Posabit Systems Corp

Good afternoon, ladies and gentlemen, and welcome to the Puzzlebit Systems Corporation's second quarter 2021 earnings call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, James Carbonara. Sir, the floor is yours.

Thank you, and once again, welcome. With me on this call are Ryan Hamlin, Chief Executive Officer, and Matt Fowler, Chief Financial Officer. I would like to begin by reading the safe harbor statement. This statement is made pursuant to the safe harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. All statements made on this call, with the exception of historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although the company believes that expectations and assumptions reflected in these forward-looking statements are reasonable, it makes no assurances that such expectations will prove to have been correct. Actual results may differ materially from those expressed or implied in the forward-looking statements due to various risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those expressed or implied in the forward-looking statements, please see risk factors detailed in the company's annual report and subsequent filed reports as well as in other reports that the company files from time to time with CDAR. Any forward-looking statements which include in this earnings call are made only as of the date of this call. We do not undertake any obligation to update or supplement any forward-looking statements to reflect subsequent knowledge, events, or circumstances. The company will also be citing adjusted EBITDA in today's discussion. Adjusted EBITDA is a non-IFRS measure used by management that does not have any prescribed meeting by IFRS and that may not be comparable to similar measures presented by other companies. The company defines adjusted EBITDA as net income or loss generated for the period as reported before interest, taxes, depreciation, and amortization, and it's further adjusted to remove changes in fair values and expected credit losses, foreign exchange gains, and or losses and impairments. We believe this is a useful metric to evaluate our core operating performance for both Canadian and U.S. investors. Now I'd like to turn the call over to Ryan Hanlon, Chief Executive Officer and Metfiler CFO. Ryan, please proceed.

Thanks, James, and thanks, everyone, for joining the call today. I've arranged my comments as follows. First, I'm going to highlight some of our high-level financial results. A reminder, all the numbers that we'll be sharing with you today are in U.S. dollars. Next, I'll spend some time providing a brief operational update. and then we'll dive deeper into our financial specifics. We'll conclude the call today with some Q&A. Let's begin with our financial highlights. Q2 was an excellent quarter for Positbit. It was our highest grossing revenue quarter in the history of the company, up 232% year-over-year, finishing at approximately $5 million. Given our growth rate, and with first-half revenue now exceeding our full-year 2020 revenue, we are increasing our revenue guidance by 20%, to $17.5 million to $19 million for the full year ending December 2021, which is an increase of $3 million from our previous forecast. As far as margins, gross profit was over $1.1 million in Q2, an increase of 350% from our Q2 2020 gross profit of $292,000. Our strong financial results, including positive adjusted EBITDA, are enabling us to reinvest for additional growth. In fact, we anticipate we will double our current headcount over the next 12 months to support the hypergrowth we are experiencing. Turning to our operational highlights, as the year progresses, we will continue to focus on the following, growing our merchant base for both payments and point of sale, improving the breadth of our offerings specific around our payments infrastructure, and continuing to forge strong partnerships with industry leaders, all of which will drive our financial performance and set us up for continued hypergrowth during the duration of 2021. In terms of our merchant-based performance, we're seeing strong results across both existing stores and new stores, which has accelerated our growth in 2021. Starting with our existing stores, we're seeing large growth in adoption in terms of the percent of transactions going through our system. Simply put, customers prefer cards over cash. And the same can be said for our merchants. Stores continue to see significantly higher average tickets with card transactions versus cash transactions. Net-net, merchants are actively promoting our solutions to their customers. Regarding new merchants, we had our best quarter ever in terms of newly signed merchants. Among the new stores that joined the platform were two large multi-state operators, each comprising of over 20 locations. We attribute the increase in new stores joining the platform to our reputation in the industry as the payments infrastructure leader. Finally, we are also seeing continued expansion and adoption of our suite of payment offerings. Turning to our next major operational highlight, expanding our product offerings. A few of the new offerings we are currently working on include B2B ACH payments, in-store payment kiosks, more point of sale integrations, loyalty integrations, a true mobile application, payments rewards, invoicing, and much more. What we're aiming for in both the long and short term is for Positbit to offer a comprehensive payments infrastructure. These new offerings will continue to fuel our revenue growth in 2022 and beyond. So that completes two of our three major financial highlight categories. We've now touched on both our merchant base and our offerings. Now let's turn our attention to partnerships. Last quarter we officially partnered with Ola, a next-gen e-commerce platform for cannabis retailers. The partnership features a full integration of the Ola e-commerce platform with Podsbit's point of sale. We also announced a deep partnership with iHeartJane, the premier online ordering and menu platform for cannabis retailers. These integrations cover every facet of the industry, including online menus, loyalty systems, marketing, analytics, and more. We continue to be excited to have both Ola and Jane as our integration partners. Looking ahead in the second half of this year, we are planning to announce several loyalty and marketing partners with our point of sale service. This will involve a two-way integration of customer loyalty between our POS and the marketing service provider. We also have several ongoing partnership discussions focused on expanding our payments infrastructure platform. Cultivating these kinds of opportunities will drive growth, and we look forward to having more to update you in our next call. We're also building out a strong internal team. In April this year, we announced that Matt Fowler was appointed Chief Financial Officer of Positbit USA. Matt brings over a decade of diverse finance and operating skills to Positbit. Also, as we mentioned earlier, we intend to double the size of our team in the next year to support our hyper growth. We'll be hiring across the board for all positions. Our current momentum has poised us for another quarter of extraordinary growth as we continue to increase our offerings, announce new technology partnerships, expand our internal team, and secure new payment and point of sale merchants. The market opportunity remains enormous and we continue to be very excited about the future of Clausewitz in our 2021 results as we prepare for 2022 and beyond. One additional note, we continue to work towards our QB OTC symbol for U.S. investors and expect the listing to be approved no later than November 1st of 2021. There have been several delays that have unfortunately affected all companies who are registering with the OTC right now due to a significant backlog from the pandemic. We will now turn our attention to our specific financial operating results for the period ending June 30th, 2021. I've asked our CFO, Matt Fowler, to review the numbers for you. Matt, take it away.

