USIO Usio Inc

Company Reports Record Quarterly Revenues

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

Louis Hoch, President and CEO of Payment Data Systems, said, “With the third quarter’s record revenues and volumes, and the strong momentum across our ACH, prepaid and card processing businesses, we are on pace for a banner year.   In addition, we continue to make significant progress with our plans to grow revenues, which we expect to improve even further in the fourth quarter.  Most exciting, organic revenue growth was 18% this quarter compared to our 14% organic growth in Q2 2018, primarily due to our fifth consecutive quarter of growth in our ACH business.  We also ended the quarter in a strong financial condition, which together with the anticipated continued improvement in cash flow generation, is providing sufficient resources to fund the exciting growth initiatives that are gaining traction in our Prepaid and PayFac operations. The outlook has never been brighter, and we are committed to capitalizing on the significant opportunities we see in order to leverage our proprietary technology and to build value for our shareholders.”

Third Quarter 2018 Financial Summary

Revenues were $6.5 million for the third quarter of 2018, up 80% compared to $3.6 million in the same period last year.  The primary drivers of the revenue growth included organic growth of 18% for the quarter, excluding Singular Payments in both periods, plus three months of Singular Payments results in 2018 compared to one month in 2017.   Organic growth in the second quarter of 2018 was 14%.

Gross profits were $1.5 million, up 77% from $0.8 million in the same period last year.  Gross margins improved to 22.5% in the third quarter of 2018 compared to 23.0% in the same period last year.   The primary driver for the improved gross margin came from strong revenue growth and improved profits in the ACH business line.

Operating loss was $0.8 million in the third quarter of 2018 compared to $0.9 million in the same period last year and $1.0 million in the second quarter of 2018.

Adjusted EBITDA was a loss of $60,653 for the third quarter of 2018, improving from an adjusted EBITDA loss of $0.3 million in the third quarter of 2017.

Net loss for the third quarter of 2018 was $0.8 million or ($0.07) per share compared to a net loss of $0.9 million or ($0.10) per share for the same period last year. The earnings per share loss for the current quarter was based upon 12.1 million shares outstanding whereas the earnings per share loss in the same period last year was based upon 8.9 million shares outstanding.

Net loss improved $0.2 million to a loss of $0.8 million compared to a net loss of $1.0 million in the second quarter of 2018.

More than $885 million total dollars were processed during the third quarter of 2018, which is 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 September 30, 2018.

Electronic check transaction volumes during the third quarter of 2018 were up 28% versus the same time period last year.  Returned check transactions processed during the third quarter of 2018 were up 34% versus the same period last year.

Credit card transaction volumes during the third quarter of 2018 were up 109% compared to the same period last year.  Credit card dollars processed during the third quarter of 2018 were up 112% compared to the same period last year.

Financial Results for the Nine Months of Fiscal 2018Revenues for the nine months ended September 30, 2018 were $18.6 million, up 108% from the same period last year.

Gross profit in the nine months ended September 30, 2018 was $4.0 million, up 64% from the same period last year.

Gross margins were 21.8% for the nine months ended September 30, 2018 compared to 27.5% in the same period last year.

Operating loss for the nine months ended September 30, 2018 was $2.9 million compared to $1.8 million for the same period last year due to continued investments in the Prepaid and PayFac growth initiatives. 

Adjusted EBITDA for the nine months ended September 30, 2018 was a loss of $0.6 million compared to a loss of $0.3 million for the same period in the prior year.

Net loss for the nine months ended September 30, 2018 was $2.9 million or ($0.24) per share compared to a loss of $1.7 million or ($0.20) per share in the same period last year.

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 November 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 10125759.

Payment Data Systems, Inc. (Nasdaq: PYDS), 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 services 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 Systems is headquartered in San Antonio, Texas, and has offices in Franklin, Tennessee, just outside of Nashville. 

Websites: www.paymentdata.com, www.singularpayments.com, www.payfacinabox.com, www.akimbocard.com, and www.ficentive.com. Find us on Facebook® and Twitter.

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 "Non-GAAP Reconciliation."

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

	September 30, 2018				December 31, 2017
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	2,716,316			$	4,800,554
Accounts receivable, net	1,147,482				969,674
Settlement processing assets	34,767,837				38,027,984
Prepaid expenses and other	179,330				176,945
Notes receivable, net	72,500				150,000
Current assets before merchant reserves	38,883,465				44,125,157
Merchant reserves	13,602,562				14,977,468
Total current assets	52,486,027				59,102,625
Property and equipment, net	2,050,221				2,105,186
Other assets:
Intangibles, net	3,926,426				4,676,427
Deferred tax asset	1,394,000				1,394,000
Other assets	303,759				157,565
Total other assets	5,624,185				6,227,992
Total assets	$	60,160,433			$	67,435,803
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	251,906			$	300,736
Accrued expenses	1,217,307				1,006,262
Settlement processing obligations	34,767,837				38,027,984
Deferred revenues	35,000				—
Current liabilities before merchant reserve obligations	36,272,050				39,334,982
Merchant reserve obligations	13,602,562				14,977,468
Total current liabilities	49,874,612				54,312,450
Non-current liabilities:
Deferred rent	58,457				—
Total liabilities	49,933,069				54,312,450
Stockholders’ equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized; -0- shares outstanding at September 30, 2018 (unaudited) and December 31, 2017, respectively	—				—
Common stock, $0.001 par value, 200,000,000 shares authorized; 17,020,180 and 16,874,235 issued, and 15,943,624 and 16,201,634 outstanding at September 30, 2018 (unaudited) and December 31, 2017, respectively	185,447				186,299
Additional paid-in capital	74,371,930				74,041,083
Treasury stock, at cost; 1,076,556 and 672,601 shares at September 30, 2018 (unaudited) and December 31, 2017, respectively	(1,797,442		)		(831,059		)
Deferred compensation	(6,372,735		)		(7,012,544		)
Accumulated deficit	(56,159,836		)		(53,260,426		)
Total stockholders’ equity	10,227,364				13,123,353
Total liabilities and stockholders’ equity	$	60,160,433			$	67,435,803

