Q4 2023 RYVYL Inc Earnings Call
Okay.
Good afternoon.
Afternoon, everyone and welcome to rival Inc's fourth quarter and full year 2023 conference call.
At this time all participants are in a listen only mode.
Question and answer session will follow the formal presentation.
The earnings press release accompanying this conference call was issued at the close of the market today.
The annual report, which includes the company's results of operations and at December 31, 2023 was filed with the SEC today.
A replay of this call is available at the Investor Relations section of the rifles website any events the quarterly earnings section.
As a reminder, this call is being recorded.
Before we begin I would like to remind you that today's call contains certain forward looking statements from our management.
Concerning future events. These forward looking statements are based on the company's current beliefs assumptions and expectations regarding future events, which in turn are based on information currently available to the company and contain projections of future results of operations or financial.
Condition or state other forward looking information.
By their nature forward looking statements address matters that are subject to risks and uncertainties.
A variety of factors could cause actual events and results to differ materially from those expressed in or contemplated by the forward looking statements.
Other risk factors affecting the company are discussed in detail in the company's filings with the U S. D C. The <unk>.
Company undertakes no obligation to publicly update or revise any forward looking statement, whether as a result of new information future events or otherwise except to the extent required by applicable laws.
I will now hand, the call over to Ben Earth Chairman arrival. Please go ahead. Thank you operator, good afternoon, everyone and thank you for joining us today and proud to bring you our fourth quarter and fiscal year 2023 financial results 2023 was a momentous year for arrival, our best year, yet with still.
Loan growth in our business volume, leading to a record company revenues for the full year 2023, we delivered revenue of approximately $66 million a remarkable 100% increase over 2000 tons to our fourth quarter of 2023 revenue increased 100% year over year to $22 $3 million exceeding our guy.
<unk> range of $19 million to $21 million, while setting the company records for the fifth consecutive quarter. This also reflects a 27% sequential increase from $17 $5 million in the third quarter of 2023. This tremendous revenue growth was derived from processing volume, which totaled approximately $3 $1 billion.
The company record and then 82% increase from 2022, we continue to bear fruit from our 2022 acquisition of transact Europe. The company is now rebranded as rival EU and experienced exponential revenue growth in 2023, increasing 294% to nearly $17 million at the same time our.
North America business revenue also grew an impressive 71% to $48 million, our chief operating officer, Ms. Wei will once again provide a full breakdown of the various processing channels performance later during this call. Overall, we are very pleased with our operating performance and strong growth trajectory now to discuss some of.
Our key growth initiatives during the quarter, we announced a collaboration with all three to offer businesses. The groundbreaking blockchain as a service solution that enables streamlined and secure digital transformation are three is a leading provider of enterprise distributed ledger technology software and services for the financial services.
The new platform rivaled block is designed to be an innovative and cost effective solution simplify the adoption of blockchain technology for businesses in banking payments and high volume processing environments rivaled block streamlines block chain integration and will offer business customers' effortless access to.
The essential tools and building blocks required to develop a secure distributed ledger infrastructure rival block further features rich business a P O I's and rapid implementation by emerging rivals expertise with all three leading distributed ledger technology, we're setting a new standard for accessible secure and transformative blockchain services.
Turning to rival you, where we are seeing strong growth momentum, we now see Paul enabled and targeting more than 2000 payment service providers across 36 countries in the eurozone with incoming and outgoing instant transfer as we progress towards completing integration with visa direct which is now in testing. The service allows rival you to leverage it.
Capabilities and provide a superior banking as a service offering once enabled we will be able to better serve our customers retain their loyalty and create new revenue streams. We continue to expect integration to be complete by mid 2024, what makes us so excited about being a visa direct partners that we believe that collaboration and the eastern European region.
<unk> will revolutionize the way funds are transferred between accounts offering fast convenient and secure transactions or customers expect the opportunity to send money to authorized accounts E wallets and debit cards in over 80 countries across multiple currencies, we accomplish that using visa's extensive network of local banking.
Partners visa affords the benefits of faster access to funds with money becoming available in many cases within minutes instead of days, we remain quite optimistic about the opportunity in Europe and beyond we continue to work with our large institutional partners on our banking as a service platform and have ramped up to over 200.
Millions of dollars per month in transaction volume as a reminder, our banking as a service solution offers API integrations and foreign exchange capabilities and more than 40 different currencies with local settlements.
Authorizes transactions 24 hours per day on business days.
