Good morning, and welcome to Usio Earnings Conference Call for the Third Quarter Ended September 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 27, 2020. I'd like to turn the conference over to Mr. Joe Hassett of Investor Relations. Please go ahead.

Thanks, Nick, and thank you everyone for participating today. Welcome to Usio's third 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 this 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. I'm pleased to report all time record quarterly revenues for the third quarter of 2020. With these results, we resumed the growth trajectory for the company before it was temporarily impacted by the coronavirus in the second quarter. The results also clearly demonstrate the strength of our diverse payments, channel strategy, offering ACH prepaid, card processing services to the growing electronic payments market. Both card and prepaid business lines experienced all time record volumes and associated revenues. After defining the economic downturn and growing nicely in the second quarter, the strong growth continued their momentum with well above industry growth rates in the third quarter, once again illustrated the success we are achieving penetrating these markets with innovative technology that makes payments simple and secure. We also saw a sequential recovery in our ACH business despite the ongoing headwinds of a weak consumer lending market. And while we continue to invest in our growth initiatives, like staffing up to handle the increasing call centre volume associated with the growth on prepaid we are doing so while keeping overhead expenses in check. SG&A this quarter was essentially unchanged from a year ago and up only marginally on a sequential basis. The net result is that the third quarter profitability both adjusted EBITDA and net loss improved from both the year ago quarter, as well as the second quarter of this year. Fiscal 2020 probability continues to run ahead of last year, as we work not only to grow the business but to leverage that growth sort of bottom line. In the first quarter, we began providing segment reporting in an effort to improve transparency and our revenue disclosure. So let me offer some high level comments by segment. Credit card processing - credit card transactions…

Thank you, Louis. Last quarter's call we stated that we expected substantially larger load in transaction volumes. This quarter and I'm happy to announce that we did not disappoint with prepaid card load volumes up 167% in Q3 over Q2 this year, which follows a 94% increase in card load volumes - sorry, 94% increase in card load volume in Q2 as compared to Q1 2020. We expect to exceed 100 million in total card load volume in 2020, which would be over 150% growth in annual load volumes as compared to 2019. The rapid growth during Q3 was largely related to pandemic relief efforts. And while total card loads next quarter will be down somewhat from this Q3 peak, we expect that load volumes in the fourth quarter and beyond will continue at levels that exceed what we saw in Q2 of this year. Our nonprofit and municipal partners are continuing to disperse funds, and we signed on several new programs for initiatives that are not pandemic related. These include a variety of municipal program, as well as nonprofit supporting new guaranteed income programs. We reported 55 new clients at the end of last quarter and are now up to 78 total clients - new clients for the year. Our third quarter revenue was up 68% sequentially from the second quarter and 225% as compared to the same period last year. Please remember that card load volumes are leading indicator and revenues generated from this card load activity over a 12 to 24 month period, with as much as 50% of the revenue generated in periods after the period the card orders and the loads occurred. As such, we expect to dip in card loads volumes in Q4 as compared to Q3 will not result in a proportional drop in quarterly revenue. And indeed, we expect that new car programs implemented this year will contribute - will continue to contribute to our - to both our top and bottom lines over the next several quarters. With that, I'd like to conclude my opening remarks and turn the call over to Tom Jewell, our Senior Vice President and Chief Financial Officer to discuss financial results in greater detail.

Thanks, Houston. 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 our third quarter results, revenues for the quarter ended September 30, 2020, increased 15% to $8.1 million compared to the same period in last year. As shown in our revenue details, the growth came from our prepaid and credit card businesses offset by softness in our consumer lending ACH business. Revenues were up 225% versus the previous year in our prepaid category and 14% in our credit card category, including 108% year-over-year growth in our PayFac business. So down from a year ago, ACH revenues rebounded in the quarter from the previous quarter and we generated additional growth in our PINless debit product line. Gross profits increased by 11% to $1.7 million versus the same period last year. Gross margins in the third quarter were marginally lower by 70 basis points from the prior year period primarily driven by shifts in product mix. I would note that margins expanded 630 basis points in the quarter on a sequential basis compared to the second quarter of this year, as we recovered from the economic impact caused by the COVID-19 pandemic. Other selling, general and administrative expenses were flat at $2 million for the quarter comparable to the same period last year. Costs were higher than the second quarter due to the incremental resources needed to accommodate the incremental growth of our prepaid programs in third quarter. We are adding resources to support our current and anticipated growth at a measured face, such as in our call centers where all volumes have dramatically increased. For the third quarter of 2020, operating loss was approximately $900,000 versus…

