UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
or
For the transition period from ________ to ________.
Commission File Number:
USIO, INC.
(Exact name of registrant as specified in its charter)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name on each exchange on which registered |
| | | The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| | Smaller reporting company |
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| Emerging Growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
As of May 11, 2026, the number of outstanding shares of the registrant's common stock was
INDEX
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
USIO, INC.
CONSOLIDATED BALANCE SHEETS
| March 31, 2026 | December 31, 2025 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Settlement processing assets | ||||||||
| Prepaid card load assets | ||||||||
| Customer deposits | ||||||||
| Accounts receivable, net | ||||||||
| Inventory | ||||||||
| Prepaid expenses and other | ||||||||
| Merchant reserves | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Other assets: | ||||||||
| Intangibles, net | ||||||||
| Deferred tax asset, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Other assets | ||||||||
| Total other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Operating lease liabilities, current portion | ||||||||
| Equipment loan, current portion | ||||||||
| Settlement processing obligations | ||||||||
| Prepaid card load obligations | ||||||||
| Customer deposits | ||||||||
| Merchant reserve obligations | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities: | ||||||||
| Equipment loan, net of current portion | ||||||||
| Operating lease liabilities, net of current portion | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 11) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $ par value, shares authorized; -- shares outstanding at March 31, 2026 (unaudited) and December 31, 2025 | ||||||||
| Common stock, $ par value, shares authorized; and issued, and and outstanding at March 31, 2026 (unaudited) and December 31, 2025, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock, at cost; and shares at March 31, 2026 (unaudited) and December 31, 2025, respectively | ( | ) | ( | ) | ||||
| Deferred compensation | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See the accompanying notes to the interim consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended March 31, |
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| 2026 |
2025 |
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| Revenues |
$ | $ | ||||||
| Cost of services |
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| Gross profit |
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| Selling, general and administrative expenses: |
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| Stock-based compensation |
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| SG&A |
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| Depreciation and amortization |
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| Total selling, general and administrative |
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| Operating income (loss) |
( |
) | ||||||
| Other income (expense): |
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| Interest income |
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| Interest expense |
( |
) | ( |
) | ||||
| Other income, net |
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| Income (loss) before income taxes |
( |
) | ||||||
| Federal income tax expense |
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| State income tax expense |
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| Income tax expense |
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| Net income (loss) |
$ | $ | ( |
) | ||||
| Basic income (loss) per common share: |
$ | $ | ( |
) | ||||
| Diluted income (loss) per common share: |
$ | $ | ( |
) | ||||
| Weighted average common shares outstanding |
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| Basic |
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| Diluted |
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See the accompanying notes to the interim consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Three Months Ended March 31, |
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| 2026 |
2025 |
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| Operating activities: |
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| Net income (loss) |
$ | $ | ( |
) | ||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
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| Depreciation and Amortization |
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| Deferred federal income tax |
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| Employee stock-based compensation |
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| Reserve for processing losses |
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| Changes in current assets and current liabilities: |
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| Accounts receivable |
( |
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| Accounts receivable, tax credit |
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| Prepaid expenses and other |
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| Operating lease right-of-use assets |
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| Inventory |
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| Accounts payable and accrued expenses |
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| Operating lease liabilities |
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| Merchant reserves |
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| Customer deposits |
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) | ( |
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| Net cash provided by operating activities |
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| Investing activities: |
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| Purchases of property and equipment |
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| Capitalized labor for internal use software |
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) | ( |
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| Net cash used in investing activities |
( |
) | ( |
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| Financing activities: |
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| Payments on equipment loan |
( |
) | ( |
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| Proceeds from issuance of common stock |
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| Purchases of treasury stock |
( |
) | ( |
) | ||||
| Assets held for customers |
( |
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| Net cash provided by (used in) financing activities |
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| Change in cash, cash equivalents, settlement processing assets, prepaid card load assets, customer deposits and merchant reserves |
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| Cash, cash equivalents, settlement processing assets, prepaid card load assets, customer deposits and merchant reserves, beginning of period |
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| Cash, Cash Equivalents, Settlement Processing Assets, Prepaid Card Load Assets, Customer Deposits and Merchant Reserves, End of Period |
$ | $ | ||||||
| Supplemental disclosure of cash flow information: |
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| Cash paid during the period for: |
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| Interest |
$ | $ | ||||||
| Income taxes |
— |
— |
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| Non-cash investing and financing activities: |
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| Right of use assets obtained in exchange for operating lease liabilities |
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The reconciliation of cash and cash equivalents to cash, cash equivalents, settlement processing assets, prepaid card load assets, customer deposits and merchant reserves is as follows for each period presented:
| Three Months Ended March 31, |
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| 2026 |
2025 |
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| Beginning cash, cash equivalents, settlement processing assets, prepaid card load assets, customer deposits and merchant reserves: |
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| Cash and cash equivalents |
$ | $ | ||||||
| Settlement processing assets |
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| Prepaid card load assets |
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| Customer deposits |
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| Merchant reserves |
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| Total |
$ | $ | ||||||
| Ending cash, cash equivalents, settlement processing assets, prepaid card load assets, customer deposits and merchant reserves: |
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| Cash and cash equivalents |
$ | $ | ||||||
| Settlement processing assets |
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| Prepaid card load assets |
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| Customer deposits |
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| Merchant reserves |
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| Total |
$ | $ | ||||||
See the accompanying notes to the interim consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
| Common Stock |
Additional Paid- In |
Treasury |
Deferred |
Accumulated |
Total Stockholders' |
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| Shares |
Amount |
Capital |
Stock |
Compensation |
Deficit |
Equity |
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| Balance at December 31, 2025 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||
| Issuance of common stock under equity incentive plan |
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| Issuance of common stock under employee stock purchase plan |
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| Deferred compensation amortization |
— | |||||||||||||||||||||||||||
| Purchase of treasury stock, at cost |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Net income for the period |
— | |||||||||||||||||||||||||||
| Balance at March 31, 2026 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||
| Balance at December 31, 2024 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||
| Adjustment to par value of common stock |
— | ( |
) | |||||||||||||||||||||||||
| Issuance of common stock under equity incentive plan |
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| Issuance of common stock under employee stock purchase plan |
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| Deferred compensation amortization |
— | — | — | — | — | |||||||||||||||||||||||
| Purchase of treasury stock, at cost |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Net loss for the period |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance at March 31, 2025 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||
See the accompanying notes to the interim consolidated financial statements.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Presentation
The accompanying unaudited interim consolidated financial statements of Usio, Inc. and its subsidiaries (collectively, the “Company” or "Usio") have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "Commission" or the "SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles ("GAAP") have been omitted pursuant to such rules and regulations. In the opinion of management, the accompanying unaudited interim consolidated financial statements reflect all adjustments of a normal recurring nature considered necessary to present fairly the Company's financial position, results of operations and cash flows for such periods. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2025, as filed with the Commission on March 18, 2026 (the "2025 Annual Report"). Results of operations for interim periods are not necessarily indicative of results that may be expected for any other interim periods or the full fiscal year. References in this quarterly report to "the quarter" or the "first quarter" mean the three month period ended March 31, 2026 or 2025, as applicable, unless otherwise noted.
Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents: Cash and cash equivalents includes cash and other money market instruments. The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents.
Settlement Processing Assets and Obligations: Settlement processing assets and obligations represent intermediary balances arising in our settlement process for merchants. The Company earns interest on these underlying processing assets, which is recognized as revenue in the Automated Clearing House ("ACH") and complementary services business line.
Prepaid Card Load Assets: The Company maintains pre-funding accounts for its customers to facilitate prepaid card loads as initiated by our customer. These prepaid card load assets are carried on the Company's balance sheet with a corresponding liability. The Company earns interest on these prepaid card load assets and obligations, which is recognized as revenue in the prepaid card services business line.
Customer Deposits: The Company holds customer deposits primarily for postage expenses to ensure the Company is not out of pocket for amounts billed daily by the United States Postal Service. These customer deposits are carried on the Company's balance sheet with a corresponding liability. The Company earns interest on these customer deposits, which is recognized as revenue in the Output Solutions business line.