And enables payouts by way of approved methods, such as real time payment.
Direct deposits. In addition, the service allows for the ability to readily trace transactions and reduce fraud, all while maintaining strict compliance requirements. We continue to view this as a long term potential growth driver in the lucrative market that our technology is well suited to tap into during the fourth quarter, we made the strategic decision to retain.
[laughter] corny as a wholly owned subsidiary and not spin off into a new publicly traded entity. This allows us to optimize the koine technology platform to complement and expand payment processing and banking as a service solutions by maintaining a consolidated product roadmap, we expect to leverage coin in both of them.
Listing and targeted new vertical markets for better operating efficiencies and enhanced profitability in the second half of 2023, we've made great strides in bolstering our balance sheet through the restructuring of our debt. This was accomplished through two exchange agreements with the holder of arrival issued convertible note initially in the principal amount of 100.
The execution of these agreements reduced the principal balance of our convertible note by $66 $3 million lowering the total indebtedness to $19 $2 million.
December 31st 2023, it also evidences the noteholders ongoing support and belief in our core mission. In addition to cash flow from operations in late December we sold our Chicago office building for $2 $6 million in gross proceeds taken together. These steps have produced a much stronger balance sheet.
And significantly increased net shareholder equity ultimately, helping us to regain NASDAQ compliance by satisfying NASDAQ stockholders' equity requirement operationally in the fourth quarter, we fortified our management team appointing George Oliver as Chief Financial Officer of the company George brings vast experience as a senior.
Finance professional with a background in corporate finance Treasury financial planning and analysis International tax and strategic planning George has been instrumental already for us during our debt reduction initiative.
And will play a vital role in the future development of the company in summary rival continues to be a growing force in shaping the future of financial transactions in 'twenty to 'twenty, three we delivered meaningful operational execution and revenue growth, while setting the foundation to rapidly scale, our processing volume number of transactions.
Harper ships and banking as a service platform looking ahead. In addition to the underlying momentum in our processing volume. We're excited about our partnership with <unk> III and the future of rival block to provide a scalable platform for businesses seeking agile and secure blockchain solution by retaining corny as a wholly own.
Drybulk subsidiary and improved efficiencies, we believe we can accelerate business volume growth, we are well on our way towards being a revolutionary forced them to digital payments landscape and expect another year of strong revenue growth leading to profitability in 2024, and now to discuss the details of our financial results I'd like to turn the.
Call over to our Chief Financial Officer, George Oliver George the floor is yours. Thank you Ben I will be referring to adjusted EBITDA and other non-GAAP measures for the calculation of adjusted EBITDA. Please refer to the reconciliation of this non-GAAP metric in our earnings release issued before this call.
<unk>, which can be accessed on the company's IR website and the press release quarterly earnings sections I'll first review, our fourth quarter 'twenty to 'twenty three financial performance revenue for the fourth quarter increased 100% to $22.3 million compared to $11.1 million.
In the fourth quarter 2022 reflecting our continued expansion of our independent sales organization known as an ISO and partnership network and growth in our acquired businesses and rival EU North America fourth quarter revenue increased 85% to $16.6 million for <unk>.
Fourth quarter 2023, compared to the fourth quarter 2022 International fourth quarter revenue increased 165% to $5.6 million the fourth quarter 2023, compared to fourth quarter 2020 to cost of revenue was $14.5 million for the <unk>.
Fourth quarter 2023, compared to $5.4 million in fourth quarter 2022. The increase is primarily attributable to growth in transaction volume, which resulted in higher processing fees paid to gateways and commission payments to I suppose in both North America and international segments.
Operating expenses decreased by $13 $8 million to $10.6 million for the fourth quarter 2023, compared to $24.4 million in the fourth quarter 2022, reflecting lower depreciation and amortization expenses related to the write off of the contracted acquisition.
Of the Sky financial portfolio. During 2022 other expense totaled $27.0 million for fourth quarter 2023, compared to other income of $2.7 million for the fourth quarter 2020 to be.
The increase was primarily attributable to noncash Derek ignition charge of $23.5 million associated with the conversion of convertible debt to equity.
Justice EBITDA improved to a positive zero point $1 million in the fourth quarter 2023, compared to negative $2 $9 million in the fourth quarter 2022, turning to our full year 2023 revenue also doubled to $65 $9 million compared to 32.
$2.9 million in 2022.
