Q2 2022 Greenbox Pos Earnings Call
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Good afternoon, ladies and gentlemen, and welcome to the Green box P. O S second quarter 2022 earnings conference call.
During todays presentation, all parties will be in a listen only mode.
Following management's remarks, the conference will be open to questions.
The earnings press release accompanying this conference call was issued at the close of the market today.
The quarterly report.
Fluids, the company's results of operations for the three months ended June 30th 2022 was filed with the SEC today.
On our call today are green box P. O S Chairman, Ben Erez, Chief Financial Officer, Ben Cheung and Chief operating Officer Midway.
I'd like to remind everyone that statements made on today's call and webcast, including those regarding future financial results and industry prospects are forward looking and maybe subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call.
Please refer to the company's regulatory filings for the list of associated risks.
The replay of this call and webcast will be available for the next 90 days on the Companys website under the events <unk> section.
At this time I'd like to turn the call over to Ben Harris. The company's Chairman then the floor is yours Hello, and thank you all for joining our second quarter two financial results conference call.
We are delighted to announce that our second quarter of 2022 of Greenwald was marked by excellent financial results along with the steady progress on several key initiatives.
It's further establish our standing.
As an emerging force on the Fintech landscape.
We achieved yet another company record quarter processing volume of over $1 billion.
More than doubled the volume versus the same quarter a year ago.
There's many others believe we to consider a processing volume.
That's the best proxy to predict our growth trajectory and the global digital financial transactions industry.
In addition to amazing processing volume result.
We also accomplished a number of critical operational objectives as well as a strategic partner with customer announcements.
During the second quarter, we strengthen our core business infrastructure within the sales marketing and operational function introducing all products in select territories, such as American Samoa.
And made excellent progress on development of coin.
Cable cord blood for.
We Additionally, integrated material business capabilities from recent M&A.
Transact to Europe to launch service offerings in several business domain.
S H foreign exchange.
In international payments.
Despite the challenging macro environment, we remain hyper focused on execution of our business plan.
For the balance of the year.
To continue growing processing volume and share.
The global marketplace as we look to further scale in 2023.
Market turmoil during the second quarter severely exposed certain stable go and model that.
While peg to currencies.
The U S dollar use of variety of algorithmic methodologies.
Non liquid or risky investment strategies.
There is something that's very important to note that green box, we ensure that our stable coin koine has available existing reserves in.
In a custodial account to secure liquidity.
And he said I.
Should anyone want to exit that anytime.
This means that.
Users of Queenie always have the dollar for dollar of assurance of their assets being available.
And.
This group of this essential distinction in the second quarter, we became one of the industry's first to ensure real time custodial account at the station.
Linked to review process I T compliance.
And specifically.
Two compliance certification from our Menino top U S accounting consulting and technology.
We consistently challenge the stable growing industry for improved processes.
And to 100% funds custodial accounts.
In real time two elements.
Many stable growing structures do not offer but that we deem are vital to the industry's long term success.
So while our company has a diverse set of outstanding payments solution because of this critical differentiator, we view Koine technology.
The significant long term growth driver for EBITDA.
Another partnership in which we have seen major progress in Q2 is really the territorial bank of American Samoa P bass.
After being named the exclusive payment technology provider in 2020 one.
We are now deploying our glyn off providing digital payment solutions in this U S territory.
Do we have a close loop ecosystem that is most of the reliant on cash transaction and tracking these would pencil and paper being catapulted into tech driven green box solution that offer secure state of the art high speed transactions, delivering merchant and money transmission service.
Credit and debit card processing.
And more.
Given the recent exit of a second bank in American Samoa Sea bass is now the only banking institution remaining on the island.
Allowing for greater Green books growth.
We have now achieved about 13% market share, but this island territory.
All gained during the second quarter.
This showcases our agility and ability to use our unique technology.
There are all types of customer needs.
We firmly believe T bus will prove.
To be the ideal model market for our Koine platform to implement the same offering to other similar close loop geography.
