Q4 2020 Paysign Inc Earnings Call
Hello.
And welcome to the pay side fourth quarter and full year 'twenty 'twenty earnings conference call. At this time, all participants are in a listen only mode of.
A question and answer session will follow the formal presentation.
If anyone should require operator assistance. Please press star zero on your telephone keypad.
As a reminder of this conference is being recorded.
This presentation may include forward looking statements to the extent of the information presented in this presentation discusses the financial projections information or expectations about the company's business plans results of operations. The impact of COVID-19 returns on equity expected gross margins markets or otherwise.
Make statements about future events such statements are forward looking such.
Such forward looking statements can be identified by the use of words, such as should May intends anticipates believes estimates projects forecasts expects plans of proposals.
Although the company believes that the expectations reflected the these forward looking statements are based on reasonable assumptions. There are a number of risks and uncertainties that could cause actual results to differ materially from such forward. Looking statements. You are urged to carefully review of the consider any cautionary statement in the other disclosures, including the statements made under the heading risk.
Factors and elsewhere in the form 10-K forward looking statements speak only as of the date of the document in which they are contained in the company does not undertake any duty to update any forward looking statements, except as may be required by law.
This presentation also includes adjusted EBITDA, a non-GAAP financial measure that is neither prepared in accordance with nor an alternative to financial measures prepared in accordance based on any standardized methodology prescribed by GAAP is not necessarily comparable to similarly titled measures presented by other companies.
It's now my pleasure to turn the call over to Mark Newcomer. Please go ahead.
Thanks, Kevin.
Afternoon, everyone and thank you for joining the <unk> fourth quarter and full year 2020 earnings call.
Newcomer co founder and Chief Executive Officer also on the call with me today is Jeff Baker, our new Chief Financial Officer.
Our fourth quarter revenue was $7 3 million down $2 5 million from the same period last year for the full year 2020 of revenue was $24 1 million down $10 5 million from 2019 of these decreases were primarily due to the change in accounting estimate on the revenue on the recognition of settlement net income for the.
Pharmaceutical business, we made in the third quarter of this year and the impact of COVID-19 on our plasma business.
We continue to closely monitor of U S economic indicators as COVID-19, vaccination distribution continues and restrictions ease across the U S. While the recession caused by the pandemic may have some lasting effects on consumer spending we saw consumer spending on our programs begin to return to pre pandemic levels for the per.
The first two quarters, we have seen quarter over quarter increases in consumer spending, indicating the gradual return to pre pandemic normalcy.
In Q4, 2020, we saw a $14 four per cent decrease over Q3 2020.
In the fourth quarter of consumer setting on the based on the programs was down 12% versus Q4 2019, showing the continued impact of the pandemic on the business.
However for the full year, we were only we were down only one 6%.
Due primarily to the growth in our pharmaceutical business. According to inside the published by the principal economist the visa consumer spending was solid in the first quarter of 2021, despite the impact of multiple severe weather events. I believe these all of the be signs of improving economic conditions interest continues to be positive for based on.
Despite the pandemic related business impacts, we continue to add new clients, new plasma centers and new products. Throughout 2020, we added 36, new centers in the fourth quarter exiting the year with the total of 340 centers. This compares to 285 centers at the end of 2019, an increase of.
The 19, 3%.
We continue to expand our patient affordability footprint during Q4 of our sales teams were hard at work expanding our relationships in the industry, bringing two additional hub service company partnerships. These partnerships are instrumental to our growth in this industry as they will resell our solutions into larger direct of the form of audience and <unk>.
We launched three new pharmacy based co pay programs and were awarded two additional programs that will launch in 2021, we continue to receive a high level of interest in both of our direct to farm of N hub service solutions, we will continue to build out of additional products and offerings. During 2021 that will allow us to remain the preferred partner.
For some of the nation's largest pharmaceutical manufacturers and other service providers in 2020, we launched new products and features as we continued our efforts to expand into other the product verticals.
We continue to enhance the pace on the mayor of digital Bank account product and out of additional features such as sub accounts the ability for cardholders to lock the card for security purposes. We added one new clients to this program in 2020 and have a good pipeline of new clients for 2021.
We also have additional features and functionalities in our product roadmap.
We launched peace of mind pace, our merchant cash back rewards program and rolled it out across our pace on premier and the plasma clients. This program as an additional incentive per card holders to use their pace on the card by operating cash back from over 1200 merchants with over 60000 locations such as Walmart Kohl's Cvs.
Macy's Petco home depot, and GAAP to name a few.
Each month cardholders can activate offers from participating retailers and use their enrolled peso line card either in store or online and earn on average 5% cash back which is the positive directly back to their pace of an account.
As you May have seen we recently announced changes to our executive leadership team.
Matt Lanford has been named President and Chief operating Officer, and Jeff Baker has been appointed as Chief Financial Officer.
