Operator
Good afternoon. Now presenting Michael White and Greg Carter from the UCO.
Operator
My name is Greg Carter. I'm the Chief Revenue Officer for UCO, and we're going to talk to probably the most dynamic famous company you've never heard about. A little bit about us. It was founded in 1998. It's been essentially public since then in various forms. We are not just certified. We'll talk about that when it comes to our ACH business. very high industry accreditation and obviously publicly traded on NASDAQ and we assemble USI. Here's a little bit about our business platform. Our primary there's really three segments of our business. There's a prepaid exclusive to MasterCard, we have our acquiring division which includes ACH, then we have a print and mail house. We did 7 million checks, we printed 7 million checks on the logo slide. Since we do operate three different business units we have customers that consume all of them. We'll notice the Apple sign up there. Sucks them inside of our business lines. Payment Facilitation resides in our acquiring division. This is our flagship product. So our sales team does not go out and call on. We sell exclusively to software. So we'll go find a software vendor that says product management software.
That's a lot better. Okay, we'll start over. No, we're not going to start over. So anyway, payment facilitation is is credit card processing with the software company now if you want to become a software or i'm sorry a credit card processor in order to do that you're talking about millions of dollars in capex you're going to need the personnel more importantly you're going to need a processor and a bank sponsor well if you come to uco you don't need any of that you sign an agreement with us you integrate to our technology and then we look the software company then looks like it's actually the credit card processor so what's the value proposition the value proposition is we share some revenue the interchange revenue that we earn from processing that credit card and we're going to kind of tag team this and i'll have michael he's our chief accounting officer go over the financials of our payment facilitation business yeah so i'm michael white
chief accounting officer so quick breakdown on how we make money on this business line so if you're talking about a hundred dollar transaction we're going to receive two and a half percent roughly um in top line revenue that we're going to recognize and then with that there's some costs associated about 75% goes to the card issuer another 6% goes to the car brand bring our gross revenue to 50 cents or 20% but then as Greg mentioned after that we're splitting that 50 50 with the partner bringing our net to just 25 cents on a hundred dollar swipe but you can see you know how volume it's it's really a volume game uh on 2.5 million dollars um you know just over six thousand dollars you'll later you'll see we processed over eight billion dollars in uh total payments in 2025 so we're really excited to see that scale what's really cool about this business model is we sell one software company and then they sell to subscribes or in the case of that physician new doctors so there are customers that on board to our system through software companies that we may have sold five years ago.
So really, it's a proxy sales force for us as well. As they grow, we grow. It's three legs to the stool. So that's payback or payment facilitation. Talk about ACH. I think everybody knows what ACH is. That's a direct debit off your checking or savings account. Again, contrary to public opinion, ACH is thriving and growing very well. As you can see from the margin profile, it's our highest level margin. And most of our customers are in lenders, both hard money and fintech lenders, state's license lenders, HOAs, school boards, anything that's reoccurring in nature is a target for ACH. So Michael, you want to go over the financials? Sure.
Yeah. So unlike credit card processing on ACH, we're charging a fee per transaction.
So whether it's a $10 transaction or a $10,000 transaction, we earn about 70 cents per transactions with margins um the highest margin product of up to 70 percent our card issuing site again we're exclusive to mastercard so we are the issuer and program manager for this product we actually could put a virtual mastercard in your phone without you even asking for it if i have your phone number i could put that's the technology we do with apple um probably the best example of this business unit was during covid city of new york wanted to give out $100 MasterCards for all their citizens that got a COVID shot. Well, City of New York calls MasterCard and said, hey, we want to do this program. MasterCard tells New York, we don't do that. They really don't really do anything in the transaction. There's only one company that you can call that can do that in the timeframe, and that's UCO. So we did that program for City of New York. Even though that platform or that use case is expired, that platform still resides. In fact, they used it recently with the New York nurses strike. So they used our platform to pay those nurses while they were on strike. Other use case examples are per diem. The Baltimore Orioles, for example, uses our platform for their per diem when their players go on the road. Rather than give them a check, they just load their amount on a card and they can reuse that as necessary. Our card is unique in that it's GPR in nature, or it can be custom use case.
