the Company’s website or by dialing 1-877-344-7529 (U.S.) or +1-412-317-0088 (international). The replay conference playback code is 10136461.

About Usio, Inc.

Usio, Inc. (Nasdaq: USIO), a leading integrated payment solutions provider, offers a wide range of payment solutions to merchants, billers, banks, service bureaus, and card issuers. The Company operates credit, debit/prepaid, and ACH payment processing platforms to deliver convenient, world-class payment solutions and services to their clients. The strength of the Company lies in its ability to provide tailored solutions for card issuance, payment acceptance, and bill payments as well as its unique technology in the prepaid sector. Usio is headquartered in San Antonio, Texas, and has offices in Austin, Texas, and Franklin, Tennessee, just outside of Nashville. Websites: www.usio.com, www.singularpayments.com, www.payfacinabox.com, www.akimbocard.com, and www.ficentive.com. Find us on Facebook® and Twitter.

About Non-GAAP Financial Measures
This press release includes non-GAAP financial measures, EBITDA and adjusted EBITDA, as defined in Regulation G of the Securities and Exchange Act of 1934, as amended. The Company reports its financial results in compliance with GAAP, but believes that also discussing non-GAAP measures provides investors with financial measures it uses in the management of its business. The Company defines EBITDA as operating income (loss), before interest, taxes, depreciation and amortization of intangibles. The Company defines adjusted EBITDA as EBITDA, as defined above, plus non-cash stock option costs and certain non-recurring items, such as acquisitions. These measures may not be comparable to similarly titled measures reported by other companies. Management uses EBITDA and adjusted EBITDA as indicators of the Company's operating performance and ability to fund acquisitions, capital expenditures and other investments and, in the absence of refinancing options, to repay debt obligations.

Management believes EBITDA and adjusted EBITDA are helpful to investors in evaluating the Company's operating performance because non-cash costs and other items that management believes are not indicative of its results of operations are excluded. EBITDA and adjusted EBITDA are supplemental non-GAAP measures, which have limitations as an analytical tool. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Non-GAAP financial measures do not reflect a comprehensive system of accounting, may differ from GAAP measures with the same names, and may differ from non-GAAP financial measures with the same or similar names that are used by other companies. For a description of our use of EBITDA and adjusted EBITDA, and a reconciliation of EBITDA and adjusted EBITDA to operating income (loss), see the section of this press release titled "Non-GAAP Reconciliation."

FORWARD-LOOKING STATEMENTS DISCLAIMER
Except for the historical information contained herein, the matters discussed in this release include forward-looking statements which are covered by safe harbors. Those statements include, but may not be limited to, all statements regarding management's intent, belief and expectations, such as statements concerning our future and our operating and growth strategy. These forward-looking statements are identified by the use of words such as "believe," "intend," "look forward," "anticipate," "schedule,” and "expect" among others. Forward-looking statements in this press release are subject to certain risks and uncertainties inherent in the Company's business that could cause actual results to vary, including such risks related to the realization of the anticipated opportunities from the Singular acquisition, the management of the Company's growth, the loss of key resellers, the relationships with the Automated Clearinghouse network, bank sponsors, third-party card processing providers and merchants, the security of our software, hardware and information, the volatility of the stock price, the need to obtain additional financing, risks associated with new tax legislation, and compliance with complex federal, state and local laws and regulations, and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission including its annual report on Form 10-K for the fiscal year ended December 31, 2018. One or more of these factors have affected, and in the future, could affect the Company’s businesses and financial results in the future and could cause actual results to differ materially from plans and projections. The Company believes that the assumptions underlying the forward-looking statements included in this release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the objectives and plans will be achieved. All forward-looking statements made in this release are based on information presently available to management. The Company assumes no obligation to update any forward-looking statements, except as required by law.

