Q2 2024 RYVYL Inc Earnings Call

Speaker Change: Good afternoon, everyone, and welcome to Rival, Inc.'s second quarter 2024 financial results conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow management's remarks. The second quarter end results press release accompanying this conference call was issued at the close of the market today. Our quarterly report on Form 10-Q, which includes the company's results of operations ended June 30, 2024, was filed with the SEC today. A replay of this call is available on the Investor Relations section of the Rival website in the events quarterly results session.

Operator: Inc.'s second quarter 2024 financial results conference call. At this time, all participants are in a listen-only mode.

Operator: A question-and-answer session will follow management's remarks. The second quarter end results press release accompanying this conference call was issued at the close of the market today. Our quarterly report on Form 10-Q, which includes the company's results of operations for the fiscal period ending June 30, 2024, was filed with the SEC today. A replay of this call is available on the investor relations section of the Ryvyl website in the events quarterly results session. As a reminder, this call is being recorded.

Speaker Change: 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.

Operator: 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, Sate, other forward-looking statements address matters that are subject to a variety of factors could cause actual events and results to differ materially from those expressed in or contemplated by the forward-looking statement.

Speaker Change: 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.

Speaker Change: By their nature, forward-looking statements address matters that are subject to risks and uncertainties.

Speaker Change: A variety of factors could cause actual events and results to differ materially from those expressed in or contemplated by the forward-looking statement. Other risk factors affecting the company are discussed in detail in the company's filings to the SEC. The 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 Errez, Chairman of Ryeville. Please go ahead.

Operator: Other risk factors affecting the company are discussed in detail in the company's filings with the SEC. The 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 Errez, Chairman of Ryvyl. Please go ahead.

Ben Errez: Good afternoon, everyone, and thank you for joining us today. In the second quarter of 2024, total revenue was in line with our expectations, bolstered by 134% revenue growth in international compared to the second quarter of 2023. I'll review our efforts to continue to expand our European operations through Ryvyl EU, address banking changes in North America, launch new licensing arrangements, and broaden our technology applications, as well as other product developments. Our Chief Executive Officer, Fredi Nisan, will discuss product initiatives and operations, and our Chief Financial Officer, George Oliver, will discuss our financials. Ryvyl EU continues to deliver strong growth, and we expect it to be the largest generator of revenue in 2024.

Ben Errez: Good afternoon everyone and thank you for joining us today. In the second quarter of 2024, total revenue was in line with our expectations, bolstered by 134% revenue growth in international compared to the second quarter of 2023. I'll review our efforts to continue to expand our European operations to rival EU, address banking changes in North America, launch new licensing arrangements.

Ben Errez: and broaden our technology applications.

Ben Errez: as well as other product developments.

Speaker Change: Our Chief Executive Officer, Fredi Nisan, will discuss product initiatives and operations, and our Chief Financial Officer, George Oliva, will discuss our financials. Bival EU continues to deliver strong growth, and we expect it will be the largest generator of revenue in 2024. In fact, to ensure rapid onboarding of our EU customers, we've been leveraging U.S. resources.

Ben Errez: In fact, to ensure the rapid onboarding of our EU customers, we've been leveraging U.S. resources. Our international banking as a service offering led to an increase in customers, as well as an increase in international transaction volume growth, which increased from $665 million in the first quarter of 2024 to $781 million in the second quarter of 2024. Our banking as a service offering includes API integration and foreign exchange and real-time electronic fund or direct deposits, which deliver benefits to our customers by ensuring compliance and streamlining operations.

Speaker Change: Our international banking as a service offering led to an increase in customers.

Speaker Change: as well as an increase in international transaction volume growth, which increased from $665 million in the first quarter of 2024 to $781 million in the second quarter of 2024. Our banking as a service offering includes API integration.

Speaker Change: and foreign exchange and real-time electronic fund or direct deposits which deliver benefits to our customers by ensuring compliance.

Ben Errez: This offering continues to gain traction with customers, and we believe it offers us the opportunity for long-term growth potential. We completed our first Visa Direct integration in the first quarter, and are now live in five countries out of a total of 80.

Speaker Change: and streamlining operations. This offering continues to gain traction with customers and we believe offers us the opportunity for long-term growth potential. We completed our first visa direct integration in the first quarter.

Ben Errez: And, in acquiring, we are processing in 150 countries, with additional integrations planned for the third quarter. This initiative delivers Visa Direct's network capabilities for our customers, fortifies our revenue growth, and proves our capabilities to Visa. Building upon this connection, we've expanded our partnership and are implementing the Visa Payment Enabler Network. This new platform will provide the infrastructure and services to facilitate electronic payments and financial transactions and leverages Visa's global acceptance, enabling various entities, including banks, merchants, and consumers, to perform secure and efficient financial transactions using Visa's widespread payment system.

Speaker Change: and are now live in five countries out of a total of 80. And, in acquiring, we are processing in 150 countries with additional integrations planned for the third quarter. This initiative delivers Visa Direct's network capabilities for our customers, fortifies our revenue growth.

Speaker Change: and proves our capabilities to Visa. Building upon this connection, we've expanded our partnership and are implementing the Visa Payment Enabler Network. This new platform will provide the infrastructure and services to facilitate electronic payments and financial transactions and leverages Visa's global acceptance, enabling various entities, including banks, merchants, and consumers to perform secure and efficient financial transactions using Visa's widespread payment system. Our collaboration with ACI Worldwide is also contributing to recent growth internationally. We fully completed this integration in July. Now active, we are offering enhanced transaction processing and security features.

Ben Errez: Our collaboration with ACI Worldwide is also contributing to recent growth internationally. We fully completed this integration in July, and now active, we are offering enhanced transaction processing and security features. Coiny, our payment software that makes PayPal and other services available, is being deployed exclusively across Europe in coordination with our partner, First Data, allowing us to operate as a payment facilitator.

Speaker Change: Koini, our payment software that makes PayPal and other services available, is being deployed exclusively across Europe in coordination with our partner, FirstData, allowing us to operate.

Ben Errez: Our momentum in the EU has been strong over the past several quarters, and we've built a well-defined pipeline of opportunities to further fuel growth in this region. In the US, to drive growth, we strengthened our corporate structure, furthered our expansion into new verticals, and launched private and white-label licensing. As discussed in the first quarter, changes in US banking regulations impacted one niche industry customer base. As it had been a significant contributor, our North American revenue was affected, which continued into the second quarter. We have been implementing a multi-layered strategy to address this situation, which we believe is largely behind us. We began by right-sizing our US operations to better align with lower processing volumes.

Speaker Change: As a payment facilitator, our momentum in the EU has been strong over the past several quarters, and we've built a well-defined pipeline of opportunities to further fuel growth in this region. In the U.S., to drive growth, we strengthened our corporate structure, furthered our expansion into new verticals, and launched private and white-label licensing.

Speaker Change: As discussed in the first quarter, changes in U.S. banking regulations impacted one niche industry customer base. As it had been a significant contributor, our North American revenue was affected, which continued into the second quarter. We have been implementing a multi-layered strategy to address this situation, which we believe is largely behind us. We began by right-sizing our U.S. operations to better align with lower processing volumes.

Ben Errez: We strengthened our leadership in the US, hiring fintech experts as managing director of Northeast Merchant Systems and VP of Compliance, both newly created roles, as well as a new VP of Revenue. Additionally, we have been building more vertical market opportunities. We expanded a long-standing, successful US banking relationship that served low- and moderate-risk verticals to include high-risk processing that carries higher margins. We have embedded our proprietary technology into our Northeast Merchant Systems core offering, that we call NEMS Core, to focus on pay-back-as-a-service and merchant service operations.

Speaker Change: We strengthened our leadership in the U.S. hiring FinTech experts.

Speaker Change: as Managing Director of Northeast Merchant Systems and VP of Compliance.

Speaker Change: both newly created roles, as well as a new VP of Revenue. We have been building more vertical market opportunities. We expanded a long-standing, successful U.S. banking relationship that served low

Speaker Change: and moderate risk verticals to include high risk processing.

Speaker Change: that carries higher margins. We have embedded our proprietary technology into our Northeast Merchant Systems core offering that we call NEMS Core to focus on PAYFAC as a service and merchant service operation. This effort aims to expand our customer base.

Ben Errez: This effort aims to expand our customer base and increase business retention. To leverage our technology, we are pursuing both private and white-label licensing opportunities. Private labeling enables our partners to use their own banks, which increases our access to customers and, we believe, reduces regulatory challenges for us while improving our operating leverage. White labeling delivers customized branding to our partners while we retain the transaction processing.

Speaker Change: and increased business retention. To leverage our technology, we are pursuing both private and white-label licensing opportunities. Private labeling enables our partners to use their own banks, which increases our access to customers.

