Categories Earnings Call Transcripts, Technology

Usio Inc. (USIO) Q3 2020 Earnings Call Transcript

USIO Earnings Call - Final Transcript

Usio Inc.  (NASDAQ: USIO) Q3 2020 earnings call dated Nov. 13, 2020

Corporate Participants:

Joe Hassett — Investor Relations

Louis Hoch — President, Chief Executive Officer and Chief Operating Officer

Houston Frost — Senior Vice President, Corporate Development and Prepaid Services

Tom Jewell — Senior Vice President, Chief Financial Officer

Greg Carter — Senior Vice President, Payment Facilitation

Analysts:

Gary Prestopino — Barrington Research — Analyst

Jon Hickman — Ladenburg — Analyst

Brian Kinstlinger — Alliance Global Partners — Analyst

Michael Diana — Maxim Group — Analyst

Presentation:

Operator

Good morning, and welcome to Usio Earnings Conference Call for the Third Quarter Ended September 30, 2020. [Operator Instructions] Participants of this call are advised that the audio of the conference is being broadcast live over the Internet and is also being recorded for playback purposes. A replay will be available shortly after the end of the call through November 27, 2020.

Now, I’d like to turn the conference over to Mr. Joe Hassett of Investor Relations. Please go ahead.

Joe Hassett — Investor Relations

Thanks, Nick, and thank you, everyone, for participating today. Welcome to Usio’s third quarter 2020 financial results conference call. The earnings release, which Usio issued yesterday after market closed, is available in the Company’s Investor Relations website at usio.com/investor under News.

On the call today are Louis Hoch, President and CEO; Greg Carter, Senior Vice President of Payment Facilitation; Tom Jewell, Senior Vice President and Chief Financial Officer; and Houston Frost, Senior Vice President of Prepaid Services. Management will provide prepared remarks, and then we’ll open the call to your questions.

Before we begin, please remember that comments on today’s call include forward-looking statements. Forward-looking statements can be identified by the use of such words as estimate, anticipate, expect, believe, intend, may, will, should, seek, approximate or plan or the negative of these words and other similar words and phrases. Forward-looking statements by their nature involve estimates, projections, goals, forecasts and assumptions and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements, including risks related to the COVID-19 pandemic and its effect on the economy, the realization of the opportunities from the Singular acquisition, management of the Company’s growth, the loss of key resellers, the relationships with the automated clearinghouse network, bank sponsors, third-party card processing providers and merchants, the volatility of stock price, the loss of key personnel, growing competition in the electric commerce market, the security of the Company’s software, hardware and information, compliance with complex federal, state and local laws and regulations and other risks detailed in the Company’s filings with the SEC.

These forward-looking statements speak only as of the date of this conference call and should not be relied upon as predictions of future events. Usio expressly disclaims any obligations or undertaking to update or revise any forward-looking statements made today to reflect any change in Usio’s expectations with regard thereto or any other changes in the events, conditions or circumstances on which any such statement is based, except as required by law. Please refer to the company’s SEC filings on its Investor Relations website for additional information.

With that, I would now like to turn the call over to Louis. Louis?

Louis Hoch — President, Chief Executive Officer and Chief Operating Officer

Thank you, Joe, and welcome, everyone. I’m pleased to report all-time record quarterly revenues for the third quarter of 2020. With these results, we resume the growth trajectory for the Company before it was temporarily impacted by the coronavirus in the second quarter. The results also clearly demonstrate the strength of our diverse payments channel strategy, offering ACH, Prepaid, Card Processing services to the growing electronic payments market. Both Card and Prepaid business lines experienced all-time record volumes and associated revenues. After defining the economic downturn and growing nicely in the second quarter, these segments continued their momentum with well above industry growth rates in the third quarter, once again, illustrating the success we are achieving, penetrating these markets with innovative technology that makes payments simple and secured.

We also saw a sequential recovery in our ACH business, despite the ongoing headwinds of a weak consumer lending market. And while we continue to invest in our growth initiatives like staffing up to handle the increasing call center volume associated with the growth of Prepaid, we are doing so while keeping overall overhead expenses in check. SG&A this quarter was essentially unchanged from a year ago and up only marginally on a sequential basis.

