Summary of Usio Conference Call Company Overview - **Company Name**: Usio (Ticker: USIO) - **Industry**: Fintech Payment Processing - **Founded**: 27 years ago, evolved into a growth-oriented company over the last eight years under current CEO Louis Hoch [3][4] Core Business Segments 1. **ACH Processing** - Industry leader in ACH (Automated Clearing House) processing with significant transaction volume - Unique tech stack allows for direct access to the Federal Reserve, providing competitive advantages [7][8][10] - High margin business with approximately 70% gross margin [45] 2. **Payment Facilitation** - Focuses on credit and debit card processing, primarily through integrated software vendors (ISVs) - Unique go-to-market strategy leveraging ISVs as sales extensions, leading to organic growth [14][15][18] - Lower gross margin at about 9% due to the payment ecosystem structure [47][49] 3. **Card Issuing** - Issues branded MasterCard for various use cases, including government payouts and guaranteed income programs - Significant presence in major U.S. cities, with unique programs like "Cash for Trash" [19][21][23] - Gross margin ranges from 30% to 40% depending on spoilage [45] 4. **Output Solutions** - Provides print and mail services, generating electronic documents and statements - Operates with a gross margin around 20%, which is improving as electronic document generation increases [29][35] Financial Performance - **Revenue Generation**: Approximately $20 million per quarter, with expectations for significant growth in Q3 and Q4 [44][51] - **Overall Gross Margin**: Targeting around 24% to 25% across the company [50] Growth Opportunities - Usio aims for a 20% annual growth rate, although current year projections are lower due to implementation delays of large deals [51][52] - Strong pipeline of sold deals, with operating leverage expected to expand adjusted EBITDA margins to at least 10% of sales [53] Future Vision - Plans to innovate and add more payment channels, including stablecoin payments and biometric solutions [56][57] - Aiming for potential acquisition or merger opportunities in the next decade [56] Additional Insights - The company is well-funded and generates its own cash, minimizing the need for external financing [53] - Internal initiative "UCO1" focuses on cross-selling across business lines, enhancing customer engagement and revenue potential [36][41] Conclusion - Usio is positioned for future growth with a diversified product offering, strong market presence, and innovative technology solutions in the fintech space. The company is focused on expanding its customer base and enhancing its service offerings to capitalize on emerging payment trends.

About Usio, Inc. Usio, Inc. (Nasdaq: USIO), a leading, cloud-based, integrated FinTech electronic payment solutions provider, offers a wide range of payment solutions to merchants, billers, banks, service bureaus, integrated software vendors and card issuers. The Company operates credit, debit/prepaid, and ACH payment processing platforms to deliver convenient, world-class payment solutions and services to clients through its unique payment facilitation platform as a service. The Company, through its Usio O ...

分组1 - Usio Inc reported a quarterly loss of $0.01 per share, matching the Zacks Consensus Estimate, compared to break-even earnings per share a year ago [1] - The company posted revenues of $19.96 million for the quarter ended June 2025, missing the Zacks Consensus Estimate by 11.32% and down from $20.08 million a year ago [2] - Usio shares have increased by approximately 29.8% since the beginning of the year, outperforming the S&P 500's gain of 7.1% [3] 分组2 - The earnings outlook for Usio is uncertain, with current consensus EPS estimates at $0.03 for the coming quarter and $0.08 for the current fiscal year [7] - The Zacks Rank for Usio is currently 4 (Sell), indicating expected underperformance in the near future [6] - The Financial Transaction Services industry, to which Usio belongs, is ranked in the top 41% of Zacks industries, suggesting a favorable industry outlook [8] 分组3 - Nayax, another company in the Financial Transaction Services industry, is expected to report quarterly earnings of $0.10 per share, reflecting a year-over-year increase of 225% [9] - Nayax's anticipated revenues are $97.8 million, representing a 25.2% increase from the previous year [9]

Financial Data and Key Metrics Changes - Total revenues were slightly down, impacted by weakness in card issuing and a decrease in interest income, but ACH revenues grew over 30% for the second consecutive quarter [4][5] - Total payment dollars processed increased by 15% to $1.9 billion, with ACH processing up 19% and card processing up 9% [5] - Gross margins widened by 185 basis points to 25.8%, leading to an increase in gross profits by $350,000 to $5.1 million [6][7] - Adjusted EBITDA was reported at just over $500,000, indicating continued profitability [7][26] Business Line Data and Key Metrics Changes - ACH revenues increased by 32% in Q2, with electronic check transaction volume up 33% and electronic check dollars processed up 19% [17] - Card issuing saw a nominal decline in revenue for the quarter but improved year-over-year margins and adjusted EBITDA [22] - Output Solutions processed over 5.4 million mail pieces and more than 20 million electronic documents, with a slight increase in transaction pieces processed [18][20] Market Data and Key Metrics Changes - The company is adjusting its revenue guidance expectations to a growth range of 5% to 12% for the year due to prolonged customer implementation delays [10] - The company is focusing on diverse markets, which helps mitigate risks associated with macroeconomic fluctuations [50] Company Strategy and Development Direction - The UCO One initiative aims to integrate various product offerings and improve cross-selling opportunities among existing clients [11][31] - The company is committed to enhancing profitability through cost reductions and improved productivity across all business lines [14][21] - The company is exploring acquisition opportunities in a more active M&A environment, focusing on strategic value and favorable valuation multiples [33][35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in generating strong cash flow and improving liquidity over the remainder of the year [8] - The company is optimistic about the second half of the year, citing a strong portfolio of existing clients and numerous initiatives underway [15][26] - Management acknowledged the impact of lost accounts on revenue but indicated efforts to backfill these losses quickly [22] Other Important Information - The company is implementing additional cost reductions and expects to see a decrease in certain expenses in future quarters [7] - The company is quadrupling its check printing capacity to capitalize on growth opportunities in check-dependent use cases [21] Q&A Session Summary Question: Can you expand on the number of new programs in implementation? - Management confirmed there are currently 20 card issuing programs in implementation, which is the highest in history [30] Question: What is the outlook for M&A activity? - Management indicated that M&A activity is more active now, with several deals fitting their criteria [33] Question: What contributed to the improvement in gross margins? - Management attributed the improvement to a mix of factors, including strong growth in ACH and efficiency gains [39] Question: How should investors view the revenue guidance range? - Management explained that the range is influenced by customer implementation timelines, with potential for higher revenue if implementations accelerate [45] Question: What was the revenue impact from the amusement park account loss? - Management stated that the loss cost approximately $2 million in quarterly revenue [55]