Speaker Change: and, we believe, reduces regulatory challenges for us while improving our operating leverage.

Speaker Change: White Labeling delivers customized branding to our partner while we retain the transaction processing. As announced last week, we licensed a legacy high-risk business to a third-party partner through Private Labeling, which uses our core technology.

Ben Errez: As announced last week, we licensed a legacy high-risk business to a third-party partner through private labeling, which uses our core technology to create revenue streams via quick card private label payment processing-as-a-service. While our per-transaction fees under this private label structure will be lower than those based on processing volume, we will eliminate operating costs, and expect to achieve higher gross margins and reduce operational risk. We are in the final stages of implementation and expect to start transactions in the fourth quarter.

Speaker Change: to create revenue streams via QuickCard Private Label Payment Processing as a service. While our per-transaction fees under this private label structure will be lower than those based on processing volume, we will eliminate operating costs.

Speaker Change: and expect to achieve higher growth margins.

Speaker Change: and reduce operational risk. We are in the final stages of implementation and expect to start transactions in the fourth quarter. I'll take a moment to elaborate on the details of this agreement which are illustrative of future opportunities. We will provide a fully branded implementation.

Ben Errez: I'll take a moment to elaborate on the details of this agreement, which is illustrative of future opportunities. We will provide a fully branded implementation and hosting of the consumer e-wallet software and mobile app, along with our merchant management system, as well as a website landing page, assistance with merchant applications, and other ancillary support.

Speaker Change: and hosting of the consumer eWallet software and mobile app along with our merchant management system as well as a website landing page, assistance with merchant applications and other ancillary support. We will also handle the deployment.

Ben Errez: We will also handle the deployment and maintenance of the rival payment processing as a service and its interface and collaborate on the system integration and any add-on work. Our partner will manage implementation and ongoing operations of the point of banking system, procure and manage its own ACH solution for consumer purchases on the platform, and collaborate on systems integration. They will establish and operate banking connectivity for settlements to their merchants, recruit and grow the merchant business portfolio, and ensure timely payment obligations and audit rights of all overrides to rival. Additional product offerings include NanoCard and Rival Fabric, which were introduced in August. I will now hand the call over to our CEO, Fredi Nisan, who will discuss our product initiatives and operations. Fredi, please go ahead.

Speaker Change: and maintenance of the rival payment processing as a service and its interface.

Speaker Change: and collaborate on the system integration and any add-on work. Our partner will manage implementation.

Speaker Change: and ongoing operations of the point-of-banking system procure

Speaker Change: and manage its own ACH solution for consumer purchases on the platform and collaborate on systems integration. They will establish and operate banking connectivity for settlements to their merchants, recruit...

Fredi Nisan: and grow the merchant business portfolio and ensure timely payment obligations and audit rights of all overrides to Rival. Additional product offerings include NanoCard and Rival Fabric, which were introduced in August. I will now hand the call over to our CEO, Fredi Nisan.

Fredi Nisan: Thank you, Zen. We pride ourselves on delivering innovative technology and solutions for our customers, and our latest product releases build on our proprietary capabilities with enhanced functionality and features for our clients. Additionally, we have incorporated our latest generation of Rival software into all our solutions exclusively.

Fredi Nisan: who will discuss our product initiatives and operations.

Fredi Nisan: Fredi, please go ahead. Thank you, Ben. We pride ourselves on delivering innovative technology and solutions for our customers, and our latest product releases build on our proprietary capabilities with enhanced functionality and features for our clients. Additionally, we incorporated our latest generation 4Rival software into all our solutions exclusively. Rival Generation 4 software is our backbone technology and offers highly customizable, advanced, and efficient FinTech payment solutions to businesses and merchants. Our NanoCard app offers users an alternative to cash or charge cards, and we deliver merchants processing capabilities for these prepaid gift cards.

Fredi Nisan: Rival Generation for software is our backbone technology and offers highly customizable, advanced, and efficient fintech payment solutions to businesses and merchants. Our NanoCard app offers users alternatives to cash or charge cards, and we deliver merchants processing capabilities for these prepaid gift cards. By targeting select verticals for these gifts of convenience and security, we are bringing online a new product for high-margin products. Ryvyl Fabric is an innovative and cost-effective solution that offers tools and building blocks to ensure easy blockchain access with multi-layer security that is compatible with both R3's quota and with Hyperlink.

Speaker Change: by targeting select verticals for these gifts of convenience and security.

Speaker Change: We are bringing online a new product for high margin processing. Rival Fabric is an innovative and cost-effective solution that offers tools and building blocks to ensure easy blockchain access with multi-layer security that is compatible with both R3's quota and with Hyperledger.

Fredi Nisan: Ryvyl's Fabric Software Layer enables customers to implement blockchain at a faster pace with a low cost pay-per-API structure. Our partnership with R3 expands our reach for enterprise distributed ledger technology and services in regulated industries where trust is critical. Turning to operations, during the second quarter, several significant achievements highlighted our commitment to innovation, growth, and expansion in key markets. We expanded Payfac as a service, which has been instrumental in broadening and growing our merchant base.

Speaker Change: Rival's Fabric software layer enables customers to implement blockchain at a faster pace with a low cost pay per API structure.

Speaker Change: Our partnership with R3 expands our reach for enterprise distributed ledger technology and services in regulated industries where trust is critical.

Speaker Change: Turning to operations, during the second quarter, several significant achievements highlighted our commitment to innovation, growth, and expansion in key markets.

Speaker Change: We expanded PAYSAC as a service, which has been instrumental in broadening and growing our merchant base. Notably, we revamped our banking system software in Europe to improve efficiency and create more revenue streams. Additionally, as Ben mentioned, we added new verticals in both Europe and the US to further diversify our market presence. We expect these key strategic initiatives to broaden our verticals, lower overhead and reduce certain risks. Yet, they will change our financial model. As licensing increases as part of the revenue mix, processing volumes and associated revenue are expected to be lower. However, gross margins are expected to increase.

Fredi Nisan: Most notably, we revamped our banking system software in Europe to improve efficiency and create more revenue streams. Additionally, as Ben mentioned, we added new verticals in both Europe and the U.S. to further diversify our market presence. We expect these key strategic initiatives to broaden our verticals, lower overheads, and reduce certain risks, yet they will change our financial model. As licensing increases as part of the revenue mix, processing volumes and associated revenue are expected to be lower.

George Oliva: However, gross margins are expected to be higher. As licensing will earn transactional fees, going forward, we will track the number of transactions. With strong business relationships, emerging private and white label licensing partnerships, our proprietary RYVYL technology, as well as new products coming online, we are extremely excited about our growth prospects in the second half of 2024 and momentum leading into 2025. We have good visibility into our pipeline and are well-positioned to further diversify our customer base and revenue streams. With that, I'll now hand the call to George Oliva, our CFO, who will review the financial results and provide an update on our 2024 financial guidance. Thank you, Fredi.

Speaker Change: As licensing will earn transactional fees, going forward we will track the number of transactions. With strong business relationships, emerging private and white-label licensing partnerships, our proprietary rival technology, as well as new products coming online, we are extremely excited about our growth prospects in the second half of 2024 and momentum leading into 2025.

George Oliva: We have good visibility into our pipeline and are well positioned to further diversify our customer base and revenue streams. With that, I'll now hand the call to George Oliva, our CFO, who will review the financial results and provide an update for our 2024 financial guidance.

George Oliva: I'll review our second quarter of 2024 financial performance. Processing volumes across all channels reached a total of $1,055,000,000, exceeding our guidance and 6% higher than the first quarter of 2024 and 55% higher than the second quarter of 2023. The growth in volumes is being driven by our banking business in Europe, banking as a service, and ACH payments. These have a lower residual rate than processing for acquiring business but have a very low cost of revenues, and therefore contribute to higher overall blended gross margins.

George Oliva: Thank you, Fredi. I'll review our second quarter of 2024 financial performance.

George Oliva: Processing volumes across all channels reached a total of $1,055,000,000 exceeding our guidance and 6% higher than the first quarter of 2024 and 55% higher than the second quarter of 2023.

George Oliva: The growth in volumes is being driven by our banking business in Europe, Banking as a Service and ACH Payments.

George Oliva: These have a lower residual rate than processing for acquiring business, but has very low cost of revenues, and therefore contributes to higher overall blended gross margins.

