Usio, Inc.

Previous wording

Since 1998, Usio has entered a number of market verticals within the payments industry in order to satisfy the growing payment needs of consumers and merchants across the United States. Beginning with our Electronic Bill Presentment and Payment, or EBPP, product that launched the Company, we entered into the electronic funds transfer space through the ACH network, developing ancillary and complementary products such as PINless debit in 2016, and Remotely Created Checks, or RCC, account validation, and account inquiry in 2019. These supplementary product options offer customers access to faster and more convenient payment options and tools to improve operating efficiencies. Further, our credit card payment offering was expanded in 2017 with the development of Payment Facilitation, or PayFac, that utilizes our unique technology that allows for instant enrollment of merchants and combined our suite of payment options into an integrated platform for merchants and customers to utilize. In the first half of 2025, we began, and completed, development of a new EBPP. This offering allows merchants to create and distribute bills to their customers that can be viewed, and paid, online through our platform and payment processing services.

Current wording

Since 1998, through our merchant services business lines, which now consist of ACH and complementary services, credit card processing and prepaid cards, Usio has entered a number of market verticals within the payments industry in order to satisfy the growing payment needs of consumers and merchants across the United States. Beginning with our Electronic Bill Presentment and Payment, or EBPP, product that launched the Company, we entered into the electronic funds transfer space through the ACH network, developing ancillary and complementary products such as PINless debit in 2016, and Remotely Created Checks, or RCC, account validation, and account inquiry in 2019. These supplementary product options offer customers access to faster and more convenient payment options and tools to improve operating efficiencies. Further, our credit card payment offering was expanded in 2017 with the development of Payment Facilitation, or PayFac, which utilizes our unique technology that allows for instant enrollment of merchants and combines our suite of payment options into an integrated platform for merchants and customers.

Previous wording

With the growing need for faster payment methods, we continue to invest in technology that can help us further expand our suite of payment technology. With the rise of Real Time Payments, or RTP, we began expansion into this market vertical in 2023, which serves as an alternative to ACH payments. We also continue to enhance our existing product offerings, with improvements in reporting, data management, fraud and risk monitoring, ease of access, and accelerations in client onboarding and implementation times. With our transition to a cloud-based platform, our speed, security, and scalability in payment processing is further expanded, allowing us to seamlessly grow as the market demands.

Current wording

With the growing need for faster payment methods, we continue to invest in technology that can help us further expand our suite of payment technology to complement our merchant services offerings. With the rise of Real Time Payments, or RTP, we began expansion into this market vertical in 2023, which serves as an alternative to ACH payments. We also continue to enhance our existing product offerings, with improvements in reporting, data management, fraud and risk monitoring, ease of access, and accelerations in client onboarding and implementation times. With our transition to a cloud-based platform, our speed, security, and scalability in payment processing is further expanded, allowing us to seamlessly grow as the market demands.

Previous wording

Through our innovative Prepaid Debit Card platform, we offer a variety of prepaid card products such as reloadable, incentive, promotional and corporate card programs. Combined with Output Solutions' printing and mailing services, we can satisfy the diverse requirements of customer needs with physical and virtual document creation and distribution, including traditional paper checks. Our Consumer Choice product, which was developed and debuted in 2022, provides flexible ways to initiate a variety of payment distributions through a multitude of payment methods, including physical prepaid and virtual cards, ACH, paper checks, real-time PINless debit and others. This offering provides us with a superior opportunity to increase our cross-selling efforts through all of our payment methods.

Current wording

Our Consumer Choice product, which was developed and debuted in 2022, provides flexible ways to initiate a variety of payment distributions through a multitude of payment methods, including physical prepaid and virtual cards, ACH, paper checks, real-time PINless debit and others. This offering provides us with a superior opportunity to increase our cross-selling efforts through all of our payment methods.

Previous wording

Electronic Billing. On December 15, 2020, we entered into the business of electronic bill presentment, document composition, document decomposition and printing and mailing services serving hundreds of customers representing a wide range of industry verticals, including utilities and financial institutions through the acquisition of substantially all of the assets of IMS. This product offering, through Output Solutions, provides an outsourced solution for document design, print, and electronic delivery to potential customers and entities looking to reduce postage costs and increase efficiencies. This acquisition increased our ability to grow new revenue streams and allowed us to reenter the electronic bill presentment and payment revenue stream. The success of this new business line depends on our ability to realize the anticipated growth opportunities; we cannot provide any assurance that we will be able to realize these opportunities.

Current wording

Electronic Billing. On December 15, 2020, we entered into the business of electronic bill presentment, document composition, document decomposition and printing and mailing services serving hundreds of customers representing a wide range of industry verticals, including utilities and financial institutions, through the acquisition of substantially all of the assets of IMS. This product offering, through Output Solutions, provides an outsourced solution for document design, print, and electronic delivery to potential customers and entities looking to reduce postage costs and increase efficiencies. This acquisition increased our ability to grow new revenue streams and allowed us to reenter the electronic bill presentment and payment revenue stream. Output Solutions offers a unique, and complementary payment related solution to our merchant services products of ACH, credit card, and prepaid card processing, with an opportunity for enhanced cross-selling efforts. The success of this new business line depends on our ability to realize the anticipated growth opportunities, although we cannot provide any assurance that we will be able to realize these opportunities.

