Q3 2020 Paysign Inc Earnings Call
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Hello, and welcome to the pace on 2023rd quarter Earnings Conference call. At this time, all participants are in listen only mode a quick.
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It's now my pleasure for turn the call over to Mark New Homer. Please. Please go ahead.
Thank you Kevin Good afternoon, everyone and thank you for joining us for peace sign on third quarter 2020 earnings call on Mark Newcomer President and Chief Executive Officer also on the call with me today is marketing or our chief financial officers. We will you on your family's overseas sales during the Cobi 19 pandemic we continue.
For the focused on ensuring the health and safety of our employees, while supporting our clients from cardholders and see committed for the long term success on pace on.
The COVID-19 operations has had and will continue to have an adverse effect on the company's results of operations given the uncertainty around the the extent and expense given the uncertainty around the extent and timing of the potential future spreads for them.
Litigation reported 19 and around the same position for relaxation. So protective measures management cannot reasonably estimate the impact of the company's future results of operations cash flows for financial conditions on.
Although we are disappointed with the quarter's financial results. The company did have significant wins in pharma plasma as well as the new business lines. We have the integrated within mid sized hub provider and are completing integration with a fortune 500 have company paving the way for additional patient affordability and clinical.
Research solution programs, we have three three new co pay programs that will launch in December we're executing extremely well in the pharma space concentrating our commercial strategy on client satisfaction from through a consultative approach based on performance and client satisfaction. We've recently expanded the small.
For the mid sized outreach program by full we're confident with our product offerings management sales and operations teams, which will lead to bigger wins in 2021.
26 of the 49 centers that were to be completed in October for no no now going to be completed in December due to client delays on the implementation process of these centers has begun and will conclude the go live of all 49 plasma on blood collection centers previously mentioned in December.
We have 300 for donation centers at the end of Q3 up from 290 in Q2. Subsequently we have gone live with six additional centers and have free more centers ready for implementation. This along with the after mentioned 26 brings the total number of centers for 339 look.
Looking ahead, we expect to see an increase in new center openings from our plasma clients. So for the next 18 to 24 months, we continue to see higher donations higher donation dollar amounts, resulting from increase donor incentive and collection COVID-19 plasma our pipeline remains robust on the plasma space. This.
We're also we also launched a new product line the pace on business expense current we have signed two new clients, which are currently in the implementation phase and expected to go live later this year and first quarter 2021.
This product is targeted to small and medium sized businesses, including sole proprietors and their self employed and NSS.
On a self employed.
As an official sufficient way for management to seeing control, while giving their employees for contractors the ability to pay for business related expenses.
At this time I would like to turn it over to our CFO, Mark I think Europe, who will discuss our third quarter results in detail.
Thank you Mark on good afternoon or evening.
On a simultaneous through the third quarter results and provide some variance commentary.
As I proceed referenced the year on year changes in dollars or per cent or comparisons to 2019 unless stated otherwise for first its Q3 2020 as compared to Q3 2019.
Revenue for the quarter ended September Thirtyth 2020 was a negative 0.2 million a decrease of 9.2 million compared to the prior year of 9.0 million platform.
Plots on revenue consisted of 5.2 million a decrease of 25 per cent compared to quarter, three 2019, and an increase of 13% compared to quarter two 2020.
Pharma revenue was a negative 5.4 million both industries were impacted by the novel grew on a virus and the incidence of the related disease COVID-19.
The pharma revenue decrease included a 6.3 million dollar adjustment for a change in accounting estimate in the third quarter related to our recognition of settlement income based on substantially different performance indicators observed trends regarding program management and new information available.
And low dollar loads and spending patterns, all of which were different than our historical experience. This change in accounting estimate resulted in the company constraining revenue in accordance with assay six on six by changing EPS estimate a breakage. So the remote method of revenue recognition for settlement income.
Whereby the unspent balances will be recognized as revenue at the expiration of the cards and the respective program.
This has resulted in the reversal of all previously recognized settlement income for current pharma programs.
Revenue, excluding this change in accounting estimate.
In quarter, three was 6.1 million a 4.7 per cent decrease from the prior quarter, primarily resulting from the lower settlement income offset by a 13% quarter on quarter increase in plasma.
Negative three 4 million due to the reduction in revenue and the disproportionate decrease in cost of sales.
Total operating expenses were 5.0 million, an increase of 62% compared to 2019 or a 40% increase excluding charges in the quarter of 659000 for intangible impairment legal fees pertaining to mergers and acquisitions activities I should say and legal fees pertaining to merge.