The net result is that the third quarter profitability, both adjusted EBITDA and net loss, improved from both the year-ago quarter as well as the second quarter of this year. Fiscal 2020 profitability continues to run ahead of last year, as we work not only to grow the business, but to leverage that growth to the bottom line.

In the first quarter, we began providing segment reporting in an effort to improve transparency in our revenue disclosure. So let me offer some high-level comments by segments. Credit card processing — credit card transactions processed in the third quarter were up 81%, and the dollars processed were up 15% from a year ago, setting new quarterly records. Both PayFac and legacy card processing were strong. PayFac continues to layer on new accounts, and the legacy business has rebounded with the opening — reopening of dental and veterinarian offices. And as the segment scales, the bottom line is improving. In particular, most of the growth is coming from our PayFac business, where we are seeing a dramatic increase in the number of new accounts being boarded and beginning to process on our platform.

Shortly, Greg is going to talk more about the exciting progress in Card Processing, especially PayFac, where the new implementation team is enjoying tremendous success. In ACH, we continue to feel the weakness in consumer lending. Some of the forbearances lenders had provided — have expired, so we have seen an increase in the number of debits for loan repayments, and that is accounted for the relative strength of the third quarter compared to the second quarter. Return checks were up 21% and transactions were up 7%, respectively, from the second quarter, which was clearly at a bottom. We expect to see sequential improvement to continue into the fourth quarter. We also had record results for PINless debit and RCC, remote check creation, where we’re having a great success in selling these alternative products into our existing base.

Again, all of the decrease in ACH volume is strictly attributable to less usage as we continue not only to retain existing clients but to add new ones as well. Our expectation is that as consumer lending recovers, we will get back to or above the strong levels we achieved in the first quarter this year. Prepaid had another impressive quarter. Revenue in the third quarter basically doubled sequentially from the second quarter. Compared to a year ago, third quarter load volume more than tripled, while transaction volume nearly doubled. We’ve had great success with prepaid programs that support government and charitable organizations in their effort to provide assistance and relief. Five of the 10 largest cities in the United States are now clients, as our prestigious national organizations such as United Way and many others.

These organizations use our program to provide monetary assistance to those who are experiencing financial hardship, and that money is being disbursed using a Usio prepaid card. The Usio prepaid program is winning in this market because our prepaid cards streamline the disbursement of funds for these organizations and ease record keeping it and provides the recipients with a simple and convenient means to access their funds. In addition, we offer several key features useful for any community organization looking to provide financial relief. For instance, the cards provide cash access, the cards can be reloaded, the cards can be programmed to prohibit their use for purchases of prohibitive items such as alcohol, and the cards can be sent virtually by text or e-mail. But most importantly, we’re winning because of our ability to build strong relationships with these organizations.

The pandemic was one of the catalysts for Prepaid’s recent growth. However, many of these client organizations have a need for money disbursement solutions for a number of other programs not related to the pandemic. So we expect prepaid to continue its outstanding performance in the fourth quarter and into 2021. Before wrapping up my comments and turning the call over to Houston, on behalf of the entire Usio team, I would — we would like to express our condolences to the Chapa family for the passing of Miguel, who served so admirably on the Board for many years. To me, he was invaluable source of wisdom, knowledge, and inspiration, and he will be greatly missed.

At the same time, I want to welcome Ernesto Beyer to the Board of Directors. Ernesto will serve as a member of the Company’s Audit, Compensation, Nominations and Corporate Governance Committees. Ernesto has over 25 years of international trade experience and holds an MBA in International Business from University of Texas in San Antonio. On behalf of the Board, we welcome him and look forward to working with Ernesto. Finally, I want to note that at the end of September, we closed an equity offering, raising $8 million from a group of 16 very strong institutional investors. Along with the $30 million [Phonetic] that we raised earlier this year, we now have a very strong balance sheet and an outstanding group of institutional investors supporting the Company. Our strategies always encompass non-organic growth, and with these offerings, we now have the resources not only to support our working capital and general corporate needs, but to invest in our growth businesses and to undertake accretive acquisitions.

