Usio Inc (USIO) 2021 Q2 法說會逐字稿

Good afternoon, and welcome to the Usio earnings conference call for the second quarter ended June 30, 2021. (Operator Instructions) Participants of this call are advised that the audio of this conference call 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 28, 2021. I would now like to turn the conference over to Joe Hassett, Investor Relations. Please go ahead.

Thanks, Matt. And just a point of clarification. The replay will be available until the end of August.

And thanks, everyone, for participating. Welcome to Usio Second Quarter 2021 Financial Results Conference Call. The earnings release, which Usio issued yesterday after market close, is available on the company's Investor Relations website at usio.com/investors under News. On this call today are Louis Hoch, President and CEO; Greg Carter, Senior Vice President of Payment Facilitation; Tom Jewell, Senior Vice President and Chief Financial Officer; and Houston Frost, Senior Vice President of Business Development and Prepaid Products. 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. Forward-looking statements can be identified by the use of such words as estimate, anticipate, expect, believe, intend, may, will, should, seek, approximate or plan or the negative of these words and other similar words and phrases.

Forward-looking statements, by their nature, involve estimates, projections, goals, forecasts and assumptions and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements, including risks related to the COVID-19 pandemic and its effect on the economy, the realization and the opportunities from the IMS acquisition, 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 volatility of stock price; the loss of key personnel; growing competition in the electronic commerce market; the security of the company's software, hardware and information; compliance with complex federal, state and local laws and regulations and other risks detailed in the company's filings with the SEC.

These forward-looking statements speak only as of the date of this conference call and should not be relied upon as predictions of future events. Usio expressly disclaims any obligations or undertaking to update or revise any forward-looking statements made today to reflect any change in Usio's expectations with regard thereto or any other changes in the events, conditions or circumstances on which any such statement is based, except as required by law. Please refer to the company's SEC filings on its Investor Relations website for additional information.

And with that, I would now like to turn the call over to Louis. Louis?

Thank you, Joe, and welcome, everyone. The second quarter was another record quarter with record processing volumes and record revenue growth. Revenues for the quarter were up 119% to $15.2 million with revenues for ACH up 125%. Adjusted EBITDA was $1.3 million for the second quarter, which was our third consecutive quarter of positive adjusted EBITDA. And our positive operating cash flow increased our cash balance by $1.3 million to $5.6 million at June 30 from $4.3 million at the end of the first quarter and up $600,000 since the end of 2020.

As a result of the strong first half of 2021, we're increasing our revenue guidance for the year to be in the range of $56 million to $59 million, which represents a growth of 73% to 83% over 2020 revenue growth. We still expect positive EBITDA -- adjusted EBITDA for the year. It was another quarter of record transaction processing volume with total dollars processed, a record of $2.73 billion, topping the previous all-time record of $1.87 billion that was set in the first quarter of 2021. More ACH transactions were processed in the second quarter of 2021 than any previous quarter in the company's history.

Card processing, including PayFac, set another all-time quarterly record for both transactions and dollar processed. And May was our first ever $1 billion processing month. This was our third consecutive quarter of record electronic payments and transaction processing volumes.

In addition, Output Solutions revenue was $3.6 million for the quarter, a run rate that is well above the assumptions we made for the IMS acquisition. We're on a rapid growth trajectory fueled by our innovative technology, multichannel distribution strategy and a focus on serving a diversity of end markets. The Usio franchise has never been stronger, and this quarter was a testament to the scalability of our systems and associated products and services.

We continue to innovate. We recently announced a partnership with Voyager Digital, the fast-growing cryptocurrency app and platform to enable our merchants to accept electronic payments in as many of 60 cryptocurrencies via our payment processing gateway. This exciting solution should be launched later this year. We provide business line revenue reporting, so let me offer some high-level comments by business line.

ACH continues to set records with electronic check dollars processed almost quadrupling this quarter. ACH revenues were up 125% in the quarter, and ACH continues to be one of our most profitable businesses. While ACH is broadly growing, it's been fueled especially by the rapid expansion of the cryptocurrency market. Our success in this industry leading to new opportunities such as with Voyager Digital, where our relationship keeps expanding. Together with our newly introduced PINless debit and account inquiry products, we remain one of the fintech industry's leading innovators.

While we experienced triple-digit growth for ACH in comparison to the second quarter of 2020, which was affected mostly by COVID, we expect ACH to continue to grow year-over-year in the back half of this year. Based upon our expectations of somewhat softer crypto market, we see that ACH transaction is growing over 70% this year to a new record high.

