Chronicle Journal: Finance

Usio Announces Record Second Quarter 2020 Financial Results

Card Processing, PayFac, Prepaid all Show Growth in the Quarter, with Prepaid Tripling over last several months

Balance Sheet Strengthens

SAN ANTONIO, Aug. 13, 2020 (GLOBE NEWSWIRE) -- Usio, Inc. (Nasdaq: USIO), an integrated electronic payment solutions provider, today announced financial results for the second quarter of 2020, which ended June 30, 2020.

“We are entering the second half of 2020 in a strong position, as our business model has proven its resilience in one of the worst economic quarters in recent memory," commented Louis Hoch, President and Chief Executive Officer of Usio. “Our Card Processing and Prepaid business revenues were up 4% and 58%, respectively in the quarter and as compared to the same period of 2019, reflecting the continued strong demand for our innovative payment solutions.  The performance of these businesses is particularly heartening and further validates that our strategy to serve a diversity of payments markets provides a foundation for continued growth and justifies our continued investment into both our Prepaid and PayFac business lines. Our ACH business continues to fight the headwinds of a soft consumer lending market from the effects of COVID-19 which generated generous forbearance agreements and government support programs that are dampening transaction volume. Conversely, ACH's remote check capture (RCC) and PINless debit continued their steady growth in the quarter."

"Exiting the quarter, both our Card Processing and Prepaid businesses had returned to virtually the same volume levels they had enjoyed prior to the onset of the pandemic, with continued, steady improvement in operational results. We have several PayFac Integrated Software Vendors (ISV’s) currently in the implementation and on-boarding phase and anticipate continued growth from this segment.  Funds loaded on prepaid cards, which is a leading indicator of future revenue, has tripled in just the last few months.  We now have five of the ten largest cities in the United States, including the New York Immigration Coalition and the Mayors Fund of Los Angeles, using our prepaid platform to distribute government assistance funds. Furthermore, with our recent capital raise, we have liquidity to support our operations and strategic initiatives. As the consumer lending market returns to normal, this will add to the improvements that are now driving our business forward and help resume the momentum that had been built prior to the onset of the pandemic."

“As always, the health and safety of our employees as well as those around us remains a priority in everything we do.”

Second Quarter 2020 Financial Summary

Revenues for the quarter ended June 30, 2020 decreased 3% to $7.0 million compared to the same period last year, primarily as a result of the softness in our consumer lending ACH business. Gross profits decreased by 18% to $1.3 million versus the same period last year and gross margins contracted by 3.4% to 18.5% for the quarter ended June 30, 2020, primarily driven by a shift in product mix.

Other selling, general and administrative expenses decreased by 6% to $1.9 million for the quarter ended June 30, 2020 compared to the same period last year.  The lower expenses were a result of restricted travel and other costs due to COVID-19 restrictions coupled with a lack of significant one-time expenses. For the second quarter of 2020, the operating loss was $1.3 million, flat compared to a year ago.

Adjusted EBITDA was a loss of $571,258 compared to a loss of $404,710 in the second quarter of 2019.  The major driver of the incremental loss was the lower gross profits related to COVID-19 revenue impacts.

The Company reported a net loss of $1.3 million ($0.10 per share) for the quarter ended June 30, 2020, flat versus a net loss of $1.3 million ($0.10 per share) for the same period in the prior year.

Six Months Ended June 30, 2020 Financial Summary

Revenues for the six months ended June 30, 2020 were $14.7 million, up 7% from $13.7 million from the same period last year. The revenue growth in 2020 is all organic. Gross profits in the first six months of the year were $3.2 million up 11% from $2.9 million in the comparable period of 2019.  Gross margins over the first half of 2020 increased by 0.7% to 21.8% from 21.1% over the first half of 2019.

Other selling, general and administrative expenses increased by 10% to $4.0 million compared to $3.6 million for the same period last year reflecting our continued investment in our PayFac and Prepaid growth initiatives. 

Adjusted EBITDA for the first half of 2020 was a loss of $765,080 compared to a loss of $730,718 in for the same period of 2019.  

The Company reported a net loss of $2.1 million ($0.16 per share) for the six months ended June 30, 2020, compared to a net loss of $2.3 million ($0.18 per share) for the same period in the prior year.

Usio continues to be in solid financial condition with $1.8 million in cash and cash equivalents at June 30, 2020. Subsequent to June 30, 2020, the Company received cash proceeds of $3,000,000 from a private placement with Topline Capital Partners, LP, an institutional investor that is focused on the long term.

Conference Call and Webcast

Usio, Inc.'s management will host a conference call with a live webcast on Friday, August 14, 2020 at 11:00 am 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 website at www.usio.com/invest.