As we've previously discussed at the end of Q1, we completed the acquisition of comes back to Europe or Teu.
T U.
He is a vital piece of our growth plan, enabling us to effectively deliver the advantages of our customized payment solutions technology to European and U K merchant and begin foreign exchange transaction processing.
It also serves as a gateway into the Asian market.
During the second quarter we.
We are focused on infrastructure and packaging or key offerings to maximize the immediately available business building opportunities.
Several key strategic initiatives are being deployed to drive growth from this acquisition and are on track to produce revenue growth in the second half of the year.
This coupled with the purchase of the Sky financial portfolio at the start of Q2 will generate a significant processing volume portfolio for the violence of 'twenty to 'twenty two.
As we have grown in Q2, so has our board of directors.
With the appointment of Dell Hogan.
Highly experienced and well respected transactions.
And that has already proven materials too.
Our recent acquisitions and securities compliance successes.
And we will be an important contributor to any M&A and dividend plans in the future.
Anticipation of our continued growth and evolution as a public company and indicative of our continued commitment to strong governance practices.
We have also transitioned our auditors to Simon and Edward.
And alliance member of BDO.
This provides an overview of our accomplishments during the second quarter.
I'll now turn it over to our Chief financial officer of bench on.
To walk us through the details of our financial results.
Thank you Ben.
And then my portion to key results of our financials.
Breakdown is available in our 10-Q filing and in the press release that was just shouldn't eat it after market close today.
Please note that I'll be referring to adjusted EBITDA and other non-GAAP measures for the calculation of adjusted EBITDA.
non-GAAP measures. Please refer to the MD&A, which is available in our 10-Q filing which you can find on our website under SEC filings.
We continue to see solid revenue growth due to increased processing volumes, what's our merchants and we will continue to have growth in our processing volumes throughout the year. Our net revenue increased by 0.8 million or six 6% to $11 9 million for the six months.
At June 32022 from 11 1 million in the prior years same period.
Net revenue increased by 0.6 million or nine 2% to 7.0 million in the second quarter of 2022 from $6 4 million in the same quarter of prior year. The increase in net revenue was due to the increase in processing volumes, but offset by.
Higher fees to gateways and I suppose.
Gross profit for the six months ended June 32022, well, it's $5 2 million or 43, 5% of total net revenue compared to gross profit of $8 2 million or 73, 8% total net revenue in the prior years same period.
Gross profit in the second quarter of 2022, well, it's $2 8 million or 45% of total net revenue compared to gross profit of $5 1 million or 79, 3% of total net revenue in the same quarter a year ago.
Our total net revenue and gross margin will be primarily driven by our negotiate a commission structure with Iso's, which are our independent sales organizations and gateway fees. The decrease in gross profit was primarily due to the increased cost of revenue, resulting from higher profit.
Fees eight two gateways and commission payments to Iqos.
I would like to now discuss our operating expenses.
Once again I would like to point out that our operating expenses are not directly co related with our net revenue primarily because of the scalability of our revenue from a small number of employees due to our technology and the business we are in.
We distinguish our operating expenses into two categories.
Ordinary operating expenses and noncash operating expenses ordinary operating expenses, including marketing research and development payroll professional and general expenses well noncash operating expenses include stock compensation expenses for employees and for it services, including depressed.
In Asia.
Our ordinary operating expenses were $15 4 million and $5 3 million for the six months ended June 32022, and 2021, respectively, an increase of $10 1 million.
Our ordinary operating expenses were $7 7 million and $3 1 million for Q2, 2022 and 2021 respectively, an increase of $4 6 million.
The overall increase was primarily due to an increase in general and administrative expenses related to increased head count to support operations and sales growth as well as heavy investment in R&D to improve our technology.
Our noncash operating expenses are primarily related to stock compensation expenses for employees and services and depreciation and amortization expenses.
We ended with a net loss from operations of 15 million for the six months ended June 32022, compared to $9 4 million in the same period prior.
Prior year.