Merchant Reserves: The Company has merchant reserve requirements associated with ACH transactions. The merchant reserve assets are carried on the Company's balance sheet with a corresponding liability. Merchant Reserves are set for each merchant. Funds are collected from each merchant and held as collateral to minimize contingent liabilities associated with any losses that may occur under the merchant agreement. While this cash is not restricted in its use, the Company believes that designating this cash to collateralize Merchant Reserves strengthens its fiduciary standing with the Company's member sponsors and is in accordance with the guidelines set by the card networks. The Company earns interest on these merchant reserves, which is recognized as revenue in our ACH and complementary services business line.
Accounts Receivable/Allowance for Estimated Credit Losses: Accounts receivable are reported as outstanding principal net of an allowance for estimated credit losses of $
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 does not charge interest on accounts receivable.
Inventory: Inventory is stated at the lower of cost or net realizable value. At March 31, 2026 and December 31, 2025, inventory consisted primarily of printing and paper supplies used for Usio Output Solutions, Inc., or Output Solutions.
Property and Equipment: Property and equipment are stated at cost. Depreciation and amortization are computed on a straight-line method over the estimated useful lives of the related assets, ranging from to years. Leasehold improvements are amortized over the lesser of the estimated useful lives or remaining lease period. Expenditures for maintenance and repairs are charged to expense as incurred.
Accounting for Internal Use Software: The Company capitalizes the costs associated with software being developed or obtained for internal use until both the preliminary project stage is substantially completed and it is probable that computer software being developed will be completed and placed in service. Capitalized costs include only (i) external direct costs of materials and services consumed in developing or obtaining internal-use software, (ii) payroll and other related costs for employees who are directly associated with and who devote time to the internal-use software project, and (iii) interest costs incurred, when material, while developing internal-use software. The Company ceases capitalization of such costs no later than the point at which the project is substantially complete and ready for its intended purpose. During the three months ended March 31, 2026 and 2025, the Company capitalized software costs of $
Concentration of Credit Risk: Financial instruments that potentially expose the Company to credit risk consist of cash and cash equivalents, and accounts receivable. The Company is exposed to credit risk on its cash and cash equivalents in the event of default by the financial institutions to the extent account balances exceed the amount insured by the Federal Deposit Insurance Corporation, or FDIC, which is $250,000. Accounts receivable potentially subject the Company to concentrations of credit risk. The Company’s customer base operates in a variety of industries and is geographically dispersed. The Company closely monitors extensions of credit. Estimated credit losses have been recorded in the consolidated financial statements. Recent credit losses have been within management's expectations. single customer accounted for more than 10% of revenues in 2026 or 2025.
Valuation and Impairment of Long-Lived and Intangible Assets: The Company assesses the impairment of long-lived and intangible assets at least annually, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors considered important, which could trigger an impairment review, include the following: significant underperformance relative to historical or projected future cash flows; significant changes in the manner of use of the assets or the strategy of the overall business; and significant negative industry trends. When management determines that the carrying value of long-lived and intangible assets may not be recoverable, an impairment loss is recognized, which is measured as the excess of the assets’ carrying value over the estimated fair value (with the estimated fair value determined based upon the estimated future cash inflows attributable to the asset, less estimated future cash outflows).
Fair Value Measurements: The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
• Level 1 inputs - unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date;
• Level 2 inputs - other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability; and
• Level 3 inputs - unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.
Cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and short-term borrowings are reflected in the accompanying consolidated financial statements at cost, which approximates fair value because of the short-term maturity of these instruments.
Reserve for Processing Losses: 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 March 31, 2026 and December 31, 2025, the Company’s reserve for processing losses was $
Revenue Recognition: 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 Accounting Standards Codification ("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.
The following table presents the Company's consolidated revenues by source:
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| ACH and complementary services | $ | $ | ||||||
| Credit card | ||||||||
| Prepaid card services | ||||||||
| Output Solutions | ||||||||
| Interest - ACH and complementary services | ||||||||
| Interest - Prepaid card services | ||||||||
| Interest - Output Solutions | ||||||||
| Total revenue | $ | $ | ||||||
Legal Proceedings: The Company may be involved in legal matters arising in the ordinary course of business from time to time. Litigation is subject to inherent uncertainties, and an adverse result in the legal proceedings disclosed in this quarterly report or other matters that may arise from time to time may harm our business.
Accounting for Income Taxes: Our annual tax rate is based on our income, statutory tax rates, and available tax planning opportunities. Tax laws are complex and subject to different interpretations by the taxpayer and respective government taxing authority. Significant judgement is required in determining our tax expense and in evaluating our tax positions, including evaluating uncertainties. We review our tax positions yearly and adjust the balances as new information becomes available.
Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss and tax credit carryforwards. We evaluate the recoverability of these future tax deductions and credits by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings, and available tax planning strategies. These rely heavily on estimates that are based on a number of factors, including historical data, and business forecasts. To the extent deferred tax assets are not expected to be realized, we record a valuation allowance.
We recognize and measure uncertain tax positions in accordance with GAAP, pursuant to which we only recognize the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities.
As with all businesses, the Company’s tax returns are subject to periodic examination. The Company’s federal returns for the past four years remain open to examination. The Company is subject to the Texas franchise tax. Management is not aware of any tax positions that would have a significant impact on its financial position.
Recently Adopted and Recently Issued But Not Yet Adopted Accounting Pronouncements: Accounting standards that have been issued or proposed by the Financial Accounting Standards Board ("FASB"), the U.S. Securities and Exchange Commission ("SEC") or other standard setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company's consolidated financial statements upon adoption.
In October 2023, FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. This ASU amends the ASC to incorporate certain disclosure requirements from SEC Release No. 33-10532, Disclosure Update and Simplification that was issued in 2018. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. For all other entities, the amendments will be effective two years later. The Company is evaluating the effect that ASU 2023-06 will have on its financial statements and related disclosures.
In January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. ASU 2025-01 clarifies the effective date for ASU 2024-03 (Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures), ensuring public business entities adopt it initially in annual reporting periods (not interim) for non-calendar year-end entities. ASU 2024-03 requires disclosure on an annual and interim basis, in the notes to the financial statements, of disaggregated information about specific categories underlying certain income statement expense line items. The effective dates of ASU 2025-01 align with ASU 2024-03: annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. The Company is currently evaluating the impact of adopting this new accounting guidance on its financial statements and related disclosures, but does not expect adoption of this new standard to be material.
In May 2025, the FASB issued ASU No. 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity (“ASU 2025-03”). ASU 2025-03 changes how companies determine the accounting acquirer in certain business combinations involving variable interest entities. The new guidance requires considering the factors used for other acquisition transactions to assess which party is the accounting acquirer. ASU 2025-03 is effective for the Company’s annual reporting periods beginning on January 1, 2027. Early adoption is permitted. The Company is currently evaluating the impact of adopting this new accounting guidance on its financial statements and related disclosures, but does not expect adoption of this new standard to be material.
In May 2025, the FASB issued ASU No. 2025-04, Compensation – Stock Compensation (Topic 718) and Revenue from Contracts With Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer (“ASU 2025-04”). ASU 2025-04 revises the definition of a performance condition, eliminates the forfeiture policy election for service conditions, and clarifies that the variable consideration constraint in ASC Topic 606 does not apply to share-based consideration payable to customers. The new guidance requires entities to consistently account for share-based awards granted to customers by clarifying the treatment of vesting conditions and ensuring alignment with ASC Topic 606 and ASC Topic 718: Compensation—Stock Compensation. ASU 2025-04 is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of adopting this new accounting guidance on its financial statements and related disclosures, but does not expect adoption of this new standard to be material.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”), which provides a practical expedient for estimating expected credit losses for current accounts receivable and current contract assets. ASU 2025-05 will be effective for annual periods beginning after December 15, 2025, and interim periods within those annual reporting periods and should be applied prospectively. We adopted this guidance effective January 1, 2026 on a prospective basis. Our financial statements were not materially impacted upon adoption.
In September 2025, the FASB issued ASU 2025-06, "Targeted Improvements to the Accounting for Internal-Use Software," which simplifies the capitalization guidance by removing all references to software development project stages, so that the guidance is neutral to different software development methods. The amendments in this update are effective for annual periods beginning after December 15, 2027. Early adoption is permitted. The amendments should be applied either retrospectively, prospectively to software costs incurred after the adoption date or on a modified prospective basis. The Company is currently evaluating the potential effects of ASU 2025-06 on our consolidated financial statements and related disclosures but does not expect adoption of this new standard to be material.