[Executive Summary](index=1&type=section&id=Executive%20Summary) This section provides an overview of Usio's Q2 2025 financial and operational performance, highlighting key achievements and strategic directions [Q2 2025 Performance Highlights](index=1&type=section&id=Q2%202025%20Performance%20Highlights) Usio reported a 15% increase in total payment dollars processed and expanded gross margins for Q2 2025, achieving its seventh consecutive quarter of positive Adjusted EBITDA despite a net loss of $0.4 million - Total payment dollars processed through all payment channels increased **15%** versus the prior year period[1](index=1&type=chunk) - Gross margin expanded, marking the **seventh consecutive quarter of positive Adjusted EBITDA**[1](index=1&type=chunk) Q2 2025 Key Financial Highlights | Metric | Q2 2025 (USD) | Q2 2024 (USD) | Change | Source | | :--------------------- | :------ | :------ | :----- | :----- | | Net Loss | ($0.4M) | $0.1M | Down | [4] | | Adjusted EBITDA | $0.5M | $0.8M | Down | [4] | [CEO Commentary and Strategic Initiatives](index=1&type=section&id=CEO%20Commentary%20and%20Strategic%20Initiatives) CEO Louis Hoch highlighted improvements across strategic objectives, including strong processing growth, positive operating cash flow, and expanded margins, while implementing a new 'Usio One' go-to-market strategy and investing in new technologies - The company is implementing a new 'Usio One' go-to-market strategy, reducing costs, improving efficiency, and investing in new technologies such as wearables and biometric payment systems[2](index=2&type=chunk) - More new programs are in implementation across all businesses than at any time in the company's history[2](index=2&type=chunk) - A new enterprise customer in the card business has the potential to consistently generate over **$100 million in annual recurring processing volume**[5](index=5&type=chunk) [Operational Performance Review](index=3&type=section&id=Operational%20Performance%20Review) This section details Usio's processing and transaction volumes, along with segment-specific performance trends for Q2 2025 [Overall Processing and Transaction Volumes](index=3&type=section&id=Overall%20Processing%20and%20Transaction%20Volumes) In the second quarter of 2025, Usio experienced significant growth in overall processing volumes, with total payment transactions increasing by 26% and total payment dollars processed rising by 15% year-over-year Q2 2025 Processing Volumes | Metric | Q2 2025 | Q2 2024 | Change | Source | | :-------------------------- | :-------- | :-------- | :----- | :----- | | Total Payment Transactions (M) | 14.1M | N/A | +26% | [6] | | Total Payment Dollars Processed (B) | $1.94B | $1.68B | +15% | [6] | [Segment-Specific Processing Trends](index=3&type=section&id=Segment-Specific%20Processing%20Trends) Usio's ACH and PINless debit services showed strong growth in Q2 2025, while credit card processing volumes also increased, despite significant declines in the prepaid card business Q2 2025 Segment Processing Volume Changes (YoY) | Segment | Metric | Change | Source | | :-------------------- | :-------------------- | :----- | :----- | | ACH Electronic Check | Dollar Volume | +19% | [2, 7] | | ACH Electronic Check | Transactions | +33% | [2, 7] | | ACH Returned Check | Transactions | +32% | [2, 7] | | PINless Debit | Transactions | +144% | [2] | | PINless Debit | Dollars Processed | +93% | [2] | | Credit Card | Dollars Processed | +9% | [7] | | Credit Card | Transactions Processed | +69% | [7] | | Prepaid Card | Card Load Volume | -51% | [7] | | Prepaid Card | Transactions Processed | -37% | [7] | | Prepaid Card | Purchase Volume | -23% | [7] | | Output Solutions | Mail Pieces Processed | +3% | [7] | | Output Solutions | Electronic Documents Processed | -3% | [7] | [Financial Performance](index=3&type=section&id=Financial%20Performance) This section provides a detailed analysis of Usio's financial results for Q2 and H1 2025, covering revenues, profits, expenses, and cash flows [Second Quarter 2025 Financial Results](index=3&type=section&id=Second%20Quarter%202025%20Financial%20Results) Usio's Q2 2025 consolidated revenues saw a slight decline, primarily due to the prepaid card services business, though this was largely offset by strong growth in ACH and complementary services, leading to an operating loss and a net loss despite expanded gross margins [Revenue Breakdown](index=3&type=section&id=Q2%20Revenue%20Breakdown) This subsection details Usio's revenue performance across its various business segments for Q2 2025 Q2 2025 Revenue by Segment | Segment | Q2 2025 Revenue (USD) | Q2 2024 Revenue (USD) | $ Change (USD) | % Change | Source | | :-------------------------------- | :-------------- | :-------------- | :------- | :------- | :----- | | ACH and complementary services | $5,192,224 | $3,894,330 | $1,297,894 | 33% | [9] | | Credit card | $7,045,030 | $7,261,268 | ($216,238) | (3)% | [9] | | Prepaid card services | $2,726,410 | $3,673,418 | ($947,008) | (26)% | [9] | | Output Solutions | $4,642,901 | $4,686,869 | ($43,968) | (1)% | [9] | | Total Revenue | $19,960,990 | $20,079,888 | ($118,898) | (1)% | [9] | [Gross Profit and Margins](index=3&type=section&id=Q2%20Gross%20Profit%20and%20Margins) This subsection presents Usio's gross profit and margin performance for Q2 2025, highlighting efficiency improvements Q2 Gross Profit and Margins | Metric | Q2 2025 | Q2 2024 | Change | Source | | :---------------- | :-------- | :-------- | :----- | :----- | | Gross Profit (USD) | $5.1M | $4.8M | +$0.3M | [9] | | Gross Margin | 25.8% | 23.9% | +1.9 pp | [9] | - Gross margin expanded by **185 basis points** compared to Q2 2024, driven by mix and efficiency enhancements[4](index=4&type=chunk) [Operating Expenses (SG&A)](index=3&type=section&id=Q2%20Operating%20Expenses%20(SG%26A)) This subsection analyzes Usio's Selling, General, and Administrative expenses for Q2 2025, including key drivers and future outlook Q2 SG&A Expenses | Metric | Q2 2025 (USD) | Q2 2024 (USD) | Change | Source | | :------------- | :-------- | :-------- | :----- | :----- | | SG&A Expenses | $4.6M | $4.0M | +$0.6M | [10] | - The increase in SG&A was primarily due to several one-time expenses related to sponsorship and marketing events, insurance renewals, professional fees, and other one-time expense accruals[4](index=4&type=chunk)[10](index=10&type=chunk) - SG&A expenses are expected to be significantly lower in the second half of the year, resulting in only a nominal increase for full-year 2025 compared to 2024[4](index=4&type=chunk)[10](index=10&type=chunk) [Net Income (Loss) and Adjusted EBITDA](index=3&type=section&id=Q2%20Net%20Income%20(Loss)%20and%20Adjusted%20EBITDA) This subsection reviews Usio's net income (loss) and Adjusted EBITDA for Q2 2025, providing insights into profitability Q2 Net Income (Loss) and Adjusted EBITDA | Metric | Q2 2025 (USD) | Q2 2024 (USD) | Change | Source | | :-------------------- | :-------- | :-------- | :----- | :----- | | Operating (Loss) | ($0.4M) | ($0.2M) | Down | [11] | | Net Income (Loss) | ($0.4M) | $0.1M | Down | [11] | | (Loss) Per Share | ($0.01) | $0.00 | Down | [11] | | Adjusted EBITDA | $0.5M | $0.8M | Down | [4, 11] | - The net loss in Q2 2025 was approximately **$0.4 million**, compared to net income of $0.1 million in Q2 2024, with the prior year benefiting from a **$0.3 million employee retention tax credit**[11](index=11&type=chunk) [Six Months Ended June 30, 2025 Financial Results](index=4&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20Financial%20Results) For the first half of 2025, Usio's total revenues increased, driven by growth across most business lines except prepaid card services, with slight improvements in gross profit and margins, but increased SG&A expenses contributed to an operating loss and a net loss, while operating cash flow significantly improved [Revenue Breakdown](index=4&type=section&id=H1%20Revenue%20Breakdown) This subsection details Usio's revenue performance across its various business segments for the first half of 2025 H1 2025 Revenue by Segment | Segment | H1 2025 Revenue (USD) | H1 2024 Revenue (USD) | $ Change (USD) | % Change | Source | | :-------------------------------- | :-------------- | :-------------- | :------- | :------- | :----- | | ACH and complementary services | $10,236,741 | $7,776,064 | $2,460,677 | 32% | [9] | | Credit card | $14,923,724 | $14,822,002 | $101,722 | 1% | [9] | | Prepaid card services | $5,633,861 | $7,014,642 | ($1,380,781) | (20)% | [9] | | Output Solutions | $10,375,768 | $10,224,792 | $150,976 | 1% | [9] | | Total Revenue | $41,970,040 | $41,050,274 | $919,766 | 2% | [9, 12] | [Gross Profit and Margins](index=4&type=section&id=H1%20Gross%20Profit%20and%20Margins) This subsection presents Usio's gross profit and margin performance for the first half of 2025, highlighting efficiency improvements H1 Gross Profit and Margins | Metric | H1 2025 | H1 2024 | Change | Source | | :---------------- | :-------- | :-------- | :----- | :----- | | Gross Profit (USD) | $9.9M | $9.7M | +$0.2M | [13] | | Gross Margin | 23.7% | 23.5% | +0.2 pp | [13] | [Operating Expenses (SG&A)](index=4&type=section&id=H1%20Operating%20Expenses%20(SG%26A)) This subsection analyzes Usio's Selling, General, and Administrative expenses for the first half of 2025, including key drivers H1 SG&A Expenses | Metric | H1 2025 (USD) | H1 2024 (USD) | Change | Source | | :------------- | :-------- | :-------- | :----- | :----- | | SG&A Expenses | $8.8M | $8.1M | +9% | [14] | - The increase in SG&A was primarily related to several one-time expenses for sponsorship and marketing events, annual insurance renewals, professional fees, and franchise taxes[14](index=14&type=chunk) [Net Income (Loss) and Adjusted