I'm extremely pleased to have him out of Sweden, the important role of president and COO since joining the pace on in 2019 as Chief product Officer. He has been an integral he said in full in our product development and overall success.
Brings with him more than 30 years of payments and payment industry experienced senior leadership roles and accolades method of succeeded me as president.
And I continue in my role as Chief Executive Officer.
He was also replace Gerald Herman as Chief operating Officer, Joe The remains a member of the board of directors and her new role as executive Vice President of operations.
Equally pleased to have Jeff assumed the role of CFO Jeff.
Jeff joined the pace on in February of this year and brings with him and depth of knowledge of the payments industry and global mergers and acquisitions along with extensive experience at the senior Act with the equity analysts for several major firms with Jeff Jeff successful track record, leading high performing payment organization I'm excited to have them in the role of <unk>.
The financial Officer.
Jeff has succeeded mark out of here as CFO.
With these two these two C level positions in the senior leadership roles, we built over the past year in sales marketing and I T. I believe we have assembled the very best team of experts to Usher in the next phase of growth from baseline.
I'm extremely impressed with their performance at this time I would like to turn it over to our CFO, Jeff Baker, who will discuss our fourth quarter and full year results in detail. Thank.
Thank you Mark good afternoon, everyone. The revenue and operating performance in the fourth quarter continued to improve over the prior two quarters, primarily driven our plasma business.
Of the total revenues of $67 $3 million mentioned by Mark plasma revenue accounted for $6 3 million pharma revenue was 90 921000 and other revenue was 33000.
Importantly, our gross margins continue to hold the north of 50% landing of 51, 2% for the fourth quarter, our adjusted EBITDA for the fourth quarter came in at 768000 or one penny per share on a fully diluted basis. This is the highest dollar amount of experience since COVID-19 started last year.
<unk>.
These results compared unfavorably to the pre Covid fourth quarter 2019 results of total revenue of $9 8 million gross margins of 51, 8% and adjusted EBITDA of $2 6 million or five cents per fully diluted shares.
As previously mentioned by Mark fourth quarter gross dollar load volume declined two 2% versus the year ago period, but increased sequentially by 15, 9% fourth quarter purchase volume declined 12% versus the year ago period, but also increased sequentially by $14 four person.
<unk>.
Taking a closer look at the form of business in the quarter revenues of $6 3 million were up from $5 2 million reported in the third quarter and $4 6 million reported in the second quarter as Mark pointed out we exited 2020 with 340 centers, adding 36 in the fourth quarter.
Here are a few important items worthy of.
Pointing out first.
While we are still below pre COVID-19 quarterly plasma revenue levels, we are seeing gradual improvements.
Second our average revenue per center also continues to improve despite adding 36, new centers in the fourth quarter I say, despite because it takes time for new centers of ramp up after on boarding so the higher denominator used in the calculation without a full revenue benefit causes our average revenue per center calculation would be lower.
That being said with Covid in these new centers being on boarded our average revenue per center increased each quarter from second quarter two of the third quarter to the fourth quarter with the fourth quarter being of $19885 per center.
Third if we can return to pre Covid average revenues per center of approximately $25000.
Coupled with the increased number of centers, we added in the fourth quarter, then we can get to over $8 $5 million in revenue per quarter, just from our plasma business or 34% to $35 million per year in total plasma revenues.
However, let me caution listeners without COVID-19.
Our plasma business does experience.
Seasonality with the dip in Q1 as tax rebates go out that coupled with stimulus checks and unemployment benefits ongoing we do not expect to return to pre COVID-19 averages until those factors are no longer with us.
Turning your attention to the pharma business fourth quarter 2020 revenues of 921000 decrease $914000 compared to the fourth quarter 2019, primarily driven by a change in accounting estimate in the third quarter of previously mentioned by Mark as a reminder, that change in estimate of impacted the.
<unk> of settlement income during the fourth quarter compared to the same period in 2019, we continue to make investments in the pharma business and believe that it is an attractive niche business that can have a meaningful impact to our overall business and help diversify our customer base as Mark mentioned, we continue to make significant investments in our business from.
And SG&A and it perspective to give us the support of technological capabilities needed to efficiently efficiently grow the business.
Fourth quarter 2020, operating expenses increased 762000 to $4 4 million versus $3 6 million in the fourth quarter of 2019 of 185000 of that was due to an increase in stock based compensation and of 143000 of that was increased.
Of that increase was due to an increase in depreciation and amortization.
Excluding those changes total operating expenses would have risen 435000 or $12 one per cent.
During the fourth quarter, we decided to take the $4 million tax provision for recording the valuation on our deferred tax assets. This was a noncash provision that will remain available for future benefit when the company returned to generating positive net income net income for the quarter decreased $6 2 million two of loss of $4 3 million.