George Oliva: International processing volumes were $902 million, and North America processing volumes were $153 million, reflecting, as Ben discussed, the growth in the EU partially offset by the subdued merchant activity in the U.S. Revenue in the second quarter of 2024 was $11.9 million compared to $14.8 million in the second quarter of 2023. International revenue increased 134% to $8.9 million for the second quarter of 2024 compared to the second quarter of 2023. Cost of revenue decreased $1.6 million to $7.2 million for the second quarter 2024 compared to $8.7 million for the second quarter 2023 due to decreased processing volumes of acquiring in North America.

Ben Errez: International processing volumes were 902 million dollars and North America processing volumes were 153 million dollars reflecting as Ben discussed the growth in the EU partially offset by the subdued merchant activity in the US.

Ben Errez: Revenue in the second quarter of 2024 was $11.9 million compared to $14.8 million in the second quarter 2023.

Ben Errez: International revenue increased 134% to $8.9 million for the 2nd quarter of 2024 compared to the 2nd quarter 2023.

Operator: Inc. 2nd quarter, 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow management remarks. The 2nd quarter end result press release accompanying this conference call was issued at the close of the market today. Our quarterly report on Form 10Q, which includes the company's results of operations ended June 30, 2024, which filed with the SEC today. A replay of this call is available on the Investor Relations section of the Ryvyl website in the event quarterly results session.

Ben Errez: Cost of revenue decreased $1.6 million to $7.2 million for the second quarter 2024 compared to $8.7 million in second quarter 2023 due to decreased processing volumes of acquiring in North America.

Ben Errez: Gross margin in the second quarter 2024 was 39.9% versus 41.2% in the second quarter 2023, reflecting the shift in product mix.

George Oliva: Growth margin in the second quarter 2024 was 39.9% versus 41.2% in the second quarter 2023, reflecting the shift in product mix. Operating expenses in the second quarter of 2024 were $15.6 million, including $8.3 million of mostly non-cash charges for goodwill impairment, restructuring costs, and employee severance. This compares to $9.6 million in operating expenses in the second quarter of 2023. Excluding the non-recurring charges, operating expenses were lower by $2.3 million, primarily consisting of $1.3 million in lower professional fees and $700,000 in lower G and A costs.

Speaker Change: Operating expenses in the second quarter of 2024 were $15.6 million, including $8.3 million of mostly non-cash charges for goodwill impairment, restructuring costs, and employee severance.

Operator: 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.

Speaker Change: This compares to $9.6 million in operating expenses in the second quarter of 2023.

Speaker Change: Excluding the non-recurring charges, operating expenses were lowered by $2.3 million, primarily consisting of $1.3 million in lower professional fees and $700,000 in lower G&E costs.

George Oliva: Other expenses totaled $800,000 in the second quarter of 2024 and were mostly related to debt discount accretion, compared to $8.5 million in the second quarter of 2023, of which $5.1 million was related to debt interest, debt discount accretion, and changes in fair value of the derivative liability. Adjusted EBITDA in the second quarter of 2024 was negative $1.6 million compared to $900,000 in the second quarter of We are carefully managing our working capital.

Operator: 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 of the SEC. The 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.

Speaker Change: Other expense totaled $800,000 in the second quarter 2024, and mostly related to debt discount accretion, compared to $8.5 million in the second quarter of 2023, of which $5.2 million was related to debt interest, debt discount accretion, and changes in fair value of the derivative liability.

Speaker Change: Adjusted EBITDA in the second quarter of 2024 was negative $1.6 million compared to $900,000 in the second quarter of 2023.

George Oliva: Continuing to leverage our strong growth in the EU during the second quarter 2024, we repatriated $2.5 million from Europe to shore up U.S. capital resources. At the corporate level, as of June 30, 2024, the cash and restricted cash balance was $75.2 million, unrestricted cash was $6.4 million, and net working capital was slightly negative.

Speaker Change: We are carefully managing our working capital. Continuing to leverage our strong growth in the EU during the second quarter 2024, we repatriated $2.5 million from Europe to shore up the U.S. capital resources.

Operator: I will now hand the call over to Ben Erez, Chairman of Rivell. Please go ahead.

Ben Erez: Good afternoon, everyone, and thank you for joining us today. In the second quarter of 2024, total revenue was in line with our expectations, bolstered by 134% revenue growth in international compared to the second quarter of 2023.

Speaker Change: At the corporate level, as of June 30th, 2024, cash in restricted cash balance was $75.2 million, unrestricted cash was $6.4 million, and net working capital was slightly negative.

Ben Erez: I'll review our efforts to continue to expand our European operations through rival EU, address banking changes in North America, launch new licensing arrangements, and broaden our technology applications, as well as other product developments.

George Oliva: During the second quarter of 2024, $200,000 of debt and $875,000 of preferred stock were retired, as our investor converted these securities into approximately 736,000 shares of common stock. Turning to guidance, we continue to anticipate processing volumes to grow year over year to over $4 billion in 2024. However, as discussed, several factors are impacting the timing of revenue. As such, we believe our revenue recovery in North America may be prolonged by two quarters.

Speaker Change: During the second quarter of 2024, $200,000 of debt and $875,000 of preferred stock was retired, as our investor converted these securities into approximately 736,000 shares of common stock.

Ben Erez: Our chief executive officer, Freddie Nissen, will discuss product initiatives and operations, and our chief financial officer, George Oliver, will discuss our financial. Vival EU continues to deliver strong growth, and we expect it will be the largest generator of revenue in 2024. In fact, to ensure rapid onboarding of our EU customers, we've been leveraging US resources. Our international banking is a service offering led to an increase in customers, as well as an increase in international transaction volume growth, which increased from $665 million in the first quarter of 2024 to $781 million in the second quarter of 2024.

Speaker Change: Turning to guidance, we continue to anticipate processing volumes to grow year over year to over $4 billion in 2024.

Speaker Change: However, as discussed, several factors are impacting the timing of revenue. As such, we believe our revenue recovery in North America may be prolonged by two quarters.

George Oliva: Now, we expect 2024 total revenue to be in the range of $65 to $70 million. Specifically, we project third quarter revenue to grow sequentially and be in the range of $14 to $15 million, and Q4 to be very strong, with accelerating momentum into early 2025. We believe that any growth in revenue will largely be driven by our international segment, which we expect will comprise the largest portion of revenue in 2025. We expect to achieve adjusted EBITDA profitability in Q4 2024. I'll now hand the call back over to Ben for some final remarks before Q&A. In conclusion, Ryvyl remains a dynamic company in a dynamic industry.

Speaker Change: Now we expect 2024 total revenue to be in the range of 65 to 70 million dollars

Speaker Change: Specifically, we project third quarter revenue to grow sequentially and be in the range of $14 to $15 million and Q4 to be very strong with accelerating momentum into early 2025.

Ben Erez: Our banking is a service offering includes API integration, and foreign exchange and real-time electronic fund or direct deposits, which deliver benefits to our customers by ensuring compliance and streamlining operations. This offering continues to gain traction with customers, and we believe offers us the opportunity for long-term growth potential. We completed our first visa direct integration in the first quarter, and are now live in five countries out of a total of 80. And in acquiring, we are processing in 150 countries with additional integrations planned for the third quarter.

Speaker Change: We believe that any growth in revenue will largely be driven by our international segment.

Speaker Change: which we expect will comprise the largest portion of revenue in 2024.

Speaker Change: We expect to achieve adjusted EBITDA profitability in Q4 2024.

Speaker Change: I'll now hand the call back over to Ben for some final remarks before Q&A. In conclusion, Rivo remains a dynamic company in a dynamic industry.

Ben Errez: We made the right adjustments in the first and second quarters of this year as one niche industry customer-based market in the U.S. experienced regulatory issues that impacted our business. We are now poised to rebuild that market via a white-label partner and believe these transitory issues in the U.S. are largely behind us. Europe has not slowed down at all and continues to deliver ongoing growth and strong execution.

Ben Erez: This initiative delivers visa direct network capabilities for our customers, fortifies our revenue growth, and proves our capabilities to visa. Building upon this connection, we've expanded our partnership and are implementing the visa payment-enabled network. This new platform will provide the infrastructure and services to facilitate electronic payments and financial transactions and leverages visa's global acceptance, enabling various entities, including banks, merchants, and consumers to perform secure and efficient financial transactions using visa's widespread payment system.

Speaker Change: We made the right adjustments in the first and second quarters of this year as one niche industry customer-based market in the U.S. experienced regulatory issues that impacted our business.

Ben Errez: We are now poised to rebuild that market via a white-label partner and believe these transitory issues in the U.S. are largely behind us.

Ben Errez: Europe has not slowed down at all and continues to deliver ongoing growth.

Ben Errez: We expect renewed sequential growth in the third and fourth quarters of 2024, positioning us for further growth in 2025. Before we go to the Q and A session, I want to mention some upcoming conferences we will be attending. We will be at the H.C. Wainwright Conference in New York City on September 9-11 and at the LD Micro Main Event in Los Angeles on October 28-30.

