Detailed narrative
Overall Performance and Strategic Execution
Usio achieved strong Q2 FY26 results, meeting or exceeding analyst expectations for revenue, adjusted EBITDA, and EPS, while delivering its second consecutive quarter of positive GAAP net income. The company's strategy of leveraging innovative technology and diversified business operations is driving continued growth, with revenue up 19% YoY and total payment dollars and transactions processed both increasing by 27%.
This performance has led to a strong first half of the year, positioning the company for continued momentum.
PayFac Business Momentum
The PayFac business continues to be a primary driver of growth, with Card revenue up 28% YoY and PayFac-specific revenue increasing 43% in the quarter. PayFac now represents over three-quarters of Card's revenue. The "flywheel" effect is evident, with merchant count increasing by 34% in the first six months of the year, driven by new ISV additions and the growth of existing merchants on the platform.
This robust model is attracting new accounts, including a large bodega-oriented healthcare account and education-oriented accounts.
ACH and Real-Time Payments (RTP) Growth
ACH revenues increased 21%, with transactions up 34% and dollar volume up 28%. This momentum continued into Q3, with July setting a new monthly ACH transaction record. The company is seeing a shift from PINless debit to RTP, which, despite lower revenue per transaction, generates higher margins and benefits overall profitability.
Usio is now processing RTP transactions for 12 accounts, up from zero last year, indicating strong capture of this emerging payment channel.
Card Issuing Opportunities
Despite prior revenue headwinds, Card Issuing delivered an improved quarter through disciplined expense management and strategic initiatives. Purchase volume rebounded 11%, and the business signed 16 new clients, with over 20 clients in implementation or scaling volume. Significant opportunities include school voucher programs, with 5-6 states expected to disburse approximately $1.5 billion, and university loan payment refunds through a fintech partner, potentially transitioning 30 universities to Usio over time⏳.
Output Solutions Expansion
Output Solutions had an outstanding year, with revenues increasing 22% in Q2, accelerating from 19% in Q1. Pieces processed and mailed increased 43%, and electronic documents processed were up 49%. The business set new monthly revenue records throughout H1. A new high-speed printer, 4x faster and with 4x the resolution, has been brought online, significantly upgrading production capabilities, improving cost-effectiveness, and expanding service offerings for both transactional and high-quality print work.
Usio Ion (PostCredit) Development
Usio Ion, formerly PostCredit, is a key new product under development, expected to be a significant catalyst for both top-line growth and margin expansion. The platform, which was acquired and fast-tracked development by 18-24 months, is designed to sit across all Usio divisions, managing float, increasing risk visibility, and enabling quicker fund settlements.
Management estimates over $200 million could potentially be held in the Ion platform daily, generating substantial float with 100% margin.
Margin Focus and Cost Structure
The company maintains an intense focus on margins and profitability, supported by tailwinds such as a more profitable transaction mix (e.g., RTP), lower production costs at Output Solutions due to new equipment, and the continued rollout of Ion. Disciplined cost control is evident, with SG&A expenses marginally down YoY despite a 19% revenue increase.
Increased processing volumes have also enabled improved pricing from sponsoring banks starting in Q3, further contributing to operating leverage.