GlobeNewswire Inc | Aug 13, 2020 07:00PM EDT

August 13, 2020

Card Processing, PayFac, Prepaid all Show Growth in the Quarter, with Prepaid Tripling over last several months

Balance Sheet Strengthens

SAN ANTONIO, Aug. 13, 2020 (GLOBE NEWSWIRE) -- Usio, Inc. (Nasdaq: USIO), an integrated electronic payment solutions provider, today announced financial results for thesecond quarter of 2020, which ended June 30, 2020.

We are entering the second half of 2020 in a strong position, as our business model has proven its resilience in one of the worst economic quarters in recent memory," commentedLouis Hoch, President and Chief Executive Officer of Usio. Our Card Processing and Prepaid business revenues were up4%and58%, respectively in the quarter and as compared to the same period of 2019, reflecting the continued strong demand for our innovative payment solutions. The performance of these businesses is particularly heartening and further validates that our strategy to serve a diversity of payments markets provides a foundation for continued growth and justifies our continued investment into both our Prepaid and PayFac business lines. Our ACH business continues to fight the headwinds of a soft consumer lending market from the effects of COVID-19 which generated generous forbearance agreements and government support programs that are dampening transaction volume. Conversely, ACH's remote check capture (RCC) andPINless debit continued their steady growth in the quarter."

"Exiting the quarter, both our Card Processing and Prepaid businesses had returned to virtually the same volume levels they had enjoyed prior to the onset of the pandemic, with continued, steady improvement in operational results. We have several PayFac Integrated Software Vendors (ISVs) currently in the implementation and on-boarding phase and anticipate continued growth from this segment. Funds loaded on prepaid cards, which is a leading indicator of future revenue, has tripled in just the last few months. We now havefive of the tenlargest cities in the United States, including the New York Immigration Coalition and the Mayors Fund of Los Angeles, using our prepaid platform to distribute government assistance funds. Furthermore, with our recent capital raise, we have liquidity to support our operations and strategic initiatives. As the consumer lending market returns to normal, this will addto the improvements that are now driving our business forward and help resume the momentum that had been built prior to the onset of the pandemic."

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

Second Quarter2020 Financial Summary

Revenues for the quarter ended June 30, 2020decreased 3%to$7.0 million compared to the same period last year, primarily as a result of the softness in our consumer lending ACH business. Gross profits decreased by18%to$1.3 million versus the same period last yearand gross margins contracted by 3.4%to 18.5%for the quarter ended June 30, 2020, primarily driven by a shift in product mix.

Other selling, general and administrative expenses decreased by 6% to$1.9 million for the quarter ended June 30, 2020 compared to the same period last year. The lower expenses were a result of restricted travel and other costs due to COVID-19 restrictions coupled with a lack of significant one-time expenses.For the second quarter of 2020, the operating loss was $1.3million, flat compared to a year ago.

Adjusted EBITDA was a loss of$571,258compared to a loss of$404,710in the second quarter of 2019. The major driver of the incremental loss was the lower gross profits related to COVID-19 revenue impacts.

The Company reported a net loss of$1.3million ($0.10per share) for the quarter ended June 30, 2020, flat versus a net loss of$1.3million ($0.10per share) for the same period in the prior year.

Six Months EndedJune 30,2020 Financial Summary

Revenues for the six months ended June 30, 2020were$14.7million, up7%from$13.7million from the same period last year. The revenue growth in 2020is all organic. Gross profits in the first six months of the year were$3.2million up 11%from$2.9 million in the comparable period of 2019. Gross margins over the first half of 2020 increased by 0.7%to21.8%from21.1%over the first half of 2019.

Other selling, general and administrative expenses increased by10%to$4.0million compared to$3.6million for the same period last year reflectingour continued investment in our PayFac and Prepaid growth initiatives.

Adjusted EBITDA for the first half of 2020 was a loss of$765,080compared to a loss of$730,718in for the same period of2019.

The Company reported a net loss of$2.1million ($0.16per share) for the six months ended June 30, 2020, compared to a net loss of$2.3million ($0.18per share) for the same period in the prior year.