This reflects significant growth in processing volume, which increased from $1.7 billion in 2022 to $3 $14 billion in 2023, driven by our ISO and partnership network expansion and growth in our global payment processing businesses banking as a service offering 2020.
Three adjusted EBITDA loss improved to $3 $9 million compared to adjusted EBITDA loss of $14.4 million in 2022 at December 31, 2023, cash and restricted cash was $73.3 million was 12 point too.
Millions of dollars of that being unrestricted cash and working capital of $4.3 million continuing to enhance our liquidity is a top priority for us our ability to fund working capital and other expenditures depends on cash generation from our two operating segments activities short term.
Growing in the U S and capital raises as shareholders ourselves, we are committed to achieving positive cash flow, while minimizing the dilutive effects in connection with any financing transaction consistent with our commitment to execute on our long term strategy and continue our growth trajectory I will now turn the call.
Over to Min way, our Chief operating officer to provide a review of business operations and our outlook. Thank you George I'd like to first walk through our processing volumes for the verticals, we serve and discuss our fourth quarter results and outlook for the first quarter of 2020 for a fourth quarter processing volume across all channels as a proxy.
Min: The $1 billion, but actually saw published indication of $900 million to $1 billion for the quarter. We are pleased to hit $1 billion quarterly volume again, the first time since third quarter 2020 to the fourth quarter volume is about 16% better than our third quarter 2023 volume up $861 million and an increase of about <unk>.
8% from our fourth quarter 2022 volume, our North American merchant services business, including rival block charts savvy in other portfolios process $278 million in the fourth quarter, which is about 30% higher than the third quarter's $213 million volume and a 69% higher than the same period one year earlier.
Increase is largely attributable to the increased block processing volume, partly negated by a reduced processing volume onto trucks savi for FX and international payments portfolio, including the acquired transact here a business now rival EU and all new banking as a service offering we processed $519 million in the fourth quarter compared to 570.
$10 million in business volume in the third quarter, an increase of over 14%. This represents an 87% increase from $315 million in the fourth quarter of 2022, we are very pleased with the growth we achieved in the international markets in 2023 for an update on American Samoa, we continue to serve over 60% of the Taj.
Much of the market on the island in the fourth quarter, our processing volume was about $34 million about 10% higher than the prior quarter and a monthly volume is sustaining at above $10 million with respect to Corning in the U S. We started the mobile based processing in the first quarter and expect to ramp up the volume in the coming months, you're now talking service verticals.
EU market, we received a license in merchant processing approval for Carney and anticipate the initial business to be brought it to now I'd like to turn to our outlook for the first quarter and a total of 2024 first quarter processing volume is expected to be in the range of $900 million to $950 million. This is lower than the reported fourth quarter 2023 volume due to that.
Transitioning one of our North American product from terminal base to App based processing. This transition coincided with a change in our banking partner that was prompted by recent changes in the compliance requirement and banking regulation, while we were able to accomplish this quickly it has adversely impacted our first quarter processing volume and revenues, our total year 'twenty 'twenty four.
You mean expectation is over $5 billion for first quarter revenue outlook, we expect to be in the range of $15 million to $16 million, a decrease of approximately 28% to 33% sequentially, but over 35% better year over year for a total year 'twenty 'twenty four our revenue indication is that $90 million to $100 million with regard to.
Adjusted pro forma EBITDA. Please refer to the reconciliation of this non-GAAP metric in our earnings release issued before this call a fourth quarter figure is a positive $126000. This is lower than our targeted 500000 to $1 million for the quarter, which is due to higher than planned expenses associated with payment processing technology development.
Min: <unk> external legal spending and administrative expenses to began trading compliance. Some of these referenced investments and expenses will continue coupled with the first quarter volume correction and we are estimating our first quarter adjusted EBIT thought there'd be a negative one $5 million to $3 million in our total year 2024, adjusted EBITDA to come in at a positive one to five.
This concludes my remarks, I'd like to now turn the call back to Erez, our chairman to begin our Q&A.
Yeah.
Okay. So let's take a few of the questions that have.
Have come our way prior to this call.
Erez: The first question goes to chief operating them in.
I mean can you talk about the partnerships with ACI and all three.
And how you see these developments.
Over time, and how you should think about the economics of those near term and long term.
Thank you Dan.
This is a great question.
Erez: We have ambitious business plan for 'twenty 'twenty four.
Achieving $90 million to $100 million in revenue.
Erez: A competitor reported $5 $9 million in 2023.
75% to 80% growth.
