SAN ANTONIO–(BUSINESS WIRE)–Usio, Inc. (Nasdaq: USIO), a leading provider of cloud-based FinTech integrated payment solutions, today issued the following letter to shareholders.

Dear shareholder friend:

Usio is a company that serves various industries with various payment channels so that our customers can collect and issue payments. It has served us well during good and bad economic conditions. In 2020, unlike other companies in the payments industry, we grew our revenue compared to 2019 because of this diversity. As one payment channel or industry was negatively impacted by the Covid shutdown, another payment channel or industry was positively impacted.

The economy continues to be volatile in many areas and as we navigate these changes, we are seeing a positive trend with certain customer segments and more uncertain trends that we are watching closely, on which I wish to comment.

First, our non-bank lending segment has increased ACH transaction volume due to consumer lending growth, which naturally leads to more ACH repayments. The growth of consumer loans is also leading to an increase in returned check transactions. Returned checks are the highest margin sub-business in our ACH offering, with gross margins over 80%. In the month of June, we processed more returned check transactions than in any month in the past eleven years. We expect to report both sequential and year-over-year growth in ACH returned check processing for the second quarter of 2022. Additionally, we expect to report sequential growth in the total number of ACH transactions processed. However, as previously announced, in the second quarter of 2022, we expect to report a year-over-year decline in the number of ACH transactions processed, as this quarter will be compared to the record volume of the prior year quarter caused by the explosion of crypto enthusiasm. We were pleased to report that we expect the decline to be moderate and the resulting revenue for ACH to be similar to the second quarter of 2021.

Second, on July 1, 2022, we learned that one of our partners, Voyager Digital, had publicly announced its intention to “…temporarily suspend transactions, deposits, withdrawals and loyalty rewards effective 2:00 p.m. , Eastern Daylight Time, today. [July 1, 2022].” Usio has provided and continues to provide payment processing services for Voyager, and our ACH and prepaid services for Voyager are fully available to them. We plan to continue to process transactions as requested by Voyager. However, following Voyager’s announcement, we believe that the volume of ACH transactions we process for Voyager, and therefore our revenue, will be negatively impacted unless Voyager resumes full operations. Voyager is independent of Usio and we cannot predict when, or if, Voyager will resume operations in any capacity. Voyager represented 8% of Usio’s total revenue for the year 2021 and 8% of Usio’s revenue from January 1, 2022 to May 31, 2022.

Of the 8% of revenue generated by Voyager in 2022, 2% represented revenue from blank card orders for Voyager’s prepaid card program, on which Usio made no margin because we sold these cards to Voyager at cost price in anticipation of future transactional revenue from the card. use of the medium.

Usio’s forecast for fiscal year 2022 assumed only $1 million in revenue from Voyager’s prepaid card program services for 2022. Through May 31, 2022, prepaid card service revenue was approximately $670 million. $000. We therefore expect the impact of a slowdown or the end of this prepaid card program on our results to be minimal.

Accounts receivable balances from Voyager with Usio are minimal as of July 5, 2022.

Due to the strength of our new sales pipeline, potential card deterioration, and trends we are seeing with our non-bank lenders, we believe we will be able to replace any potential revenue shortfall due to suspended Voyager processing. planned in our forecasts. As a result, Usio is reiterating its fiscal 2022 revenue guidance, but widening the range to 16-20% revenue growth for 2022 versus 2021. As always, the revenue guidance is conditional on favorable economic conditions .

We expect the revenue replacement to consist of new PayFac relationships that will generate a lower margin than we expected to earn on processing ACH transactions. We also have over $15 million in potential card spoilage revenue that we expect to begin recognizing in September of this year and continue to recognize for the next 12-18 months. Spoilage has significant margins of up to 50-80%.

We believe the Voyager announcement is a temporary distraction from our rapid growth, and we plan to manage these challenges and achieve our goals for the year consistent with our recent track record.

We have launched our previously announced stock buyback plan and have already purchased over $400,000 of Usio stock on the open market.

Finally, Usio is well positioned to take advantage of new growth opportunities by leveraging our strong balance sheet with a sufficient cash balance ($7.6 million as of March 30, 2022) and less than $115,000 in debt.

I look forward to ending the year with strong growth in our PayFac and prepaid segments, and exit solutions exceeding our expectations.

Sincerely,

Louis Hoch

Chief executive officer

About Usio, Inc.

Usio, Inc. (Nasdaq: USIO), a leading provider of integrated, cloud-based FinTech electronic payment solutions, offers a wide range of payment solutions to merchants, billers, banks, offices services, crypto exchanges and card issuers. The company operates credit, debit/prepaid and ACH payment processing platforms to provide its customers with convenient, world-class payment solutions and services. The Company, through its Usio Output Solutions division, offers services related to electronic invoice presentment, document composition, document breakdown, and printing and mailing services. The Company’s strength lies in its ability to provide tailor-made solutions for card issuance, payment acceptance and bill payment as well as its unique technology in the prepaid sector. Usio is headquartered in San Antonio, TX, with offices in Austin, TX and Franklin, TN, just outside of Nashville.

Websites: www.usio.com, www.payfacinabox.com, www.akimbocard.com and www.usiooutput.com. Find us on Facebook® and Twitter.

DISCLAIMER OF FORWARD-LOOKING STATEMENTS

Except for historical information contained in this release, the matters discussed in this release include forward-looking statements that are covered by safe harbors. These statements include, but are not limited to, all statements regarding management’s intent, beliefs and expectations, such as statements regarding our future and our operating and growth strategy. These forward-looking statements are identified by the use of words such as “believe”, “intend”, “look into the future”, “anticipate”, “plan” and “expect”, among others. . are subject to certain risks and uncertainties inherent in the business of the Company that could cause actual results to vary, including risks related to an economic downturn resulting from the COVID-19 pandemic, the realization of opportunities from the acquisition of IMS , management of Company growth, loss of key resellers, relationships with the Automated Clearinghouse network, banking sponsors, third-party card processing providers and merchants, security of our software, hardware and information, share price volatility, 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 filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2021. One or more of these factors has affected, and may in the future, affect the Company’s business 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 material uncertainties inherent in the forward-looking statements included herein, the inclusion of this information should not be construed as a statement by us or anyone else that the objectives and plans will be achieved. All forward-looking statements made in this release are based on information currently available to management. The Company undertakes no obligation to update forward-looking statements, except as required by law.

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