USIO

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.

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.

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 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 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.

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.

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 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 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 six new cities, two county governments, and four other new customer accounts. All but two 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 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. 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 theq best starts to a new year in recent memory, a record start. We've read the reports concerning inflation, higher prices potentially higher interest rates, and 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.

Thank you, Sir. We will now begin the question-and-answer session. To ask a question, you may press star, then one your touchtone phone. If you're using speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. As a reminder, please restrict yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. [inaudible]Our first question comes from Barry Sine from Litchfield Hills Research. Please go ahead.

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?

That's correct.

Okay. The other points are all correct?

Yes, Sir.

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?

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.

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?

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.

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 four product lines today where you're in good shape there?

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 one-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.

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?

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.

Okay. That's a great answer. Thank you, Louis. Those are my questions. Thank you, gentlemen.

Thank you, Barry.

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

Hey, Louis. My question was just the answers about the gross margins. Thanks.

All right. Thanks, Jon.

Mallory, I have one more.

Oh, okay. Jon?

Jon, you may please proceed with your question.

Mark? Louis?

John?

John.

I'm sorry. Okay. Excuse me. Talk a little bit about this comment that prepaid's gonna start growing again.

Can you ask your question again? You're cutting out.

Can you elaborate on that? I'm sorry.

Elaborate?

Can you elaborate on the comment about prepaid's growth year-over-year? Like, what gives you confidence?

Yeah.

Where is that coming from?

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?

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.

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?

Yeah, we think so. I mean, the attrition primarily comes from our legacy Singular portfolio.

Yeah.

Yeah, I think that the worst of those days are behind us, yes.

Going forward.

That is-

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

Well-

Is that what you said?

No.

I mean-

No.

The credit cards.

The growth in PayFac is gonna be higher than any attrition.

Right. So

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?

What we said was-

Did I get that right?

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.

Is ACH still the highest gross margin product?

Yes.

Okay. Thanks. That's it for me. Nice quarter. It's really good to see the change in revenue growth.

Thanks, Jon.

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

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.

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.

Right. Which ones seem to be boarding most quickly now?

Typically, the member-associated, the legal and healthcare, those two industry verticals are fast-growing.

Okay, great. Okay. Thank you very much.

Thank you.

Thank you.

On this call with me today are Louis Hoch, our Chairman and CEO, and Greg Carter, Executive Vice President of Payment Acceptance and our Chief Revenue Officer. Michael White, Senior Vice President and Chief Accounting Officer, and Jerry Uffner, Head of Card Issuing, will also be available during the question-and-answer session. Let me remind our listeners that certain statements made today during the call 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. Let me start off today's call with some highlights from this afternoon's release. It was a solid quarter in line with our commitment to shareholders to deliver a stronger second half of the year.

Revenues were up both sequentially and on a year-over-year basis, with record growth accelerating to 8% in the fourth quarter. This led to a 3% increase in revenue for the year, but excluding revenue associated with interest, revenues from products and services were up 4%. We set a record for total dollars processed in the year, which were up 19%, and transactions processed were up 30%. As has been the case over the course of the year, revenue growth for the quarter was led by our ACH and card businesses. ACH was once again our fastest-growing segment. Revenue increased more than 30% for both the quarter and the full year, driven by new client implementations and strong growth in pinless debit.

For the year, ACH set a record for dollars processed, up 22%, transactions up 29% and returns which were up 31%. Pinless debit dollars processed was up 81%. Card revenue increased 7% in the fourth quarter and finished the year up 3%, with continued PayFac growth driving performance. Card also reported record processing volume and transactions. Our Output Solutions finished the year with strong momentum, with pieces mailed up 11% and electronic documents processed up 18% in the fourth quarter. This led to a 6% increase in revenues for the quarter, so that revenues ended up flat for the year. Although Card Issuing revenues were down in the quarter, they improved relative to the third quarter. Card Issuing also continues to improve its profitability.