Adjusted EBITDA, which we define as operating income plus depreciation amortization stock based compensation impairment of intangible assets and loss on the abandonment of assets and is a non-GAAP metric used by management to gain the operator operating performance of the business came in at 768000.
A decrease of $1 8 million from the same period in 2019.
Lastly, regarding the health of our company, we exited the year with $7 8 million in unrestricted cash and zero debt. We believe that we remain well capitalized and positioned to weather any further impacts from COVID-19.
With that I'd like to turn the call over to the moderator for Q&A.
Thank you will now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he'd like term of your question from the queue for participants using speaker equipment maybe.
The necessary to pick up the handset before pressing the star keys once again Thats star one to be placed in the question queue.
Our first question today is coming from Peter Heckmann from David Citi. Your line is now live.
Good afternoon, gentlemen, thanks for taking the questions.
Okay.
Hey, Peter the piece.
Can you talk a little bit about.
Your current out of sales pipeline within plasma of if theres any other centers that are that are scheduled to convert.
Or ones that you're working on and then just a little bit about you know, there's a fairly significant ownership change of one of your competitors.
Can you just talk about have you seen any change of the competitive dynamics there.
Yeah, I'll go ahead and address that Pete.
I would say that for our pipeline, we're pretty much looking at on par with last year or beating last year for.
For 2021.
I won't go into too much more detail the math at this point.
Regarding the competitive landscape yeah. There has there have been some changes there have been additional people that are out looking and talking so all things considered I think there will be some ramifications.
Okay. Okay, and then just in terms of of how we're thinking now about the pharma revenue.
Yeah.
Correct me, if I'm wrong, but I guess the the the 900000 in this quarter did that include any campaigns that we're ending the.
It would of had a kind of of onetime true up or.
How should we think about those one time true ups as we go over the next.
A few quarters.
Yes, Pete so so the.
With the change in the accounting and it does make some lumpiness come in.
It's.
We did have a small program in.
The benefited a little bit it wasn't huge I mean right now you see pharma is still from a from an overall contribution of the business is quite low.
There will be as we go forward in 2021 yes.
We'll have another program and and but the like I said, it will be a little lumpy and but it's not going to be massively.
Now the material like millions of dollars or anything like that so.
Got it got it I'll get back of the queue for now thanks.
Thank you. Our next question is coming from Austin <unk> from Canaccord Genuity. Your line is that line.
Hi, Thanks for taking my questions.
On the five new pharma programs.
In 2020 can you refresh us a bit and in terms of what kinds of services what kinds of programs that report and also just quickly just.
Just wanted to clarify how many programs.
Began and ended in Q4.
Yeah.
In regards to the the mix of products.
In the patient of really patient affordability space that we have the co pay we have some buy and bill differ.
Different products of those nature, I mean to get you I'd have to get to probably go back to some notes to get out some of the information that youre looking for and we can certainly bring me up to speed on that.
Okay.
Okay.
And yep sorry.
Well I was just saying on the number of programs, we exited three fourty Austin I did not.
And that number where the where the quarter started.
But.
We will get that to you.
In in pharma would you be able to get that program number from the core.
Okay.
The programs that ended and that were launched in the quarter.
We only had one hand, and then as far as new ones launch.
You know all of them.
I know the two the Atlanta, two that went into the to the <unk>.
For 2020 of them yeah.
Believe there was an additional.
And again.
Non real comfortable saying the number I'm not 100 percentage of above.
So Phil let me defer and we'll get back to you on that.
Okay.
Again on the pharma can you speak to the the.
The growth in and just the pharma segment.
For the loaded funds in.
In the quarter.
But again also I'm sorry.
As it pertains to just the pharma segment would you be able to speak to the growth you saw in the quarter for pharma loaded funds.
Yeah, I mean from.
For the quarter of the gross dollar loads for pharma.
So when I look at my chart here and do some calculation, but the about.
It was around $24 million.
What's the total number of loads during the quarter.
Okay.
All of it and last question here on the other business line.
Can you can you just kind of give a little color on line.
What's contributing.
Which of those other business line programs are contributing to the two.
<unk> revenue in <unk>.
What the expectation is for 2021 other revenue contribution.
Well, we're not going to give any guidance on 2021.
As it relates to revenue specifics what I can tell you is the other programs.
It was 33.
33000.
This quarter and that was down from 300, roughly 300000 in the fourth quarter of 2019. So I think it's been bouncing around the 33 ish thousand range it sort.
Lee of focus on on us in the new sales group, but it's going to take time to ramp that up and those expectations. So at this point in time its kind of era.
Relative to give you any kind of guidance around that until we see.
Better pipeline metrics and things of that nature.
One thing I can tell you Austin is.
I can kind of address some of the product types for instance, I think we will see some growth of around our digital banking account.
As with some of the new features and functionalities, we're adding to that and I also think we will see.
