USIO Usio Inc

Company Reports Record Quarterly Revenues

 Payment Data Systems (PYDS), an integrated electronic payment solutions provider, today announced financial results for the second quarter of 2018, which ended June 30, 2018.

Second Quarter 2018 Financial Summary

• Revenues were $6.3 million for the second quarter of 2018 vs. $2.6 million for the second quarter of 2017, an increase of 146%.
• Gross profits were $1.3 million, up 90% from $.7 million in the second quarter of 2017.
• The operating loss in the second quarter of 2018 was $1.0 million compared to an operating loss of $.5 million for Q2 2017.
• Adjusted EBITDA was a loss of $.3 million for the second quarter of 2018 compared to a loss of $.1 million for the second quarter of 2017.
• Net loss for the second quarter of 2018 was $1.0 million or ($0.09) per share versus a net loss of $.5 million or ($0.06) per share for the second quarter of 2017.  Net loss for the current quarter was based upon 12.1 million shares outstanding whereas net loss in the year ago quarter was based upon 8.5 million shares outstanding.
• More than $821 million total dollars were processed during the second quarter of 2018 which represented the Company’s highest volume in the last three years.
• Payment Data Systems continues to be in solid financial condition with $2.7 million in cash and cash equivalents and no debt at June 30, 2018.

Electronic check transaction volumes during the second quarter of 2018 were up 17% versus the same time-period in 2017.  Returned check transactions processed during the second quarter of 2018 were up 30% versus the same time period in 2017.

Credit card transaction volumes during the second quarter of 2018 were up 415% versus the same time period in 2017.  Credit card dollars processed during the second quarter of 2018 were up 291% versus the same time-period in 2017.

“It was a record quarter for Payment Data Systems.  We reported record revenues and record volumes, reflecting continued strong organic growth in ACH, card processing and prepaid businesses, as well as from acquisitions,” said Louis Hoch, president and CEO of Payment Data Systems.  “We expect this record pace to continue throughout the year as we heavily invest in enhancing our capabilities and expanding our sales and marketing organization.  In our card processing business, in addition to the organic growth we experienced by our established platform, our PayFac-in-a-box solution continues to generate strong interest, especially in the healthcare market.  The ACH business has now recorded four consecutive quarters of growth as we continue to capitalize on our NACHA certification and multiple bank sponsorships.  Additionally, our prepaid business has added several new customers and is leveraging the synergistic nature of our complementary business lines.  The second half of the year looks promising as we have strong momentum and many exciting new opportunities across our entire organization under development.”

Financial Results for the Three Months Ending June 30, 2018Revenues for the quarter ended June 30, 2018 increased 146% to $6.3 million primarily due to the acquisition of the business of Singular Payments, LLC. Organic growth in the quarter was 14%.

Gross profit in the second quarter was $1.3 million, or 21% of revenues, compared to $.7 million, or 27% of revenues in the second quarter of last year. Margins reflect the shift in product mix brought about with the Singular acquisition.

Selling, general and administrative expenses were $2.4 million for the second quarter of 2018 versus $1.2 million during the second quarter of 2017.  The increased operating expenses primarily reflect the incremental salaries and other employee related expenses associated with the Singular Payments acquisition.  Second quarter operating expenses also reflect incremental non-cash depreciation and amortization and other non-cash expenses related to the Singular acquisition.  There were also some one-time expense and capital requirements associated with the new Tennessee office and the re-location of our corporate headquarters.

The second quarter operating loss was $1.0 million compared to an operating loss of $.5 million in the second quarter of 2017. 

Adjusted EBITDA in the second quarter of 2018 was a loss of $.3 million compared to an Adjusted EBITDA loss of $.1 million in the second quarter of 2017. 