In December 2025, the FASB issued ASU No. 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. ASU 2025-10 establishes the accounting for a government grant received by a business entity, including guidance for (1) a grant related to an asset and (2) a grant related to income. The ASU is effective for annual periods beginning after December 15, 2028, and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact of adopting this new accounting guidance on its financial statements and related disclosures, but does not expect adoption of this new standard to be material.
In December 2025, the FASB issued ASU 2025-11, “Interim Reporting (Topic 270): Narrow-Scope Improvements”. The amendments are intended to improve the clarity and navigability of interim reporting requirements within Topic 270 by clarifying when interim reporting guidance applies, enhancing the organization of required interim disclosures, and specifying the form and content of interim financial statements. The guidance responds to stakeholder feedback that existing interim reporting requirements were difficult to navigate because of the historical origins and accumulated amendments within Topic 270. ASU 2025-11 adds a disclosure principle requiring entities to disclose events that occur after the end of the most recent annual reporting period that have a material impact on the entity. The amendments also introduce a comprehensive list of required interim disclosures drawn from various Codification topics and clarify the presentation requirements for interim financial statements, including condensed financial statements and accompanying footnotes. Importantly, the ASU does not change the fundamental nature of interim reporting nor expand or reduce existing disclosure requirements; rather, it improves clarity and consistency across entities that issue interim financial statements in accordance with generally accepted accounting principles. ASU 2025-11 is effective for the Company for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted, and the amendments may be applied either prospectively or retrospectively. The Company is currently evaluating the impact of adopting this new accounting guidance on its financial statements and related disclosures, but does not expect adoption of this new standard to be material.
Note 2. Leases
The Company leases facilities and office equipment under various operating leases, which generally are expected to be renewed or replaced by other leases. For each of the three months ended March 31, 2026 and 2025, operating lease expenses totaled $
Note 3. Accrued Expenses
Accrued expenses consisted of the following balances:
| March 31, 2026 |
December 31, 2025 |
|||||||
| Accrued commissions |
$ | $ | ||||||
| Reserve for processing losses |
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| Other accrued expenses |
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| Accrued taxes |
||||||||
| Accrued salaries |
||||||||
| Total accrued expenses |
$ | $ | ||||||
Note 4. Loans
Equipment Loans
On October 1, 2023, the Company entered into a debt arrangement to finance $
On September 19, 2025, the Company entered into a debt arrangement to finance $
As of March 31, 2026, the Company maintains an undrawn line of credit and an outstanding letter of credit, both of which were established in connection with a bond required for the Company's appeal of the court’s decision in a prior lawsuit that has since been settled in the Company's favor.
Line of Credit
The Company has an unsecured revolving line of credit with a maximum borrowing capacity of $
Letter of Credit
The Company has an irrevocable letter of credit in the amount of $
These credit facilities were arranged to comply with legal requirements related to the Company’s appeal and provide additional liquidity resources if needed. Management continues to monitor its financial position and believes that existing cash balances, along with these credit facilities, are sufficient to meet operational needs and legal obligations.
As a result of the lawsuit settlement, the Company will not renew the line of credit or letter of credit upon their maturity. There are no ongoing costs associated with the maintenance of either of these credit facilities.
Future principal payments on current debt arrangements are as follows at March 31, 2026:
| Year ending December 31, | ||||
| Amount Due | ||||
| 2026 (remainder of the year) | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Total payments | $ | |||
Note 5. Stockholders' Equity
Stock Warrants: On December 15, 2020, the Company issued warrants to purchase
Note 6. Net Income (Loss) Per Share
Basic income (loss) per share (EPS) was computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted EPS differs from basic EPS due to the assumed conversion of potentially dilutive awards and options that were outstanding during the period. Holders of unvested restricted stock awards have the right to receive nonforfeitable dividends on the same basis as common shares; therefore, unvested restricted stock is considered a participating security for the purpose of calculating EPS. The following is a reconciliation of the numerators and the denominators of the basic and diluted per share computations for net income (loss) for the three months ended March 31, 2026 and 2025.
| Three Months Ended March 31, |
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| 2026 |
2025 |
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| Numerator: |
||||||||
| Numerator for basic and diluted income (loss) per share, net income (loss) available to common shareholders |
$ | $ | ( |
) | ||||
| Denominator: |
||||||||
| Denominator for basic income (loss) per share, weighted average shares outstanding |
||||||||
| Effect of dilutive securities |
||||||||
| Denominator for diluted earnings per share, adjusted for weighted average shares and assumed conversion |
||||||||
| Basic income (loss) per common share |
$ | $ | ( |
) | ||||
| Diluted income (loss) per common share and common share equivalent |
$ | $ | ( |
) | ||||
The warrants to purchase shares of common stock that were outstanding at March 31, 2026 and 2025 which were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive, were as follows:
| March 31, |
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| 2026 |
2025 |
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| Anti-dilutive warrants |
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Note 7. Income Taxes
Deferred tax assets and liabilities are recorded based on the difference between financial reporting and tax basis of assets and liabilities and are measured by the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Deferred tax assets are computed with the presumption that they will be realizable in future periods when taxable income is generated. Predicting the ability to realize these assets in future periods requires judgment by management. GAAP prescribes a recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return. Income tax benefits that meet the “more likely than not” recognition threshold are recognized.
At March 31, 2026 and December 31, 2025, the Company had a deferred tax asset of approximately $
At March 31, 2026, the Company had available net operating loss carryforwards ("NOLs") of approximately $
Pursuant to Sections 382 and 383 of the Internal Revenue Code ("IRC"), federal and state tax laws impose significant restrictions on the utilization of net operating loss and other tax carryforwards in the event of a change in ownership of the Company. The Company does not expect IRC Sections 382 and 383 to significantly impact the utilization of its NOLs and other tax carryforwards. If we were to experience an "ownership change," as determined under Section 382 of the IRC, our ability to offset taxable income arising after the ownership change with NOLs generated prior to the ownership change would be limited, possibly substantially. An ownership change would establish an annual limitation on the amount of our pre-change NOLs we could utilize to offset our taxable income in any future taxable year to an amount generally equal to the value of our stock immediately prior to the ownership change multiplied by the long-term tax-exempt rate. In general, an ownership change will occur if there is a cumulative increase in our ownership of more than 50 percentage points by one or more "5% shareholders" (as defined in the IRC) at any time during a rolling three-year period.
The schedule below outlines when the Company's Pre-2018 NOLs were generated and the year they may expire.
| Tax Year End |
NOL |
Expiration |
||||||
| 2006 |
$ | 2026 | ||||||
| 2007 |
2027 | |||||||
| 2008 |
2028 | |||||||
| 2009 |
2029 | |||||||
| 2010 |
2030 | |||||||
| 2013 |
2033 | |||||||
| 2016 |
2036 | |||||||
| 2017 |
2037 | |||||||
| Total |
$ | |||||||
As of March 31, 2026, there were NOLs totaling approximately $
| Tax Year End |
NOL |
|||
| 2018 |
$ | |||
| 2019 |
||||
| 2020 |
||||
| 2022 |
||||
| 2025 |
||||
| Total |
$ | |||
| Total loss carryforwards |
$ | |||
The tax provision for federal and state income tax is as follows for the three months ended March 31, 2026 and 2025.
| Three Months Ended March 31, 2026 |
Three Months Ended March 31, 2025 |
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| Current provision: |
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| Federal |
$ | $ | ||||||
| State |
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| Deferred provision: |
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| Federal income tax |
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| Income tax expense |
$ | $ | ||||||
The reconciliation of federal income tax expense (benefit) computed at the U.S. federal statutory tax rates to total income tax expense (benefit) is as follows for the three months ended March 31, 2026 and 2025.
| Three Months Ended March 31, 2026 |
Three Months Ended March 31, 2025 |
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| Amount |
Rate |
Amount |
Rate |
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| Income tax (benefit) at 21% |
$ | % | $ | ( |
) | % | ||||||||||
| Change in valuation allowance |
% | % | ||||||||||||||
| Permanent and other differences |
% | - |
% | |||||||||||||
| State taxes |
% | - |
% | |||||||||||||
| Income tax expense |
$ | % | $ | - |
% | |||||||||||
Note 8. Related Party Transactions
During the three months ended March 31, 2026 and 2025, the Company purchased a total of $
Note 9. Stock Based Compensation
In the three months ended March 31, 2026, we withheld
On August 21, 2025, the Company granted
On August 21, 2025, the Company granted
Note 10. Segment Reporting
Usio's reportable operating are "Output Solutions" and "Merchant Services" and these segments have been selected based on management’s resource allocation and performance assessment in making decisions regarding the Company. Our chief operating decision maker ("CODM") is the Company’s chief executive officer. The CODM has ultimate authority and responsibility over resource allocation decisions and performance assessment.
