Usio's 2025 Q2 Earnings Call: Unpacking Contradictions in Revenue Growth, Margins, and M&A Strategy

Organic Revenue Growth Rate Considerations, Gross Margin Outlook and Drivers, M&A Activity and Criteria, Visibility for 2025 and Revenue Cadence



Strong Financial Performance Despite Challenges:
- Usio reported solid results across key performance metrics, including a 15% increase in total payment dollars processed to $1.9 billion, led by ACH with a 19% increase in dollars processed.
- The gross margin improved to 25.8%, with gross profits increasing by $350,000 to $5.1 million.
- Despite revenue challenges due to a surprise loss of a major client in card issuing, the company maintained profitability with adjusted EBITDA of over $500,000.

ACH and PINLess Debit Growth:
- ACH revenues grew by over 30% for the second consecutive quarter, with electronic check dollars processed up 19%.
- The PINLess debit business nearly doubled in the quarter, significantly contributing to growth and profitability.
- This growth is attributed to strong client adoption and the integration of Usio 1 initiatives.

Card Issuing and Payment Acceptance:
- Card issuance revenue was nominally down in the quarter but up for the year-to-date, with transactions up 69% and dollar volume up 9%.
- The loss of one major account in card issuing impacted total revenue, leading to a decrease in interest income.
- Despite this setback, new business growth in card issuance is expected to drive future results as new implementations ramp up.

Operational Efficiency and Margin Improvement:
- The gross margin improvement was driven by a mix of higher-margin products, operational efficiencies, and reduced costs.
- The company achieved further efficiencies through improved machinery and reduced personnel costs, demonstrating commitment to enhancing profitability.
- These improvements align with strategic objectives to enhance margins and leverage operational efficiencies.