Net loss for the second quarter of 2018 was $1.0 million or ($0.09) per share, compared to a net loss of $.5 million or ($0.06) per share for the second quarter of 2017.  Factors contributing to the increased net loss were approximately $.2 million amortization expense related to the Singular Payments acquisition plus incremental salaries and other payroll related expenses as we build out our sales force to drive incremental revenues. As of June 30, 2018, the company has $2.7 million in cash and cash equivalents and no debt, compared to $4.8 million at December 31, 2017. 

Financial Results for the First Six Months of Fiscal 2018 Revenues for the six months ended June 30, 2018 were $12.1 million, up 126% from the same period of fiscal 2017.  Organic growth for the first half of the year was 5%.  Cost of services were up 156% to $9.5 million.   Gross profits in the first six months of 2018 were up 58% to $2.6 million.  Gross margins at 21% were lower this year than in 2017 driven due to the same factors that contributed to lower second quarter gross margins.  The operating loss for the first six months of 2018 was $2.1million as compared to $.9 million in the same period of 2017.  Adjusted EBITDA for the first six months of 2018 was a loss of $.5 million as compared to slightly positive, $10 thousand, for the comparable period in 2017.   The net loss for the six months ended June 30, 2018 was $2.1 million or ($0.17) per share compared to a loss of $.8 million or ($.10) per share in the same period of 2017.

Conference Call and Webcast

Payment Data Systems, Inc.’s management will host a conference call with a live webcast today at 5:30 p.m. Eastern Time to provide a business update.To listen to the conference call, interested parties within the U.S. should call 1-844-883-3890. International callers should call +1-412-317-9246. All callers should ask for the Payment Data Systems conference call. The conference call will also be available through a live webcast, which can be accessed via the company’s website at www.paymentdata.com/invest. A replay of the call will be available approximately one hour after the end of the call through August 28, 2018. The replay can be accessed via the Company’s website or by dialing 1-877-344-7529 (U.S.) or +1-412-317-0088 (international). The replay conference playback code is 10123037.

About Payment Data Systems, Inc.Payment Data Systems, Inc., a leading integrated payment solutions provider, offers a wide range of payment solutions to merchants, billers, banks, service bureaus, and card issuers. The Company operates credit, debit/prepaid and ACH payment processing platforms to deliver convenient, world-class payment solutions and service to their clients. The strength of the Company lies in its ability to provide tailored solutions for card issuance, payment acceptance, and bill payments as well as its unique technology in the prepaid sector.  Payment Data is headquartered in San Antonio, Texas, and has offices in New York, New York; Long Beach, California and Nashville, Tennessee.  Websites: www.paymentdata.com, www.singularpayments.com, www.payfacinabox.com, www.akimbocard.com, and www.ficentive.com. Find us on Facebook®.About Non-GAAP Financial MeasuresThis press release includes non-GAAP financial measures, EBITDA and adjusted EBITDA, as defined in Regulation G of the Securities and Exchange Act of 1934, as amended. The Company reports its financial results in compliance with GAAP, but believes that also discussing non-GAAP measures provides investors with financial measures it uses in the management of its business. The Company defines EBITDA as operating income (loss), before interest, taxes, depreciation and amortization of intangibles. The Company defines adjusted EBITDA as EBITDA, as defined above, plus non-cash stock option costs and certain non-recurring items, such as acquisitions. These measures may not be comparable to similarly titled measures reported by other companies. Management uses EBITDA and adjusted EBITDA as indicators of the Company's operating performance and ability to fund acquisitions, capital expenditures and other investments and, in the absence of refinancing options, to repay debt obligations.

Management believes EBITDA and adjusted EBITDA are helpful to investors in evaluating the Company's operating performance because non-cash costs and other items that management believes are not indicative of its results of operations are excluded. EBITDA and adjusted EBITDA are supplemental non-GAAP measures, which have limitations as an analytical tool. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Non-GAAP financial measures do not reflect a comprehensive system of accounting, may differ from GAAP measures with the same names, and may differ from non-GAAP financial measures with the same or similar names that are used by other companies. For a description of our use of EBITDA and adjusted EBITDA, and a reconciliation of EBITDA and adjusted EBITDA to operating income (loss), see the section of this press release titled "Reconciliation of GAAP to Non-GAAP Financial Measures."