Segment gross profit is the measure of segment profit and loss reviewed by the CODM and is used by the CODM to evaluate segment performance and make decisions about funding our operations and allocating resources.
The following is a description of the segments.
Output Solutions
This segment, which was created in connection with the acquisition of substantially all of the assets of IMS, offers 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. 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.
Merchant Services
This segment offers integrated electronic payment processing services to merchants and businesses, including credit and debit card-based processing services and electronic funds transfer via the ACH network. Additionally, as part of our Prepaid card-based processing services, we develop and manage a variety of Mastercard-branded prepaid card program types, including consumer reloadable, consumer gift, incentive, promotional, general and government disbursement and corporate expense cards.
The following tables set forth certain financial information with respect to Usio’s reportable segments for the three months ended March 31, 2026 and 2025:
| For the Three Months Ended March 31, 2026 | Output Solutions | Merchant Services | Total | |||||||||
| Revenues | $ | $ | $ | |||||||||
| Cost of services | ||||||||||||
| Processing expense | ||||||||||||
| Services expense | ||||||||||||
| Postage expense | ||||||||||||
| Cost of services | ||||||||||||
| Gross profit | $ | $ | $ | |||||||||
| Depreciation and amortization | $ | $ | $ | |||||||||
| Capital expenditures | $ | $ | $ | |||||||||
| Identifiable assets1 | $ | $ | $ | |||||||||
| For the Three Months Ended March 31, 2025 | Output Solutions | Merchant Services | Total | |||||||||
| Revenues | $ | $ | $ | |||||||||
| Cost of services | ||||||||||||
| Processing expense | ||||||||||||
| Services expense | ||||||||||||
| Postage expense | ||||||||||||
| Cost of services | ||||||||||||
| Gross profit | $ | $ | $ | |||||||||
| Depreciation and amortization | $ | $ | $ | |||||||||
| Capital expenditures | $ | $ | $ | |||||||||
| Identifiable assets1 | $ | $ | $ | |||||||||
Note to tables:
| (1) | Identifiable assets is calculated by summing the balances of accounts receivable, net; inventory; property and equipment, net; operating lease right-of-use lease assets; and intangibles, net. |
The following table reconciles segment profit reported above to the loss from operations reported in the consolidated statements of operations for the three months ended March 31, 2026 and 2025:
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Segment Profit | $ | $ | ||||||
| Stock-based compensation | ( | ) | ( | ) | ||||
| SG&A | ( | ) | ( | ) | ||||
| Depreciation and amortization | ( | ) | ( | ) | ||||
| Operating income (loss) | $ | $ | ( | ) | ||||
Note 11. Commitments and Contingencies
Legal Proceedings.
The Company may be involved in legal matters arising in the ordinary course of business from time to time. While we believe that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which we are or could become involved in litigation will not have a material adverse effect on our business, financial condition, or results of operations.
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
FORWARD-LOOKING STATEMENTS DISCLAIMER
This Quarterly Report on Form 10-Q (this "quarterly report" or this "report") contains forward-looking statements that involve risks and uncertainties. If used in this report, the words "will," "anticipate," "believe," "estimate," "intend," and other words or phrases of similar import are intended to identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described in the 2025 Annual Report and other reports we file with the Commission. Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made. We do not intend to update any of the forward-looking statements after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.
This discussion and analysis should be read in conjunction with the unaudited interim consolidated financial statements and the notes thereto included in this report, and the 2025 Annual Report, including the audited consolidated financial statements and the notes contained therein.
Overview
As a cloud-based, Fintech payment processor, we serve multiple industry verticals with technology that facilitates payment acceptance and funds disbursement in a single, full-stack ecosystem. We provide payment acceptance through multiple payment methods including: payment facilitation, prepaid card and electronic billing products and services to businesses, merchants and consumers. We seek to grow our business both organically through the continued development and enhancement of our products and services and through acquisitions of new products and services. We will continue to look for opportunities (both internally and externally) to enhance our offerings to meet customer demands as they arise.
Since 1998, through our merchant services business lines, which now consist of Automated Clearing House, or 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 combined our suite of payment options into an integrated platform for merchants and customers to utilize.
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 our 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, developed and introduced 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 allows us a superior opportunity to increase our cross-selling efforts through all of our payment methods. Throughout 2025, we enhanced our Consumer Choice product to accommodate additional methods of disbursement, such as issuing funds through PayPal and Venmo, alongside integration with the PIN4 network to allow cardless ATM withdrawals.
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 have been further expanded, allowing us to seamlessly grow as the market demands.
In our over 25 year history, we have created a loyal customer base that relies on us for our convenient, secure, innovative and adaptive services and technology, and we have built long-standing and valuable relationships with premier banking institutions such as Fifth Third Bank, Sunrise Bank, TransPecos Bank and others.
Payment Acceptance. We provide integrated electronic payment processing services to merchants and businesses, including credit, and debit card-based processing services and electronic funds transfer via the ACH network. The ACH network is a nationwide electronic funds transfer system that is regulated by the Federal Reserve and the National Automatic Clearing House Association, or NACHA, the electronic payments association, and provides for the clearing of electronic payments between participating financial institutions. Our ACH processing services enable merchants or businesses to both disburse and collect funds electronically using e-checks instead of traditional paper checks. An e-check is an electronic debit to a bank checking account that is initiated at the point-of-sale, on the Internet, over the telephone, or via a bill payment sent through the mail via a physical check. E-checks are processed using the ACH network. We are one of nine companies that hold the prestigious NACHA certification for Third-Party Senders and were the second company to receive the certification.
Our payment acceptance services are delivered in a variety of forms and situations. For example, our capabilities allow merchants to convert a paper check to an e-check or receive card authorization at the point-of-sale, allow our merchants’ respective customer service representatives to take e-check or card payments from their consumers by telephone, and enable their consumers to make e-check or card payments directly through the use of a website or by calling an interactive voice response telephone system.
Similarly, our PINless debit product allows merchants to debit and credit accounts in real-time.
In the first half of 2025, we began, and completed, development of a new EBPP product. 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, increasing the opportunities for cross-selling between our various business lines.
Card-Based Services. Our card-based processing services enable merchants to process both traditional card-present, tap-and-pay, or "swipe" transactions, as well as card-not-present transactions. A traditional card-present transaction occurs whenever a card holder physically presents a credit or debit card to a merchant at the point-of-sale. A card-not-present transaction occurs whenever the customer does not physically present a payment card at the point-of-sale and may occur over the Internet, mail, or telephone. A tap-and-pay transaction occurs whenever a consumer taps their phone on a physical terminal utilizing third party wallet services like Apple Pay®, Samsung Pay™ and Google Pay™.
Payment Facilitation. Following the completion of the Singular Payments acquisition in 2017, we launched our payment facilitation, or PayFac, platform called "PayFac-in-a-Box" in late 2018 targeting partnership opportunities with app and software developers in bill-centric verticals, such as legal, healthcare, property management, utilities and insurance. The PayFac-in-a-Box platform 'integration layer' offers a simple integration experience for technology companies who are looking to monetize payments within an existing base of downstream clients. The added value of offering our integration partners access to real-time merchant enrollment, credit card, debit card, ACH and prepaid card issuance capabilities through a single vendor partner relationship in face-to-face, mobile and virtual payment acceptance environments provides a true single channel commerce experience through an application programming interface, or API.
