Good morning, and welcome to the Usio earnings conference call for the first quarter ended March 31, 2022. Participants of this call are advised that the audio of this conference is being broadcast live over the Internet and is also being recorded for playback purposes. A replay will be available shortly after the end of the call through May 26, 2022. And now, I would like to turn the conference over to Joe Hassett, Investor Relations. Please go ahead.

Thanks, Tom, and thank you, everyone, for participating in today's call. Welcome to Usio's First Quarter Fiscal 2022 Financial Results Conference Call. The earnings release, which Usio issued yesterday after market close, is available on the company's Investor Relations website. On this call today are Louis Hoch, President and CEO; Tom Jewell, Senior Vice President and Chief Financial Officer; Greg Carter, Executive Vice President of Payment Acceptance; Houston Frost, Senior Vice President of Prepaid Services. Management will provide prepared remarks, and then we will open the call to your questions. Before we begin, please remember that comments on today's call include forward-looking statements.

Thank you, Joe, and welcome, everyone. I'm pleased to report that it was another record quarter for Usio. For the quarter, revenues were a record $18.1 million, a 35% increase from a year ago. All of our growth this quarter was organic. While adjusted EBITDA was marginally negative for the quarter, we generated positive adjusted cash flow for the fourth consecutive quarter and ended the quarter with $7.6 million in cash, virtually no debt as we continue to strengthen our balance sheet. Once again, we experienced outstanding growth across all of our business segments: ACH, card processing, prepaid card issuing, output solutions. As a result, total dollars processed in the first quarter were $2.2 billion, up 18% compared to the same period last year, while total transactions were 10.5 million. Our strategy of being a diverse fintech payment processor by delivering our services to a variety of end markets, with a mixture of electronic payment channels, allows for continued growth when economic conditions aren't optimal. This was clearly demonstrated in the first quarter where we generated growth above our guidance despite experiencing weakness in one of our growth verticals, cryptocurrency. However, because of the strength in our other markets, we easily absorbed this weakness and still generated 35% organic revenue growth. Consequently, we are reiterating our guidance and expect strong 18% to 20% revenue growth in 2022 while also anticipating continued positive adjusted operating cash flows; and we are also reiterating our expectation of positive adjusted EBITDA for this year, with adjusted EBITDA significantly improving in subsequent quarters from the first quarter when we made significant investments in the business to accommodate future growth. Also, the Board of Directors has authorized a repurchase of up to $4 million of the company's common stock from time to time on open market block transactions or in privately negotiated transactions. More information on the stock repurchase program will be published soon. In particular, the following items temporarily depressed margins and increased expenses in the first quarter. We incurred approximately $650,000 to produce plastic cards that we anticipate issuing in future quarters under the Voyager Digital debit card program. While there's no margin on the sales of these blank cards, Voyager's instructions to inventory these blank cards is a strong sign that they expect to be issuing these cards to their customers in the very near future. As previously communicated on our last call, we've been investing in our call center operations to be ready for the influx of customer interactions that we expect will occur. And as such, we incurred significant upfront expenses to expand and strengthen our customer service organization, both to manage the increased growth and to be prepared to meet the demands of our Voyager Digital debit card program, where we will be servicing customers as well as issuing the cards and processing the transactions. Thus, we will be receiving 3 separate revenue streams under this program. The large prepaid program concluded in the first quarter, and we anticipate seeing increased contributions from these expiring contracts during the second half of the year. Finally, there was about $200,000 of nonrecurring expense in the quarter. Consequently, while guidance is conditioned on enthusiastic fintech lending and cryptocurrency industries as well as no appreciable deterioration in economic conditions, we feel very strongly that we will be able to achieve our objectives this year. In fact, we consider the prevailing sentiment about the near-term economic outlook favorable for some of our business lines that tend to outperform in these types of economies. Now let me offer some high-level comments by business line. ACH and complementary services revenue was $3.8 million, up 25% as transaction volume was up 21%. Returned checks processed were up 32% and electronic check dollars were up 16%. Growth in the quarter was impacted somewhat by the weakness in the cryptocurrency market. Since the second quarter of last year was by far the peak in cryptocurrency-related volume, we anticipate the second quarter this year will lag the results we experienced last year. However, we are optimistic for a rebound in ACH over the second half of the year, not just based upon a recovery in the cryptocurrency market but also on lending and other verticals that we serve. In card, PayFac continues to drive significant growth. PayFac transaction volume was up to 67% in the first quarter, which drove another strong increase in card revenue, which is all the more impressive when considering this growth is from the highest revenue base of any of our business lines. Thus, with a more robust infrastructure in place, we can significantly grow the business without much increased expense. And we generated positive adjusted cash flow of $500,000 in the quarter, further strengthening our financial position while we are undertaking these investments. In summary, I consider the first quarter a great start to a year that I think could be transformational for Usio. Electronic payments or fintech is an extremely exciting space where innovation is being rewarded. And we have plans to introduce exciting new products and solutions in virtually all of our operations this year. We have made the decision in the first quarter to absorb the costs and prepare the organization to capitalize on numerous growth opportunities that are imminent. With the resources in place, we can now focus on continuing the outstanding top-line growth that we have generated each quarter for almost 2 years, and with that, using our improved scale to drive an increase in the bottom line to create value for our shareholders.