So you could reload this payroll deduction etc so it is a full service debit card like you would get anywhere else but we have the ability to do that in a virtual environment as well and Michael go over the financials so we earn money primarily in three ways in this business line the first being card creation so between 35 cents to four dollars if it's a digital card to your wallet obviously the fee is going to be less but then we also can do custom cards that you know so the price can vary and then once the funds are loaded onto the card we're earning one to two percent of the swipe amount via interchange and then lastly we estimate between two and four percent of funds that are loaded onto cards to eventually spoil and come off via inactivity fees so you know we're able to basically if a card doesn't isn't used after a period of 12 months we start to feed that down until the balance is zero so if you get a hundred dollar card often people don't spend the last five bucks or whatever that might be left on the card so we feed that down over time and so combined we see margins of about 30 to 40 percent in this business line so from a product development standpoint we're taking our technology and we're using that to our existing we're using our prepaid technology to use wearables so those can be tap to pay they
They could be wristbands for concerts. Some of our customers include reverse ATM providers. So if you've ever been to a resort like Six Flags where they don't take cash and you don't have a credit card, you can go up to these kiosks, put $100 of cash in, and it distributes or dispenses a prepaid MasterCard. We power that solution. So these are the type of products that we're doing. The custom card was fan cards, so those are branded university cards that they sell in the student unions. Consumer choice is really our flagship product. If you look at our entire spectrum of capabilities, we now probably one of the only companies that if a plaintiff's attorney or class action came to you and said, we need to distribute a billion dollars, how can you do that? Well, just give us the phone numbers or emails and we can give the consumer the choice of how they want to receive those funds. ACH, a check, penless debit, you know, direct debit to the bank account. So we can do that where a lot of other companies are siloed. They can do one if not the other, but they can't do all three We can even print checks if we need to Output solutions is our print and mail shop. We purchased this asset about six years ago It is also located in San Antonio where our corporate headquarters are they were printing our checks We now take this technology and integrate it to everything we've got. So The obvious question is why would a payments company buy a print house? Well, if you think about it most invoices require payment. Our customers are utilities, they're credit unions, they're regulated entities that typically have some kind of payment hook into them. So when you get that utility statement, there's a QR code on that. That's generated by us, printed by us, and then we process that payment as well. We bought this business in 2020 for $6 million and it does over $20 million now, so it was a pretty good trade. And Michael, you want to go to the financials?
So this is a little more simple to understand as far as how we make money. It's basically per page printed. So we earned about 15 to 18 cents per page. We earned some margin on the actual postage as well, around two cents per page that goes out. We also do electronic bill presentment. So if you, you know, some customers opt to go paperless, we do that document housing and send those documents as well and also are able to tie in those payment needs. 18 to 22% margins in this business. Okay, and then Michael's going to go over some data points as far as the business itself is concerned yeah so there's two metrics that we look they're important to us so dollars processed and transactions processed so on some business lines like payfac and card issuing we're earning on on the amount that is spent so you can see last year we processed 8.4 billion dollars across all the business lines second highest in the history of the company 2021 was our peak we were processing payments for a crypto company not actually touching the crypto just the USD in and out of the wallet but we're reaching you know those levels again yeah and he's being those familiar with Voyager
digital we were doing the ACH in and out of those wallets until they went bankrupt so we lost that revenue yep and then transactions process last year we processed 61 million transactions.
That was the highest in the company's history. So both metrics are important and we're seeing you know these continue to grow into into 2026. Here's a little chart of our revenue since 2017. Last year we reported 85.4 million dollars in revenue. You can see the last three years were relatively flat. So Greg mentioned the New York City program. So in 2023 we recognized about 12 million dollars of spoilage revenue in New York City that from New York City that didn't reoccur in 2024. So we were we replaced that with recurring revenue and unfortunately going to 2025 one of our larger customers was acquired and we lost that due to the acquisition if you were to normalize 2025 and 2024 to those changes we would have grown last year around 12% our guidance for 2026 is 10 to 12% revenue growth you'll see in the future slides we're really confident in that in Q1 we recorded 25 and a half million dollars in top-line revenue which was 16% growth over 2025's first quarter. A quick look at our financials like I said 85.4 million dollars in last year I mean last yeah last year 2025 and 25 and a half million dollars in Q1. We report adjusted EBITDA net of our non-cash stop compensation. The first quarter was 800,000 and adjusted EBITDA margins of 3% we're expecting you know as we scale over the next you know several months into 2027 that these EBITDA bottom line margins will improve as we continue to grow top-line revenue our expenses are at a point where we can keep them on it moderately moderately flat with some minor growth there so we're at a point of operating leverage in the company we can add you know another one to two billion dollars worth of payments without having to increase head count or staff. A really strong balance sheet we have about seven point seven million dollars in operating cash you can see the second line there the restricted cash and settlement funds at any given time we have between eighty and hundred twenty million dollars in our account we're seeing those balances actually increase and that's funds that's in some stage of being processed so in our settlement accounts then we typically hold funds for ACH up to three days we do earn interest on those funds we do overnight sweeps into investment accounts and consider that to also be a key part of our business strategy essentially no debt we have one small equipment loan of less than a million dollars for a printer and output solutions so really strong balance sheet and we're continuing to um you know build that leverage 27.7 million shares outstanding as of the end of the quarter uh 5.2 of that is insider ownership so 22 and a half million dollars or million shares of public float it's important to note that every every employee of uco is a shareholder so everybody's got a hand on the bag if you will with respect to our our performance just kind of uh you know again one of the obligatory slides for this event You know, we really are a unique animal.