Previous wording

Growing Revenues. Revenue growth remains a consistent focus for the Company, as we strive to achieve expanded scale, and establish a strong reputation within the financial technologies space. This growth assists us in maintaining our diversified offerings and remaining relevant in the payments ecosystem by developing payment platforms that address the current needs of our marketplace. In the second quarter of 2025, our revenues decreased 1% to $20.0 million, as compared to $20.1 million for the quarter ended June 30, 2024, due primarily to declines in all but our ACH and complimentary services line of business. Declines in our credit card line of business were due primarily to the loss of a meaningful customer in our Payfac business during the second quarter, compounded by attrition in our legacy portfolios. However, net new customers from our pipeline have already been implemented and onboarded, which we believe will help offset and overcome this loss in future periods. The decrease in our prepaid card services revenues were due to declines from one our key prepaid card programs, as their business was impacted by the loss of key customers that made significant contributions to Usio revenues in 2024. Declines in Output Solutions were due to the absence of some one-time revenues that occurred in the second quarter of 2024. Additional declines in revenues came from lower interest revenues, as interest rates and interest bearing deposits declined versus the prior year period. These revenue declines were partially offset, however, by strong growth in our ACH and complementary services line of business, due to organic growth from existing customers, and net new client implementations and onboarding.

Current wording

Growing Revenues. Revenue growth remains a consistent focus for the Company, as we strive to achieve expanded scale, and establish a strong reputation within the financial technologies space. This growth assists us in maintaining our diversified offerings and remaining relevant in the payments ecosystem by developing payment platforms that address the current needs of our marketplace. In the third quarter of 2025, our revenues declined 1% to $21.2 million, as compared to $21.3 million in the same quarter of 2024, due primarily to declines in our prepaid card services and our Output Solutions line of business. The decrease in our prepaid card services revenues was due to declines from one our key prepaid card programs, as its business was impacted by the loss of key customers that made significant contributions to Usio revenues in 2024. Declines in Output Solutions were due to certain one-time revenues that occurred in the third quarter of 2024, being absent in the third quarter of 2025. Additional declines in revenues came from lower interest revenues, as interest rates and interest bearing deposits declined versus the prior year period. These revenue declines were partially offset, however, by strong growth in our ACH and complementary services line of business, alongside nominal growth in our credit card line of business as they have already replaced the loss of a meaningful customer in the second quarter of 2025. Both of these business lines grew due to organic growth from existing customers and net new client implementations and onboarding.

Previous wording

In the six months ended June 30, 2025, our revenues increased 2% to $42.0 million, as compared to $41.1 million for the six months ended June 30, 2024, due primarily to growth in our ACH and complimentary services line of business. This growth, however, was partially offset by the aforementioned declines in revenue that occurred during the second quarter of 2025.

Current wording

In the nine months ended September 30, 2025, our revenues increased 1% to $63.2 million, as compared to $62.4 million for the nine months ended September 30, 2024, due primarily to growth in our ACH and complementary services line of business. This growth, however, was partially offset by the aforementioned declines in revenue that occurred during 2025.

Previous wording

*Managing Selling, General and Administrative Expenses.*By appropriately managing our expenses (which are discussed under "- Results of Operations - Selling, General and Administrative Expenses" below), we believe we can achieve better economies of scale, and drive revenue growth. We believe that carefully evaluating our existing SG&A expenses, and balancing them against the need for client implementation and support, together with our technology staff driving product innovation, will guide our operational strategies while maintaining a focus on efficiencies and profitability. SG&A expenses were up in the quarter, at $4.6 million as compared to $4.0 million in the prior year quarter. The increase in SG&A expense was primarily due to some one-time expenses incurred during the quarter, related to insurance renewals, marketing and travel expenditures, professional fees, and other various one-time expense accruals. We believe all of the aforementioned expenses, and SG&A in general, will decline sequentially, combined with improved expense management, alongside workforce efficiencies due to new equipment in our Output Solutions line of business. Considering these cost saving initiatives we anticipate year over year SG&A to remain relatively flat. For more information, see "-Results of Operations - Selling, General and Administrative Expenses" below.

Current wording

*Managing Selling, General and Administrative Expenses.*By appropriately managing our expenses (which are discussed under "- Results of Operations - Selling, General and Administrative Expenses" below), we believe we can achieve better economies of scale, and drive revenue growth. We believe that carefully evaluating our existing selling, general and administrative, or SG&A, expenses, and balancing them against the need for client implementation and support, together with our technology staff driving product innovation, will guide our operational strategies while maintaining a focus on efficiencies and profitability. SG&A expenses were up in the quarter, at $4.5 million as compared to $4.1 million in the prior year quarter. The increase in SG&A expense was primarily due to increases in salary alongside increases in network infrastructure, travel expenditures, professional fees, and other various general expenses. For more information, see "-Results of Operations - Selling, General and Administrative Expenses" below.

Previous wording

During the second quarter of 2025, the number of credit card transactions processed by us increased by 69% versus the second quarter of 2024. The volume of credit card dollars processed during the second quarter of 2025 increased by 9% compared to the same period in 2024. The continued growth in credit card metrics was primarily attributable to our PayFac strategy to drive increased penetration across multiple industries including healthcare and legal. The significant increases in transaction and processing volume growth were offset by the more competitive landscape in credit card processing, resulting in lower than expected revenue growth as the pricing rates for credit card processing were driven down by market competition. This was compounded by continued attrition in the legacy customer base, who were typically onboarded at higher prices, reducing the impact of the transaction count and processing volume growth we experienced.

Current wording

During the third quarter of 2025, the number of credit card transactions processed by us increased by 75% versus the third quarter of 2024. The volume of credit card dollars processed during the third quarter of 2025 increased by 12% compared to the same period in 2024. The continued growth in credit card metrics was primarily attributable to our PayFac strategy to drive increased penetration across multiple industries including healthcare and legal. The significant increases in transaction and processing volume growth were offset by the more competitive landscape in credit card processing, resulting in lower than expected revenue growth as the pricing rates for credit card processing were driven down by market competition. This was compounded by continued attrition in the legacy customer base, who were typically onboarded at higher prices, reducing the impact of the transaction count and processing volume growth we experienced.