Ben Errez: and strong execution. We expect renewed sequential growth in the third and fourth quarters of 2024, positioning us for further growth in 2025. Before we go to the Q and A session, I want to mention some upcoming conferences we will be attending. We'll be at the H.C. Wainwright Conference in New York City September 9th to 11th and at the LD Micro Main Event in Los Angeles on October 28th to 30th. Before we open the call to analysts, there are several questions we received in advance of the call that we will address.

Ben Erez: Our collaboration with ACI worldwide is also contributing to recent growth internationally. We fully completed this integration in July. Now active, we are offering enhanced transaction processing and security features. Coiny, our payment software that makes PayPal and other services available, is being deployed exclusively across European coordination with our partner. First data, allowing us to operate as a payment facilitator, our momentum in the EU has been strong over the past several quarters. And we've built a well-defined pipeline of opportunities to further fuel growth in this region.

Ben Errez: Before we open the call to analysts, there are several questions we received in advance of the call that we will address. So here are some of the questions that we received prior to this call. The first question will go to both George and Fredi. George will open, and Fredi will continue. The question is... What are the areas in which you are focused to reach profitability? and George Tisticakis.

Ben Errez: So here are some of the questions that we received prior to this call.

Speaker Change: First question will go to both George and Fredi. George will open, Fredi will continue. The question is...

Ben Erez: In the US, to drive growth, we strengthened our corporate structure, furthered our expansion into new verticals and launched private and white label licensing. As discussed in the first quarter, changes in US, banking regulations impacted one niche industry customer base, as it had been a significant contributor. Our North American revenue was affected, which continued into the second quarter. We have been implementing a multi-layered strategy to address this situation, which we believe is largely behind us.

Speaker Change: What are the areas in which you are focused to reach profitability? George, please begin.

George Oliva: Well, we focused on reducing costs in the U.S. primarily with a reduction in payroll headcount by approximately 25%. Due to severance and vacation payouts and such, we should start to see the benefit of the reduced headcount in the second half of the year.

Speaker Change: Well, it...

Fredi Nisan: We focused on reducing costs in the U.S. primarily with reduction in payroll headcount approximately 25 percent.

Fredi Nisan: Due to severance and vacation payouts and such, we should start to see the benefit of the reduced head count in the second half of the year. We also have been controlling discretionary costs in the U.S.

Ben Erez: We began by right-sizing our US operations to better align with lower processing volume. We strengthened our leadership in the US hiring FinTech experts, as managing director of Northeast merchant systems and VP of compliance, both newly created roles, as well as a new VP of revenue. We have been building more vertical market opportunities. We expanded a long-standing successful US banking relationship that served low and moderate risk verticals to include high-risk processing that carries higher margin.

George Oliva: We also have been controlling discretionary costs in the U.S., and we are maximizing cash flow in Europe and repatriating cash to cover the deficit in the U.S. That's basically what we're doing in the short term. Thank you, George. Thank you everybody for coming in. As George mentioned, we made a lot of adjustments in the past and now and are moving forward into the future. As a company, our focus is on... The two areas that we separated into two areas; one area will be the license.

Fredi Nisan: and we are maximizing cash flow in Europe and repatriating cash to cover the deficit in the U.S. That's basically what we're doing in the short term.

Speaker Change: Thank you, George.

George Oliva: and thank you everybody for coming in.

George Oliva: as George mentioned.

Speaker Change: We did a lot of adjustments in the past and now, and moving forward into the future.

Ben Erez: We have embedded our proprietary technology into our Northeast merchant systems core offering that we call NEMS core to focus on pay fax as a service and merchant service operation. This effort aims to expand our customer base and increase business retention to leverage our technology. We are pursuing both private and white label licensing opportunities. Private labeling enables our partners to use their own banks, which increases our access to customers. And we believe reduces regulatory challenges for us while improving our operating leverage.

Speaker Change: As a company, our focus is on

Speaker Change: the two areas that we separated in two areas. One area will be the licensing.

Fredi Nisan: We see huge opportunity in PAYFAC as a service, banking as a service, and the other area is directly working with our partner ISOs and banks to drive direct traffic onto our platforms as this is a higher margin when we have direct compared to light. But on the licensing side, we see a huge, huge opportunity due to regulatory change in different verticals. And we see the demand for KYC, KYC, ledgering services, and other banking-related services that, for example, effect, bank accounts, card issuing, to support the ongoing change in the financial segment, and we're very, very excited about it. Fredi will continue with the next question. Can you provide some color on trends in verticals?

Speaker Change: We see huge opportunity in the PAYFAC as a service.

Speaker Change: the Banking as a Service

Speaker Change: and the other area is directly working with our partner ISOs and banking to drive direct traffic onto our platforms as this is a higher margin when we have direct compared to licensing.

Ben Erez: White labeling delivers customized branding to our partner while we retain the transaction processing. As announced last week, we licensed a legacy high-risk business to a third-party partner through private labeling, which uses our core technology to create revenue streams by a quick card-private label payment processing as a service. While our per transaction fees under this private label structure will be lower than those based on processing volume, we will eliminate operating costs and expect to achieve higher gross margins and reduce operational risk. We are in the final stages of implementation and expect to start transactions in the fourth quarter.

Speaker Change: but on the licensing side we see a huge huge opportunity due to regulatory change in different verticals and we see the demand for compliance

Speaker Change: KYC, ledgering services, and other banking-related services that, for example, effects bank accounts, card issuing.

Speaker Change: to support the ongoing change in the financial segment and we are very, very excited about it.

Ben Erez: I'll take a moment to elaborate on the details of this agreement, which are illustrative of future opportunities. We will provide a fully branded implementation and hosting of the consumer-evalid software and mobile app along with our merchant management system, as well as a website landing page, assistance with merchant applications and other ancillary support. We will also handle the deployment and maintenance of the rival payment processing as a service and its interface and collaborate on the system integration and any add-on work.

Speaker Change: Fredi will continue with the next question. Can you provide some color on trends in verticals?

Fredi Nisan: and what you believe are or will be the most attractive opportunities in the coming year. Thank you, Ben. That's actually a great question. Thil Lama, Tac?

Fredi Nisan: and what you believe are or will be the most attractive opportunities in the coming year.

Fredi Nisan: Thank you, Ben. That's actually a great question.

Fredi Nisan: If I hear your name, may I make a reference to you? Do I come across a mimickry, a jousting, or intrigue? What do you mean when you say you're running an organization down to make some talks about different categories? Can you let me know about some of the challenges? I feel like his or her potential for graduate education often reflects a lot of the things I know. The foundation we worked with as a community and who was interested in buyers of options—who has an opinion on equity but also about diversifying is Mike Guyla, who is called Ed Bear, who committed to endorsing equity technology here at Richmond School.

Fredi Nisan: Thank you. Bye. Bye.

Speaker Change: working with Visa, MasterCard, working with other vendors and based on their movement and how they perceive the future and how we perceive the future is in three areas that are going to be

Fredi Nisan: He is also a graduate of Dartmouth, and he fell in love with the idea of making solar panels. The financial market... working with Visa, MasterCard, working with other vendors. And based on their movement and how they perceive the future, and how we perceive the future, there are three areas that are going to be important. Ynell.

Ben Erez: Our partner will manage implementation and ongoing operations of the point of banking system, procure and manage its own ACH solution for consumer purchases on the platform and collaborate on systems integration. They will establish and operate banking connectivity for settlements to their merchants, recruit and grow the merchant business portfolio and ensure timely payment obligations and audit rights of all overrides to rival.

Fredi Nisan: My Room My Room My Room My Room My Room My Room My Room My Room Lamborghini Ramp My Room Largues Wreck My Room Door My Room Cursor My Room My Room Fast Road Veil My Soup My aan My Woob Slow Move Red Locod Musik Slow Smoking Smoke Smell Smokie Sabot My Uncle Nappelle Mind Nick Mental Pit Mind Local Mind H singer RUS The last one, and I'm sure there's not a surprise, but as the financial systems are changing, crypto become a huge demand. Especially working with Visa on our new Visa Direct.

Speaker Change: in huge demand. One.

Speaker Change: is the faster rail, what we call a real-time payment. We see a huge, huge, huge demand in it when it comes to instant payment.

Speaker Change: People looking, and partners, and our businesses looking for real-time payment, 24-7. And I believe that's something that we're going to see more of in the near future.

Ben Erez: Additional product offerings include NanoCard and rival fabric, which were introduced in August.

