GlobeNewswire Inc | Nov 12, 2020 04:01PM EST

November 12, 2020

SAN ANTONIO, Nov. 12, 2020 (GLOBE NEWSWIRE) -- Usio, Inc. (Nasdaq: USIO), an integrated electronic payment solutions provider, today announced financial results for thethird quarter of 2020, which ended September 30, 2020.

I am pleased to report all-time record quarterly revenues for the third quarter of 2020, commentedLouis Hoch, President and Chief Executive Officer of Usio. Our ability to achieve the Companys highest quarterly revenue in this challenging economic environment is a testament to the strength of our diverse payments channel strategy -- offering ACH, Prepaid and Card Processing services to the growing electronic payments market -- as well as to the steadfast and unwavering commitment we havemade through continued investment in our growth initiatives, PayFac and Prepaid,over the past several years. These results put us back on the strong growth trajectory that was temporarily interrupted by COVID-19 in the second quarter.

Card Processing and Prepaid revenues were up14%and225%, respectively, compared to the same period of 2019, with growth accelerating sequentially from the second quarter. We continue to penetrate these markets with innovative technology that make payments simple. Our prepaid platform has been widely adopted by municipal, charitable and community organizations to distribute government assistance funds, and this success is creating opportunities in adjacent and new markets. PayFac is gaining traction and the momentum is continuing to build. In September, weseta record for new monthly merchants added on our PayFac platform. Net new merchant additionshave been growing week by week. ACH was also up sequentially from the second quarter, although the consumer lending market remains weak. We are continuing to grow our ACH customers, by both adding new accounts and keeping attrition at a minimum, which we believe will be a key to our continued success as our markets recover. Record RCC and PIN Debit volumes in the quarter also continue to contribute and have experienced sequential revenue growth in every quarter of the year. And, by keeping operating expenses relatively flat, our third quarter results reflect positive improvements (reductions) in ourAdjusted EBITDA loss andNet Lossfrom both the prior year quarteras well as the second quarter of this year. During the quarter we also successfully completed two equity offerings, giving us one of the strongest balance sheets and most distinguished group of institutional investors in the companys history. Our strategy has always encompassed a non-organic growth component, and with this fresh capital we now have the resources to not only support our working capital and general corporate needs, but to invest in our growth businesses and undertake accretive acquisitions.

Despite the many challenges encountered throughout 2020, we are on pace for year-over-year revenue and profitability growth, ending the year with one of our strongest balance sheets ever. We believe this provides a solid foundation for continued growth, both organically as well as through strategic, accretive acquisitions in the future."

Louis Hoch continued, "as always, the health and safety of our employees as well as those around us remains a priority in everything we do.

Third Quarter2020 Financial Summary

Revenues for the quarter ended September 30, 2020increased by15%to$8.1 million compared to the same period last year, primarily as a result of strong year over year growth in our prepaid and credit card businesses offset by softness in our consumer lending ACH business. Gross profits increased by11%to$1.7 million versus the same period last yearand gross margins declined by 70 basis points to 21.2%for the quarter ended September 30, 2020versus21.8%in the prior year period, primarily driven by a shift in product mix.

Other selling, general and administrative expenses were flat at $2.0 million for the quarter ended September 30, 2020 compared to the same period last year. For the third quarter of 2020, the operating loss was $0.9million versus a loss of $1.2million in the prior year.

Adjusted EBITDA was a loss of$253,921compared to a loss of$421,459in the thirdquarter of 2019, a40% improvement.

The company reported a net loss of$0.9million ($0.06per share) for the quarter ended September 30, 2020, versus a net loss of$1.2million ($0.09per share) for the same period in the prior year.

Nine Months EndedSeptember 30, 2020Financial Summary

Revenues for the nine months ended September 30, 2020were$22.9million, up10%from$20.8million from the same period last year. The revenue growth in 2020is all organic and was derived primarily from our card services business that is anchored by PayFac. Our prepaid division also contributed to the strong increase.Gross profits in the first ninemonths of the year were$4.9million up 11%from$4.4 million in the comparable period of 2019. Gross margins for the first nine monthsof 2020 increased by 20 basis pointsto21.6%from21.4%over the same period in 2019.

Other selling, general and administrative expenses increased by6%to$6.0million compared to$5.6million for the same period last year reflectingour continued investment in our PayFac and Prepaid growth initiatives.