Other expenses decreased by 8 million two eight net other income of $4 million for the six months ended June 32022 from a net other expense of 4 million in the same period the prior year.
Interest expense increased significantly for the six months ended June 32022, as compared to the same period in the prior year due to the $100 million convertible note issued in November 2021.
We also recorded an income from changes in fair value of derivative liability in the amount of $18 7 million for the six months ended June 32022, and none in the same period the prior year.
Comparing Q2 2022 versus Q2, 2021 other expenses decreased by $19 1 million to our net other income of $19 1 million for Q2 of 2022 for a meal for Q2 2021.
Interest expense increased significantly in Q2, 2022 as compared to Q2, 2021 due to the $100 million convertible notes issued in November 2020, what ammar.
Amortization of debt discount fees and the fair value of derivative liability associated with the note were also contributing factors.
Are there more the company recorded an income of $26 4 million from changes in fair value of derivative liability expense for Q2, 2022, and none in the previous year's same quarter.
The company sustained a net loss of $10 9 million for the six months ended June 32022, or a negative 26 cents per basic and diluted share compared to a net loss of $13 4 million or a negative 43 cents per basic and diluted.
Its share in the same period the prior year.
The company recorded net income in the second quarter of 2022 of $10 4 million or 24 cents per basic and diluted share compared to a flat net income or zero cents per basic and diluted share in the same quarter a year ago.
The increase in net income for the six months ended June 32022, and decrease in net loss for Q2 2022, well, it's primarily due to a decrease in change in fair value of derivative liability and offset by increases in research and development general and administrative.
Payroll and payroll taxes and professional fees as we continue to add staff and infrastructure related to our growth.
We ended our cash and cash equivalents balance of $20 1 million and restricted cash balance of $26 5 million as of June 32022.
We believe our financial position is strong and we remain well positioned for future growth and profitability.
With that I'll now turn the call over to in many ways, our chief operating officer to provide a review of business operations and outlook for the back half of the year.
Thank you band, we highlighted several revenue generating channels in a reason CEO letter at the end of June .
I'd like to take this time to take out through a material revenue contributors and provide an update before turning to our outlook for the second half.
Oh Q2 volume across all the channels is north of $1 billion.
About 50% ahead of our internal projections.
This is a staggering 40% increase.
Compared to our Q1 processing volume.
$754 million.
You know acquiring business.
Including the recently added Sky financial portfolio.
Q2 volume was $769 million.
Which outpaced our expectations by over 38%.
We expect all acquiring line of business to continue exceeding processing volume targets.
The balance of the year.
Next chart savvy contributed over 6%.
All total processing in Q2.
And it is currently tracking at 10% higher than the plant.
When compared to the same period in 2021, this quarter's volume is 64% better.
Oh, ACTH business reported $17 $9 million in volume.
What's the status of my life in the later part of Q2.
This is 35% ahead of our expectations for the quarter.
And it demonstrates great progress towards that 50 million monthly volume to be at abated.
We predict this business would represent 8% of that total 2022 business.
Oh, FX had an international payments business line, including trends in Europe .
That's it seems significant momentum in the quarter.
We all but $184 million in business volume.
Of which $164 million is attributable to FX conversion.
National payment transaction.
The actual volume is more than double.
Our estimate for the quarter.
That's been Arris mentioned, we launched our merchant service business in America. So all of that this past quarter.
As of the end of the quarter, we have commenced services with about 13% of the total number of target much in on the island.
We are currently on track to complete all phase one rollout.
By end of October .
The other thing, 40% to 50% of that merchandise.
Turning back to Connie.
Now me to provide an update on our roadmap and deep all of them are in progress.
In Q2.
We successfully deployed one zero of the Kony public paid up and.
And complete the core development budget in two zero.
Which is on schedule the rollout with customers already identified in the pipeline in Q3.
We expect a good amount of volume to begin internationally at the end of that quarter.
We expect to begin to see moderate volume for Connie domestically in Q4, we international volume ramping up significantly.
