Posabit Systems Corp

Greetings and welcome to the Positbit Systems Corporation fourth quarter and full year 2025 earnings call. At this time, all participants have been placed on a listen-only mode. We will be monitoring for questions and comments via email. You can submit any questions or comments to investors at Positbit.com. Once again, that's investors at Positbit.com. Please note, this conference is being recorded. It's now my pleasure to turn the floor over to your host, Oscar Dahl. The floor is yours.

Thank you, Operator. With me on this call are Ryan Hamlin, Chief Executive Officer, and Emily Egan, Vice President of Finance. 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 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 file 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 in today's 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 POSBIT's 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, depreciation, 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 to our annual earnings call. As a reminder, all numbers that we'll be talking about today are in U.S. dollars. Q4 capped off an outstanding year for POSBIT. It was perhaps the most significant and meaningful year for us in our 10-year history of our company. We continued to execute on the strategy we've been talking about for several years, growing our reoccurring SaaS revenue, expanding our margins, driving profitability, and putting more cash on the balance sheet. I'm proud that our team delivered on the goals we laid out for them in January of 2025. Gross profit dollars grew year over year, even though top line revenue was down. We'll talk about that shortly. Adjusted EBITDA for the full year reached a positive 2.5 million, up over 400% from 2024. And we ended the year with meaningfully more cash in the bank than we started with. In fact, 76% more. We accomplished this while continuing to streamline the business, remain disciplined on expenses, and investing in the future of Positbit. To start with, I want to address the elephant in the room. At first glance, many investors will just read the headline that Positbit's top line revenue went down year over year. This is not the story that should be told. In fact, the reason our top line revenue went down was 100% driven by a strategic decision that we made as a company. to shift the relationship we have with our payment processors. To de-risk our payments business, we moved to an agent model where we now refer merchants to processors and in return, we get a residual payment. As a result, the top line accounting of our revenue changed. Prior to the agent model that we're now in, we recognized the full grossed amount of the consumer fee. This included our cost to the payment processor as well as any revenue sharing we did with our referral partners. This is why you will see a drop in top line revenue in 2025 versus 24. But if you look at gross profit dollars, which is the money that all companies use to run their business, you will see we actually grew year over year. Also note that we grew our cash. So while top line revenue looks odd because it is down in 25, the positive business is much healthier today than it was at the end of 2024. Unfortunately, many of the less sophisticated investors and, frankly, AI bots who trade our stock will fail to realize this and instead will simply look at the top line, which is not an accurate depiction of the true positive story in 2025. So if you hear one thing on this call today, the theme is simple. Positive is profitable. We are growing our gross profit dollars year over year. We are seeing significant growth in our point-of-sale business. and we continue to increase our cash in the bank. And now a couple of financial highlights. Our full year adjusted EBITDA was approximately 2.5 million. This is the highest in our 10-year company history. Adjusted gross profit was over 80%, again, the highest in our 10-year company history. Q4 represented another profitable quarter for Positbit, continuing the momentum we built throughout the year. We increased cash on hand by approximately $800,000 during the year, ending 2025 with over $1.8 billion in cash on the balance sheet. And we continue to grow our core reoccurring revenue businesses, led by our point of sale and our e-commerce. While our retail business remains extremely strong, 2025 also marked the beginning of a very important new chapter for POSBIT that I'm excited to share a little bit with you today. Late in the year, we introduced our beta of our new brand portal service. You may have seen the press release that came out on this yesterday. The name of this new AI-driven service is called Positive Brands. Historically, Positive has been exclusively working with cannabis retailers. Positive Brands opens up an entirely new market for us, producers and processors. Think of this as the other half of the $35 billion cannabis industry in 2025. This new service taps into a brand new revenue stream and a new set of customers for Positivit. We are incredibly excited about what Positivit Brands can and has already become in early 2026. The platform gives brands and manufacturers access to real-time reporting, business intelligence, product catalogs, inventory management or VMI, B2B payments, and much more. It is a powerful new technology platform supported by an AI-driven backend that helps automate and simplify many of the manual tasks that producers and processors deal with today. We believe POSBIT brands will become a major growth driver for POSBIT over the next several years. The reason this product is so unique to POSBIT and such a great opportunity is that no other point-of-sale company in the U.S. has the market share in any single state that POSBIT has in Washington State. Remember, cannabis producers and processors can only sell within their own state. We already have strong relationships with the majority of all the retailers in Washington State, which is why we have initiated our launch of positive brands here in Washington State. This gives us a unique opportunity to connect both sides of the cannabis ecosystem, retailers on one side and producers and processors on the other. Because POSBIT is where the data is created, for example, all the inventory comes in our POS, all the sales initiate in our POS, we are the only one that can provide this real-time data to the brands. Brands can now see in real-time their inventory at a store, how well it's selling, manage expiration dates, and much more. As we head into 2026 and beyond, you'll hear much more from us about POSBIT brands and other new products we've been developing. We are now in a position where we can make thoughtful investments in new revenue opportunities while still remaining disciplined and fiscally responsible. Now I'll turn it over to Emily Egan, our Vice President of Finance, to dive a little bit deeper into our full year numbers. Emily?

