Q2 2023 RYVYL Inc Earnings Call
Speaker 1: shareholder equity and cash flow. The second exchange is also possible upon shareholder approval, which would further reduce our debt by $16.7 million for a total of $21 million debt reduction. This type of institutional level commitment is a major win for all rival stakeholders and illustrates the conviction in our mission as a disruptive force in digital payments landscape. Operationally, during the quarter, we welcome Gene Jones as Interim Chief Financial Officer of the company.
Speaker 1: For over 35 years, Jean has served with in various executive roles, including CFO , COO, corporate treasure, and controller for public, private equity, venture funded, and startup companies. He's strong leadership and expertise in financial and operational improvements has had an immediate positive impact on our company. As we stand today, the second quarter exceeded our expectations with record top line results, and we saw positive momentum for our business transformation of updating payments infrastructure.
Speaker 1: highly focused on executing towards this large opportunity ahead of us in the look at a digital payments landscape. We are thrilled with the expansion and higher margin acquiring processing volume, both internationally and domestically. Plenty spin off strategy is moving forward.
Speaker 1: and has taken meaningful steps towards completion. We remain confident we are on the path to creating significant long-term value for our shareholders. And now to discuss the details of our financial results, I'd like to turn the call over to our Interim Chief Financial Officer, Gene Jones. Gene, the floor is yours. Thank you, Ben. I'll be referring to adjusted EBITDA and other non- GAAP measures .
Speaker 2: For the calculation of adjusted EBITDA and other non- GAAP measures , please refer to our 10Q filing, which will be available on the company website under SEC Filing. Our revenue increased by $7.9 million or 113%. To $14.8 million for the quarter ended June 30th, 2023, from $6.9 million for the year earlier quarter. The increase was...
Speaker 2: In recent revenues from our acquiring businesses, including charge Savvy, Rival EU, and American Simoa. North America Q2 revenue increased 86% from $5.9 million in Q2 2022 to $11 million for the quarter ended June 30 of 2023. The Q2 revenue is $3.8 million increasing by 270%.
Speaker 2: in the quarter ended June 30 of 2023, compared to 39% in the year earlier quarter. Payment processing consists of various processing fees paid to gateways and commission payments to the independent sales organizations. Or ISOs responsible for establishing and maintaining merchant relationships from which the processing transactions ensue. Cost of revenues increased chiefly due to increased volume, resulting in higher processing fees paid to gateways, commission payments to ISOs, and cost of revenue of acquired businesses in the US and EU, operating expenses.
Speaker 2: The increase was due primarily to higher general, administrative and professional fees for the quarter ended June 30, 2023, offset by decreases in advertising and marketing, stock-based compensation, expense, and depreciation and amortization. The higher general and administrative expenses in the quarter ended June 30, 2023 are mainly attributable to non-recurring legal settlements.
Speaker 2: and financial statements. Other expense was $6.4 million for the quarter ended June 30 of 2023, compared to other income of $20.1 million for the quarter ended June 30 of 2022. The biggest portion of this change was in the highly volatile change in the fair value of derivative liability. That amount was a charge of half a million dollars for the quarter ended
Speaker 2: interest expense, including expense related to the accretion of debt discount related to the $100 million convertible note. Decreased by $3 million from the year earlier quarter due primarily to a lower level of amount of debt outstanding, additionally we incurred a charge of $0.2 million in the quarter ended June 30 of 2023 related to the conversion of debt
Speaker 2: that you may recall that we had a restatement of previously issued financial statements and so there are some carryover effects from that including a $1.2 million charge in the second quarter. This was a challenging mission but we believe we have substantially all the restatement effects behind us. However if we exclude the effects of that highly volatile change in the fair value of our derivative liability and then
Speaker 2: In summary, we recorded a net loss of $12 million in the second quarter. This compares to $12 million in net income in the year earlier period primarily due to $26.4 million in income related to the change in the fair value of our derivative liability last year versus this year's change in. Fair value of derivative liability expense of zero-
Speaker 2: bit dies a loss of 0.9 million dollars compared to 3.1 million dollars in the second quarter of last year. Non-recurring items totaled 5.5 million dollars for the quarter and include legal settlements, legal matters and related fees, charge offs of some non-continuing legacy accounts, and accounting fees related to the restatement of prior periods.
Speaker 3: Please note that all the figures are exclusive of the Sky Financial portfolio. Our Q2 processing volume across all channels exceeded $678 million. Lessons are published in vacation of $580 to $610 million for the course. This is about 20% better than our Q1 2023 volume of $565 million. And an increase of about 85% from our Q2 2022 volume not including the Sky Financial volume. Our Q2 North America acquiring business volume was $146 million, which is 30% higher than the first quarter $112 million volume and is 77% higher than the same period one year earlier.
Speaker 3: Q2 charge savvy processing was 53 million dollars or about 19% lower than Q1 2023 processing volume when compared to the 62 million dollars volume in Q1 2022 it is a 15% decline. The year over year decline is due to reduced processing from select merchant base.