Let me conclude with a few remarks about the coronavirus pandemic. After acting quickly to ensure the health and safety of our employees and customers, we have managed to avoid any material impacts from the coronavirus in any of our operations. Many of the industries we serve that suspended operations in the second quarter were back up in operation on the third quarter. And while COVID is having a peripheral impact on Card and Prepaid, such as slowing some of PayFac’s implementation, consumer lending remains as the only area that has not completely bounced back. Nevertheless, we remain optimistic that the record growth we have seen since building in the middle of 2019 as resumed. Again, thanks to our channel diversification strategy, we had tremendous growth. Fiscal 2020 is shaping up to be a very strong year for Usio. With outstanding growth and extremely solid financial position, we feel that we are building a strong foundation for future growth.

With that, I’d like to conclude my opening remarks and turn the call over to Houston Frost, our Senior Vice President of Prepaid Services.

Houston Frost — Senior Vice President, Corporate Development and Prepaid Services

Thank you, Louis. Last quarter’s call, we stated that we expected substantially larger load and transaction volumes this quarter, and I’m happy to announce that we did not disappoint, with prepaid card load volumes up 167% in Q3 over Q2 this year, which follows a 94% increase in card load volumes with — sorry, a 94% increase in card load volume in Q2 as compared to Q1, 2020. We expect to exceed $100 million in total card load volume in 2020, which would be over 150% growth in annual load volumes as compared to 2019. The rapid growth during Q3 was largely related to pandemic relief efforts. And while total card loads next quarter will be down somewhat from this Q3 peak, we expect that load volumes in the fourth quarter and beyond will continue at levels that exceed what we saw in Q2 of this year.

Our non-profit and municipal partners are continuing to disburse funds, and we’ve signed on several new programs for initiatives that are not pandemic related. These include a variety of municipal programs as well as non-profit supporting new guaranteed income programs. We reported 55 new clients at the end of last quarter and are now up to 78 total clients — new clients for the year. Our third quarter revenue was up 68% sequentially from the second quarter and 225% as compared to the same period last year. Please remember that card load volumes are a leading indicator, and revenue is generated from this card load activity over a 12 to 24-month period with as much as 50% of the revenue generated in periods after the period the card orders and the loads occurred.

As such, we expect the dip in card load volumes in Q4 as compared to Q3 will not result in a proportional drop in quarterly revenue. And indeed, we expect that new card programs implemented this year will contribute — will continue to contribute to our — to both our top and bottom lines over the next several quarters.

With that, I’d like to conclude my opening remarks and turn the call over to Tom Jewell, our Senior Vice President and Chief Financial Officer, to discuss financial results in greater detail.

Tom Jewell — Senior Vice President, Chief Financial Officer

Thanks, Houston. Welcome, everyone, and thanks for joining our call today and your interest in Usio. I’m going to provide a brief review of our financial results before turning the call over to Greg.

Looking at our third quarter results, revenues for the quarter ended September 30, 2020, increased 15% to $8.1 million compared to the same period in last year. As shown in our revenue details, the growth came from our prepaid and credit card businesses, offset by softness in our consumer lending ACH business. Revenues were up 225% versus the previous quarter — previous year in our prepaid category and 14% in our credit card category, including 108% year-over-year growth in our PayFac business. Though down from a year ago, ACH revenues rebounded in the quarter from the previous quarter, and we generated additional growth in our PINless debit product line.

Gross profits increased by 11% to $1.7 million versus the same period last year. Gross margins in the third quarter were marginally lower by 70 basis points from the prior year period, primarily driven by shift in product mix. I would note that margins expanded 630 basis points in the quarter on a sequential basis compared to the second quarter of this year as we recovered from the economic impact caused by the COVID-19 pandemic. Other selling, general and administrative expenses were flat at $2 million for the quarter compared to the same period — comparable to the same period last year. Costs were higher than the second quarter due to the incremental resources needed to accommodate the incremental growth of our prepaid programs in the third quarter.

