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 Payside, Inc. second quarter 2025 earnings conference call. After the speaker's remarks, there'll be a question and answer session. You will be placed into question queue by pressing star 1 on your telephone keypad. As a reminder, this conference call is being recorded. The comments on today's call regarding Payside's financial results will be on a gap basis unless otherwise noted. PaySign's earnings release was 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 This 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 November 5, 2025. Please see PaySign's second quarter 2025 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, President and CEO.

Please go ahead. Thank you, Kevin, and good afternoon, everyone. Thank you for joining us as we review our second quarter 2025 results. I'm Mark Newcomer, President and CEO of PaySign. Joining me today is our CFO, Jeff Baker, along with Matt Turner, President of Patient Affordability, and Matt Lanford, our Chief Payments Officer, who will be available for Q&A. This was another standout quarter for PaySign. Earlier today, we reported record revenue of $19.1 million. up 33% compared to the second quarter last year, and a meaningful improvement in gross margins, raising 870 basis points to 61.6%. Even with one-time expenses of about $300,000 related to the onboarding of 123 transitioning plasma centers late in the quarter, we doubled adjusted EBITDA to $4.5 million, up 102% from second quarter 2024, and nearly doubled net income to $1.4 million up 99% from second quarter 2024. Our patient affordability business is driving much of this momentum. Revenue grew 190% year over year to $7.75 million, and revenue per program rose over 83%, reflecting the strong confidence our pharmaceutical partners place in our solutions as claims process grew by more than 80%. We launched seven programs this quarter, 21 in the first half of the year, already surpassing last year's pace of 18 programs launched, exiting the quarter with 97 active programs, while expecting another 30 to 40 programs prior to year end. Our pipeline remains robust, with demand accelerating from both new and existing clients, where over half are transition programs, which ramp very quickly. The fact that existing clients are expanding their programs with us is one of the strongest validations of our ability to scale, deliver results, and solve real industry challenges. In order to meet this growing demand, we are planning to open a new state-of-the-art patient services contact center during the third quarter. This facility will increase our support capacity fourfold, ensuring our ability to effectively scale operations and ensure the highest level of service for both pharmaceutical companies and patients. One of our biggest differentiators responsible for this surge in demand is our proprietary dynamic business rules technology. DBR operates in real time during the point of sale adjudication process, helping manufacturers and patients overcome tactics used by copay maximizers. ensuring assistance reaches patients as intended. It's innovation where few people see it, inside the transaction itself, and it's making a meaningful difference by generating significant savings for pharmaceutical manufacturers. Overall, we're not just moving payments. We're reshaping how financial support is delivered within healthcare, removing financial barriers to treatment and providing measurable savings to patients in need and pharmaceutical manufacturers. We remain extremely pleased with the performance of our patient affordability business and expect its continued growth trajectory well into the 2026 and beyond. In our plasma compensation business, revenue was 10.7 million, down 4.7% year over year, but up 14.2% sequentially. We ended the second quarter with 607 centers, having onboarded 123 of the 132 centers awarded to us in mid-June. bringing our market share to approximately 50%. We expect to onboard an additional 10 to 13 centers in the second half of the year. We were recently informed that a Plasma customer will be closing 22 underperforming donation centers as of August 15th. We believe that a majority of those donors will continue to donate at nearby centers. Additionally, an existing client has also informed us of their intention to open six to eight new centers in the next 10 months, as well as an additional six to eight centers in the following year. As we previously noted, the plasma business continues to face headwinds driven by an oversupply of source plasma and increased collection efficiencies at the center level. While these pressures will likely persist through 2025, we anticipate a return to organic center level growth to start during 2026 as the plasma collection cycle improves. In the meantime, we're confident the addition of 132 newly awarded centers, 123 that went live late June, and nine that went live late July will return the business to year-over-year revenue growth. This positions us exceptionally well to capture additional upside when the industry enters its next growth cycle. A major part of our strategy is to expand our value proposition in plasma with new software solutions. In May, at the International Plasma Protein Congress held in Warsaw, Poland, we introduced a software as a service engagement platform, including a donor app, a plasma-specific CRM, and a donor management system. The response has been overwhelmingly positive, both domestically and internationally, as we are in discussions with plasma collectors and device manufacturers. This is an exciting step in evolving from a trusted payments partner to a broader technology provider for the industry. We look forward to keeping you apprised of our progress in the coming quarters. To close, Q2 was another quarter of strong execution and innovation. We're scaling efficiently to meet the growing demand, expand our presence in both patient affordability and plasma with solutions that are built for impact. I'm incredibly proud of our team's focus and determination, and I'm excited about the opportunities ahead. We remain confident in our trajectory and committed to delivering long-term value for our shareholders. With that, I'll turn it over to Jeff for a closer look at the financials. Jeff.