EBITDA](index=4&type=section&id=H1%20Net%20Income%20(Loss)%20and%20Adjusted%20EBITDA) This subsection reviews Usio's net income (loss) and Adjusted EBITDA for the first half of 2025, providing insights into profitability H1 Net Income (Loss) and Adjusted EBITDA | Metric | H1 2025 (USD) | H1 2024 (USD) | Change | Source | | :-------------------- | :-------- | :-------- | :----- | :----- | | Operating (Loss) | ($0.6M) | ($0.5M) | Down | [15] | | Net Income (Loss) | ($0.6M) | ($0.2M) | Down | [15] | | (Loss) Per Share | ($0.02) | ($0.01) | Down | [15] | | Adjusted EBITDA | $1.17M | $1.59M | Down | [37] | - The net loss for H1 2025 was approximately **$0.6 million**, compared to a net loss of $0.2 million in H1 2024, primarily due to the absence of a **$0.3 million employee retention tax credit** received in the prior year[15](index=15&type=chunk) [Operating Cash Flow and Financial Position](index=4&type=section&id=H1%20Operating%20Cash%20Flow%20and%20Financial%20Position) This subsection details Usio's operating cash flow and overall financial position for the first half of 2025 H1 Operating Cash Flow and Cash Position | Metric | H1 2025 (USD) | H1 2024 (USD) | Change | Source | | :-------------------------- | :-------- | :-------- | :----- | :----- | | Operating Cash Flows | $1.1M | $0.5M | +$0.6M | [16] | | Cash and Cash Equivalents (as of June 30) | $7.5M | N/A | N/A | [16] | - The increase in operating cash flow was primarily driven by a **reduction in accounts receivable**[16](index=16&type=chunk) [Business Outlook and Capital Management](index=2&type=section&id=Business%20Outlook%20and%20Capital%20Management) This section outlines Usio's revised revenue guidance and its strategic approach to capital deployment and potential M&A activities [Revised Revenue Guidance](index=2&type=section&id=Revised%20Revenue%20Guidance) Due to prolonged customer-caused implementation delays with two large national accounts, Usio has adjusted its full-year revenue guidance to 5–12% growth - Full-year revenue guidance adjusted to **5–12% growth**, down from previous expectations, due to prolonged customer-caused implementation delays with two large national accounts[5](index=5&type=chunk) [Capital Deployment and M&A Strategy](index=2&type=section&id=Capital%20Deployment%20and%20M%26A%20Strategy) Usio maintains a strong financial position and continues to strategically deploy capital, including over $700,000 in share repurchases year-to-date, while also preserving liquidity for potential merger and acquisition opportunities - Over **$700,000** has been expended on share repurchases so far this year[5](index=5&type=chunk) - The company maintains sufficient liquidity to opportunistically capitalize on a more active merger and acquisition market to accelerate growth through acquisition[5](index=5&type=chunk) [Corporate Information](index=5&type=section&id=Corporate%20Information) This section provides an overview of Usio, Inc., its business activities, and details regarding upcoming investor events and contact information [About Usio, Inc.](index=5&type=section&id=About%20Usio%2C%20Inc.) Usio, Inc. is a leading cloud-based FinTech company providing integrated electronic payment solutions, including credit, debit/prepaid, and ACH processing, as well as Output Solutions for electronic bill presentment and document services, headquartered in San Antonio, Texas - Usio, Inc. (Nasdaq: USIO) is a leading FinTech company operating a full stack of integrated, cloud-based electronic payment and embedded financial solutions[1](index=1&type=chunk)[20](index=20&type=chunk) - The company offers a wide range of payment solutions to merchants, billers, banks, service bureaus, integrated software vendors, and card issuers[20](index=20&type=chunk) - Usio operates credit, debit/prepaid, and ACH payment processing platforms and provides electronic bill presentment, document composition, and printing/mailing services through its Usio Output Solutions division[20](index=20&type=chunk) [Investor Events and Contact](index=4&type=section&id=Investor%20Events%20and%20Contact) Usio has scheduled several upcoming investor events, including virtual and in-person conferences, and provided details for its Q2 2025 financial results conference call and webcast, along with investor relations contact information Upcoming Investor Events | Event Type | Date | Conference | Location | | :----------- | :----------- | :------------------------------------------ | :----------------------------------- | | Virtual | Aug 11–13 | Oppenheimer 28th Annual Technology, Internet & Communications Conference | Virtual | | In Person | Sep 8–10 | H.C. Wainwright 27th Annual Global Investment Conference | Lotte Hotel, New York, New York | | In Person | Oct 19–21 | LD Micro Main Event XIX | Hotel Del Coronado, San Diego, California | - Usio's management hosted a conference call on August 6, 2025, to review financial results and provide a business update, with replay available through August 20, 2025[18](index=18&type=chunk)[19](index=19&type=chunk) - Investor Relations contact: Paul Manley, Senior Vice President, Investor Relations, paul.manley@usio.com, 612-834-1804[27](index=27&type=chunk) [Non-GAAP Financial Measures](index=5&type=section&id=Non-GAAP%20Financial%20Measures) This section defines Adjusted EBITDA as a key non-GAAP financial measure and provides its reconciliation to GAAP operating loss for Q2 and H1 2025 [Definition and Reconciliation](index=5&type=section&id=Definition%20and%20Reconciliation) This section defines Adjusted EBITDA as a non-GAAP financial measure used by management to assess operating performance, excluding non-cash costs and non-recurring items, and provides a reconciliation of GAAP operating loss to Adjusted EBITDA for both the three and six months ended June 30, 2025 and 2024 - Adjusted EBITDA is a non-GAAP financial measure, defined as operating income (loss) before interest, taxes, depreciation, amortization of intangibles, non-cash stock option costs, and certain non-recurring items[22](index=22&type=chunk)[25](index=25&type=chunk) - Management believes Adjusted EBITDA is helpful to investors in evaluating the Company's operating performance by excluding items not indicative of its results of operations[23](index=23&type=chunk) Reconciliation of GAAP Operating (Loss) to Adjusted EBITDA | Metric | Q2 2025 (USD) | Q2 2024 (USD) | H1 2025 (USD) | H1 2024 (USD) | Source | | :------------------------------------ | :-------- | :-------- | :-------- | :-------- | :----- | | Operating (loss) | ($396,970) | ($208,941) | ($636,554) | ($490,898) | [37] | | Depreciation and amortization | $464,599 | $547,849 | $960,369 | $1,124,003 | [37] | | EBITDA | $67,629 | $338,908 | $323,815 | $633,105 | [37] | | Non-cash stock-based compensation expense, net | $434,255 | $460,061 | $844,317 | $959,334 | [37] | | Adjusted EBITDA | $501,884 | $798,969 | $1,168,132 | $1,592,439 | [37] | | Adjusted EBITDA margins | 2.5% | 4.0% | 2.8% | 3.9% | [37] | [Condensed Consolidated Financial Statements](index=7&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents Usio's condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and changes in stockholders' equity [Balance Sheets](index=7&type=section&id=Balance%20Sheets) The condensed consolidated balance sheets provide a snapshot of Usio's financial position as of June 30, 2025, compared to December 31, 2024, detailing assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheets Highlights | Metric | June 30, 2025 (USD) | December 31, 2024 (USD) | Source | | :-------------------------- | :-------------- | :---------------- | :----- | | Total Assets | $108,351,847 | $107,208,447 | [29] | | Total Liabilities | $89,618,996 | $88,051,484 | [29] | | Total Stockholders' Equity | $18,732,851 | $19,156,963 | [29] | | Cash and cash equivalents | $7,506,411 | $8,056,891 | [29] | [Statements of Operations](index=9&type=section&id=Statements%20of%20Operations) The condensed consolidated statements of operations present Usio's revenues, costs, and expenses, leading to operating income (loss) and net income (loss) for the three and six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Operations Highlights | Metric | Q2 2025 (USD) | Q2 2024 (USD) | H1 2025 (USD) | H1 2024 (USD) | Source | | :-------------------------- | :-------- | :-------- | :-------- | :-------- | :----- | | Revenues | $19,960,990 | $20,079,888 | $41,970,040 | $41,050,274 | [31] | | Gross profit | $5,140,069 | $4,799,814 | $9,949,212 | $9,653,509 | [31] | | Operating (loss) | ($396,970) | ($208,941) | ($636,554) | ($490,898) | [31] | | Net income (loss) | ($366,654) | $75,492 | ($601,624) | ($174,696) | [31] | | Basic (Loss) Per Share | ($0.01) | $0.00 | ($0.02) | ($0.01) | [31] | [Statements of Cash Flows](index=10&type=section&id=Statements%20of%20Cash%20Flows) The condensed consolidated