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Usio, Inc. (USIO)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 was operationally solid but financially mixed: revenue declined 1% year over year to $19.96M and fell sequentially versus Q1, while gross margin expanded 185 bps to 25.8% and Adjusted EBITDA remained positive at $0.50M .
  • Results missed Wall Street: vs S&P Global consensus, revenue missed by ~10.9%, EPS missed by ~$0.0067, and EBITDA missed materially; management also cut FY25 revenue growth guidance to 5–12% (from 14–16%) due to implementation delays at two large national accounts, while reiterating positive Adjusted EBITDA for the year . Estimates marked with asterisk are from S&P Global.
  • Mix and efficiency were clear bright spots (ACH strength, electronic shift in Output Solutions), but a prepaid decline and a card issuing downstream customer loss weighed on consolidated revenue, alongside lower interest income; management expects SG&A to be “significantly lower” in 2H25 and cash to increase in 2H25 .
  • Stock reaction catalyst: the guidance cut and the magnitude of the revenue/EBITDA miss vs consensus, partially offset by durable ACH momentum, margin expansion, and 2H ramp potential as implementations progress .

What Went Well and What Went Wrong

  • What Went Well

    • ACH momentum and margin mix: ACH revenues up >30% YoY for the second straight quarter; Q2 gross margin expanded 185 bps to 25.8% on mix and efficiencies; PINless debit transactions +144% and dollars +93% YoY .
    • Positive cash generation and continued buybacks: Q2 operating cash flow of ~$1.1M (net of >$1M non-recurring outlays) and ~$350K of buybacks; $7.5M cash at 6/30/25 .
    • Pipeline and cross-sell under UCO/Usio One: 20 ISVs in implementation on PayFac; cross-selling examples across ACH and Output; new enterprise merchant with ~$100M annual processing potential beginning to ramp .

  • What Went Wrong

    • Revenue/EBITDA miss vs consensus and guide down: Q2 revenue and EBITDA missed S&P Global consensus and FY25 revenue growth guide cut to 5–12% as two national accounts delayed implementations .
    • Prepaid and card issuing headwinds: prepaid revenue -26% YoY; card issuing impacted by a client losing a large amusement park account (~$2M quarterly revenue impact) .
    • Interest income and one-time SG&A: revenue was impacted by decreased interest income; SG&A up ~$0.6M on largely one-time items (insurance, sponsorship/marketing, professional fees, franchise taxes) .

Financial Results

Consolidated P&L (USD Millions, except per-share and margins)

MetricQ4 2024Q1 2025Q2 2025
Revenue$20.56 $22.01 $19.96
Gross Profit$5.06 $4.81 $5.14
Gross Margin %24.6% 21.9% 25.8%
Operating Income (Loss)($0.60) ($0.24) ($0.40)
Adjusted EBITDA$0.52 $0.67 $0.50
Net Income (Loss)$0.63 ($0.23) ($0.37)
Diluted EPS$0.02 ($0.01) ($0.01)

Segment Revenue (USD Millions)

SegmentQ4 2024Q1 2025Q2 2025
ACH & Complementary Services$4.6 $5.04 $5.19
Credit Card$7.2 $7.88 $7.05
Prepaid Card Services$3.0 $2.91 $2.73
Output Solutions$5.1 $5.73 $4.64
Interest – ACH & Complementary$0.2 $0.22 $0.18
Interest – Prepaid$0.3 $0.18 $0.13
Interest – Output Solutions$0.0 $0.04 $0.04
Total Revenue$20.6 $22.01 $19.96

KPIs

KPIQ1 2025Q2 2025
Total Payment Transactions (M)13.7 14.1
Total Payment Dollars Processed ($B)$2.00 $1.94
ACH Tx Growth YoY+36% +33%
ACH $ Growth YoY+42% +19%
PINless Debit Tx Growth YoY—+144%
PINless Debit $ Growth YoY—+93%
Card Transactions Growth YoY+65% +69%
Card Dollars Growth YoY+17% +9%
Output Solutions Mail Pieces (M)—>5.4
Output Solutions Electronic Docs (M)—>20.0

Results vs S&P Global Consensus (Q2 2025)

MetricActualConsensusSurprise
Revenue ($M)$19.96 $22.32*-$2.36 (-10.9%)*
EPS (Primary)($0.01) ($0.0033)*-$0.0067*
EBITDA ($M)$0.068 $0.857*-$0.789*

Values with asterisk retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue Growth YoYFY 2025+14–16% +5–12% Lowered
Adjusted EBITDA MarginFY 20255–7% Positive Adjusted EBITDA (no margin range) Less specific/downshift
SG&A Run-Rate2H 2025—“Significantly lower” vs 1H; 2025 SG&A up only nominally vs 2024 New qualitative
Liquidity2H 2025—Cash position expected to increase in 2H25 New qualitative