We are adding resources to support our current and anticipated growth at a measured pace, such as in our call centers where call volumes have dramatically increased. For the third quarter of 2020, operating loss was approximately $900,000 versus a loss of $1.2 million in the prior year. Looking at adjusted EBITDA, the loss was approximately $254,000 in the quarter compared to a loss of approximately $421,000 in the third quarter of 2019. The adjusted EBITDA results were much improved sequentially from the second quarter as we narrowed the EBITDA loss by over $350,000. We had a net loss of approximately $900,000 or $0.06 per share for the quarter versus a net loss of $1.2 million or $0.09 per share for the same period in the prior year. Third quarter share count used in the EPS calculation was 15,474,171 shares.

Going to the nine-month financial comparison, revenues were up to — were $22.9 million, up 10% over the same period last year, with all of the increased organic growth in our Prepaid and credit card segments. Gross profits in the first nine months were up 11% over the comparable period of 2019, while we were able to expand margins 20 basis points during this period, despite the headwinds of the COVID-19 pandemic, the slowing economy and overall weakness in our consumer lending market.

While revenues for the first three quarters were up 10%, our SG&A costs increased 6%, while continuing our investments in our PayFac and prepaid growth initiatives. Adjusted EBITDA for the year-to-date period improved 12% to a $1 million loss compared to a $1.15 million loss in the same period in 2019. There is an equally good story in our liquidity and overall financial position. Cash and cash equivalents at September 30, totaled $11.4 million as we closed the two equity offerings in the quarter that Louis referred to, $8 million raised in a public offering in September; and $3 million raise from a single institutional investor in July.

The Company’s only debt is a PPP loan, the proceeds of which were used for payroll costs and other permitted expenses, which under the terms of the PPP loan program are qualifying expenses for loan forgiveness. The loan forgiveness documentation was filed on August 12 with the SBA, and although we believe we qualify under current rules, we are awaiting official SBA notification. We believe we have the liquidity and financial strength to support continued investment in our growth initiatives to fund operations and to undertake selective accretive acquisitions consistent with our growth strategy.

After a second quarter interruption, our third quarter results demonstrate we’re back on a strong growth trajectory. Our improved gross profits allow improved cash flows, which fuels continued investments in our prepaid and PayFac growth initiatives, which we believe together will generate improved profitability. Our balance sheet and financial position are the strongest in years, providing us the resources needed to support our overall growth strategy and a solid foundation for continued growth.

At this time, I’d like to turn the call over to Greg.

Greg Carter — Senior Vice President, Payment Facilitation

Thank you, Tom, and welcome, everyone. As I stated last quarter, the Card segment is making great progress and third quarter results bear that out. It was a record quarter across the board with the highest quarterly credit card transactions and dollars processed in the Company’s history. Dollars processed were up 15% from a year ago, while transactions were up 81%. As Louis mentioned, this continues the trend we have seen for several consecutive quarters even through the pandemic, and that’s clearly indicative of the success we are achieving in both PayFac and Legacy singular portfolio.

Attrition across both portfolio has consistently been low. So as we add new accounts and as our existing accounts grow, we grow with them. Last quarter, I articulated our strategy to leverage our strengths and accelerate growth, and this revolved primarily around bringing more discipline to our operations and to the organization. Our implementation process needed to be more formalized, documented and managed, so we created a dedicated implementation team, equipped them with a high-powered program of management software tool and required that certain criteria be met before we could advance the implementation to its next phase.

Consequently, I’m pleased with the third quarter performance as I attribute it to our unwavering marks towards those goals and the strong results it is producing. As expected, conversion rates are rapidly rising. In particular, September was one of our best months as the implementation team boarded a monthly record of new merchants and had many of them up and processing on our platform in short order. That is the goal; boarding more merchants and getting them up and generating volume on our system. Our increased focused and greater attention on our ISV customers has led to their greater adoption of our PayFac platform and the subsequent increase in new merchants boarded.

