Q2 2020 Paysign Inc Earnings Call
2022nd quarter earnings Conference call.
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No it's still the conference over to CEO Mark do cover more please go ahead.
Thank you Kevin.
Good afternoon, everyone and thank you for joining us for pay side second quarter 2020 earnings call.
Our president and Chief Executive Officer, who pay side and joining me. This afternoon as Mark out of our Chief Financial Officer.
We all of you and your families are staying safe during the cold in 19.
We continue to work to ensure the safety of our employees, while supporting our clients and cardholders and focusing on the long term success pace.
Well, the second quarter or revenues were 6.4 million.
Decreased 25 per cent compared to prior year.
8.6 million.
Net income was a loss.
2 million compared to net income.
Point Sevenmillion prior year.
And our adjusted EBITDA was <unk> point, Fivemillion compared to 2.6 million for the second quarter for the prior year [laughter] business was impacted more than anticipated by the effects of the cold in 19 pandemic.
As well as the restrictions imposed by the various federal state and local governments and the kids plasma collection the effects of terrorism.
[laughter], we didn't see a partial recovery beginning in late may as restrictions began to be lifted as well as more recent improvements related to the expiration of the cures Act point about that.
And the second quarter, we added one new pharmaceutical programs for patient affordability business line.
[music] and and medical claims processing program and added several new form on inpatient affordability programs to the pipeline, we continue to expand our footprint in plasma space, adding an additional 49 plasma and blood center locations expecting too to complete go like early fourth quarter one of the 40.
What do you mind centers 38 far plasma centers with six new and 32 mature center transitions from an existing provider.
And also 11 blood centers.
Currently we have a system declines with their business continuity plan by on 4900 and for cloud [laughter]. My early fourth quarter, we're on pace to exceed the number of new card program go lives achieved in 2019, we expect to launch a new product called.
Okay Fine business card. This innovative product is used by media small or large businesses to manage their day to day expenses as well as distribute funds in various scenarios.
They can receive incoming disbursements links are there other bank accounts and used to pay suppliers et cetera.
Our pipeline remains robust strengthened by recent changes in the competitive landscape.
We remain extremely optimistic as we position pay side will emerge from these try and tied to the stronger company focused on maximizing long term shareholder value.
This time I'd like to turn it over to our CFO Mark out there who will take us through the financials in more detail.
Thank you Mark.
Good afternoon, where evening.
At this time I will take us through the second quarter results and provide some grants commentary.
Hi proceed references the year on year changes $10, 4% or comparison to 2019 unless stated otherwise otherwise were first to Q2 2020 as compared to Q2 2019.
Revenue for the quarter ending June Thirtyth 2020 were 6 million for 43 zero 65, a decrease of 25.4% compared to the prior year over 8 million 630 60 to 71.
Revenue consisted of 4.6 million or 71% in support of the plasma industry. It 30.1% decreased 1.8 million for 27% pharma, a 16% decrease and 0.1 million fourq, 2% and other revenue.
Consolidated decrease was primarily due to a significant decrease in plasma donations and dollars loaded to card combined with a smaller decrease in pharma revenues, resulting from a slowdown in load volumes lower on spend balances and improved client management, both industries were impacted by cobot 19, including.
Strong first quarter revenue for the first top 2020 was 17.0 million an increase of 7.1% year on year compared to 15.9 million.
Cost of revenues were 3.1 million and decreased 460000 compared to the same period in the prior year.
Constituted approximately 49% and 42% of total revenues for the three months ended June Thirtyth 2020, and 2019, respectively. The reduction of the cost of revenues consisted of a favorable volume variance of 914000 due to the decrease in transactions offset by unfavorable raised marriott's a 400.
54000, resulting from a decrease in higher margin revenue business gross profit for three months ended June 30 up 2020 decreased 1.7 million sport, 34.4% to 3.3 million for 51.3% of revenues compared to 5.0 million and 58.31st.
Revenues in 2019.
705 basis point degradation in gross margin, resulting from an unfavorable cost of revenues right bear interest at a lower consolidated revenue conversion rate.
Total operating expenses were 4.0 million, an increase of 15.9% versus 3.4 million in 2019, the U.S. DNA component increased 389000 in consisting primarily of an increase in stopping and therefore salaries and benefits a 329000 technologies and telecom 87.
