Posabit Systems Corp

Good day, ladies and gentlemen, and welcome to the Positbit Systems Corporation third quarter 2022 earnings call. All participants have been placed on a listen-only mode, and the floor will be open for 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, operator. With me on this call are Ryan Hamlin, Chief Executive Officer, and Matthew Fowler, Chief Financial Officer. I would like to begin the call 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 Included in this call are made only 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 may 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 meaning 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. It's further adjusted to remove changes in fair value and expected credit losses, foreign exchange gains, and or losses and impairments. The company believes this is a useful metric to evaluate its core operating performance. Now, I would like to turn the call over to Ryan Hamlin, Chief Executive Officer. Ryan, please proceed.

Thank you, James, and welcome, everyone. As a reminder, all numbers that I'll be talking about today are in US dollars. For the third quarter, we delivered strong revenue growth, both year over year and sequentially. We had our first 10 million plus revenue quarter, finishing at 10.3 million. Revenue was up 62% over the third quarter of 2021, and 26% over this year's Q2 results. Importantly, we remain on track to achieve our full year guidance for 2022, and are continuing to build upon our success for long-term growth into 2023 and beyond. I know that I say this on every call, but it's important to stress that Positivit has doubled or nearly doubled our revenue each year since 2017 and are on track to continue this trend in 2022. We set a record for monthly payments revenue in each month in Q3, and this trend has continued into Q4. For the third quarter, we once again significantly exceeded the cannabis industry growth rates, which still remain in the single digits or negative growth for many, as well as outperformed all our competitors. Further, we continue to expand our partnerships, evolve and improve our platform, and license our geographic footprint to reinforce the long-term prospects for our business. This is in stark contrast to others in the industry. Now let's discuss what we're seeing in the cannabis market. As I mentioned already, many of our competitors are struggling. Major restructuring, employee layoffs, and top management changes are driving what was once an extremely high industry valuations in both the private and public sector to what are now far lower valuations today. The overall environment is increasingly favorable for companies like Positbit, who have a track record of demonstrating great results over five years have capital in the bank, and are moving towards full EBITDA profitability. It is times like these that separate the companies that have real results, like ours, from those whose value is manufactured by overly broad promises, but fail when it comes to results. As a result of this, it will be a time of continued execution and growth for Positivit, as we capture more and more of the market during this distressed period for many in the industry. This quarter, we continue to see the number of merchants using POSBIT grow, and they are increasingly embracing the idea that a robust, integrated payments and point of sale solution are crucial to the survival of their business. Across the industry, the average sales ticket continues to decline slightly quarter over quarter. And with new retailers emerging, competition is increasing. Merchants demand open technologies like POSBIT that can support their business. provide them the software tools they need, while also offering an open platform that allows merchants the choice of any third party solution they desire. The positive platform provides complete freedom to the merchant. Earlier this month, voters in Maryland and Missouri approved legalization measures during the election cycle, bringing the total to 21 states and the District of Columbia that now allow recreational use cannabis. The market opportunity is clearly expanding and Pozibit is well positioned to enter these new markets. Now let's shift our focus to new business that was created in Q3. As you all may recall, in September, we signed the largest partner deal in the history of our company, a four-year, $20 million guaranteed software license agreement with a large cannabis technology provider for loyalty payments to Pozibit. This created a significant new stream of guaranteed reoccurring revenue over at least the next four years and quite possibly beyond that. Even more importantly, our investors will be pleased to know that because it is a license agreement for software that is already developed, the revenue essentially falls to the bottom line, creating $5 million of non-dilutive capital each year for the next four years. All in all, the economics of this agreement are highly attractive for the company. It is important to note that this deal was only possible because Positivit is an open platform. meaning all cannabis technology companies in the industry are welcome to integrate with Positbit for both our point of sale and our payments platform. This open platform approach is key, is a key strategic differentiator in the commercial market, and just as important, a key driver of value for our shareholders. In terms of merchant agreements, we now service more than 500 merchants, which is an increase of nearly 70% since the start of the year, with new locations being added regularly. including several large MSOs or multi-state operators. Our 2022 goal of entering eight new states will soon be achieved. We began the year with operations in 15 states. We are now live in 21 states and are under contract with merchants with three more, which are scheduled to go live before year's end. As we head into 2023, we look forward to adding many more states to our existing list, with a focus primarily on the eastern seaboard. Earlier this month, we launched and showcased Positbit 2.0, the newly designed version of our Positbit point of sale client at MJBiz, one of the industry's largest conferences. The feedback was overwhelmingly positive. It is our most intuitive experience yet with a thoughtfully redesigned user interface, enhanced front end features, new end user centric improvements to its recommendations and preferences platform, and enhanced reporting and insights on the back end. Overall, It elevates the day-to-day experiences of bud tenders, managers, and owners, whether they are a small retailer or a growing MSO. Positive 2.0 is now live with a handful of beta customers, and we plan to roll it out to our entire customer base over the next month. This morning, we announced our new integration of our platform with OnFleet, the largest cannabis delivery company in the market today. OnFleet is the trusted last-mile delivery solution for thousands of companies across dozens of industries, including cannabis. Importantly, the integration is two-way, meaning all delivery statuses are reflected in both systems to provide a real-time ability to track consumer deliveries. Through this relationship, Positive now fully supports consumer delivery capabilities for all states that allow for this. More information about this newly formed partnership can be found in today's press release. I will briefly touch on safe banking since I assume most of you are tracking this legislation. All indications are pointing to the passage of some form of safe banking in 2023. Given the split Congress, some believe this may occur in the next month during the lame duck session. We do not believe that is the case. However, we are very excited and supportive of the majority of the components in the most recent version of safe banking. Positbit will be in a great position to continue to support our current merchants with best-in-class payment technologies, as well as take advantage of a significant increase in the percentage of transactional sales. We continue to track state banking closely and have already set up the ability to provide credit card processing if and when it becomes available to the industry. Before I hand it off to Matt to go over our Q3 financials in detail, I would like to briefly share some information about our overall capitalization. At Positit, we have raised just over 11 million of external capital over the last seven years since the company was founded in 2015. We have used that limited capital to build a business that is now approaching 40 million in annualized revenue, which is a testament to our team's ability to execute and generate results. Our business continues to run lean with just under 60 employees and we do not foresee a need to increase staffing significantly to support the next step up in our growth. We ended the third quarter with $8.2 million in cash and minimal debt. We remain focused on growing the top line and achieving adjusted EBITDA profitability. Equally important, we are also focusing on maintaining a strong balance sheet to support our goals as the largest payment infrastructure provider in the cannabis industry. With that, I'll now turn the call over to Matt Fowler, our CFO, for a more detailed review of our financial results for the quarter ending September 30, 2022. Thank you, Ryan.