Paysign, Inc.

Hello, and welcome to the PaySign second quarter 2022 earnings conference call. As a reminder, this conference is being recorded. This call may include comments that may be deemed to be forward-looking statements under the 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 on this call 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 margin, operating expenses, depreciation and amortization, stock-based compensation, adjusted EBITDA, plasma revenues, new plasma center additions, pharma revenues, and new pharma copay customer additions 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 by 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 our product 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 law and regulations, changes in laws, regulations, credit card association rules, or other industry standards affecting our business, that a data security breach could expose us to a liability and protracted in cost 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 conference call also includes comments about 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 Mr. Mark Newcomer, CEO. Please go ahead.

Good afternoon, everyone, and welcome to PaySign's second quarter 2022 earnings call. I am Mark Newcomer, Chief Executive Officer, and Jeff Baker, our Chief Financial Officer, is also with me this afternoon. First, I am delighted to say that we have finished the second quarter with a level of optimism that we haven't experienced since pre-COVID times. Earlier today, we announced our second quarter revenue was $8.6 million, an increase of $1.9 million, or 29% over Q2 2021. First and foremost, we added 62 new plasma centers this quarter. The majority of these centers being transition centers, all in various stages of maturity, were added very late in the quarter with very little revenue contribution. We ended the quarter with a total of 437 centers utilizing our services. Additionally, we participated in an RFP sponsored by one of the two largest plasma collection companies in the U.S., which we currently do not provide any services. In early July, the company informed us that we were selected to be a supplier. We expect to begin onboarding this new client in early 2023. We also continue to see new entrants in the plasma collection space, and during this quarter, we went live with the initial center for three of these new entrants. As our plasma clients continue to execute on their aggressive growth strategies, we remain confident in our continued growth prospects for this segment. Looking at the remainder of the year, we expect to onboard an additional three to four centers each month for a total of 90 to 95 new centers in 2022. Throughout the quarter, we continue to see our load and spend trends improve as the number of plasma donations increased, as well as seeing an increase in average donor compensation. Funds loaded on cards was up 40.5% over second quarter last year and up 16.1% over last quarter. The first quarter spend volume increased 45.7% from last year and was up 26.8% over last quarter. Adding to our plasma growth, we launched one new patient affordability program in the second quarter. Our pharmacy and medical claims benefit volumes continue to increase month to month as programs mature and the pharmaceutical products that and spread margin. We have been successful in providing data-driven insights and solutions to current and future clients, helping to drive deep conversations that we are confident will lead to new program wins. The second quarter offered additional opportunities to participate in RFPs and submit bids for new business, both through our hub partners and direct-to-pharmaceutical manufacturers. We are on track to launch additional programs this year and have a strong pipeline for the remainder of the year and into next. We mentioned on a past earnings call that we signed a processing deal with Spentra, an earned wage payroll provider. I am pleased to say that we are now live with this new client. Not only does this client expand our product offering into the payroll card space, but with this launch, we completed our direct connect with MasterCard. Our MasterCard connection allows us to offer greater choice to our clients by adding an additional payments network to our offerings. Additionally, with this connection, we are now enabled to support not only payroll, but gift, general purpose reloadable, corporate incentive, and debit on the MasterCard brand. The MasterCard connection also enables EMB, contactless, and tokenization support for our products. We are very excited by the opportunities that this new connection with MasterCard will bring. Finally, you may have seen the announcement in 8K earlier today with the resignation of Board Director Daniel Spence and the appointment of Board Director Matthew Lanford, Paysign's President and COO. Dan was one of the original founders of the company and previously held the position of CTO. He was instrumental in getting us to where we are today and we can't thank him enough for his leadership and technical direction. We are supportive of his decision to hand the baton to Mr. Lanford and spend more time with his family in Australia. Everyone here at PaySign wishes him the best of luck in his future endeavors. We welcome Matt to our board, and if you are not familiar with Matt's bio, I highly encourage you to visit our website at www.PaySign.com. Matt has been a driving force within the organization for over three years and has more than 30 years of experience in the payments industry. With that, I'll pass it over to Jeff to give you more insight in our financials for the quarter.