It is clear we have a wealth of opportunity in the ISVs with whom we already have agreements. In the aggregate, they are processing billions of dollars in electronic payments. This is our low-hanging fruit. The last few months have been a learning curve and the things we can do to get them off the sidelines and into the game. For instance, we have one of our customers, is a highly disciplined organization that instituted a very detailed process to onboard their merchants to the Usio platform. It has been our most successful implementation thus far. Now we are sharing that model with other ISVs to replicate that success more broadly across our entire portfolio. And it’s not just the ISVs that are activating and processing transactions. We are still aggressive in the market, opening up new relationships. That’s the motivation behind our most recent strategy. I’m a firm believer in the power of subject matter experts, or SMEs. An organization developing software that service law firms is more likely to do business with a PayFac that understands the nuances of the legal profession. To that end, we’ve reorganized our sales organization along industry verticals, where we can best leverage our proprietary technology and considerable expertise. These industries include legal, health care, education, property management, non-profit and several others. This is a relatively recent change and to support those efforts, we are developing industry and vertical-specific marketing actions.

And just as our focus on a more disciplined implementation process has paid dividends, I’m equally excited about the potential of this industry-focused sales organization. Innovation never sleeps at Usio. Let me give you an example. We are now working with a firm that has taken robots and turn them into flower arrangement dispensing kiosks. They needed a payment partner that could provide them the flexibility for their electronic payments, which is complicated by the mobility factor. This is just one example of the technology we have developed to support innovative retail and other emerging concepts.

There have been many other successes, similar ones, as well as those that are unique in their own regard. So our customer list keeps growing. This is resulting in net new adds every week. We are seeing more and more merchants boarded and more and more processing each week. Whether large or small, the volume keeps layering on top of the reoccurring volume coming from our established customers. And considering in many cases, these integrations have taken as long as a year or more to complete, we are highly confident that they have made a long-term commitment, and the volume will continue to grow. This is why you’re starting to see record growth in volumes in the second — reported during this quarter.

One final note on the legacy business. There, we’re seeing a V-shaped recovery. That portfolio has fully recovered from the COVID-19 and is actually showing modest growth despite virtually no sales or marketing efforts.

This is just a function of the loyalty of those merchants and the firm relationships our employees have forged with these customers. So let me finish with this theme, service. It may not sound as sexy as some of the latest technology, but we know this is still a very relationship-centric business. The loyalty of the Singular merchants and the success of our implementation team illustrate how taking a sincere interest in customers can contribute to success. Usio emphasizes service. We believe it’s the glue that holds all other parts of our business together.

Not unlike my comments last quarter and the allusions to the impact of COVID-19 Louis made earlier, we are seeing some residual effects of the pandemic. Consider our ISV customer that developed software for parking garages. There is less demand right now, but we are well positioned to see immediate growth once the business returns. We’ve boarded every parking lot they have, so when our world comes back to some resemblance of pre-COVID, that volume and associated revenue will return. It’s very exciting to think about that potential as well as many other customers facing similar headrooms once the pandemic subsides. We are running at a record pace. Each day, we are seeing new merchants. Each day, we are seeing [Indecipherable] opportunities. Each day, we are maintaining discipline and improving organizational efficiencies to provide our customers with world-class service and to make sure we are well prepared to handle the anticipated growth. I believe the results of the last two quarters are evidence that your patience waiting for the PayFac business to inflect is now being rewarded. Even more so, I believe the best is yet to come.

That concludes our prepared remarks for today. So we would now like to open up the call for questions.

Questions and Answers:

Operator

We’ll begin the question-and-answer session. [Operator Instructions] First question comes from Gary Prestopino of Barrington Research. Please go ahead.

Gary Prestopino — Barrington Research — Analyst

A couple of questions here. Number one, I think as I was writing down, you recited 108% growth in the PayFac business. I think Tom may have said that in his commentary. Is that sequentially? Is that year-over-year? And how is that being measured, by processing volume or revenue?