Thank you, Tom, and welcome everyone. As I stated last quarter of the card segment is making great progress and third quarter results bear that out. It was a record quarter across the board with the highest quarterly credit card transactions and dollars processed in the company's history. Dollars process were up 15% from a year ago, while transactions were up at 81%. As Louis mentioned, this continues a trend we have seen for several consecutive quarters, even through the pandemic. And it's clearly indicative of the success we are achieving in both PayFac and legacy singular portfolio. Attrition across both portfolio has consistently been low so as we add new accounts and as our existing accounts grow, we grow with them. Last quarter, I articulated our strategy to leverage our strengths and accelerate growth. And this revolves primarily around bringing more discipline to our operations and to the organization. Our implementation process needed to be more formalized, documented and managed. So we created a dedicated implementation teams, equipped them with a high powered program of management software tool, and required a certain criteria have been met before we could advance the implementation to its next phase. Consequently, I'm pleased with the third quarter performance as I attributed to our unwavering march towards those goals, and the strong results it is producing. As expected conversion rates are rapidly rising. In particular September, it was one of our best months, as the implementation team boarded a monthly record of new merchants and had many of them up and processing on our platform in short order. That is the goal. Boarding more merchants and getting them up and generating volume on our system. Our increased focused and greater attention on our ISV customers has led to their greater adoption of our PayFac…

[Operator Instructions] First question comes from Gary Prestopino of Barrington Research. Please go ahead.

A couple of questions here. Number one, I think as I was writing down, we recited 108% growth in the PayFac business. I think Tom may have said that in his commentary. Is that sequentially - is that year-over-year, and how is that being measured by processing volume or revenue?

It is a year-over-year period. And it is revenue.

Year-over-year and revenue, okay. And then could you - Greg, could you maybe help us here with number one, the amount of ISVs you're now working with the amount of potential merchants these ISVs have and what percentage of those have been boarded so far?

Let me provide a data point that may help answer that question because it's a long question, but we boarded 1187 merchants in the third quarter. And in September, 891 of those came in September. So the trend is improving. We're working with several ISVs to do just that. So perhaps that helps you from a quarterly standpoint, get a feel for the numbers.

I mean, in terms of - have you been able to sign up some new ISVs. This quarter, I am just trying to get an idea how many you're working with? What the change is sequentially in the ISV universe for PayFac?

Okay. Well, we executed five new agreements with ISVs during the third quarter. We have as many as 15 in queue - implementation queue right now in various stages.

Okay, that helps. That helps. And then one last question, I'll jump off. For Houston, a lot of these - it appears to me that a lot of these prepaid programs may have somewhat of a short duration in terms of that their government program, am I incorrect in that assessment? When you sign these things up, what kind of duration are you looking at and card retention usage?

So, really, it is a pretty wide variety of programs that we've implemented this year. Certainly in Q3, we had a substantial amount of programs related to pandemic relief efforts. But what I'll say is that several of the municipalities that we've worked with have now moved on to leverage our product for a variety of other city initiatives. And while those initiatives may not be the same volume of dollars in a short amount of time, these are actually programs that are ongoing, that could last for years. So I can give you a few - a couple of examples. One for example is a program on the West Coast that is for kind of beautification of the city and engaging communities to help clean up the city. And this is a program that really is just getting started, but doesn't even have an end-date. Another example are a couple of new nonprofits that we've engaged with that are using our product to support some guaranteed income programs, these programs last one to three years. And if they're successful, would never go away. So what I'm telling you is Q3, yes, there was a spike in low volumes related to the pandemic. Q4, we will see that number come down. Generally, I expect, we will maintain though levels like I said the card load levels higher than what we saw in Q2 of this year and probably around 60% to 70%, of what we experienced in Q3 but the rate of sales and some of the new relationships that we're building. I mean, we could be right back at Q3 levels sometime next year, so we're going have this drop, it might not be too long before we are really at a level that sustains what we saw this quarter.

Okay. And are these cards open loop?

Yes, all of our cards are open loop. They're also all reloadable. But again it sort of depends on the program, if it's more of a one time or two to three time load versus a recurring monthly load for example.

Thank you.

Gary, before you drop off, Houston has missed one important factor in this uptick in prepaid. And we talked about it in our comments, but it's very important for everybody to understand. All these load dollars that are going on the cards now. Part of the revenue gets recognized when it's spent. But a big part of it gets recognized when they leave money on the card. And that will end up coming to us as revenue as spoilage 12 or 24 or even 36 months later. So we're building up a huge bucket of feature revenue right now.

The next question is from Jon Hickman of Ladenburg. Please go ahead.

I was wondering, you've talked several times in your prepared remarks about possible acquisitions. The last acquisition made was aimed at a product or a technology. What are you after what do you think you, what's most attractive to you now, more customers or more technology?