Thousands and rent and occupancy of 60000 offset by a decrease in travel of 103000, depreciation and amortization increased to 111000, and we wrote off some leasehold improvements a 43000.
Pay five net income for the quarter was a loss of 219 to 34.40 cents per basic share compared to net income of a million 738, 792 or four cents per basic share the same period the prior year.
Fully diluted EPS was also zero cents compared to three cents the prior period.
Non-GAAP adjusted EBITDA for the core was five all 399 or one cents per basic share compared to 2 million 593, 675 or five cents per basic share. The prior year. The adjusted EBITDA margin decreased to 7.8% down from 30.0% the prior year and first half adjusted.
EBITDA was 3 million 121, you know one or six cents per basic share compared to 4 million 3111, 54 or nine cents per basic share the same six month period the prior year.
Our gross dollar volume loads. The cards was 183 million versus 205 million load. The prior year down 11% a revenue conversion rate revenue divided by the GDV was 3.53% worth 353 cents, an increase compared to 324 beds to prior quarter.
But a decrease compared to 4.21%.
Pardon 21 basis points. The prior year. The decrease resulted primarily from a lower revenue conversion rate on pharma due to lower unspent balances.
Our balance sheet perspective, consolidated cash, including restricted cash has increased 2.0 million or 4% to 47.6 million compared to 45.6 million at the end of 2019.
Working capital ending Q2, 2020 increased to 14.4 million compared to 13.6 million at year end, 2019, and compared to 9.5 million ending quarter to 2019.
Our liquidity as measured by an adjusted current ratio excluding restricted cash in the current funding liability from both sides of the balance sheet reflect at 6.8 times coverage versus 7.9 times at year end.
Operating cash flow was four point threemillion for the six months ending June Thirtyth 2020.
Looking to the remainder of the year, while we have seen a partial recovery related to the easing of government restrictions in the latter portion of the second quarter.
We anticipate similar results for the current quarter, followed by an upturn in Q4, resulting from Onboarding a number of new client programs. The Q4 additions coupled with a very strong pipeline and some anticipated cobot relieved give us confidence in our production is to return to our go.
Great and 2021.
That concludes my remarks at this time I'll turn it back over to our moderator Kevin to begin the question answer session. Thank you.
Well now be conducting a question answer session. If you like replacing the question could you. Please press star one under telephone keypad, a confirmation tone will indicate your line is in the question Q.
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One moment please poll for questions.
Our first question today, it's coming from Peter Heckmann from Davidson. Your line is that a lot.
Good afternoon, everyone. Thanks for taking the question you noted the end up that cares act and the stimulus that went to individuals I ended at the end of July I don't know how real time your data might be but can you talk about.
Right.
Ladies and most recent trends you can talk about in terms of year over year decline in volumes.
Yes, so it's the in the month of June we saw a little bit of a pick up relative to April and May.
But nothing material.
And from the the May looks to be the what in the low watermark in our results.
Okay and that appears to be the case as we look to a kind of early indications on how July has performed which were still on closing the books on just getting through this quarter.
On July has picked up a little bit from June, but again as as we stated I think that the the.
[noise] year on year in and the quarter three will be similar a little bit better than a quarter two but more similar then divergent from quarter to Oh, we do expect a strong fourth quarter.
Got it got it and then can you talk about some of the dynamics you noted as regards the pharma business.
I understand you were prescriptions filled.
But.
True client program management comment and just.
Some of the dynamics and within that and whether or not.
We're gonna be longer lasting than just.
Yes, good question I'm I'm going to actually introduce massacre, he's our vice President and general manager for the head of the overall patient affordability program and he can probably talk to you well I'm what he's saying.
Yeah, Hi, So I think we obviously saw a little bit of a downturn N D. A number of patients that are going to the doctors that are going to be.
Accessing new therapy. So no as people are laid off as the job market is more in certain people are not gonna be spending as much money in the health care area as far as going to the doctor getting on newer high cost drugs I patients that are already on therapy, most likely already have a prescription. That's you know available for the next 12 months.
That's doctors are a little more lenient as far as you know calling into refill without having to have a patient show back up and the doctor's office that they know they can't afford it. So you know I think as the recovery.
Continues we'll continue to see an acquisition of new patients, which will result in higher claim volumes on our products.