And acquisitions activity.
For the remaining increase was primarily related to an increase in staffing and compensation professional fees.
Stock based compensation technologies in telecom depreciation amortization and rent cost.
Slightly offset by a decrease in travel additional granularity can be reviewed and the 10-Q MD&A section.
Pay slides net income for the quarter was a net loss of six 2 million for a negative 12 per basic share compared to a net income of 3.0 million or six per basic share. The same period. The prior year diluted EPS was also a negative 12.
Compared to five.
Non-GAAP adjusted EBITDA for the quarter was a negative six $7 million or a negative 14 compared to basic share.
Excuse me or a negative for 14 per basic share compared to three 3 million or seven per basic share. The prior year for nine months adjusted EBITDA was a negative three 6 million. We're on negative seven per basic share compared to seven $6 million or 16 per basic share.
The same nine month period prior year, our gross dollar volume loaded the car was 212 million versus 210 million up one 2% versus the prior year and up 16, 3% compared to 183 million the prior quarter from a.
Balance sheet perspective, consolidated cash at 55, 5 million, including restricted cash has increased nine 9 million or 22% compared to for 45 6 million at your in 2019.
Unrestricted cash was seven 5 million compared to seven $6 million at the end of quarter too.
Working capital ending quarter, three 2020 was seven 3 million compared to $13 $6 million at year end 2019 impacted by the change to the card funding liability, resulting from the settlement income change in the quarter three.
Our liquidity as measured bike and adjusted current ratio, excluding restricted cash and the card funding liability was for three X times coverage compared to seven nine X coverage.
At year end 2019.
We remain with no debt on the balance sheet and are adequately capitalized for the coming 12 months.
This time I will turn it back over to our moderator Kevin to begin a question and answer session. Thank you.
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Once again, that's star ones. He placed on the question Q1 moment, please what we call for questions.
Our first question today is coming from Austin mold out from Ken question here on your line is that lives.
Hi, Thanks for taking my questions.
On the farmer adjustment and additionally, changing the accounting to recognize revenue current exploration cause the comment you made on changing changes in performance indicators.
Mean programs are are managing or on spec revenue more efficiently now.
Yes, that's correct costumes, sorry, I was on mute.
Okay, how should we factor that into our estimates on.
On going forward and is this is this something that.
All of the different programs have have needed a meaningful change toward or is it just one or two large ones and.
What do you think sort of trigger D D recent change.
So I would I would refer to the statements that essentially the evaluation of the performance indicators and the revenue trends were substantially different than our experience and that data came about in the third quarter and so by definition if the.
Ending on spin balances are less predictable.
In accordance with Afc's six O six you must constrained revenue fully by we're moving to the room to moving to the remote method of accounting.
Versus the rateable method.
Okay got it.
Uhm.
Does adding back at 6.3 million adjustment get us too.
We're close to a formal revenue number comparable to historical periods.
That would be correct.
So I think I mentioned I think I mentioned during the call.
Prior to that adjustment revenue would be approximately six 1 million.
Which would be down for 7% in the quarter compared to the prior quarter.
And that's lower settlement income and as well as higher partially offset by higher plasma.
Plasma business.
But I caution you a little bit because we have moved to the remote method and frankly, what that says is we don't have the.
Predictability of the on spend balances.
And so that's what requires that when you can no longer predicted in your models and you can assure that no revenue will be reversed you are required to constrain the revenues fully and moved to the remote method.
Okay.
On on the revenue conversion rates.
Any commentary you can provide on D like for like changes in each other seconds.
Yeah.
I apologize Austin I do not have the segment breakout on the revenue conversion rates handy with me and we can we can we can do some offline detail into that category. Further I didn't segment that out for this particular call and I probably should have.
Okay and.
And then my last question is on Uhm plasma.
What have you.
<unk> industry y for plasma volume trends year over year, or maybe sequentially from last quarter.
So the I mean, the industry as a whole is still down.
But what we've seen is the percentage and I think this is somewhat indicative in the industry from the press releases that we've been reading probably just like yourselves is that when we look at for example, and we talked about this previously may was are low water mark that was our lowest plasma month year and when we can.
Compare ourselves and may to the prior year and we compare ourselves now in in July August September and even October to the prior year the year on year improvement or excuse me the year on year comparison is improving but is still down.
Approximately 20% in the most recent months compared to the prior year, but as we indicated for the quarter plasma is down by 25% on revenue, but in the most recent months, it's continuing to get better and better relatively to the prior year.