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
Usio One (UCO One) go-to-marketFramed as 2025 strategic integration to drive operating leverage and cross-sell Cross-sell wins; team enablement; 20 ISVs in implementation; early ACH wins from card base Improving
ACH momentum & mixACH revenue growth: +17% in Q4; +30% in Q1; gross margin mix benefits ACH rev >30% YoY; PINless debit surged; July ACH at YTD high Improving
Card issuing dynamicsPayFac up 29% in Q4; +25% in Q1; legacy attrition continued Transactions +69%; dollars +9%; 20 ISVs; new $100M enterprise ramp; but downstream client lost amusement park acct Mixed
Output Solutions shift to electronicQ4 rebound; capacity investments Mail pieces >5.4M; >20M e-docs; electronic mix boosts profitability even if revenue/unit declines Improving margin mix
OpEx/SG&A discipline2024 SG&A +3%; Q1 largely flat YoY Q2 SG&A up on one-time items; mgmt expects 2H reductions and added cost actions Improving 2H setup
M&A/Capital returnsBuyback authorization increased in Mar; cash at record $8.1M YE24 Continued buybacks (~$350K in Q2, ~$700K YTD); M&A pipeline more active; disciplined valuation Optionality rising
Guidance/ImplementationsFY25 guide +14–16% set in Mar Guide cut to +5–12% on two national account delays; timing governs high/low end Deteriorated near-term

Management Commentary

  • “Results in the second quarter continue to reflect improvements across key strategic objectives including another quarter of strong processing growth, positive operating cash flow, expanded margins and positive Adjusted EBITDA” .
  • “Due to prolonged customer caused implementation delays with two large national accounts, we are adjusting our revenue guidance expectations to 5–12% growth this year with continued positive adjusted EBITDA” .
  • On PayFac and pipeline: “We now have 20 new ISVs currently in various stages of implementation… includes a new large enterprise merchant with the potential to generate $100,000,000 of annual processing volume and that account is just starting to ramp” .
  • On output mix: “Electronic document processing is more profitable than print and mail… transition to a greater proportion… should boost margins” .
  • On innovation: “Tested our biometric merchant payment system… tied a token generated from a human iris with a payment wallet and successfully initiated payments” .

Q&A Highlights

  • Margin drivers: Mix (ACH, PINless debit), efficiency gains, and electronic Output drove the 185 bps gross margin expansion; expense discipline remains a focus .
  • SG&A normalization: Q2 SG&A elevated by one-time items; management outlined efficiency initiatives (machinery, not backfilling roles, vendor renegotiations) and expects lower run-rate ahead .
  • Guidance bridge: The width between low/high ends is driven by timing of two large implementations; faster ramps push toward high end, slower to low end .
  • Capital allocation and M&A: Ongoing buybacks each quarter; M&A pipeline more active with valuation discipline and self-sustaining targets emphasized .
  • Specific headwind size: Lost amusement park downstream account equates to ~“$2,000,000 a quarter of revenue” impact at the client .

Estimates Context

  • Q2 2025 vs S&P Global consensus: revenue $19.96M vs $22.32M*, EPS ($0.01) vs ($0.0033), EBITDA $0.07M vs $0.86M—a broad miss on top-line and profitability that likely necessitates estimate resets for 2H25 given the guide cut .
  • Forward S&P Global consensus (next quarters):
    • Q3 2025: Revenue $22.19M*, EPS $0.005*, EBITDA $0.92M*
    • Q4 2025: Revenue $23.06M*, EPS $0.01*, EBITDA $1.01M*
      Values with asterisk retrieved from S&P Global.

Key Takeaways for Investors

  • ACH-led mix shift is expanding margins despite flattish revenue; sustainability looks solid given strong July ACH volumes and continuing PINless debit tailwinds .
  • The FY25 guide cut is primarily timing-driven; monitor ramp cadence at the two national accounts as the key swing factor for 2H revenue trajectory .
  • Card issuing remains a tale of two portfolios: PayFac scaling (20 ISVs, new $100M enterprise) vs legacy/one-off client losses—net effect should improve into 2H as implementations convert .
  • SG&A normalization and ongoing efficiency actions should support incremental margin gains in 2H, even on modest revenue growth .
  • Capital allocation remains shareholder-friendly (buybacks) with optionality for tuck-in M&A at disciplined valuations; cash expected to rise in 2H .
  • Output Solutions’ shift to electronic delivery is a margin enhancer; revenue optics can understate underlying activity and profitability .
  • Near-term trading setup likely hinges on estimate cuts and evidence of implementation progress; watch September/October investor conference commentary and any updates on ramp timing .