Contact:
Joe Hassett, Investor Relations
joeh@gregoryfca.com
610-228-2110

USIO, INC.
CONSOLIDATED BALANCE SHEETS

	September 30, 2019				December 31, 2018
	(Unaudited)
ASSETS
Cash and cash equivalents	$	2,636,378			$	2,159,698
Accounts receivable, net	1,158,851				1,214,355
Settlement processing assets	38,494,805				44,139,861
Prepaid card load assets	725,333				535,479
Prepaid expenses and other	212,952				101,722
Note receivable, net	108,750				108,750
Current assets before merchant reserves	43,337,069				48,259,865
Merchant reserves	10,201,904				12,645,803
Total current assets	53,538,973				60,905,668
Property and equipment, net	1,743,771				1,932,660
Other assets:
Intangibles, net	2,926,427				3,676,427
Deferred tax asset	1,394,000				1,394,000
Operating lease right-of-use assets	2,547,803				—
Other assets	333,422				306,757
Total other assets	7,201,652				5,377,184
Total Assets	$	62,484,396			$	68,215,512
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	240,724			$	308,178
Accrued expenses	1,214,888				852,717
Operating lease liabilities, current portion	248,056				—
Settlement processing obligations	38,494,805				44,139,861
Prepaid card load obligations	725,333				535,479
Deferred revenues	136,765				20,000
Current liabilities before merchant reserve obligations	41,060,571				45,856,235
Merchant reserve obligations	10,201,904				12,645,803
Total current liabilities	51,262,475				58,502,038
Non-current liabilities:
Operating lease liabilities, current portion	2,452,686				—
Deferred rent	—				79,748
Total liabilities	53,715,161				58,581,786
Stockholders' equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized; -0- shares outstanding at September 30, 2019 (unaudited) and December 31, 2018, respectively	—				—
Common stock, $0.001 par value, 200,000,000 shares authorized; 18,011,077 and 17,129,680 issued, and 16,901,039 and 16,043,630 outstanding at September 30, 2019 (unaudited) and December 31, 2018, respectively	186,442				185,561
Additional paid-in capital	76,658,269				74,568,627
Treasury stock, at cost; 1,110,038 and 1,086,050 shares at September 30, 2019 (unaudited) and December 31, 2018, respectively	(1,866,130		)		(1,813,546		)
Deferred compensation	(5,585,571		)		(6,270,675		)
Accumulated deficit	(60,623,775		)		(57,036,241		)
Total stockholders' equity	8,769,235				9,633,726
Total Liabilities and Stockholders' Equity	$	62,484,396			$	68,215,512

USIO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)

	Three Months Ended September 30,								Nine Months Ended September 30,
	2019				2018				2019				2018
Revenues	7,087,732				6,473,743				20,833,143				18,601,283
Cost of services	5,539,314				5,014,603				16,383,149				14,551,621
Gross profit	1,548,418				1,459,140				4,449,994				4,049,662
Selling, general and administrative:
Stock-based compensation	315,259				289,038				954,770				961,893
Other expenses	1,969,877				1,519,793				5,602,171				4,613,720
Depreciation and amortization	491,749				473,225				1,475,291				1,389,164
Total operating expenses	2,776,885				2,282,056				8,032,232				6,964,777
Operating (loss)	(1,228,467		)		(822,916		)		(3,582,238		)		(2,915,115		)
Other income:
Interest income	20,781				23,327				66,475				50,244
Other income (expense)	608				1,423				185				(539		)
Other income and (expense), net	21,389				24,750				66,660				49,705
(Loss) before income taxes	(1,207,078		)		(798,166		)		(3,515,578		)		(2,865,410		)
Income taxes	31,956				15,000				71,956				34,000
Net (Loss)	$	(1,239,034	)		$	(813,166	)		$	(3,587,534	)		$	(2,899,410	)
Earnings (Loss) Per Share
Basic earnings (loss) per common share:	$	(0.09	)		$	(0.07	)		$	(0.28	)		$	(0.24	)
Diluted earnings (loss) per common share:	$	(0.09	)		$	(0.07	)		$	(0.28	)		$	(0.24	)
Weighted average common shares outstanding
Basic	13,054,962				12,145,323				12,906,206				12,098,828
Diluted	13,054,962				12,145,323				12,906,206				12,098,828