Okay understood. Thanks, very much for taking my questions.
Thank you as a reminder, that star one to be placed in the question queue. Our next question is coming from Peter Heckling from the David figure line is not alive.
Hey.
Afternoon, everyone. So in terms of how you'll think about arbor revenue going forward.
For those.
Campaigns that required estimates for for revenue recognition.
Should we expect to see a large amount of revenue recognized on the fourth quarter every year for it.
I guess on annual programs that have started.
Or will it be.
Yes, my my perception, whether it most of the plans where annual it went January December are there other campaign that they would have other different starting to start times.
So.
The latter Pete.
We have programs ending in the first quarter and the second quarter and at the end of 2022.
So and in differing months as well so the programs were secured at different points on time.
And they typically have a two year life and.
And so those those programs will be recognized when those.
The revenue we recognized for those programs and.
Got it can you talk about how many then current campaigns you had at the end of the quarter.
And they talk a little bit about some of the share affordability in clinical research opportunities that you mentioned.
Signing more recently.
Sure so.
At the end of September.
We actually finished with a total of 11 pharma programs.
Of those 11.
Three of them are in the co pay space and the other a R programs that would have had and do have and we'll have settlement income that will now be recognized at the end of those programs, but in marks comments and I'll, let him comment a little bit further we have been some.
Cecil signing three additional co pay programs that are preparing to go live in those were actually sign on.
In October, but spark you want to add to that.
Nothing more of them as they're expected to go before the end of the year.
And.
Obviously, we have the business products product.
Product line the business expense car product line, which is is a commercial band and that's going to obviously pay us a little more interchange we're looking for.
For to that as well.
Okay. Okay. So just to verify that the nomenclature when you say co pay that for the type of campaign, where you're going to get paid more on a fixed rate basis, if there's not uncertainty.
Cash will be left on the cards at the end.
Yeah more transactional in nature more transactional nature versus settlement income now keep in mind.
Those programs that have settlement income still have monthly management fees have load fees and earn interchange.
And so those are still very.
Profitable programs and you still have and you still have settlement income you just recognize it at the end.
So so just wanted to paint that picture for Ya.
Got it got it and one last question before I get in the queue in terms of the other programs.
I think you had said at the end of the second quarter something like six.
Where would you have it at the end of September.
September and then have you signed any of these additional.
Business TNA take programs since that time.
So at the end of September just to be Crystal clear, we have 300 for plasma programs. We had that included.
14, new pharma for plasma programs in the quarter, we had 11 pharma.
We had seven others up from for.
And that seven was for new corporate incentive programs less than one program that ended.
So we have a total at the end of September of 320 for programs, but as Mark mentioned to your plasma should end of the year with 339 and after the end of September we signed those three additional programs. We just referenced in pharma so that gives us the 14 and.
We also have a pretty active pipeline on other new programs two of which were actually signed in the fourth quarter, bringing other to nine from seven so essentially based on what we know right now without securing any new business in the pipeline and again.
Then under the assumption that the things that Mark indicated on the plasma side take us to 339, and we get those executed in the fourth quarter will be it will increase from 320 for programs in September two 365 programs in December.
Got it got it that's very helpful plug it back in the queue. Thank you.
You bet.
Thank you as a reminder, that star one to be placed in the question queue.
Our next question is coming from Michael Diana from Max from group per line is not alive.
Okay, Hey, Mark at <unk>.
I think you said in October your revenues for $2.3 million is that using the new method of recognition or do you.
That is the new method of recognition and we will only talk new going forward and all all results that are gap and reflected in the queue.
And the press release are entirely GAAP with the exception of the adjusted EBITDA table and.
In the very back exhibit of that press release.
Okay, great and the <unk>, but yes, two three years is for.
Yeah for the new method.
Thank you.
You're welcome.
Thank you once again, that's for one to be placed in the question queue. Our next question is coming from John Hickman from that and break problem on your line is now alive.
Hi, This is Graham Hickman actually on for Joan.
How much variability is you're talking about this evolution 320 for programs up to 365. It can you give us a sense is there a lot of variability in contractor program size or I guess kind of can you put some range around for.
And then second.
Secondly, kind of following up to an earlier question.
It seems like with this new revenue recognition method makes a business a bit more difficult to forecast so I guess.
What would need to change or or when might you feel comfortable giving some sort of guidance on it again.
Thank you.
Yeah those are for those both really good questions Graham.