You're not going to find a comparable for UCO of our size. There's nothing like us until you get way up market to the global FISER type entities. And for that reason, we draw a lot of attention. And that attention is warranted because we deliver. UCO works at the speed of business. We answer the phone. There's not chat bots or voicemails. We have account managers that do that. Our white glove service is talked about, but it's delivered and it's reflected in our growth. our attrition is stellar we don't have attrition we do lose customers from time to time through either acquisition or insolvency but not because they're not happy with the service Paul Manley is our senior vice president of investor relations that's his contact information I know we're a little early but we'd like to open it up for questions if there are any yes sir sure sure so I mean at the end of the day it's just processing a credit card it's it's it's commodity type issue just processing credit cards the payment facilitation angle is that we give that illusion if you will that that software company is the processor of record and the other hook is that revenue share so unless you're significant I mean very large maybe hundreds of millions of dollars of processing volume you may get a revenue share from stripe but we have startups that we share revenue with we have startups that have gone literally from zero to multi-million dollars in processing. And now with using UCO, they have a no cost revenue source that they can tap into for, you know, whatever needs they have. But payment facilitation is really the moniker, but at the end of the day, it's just a business model and a sales acquisition method with respect to that revenue share. And it's the one to many, right? So we sell to that software company that may have a thousand subscribers. We just got access to a thousand subscribers for processing which if we try to do that one-on-one you can imagine the time associated with them yes sir sure we do have a traditional sales force we have eight quoted sales bodies and a proxy sales force of referral agents and customers of about 25 traditional smile and dial prospecting industry participation a lot of referrals from MasterCard believe it or not. MasterCard calls us weekly with referrals. So on the prepaid side, we don't make a lot of outbound calls just because we're tending to the calls from MasterCard themselves. Those are 99% high qualified leads when they come in. On the payment facilitation side or the Payfax side, that's just, you know, guerrilla type marketing, you know, traditional means. Salespeople from an NDA to contract execution to implementation can take two weeks to two the years it's all about pace and priority of the software company and on the print shop most of our customers are municipalities regulated entities like credit unions utility companies we reside in Bexar County so we did a million and a half voter registration cards that's typically done through an RFP process but that's most of our sales are just traditional business development yes sir so we made the acquisition of a company called a Kimbo back in 2016 and they were exclusive to MasterCard at that time and we just maintain that and we can't be exclusive we got to choose one so we chose MasterCard from a capability standpoint we could but contractually and from a relation standpoint standpoint it's MasterCard yes sir good question I can't give you like a break out of in 2025 of what was net net new for the year verse organic growth but given the model the pay fact model it does grow itself because of that replicating nature as they sell the prepaid side has a lot of limited time you know their use cases like the cobit we don't really have open-ended prepaid programs we have one that's coming up but I don't have a real clean answer for you I'd say it's probably you know 75 25 75 of net new logos verse 25 organic growth yeah so they're restricted cash
so right now we're earning interest on probably 70% of it there so basically we sweep it into money market accounts and are earning a little under whatever the treasure the Treasury rate and that's just our agreement with our banking partners but we're sweeping funds overnight and then you know we can kind of predict to see or we know when the funds are going to be coming out so we just make sure the funds are available when they need to be settled so we're working to bring that closer to a hundred percent with some different initiatives with our bank and some newer technologies of you know automated sweeps and that kind of thing so but right now about seventy percent of those balances are earning and just to add to that all of our customers are required to pre-fund before we'll do any ACH or pre-fund their their debit their prepaid program so that's the lion's share of that plus our settlement funds from processing the in the days previous and one thing that we haven't added to this presentation yet but we're talking about is a software acquisition we made in November of 2025 it was a company called post credit we recently announced that we're calling it ECO ion it's essentially allows us to kind of operate as a pseudo bank all of our customers will be getting a UCO bank account similar to how a stripe or a square works when you process payments the settlement goes into your stripe or PayPal or square wallet and then you have to transfer that to your account or you could leave it there so we're expecting to see our the balances in our realm increase and also be there for longer once they're in that once funds are in the uco link account the idea is that all of our products will be tied into one so they can then you know similar to consumer choice our customers can choose how they want to disperse funds all in one platform so these restricted cash and settlement funds we're expecting to increase so our associated interest income as well so
there is a little bit of nuance on the business line itself where that revenue comes from on the pay fact side we can add we can double our processing we literally double it maybe add an account manager but from a infrastructure issue no issue he's spot-on with respect to like we couldn't triple our output because we bought a new printer we'd have to buy probably another printer to do order of magnitude but we're comfortable growing our business to 200 million dollars current configuration correct that's on the prepaid side some of the larger names some of it was self-funded as well or self-directed payments is like telecommunications it's somewhat incestuous so we provide services for our competitors as well like those print those checks we do that for a competitive fintech same thing on this voucher program they don't have a disbursement capability remember I talked about consumer choice like we can send money any way you want it there's not a lot of companies that can do that and that's why we were selected well that's all we got thanks for your time keep an eye on this one because this is a tiger by the tail telling you thank