Erez: ACI worldwide, the global leader in mission critical real time payment software.
They are secure and scalable software naval leading corporations impacts.
In Asia disrupt the process of managing digital payments.
Erez: Power Omni commerce payments.
Erez: Then bill payment and manage fraud and risk.
Rob will you deal with all its E Commerce medicine.
PSP customers onto the award winning.
Erez: Payment.
Oh, okay straight and platform.
Labeling them to orchestrate payments.
One platform and one API integrations for optimal come back in the late and minimal operational cost.
Migration will allow merchants to provide customers with a more seamless.
Customer journey, we are currently in the process of integrating the ACI solution into our offering and having the same place we enable us to increase capacity for the easier much in acquiring business.
Which is set to scale by over 200% year in volume.
In terms of all three all three has extensive international experience walking with regulated.
Across the financial sector.
This partnership between rival in all three aims to provide a scalable platform by boardwalk that can adapt to that.
It meets providing flexibility for seamless expansion and growth.
Erez: Project will elaborate survival, if that's the case.
In digital solutions in all three it's cutting edge blockchain technology.
The integration.
Into existing business framework.
This call is to simplify and expedite the adoption policy that well blockchain what businesses of all sizes delivering a user friendly experience.
Erez: And all three are committed to delivering a coffee package Watson as a service solution, eliminating significant upfront investments and reducing complexity typically associated with locked in adoption.
Business part about 'twenty 'twenty four plan the pilot improve the pace of monetization for survival block solution.
In the long term this can become a new second.
Tell us a viable and a new source of revenue and profit and loss.
Okay.
Thank you min.
Our next question.
Also to a man and clarity.
Oh, Nick when you started you can you detail, how you can leverage it into existing and new verticals and how it creates more operating efficiencies and profitability.
I'll take that one.
We share that due to the regulatory environment changes and.
And banking industry dynamics or thinking about at the banking we adjust it.
Connie monetization path, they focus on payments and banking as a service offering.
All right.
Erez: For the business verticals, we serve.
Due to the change and as we already have a lot of infrastructure for payments and banking as a service.
It's more suitable for us to leverage our existing infrastructure and resources available at arrival.
About the service.
Great.
Erez: That's a spinning it off.
We incur additional costs or building, new physical operations around them.
That aligns with the interests of policyholders with respect to Connie and the U S. We started the mobile bay processing in the first quarter and expect to ramp up the volume in the coming months.
Erez: Target verticals, we also expecting to do without quality functionality.
We lived it.
As we previously announced at the end parts to our customers in retail or delivery business.
In the EU market, we receive a license and much in processing approval for Connie and we have a clear view of the business opportunities to start with.
Erez: Okay.
Speaker Change: Thank you Mary.
Add to the question about Courtney.
Speaker Change: Infrastructure.
Speaker Change: When you automate it.
And part of them.
Infrastructural according to reduce the mantle.
Employee.
We needed to move money well utilized in Colombia.
<unk> from Onboarding.
Monitoring.
Customer support everything that's related to the operation side.
Courtney.
It was designed to take care of about 70% of the operation. So we hope through this process not just to reduce the cost of the operation, but beat up as well.
The on boarding.
Accordingly.
Thank you Freddie.
Next question again to Chief operating then.
You've alluded in the past the European market.
With the focus for growth.
You'll see that that's the case and.
Chief operating: And do you expect to see growth in North America to pick up as well.
That's another good question so.
Well first of all you know.
Thank you to raise the question for recognizing viable business as well.
Mark.
That is a key reason why we got quire sans that Europe now renamed to rival your U.
You know, we have a whole suite of acquiring <unk>.
And banking licenses.
<unk> market.
With our licensees and our local team and capacity you know we tripled.
Processing volume in 2023 and.
And we launched our banking as a service offering.
Chief operating: Offering.
We've turned the business around.
We're now generating greater rapidly a profit there.
We expect plenty 24th at the most successful year for arrival.
The North American market remains one of the key markets, we serve and we focus on.
In the annual report we described.
Near term business volume correction due to one of our products.
Listening from.
Chief operating: Terminal based processing to mobile App based processing.
This coincided with some changes in the compliance environment.
More mobile bay processing speed and ease of key trends might transmit their journey.
We see in the service verticals.
We are supporting today and.
In the new verticals, we are pursuing.
So we expect the business volume to recover over the coming quarters.
Yeah.
Thank you Ben.
