Paysign, Inc.

Hello, and welcome to the PaySign first quarter 2022 earnings conference call. As a reminder, this conference is being recorded. This presentation may include comments that may be deemed to be forward-looking statements under federal securities laws, and the company intends that such forward-looking statements be subject to the safe harbor created thereby. All statements other than statements of fact included in this release are forward-looking statements. Such forward-looking statements include, among others, that our unrestricted cash, anticipated revenues, and profits will be sufficient to sustain operations for the next 12 months, that the expected total revenue, gross profit margins, operating expenses, depreciation and amortization, stock-based compensation, adjusted EBITDA, plasma revenues, and pharma revenues for 2022 meet our expectations, that the company will continue to post year-over-year improvements, that the company's growth prospects in plasma, pharma, and other prepaid business materialize, and that the company will continue to be affected by COVID-19-related labor shortages. We caution that these statements are qualified under important risks, uncertainties, and other factors that could cause actual results to differ materially from those reflected by such forward-looking statements. Such factors include, among others, the inability to continue our current growth rate in future periods, that a downturn in the economy, including as a result of COVID-19 and variants, as well as further government stimulus measures could reduce our customer base and demand for our products and services, which could have an adverse effect on our business, financial condition, profitability, and cash flows. Operating in a highly regulated environment, failure by us or business partners to comply with applicable laws and regulations, changes in the laws, regulations, credit card association rules, or other industry standards affecting our business. that a data security breach could expose us to liability and protracted and costly litigation and other risk factors set forth in our Form 10-K for the year ended December 31st, 2021. Except to the extent required by federal securities laws, the company undertakes no obligation to publicly update or revise any statements made today, whether as a result of new information, future events, or otherwise. This presentation also includes adjusted EBITDA, a non-GAAP financial measure That is neither prepared in accordance with nor an alternative to financial measures prepared in accordance based on any standardized methodology prescribed by GAAP and is not necessarily comparable to similarly titled measures presented by other companies. It's now my pleasure to turn the call over to Mark Newcomer. Please go ahead.

Thank you. Good afternoon, everyone, and thank you for joining us for PaySign's first quarter 2022 earnings call. I'm Mark Newcomer, Chief Executive Officer, and with me this afternoon is Jeff Baker, our Chief Financial Officer. First, I would like to say that we are pleased with our first quarter results as we reported Q1 2022 revenue of $8.2 million, an increase of $1.9 million, or 31%, over Q1 2021. Throughout the first quarter, we saw our load and spending trends continue to improve as the number of plasma donations increased. as well as seeing an increase in average donor compensation. Funds loaded on cards was up 16.2% over first quarter last year and up 7.6% over last quarter. The first quarter spend volume increased 24.7% from last year and was slightly down at 1.3% over last quarter. This is consistent with the normal seasonality we see in the plasmid donor spending habits in the first quarter. We onboarded nine new plasma centers, ending the quarter with a total of 375 centers. With the increase in new centers and the increase in transaction volumes, we saw a 37% increase in plasma revenues and an increase in monthly revenue per center to $6,672 per center, up from $5,260 in the first quarter of 2021. On the patient affordability side, we onboarded four new pharma co-pay programs. Additionally, we developed two new patient affordability products to address the pending regulatory changes which come into effect in 2023 that will impact pharmaceutical manufacturers. We devoted our sales and product resources in the pharma vertical to raising awareness of these products ahead of the Assembia 2022 conference that took place the first week of May. During the conference, our sales, product, and account management teams were fully booked and received excellent feedback from current and potential clients. Based upon feedback that was received during and immediately following the conference, we believe our products place us in the best position to assist current and potential clients with appropriate mitigation strategies regarding future best price implications imposed by the new regulations. This is an area where we are truly seeing our fintech and healthcare expertise converging to maximize our effectiveness in the marketplace. generate additional interest within our target market, and develop new products and strategies to navigate a rapidly changing regulatory environment within the healthcare space. Finally, for the remainder of 2022, we continue to have a strong pipeline across all of our product verticals as we execute on our strategy. Our Q1 key performance indicators are showing that we are returning to pre-pandemic normalcy for the business. With that, I'll pass it over to Jeff to give you more insight on our financials for the quarter.