Okay, Okay, that's helpful, but but in terms of the.
The program management.
Indicate any any increase.
Yes.
Business model and pharma.
And increasingly shifted and they and the business itself, resulting from this like does it does it change our position in our products.
Can you just clarify your question maybe a little.
And I think he said you added staff role and just curious how some of those programs are coming in a relatively larger or smaller.
Yep.
They're generating.
So we we.
We have 11 pharma programs today.
And three of those 11, including one new one that was added in the second quarter. Two the were added in the first quarter and if you recall we ended last year. After two programs expiring. We ended with eight last years, we're sitting with 11 now three of those 11 or in the the non buy and bill.
Space, and and Bakken speak to kind of size and what's in the pipeline perhaps.
Yeah. So.
On the co pay side are the transactional volumes are low on the co pay side and when you're talking I believe you had a question around the program management fees, so that tends to be a smaller amount on the buy and bill side as far as what the revenue percentages of the transactional fees or what makes up the difference in the smaller co pay or pharmacy.
He based products it tends to be left where the the management fees make up a majority of the revenue and then the transactional pieces or a smaller portion of that and as far as the pipeline is concerned we were very confident with the pipeline that we have a right now moving into the latter part of this year and moving into next.
Next year I'm as we've had a substantial amount of opportunities put in our.
Huh.
But in our hands and we think we're gonna be able to the pulled us or would it next year.
That's great I appreciate I'll get back into queue.
Thank you next question is coming from Austin rolled out from Canaccord Genuity. Your line is not a lot.
Thanks for taking my questions.
You mentioned, a little effect Colgate impacts on pharma was the pipeline for the pharma segment impacted for any contracts.
Eight or deferred indefinitely.
No not definitely we did have one client that we are one of the two class that we communicated with you on from the first quarter that while we had some startup fees. We actually only recently began funding into that client. So they seem to have I'm, taking a pause and got some temperature before they rolled out program out.
Many of those programs require that the the manufacturers and the representatives on behalf of manufacturers can get out to the physicians and educate and onboard positions as part of that so that those positions are actually operating there there are biologics and there and their medications for the conditions are those.
Patients and when you can travel that that made them take a pause in slow down, but nothing has oh suspended any clients and as Matt indicated the pipeline is very strong Europeans have continued to come in and yes, correct ramped as well as RPC absolutely combination.
Then a follow up.
Please.
Yeah that can you.
Elaborate a little more on the revenue conversion rates, but Andy.
Individual segments, how they trended on like for like pay sensor <unk>, a major impacts were up on those individually.
Sure. So the revenue conversion rate on the plasma side was actually stronger than the first quarter.
The revenue conversion rate on the pharma side wall. It was better than the first quarter typically it picks up markedly in the second third quarter as lows start to come down, but you still have a projected money.
Based on current rates are kinda settlement can come at you expect when those programs are to expire and the cost of sales on those as well as the revenue conversion rate on those sense loads are descending tends to just to the way assay six so six works tends to increase your revenue conversion rate.
Squint quarters until you get back to the first quarter and this particular case, what we saw is with loads descending.
And also customers using up those remaining balances and the program management of those funds being tighter we had to bring down our projected I'm left on card a forecast and therefore, just due to revenue recognition that resulted.
Lower conversion rates.
Got it and my last questions on expense management can you can you talk about.
<unk> expense management in the quarter, specifically and maybe for Q3 as you're kind of coke.
Lower topline.
Yes. Good question Austin, So we did take some some solid measures to oh reduce some expenses that were not essential to limit all travel unless it was revenue producing a lot and to suspend hiring and less it was going to be contributing to a.
Structure or to topline growth. We also have established a new banking agreement, which gave us some favorable pricing.
And these were all levers that we identified the essentially going into the forecasting for our budgeting process for the year.
And and kind of executed those odd during the second quarter and that allowed us as you can see to kind of moderate that what had been a growth rate in that area.
That said, we do continue to invest in people and in capabilities to make sure. We can execute on all of the pipeline and business products that we're implementing off so I do think we'll see a little bit of a pick up in the third and fourth quarter I'm on the total opex, but we are being very cautious.
Yes, what our spend right now.
Okay. Thanks for taking my questions.
Your next question today.
<unk>.
Right.