Previous wording

ACH (eCheck) transaction counts during the second quarter of 2025 increased by 33% compared to the second quarter of 2024. Returned check transactions processed during the second quarter of 2025 increased by 32% compared to the second quarter of 2024. Electronic check dollars processed during the second quarter of 2025 increased by 19% compared to the second quarter of 2024. The increases in eCheck transactions, returns, and electronic check dollar volumes processed were primarily attributable to traction in our ACH sales efforts driving new merchant onboarding and processing, alongside organic growth from existing customers.

Current wording

ACH (eCheck) transaction counts during the third quarter of 2025 increased by 26% compared to the third quarter of 2024. Returned check transactions processed during the third quarter of 2025 increased by 35% compared to the third quarter of 2024. Electronic check dollars processed during the third quarter of 2025 increased by 8% compared to the third quarter of 2024. The increases in eCheck transactions, returns, and electronic check dollar volumes processed were primarily attributable to traction in our ACH sales efforts driving new merchant onboarding and processing, alongside organic growth from existing customers.

Previous wording

Prepaid card load volumes during the second quarter of 2025 decreased by 51% compared to the second quarter of 2024. Prepaid card transaction counts processed during the second quarter of 2025 decreased by 37% compared to the second quarter of 2024. Prepaid card purchase volume during the second quarter of 2025 decreased by 23% compared to the second quarter of 2024. These declines were primarily due to processing reductions from one of our key clients, who lost their own downstream customers during the quarter. This client contributed significant card load, purchase volume, and purchase transactions during the prior year period. We continue to invest time and resources in the development of additional net new customers and clients that are at various stages of the implementation process.

Current wording

Prepaid card load volumes during the third quarter of 2025 decreased by 46% compared to the third quarter of 2024. Prepaid card transaction counts processed during the third quarter of 2025 decreased by 33% compared to the third quarter of 2024. Prepaid card purchase volume during the third quarter of 2025 decreased by 21% compared to the third quarter of 2024. These declines were primarily due to processing reductions from one of our key clients, who lost its own downstream customers during the second quarter of 2025. This client contributed significant card load, purchase volume, and purchase transactions during the prior year period. We continue to invest time and resources in the development of additional net new customers and clients that are at various stages of the implementation process.

Previous wording

Output Solutions total mail pieces processed and delivered were up 3% for the second quarter of 2025 compared to the second quarter of 2024, exceeding 5.4 million, and electronic only documents delivered exceeded 20 million for the second quarter of 2025. This strong processing activity is not reflected in revenues as the ongoing transition to a more electronic only document delivery model has the effect of reducing the price per unit processed compared to print and mail while at the same time improving profitability.

Current wording

Output Solutions total mail pieces processed and delivered exceeded 5.4 million for the third quarter of 2025 but was down 6% compared to the third quarter of 2024, and electronic only documents delivered exceeded 19.9 million in the third quarter of 2025. This strong processing activity is not reflected in revenues as the ongoing transition to a more electronic only document delivery model has the effect of reducing the price per unit processed compared to print and mail while at the same time improving profitability.

Previous wording

Total dollar volumes processed across all business lines in the second quarter of 2025 were $1.94 billion compared to $1.68 billion processed in the second quarter of 2024, up 15% over the prior year quarter, attributable to processing volume growth in our credit card, and ACH and complementary services business lines, countering the decline of prepaid card processing volume.

Current wording

Total dollar volumes processed across all business lines in the third quarter of 2025 were $2.18 billion compared to $2.02 billion processed in the third quarter of 2024, up 8% over the prior year quarter, attributable to processing volume growth in our credit card, and ACH and complementary services business lines, countering the decline of prepaid card processing volume.

Previous wording

On August 16, 2022, President Biden signed the Inflation Reduction Act, or IRA, which implemented a 1% excise tax on certain corporate stock repurchases. On May 13, 2022, and again on March 24, 2025, our Board of Directors authorized a renewal of the Company's stock buyback program (the "buyback program"), with a repurchase limit equal to $4 million of the Company's common stock and a three-year duration. As of December 31, 2024, the Company had repurchased approximately $1.4 million of stock as part of the buyback program for which the Company may be required to pay approximately $14,000 in excise tax. Should the Company continue the repurchase of its securities on the open market, and the IRA remains in effect, we may be subject to this tax in 2025 and future years. During the six months ended June 30, 2025, the Company repurchased $708,298 of stock as part of the buyback program, which may become subject to the IRA's 1% excise tax if the Company meets or exceeds the IRA's 1% excise tax repurchase minimum of $1 million in stock buybacks.

Current wording

On August 16, 2022, former President Biden signed the Inflation Reduction Act, or IRA, which implemented a 1% excise tax on certain corporate stock repurchases. On May 13, 2022, and again on March 24, 2025, our Board of Directors authorized a renewal of the Company's stock buyback program (the "buyback program"), with a repurchase limit equal to $4 million of the Company's common stock and a three-year duration. As of December 31, 2024, the Company had repurchased approximately $1.4 million of stock as part of the buyback program for which the Company may be required to pay approximately $14,000 in excise tax. Should the Company continue the repurchase of its securities on the open market, and the IRA remains in effect, we may be subject to this tax in 2025 and future years. During the nine months ended September 30, 2025, the Company repurchased $765,887 of stock as part of the buyback program, which may become subject to the IRA's 1% excise tax if the Company meets or exceeds the IRA's 1% excise tax repurchase minimum of $1 million in stock buybacks.