Thank you, Mark. Good afternoon, everyone. As Mark pointed out, we are pleased with the start of our 2022 operating results with revenues, loss from operations, EBITDA, adjusted EBITDA, and transactional trends all improving year over year. Our business appears to be returning to a more seasonal operating pattern where plasma revenues decline sequentially from the fourth quarter due to tax season and then increase as we move throughout the year. With all of the details we provided in the press release, and that will be available in our 10Q tomorrow, I will simply hit the financial highlights for the first quarter 2022 relative to the first quarter of 2021. Total revenue of $8.2 million increased $1.9 million, or 31%, versus the year-ago period. Of that amount, plasma revenue was $7.4 million, an increase of 37%. Pharma revenue was $800,000, a decrease of 9%. and other revenue was $20,000, an increase of 47%. The average revenue per month per plasma center was $6,672 versus $5,260 last year. We added nine centers during the quarter, ending with 375 centers versus 343 centers at the end of Q1 2021. Also of note, we have added an additional 11 centers since the end of March, bringing our total number of plasma centers to 386 to date. Gross profit margin for the quarter was 60.8% versus 45.1%, an increase of over 15 percentage points. As we mentioned during our last conference call, this was expected due to the renewal and restructuring of an agreement this quarter, along with continued operating leverage inherent in our business model. SG&A increased 20.1% to $3.4 million, and total operating expenses were up 19.3% to $5.3 million. Including in these numbers were unusual legal settlement costs of $354,000. Without these legal settlement costs, SG&A would have increased 15.4% to $3.0 million. Adjusted EBITDA, which adds back stock compensation to EBITDA, was $927,000 or two cents per diluted share and marks the fourth consecutive quarter of positive adjusted EBITDA. If not for the unusual legal settlement costs mentioned, adjusted EBITDA would have been $1.3 million for the quarter. Regarding the health of our company, we exited the quarter with $8.5 million in unrestricted cash and zero debt, which is an increase of $1.1 million of unrestricted cash from our fourth quarter ending cash balance. We remain optimistic that the headwinds our business faced during COVID-19 are behind us as we return to a more normalized business environment. While we are not changing our guidance for 2022 at this time, there appears to be positive trends evolving with our plasma business. Additionally, we were happy to learn on Tuesday that the U.S. Court of Appeals for the D.C. Circuit overturned a prior ruling whereby a judge had ruled the plasma companies lack standing to bring suit against the U.S. Customs and Border Protection, who had stopped Mexican nationals from donating plasma with B-1 visas. Now it appears the plasma companies will get to move forward with their lawsuit. Also, as Mark mentioned, we are well positioned with our pharma business and the solutions we have in place in anticipation of the upcoming CMS rule change January 1st, 2023. With that, I would like to turn the call back over to the moderator for questions and answers.

Thank you. And I'll be conducting a question and answer session. If you'd like to be placed in the question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star 1. One moment, please, while we poll for questions. Our first question today is coming from Gary Prestapino from Barrington. Your line is now live.

Thanks. Good afternoon, everyone. A couple of things here. It looks like as I annualize your revenue for Plasma Center, it looks like it's about $80,000 versus $63,000. And by my math, that's still below 2019. Is all of that attributed really to what's going on on the southern border, or is it still more or less a part of that is that people are still getting, not donating as much because of government transfer programs, for instance?

No, Gary, a lot of that is on the southern border. I mean, if you look at it, we think it's about another 10% per month in the average revenue per center per month. So that would be one. And we are still seeing some labor shortages at the donation center. So people are just unwilling to wait long times to donate plasma. So we're making good headway in the industry overall. And there's some good trends that are evolving even through to date. But, you know, I would say we're not hitting on all six cylinders right now from an industry perspective.

Okay. And then you mentioned, you know, the increase in expenses, which obviously we're in an inflationary period here. What are some of the increases in people and investments that you're going to be making? Is it a lot of sales and marketing?

Well, we're... we're, you know, with the CMS rule and to build up our business, it will be continuing to invest on the sales and kind of operation side. We're also investing, continue to invest in technology as we bring these new products and services to light, you know, it's additional development. So it's really across the board and you're right. I mean, inflationary pressures, you know, we're seeing it on insurance. We're seeing it from, you know, we're turning more to a, normalized travel world, T&E is going up. So everything relative to the previous year is going up. Now, I will turn your attention to the fact that, you know, we had some legal settlements there that, you know, made it a little bit higher than normal, where on an adjusted basis, the increase would have been around 15%. Right. But they're still, you know, costs are going to go up.

Is there anything you guys can do on your fee structures to try and mitigate some of this inflationary pressure? This is a question due to my unfamiliarity with the business.

Mark, do you want to take that one?

Yeah, I mean, we tend to a point based on our competition, but at this point, I would say that We're fairly comfortable where we're at. You know, we will raise some of our prices on implementations and some, and, you know, overall management fees. I think that would be the area that we'd raise them in. Okay. Thank you.

And the other thing, Gary, I'd added that is, I mean, even despite the increase in the costs on the SG&A side, I mean, we still have, you know, very good operating leverage that you're seeing flow through the numbers. So the The increase on the top line, you know, is definitely flowing down to the bottom line. Thank you.

We've reached the end of our question and answer session. I'd like to turn the floor back over for any further or closing comments.

Thank you, Kevin. I want to thank everyone for your participation. We appreciate you jumping on the call today, and we'll look forward to speaking to you next quarter.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.