Tom Jewell — Senior Vice President, Chief Financial Officer

It is year-over-year period, and it is revenue.

Gary Prestopino — Barrington Research — Analyst

Year-over-year and revenue, okay. And then could you — Greg, could you maybe help us here with, Number 1, the amount of ISVs you’re now working with, the amount of potential merchants these ISVs have, and what percentage of those have been boarded so far?

Greg Carter — Senior Vice President, Payment Facilitation

Let me provide a data point that may help answer that question, because it’s a long question. But we boarded 1,187 merchants in the third quarter, and in September, 891 of those came in September. So the trend is improving. We’re working with several ISVs to do just that. So perhaps, that helps you from a quarterly standpoint, get a feel for the numbers.

Gary Prestopino — Barrington Research — Analyst

All right. I mean, in terms of — have you been able to sign up some new ISVs this quarter? I’m just trying to get an idea how many you’re working with, what the change is sequentially in the ISV universe for PayFac?

Greg Carter — Senior Vice President, Payment Facilitation

Okay. Well, we’ve executed five new agreements with ISVs during the third quarter. We have as many as 15 in queue, implementation queue right now in various stages.

Gary Prestopino — Barrington Research — Analyst

Okay. That helps. That helps. And then one last question, I’ll jump off. For Houston, a lot of these — it appears to me that a lot of these prepaid programs may have somewhat of a short duration in terms of their government programs. Am I incorrect in that assessment? I mean, when you sign these things up, what kind of duration are you looking at and card retention usage?

Houston Frost — Senior Vice President, Corporate Development and Prepaid Services

So, really, it is a pretty wide variety of programs that we’ve implemented this year. Certainly, in Q3, we had a substantial amount of programs related to pandemic relief efforts. What I’ll say is that several of the municipalities that we worked with have now moved on to leverage our product for a variety of other city initiatives. And while those initiatives may not be the same volume of dollars in a short amount of time, these are actually programs that are ongoing that should last — could last for years. So I can give a few — a couple of examples. But one, for example, is a program on the West Coast that is for kind of the beautification of the city and engaging communities to help clean up the city. And this is a program that really is just getting started, but doesn’t even have an end date. Another example are a couple of new non-profits that we’ve engaged with that are using our product to support some guaranteed income programs. These programs last one, two, three years, and if they’re successful, would never go away. So what I’ll tell you is, Q3, yes, there was a spike in load volumes related to the pandemic. Q4, we will see that number come down. Generally, I expect we will maintain though levels, like I said, card load levels higher than what we saw in Q2 of this year, and probably around 60% to 70% of what we experienced in Q3. But with the rate of sales and some of the new relationships that we’re building, I mean, we could be right back at Q3 levels sometime next year. So we’re going to have this drop. It might not be too long before we are really at a level that sustains what we saw this quarter.

Gary Prestopino — Barrington Research — Analyst

Okay. And are these cards open loop?

Houston Frost — Senior Vice President, Corporate Development and Prepaid Services

Yes. All of our cards are open loop. They’re also all reloadable, but again, it sort of depends on the program. If it’s more of a 1 time or 2 time to 3 time load versus a recurring monthly load, for example?

Gary Prestopino — Barrington Research — Analyst

Okay. Thank you.

Louis Hoch — President, Chief Executive Officer and Chief Operating Officer

Gary, before you drop off, Houston missed one important factor in this uptick in Prepaid. And we talked about it in our comments, but it’s very important for everybody to understand. All these load dollars that are going on the cards now. Part of the revenue gets recognized when it’s spent, but a big part of it gets recognized when they leave money on the card. And that will end up coming to us as revenue, as spoilage 12 months or 24 months or even 36 months later. So we’re building up a huge bucket of future revenue right now.

Gary Prestopino — Barrington Research — Analyst

Okay. Thank you.

Operator

Thank you. The next question is from Jon Hickman with Ladenburg. Please go ahead.

Jon Hickman — Ladenburg — Analyst

Hey, Louis, I was wondering, you talked several times in your prepared remarks about possible acquisitions. The last acquisition made was aimed at a product or a technology. What are you after? What do you think you — what’s most attractive to you now, more customers or more technology?