Next question, two chief Executive Rudy.
What other regions of the World might we see you I will look to expand into.
Chief operating: In the near future.
Thank you Ben.
Awesome.
Chief operating:
Well I believe as a global company.
We are looking into a.
Very.
Chief operating: Two regions actually one.
Chief operating: The Asia region.
Sector in South America.
We already communicated with the market.
The American Samoa and the location.
Hum.
<unk> strategic goal of the benefit of getting into that region saw extension.
So those two region, we're very excited about it.
Working on that but we don't have too much debate at the moment, but we will share.
Become available.
Okay.
Thank you Brady.
The next question will go to a combination of men and Chief Financial Officer George.
Chief operating: A win.
Women arrival looks to be earning per share of positive jaws.
George why don't you start.
Well, that's a that's difficult to say I think.
In terms of our earnings.
Earnings per shares dependent upon you know noncash charges that are hard to predict such as when we converted that to to equity but in terms of profitability I think where we're looking at $120 million revenue level, we believe will be profitable.
And that'll be large enough to that we can control expenses.
Chief operating: Would be positive.
Than you.
Okay.
Speaker Change: Thank you George.
Again, something that we always on an online right so achieving a positive bottom line.
And as a result of positive E. One about it it's all commitments all shareholders.
Team.
Do want to also take a moment.
Referring to adjusted EBITDA as George mentioned earlier during the call.
That is a decent representation of normalized result.
The company.
You know it is heartening to have achieved positive adjusted EBITDA for the second half 2023.
Speaker Change: In 'twenty 'twenty four we expect the total year.
By a positive $1 million to $5 million of adjusted EBITDA.
While we do anticipate that the first half to be negative as I imagine early yet.
Speaker Change: Due to the product transition.
We are experiencing and as a result of that.
Volume in EMEA.
The steps with getting a.
Positive adjusted EBITDA to a positive EPS.
As George mentioned, it's contingent upon us.
Successfully.
Go away.
Noncash expenses.
Example of that.
You know fully retire the convertible convertible debt.
Speaker Change: We have as many men as Pam mentioned earlier during the call we successfully converted 78% of it.
In 2020 three.
With that momentum we are you know.
Optimistic that we can get through that right. Yeah. That's the cheat anybody if possible it consistent we want Georgia set.
Once we get to 120 million in revenue level are.
We anticipate to hit a pause there.
Yeah.
Timeline for that indicative at least 2025.
Speaker Change: Yeah.
Thank you min.
Speaker Change: Operator at this time, we would like to switch to analyst.
Question.
And then we'll take a question from the floor following.
Right.
Thank you ladies and gentlemen at this time, we'll 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.
You May press Star two if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Our first question comes from the line of Kevin Didi with H C. Wainwright. Please proceed with your question.
Thank you operator, this is Michael Doss, I'm actually calling in for for Kevin D D.
Congrats on the quarter, Dan <unk> and George for first question.
Could you elaborate on the expected outcomes.
The partnerships with our three and ACI worldwide.
Especially regarding the visa direct integration, then and its impact there.
Okay. Thanks, Michael for the question, we'll take that.
Hey, Michael. Thank you go to a question right. There are two parts and I'll definitely be directly related so I'm going to go one by one.
You know first of all on the all three.
Speaker Change: The partnership.
So as we indicated in the press release in the author he's a very rapid company operating in the enterprise.
Financial institution space as well as enterprise customer space.
We.
Ponto together with them.
Defined as Lego blocks to loosen.
In a nutshell LIBOR blossom really ease the way too.
Neighborhood businesses transform their day to day work flows.
Speaker Change: Two a logjam magic in naval work load for example of that.
Rival ourselves we are the first half of my leveraging that right because we're leveraging the blockchain ledger or security or completeness of data integrity as.
As well as leveraging.
Smart contracting as Friday mentioned earlier, the beauty of our technology platform has allowed us to be able to fast track all day to day work loads.
We're the fastest speed with lariat less dependency on human being.
And that will lower operating costs.
So we have down that's what that's really using all.
Speaker Change: First of all all the benefit from that.
And working closely with the Osprey team.
Speaker Change: Sales and marketing we believe backend.
That can be a great potential for the enterprise customer base.
<unk> said this in my pocket I said it.
For that reason you know what we are doing this year is we are passing now the pilot.
The business case.
To get it out to a couple of pilot customers and ensure they actually.
See the same benefit as we have realized slots out.
