Usio signals inflection point with 16.2M record transactions and recurring revenue focus as ACH leads growth

Earnings Call Insights: Usio, Inc. (USIO) Q3 2025

MANAGEMENT VIEW

* Louis Hoch, Co-Founder, Chairman, President, CEO & COO, opened by highlighting strong processing volume records, stating, "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 7 quarterly processing volume records set in the period, including a record quarterly overall transaction volume of 16.2 million, up 8% year-over-year." Hoch emphasized that the momentum positions Usio for "a return to top line growth in the fourth quarter and for the full year 2025."
* Hoch noted a $1.2 million sequential increase in revenues, led by ACH, which was "up strongly from the second quarter and for the third consecutive quarter, up 30% from the year ago quarter." He also stated, "One of the key themes this quarter is most of our new and total revenue are recurring in nature. This is an important milestone and one you'll hear reflected throughout our discussion today."
* Michael White, Senior VP, Chief Accounting Officer and Principal Accounting & Financial Officer, contributed, "Our third quarter was another quarter of positive profits and cash flow. Adjusted EBITDA in the quarter was $368,000, down just incrementally on a sequential basis from $500,000 in the second quarter and also down from a year ago. Operating cash flow for the quarter was $1.4 million... Our cash was up over $200,000 over the past 3 months to over $7.8 million at quarter end."
* Greg Carter, Executive VP of Payment Acceptance & Chief Revenue Officer, said, "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."

OUTLOOK

* Usio management stated, "we anticipate continued cash growth through the remainder of fiscal '25, positioning us to invest both in organic expansion and potentially into opportunistic strategic acquisitions."
* Hoch emphasized, "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."
* Carter stated, "We are starting to see the fruits of that now and into the fourth quarter, setting up for a really solid 2026."
* No explicit new guidance figures were disclosed; management reiterated growth expectations for the remainder of 2025 and into 2026.

FINANCIAL RESULTS

* Hoch reported, "Adjusted EBITDA in the quarter was $368,000, down just incrementally on a sequential basis from $500,000 in the second quarter and also down from a year ago. Operating cash flow for the quarter was $1.4 million."
* The company ended the quarter with cash "over $7.8 million at quarter end."
* Approximately $60,000 was used for share repurchases in the quarter, bringing the total year-to-date repurchases to $750,000 or just over 500,000 shares.
* ACH revenues were "up 30% for the third quarter, led by the previously mentioned record volume" while card issuing generated sequential volume growth with "total dollars loaded exceeding $75 million."
* Output Solutions delivered "electronic-only documents... up to 20 million pieces in the quarter, up about 500,000 from a year ago."

Q&A

* Scott Buck, H.C. Wainwright: Asked about changes in sales cycles and pipeline execution. Hoch responded, "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."
* Buck questioned levers to accelerate adoption. Hoch replied, "The implementations are out of our control. If we can figure that out, that would be the secret sauce to accelerating this very fast." Carter added, "Each business unit is nuanced, in that the implementation of the adoption is slightly different... but the Usio ONE initiative is doing a lot better as far as standardizing... but then it's all dependent on those customers to integrate at their will."
* Buck inquired about impact from the federal government shutdown. Hoch answered, "when SNAP payments got suspended, we received numerous calls from cities and counties looking to bridge those payments on their own... 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."
* Buck asked about M&A criteria. Hoch detailed, "We're very strict on what we acquire and our criteria is threefold. One, it's got to provide some type of synergy... 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, 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."
* Buck asked about remaining repurchase authorization. White responded, "there's still another just over $3 million remaining on that current plan."
* Jon Hickman, Ladenburg Thalmann: Asked about recurring revenue in ACH. Hoch explained, "All of our business has been largely recurring. It's just when we compare it to last year, we had quite a few onetime events that we earned revenue."
* Hickman asked about credit card processing volumes. Carter stated, "The transactions process, yes." Hoch clarified, "transactions for credit cards when we report the operating metrics include PINless debit. The revenue associated with PINless debit goes into ACH... And also remember on credit cards, transactions don't really mean anything to us. It's the dollars processed. That's how we earn revenue."

SENTIMENT ANALYSIS

* Analysts focused on pipeline execution, timing of implementations, recurring revenue sustainability, government shutdown impacts, and capital allocation, displaying a neutral to slightly positive tone—questions probed for clarification but did not challenge management's bullish narrative.
* Management maintained a confident tone throughout, with Hoch stating, "I'm thrilled with the results of our operating metrics for the third quarter" and expressing optimism about "a potential inflection point that should follow the momentum that we've been building."
* Compared to the previous quarter, analysts' tone remained similarly neutral, continuing to focus on operational details and cash deployment, while management sustained a consistent message of confidence and growth, with increased emphasis on recurring revenue and operational momentum.

QUARTER-OVER-QUARTER COMPARISON

* Management in Q3 stressed operating leverage from recurring revenue and highlighted sequential revenue increases across all business lines, projecting a return to top-line growth, compared to Q2's focus on margin improvements and recovering from card issuing weakness.
* Strategic focus evolved in Q3 to emphasize implementation speed and pipeline conversion, versus Q2's attention to cost control and margin enhancement.
* Key metrics in Q3 included a record 16.2 million transactions and $1.4 million in operating cash flow, while Q2 reported 15% growth in total payment dollars processed and 25.8% gross margin.
* Analysts in both quarters pressed on implementation timing and M&A criteria, with Q3 adding questions about the government shutdown's effect on municipal business.
* Management's confidence remained high, with Q3 providing more detail on recurring revenue and new product initiatives, while Q2 described more near-term cost controls and margin discipline.

RISKS AND CONCERNS

* Management highlighted continued weakness in card issuing as an area that adversely impacted revenues but stated, "We expect this to mark the final quarter of difficult card issuing comparisons with performance improving going forward."
* Implementation speed remains a risk, with Hoch noting, "The implementations are out of our control. If we can figure that out, that would be the secret sauce to accelerating this very fast."
* The impact of government funding interruptions was discussed, with Hoch explaining how the company received calls for emergency programs during the federal shutdown, though some opportunities were delayed or put on hold.

FINAL TAKEAWAY

Usio management emphasized that the third quarter of 2025 marked a turning point with record processing volumes, a pronounced shift toward recurring revenue, and positive operating cash flow. The company stressed that its strong pipeline, new implementations, and technology enhancements are setting the stage for continued growth into 2026, while maintaining disciplined capital allocation and readiness for both organic and strategic expansion opportunities.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/usio/earnings/transcripts]

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