Thank you, Ryan. I'm going to walk through our results for the year ended December 31st, 2025, compared to 2024. First, On the top line, total revenue for 2025 was $10 million compared to $15.3 million in 2024. As we have discussed throughout the year, this decline was expected and is directly related to the transition in our legacy payment processing relationship as Ryan laid out before. Again, this was a strategic shift that positions the business for stronger profitability and more durable reoccurring revenue over time. What is especially encouraging is that despite the lower revenue base, gross margin increased significantly. Gross profit was $7.2 million, up from $7 million last year, while gross margin expanded to approximately 72% compared to 46% in 2024. This reflects the continued success of our transition towards a more software-driven revenue mix and improved unit economics across the business. On the expense side, we remained highly focused on operational discipline. Total operating expenses were $9.3 million, down from $12.2 million in the prior year, representing a 24% reduction year over year. This improvement was driven primarily by lower professional fees, reduced share-based compensation, lower depreciation expense, and continued cost discipline on overhead across the organization. As a result, the company delivered a meaningful improvement in profitability. Net loss for the year was 2 million, compared to a 5.7 million in 2024, a 65% improvement year over year. Most notably, adjusted EBITDA improved to positive 2.5 million compared to a loss of 761,000 last year. This represents a significant milestone for Positbit and clearly demonstrates the operating leverage in our model as we continue to scale our offerings and headed into 2026 with the new Positbit brands as Ryan shared. Turning to the balance sheet, we continue to strengthen our liquidity position. Cash increased to 1.8 million up from 1 million at the end of 24. a 76% increase year over year, even as we actively worked through and paid down past due liabilities. That progress is reflected in our working capital. Accounts payable and accrued liabilities decreased by approximately 1.3 million, primarily driven by the payoff of paying off aged payables from prior years. As a result, we are now fully current with our vendors and operating from a position of strength. Accounts receivable declined by over 600,000, reflecting improved collections and tighter executions. Overall, current liabilities decreased by nearly 2 million, highlighting the significant balance sheet cleanup we've achieved and the momentum we're carrying into the new year. These improvements reflect stronger collections, disciplined cash management, and continued focus on balance sheet health. Our debt profile remains stable, with credit facility borrowings at approximately 4.5 million, essentially unchanged from the prior year. The overall financial profile of the business is materially stronger today than it was a year ago. We improved margins, reduced operating costs, generated positive adjusted EBITDA, strengthened the balance sheet, and significantly reduced net losses. These results reflect the benefits of the strategic changes we have made to build a leaner, higher margin, and more scalable business. A huge thank you to the entire Positbit team for the execution and commitment that made these results possible. With that, I'll hand it back to Ryan to wrap up the call.

Thanks Emily. One area that I wanted to provide a quick update on is the progress in the cannabis industry related to schedule three. Just this past weekend during a press conference, President Trump looked at the head of the DOJ and said, You're going to get this done, right? And this was in regards to rescheduling. And you can hear in the background them say yes, which is very exciting. And by the way, it was reported on this week, so most of you may have heard that. So we are now closer than ever to finally getting this to happen. The reason this is so important to Positiv is that it changes the way cannabis businesses are taxed, most likely opens up the public markets, and takes us one step closer to all merchants being able to transact with traditional merchant services like credit card processing. Positbit is already an approved merchant provider for credit card processing and is working with merchants today outside of cannabis to process credit cards. This means we are ready now and on day one when credit card processing is allowed in the cannabis industry. I will close with a few more comments about how excited I personally am about the future of Positbit. We have demonstrated year after year that not only can we run an efficient company, but now we are profitable in putting cash in the banks. This sets us apart from most tech companies in the cannabis industry. I personally have worked in tech for over 35 years now. This is the most challenging but also rewarding company I have ever been a part of. I am frustrated, as you are, about the equity valuation of POSBIT in the market today. It literally makes zero sense. However, we remain confident that one day the market will fully appreciate the full value creation we have built with POSBIT Over these last 10 years, I am equally excited about our new Positive Brands initiative and our ability to tap into a new huge revenue stream. With that, as always, thank you for being a positive shareholder. You have our commitment to continue to execute, to continue to grow, to continue to generate profit, and to continue to create shareholder value. Thanks for your time. And now we're going to move into some question and answers. I know quite a few questions were submitted ahead of time. So, Oscar, why don't you take over from here?