Speaker Change: And once we get to that what makes you what that commercial model structure. It's all laid out so that we can go full steam ahead to pursue business in this space No Michael to answer your question in case you have the question.
This initial piloting.
The initial rollout is in our 2020 for People's plans, so we committed to that.
Now in terms of ACI worldwide and you also mentioned about visa direct right.
Speaker Change: ACI and he's a very rare.
First of all you know.
<unk> service company and they also have a lot of strength in for monitoring and risk management.
We see a lot of synergy and benefit philosophy honest to get up because we are in the payment.
Space on a day to day basis.
We continue to feel that momentum in the European market.
As I mentioned earlier, well 'twenty 'twenty four with <unk>.
Speaker Change: Getting to you know well the acquiring business volume by more than 200%.
In the European market.
Made logical sense, it's part of our commitment to provide better and more secure services for our customer base in the ear market.
Being able to partner with ACI, we were gonna be able to get that right. Now we have great mouse pad already today by partnering with ACI is Gonna, Florida, Alabama also offering.
Speaker Change: You know suddenly you might imagine about visa direct visa.
Visa direct is a long partnership.
Have you know as a matter of fact, you know Bible wasn't.
To participate in the visa a client council, which is a select.
Community that come together to shape the future of all the space, we operate in to make sure that we all understand the evolving customer needs.
Speaker Change: I understand the technology landscape.
And how we can collaborate walking with major players like visa and others to ensure that we have seamless payment experience.
Now coming back to the integration and monetization for that partnership.
Albeit that Iraq, where in the past that we already finished the initial integration of war arena.
Process of testing the integrated system right between us and visa.
We are in the you know kind of a process of going out to their face foreign countries. We saw.
Paul we already have customers identify for.
For the face one countries. So all of that momentum currently capture as part of our rollout plan for 'twenty 'twenty four but that's not to say if we are proven.
Proven very successful then we potentially can achieve more than what we indicated right. So.
Okay.
That's very very.
Very helpful. Appreciate it.
The cost of revenue slightly higher than fourth quarter, how should we think about margins going forward as a function of volume.
Okay, Michael like Michael you you very good question.
Perhaps with that question because that's something we can on a daily basis. He has a team right because as we continue to be a volume.
Yeah.
The cost drivers all relevant and important.
I think we have already began the decent understanding a reliable understanding of our cost ratio to revenue volume right, especially when it comes to the existing service study called me an acquiring business in the banking as a service business. We also had a good understanding as we continue to build volume and scaling.
I will say that you know if we look at the overall gross margin ratio for the company, we are in probably hovering around <unk>.
Buddy age of 40% as a company right. So Michael you know just kind of put myself in your shoes.
I think you're really asking how actually.
Speaker Change: How that will evolve over time I would say in the near time, it's probably it's probably going to be pretty reliable in that range.
For the longest time because that study is that we have built a good solution for Connie Lai continue to scale, our business leveraging the quanta capabilities I mean for the longer term, we expect to see in a.
Battery cost you know cost ratio.
And then in the past.
Okay. Good.
Maybe one more thing Michael Oh, Yeah go ahead.
Speaker Change: Yeah.
And this is Ben.
Speaker Change: So.
Ben: Profitability It goes in both directions.
Specialty margins.
So.
Efficiency, obviously causes the margins to get better.
Ben: But scale.
Ben: Cause them to go the other direction.
In the.
Ben: Common scenarios.
So.
The play for US is to maintain the margins that we have today and maybe get the slightly better.
Ben: The numbers get bigger.
But we're very happy with the performance the operating performance.
Expressing their margins as they are showing today.
Very good thank you.
Focusing a bit more on North America.
This is slightly related to margins I suppose.
Regarding regarding the shift from terminal base too based processing.
What is the anticipated impact there on customer retention and what trends do you see for this type of shift do you think it's going to decrease your acquisition cost in the short term or how how are you thinking about about this shift right here.
Yeah.
Maybe I'll take that.
Thank you Dan.
Mike This is another great question.
As we have probably seen this.
Transition or transformation in different business verticals those sectors.
You know I would say you know they are intra cats die.
Dynamics in this on this journey right because you know when you move the payment experience on my terminal base experience to the mobile App experience.
Ben: Faxes.
A few facts that Sofia.
First of all you know you allow us as a service provider as a technology enabler.
Ben: Do you have more customer touch points, because the cost tops customer touch points.
Listening from previously.