Our card business has also had a record quarter. Momentum continues to build as growth in dollars processed rose 55% this quarter, accelerating from 30% growth last quarter. Transactions processed in the quarter doubled after doubling last quarter. And our card division generated profits this quarter. Greg will review the performance in more detail, but it's clear that card has reached an inflection point and its growth is accelerating. It now appears we're on pace to generate over $1 billion in card processing volume this year, which represents another milestone.

Card processing continues to set records and is experiencing sequential growth each quarter. We expect to see that continue over the balance of the year as we grow card through its 3 growth channels: new ISVs, increased penetration of the ISV merchants and organic processing volume growth at the individual merchant level. Card is also innovating new products with the global Voyager crypto processing agreement also expected to bolster card volume.

Prepaid load volume was up 65% in the quarter, while revenues were up 82%, consistent with the expectations established last quarter. Prepaid continues to further strengthen its position in government, municipal, charitable and related markets. Without stealing Houston's thunder, I want to quickly mention our recently -- a recent win with the New York City Economic Development Corporation's new COVID vaccination program where the city is dispersing $100 to eligible residents that get vaccinated. This highly visible program is a testament to the strength of our relationship with various New York City agencies built through numerous COVID economic relief programs already supported by our prepaid technology.

It also recognizes the ability -- our ability to respond rapidly and provide innovative solutions, which , in this case, required both a physical and virtual card solutions. It is this combination of innovative technology and strong relationships that has us confident that prepaid will continue on its pace of record results again for 2021.

Finally, Output Solutions continues to exceed our expectations. Their integration continues to progress and now extends to successfully earning business from our card customers that have a need for high-quality print and mail solutions. We're also making inroads with electronic bill presentment payment program, which we can now claim a top 5 credit union as our latest customer.

As I briefly mentioned, we generated over $1.3 million in adjusted EBITDA and we're in positive cash flow for the quarter, with the year-to-date adjusted EBITDA is now over $1.5 million and is the primary driver over $600,000 increase in our cash balances since the end of 2020. Consequently, we believe that we are more sufficiently funded to support our current growth initiatives over the next 12 months.

It's been a record first half of the year. Dollars processed volumes this year have already surpassed what we did for all of fiscal 2020. We have turned cash flow positive. Revenue growth is up 95% for the first half of the year versus the prior year period, which enabled us to raise guidance for the full year. Of course, the results are contingent on the continued improvement of the overall economy, the continued excitement in the cryptocurrency marketplace and the recovery of the consumer lending industry.

With that, I'd like to conclude my opening remarks and turn the call over to Houston Frost, our Senior Vice President of Prepaid Products.

Thank you, Louis, and thank you to everyone who's joined the call this morning. The prepaid business had another great quarter with revenue up 82% as compared to the second quarter last year. And this showed continued improvement as we reported 61% growth in Q1 as compared to the first quarter last year. In the second quarter, prepaid load volumes were up 65%. And prepaid card transaction volume growth was also strong, up 63%.

As discussed in previous quarters, we began to earn additional revenue this quarter in May and June through inactivity fees and breakage on cards that were issued last year. In addition, we have continued to earn new business from our nonprofit and government clients from more general civic and community-related card programs. More recently, and as Louis mentioned, we've actually seen an uptick in pandemic-related card orders as well, with the most notable being our recent win to support the New York City Economic Development Corporation vaccine incentive program. Under this program, we are providing the NYEDC with the ability to issue both physical and virtual cards as their means to disperse the $100 cash award that city residents and employees receive for getting their COVID-19 vaccination. It's estimated that approximately 41% of the eligible population of New York City qualify for this incentive. This is an important, highly visible program that is a natural outgrowth of the COVID relief-related solutions we've been providing the New York City-related entities since last year.

It also illustrates how the New York City Mayor's office as well as similar organizations across the United States have come to depend on our ability to quickly deploy a solution that provides the convenience, simplicity and transparency they require for money disbursement programs. We are also proud to have been able to support the Coral Gables Community Foundation's effort to provide money to the families affected by the condominium building collapse in Miami. We also continue to make progress on new guaranteed income programs like the Compton Pledge. Compared to the limited duration of COVID relief and other disaster relief programs, these guaranteed income programs are generally longer term with significantly larger lifetime load amounts.

To date, this year, we have added about 50 new programs to the more than 100 programs from community civic, social nonprofit and government entities we administered last year. Our flexibility, responsiveness and technology are the backbone of our success. And this backbone is what supports the strong relationships we continue to build with these organizations.

As discussed before, our clients also greatly value the data and insight we provide them regarding how money loaded to these cards is spent. This provides feedback they can use to refine and to generate additional support for their programs. This is one of the key advantages of a card program compared to other money disbursement methods like check, ACH, or peer-to-peer services like PayPal and Venmo.

It's been a good first half of the year, and we expect our momentum to continue throughout the balance of 2021. The anticipated lull between the wind down of last year's COVID relief programs and the ramp-up of new disbursement programs has just about run its course, and we expect sequential revenue growth moving forward.

So with that, I will conclude my remarks and turn the call over to Tom Jewell, our Senior Vice President and Chief Financial Officer, to discuss financial results in greater detail.

Thanks, Houston, and welcome, everyone. Thanks for joining our call today and your interest in Usio. I'm going to provide a brief review of our second quarter financial results before turning the call over to Greg.

As Louis mentioned, revenues for the quarter ended June 30, 2021, were $15.2 million, an increase of 119% compared to the same period last year. Over the past few quarters, our rate of revenue growth has been accelerating from 27% in the fourth quarter to 73% last quarter to now 119%. On an organic growth basis, revenues increased 67%, also accelerating from 25% last quarter.

Revenue growth was led by ACH and complementary services, which is up 125% on the strength of a 155% increase in transactions processed, while prepaid revenue was up 82%, both growth rates had accelerated compared to the first quarter. Revenues in our credit card line were also up, increasing 43% after increasing 15% in the first quarter, with card transactions processed in the quarter doubling from a year ago, while dollars processed rose 55%.

Growth was especially strong in PayFac, where revenues were up 111% year-over-year and sequentially up 21% from Q1 of this year, in addition to the December 2020 acquisition of Output Solutions contributed $3.6 million of revenues in the quarter. Gross profits in the quarter more than tripled to $4.1 million, with gross margins expanding 900 basis points to 27% from 18.5% in the same period a year ago. The improvement in gross margins reflects a more favorable product mix, especially the increase of ACH revenues, which is our most profitable business segment. Margins also benefited from an increase in volume, which better leveraged our fixed costs.

For the quarter, total other selling, general and administrative costs were up 53% from the year ago period to $2.8 million, reflecting the incremental cost of Output Solutions overhead and our continued investment in prepaid and PayFac growth initiatives. We expect other SG&A expenses to remain at similar expense levels with moderate increases over the balance of the year as we take advantage of market opportunities to enhance our current staffing for growth opportunities and maintain our high service levels.

Depreciation and amortization in the quarter increased $240,000 year-over-year to $0.6 million, primarily due to the additional costs associated with the amortization of the customer list acquired in the purchase of IMS. We had positive operating income of $338,000 in the quarter, which is an improvement of $1.6 million from the same quarter a year ago.

Adjusted EBITDA, as Louis mentioned, was $1.3 million in the quarter, a nearly $1.9 million improvement over the second quarter of 2020. This is our third consecutive quarter of positive adjusted EBITDA. We also recorded positive operating cash flow of $1.1 million over the first half of 2021 and my definition of operating cash flow excludes the changes in merchant reserve funds, prepaid card loads, customer deposits and net operating lease assets and liabilities that are included in the cash flow statement.

For the quarter, we reported GAAP net income of $220,000 or $0.01 per share compared to a net loss of $1.3 million or $0.10 per share in the second quarter of last year. I will add that net income for the quarter includes a diluted share calculation, which includes our unvested shares.

The company remains in strong financial position, cash and cash equivalents of -- at June 30, 2021 totaled $5.6 million, and as Louis alluded to, rising $1.3 million from the $4.3 million at March 31, 2021, and $0.6 million over the December 31, 2020, balance of $5 million. Our only debt is a small equipment loan taken on in the first quarter to finance a new postage order at Output Solutions.

Providing a quick snapshot of year-to-date results. Revenues were $28.7 million, up 95% from the $14.7 million from the prior period, nearly doubling. All lines of business were up double digits, on top of the incremental revenues from Output Solutions of $7.4 million. Organic growth, excluding Output Solutions, is 45% for the 6-month period.