statements of cash flows detail the cash generated and used by Usio's operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Cash Flows Highlights | Metric | H1 2025 (USD) | H1 2024 (USD) | Source | | :------------------------------------ | :-------- | :-------- | :----- | | Net cash provided by operating activities | $1,110,326 | $457,772 | [33] | | Net cash (used in) investing activities | ($747,167) | ($455,057) | [33] | | Net cash provided by financing activities | $2,463,501 | $2,525,199 | [33] | | Change in cash, cash equivalents, etc. | $2,826,660 | $2,527,914 | [33] | [Statements of Changes in Stockholders' Equity](index=11&type=section&id=Statements%20of%20Changes%20in%20Stockholders'%20Equity) The consolidated statements of changes in stockholders' equity outline the movements in Usio's equity accounts, including common stock, additional paid-in capital, treasury stock, deferred compensation, and accumulated deficit, for the six months ended June 30, 2025 and 2024 Changes in Stockholders' Equity Highlights (H1 2025) | Metric | Balance at Dec 31, 2024 (USD) | Net (loss) for the period (USD) | Purchase of treasury stock costs (USD) | Balance at June 30, 2025 (USD) | Source | | :-------------------------- | :---------------------- | :------------------------ | :----------------------- | :----------------------- | :----- | | Total Stockholders' Equity | $19,156,963 | ($601,624) | ($708,298) | $18,732,851 | [29, 31, 34] | - The company repurchased treasury stock totaling **$708,298** during the six months ended June 30, 2025[33](index=33&type=chunk)[34](index=34&type=chunk) [Disclaimers](index=6&type=section&id=Disclaimers) This section provides important disclaimers regarding forward-looking statements, outlining inherent risks and the company's policy on updating such information [Forward-Looking Statements](index=6&type=section&id=Forward-Looking%20Statements) This section contains a standard disclaimer regarding forward-looking statements, highlighting that such statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from expectations, advising against undue reliance, and noting no obligation to update them - Forward-looking statements are identified by words such as 'believe,' 'should,' 'intend,' 'look forward,' 'anticipate,' 'schedule,' and 'expect'[26](index=26&type=chunk) - These statements are subject to certain risks and uncertainties inherent in the Company's business, including economic downturns, management of growth, loss of key resellers, relationships with networks and providers, security risks, stock price volatility, and the need for additional financing[26](index=26&type=chunk) - The Company assumes no obligation to update any forward-looking statements, except as required by law[26](index=26&type=chunk)

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and stockholders' equity, along with detailed notes on accounting policies, leases, accrued expenses, loans, stock-based compensation, income taxes, related party transactions, segment reporting, and commitments and contingencies for the periods ended June 30, 2025 and 2024 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | Dec 31, 2024 | Jun 30, 2025 | Change | | :-------------------------------- | :----------- | :----------- | :----- | | Total Assets | $107,208,447 | $108,351,847 | +$1,143,400 | | Total Liabilities | $88,051,484 | $89,618,996 | +$1,567,512 | | Total Stockholders' Equity | $19,156,963 | $18,732,851 | -$424,112 | | Cash and cash equivalents | $8,056,891 | $7,506,411 | -$550,480 | | Settlement processing assets | $47,104,006 | $62,891,265 | +$15,787,259 | | Prepaid card load assets | $25,648,688 | $13,064,060 | -$12,584,628 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenues | $19,960,990 | $20,079,888 | $41,970,040 | $41,050,274 | | Gross profit | $5,140,069 | $4,799,814 | $9,949,212 | $9,653,509 | | Operating (loss) | $(396,970) | $(208,941) | $(636,554) | $(490,898) | | Net income (loss) | $(366,654) | $75,492 | $(601,624) | $(174,696) | | Basic EPS | $(0.01) | $0.00 | $(0.02) | $(0.01) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Metric | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :----- | | Net cash provided by operating activities | $1,110,326 | $457,772 | +$652,554 | | Net cash (used in) investing activities | $(747,167) | $(455,057) | -$292,110 | | Net cash provided by financing activities | $2,463,501 | $2,525,199 | -$61,698 | | Change in cash, cash equivalents, settlement processing assets, prepaid card load assets, customer deposits and merchant reserves | $2,826,660 | $2,527,914 | +$298,746 | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) | Metric | Dec 31, 2024 | Jun 30, 2025 | Change | | :-------------------------------- | :----------- | :----------- | :----- | | Total Stockholders' Equity | $19,156,963 | $18,732,851 | -$424,112 | | Accumulated Deficit | $(68,032,656) | $(68,634,280) | -$601,624 | | Treasury Stock | $(5,770,592) | $(6,478,890) | -$708,298 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Basis of Presentation and Significant Accounting Policies](index=10&type=section&id=Note%201.%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) This note outlines the basis of financial statement preparation, significant accounting policies, and recent changes. A key change was the retrospective reclassification of prepaid card load obligations from operating to financing activities in the cash flow statement, and including settlement processing assets as cash equivalents, which did not impact net loss or total assets/liabilities/equity - The company retrospectively changed its cash flow presentation policy to include settlement processing assets as cash equivalents and reclassified prepaid card load obligations from operating to financing activities, effective December 31, 2024. This change increased operating cash flows for the six months ended June 30, 2024, by **$3.5 million** and assets held for customers by **$6.2 million**, with no impact on working capital, total assets, liabilities, equity, or net loss[20](index=20&type=chunk) - The company earns interest revenue on settlement processing assets (ACH and complementary services), prepaid card load assets (prepaid card services), and customer deposits (Output Solutions)[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk)[27](index=27&type=chunk) - The allowance for expected credit losses for accounts receivable remained at **$324,000** at June 30, 2025, and December 31, 2024[28](index=28&type=chunk) - Capitalized software costs for internal use were **$608,233** for the six months ended June 30, 2025, up from **$353,316** in the prior year[32](index=32&type=chunk) - The reserve for processing losses decreased to **$725,591** at June 30, 2025, from **$897,116** at December 31, 2024[38](index=38&type=chunk) | Revenue Source | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | ACH and complementary services | $5,192,224 | $3,894,330 | $10,236,741 | $7,776,064 | | Credit card | $7,045,030 | $7,261,268 | $14,923,724 | $14,822,002 | | Prepaid card services | $2,726,410 | $3,673,418 | $5,633,861 | $7,014,642 | | Output Solutions | $4,642,901 | $4,686,869 | $10,375,768 | $10,224,792 | | Interest - ACH and complementary services | $176,518 | $190,233 | $400,647 | $401,873 | | Interest - Prepaid card services | $134,823 | $334,624 | $317,484 | $737,365 | | Interest - Output Solutions | $43,084 | $39,146 | $81,815 | $73,536 | | **Total revenue** | **$19,960,990** | **$20,079,888** | **$41,970,040** | **$41,050,274** | [Note 2. Leases](index=15&type=section&id=Note%202.%20Leases) Operating lease expenses for facilities and office equipment were $151,568 for the three months ended June 30, 2025, an increase from $133,973 in the prior year | Period | Operating Lease Expenses | | :-------------------------- | :----------------------- | | 3 Months Ended Jun 30, 2025 | $151,568 | | 3 Months Ended Jun 30, 2024 | $133,973 | | 6 Months Ended Jun 30, 2025 | $302,256 | | 6 Months Ended Jun 30, 2024 | $266,105 | [Note 3. Accrued Expenses](index=15&type=section&id=Note%203.%20Accrued%20Expenses) Total accrued expenses decreased to $2.56 million at June 30, 2025, from $3.37 million at December 31, 2024, primarily due to reductions in accrued salaries, taxes, and processing loss reserves | Accrued Expense Category | Jun 30, 2025 | Dec 31, 2024 | | :----------------------- | :----------- | :----------- | | Accrued commissions | $599,189 | $425,486 | | Reserve for processing losses | $725,591 | $897,116 | | Other accrued expenses | $749,031 | $881,925 | | Accrued taxes | $159,377 | $474,561 | | Accrued salaries | $331,003 | $687,837 | | **Total accrued expenses** | **$2,564,191** | **$3,366,925** | [Note 4. Loans](index=15&type=section&id=Note%204.