Adjusted EBITDA for year to date period was a loss of$1.0million compared to a loss of$1.2million for the same period of2019, a12%improvement.

The Company reported a net loss of$3.1million ($0.22per share) for the nine months ended September 30, 2020, compared to a net loss of$3.6million ($0.28per share) for the same period in the prior year.

Usio continues to be in solid financial condition with$11.4 million in cash and cash equivalents at September 30, 2020.

Conference Call and Webcast

Usio, Inc.'s management will host a conference call with a live webcast on Friday, November13, 2020 at 11:00 am Eastern timeto provide a business update. To listen to the conference call, interested parties within theU.S.should call +1-844-883-3890. International callers should call+1-412-317-9246. All callers should ask for the Usio conference call. The conference call will also be available through a live webcast, which can be accessed via the companys website atwww.usio.com/invest.

A replay of the call will be available approximately one hour after the end of the call through November 27, 2020. The replay can be accessed via the Companys website or by dialing+1-877-344-7529 (U.S.) or+1-412-317-0088(international). The replay conference playback code is10149713.

About Usio, Inc.

Usio, Inc. (USIO), a leading integrated payment solutions provider, offers a wide range of payment solutions to merchants, billers, banks, service bureaus, and card issuers. The Company operates credit, debit/prepaid, and ACH payment processing platforms to deliver convenient, world-class payment solutions and services to their clients. The strength of the Company lies in its ability to provide tailored solutions for card issuance, payment acceptance, and bill payments as well as its unique technology in the prepaid sector. Usio is headquartered in San Antonio, Texas, and has offices in Austin, Texas, and Franklin, Tennessee, just outside of Nashville. Websites:www.usio.com,www.singularpayments.com,www.payfacinabox.com,www.akimbocard.comandwww.ficentive.com. Find us on Facebook and Twitter.

About Non-GAAP Financial MeasuresThis press release includes non-GAAP financial measures, EBITDA and adjusted EBITDA, as defined in Regulation G of the Securities and Exchange Act of 1934, as amended. The Company reports its financial results in compliance with GAAP, but believes that also discussing non-GAAP measures provides investors with financial measures it uses in the management of its business. The Company defines EBITDA as operating income (loss), before interest, taxes, depreciation and amortization of intangibles. The Company defines adjusted EBITDA as EBITDA, as defined above, plus non-cash stock option costs and certain non-recurring items, such as acquisitions. These measures may not be comparable to similarly titled measures reported by other companies. Management uses EBITDA and adjusted EBITDA as indicators of the Company's operating performance and ability to fund acquisitions, capital expenditures and other investments and, in the absence of refinancing options, to repay debt obligations.

Management believes EBITDA and adjusted EBITDA are helpful to investors in evaluating the Company's operating performance because non-cash costs and other items that management believes are not indicative of its results of operations are excluded. EBITDA and adjusted EBITDA are supplemental non-GAAP measures, which have limitations as an analytical tool. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Non-GAAP financial measures do not reflect a comprehensive system of accounting, may differ from GAAP measures with the same names, and may differ from non-GAAP financial measures with the same or similar names that are used by other companies. For a description of our use of EBITDA and adjusted EBITDA, and a reconciliation of EBITDA and adjusted EBITDA to operating income (loss), see the section of this press release titled "Non-GAAP Reconciliation."

FORWARD-LOOKING STATEMENTS DISCLAIMER

Except for the historical information contained herein, the matters discussed in this release include forward-looking statements which are covered by safe harbors. Those statements include, but may not be limited to, all statements regarding management's intent, belief and expectations, such as statements concerning our future and our operating and growth strategy. These forward-looking statements are identified by the use of words such as "believe," "intend," "continue," "anticipate," "schedule, and "expect" among others. Forward-looking statements in this press release are subject to certain risks and uncertainties inherent in the Company's business that could cause actual results to vary,including risksrelated to the COVID-19 pandemic and its effect on the economy, risks related to the realization of the anticipated opportunities from the Singular acquisition, the management of the Company's growth, the loss of key resellers, the relationships with the Automated Clearinghouse network, bank sponsors, third-party card processing providers and merchants, the security of our software, hardware and information, the volatility of the stock price, the need to obtain additional financing, risks associated with new tax legislation, and compliance with complex federal, state and local laws and regulations, and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission including its annual report on Form 10-K for the fiscal year ended December 31, 2019. One or more of these factors have affected, and in the future, could affect the Companys businesses and financial results in the future and could cause actual results to differ materially from plans and projections. The Company believes that the assumptions underlying the forward-looking statements included in this release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the objectives and plans will be achieved. All forward-looking statements made in this release are based on information presently available to management. The Company assumes no obligation to update any forward-looking statements, except as required by law.