Weakness in Card Issuing in 2025 was almost exclusively attributable to the indirect acquisition of a reseller's amusement park card program. Since this transaction occurred early in 2025, this should provide relatively easy 2026 comps, which we anticipate will help Card Issuing 2026 results reflect the recovery staged over the balance of the year. The majority of the revenue in the quarter was generated from ongoing programs, with the primary exception being certain Card Issuing programs with governmental entities. No single client accounted for more than 10% of total revenue, reflecting the diversified nature of our customer base. From an account perspective, attrition remained very minimal. Operating cash flow for the year was $1.5 million.

These proceeds were used over the past year to invest in expanding both our tangible and intangible fixed assets, as well as for over $1.1 million in share repurchases. Though down from a year ago, we still have nearly $7.5 million in cash on hand, positioning us to invest both organic, inorganic and non-organic expansion opportunities. In the fourth quarter, we used stock for the $500,000 purchase of PostCredit. Bottom line, we still have plenty of dry powder for strategic development. In addition to positive cash flow, we also delivered another year of positive adjusted EBITDA and have now reported positive adjusted EBITDA for three consecutive years. Our guidance contemplates positive adjusted EBITDA in fiscal 2026 as well. All in all, a solid growth year with record revenues and record operating performance.

We believe 2026 is the year to take another big step forward with new initiatives to increase our share of our customers' wallets, build a portfolio of recurring revenues, and to introduce new products and services that only improve on the affinity that we already enjoy with all of our clients. This is a strategy that builds value. Now, with that, at this time, I'd like to turn the call over to Greg Carter.

Thank you, Paul, and good afternoon, everyone. It was another record quarter and year for Card as we reported all-time record quarterly and annual transactions and dollar volume processed led by our continued focus on PayFac. As a result, revenue growth net of our legacy portfolio was 13% for the quarter and 7% for the year. That's been Card's mantra strong processing volume and solid PayFac revenue growth. It's resulted in steady, predictable, recurring revenue growth built on a foundation of primarily ISVs who are loyal to Usio and most frequently are growing their own client base and consequently processing volume with us year after year. Since joining Usio, I've seen our market reputation and awareness steadily increase. This success can be attributed to our multi-pronged sales and marketing strategy that incorporates both traditional as well as creative and new age digital marketing tactics.

For instance, our SEO results continue to improve. We are leveraging this success and recently we are added to the G2 platform, which is one of the largest online influencer reference sites. We're already starting to get quality leads from software companies that are searching on these sites, specifically for payment processing. It's not more effort, it's smarter effort with more surgical precision, something we've preached from day one. Another growth lever is Usio One. Usio now is essentially fully integrated. The idea is to mine our existing relationships to uncover opportunities where other Usio services may be needed. This is a mandate to increase our share of our customer's wallet. We've made changes within the sales structure that's going to improve our throughput and accountability.

In addition to our efforts, Houston Frost is now focused almost exclusively on new product development that will also increase our share of the customer's wallet. Louis will provide some insight on how the PostCredit acquisition fits into the strategy and is the ideal platform to supplement and accelerate our existing efforts. The proof is in the pudding, so let me offer you some examples of our new agreements that have arisen from this strategy. I've talked about our growing backlog of new customers that are in various stages of implementation, and I'm pleased to report that many of these implementations are complete and are processing volume with us. For instance, we completed the implementation of a national online specialty sports goods retailer. This is a straight merchant processing account that we expect to add meaningful volume this year.

In addition, we completed the rollout with the multi-state building supplies company. All their stores have been boarded and processing volume is correspondingly on a very attractive growth trajectory. Finally, a quick note on the outstanding progress of our new Filtered Spend program, which was a massive implementation. It's up and running with thousands of bodegas and smaller grocery stores now able to accept healthcare assistance cards. It allows users to buy over-the-counter pharmaceuticals using a specific healthcare spending account. The takeaway is that we successfully boarded well over 2,000 of those merchants during 2025 that are now live. There are over 8,000 more target merchants that are involved in this program, and now that all the complex initial interfaces have been completed, we are hoping to board the remaining locations through mid-summer 2026. I used to say that Usio was the best-kept secret in payments.

I'm not so sure that's true anymore. It's also reassuring to see us more widely appear and more quickly climb among various surveys that rate payment processors. As the number of successful implementations increases, so does the interest. Now we need to capitalize on this interest to continue to deliver value to our clients and profitably grow Usio. Now, I'd like to turn the call over to Louis.

Good afternoon and welcome everyone. I'm proud of our accomplishments and progress in what was a record 2025. It was a year in which we achieved the highest revenue in the company's history. Operationally, we set numerous full-year transaction and processing volume records across many of the company's operating metrics. Of equal importance, we met our commitment to shareholders by posting a second half that was improvement over the first half. These records bear out the message in my shareholder's letter that throughout 2025, we executed on the mission of delivering secure, scalable and integrated electronic payment and embedded financial solutions. Time and again, our technology has been chosen by leaders such as Mastercard, Apple, the City of New York, State of California for the ability to meet this mission. I'm very proud of our market reputation we have built on this foundation of trust and reliability.

This is the value in our mission, and as Greg alluded to, it's becoming increasingly recognized. We continue to work to unlock the value by building on this legacy with innovative new technologies that meet and sometimes even exceed customer requirements. Our strategy is to pursue opportunities to increase the proportion of customers that need these services on a recurring basis, an area where there is significant opportunity to achieve this objective through increased penetration of our existing customer base. Greg is leading our Usio One initiative with the objective to increase cross-selling. At the same time, Houston is developing new products and services that similarly cater to untapped customer needs. One of the most exciting new opportunities to capitalize on our strategy was the acquisition of PostCredit, Co.

It supports our strategy to offer our customers a comprehensive business banking solution while enhancing our visibility into managing customer risks. Today, we move over $100 million every day by virtue of our clients' processing agreements. With Usio's business banking solution, we can effectively become our clients' depository institution. When they log on to our business banking solution, clients will be greeted with a dashboard clearly illustrating their account. It will also enable them to utilize their funds for any of our services, such as the issuance of corporate cards, an ACH disbursement, or even settling accounts payable. When this goes live later this year, all new clients will be encouraged to use our business banking solution to pre-fund their Usio accounts and to receive their daily settlement funds. When they log in, they're seeing a full suite of banking tools representing another cross-selling opportunity.

This reflects our ongoing commitment to developing innovative payment solutions, including early initiatives such as virtual cards and our Consumer Choice platform. As we roll out enhanced version of Consumer Choice with significant upgrades, including Venmo, PayPal, push to debit, instant withdrawal, we are seeing increased interest from both new and existing clients. As a result, Card Issuing is now actively engaged with large commercial and governmental entities in need of versatile and dependable disbursement platform, especially one that offers modern payment rails. Consumer Choice is one of the most robust disbursement solutions in the market. In fact, one of our larger prospects was virtually stunned to learn that we are integrated with all the major wallets, something they said was missing from most other comparable payment disbursement platforms.

Mastercard needs to be recognized as they continue to refer business our way, any of which would layer nicely on top of the 44 deals and the 53 new implementations Card Issuing completed in 2025. After a year that was disrupted by the indirect acquisition of a large amusement park client from one of our resellers, it is nice to see Card Issuing recovering. Card Issuing has a solid base that is stable and growing. There are many new clients that require complex integrations that were implemented late in 2025 and have not yet scaled. Even without any contribution from these large opportunities, we expect Card Issuing to make a nice rebound.

All of these growth initiatives should also benefit Output Solutions, which finished fiscal 2025 with strong momentum, including growth in both revenue and pieces distributed and a 10% increase in higher margin electronic document distribution. In 2025, they added 37 new clients, primarily in their core markets, with vast majority representing recurring business. That has created momentum into 2026. In the early in the new year, they are already setting records for number of pieces mailed. Output also expects to put a new printer into operation this year, which will run at a better than twice the rate of our existing printer and at better resolution while reducing the quantity of the supplies consumed. This positions us to expand to new markets, pursue additional opportunities, including the production of marketing materials.