Previous wording

As the Federal Reserve worked to fight economic inflation, the federal funds rate experienced rapid growth from the beginning of 2022 into the third quarter of 2023, and remained flat until September 2024 when the federal funds rate was lowered. This resulted in the Company's receiving more favorable interest rates on its current cash balances, amounting to $1.0 million in interest earnings in the six months ended June 30, 2025. Of this interest, $0.8 million was recognized as revenue in the respective business lines for which the cash balances are held, and $189,919 as interest income. In September 2024, the Federal Reserve lowered the federal funds rate by 0.50%, followed by a further 0.25% decline in each of November and December 2024, which has resulted in lower interest earnings on our interest-bearing cash accounts. Should the Federal Reserve continue lowering the federal funds rate in the future, this incremental source of income would decline. We continue to work closely with our bank partners, to ensure we effectively manage our cash balances, and monitor the Federal Reserve's monetary policy decisions.

Current wording

As the Federal Reserve worked to fight economic inflation, the federal funds rate experienced rapid growth from the beginning of 2022 into the third quarter of 2023, and remained flat until September 2024 when the federal funds rate was lowered. This resulted in the Company's receiving more favorable interest rates on its current cash balances, amounting to $1.5 million in interest earnings in the nine months ended September 30, 2025. Of this interest, $1.1 million was recognized as revenue in the respective business lines for which the cash balances are held, and $314,368 as interest income. In 2024, the Federal Reserve lowered the federal funds rate four times by a cumulative 1%, and by 0.25% twice in 2025 during September and October 2025, which has resulted in lower interest earnings on our interest-bearing cash accounts. Should the Federal Reserve continue lowering the federal funds rate in the future, this incremental source of income would decline. We continue to work closely with our bank partners, to ensure we effectively manage our cash balances, and monitor the Federal Reserve's monetary policy decisions.

Previous wording

During the first six months of 2025, global economic activity continued to be impacted by inflation and ongoing geopolitical concerns including the Russia – Ukraine and Hamas – Israel conflicts. Additionally, the uncertainty resulting from changes in international trade policies (including the potential for new or increased tariffs) created market volatility. While the economy in the U.S. remained resilient, concerns about the prospect of a recession in the future increased. In addition, markets have been focused on the timing and amount of policy interest rate cuts by central banks globally. Uncertainty and concerns about geopolitical risks, global central bank policies, inflation and trade policies, including tariffs, escalated over the course of the first six months of the year.

Current wording

During the first nine months of 2025, global economic activity continued to be impacted by inflation and ongoing geopolitical concerns including the Russia – Ukraine and Hamas – Israel conflicts. Additionally, the uncertainty resulting from changes in international trade policies (including the potential for new or increased tariffs) created market volatility. While the economy in the U.S. remained resilient, concerns about the prospect of a recession in the future increased. In addition, markets have been focused on the timing and amount of policy interest rate cuts by central banks globally. Uncertainty and concerns about geopolitical risks, global central bank policies, inflation and trade policies, including tariffs, escalated over the course of the first nine months of the year.

Previous wording

If, due to insolvency or bankruptcy of one of the Company’s merchant customers, or for any other reason, the Company is not able to collect amounts from its credit card, ACH or prepaid customers that have been properly "charged back" by the customer, or if a prepaid cardholder incurs a negative balance, the Company must bear the credit risk for the full amount of the transaction. The Company may require cash deposits and other types of collateral from certain merchants to minimize any such risks. In addition, the Company utilizes multiple systems and procedures to manage merchant risk. ACH, prepaid and credit card merchant processing loss reserves are primarily determined by performing a historical analysis of the Company’s loss experience, considering other factors that could affect that experience in the future, such as the types of transactions processed and nature of the merchant relationship with its consumers and the Company’s relationship with the Company’s prepaid card holders. This reserve amount is subject to the risk that actual losses may be greater than the Company’s estimates. Estimates for processing losses are variable based on the volume of transactions processed and could increase or decrease accordingly. At June 30, 2025 and December 31, 2024, the Company’s reserve for processing losses was $725,591 and $897,116, respectively, and carried on the Company's balance sheet as an accrued expense, and in the statement of cash flows as a change in accrued expenses.

Current wording

If, due to insolvency or bankruptcy of any of the Company’s merchant customers, or for any other reason, the Company is not able to collect amounts from its credit card, ACH or prepaid customers that have been properly "charged back" by the customer, or if a prepaid cardholder incurs a negative balance, the Company must bear the credit risk for the full amount of the transaction. The Company may require cash deposits and other types of collateral from certain merchants to minimize any such risks. In addition, the Company utilizes multiple systems and procedures to manage merchant risk. ACH, prepaid and credit card merchant processing loss reserves are primarily determined by performing a historical analysis of the Company’s loss experience, considering other factors that could affect that experience in the future, such as the types of transactions processed and nature of the merchant relationship with its consumers and the Company’s relationship with the Company’s prepaid card holders. This reserve amount is subject to the risk that actual losses may be greater than the Company’s estimates. Estimates for processing losses are variable based on the volume of transactions processed and could increase or decrease accordingly. At September 30, 2025 and December 31, 2024, the Company’s reserve for processing losses was $751,937 and $897,116, respectively, and carried on the Company's balance sheet as an accrued expense, and in the statement of cash flows as a change in accrued expenses.

Previous wording

Accounts receivable are reported as outstanding principal net of an allowance for expected credit losses, which was $324,000 at June 30, 2025 and December 31, 2024.

Current wording

Accounts receivable are reported as outstanding principal net of an allowance for estimated credit losses, which was $324,000 at September 30, 2025 and December 31, 2024.

Previous wording

The Company maintains an allowance for credit losses for estimated losses resulting from the inability or failure of its customers to make required payments. The Company determines the allowance based on an account-by-account review, taking into consideration such factors as the age of the outstanding balance, historical pattern of collections and financial condition of the customer. Past losses incurred by the Company due to credit losses have been within its expectations. If the financial condition of its customers deteriorates, resulting in an impairment of their ability to make contractual payments, additional allowances might be required. Estimates for credit losses are variable based on the volume of transactions processed and could increase or decrease accordingly. The Company normally doesnot charge interest on accounts receivable.