Yes. Thank you. Thank you for taking my questions. Yeah first of all as you mentioned a there had been some recent changes in the competitive landscape.
Asleep wire cars going through it saga, if you can talk about.
How many centers.
Could potentially be coming up for bid.
During the balance of 2020, and then into 2021, such that you'd have an opportunity to go after this.
So I I'm I'm going to start and I think Mark newcomer wants to comment on this I'm I'm not I'm Gonna basically say that book work hard on North America is a solid organization. They continue to do a great job retaining clients.
We are competing with them on the plasma business.
And we have had some success and building our entire plasma business at their expense that said, it's it's hard work and the numbers that we quoted which mark and speak to many of those are takeaways, but there isn't a.
With a clear roadmap on how other business from any competitor.
Mike.
Be in in our in our future. So we're going to continue work hard do what we do well as a processor and a very nimble and capable company but.
No nothing clear on the road map of market, probably much more suited to answer yeah. I mean, you know obviously, we're we're actually talking with many companies right now the number of centers range.
All are two larger though we remain in talks and that's about all I can comment at this point in time, but you know we look it is a positive opportunity for us.
[noise] [noise] again, and just from a housekeeping perspective, what is a was the total count on centers at the ended the quarter and what would you make your market share is that at the ended the quarter.
And I'll get back yet.
Give me just one moment I'll get back on track here.
[noise] [noise]. So there. We currently have 290 plasma centers 11 pharma programs and for other programs for 300.
Seven.
That's essentially all.
Seven from the prior quarter.
And that rough represents.
I think it's roughly 38% right in that ballpark.
[music].
Thank you.
Thank God next question is coming from Jon Hickman from Robert.
Right.
Hi, Thanks for taking my question can you I can you explain what these hundred imports centers are.
Supportive of clients business continuity plan.
Well I mean.
What that means is Ah.
We can't tell you that those 104 centers are going to go lives, it's really up to the client and what they made and whats decision. They may can be oh. They they were nervous and result in respect to you know what's going on in the world and and what's going on with one of their service provider.
Writers and therefore asked us to provide a continuity plan and which we did so.
Yeah, but I think it's important to point out that all of those centers have received card product and can go lives immediately the day, they make that decision the technology the card product.
The terms and conditions all of the packaging is in each site.
Okay.
Hundreds or they don't her [noise].
49.
Centers that they do not correct.
Okay.
So 49 is a pretty healthy percentage above what you are.
Doing right now.
Okay.
Okay. So.
That was actually my.
Hi, My other questions have been asked and answered.
<unk>.
Thank you as a reminder, that star one to be placing the question Q.
Our next question is a follow up from Peter Heckmann from Davidson. Your line is that what.
Right.
Yes.
Sure.
So so no revenue related to those.
Or on the 49 that had been won are going on Onboarded I think that's about it.
[noise], 17%.
So in order for the third quarter.
The same in the third quarter second quarter with those new units you'd have to expect duration volumes to be down more which doesn't seem to play with some of the things that we're opening up so.
There is there something else about.
In terms of how they might ramp up that might be slower.
Or maybe they're more backend loaded where you just don't have the benefit of any of in third quarter.
Yes, more more that more of the latter also just to clarify a mark how many of those were blood center.
11, 11 or blood those blood have the equivalent roughly of about two centers.
So the plasma generate more load volume and more revenue.
And then you you have you hit it on the on on the head there we will be a little bit more back loaded but should be by the first of October all 49 center should be should be automotive.
On boarded up.
That's the schedule. So there's a specific rollout of exactly when the centers go live bye bye week, essentially but most of that's backloaded.
Got it got it okay, and so well continue to monitor publicly traded companies but.
The bar recovery.
Indonesian volumes and then then.
I suspect it.
Correct.
Got it.
Absolutely.
Thank you.
You bet.
[noise] I feel we reach and about question answer session. I'll, then turn the floor back over to management pretty further or closing comments.
Yeah. Thanks, Kevin again, although our business was impacted by the effects of the cobot 19 pandemic. We believe that we've made significant strides that will enable us to resume our growth trajectory in 2021 and beyond.
Thank you for your continued interest your questions and your participation in this earnings call stay safe and have a nice evening. Thank you.
Thank you that does conclude today's teleconference. You may disconnect. Your lines at this time it up a wonderful day, we thank you for your participation today.