First of all there is quite a bit of variability between a new deal that is secured.
Not so much on the plasma side, we have a much better read on those and given the number of centers.
They tend to be a little bit closer in size, but when you look at the non plasma business and in particular.
The corporate incentive programs like the business card program they are quite spirit in size.
And could be real contributors in 2021, too where we're headed.
So there's quite a bit of variability and it would be very difficult on a call like this in for us and we probably wouldn't any ways to give too much visibility due to frankly, the uncertainty of how those will perform because you are basing it on what you're learning in the.
And the contracting process from your client and as you are going lives and then you are observing performance.
Right right, Okay, and then on.
On your second question.
Remember that these programs that we have that are that have historically has has settlement income on.
Our of differing sizes and do have expiration dates.
As we began to work on new business on the farm aside the team is having tremendous success in on.
New programs that are that are price differently, and where our earnings are coming from different revenue streams than the reliance upon money left on card on.
And that's more of a partnering outcome of that approach.
Therefore, we see that revenues will be much more predictable than they have been other than two I think what you're alluding to the uncertainty in the coming 12 to 24 months on the settlement income that you recognize all at the end when those programs conclude.
Yeah, I guess, that's what I'm getting other kind of.
There you mentioned that there are management fees load fees and I know, there's kind of diversification happening so is that kind of thing.
Settlement needs to become a smaller percentage and then you'll feel comfortable kind of putting a range around what what the range about <unk> could be.
Is that how you're thinking about it or maybe correct me if I'm wrong on there.
I think that's right and we will still make estimates for what we think that breakage might be at the end of those programs, but we don't have as much visibility and therefore had to constrain revenues to be in compliance with AFC six O six it's been.
From less predictable, so we will be very conservative and those estimates.
The bigger the bigger challenge icy and you should be interest Mark's comments on this as well, but the bigger issue that I see is the uncertainty around COVID-19.
And how that effects free business in the plasma business. That's that's more of a challenge than than projecting based on what we see in the pipeline and based on what we are executing on right now.
Generally on March point, we will have a crystal ball, so that that does make it very difficult for us.
We look towards the future.
Very much hoping that for vaccines from zone.
Timely manner and that helps reduce.
On disclosures of their other states so.
To keep an eye on.
It's just hard to pinpoint what's going to happen with that.
Alright.
Okay. Thanks, I'll jump back in.
Thank you once again, that's star one to be placed in the question queue. Our next question is a follow up from Peter Heckman from day, David Senior light is on our lives.
Disadvantage could have any thoughts on the sale of water card North America.
Any early impressions of the buyer and whether or not that it that it.
True or or.
For.
Does it improve your competitive position in the U S in terms of potential for gaining market share.
I believe it does.
I believe.
On North Lane and seek a pay is not sure just how much of a for healthcare approach they have to the market.
No I am not sure plasmas and there will have that said the wildcard division has as continuously gone after that.
We we will find ourselves.
Harder and harder to to pull down additional business opportunities.
Yeah once the one thing I would add to.
<unk> comments is.
The conclusion of who the buyer is in that transaction.
Resulted in us securing.
Those 25 centers and letting the industry as a whole digest what was happening with wildcard before that could transpire and so that was actually helpful to clearing the air if you will and letting that particular client.
Provide us that opportunity on the first week of December.
I'm not convinced that there is.
One of those loans out there that are looking to make a transition and that therefore, why we continue to to talk with folks out on the marketplace.
Got it got it and just to put a finer point on the farm.
Six 3 million dollar revenue rehearsal.
Do you still expect to recognize the majority of that six 3 million.
As all of the existing.
Satellite income campaigns are complete it or or did you find that.
Had been that had been in overestimated in the amount of revenue to be recognized will be significantly lower than than that takes 43.
Yeah, we don't have visibility on that and that's why we had to constrain the revenues and revert the methodology.
So I wouldn't want to speculate we will certainly have settlement income.
Okay. Thank you.
Thank you as a reminder, that star willing to be placed in the question Q1 moment. Please while we pull for further questions.
We appreciate it have a question and answer session I'd like to turn on the floor back over to management pretty further closing comments.
Thanks, Kevin again, although our business continues to be adversely impacted by the effects of COVID-19 pandemic, we continue to make the investments in our company that will enable us to resume on long term growth trajectory in 2021 beyond. Thank you for your continued interest your questions and your participation in this earnings call.
<unk> and have a nice evening. Thank you.
Thank you that does conclude today's teleconference. Webinar you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation.