Usio, Inc. (USIO) Q2 2020 Earnings Report, Transcript and Summary

Good afternoon, and welcome to the Usio Earnings Conference Call for the Second Quarter ending June 30, 2020. [Operator Instructions] Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes. A replay will be available shortly after the end of the call through November 28, 2020. I would now like to turn the conference over to Joe Hassett of Investor Relations. Please go ahead.

Thanks, Cole, and thank you, everyone for participating today. Welcome to Usio's second quarter 2020 financial results conference call. The earnings release, which Usio issued yesterday after market close is available on the company's Investor Relations website at uco.com/investor under News. On the call today are Louis Hoch, President and CEO; Greg Carter, Senior Vice President of Payment Facilitation; Tom Jewell, Senior Vice President and Chief Financial Officer; and Houston Frost, Senior Vice President of Prepaid Services. Management will provide prepared remarks, and then we will open the call to your questions. Before we begin, please remember that comments on today's call include forward-looking statements. Forward-looking statements can be identified by the use of such words as estimate, anticipate, expect, believe, intend, may, will, should, seek, approximate or plan or the negative of these words and other similar words and phrases. Forward-looking statements, by their nature, involve estimates, projections, goals, forecasts and assumptions and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements, including risks related to the COVID-19 pandemic and its effect on the economy, the realization, and the opportunities from the Singular acquisition; management of the company's growth; the loss of key resellers; the relationships with the Automated Clearing House Network, bank sponsors, third-party card processing providers and merchants; the volatility of stock price; the loss of key personnel; growing competition in electronic commerce market; the security of the company's software, hardware and information; compliance with complex federal, state and local laws and regulations and other risks detailed in the company's filings with the SEC. These forward-looking statements speak only as of the date of this conference call and should not be relied upon as predictions of future events. Usio expressly disclaims any obligations or undertaking to update or revise any forward-looking statements made today to reflect any change in Usio's expectations with regard thereto or any other changes in the events, conditions or circumstances on which any such statement is based, except as required by law. Please refer to the company's SEC filings on its Investor Relations website for additional information. With that, I would now like to turn the call over to Louis. Louis?

Thank you, Joe, and welcome, everyone. The second quarter was much as expected with the Coronavirus temporarily impacting our growth momentum, but with performance progressively improving as we move from April to June and even into July. In the process, the second quarter demonstrated that our strategy to offer broad portfolio of payment solutions to diversified end markets, which was more resilient than other business models throughout much of our industry. With companies suffering fairly significant revenue decreases because of their more concentrated portfolios and single payment channels. While our consolidated revenues were down about 3% in the worst economic quarter in recent memory, revenues and our two growth initiatives PayFac and Prepaid were actually up. These two fast growing business lines demonstrate that our innovative technology is in high demand as it offers solutions to make payments simple. We also worked hard to control costs, with our total overhead down nearly 300,000 or 10% from a year ago. With overall expenses decrease, we're still investing in the growth of our prepaid and card businesses, as we have added operational resources to each of these business units over the past three months. For the quarter, our net loss was unchanged from the second quarter of 2019 and for the six months, the bottom line is running ahead of a year ago. In the first quarter, we began providing segment reporting in our effort to improve transparency in our revenue disclosure. So let me offer some high level comments by segment. Despite reports of widespread second quarter payments industry weakness, our credit card transactions in the second quarter were up 26%. In fact, the number of transactions was the highest in the company's history, and the dollars process was the second highest in the company's history. The card results are particularly impressive as they achieve despite a decline of over $20 million in combined April and May processing volumes, primarily attributable to the mandated closing of our dental offices of veterinarian office clients. Card revenues were up again this quarter on a year-over-year basis and profitability continues to improve. In a minute, Greg will talk about the exciting developments in card including the creation of a new implementation team in addition of additional business development professionals, and other promising changes we believe will accelerate near term growth. Overall, our ACH transactions and processing volumes were down from a year ago. The volume was tied to the disbursement in collection of consumer loans, one of our largest industry concentrations, which has been extremely soft. Consumer lending is slowly recovering, and the business remains strong with all of the decrease in the volume strictly attributed to less users, as we continue not only to retain existing clients, but add new ones. And as we continue to grow our products with RCC and PINless debit products growing very strongly and unhampered by the COVID shutdown, part of our expanding portfolio of products that leverage are not just certification Tier 1 processing designation, which includes direct access to the Federal Reserve and a dedicated bank routing number. We're confident that consumer lending will bounce back and when it does, our ACH will be back at or above record setting levels achieved earlier. The real standout in the quarter and for the first half of this year has been our prepaid business. For the second quarter, card load volume was up 64%, transaction volumes were up 47%, and revenues were up 58%. This follows a 69% increase in revenues in the first quarter. [Indiscernible] but I do want to note that we believe the best is yet to come. Our prepaid program supporting government and charitable organizations and their effort to provide governance assistance and relief has been particularly successful, and has been adopted by five of the ten largest cities in the United States. Note that all of the anticipated revenue from these programs is not recognized in the current period. So these programs are expected to contribute to both our top and bottom lines over the next few quarters as far as revenue to occur in 12 to 24 months in the future. In our view, load and transaction volumes, and even revenue far understate prepaid success. In fact, card loads have actually tripled over the past few months, which we believe is far more indicative of prepaid's growth. Heading into the second half of this year, we believe much of the worst is behind us. Our card and prepaid businesses have already rebounded to pre-COVID or even better levels. It's just a matter of time until consumer lending fully recovers. To support our growth strategy and to provide the resources to fuel operations, we completed a $3 million private placement with a single institutional investor that has a long-term vision on their investments. The fund demonstrated their long-term commitment by purchasing unregistered shares from the company. As a result, our balance sheet is strong and we have the resources needed to implement our strategy and support operations as we continue to invest in our growth initiatives and work our way back to positive operating cash flow from operations. Let me conclude my remarks with a statement about Coronavirus which continues to affect our daily lives, our operations and the economy. Usio was quick to act to ensure that the health and safety of our employees as we have implemented policies to achieve social distancing, and other safety measures. However, the economic consequences of the pandemics remain. After an awful April, businesses improved sequentially throughout the quarter as well into July. While card and prepaid revenues, the card and prepaid have returned to – or exceeded their pre-COVID levels consumer lending is the only segment of our business that is recovering slowly. Thus, we expect it to be a drag on ACH in the third quarter. But every other segment of our business is expected to be up in the case of prepaid the growth could be dramatic. However, once the economy is back at full swing, we feel very well positioned to resume the strong growth momentum we achieved heading into the second quarter. Leveraging that into potentially even better returns for our shareholders over the long-term. With that, I'd like to conclude my opening remarks and turn the call over to Houston Frost, our Senior VP of Prepaid Services to talk a little more about that segment.

Thank you, Louis. Prepaid had a solid quarter with revenue up 8% sequentially from the first quarter of this year and 58% compared to the same period last year. It should be noted the card load activity experienced a significant uptick in June growing 123% as compared to May. And then we saw card loads increase again substantially in July by 120%, as compared to June, so a lot of growth in June, and then even more growth in July. The growth related to our new municipal and non-profit clients was concentrated in the last month of the quarter, and we expect to report substantially larger load and transaction volumes in the third quarter. All told, we have signed 55 new clients in 2020. These clients are actually working with hundreds of additional community organizations, and we have several more in the pipeline. Most of the client programs became active in June and July. And accordingly as I said before, we expect continued growth in the second half of 2020. It is important to note and Louis mentioned this as well that because of the structure of the programs, more than 50% of the revenue from this activity will be realized after 12 months from the time the card accounts are loaded. This is when we receive income from card over fees and funds exploration. As such, we expect the activity in 2020 to fuel revenue growth, not just through the end of the year, but in 2021 as well. While the pandemic was the catalyst for much of our recent growth, many of the organizations we've partnered with have the need for money disbursement solutions for a number of other programs, not related to the pandemic. In addition, many of these organizations have introduced us to other cities and/or non-profits. And so, while we do believe that load volumes related to these programs, may slow a bit in the third quarter, we do feel strongly that we should be able to maintain a substantial portion of the elevated load and transaction volumes in the quarters that follow. Most valuable thing we built this year are new relationships. And if we stay focused on those and we continue to execute well, the prepaid line of business will continue to grow and prosper. With that, I'd like to conclude my opening remarks and turn the call over to Tom Jewell, our Chief Financial Officer to discuss financial results in greater detail.

Welcome everyone and thanks for joining our call today and your interest in Usio. I'm going to provide a brief review of our financial results before turning the call over to Greg. Looking at the quarter ended June 30, 2020 and 2019, revenues for the quarter decreased 3% to $7 million versus $7.2 million in the comparable period. This decrease is significantly less than the revenue decreases being widely reported throughout the industry. Two of our three reporting segments representing both growth initiatives reported second quarter growth. Revenues were up 58% in the prepaid category and 4% in our credit card category, including 167% growth in our PayFac business. ACH revenues were down approximately 25% due to the weakness in the consumer lending industry as Louis mentioned. Gross profits decreased 18% to $1.3 million versus $1.6 million in the prior period, and gross margins were down 340 basis points to 18.5% from 21.9% in the prior period. Gross margins reflect a shift in product mix as a result of the growth of the credit card and prepaid categories and a decrease in our highly profitable ACH category. Other selling, general and administrative expenses were $1.9 million down 6% from $2 million in the prior period. Despite the decrease versus the prior period, we continue to invest wisely in our growth initiatives to enhance capabilities to fuel future growth. Our operating loss was $1.3 million unchanged from the prior period. Adjusted EBITDA loss was approximately $571,000 compared to a loss of $405,000, an incremental loss of $166,000. We reported a net loss of $1.3 million or $0.10 per share unchanged from the prior period net loss and loss per share. Going on to the six months results, year-to-date revenues were $14.7 million up 7% or $1 million from $13.7 million in the prior period. Gross profits were $3.2 million, up 11% from $2.9 million. Gross margins were 21.8% or up 70 basis points better than the 21.1% gross margins recorded in the prior period. Other SG&A expenses were $4 million up 21% from $3.6 million in the prior period. The six months adjusted EBITDA was a loss of $765,000 flat to a loss of $731,000 in the prior year. The net loss was $2.1 million or $0.16 per share compared to $2.3 million or $0.18 per share for the year ago period. As Louis’ mentioned, we continue to have a solid balance sheet with a cash balance of $1.8 million at June 30, 2020. We received gross proceeds of $3 million from private placement in the quarter. Rolling forward to the end of July, our cash balances were approximately $4.6 million. The company's only debt is a PPP loan. The company's loan forgiveness documents have been submitted, requesting full forgiveness of the loan and are in the process of being filed with the Small Business Administration through our lender. We believe we have the liquidity and financial strength to support both continued investment in our growth initiatives and to fund operations. Although the momentum built up over the past year has been interrupted by the COVID-19 both credit card and prepaid experience sequentially better quarters after a tough April and May and are now back to pre-COVID activity levels. ACH is experiencing a slower recovery. Our emerging new products RCC and PINless debit are gaining traction. As we continue to work our way through these unprecedented times. We are fortunate we have a solid balance sheet that we believe will support our plans until operations are completely restored to normal. At this time, I'd like to turn the call over to Greg.

Thank you, Tom and welcome everyone. I'm pleased to be with you today. Now having been in this role over the past three months and haven't had any chance to talk to some of you during that time. As I stated last quarter, PayFac is making great progress and I can say that more emphatically today. The card business got off to a great start this year and had another growth quarter over the past three months. Revenues, volumes and transactions were all up again in the second quarter, which is more impressive when you consider the significant decreases reported across the industry. We have very little exposure to large are insulated largely from a large degree from retail, restaurant, hospitality and similar verticals that have been bearing the brunt of the economic slowdown. While our dental and veterinarian office were forced to shut down for a time, most are backup and in operation and we expect that business to remain stable if not grow. So all of the Coronavirus slowed the momentum that built up over the back half of 2019, we have regained our stride with volumes today essentially back at pre-COVID levels. At the same time, there's been no let up in our sales performance. For instance, we announced a number of deals in the legal software space where we're making a concerted effort to become a leader in that large, but highly fragmented market. We're having similar success in parking management software and other verticals where our technology is truly generating excitement in the ISP community. The pieces are in place for a significant ramp in our volume, and I see my job is unlocking that vast potential. So I've been looking very closely for any pinch points that might be limiting our success or from new opportunities, we're adding resources, or making some changes might accelerate our growth. Consequently, we've instituted a few changes, I believe we'll make a difference. At the top of that list is a new dedicated implementation team staffed with experienced card processing professionals. Too frequently, our teams are trying to wear too many hats, searching for new opportunities, signing new agreements, and resolving the client issue [indiscernible]. Implementation was consequently not the priority it should have been. The result was a conversion rate below expectations. Now we have a team who is so focused is to help the ISVs which we've contracted with onboard their merchants as quickly and efficiently as possible. Whether it's troubleshooting an integration issue or helping with the pitches to go out to their customers, our team is skilled and experienced at providing the support needed to get the merchants converted and processing on our platform. We also added more structure to the team and implemented more standardized processes throughout the organization. This will help improve our overall efficiency, productivity and keep the teams focused. Finally, we're enhancing our business development efforts. We recently hired a new business development professional who was well tendered in the card service space and brings with him existing relationships in the ISV channel. The opportunity is now and we aim to seize upon it by growing our business development team to quickly capture market share within the ISV segment. I understand you've been patient waiting for the business to inflect and wondering what trajectory it will take. I believe we can inflect at a very steep trajectory for a number of solid reasons. For instance, many of our clients are spending significant dollars and allocating meaningful resources on the integration phase. Expenses I'm sure they would not have undertaken if they were not intent on making this relationship a success. I know there are several sizable relationships that we've been working with for months, and are literally on the cusp of going live. These are clear indications that there are significant processing volumes to be realized and quickly. So it is our job to serve them well and set them up for success. And with the changes we've implemented, I believe we're now better prepared to help them succeed. Certainly there are obstacles to overcome. For instance, COVID has hampered development at some of our ISVs, but on balance the business is already sound, it is growing and our target markets are continuing to embrace our technology. The goal now is to improve conversion rates which can result in a steep increase in processing volumes. This is one of my priorities and you can be assured we're doing everything in our power to achieve this objective. That concludes our prepared remarks for today. So we would like now to open the call for questions.

[Operator Instructions] The first question today will come from Gary Prestopino with Barrington Research.

Several questions on PayFac first of all, was there any sequential revenue growth in PayFac this quarter?

Yes, on a normalized basis so there is a 4% growth month-over-month or quarter-over-quarter.

Okay 4% sequential. Okay and then Greg, can you maybe just talk about some of the things that you're going to do different in terms of trying to focus on the ISVs and then focus on merchant boarding. I mean, is this something that had not really been addressed, and it's a new endeavor for you or your plan of action is to attack it differently and how?

That's a great question. As I said in my prepared remarks, there really wasn't a solid planning in place. There wasn't an implementation process that was formalized, documented, and adhere to. The result was that is, the ISVs in various forms of implementation. We fix that by creating this team and a lot of focus around that. We have a specific program management software tool that we use that is Gantt chart oriented that is - it requires a certain amount of information for the plan to be moved to the next phase. And that's in - it’s resulting in better conversion rates. But we're also working with the ISVs on a marketing standpoint to develop what works best to get their back book of business, whether that's a card behind, webinars, newsletters, there is a variety of different ways we can go about that. But to sum up that question is just, I think there was a lack of structure and discipline around the implementation phase.

Okay. And this has just really been put in place. So we'll see things progressively get better as we roll along?

Yes.

All right, and then question for Houston. You said you got 55 new accounts year-to-date. How many of those accounts right now are actually generating revenues and at what percentage of - what you guys think they could generate, are they generating revenues?

It's a good question. I don't necessarily have an exact percentage for you. I mean, what I'll say is that the contracts are being executed relatively quickly. And so, there is definitely a percentage, 25%, maybe 30% that haven't even ordered their first batch of cards or maybe we've gotten cards out, but they haven't really started loading them yet. So I mean, one number I could just judge on is two weeks ago. I asked for the number from my Head of Sales and the number was 48. I mean, that might have been even less than two weeks ago. So as of yesterday, we had 55 signed and executed, and I don't have an exact percentage, but - the notion is accurate that not all of those have started generating revenue. The other thing, I really do want to point out and I think this is indicated in the earnings. But our gross margins decreased obviously for the company, they decreased, but in prepaid, they decreased substantially in - Q2 as compared to Q1. That is because cards are going out and that's a lower margin source of revenue for us. And so, when you see all these cards going out, and then we're invoicing on the actual physical cards or in some cases virtual cards going out, that's the first part of the revenue that we received from a client. And then over the next call it three to 12 months we get a different chunk of revenue, which is interchange and cardholder transactional fees. And then post 12 months after that, that's when we get a third kind of source of revenue. So, this is why we're reporting on card loading is because it really is the leading indicator first. First we get cards out, then those cards get loaded. We generate revenue as money is spent on those cards. And then finally, 12 to 24 months later, we're generating additional revenue. So, we really saw the growth in June and then even more in July. So the revenue is delayed from that activity and so you're thinking correctly about kind of that delay I would say.

Okay.

It’s not implementing, yes.

Okay. And then just one last question I'll jump off. In terms of the OpEx for the quarter, I mean, obviously you guys have gone in a control expenses because of COVID. We expect that to start picking up as we get through the rest of the year, you're going to try and hold it at that, it looks like at the back of the envelope it looks like about $2.6 million of OpEx?

Gary is definitely going to pick up - where we’ve made some hires. We've increased because of this huge uptick and prepaid activities. We hired a lot of call center reps to support the new call volume, which has gone through the roof. So yes, it's going to go up.

And our next question will come from Jon Hickman with Ladenburg. Please go ahead.

I was wondering, could you tell us what the sequential decline in ACH was from Q1 to Q2?

Just - on top of my head. I can’t even do it on top of my head. I will tell you in revenues, let’s see.

Yes.

In revenues, it’s $500,000.

Difference okay.

Yes.

And then so can I just drill down a little bit more. So you're still kind of projecting softness in the consumer lending through the - at least through the end of September or were you honest of?

So ACH is going to continue to be affected by consumer lending - the downturn in consumer lending based upon downturns in the economy. Now, we haven’t lost many customers, so once that ticks back up, we're going to be the leader that we are in that space, but yes, it's going to affect us in Q3.

Okay.

Now the good thing is every other segment of our business is up. So Q3 will definitely be better than Q2.

Our next question will come from Barry Sine with Spartan Capital. Please go ahead.

Wanted to continue on pretty different results from your different revenue segments and your diversification strategy really, shown through this quarter with revenue down only 2.7%, ACH down 25%. So if you're only in that business, you would have had a terrible order. Again so the strategy is really working. On ACH in the Q, you talk about a relationship to employment levels? And on this call, you're talking about more relationship to consumer loans. I assume there is some relationship there. It's hard to get a loan, if you're not employed. You were on about a $9 million a year revenue run rate on ACH, now you're down to about $7 million, and it's hard to grow the entire company if you've got a boat anchor like that in the near term. And I'm guessing that you know, the macro economy is not going to return? We're at 10% unemployment for at least a year if not longer. So how do you get that back to 9%, and how do you stop that business from being a boat anchor and let the strong growth in the other segments really drive the results?

I don't really like boat anchors Barry, but I understand what you mean. So well, ACH has already hit its bottom in this quarter. So this is going to go up from there. And - again we didn't lose any customers in fact we've been adding customers. So consumer lending is a segment of that ACH business. And it is directly tied to the economy you're right. If you're unemployed, you're probably not going to get a loan And then the lenders are not requiring people to payback their loans like they were before the pandemic. So they're offering deferrals. We're seeing that they're starting more and more payments being made, but - and it's recovering. But it's not recovering like the dental office and a veterinarian office, that traffic in April, it was down to 10 million in May, it was down 11 million. And then in July, it popped back up to levels above COVID. And so we're just helping you understand - the world understand, we're not going to see that type of turnaround with ACH where it just pops back, but we're confident that it will come back. And so, you know that what you call [indiscernible] is still a very stable force within the company. And when you combine that stable force, it's not going - it’s already hit its bottom. With the growth that's occurring in card and prepaid. Q3 is going to be a lot better than Q2. And we're already experiencing July was amazing.

Okay, and then prepaid pretty incredible numbers, you've given a lot of data points on card loading and pretty tremendous acceleration. Obviously continuing into the third quarter, you had one sentence in the script that I want to highlight, which was about spoilage. I'm trying to size that and understand that you talked about 12 to 24 months in terms of recognizing spoilage revenue and I guess that varies by customer agreement? I don't think you've given any - you've given growth rates on the loading, but you've never given the dollar amount of the load so we - got to get a sense of that. Could you give me any more information to help me size what - revenue from spoilage might look like in that, 12 to 24-month timeframe, when you start recognizing it, because I'm guessing that could be a material source of revenue?

It’s is definitely going to be material and we can't tell you what the conversion rate is going to be, what the breakage is going to be on these cards. It’s definitely going to be a nice percentage. Card loading as Houston said, is the best leading indicator of future revenue in that business segment. Money has to get on cards before we get paid in either in terms of purchases or in fees generated from ATMs or they leave $0.58 on a card and the card expires and we earn-in as spoilage revenue. Some of the card programs are putting out, the spoilage kicks in 12 months someone kicks much as three years later. So, what's really great about what's occurring now and the message that we're trying to make sure everybody understands is all this growth is currently prepaid. And again, you haven't seen it - all of it, yet. The best is yet to come. It’s not only going to help this year, it's helping next year and the year after. And it's substantial. If you look at our balance sheet, you'll see in the prepaid balance column, this time last year, there was $500,000 on card programs in the card loading database, waiting to go on the cards. When we closed this quarter, it was 20 million so that's the type of delta that we're seeing right now. And that's a snapshot, right because it's a balance sheet. That was what it was on that day. So more than that, it's actually going on the cards.

And continue on that. I think you've said in the past you've given spoilage rates, which I think are inversely related to the amount that's loaded on a card. So a card with $500 has less spoilage than a card with $25 for example. Could you kind of, repeat what those numbers are? And then on some of these municipal accounts where I think you're seeing, some of the strong growth, could you describe what's the size of the average load per card is, again to help me better estimate what spoilage revenue might be?

Yes, so I'll let Houston's answer about the current programs. But the industry averages are and kind of a rule of thumb is like a $20 rebate card, that maybe you get for purchasing some tires, is going to spoil, around 40% of the time. Almost one out of two cards are going to go unused as compared to like a $200 card that's going to spoil less than 5%. So you're right as there's more money on the card, less likely that the core card is going to spoil. But there's still going to be some type of spoilage or what we call breakage when they leave a little bit of money. But like Houston talked about are actual new programs.

Yes, so I mean Louis is exactly right on kind of those numbers. You have a really wide range, depending on dollar amount on the card could be 40% on a $20 card that's a good industry average, less than 5%, on a $5 card. In addition to that several of the municipalities are going get back, a portion of spoilage. I mean, that's one of - that's part of the benefits of using a prepaid product. But there's also several clients that, the cards run at a little bit of a different model where there's and inactivity fee there. But there's not direct spoilage and then there's a sheet that can happen, in three years or later. I mean, one way to try and correlate it and it is, you know if our loads were up 690% kind of year-over-year, which is what we reported in a our recent press release. Ultimately that should lead to revenue growth down the road, call it, over the next 24 months, somewhat similar numbers. Now, because of revenue spread out, you're going to see that revenue growth necessarily, kind of a comparable from one month to another, but if you start looking at revenue over 12 months, that may not be the worst estimate. If you go back and you look at 2019 revenue numbers and you think about what, sort of second half of 2020. And in the first few quarters of 2021 could be, it may stick, really be fairly close to that kind of growth number in terms of revenue over a 12-month or 18-month timeframe. So, we think that's a good indicator, obviously, the mixing revenue is a little bit different. And there was a question, I want to go back and answer in terms of what are the values of the cards? A lot of these cards are higher dollar value. They're $600, even $1,200. We also have several programs that are actually doing smaller dollar cards, and those are kind of for different purposes. So, I think it really is going to depend a little bit on how the mix sort of works out and we're really trying to crunch some numbers to get a better idea on that. But the general idea is, you should be able to look at the growth rate and lows. And that should correlate fairly well to what the growth rate and revenue is going to be, kind of over the next six to 18 months if you will.

One last kind of housekeeping question on calculating the share count with the new share issuances on the cover of the 10-Q as of August 10, you have 20.4 million shares outstanding. The weighted average diluted shares outstanding for the quarter was 13.2 million. Can you - maybe Tom, can you help me for modeling purposes understand, how that number is going to grow and impact EPS going forward?

So, with the private placement it’s going to grow up to about 15 million for EPS calculations.

[Operator Instructions] And our next question will come from Brian Kinstlinger with Alliance Global. Please go ahead.

Great, thanks so much for taking my questions. Can you quantify your installed base for PayFac at the end of June maybe compared to March 2020 and discuss how COVID ended up impacting installations during the second quarter?

Sure, maybe perhaps a better number is in 2020 we've on boarded 31 master merchants that had subs underneath them. So just kind of as a reference COVID is definitely hampered just because of the remoteness of some employees working from home delaying the integration, implementation phase. As I said earlier, there is the initial implementation or onboarding of a master merchant, but the subsequent loading or boarding of their subscribers has been a struggle historically and even to this day. So, if an ISP comes to us, we sign and integrate them as a master merchant, board them as a sub-merchant, and they have use a number of 500 subscribers, getting that 500 to convert real time for at the same time has not been the case. So, therein itself lies the challenge and the opportunity.

Okay. And you mentioned that your ISVs are in the process of installing PayFac in the press release. First of all, there are ongoing challenges still today and getting that done? Is that going to take some time given COVID or they are able to do that? Are you able to help them remotely? And should that be done pretty quickly?

It should be noted that even before COVID, there is meaningful amounts of integration to code to our API, so it's not just a plug-and-play application that we have. So it comes down to the ISVs. And I think [they have] coined a good phrase patient priority. I mean, they want to do this. But when it comes to resource allocation, and or time on the IT shots, sometimes it's not a priority for the organization. So that inherently delays full implementation and integration and nothing to do with COVID. But COVID has exacerbated because those resources that may have been allocated - may not be available at this point. So it's really a challenge on both sides and COVID is not helping it, but that that challenge existed prior to the pandemic.

Right. And then, one more for you Greg. In building that installation team, did you add additional people in cost by adding new resources, or did you redeploy people, and how much of installation requires business travel?

So it's been a reallocation of resources with one additional new hire or pending new hire. And there has been no travel from our team since the pandemic started. For that it's all been done online. And when I say the redistribution of resources internally, it's those individuals that had firsthand knowledge of the platform. And now we can put or we have put a program in place that's programmatic to go through this implementation phase, but there is one new or pending one new hire for that team and the other individuals that are tasked were redeployed from other areas.

And then one for Houston, you mentioned that 55 new accounts. What was your installed base or customer base and prepaid before that?

I don't have that exact number in front of me. It was over 100 clients at the end of 2019, but in terms of what the number of active clients that we're building 2019 that would be a better number. And that's the number I just don't have, it may be - more or less maybe good estimate there is - we probably had about 50 clients build in 2019, and I can get you an exact number, so maybe we already doubled in the first half of 2020.

Great. And then one for Tom, and the G&A decline you mentioned, is that cause reduction temporary, permanent or is it some combination?

I would say it's a combination. So the big thing is obviously with COVID-19, we just didn't have any travel expenses at all. And in some of the prior quarters, I think if you remember to last quarter, we had 100,000 of one time, that if you're looking at it sequentially, and particularly with all the new card loads, the biggest impact on an organization is there's a lot of calls into the call center. So as we've mentioned, we're staffing up the call center significantly, and I guess we're also in the PayFac business adding business development people and we're going to do the right things to invest properly in the Prepaid and PayFac growth initiatives and other requirements as needed by the business.

And our next question will come from [indiscernible] with [Sierra Asset Management]. Please go ahead.

Has COVID impacted the acquisitions that you may be looking at? And has this reduced any prices? And does it make you want to pull the trigger sooner or just wait longer for any fits? Are you seeing any fits?

That's kind of a loaded question. We did announce last quarter on this conference call that we had terminated acquisition that we were involved in, in Q1, and that's why we brought some expense forward. That was one time almost $200,000 worth. But there are acquisition opportunities out there for us, and we continue to look at them. And there's some great opportunities for us so.

Yes, do you see prices coming down because of COVID?

You know, it's creating some distressed properties, but we're not looking at it any distress properties. People are concerned that the capital gains rates going to go up after the election. So it's causing some more activity to occur right now. Again, we're focused in on acquisitions and there is some great opportunities for us to have to add value to our company and through - really is great opportunities for us.

Okay, that sounds good. And it would appear that - has the revenue improved in the current - future quarters after the COVID or you seeing the same? I mean your revenue almost improved in the current quarter to June quarter?

So, Q3 is definitely going to be better than Q2. July has been wonderful, beginning August has been wonderful. So, yes, it's going to continue to improve the only - everything is back at current levels or exceeding our expectations with the exception of one segment of our ACH business, and that's slowly recovering.

Ladies and gentlemen, this will conclude our question-and-answer session, also concluding today's call. We would like to thank you for attending today's presentation. And at this time, you may now disconnect.