Yep. And actually, these first two we received during the call. So we'll start there. First question. Ryan, I read the press release today about the new Positive Brands products. How big do you anticipate this business being for Positive? And what else can you share to help investors fully understand the upside here?

Thanks for sending that in. I talked about some of this a few minutes ago, but I hope most of you read the press release yesterday. If you haven't, please Google it, read it, because it will go into some good details about why we're excited about this brand new opportunity. Think of it this way. Today, we've been servicing half the market, the retailers. Now, we get to serve the entire other half of the market. Like any business, when your TAM or your target market doubles, that creates double opportunity. I We're excited. This is something we've been working on for a while now, literally over the last year. We're now able to roll this out. And just like retailers, brands need great software, too. And I think Positive is in a perfect position to succeed with our new Positive brands. And so, yeah, we're excited for it and definitely think it's going to be a large source of revenue in the coming months and years.

All right. Another one we just got in during the call. Ryan, I understand what you explained on why your top line revenue went down between 24 and 25. That was helpful. You are correct. Gross profit dollars did go up by only about 4% if my math is correct. Do you expect better growth next year in gross profit dollars?

Yeah, thank you for that question. We wanted to make sure we spent enough time on this call explaining that because it's very important to not just look at the top line but to look under the cover, so to speak. Yeah, so you're correct. I mean, single-digit growth for our gross profit dollars was not ideal, but it was growth. We are very confident that as we go into 26 that that is going to be double-digit growth next year. We really have streamlined our business, and we're growing it. We have no plans to – grow our team size or anything like that. So it's natural if our expenses are going to remain flat, but we're growing as a company, then obviously our gross profit dollars are going to increase. So yes, we're very excited about where we are as a team today and the potential to have double-digit growth in gross profit dollars next year.

All right, next question. In the press release yesterday and earnings release today, you mentioned AI a lot. Can you share how POSBIT is using AI today and maybe share what if anything else is coming?

Yeah, sure. AI seems to be everywhere now. Everybody just puts it out of press releases and throws it in front of their brand. And it seems to be a marketing tool. For us, it's not. It's a real tool. And, you know, we use it throughout our development process. In fact, we use cloud code in a lot of our UI and user feature developments. We've incorporated AI to help us do a lot of the data mapping for our new brand portal. So it actually can help with data cleanup and data mapping as we build out our product catalog. And lastly, we're looking at it to incorporate a lot of natural language capabilities into our point of sale. So it makes it easier for our customers to type in natural language for extensive custom queries that they might want. So these are These are all things we're doing today and we're excited about. And I think like any company, I mean, AI is here to stick. And so we are very much taking an AI first approach to all of our engineering efforts.

All right. Next, we got a five part question here. So we'll try to go rapid fire. Ryan, can you provide more clarity on when you expect total revenue to stabilize and whether you're seeing sequential improvement quarter over quarter?

Yeah, so if you go and you look in our financials, I think it's in our NDNA that we just released today, you'll see the quarterly breakdown from Q1 through Q4. And you'll actually see that gross margin dollars in all four quarters grew. So from Q1 to Q2, Q2, Q3, and Q3 to Q4. So we are stabilized and we are growing. Again, that's The revenue is one way to look at it. We look at it as gross margin dollars because that's how we operate the company. And so, yes, we have stabilized, and we are growing quarter over quarter.

Okay. Is growth in SaaS slash recurring revenue now offsetting declines in legacy payment processing, or is there still a gap?

So, yeah, if you think back to when we first became a public company in 2019 – Our payments business represented probably 95% of revenue, and SAS was 5%. So we've done a really good job kind of making that more equal. I'd say today we're close to 50-50 in reoccurring SAS versus payments. I expect that to increase this next year to maybe even 60-40 as far as SAS to payments. But then, of course, if credit card processing does open up with Schedule 3, then it's natural that payments revenue for us is going to go up, which is a very good thing. And then, you know, those numbers could shift back a little bit. But I guess the point here is, yes, we have a much stronger base of reoccurring SaaS revenue now than we have in any other year.