Louis Hoch — President, Chief Executive Officer and Chief Operating Officer

Well, whatever we do in the acquisition world, we want it to be accretive. We don’t want to take on a project, so we want it to be financially accretive. We also want it to have synergies with existing — our existing business, something that we can overlay or pay payments into and that we can bring strong customer relationships, too. And we are looking at acquisitions. We’re in final stages with one that will be greatly accretive to the Company and hit all those categories of having strong synergies and bringing in blue-chip customer base for us to leverage.

Jon Hickman — Ladenburg — Analyst

Final stages, does that mean like in the next couple of months, we might hear something?

Louis Hoch — President, Chief Executive Officer and Chief Operating Officer

We’re in final due diligence. I mean, it could still not happen, but it’s looking well — good.

Jon Hickman — Ladenburg — Analyst

Is that — is it a pretty target-rich environment right now with COVID or just pay — payment technologies in general?

Louis Hoch — President, Chief Executive Officer and Chief Operating Officer

If target-rich, you say target-rich, you’re meaning…

Jon Hickman — Ladenburg — Analyst

Lots of opportunities.

Louis Hoch — President, Chief Executive Officer and Chief Operating Officer

We would make sure that we deploy our capital at multiples less than we’re trading. So in that case, yes, that those opportunities exist.

Jon Hickman — Ladenburg — Analyst

Well, right now, that wouldn’t be hard. Anyway, well, I guess that would be kind of — you’re not trading at a very high multiple yourself. Just one other question. The — I was interested in — to follow-up on the previous question, how long does it take nowadays to implement an ISV? Or is that pretty much up to them?

Greg Carter — Senior Vice President, Payment Facilitation

It’s — there’s a wide range of answers to that, and we have some that implement — integrate very quickly and then onboard, and there’s others, as I said, have taken well over a year to get to that process. And we have ISVs in all those different stages, but there is really not a firm answer.

Jon Hickman — Ladenburg — Analyst

Okay. Thank you. That’s it for me. Nice quarter by the way.

Louis Hoch — President, Chief Executive Officer and Chief Operating Officer

Thanks, Jon.

Operator

Thank you. Next question is from Brian Kinstlinger of Alliance Global Partners. Please go ahead.

Brian Kinstlinger — Alliance Global Partners — Analyst

Great, thank you. Are you able to actually quantify the revenue from both PayFac and Prepaid separately during this quarter?

Louis Hoch — President, Chief Executive Officer and Chief Operating Officer

Yeah. You can look at it. Well, the Prepaid is broken out for you in the 10-Q. I mean, yeah, in the 10-Q. The revenues were — basically $1 million, $997,000 as compared to last year at the same time, $306,000. PayFac is included in credit card revenue bucket. I’m not sure what that is, like $1 million? Like $1 million of the $5 million.

Brian Kinstlinger — Alliance Global Partners — Analyst

Right. And then as Prepaid sounds like it could become a catalyst to your business, can you share with us the rough fee percentage for Prepaid, meaning if a $1 million of load volume for processed repayments, what revenue do you get contributed to your revenue for Usio?

Louis Hoch — President, Chief Executive Officer and Chief Operating Officer

We don’t have that metric right off top of our heads, but I can tell you that prepaid is a larger gross margin. It’s our second largest product line. The margins will fluctuate between 30% and 40%, more towards the top number when we’re experiencing spoilage, more towards the bottom number when we’re — the revenue is comprised of us selling cards, the actual physical plastic, which we usually don’t mark up much at all. So we don’t have that metric of a low dollar — 2% of low dollars turn into revenue, yes.

Brian Kinstlinger — Alliance Global Partners — Analyst

Would it be similar to just traditional credit card processing?

Louis Hoch — President, Chief Executive Officer and Chief Operating Officer

No. It would be much higher.

Brian Kinstlinger — Alliance Global Partners — Analyst

Much higher, okay. And then finally, just a follow-up on the M&A. We’ve heard about M&A for some time, and the industry has always been consolidating. So what has been the biggest impediments to you actually completing the acquisition in the last few years?