Fredi Nisan: I will now hand the call over to our CEO Freddie Nissen, who will discuss our product initiatives and operations. Freddie, please go ahead. Thank you, Ben. We pride ourselves on delivering innovative technology and solutions for our customers and our latest product releases built on our proprietary capabilities with enhanced functionality and features for our clients. Additionally, we incorporated our latest generation four rival software into all our solutions exclusively, rival generation four software is our backbone technology and offers highly customizable advanced and efficient synthetic payment solutions to businesses and merchants.

Fredi Nisan: We see huge demand in South America, Asia, and especially the U.S. for Europe. We see huge, huge demand. And the last one, and I'm sure it's not a surprise, but as the financial systems are changing, crypto has become a huge demand. And we are looking into that in Europe, with certain partnerships and to see how to overcome the demand for crypto. That's something we will see grow in the coming years, and we are very, very excited about it.

Speaker Change: Second is the settlement, globally, international settlement. We see huge, huge demand, especially working with Visa on our new Visa Direct.

Speaker Change: We see huge demand in South America, Asia, and especially U.S. to Europe. We see huge, huge demand. And the last one, and I'm sure there is not a surprise, but as the financial systems are changing, crypto becomes a huge demand.

Speaker Change: and we are looking into that in Europe to certain partnership and to see how to overcome the demand of crypto. That's something we will see grow in the upcoming years and we are very very excited about it.

Fredi Nisan: Our NanoCard app offers users and alternatives to cash or charge cards and we deliver merchants processing capabilities for these pre-paid disc cards. By targeting select verticals for these gifts of convenience and security, we are bringing online a new product for high margin processing. Ryvyl Fabric is an innovative and cost-effective solution that offers tools and building blocks to ensure easy blockchain access with multi-layer security that is compatible with both R3s Coda and this hyperlegic.

Fredi Nisan: Those are the areas, and the second side and the other side of that trend are licensing marketplaces that are looking for technology and services for their own clients in this compliance and regulatory environment, and we believe that our software technology can help facilitate and accelerate the execution or the go-live for a lot of companies and partners in this space. Thanks, Fredi. The next question pertains to our growth in Europe. Why is Europe doing so well?

Speaker Change: those are the areas and the second side and the other side of that trend is licensing marketplaces that looking for technology and services their own clients

Speaker Change: in this compliance and regulatory environment. And we believe that our software technology can help facilitate and accelerate the execution or the go live for a lot of companies and partners in this space.

Fredi Nisan: Ryvyl Fabric software layer enables customers to implement blockchain at a faster pace with a low cost pace for API structures. Our partnership with R3 expand our range for enterprise, distributed ledger technology and services in regulated industries where trust is critical.

Speaker Change: The next question pertains to our growth in Europe.

Fredi Nisan: As this is going to be the major growth driver for the balance of the year, can you elaborate on your strategy and operations? What gives you confidence in your financial projections? Thank you, Ben. Another great question.

Speaker Change: Why is Europe doing so well?

Speaker Change: As this is going to be the major growth driver in the balance of the year, can you elaborate on your strategy and operations there?

Fredi Nisan: Turning to operations during the second quarter several significant achievements highlighted our commitment to innovation, growth and expansion in key markets. We expanded payback as a service which has been instrumental in broadening and growing our merchant base. Notably, we revamped our banking system software in Europe to improve efficiency and create more revenue streams. Additionally, as Ben mentioned, we added new verticals in both Europe and the US to further diversify our market presence.

Speaker Change: what gives you the confidence in your financial projections?

Speaker Change: Thank you, Ben. Another great question.

Fredi Nisan: We've been working really hard in the last two and a half years since we purchased the entity, implementing a lot of the infrastructure that's needed. Europe is changing as well, and we implemented a lot of partnerships, including VISA, ACI, and others, to offer our... Paycheck as a Service, Business, Banking as a Service. And Europe has a huge, huge demand for high risk.

Speaker Change: We're working really hard in the last two and a half years since we purchased the entity, implementing a lot of the infrastructure that needed.

Speaker Change: Europe is changing as well and we implemented a lot of partnerships including Visa, ACI and others to offer our

Fredi Nisan: We expect these key strategic initiatives to broaden our verticals lower overhead and reduce certain risks, yet they will change our financial model. As licensing increases as part of the revenue mix, processing volumes and associated revenue are expected to be lower. However, most margins are expected to be higher. As licensing will earn transactional fees, going forward, we will track the number of transactions with strong business relationships, emerging private and white label licensing partnerships, our proprietary valuable technology, as well as new products coming online.

Speaker Change: Paycheck as a Service, Business, Banking as a Service.

Fredi Nisan: We as a company are registered with Visa and MasterCard as a high-risk provider. And we see huge, huge growth in the gaming, adult, and crypto business. And those are three verticals that are being scrutinized right now by a lot of banks that don't want to touch them, but we welcome this business, and we have the full support of Visa and MasterCard and other banks to onboard such verticals. And we are very excited to support them, and that's why we see a huge growth in our portfolio. Thanks, Fredi. We're going to give George an opportunity to answer the next question. George, what are the data science points that you track and monitor to manage the health of the patient?

Speaker Change: and Europe have a huge, huge demand for high-risk. We, as a company registered with Visa MasterCard as a high-risk provider, and we see a huge, huge growth in the gaming, adult, and crypto business.

Speaker Change: And those are three verticals that are being scrutinized right now by a lot of banks.

Speaker Change: that don't want to touch it, but we welcome this business and we have the full support of Visa and MasterCard and other banks to onboard such verticals. And we are very excited to support them and that's why we see a huge growth in our portfolio.

Fredi Nisan: We are extremely excited about our growth prospects in the second half of 2024 and momentum leading into 2025.

Speaker Change: Thanks Fredi. We're going to give George an opportunity to answer the next question.

George Oliver: We have good visibility into our pipeline and our world position to further diversify our customer base and revenue streams. With that, I'll now hand the call to George Oliver, our CEO, who will review the financial results and provide an update for our 2024 Financial Guidance. Thank you, Freddie. I'll review our second quarter of 2024 financial performance. Processing volumes across all channels reached a total of $1.55 million exceeding our guidance in 6% higher than the first quarter of 2024 and 55% higher than the second quarter of 2023.

Speaker Change: George, what are the data science points that you track and monitor to manage the health of the business?

George Oliva: Historically, revenues were coming from acquiring, from processing credit card payments. We looked at transaction volume as a primary driver of revenue. As the mix between the U.S. and Europe shifts and as we ramp up volumes in banking, then we have to drill down and look at residual rates for the different segments. Historically, in acquiring, we had 2% revenue for processing volume. The mix changes, the banking has a lower residual rate, and there are different gross margins in segments, so as the business mix shifts, we have to drill down and look at the residual rates of the different verticals at different types of revenue between acquiring and banking. We look at the gross margin in each and then predict the change in mix, and that helps us to forecast results.

George Oliva: Well, historically, the revenues were coming from acquiring, from processing credit card payments. We looked at the...

George Oliva: the transaction volume as a primary driver to revenue. As the mix between the US and Europe shifted and as we ramp up volumes in banking.

Speaker Change: then we have to drill down and look at residual rates of the different segments.

George Oliver: The growth in volumes is being driven by our banking business in Europe, banking as a service and a CH payments. These have a lower residual rate than processing for acquiring business but has very low cost of revenues and therefore contributes to higher overall blended gross margins. International processing volumes were $902 million and North America processing volumes were $153 million, reflecting as Ben discussed the growth in the EU partially offset by the subdued merchant activity in the US.

Speaker Change: Historically, in acquiring, we had 2% revenue for processing volume. The mix changes. The banking has a lower residual rate.

Speaker Change: and there's different gross margins and segments. So we look, so as the business makes shifts, we have to drill down and look at the residual rates of the different verticals, at the different types of revenue between acquiring and banking.

Speaker Change: and we look at the gross margin in each and then and then predict the change in mix and that helps us to forecast results.

George Oliver: Revenue in the second quarter of 2024 was $11.9 million compared to $14.8 million in the second quarter of 2023. International revenue increased 134% to $8.9 million for the second quarter of 2024 compared to the second quarter of 2023. Cost of revenue decreased $1.6 million to $7.2 million for the second quarter of 2024 compared to $8.7 million in second quarter of 2023 due to decreased processing volumes of acquiring in North America. Gross margin in the second quarter 2024 was 39.9% versus 41.2% in the second quarter 2023 reflecting the shift in product mix.

George Oliva: So that's what I'm looking at, all this data. Thank you, George. Operator, at this point, we will open it up for questions from the floor. Please proceed. Yes sir, if you would like to ask a question, please press star then 1 on your telephone keypad at this time. If you'd like to remove yourself from the queue, please press star then 2.

Speaker Change: So that's that's what I'm looking at is all this data

Speaker Change: Thank you, George. Operator, at this point, we will open it up for questions from the floor. Please proceed.

Speaker Change: Yes sir, if you would like to ask a question, please press star then 1 on your telephone keypad at this time.

Speaker Change: If you'd like to remove yourself from cue, please press star then 2.

Operator: Once again, that is star more than one if you have a question. We'll pause for just a moment to assemble our roster, and our first question today comes from Kevin Dede at H.C. Wainwright. Please go ahead.

Speaker Change: Once again, that is star than one if you have a question.

Speaker Change: We'll pause for just a moment to assemble our roster.

Speaker Change: And our first question today comes from Kevin Deedy at H.C. Wainwright. Please go ahead.

Kevin Dede: Good afternoon, gents. Thanks for having me on the call. So, uh, help me understand what's happening in the U.S. exactly and how you feel you're getting your arms around it. Okay, Fredi, take it away.

Speaker Change: Good afternoon, gents. Thanks for having me on the call.

George Oliver: Operating expenses in the second quarter of 2024 were $15.6 million including $8.3 million of mostly non-cash charges for goodwill impairment, restructuring costs, and employee Williams. This compares to $9.6 million in operating expenses in the second quarter of 2023. Excluding the non-recurring charges, operating expenses were lower by $2.3 million, primarily consisting of $1.3 million in lower professional fees, and $700,000 in lower G and costs. Other expense totaled $800,000 in the second quarter of 2024, and mostly related to debt discount accretion compared to $8.5 million in the second quarter of 2023, of which $5.1 million was related to debt interest, debt discount accretion, and changes in fair value of the derivative liability.

Speaker Change: Hello, Kevin.

Kevin Deedy: So, uh...

Speaker Change: Help me understand what's happening in the U.S. exactly and how you feel you're getting your arms around it.

Fredi Nisan: Hey, good afternoon. Thank you for the question, as always. In the U.S, check you guys out. Talk to you soon. Bye Bye Bye Bye Bye Bye Bye Bye Bye, Jeu, and Sue Seepert.

Speaker Change: Okay, Fredi, take it away. Hey, good afternoon.

Fredi Nisan: We as a company decided to license the technology to an entity that has the infrastructure and has been doing it for many years to utilize our technology to run the business faster, easier, in a more compliant way, and reduce certain burdens from our side. We decided to do that because of the challenges that exist and the instability that we see moving forward if we stay in that vertical. For those reasons, we decided to license it.

Speaker Change: Due to certain regulations and compliance, we as a company decided to license the technology to an entity that has the infrastructure and has been doing it for many years.

Speaker Change: to utilize our technology to run the business faster, easier, in a more compliant way, and reduce certain burdens from our side.

Speaker Change: We decided to do that because of the challenges that exist and the instability that we see moving forward if we stay in that vertical. For those reasons, we decided to license.

George Oliver: Adjusted EBITDA in the second quarter of 2024 was negative $1.6 million compared to $900,000 in the second quarter of 2023. We are carefully managing our working capital. Continuing to leverage our strong growth in the EU during the second quarter of 2024, we repatriated $2.5 million from Europe to shore up the US capital resources. At the corporate level, as of June 30, 2024, cash in restricted cash balance was $75.2 million, unrestricted cash was $6.4 million, and networking capital was slightly negative.

Fredi Nisan: We may make less money on it, but it will be stable, and we can rely on that revenue for a longer time, lessening the burden of compliance, regulatory environment changes that may occur moving forward. And that recovery took a little bit longer due to some challenges in going live on the banking side, on the partner side, but other than that, I think we're on track to recover in this vertical. So Fredi, what do you think?

Speaker Change: We maybe make less money on it.

Speaker Change: but it will be stable and we can rely on that.

Speaker Change: revenues for a longer time, less the burden of compliance, regulatory environment changes.

Speaker Change: that may occur moving forward. And that recovery takes a little bit longer due to some challenges in going live on their banking side, on the partner side. But other than that, I think we're on track to recover in this vertical, in this niche.

Speaker Change: So, Fredi, do you think...

Fredi Nisan: Do you think that the licensing agreement is exclusive, or is there an opportunity for you to offer it to other players to capitalize more on transaction services and processing in North America? Ditch was issued to our partner only in the retail environment, only in the car-present or what we call the car-present environment? The moment the regulatory environment changed to offer a little bit more support to B2B, we were looking to whether we wanted to run it as a company, for example, or we wanted to give it to our liaisons. Holder to do so. We have enough verticals we support. This specific vertical requires extra time and effort in the compliance and regulatory environment. But at the moment, it's an exclusive license in the retail space.

Fredi Nisan: Do you think that licensing agreement is exclusive or is there an opportunity for you to offer it to other players to capitalize more on transaction services and processing in North America?

George Oliver: During the second quarter of 2024, $200,000 of debt and $875,000 of preferred stock was retired, as our investor converted the securities into approximately 736,000 shares of common stock. Turning to guidance, we continue to anticipate processing volumes to grow year over year to over $4 billion in 2024. However, as discussed, several factors are impacting the timing of revenue, as such we believe our revenue recovery in North America may be prolonged by two quarters.

Fredi Nisan: This license was issued to our partner only in the retail environment, only in the car present or what we call car present environment.

Speaker Change: At the moment, the regulatory environment changed to offer a little bit more support to the B2B. We will look into if we want to run it as a company, for example, or we want to give it to our license.

Speaker Change: to do so. We have enough verticals we support. These specific verticals require extra time and effort in the compliance and regulatory environment.

George Oliver: Now we expect 2024 total revenue to be in the range of $65 to $70 million. Specifically, we project third quarter revenue to grow sequentially and be in the range of $14 to $15 million and Q4 to be very strong with accelerating momentum into early 2025. We believe that any growth in revenue will largely be driven by our international segments, which we expect will comprise the largest portion of revenue in 2024. We expect to achieve adjusted EBITDA profitability in Q4 2024.

Speaker Change: But at the moment, it's an exclusive license in the retail space. It's more in the retail and e-commerce.

Fredi Nisan: It's more in the retail and e-commerce sectors. You're welcome. Box, and a bit of So, um... Obviously, we are in an election year, and depending on the administration, the handling of our economy, our digital currency, our blockchain stance, and a lot of other variables that impact our business may be dramatically different, and it's prudent for the company to set itself up for success regardless of who ends up in the White House.

Speaker Change: Hey Kevin, I'm working on this.

Speaker Change: So.

Speaker Change: Obviously we are in an election year and depending on the administration we end up with the handling of our economy, our digital

Ben Erez: I'll now hand the call back over to Ben for some final remarks before Q&A.

Kevin Deedy: currency, our blockchain stance, and a lot of other variables that impact our business.

Ben Erez: In conclusion, RIBO remains a dynamic company in a dynamic industry. We made the right adjustments in the first and second quarters of this year as one niche industry customer-based market in the U.S, experienced regulatory issues that impacted our business. We are now poised to rebuild that market via a white label partner and believe these transitory issues in the U.S, are largely behind us. Europe has not slowed down at all and continues to deliver ongoing growth and strong execution.

Speaker Change: may be dramatically different and it's prudent for the company to set itself up for success regardless of who ends up in the White House.

Fredi Nisan: So, as such, we put emphasis and focus on our European operations, and we push forward as quickly as we can on these fronts in parallel to maintaining our position with the U.S. Okay, Ben. It seems that the European business just reflects a low residual rate. Is it fair to assume that'll be consistent going forward? It's a function of a blend between the banking and the acquiring over there, so the banking has a lower residual rate, but it also has a lower processing cost and a higher margin. So we'll have to look at it separately to be able to understand it, but the blended residual rate has come down to about 1%.

Speaker Change: So as such we put emphasis and focus on our European operations and we push forward as quickly as we can on these fronts in parallel to maintaining our position with the U.S.

George Oliver: We expect renewed sequential growth in the third and fourth quarters of 2024, positioning us for further growth in 2025. Before we go to the Q&A session, I want to mention some upcoming conferences we will be attending. We'll be at the H.C. Wainwright Conference in New York City September 9th to 11 and at the LD Micro main event in Los Angeles on October 28th to 30th. Before we open the call to analysts, there are several questions we received in advance of the call that we will address.

Ben Errez: Okay Ben, it seems that the European business just reflects a lower residual rate. Is it fair to assume that'll be consistent going forward?

Ben Errez: I'll let George take that. Yes, I mean it's it's a function of a blend between the banking and the acquiring over there so the banking has a lower residual rate but it also has a lower processing cost and a higher margin.

