Q4 2022 RYVYL Inc Earnings Call
Ladies and gentlemen, thank you for standing by the conference will start in just a couple of minutes. Once again. Thank you for standing by the conference will start in just a couple of minutes.
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Good afternoon, ladies and gentlemen, and welcome to the rival fourth quarter and full year 2022 earnings conference call.
During todays presentation, all parties will be in a listen only mode.
Boeing management remarks, the conference will be open for questions. The earnings press release accompanying this conference call was issued at the close of the market today.
Annual report, which includes the company's results of operations for the 12 months ended December 31, 2022 was filed with the SEC today on our call today, our rival Chairman then Erez interim Chief Financial Officer, Mary Lai, Hoyt and Chief operating Officer Midway.
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 a 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 section at this time I'd like to turn the call over to Ben Harris, The company's chairman.
Ben the floor is yours.
Thank you for joining our fourth quarter and full year 2022 financial results conference call and an ongoing effort to simplify the reporting process and make it more efficient and cost effective youre utilizing AI to edit and produce portions of this call. We hope you see the value in doing so as well.
Do if it is successful we will increase the use of these tools in future calls against failing crypto exchanges volatility and more recently bank failures rival continues to make meaningful strides toward achieving its long term objective of becoming a disruptive force in the digital payments market our fiscal year 2022 was highlighted by.
Continued topline growth leading to record revenue up just short of $33 million on a total processing volume of $3 $6 billion also a new company records and growth of 83% from 2021 processing volume as a reminder, we only recently launched our Gen. Three technology, just two short years ago, achieving such growth.
It's been a relatively brief period, while remaining compliant is truly remarkable, especially in light of a slowdown in global growth from persistently elevated inflation rival continues to prove the growing adoption of innovative payment solutions does Meanwhile, the test during the breakdown of our segment results the levers that drove rivals growth in 'twenty to 'twenty two are merchant.
Wiring business and geographic expansion following the completion of our acquisition of transact Europe . We expect these two areas to continue to pave the way for future growth for our processing business for years to come. Meanwhile, we continue to rigorously focused on additional growth drivers that we expect to drive long term sustainable value for our shareholders.
The first of which is our stable coin technology branded as corny, which we officially launched in October of 2022, even recent disruptions in the crypto and stable coin markets along with the more recent bank failures increased regulation is undoubtedly underway. We believe koine it will be a beneficiary of that as it presents an ideal.
Solutia pointing is properly pegged to Fiat currency, both in coverage and compliance reporting findings equivalency to fifth isn't likely to eventually be even better than fear as it has the potential of being adjusted or hedged by commodity to ignite corneas growth trajectory, we will use a multifaceted approach Soc will lever.
Our existing growing global processing volume to increase the adoption of corny second we believe a spin off of corny as a separate publicly traded entity has several benefits that I've previously discussed and will best position. Its growth. This has long been part of our growth and value creation strategy, while market conditions in the vicinity.
Last year recent sector turmoil have reopened their doors of opportunity for us we have identified and expect to acquire the vehicle to spinoff corneas technology branding and revenue into a publicly traded company in the coming weeks. We have also identified the investment banking team for the proposed transaction we are in the process of evaluating.
Mergers with possible partners upon completion of the spin off we plan to reward shareholders with a special dividend for their long standing support another important growth driver for US is our relationship with the territorial bank of American symbol in Q4, we experienced continued progress towards the adoption of our payment solutions through this partnership.
I am pleased to report we now process. The island's majority of electronic payments just three quarters. After deployment. This is a successful demonstration of our capabilities to create a closed loop ecosystem.
And modernized payments infrastructure. It has helped generate interest from a variety of potential customers, including other islands businesses and governments around the world. We continue to explore collaboration opportunities with the bank. We were very pleased to recently report we are seeing traction with our bank because the service solution with six global financial.
Institutions, signing up and adding an estimated $100 million in monthly transaction volume over time and the aftermath of major bank failures rival was chosen by these firms due to our innovative infrastructure was a robust compliant and superior bank because the service solution. We believe this is just the tip of the iceberg for our bank because it's.
Service solution.
And expect to see continued growth in this segment play an important role in our evolution. The company is experiencing a strong and growing pipeline domestic and international acquiring business market share capture in Samoa and recent breakthrough of wins with our banking as a service solution. This coupled with plans to spin off with coining to unlock it.
Potential we are well positioned to significantly expand our presence in the digital payments market and deliver strong results for our shareholders with that I'd like to introduce our interim Chief Financial Officer, Mary Lai Hoyt to walk us through the details of our financial results and the impacts of our restatement.