Current wording

The Company maintains an allowance for estimated credit losses representing estimated losses expected to result from the inability or failure of its customers to make required payments. The Company determines the allowance based on an account-by-account review, taking into consideration such factors as the age of the outstanding balance, historical pattern of collections and financial condition of the customer. Past losses incurred by the Company due to credit losses have been within its estimates. If the financial condition of its customers deteriorates, resulting in an impairment of their ability to make contractual payments, additional allowances might be required. Estimates for credit losses are variable based on the volume of transactions processed and could increase or decrease accordingly. The Company normally doesnot charge interest on accounts receivable.

Previous wording

Revenue consists primarily of fees generated through the electronic processing of payment transactions and related services. Revenue is recognized during the period in which the transactions are processed or when the related services are performed. The Company complies with ASC 606-10 and reports revenues at gross as a principal versus net as an agent. Although some of the Company's processing agreements vary with respect to specific credit risks, the Company has determined for each agreement it is acting in the principal role. Merchants may be charged for these processing services at a bundled rate based on a percentage of the dollar amount of each transaction and, in some instances, additional fees are charged for each transaction. Certain merchant customers are charged a flat fee per transaction, while others may also be charged miscellaneous fees, including fees for chargebacks or returns, monthly minimums, and other miscellaneous services. Revenues derived from electronic processing of credit, debit, and prepaid card transactions that are authorized and captured through third-party networks are reported gross of amounts paid to sponsor banks as well as interchange and assessments paid to credit card associations. Certain card distributors remit payment of fees earned 45 days after the end of the processing period. Prepaid card distributors have payment terms of 30 days following the end of the month. Sales taxes billed are reported directly as a liability to the taxing authority and are not included in revenue. Usio Output Solutions, Inc. provides bill preparation, presentment and mailing services. Revenue from Output Solutions is recognized when the related services are performed for printing and delivered to USPS for postage. We also earn revenues from interest and fees earned on certain assets underlying customer balances. Interest earned on assets directly related to our core business line operations are recorded in the revenue source underlying the associated customer balances. Customer balances held on which the Company earns interest revenues include balances from our Automated Clearing House, or ACH, and complementary services, prepaid card services, and Output Solutions business lines.

Current wording

Revenue consists primarily of fees generated through the electronic processing of payment transactions and related services. Revenue is recognized during the period in which the transactions are processed or when the related services are performed. The Company complies with ASC 606-10 and reports revenues at gross as a principal versus net as an agent. Although some of the Company's processing agreements vary with respect to specific credit risks, the Company has determined for each agreement it is acting in the principal role. Merchants may be charged for these processing services at a bundled rate based on a percentage of the dollar amount of each transaction and, in some instances, additional fees are charged for each transaction. Certain merchant customers are charged a flat fee per transaction, while others may also be charged miscellaneous fees, including fees for chargebacks or returns, monthly minimums, and other miscellaneous services. Revenues derived from electronic processing of credit, debit, and prepaid card transactions that are authorized and captured through third-party networks are reported gross of amounts paid to sponsor banks as well as interchange and assessments paid to credit card associations. Certain card distributors remit payment of fees earned 45 days after the end of the processing period. Prepaid card distributors have payment terms of 30 days following the end of the month. Sales taxes billed are reported directly as a liability to the taxing authority and are not included in revenue. Output Solutions provides bill preparation, presentment and mailing services. Revenue from Output Solutions is recognized when the related services are performed for printing and delivered to USPS for postage. We also earn revenues from interest and fees earned on certain assets underlying customer balances. Interest earned on assets directly related to our core business line operations are recorded in the revenue source underlying the associated customer balances. Customer balances held on which the Company earns interest revenues include balances from our ACH and complementary services, prepaid card services, and Output Solutions business lines.

Previous wording

This report includes the following non-GAAP financial measures as defined in Regulation G adopted by the Commission: EBITDA, Adjusted EBITDA, and Adjusted EBITDA margins. The Company reports its financial results in compliance with GAAP, but believes that also discussing non-GAAP financial measures provides investors with financial measures the Company uses in the management of its business.

Current wording

This report includes the following non-GAAP financial measures as defined in Regulation G adopted by the Commission: EBITDA, Adjusted EBITDA, and Adjusted EBITDA margins. The Company reports its financial results in compliance with GAAP but believes that also discussing non-GAAP financial measures is useful to investors because it provides them with financial measures the Company uses in the management of its business.

Previous wording

We reported Adjusted EBITDA of $0.5 million for the quarter ended June 30, 2025, as compared to Adjusted EBITDA of $0.8 million for the same period in the prior year. The decrease in Adjusted EBITDA in the 2025 quarter was attributable to increased SG&A expenses in the period. Adjusted EBITDA margins were 2.5% in the quarter ended June 30, 2025, as compared to Adjusted EBITDA margins of 4.0% for the same period in the prior year. The decrease in Adjusted EBITDA margins was due primarily to higher SG&A expenses versus the prior year period, alongside lower interest revenues in the period, a high margin revenue source.

Current wording

We reported Adjusted EBITDA of $0.4 million for the quarter ended September 30, 2025, as compared to Adjusted EBITDA of $0.8 million for the same period in the prior year. The decrease in Adjusted EBITDA in the 2025 quarter was attributable to increased SG&A expenses in the period. Adjusted EBITDA margins were 1.7% in the quarter ended September 30, 2025, as compared to Adjusted EBITDA margins of 3.6% for the same period in the prior year. The decrease in Adjusted EBITDA margins was due primarily to higher SG&A expenses versus the prior year period, alongside lower interest revenues in the period, a high margin revenue source.