%20Loans) The company has an equipment loan for an Output Solutions folder and inserter, with future principal payments totaling $647,115. An older equipment loan was paid in full in March 2024. The company also maintains an undrawn $475,000 revolving line of credit and a $474,229 irrevocable letter of credit, both secured for a legal appeal bond - An equipment loan for **$165,996** (**3.95%** interest) was paid in full on its maturity date of March 20, 2024[51](index=51&type=chunk) - A new equipment loan for **$811,819** (**6.75%** interest) was entered into on October 1, 2023, maturing April 5, 2029, for an Output Solutions folder and inserter[52](index=52&type=chunk) - The company has an unsecured revolving line of credit with a maximum borrowing capacity of **$475,000**, maturing June 5, 2026, which remains undrawn[54](index=54&type=chunk) - An irrevocable letter of credit for **$474,229**, issued June 3, 2024, maturing June 3, 2026, has not been drawn upon. Both credit facilities support a bond requirement for the KDHM lawsuit appeal[55](index=55&type=chunk)[56](index=56&type=chunk) | Year Ending December 31, | Amount Due | | :----------------------- | :--------- | | 2025 (remainder of the year) | $74,525 | | 2026 | $158,043 | | 2027 | $169,048 | | 2028 | $180,818 | | 2029 | $64,681 | | **Total payments** | **$647,115** | [Note 5. Stockholders' Equity](index=16&type=section&id=Note%205.%20Stockholders%27%20Equity) Stockholders' equity decreased by $0.42 million to $18.73 million at June 30, 2025, from $19.16 million at December 31, 2024. This was influenced by net losses and treasury stock purchases, partially offset by issuances of common stock under equity incentive and employee stock purchase plans. Warrants issued in 2020 related to the IMS acquisition are amortized, with $27,615 and $55,228 amortized for the three and six months ended June 30, 2025, respectively - Warrants to purchase **945,599 shares** of common stock were issued on December 15, 2020, to KDHM, LLC, with an initial exercise price of **$4.23 per share**. These warrants became fully vested on December 15, 2023[58](index=58&type=chunk) - Amortization of these warrants, included in customer list intangible asset amortization, totaled **$27,615** for the three months and **$55,228** for the six months ended June 30, 2025 and 2024, respectively[58](index=58&type=chunk) [Note 6. Net Income (Loss) Per Share](index=17&type=section&id=Note%206.%20Net%20Income%20(Loss)%20Per%20Share) Basic and diluted net loss per common share was $(0.01) for the three months and $(0.02) for the six months ended June 30, 2025, compared to $0.00 and $(0.01) for the respective prior year periods. Warrants outstanding were anti-dilutive and thus not included in diluted EPS calculations | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net (loss) available to common shareholders | $(366,654) | $75,492 | $(601,624) | $(174,696) | | Basic EPS | $(0.01) | $0.00 | $(0.02) | $(0.01) | | Diluted EPS | $(0.01) | $0.00 | $(0.02) | $(0.01) | | Weighted average common shares outstanding (Basic/Diluted) | 26,456,411 | 26,534,407 | 26,577,052 | 26,454,848 | - **945,599** anti-dilutive warrants were outstanding at June 30, 2025 and 2024, and were not included in diluted EPS computation[61](index=61&type=chunk) [Note 7. Income Taxes](index=17&type=section&id=Note%207.%20Income%20Taxes) The company had a deferred tax asset of approximately $4.6 million, net of a $2.7 million valuation allowance, at June 30, 2025. It also holds approximately $21.8 million in net operating loss (NOL) carryforwards, with $8.8 million expiring between 2025 and 2037, and $13.0 million generated after 2017 that do not expire - Deferred tax asset of approximately **$4.6 million**, net of a **$2.7 million** valuation allowance, at June 30, 2025[63](index=63&type=chunk) - Total net operating loss carryforwards (NOLs) of approximately **$21.8 million** at June 30, 2025[64](index=64&type=chunk)[69](index=69&type=chunk) | Tax Year End | NOL (Expiring) | Expiration Year | | :----------- | :------------- | :-------------- | | 2005 | $1,275,415 | 2025 | | 2006 | $1,350,961 | 2026 | | 2007 | $1,740,724 | 2027 | | 2008 | $918,960 | 2028 | | 2009 | $835,322 | 2029 | | 2010 | $429,827 | 2030 | | 2013 | $504,862 | 2033 | | 2016 | $474,465 | 2036 | | 2017 | $1,267,336 | 2037 | | **Total Expiring NOLs** | **$8,797,872** | | - Approximately **$13.0 million** in NOLs generated since 2017 do not expire and can be carried forward indefinitely[68](index=68&type=chunk)[69](index=69&type=chunk) [Note 8. Related Party Transactions](index=19&type=section&id=Note%208.%20Related%20Party%20Transactions) The company purchased $4,756 and $4,402 of corporate sportswear and promotional items from Angry Pug Sportswear during the six months ended June 30, 2025 and 2024, respectively. The company's Chairman, President, CEO, and COO is a 50% owner of Angry Pug Sportswear LLC | Period | Purchases from Angry Pug Sportswear | | :-------------------------- | :-------------------------------- | | 6 Months Ended Jun 30, 2025 | $4,756 | | 6 Months Ended Jun 30, 2024 | $4,402 | - The company's Chairman, President, CEO, and COO is a **50%** owner of Angry Pug Sportswear LLC[70](index=70&type=chunk) [Note 9. Stock Based Compensation](index=19&type=section&id=Note%209.%20Stock%20Based%20Compensation) Stock-based compensation expenses decreased to $0.4 million for the three months and $0.8 million for the six months ended June 30, 2025, due to completed amortization of previously issued awards. The company withheld shares for tax purposes from officers, directors, and employees in both periods. In June 2024, significant restricted stock and RSU grants were made to officers, employees, and non-employee directors | Period | Stock-based Compensation Expenses | Shares Withheld for Taxes | Value of Shares Withheld | | :-------------------------- | :------------------------------ | :------------------------ | :----------------------- | | 3 Months Ended Jun 30, 2025 | $434,255 | N/A | N/A | | 3 Months Ended Jun 30, 2024 | $460,061 | N/A | N/A | | 6 Months Ended Jun 30, 2025 | $844,317 | 76,397 | $136,036 | | 6 Months Ended Jun 30, 2024 | $959,334 | 219,536 | $319,244 | - On June 21, 2024, the company granted **966,000 shares** of restricted common stock (10-year cliff vesting) and **277,200 restricted stock units** (3-year equal tranche vesting) to officers and employees, and **84,000 RSUs** (3-year vesting) to non-employee directors, all at an issue price of **$1.55 per share**[72](index=72&type=chunk)[73](index=73&type=chunk) [Note 10. Segment Reporting](index=20&type=section&id=Note%2010.%20Segment%20Reporting) The company operates in two reportable segments: Output Solutions and Merchant Services. For the three months ended June 30, 2025, Output Solutions' gross profit decreased while Merchant Services' gross profit increased, leading to an overall increase in consolidated gross profit. For the six months, both segments showed gross profit increases - Output Solutions offers electronic bill presentment, document composition, printing, and mailing services[76](index=76&type=chunk) - Merchant Services provides integrated electronic payment processing, including credit/debit card processing, ACH network services, and Mastercard-branded prepaid card programs[77](index=77&type=chunk) | Metric (3 Months Ended Jun 30, 2025) | Output Solutions | Merchant Services | Total | | :----------------------------------- | :--------------- | :---------------- | :---- | | Revenues | $4,685,985 | $15,275,005 | $19,960,990 | | Cost of services | $3,846,854 | $10,974,067 | $14,820,921 | | Gross profit | $839,131 | $4,300,938 | $5,140,069 | | | | | | | Metric (3 Months Ended Jun 30, 2024) | Output Solutions | Merchant Services | Total | | :----------------------------------- | :--------------- | :---------------- | :---- | | Revenues | $4,726,015 | $15,353,873 | $20,079,888 | | Cost of services | $3,790,529 | $11,489,545 | $15,280,074 | | Gross profit | $935,486 | $3,864,328 | $4,799,814 | | Metric (6 Months Ended Jun 30, 2025) | Output Solutions | Merchant Services | Total | | :----------------------------------- | :--------------- | :---------------- | :---- | | Revenues | $10,457,583 | $31,512,457 | $41,970,040 | | Cost of services | $8,372,664 | $23,648,164 | $32,020,828 | | Gross profit | $2,084,919 | $7,864,293 | $9,949,212 | | | | | | | Metric (6 Months Ended Jun 30, 2024) | Output Solutions | Merchant Services | Total | | :----------------------------------- | :--------------- | :---------------- | :---- | | Revenues | $10,298,328 | $30,751,946 | $41,050,274 | | Cost of services | $8,355,378 | $23,041,387 | $31,396,765 | | Gross profit | $1,942,950 | $7,710,559 | $9,653,509 | [Note 11. Commitments and Contingencies](index=23&type=section&id=Note%2011.