Hello and welcome to the Usio Third Quarter Fiscal 2025 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note today's event is being recorded. Now I would like to turn the conference over to your host, Paul Manley. Please go ahead, sir.

Thank you, operator. Good afternoon, and thank you for joining Usio's third quarter fiscal 2025 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, and Gregory Mark Carter, Executive Vice President Payment Acceptance and our Chief Revenue Officer. Michael White, our Chief Accounting Officer, Jerry Uffner, Head of Card Issuing, and Houston Frost, our Chief Product Officer, will be available during the question and answer session later. Please 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 and Litigation Act of 1995 as amended, as more fully discussed in our press release and in our filings with the SEC. I'd like to start off today's call with some highlights from this afternoon's release. Q3 was a solid quarter and in line with our commitment to deliver a stronger second half of the year. These results were achieved on the strength of strong across-the-board processing volumes with seven quarterly processing volume records set in the period, including a record quarterly overall transaction volume of 16,200,000, up 8% year over year. This resulted in a $1,200,000 sequential increase in revenues, impressively led by ACH, which was up strongly from the second quarter and for the third consecutive quarter up 30% from the year-ago quarter. While total revenues were relatively unchanged from the year-ago quarter, our strong sequential momentum positions Usio for a return to top-line growth in the fourth quarter and for the full year 2025. As discussed last quarter, our total revenues this period were again adversely impacted primarily by continued weakness in card…

Thank you, Paul, and good afternoon, everyone. September was a record quarter for Card as we reported an all-time quarterly record of transactions processed and the second highest volume of card dollars processed in any quarter. Led by our continued focus on the PayFac business, our credit card segment continues to grow with dollars processed up 12% and transactions processed up 75% from a year ago. While card revenues were correspondingly up both sequentially and on a year-over-year basis, Key PayFac revenues were up 32%, continuing their double-digit year-over-year growth as a result of net new client implementations. There are currently 16 new ISVs in various stages of implementation. And from last quarter's implementations, I'm pleased to report that the largest of these new enterprise merchants has now been implemented and has been processing with us over the past few months. That's really the theme of the third quarter. This virtuous cycle of a strong pipeline leading to implementations that then lead to volume and ultimately recurring revenue. We are starting to see the fruits of that now and into the fourth quarter setting up for a really solid 2026. We've also been seeing existing customers adding new business. For example, have a long-time ISV that just added a new innovative prepaid program. The current customer base continues to evolve and grow through new programs and new merchant acquisitions. All along, referenceability has always been a key. Our capability and our unique products have attracted several referral entities that are sending larger opportunities our way as they've been impressed with our performance in the market. So in addition to our sales team, we are cultivating referral agents that can send us meaningful opportunities. This is paying dividends for us as, for instance, the large account recently implemented was from a…

And welcome everyone. Let me begin by saying that I'm thrilled with the results of our operating metrics for the third quarter. We set seven quarterly processing records including most transactions processed through all of our payment channels, record electronic check transactions, check dollars, and return checks processed as well. Including penless debit transactions and dollars processed and credit card transactions. This momentum continued in the month of October. Where we set an all-time monthly processing record for ACH for both transactions processed and return checks processed. I'm very excited about what I'm seeing with our ACH business which also happens to be our highest margin business unit. What is different today is that the volume is primarily from recurring businesses. But when you look at our numbers, today's primarily recurring revenue is being compared to a year-ago quarter that included a number of one-time non-recurring items. UCO story. That's distorting our underlying progress and the real stripping away the influence of those one-time items provides a better picture of the fundamental growth and the strength of our core operations. And those seven processing records provide a great measure of our progress. I would also note that revenues were up on a sequential basis in all of our business lines. Putting us on pace to meet our commitment to shareholders to deliver a better second half compared to the first half of this year. This is a great start to the second half. Which we will expect to lead Usio to growing once again this year. The message is clear as a processor our job is to grow volumes to take advantage of the operating leverage that we have created. We want more transactions. And we want more volume. And we're doing it while maintaining our pricing discipline. And most…

Thank you. We will now begin the question and answer session. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Scott Buck of H. C. Wainwright. Please go ahead.

Hi, good afternoon guys. Thank you for taking my questions. Louis, I'm curious, you guys described a pretty sounds like a pretty strong pipeline of future opportunities. Are you seeing any change in sales cycles or anything along those lines that could potentially move some of those opportunities forward or maybe push them further out versus what you've seen historically? Well, pipeline strong. Greg wants to add anything to my comments, he's welcome to. But the sales process is very exciting for us. But we actually are focusing more on implementations. And trying to get these customers that we've already sold implemented. Which represent quite a bit of volume. So that's our focus is getting the merchants to implement faster. But sales pipeline for every division is rich. Craig, you want to add anything?