Previous wording

We reported Adjusted EBITDA of $1.2 million for the six months ended June 30, 2025, as compared to Adjusted EBITDA of $1.6 million for the same period in the prior year. The decrease in Adjusted EBITDA in the 2025 period was attributable to increased SG&A expenses in the period. Adjusted EBITDA margins were 2.8% in the six months ended June 30, 2025, as compared to Adjusted EBITDA margins of 3.9% for the same period in the prior year. The decrease in Adjusted EBITDA margins was due primarily to higher SG&A expenses versus the prior year period, alongside lower interest revenues in the period, a high margin revenue source.

Current wording

We reported Adjusted EBITDA of $1.5 million for the nine months ended September 30, 2025, as compared to Adjusted EBITDA of $2.4 million for the same period in the prior year. The decrease in Adjusted EBITDA in the 2025 period was attributable to increased SG&A expenses in the period. Adjusted EBITDA margins were 2.4% in the nine months ended September 30, 2025, as compared to Adjusted EBITDA margins of 3.8% for the same period in the prior year. The decrease in Adjusted EBITDA margins was due primarily to higher SG&A expenses versus the prior year period, alongside lower interest revenues in the period, a high margin revenue source.

Previous wording

The following tables set forth reconciliations of Operating (Loss) to EBITDA; EBITDA to Adjusted EBITDA; and Revenues to Adjusted EBITDA margins for the three and six months ended June 30, 2025 and 2024.

Current wording

The following tables set forth reconciliations of Operating (Loss) to EBITDA; EBITDA to Adjusted EBITDA; and Revenues to Adjusted EBITDA margins for the three and nine months ended September 30, 2025 and 2024.

Previous wording

Our revenue is principally derived from providing integrated electronic payment services to merchants and businesses, including credit and debit card-based processing services and transaction processing via the Automated Clearing House, or ACH, network and program management and processing of prepaid debit cards. In addition, through Output Solutions, we provide electronic bill presentment, document composition, document decomposition and printing and mailing services serving hundreds of customers representing a wide range of industry verticals, including utilities and financial institutions. We also earn revenue from interest and fees earned on certain assets underlying the associated customer balances. Customer balances on which the Company earns interest revenue include balances from our ACH and complementary services, prepaid card services, and Output Solutions business lines.

Current wording

Our revenue is principally derived from providing integrated electronic payment services to merchants and businesses, including credit and debit card-based processing services and transaction processing via the ACH network and program management and processing of prepaid debit cards. In addition, through Output Solutions, we provide electronic bill presentment, document composition, document decomposition and printing and mailing services serving hundreds of customers representing a wide range of industry verticals, including utilities and financial institutions. We also earn revenue from interest and fees earned on certain assets underlying the associated customer balances. Customer balances on which the Company earns interest revenue include balances from our ACH and complementary services, prepaid card services, and Output Solutions business lines.

Previous wording

Consolidated revenue for the quarter ended June 30, 2025 decreased by 1% to $20.0 million, as compared to $20.1 million for the quarter ended June 30, 2024, due primarily to the 26% decline in our prepaid card services business line. This decrease in prepaid revenues was attributable to one of our key clients losing a portion of their downstream customer base during the second quarter of 2025, which contributed significant revenues in the prior year period. Further declines were attributable to the 3% decrease in our credit card business unit, which incurred the loss of a key customer during the second quarter of 2025, compounded by attrition in our legacy credit card portfolios. However, we believe the implementation and onboarding of net new clients during the second quarter of 2025, including a new enterprise customer that we believe has the potential to consistently generate $100 million in annual processing volume, will offset and overcome this loss in future periods. Output Solutions revenue was also down 1% for the quarter ended June 30, 2025 compared to the same period of 2024, due primarily to the presence of some non-recurring revenues during the prior year period. Further declines in revenues were attributable to lower interest revenue, associated with lower interest rates and interest bearing deposits versus the prior year period. All of this decline, however, was almost entirely offset by the 33% growth in our ACH and complimentary services business line. ACH and complementary services revenue growth was primarily attributable to an increase in ACH check dollar volume of 19%, an increase in transactions of 33%, and an increase in returned check transactions of 32%, in each case, for the quarter ended June 30, 2025 compared to the same period of 2024. This growth was a result of organic growth within our existing customer base, alongside net new client implementations that began processing during the second quarter of 2025. Our ACH business also benefited from an increase in revenue from ancillary product offerings, such as RCC and PINless debit. For more information, see "- Summary of Results."

Current wording

Consolidated revenues for the quarter ended September 30, 2025 was down 1%, at $21.2 million, as compared to $21.3 million for the quarter ended September 30, 2024, due primarily to the 30% decline in our prepaid card services business line. This decrease in prepaid card services revenues was attributable to one of our key clients losing a portion of its downstream customer base during the second quarter of 2025, which contributed significant revenues in the prior year period. Output Solutions revenue was also down 8% for the quarter ended September 30, 2025 compared to the same period of 2024, due primarily to the presence of some non-recurring revenues during the prior year period. Further declines in revenues were attributable to lower interest revenue, associated with lower interest rates and interest bearing deposits versus the prior year period. Much of this decline, however, was almost entirely offset by the 36% growth in our ACH and complementary services business line. ACH and complementary services revenue growth was primarily attributable to an increase in ACH check dollar volume of 8%, an increase in transactions of 26%, and an increase in returned check transactions of 35%, in each case, for the quarter ended September 30, 2025 compared to the same period of 2024. This growth was a result of organic growth within our existing customer base, alongside net new client implementations that began processing at the end of the second quarter of 2025. Our ACH business also benefited from an increase in revenue from ancillary product offerings, such as RCC and PINless debit. Nominal increases in revenue were attributable to the 2% increase in our credit card business unit, which benefited from the implementation and onboarding of net new clients, including a new enterprise customer that we believe has the potential to consistently generate $100 million in annual processing volume. This growth helped offset the loss of a key customer during the second quarter of 2025, alongside attrition in our legacy credit card portfolios. For more information, see "- Summary of Results."