Usio continues to be in solid financial condition with$1.8 million in cash and cash equivalents at June 30, 2020. Subsequent to June 30, 2020, the Company received cash proceeds of $3,000,000 from a private placement with Topline Capital Partners, LP, an institutional investor that is focused on the long term.

Conference Call and Webcast

Usio, Inc.'s management will host a conference call with a live webcast on Friday, August 14, 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 August28, 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 is 10146617.

About Usio, Inc.

Usio, Inc. (Nasdaq: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.com, andwww.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

June 30, 2020 December 31, 2019 (Unaudited) ASSETS Cash and cash equivalents $ 1,793,252 $ 2,137,580 Accounts receivable, net 1,124,207 1,274,001 Settlement processing assets 27,002,450 38,906,780 Prepaid card load assets 19,281,293 528,434 Prepaid expenses and other 187,614 183,575 Current assets before merchant reserves 49,388,816 43,030,370 Merchant reserves 8,430,339 10,016,904 Total current assets 57,819,155 53,047,274 Property and equipment, net 1,624,269 1,557,521 Other assets: Intangibles, net 2,176,426 2,676,427 Deferred tax asset 1,394,000 1,394,000 Operating lease right-of-use assets 2,366,775 2,480,902 Other assets 428,623 404,055 Total other assets 6,365,824 6,955,384 Total Assets $ 65,809,248 $ 61,560,179 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 262,363 $ 419,849 Accrued expenses 1,378,289 1,360,551 Operating lease liabilities, current 233,738 356,184 portionSettlement processing obligations 27,002,450 38,906,780 Prepaid card load obligations 19,281,293 528,434 Deferred revenues 97,059 123,529 PPP Loan payable, current portion 383,738 ? Current liabilities before merchant reserve 48,638,930 41,695,327 obligationsMerchant reserve obligations 8,430,339 10,016,904 Total current liabilities 57,069,269 51,712,231 Non-current liabilities: PPP Loan payable, non-current portion 429,762 ? Operating lease liabilities, current 2,291,334 2,279,613 portionTotal liabilities 59,790,365 53,991,844 Stockholders' equity: Preferred stock, $0.01 par value,10,000,000 shares authorized; -0- shares outstanding atJune 30, 2020 (unaudited) and December 31, ? ? 2019, respectivelyCommon stock, $0.001 par value, 200,000,000 shares authorized; 19,776,121 and18,224,577 issued, and 18,595,358 and 17,104,998 outstanding at June 30, 2020(unaudited) and December 31, 2019, 188,207 186,656 respectivelyAdditional paid-in capital 78,773,990 77,055,273 Treasury stock, at cost; 1,180,763 and1,119,579 shares at June 30, 2020 (unaudited) andDecember 31, 2019, respectively (1,967,900 ) (1,885,452 )Deferred compensation (6,700,248 ) (5,636,154 )Accumulated deficit (64,275,166 ) (62,151,988 )Total stockholders' equity 6,018,883 7,568,335 Total Liabilities and Stockholders' Equity $ 65,809,248 $ 61,560,179



USIO, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)

Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Revenues $ 6,960,553 $ 7,157,379 $ 14,732,232 $ 13,745,411 Cost of 5,674,887 5,591,534 11,518,282 10,843,835 servicesGross profit 1,285,666 1,565,845 3,213,950 2,901,576 Selling,general and administrative:Stock-based 348,393 356,103 636,103 639,511 compensationOther expenses 1,856,924 1,970,555 3,979,030 3,632,294 Depreciationand 382,244 496,994 770,039 983,542 amortizationTotal operating 2,587,561 2,823,652 5,385,172 5,255,347 expenses Operating (1,301,895 ) (1,257,807 ) (2,171,222 ) (2,353,771 )(loss) Other income: Interest income 1,487 22,620 12,643 45,694 Other income 38 (424 ) 726 (423 )(expense)Other incomeand (expense), 1,525 22,196 13,369 45,271 net (Loss) before (1,300,370 ) (1,235,611 ) (2,157,853 ) (2,308,500 )income taxesIncome taxexpense (12,201 ) 40,000 (34,675 ) 40,000 (benefit) Net (Loss) $ (1,288,169 ) $ (1,275,611 ) $ (2,123,178 ) $ (2,348,500 ) Earnings (Loss) Per ShareBasic earnings(loss) per $ (0.10 ) $ (0.10 ) $ (0.16 ) $ (0.18 )common share:Dilutedearnings (loss) $ (0.10 ) $ (0.10 ) $ (0.16 ) $ (0.18 )per commonshare:Weightedaverage common sharesoutstandingBasic 13,173,009 13,041,799 13,150,119 12,831,828 Diluted 13,173,009 13,041,799 13,150,119 12,831,828