And contributing approximately 20% to our volume profile for 2022.
Driving strong fourth quarter financial results.
Looking ahead to the second half of the year at all Kpis.
We now expect to see that falling.
While processing volume.
Q2 2022 set.
Not a new record.
That's our best quarter ever.
Almost double the volumes year over year would.
Which brings our year to date volume for the six months ended June 30 of 2022 to about $1.8 billion.
We look forward to a continuation of this trend during the second half of the year with new processing volume records in each subsequent quarter.
We remain confident.
With that we will process at least $4 billion with a total of 2022.
Revenue from processing in Q2, its about $7 million.
We saw a margin during the quarter increased by 21% compared to Q1.
As previously mentioned.
We are planning for a solid ramp up in revenue during Q3 <unk>.
In Q4.
That's ACTH and corny business volumes continue to grow in addition to our traditional payment processing revenues.
While adjusted pro forma EBITDA, we now believe we will break even in Q3.
Which is a significant improvement as compared to Q2 was negative $4 $9 million.
And we project Q4 to be a minimum of positive $3 million.
In terms of operating cash flow, we expect to turn positive starting in Q3.
So.
Operationally and from a growth trajectory standpoint, the landscape is very promising.
I'd like to now turn the call back over to better address before we begin our Q&A.
Thank you ma'am.
Before moving to the Q&A I'd like to address any concern pertaining to the $100 million notes outstanding.
The maturity date, and the coupon costs weighing on the company cash flow.
We have been in ongoing negotiations to modify the note and I'm pleased to report that we have agreed to terms in principle.
The satisfaction of the executive staff and the board of directors.
We ask that you stay tuned for our school disclosure.
The amendments to the node that is currently being prepared and will be shared in a separate SEC filings.
Also I'd like to reiterate some key points Omar recently, you should see a little that are worth highlighting.
We are cognizant of and continuously monitor industry developments.
Allocation of the competitive landscape and the overall business environment.
While there has been a significant disruption in the cryptocurrency and the financial technology industry. This year.
Green boxes focus remain on building the infrastructure partnerships communications and technology to achieve our long term business objectives.
We remain highly confident you know our ability to create differentiated customized financial transactions technology.
And deployed at scale.
Despite the depressed stock price our commitment to rewarding shareholders is unwavering and we believe as we continue to build green box into a disruptive I mentioned force.
We envision it will ultimately be reflected in a long term sustainable value for our shareholders.
Thank you for your commitment to Green box, we are truly grateful for your ongoing support.
With that I'd like to begin our Q&A session.
In addition to bin men and myself.
Other members of our executive leadership team, including our CEO for the Nissan and CMO Jacqueline Reynolds.
Oh on hand to answer your questions.
Operator, Please guide us through the question and answer session. Thank you so much.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session. If you'd like to ask a question you May 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 you would like to remove your question from the Q.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star King.
Our first question comes from the line of Howard Halpern with <unk> Brothers. Please proceed with your question.
Good afternoon, guys, a great job navigating the these tough waters right now.
But my first question is in regards to what was talking about just towards the end about driving EBITDA do you a breakeven and then positive is that how is that going to be driven by a reduced our gateway in the ISO class a.
Yeah, you know reduced our G&A expense.
How should we model and profile that moved from what you had in this quarter to the third quarter, we need to break even and how that's going to happen.
First of all Howard Thanks for your continued support main way our Chief operating Officer will take this question I mean go ahead, and say Hey, Howard.
Thank you for the great question.
So.
As we continue there won't be a moment in time across all the major revenue channels.
When would you expect to see increasing volume.
And the main acquiring business as well as channels FX international payments channels.
So we expect to see a rising revenue.
While being able to.
So they own and control costs.
Okay. Okay.
And in terms of how you know Oh.
The launch is going with American Samoa.
How should we look at it in terms of you say right now you've got 13% market share what.
What should we expect the ramp to be in the second half of the year and enter into the first half of next year as you gain momentum there.
Yeah sounds good Oh man hour so yep.
