Sector Spotlight: Fintech Stock Watchlist (USIO, PAYS, APCX, PSFE, PAYO)

September 06 09:36 2023

According to the most recent Federal Reserve Payments Study (FRPS), the value of core non-cash payments in the US grew faster from 2018 to 2021 than in any previous measurement period since 2000. Having increased at a rate of 9.5% per year since 2018, the value of non-cash payments reached $128.51 trillion in 2021. This increase was more than twice the rate of increase in the previous three-year period (2015–2018) and more than three times the rate of increase from 2000–2018. 

This is not surprising considering that far fewer U.S. adults report using cash to make purchases now than they were doing so five years ago, according to a Gallup Poll. Six in 10 now say they make “only a few” or no purchases with cash today, nearly double the 32% who said they did so five years ago. With more than half of those polled saying that they believe it is likely the US will be cashless in their lifetime, the fintech sector seems well positioned for massive growth, which bodes well for several companies. Let’s take a closer look at five possible beneficiaries of these trends.

Usio (NASDAQ:USIO) is a leading FinTech company that operates a full stack of proprietary and integrated cloud-based electronic payment and embedded financial solutions for a wide range of merchants. These solutions include Payment Facilitation (PayFac), ACH, Prepaid Card Issuing, and Output Solutions. 

Some of the major highlights for USIO include the fact that USIO processed over 40 million transactions in 2022, representing a 16% increase from the prior year, which resulted in a record revenue year of $69.4 million. All of USIO’s solutions are highly profitable businesses, with ACH boasting 70%+ margins and prepaid card issuing margins between 30% and 40%.

To better illustrate just how significant an opportunity the company is positioned for, consider this: Back in August, USIO reported 2Q23 results with revenue of $21.3 million, up 31% compared to 2Q22, surpassing the analyst consensus of $20.4 million, and adjusted EBITDA of $1.2 million, exceeding the consensus of $1 million. Notably, this marked the 12th consecutive quarter of revenue growth. The company anticipates that prepaid revenues will more than double in 2023 compared to 2022, in part because of the more than $6 million in revenue that is anticipated to be generated over 2H23 from spoilage fees on expired card programs. 

In addition, USIO’s partnership with MoviePass, announced earlier this year, has delivered impressive results. MoviePass, which leverages Usio’s innovative and proprietary prepaid card issuing platform and unique external authorization engine to fund transactions for the MoviePass Debit card, has seen increasingly higher demand across the country, thus increasing market penetration from three cities to nine cities across the United States.

This is USIO’s largest program in terms of number of cards, considering 200K prepaid debit cards have been issued and 170K–190K cards are active. Each active subscriber generates recurring load fees and interchange fees, with unit profitability about twice that of other USIO programs. Going forward, this segment could deliver substantially higher growth if reports from Business Insider about the possibility of a partnership between MoviePass and Walmart turn out to be true.

It is important to note that all of USIO’s revenue streams reported significant revenue growth compared to the same period last year, including Automated Clearing House (ACH), which rebounded from the 2Q22 bankruptcy of USIO’s then-largest ACH customer, Voyager Digital, which accounted for 8% of the company’s total revenue. Management highlighted the fact that the sales pipeline in all segments is robust and continues to accelerate. For instance, the relationship with LA County continues to expand its check printing services and now offers an option for customers to utilize a QR code linked directly to a USIO payment window.

Following a string of positive corporate updates, USIO has gained increasing investor interest, and a number of analysts have weighed in on the future of the stock. For instance: 

  • H.C. Wainwright initiated a ‘buy’ rating with a $3.5 price target 
  • Ladenburg Thalmann analyst Jon R. Hickman gave a ‘buy’ recommendation with a price target of $12.
  • Maxim Group reiterated their ‘buy’ rating with a $6 price target

That means that these analysts consider that USIO has an upside potential of anywhere between 100% and 610%.

Paysign, Inc. (NASDAQ:PAYS) is a leading provider of prepaid card programs, comprehensive patient affordability offerings, digital banking services, and integrated payment processing. On August 8, the company announced financial results for the second quarter of 2023, which reaffirmed the broader industry’s growth prospects. Total revenue for the quarter came in at $11.0 million, an increase of 28% compared to the second quarter of 2022, with adjusted EBITDA of $1.1 million, an increase of 23% compared to the same period last year.

The CEO, Mark Newcomer, stated that “we delivered strong revenue growth this quarter, a year-over-year increase of 28%, supported by the continued positive momentum in our plasma, patient affordability, and other areas of our business.” 

Plasma revenue increased $2.2 million, or 28%, primarily due to an increase in plasma locations, plasma donations, and dollars loaded onto cards, with average monthly revenue per center up 13% to $7,587.

AppTech Payments (NASDAQ: APCX) provides digital financial services for corporations, small and midsized enterprises, and consumers through the Company’s scalable cloud-based platform architecture and infrastructure, coupled with our commerce experience development and delivery model.

AppTech recently reported second-quarter earnings, with revenue increasing 9% to $134,000 compared to the same period last year. During the quarter, the company signed a patent licensing agreement with Broadnet Technologies to expand AppTech’s reach in the global text-to-pay space in addition to a strategic partnership to build, develop, launch, and manage InstaCash, Inc.’s mobile-to-mobile payment system, and subsequently extended the license to Brazil and Mexico. 

Paysafe (NASDAQ:PSFE) provides digital commerce solutions to online businesses, small and medium-sized merchants, and consumers through two segments: Merchant Solutions and Digital Wallets. It differentiates itself from peers by targeting the global entertainment niche, that encompasses online sports, casino games, poker, and video gaming, as well as the hospitality industry and cryptocurrencies. 

Paysafe recently released its second-quarter results, with reported sales and earnings for the period beating Wall Street’s expectations. Paysafe’s revenue rose 6.2% year over year in the second quarter, and total payment volume conducted across its platform increased 6% to reach $35.5 billion. 

Apart from exceeding sales and earnings expectations for Q2, Paysafe also raised its full-year guidance. Thanks to stronger-than-expected second-quarter results and some encouraging demand momentum, Paysafe now expects annual sales growth between 6.5% and 7.5%.

Payoneer Global (NASDAQ:PAYO) is a fintech company empowering the world’s small and medium-sized businesses to transact, do business, and grow globally. During the company’s Q2 earnings release, PAYO reported a record revenue quarter with sales increasing 40% year-over-year thanks to an increase in active Ideal Customer Profiles (ICP) growth, including a second consecutive quarter of 18% growth in its larger ICPs, or those who have on average over $10k a month in volume.

“We continue to steadily acquire ICPs, generate significant revenue growth and margin expansion, and invest for future growth,” said Bea Ordonez, Chief Financial Officer. “Our revenue growth is accelerating as we increase monetization of our customer segments, drive ICP growth, and earn interest income revenue from customer funds held on our platform.”

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