%20Commitments%20and%20Contingencies) The company is involved in two significant legal proceedings: a breach of contract and trade secret misappropriation suit against former executives (Kauder, Pioletti, and Triple Pay Play), and a dispute with KDHM, LLC regarding an asset purchase agreement. In the KDHM case, an appeals court reversed a lower court's judgment against Usio on one claim, remanding others. The company has not recorded a contingency for the KDHM case, considering the risk of loss remote, and has credit facilities to cover potential bond requirements - Usio filed a lawsuit against former executives Ben Kauder and Nina Pioletti and their new company, Triple Pay Play, for breach of contract and misappropriation of trade secrets. The motion to dismiss by the defendants was denied in March 2025, and depositions are ongoing[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) - KDHM, LLC sued Usio Output Solutions, Inc. for breach of an asset purchase agreement, claiming improper transfer of **$317,000** in customer deposits. Usio counterclaimed, alleging misrepresentations and failure to disclose additional customer deposits by KDHM[87](index=87&type=chunk)[88](index=88&type=chunk)[89](index=89&type=chunk) - On April 2, 2025, the Fourth Court of Appeals reversed the trial court's judgment against Usio on KDHM's "money had and received claim" and remanded the remaining claims. KDHM's motion for reconsideration was denied[93](index=93&type=chunk) - The company has not recorded a contingency for the KDHM case, deeming the risk of loss remote. It has a **$475,000** undrawn line of credit and a **$474,229** irrevocable letter of credit to cover the appeal bond requirement[94](index=94&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, including an overview of its business, a summary of recent financial performance, material trends and uncertainties, critical accounting policies, key business metrics (including non-GAAP measures), and a detailed analysis of revenues, expenses, liquidity, and cash flows [Forward-Looking Statements Disclaimer](index=25&type=section&id=Forward-Looking%20Statements%20Disclaimer) - The report contains forward-looking statements subject to risks and uncertainties, and actual results may differ materially from expectations[97](index=97&type=chunk) - The company does not intend to update forward-looking statements after the report date, except as required by law[97](index=97&type=chunk) [Overview](index=25&type=section&id=Overview) - Usio is a cloud-based, Fintech payment processor providing payment acceptance (payment facilitation, prepaid card, electronic billing) and funds disbursement services[99](index=99&type=chunk) - The company has expanded its offerings from Electronic Bill Presentment and Payment (EBPP) to include ACH network services, PINless debit, Remotely Created Checks (RCC), account validation, and credit card payment facilitation (PayFac)[100](index=100&type=chunk) - In the first half of 2025, Usio completed development of a new EBPP offering[100](index=100&type=chunk) - The company is expanding into Real Time Payments (RTP) and enhancing existing products with improvements in reporting, data management, fraud/risk monitoring, and client onboarding[102](index=102&type=chunk) - The "One Usio" strategy aims to unify brand, sales, and payment offerings, including enhanced client onboarding, customer management, reporting, and a consolidated sales/marketing team[103](index=103&type=chunk) [Summary of Results](index=26&type=section&id=Summary%20of%20Results) - Q2 2025 revenues decreased **1%** to **$20.0 million** (vs. **$20.1 million** in Q2 2024), while six-month revenues increased **2%** to **$42.0 million** (vs. **$41.1 million** in H1 2024)[115](index=115&type=chunk)[116](index=116&type=chunk) - Revenue declines in Q2 2025 were primarily due to a **26%** decrease in prepaid card services (loss of key client's downstream customers) and a **3%** decrease in credit card business (loss of a meaningful PayFac customer, legacy portfolio attrition). Output Solutions also saw a **1%** decline due to the absence of one-time revenues[115](index=115&type=chunk) - Strong growth in ACH and complementary services (**33%** in Q2 2025) partially offset revenue declines, driven by organic growth and new client implementations[115](index=115&type=chunk) - SG&A expenses increased to **$4.6 million** in Q2 2025 (vs. **$4.0 million** in Q2 2024) due to one-time expenses (insurance renewals, marketing, travel, professional fees), but are anticipated to decline sequentially and remain relatively flat year-over-year[117](index=117&type=chunk)[164](index=164&type=chunk) | Metric (Q2 2025 vs Q2 2024) | Change | | :-------------------------- | :----- | | Credit card transactions | +69% | | Credit card dollars processed | +9% | | ACH (eCheck) transaction counts | +33% | | Returned check transactions | +32% | | Electronic check dollars processed | +19% | | Prepaid card load volumes | -51% | | Prepaid card transaction counts | -37% | | Prepaid card purchase volume | -23% | | Output Solutions total mail pieces processed | +3% | | Total dollar volumes processed (all business lines) | +15% (to $1.94 billion) | [Material Trends and Uncertainties](index=28&type=section&id=Material%20Trends%20and%20Uncertainties) - The Inflation Reduction Act's **1%** excise tax on stock repurchases may apply to the company's buyback program, which repurchased **$708,298** of stock in H1 2025[127](index=127&type=chunk) - Interest income is declining due to Federal Reserve rate cuts in late 2024, which reduced interest earnings on cash balances[128](index=128&type=chunk)[129](index=129&type=chunk) - Global economic activity is impacted by inflation, geopolitical concerns (Russia-Ukraine, Hamas-Israel), and international trade policy changes (tariffs), increasing the risk of lower consumer spending, bankruptcies, and higher credit losses[130](index=130&type=chunk)[131](index=131&type=chunk) [Critical Accounting Policies and Estimates](index=29&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Reserve for processing losses was **$725,591** at June 30, 2025, down from **$897,116** at December 31, 2024[136](index=136&type=chunk) - Allowance for expected credit losses for accounts receivable remained at **$324,000** at June 30, 2025, and December 31, 2024[137](index=137&type=chunk) - Revenue is recognized gross as a principal, not net as an agent, for electronic payment processing and related services[143](index=143&type=chunk) - Interest earned on customer balances (ACH, prepaid card, Output Solutions) is recognized as revenue in the respective business lines[144](index=144&type=chunk) [Key Business Metrics - Non-GAAP Financial Measures](index=32&type=section&id=Key%20Business%20Metrics%20-%20Non-GAAP%20Financial%20Measures) | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Operating (loss) | $(396,970) | $(208,941) | $(636,554) | $(490,898) | | Depreciation and amortization | $464,599 | $547,849 | $960,369 | $1,124,003 | | EBITDA | $67,629 | $338,908 | $323,815 | $633,105 | | Non-cash stock-based compensation expense, net | $434,255 | $460,061 | $844,317 | $959,334 | | **Adjusted EBITDA** | **$501,884** | **$798,969** | **$1,168,132** | **$1,592,439** | | Revenues | $19,960,990 | $20,079,888 | $41,970,040 | $41,050,274 | | **Adjusted EBITDA margins** | **2.5%** | **4.0%** | **2.8%** | **3.9%** | - The decrease in Adjusted EBITDA and margins was primarily due to higher SG&A expenses and lower interest revenues[147](index=147&type=chunk)[148](index=148&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) [Revenues](index=33&type=section&id=Revenues) Consolidated revenue for Q2 2025 decreased by 1% to $20.0 million, while for the six months ended June 30, 2025, it increased by 2% to $42.0 million. ACH and complementary services showed strong growth (33% in Q2, 32% in H1), offsetting declines in prepaid card services (26% in Q2, 20% in H1) and a slight decrease in credit card revenue (3% in Q2) | Revenue Source | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | ACH and complementary services | $5,192,224 | $3,894,330 | $10,236,741 | $7,776,064 | | Credit card | $7,045,030 | $7,261,268 | $14,923,724 | $14,822,002 | | Prepaid card services | $2,726,410 | $3,673,418 | $5,633,861 | $7,014,642 | | Output Solutions | $4,642,901 | $4,686,869 | $10,375,768 | $10,224,792 | | Interest - ACH and complementary services | $176,518 | $190,233 | $400,647 | $401,873 | | Interest - Prepaid card services | $134,823 | $334,624 | $317,484 | $737,365 | | Interest - Output Solutions | $43,084 | $39,146 | $81,815 | $73,536 | | **Total Revenue** | **$19,960,990** | **$20,079,888** | **$41,970,040** | **$41,050,274** | - ACH and complementary services revenue grew by **33%** in Q2 2025 and **32%** in H1 2025, driven by increased check dollar volume (**19%** in Q2), transactions (**33%** in Q2), and returned