Thank you for the introduction, Brian I'm excited to be part of the team before I dive into the Q4 and 2022 financial results.
<unk> disclosed in our filings, we amended and restated our audited consolidated financial statements and related disclosures for the year ended December 31, 2021 presented in this Form 10-K, along with our unaudited consolidated financial statements.
And related disclosures for the quarters ended March 31, 2021.
30, 2021.
Remember 30, 2021 March 31, 2022.
32022 and September 32022.
Following adjustments impacted revenue net loss total assets and shareholders' equity.
For a description of the adjustments and accompanying tables are available in our 10-K filing.
The company recorded adjustments to reverse the recognition of certain commission related to transactions processed under the Sky financial portfolio.
Company has recorded adjustments to proper you leave reflect certain transactions and the repurchase of the company's stock.
Company determined that for one of its gateway banks it had not accrued the appropriate b percentage and has recorded adjustments to each of the periods being restated to record additional fee in the statement of operations and to reduce the net receivable due from the Gateway Bank.
The company made adjustments to charge offs of certain receivables due from Gateway Bank.
The company recorded adjustments to increase its merchant liability balances for each of the periods presented to properly reflect all liabilities incurred as of the end of each respective period being restated.
The company made certain adjustments to properly account for this convertible debt in each of the three quarters of 2022.
It just looks to the debt balance interest expense loss on extinguishment of debt and accumulated accretion. In addition, the company recorded adjustments to make certain reclassifications on its balance sheet to record the loss of extinguishment of debt and to record fee income from merchants related.
To assess fines and penalties.
Turning to the company's fourth quarter and full year 2020 financial result.
As a note I'll be referring to adjusted EBITDA and other non-GAAP measures for the calculation of adjusted EBITDA and other non-GAAP measures. Please refer to our 10-K filing which will be available on the company's website under SEC filings.
Fourth quarter results fourth quarter net revenue increased by 4.1 million or 56% to $11 1 million from $7 1 million in the year prior.
The increase was primarily due to an increase in processing volumes due to the number of factors, including growth of our customer and merchant base.
As a result of expanded sales and marketing efforts.
The expansion and growth of our advanced blockchain ledger based payment solutions product offering combined with an expanding ISO and partnership network our expansion into the banking as a service and FX business using our acquired capabilities in the EU market or business growth in Americas Tomorrow.
Our strategic acquisition strategy.
Operating expenses increased by $5 3 million to $24 7 million for the three months ended December 31 2022.
For $19 5 million in the same quarter of the prior year.
The increase was primarily due to an increase in depreciation and amortization expense, including an impairment charge of $14 million related to the acquisition of Sky financial portfolio with the impairment charge. The company is written off the book value of the acquired intangible assets of $18 1 million due to.
The uncertainty of gaining access to the acquired merchant accounts and I have found list.
The company recorded a net loss in the fourth quarter of 2020 to $16 4 million or 41 cents per basic and diluted share compared to a net loss of $15 9 million or 16 cents per basic and diluted share in the same quarter a year ago.
Increase in net loss was primarily due to an increase in depreciation and amortization interest and other expenses related to the $100 million senior convertible note issued in November 2021.
Cause it for 'twenty to 'twenty two result.
Net revenue increased by $6 6 million or 25% to $32 9 million in 2022 from $26 3 million in 2021.
The increase was primarily due to an increase in processing volume from one 9 billion in 2021 to 3.58 billion in 2020 two.
The increase in processing value volume was due to a number of factors, including growth of our customer and merchant base. As a result of expanded sales and marketing efforts the expansion and growth of our advanced blockchain ledger based payment solutions product offering combined with an expanding iron selling partnership network.
Our expansion into banking as a service.
FX business using our acquired capabilities in the EU market or business growth in South America is small and our strategic acquisition strategy.
Net revenue in North American segment was $28 6 million, while international revenue was $4 3 million. This compares to 26.3 million all of which were in North America revenue in 2020 one.
Operating expenses increased by $8 8 million or 19% to $54 2 million from 'twenty to 'twenty two.
In 2022, excuse me from $45 4 million in 2021, the increase was primarily due to goodwill and intangible impairment charges of $18 1 million related primarily to the sky financial portfolio.
Increase in payroll and payroll taxes due to increased headcount and professional fees offset by a decrease in general and administration expenses.
Decreases in stock compensation for services by $11 8 million to reward key vendors for services rendered and to conserve cash.