Do you have a very great relationship with you that we work closely with.
So you've got leadership at the bank.
We have already tried it out the merchant base.
Island.
As indicated earlier.
End of October we expect to get to 40% to 50% I'll say much on base on the island.
We already have plans to go beyond phase one.
To continue to ramp up because the only we can actually you have.
Elusive banking relationship with G fast.
Thanks.
On the island so.
We do expect to see revenue ramp up and our improved contribution margin.
That particular business project.
Okay.
Hi, This is Ben.
Okay.
Our activities in American Samoa.
Should be considered.
A large scale test case or other close.
And we anticipate that they are working on additional.
Such systems.
Who are closely monitoring the success over there.
We didn't want.
Turning to 13% of market share and anticipating growing to 40% minimum.
In the third quarter.
Is a major achievement.
Okay.
The American some wise it is an amazing opportunity for the company and we intend to capitalize on it.
The largest extended weekend.
Okay, and so and what from my understanding of what you said you actually have a growing pipeline of interested parties that are monitoring.
Your activities in American Samoa to make sure everything is it's a closed loop locked up tight and once once proven you'll be able to green light. Many more projects are hopefully by the second half of next year.
That's exactly the case, we anticipate exactly that.
Okay and one last one on the you know the acquisition of T. He you when you talk about it being a gateway to Asia, but you've been building. The infrastructure do you still have a ways to go building that infrastructure before you deploy.
Sales team or you know to try to break through and get into the Asia Pacific market.
I'll, let the main.
The main way again think that go ahead, yeah, Hey, Howard what we do is we take.
That's very kind of add all that much.
Development and our sales approach.
Sales pipeline.
The price is right.
Channels and partnerships.
And as you know I'm blank and lay out our additional opportunities in the peripheral business, we can ramp up and those will be executed in accordance with our business as well as their.
Realization process.
So we are having a lot of momentum market. We started seeing a rising interest both in North America as well as Asia Pacific leveraging the trends in Europe , you know a business platform and a license.
So that's how we approach it.
I'll add to that.
Did you your questions with regards to the Gateway to Asia Pacific.
Hum.
The state are in other calls and earlier on this call.
Let's see.
The company is looking very closely at opportunities.
On the M&A plane.
Both in Europe and in Asia Pacific.
And we think that the.
Great.
Fortunately as a waiting for that for us over there.
Most of those are designed to operate through the pipeline.
In Europe that we already own and often.
But we are looking at other opportunities in Asia Pacific as well.
Okay, Oh Wow I, one last one since you mentioned the M&A potential what are you seeing out there in terms of what multiples are compared to your maybe even this time last year or the end of the year have they gotten more reasonable.
Uh huh.
I think youre asking that question because you already know the answer.
Have a nice.
Yes.
It is true we do see the global landscape are accommodating the current situation, we see shrinking channels for capital.
Increase our cost of capital.
And as such the market has reacted and multiples have come down significantly.
Okay, we think that that will actually lead to opportunities and we're following right.
That with redoubled efforts.
Okay, well congratulations on navigating this tough environment, and keep blocking and tackling and and you know keep keep moving forward.
Thank you all where they appreciate your participation.
Okay.
Yeah.
Once again, ladies and gentlemen, it is star one to ask a question.
Yeah.
There are no further questions in the queue I'd like to hand, the call back over to Mr. Harris for closing remarks.
Thank you operator.
Before concluding this call I would like to give a special thanks to Ben Cheung.
This would be Ben.
Final, earning conference call with US. We appreciate all that he has contributed over the last 15 months with us and wish him the best in future endeavors.
This information will be forthcoming in the press release and associated SEC filings, starting tomorrow morning before market opened.
Thank you all for joining our earning calls today.
We look forward to continuing to update you on our ongoing progress and growth.
If we were unable to answer any of your questions. Please reach us.
Ed.
On our website or directly to our IR firm, the MZ group and.
And we would be more than happy to assist.
Okay.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.
Yeah.