Thanks, Ryan. Our overall financial and operating results for the quarter increased significantly from the prior year. Payments processed for Q2 grew 232% compared to Q2 of last year. processing over $87.3 million through our payments platform, while gross profits increased approximately 350% year over year to $1.3 million. Gross margins improved to 27% of sales compared to 20% in Q2 2020. Total revenue was approximately $5 million, an increase of 232% from $1.5 million in Q2 of last year. Operating expenses increased in Q2 by 100% to $1.1 million versus the prior year period of $571,000, primarily due to the continued expansion of our internal team. Additionally, our balance sheet strengthened during the quarter with $8.3 million in assets versus $3.6 million for the year ended December 2020. Cash on hand increased by 407% to $5 million versus $1 million at the end of 2020. This was driven by increased volume from our payments business, attributing to significant increase in cash on hand and receivables, as well as approximately $762,000 of cash received from the exercise of outstanding warrants during the period. We are very happy to announce our fourth consecutive quarter of positive adjusted EBITDA in Q2 of $185,000. This is compared to an adjusted EBITDA loss of $240,000 in Q2 of 2020. That's it for me, Ryan. I'll hand it back to you to conclude our call.

Thanks, Matt. In conclusion, I now want to reiterate that we are increasing our 2021 guidance. Specifically, Positbit provides the following revenue, gross margin and transactional guidance for the full year of 2021. Total revenue of $17.5 million to $19 million, gross margin between 28 and 32 percent, and transactional sales of $350 million to $375 million. This represents a 20 percent increase in guidance for revenue and transactional sales from last quarter's prior guidance. POSiVet will also expand beyond the current 14 U.S. states and add five to eight new states primarily on the East Coast that will be fully supported by our POSBIT payments infrastructure. Thank you for your attention on this call. I'll now move into the Q&A portion of the conference. At this point, operator, we're opening up the floor for questions.

Thank you. Thank you, ladies and gentlemen. The floor is open for questions. If you have any questions or comments, please indicate so now by pressing star 1. Lastly, while posing your question, please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. Once again, that's star one if you have a question or a comment.

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Once again, ladies and gentlemen, that's star one if you have a question or a comment.

Okay. Thank you, ladies and gentlemen. This does conclude today's conference call.

You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.