USIO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	Nine Months Ended
	September 30, 2019				September 30, 2018
Operating Activities
Net (loss)	$	(3,587,534	)		$	(2,899,410	)
Adjustments to reconcile net (loss) to net cash (used) by operating activities:
Depreciation	725,291				639,164
Amortization	750,000				750,000
Provision for loss on note receivable	—				72,500
Non-cash stock-based compensation	954,770				961,893
Amortization of warrant costs	26,955				—
Issuance of stock to consultant for services	—				7,911
Changes in operating assets and liabilities:
Accounts receivable	55,504				(177,808		)
Prepaid expenses and other	(111,230		)		(2,385		)
Operating lease right-of-use assets	(2,547,803		)		—
Other assets	(26,665		)		(146,194		)
Accounts payable and accrued expenses	294,717				(45,444		)
Operating lease liabilities	2,700,742				—
Prepaid card load assets	189,854				207,659
Merchant reserves	(2,443,899		)		(1,374,906		)
Deferred revenue	116,765				35,000
Deferred rent	(79,748		)		58,457
Net cash (used) by operating activities	(2,982,281		)		(1,913,563		)
Investing Activities
Purchases of property and equipment	(536,405		)		(584,198		)
Notes receivable	—				5,000
Net cash (used) by investing activities	(536,405		)		(579,198		)
Financing Activities
Proceeds from public offering, net of expenses	1,793,905				—
Purchases of treasury stock	(52,584		)		(966,383		)
Net cash provided (used) by financing activities	1,741,321				(966,383		)
Change in cash, cash equivalents, prepaid card loads and merchant reserves	(1,777,365		)		(3,459,144		)
Cash, cash equivalents, prepaid card loads and merchant reserves, beginning of year	15,340,980				19,778,022
Cash, Cash Equivalents, Prepaid Card Loads and Merchant Reserves, End of Period	$	13,563,615			$	16,318,878
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest	$	—			$	—
Income taxes	82,206				49,000