Contact:Joe Hassett, Investor Relationsjoeh@gregoryfca.com610-228-2110



USIO, INC.CONSOLIDATED BALANCE SHEETS

September 30, December 31, 2020 2019 (Unaudited) ASSETS Cash and cash equivalents $ 11,405,119 $ 2,137,580 Accounts receivable, net 1,219,370 1,274,001 Settlement processing assets 24,079,975 38,906,780 Prepaid card load assets 7,906,580 528,434 Prepaid expenses and other 185,109 183,575 Current assets before merchant reserves 44,796,153 43,030,370 Merchant reserves 8,234,404 10,016,904 Total current assets 53,030,557 53,047,274 Property and equipment, net 1,729,614 1,557,521 Other assets: Intangibles, net 1,926,426 2,676,427 Deferred tax asset 1,394,000 1,394,000 Operating lease right-of-use assets 2,308,736 2,480,902 Other assets 422,418 404,055 Total other assets 6,051,580 6,955,384 Total Assets $ 60,811,751 $ 61,560,179 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 405,334 $ 419,849 Accrued expenses 1,303,757 1,360,551 Operating lease liabilities, current 236,700 356,184 portionSettlement processing obligations 24,079,975 38,906,780 Prepaid card load obligations 7,906,580 528,434 Deferred revenues 83,824 123,529 PPP Loan payable, current portion 342,096 ? Current liabilities before merchant reserve 34,358,266 41,695,327 obligationsMerchant reserve obligations 8,234,404 10,016,904 Total current liabilities 42,592,670 51,712,231 Non-current liabilities: PPP Loan payable, non-current portion 471,404 ? Operating lease liabilities, current 2,230,639 2,279,613 portionTotal liabilities 45,294,713 53,991,844 Stockholders' equity: Preferred stock, $0.01 par value,10,000,000 shares authorized; -0- sharesoutstanding at September 30, 2020 ? ? (unaudited) and December 31, 2019,respectivelyCommon stock, $0.001 par value, 200,000,000shares authorized; 25,887,785and18,224,577issued, and 24,665,486and 194,318 186,656 17,104,998outstanding at September 30,2020 (unaudited) and December 31, 2019,respectivelyAdditional paid-in capital 88,392,782 77,055,273 Treasury stock, at cost; 1,222,299and1,119,579shares at September 30, 2020 (2,065,763 ) (1,885,452 )(unaudited) and December 31, 2019,respectivelyDeferred compensation (5,793,116 ) (5,636,154 )Accumulated deficit (65,211,183 ) (62,151,988 )Total stockholders' equity 15,517,038 7,568,335 Total Liabilities and Stockholders' Equity $ 60,811,751 $ 61,560,179

USIO, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)

Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Revenues $ 8,137,077 $ 7,087,732 $ 22,869,309 $ 20,833,143 Cost of 6,414,807 5,539,314 17,933,089 16,383,149 servicesGross profit 1,722,270 1,548,418 4,936,220 4,449,994 Selling,general and administrative:Stock-based 267,223 315,259 903,326 954,770 compensationOther SG&A 1,976,191 1,969,877 5,955,221 5,602,171 expensesDepreciationand 390,216 491,749 1,160,255 1,475,291 amortizationTotal operating 2,633,630 2,776,885 8,018,802 8,032,232 expenses Operating (911,360 ) (1,228,467 ) (3,082,582 ) (3,582,238 )(loss) Other income and (expense):Interest income 10,157 20,781 22,800 66,475 Other income 186 608 912 185 (expense)Other incomeand (expense), 10,343 21,389 23,712 66,660 net (Loss) before (901,017 ) (1,207,078 ) (3,058,870 ) (3,515,578 )income taxesIncome tax 35,000 31,956 325 71,956 expense Net (Loss) $ (936,017 ) $ (1,239,034 ) $ (3,059,195 ) $ (3,587,534 ) Earnings (Loss) Per ShareBasic earnings(loss) per $ (0.06 ) $ (0.09 ) $ (0.22 ) $ (0.28 )common share:Dilutedearnings (loss) $ (0.06 ) $ (0.09 ) $ (0.22 ) $ (0.28 )per commonshare:Weightedaverage common sharesoutstandingBasic 15,474,171 13,054,962 13,924,803 12,906,206 Diluted 15,474,171 13,054,962 13,924,803 12,906,206

