Posabit Systems Corp

Welcome to Positbit Systems Corporation second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Oscar Dahl, Chief of Staff at Positbit. Oscar, you may begin.

Thank you, Operator. With me on this call are Ryan Hamlin, Chief Executive Officer, and Chelsea Bolander, Plausibus Corporate Controller. 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 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 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 at 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, adjusted revenue, and adjusted gross profit into the discussion. Adjusted revenue, adjusted gross profit, and adjusted EBITDA are non-IFRS measures used by management that do not have any prescribed meaning by IFRS and may not be comparable to similar measures presented by other companies. The company defines adjusted revenue as gross revenue minus license support revenue plus actual licensing cash received as part of POSBIS licensing deals. The company defines adjusted gross profit as adjusted revenue less company cost of goods sold. The company defines adjusted EBITDA as net income or loss generated for the period as reported before interest, taxes, depreciations, and amortization and further adjusted to remove changes in fair values and expected credit losses, foreign exchange gains, and or losses and impairments. The company believes these non-IFRS measures are useful metrics to evaluate its core operating performance and uses these measures to provide shareholders and others with supplemental measures of its operating performance. The company also believes that securities analysts, investors, and other interested parties frequently use these non-IFRS measures in the evaluation of companies, many of which present similar metrics when reporting their results. We caution that adjusted revenue, adjusted gross profit, and adjusted EBITDA are not substitutes for gross revenue, gross profit, or profit loss, respectively. Now, I would like to turn the call over to Ryan Hamlin, Chief Executive Officer. Ryan, please proceed.

Thanks, Oscar, and welcome, everyone. As a reminder, all numbers that we'll be talking about today are going to be in U.S. dollars. Our Q2 results had several firsts for Positiv. It was the first time that we've been both adjusted EBITDA positive, finishing the quarter with nearly $100,000 in adjusted EBITDA profit, but we also finished the quarter with positive free cash flow, adding $200,000 more to our cash on hand. This is a very significant accomplishment for Positiv. We not only have righted the ship from the challenges over the last 12 months, but we are now growing in our cash flow positives. In Q2, we saw solid quarter-over-quarter growth across the board. Revenue was up 13%, payments revenue was up 24%, gross margin dollars were up 47%, and our overall gross margin percentage grew to a historic record of 59%, which is representative of not only the continued focus we are putting on controlling our costs, but also a nice increase in quarter-over-quarter revenue. It is important to note when looking at our year-over-year comparisons, our gross revenue decreased, but our gross margin percent increased. I bring this up so they understand why gross revenue was higher in 23 than it has been in 24. In the past, in 23 and before, we recognized both merchant fees and consumer fees in our payments revenue. In 2024, we moved to a new method of processing, which resulted in no more merchant fees, just consumer fees. In prior years, we had a much larger revenue share pass through to the merchant to offset their fees. Thus, our COGS were much higher and our gross percentage margin was much smaller. As we go forward, a much better metric to track year over year improvements is to look at our gross margin dollars and gross margin percent as opposed to just gross revenue. As mentioned above, we are laser focused on growing our gross margin dollars and adjusted EBITDA profitability. We added 200K to our cash reserves despite paying down a host of outstanding aged accounts payable, in addition to our normal Q2 payables. So while we are happy we're able to add 200K to our reserves, we are even more pleased that we have been able to pay down our large AP balance that has accumulated over the last 12 months during more difficult times. Our internal goal is to pay off a substantial amount of our outstanding vendor debt by the end of 2023, while still maintaining free cash flow and increasing cash on hand. To reiterate, financially, as we have exited this quarter, we are in a much stronger position for the present and the future. I would like to now briefly discuss a few material product releases we had in Q2. We officially launched our Positive Pay application, our Venmo-type payment app for both in-store payments and online orders. We expect continued growth with positive pay over the remainder of 24 and into 25. In addition to the incremental revenue that positive pay will bring in, it is also another example of how we are adding redundant payment solutions into our overall offering for our merchants. We are now seeing about 50% adoption rate of all new debit payment merchants also signing up for positive pay. We will continue to share more about positive pay as we continue this rollout. In Q2, we also successfully launched the beta of our very own e-commerce and menu platform at about a dozen of our current point-of-sale stores. While it is still early, the feedback today has been very positive, and we are hearing from many of our merchants that they plan to move away from their current e-com provider to the new positive menus. We anticipate many more merchants will adopt our menus in Q3 and Q4 and expect about 50% of our POS base to eventually adopt our platform and move away from traditional menu providers. Our point of sale growth remains strong. We're gaining traction outside of our home state of Washington, specifically in Oregon, New Mexico, and Colorado. Our significant growth in the POS space over the last 12 months has had a material effect on the overall percentage of POS revenue versus payments revenue. It currently represents roughly 23% of POSBIT's total revenue. The POS monthly reoccurring cash flow is steady, predictable, and forecastable revenue source. Lastly, our point of sale licensing deal continues to be a great source of cash that goes straight to the bottom line. There is still an expected $12 million in cash that will be paid deposit over the next 24 months. With that, I'll now turn the call over to Chelsea Bolander, our corporate controller for a more detailed review of our financial results.