PAYMENT DATA SYSTEMS, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)

		Three Months Ended September 30,								Nine Months Ended September 30,
		2018				2017				2018				2017
Revenues		$	6,473,743			$	3,588,853			$	18,601,283			$	8,950,038
Cost of services		5,014,603				2,764,236				14,551,621				6,486,587
Gross profit		1,459,140				824,617				4,049,662				2,463,451
Selling, general and administrative:
Stock-based compensation		289,038				230,206				961,893				655,885
Other expenses		1,519,793				1,172,021				4,613,720				2,800,033
Depreciation and amortization		473,225				314,789				1,389,164				770,607
Total selling, general and administrative expenses		2,282,056				1,717,016				6,964,777				4,226,525
Operating (loss)		(822,916		)		(892,399		)		(2,915,115		)		(1,763,074		)
Other income and (expense):
Interest income		23,327				16,381				50,244				88,927
Other income (expense)		1,423				993				(539		)		(121		)
Other income and (expense), net		24,750				17,374				49,705				88,806
(Loss) before income taxes		(798,166		)		(875,025		)		(2,865,410		)		(1,674,268		)
Income taxes		15,000				15,000				34,000				36,677
Net (loss)		$	(813,166	)		$	(890,025	)		$	(2,899,410	)		$	(1,710,945	)
Basic (loss) per common share:		$	(0.07	)		$	(0.10	)		$	(0.24	)		$	(0.20	)
Diluted (loss) per common share:		$	(0.07	)		$	(0.10	)		$	(0.24	)		$	(0.20	)
Weighted average common shares outstanding
Basic		12,145,323				8,954,831				12,098,828				8,637,169
Diluted		12,145,323				8,954,831				12,098,828				8,637,169

PAYMENT DATA SYSTEMS, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)

							Nine Months Ended September 30,
							2018								2017
Operating activities:
Net (loss)							$	(2,899,410					)		$	(1,710,945				)
Adjustments to reconcile net (loss) to net cash (used) by operating activities:
Depreciation							639,164								564,920
Amortization							750,000								205,687
Provision for loss on note receivable							72,500								—
Bad debt expense							—								71,667
Stock based compensation							961,893								655,885
Issuance of stock to consultant for services							7,911								15,400
Changes in current assets and current liabilities:
Accounts receivable							(177,808						)		30,733
Prepaid expenses and other							(2,385						)		(84,783					)
Other assets							(146,194						)		64,440
Accounts payable and accrued expenses							162,215								220,100
Merchant reserves							(1,374,906						)		(894,741					)
Deferred revenue							35,000								—
Deferred rent							58,457								—
Net cash (used) by operating activities							(1,913,563						)		(861,637					)
Investing activities:
Purchases of property and equipment							(584,198						)		(344,611					)
Purchase of Singular Payments, LLC							—								(900,000					)
Notes receivable							5,000								(600,000					)
Net cash (used) by investing activities							(579,198						)		(1,844,611					)
Financing activities:
Purchases of treasury stock							(966,383						)		(109,382					)
Net cash (used) by financing activities							(966,383						)		(109,382					)
Change in cash, cash equivalents and merchant reserves							(3,459,144						)		(2,815,630					)
Cash, cash equivalents and merchant reserves, beginning of period							19,778,022								19,924,379
Cash, cash equivalents and merchant reserves, end of period							$	16,318,878							$	17,108,749
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest							—								—
Income taxes							$	49,000							$	21,677
Non-cash transactions:
Issuance of common stock in exchange for purchase of Singular Payments, LLC							—								3,500,000
Forgiveness of note receivable in exchange for purchase of Singular Payments, LLC							—								600,000
Issuance of deferred compensation to Vaden Landers							—								630,000

 

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
	Three Months Ended								Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2018				2017				2018				2017
Reconciliation from Operating (Loss) to Adjusted EBITDA:
Operating (Loss)	$	(822,916	)		$	(892,399	)		$	(2,915,115	)		$	(1,763,074	)
Depreciation and amortization	473,225				314,789				1,389,164				770,607
EBITDA	(349,691		)		(577,610		)		(1,525,951		)		(992,467		)
Non-cash stock-based compensation expense, net	289,038				230,206				961,893				655,885
Adjusted EBITDA	$	(60,653	)		$	(347,404	)		$	(564,058	)		$	(336,582	)
Calculation of Adjusted EBITDA margins:
Revenues	$	6,473,743			$	3,588,853			$	18,601,283			$	8,950,038
Adjusted EBITDA	(60,653		)		(347,404		)		(564,058		)		(336,582		)
Adjusted EBITDA margins	-0.9		%		-9.7		%		-3		%		-3.8		%