Speaker 3: For our FX and international payments portfolio, including the acquired Transactual Business and our new Banking as a Service offering, we processed $425 million in the second quarter compared to $344 million in business volume in Q1, an increase of over 23%. This is a 248% increase from Q2 of 2022.
Speaker 3: 60% of the target merchants market for our plan. In Q2, our processing volume was about $31 million, or a 10% improvement from the prior quarter and our monthly volume is sustaining at about $10 million. With respect to Corning, as Ben spoke to earlier, we continue to work towards executing our spin-off plan.
Speaker 3: We just announced the release of the Corny MPOS app that enables simple setup of point-of-sales terminal using compatible smartphones and users for convenient contactless payments. Furthermore, we discussed our near-term focuses on rolling out the platform in the European market due to the US regulatory environment.
Speaker 3: and digital banking changes as well as the increasing demand in the European market. Our efforts to establish the European business is well underway. Now I'd like to turn to our outlook for the third quarter and the total year. With respect to the processing volume in Q3, we are targeting a range of $720 to $800 million. For the total year of 2023 without the Sky Financial volume.
Speaker 3: we are estimating a range of $3 to $4 billion. Given the strength of our Q2 revenue of $14.8 million and continuing momentum, we are raising our Q3 revenue outlook to $16 to $18 million, which will bring our total year revenue to exceed $16 million. With regard to adjusted pro forma EBITDA, our Q2 figure is a negative figure of $16 to $18 million.
To be considered and approved by the SEC.
In fairly short timeline, perhaps 30 to 60 days.
Following that we will announce.
The data break one for the dividend and take steps towards distributing debt.
David.
As we said on the on the call we anticipate that to be completed by the end of the year.
I would also take the next question.
No.
Does the company have any updates on pursuing the entitlements under the Sky financial purchase agreement.
So.
Very quick update on that.
Hum.
We are pursuing.
That's.
Option for us.
On the legal front, we're still looking through different strategies to maximize the recovery under that liability.
And as it stands right now we don't have any further substantially.
The updates to share with everybody, but we will obviously share alternate information that.
That comes about.
The next question.
Can you talk about the strategy to scale up into a larger or bigger economies.
Or is that the focus on maximizing opportunity in smaller economies and face less competition.
Such as Bulgaria was some more et cetera.
Oh, Hey.
And you the baton to take.
They can drive a bachelors.
Yeah. That's a great question you know in terms of our growth strategy, we've been very selective.
I bought a then categorized into larger lots of smaller economies.
Look at I'll focus on specific verticals and.
And Geographics.
Example, in the U S.
I'll blow up a block processing volumes growing.
Continuing to grow very well.
Robustly right you know we have seen more than.
15% to 20% you know grow from Q1 to Q2.
We expect to continue to focus on the verticals will be sub today to achieve double digit growth.
In the U S market focus on the specific verticals that we target on.
Separately, we are also looking at new verticals.
New Geographics, where you know we have less competition, where we expect to generate high profit margin.
You know for example.
All planned two blown out Connie.
The European market.
We're focused on specific you know.
Medium to high.
No risk I returned.
Well that's at Kohl's.
We have a plan when the process of that between the business of entities loading out the product platform.
In the second half.
P market.
The U S. We also in the process of <unk>.
We're seeing the rollout of Connie.
As.
For E Commerce programs.
Some additional wallet programs as well so I would say all in all we focus on select verticals, we focus on CLEC business portfolio, that's been again the bus.
Good color.
Jim.
As a result that we can generate better retired all shareholders.
Okay.
Thanks, Dan.
The next question will go to Freddie.
Can you elaborate on the mpls capabilities and how that's being marketed and we estimate the impact on financials and timing that you can provide this follows a P. O that we just released about this new product.
Go ahead.
Thank you Ben.
The I P. O S is an extension to coordinate.
Hello.
This product for all you've done.
Understanding of why don't the challenges that exist today in the market when you run.
The company one of the biggest challenges.
The way of determining.
The time to deployment.
The challenge is when they arrive set up all of that time consuming tasks related to Hum.
Older Technology that we go through our merchant services called the P O.
So we developed a new technology that you're considering any form.
That turned out.
I'm going to Europe , Korea, and you're part of the accordingly merchant.
Our program.
That's allowed us to go to die from the moment you get approved very quick can you don't have to wait for a device to be shipped or you don't have to do it downloads.
And we can deploy globally with the same exact.
Sorry, we don't even talk to require.
As shown in different countries.
Okay.
Oster windows operation costs deployment cost.
And other support that need to.
We exist in a company like a payment processing company.
Went up to support that starting at the end of the day the benefits of simple faster deployment.
I hope we are.
Global that are.
Employment in our California cost effective fall nurturing, meaning they're trying to buy it turned out and the last thing would be to help us to actually help them to support.
As fraud, chargeback give us visibility into the transaction.
Give us the ability as well have to get into a new vertical it may be configured today are moving to risk here all.
All of it together.
That was due to increased volume increased.
The ability of the company on.
On both sides of the operation.
On the front of the commission.
Yeah.
Thanks Brady.
Operated group. Please proceed with the Q&A and the do the rest of the conversation.
Yes.
To begin the audio.
A question and answer session to ask a question you May Press Star then one on your telephone keypad.
If you are using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
And we have a question from Kevin D D with H C. Wainwright. Please go ahead.
Thank you for taking my question operator, this is Michael Donovan, calling on behalf of Kevin D D.
So in your press release, you stated they expect to have a full global payments platform covering over 100 local currencies in local sediments want to clarify is this going to be using visa's network or Oh, well Koine also the handling multiple currencies as well.
I mean, I'll I'll have you take that part of your conversation.
No problem.
Very fair question.
When we referred to the potash, you'll obviously in the context of the press release.
Try to beat that buyback program.
Very impressive coverage of visa offer you know outside of the conventional.
You know sweep transfer right, it's gonna be faster I think it's gonna be cheaper for our business and consumer customers.
But that's not to say that we don't you know processing interface with conventional programs, we do have full capability.
Welcome to Swift walking with Samsung, we talked about earlier and as well as the visa direct.
Hum.
In terms of corny, yes. It is you know our plan as I mentioned earlier, we have the corny rollout plan covers both the U S market.
Yes.
Especially in the business.
Business cable processing capability for the European market, we fully expect with the banking solutions with the Kony platform, we have the capability of handling multi currency.
They you know kind of that you're speeding is you know processing way.
You know for all customers.
Okay.
Okay. Thank you Matt.
For 'twenty is a mobile point of sale App.
Are you with a specific geographical regions are you targeting.
In the beginning and have you had a feedback from the merchants right already I know, it's been only a few days, but okay, but a little bit more color on that that'd be appreciate it.
Thanks, Michael for the question, we're going back to Freddie.
My apologies guys, but my for some reason I came here only a couple of centers.
If you don't mind repeating the question.
Yeah.
Michael I'm sorry.
So that's all I got.
Thanks, Betty so for Koine mobile point of sale App are there specific geographical regions that you're targeting.
In the beginning and also I know, it's only been a few days, but have you received feedback from merchants already.
Thank you for repeating the question.
At the moment, we are focusing on the U S. A we do have a couple of merchants that already kind of approach us and when they start utilizing that in a very specific verticals that we are comfortable with as well.
But the next the next draw. These as we are deploying corneas when youre in Europe . It will be deployed there in a in a few verticals that we believe we can be very successful, but at the moment, we start with the U S.
Okay.
Thank you so much for that clarity and.
For the regulatory landscape in the U S.
I know a man touched upon this a bit.
But how how are things changing in the U S.
But what's your take on the stable regulated regulatory build that's going through the house right now.
Yeah.
I'll take this one so that's interesting.
A topic.
Yeah.
And Michael you and Kevin has been a persistent on that front are much more than what we see.
Centrally from the government and from the Federal Reserve.
The.
Now initiative.
Uh huh.
Declared.
<unk>.
Pilot program back in 'twenty 'twenty.
Hum.
That's the time, 1% of all financial institutions.
Around the country and there are about 10000 of those.
Uh huh.
We are signed up to participate in this pilot program so about 100.
Back in April of this year.
The certification program.
It was announced.
For fan out.
And the certificates were awarded in July of this year.
To the 100 or so participants.
Of the 41 as of now our certified.
And a big portion of that are not stumbled financial institutions. They are more service provider.
And by the way the government includes itself as one of those successful completion for this course.
The harsh reality is that this landscape is very challenging in the U S.
The world is not waiting for us to figure it out.
This is part of the reason why Queenie spin.
The spin off is primarily targeting operations in Europe .
Where the landscape.
Is maybe a lot more competitive but it looked more finite the regulators have already established the playing field.
He understands it.
Banks are participating in very large companies and penetration is.
Sort of define.
So I guess this is a longer answer to a short question.
But I think it gives you a little bit of a flavor of where we're going with all of this.
Uh Huh, that's certainly quite helpful.
That's all I have for today I appreciate your time, Ben and Radiant gene I'll hop back into queue.
I would like to go back to <unk> for closing remarks.
Yeah.
So I'd like to thank everyone for participating.
This conversation and signing up to listen to our quarterly results.
As we stated in the beginning of the conversation.
The entire <unk>.
Fiction.
Will produce using AI.
I think very effectively and we will continue to use this technology moving forward.
Looking forward to our next call with you all.
Shareholder.
The meeting is coming up in the air.
End of October .
And hopefully at that point.
We will have further clarity on the dividend.
Oh play for everybody.
With this I. Thank you all and well see you next time.
This concludes today's conference call.
You may now disconnect.
Okay.
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