Additional growth.
And the rewards sector.
Okay, great. Thanks very much.
All of them.
Thank you as a reminder of that star one to be placed in the question queue. Our next question today is coming from Mark Palmer from <unk>. Your line is now live.
Yes, Thank you and thanks for taking my question.
A large company in the plasma space reported recently.
And believes that attitudinal changes.
And those who have donated plasma historically.
<unk> continued to be a headwind as the result of the pandemic.
What gives you confidence that we're going to see a rebound.
In plasma donation volumes.
The willingness of those who would.
It would benefit from the additional cash to come forward and donate plasma and therefore use your cards.
Yes.
I think as we see some easing in the restrictions I think youre going to see people return.
The return to normalcy and start arriving in back of the donation centers you got to understand a lot of these people they're not doing this for all terrific reasons, but not doing this to be of good citizen of don't need a lot of these people are doing this the supplement their income and I believe that will continue to.
I believe that will continue to happen in the future of as well.
Mark Let me, let me add this I mean.
The one thing we are seeing even today is that the average dollar of loaded per card continues to go up.
And that's the that's a factor of supply and demand.
Know that there are more.
The therapies that are using plasma of plasma has not gone away of the demands there.
And as that average rep.
The revenue per load goes up.
That's going to be of benefit to us.
As we make money on fees and interchange of things of that nature. So.
I think just like anything else on an absolute number of of.
Of the plasma donations if.
Those weekend in the plasma centers will be forced to raise the price of that they can drive more more people into their centers, but we got we got to get it behind us.
Clearly, what we're seeing coming out of Washington, whether it's stimulus checks are ongoing.
Unemployment benefit to incentivize people to stop sitting at home and get out and actually work and pay their bills like they did.
They did prior to Covid and and it's not just of our business that we're seeing the SA.
That's why.
What is I'm commuting back and forth of Las Vegas, and I can't even get a car to pick me up because there are no drivers because they are not incentivized to go out and and and.
And drive so, but this will all normalize as we all know and hopefully we will benefit from it at that time.
Thank you.
Thank you as a reminder, that star one to be placed in the question queue. Our next question is coming from Jon Hickman from Ladenburg Thalmann. Your line is now live.
Hi.
Yes.
Sorry can you hear me okay.
Hey, John Yeah, we.
I'm sure I have a couple of questions first of all in the.
Operating expense line. This quarter were there any was there one time expenses for the.
Accounting you know to get you guys fully complying get rid of that.
Oh, what do you call it.
Material weaknesses.
<unk> finished with no.
There were not any one time the material weaknesses, we worked on all throughout 2020.
And exited the year anchor clients, but the from an SG&A perspective.
There werent any one time items in this quarter, you would've seen part of that.
Starting back earlier in the year when we brought on the outside firm and they did their work so but no one time expenses this quarter.
Okay, and then I know you cant report it because you've changed the accounting.
On your pharma programs, but are you seeing.
Any change in like consumer behavior there from.
How the cards are being used or how much you know.
People are leaving on the cards et cetera is that is.
Is the historical norms changed.
No not at all.
It's the same we're seeing the same patterns that causes to change the estimate in the third quarter even today.
Okay.
And then so just to clarify one comment I think you made in the question and answer period. So you said that your pipeline for new plasma centers is roughly equal to what we signed last year Mike.
Like 30, 30 to 40 centers do you expect to add this year is that what you were trying to communicate.
Okay.
Yes, I believe we will beat that.
Okay.
Okay. That's it from me thanks.
Okay.
Thank you. Our next question is a follow up from Peter Heckmann from Davidson. Your line is now of life.
Just following up given we've only got about a week left in the first quarter. You know can you give us some qualitative comments there maybe your relative level of comfort with the first quarter consensus numbers.
I think again, we're not giving guidance out.
I gave in my prepared comments.
Some of the things that you guys need to be aware of which is seasonally fourth quarter or excuse me. The first quarter is usually.
Lower due to tax season people will get the rebase.
And then of course, then you had the big stimulus hit mid mid March stimulus checks went out.
Et cetera. So.
Yeah, Pete if I, if I could give you guidance and I had a crystal ball I would do it but it's hard to see how those factors are going to influence the first quarter.
And remember first quarter last year was the very strong quarter. So.
The Covid didn't really go into full effect, our low watermark was in may.
So just be cognizant of that as Youre looking at your models.
Got it got it okay. Thank you.
Yeah.
Thank you we've reached the end of our question and answer session I'd like to turn the floor back over to management for any further of closing comments.
Thank you, Kevin and again I want to end with an emphasis on the amazing teams, we have assembled along with the robust pipeline. We are building in support of 2021 and beyond.
Thank you for your continued interest of your questions and your participation in this earnings call and stay safe and have a nicely.
Thank you that does conclude today's teleconference and webcast you may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.