USIO, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)

Nine Months Ended September September 30, 30, 2020 2019Operating Activities Net (loss) $ (3,059,195 ) $ (3,587,534 )Adjustments to reconcile net (loss) to net cash provided(used) by operating activities:Depreciation 410,254 725,291 Amortization 750,001 750,000 Non-cash stock-based compensation 903,326 954,770 Amortization of warrant costs 26,958 26,955 Changes in operating assets and liabilities: Accounts receivable 54,631 55,504 Prepaid expenses and other (1,534 ) (111,230 )Operating lease right-of-use assets 172,166 (2,547,803 )Other assets (18,363 ) (26,665 )Accounts payable and accrued expenses (71,309 ) 294,717 Operating lease liabilities (168,458 ) 2,700,742 Prepaid card load obligations 7,378,146 189,854 Merchant reserves (1,782,500 ) (2,443,899 )Deferred revenue (39,705 ) 116,765 Deferred rent ? (79,748 )Net cash provided (used) by operating 4,554,418 (2,982,281 )activities Investing Activities Purchases of property and equipment (582,347 ) (536,405 )Net cash (used) by investing activities (582,347 ) (536,405 ) Financing Activities Proceeds from PPP Loan Program 813,500 ? Proceeds from public offering, net of expenses 7,257,925 1,793,905 Proceeds from private offering 3,000,000 ? Purchases of treasury stock (180,311 ) (52,584 )Net cash provided by financing activities 10,891,114 1,741,321 Change in cash, cash equivalents, prepaid card 14,863,185 (1,777,365 )load assetsand merchant reservesCash, cash equivalents, prepaid card loadassetsand merchant reserves, beginning of 12,682,918 15,340,980 year Cash, Cash Equivalents, Prepaid Card Load $ 27,546,103 $ 13,563,615 Assetsand Merchant Reserves, End of Period Supplemental disclosures of cash flow informationCash paid during the period for: Interest $ ? $ ? Income taxes 93,525 82,206 Non-cash transactions: Issuance of deferred stock compensation 1,559,520 ?

USIO, INC.STATEMENT OF CHANGES INSTOCKHOLDERS' EQUITY(UNAUDITED)