Gross profits were $7 million, up 119% from the $3.2 million in the prior year. Gross margins for the first half were 24.5% versus 21.8% in the prior year. Adjusted EBITDA, as Louis mentioned, was a positive $1.5 million versus a prior year loss of $0.8 million, an improvement of $2.3 million. Operating income for the first half was a loss of $0.4 million compared to a loss of $2.2 million in prior period, another improvement of $1.8 million. And on a net income or loss basis, the net loss for the first half of the year was $0.5 million compared to a prior year loss of $2.1 million.

Results over the first half of 2021 have been strong. We are growing at an exponential rate and we're increasing profitability. This should provide the liquidity and financial strength to support investment in our growth initiatives to fund operations and undertake selective accretive acquisitions consistent with our growth strategy in 2021. A great start to the first half of the year. At this time, I'd like to turn the call over to Greg.

Thank you, Tom, and good morning, everyone. It was another record quarter for the card segment. Our growth continues to accelerate. Total dollars processed were up 55% in the quarter, following growth of 30% last quarter and 17% in the fourth quarter of last year. Transactions processed also doubled for the second consecutive quarter leading to a 43% increase in revenues. I'm also pleased to report segment profitability this quarter.

Based on performance so far this year, card is on pace to exceed $1 billion in annual transaction processing volume for the first time. Clearly, growth is accelerating, and we believe it will continue to accelerate for the balance of this year.

Since its inception, our PayFac business has been highly successful penetrating the ISV market based on our innovative technology and compelling value proposition, what we call Payfac-in-a-Box. So the real key to our success has been our improved ability to help these ISVs board an increasingly larger number of their merchants onto the Usio processing platform.

Initially, I view my role as modifying our organization, implementing new strategies and tactics and adding skilled resources to do just that. Consequently, I'm happy to report that conversion rates continue to increase.

In the second quarter, 52% of boarded merchants are processing, which is up from 20% a year ago. And we expect that proportion to continue to rise over the balance of this year as we believe there is still low-hanging fruit to be harvested in the billions of dollars in electronic payments available to us simply through increased penetration.

This is what makes our business so dynamic. We essentially have 3 growth engines. We can add new ISVs. Those ISVs can increase their penetration of their merchant base. And those merchants can organically grow year-over-year, automatically increasing our volume. Our growth this year has been along all 3 dimensions.

After a challenging 2020, most of our merchants are back on their feet and scaling their businesses. This is particularly true of our long-term legacy clients, where attrition remains virtually nonexistent and growth has rebounded after suffering throughout much of 2020. Besides increasing penetration in organic merchant processing volume growth, we continue to grow by adding new ISVs.

Let me provide some examples. An existing ISV growth processing volume by more than 40% between the first and second quarters as a result of new call-behind efforts and other conversion strategies we've helped them implement. I previously mentioned how we are getting smarter conversions, and this is a classic example of putting our knowledge and best practices to work.

A church software provider is a new ISV client. About 90% of its boarded merchants are processing on the Usio platform. The volume was up 37% sequentially in the first quarter and up even a more impressive 57% in the second quarter, all at very attractive margins. We are continuing to add new ISVs to the Usio platform, including several in the second quarter. This includes new greenfield opportunity customers, new organizations with no preexisting payments processing relationships. As a result, we get 100% of their merchants and 100% of that merchant volume. These types of success stories are happening throughout the organization, so you can appreciate how our hard work is being rewarded with tremendous growth and why we're so excited about our future potential. We are very pleased with our progress and we are leveraging our momentum to further penetrate our markets. We are refreshing our client portal, including a tool where our prospective ISVs can calculate exactly how much more they could earn through a relationship with Usio.

Marketing is continuing to improve our SEO inbound lead generation and outbound productivity. The professional business development team continues to expand their network and create new opportunities, and we continue to nurture relationships with our less active ISVs. For instance, the legal vertical ISVs, especially our bankruptcy law software ISVs are currently somewhat slowed due to widespread forbearances. But we believe they have the potential to rebound with a vengeance and generate exponential growth once government assistance programs end.

Perhaps one of the most exciting developments is the introduction of cryptocurrency as a form of payment for our numerous platforms, making us the first PayFac to be able to enable merchants and ISVs to accept cryptocurrency as a form of payment on a global scale. Growing out of our expanding relationship with Voyager Digital, this emerging technology is just another example of how far we go to serve our customers, which, in this case, is a potential game changer. We'll be rolling out our crypto product later this year, so stay tuned for further updates.