There was a decrease in stock based compensation to employees by $3 5 million, partially offset by increase in stock grant expense.
Increase in research and development expenses.
By $2 4 million due to expenditure on the Sony platform development and version one pilot that led to a successful person two systems go live in the second half of the year.
The increase in marketing expenses by 1.2 million to establish our new Master brand arrival and develop our new corporate website.
Now turning to non operating expenses.
Were some unusual items in the non operating expense category.
Including expenses related to amortization of debt discount the company incurred interest expense of $8 2 million in 2022 primarily related to the increase in average outstanding debt due to the issuance of the 100 million convertible note in November 2021 no.
Noncash interest expense from the amortization of debt discount was $15 1 million in 2022.
We recorded a gain from D recognition unconverted convertible debt of $16 9 million in 2022 and we recorded a loss on a merchant liability settlement of $5 7 million in 2022.
We ended fiscal year 2022 with a loss from operations of 38 1 million compared to a loss of $20 8 million in 2020 one.
The increase in net loss from operations is primarily due to increased operating expenses.
The company sustained a net loss for the 12 months ended December 31, 2022 of $49 6 million.
Or 1.03 cents per basic and diluted share compared to a net loss of $35 3 million or 0.65 cents per basic and diluted share in the same period.
The prior year the increase in the net loss for the 12 months was primarily due to an increase in depreciation and amortization expense related to a goodwill impairment charge as well as interest and other expenses related to the $100 million note.
We ended the year with cash cash equivalents and restricted cash of $40 8 million as of December 31, 2022, I will now turn over the call to memory, our Chief operating officer to provide a review of business operations and our outlook.
Thank you Mary.
As I've done in prior conference calls I will provide a walk through of the material revenue contributors.
And before turning it over to our 2023 outlook.
During 2022, our processing volume hit nearly $3 $6 billion.
Which is approximately 15% lower than our processing projection of $3 $8 billion.
Q4 volume across all channels is about $508 million.
About 59% lower than our Q3 volume this.
This was primarily due to us suspending the reporting of the volume and revenue from the Sky financial portfolio.
Plus the timing of volume ramp up and the foreign exchange and international payments business and Connie.
While compared to the 12 months and the 2021 we're looking at 983% improvement should we look at the processing volume outside of the Sky financial portfolio.
Volume improved from $323 million to $1 $7 billion year over year.
Or a 420% increase.
Our acquiring business Q4 volume is $98 million, which is $536 million less than the Q3's $634 million due to the pause in reporting the sky financial related point.
Chart Savi is approximately 19% higher than planned processing $67 million in Q4 and for the full year 2020 to process $250 million Q4 over Q3 growth rates at about 5%.
While our foreign exchange, our international payments business line, including trends in Europe , we reported over $350 million. He business volume in Q4 of which $289 million is attributable to FX conversion and international payment transactions.
Total year volume of $1 billion is 25% higher than our original budget estimate.
For an update all Americans them, all while we continue to gain traction and I'm pleased to share that all services have been rolled out to over 250 merchants.
Representing over half of their overall much in target market in.
In Q4, our monthly volume exceed $10 million for the first time with a total Q4 volume at about $27 million.
We're very proud of our electronic payment enablement for the businesses and customers on the island.
With respect to our ACG business, we decided to adjust our strategic approach to this offering and we'll pivot.
As part of the banking as a service offering in early 2023, we have announced our experienced and getting great momentum in this space recently.
To circle back to Connie since the launch of a platform on October 12, 2022, we have made a couple of enhancement releases to improve merchant and customer experience with a reason business environment shifts in the digital banking space in the states.
He further supports our plan to monetize corny platform to support the EU and other international markets now I would like to turn to our outlook for 2023.
With respect to the processing volume, we're targeting to achieve $6 billion and plus revenue from our existing and planned business expansion is toxic at $60 million for the year for adjusted pro forma EBITDA target for the year is a positive $4 million.
Overall, we expect to continue our strong growth momentum for our various processing businesses.
I'll expand the ISO partnerships and direct sales force.
It all corny platform of course, they're going to come a ranked ramp up in the global market.
Through our schedule spinoff plan and further improve shareholder values in 2023.
With this I would like to now turn the call back over to Ben Harris, our chairman to begin our Q&A.
Okay.
Thank you mean.
I think the folks listening to this call. Thank you all for your interest and commitment to rival.
We are genuinely grateful for your ongoing support.
As a personal personal comment.
I would mention and highlight again that the my portion of this call.
It was edited and produced using AI.
And the although it sounded like be it wasn't me talking.
