Greenbox POS

Good afternoon, ladies and gentlemen, and welcome to the Greenbox POS First Quarter 2022 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 quarterly report, which includes the company's results of operations for the three months ended March 31, 2022, was filed with the SEC today. On our call today is Greenbox POS Chairman Ben Ayres, Chief Financial Officer Ben Chung, and Chief Operating Officer Min Wei. 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 filings 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 event section. At this time, I'd like to turn the call over to Mr. Ben Ayres, the company's chairman. Ben, the floor is yours.

Thank you, operator, and thank you all for joining us today for our first quarter 2022 financial results conference call. Following up on a strong growth trajectory in 2021, the first quarter of 2022, the best quarter by volume of processing in the company's history, was also highlighted by continued execution against several key strategic objectives that paved the way for our long-term growth. We successfully completed the acquisition of Transact Europe, ushering Greenbox into a very attractive European payment market and setting the table for our global ascension. By partnering with Coast River, a well-respected financial technology infrastructure leader, we can bring to fruition our banking as a service solution and materially enlarge the potential universe of customers to deliver our financial solutions to, while also expanding our solutions to all existing customers. With the purchase of Sky Financial's processing portfolio, we secured a large merchant base of approximately $1 billion in annual transaction volume and growing. Operationally, we continued to make progress on improving our executive team and board of directors, putting the needed expertise and infrastructure in place for us to continue to scale. With that, I'd like to elaborate on some of our key operating highlights from the quarter. As I've talked about previously, acquisitions are a vital part of our long-term growth strategy. We look for select, opportune targets to increase our processing volume, licensing assets, technology, and talent. On that front, we had two noteworthy accomplishments. First, we completed our acquisition of Transact Europe, or as we call it internally, TEU, which, considering the time and thoroughness of the Bulgarian bank regulatory review process, was no simple task. TEU enables us to effectively deliver the advantages of our customized payment solutions technology to European merchants. Several key strategic initiatives are ready to deploy to unleash the synergies and unlock the growth from this acquisition. For example, by adding card present transactions, TEU can more effectively target the retail segment. Incorporating alternative payment methods with partners in Europe will expand acceptance to include other regional card issuers. The addition of banking and foreign exchange capabilities will provide value-add solutions for clients as well as another driver of revenue for Greenbox. This essential number of cross-border transactions in Europe makes for fertile ground to drive adoption for COINI. Furthermore, by leveraging TEU licensing for our US-based clients, with capabilities to expand their business into Europe and vice versa, there is a tremendous potential value for both existing and prospective customers on both sides of the pond. As we mentioned in our announcement, for its first full year of operation, Transact Europe is expected to contribute approximately $2 million to our adjusted EBITDA, and we anticipate will be accretive in the first year. We also announced the purchase of Sky Financial's merchant processing portfolio to secure a large processing volume that was already integrated in our technology. Sky is a big part of our 2021 success and contributed significantly to our revenue during the year. The acquisition accomplishes two very important things. By bringing a large merchant account portfolio in-house, we eliminate the commission's costs previously incurred. Second, it allows Greenbox to own these customer relationships, securing a considerable portion of our processing volume base and offer additional revenue generating solutions to this same customer base. Establishing strategic partnerships with leading tech-forward financial companies is also an integral part of our growth strategy. In the first quarter, we announced such partnership with CrossRiver, a very well-respected financial technology infrastructure company. The licensing partnership is the initial step towards a banking-as-a-service platform and represents a fantastic opportunity for us to significantly expand our potential universe of clients while allowing us to offer existing merchant accounts more services, including banking solutions. The CrossFever partnership single-handedly closes the gap towards Greenbox becoming a vertically integrated end-to-end financial technology solution. While in the early innings of that partnership, we expect great things from it, and over time believe it will lead to a substantial revenue generation. Operationally, we have grown. Our executive management team and board of directors has continued to evolve. In the first quarter, we welcomed Min Wei, from which you will hear shortly, as our new chief operating officer. Min has an extensive background in operational efficiency at growing technology companies on a global basis. He will be vital for us given our expansion plans in order to scale efficiently. We also added to our board with the appointment of Adele Hogan. Adele is an experienced and well-respected transaction lawyer. She has already been material to our recent acquisitions and as part of our securities compliance team and will be important contributor to any M&A and dividend plans to come. For an update on COINI, we're quite pleased by the recent public beta test of our first-generation development product as we work to scale up its application while ensuring quality control. We expect COINI to be an important growth driver for us in the years to come and fully committed to the lucrative opportunity it represents. We'll comment on this more in a few minutes. And now I'd like to turn the call over to our Chief Financial Officer, Ben Chang, to walk through our financial results.

Thank you, Ben. I will limit my portion to key results of our financials. A full breakdown is available in our 10-Q filing and in the press release that was distributed after markets closed today. Please note that I'll be referring to adjusted EBITDA and other non-GAAP US GAAP measures. And for the calculation of adjusted EBITDA and other non-GAAP measures, please refer to the MD&A, which is available in our 10-Q filing, which you can find on our website under SEC filings. Net revenue increased by $140,000, or 3.1%, to $4.9 million for the three months ended March 31, 2022, from $4.7 million for the three months ended March 31, 2021. The increase in revenue was due to the increase in processing volume, but offset by higher fees to gateways and ISOs. Growth profit in the first quarter of 2022 was $2.3 million, or 47.6% of total net revenue compared to gross profit of $3.2 million or 66.4% of total net revenue in the same quarter a year ago. The decrease in gross profit was primarily due to increased cost of revenue resulting from higher processing fees paid to gateways and commission payments to ISOs. I would like to now 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, and general expenses, while non-cash operating expenses include stock compensation expenses for employees and for services, including depreciation. Our normal operating expense was $7.8 million and $2.3 million for Q1 2022 and 2021, respectively. An increase of $5.5 million primarily due to an increase in general and administrative expense related to payroll for increase in number of employees due to growth and 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. We ended Q1 2022 with a loss from operations of $6.2 million compared to a loss of $9.4 million in the same quarter prior year. If our non-cash operating expenses such as stock compensation expense for employees and services and depreciation are added back, we had a net loss from operations of $5.4 million for Q1 2022 and a net income of $0.9 million for the same quarter prior year. I would now like to go over our other expense category. Our other expense increased by $11.1 million to $15.1 million for Q1 2022 from $4.0 million for Q1 2021. Interest expense increased slightly in Q1 2022 as compared to Q1 2021 due to the $100 million convertible note issued in November 2021. Amortization of discounts fees and the fair value of derivative liability associated with the note were also contributing factors. Furthermore, the company changed in fair value derivative liability expense of $7.7 million for Q1 2022 and none in previous year same quarter. The company sustained a net loss in the first quarter of 2022 of $21.3 million or 51 cents per basic and diluted shares compared to net loss of 13.3 million or 38 cents per basic share and diluted shares in the same quarter a year ago. The increase in net loss was primarily due to an increase in change in fair value of the river liability and increase in research and development, general and administrative related to payroll and payroll taxes and professional fee as we continue to add staff and infrastructure related to our growth and being a public traded company. Adjusted net income, a non-GAAP financial measure for the first quarter 2022 was 5.4 million of net loss. You can find a reconciliation in our earnings press release. I'll now turn the call over to Min to speak about our outlook for the rest of the year.