Thank you, Mark. Good afternoon, everyone. As Mark said, we had an exciting second quarter with a lot of positive activity across both major areas of our business. We had some really nice wins in our patient affordability business that will enable us to continue the momentum we have experienced in the first half of the year into the second half of the year and into 2026. We had the addition of 132 plasma centers, 123 of which went live late in the quarter, that should provide additional momentum through the end of this year and into 2026 as the oversupply of inventory levels normalize. We cannot be more excited about the prospects of our business for the remainder of this year and throughout 2026. I encourage everyone to read our 10Q for more details about our financial results which is expected to be filed tomorrow morning before the market opens. Now turning your attention to the results for the second quarter. Results were in line with the guidance we provided last quarter despite unexpected, pleasant, upfront costs we absorbed to launch the 123 new plasma centers late in the quarter. These costs far outweigh the slight revenue benefit we received during the quarter, but we expect that to swing the other way in the second half of the year. Second quarter 2025 total revenues of $19.1 million increased $4.7 million or 33.1%. Plasma revenue declined 4.7% to $10.7 million and our revenue per plasma center declined to $7,098. We added 123 net plasma centers exiting the quarter with 607 centers. Gross dollars loaded to cards decreased 3.7%, total number of loads decreased 4.6%, and gross spend volume decreased 6.3%. Moving to our pharma patient affordability business. Second quarter pharma revenues of $7.8 million was up 190% and accounted for 40.6% of quarterly revenues. This is a significant increase from the 18.7% of revenue that pharma represented during the same period last year. We added seven net programs exiting the quarter with 97 pharma patient affordability programs and grew the number of claims processed by over 80% versus the same period last year. Gross profit margin for the quarter was 61.6% versus 52.9% during the same period last year. our gross profit margin was negatively impacted by the upfront costs that were just mentioned. SG&A for the quarter, excluding depreciation and amortization and stock-based compensation, increased 35.4% to $7.2 million, with total operating expenses increasing 38.3% to $10.3 million. Having made significant investments in our employee base over the past year to support the continued growth in our businesses, Compensation and benefits increased just under $1 million. We exited this quarter with 191 employees versus 149 employees during the same period last year. Stock compensation increased $284,000 while we started seeing the operational benefits from our gamma transactions as our capitalized software costs declined by $369,000. Depreciation and amortization expense increased $680,000 due to the continued enhancements in our technology platform. Net income for the quarter was $1.4 million or two cents per fully diluted share versus $697,000 or one cent per fully diluted share for the same period last year. Negatively impacting the per share amounts was lower interest income related to the implied interest expense on future cash payments for the gamma acquisition. lower interest rates and average bank balances primarily from our plasma customers at our sponsor bank, higher income tax provision of $655,000 or 32.1%, reflecting the impact of discrete items related to the appreciation of our stock price during the quarter, and higher diluted shares outstanding related to in-the-money options. Second quarter adjusted EBITDA, which is a non-gap measure that adds back stock compensation to EBITDA, was $4.5 million or $0.08 per diluted share versus $2.2 million or $0.04 per diluted share for the same period last year. The fully diluted share count for the quarter used in calculating per share amounts was $57.9 million and $55.9 million, respectfully. Regarding the health of our company, we exited the quarter with $11.8 million in unrestricted cash and zero debt. The operational benefits of our gamma acquisition are beginning to show up in our unrestricted cash balances, which increased by just under $1 million from the end of the year and $4.9 million from the first quarter. We now expect our annual cash cost savings from this acquisition to be at the high end of the $4 to $5 million guidance we gave at the end of last quarter. And as Mark mentioned, we couldn't be more excited about the early sales momentum we are building from existing and non-existing plasma companies. Now turning your attention to our revised guidance for 2025, which now incorporates Q2 actual results. We are raising our revenue guidance to be in the range of $76.5 million to $78.5 million, reflecting year-over-year growth of 32.7% at the midpoint. Plasma is expected to make up approximately 56% of total revenue, representing flat year-over-year growth, While pharma patient affordability revenue is expected to make up approximately 40.5% of total revenue, representing year over year growth of over 145%. Despite the seasonality we typically see in our patient affordability business and industry trends in our plasma business, we now forecast revenue to grow in the second half of the year compared to the first half of the year. Full year gross profit margins are expected to be between 61% and 62% as we bring up a new state of the art Patient Services Contact Center during the third quarter to support the growth in our business. We continue to expect operating expenses to be between $41 million and $43 million with depreciation and amortization expense of approximately $8.4 million and stock-based compensation of approximately $4.4 million. Interest income is estimated to be approximately $2.5 million, reflecting the applied interest expense for future gamma payments and lower bank balances from our plasma customers. Taking all the factors above into consideration, we continue to expect net income to be between $6 million and $7 million for the year, or 10 cents to 12 cents per diluted share, but that may fluctuate depending on our effective tax rate. Adjusted EBITDA is expected to be in the range of $18 million to $20 million, or 31 cents to 35 cents per diluted share. The diluted share count for the year is estimated to be 57.5 million shares. For the third quarter of 2025, we expect total revenue to be in the range of $19.5 million to $20.5 million, reflecting continued strength for our patient affordability business and the contribution of the nine additional plasma centers added July 21st, offset by the reduction of 22 underperforming plasma centers on August 15th. We expect to exit the third quarter with approximately 595 plasma centers. We expect plasma revenues to be approximately 60% of revenue and patient affordability to be approximately 37% of revenue. Gross profit margins are expected to be approximately 59% due to the higher mix of plasma revenue and the launch of the new patient services contact center. Operating expenses are expected to be between $10.5 million and $11.5 million of which depreciation and amortization will be approximately $2.2 million and stock-based compensation will be approximately $1.4 million. Adjusted EBITDA is expected to be in the range of $4.5 million to $5.0 million or approximately 23.1% to 24.4% of revenue. With that, I would like to turn the call back over to Kevin for questions and answers.