Paysign, Inc.

Good afternoon, my name is Kevin and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Paysign Inc. 3rd Quarter 2024 Earnings Conference Call. After the speaker's remarks, there'll be a question and answer session. As a reminder, this conference is being recorded. If you'd like to be placed into question queue, you may press star 1 at any time. The comments on today's call regarding PaySign's financial results will be on a GAAP basis unless otherwise noted. PaySign's earnings release will be disseminated to the SEC earlier today and can be found on the investor relations section of our website, PaySign.com, which includes reconciliations of non-GAAP measures to GAAP reported amounts. Additionally, as set forth in more detail in our earnings release, I'd like to remind everyone that today's call will include forward-looking statements regarding PaySign's future performance. Actual performance could differ materially from these forward-looking statements. Information about the factors that could affect future performance is summarized at the end of PaySign's earnings release and in our recent SEC filings. Lastly, a replay of this call will be available until February 5th, 2025. Please see PaySign's third quarter earnings call announcement for details on how to access the replay. It's now my pleasure to turn the call over to Mr. Mark Newcomer, CEO. Please go ahead.

Thank you, Kevin. Good afternoon, everyone, and welcome to PaySign's third quarter earnings call. I'm Mark Newcomer, President and CEO of PaySign. Joining me today is Jeff Baker, our Chief Financial Officer. Later during our Q&A session, we will also be joined by Matt Turner, our President of Patient Affordability, and Matt Lanford, our Chief Payments Officer. Today, we announced our financial results for the third quarter of 2024. And I'm pleased to report that PaySign has demonstrated meaningful growth in both revenue and profitability consecutively and year over year. Revenue for the third quarter was $15.3 million, an increase of 23% compared to the same period in 2023, and a 6.5% increase from the prior quarter. Our adjusted EBITDA rose 20.6% to $2.8 million, or $0.05 per fully diluted share, up from $2.4 million to or $0.04 per fully diluted share a year earlier. Gross margins also improved significantly, increasing by 440 basis points to 55.5% compared to 51.1% in the same period last year, driven largely by the expansion of our patient affordability business. Revenue from our patient affordability business grew by an impressive 219% year-over-year, reaching 3.3 million in the third quarter, up from roughly 1 million in the same quarter last year. Claims processed rose by 430% compared to the same period last year. This marks the fourth consecutive quarter of triple-digit year-over-year revenue growth for patient affordability, which continues to be a major contributor to our overall success. We finished the quarter with 66 patient affordability programs with additional launches continuing throughout the remainder of the year. We are encouraged by the trend of existing clients bringing additional programs to us, which not only shortens the sales cycle, but also reduces the program acquisition cost while creating immediate revenue opportunities as many of these additional programs are transition programs. In the fourth quarter, we expect to onboard several programs from both new and existing clients, including a new Cornerstone account, one of the world's largest pharmaceutical companies. Our forward momentum positions us well for continued growth throughout the remainder of this year and well into 2025. Our pipeline remains strong with a mix of pharmacy-based retail specialty and medical benefits programs, highlighting our strategy to diversify revenue streams. Our current program composition is weighted towards specialty drugs with an emphasis on oncolytics. Programs launched in the third quarter of this year gave us additional claim volume in the retail space, something we believe will drive further growth as we pursue new opportunities in this market. Our plasma donor compensation business faced some challenges this quarter with hurricanes and staffing shortages affecting operations in our client centers. Despite these headwinds, revenue grew to $11.4 million, representing a 3.4% increase year over year and a 1.5% increase from the second quarter. We did experience a slight decrease in revenue per center to $7,991 this quarter versus $8,041 last year relating to these factors. We added one plasma center during the quarter, bringing our total to 478 centers, and we plan to add another two centers by the end of the year as new center openings remain muted. While growth in the plasma business has been tempered by external forces outside of our control, we remain committed to enhancing the productivity and efficiency of our services to the centers. Overall, we are pleased with our performance in the third quarter, which was driven primarily by outstanding growth in our patient affordability business. This segment is on its way to becoming our primary revenue driver. We believe the investments we are making in this area will yield substantial long-term growth and create significant shareholder value. Our commitment to developing innovative FinTech solutions that address key challenges in healthcare payments, particularly patient affordability, remains strong. We are confident that combined with our ongoing initiatives in plasma compensation and new opportunities in the evolving payments landscape, we are well positioned to deliver sustainable long-term value for our shareholders. I want to extend my gratitude to each member of the Paysign team for their relentless dedication and hard work. It is your commitment that drives our success. I will now pass the call over to Jeff, who will provide further details on our financial performance for the quarter.

