Greenbox POS

Good afternoon, ladies and gentlemen, and welcome to the Greenbox POS fourth quarter and full year 2021 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following management remarks, the conference will be open for questions. The earnings press release accompanying this conference call was issued at the close of the market today. The annual report, which includes the company's results of operations for the year ended December 31st, 2021, was filed with the SEC today. On our call today is Greenbox POS Chairman Ben Erez and Chief Financial Officer Ben Chung. I'd like to remind everyone that statements made on today's call and webcast, including those regarding future financial results, and industry prospects are forward-looking and may be subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call. Please refer to the company's regulatory filing for a list of associated risks. The replay of this call and webcast will be available for the next 90 days on the company's website under the Events section. At this time, I would like to turn the conference over to Ben Erez, the company's chairman. Ben, the floor is yours.

Hello, everyone, and thank you for joining us today for our fourth quarter and full year 2021 financial results call. 2021 was a record-setting year for Greenbox. As we continue to rapidly expand our payment processing footprint, and processed approximately $2 billion in transaction volume, which makes it about 10 times the processing volume of fiscal year 2020. As we've discussed previously, processing volume is currently our primary KPI and business focal point. It is indicative of the scalability of our technology, our market share growth, our ability to remain compliant, and our investment in good quality people, technology, development, infrastructure, and acquisitions. We also achieved record company revenues during 2021 of 26.3 million, representing tremendous growth of over 209% when compared to 2020 full year revenue. As a reminder, Our Generation 3 technology was only deployed at the onset of 2021, in January of last year. To achieve impressive scale so quickly with no major setback is a demonstration of the quality and capabilities of our talented team and technology. With that, I'd like to walk through some key operational highlights and provide updates on several of our core objectives that we have been diligently working on towards. Acquisitions are a vital part of our growth strategy. They allow us to purchase merchant portfolios, adding processing volume to our platform, and provide a way to obtain key licensing assets, both domestically and globally, that enable us to branch out and service more verticals and geographic locations. In 2021, we announced three such acquisitions, including Northeast Merchant Services, Charge Savvy, and Transact Europe. The first two acquisitions have been completed and successfully integrated with the Greenbox operations. As an indication of their success, just six months after integration, Charge Savvy recorded the best quarter in its nine-year history as a result of improved technology and efficiencies. Regarding Transact Europe, after a lengthy review process, I'm excited to report that after receiving final approval from the Bank of Bulgaria, we proceed with closing Transact Europe, or TEU, is an incredibly important purchase for us, given that it opens doors for us globally for expansions both in Europe and as a stepping stone into markets in Asia-Pacific regions. It gives credibility to Greenbox, further establishing us as a premier global fintech. Greenbox and PEU are a natural complement to each other, with TEU licenses and infrastructure combined with our suite of customized payment solutions and technology. We believe there is a powerful synergy that we can capitalize on, drive coin adoption and ultimately achieve significant revenue and earnings. An 8K filing was just made based on the amendment to the purchase agreement regarding the purchase price of the acquisition. which was reduced to 26 million euro from the original 30 million. While not complete just yet, we are confident this will cross the finish line in the next couple of days. So we can announce that this transaction is in completion mode. Earlier this year, Greenbox launched a vast new payment vertical by offering bulk ACH processing abilities to merchants. ACH Market is a lucrative opportunity for us as it offers merchants a low-cost execution alternative to more expensive debit and credit cards. Since our launch of this initiative, we've already booked commitments in excess of $50 million per month and rising. This is a profitable multi-million dollar revenue stream for Greenbox that we expect will continue to grow over time. Establishing strategic partnerships with leading tech-forward financial companies is also an integral part of our growth strategy. We recently announced such a partnership with Cross River Bank, a very well-respected financial technology infrastructure company, following a very thorough evaluation process by them of Greenbox. And I would like to take this opportunity to congratulate them Cross River for raising $620 million last week. We entered into a licensing partnership as the initial step towards the first of its kind banking as a service initiative. This is a truly massive opportunity for us that significantly expands the potential universe of clients that Greenbox can service, while allowing us to offer existing merchant accounts more services, including banking solutions. The Cross River Partnership single-handedly closes the gap towards Greenwood's becoming a vertically integrated end-to-end financial technology solution. While in the early innings of this partnership, we expect great things from it, and over time believe it will lead to a substantial revenue generation for us. Through 2021 and into the new year, we continue to strengthen the composition of our management team. Recently, we welcomed Min Wei as our new chief operating officer. Min has extensive background in operational efficiencies and growing technology companies, particularly on a global basis, which is critical for us given our expansion plans. Min Wei will be available at the end of this call as well as Ben and I for Q&A. Given these aspirations, we set out to find the right marketing and branding leader. And we found that perfect fit with the appointment of Jacqueline Reynolds as Chief Marketing Officer. Her decades of experience leading startups some of the most highly coveted brands, Jacqueline is respected as a world-class global marketer. She's also spearheading our recently announced transformational global initiative to raise the Greenbox brand awareness with the appointment of an award-winning advertising agency in Ocean as our advertising and branding agency of record. In January, we once again demonstrated our commitment to our shareholders and confidence in our ability to execute on the growth opportunity in front of us. With the approval of an accelerated share repurchase program of up to $10 million, our commitment to defend our stock is unwavering, and we will continue to utilize this strategy when we feel it is prudent. Additional details regarding this stock purchase plan can be found in our 10K filing. Last, but certainly not least, let's talk about Koini, our stablecoin and digital payment platform. All of the aforementioned items I've discussed lay the foundation for us to drive adoption for Koini. After much internal discussion, we believe the most effective path for us initially at least, is to deploy and grow the business under the Greenbox umbrella. There are several key advantages that we can leverage, such as compliance, sales, and more effectively execute on its growth. The Koine app has gone through vigorous beta testing, as well as three auditor attestations. and we plan to make the Koine app available on the App Store in a few weeks, perhaps by the end of April. We remain 100% committed to rewarding our loyal shareholders from the success of Koine and our acquisitions by way of a dividend in the same parameters as we have discussed before. And now I turn the call over to our Chief Financial Officer, Ben Chung, to walk through our financial results. Ben, the floor is yours.