Prepaid and Incentive Card Services. Through our December 2014 acquisition of the assets of Akimbo Financial, Inc., we added a highly talented technical staff of industry subject matter experts and an innovative cardholder service platform including cardholder web and mobile applications and launched what is now our UsioCard business. As a result of this acquisition, through our subsidiary, FiCentive, Inc., we offer customizable prepaid cards which companies use for expense management, incentives, refunds, claims and disbursements, as well as unique forms of compensation such as per diem payments, government disbursements, and similar payments. This comprehensive money disbursement platform allows businesses to pay their contractors, employees, or other recipients by choosing among a prepaid debit Mastercard, real-time deposit to a checking account, traditional ACH, direct deposit or paper check. These cardholder web and mobile applications have been fully integrated into FiCentive’s prepaid card core processor, and now support all program types and brands offered by FiCentive and its clients.
As part of our Prepaid card-based processing services, we develop and manage a variety of Mastercard-branded prepaid card program types, including consumer reloadable, consumer gift, incentive, promotional, general and government disbursement and corporate expense cards. We also offer prepaid cards to consumers for use as a tool to stay on budget, manage allowances and share money with family and friends. Our UsioCard platform supports Apple Pay®, Samsung Pay™ and Google Pay™ with full mobile wallet provisioning.
In 2025 we also launched a new distribution strategy for our Prepaid card services, with a wearable device program. Our prepaid cards can now be successfully loaded onto items such as watches, wristbands, belt buckles, or nearly any wearable product through the use of embedded chips. We first demonstrated this new product in October 2025, and continue to refine the product, anticipating it will assist in enhancing our prepaid card program's marketability and diversity in the overall payment ecosystem.
Electronic and Paper 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 Information Management Solutions, LLC, or IMS. This product offering 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. Usio Output Solutions, Inc., or 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 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. Since the acquisition of substantially all of the assets of IMS, we have invested in new equipment to enhance the capacity and speed of the business unit, such as a new inserter and folder, on October 1, 2023, that was implemented over the course of 2024, and a new printer in September 2025 that will be installed and operational in the first half of 2026. Further, in December 2024, we partnered with an outsourced presorting company to further automate our print and mail systems. Despite challenges in growing revenues from Output Solutions in 2025, we have significantly reduced labor costs related to print and mail processing. We believe this reduction has better positioned the business line to pursue and successfully generate much larger opportunities than we previously were able to through the increase in capacity and automation. Results have already been realized, as the quantity of mail we printed and delivered in the first quarter of 2026 was higher than in any other fiscal quarter in the history of the Company, while simultaneously requiring fewer working hours to achieve, compared to each fiscal quarter of 2025.
"Usio One". Throughout 2025, we adopted and began implementing our "Usio One" strategy, designed to unify our brand, sales approach, and payments offerings. Through this strategy, we are developing enhanced client onboarding features, superior customer management, improved reporting and fraud monitoring, alongside a consolidated sales and marketing team to better cross-sell our various payment methods and ancillary services. We believe this strategy will help better position our merchant services and Output Solutions business segments to customers and the broader payments related market as a more cohesive service offering. In turn, we anticipate being able to better leverage our resources, reduce friction in new customer acquisition, and drive more meaningful cross-selling opportunities, which we anticipate will help increase our products' stickiness and customer retention. Success from this strategy has already been realized by our sales and client management staff through the generation of new integrations between our existing customers and our ancillary business lines. The consolidation of our various technologies into a more seamless product offering continues to progress, and we anticipate that it will ultimately result in a client and customer onboarding process that enables all of our customers to automatically be enrolled in, and have access to, each of our payment acceptance and issuing products. In turn, through the continued development of our back end technology infrastructure, we anticipate the ability to eliminate the need for distinct contracts, dashboards, funding accounts, and support teams per product.
PostCredit Acquisition. In November of 2025, we acquired substantially all of the assets of PostCredit, allowing an entry point into the expense management space. PostCredit had been developing technology that would cater to companies looking for fund management and expense tracking that integrated with various Enterprise Resource Planning, or ERP, systems. The Company anticipates continuing to develop this technology, while simultaneously integrating it into our existing products, opening a new sales channel to the broader market already utilizing ERPs such as Microsoft Business Dynamics and Business Central. We intend to combine this technology seamlessly with our EBPP product launched in 2025, allowing clients to send invoices, payments, manage funds, and reconcile with their various ERP platforms utilizing our payment channels. In combination with the other efforts of our Usio One strategy, we believe we will be able to develop a central Usio Hub that further encourages and incentivizes the utilization of our products, cross-sells our corporate expense solution, and assists in retaining the deposits we hold for our customers to help maintain or grow our interest revenues. We believe we will be able to implement phased portions of this strategy, and other PostCredit related projects, by the end of 2026. In the first quarter of 2026, we were able to demonstrate our early stage development to both existing clients and prospective customers as an upcoming feature, and believe we have been able to generate significant interest in PostCredit as both a standalone product and as a value-added service to our existing suite of technology.
Summary of Results
We believe that our success will continue to depend in large part on our ability to (a) scale recurring revenues and deepen partner relationships, (b) expand our product offerings, (c) pursue disciplined, accretive opportunities, (d) enhance shareholder value via operational execution and capital allocation, and (e) assimilate current and future acquisitions of companies and customer portfolios. We will continue to invest in our sales force and technology platforms to drive revenue growth. In particular, we are focused on growing our ACH merchants, adding new software integrators, and growing our electronic bill presentment, document composition, document decomposition, printing and mailing services business while providing incremental services to existing merchants. In addition to our near-term growth opportunities, we are focused on leveraging and optimizing the infrastructure of our business to enable expansion of our payment processing and mail and printing capabilities without significantly increasing our operating costs. We continue to seek ways to grow revenue, and net new client implementations and onboards occur regularly due to our ability to address the needs of our market.
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 first quarter of 2026, our revenues increased 16% to $25.5 million, as compared to $22.0 million in the same quarter of 2025, due primarily to strong growth in our ACH and complementary services, credit card, and Output Solutions lines of business, though offset slightly by declines in our prepaid card services line of business and interest revenues. The strong growth in each of our ACH and complementary services, and credit card lines of business was due to organic growth from existing customers and net new client implementations and onboarding. Growth in our Output Solutions line of business was driven by a combination of organic growth and net new customer acquisitions, but also from the presence of some cyclical business related to voter registration cards and tax statements, that are almost entirely printed and mailed in the first quarter each year in the case of tax statements, or every other year in the case of voter registration cards. The decrease in our prepaid card services revenues was due to declines from one of our key prepaid card programs, as its business was impacted by the loss of a key customer in the second quarter of 2025 that made meaningful contributions to Usio revenues in the first quarter of 2025. Lower interest revenues were driven by interest rates and interest bearing deposits declining versus the prior year.
Expand our product offerings. We maintain a committed focus on the ever changing technological landscape within the payments ecosystem. We believe that regularly attending payments focused conferences, webinars, and training sessions, alongside our consistent communication with customers and clients, enables us to be informed of the most current, and future, applications and evolutions of financial technologies. We believe that this allows us to implement new feature functionality to existing products and introduce new payment methods. This has led to our evolution from being an EBPP provider at the Company's founding, to the diverse payment provider we are today, with offerings such as ACH processing, PINless debit, RTP, prepaid card issuance, and credit card processing. In the digital marketplace, it is especially crucial to match the need for diversified payment options in an increasingly ecommerce driven world.
Pursue disciplined, accretive opportunities. Acquisitions have been a key element in our growth-focused strategy, both by adding net new customers and by enhancing our suite of payment technologies. This is evident through our acquisitions of Akimbo Financial, Inc., Singular Payments, and IMS, which allowed us to introduce new offerings such as prepaid card issuance, PayFac, and electronic bill presentment, all of which represent significant portions of our current revenues. The Company continually evaluates the markets for opportunities to acquire or partner with accretive opportunities that align with our core competencies. In 2025, we acquired the assets of PostCredit, which we believe once again represents an opportunity to enhance our existing products and to introduce us as a new competitor in the expense management market vertical. We cannot assure you that we will be able to complete any acquisitions in the future.
Enhancing shareholder value via operational execution and capital allocation. 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 $4.4 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.
Assimilating Current and Future Acquisitions. The assimilation of our previous acquisitions has been critical in both the retention of purchased assets and their growth, through cross-selling and implementation into our broader infrastructure, which allows for increased diversity of offerings and support. Successfully assimilating acquisitions remains a crucial priority for the success of the Company. The recent acquisition of PostCredit represents an especially critical component of this strategy, and may require significant time investment and capital expenditure to fully implement. We cannot assure you that we will be able to successfully assimilate new and future acquisitions.