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

Six Months Ended June 30, June 30, 2020 2019Operating Activities Net (loss) $ (2,123,178 ) $ (2,348,500 )Adjustments to reconcile net (loss) to net cash provided (used) by operating activities:Depreciation 270,038 483,542 Amortization 500,001 500,000 Non-cash stock-based compensation 636,103 639,511 Amortization of warrant costs 17,973 17,970 Changes in operating assets and liabilities: Accounts receivable 149,794 (354,550 )Prepaid expenses and other (4,039 ) (99,853 )Operating lease right-of-use assets 114,127 (2,614,006 )Other assets (24,568 ) (6,023 )Accounts payable and accrued expenses (139,748 ) 31,156 Operating lease liabilities (110,725 ) 2,766,034 Prepaid card load assets 18,752,859 105,616 Merchant reserves (1,586,565 ) (1,570,912 )Deferred revenue (26,470 ) 130,000 Deferred rent ? (79,748 )Net cash provided (used) by operating 16,425,602 (2,399,763 )activities Investing Activities Purchases of property and equipment (334,688 ) (333,205 )Net cash (used) by investing activities (334,688 ) (333,205 ) Financing Activities Proceeds from PPP Loan Program 813,500 ? Proceeds from public offering, net of expenses ? 1,793,905 Purchases of treasury stock (82,448 ) (50,515 )Net cash provided by financing activities 731,052 1,743,390 Change in cash, cash equivalents, prepaid card 16,821,966 (989,578 )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 $ 29,504,884 $ 14,351,402 Assetsand Merchant Reserves, End of Period Supplemental disclosures of cash flow informationCash paid during the period for: Interest $ ? $ ? Income taxes ? ? Non-cash transactions: Issuance of deferred stock compensation 1,559,520 ?

USIO, INC.STATEMENT OF CHANGES in STOCKHOLDERS' 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 stock underequityincentive 51,000 51 59,440 ? ? ? 59,491 planWarrantcompensation ? ? 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 stock underequityincentive 1,500,544 1,500 1,641,304 ? (1,559,520 ) ? 83,284 planWarrantcompensation ? ? 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 Balance atDecember 31, 17,129,680 $ 185,561 $ 74,568,627 $ (1,813,546 ) $ (6,270,675 ) $ (57,036,241 ) $ 9,633,726 2018Issuance 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

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

Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Reconciliationfrom Operating(Loss) to AdjustedEBITDA:Operating $ (1,301,895 ) $ (1,257,807 ) $ (2,171,222 ) $ (2,353,771 )(Loss)Depreciationand 382,244 496,994 770,039 983,542 amortizationEBITDA (919,651 ) (760,813 ) (1,401,183 ) (1,370,229 )Non-cashstock-based 348,393 356,103 636,103 639,511 compensationexpense, netAdjusted $ (571,258 ) $ (404,710 ) $ (765,080 ) $ (730,718 )EBITDA Calculation ofAdjusted EBITDAmargins:Revenues $ 6,960,553 $ 7,157,379 $ 14,732,232 $ 13,745,411 Adjusted (571,258 ) (404,710 ) (765,080 ) (730,718 )EBITDAAdjusted (8.2 )% (5.7 )% (5.2 )% (5.3 )%EBITDA margins