Previous wording

Consolidated revenue for the six months ended June 30, 2025 increased by 2% to $42.0 million, as compared to $41.1 million for the six months ended June 30, 2024, due primarily to the 32% growth in our ACH and complimentary services business line. This growth was a result of organic growth within our existing customer base, alongside net new client implementations that began processing during the first six months of 2025. Our ACH business also benefited from an increase in revenue from ancillary product offerings, such as RCC and PINless debit. Output Solutions revenue was also up 1% for the six months ended June 30, 2025 compared to the same period of 2024 as the business unit continues to attract new customers due to its enhanced capacity and efficiency related to the purchase and integration of new equipment in 2024. Further growth was attributable to the 1% revenue increase in our credit card business unit for the six months ended June 30, 2025 compared to the same period of 2024, despite the loss of a key customer during the second quarter of 2025, and attrition in our legacy credit card portfolios. We believe the implementation and onboarding of net new clients during the second quarter of 2025 will offset and overcome this loss in future periods. Revenue growth was offset by a 20% decline in our prepaid card services business line for the six months ended June 30, 2025 compared to the same period of 2024. This decrease in prepaid revenues was attributable to one of our key clients losing a portion of their downstream customer base during the second quarter of 2025, which contributed significant revenues in the prior year period. Further declines in revenues were attributable to lower interest revenue, associated with lower interest rates and interest bearing deposits versus the prior year period. For more information, see "- Summary of Results."

Current wording

Consolidated revenues for the nine months ended September 30, 2025 increased by 1% to $63.2 million, as compared to $62.4 million for the nine months ended September 30, 2024, due primarily to the 33% growth in our ACH and complementary services business line. This growth was a result of organic growth within our existing customer base, alongside net new client implementations that began processing during the first nine months of 2025. Our ACH business also benefited from an increase in revenue from ancillary product offerings, such as RCC and PINless debit. Further growth was attributable to the 1% revenue increase in our credit card business unit for the nine months ended September 30, 2025 compared to the same period of 2024, despite the loss of a key customer during the second quarter of 2025, and attrition in our legacy credit card portfolios. Revenue growth was offset by a 24% decline in our prepaid card services business line for the nine months ended September 30, 2025 compared to the same period of 2024. This decrease in prepaid revenues was attributable to one of our key clients losing a portion of its downstream customer base during the second quarter of 2025, which contributed significant revenues in the prior year period. Further declines in revenues were attributable to lower interest revenue, associated with lower interest rates and interest bearing deposits versus the prior year period. Output Solutions revenue was also down 2% for the nine months ended September 30, 2025 compared to the same period of 2024 as the business unit continues to work towards replacing some one-time revenues generated in the prior year period by attracting new customers through use of its enhanced capacity and efficiency related to the purchase and integration of new equipment in 2024. For more information, see "- Summary of Results."

Previous wording

Cost of services decreased by $0.5 million, or 3%, to $14.8 million for the quarter ended June 30, 2025, as compared to $15.3 million for the same period in the prior year, due to lower total revenues, with increased revenue contribution from higher margin business lines such as ACH and complementary services, and declines in our other, lower margin business units, driving similar decreases in our processing, banking and transactional expenses.

Current wording

Cost of services decreased by $0.1 million, or 1%, to $16.3 million for the quarter ended September 30, 2025, as compared to $16.4 million for the same period in the prior year, due to increased revenue contribution from higher margin business lines such as ACH and complementary services, and declines in our other, lower margin business units, driving similar decreases in our processing, banking and transactional expenses.

Previous wording

Cost of services increased by $0.6 million, or 2%, to $32.0 million for the six months ended June 30, 2025, as compared to $31.4 million for the same period in the prior year, due to increased total revenues driving similar increases in our processing, banking and transactional expenses.

Current wording

Cost of services increased by $0.5 million, or 1%, to $48.3 million for the nine months ended September 30, 2025, as compared to $47.8 million for the same period in the prior year, due to increased total revenues driving similar increases in our processing, banking and transactional expenses.

Previous wording

Gross profit increased by 7% to $5.1 million for the quarter ended June 30, 2025, as compared to $4.8 million for the same period in the prior year. Gross profit percentage of revenue was 25.8% for the quarter ended June 30, 2025, up from 23.9% in the prior year period, an increase of approximately 1.85%, or 185 basis points. The increase in gross profit in the quarter ended June 30, 2025, as compared to the same period during the prior year, was primarily attributable to higher gross profit percentage of revenue. The increase in gross profit percentage of revenue was primarily due to the ACH and complementary services segment revenue growth, our highest margin business unit, while lower margin revenues from other business lines declined.

Current wording

Gross profit decreased by 1% to $4.87 million for the quarter ended September 30, 2025, as compared to $4.90 million for the same period in the prior year. Gross profit percentage of revenue was 23.0% for the quarter ended September 30, 2025, flat versus 23.0% in the prior year period. The decrease in gross profit in the quarter ended September 30, 2025, as compared to the same period during the prior year, was primarily attributable to nominally lower revenue.

Previous wording

Gross profit increased by 3% to $9.9 million for the six months ended June 30, 2025, as compared to $9.7 million for the same period in the prior year. Gross profit percentage of revenue was 23.7% for the six months ended June 30, 2025, up from 23.5% in the prior year period, an increase of approximately .19%, or 19 basis points. The increase in gross profit in the six months ended June 30, 2025, as compared to the same period during the prior year, was primarily attributable to higher total revenue with a nominal increase in gross profit percentage of revenue, both of which were related in growth in our ACH and complementary services line of business.

