Usio Q1 FY2026 Earnings Call - Record Revenue Growth Driven by PayFac and Real-Time Payments Momentum

Operator: Hello, and welcome to the Usio fourth quarter fiscal 2026 earnings conference call. All participants will be in a listen-only mode. Please note today’s event is being recorded. I would like to turn the conference over to your host, Paul Manley. Please go ahead, sir.

Paul Manley, Investor Relations, Usio: 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 Litigation Reform 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 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 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, Senior Vice President and Chief Accounting Officer, Usio: 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 a 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. 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 1st 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 1 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 margins 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 31st, 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, Executive Vice President of Payment Acceptance and Chief Revenue Officer, Usio: 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, 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. 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. 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 two newly recently implemented enterprise accounts, a multi-location building supply organization and an online specialty sporting goods retailer. This is all reoccurring 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 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’re 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 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, Chairman and Chief Executive Officer, Usio: 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’re 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 $ 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 in complementary services. April was ACH’s best ever month for transactions processed, 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. 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 Debit, RTP services generate less revenue per transaction but has more lucrative margin profiles. Prepaid had a busy quarter. They implemented 27 new accounts that are expected to scale. 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, had superior technology, and also to add vendor redundancy to their existing card issuing programs. An existing client continues to be on track to launch two state-sponsored school choice voucher programs that will utilize both Usio card issuing and ACH. We expect those distributions to exceed $1 billion in re-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. 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 off, 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 4 times 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. That is what we call today Post Credit. Implementation is rapidly progressing. We expect it to be market ready in the upcoming months. Among Post Credit’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. Once it’s live, all new Card, ACH, prepaid, and other clients will automatically receive a Post Credit 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. It only reminds us why we’ve intentionally avoided retail merchants. We have every reason to be optimistic about 2026. 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%-12% revenue growth in 2026, while also anticipating continued positive adjusted EBITDA. Shareholders can be 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: Thank you, sir. We will now begin the question and answer session. First question come from Barry Sine from Litchfield Hills Research. Please go ahead.

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

Louis Hoch, Chairman and Chief Executive Officer, Usio: That’s correct.

Barry Sine, Analyst, Litchfield Hills Research: Okay. The other points are all correct?

Louis Hoch, Chairman and Chief Executive Officer, Usio: Yes, sir.

Barry Sine, Analyst, Litchfield Hills Research: The sales funnel, I don’t know if you quantify it or if you use a, you know, a CRM system. Can you give us a bigger picture or a numeric picture what the sales funnel’s looking like? From the script, it sounds like you have a pretty good balance among products. Are there any one or two products that are leading in that sales funnel before you start the cross-sale process?

Greg Carter, Executive Vice President of Payment Acceptance and Chief Revenue Officer, Usio: No, Barry. As I’ve said along last couple 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. With respect to quantifying the pipeline, it’s, you know, there’s in total processing volume, there’s billions of dollars, but, you know, all along it’s always been an issue of implementation and processing, actual processing, and we’ve finally broke through some of those challenges. I remain optimistic for all business lines for the balance of 2026.

Barry Sine, Analyst, Litchfield Hills Research: 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 on board to start activating. How are we doing on that, on that, and did that have an impact in the very positive credit card results for the quarter?

Greg Carter, Executive Vice President of Payment Acceptance and Chief Revenue Officer, Usio: 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 a really a combination of both. Our legacy ISVs, as I said, continue to add merchants virtually every week. We’re adding new ISVs that are also adding new merchants. When you add on top of those, these larger enterprise accounts that are, you know, 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 2026.

Barry Sine, Analyst, Litchfield Hills Research: 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 new customers. How many of your customers are still, you know, only taking a single product from you, so implying opportunity for cross-sale? Roughly what percent, you know, have the quadfecta of all 4 product lines today where you’re in good shape there?