A replay of the call will be available approximately one hour after the end of the call through August 28, 2020. 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 10146617.

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.comwww.singularpayments.comwww.payfacinabox.comwww.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," "continue," "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 risks related to the COVID-19 pandemic and its effect on the economy, 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, 2019. 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

  June 30, 2020  December 31, 2019 
  (Unaudited)     
ASSETS        
Cash and cash equivalents $1,793,252  $2,137,580 
Accounts receivable, net  1,124,207   1,274,001 
Settlement processing assets  27,002,450   38,906,780 
Prepaid card load assets  19,281,293   528,434 
Prepaid expenses and other  187,614   183,575 
Current assets before merchant reserves  49,388,816   43,030,370 
Merchant reserves  8,430,339   10,016,904 
Total current assets  57,819,155   53,047,274 
         
Property and equipment, net  1,624,269   1,557,521 
         
Other assets:        
Intangibles, net  2,176,426   2,676,427 
Deferred tax asset  1,394,000   1,394,000 
Operating lease right-of-use assets  2,366,775   2,480,902 
Other assets  428,623   404,055 
Total other assets  6,365,824   6,955,384 
         
Total Assets $65,809,248  $61,560,179 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities:        
Accounts payable $262,363  $419,849 
Accrued expenses  1,378,289   1,360,551 
Operating lease liabilities, current portion  233,738   356,184 
Settlement processing obligations  27,002,450   38,906,780 
Prepaid card load obligations  19,281,293   528,434 
Deferred revenues  97,059   123,529 
PPP Loan payable, current portion  383,738    
Current liabilities before merchant reserve obligations  48,638,930   41,695,327 
Merchant reserve obligations  8,430,339   10,016,904 
Total current liabilities  57,069,269   51,712,231 
         
Non-current liabilities:        
PPP Loan payable, non-current portion  429,762    
Operating lease liabilities, current portion  2,291,334   2,279,613 
Total liabilities  59,790,365   53,991,844 
         
Stockholders' equity:        
Preferred stock, $0.01 par value, 10,000,000 shares authorized; -0- shares outstanding at        
June 30, 2020 (unaudited) and December 31, 2019, respectively      
Common stock, $0.001 par value, 200,000,000 shares authorized; 19,776,121 and        
18,224,577 issued, and 18,595,358 and 17,104,998 outstanding at June 30, 2020        
(unaudited) and December 31, 2019, respectively  188,207   186,656 
Additional paid-in capital  78,773,990   77,055,273 
Treasury stock, at cost; 1,180,763 and 1,119,579 shares at June 30, 2020 (unaudited) and        
December 31, 2019, respectively  (1,967,900)  (1,885,452)
Deferred compensation  (6,700,248)  (5,636,154)
Accumulated deficit  (64,275,166)  (62,151,988)
Total stockholders' equity  6,018,883   7,568,335 
         
Total Liabilities and Stockholders' Equity $65,809,248  $61,560,179 

 

USIO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)

  Three Months Ended June 30,  Six Months Ended June 30, 
  2020  2019  2020  2019 
                 
Revenues $6,960,553  $7,157,379  $14,732,232  $13,745,411 
Cost of services  5,674,887   5,591,534   11,518,282   10,843,835 
Gross profit  1,285,666   1,565,845   3,213,950   2,901,576 
                 
Selling, general and administrative:                
Stock-based compensation  348,393   356,103   636,103   639,511 
Other expenses  1,856,924   1,970,555   3,979,030   3,632,294 
Depreciation and amortization  382,244   496,994   770,039   983,542 
Total operating expenses  2,587,561   2,823,652   5,385,172   5,255,347 
                 
Operating (loss)  (1,301,895)  (1,257,807)  (2,171,222)  (2,353,771)
                 
Other income:                
Interest income  1,487   22,620   12,643   45,694 
Other income (expense)  38   (424)  726   (423)
Other income and (expense), net  1,525   22,196   13,369   45,271 
                 
(Loss) before income taxes  (1,300,370)  (1,235,611)  (2,157,853)  (2,308,500)
Income tax expense (benefit)  (12,201)  40,000   (34,675)  40,000 
                 
Net (Loss) $(1,288,169) $(1,275,611) $(2,123,178) $(2,348,500)
                 
Earnings (Loss) Per Share                
Basic earnings (loss) per common share: $(0.10) $(0.10) $(0.16) $(0.18)
Diluted earnings (loss) per common share: $(0.10) $(0.10) $(0.16) $(0.18)
Weighted average common shares outstanding                
Basic  13,173,009   13,041,799   13,150,119   12,831,828 
Diluted  13,173,009   13,041,799   13,150,119   12,831,828 



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

  Six Months Ended 
  June 30, 2020  June 30, 2019 
Operating Activities        
Net (loss) $(2,123,178) $(2,348,500)
Adjustments to reconcile net (loss) to net cash provided (used) by operating activities:        
Depreciation  270,038   483,542 
Amortization  500,001   500,000 
Non-cash stock-based compensation  636,103   639,511 
Amortization of warrant costs  17,973   17,970 
Changes in operating assets and liabilities:        
Accounts receivable  149,794   (354,550)
Prepaid expenses and other  (4,039)  (99,853)
Operating lease right-of-use assets  114,127   (2,614,006)
Other assets  (24,568)  (6,023)
Accounts payable and accrued expenses  (139,748)  31,156 
Operating lease liabilities  (110,725)  2,766,034 
Prepaid card load assets  18,752,859   105,616 
Merchant reserves  (1,586,565)  (1,570,912)
Deferred revenue  (26,470)  130,000 
Deferred rent     (79,748)
Net cash provided (used) by operating activities  16,425,602   (2,399,763)
         
Investing Activities        
Purchases of property and equipment  (334,688)  (333,205)
Net cash (used) by investing activities  (334,688)  (333,205)
         
Financing Activities        
Proceeds from PPP Loan Program  813,500    
Proceeds from public offering, net of expenses     1,793,905 
Purchases of treasury stock  (82,448)  (50,515)
Net cash provided by financing activities  731,052   1,743,390 
         
Change in cash, cash equivalents, prepaid card load assets and merchant reserves  16,821,966   (989,578)
Cash, cash equivalents, prepaid card load assets and merchant reserves, beginning of year  12,682,918   15,340,980 
         
Cash, Cash Equivalents, Prepaid Card Load Assets and Merchant Reserves, End of Period $29,504,884  $14,351,402 
         
Supplemental disclosures of cash flow information        
Cash paid during the period for:        
Interest $  $ 
Income taxes      
Non-cash transactions:        
Issuance of deferred stock compensation  1,559,520    



USIO, INC.
STATEMENT OF CHANGES in STOCKHOLDERS' EQUITY
(UNAUDITED) 

  Common Stock  Additional Paid- In  Treasury  Deferred  Accumulated  Total Stockholders' 
  Shares  Amount  Capital  Stock  Compensation  Deficit  Equity 
                             
Balance at December 31, 2019  18,224,577  $186,656  $77,055,273  $(1,885,452) $(5,636,154) $(62,151,988) $7,568,335 
                             
Issuance of common stock under                            
equity incentive plan  51,000   51   59,440            59,491 
Warrant compensation costs        8,985            8,985 
Deferred compensation amortization              228,219      228,219 
Purchase of treasury stock           (26,629)        (26,629)
Net (loss) for the period                 (835,009)  (835,009)
                             
Balance at March 31, 2020  18,275,577  $186,707  $77,123,698  $(1,912,081) $(5,407,935) $(62,986,997) $7,003,392 
                             
Issuance of common stock under                             
equity incentive plan  1,500,544   1,500   1,641,304      (1,559,520)     83,284 
Warrant compensation costs        8,988            8,988 
Deferred compensation amortization              267,207      267,207 
Purchase of treasury stock           (55,819)        (55,819)
Net (loss) for the period                 (1,288,169)  (1,288,169)
                             
Balance at June 30, 2020  19,776,121  $188,207  $78,773,990  $(1,967,900) $(6,700,248) $(64,275,166) $6,018,883 
                             
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 cost        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 stock compensation that did not vest  (6,000)  (6)  (13,254)     13,260       
Purchase of treasury stock           (28,693)        (28,693)
Net (loss) for the period                 (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 



USIO, INC
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED)

  Three Months Ended June 30,  Six Months Ended June 30, 
  2020  2019  2020  2019 
                 
Reconciliation from Operating (Loss) to Adjusted EBITDA:                
Operating (Loss) $(1,301,895) $(1,257,807) $(2,171,222) $(2,353,771)
Depreciation and amortization  382,244   496,994   770,039   983,542 
EBITDA  (919,651)  (760,813)  (1,401,183)  (1,370,229)
Non-cash stock-based compensation expense, net  348,393   356,103   636,103   639,511 
Adjusted EBITDA $(571,258) $(404,710) $(765,080) $(730,718)
                 
                 
Calculation of Adjusted EBITDA margins:                
Revenues $6,960,553  $7,157,379  $14,732,232  $13,745,411 
Adjusted EBITDA  (571,258)  (404,710)  (765,080)  (730,718)
Adjusted EBITDA margins  (8.2)%  (5.7)%  (5.2)%  (5.3)%

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