Primarily interfacing with lodging and physical Cosmos.
Now we have customer interface interaction with both.
Merchants and our business customers as well as the general consumer.
Right. So you know that's important because I'm sorry, it's taken a long time to get to the answer.
You know because you didn't mention about customer retention and whatnot right.
It gave us more Iraqis irrationally feedback from the consumers, which gave us the feedback loop as needed and motivate us to continue.
You know based on user feedback right.
That way, we're not just depending on second handed out.
They'll all direct feedback on the margins now we actually have that feedback directly from consumers.
And the second point is it gave us better visibility.
It gave us better visibility in terms of.
For management and risk management and monitoring.
Ben: In the past, we were doing a great job on behalf of our merchant customers.
You know now that we have direct interaction be directly involved in Ky C. On boarding all the consumers onto the mobile App a lot of this information is timely validated you know through all of them.
Risk monitoring and management system.
So that will also allow us to reduce this fall customers right. So all of this will lead to us in the long term data business, we passion customer retention you know.
At her engagement with customers both at emotion level at the consumer level would you be kind of a lot about.
Now in the near term because we are talking about a.
You know transition it is a.
Ben: And if I can change in terms of user experience.
So we do expect they will be a little bit at the time it takes to rebuild momentum, but that's not to say we have lots of our customers.
Many of US not just for a minute you know I know.
I'll still you know in life contract with us.
But we are we're taking the time to ensure we work closely with our merchant partners our isos.
Agitate them, we also prepare them to educate the consumer.
They use the system, we have now on the basis that can benefit from the user experience. So hopefully that answered your question Michael.
Oh definitely definitely.
Oh yeah.
You mentioned risk and I believe.
Not too long ago, we discussed North America in the high risk licenses, our Paypal and strikes there'll be only players with this high risk life sets and.
And his rival pursuing a high risk license in North America.
Yeah.
I'll I'll try to answer the question because there's really two paths Michael.
First of all you know, we do understand that you know Paypal venmo and others.
No very rats reputable Vietnam players in terms of P. A P to P.
You know Peter it's easy to be payment experience in the overall general market right.
Ben: No libel and all offerings with a focus on very specific.
And our service verticals in each market.
You know it is not part of our strategic vision to you.
Ben: And our goal has to have we don't take place in the general market.
Our sweet spot and the strength at all because it's <unk>.
She knew too.
Basketball and that's out in the space we saw.
So whether that's considered medium risk low risk or high risk.
We do have you know walking we haven't walked away if you're walking around banking channels.
You know both in the U S and E U.
We have the requisite licensee.
Ben: He took a poll performed business being a compliant way and that's something we are absolutely committed to right. So again to answer your question about that is we do not see Paypal venmo to compete in the near time in the space. We operate in we do believe there is a barrier to entry.
We also do believe we have all unique offerings that that's it's not just all merchants Cup business customers.
Also our partners all agents ISIL.
Well as consumers.
Thanks for that.
Fantastic.
So theyre very diplomatic thereby final question before.
Returning to floor.
Ben: In regard to American Samoa.
And market penetration.
He mentioned around 60% for all payments there.
What are some of the hurdles that that youre seeing.
Four increasing market penetration and also what are some of the.
Perhaps.
Hudson surprises that you've seen in America.
Speaker Change: Yeah, No problem, So my Mike, where you Havent fab reservation there.
As we indicated it would be supporting and servicing over 60% of the target mushrooms market.
For the past few quarters already right and I believe your questions are two folds.
Speaker Change: So number one is you know why is that penetration not going higher if I pay my American. So my wife is a very contain involvement or a market for us.
There's a lot of added benefit for that because it gave us that tactic tattered rytary fast to potash.
Hi, dad and prove that we can do a good job to transform the payment experience for the market.
Customers' investments there on the island.
The reason for that you know kind of us the same in that 60% is in total we have a.
Good determination of the total merchant market for the island.
Have already penetrated audits that neither one right you know most recently we worked closely with our partners you bet.
Our retiree air bag of American Samoa to ensure that we introduced to our e-commerce online business as well.
Right. So one that gain momentum we will have more often with a general retail much in market I think we have probably hit that kind of a plateau there because at the end of the day, you're always going to have a mom and pop shop. You know wanted to you know take cash right because they want to be mindful of course of international credit cards on the.
The item for example.
Now secondly.
Speaker Change: You mentioned about future momentum. So you know again tea bags is amazing partner.