Louis Hoch — President, Chief Executive Officer and Chief Operating Officer

We’ll have one soon.

Brian Kinstlinger — Alliance Global Partners — Analyst

Has there been valuation? Has it been capital? Has it been not the right fit?

Louis Hoch — President, Chief Executive Officer and Chief Operating Officer

It’s because of our market cap. We’re limited to what we can buy.

Brian Kinstlinger — Alliance Global Partners — Analyst

Okay. All right. Thank you.

Louis Hoch — President, Chief Executive Officer and Chief Operating Officer

All right. Thank you.

Operator

Next question is from Michael Diana of Maxim Group. Please go ahead.

Michael Diana — Maxim Group — Analyst

Louis, nice bounce back. My questions were related to M&A as well. Most of them have been answered. I just wondered, in this environment, are you getting incoming calls from companies that want to talk to you? Are you — are some of the companies maybe you’ve talked to in the past and weren’t able to get something done with, they’re coming back to you? Or is it — has it picked up in that regard at all?

Louis Hoch — President, Chief Executive Officer and Chief Operating Officer

Are you talking about Usio being a target or…

Michael Diana — Maxim Group — Analyst

No, no, no, Usio making acquisitions, yeah.

Louis Hoch — President, Chief Executive Officer and Chief Operating Officer

Okay. So we’re selective in what we’re looking at. So we’re not just taking in the flood of leads of companies that want to be purchased. When we go after something, it’s usually because we want it, and we see the synergies. So we’re just very selective. There are properties out there, portfolios to buy. There is a lot of properties out there in the payments world. And because of our size, we’re very limited to what we can do, and when we do something, we want to make sure we’re buying it right, and that it’s accretive and it’s not a project and we’re going to be able to leverage it throughout our company. And you’ll see us execute that way.

Michael Diana — Maxim Group — Analyst

All right, great. Thank you.

Louis Hoch — President, Chief Executive Officer and Chief Operating Officer

Thank you.

Operator

[Operator Instructions] We have a follow-up question from Gary Prestopino with Barrington Research. Please go ahead.

Gary Prestopino — Barrington Research — Analyst

Yeah. Louis, did you say that out of the revenues and credit card this quarter, about $1 million is PayFac generated?

Louis Hoch — President, Chief Executive Officer and Chief Operating Officer

Yeah, a little more than $1 million.

Gary Prestopino — Barrington Research — Analyst

Okay. That’s fine. And then Greg, could you help me, what is causing the big delta between transaction growth and dollar volume growth? I mean, your transactions were up 81%. Your dollar volume process was only up 15%. And I would tend to think that given that these ISVs are signing merchants that may have bigger dollar ticket — bigger dollar per ticket, why is that moving more towards where it looks like it’s actually lower dollar per ticket?

Greg Carter — Senior Vice President, Payment Facilitation

Well, you hit the nail on the head, Gary. So we took a micro-processor or micro-merchant we implemented in Q3. Well, actually earlier than that, but the real volume hit in Q3, and their services costed $1.99. So tons of transactions, little dollar amount, and it was…

Gary Prestopino — Barrington Research — Analyst

A micro-merchant, is that like a vending machine company?

Greg Carter — Senior Vice President, Payment Facilitation

No. It’s actually in consumer lending, and that’s their fee to get a $20 loan — $20 loan, they charge you $1.99 or $30 loan, they charge you $1.99. And they have really good volume.

Gary Prestopino — Barrington Research — Analyst

Yeah, it looks — seems like it. All right. Thank you.

Greg Carter — Senior Vice President, Payment Facilitation

You bet.

Operator

This concludes our question-and-answer session. Now, I’d like to turn the conference back over to management for any closing remarks.

Louis Hoch — President, Chief Executive Officer and Chief Operating Officer

Well, thanks, everybody, for joining our call, and this is going to conclude our third quarter conference call.

Operator

[Operator Closing Remarks]

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