In addition to the factors discussed above, we believe that processing volume and transaction counts are vital measures that indicate our addition and implementation of net new customers, and growth from existing customers, which we believe correlate to both current and future revenues. The change in credit card processing volume, ACH transaction counts, and prepaid card purchase volume are the most direct metrics that drive revenues in their respective business lines, while prepaid card load volumes specifically, are an indicator of future revenue change within the prepaid card business line. While there are many components to the revenues of our business units that could impact revenue growth or decline, these processing metrics offer an indication to the current health of our overall company and success in our strategies to grow the business.
During the first quarter of 2026, the number of credit card transactions processed by us increased by 22% versus the first quarter of 2025. The volume of credit card dollars processed during the first quarter of 2026 increased by 16% compared to the same period in 2025. 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.
ACH (eCheck) transaction counts during the first quarter of 2026 increased by 34% compared to the first quarter of 2025. Returned check transactions processed during the first quarter of 2026 increased by 54% compared to the first quarter of 2025. Electronic check dollars processed during the first quarter of 2026 increased by 31% compared to the first quarter of 2025. 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, and increased adoption of newer payment products, such as RTP.
Prepaid card load volumes during the first quarter of 2026 decreased by 19% compared to the first quarter of 2025. Prepaid card transaction counts processed during the first quarter of 2026 decreased by 16% compared to the first quarter of 2025. 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. Prepaid card purchase volume during the first quarter of 2026 increased by 7% compared to the first quarter of 2025. Despite the growth in prepaid card purchase volume driving increase revenues related to spend, it was not enough to overcome the more meaningful client and cardholder fee revenues derived from the aforementioned declines in one of our key clients. 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, and we believe have the potential to drive meaningful revenue growth in the third and fourth quarters of 2026.
Output Solutions total mail pieces processed and delivered were 8.9 million for the first quarter of 2026, an increase of 31% compared to 6.8 million in the first quarter of 2025, while electronic only documents delivered were 29 million, up 41% in the first quarter of 2026 compared to 20.5 million in the first quarter of 2025. This strong processing activity was driven by increased organic growth, new customer acquisitions, and the presence of increased traffic related to tax forms and voter registration cards being printed and mailed in the first quarter of 2026.
Total dollar volumes processed across all business lines in the first quarter of 2026 were $2.50 billion compared to $1.96 billion processed in the first quarter of 2025, up 28% 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.
For more information, see "Results of Operations - Revenues."
Material Trends and Uncertainties
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, when repurchases of stock on an established securities market exceed $1 million in a tax year. On May 13, 2022, and again on March 24, 2025, the Board authorized a renewal of the buy-back program, with a limit up to $4 million of the Company's common stock with a three year duration. As of December 31, 2025, the Company had repurchased approximately $1.1 million of stock as part of the buyback program for which the Company may be required to pay approximately $11,000 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 2026 and future years. During the three months ended March 31, 2026, the Company repurchased $233,459 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.
The broader implications of the macroeconomic environment, including uncertainty around recent international conflicts such as the Russia and Ukraine conflict and the military actions in Iran by the U.S. and Israel, supply chain shortages, a recession globally or in markets in which we operate, higher inflation rates, higher interest rates, and other related global economic conditions, remain unknown. In April 2025, developments relating to tariffs intensified concerns over the global macroeconomic environment. Volatility across financial markets rose and the prospect of a U.S. recession increased further. Uncertainty around the path forward and concerns over the potentially escalating effects of a trade war have created risks for the U.S. and global economies. A deterioration in macroeconomic conditions as well as ongoing uncertainty regarding tariffs or trade disputes could continue to increase the risk of lower consumer spending, merchant and consumer bankruptcy, insolvency, business failure, higher credit losses, or other business interruption, which may adversely impact our business. If these conditions continue or worsen, they could adversely impact our future financial and operating results.
As the Federal Reserve has 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 $0.4 million in interest earnings in the three months ended March 31, 2026. Of this interest, $0.3 million was recognized as revenue in the respective business lines for which the cash balances are held, and $91,491 as interest income. In 2024, the Federal Reserve lowered the federal funds rate three times by a cumulative 1%, and by 0.25% three times in 2025 during September, October, and December 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.
Changes in these factors are difficult to predict, and a change in one factor could affect other factors, which could result in adverse effects to our business, results of operations, financial condition, and cash flows.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to the reported amounts of revenues and expenses, credit losses, investments, intangible assets, income taxes, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates under different assumptions or conditions. We consider these accounting policies to be critical because the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for such highly uncertain matters or due to the susceptibility of such matters to change or because the impact of the estimates and assumptions on financial condition or operating performance is material.
For a summary of Critical Accounting Policies and Estimates, please refer to the Notes to Interim Consolidated Financial Statements, Note 1, Basis of Presentation.
Reserve for Processing Losses
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 March 31, 2026 and December 31, 2025, the Company’s reserve for processing losses was $802,937 and $784,937, 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.
Accounts Receivable/Allowance for Estimated Credit Losses
Accounts receivable are reported as outstanding principal net of an allowance for estimated credit losses, which was $404,132 at March 31, 2026 and December 31, 2025.
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 does not charge interest on accounts receivable.
Accounting for Income Taxes
Our annual tax rate is based on our income, statutory tax rates, and tax planning opportunities available to us. Tax laws are complex and subject to different interpretations by the taxpayer and respective government taxing authority. Significant judgement is required in determining our tax expense and in evaluating our tax positions, including evaluating uncertainties. We review our tax positions yearly and adjust the balances as new information becomes available.
Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss and tax credit carryforwards. We evaluate the recoverability of these future tax deductions and credits by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings, and available tax planning strategies. These rely heavily on estimates that are based on a number of factors, including historical data, and business forecasts. To the extent deferred tax assets are not expected to be realized, we record a valuation allowance.
We recognize and measure uncertain tax positions in accordance with GAAP, pursuant to which we only recognize the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities.
As with all businesses, the Company’s tax returns are subject to periodic examination. The Company’s federal returns for the past four years remain open to examination. The Company is subject to the Texas franchise tax. Management is not aware of any tax positions that would have a significant impact on its financial position.
Revenue Recognition
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.
Key Business Metrics - Non-GAAP Financial Measures
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.
| • | 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 based compensation and certain non-recurring items, such as costs related to acquisitions. |
| • | The Company defines Adjusted EBITDA margins as Adjusted EBITDA, as defined above, divided by total revenues. |
Management believes that EBITDA, Adjusted EBITDA, and Adjusted EBITDA margins 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.
We reported Adjusted EBITDA of $0.8 million for the quarter ended March 31, 2026, as compared to Adjusted EBITDA of $0.7 million for the same period in the prior year. The increase in Adjusted EBITDA in the 2026 quarter was attributable to increased gross profit in the period. Adjusted EBITDA margins were 3.1% in the quarter ended March 31, 2026, as compared to Adjusted EBITDA margins of 3.0% for the same period in the prior year. The increase in Adjusted EBITDA margins was due primarily to increased gross profit versus the prior year period, alongside SG&A expenses representing a smaller percentage portion of revenues driving improved bottom line results.
The following tables set forth reconciliations of Operating (Loss) to EBITDA; EBITDA to Adjusted EBITDA; and Revenues to Adjusted EBITDA margins for the three months ended March 31, 2026 and 2025.
| Three Months Ended March 31, |
||||||||
| 2026 |
2025 |
|||||||
| Reconciliation from Operating income (loss) to Adjusted EBITDA: |
||||||||
| Operating income (loss) |
$ | 225,712 | $ | (239,584 | ) | |||
| Depreciation and amortization |
225,745 | 495,770 | ||||||
| EBITDA |
451,457 | 256,186 | ||||||
| Non-cash stock-based compensation expense, net |
329,284 | 410,062 | ||||||
| Adjusted EBITDA |
$ | 780,741 | $ | 666,248 | ||||
| Calculation of Adjusted EBITDA margins: |
||||||||
| Revenues |
$ | 25,465,774 | $ | 22,009,050 | ||||
| Adjusted EBITDA |
$ | 780,741 | $ | 666,248 | ||||
| Adjusted EBITDA margins |
3.1 | % | 3.0 | % | ||||
Use of Non-GAAP Financial Measures
EBITDA, Adjusted EBITDA, and Adjusted EBITDA margins should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. They are not measurements of our financial performance under GAAP and should not be considered as alternatives to revenue, net income (loss), or cash provided by (used in) operating activities, as applicable, or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other businesses. EBITDA, Adjusted EBITDA, and Adjusted EBITDA margins have limitations as analytical tools and you should not consider these non-GAAP measures in isolation or as a substitute for analysis of our operating results as reported under GAAP.
Results of Operations
Revenues
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.
| Three Months Ended March 31, |
||||||||||||||||
| 2026 |
2025 |
$ Change |
% Change |
|||||||||||||
| ACH and complementary services |
$ | 6,293,066 | $ | 5,044,517 | $ | 1,248,549 | 25 | % | ||||||||
| Credit card |
9,710,324 | 7,878,694 | 1,831,630 | 23 | % | |||||||||||
| Prepaid card services |
2,373,201 | 2,907,451 | (534,250 | ) | (18 | )% | ||||||||||
| Output Solutions |
6,805,314 | 5,732,867 | 1,072,447 | 19 | % | |||||||||||
| Interest - ACH and complementary services |
122,201 | 224,129 | (101,928 | ) | (45 | )% | ||||||||||
| Interest - Prepaid card services |
118,029 | 182,661 | (64,632 | ) | (35 | )% | ||||||||||
| Interest - Output Solutions |
43,639 | 38,731 | 4,908 | 13 | % | |||||||||||
| Total Revenue |
$ | 25,465,774 | $ | 22,009,050 | $ | 3,456,724 | 16 | % | ||||||||
Consolidated revenues for the quarter ended March 31, 2026 were up 16%, at $25.5 million, as compared to $22.0 million for the quarter ended March 31, 2025, due to the 25% growth in ACH and complementary services revenue, 23% growth in credit card revenue, and 19% growth in Output Solutions revenue. This growth completely offset an 18% revenue decline in our prepaid card services business line, alongside a net 36% decline in total interest revenues from all three interest revenue sources.
ACH and complementary services revenue growth of 25% was primarily attributable to an increase in ACH check dollar volume of 31%, an increase in transactions of 34%, and an increase in returned check transactions of 54%, in each case, for the quarter ended March 31, 2026 compared to the same period in 2025. 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 PINless debit, RCC, and RTP.
The 23% increase in our credit card business unit was partially the result of several key implementations of new independent software vendors and enterprise customers throughout 2025, who began processing at the end of the fourth quarter of 2025, and continued to increase their volumes in the first quarter of 2026. This new business was in addition to the organic growth from our existing customer base, who have continued to increase their processing volumes over time.
Output Solutions revenue was up 19% for the quarter ended March 31, 2026 compared to the same period of 2025, due to strong organic growth, and net new customers. Compounding this was the presence of increased business related to the printing and mailing of tax statements and voter registration cards that occurred, a recurring source of revenue, but one that occurs only once each year in the case of tax statements, and once every other year with respect to voter registration cards.
The 18% 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. We have already signed several contracts throughout the second half of 2025, and into 2026, that we believe will have the ability drive meaningful revenue growth in the second half of 2026, as we fully implement and onboard their business.
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."
Cost of Services
Cost of services includes the cost of personnel dedicated to the creation and maintenance of connections to third-party payment processors and the fees paid to such third-party providers for electronic payment processing services. Through our contractual relationships with our payment processors and sponsoring banks, we process ACH and debit, credit and prepaid card transactions on behalf of our customers and their consumers. We pay volume-based fees for debit, credit, ACH and prepaid transactions initiated through these processors or sponsoring banks, and pay fees for other transactions such as returns, notices of change to bank accounts and file transmission. Additional costs include commissions paid to referral agents and partners. Cost of service fees also include fees related to our Output Solutions business line related to items such as paper, ink, and postage for the printing and mailing of paper statements.
Cost of services increased by $3.1 million, or 18%, to $20.3 million for the quarter ended March 31, 2026, as compared to $17.2 million for the same period in the prior year, due to increased revenues of 16%. Revenue contribution from lower margin business lines such as PINless debit and RCC within ACH and complementary services, and credit card. Declines in our higher margin prepaid and interest revenues further compounded this, resulting in cost of services growth slightly outpacing revenue growth.
Gross Profit
Gross profit is the net profit existing after the cost of services.
Gross profit increased by 7% to $5.1 million for the quarter ended March 31, 2026, as compared to $4.8 million for the same period in the prior year. Gross profit percentage of revenue was 20.2% for the quarter ended March 31, 2026, down versus 21.9% in the prior year period. The increase in gross profit in the quarter ended March 31, 2026, as compared to the same period during the prior year, was primarily attributable to the 16% increase in revenue. However, as a result of revenue mix favoring lower margin business lines such as PINless debit and RCC within ACH and complementary services, and credit card, alongside declines in our higher margin prepaid business and in interest revenues, gross profit percentages declined compared to the prior year period.
Stock-based Compensation
Stock-based compensation expenses were $0.3 million for the quarter ended March 31, 2026 as compared to $0.4 million for the quarter ended March 31, 2025, with the decrease from the prior year quarter due to completed amortization of previously issued stock based awards.
Selling, General and Administrative Expenses
SG&A expenses were $4.4 million for the quarter ended March 31, 2026 as compared to $4.1 million in the prior year quarter. The increase in SG&A for the quarter ended March 31, 2026 was driven primarily by increases in salary alongside increases in network infrastructure, travel expenditures, professional fees, and other various general expenses.
Depreciation and Amortization
Depreciation and amortization expense consists of the reduction in value of our tangible and intangible assets over their useful life. These assets include property, plant, and equipment, along with intangible assets acquired through acquisitions, or developed as internal use software.
Depreciation and amortization expense totaled $0.2 million and $0.5 million in the quarter ended March 31, 2026 and 2025, respectively. The decrease in depreciation and amortization expense for the quarter ended March 31, 2026 compared to the prior year quarter was due to the completed amortization of intangible assets, specifically related to the completed amortization of our acquisition of Output Solutions, alongside capitalized labor for our internal use software, decreasing overall depreciation and amortization expense versus the same period a year ago.
Other Income, Net
Other income, net was $0.1 million for the quarter ended March 31, 2026, flat compared to $0.1 million for the quarter ended March 31, 2025.
Income Taxes
State income tax expense in the three months ended March 31, 2026 and 2025 was $104,790 and $62,554, respectively, up slightly versus the prior year period as a result of increased taxable income.
Net Income (Loss)
We reported net income of $0.1 million for the quarter ended March 31, 2026, as compared to a net loss of $0.2 million for the same period in the prior year. The increase from a net loss to net income was driven primarily by the increased revenues, and corresponding gross profits alongside lower stock-based compensation and depreciation and amortization expense in the quarter ended March 31, 2026 as compared to the same period in the prior year.
We may incur future operating losses. To maintain, grow and achieve profitability, we must, among other things, continue to incrementally grow and maintain our customer base, sell our ACH, credit card, prepaid product and Output Solutions offerings to existing and new customers, implement successful marketing strategies, maintain and upgrade our technology and transaction-processing systems, provide superior customer service, respond to competitive developments, attract, retain and motivate personnel, and respond to unforeseen industry developments among other factors.
Liquidity and Capital Resources
Our primary sources of liquidity are available cash and cash equivalents and cash flows provided by operations. As of March 31, 2026, we had cash and cash equivalents of $7.7 million. For the three months ended March 31, 2026, cash provided by operations was $0.9 million. We expect available cash and cash equivalents and internally generated funds to be sufficient to support working capital needs, capital expenditures (including acquisitions), and our debt service obligations. We believe we have sufficient liquidity to operate for at least the next 12 months from the date of filing this report. Cash from operating activities is dependent on our net income (loss), less depreciation, amortization, credit losses, deferred federal income tax, non-cash stock-based compensation, the amortization of intangible assets, and net of the changes in our operating assets and liabilities. These assets and liabilities include our accounts receivable, prepaid expenses, operating lease right-of-use assets, inventory, other assets, accounts payable and accrued expenses, operating lease liabilities, merchant reserves, customer deposits, and deferred revenues.
We reported net income of $0.1 million for the three months ended March 31, 2026 compared to a net loss of $0.2 million for the three months ended March 31, 2025. We had an accumulated deficit of $70.4 million and $70.5 million at March 31, 2026 and December 31, 2025, respectively. Additionally, we had working capital of $9.0 million and $9.4 million at March 31, 2026 and December 31, 2025, respectively.
We have in the past, and may in the future, utilize equipment loans in order to finance the cost of particular pieces of equipment. On October 1, 2023, the Company entered into a debt arrangement to finance $811,819 for the purchase of an Output Solutions folder and inserter. The loan is for a period of 66 months with a maturity date of April 5, 2029 and annual interest of 6.75%. Monthly principal and interest payments are required in the amount of $16,017, with monthly interest only payments in the amount of $4,744 required for the first six months of the loan term. Total interest and principal payments on this folder and inserter equipment loan were $47,953 for each of the three months ended March 31, 2026 and March 31, 2025.
On September 19, 2025, the Company entered into a debt arrangement to finance $1,017,954 for the purchase of an Output Solutions printer. The loan is for a period of 66 months with a maturity date of March 19, 2031 and annual interest of 6.75%. Monthly principal and interest payments are required in the amount of $20,088, with monthly interest only payments in the amount of $5,758 required for the first six months of the loan term beginning in October 2025. As of March 31, 2026, $791,742 in proceeds have been drawn from the loan and presented on the Company's balance sheet with the remaining commitment of $226,212 still available. Total payments on the printer loan in the three months ended March 31, 2026 were $13,361.
As of March 31, 2026, the Company maintains an undrawn line of credit and an outstanding letter of credit, both of which were established in connection with a bond required for the Company's appeal of the court’s decision in a prior lawsuit that has since been settled in the Company's favor.
The Company has an unsecured revolving line of credit with a maximum borrowing capacity of $475,000. The facility was established on May 29, 2024, and matures on June 5, 2026. As of March 31, 2026, no amounts had been drawn under this line of credit since its origination. This line of credit was secured to support the bond requirement in a lawsuit appeal that has since been settled but remains fully available.
The Company has an irrevocable letter of credit in the amount of $474,229, issued on June 3, 2024, with a maturity date of June 3, 2026. This letter of credit was obtained as part of the bonding requirement for a lawsuit appeal that has since been settled and has not been drawn upon since its issuance.
These credit facilities were arranged to comply with legal requirements related to the Company’s appeal and provide additional liquidity resources if needed. Management continues to monitor its financial position and believes that existing cash balances, along with these credit facilities, are sufficient to meet operational needs and legal obligations.
As a result of the lawsuit settlement, the Company will not renew the line of credit or letter of credit upon their maturity. There are no ongoing costs associated with the maintenance of either of these credit facilities.
From time to time, we have sold shares of our common stock in order to provide us liquidity. For example, on November 19, 2021, Voyager Digital purchased 142,857 unregistered shares of common stock at an offering price of $7.00 per share in a private offering. The gross proceeds to us from the private offering were $1,000,000. We have also sold securities in public offerings from time to time. For example, in September 2020, we sold 4,705,883 shares of our common stock and received net proceeds of approximately $8 million. We cannot assure you that in the future we will be able to sell shares of our equity securities on terms acceptable to us or at all.
Cash Flows
Net cash provided by operating activities for the three months ended March 31, 2026 was $0.9 million, as compared to net cash provided by operating activities of $1.4 million for the three months ended March 31, 2025. The decrease in net cash provided by operating activities was due primarily to increases in accounts receivable, alongside higher levels of prepaid expenses in the three months ended March 31, 2026. We continue to invest resources in the infrastructure of our business such as the retention and acquisition of employees, sales-related travel, and marketing efforts to achieve scale across all business lines.
Net cash used in investing activities was $0.6 million for the three months ended March 31, 2026 as compared to net cash used in investing activities of $0.3 million for the three months ended March 31, 2025. The primary driver of our investing activities was capital expenditures associated with capitalized software development costs and other capital investments associated with growing our business lines and associated employee counts. The increase in net cash used in investing activities was primarily attributable to the increased amount of fixed asset purchases and capitalization of internal use software relative to the same period a year ago.
Net cash used in financing activities for the three months ended March 31, 2026 was $17.1 million and net cash provided by financing activities for the three months ended March 31, 2025 was $3.6 million. The decrease in cash provided by financing activities was primarily attributable to the decrease in assets held for customers, which include settlement processing and prepaid card load assets, relative to the same period a year ago.
Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.
Item 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Our management evaluated, with the participation of our Chief Executive and Chief Financial Officers, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report on Form 10-Q. Based on that evaluation, our Chief Executive and Chief Financial Officers concluded that our disclosure controls and procedures as of March 31, 2026 were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in Commission rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive and Chief Financial Officers, as appropriate, to allow timely decisions regarding required disclosure.
Our disclosure controls and procedures are designed to provide reasonable assurance that such information is accumulated and communicated to our management. Our evaluation of disclosure controls and procedures included an evaluation of certain components of our internal control over financial reporting. Management’s assessment of the effectiveness of our internal control over financial reporting is expressed at the level of reasonable assurance. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met.
Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the quarter ended March 31, 2026 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
OTHER PROCEEDINGS
The Company may be involved in legal matters arising in the ordinary course of business from time to time. While we believe that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which we are or could become involved in litigation will not have a material adverse effect on our business, financial condition, or results of operations.
There have been no material changes to the Risk Factors disclosed in Item 1A. Risk Factors of the 2025 Annual Report.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Recent Sales of Unregistered Securities
We did not sell any securities that were not registered under the Securities Act of 1933, as amended, during the quarter ended March 31, 2026.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
On November 2, 2016, we announced that our Board of Directors authorized the buyback program, pursuant to which the Company may repurchase up to $1 million in shares of our common stock from time to time in the open market, in block transactions, or in privately negotiated transactions. On May 13, 2022, and again on March 24, 2025, our Board of Directors authorized renewals of the buyback program, with a limit equal to $4 million of the Company's common stock and a three year duration. The buyback program, as renewed most recently, terminates on the earliest of May 15, 2028, the date the funds are exhausted, or the date our Board of Directors, at its sole discretion, terminates or suspends the buyback program. The buyback program is used for the repurchase of stock from employees and directors, and for open-market purchases through a broker. During the three months ended March 31, 2026, we made the following stock repurchases:
| Period |
(a) Total number of shares (or units) purchased |
(b) Average price paid per share (or unit) |
(c) Total number of shares (or units) purchased as part of publicly announced plans or programs |
(d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs |
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| January 1 - January 31, 2026 |
— | $ | — | — | $ | 3,806,943 | ||||||||||
| February 1 - February 28, 2026 |
46,370 | $ | 1.36 | 46,370 | 3,743,880 | |||||||||||
| March 1 - March 31, 2026 |
136,056 | $ | 1.25 | 136,056 | 3,573,483 | |||||||||||
| Total |
182,426 | 182,426 | $ | 3,573,483 | ||||||||||||
Item 3. Defaults Upon Senior Securities.
None.
Item 4. MINE SAFETY DISCLOSURES.
Not applicable.
During the three months ended March 31, 2026, director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" (in each case, as defined in Item 408 of Regulation S-K).
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Description |
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Amended and Restated By-laws (included as exhibit 3.1 to the Form 8-K filed December 1, 2023, and incorporated herein by reference). |
| 4.1 | Description of Securities (included as exhibit 4.1 to the Form 10-K for the year ended December 31, 2025 filed on March 18, 2026, and incorporated herein by reference). | |
| 10.1* |
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| 10.2* |
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| 10.3* |
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| 10.5* |
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Copies of above exhibits not contained herein are available to any stockholder, upon written request to: Chief Financial Officer, Usio, Inc., 3611 Paesanos Parkway, Suite 300, San Antonio, TX 78231.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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USIO, INC. |
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| Date: May 13, 2026 |
By: |
/s/ Louis A. Hoch |
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Louis A. Hoch |
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Chairman of the Board, President, Chief Executive Officer, and Chief Operating Officer |
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(Principal Executive Officer) |
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| Date: May 13, 2026 | By: |
/s/ Michael White |
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Michael White |
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Chief Accounting Officer |
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(Principal Accounting and Financial Officer) |
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