And I would welcome your comments about that.
With that I'd like to begin our Q&A session. Operator. Please begin thank you so much.
Thank you Ben.
We will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the queue. You May press star two if he would like to remove your question from the queue.
And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, please when we pull for questions.
And our first question comes from the line of Kevin Dede with H C. Wainwright. Please proceed with your question.
Alright.
I've been welcomed.
Welcome Mary Hi.
Thank you.
Yeah.
So.
Oh, Wow, I don't really know where to start.
Maybe Dan you could just sort of refresh our memory on the opportunity you see in the appointed spin.
Your your AI software kind of glossed over that.
[laughter] well hopefully the the real life version of Mi and improve it.
Somewhat.
So yes, we.
Definitely see.
Great opportunity in the spin off.
For coin.
They are.
The on the negative testing side and on the positive testing side advantages for doing so.
First we wanted to remove.
The.
During the depression of the crypto.
Crypto currency from the main business.
So this is this is an opportunity to take that into a separate entity.
Also.
We believe in the technology and the stable growing opportunity and in block chain in general and we think that the combination of the two entities.
It will be far greater than the sum of the parts.
To that effect, we have identified the launch vehicle.
For Courtney.
And have acquired.
<unk>.
We have identified several merging our COO.
Into this of what she does.
To discuss this separately in days to come.
We have identified.
Investment banking team.
And we will do a joint release on that.
Hmm.
Very shortly.
All.
All of these will stop.
Establishing a launch opportunity that is not only commercial for the coronary launch itself.
But also a big advantage on the strategic direction for the company for creating shareholder value.
And we're thinking a very generous.
And the opportunity for a dividend for existing shareholders of rival.
We can do that.
Even though we plan on staying.
Above the 80% ownership of the spinoff.
Company.
Because we were able to identify the right launch vehicle and acquire the majority of it in fact north of 99% of it.
And again, we will discuss that separately in days to come but I hope that helps.
Yeah. It helps a lot Ben.
Think.
I think one of the details I was looking for was your interpretation of customer feedback.
I think one of the questions lingering for me is just whether or not your customers perceive.
A difficulty in working with rival.
With such close affiliation of Koine, and whether or not they wanted to see.
Some separation.
Yeah. So.
Very astute question and thank you for it so.
So it is true that we see that actually.
Both sides of the border.
Sample, Bart science, especially international clients prefer working directly with koine because of the speed and availability of funds and the.
The instant settlement and other properties.
Where it made available due to this technology on.
On the other side of it we see certain banks and <unk>.
Other strategic partners.
Really worried about.
These derivatives.
Reputational risks.
We see that from Audi doors, and we see that some other strategic partners.
To that effect, we saw the the best direction for the company in this separation and we think it will be.
Directly positive on both sides of the border.
That that helps even more.
Can we sort of peel, the onion back a little bit on banking there is a risk.
Ben I.
Okay.
I think what I'd like to understand better is how youre going to package in market that and what services in particular, you're going to promote and how.
That marketing effort.
Aligned with the other services that rival offers.
Okay.
Lastly, let me invite my brother from another mother to the conversation for the Nissan CEO and co founder really go ahead. Thank you very much.
That's a great story.
Oh.
He has the surveys.
Is the product that.
Have a huge need today in the market.
Especially in Europe .
We see a lot of different providers are different banks and different services.
That have different challenges in today's market and day looking for different solutions and coordinate infrastructure and technology.
Blockchain become something that they are looking for and need to be compliant.
And we with the changing of the landscape of financial today.
We are going to package that services from kind of issuing a bond and bank account issuing two effect and crypto currency.
To offer a different not enough frame capability utilizing our technology.
We have a huge demand for that as we mentioned in our last P. R.
And we in Europe , especially because a lot of the providers are shutting down for a different issue like regulation and compliance and the way we design Courtney.
We believe that that solution can be.
That they can rely on and grow their business, including our business Oh from Doug results. So we really excited about coordinate and about their opportunities.
In business banking as a service and then of course, one more thing that I would like to add.
Is the ability to process credit card and that's related to the acquiring side of the business and Courtney.
Leverage.
That as well and offering defends our payment structures.
For the own Onramp capabilities. So yes, we are excited about it and our partners as well.
Last question for me before I turn the floor over.
It seems that processing volume missed your target a little bit I guess this is sort of the elephant in the room I was hoping you could speak to that.
And maybe give us an indication I think at the beginning of 'twenty. Two there was a little seasonal weakness I'm wondering if you're seeing that so far given.