Finally, we remain encouraged by the progress being achieved in the new electronic bill presentment and payment solution we have developed in conjunction with Usio Output Solutions. The sales professionals recently hired to target enterprise-level opportunities are uncovering strong interest.

Before concluding, I want to remind everyone that while we certainly feel good about our position, we recognize the ongoing risk COVID represents. With the third consecutive quarter of accelerating growth, we are confident growth in the card segment is on a steep trajectory, and we are on pace for a record year. Momentum is building and the bottom line is seeing meaningful improvement. We are introducing new products and new capabilities and strengthening the organization to leverage our success, and we are all looking forward to the rollout of our new cryptocurrency solution.

That concludes our prepared remarks for today. So now we would like to open up the call for any questions.

(Operator Instructions) Our first question will come from Gary Prestopino with Barrington Research.

Several questions here. First of all, I think it's safe to assume a lot of what happened in the quarter was probably driven on a margin basis by the ACH business. So what I'm trying to figure out here is that on the ACH as well as card as well as prepaid, it seems to me that card and prepaid, we're going to continue to have sequential growth over the next couple of quarters. But Louis, you mentioned something about a slowdown in the crypto, so we won't be seeing that at least based on what I think in the next 2 quarters. And how does that impact the margin metrics of the company as we look at it for the back half of the year?

Well, first thing is crypto peaked in May. June and July were down compared to May, but they were still great. And in our comments, we talked about we expect ACH to grow year-over-year 70-plus percent, and that's what we'll experience this current quarter. This last quarter, Q2 was comparing against the highly affected quarter of 2020 from COVID. So that plays effect. Crypto is still very strong. And if you follow crypto, you can see the last week, some magic started to happen again in that. So ACH will not be as large as it was last quarter, but it will still be significant, so.

Okay. And then again, the ACH really drives a lot of -- is a big contributor to the overall margin metrics then?

It is. And so last year, we averaged 23% gross margins for the year. We're going to exceed that for this year. So that will give you an idea of what we expect for margins.

Okay. And then, Greg, could you -- you said you're going to do over $1 billion in processing volume in the card segment this year. Do you have what you did last year?

I don't have that number in front of me, but I can certainly get that for you. I just don't have it now.

Our next question will come from Barry Sine with Spartan Capital Securities.

I also want to ask a bit about ACH. It was kind of -- some people would even call it a rocket ship, the way it grew this quarter. If you could help us -- I know there's kind of 2 factors driving that growth. One is a return to normalcy. Some of your customers like doctors' offices were closed last year, so that's one aspect. And then you've also called out some new businesses like crypto. And then on crypto, it sounds like there's a couple of different aspects to the growth contribution. One, I guess, you're processing U.S. dollar payments in and out for crypto companies. And then the new relationship, I guess, has not kicked off with Voyager Digital, where they will handle the crypto payments. And I guess you guys are going to have some type of a revenue sharing if you are payments want -- if your customers want to accept a crypto payment. So a lot of points there on ACH. But if you could please address that?

Yes. I mean you were kind of mixing divisions up in that question, but -- so crypto, it's payment acceptance, we're going to perform all the settlement to the merchant like we do today. So when we have a merchant that wants to get paid in crypto, we'll send a request to Voyager, and they'll tell us how much that coin needs to be provided to affect the payment, and then we'll move the money directly to the merchant. That's not ACH. That will go in our card part of our business or our payment acceptance part of our business cards. And ACH this quarter was driven a lot by crypto. It was driven by some fintech lending as well. Crypto was down a little bit. Again, it peaked in May, but it's still very strong. In fact, the volumes are still very strong, and we remain very excited about that. And it's starting to recover just last week as well.

And also a question on Output Solutions, if I may. If I recall correctly, a part of the rationale for doing that acquisition was cross-selling between customers. I know you've mentioned that you won a top 5 credit union. How well are you doing selling their services into legacy Usio customers and vice versa selling Usio payment processing services into their legacy customers?

It's been very interesting. We've been able to sell more print into our existing payment customer base than we've been able to sell card or electronic. But we're excited about both channels. It just seems that the print -- that the customers value payments more. So when we call them and say, "Hey, we're now doing print," it's an easy decision for them and it happens pretty quick. And so that's been easier for us to do, and we like that. So we're going to continue to sell in both ways. But the point is that we're growing that company. As you can see, when we bought them, they were doing like $13 million in sales. They're on a run rate much higher than that for this year, and that's from increased sales.

