Usio, Inc. Annual Report: Investor Summary

Dive into Usio, Inc.'s recent performance and strategic direction with this summary, crafted from their latest annual report. Designed for retail investors, it distills key information about the company's operations, financial health, and future prospects.

1. Business Overview

Usio, Inc. operates across several key payment and business solutions sectors: ACH and complementary services, credit card processing, prepaid card services, and Output Solutions. The "Output Solutions" segment typically includes critical business services like secure document printing, mailing, and electronic delivery, often for financial statements, invoices, and marketing materials.

In the past year, Usio focused on operational expansion and technological advancement. The company invested significantly in its Output Solutions segment, acquiring new equipment such as a folder, inserter, and a printer, with some purchases occurring in 2025. This demonstrates an ongoing commitment to enhancing service capacity and efficiency in this area. Additionally, Usio established a new office in Austin, Texas, in 2024, dedicated to its Technology Organization, signaling a strategic emphasis on innovation and development.

2. Financial Performance

Usio's revenue streams are diversified across its core services: ACH, credit card processing, prepaid cards, and output solutions.

The company's operational infrastructure saw increased investment. Software and development costs rose by approximately 16.4% from $3.29 million in 2024 to $3.83 million in 2025. Similarly, equipment investments increased by about 4.2% (from $26.61 million to $27.73 million), and furniture/fixtures by approximately 5.5% (from $29.90 million to $31.56 million) over the same period. These figures reflect a general upgrade and expansion of Usio's operational capabilities.

3. Risk Factors

• Cybersecurity Threats: Cybersecurity poses a paramount concern given Usio's role in payment processing and sensitive data handling. The company addresses this through its Board of Directors' dedicated Risk and Cybersecurity Committee. Usio's Chief Technology Officer (CTO), with over 22 years at the company and 18 years in the CTO role, leads cybersecurity efforts and reports to the committee at least quarterly. This demonstrates a structured and experienced approach to risk management.

• Legal and Regulatory Risks: Usio faces an ongoing "Triple Pay Play Lawsuit," which emerged in September 2025. It also remains embroiled in a claim and counterclaim with Kdhm LLC, a dispute ongoing since 2021 with a subsequent event in February 2026. These legal challenges pose potential financial liabilities, reputational damage, and operational distractions, and their outcomes could significantly impact the company's financial performance and stock price.

• Customer Concentration: Customer concentration is a risk factor. This means a few large customers may generate a substantial portion of Usio's revenue. Losing one or more of these key customers could materially harm the company's financial results.

4. Management Discussion and Analysis (MD&A) Highlights

Management's discussion highlights strategic operational advancements and addresses key challenges.

Operational Highlights: Usio substantially invested in its Output Solutions segment, acquiring new equipment (folder, inserter, printer in 2025) to enhance capacity and service offerings. The 2024 opening of a new Austin, Texas office for its Technology Organization underscores a strategic push for technological development and innovation, supported by consistent investment in software, equipment, and furniture from 2024 to 2025.

Challenges and Legal Matters: Usio faces a new "Triple Pay Play Lawsuit," which emerged in September 2025. It also remains embroiled in a claim and counterclaim with Kdhm LLC, a dispute ongoing since 2021 with a subsequent event in February 2026. These legal battles pose potential financial liabilities and operational distractions.

Related Party Transactions and Compensation: The summary notes transactions between CEO Louis Hoch and Angry Pug Sportswear, a related entity. Usio continues to use equity compensation, including restricted stock and restricted stock units, to align employee, director, and executive interests with shareholders. The CTO's long tenure and expertise in leading cybersecurity efforts suggest stability and deep institutional knowledge in a critical operational area.

5. Financial Health

Usio used debt financing to support its growth, with equipment-specific debt increasing from $0.09 million in 2024 to $0.58 million in 2025. The company also incurred an additional $0.599 million for a new printer in 2025. To bolster liquidity, Usio established a revolving credit facility and a letter of credit in mid-2024, both expiring at the end of 2025. These facilities provide access to additional funds, offering a financial safety net for short-term operational needs and strategic flexibility.

6. Future Outlook

Usio's recent investments in Output Solutions equipment and its new Austin Technology Organization office clearly indicate a strategy focused on expanding capabilities and driving technological advancement. These initiatives aim to support future growth by enhancing service offerings, improving operational efficiency, and fostering innovation across its diverse business segments. Access to a revolving credit facility also provides flexibility for future strategic moves.