No. Just to echo that comment. Excuse me.

Okay. It's helpful. And it's a bit of a follow-up. Do you guys have levers in place where you can kind of push the pace of adoption? Or is that really outside of your control?

The implementations are out of our control. Yeah. If we could figure that out. That would be the secret sauce to accelerating us very fast. Okay. Each business is each business unit is nuanced and that the implementation of the adoption is slightly different. So there's really no one size fits all, but the UCL1 initiative is doing a lot better as far as standardizing kind of the input of information within UCO. But then it's all dependent on those customers to integrate at their will.

I see. Okay. That's helpful. And Louis, hopefully I didn't miss it I have a couple of calls going on at once here. But the federal government shutdown during the fourth quarter, has that the impact of that leak down into any of the state or local governments that you work with or would that potentially have any impact on the business during the fourth quarter?

Well, when SNAP payments got suspended, we received numerous calls from cities and counties looking to bridge those payments on their own. And it was very heartening to hear that some of these new cities that we've never talked before and counties knew about us and reached out to us. Some of those programs they're going to go forward but they're not going to go forward on the basis that it could have been because it looks like we're going to be out of the government shutdown. So Yeah. Some were pushed out. We I think they're on hold pending the movement of the federal government and opening the government back up. Okay. But nice to know that you're the first call they make. Great. And then last thing, in terms of cash levels, you mentioned M&A. Could you just kind of run through what kind of criteria you would be looking for in a potential transaction?

Yeah. I would go through this. I had this question quite a bit. You know, we're very strict. On what we acquire. And our criteria is threefold. One, it's got to provide some type of synergy. The synergy could come through people, industry, or technologies. We need to be able to buy it right. And the third thing is we need to whatever we're buying shouldn't have any issues you know, a problem that we think we can fix because we don't want to take our focus off of growing the company our organic growth that we have in sight.

Got it. Okay. And then I guess if I could squeeze just one last thing in. More of a housekeeping question. What's remaining on the current repurchase authorization?

Yes, sir. This is Michael. We renewed that at the beginning of the year. So there's still another, you know, just over $3,000,000 remaining on that current plan.

Okay. Perfect. Well, I appreciate the time, guys. Congrats on the progress and looking forward to seeing what you do the rest of the second half.

Our next question comes from Jon Robert Hickman of Ladenburg. Please go ahead. Pardon me. Just one moment. Jon, your line is live.

Okay. Hey, Louis. Can you hear me? Yes. Hello? I can hear you. Okay. I'd like to circle back on your comments on the recurring revenue, particularly in the ACH business. What's changed that it's largely recurring now?

All of our business has been marginally recurring. It's just when we compare to last year, had quite a few one-time events.

Could you That we earn revenue. Such as?

Yeah. What was we've created a large bankruptcy distribution with a large card order. Plastic, which we usually don't mark up much at all.

Okay. Okay. So going forward, don't think gonna get like, I guess you can't ever count out the future but you if you don't get those one-time events, then rest of the revenues largely coming from the same customers and that should continue. Is that is that what I'm supposed to get out of that?

No. You're what you're supposed to get out of it is our comp last year had one-time events. We may have one-time events in the future. In fact, we've already become public. You know, at the end of this year, we're gonna print the voter registration cards. You know, a large portion of them for Texas. While that's a recurring account, it only occurs every two years. So that will be another example that will occur in the fourth quarter of this year. We'll continue to get card orders but probably not at the scale that we got in Q3 of last year. So it's just a comp issue, but you can count on the revenue that we had this quarter was almost completely recurring. They're from existing customers that will continue to be customers. We'll continue to bring on new customers that have recurring business as well. To add to them.

Okay. And then I have a question for Houston. So I think you said credit card processing volumes were up 75% year over year? That accurate?

I think I think you will. It's for Greg. Yeah. I think it's Jon. Right?

Okay. Sorry. Yes. So The transactions process. Yes. Transactions process. So can you I guess for it's confusing that transaction volumes were up that much and revenues were up like 5%.

Jon, we explained this to you when we met with you in California. The transactions for credit cards that when we report the operating metrics include penless debit. The revenue associated with penless debit goes into ACH and complementary services because Penless is an alternative to ACH. And at some point, we believe that it will diminish our ACH traffic just like that now in the clearinghouse when they get their act together and allow us to do debits. So the metrics operating metrics were up transaction-wise and also remember on credit cards, transactions don't really mean anything to us. It's the dollars process. That's how we earn revenue.

Okay. Thank you. Appreciate the reminder.

This concludes our question and answer session as well as today's conference call. You may now disconnect your lines. Thank you for participating and have a great day.