Our next question will come from Jon Hickman with Ladenburg.

Congratulations on the quarter, beat my number handily. Could you explain a little bit about this crypto processing? Are you -- the merchants that want to accept crypto, they're going to need a crypto wallet and you're going to have access to that to move money in and out? Is that how that's going to work?

No. So if we just kind of go through example, I don't know what type of merchant would be a good example, but let's just say you're at a website and you're buying something from one of our merchants and you're going to see payment options: pay by ACH, pay by credit card, but now you're also going to have -- if the merchant accepts it, pay by crypto. And then if you do that, then you're going to have multiple coins that, that merchant might accept. Initially, we're going to turn all coins into cash so that if you want to pay somebody $100, we're going to come back to you and tell you how much...

Coin [that you've been in contact]?

Bitcoin, how much coins you need to provide us. And at that point, you're going to present your -- wherever your crypto is in a wallet or, et cetera. And we're going to draft it from there and at -- Voyager will actually pull it from there. And then Voyager will return to us, the $100. And when they return the $100 to us, it will end up in the daily settlement to that merchant. And all those transactions will flow through our system just like another payment type, ACH, credit card, debit cards.

So do you get paid a couple of times there to do the -- take the payment and do the -- maybe the ACH transaction?

No, it will just be for clearing the crypto. And we'll receive a percentage of that transaction.

Okay. One more question. On prepaid, since you're anniversarying the COVID, a lot of the big COVID things or accounts that you got last year, are you starting to get some breakage revenues there?

Yes. So we saw some breakage in May, a little bit more so in June, and that's been accelerating. So last month, and this month, we're continuing to see that. The good news is it does -- it is fairly spread out, I think, because we didn't have about 2 or 3 quarters of issuance that were pretty high volume. And to be honest with you, while we may have kind of -- Q3 maybe slightly more in breakage activity fees, by Q1 or Q2 of next year, I mean, we're really going to be in a steady state because we've been issuing cards and loading cards at a pretty good clip since the beginning of this year.

So what that is going to do, and I'll mention this, too, because the margin question was brought up earlier is, hopefully, that will level out a prepaid contribution to the margins because we have seen a little lumpiness in that where months where we had a lot of cards go out, it would be lower-margin months for the prepaid division and in months where we had fee income like inactivity fees or breakage would lead to larger margins. So what I'm really hoping to see over the next couple of quarters is that our margins really kind of level out and we remove that lumpiness there.

Our next question will come from Brian Kinstlinger with Alliance Global Partners.

Really great EBITDA. I think the question at every analyst minds right now, though, I'm not sure they've asked it is, can you quantify how much of ACH in 2Q was generated from crypto?

We haven't released that number. But it was -- as we said, our ACH growth was driven by growth in cryptocurrency and growth in fintech lending.

Okay. As you think about the crypto payments business, how does this contemplate? Or how does it factor in the tax consequences? I mean if I have a huge gain in bitcoin and I'm trading it in for cash, it's like I'm making a trade, and there's going to be tax consequences one way or another. So is that for Voyager to handle? Is that going to be an inhibitor in the near-term for mass usage of this? How do you think about that?

Well, I don't even know how tax crypto is, what IRS has made up their minds on that or not. But I can tell you what, our company won't be involved in the taxation of that. If it does prevent people from using it because they're converting it, then they could potentially use it less. But I think there's just uncertainty in the whole regulatory market for crypto, and we'll see what happens. We can tell you that we wouldn't have done this if we didn't know there was demand for it.

Brian, one thing I'll mention -- one thing on the crypto is there's an increasing use of stablecoins. So what you're actually, I think, seeing more and more so is individuals wanting to spend stablecoins that they're holding, meaning they're fixed to the dollar, et cetera. So that would still be a driver for payments being accepted, right? And you're not going to deal with tax consequences there because it's -- you're just dealing with a different kind of type of dollar.

It's a great point. If you follow Voyager, they're paying 9% annual interest rate on USDC stablecoin. So you can see people maintaining the balance there and using it kind of like a checking account.

Okay. I want to ask a question on the gross margin. I seem to do that every quarter, sorry. But in the fourth quarter, you had to blow out gross margin. And it was a result of Output Solutions having an unusually high contribution margin. A couple of things happened, I believe. And then here again, you have a very high gross margin. And although ACH has a stronger mix, I'm curious if there was anything in Output Solutions this quarter, similar to the fourth quarter, that drove upside temporarily to the margin? Or if anything has changed, given your talking about growing faster that it's driving a better margin for that business?