Greg Carter, Executive Vice President of Payment Acceptance and Chief Revenue Officer, Usio: Well, obviously all 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 1-off specific focused sales campaigns. For example, we had the entire sales force make some outbound calls to tax assessor collectors to the contiguous states of Texas. That yielded a number of proposal opportunities that had we not done that, would have delayed. We’re employing that strategy across all of our business lines. Our next initiative will be a prepaid or an issuing sales campaign. We’re using our salespeople, I think, at a more surgical basis rather than a more siloed basis. I hope that answers the question.

Barry Sine, Analyst, Litchfield Hills Research: No, that’s great. My last question is around the outlook for margins. I wanna ask it from two perspectives. First of all, on the gross margin, the low-hanging fruit I see there would be for Output Solutions to continue to move the mix towards digital, which I believe has a higher gross margin. The total operating margin, 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. What is the outlook for both gross margin and operating margin improvement?

Louis Hoch, Chairman and Chief Executive Officer, Usio: 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. We saw existing customers pull PINless traffic and put it onto Real-Time Payments. Real-Time Payments has a higher margin than PINless Debit. PINless Debit has higher revenue, the margins will increase 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. You’re right, the margins on that are almost 100%. We’d like to see continued growth there. It was a lot of growth this quarter. Sometimes we bundle electronic with print and mail. You know, it goes together in a bundled price.

You know, it all comes down to the mix of our products. This quarter, we also got affected by interest rates, that interest income that was last year booked as revenue into certain business segments, and those volumes just decreased. We earned less interest that we could book as revenue. Obviously, interest income is a 100% margin, so that those factors caused it to pull down a little bit. We expect our balances to be higher, which would earn us more accumulative interest, in the future, and especially as we bring some of these larger card programs on live, that will increase balances.

As I feel that we’ve hit the bottom on the gross margins this quarter, and, you know, we should be able to get back to 23%-25% in the short term.

Barry Sine, Analyst, Litchfield Hills Research: Okay. That’s a great answer. Thank you, Louis Hoch. Those are my questions. Thank you, gentlemen.

Louis Hoch, Chairman and Chief Executive Officer, Usio: Thank you, Barry.

Operator: Thank you. Our next question come from Jon Hickman with Ladenburg Thalmann. Please go ahead.

Jon Hickman, Analyst, Ladenburg Thalmann: Hey, Louis. My question was just the answers about the gross margins. Thanks.

Louis Hoch, Chairman and Chief Executive Officer, Usio: All right. Thanks, Jon.

Jon Hickman, Analyst, Ladenburg Thalmann: Mallory, I have one more.

Louis Hoch, Chairman and Chief Executive Officer, Usio: Oh, okay. Jon?

Operator: Jon, you may please proceed with your question.

Jon Hickman, Analyst, Ladenburg Thalmann: Mark? Louis?

Louis Hoch, Chairman and Chief Executive Officer, Usio: John?

Operator: John.

Jon Hickman, Analyst, Ladenburg Thalmann: I’m sorry. Okay. Excuse me. Talk a little bit about this comment that paid’s gonna start growing again.

Louis Hoch, Chairman and Chief Executive Officer, Usio: Can you ask your question again? You’re cutting out.

Jon Hickman, Analyst, Ladenburg Thalmann: Can you elaborate on that? I’m sorry.

Louis Hoch, Chairman and Chief Executive Officer, Usio: Elaborate?

Jon Hickman, Analyst, Ladenburg Thalmann: Can you elaborate on the comment about prepaid’s growth year-over-year? Like, what gives you confidence?

Louis Hoch, Chairman and Chief Executive Officer, Usio: Yeah.

Jon Hickman, Analyst, Ladenburg Thalmann: Where is that coming from?

Louis Hoch, Chairman and Chief Executive Officer, Usio: Well, one of them is a school voucher program that we discussed that’s gonna distribute, you know, mostly on cards. We’ve been told that as much as $1 billion is gonna be distributed through Usio for two different states in the United States. We’re not sure how the If it all goes on cards, that’s gonna be huge. Part of it is gonna go on ACH. Those volumes are substantial. That’s part of it. We have another two card deals that, Jerry, you wanna talk to that?