We're halfway through April already maybe you could touch on what happened in December in processing volume in the December quarter, and how you see it now.
Okay with that I will direct the conversation.
Chief Operator go ahead.
Hey, Kevin.
So as we do.
Oh, sorry in Q4, we stopped reporting the bogging processed from the Sky financials portfolio.
You know outside of the Sky's financial portfolio, we really have gain huge momentum right. So if we look at the annual volume of processing, you know without looking at Skype and Asia portfolio, We went from 320 million to.
One 7 billion from 2021 to 2022.
And that momentum continues when we look at all of our merchant base. You know we have grown by about I would say for the North America acquiring we have grown by more than 10, 15% already in Q1 of 2023.
Right. So and in addition to that we also are looking at acquiring a ballgame in the European market.
That has to go out and go has really improved from about seven to 8 million a month, you know to double digits, you know most reasonably already.
So really the impact going back to Q4 is because we decided to stop reporting the volume from Sky financial portfolio.
But other than that organic growth is very strong.
Okay.
It's been a tough.
A word.
Sorry for interrupting.
So you see that as a common theme for what is happening with the company.
Over the past.
<unk>.
We do have.
This concentrated airport.
Improving.
Our bottom line, improving our processing efficiency improving.
Workforce improving technology.
All of these things work in concert.
The one interesting manifestation for that is what you see in today's.
A call where a while the volume reported is decreasing operating margins are increasing and the overall performance is actually higher.
This is very very important to notice.
We're not done by any mean.
And we will continue to improve on all of these fronts.
But I wanted to make sure that this is on the table and everybody noticed you said.
Yes, Thanks, Ben sorry, just for a quick follow up the.
Men mention 10% to 15% up already that's year over year I'm going to assume and then I'd just like to understand why we're omitting sky financial portfolio now what what happened there I apologize for not.
No not understanding that yeah, no no problem. Kevin. This is a very fair question, it's important that we provide that clarity.
And as part of the Sky Financial acquisition, we announced in 2022.
The company expects to receive access to our customer base.
And in.
In a business I piece.
As of end of December 2022, we have not yet.
Those items, which is part of this atlas obligations to us.
You know for prudent.
Also with auditors technical accounting consideration, we have decided not to.
And is the volume and revenue associated with that.
That's in accordance with U S GAAP.
Okay would that do you expect that to change at some point going forward when the auditors are more comfortable with where.
Those asset stand.
So we will not at this point are in a position to put a target new targets on that but we'll report new information on that as it becomes available. However, we are being just stated.
We think it's prudent of us.
To disregard.
That contribution until we can prove it.
Okay. So Ben in the 6 billion target for this year and the 60 million.
It does.
Yes.
Okay does not include the Sky financial transaction volume, but includes the revenue.
No we.
We did not include any number.
Performance number volume or revenue from the Sky financials and that you should also say the.
This does not include any performance that rescheduled for acquainted.
It will be reported separately as a separate entity.
Very good. Thank you gentlemen, apologies for drawing the questions on I'll happily turn the floor over.
Thanks, Kevin appreciate it.
I'd like to now turn the call back over to Ben to answer any questions submitted prior to today's call. Thank you Ben.
Thank you so.
Kevin actually addressed a lot of these issues already.
So I think that one question.
Actually it was not answered is.
They said this was submitted before the call.
Has the growth in American some more opened opportunities into other countries in Ireland.
I think mean is probably in the best position to answer that I would just say that the we do see our approach from other countries South America and South Pacific.
Four.
The collaboration in <unk>.
On our technology and ledger.
Infrastructure.
We will report on some of that in a separate opportunity.
Got it.
You mean, the may have further like to shed on this.
Yeah. Thank you Ben yes.
Yes, absolutely, we see great potential in Nebraska small island.
Not only because we treated that as their digital transformation for banking services and the Kony platform provides a great Foundation in Boston allow you now allow us to come.
But the payment services. There are we already have interest in the local organization to.
It utilized Connie for a sudden institutional programs you know a governmental service programs you know, we expect that a bunch of those mature materialize.
It wouldn't be able to say you know.
That meant that monetization strategy.
All of that in the plan, we definitely foresee similar services can be applied to implement it.
In the mainland.
The United States as well as other countries on the islands.
Yeah.
Okay.
With that Ah.
I. Thank you all for submitting this thoughtful questions and interest in rival.
Operators.
We are back to you.
Thank you for joining US today you may now disconnect your lines have a great rest of the day.
Thank you all.
Yeah.
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