check transactions (**32%** in Q2), as well as ancillary product offerings[154](index=154&type=chunk)[155](index=155&type=chunk) - Prepaid card services revenue declined by **26%** in Q2 2025 and **20%** in H1 2025 due to a key client losing downstream customers[154](index=154&type=chunk)[155](index=155&type=chunk) - Credit card revenue decreased by **3%** in Q2 2025 but increased by **1%** in H1 2025, impacted by the loss of a key PayFac customer and legacy portfolio attrition, though new client implementations are expected to offset this[154](index=154&type=chunk)[155](index=155&type=chunk) [Cost of Services](index=34&type=section&id=Cost%20of%20Services) Cost of services decreased by 3% to $14.8 million in Q2 2025 due to lower total revenues and a higher contribution from higher-margin business lines. For the six months, it increased by 2% to $32.0 million, in line with increased total revenues | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :---------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Cost of services | $14,820,921 | $15,280,074 | $32,020,828 | $31,396,765 | - Q2 2025 cost of services decreased by **$0.5 million** (**3%**) due to lower total revenues and increased revenue contribution from higher-margin ACH services[157](index=157&type=chunk) - H1 2025 cost of services increased by **$0.6 million** (**2%**) due to increased total revenues[158](index=158&type=chunk) [Gross Profit](index=35&type=section&id=Gross%20Profit) Gross profit increased by 7% to $5.1 million in Q2 2025, with the gross profit percentage rising to 25.8% from 23.9%, primarily due to the strong performance of the higher-margin ACH and complementary services segment. For the six months, gross profit increased by 3% to $9.9 million, with a slight improvement in gross profit percentage | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :---------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Gross profit | $5,140,069 | $4,799,814 | $9,949,212 | $9,653,509 | | Gross profit percentage | 25.8% | 23.9% | 23.7% | 23.5% | - The increase in gross profit percentage in Q2 2025 was primarily driven by revenue growth in the high-margin ACH and complementary services segment, while lower-margin revenues declined[161](index=161&type=chunk) [Stock-based Compensation](index=35&type=section&id=Stock-based%20Compensation) Stock-based compensation expenses decreased to $0.4 million in Q2 2025 and $0.8 million in H1 2025, compared to $0.5 million and $1.0 million in the respective prior year periods, due to the completed amortization of previously issued awards | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Stock-based compensation | $434,255 | $460,061 | $844,317 | $959,334 | [Selling, General and Administrative Expenses](index=35&type=section&id=Selling%20General%20and%20Administrative%20Expenses) SG&A expenses increased to $4.6 million in Q2 2025 and $8.8 million in H1 2025, compared to $4.0 million and $8.1 million in the prior year periods, respectively. This increase was attributed to one-time expenditures such as insurance renewals, marketing, travel, and professional fees, but are expected to decline sequentially and remain flat year-over-year | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :---------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | SG&A | $4,638,185 | $4,000,845 | $8,781,080 | $8,061,070 | - The increase in SG&A was driven by one-time expenditures including insurance renewals, marketing and travel, and professional fees[164](index=164&type=chunk)[165](index=165&type=chunk) - SG&A expenses are anticipated to decline sequentially and remain essentially flat relative to prior year periods[164](index=164&type=chunk)[165](index=165&type=chunk) [Depreciation and Amortization](index=35&type=section&id=Depreciation%20and%20Amortization) Depreciation and amortization expense slightly decreased to $0.5 million in Q2 2025 and $1.0 million in H1 2025, compared to $0.5 million and $1.1 million in the prior year periods, respectively. This reduction was due to the completed amortization of certain intangible assets, particularly capitalized labor for internal use software | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Depreciation and amortization | $464,599 | $547,849 | $960,369 | $1,124,003 | - The decrease was due to the completed amortization of intangible assets, specifically capitalized labor for internal use software[167](index=167&type=chunk)[168](index=168&type=chunk) [Other Income](index=35&type=section&id=Other%20Income) Other income, net, significantly decreased to $0.1 million in Q2 2025 and $0.2 million in H1 2025, compared to $0.4 million and $0.5 million in the prior year periods, respectively. This decline was primarily due to the absence of an employee retention tax credit received in the prior year | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :---------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Other income, net | $99,173 | $354,433 | $166,341 | $456,202 | - The decrease was primarily due to the receipt of an employee retention tax credit under the CARES Act in the prior year period, which was not present in the current period[169](index=169&type=chunk)[170](index=170&type=chunk) [Income Taxes](index=36&type=section&id=Income%20Taxes) State income tax expense remained relatively stable at $68,857 for Q2 2025 and $131,411 for H1 2025, compared to $70,000 and $140,000 in the respective prior year periods | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :---------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | State income tax expense | $68,857 | $70,000 | $131,411 | $140,000 | [Net Income (Loss)](index=36&type=section&id=Net%20Income%20(Loss)) The company reported a net loss of $0.4 million for Q2 2025, a decline from net income of $0.1 million in Q2 2024. For H1 2025, the net loss increased to $0.6 million from $0.2 million in H1 2024. This deterioration was mainly due to increased SG&A and the absence of a prior-year employee retention tax credit | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :---------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) | $(366,654) | $75,492 | $(601,624) | $(174,696) | - The shift from net income to net loss in Q2 and increased net loss in H1 was driven by higher SG&A expenses and the absence of an employee retention tax credit received in the prior year[173](index=173&type=chunk)[174](index=174&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) - Cash and cash equivalents were **$7.5 million** as of June 30, 2025[176](index=176&type=chunk) - Cash provided by operations was **$1.1 million** for the six months ended June 30, 2025[176](index=176&type=chunk) - The company had an accumulated deficit of **$68.6 million** and working capital of **$9.9 million** at June 30, 2025[177](index=177&type=chunk) - An undrawn **$475,000** unsecured revolving line of credit (matures June 5, 2026) and an undrawn **$474,229** irrevocable letter of credit (matures June 3, 2026) are in place, both secured for a legal appeal bond[179](index=179&type=chunk)[180](index=180&type=chunk) - Management believes existing cash balances and credit facilities are sufficient to meet operational needs and legal obligations for at least the next 12 months[176](index=176&type=chunk)[181](index=181&type=chunk) [Cash Flows](index=37&type=section&id=Cash%20Flows) | Cash Flow Activity | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :----- | | Net cash provided by operating activities | $1,110,326 | $457,772 | +$652,554 | | Net cash used in investing activities | $(747,167) | $(455,057) | -$292,110 | | Net cash provided by financing activities | $2,463,501 | $2,525,199 | -$61,698 | - Increase in operating cash flow was due to tax credit collection and reducing accounts receivable[182](index=182&type=chunk) - Increase in cash used in investing activities was due to increased fixed asset purchases and capitalization of internal use software[183](index=183&type=chunk) - Financing activities were primarily driven by an increase in assets held for customers (settlement processing and prepaid card load assets)[184](index=184&type=chunk) [Off-Balance Sheet Arrangements](index=37&type=section&id=Off-Balance%20Sheet%20Arrangements) - The company has no material off-balance sheet arrangements[185](index=185&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Usio is electing scaled disclosure reporting obligations and is not required to provide detailed quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide detailed market risk disclosures[186](index=186&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025. There were no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were effective as of June 30, 2025[187](index=187&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[189](index=189&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in