Thank you, Mark. Good afternoon, everyone. As Mark pointed out, we are pleased with second quarter operating results and the foundation we have built for the remainder of 2022 and into 2023. Once again, revenue, loss from operations, EBITDA, adjusted EBITDA, and transactional trends all improved year over year. It is clear the inflationary environment may be negatively impacting our cardholder's wallet as the number of loads per average donation center increased 14% from the first quarter of 2022 and 16% over the second quarter of 2021. Given the large number of plasma donation centers that were added in the second half of June, our expenses and cash usage during the quarter were higher than expected as we quickly ramped up these centers with very little revenue contribution to offset this investment. As a result, our monthly revenue per plasma center was depressed at $6,625. To get a read-through of the impact these centers will have going forward, in July, our monthly revenue per center was over $7,000, eclipsing the $3 million mark for July plasma revenues. I'm also pleased to announce that we engaged Moss Adams LLP during the quarter as the company's independent registered public accounting firm for the fiscal year ending December 31, 2022. Moss Adams is a well-regarded public accounting firm with a great deal of experience auditing payment companies. 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 second quarter of 2022 relative to the second quarter in 2021. Total revenues of 8.6 million increased 1.9 million or 29% versus the year ago period. Of that amount, plasma revenue was 7.8 million, an increase of 31%. Pharma revenue was 773,000, an increase of 21%. And other revenue was 19,000, a decrease of 69%. The average revenue per month per plasma center with $6,625 versus $5,633 last year. We added 62 centers during the quarter, ending with 437 centers versus 356 centers at the end of Q2 2021. Also of note, we have added an additional six centers since the end of June, bringing our total number of donation centers to 443. Gross profit margin for the quarter was 54.6% versus 47.4%, an increase of over 7 percentage points. SG&A increased 22.5% to $4.3 million, and total operating expenses were up 21.5% to $5 million. Adjusted EBITDA, which adds back stock compensation to EBITDA, was $930,000, or 2 cents per diluted share, and marks the fifth consecutive quarter of positive adjusted EBITDA. Regarding the health of our company, we exited the quarter with $6.5 million in unrestricted cash and zero debt, which is a decrease of $860,000 from our fourth quarter ending cash balance. The decline was mainly driven by upfront costs required to launch the new donation centers I mentioned and the timing of payables related to our pharma vendors. Our adjusted current ratio, which excludes restricted cash, was 2.2 times versus 2.1 times at the end of the fourth quarter. Now turning your attention to our adjusted guidance for the remainder of the year. We now expect our total revenue to grow 27.5% over 2021, coming in at the high end of our guidance range of $35.25 million to $38.35 million, with upside to that range if some of the headwinds around the tight labor market at donation centers and Mexican nationals with tourist visas being allowed to donate plasma abate. Plasma is estimated to make up about 92% of total revenues for 2022. We expect Q3 2022 total revenue to be approximately $10.2 million and Q4 2022 total revenue to be approximately $10.5 million. despite two pharma prepaid programs ending in mid-November. Full-year gross profit margins are expected to be between 56% and 57%, with operating expenses expected to be approximately $22 million as we continue to invest in people and technology and experience higher costs in insurance, travel and entertainment, and other inflationary pressures. Within total operating expenses, Depreciation and amortization is expected to be approximately $3 million, while stock-based compensation is expected to be approximately $2.3 million. Adjusted EBITDA is expected to be $4.7 million to $5.3 million, with Q3 2022 adjusted EBITDA being slightly higher than Q4 2022 due to the end of the pharma prepaid programs mentioned above and the sequential increases in operating expenses. Lastly, with operating losses narrowing and interest income increasing due to higher bank balances and interest rates, we expect our tax provision to be approximately $55,000 for 2022. With that, I would like to turn the call back over to the moderator for questions and answers.