Thank you, Mark. Good afternoon, everyone. As Mark said, we executed on another good quarter. Plasma donor compensation revenue increased $378,000 versus the same period last year, or 3.4%. to $11.44 million. This was primarily driven by increases in the number of plasma centers, 478 versus 462, and to a lesser extent, modest increases in gross dollar cards loads of 1.8% and gross spend volume of 0.4%. This was offset by a modest decline in the average load amounts, net-net, the year-over-year average monthly revenue per plasma center declined slightly to $7,991 versus $8,041. As Mark mentioned, our center's experience reduced availability related to weather and staffing shortages, and we expect these same issues to have an impact on the growth of our Q4 plasma donor compensation revenue. Free cash flow from this business remains strong which is helping to support the rapid growth in our pharma patient affordability business. Pharma patient affordability revenue increased $2.25 million or 219% to $3.27 million, primarily driven by the addition of 32 net new pharma patient affordability programs launched over the past 12 months. Pharma patient affordability revenue equated to 21.5% of total revenue during the quarter versus 8.3% during the same period last year. We exited the quarter with 66 active pharma patient affordability programs, an increase of 23 programs since the end of 2023. Other revenue increased $230,000, or 73.5%, to $542,000 due to the growth in our payroll, retail, and other corporate incentive businesses. We continue to look for ways to improve the profitability of this other revenue stream, which lacks the scale of our other businesses and experiences higher fraud costs as a percentage of revenue. As in previous calls, with all the details we provided in the press release and that will be available in our 10Q filing tomorrow morning, I will simply hit the financial highlights for the third quarter of 2024 versus the same period last year. Third quarter 2024 total revenues of $15.3 million increased $2.9 million or 23% versus the same period last year. Gross profit margin for the quarter was 55.5% versus 51.1% during the same period last year, an improvement of 440 basis points. SG&A for the quarter increased 32.4% to $6.2 million, with total operating expenses increasing 35.6% to $7.8 million. $520,000 of the operating expense increase was related to higher depreciation and amortization costs. We continue to make significant investments in both IT and personnel to support the continued growth of our businesses, especially our patient affordability businesses. We exited this quarter with 164 employees versus 112 during the same period last year. For the quarter, we posted a net income of $1.4 million or $0.03 per fully diluted share versus net income of $1.1 million or $0.02 per fully diluted share for the same period last year. We recorded a tax expense of $54,000 during the quarter for an effective tax rate of 3.6%. The third quarter adjusted EBITDA, which is a non-GAAP measure that adds back stock compensation to EBITDA, was $2.8 million or 5 cents per diluted share versus $2.3 million or 4 cents per diluted share for the same period last year. This equates to a 20.6% year-over-year growth in our adjusted EBITDA. The fully diluted share count for the quarters used in calculating the per share amount was 56.1 million shares and 53.5 million shares, respectfully, which reflects additional in the money options that were previously out of the money. The adjusted EBITDA margin declined slightly to 18.5% versus 18.9% during the same period last year due to investments being made to support our patient affordability business. Regarding the health of our company, We exited the quarter with $10.3 million in unrestricted cash and zero debt, despite the use of $360,000 during the quarter to repurchase shares. This was equal to the adjusted unrestricted cash balance of $10.3 million at the end of 2023 and an increase of $1.7 million from the adjusted unrestricted cash balance of $8.8 million at the end of Q2 2024. The adjusted amounts take out the impact of accounts receivable, accounts payable, and cash collections related to pass-through invoicing of our patient affordability business. As discussed in the past, patient affordability customers are invoiced at the end of the period to reimburse funds used to cover related copay amounts for monthly patient affordability claims. The changes in these balances do not equate to the revenue per claim we charge the pharmaceutical companies for paying such claim amounts. We expect that as the business grows, so will fluctuations in AR, AP and unrestricted cash. Restricted cash increased $7.9 million to $100.3 million from December 31st, 2023, primarily due to increases in customer deposits for our plasma and pharma customers of $8.5 million offset by a decrease in funds on card of $556,000. Restricted cash are funds used for customer card funding and pharmaceutical claims with a corresponding offset under current liabilities. We repurchased 100,000 shares of our common stock in a private purchase at an average cost per share of $3.60. At the end of the quarter, $3.5 million remained outstanding under our share repurchase program. Now turning your attention to our guidance for the remainder of the year. We continue to expect total revenues to be in the range of $56.5 million to $58.5 million, reflecting year-over-year growth of 20% to 24%. Four-year growth profit margins are still expected to be between 54% and 55%, reflecting increased revenue contribution from our pharma patient affordability business. Operating expenses are still expected to be between $30 million and $32 million, as we continue to make investments in people and technology to support the growth of our business. Of this amount, depreciation and amortization is expected to be approximately $6 million, while stock-based compensation is expected to be approximately $2.6 million. As disclosed in the legal section of our 10 and in our 8 released earlier today, we expect to have one-time legal expenses during the fourth quarter related to the settlement of our class action and derivative lawsuits. This expense was not anticipated at the time we provided financial guidance but we still anticipate our operating expenses to be within the previous guided ranges. Given the continued increases in our average daily balances of unrestricted and restricted cash and the current interest rate environment, we expect interest income of approximately $3.1 million. We expect full-year tax rate to be between 19% and 19.5%, and our fully diluted share count outstanding to be between $55.5 million and $56 million. Taking all of the factors above into consideration, we expect net income to be in the range of $3 to $3.5 million, or approximately 6 cents per diluted share, and adjusted EBITDA to be in the range of $9 million to $10 million, which is 15% to 17% of total revenues, or 16 to 18 cents per diluted share. With that, I would like to turn the call back over to Kevin for question and answers.