two main legal proceedings: a lawsuit against former executives for breach of contract and trade secret misappropriation, where a motion to dismiss was denied, and a dispute with KDHM, LLC over an asset purchase agreement. In the KDHM case, an appeals court reversed a lower court's judgment on one claim and remanded others. The company considers the risk of loss remote for the KDHM case and has credit facilities for appeal bond requirements - Usio is suing former executives Ben Kauder and Nina Pioletti and their new company, Triple Pay Play, for breach of contract and misappropriation of trade secrets. A motion to dismiss was denied in March 2025, and depositions are ongoing[193](index=193&type=chunk)[194](index=194&type=chunk) - KDHM, LLC sued Usio Output Solutions, Inc. for breach of an asset purchase agreement regarding customer deposits. Usio counterclaimed, alleging misrepresentations and undisclosed deposits by KDHM[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk) - On April 2, 2025, the Fourth Court of Appeals reversed the trial court's judgment against Usio on KDHM's "money had and received claim" and remanded the remaining claims. KDHM's motion for reconsideration was denied[201](index=201&type=chunk) - The company has not recorded a contingency for the KDHM case, considering the risk of loss remote, and has credit facilities (undrawn line of credit and irrevocable letter of credit) to cover appeal bond requirements[202](index=202&type=chunk)[203](index=203&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) There were no changes to the risk factors disclosed in the 2024 Annual Report, except for an updated discussion on global and regional economic conditions, emphasizing potential adverse impacts from political unrest, financial market volatility, inflation, geopolitical conflicts, and trade policies on demand for services and credit losses - No changes to Risk Factors from the 2024 Annual Report, except for an updated discussion on global and regional economic conditions[205](index=205&type=chunk) - Adverse global and regional economic conditions (political unrest, financial market volatility, inflation, geopolitical conditions, trade policies, tariffs) could materially impact demand for products/services, transaction volumes, and increase credit losses[206](index=206&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not issue unregistered securities during Q2 2025. The Board of Directors renewed the stock buyback program on March 24, 2025, with a $4 million limit and a three-year duration. During Q2 2025, the company repurchased 249,365 shares for an average price of $1.45 per share, leaving $4,150,466 available under the program - No unregistered securities were issued during the quarter ended June 30, 2025[207](index=207&type=chunk) - The stock buyback program was renewed on March 24, 2025, with a **$4 million** limit and a three-year duration, terminating by May 15, 2028[208](index=208&type=chunk) | Period | Total Shares Purchased | Average Price Paid per Share | Maximum Dollar Value Remaining | | :----------------------- | :--------------------- | :--------------------------- | :----------------------------- | | April 1 - April 30, 2025 | 142,280 | $1.43 | $4,307,235 | | May 1 - May 31, 2025 | 67,622 | $1.48 | $4,207,300 | | June 1 - June 30, 2025 | 39,463 | $1.44 | $4,150,466 | | **Total (Q2 2025)** | **249,365** | **~$1.45** | **$4,150,466** | [Item 3. Defaults Upon Senior Securities](index=40&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - No defaults upon senior securities[209](index=209&type=chunk) [Item 4. Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[210](index=210&type=chunk) [Item 5. Other Information](index=41&type=section&id=Item%205.%20Other%20Information) During the six months ended June 30, 2025, no director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the six months ended June 30, 2025[211](index=211&type=chunk) [Item 6. Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including articles of incorporation, by-laws, employment agreements, bank sponsorship agreements, lease agreements, equity incentive plans, warrant agreements, and certifications - The section lists various exhibits, including corporate governance documents, employment agreements, bank and lease agreements, equity plans, and legal certifications[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk)

Core Viewpoint - Usio, Inc. is set to release its second quarter 2025 financial results on August 6, 2025, after market close, indicating ongoing transparency and communication with investors [1]. Financial Results Announcement - The financial results will cover the period ended June 30, 2025, showcasing the company's performance in the first half of the year [1]. - A conference call will be held on the same day at 4:30 p.m. Eastern time to discuss the results and provide a business update, followed by a Q&A session [2]. Conference Call Details - U.S. participants can join the call by dialing 1-888-999-6281, while international callers should use 1-848-280-6550 [3]. - The conference call will also be accessible via a live webcast on the company's website [3]. Replay Information - A replay of the conference call will be available approximately one hour after the call ends and can be accessed until August 20, 2025 [4]. - Replay access can be obtained through the company's website or by dialing specific numbers for U.S., Canada, and international callers [4]. Company Overview - Usio, Inc. is a leading provider of integrated, cloud-based electronic payment solutions, offering a variety of services to merchants, banks, and service bureaus [5]. - The company operates multiple payment processing platforms, including credit, debit/prepaid, and ACH, emphasizing its capability to deliver tailored solutions [5]. - Usio's headquarters is located in San Antonio, Texas, with additional offices in Austin, Texas [5].

Core Points - Usio, Inc. has made a donation to The Comfort Area Foundation to support victims of the Hill Country Floods in Texas [1][2] - The floods have resulted in significant loss of life, with 84 reported deaths in Kerr County [2] - Usio is collaborating with BoosterHub to lead efforts in collecting donations for the affected community [3] Company Overview - Usio, Inc. is a cloud-based integrated FinTech electronic payment solutions provider, offering a variety of payment solutions to merchants, billers, banks, and card issuers [4] - The company operates platforms for credit, debit/prepaid, and ACH payment processing, providing tailored solutions for card issuance and payment acceptance [4] - Usio is headquartered in San Antonio, Texas, with additional offices in Austin, Texas [4]

Core Insights - Usio, Inc. has formed a strategic partnership with Mortgage Automator to enhance payment processing capabilities for private lenders, integrating Usio's advanced payment technology into Mortgage Automator's platform [1][2][3] - The integration will provide Mortgage Automator users with access to a variety of payment options, including ACH, card payments, Pinless Debit, and real-time disbursements, streamlining loan servicing and improving compliance [2][3] - Both companies are committed to ongoing innovation and support for private lenders, with the integration officially launched in June 2025 [3] Company Overview - Usio, Inc. is a leading FinTech company that offers a full stack of integrated, cloud-based electronic payment and embedded financial solutions, operating credit, debit/prepaid, and ACH payment processing platforms [4] - The company provides tailored solutions for card issuance, payment acceptance, and bill payments, leveraging its unique technology in the card issuing sector [4] - Mortgage Automator is a premier mortgage origination and servicing software provider focused on delivering powerful and intuitive software solutions for private lenders [3]

分组1 - Usio Inc reported a quarterly loss of $0.01 per share, missing the Zacks Consensus Estimate of $0.04, representing an earnings surprise of -125% [1] - The company posted revenues of $22.01 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 1.66%, compared to year-ago revenues of $20.32 million [2] - Over the last four quarters, Usio has surpassed consensus EPS estimates only once and has not beaten consensus revenue estimates [2] 分组2 - The stock has gained approximately 8.2% since the beginning of the year, outperforming the S&P 500's gain of 0.1% [3] - The current consensus EPS estimate for the coming quarter is $0.01 on revenues of $22.97 million, and $0.16 on revenues of $94.69 million for the current fiscal year [7] - The Financial Transaction Services industry, to which Usio belongs, is currently in the top 32% of Zacks industries, indicating a favorable outlook compared to the bottom 50% [8]