FORWARD-LOOKING STATEMENTS DISCLAIMERExcept for the historical information contained herein, the matters discussed in this release include forward-looking statements which are covered by safe harbors. Those statements include, but may not be limited to, all statements regarding management's intent, belief and expectations, such as statements concerning our future and our operating and growth strategy. These forward-looking statements are identified by the use of words such as "believe," "intend," "look forward," "anticipate," "schedule", and "expect" among others. Forward-looking statements in this press release are subject to certain risks and uncertainties inherent in the Company's business that could cause actual results to vary, including such risks related to the realization of the anticipated opportunities from the Singular acquisition, the 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 security of our software, hardware and information, the volatility of our stock price, the need to obtain additional financing, risks associated with new tax legislation, and compliance with complex federal, state and local laws and regulations, and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission including its annual report on Form 10-K for the fiscal year ended December 31, 2017. One or more of these factors have affected, and in the future, could affect the Company’s businesses and financial results in the future and could cause actual results to differ materially from plans and projections. The Company believes that the assumptions underlying the forward-looking statements included in this release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the objectives and plans will be achieved. All forward-looking statements made in this release are based on information presently available to management. The Company assumes no obligation to update any forward-looking statements, except as required by law.

Contact: Joe Hassett, Investor Relationsjoeh@gregoryfca.com610-228-2110

PAYMENT DATA SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2018				December 31, 2017
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	2,722,357			$	4,800,554
Accounts receivable, net	939,394				969,674
Settlement processing assets	40,130,936				38,027,984
Prepaid expenses and other	242,606				176,945
Notes receivable, net	77,500				150,000
Current assets before merchant reserves	44,112,793				44,125,157
Merchant reserves	14,782,305				14,977,468
Total current assets	58,895,098				59,102,625
Property and equipment, net	2,121,062				2,105,186
Other assets:
Intangibles, net	4,176,426				4,676,427
Deferred tax asset	1,394,000				1,394,000
Other assets	302,287				157,565
Total other assets	5,872,713				6,227,992
Total assets	$	66,888,873			$	67,435,803
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	237,545			$	300,736
Accrued expenses	901,872				1,006,262
Settlement processing obligations	40,130,936				38,027,984
Deferred revenues	50,000				—
Current liabilities before merchant reserve obligations	41,320,353				39,334,982
Merchant reserve obligations	14,782,305				14,977,468
Total current liabilities	56,102,658				54,312,450
Non-current liabilities:
Deferred rent	27,416				—
Total liabilities	56,130,074				54,312,450
Stockholders’ equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized; -0- shares outstanding at June 30, 2018 (unaudited) and December 31, 2017, respectively	—				—
Common stock, $0.001 par value, 200,000,000 shares authorized; 17,069,680 and 16,874,235 issued, and 15,997,361 and 16,201,634 outstanding at June 30, 2018 (unaudited) and December 31, 2017, respectively	185,501				186,299
Additional paid-in capital	74,434,439				74,041,083
Treasury stock, at cost; 1,072,319 and 672,601 shares at June 30, 2018 (unaudited) and December 31, 2017, respectively	(1,790,135		)		(831,059		)
Deferred compensation	(6,724,336		)		(7,012,544		)
Accumulated deficit	(55,346,670		)		(53,260,426		)
Total stockholders’ equity	10,758,799				13,123,353
Total liabilities and stockholders’ equity	$	66,888,873			$	67,435,803