Speaker Change: Now that we have gained a law that says that there you know transacting.
But damage, albeit I saw any payment on the island I think it set a stage for us to continue to collaborate with them as well.
Speaker Change: We are absolutely blown out Connie I think that that'll be a perfect opportunity as we've previously indicated we're working with them to explore.
A lot of different angles to vote it out.
Speaker Change: You also you know allowed them to further transition hopefully over time.
From a traditional.
I'm, an old days experienced two more than in a mobile phone based experience for the general public.
Very good well thank you so much.
For for the helpful answers and congrats on the quarter.
Thank you, Michael and say Hello to Kevin in your Buddies at the H C Wainwright.
Speaker Change: We thank you for your support and continued coverage.
<unk>.
And the when it's time for you to switch from being an analyst to.
Real corporate job give me a call.
Uh huh.
Let's take the next call.
Our next question comes from the line of Howard Halpern with <unk> Brothers. Please proceed with your question.
Howard Halpern: Oh graduations been awhile, but congratulations on all the progress that you've made.
I guess my biggest question that you've talked about is getting into a.
New verticals. So in Europe is gonna be a difference between the verticals you are going to seek to enter in between Europe, and North America, and then even South America.
How about a good great to have you back online with US it's been a long time.
Uh huh.
So this is a man yes, great question.
We do look at different markets, we serve you know.
Taylor to approach the market differently to ensure that we have we hit optimal results.
In North America.
So far our journey has been very much focus on <unk>.
<unk> general retail type business.
With Friday mentioned earlier with us now.
Really getting Connie you know kind of the other roaming and getting into new verticals, we have been in conversations with our partners and our customers or E Commerce business right because again depends on the vertical itself, we are going through the journey the transition from traditional.
Masses to e-commerce, and I'll call it the payment methods.
I'll name a few examples of that so we are getting involved now into for example.
Looking at telecommunication looking at.
Some of the travel looking at.
I'm, assuming pharmaceutical and peripheral business related to that.
By doing so you will allow us to diversify our business portfolio. So we have less.
Rich just dependent on you know fuel radical right that's North America.
For the EU market as I mentioned earlier, we have again tremendous tremendous amount of momentum in payments and in banking as a service offering.
It's really a lot we can offer there you know we get a lot of momentum by being more selective.
In terms of the space, we invest in and we bought out of services two in 2020 fall, we're going to broaden that a little bit more but we're gonna salary to dwell a little bit more right.
I know it isn't focus off of that focus on business graduate, saying EU market and.
And we have also the U K market and you mentioned about Latin America, South America, we actually welcome any business you know coming from Latin America.
Long as they meet all onboarding requirements.
And rival Us because they do have we do have the capability to onboard and that process for them, but then das specific business requirements that we are happy to work with those potential customers without weekend bought it isn't it.
Okay.
Okay and in terms of I know the previous Ah.
This questioner you talked about a gross margin, but in terms of operating margin should we see.
A nice improvement on operating leverage in the second half of the year because of all the technology and koine being embedded within.
Your systems.
That definitely right. So you worried recognize more Friday sad that by continuing to leverage more streamlined processes and technology to Connie you know, we do expect to see improved operating efficiency and our resource utilization ratio for operations.
The audit that maybe it's logical waiting in a minute is that that really high level. This year in 2023 we incur some one time costs associated with legacy you know things such as regaining the FCC compliance.
As you know resolving some of the legacy cases and completed the restatement you know I'm I'm not going to speak for George but the hope is that some of those would not repeat and continue So go ahead George.
Yeah I think.
If we were targeting a 40% gross margin.
And operating expenses I think long term once we've cleaned up these legacy issues is going to be at 40% or less that's where we see.
Breaking even at the bar that income.
I think the you know.
We have enough.
Enough levers to pull that down the road, we should be able to manage under 40%.
Got that.
That sounds good okay, guys keep up the great work.
Sure.
Thanks, Howard the looking forward to seeing you COVID-19 the stock again and.
And the company.
So it is all the questions that are in the queue I'd like to hand, it back to Ben Herz for closing remarks.
Thanks, operator.
Ben Errez: Thank you everyone for your continued support.
Ben Errez: The company.
Ben Errez: And for your time today.
Should there be any further questions that have not been answer today feel free to reach out to a M D. Oh to me directly.
And we'll get those aren't there then the posted on our IR website.
With that I. Thank you all and we'll see you in the next quarter.
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.