Well, whatever we do in acquisition world, we want it to be a accretive, we don't want to take on a project. So we want it to be financially accretive. We also wanted to have synergies with existing - our existing business, something that we can overlay or pay - payments into. And that we can bring strong customer relationships to, and we are looking at acquisitions. We're in final stages with one that will be greatly accretive to the company and hit all those categories of having strong synergies and bringing in blue chip customer base for us to leverage.

Final stages, does that mean like in the next couple months, we might hear some?

We're in final due diligence. I mean, they can still not happen, but its working well good.

Is that a pretty target rich environment right now with COVID or just pay - payment technologies in general?

It’s target rich, but you say target rich and meaning.

Lots of opportunities?

We would make sure that we deploy our capital at multiples less than we're trading. So in that case, yes those opportunities exist.

Well, right now that wouldn't be hard. Anyway well, I guess that would be kind of you're not trading at a very high multiple yourself. Just one other question, I was interested in - to follow-up on the previous question. How long does it take nowadays to implement an ISV, or is that pretty much up to them?

There is a wide range of answers to that. And we have some that implement - integrate very quickly, and then onboard, and there's others as I said have taken well over a year to get to that process. And we have ISVs, and all those different stages. But there is really not like firm answer.

Next question is from Brian Kinstlinger of Alliance Global Partners. Please go ahead.

Are you able to actually quantify the revenue from both PayFac and prepaid separately during this quarter?

Yes, you can look at it - well the prepaid is broken out for you in the 10-Q, yes in the 10-Q. The revenues were 909 - basically $1, $997,000 as compared to last year at the same time, $306,000. PayFac is included in credit card revenue buckets. I'm not sure what that is like a $1million like $1 million of the 5 million.

Right. And then as prepaid sounds like it could become a catalyst to your business. Can you share with us the rough fee percentage for prepaid? Meaning $1 million of low volume for process for payments? What revenue do you get contributed to your revenue for UFC?

We don’t have that metric right off the top of our heads. But I'll tell you that prepaid is a larger gross margin, it’s our second largest product line. The margins will fluctuate between 30% and 40% more towards the top number one - when we're experiencing spoilage more towards the bottom number when we're - the revenue is comprised of selling cards, the actual physical plastic, which we usually don't mark up much at all. So, we don't have that metrics of a low dollar 2% of low dollars term as the revenue yet.

Would it be similar to this traditional credit card processing?

No, it would be much higher.

Much higher okay. And then finally just a follow-up on the M&A, we've heard about M&A for some time, and the industry has always been consolidating. So what has been, the biggest impediments to UFC completing the acquisition in the last few years?

We'll have one soon.

Has there been valuation. Has it been capital, has it been not the right fit?

It's because of our market cap. We're limited what we can buy.

Next question is from Michael Diana of Maxim Group. Please go ahead.

My questions were related to M&A as well, most of them have been answered. I just wondered in this environment are you getting incoming calls from companies that want to talk to you - or some of the companies maybe you've talked to in the past, and weren't able to get something done with they're coming back to or is it - has it picked up in that regard at all?

Are you talking about Usio being a target or?

No, Usio making acquisitions?

Okay. So, we're selective and what we're looking at. So, we're not just taken in a flood of leads of companies that want to be purchased. When we go after something, that's usually because we want it and we see the synergies. So we're just very selective. There are properties out there, portfolios to buy. There is a lot of properties out there in the payments world and because of our size, we're very limited in what we can do. And when we do something, we want to make sure we're buying it right. And then it's accretive and it's not a project, and we're going to be able to leverage it throughout our company. And you'll see us execute that way.

[Operator Instructions] And we have a follow-up question from Gary Prestopino with Barrington Research. Please go ahead.

Yes Louis, did you say that out of the revenues and credit card, this quarter about $1 million is PayFac generated?

Yes, a little more than a million.

Okay, that's fine. And then Greg, could you help me what is causing the big delta between transaction growth and dollar volume growth? And your transactions were up at 81%, your dollar volume process was only up 15%. And I would tend to think that, given that these ISVs are signing merchants that may have bigger dollar - per ticket? Why is that moving more towards where it looks like it's actually lower dollar per ticket?

Well, you hit the nail on the head, Gary. So, we took a microprocessor or micro merchants we implemented in Q3, were actually earlier than that, but the real volume hits in Q3, and their services cost of $1.99 so tons of transactions, little dollar amount.

And micro merchant is that like a vending machine company?

No, it’s actually in consumer lending and that's their fee to get a $20 loan, they charge you $1.99 or $30 loan they charge you $1.99.

All right.

And they have really good volume.

This concludes our question-and-answer session. Now I like to turn the conference back over to management for any closing remarks.

Well, thanks everybody for joining our call and this is going to conclude our third quarter conference call.

Conference is now concluded. Thank you for attending today's presentation. You may now disconnect.