George Oliver: So here are some of the questions that we received prior to this call. First question, they will go to both George and Freddie George will open, Freddie will continue. The question is, what are the areas in which you are focused to reach profitability, George please to get? Well, we focused on reducing costs in the U.S, primarily with reduction in payroll headcount approximately 25% due to severance and vacation payouts and such. We should start to see the benefit of the reduced headcount in the second half of the year. We also have been controlling discretionary costs in the U.S, and we are maximizing cash flow in Europe and repatriating cash to cover the deficit in the U.S.

George Oliva: So, we'll have to look at it separately to be able to understand it. But, you know, the blended residual rate has come down to about 1%.

Ben Errez: [inaudible] Why are you, I know another question addressed this, but maybe you could add a little more color on how you see growth in Europe and your confidence in the 65 to 70 that you've offered this year? Well, that includes tremendous growth in Q4, we have applications, we have a pipeline of business to onboard, and it's not a slam dunk, they're going to have to execute to hit those numbers, but whenever the ramp finally hits, I mean, we're going to start 2025 very strongly.

George Oliva: Why are you, I know another question addressed this, but maybe you could add a little more color on

Speaker Change: How do you see the growth in Europe and your confidence in the 65 to 70 that you've offered this year?

Speaker Change: [inaudible]

Speaker Change: Well, that includes a tremendous growth in Q4.

Speaker Change: We have applications.

Speaker Change: have a pipeline of business on board and it's not it's not a slam dunk and it's good they're going to have to execute to hit those numbers.

Fredi Nisan: That's basically what we're doing in the short term. Thank you, George. And thank you everybody for this coming in.

Speaker Change: But whenever the ramp finally hits, I mean, we're going to start 2025 very strongly. Hopefully, we hit the number in Q4, but if we're a little bit late, we're still building a huge momentum into 2025.

Ben Errez: Hopefully, we'll hit the number in Q4, but if we're a little bit late, we're still building a huge momentum into 2025, so I feel pretty good about everything that's going on. George, can you talk about the visibility that you have with Visa? I know that program is still sort of ramping up.

Fredi Nisan: As George mentioned, we did a lot of adjustment in the past and now and moving forward into the future as a company of focus is on the two areas that we separated into area one area will be the licensing. We see huge opportunity in the payback as a service, the banking as a service and the other area is directly working with our partner ISOs and banking to drive direct traffic onto our platforms as this is a higher margin when we have direct compared to licensing.

Speaker Change: So I feel pretty good about everything that's going on.

Speaker Change: George, can you talk to the visibility that you have with Visa? I know that program is still sort of ramping up. Maybe you can give us some insight on that.

Fredi Nisan: Maybe you can give us some insight on that. I will take that Kevin. As you know, or maybe you're not, but Visa is a brand new product. Only a few companies in Europe have access, we are one of them, and Visa is deploying their infrastructure very slowly to make sure everything works. We are working with them at their pace. We always deploy to five countries, and we're trying to deploy about a country every couple weeks.

George Oliva: I will take that, Kevin. As you know, or maybe you're not, but Visa is a brand new product.

Speaker Change: Only a few companies in Europe have access. We are one of them.

Speaker Change: and Visa are deploying their infrastructure very slowly to make sure everything works. We're working with them in their pace. We already deployed five countries.

Fredi Nisan: But on the licensing side, we see a huge huge opportunity due to regulatory change in different vertical. And we see the demand for compliance, KYC, ledger in services and other banking related services, for example, effects, bank accounts, card issuing to support. The ongoing change in the financial segment and we're very, very excited about it.

Speaker Change: and we're trying to deploy about a country every couple weeks.

Fredi Nisan: But it's really we are at the mercy of Visa as they are deploying this brand new infrastructure. This infrastructure is available, as I mentioned Kevin, only for a few companies, and they're really testing every aspect of it, how money moves, how banks react to all of it. But we see a huge demand for that already, especially in Colombia, Romania, and Canada. There is a huge, huge demand for visa services, and they are fully aware of that, as we are in communication with him on a weekly basis. And I don't know if you saw our post, but these are just took our management team to Paris for the Olympics. We have a good relationship with visa. And we're working hand by hand in hand to I'll turn the floor over.

Speaker Change: but it's really we are in the mercy of Visa as they are deploying this brand new infrastructure. This infrastructure is available, as I mentioned, Kevin, only for a few companies and they're really testing every aspect of it, how money moves.

Speaker Change: how the banking react to all of it, but we see a huge demand for that already.

Speaker Change: especially in Colombia.

Speaker Change: Romania.

Speaker Change: Canada

Fredi Nisan: Freddie will continue with the next question. Can you provide some color on trends in verticals and what you believe are or will be the most attractive opportunities in the coming year? Thank you, Ben. That's actually a great question. The financial market working with Visa, Massacad, working with other vendor and based on their movement and how they perceive the future and how we perceive the future is in three areas that are going to be in huge demand.

Speaker Change: Huge, huge demand for visa services.

Speaker Change: And these are fully aware of that, as we are in communication with them on a weekly base. And I don't know if you saw,

Speaker Change: on our post, but Visa just took our management team to Paris, to the Olympics. We have a good relationship with Visa and we're working hand in hand to make sure that this infrastructure is being deployed as quick as possible.

Fredi Nisan: And one is the sector rail, what we call a real-time payment. We see a huge, huge demand in it when it comes to instant payment. People looking and partner and our businesses looking for real-time payment, 24-7. And I believe that's something that we're going to see more of in the near future. Second is the settlement globally, international settlement. We see huge, huge demand, especially working with Visa on our new Visa Direct.

Speaker Change: Okay, thanks Fredi. I'll turn the floor over.

Fredi Nisan: Thank you, Kevin. Thank you. And as a reminder, if you'd like to ask a question, please press star then 1. Our next question comes from Howard Halpern with the Tagliatelle Brothers. Please go ahead.

Kevin Deedy: Thank you, Kevin.

Speaker Change: Thank you. And as a reminder, if you'd like to ask a question, please press star then 1. Our next question comes from Howard Halpern with Taglit Brothers. Please go ahead.

Howard Halpern: Good afternoon, gentlemen. Good afternoon. I guess going back a little bit in history, and it may be tied in with your high-risk opportunities, but what have you learned about the closed loop system, and how does COINI play a role in developing that type of program for high-risk customers? Hey, how are you? Good to hear from you again. This is Fredi.

Howard Halpern: Good afternoon, gentlemen. Good afternoon.

Howard Halpern: I guess going back a little bit in history, and it maybe ties in with your high-risk opportunities, but...

Howard Halpern: What have you learned about the closed loop system and how does Coiny play a role in that, in developing that type of program for high-risk customers?

Fredi Nisan: This is a great question. Coiny started as a stable coin and was focused on making that software or that platform available in a closed loop for high risk in the U.S. due to changes in compliance and, as you know, banking and crypto. They tried to stay away. We rebranded Coiny U.S. to what we call NEMSCORE, and we're going to use that as a loop in the payment environment to offer more services.

Howard Halpern: Hey, how are you? Good to hear from you again. This is Fredi. This is a great question.

Fredi Nisan: We see huge demand in South America, Asia and especially US to Europe. We see huge, huge demand in the last one and I'm sure there is not a surprise, but as the financial systems are changing, crypto become a huge demand. And we are looking into that in Europe to certain partnerships and to see how to overcome the demand of crypto. And that's something we will see grow in the upcoming years and we are very, very excited about it.

Speaker Change: Coiny started as a stable coin and was with the focus on make that software or that platform available in a closed loop for high risk.

Speaker Change: In the U.S. due to changes in compliance and as you know banking and and and crypto They try to stay away. We rebranded that coin in the U.S. to what we call NEMS Corp

Fredi Nisan: But we took that Coiny platform and deployed it in Europe. We are fully licensed in Europe as a crypto exchange or crypto license, let's call it, to be able to hold what they call tokens or crypto. In our case, it's Coiny.

Speaker Change: We're going to use that closed loop in the payment environment to offer more services.

Speaker Change: We took the CoinE platform and deployed it in Europe. We are fully licensed in Europe as a crypto exchange or crypto license, let's call it, to be able to hold what they call tokens or crypto.

Fredi Nisan: Those are the areas and the second side and the other side of that trend is licensing marketplaces that looking for technology and services their own clients in these compliance and regulatory environment. And we believe that our software technology can help facilitate and accelerate the execution or the goal lies for a lot of companies and partners in this space.

Fredi Nisan: And due to some changes now called MECA regulation in Europe that's related to stablecoin or cryptocurrency, we are implementing those. But the goal and what we see is that in a closed loop environment, it's easier to onboard on and off ramp money because it's more secure, visible to the government, visible to the bodies that oversee certain aspects of that. That's why they changed what they call MECA regulation.

Speaker Change: In our case, it's Coiny.