Well, Output did have some electronic business, as we talked about with the top 5 credit union this quarter, which should continue. But I mean, the growth in the gross margin was primarily related to ACH. But we had continued growth in card business. I mean the card business continues to set records sequentially. So it's kind of offsetting. But again, we experienced 23% gross margin last year. We're going to beat that number this year.

Right. But if you reported 22% each in the next 2 quarters, you'd get above 23% for the year. So my point really is, if you had the same mix, which you're not going to, but if you did, because crypto came back and deposits came back, would you again have a 27% margin? Or were there other onetime factors or maybe less recurring factors and output that helped you?

No. If everything was equal, we'd be 27%. If everything was equal with ACH.

Yes. Lastly, on PayFac, it's great to hear about the growth. Can you talk about if there are any impediments to onboarding, for example, are the ISVs as well as the merchant, while most of the merchants -- are they more receptive? And is it creating a faster sales cycle? Or are they still taking time, pushing back and it's a long sales cycle.

Well, with respect to the ISVs that are bringing on new customers, net new to their portfolio, almost 100% of those are boarding with Usio. It's the back or the existing merchants within those ISVs that we've been paying particular attention on with the call behind campaigns, with webinars and certain marketing activities. So we are seeing an increased adoption from those, I guess, call them, legacy merchants on those ISVs. But when we -- when I talk about the greenfield opportunities, we've got a new ISV that's centered around fundraising at schools, and they never had a payment relationship before. So in that case, we get 100% of that business right out of the gate. But to be clear, our focus day on -- every day is that existing subscriber base within our ISVs that we've executed contracts with.

Yes. And I just -- I wanted to think answer Gary's question, just overall, everybody knows. Last year, we did $776 million in transaction processing volume on the card segment, and we anticipate that to be over $1 billion this year.

Our next question will come from Michael Diana with Maxim Group.

So you used to mention that your prepaid performance this quarter reflected somewhat of a wind down in COVID-related revenues. So a broader question about all 4 of your lines of business. It seems -- is it true that -- or would you characterize your performance this quarter as more of a normalized performance as opposed to a COVID-impacted performance?

Well, I think every division was very normalized. And I think that also shows you how we are prepared for this with the scalability of our systems. There was -- as Brian was alluding to, there was no onetime type of helping hands this quarter. And the business model for prepaid continues to be the same, and we're receiving income from multiple ways. So through spoilage interchange, and it's all about getting cards out and getting -- load dollars on the cards, and we've been very successful with that. PayFac continues to just grow crazily. And one day, PayFac will be the biggest part of our business. We can see that, and it happen in the near future. So again, there was no onetime type of activities that helped us get to where we're at today.

Our next question will come from [Kevin Pearson], a private investor.

Gentlemen, this is Kevin Pearson. I'm a long-time investor. And I just had a quick question. I'm a little -- first of all, congratulations on the quarter. I've been holding the stock since about -- just after the IPO, bought in a little bit along the way. But I'm a little confused about the messaging here because there's been a lot of discussion over the last 9 months about growth and exponential growth. But the forecast for full year revenue suggests that the back half of the year is going to be flat to down as far as revenue is concerned. So I'm just looking for a little color on that and trying to understand what's your messaging here?

Well, I think it's pretty clear. I mean, we started the year with $50 million as our guidance, and then we went to $53 million to $56 million, and we just went to $56 million to $59 million. If you're taking our revenues and just sequentially growing it, then you're getting to $59 million. And so we -- our guidance was pretty clear, that for us to achieve those numbers, crypto needs to stay current and growth in the fintech lending needs to stay current, and that also the economy needs to approve. We'd also like some of these government subsidies to go away. But -- so we're giving you the best information we have. We can also tell you, and you obviously are aware of this, our original projections have been blown away this year and blown away for good. And so we continue to be excited about the year and where we're going to end up.

(Operator Instructions) Our next question is a follow-up from Gary Prestopino.

Louis, can you remind us what your original projections were for Output Solutions for revenues for this year?

$13 million and over $1 million in EBITDA.

Okay. And you're going to exceed that, right?

Yes.

This concludes our question-and-answer session, which also concludes today's conference. Thank you for attending today's presentation. You may now disconnect.