Thank you, Louis, and thank you, everyone, for joining our call this morning. The prepaid business had another great quarter, with revenues up 212% to $2.8 million, driven by a 270% increase in card transactions processed, a 134% increase in load volume, and a 139% increase in purchased dollars processed. Total dollars loaded on prepaid cards in the quarter exceeded $69 million, an all-time quarterly record and a sequential increase from last quarter's $65 million. I'll also note that revenue growth has now grown sequentially for 5 consecutive quarters. Growth continues to be driven by our position as the leader in supporting various fund disbursement needs of governmental, municipal, charitable, and related entities. To date, we have been the prepaid program manager on approximately 200 of these types of programs. We are also continuing to move forward with Mastercard's City Possible program, which is a new model for urban innovation where a global network of cities, businesses, academics, and communities work together to make cities more inclusive and sustainable. We believe there are practically limitless applications of our technology, and we are just scratching the surface. As Louis mentioned, there is great excitement around the introduction of the Voyager Digital debit card program.

Thank you, Houston. And let me begin by echoing Louis' earlier comments that the new year is off to a great start. After a breakout 2021, our PayFac business line continues to generate strong growth. PayFac revenues were up strongly in the first quarters as volumes were up 67%. This led to an 18% quarter-over-quarter growth in total card revenue as total dollars processed in the card business increased 21% and transactions were up 22%. PayFac remains our growth engine. In the first quarter, we continued to sign several new ISV agreements. Some have already completed the integration process and are now live in processing volume. We have more ISVs in some phase of integration and implementation than we ever have, demonstrating that our value proposition is recognized.

Thanks, Greg, and welcome, everyone. Thanks for joining our call today and your interest in Usio. I'm going to conclude today's prepared remarks with a brief review of our first quarter financial results before opening the call to questions. As mentioned, revenues for the quarter ended March 31, 2022, were $18.1 million, up 35% compared to the $13.5 million in the same period last year. Clearly, we are sustaining the momentum built up over the past few quarters of this, our highest-margin business, although as Louis mentioned, we have a tough Q2 comparison ahead of us.

Congratulations, a very strong quarter. In this market environment, I want to focus on risk areas that investors might be concerned with and give you a chance to respond on some of these. First of all, I think you'd agree, the balance sheet is pretty strong. And you even added cash in a negative EBITDA quarter.

We're different than most of the payment processors because our strategy is to be diverse, diverse in the industries we serve and diverse in the payment channels that we offer. No industry represents more than 10% of our revenue. We don't like when cryptocurrency trades sideways. We like volatility. Last night, we saw triple the amount of volume that we normally would have seen. And 97% of that money was going into their wallets. So as cryptocurrency is volatile, it generates more transactions for us. And we don't have any risk with cryptocurrency. We don't hold any.

So just one follow-up on that. You mentioned there's no industry more than 10% of revenue. What is your largest industry served? And what percentage of revenue would that comprise?

There's a couple that are close to 10%, crypto is one, health care is another, consumer lending, especially when you include government programs in that segment. Those are important to us.

Last quarter, I described a couple of new products under development: our funds disbursement solution we are calling Consumer Choice and point-of-sale lending, also known as Buy Now, Pay Later. Both products are now fully commercialized and are being enthusiastically received.

Yes, first, 2001, and it's very specific to ACH transaction volumes. So our ACH transaction volumes in Q2 of last year were in part fueled by extreme excitement of the cryptocurrency market in that border. It was the peak of last year in that industry. And again, we don't carry any crypto. So we have no risk by holding it. And we're moving money in and out of the platform. So we like volatility.

Could I drill down a little bit on this prepaid spoilage that you're anticipating to hit in like September time frame? Did you say like $20 million? Did I get that right?

There's $20 million on cards that is potentially going to spoil. Not all of that is going to spoil. It's just to give you the order of magnitude.

To give you an idea around that, we had nearly 1 million cards go out in 4 to 5 months, the last 4 or 5 months of 2021 with a large percentage, maybe even as high as 50% of those going out in the month of December and January. So the call center is ramped now to be able to handle large card orders going out any given month and can support programs up to about 1 million cards.

But the Voyager program and similar programs, we get paid per minute, and those are more consistent type of volumes going forward.

This will conclude our question-and-answer session, which also concludes today's conference call. Thank you all very much for attending today's presentation, and you may now disconnect.