Thank you, Ben. I will limit my portion to key results of our financials. A full breakdown is available in our 10-K filing and in the press release that will be distributed after market closes today. Please note that I'll be referring to adjusted EBITDA and other non-GAAP measures and for the calculation of adjusted EBITDA for other non-GAAP measures please refer to the MD&A, which is available in our 10-K filing, which you can find on our website under SEC filings. Our 2021 total net revenue increased by 17.8 million or 208.6% to 26.3 million from 8.5 million for the full year 2020. The increase was primarily due to an increase in processing volume, from 2022, I'm sorry, 20.2 million for the year ended December 31st, 2020, and 1.95 billion for the year ended December 31st, 2021. The increase in processing volume was due to a number of factors, including growth of our customer merchant base as a result of expanded sales and marketing efforts. An increase in average merchant transaction volume as a result of greater strategic focus on larger merchants, the expansion and growth of our advanced blockchain ledger-based payment solutions product offerings, combined with an expanding ISO and partnership network, and our strategic acquisition strategy. 2021 gross profit was $16.9 million, or 64% of net revenues. an increase of 357% compared to 3.7 million in the prior 43% of net revenue. Our margins increased significantly due to increased processing efficiency, greater utilization of lower cost gateways, and decreased cost to scale. I would like now to discuss our operating expenses. We categorize our operating expenses into two categories, normal operating expenses and non-cash operating expenses. Normal operating expenses include marketing, research and development, payroll, professional fees, and general expenses, while non-cash operating expenses include stock compensation expenses for employees and for services, including depreciation. Our normal operating expense was $20.8 million and $5.7 million for full year 2021 and 2020, respectively. An increase of $15.1 million primarily due to an increase in general and administrative expenses related to bad debt expense, but also related to our heavy investment in research and development. to improve our technology and headcount to support operations and sales growth. Our non-cash operating expenses primarily relate to stock compensation expense for employees and services. Our stock compensation expense for services are non-recurring charges, which will not recur going forward. We ended 2021 with a loss from operations of $20.8 million compared to a loss of $5.0 million in the same year prior year. If our non-cash operating expenses, such as bad debt, stock compensation expense for employees and services, and depreciation are added back, we had net income from operations of $3.1 million for 2021 and a net loss of $5.1 million for the same period prior year. I would now like to go to our other expense category. Our total other expense for full year 2021 were approximately 5.7 million compared to other income of 0.1 million in the prior year. Our other expenses consisted of interest expense related to debt discount of 2.9 million, interest expense of 1.9 million, derivative expense of 3.4 million offset by changes in fair value of derivative liability of 2.8 million a merchant liability settlement gain of 0.4 million and other income of 0.2 million the company sustained a net loss of in 2021 of 26.5 million or 0.65 cent per basic and diluted share compared to a net loss of $5.0 million or $0.17 per basic and diluted share during 2020. The increase in net loss was primarily due to bad debt write-offs, increase in operating expenses from our heavy investment in growth related to such areas as research and development, sales and marketing, staff, costs associated with due diligence for acquisitions, stock-based compensation for services, as well as increase in general administrative expenses. Adjusted net income, a non-GAAP financial measure for 2021 was $3.1 million of net income. You can find a reconciliation in our earnings press release. Our cash flows from operating activities adjusted was negative 6.9 million for the 12 months ended December 31st, 2021. Greenbox continues to be in a financially healthy position with a strong cash balance of $89.6 million as of December 31st, 2021, following the recent $100 million convertible financing, which allows us the flexibility to aggressively pursue our growth initiatives. I'll now turn the call back to Ben Ayres for some final remarks prior to our Q&A.