Common Stock Additional Treasury Deferred Accumulated Total Paid- In Stockholders' Shares Amount Capital Stock Compensation Deficit Equity Balance atDecember 31, 18,224,577 $ 186,656 $ 77,055,273 $ (1,885,452 ) $ (5,636,154 ) $ (62,151,988 ) $ 7,568,335 2019 Issuance ofcommon stockunder equity 51,000 51 59,440 ? ? ? 59,491 incentiveplanWarrantcompensation ? ? 8,985 ? ? ? 8,985 costsDeferredcompensation ? ? ? ? 228,219 ? 228,219 amortizationPurchase oftreasury ? ? ? (26,629 ) ? ? (26,629 )stockNet (loss)for the ? ? ? ? ? (835,009 ) (835,009 )period Balance atMarch 31, 18,275,577 $ 186,707 $ 77,123,698 $ (1,912,081 ) $ (5,407,935 ) $ (62,986,997 ) $ 7,003,392 2020 Issuance ofcommon stockunder equity 1,500,544 1,500 1,641,304 ? (1,559,520 ) ? 83,284 incentiveplanWarrantcompensation ? ? 8,988 ? ? ? 8,988 costsDeferredcompensation ? ? ? ? 267,207 ? 267,207 amortizationPurchase oftreasury ? ? ? (55,819 ) ? ? (55,819 )stockNet (loss)for the ? ? ? ? ? (1,288,169 ) (1,288,169 )period Balance atJune 30, 19,776,121 $ 188,207 $ 78,773,990 $ (1,967,900 ) $ (6,700,248 ) $ (64,275,166 ) $ 6,018,883 2020 Issuance ofcommon stockunder equity 32,323 32 149,961 ? ? ? 149,993 incentiveplanWarrantcompensation ? ? 8,985 ? ? ? 8,985 costsCashlesswarrant 27,051 27 (27 ) ? ? ? ? exerciseReversal ofdeferredcompensation (450,000 ) (450 ) (791,550 ) ? 594,900 ? (197,100 )amortizationthat did notvestIssuance ofcommonstock, 4,705,883 4,705 7,253,220 ? ? ? 7,257,925 publicofferingIssuance ofcommonstock, 1,796,407 1,797 2,998,203 ? ? ? 3,000,000 privateofferingDeferredcompensation ? ? ? ? 312,232 ? 312,232 amortizationPurchase oftreasury ? ? ? (97,863 ) ? ? (97,863 )stockNet (loss)for the ? ? ? ? ? (936,017 ) (936,017 )period Balance atSeptember 25,887,785 $ 194,318 $ 88,392,782 $ (2,065,763 ) $ (5,793,116 ) $ (65,211,183 ) $ 15,517,038 30, 2020 Balance atDecember 31, 17,129,680 $ 185,561 $ 74,568,627 $ (1,813,546 ) $ (6,270,675 ) $ (57,036,241 ) $ 9,633,726 2018 Issuance ofcommonstock, 769,230 769 1,793,136 ? ? ? 1,793,905 publicofferingIssuance ofcommon stockunder equity 62,222 62 58,551 ? ? ? 58,613 incentiveplanWarrantcompensation ? ? 8,985 ? ? ? 8,985 costDeferredcompensation ? ? ? ? 224,795 ? 224,795 amortizationPurchase oftreasury ? ? ? (21,822 ) ? ? (21,822 )stockNet (loss)for the ? ? ? ? ? (1,072,889 ) (1,072,889 )period Balance atMarch 31, 17,961,132 $ 186,392 $ 76,429,299 $ (1,835,368 ) $ (6,045,880 ) $ (58,109,130 ) $ 10,625,313 2019 Issuance ofcommon stockunder equity 53,445 53 133,462 ? ? ? 133,515 incentiveplanWarrantcompensation ? ? 8,985 ? ? ? 8,985 costDeferredcompensation ? ? ? ? 222,585 ? 222,585 amortizationReversal ofdeferredstock (6,000 ) (6 ) (13,254 ) ? 13,260 ? ? compensationthat did notvestPurchase oftreasury ? ? ? (28,693 ) ? ? (28,693 )stockNet (loss)for the ? ? ? ? ? (1,275,611 ) (1,275,611 )period Balance atJune 30, 18,008,577 $ 186,439 $ 76,558,492 $ (1,864,061 ) $ (5,810,035 ) $ (59,384,741 ) $ 9,686,094 2019 Issuance ofcommon stockunder equity 2,500 3 92,483 ? ? ? 92,486 incentiveplanWarrantcompensation ? ? 8,985 ? ? ? 8,985 costDeferredcompensation ? ? ? ? 224,464 ? 224,464 amortizationReversal ofdeferredstock ? ? (1,691 ) ? ? ? (1,691 )compensationthat did notvestPurchase oftreasury ? ? ? (2,069 ) ? ? (2,069 )stockNet (loss)for the ? ? ? ? ? (1,239,034 ) (1,239,034 )period Balance atSeptember 18,011,077 $ 186,442 $ 76,658,269 $ (1,866,130 ) $ (5,585,571 ) $ (60,623,775 ) $ 8,769,235 30, 2019

USIO, INCRECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES(UNAUDITED)

Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Reconciliationfrom Operating(Loss) to AdjustedEBITDA:Operating $ (911,360 ) $ (1,228,467 ) $ (3,082,582 ) $ (3,582,238 )(Loss)Depreciationand 390,216 491,749 1,160,255 1,475,291 amortizationEBITDA (521,144 ) (736,718 ) (1,922,327 ) (2,106,947 )Non-cashstock-based 267,223 315,259 903,326 954,770 compensationexpense, netAdjusted $ (253,921 ) $ (421,459 ) $ (1,019,001 ) $ (1,152,177 )EBITDA Calculation ofAdjusted EBITDAmargins:Revenues $ 8,137,077 $ 7,087,732 $ 22,869,309 $ 20,833,143 Adjusted (253,921 ) (421,459 ) (1,019,001 ) (1,152,177 )EBITDAAdjusted (3.1 )% (5.9 )% (4.5 )% (5.5 )%EBITDA margins