What is the current number of active locations and how many were added this past quarter?

I don't know the exact number for the quarter, but I know, you know, if you add in our brand portal, our POS, our e-com, our payments... All up, it's about 600 locations. This last year, we added over just close to 100 POS merchants, which is fantastic, and I think 50 or so in some of the other areas. So it was definitely a big year for us, particularly on the POS side of the house, and that's why I kind of talked about it earlier, is that we're seeing extremely strong growth in our point of sale, which is having a direct effect on our reoccurring staffs. which, like the previous question, now puts us in a much healthier position because of that reoccurring revenue.

Are you seeing increases in average revenue per location through upsells or expanded product usage?

Yeah, I guess, let me think about it from a merchant standpoint. So as we have introduced more and more products, the average SaaS revenue we get per merchant is going up. So if you were just using our POS, but now we have a great e-commerce or you're using our e-commerce, Now we're making more per merchant from a SaaS standpoint. So yes, on the SaaS side, it's definitely going up. On the payment side, unfortunately, it has gone down a little bit, meaning we measure revenue per transaction, and that's dropped slightly. And the reason is it's certainly a competitive space, but probably more frustrating is that there's a lot of fly-by-night people out there promoting payments, even credit card payments. And sometimes... it causes a distraction and it causes pricing pressure. And so we've had to reduce our pricing a little bit. So that's what's caused this slight downward turn, and I would say dollars per payment transaction. But it's stabilizing. We feel good where we're at. We're priced accordingly. And like I said at the beginning, our revenue per merchant on the SaaS side is growing.

What key milestones still need to be achieved for net income to turn positive, and is profitability within the next 12 months a reasonable expectation?

Yeah, I think I'm probably being repetitive here, but we are profitable. I think that's the thing that people don't realize. We had a large licensing deal back in 2022 that many of you remember us talking about. We had to recognize the majority of that revenue. That was a big deal for us. It was a $20 million deal. because we had to recognize so much of it, we haven't been able to recognize that top line revenue, but we still get the cash for it. So that's why we always talk about adjusted. We talk about adjusted revenue, adjusted EBITDA, adjusted gross profit, because to ignore the cash we are getting would be a mistake because all other companies get to count that as revenue. So yes, we are profitable. We obviously grew our cash in the bank. That's probably the biggest You know black and white reason. Yeah, you can look at and say yes. They are profitable And we're growing our product so again the other thing I would point out is just we are a US company based in the US with US customers, but we are publicly traded in Canada and So the lovely foreign exchange does play a factor in our financials and that's something that's completely out of our hands So depending upon the US dollar strength the Canadian dollar strength you may see some fluctuations in in our financials. And again, that's why we like to kind of eliminate the things that are out of our control, and we really focus on the adjusted side of things. All right, final question.

Ryan, it's obvious that the current POSBIT valuation measured by trading on the CSE doesn't properly reflect the value of the company. What do you think is a share price range that fairly represents POSBIT?

Okay, I see that one came in from David. Thank you, David. Good to have you again on the call. Yeah, you heard me say that obviously the current value of the company isn't a fair representation. And if you look at, you know, we're right around five and a half to six million USD in valuation, market valuation, which is ridiculous. So let's just pretend that we're a private company and use a private company metric. So what would private companies do to evaluate what their value is? They would look at EBITDA and they would look at revenue. And so a typical... the ratio for revenue is somewhere around 2x of what your revenue is. So if you look at our adjusted revenue, we're close to $15 million. Again, adjusted revenue because we've got to count that cash. So you do a 2x multiple, that would imply that we're somewhere valued around $30 million. If you want to use EBITDA instead, you look at our adjusted EBITDA, we're at $2.5 million. That usually trades valuations usually 6%, call it 6%, 7%. So you're in that probably $15 million range. So what does that tell me? It tells me that probably in the low end, we're in the 15 million, probably higher end right now, 30. If we were being properly evaluated in the market, it's unfortunate because the CSE is just a smaller market and we don't have a lot of volume and it's a lot of day trading. But if it was represented like we should be represented in the public markets, I would fully anticipate us to be a 30 million plus by eight company. So thank you, David, though, for asking that question. It's an important one. We think about it quite a bit, obviously. I would end just by thanking everybody. It's been a great year for the company. It's always fun to get on these end-of-year calls and just do a recap. We're very excited, like I said, for 26. And please, you know, be on the lookout for more press releases and what we're rolling out with the brand, the new positive brands, because it's an exciting time for us. So with that, I think we'll turn it back over to the operator.

Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.