Since many clients pre-fund their postage, this also creates a natural opportunity to introduce our business banking solutions. We believe this will create additional cross-selling opportunities through Usio One initiative, including the upcoming dedicated marketing campaign. The star of the quarter was ACH, another quarter of better than 30% revenue growth, leading to 33% full year revenue growth. We continue to set records on virtually all of our operational metrics as we add new mortgage servicing and other customers and generate explosive pinless debit growth, which saw volume increase by over 80% in 2025. There is no slowdown as it looks like Q1 could be pinless and ACH's best quarter ever. As you can tell, I'm excited about Q1 and all of 2026.

The pipeline is strong across all of our businesses, and we're working diligently to increase the share of the wallet. Those incremental revenues offer attractive margins, which is our most direct path to faster growth and improved profitability. We've got a lot in motion, so it'll be critical this year to focus on completing those tasks that offer the most immediate return on our investment. For that reason, we're being careful on our guidance. The company continues to expect 10%-12% growth in revenue in 2026, while also anticipating continued positive adjusted EBITDA. I thank our shareholders for their trust and our support. We remain committed to building a stronger, more innovative and more valuable Usio. Operator, you can now open the call to questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. The first question will come from Barry Sine with Litchfield Hills Research. Please go ahead.

Hey, good afternoon, gentlemen. You've issued guidance for the year, 10%-12%, which is in line with what you're historically capable of. I don't know if you have this number, but I know that 2025 was impacted when one of your customers lost one of their customers. It wasn't yours directly. Do you have a pro forma revenue number for what 2025 would have looked like had that single event not occurred?

Our Card Issuing division was down 22%. We were estimating, you know, really a similar number to if that one customer would have stayed, we would have around $3 million for that, the lost customer. That's the kind of revenue that we lost with that.

$3 million-$5 million.

add about $4 million back to what you reported and then calculate the that growth, and that would be kind of the normalized growth if that one event had not occurred. Fair enough?

Yes. Yes.

Okay. Looking forward to 2026, I know that your key strategic initiative is the reorganization of the sales force and under the Usio One initiative, and you've also changed their compensation models, you know, to make it more about bringing in new business rather than servicing existing. I think you're about a year into that process, and I understand you've had your second annual all-hands meeting. Could you give us an update on how that process is going? How is the team adjusting to that? How are the customers responding now that you're a bit into Usio One?

Yeah, Barry, it's been a good transition. We recently completed our annual meeting here in San Antonio. As I said in my opening remarks or my comments, we've made some changes. We've actually removed some positions from the sales team. We're also doing consolidated sales outreach campaigns. For example, the first week in March, it'll be an all-hands effort, calling states contiguous to Texas for taxing authorities. This has been an effort to drive more output business. The deal that I mentioned earlier about Filtered Spend, which is the large bodega healthcare spending, that actually originated from one of our issuing sales individuals. And that's a pure acquiring deal. I would say that the Usio One initiative is well underway, and most, if not every individual, has wins under their belt for other areas of the company.

Meaning if they were acquiring, they've sold issuing deals, and if they were output, they've sold both issuing and acquiring deals. Very happy with the progress.

Okay. Then also look, you know, on 2026, in a press release you put out in January, you talked about several new large customers where you've already signed them. I'm wondering if I can get a little more detail on that. What kind of verticals are they in? What are the revenue from those new customers look like, you know, once they're fully onboarded? What is the current onboarding cadence with those customers? You know, what is the timing? Which quarter in 2026 are we likely to see that revenue really start to kick in, and when will it be fully kicked in?

Yeah. I think you're referring to the 3 large Card Issuing projects that we talked about in the shareholder letter. The largest of the 3 is a school voucher program for a state, and it'll have a lot of distributions, and that will affect prepaid cards revenue and ACH revenue. That one's scheduled to start in Q3. The other two, one's a major bank, and we're looking at that going live in Q3. The other one's a top payment company that we're partnering with that chose us for Consumer Choice to do, can't get into a lot of detail, but refunds to individuals. That large bank, Forte is doing federal payments. Yes.

Two of those you mentioned Q3. It sounds like the growth will be more back-end weighted for 2026 with those kicking in. Is that fair?

You're gonna see some growth in Q1. You know, you will see those programs go live in the third, fourth quarter and give us a nice jump at the end.