USIO, INC. STATEMENT OF CHANGES in STOCKHOLDERS’ EQUITY (UNAUDITED)
								Additional Paid - In Capital				Treasury Stock				Deferred Compensation				Accumulated Deficit				Total Stockholders’ Equity
	Common Stock
	Shares			Amount
Balance at December 31, 2018	17,129,680			$	185,561			$	74,568,627			$	(1,813,546	)		$	(6,270,675	)		$	(57,036,241	)		$	9,633,726
Issuance of common stock, public offering	769,230			769				1,793,136				—				—				—				1,793,905
Issuance of common stock under equity incentive plan	62,222			62				58,551				—				—				—				58,613
Warrant compensation costs	—			—				8,985				—				—				—				8,985
Deferred compensation amortization	—			—				—				—				224,795				—				224,795
Purchase of treasury stock	—			—				—				(21,822		)		—				—				(21,822		)
Net (loss) for the period	—			—				—				—				—				(1,072,889		)		(1,072,889		)
Balance at March 31, 2019	17,961,132			$	186,392			$	76,429,299			$	(1,835,368	)		$	(6,045,880	)		$	(58,109,130	)		$	10,625,313
Issuance of common stock under equity incentive plan	53,445			53				133,462				—				—				—				133,515
Warrant compensation cost	—			—				8,985				—				—				—				8,985
Deferred compensation amortization	—			—				—				—				222,585				—				222,585
Reversal of deferred compensation that did not vest	(6,000	)		(6		)		(13,254		)		—				13,260				—				—
Purchase of treasury stock	—			—				—				(28,693		)		—				—				(28,693		)
Net (loss) for the quarter	—			—				—				—				—				(1,275,611		)		(1,275,611		)
Balance at June 30, 2019	18,008,577			$	186,439			$	76,558,492			$	(1,864,061	)		$	(5,810,035	)		$	(59,384,741	)		$	9,686,094
Issuance of common stock under equity incentive plan	2,500			3				92,483				—				—				—				$	92,486
Warrant compensation cost	—			—				8,985				—				—				—				$	8,985
Deferred compensation amortization	—			—				—				—				224,464				—				$	224,464
Reversal of deferred compensation that did not vest	—			—				(1,691		)		—				—				—				$	(1,691	)
Purchase of treasury stock	—			—				—				(2,069		)		—				—				$	(2,069	)
Net (loss) for the quarter	—			—				—				—				—				(1,239,034		)		(1,239,034		)
Balance at September 30, 2019	18,011,077			$	186,442			$	76,658,269			$	(1,866,130	)		$	(5,585,571	)		$	(60,623,775	)		$	8,769,235
Balance at December 31, 2017	16,874,235			$	186,299			$	74,041,083			$	(831,059	)		$	(7,012,544	)		$	(53,260,426	)		$	13,123,353
Issuance of common stock under equity incentive plan	68,889			69				147,231				—				—				—				147,300
Deferred compensation amortization	—			—				—				—				227,078				—				227,078
Purchase of treasury stock	—			—				—				(956,134		)		—				—				(956,134		)
Net (loss) for the period	—			—				—				—				—				(1,050,806		)		(1,050,806		)
Balance at March 31, 2018	16,943,124			$	186,368			$	74,188,314			$	(1,787,193	)		$	(6,785,466	)		$	(54,311,232	)		$	11,490,791
Issuance of common stock under equity incentive plan	28,223			28				74,319				—				—				—				74,347
Issuance of common stock, employees, restricted	100,000			100				179,900				—				(180,000		)		—				—
Issuance of common stock, restricted	5,000			5				7,906				—				—				—				7,911
Deferred compensation amortization	—			—				—				—				229,655				—				229,655
Reversal of deferred compensation that did not vest	(6,667	)		(1,000		)		(16,000		)		—				11,475				—				(5,525		)
Purchase of treasury stock	—			—				—				(2,942		)		—				—				(2,942		)
Net (loss) for the quarter	—			—				—				—				—				(1,035,438		)		(1,035,438		)
Balance at June 30, 2018	17,069,680			$	185,501			$	74,434,439			$	(1,790,135	)		$	(6,724,336	)		$	(55,346,670	)		$	10,758,799
Issuance of common stock under equity incentive plan	10,500			11				70,021				—				—				—				$	70,032
Deferred compensation amortization	—			—				—				—				219,006				—				$	219,006
Reversal of deferred compensation that did not vest	(60,000	)		(65		)		(132,530		)		—				132,595				—				$	—
Purchase of treasury stock	—			—				—				(7,307		)		—				—				$	(7,307	)
Net (loss) for the quarter	—			—				—				—				—				(813,166		)		(813,166		)
Balance at September 30, 2018	17,020,180			$	185,447			$	74,371,930			$	(1,797,442	)		$	(6,372,735	)		$	(56,159,836	)		$	10,227,364

USIO, INC
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
	Three Months Ended								Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2019				2018				2019				2018
Reconciliation from Operating (Loss) to Adjusted EBITDA:
Operating (Loss)	$	(1,228,467	)		$	(822,916	)		$	(3,582,238	)		$	(2,915,115	)
Depreciation and amortization	491,749				473,225				1,475,291				1,389,164
EBITDA	(736,718		)		(349,691		)		(2,106,947		)		(1,525,951		)
Non-cash stock-based compensation expense, net	315,259				289,038				954,770				961,893
Adjusted EBITDA	$	(421,459	)		$	(60,653	)		$	(1,152,177	)		$	(564,058	)
Calculation of Adjusted EBITDA margins:
Revenues	$	7,087,732			$	6,473,743			$	20,833,143			$	18,601,283
Adjusted EBITDA	(421,459		)		(60,653		)		(1,152,177		)		(564,058		)
Adjusted EBITDA margins	-5.9		%		-0.9		%		-5.5		%		-3.0		%