PAYMENT DATA SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

			Three Months Ended June 30,								Six Months Ended June 30,
			2018				2017				2018				2017
Revenues			$	6,283,875			$	2,550,441			$	12,127,540			$	5,361,185
Cost of services			4,964,260				1,854,406				9,537,018				3,722,351
Gross profit			1,319,615				696,035				2,590,522				1,638,834
Selling, general and administrative:
Stock-based compensation			298,477				217,759				672,855				425,679
Other expenses			1,595,276				799,740				3,093,927				1,628,012
Depreciation and amortization			457,276				227,273				915,939				455,818
Total selling, general and administrative expenses			2,351,029				1,244,772				4,682,721				2,509,509
Operating (loss)			(1,031,414		)		(548,737		)		(2,092,199		)		(870,675		)
Other income and (expense):
Interest income			15,396				38,730				26,917				72,546
Other income (expense)			(420		)		(2,653		)		(1,962		)		(1,114		)
Other income and (expense), net			14,976				36,077				24,955				71,432
(Loss) before income taxes			(1,016,438		)		(512,660		)		(2,067,244		)		(799,243		)
Income taxes			19,000				21,677				19,000				21,677
Net (loss)			$	(1,035,438	)		$	(534,337	)		$	(2,086,244	)		$	(820,920	)
Basic (loss) per common share:			$	(0.09	)		$	(0.06	)		$	(0.17	)		$	(0.10	)
Diluted (loss) per common share:			$	(0.09	)		$	(0.06	)		$	(0.17	)		$	(0.10	)
Weighted average common shares outstanding
Basic			12,075,580				8,471,494				12,124,538				8,478,339
Diluted			12,075,580				8,471,494				12,124,538				8,478,339

PAYMENT DATA SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended June 30,
	2018				2017
Operating activities:
Net (loss)	$	(2,086,244	)		$	(820,920	)
Adjustments to reconcile net (loss) to net cash (used) by operating activities:
Depreciation	415,939				374,249
Amortization	500,001				81,569
Provision for loss on note receivable	72,500				—
Stock based compensation	672,855				425,679
Issuance of stock to consultant for services	7,911				15,400
Changes in current assets and current liabilities:
Accounts receivable	30,280				25,647
Prepaid expenses and other	(65,661		)		(86,710		)
Other assets	(144,722		)		(22,567		)
Accounts payable and accrued expenses	(167,581		)		20,731
Merchant reserves	(195,163		)		(851,121		)
Deferred revenue	50,000				—
Deferred rent	27,416				—
Net cash (used) by operating activities	(882,469		)		(838,043		)
Investing activities:
Purchases of property and equipment	(431,815		)		(298,426		)
Notes receivable	—				(500,000		)
Net cash (used) by investing activities	(431,815		)		(798,426		)
Financing activities:
Purchases of treasury stock	(959,076		)		(108,939		)
Net cash (used) by financing activities	(959,076		)		(108,939		)
Change in cash, cash equivalents and merchant reserves	(2,273,360		)		(1,745,408		)
Cash, cash equivalents and merchant reserves, beginning of period	19,778,022				19,924,379
Cash, cash equivalents and merchant reserves, end of period	$	17,504,662			$	18,178,971
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	—				—
Income taxes	49,000				21,677

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
		Three Months Ended								Six Months Ended
		June 30,				June 30,				June 30,				June 30,
			2018				2017				2018				2017
Reconciliation from Operating (Loss) to Adjusted EBITDA:
Operating (Loss)		$	(1,031,414	)		$	(548,737	)		$	(2,092,199	)		$	(870,675	)
Depreciation and amortization			457,276				227,273				915,939				455,818
EBITDA			(574,138	)			(321,464	)			(1,176,260	)			(414,857	)
Non-cash stock-based compensation expense, net			298,477				217,759				672,855				425,679
Adjusted EBITDA		$	(275,661	)		$	(103,705	)		$	(503,405	)		$	10,822
Calculation of Adjusted EBITDA margins:
Revenues		$	6,283,875			$	2,550,441			$	12,127,540			$	5,361,185
Adjusted EBITDA			(275,661	)			(103,705	)			(503,405	)			10,822
Adjusted EBITDA margins			-4.39	%			-4.07	%			-4.15	%			0.20	%