Jerry Uffner, Head of Card Issuing, Usio: We are implementing a large regional bank strategic partnership that comes with multiple programs, that’s on track to roll out in Q3. 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. Besides that, we’ve got several other deals that we’re implementing of a material size. We’ve implemented 27 new accounts in Q1 that will contribute to the growth.

Jon Hickman, Analyst, Ladenburg Thalmann: Okay. Just one more question. The comment about that PayFac is generating 78% of credit revenues or card revenues. The drag from the legacy stuff is pretty much behind you now?

Greg Carter, Executive Vice President of Payment Acceptance and Chief Revenue Officer, Usio: Yeah, we think so. I mean, the attrition primarily comes from our legacy Singular portfolio.

Jon Hickman, Analyst, Ladenburg Thalmann: Yeah.

Greg Carter, Executive Vice President of Payment Acceptance and Chief Revenue Officer, Usio: Yeah, I think that the worst of those days are behind us, yes.

Jon Hickman, Analyst, Ladenburg Thalmann: Going forward.

Greg Carter, Executive Vice President of Payment Acceptance and Chief Revenue Officer, Usio: That is-

Going forward, the growth in card is gonna match or the growth in PayFac is gonna match the growth in cards?

Well-

Jon Hickman, Analyst, Ladenburg Thalmann: Is that what you said?

Greg Carter, Executive Vice President of Payment Acceptance and Chief Revenue Officer, Usio: No.

I mean-

No.

Jon Hickman, Analyst, Ladenburg Thalmann: The credit cards.

Louis Hoch, Chairman and Chief Executive Officer, Usio: The growth in PayFac is gonna be higher than any attrition.

Greg Carter, Executive Vice President of Payment Acceptance and Chief Revenue Officer, Usio: Right.

So

Jon Hickman, Analyst, Ladenburg Thalmann: Okay. Okay. 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, Chairman and Chief Executive Officer, Usio: What we said was-

Jon Hickman, Analyst, Ladenburg Thalmann: Did I get that right?

Louis Hoch, Chairman and Chief Executive Officer, Usio: April was our best month for ACH transactions originated, which was very exciting to us coming off, you know, our third quarter in a row of setting records for ACH. We’re hopeful that that trend will continue for this current quarter.

Jon Hickman, Analyst, Ladenburg Thalmann: Is ACH still the highest gross margin product?

Louis Hoch, Chairman and Chief Executive Officer, Usio: Yes.

Jon Hickman, Analyst, Ladenburg Thalmann: Okay. Thanks. That’s it for me. Nice quarter. It’s really good to see the change in revenue growth.

Operator: Thanks, Jon.

Thank you. Our next question come from Michael Diana with Maxim Group. Please go ahead.

Michael Diana, Analyst, Maxim Group: Okay. Thank you. 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, you know, are most prominent right now.

Greg Carter, Executive Vice President of Payment Acceptance and Chief Revenue Officer, Usio: 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. Those board frequently. We’ve got some other recreational-type ISVs, camping, for example, with their reserving camping spots, pads, et cetera. We’ve got insurance, healthcare, and education-type ISVs. It really is a gamut of various industry verticals that are contributing to this growth.

Michael Diana, Analyst, Maxim Group: Right. Which ones seem to be boarding most quickly now?

Greg Carter, Executive Vice President of Payment Acceptance and Chief Revenue Officer, Usio: Typically the member-associated, the legal and healthcare, those two industry verticals are fast-growing.

Michael Diana, Analyst, Maxim Group: Okay, great. Okay. Thank you very much.

Greg Carter, Executive Vice President of Payment Acceptance and Chief Revenue Officer, Usio: Thank you. Thank you.