My last question, you know, again, going back to the 10%-12% top-line growth guidance. What's already booked? You know, where do you have customers that are signed, maybe not onboarded? You've already talked about some of those. How much of that 10%-12% is already in the bag you've got visibility on? How much of that do you know, Greg's guys need to go out and win? How much of that is variable and dependent upon winning new customers?

Well, I can tell you that we've got tons of deals that are in implementation that, you know, if we could flush them all today, we'd be very excited for the year and probably raising guidance. We don't control when they go live, so we're always hesitant to answer a question like you're asking. The quick answer is we have enough deals to meet our numbers. It's all about when they implement. That hopefully we don't get another surprise like a large customer going away because they went through an M&A activity.

Right. We'll keep our fingers crossed on that, Louis. Thank you very much. Those are my questions.

Thanks.

The next question will come from Scott Buck with H.C. Wainwright & Co. Please go ahead.

Hi. Good afternoon, guys. Thanks for the time. Great year for ACH. I'm curious, have you guys exhausted the low-hanging fruit opportunities here, or should we expect ACH to be an outperformer again in 2026?

I think we've been pretty clear in our message that Q1 for ACH is gonna be another record, which will be our third consecutive quarter of setting all-time records for ACH. In real-time payments and pinless debit, that will also set a record. Card processing will also set a record, so that includes PayFac. You know, Q1 is gonna be exciting. We think that ACH does have some momentum. We just recently talked a few minutes ago about, you know, school voucher program that we're gonna do that's, you know, probably 50% ACH, 50% card. We're continuing to be very excited about ACH and real-time payments in general.

Great. Then you mentioned in the release SG&A expenses were up 10% for the year compared to 2024. I know that reflects some investment in the business. I'm curious whether that investment is over or you'll have to continue to make some additional investments here in 2026.

Yeah. Well, when it comes to SG&A, our headcount is down compared to last year, and we'll see some savings, and hopefully we're gonna keep it flat. We'll see.

Great. I appreciate that, Louis. Last one for me, just on Usio One. I'm curious, do you guys have specific cross-selling targets you're looking to achieve this year? Or maybe phrased another way, how, you know, what would you consider success of this program?

Well, I think we're already seeing some success as evidenced by the deals that we're talking about. It's really just more repetition, and this campaign that we're going to launch in a couple of weeks will further enforce or reinforce one business unit, this being Output Solutions' value proposition. The unique thing about Usio is when we talk to any entity, you know, we go at them now with a variety of options, meaning it's print and mail, it's issuing, whether it be plastic or virtual, ACH or credit or debit. It's becoming a natural, almost a pleasure to address these prospects because we're not a one-trick pony. Success to me is gonna be continued to look through the sales team and see the diverse contracts that are coming in.

As I said earlier, you know, we've got traditional or siloed salespeople that are now successfully signing contracts in those other business units. As long as we continue to do that, I would consider that a success.

All right. Perfect. No, that makes sense. I appreciate the time, guys. Thank you very much.

Thank you.

The next question will come from Jon Hickman with Ladenburg Thalmann. Please go ahead.

I wanna follow up on the SG&A question. Louis, you said you wanna keep it flat. You mean flat 2025 over 2026? Is that what?

Yes.

Okay.

Yes. Flat with maybe some moderate growth. Again, our head count is down. You know, it. We've been not replacing people when they leave or retire, and we're trying to do more with less.

Can you elaborate on the $500,000 jump between Q3 and Q4?

What was that, Michael?

There were some one-time expenses in Q3. You'll see we made an adjustment to our bad debt expense, which represented a big portion of that. We're now more in line, and you shouldn't see that type of jump there, but that was a large piece of it. There was also some year-end expenses that were in there. As Louis said, and just to clarify what he said, our head count is down over last year. Our 2026 head count is down over our 2025 head count. There's savings in labor that we're expecting in fiscal year 2026.

Okay. The depreciation and amortization expense should be relatively flat?

Correct.

Year-over-year. Okay. Thank you. Appreciate it.

Thanks, Jon.

Again, if you have a question, please press star then one.