Current wording

Gross profit increased by 2% to $14.8 million for the nine months ended September 30, 2025, as compared to $14.5 million for the same period in the prior year. Gross profit percentage of revenue was 23.5% for the nine months ended September 30, 2025, up from 23.3% in the prior year period, an increase of approximately 0.2%. The increase in gross profit in the nine months ended September 30, 2025, as compared to the same period during the prior year, was primarily attributable to higher total revenue with an increase in gross profit percentage of revenue, both of which were related to growth in our ACH and complementary services line of business.

Previous wording

Stock-based compensation expenses were $0.4 million for the quarter ended June 30, 2025 as compared to $0.5 million for the quarter ended June 30, 2024, due to completed amortization of previously issued stock based awards.

Current wording

Stock-based compensation expenses were $0.4 million for the quarter ended September 30, 2025 as compared to $0.6 million for the quarter ended September 30, 2024, with the decrease from the prior year quarter due to completed amortization of previously issued stock based awards.

Previous wording

Stock-based compensation expenses were $0.8 million for the six months ended June 30, 2025 as compared to $1.0 million for the six months ended June 30, 2024, due to completed amortization of previously issued stock based awards.

Current wording

Stock-based compensation expenses were $1.2 million for the nine months ended September 30, 2025 as compared to $1.5 million for the nine months ended September 30, 2024, with the decrease from the prior year period due to completed amortization of previously issued stock based awards.

Previous wording

SG&A expenses were $4.6 million for the quarter ended June 30, 2025 as compared to $4.0 million in the prior year quarter. The increase in SG&A for the quarter ended June 30, 2025 was driven by several one-time expenditures, such as insurance renewals, marketing and travel related expenses, professional fees, and other one-time expense accruals. We anticipate SG&A expenses to decline sequentially, and remain essentially flat relative to prior year periods.

Current wording

SG&A expenses were $4.5 million for the quarter ended September 30, 2025 as compared to $4.1 million in the prior year quarter. The increase in SG&A for the quarter ended September 30, 2025 was driven primarily by increases in salary alongside increases in network infrastructure, travel expenditures, professional fees, and other various general expenses. We anticipate SG&A expenses will remain relatively flat sequentially in the near term future, though increased versus prior year periods.

Previous wording

SG&A expenses were $8.8 million for the six months ended June 30, 2025 as compared to $8.1 million in the prior year period. The increase in SG&A for the six months ended June 30, 2025 was driven by several one-time expenditures during the second quarter of 2025, such as insurance renewals, marketing and travel related expenses, professional fees, and other one-time expense accruals. We anticipate SG&A expenses to decline sequentially, and remain essentially flat relative to prior year periods.

Current wording

SG&A expenses were $13.3 million for the nine months ended September 30, 2025 as compared to $12.2 million in the prior year period. The increase in SG&A for the nine months ended September 30, 2025 was driven primarily due to increases in salary alongside increases in network infrastructure, travel expenditures, professional fees, and other various general expenses. We anticipate SG&A expenses will remain relatively flat sequentially in the near term future, though increased versus prior year periods.

Previous wording

Depreciation and amortization expense totaled $0.5 million for each of the quarters ended June 30, 2025 and 2024. The slight decrease in depreciation and amortization expense for the quarter ended June 30, 2025 compared to the prior year quarter was due to the completed amortization of intangible assets, specifically related to capitalized labor for our internal use software, decreasing overall depreciation and amortization expense versus the same period a year ago.

Current wording

Depreciation and amortization expense totaled $0.4 million and $0.6 in the quarter ended September 30, 2025 and 2024, respectively. The decrease in depreciation and amortization expense for the quarter ended September 30, 2025 compared to the prior year quarter was due to the completed amortization of intangible assets, specifically related to capitalized labor for our internal use software, decreasing overall depreciation and amortization expense versus the same period a year ago.

Previous wording

Depreciation and amortization expense totaled $1.0 million and $1.1 million for the six months ended June 30, 2025 and 2024, respectively. The decrease in depreciation and amortization expense was due to the completed amortization of intangible assets, specifically related to capitalized labor for our internal use software, decreasing overall depreciation and amortization expense versus the same period a year ago.

Current wording

Depreciation and amortization expense totaled $1.4 million and $1.7 million for the nine months ended September 30, 2025 and 2024, respectively. The decrease in depreciation and amortization expense was due to the completed amortization of intangible assets, specifically related to capitalized labor for our internal use software, decreasing overall depreciation and amortization expense versus the same period a year ago.

Previous wording

Other income, net was $0.1 million for the quarter ended June 30, 2025 compared to $0.4 million for the quarter ended June 30, 2024. This decrease in the 2025 quarter compared to the corresponding 2024 quarter was driven primarily by the receipt of an employee retention tax credit issued under the CARES Act in the prior year period.

Current wording

Other income, net was $0.1 million for the quarter ended September 30, 2025, flat compared to $0.1 million for the quarter ended September 30, 2024.

Previous wording

Other income, net was $0.2 million for the six months ended June 30, 2025 compared to $0.5 million for the six months ended June 30, 2024. This decrease in the 2025 period compared to the corresponding 2024 period was driven primarily by the receipt of an employee retention tax credit issued under the CARES Act in the prior year period.

Current wording

Other income, net was $0.3 million for the nine months ended September 30, 2025 compared to $0.6 million for the nine months ended September 30, 2024. This decrease in the 2025 period compared to the corresponding 2024 period was driven primarily by the receipt of an employee retention tax credit issued under the CARES Act in the prior year period.

Previous wording

State income tax expense in the three months ended June 30, 2025 and 2024 was $68,857 and $70,000, respectively.

Current wording

State income tax expense in the three months ended September 30, 2025 and 2024 was $69,036 and $70,000, respectively, remaining relatively flat.

Previous wording

State income tax expense in the six months ended June 30, 2025 and 2024 was $131,411 and $140,000, respectively.

Current wording

State income tax expense in the nine months ended September 30, 2025 and 2024 was $200,447 and $210,000, respectively, remaining relatively flat.