Speaker Change: And due to some changes now called MECA regulation in Europe that's related to stablecoin or cryptocurrency, we are implementing those.

Speaker Change: But the goal and what we see is...

Speaker Change: in a closed-loop environment, it's easier to onboard.

Fredi Nisan: Thanks, Fredi.

Speaker Change: on and off ramp money.

Speaker Change: because it is more secure.

Fredi Nisan: The next question pertains to our growth in Europe. Why is Europe doing so well? As this is going to be the major growth driver in the balance of the year, can you elaborate on your strategy and operations there? What gives you the confidence in your financial projections? Thank you, Ben. Another great question. We're working really hard in the last two years since we purchased the entity implementing a lot of the infrastructure that needed Europe is changing as well and we implemented a lot of partnerships including VISA, HCI, and other to offer our business banking as a service.

Speaker Change: visible to the government, visible to the bodies that oversee.

Fredi Nisan: It's more visibility into the ecosystem, and we believe that that structure will be adopted in many, many use cases in the financial structure, including JP Morgan, which just released their coin. And other banks and institutions will do similar things to have better risk oversight and, of course, compliance oversight on the ecosystem. Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host. Each country has its own structure and limitations, but using the Visa network, Visa is doing the heavy lifting.

Speaker Change: certain aspects of that.

Speaker Change: That's why they changed what they call Zika regulation. It's more visibility into the ecosystem, and we believe that...

Speaker Change: That structure will be adopting many, many use cases in the financial structure, including JP Morgan just released theirs.

Speaker Change: and other banks and institutions will do similar things to have a better risk oversight and of course compliance oversight on the ecosystem.

Speaker Change: Okay, that sounds good, interesting, and what are your opportunities in South America and what are the regulations like, I guess, compared to Europe and the U.S.?

Fredi Nisan: In Europe, we have a huge, huge demand for high risk. We as a company registered with VISA, there's a high risk provider and we see a huge, huge growth in the gaming, adult, and crypto business. And those are three verticals that are being scrutinized right now by a lot of banks that don't want to touch it but we are welcome to this business and we have a full support of VISA and Mastic Out and other banks to own both such verticals and we are very excited to support them and that's why we see a huge growth in our portfolio.

Speaker Change: You know, each country has their own structure and limitation, but using the visa network

Fredi Nisan: Thanks, Fredi.

Fredi Nisan: Visa is a body that works with the regulations and the regulatory bodies in each country. Visa is working with us to deploy in 80 countries, and the body that is assigned by the government or by the banking regulatory bodies in each country to basically oversee the compliance and the structure and how money moves, and AML policy, and BSA policies, and that's why they allow money to move that quickly because Visa takes the responsibility for that. I think if you go directly to each country, you will face a lot of scrutiny and a lot of difficulties operating in those countries.

Speaker Change: These are doing the heavy lift. Visa is a body that...

Speaker Change: work with the regulation and the regulatory bodies in each country. Visa is working with us to deploy in 80 countries.

Speaker Change: and they are the body that was assigned by the government or by the banking regulatory bodies in each country.

Speaker Change: to basically oversee the compliance and the structure and how money moves.

Speaker Change: AML policy, BSA policies and that's why they allow money to move that quick because Visa took the responsibility for that and I think if you go directly to each country you will face a lot of scrutiny and a lot of difficulties to operate in those countries.

George Oliver: We're going to give a geological opportunity to answer the next question. George, what are the data science points that you track and monitor to manage the health of the business? Historically, the revenues were coming from acquiring, from processing credit card payments. We looked at the transaction volume as a primary driver to revenue as the mix in between the U.S, and Europe shifted and as we ramp up volumes in banking, then we have to drill down and look at residual rates of the different segments.

Howard Halpern: Okay, all that sounds great. Looking forward to the next couple of quarters. Thanks guys. Thank you. Thank you. This concludes our question and answer session. I'd like to turn it back over to the company for any final remarks. Well, we thank everybody for listening in to this conversation. We look forward to an even better quarter in three months' time.

Speaker Change: Okay, all that sounds great looking forward to the next couple quarters. Thanks guys. Thank you.

Speaker Change: Thank you, and this concludes our question and answer session. I'd like to turn it back over to the company for any final remarks.

Speaker Change: Well we thank everybody for listening into this conversation. We look forward to an even better quarter in three months time. Thanks everybody and have a pleasant day.

Ben Errez: Thanks, everybody, and have a pleasant day. Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful evening.

Speaker Change: Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful evening.

George Oliver: Historically, in acquiring, we had 2% revenue for every, for processing volume. The mix changes, the banking has a lower residual rate and there's different gross margins and segments. As the business mix shifts, we have to drill down and look at the residual rates of the different verticals at the different types of revenue between acquiring and banking and we look at the gross margin in each and then looking at all this data.

George Oliver: Thanks, George.

Operator: Operator, at this point, we'll open it up for questions from the floor. Please proceed. Yes, sir. If you would like to ask a question, please first start with one on your telephone keypad at this time. If you'd like to remove yourself from Q, please press star then two. Once again, that is star then one, if you have a question. We'll pause for just a moment to assemble our roster. And our first question today, co-traumat Kevin Dede at H.C.

Operator: Wait a minute, please go ahead. Good afternoon, Jens. Thanks for having me on the call. Hello, Kevin. So, help me understand what's happening in the U.S, exactly and how you feel you're getting your arms around it.

Fredi Nisan: Okay, Fredi, take it away. Thank you for the question as always. In the U.S., this is such a regulation and compliance. We have the company decided to license the technology to an entity that has the infrastructure and doing it for many years, to utilize our technology to run the business roster easier in more compliance way, and reduce certain burden from our side. We decided to do that because of the challenges that exist and the instability that we see moving forward if we stay in that vertical.

Fredi Nisan: For those reasons, we decided to license. We may be made less money on it, but it will be stable and we can rely on that revenue for longer time, less the burden of compliance regulatory environment changes that may occur moving forward. And that's recovery. Take a little bit longer due to some challenges in going live on their banking side, on the partner side, but other than that, I think we're on track and to recover in this vertical, in this niche.

Fredi Nisan: So, Fredi, do you think that licensing agreement is exclusive or is there an opportunity for you to offer it to other players to capitalize more on transaction services and processing in North America? This license was issued to our partner only in the retail environment, only in the car presence or what car presence environment. The moment the regulatory environment changed to offer a little bit more support to the bill to be, we were looking to if we want to run to the company, for example, or we want to give it to our license holder to do so.

Fredi Nisan: We have enough verticals with support. These specific verticals require extra time and effort in the compliance and regulatory environment. But at the moment, it's an exclusive license in the retail space. It's more on the retail and e-commerce. Kevin, yeah, I worked on that. So, obviously, we are in a election year and depending on the administration, we end up with the handling of our economy, our digital currency, our blockchain stance and a lot of other variables that impact our business may be dramatically different.

Fredi Nisan: And it's prudent for the company to set itself up for success regardless of who ends up in the White House. House. So as such, we put emphasis and focus on our European operations and we push forward as quickly as we can on these fronts in parallel to maintaining our position with the US. Okay, Ben. It seems that the European business just reflects a low residual rate, is it fair to assume that'll be consistent going forward?

Fredi Nisan: I'll add George to that. Yeah, I mean, it's a function of a blend between the banking and the acquiring over there. So the banking has a lower residual rate, but it also has a lower of a processing cost in the high margin. So we'll have to look at it separately to be able to understand it, but the blended residual rate has come down to about 1%.

Fredi Nisan: Why are you... I know another question addressed this, but maybe you could add a little more color on how you see the growth in Europe and your confidence in the 65 to 70 that you have offered this year. Well, that includes a tremendous growth in Q4. We have a pipeline of business on board and it's not a slam dunk. It's going to have to execute to hit those numbers. But whenever the ramp finally hits, I mean, we're going to start 2025 very strongly. Hopefully, we hit the number in Q4, but for a little bit late, we're still building a huge momentum into 2025. So I feel pretty good about everything that's going on.

George Oliver: George, can you talk to the visibility that you have with Visa? I know that program is still sort of ramping up. Maybe you can give us some insight on that. I will take that, because as you know, or maybe you're not, but Visa is a brand new product. Only a few companies in Europe have access to one of them. Visa are deploying their infrastructure very slowly to make sure everything works. We're working with them in their pace.

George Oliver: We always deploy five countries, and we're deploying about, we're trying to deploy about a country every couple weeks. But it's really, we are in the mercy of Visa as they are deploying this brand new infrastructure. This infrastructure is available, as I mentioned, carrying only so few companies, and they really testing every aspect of it, how money moves, how the banking reacts, all of that. But we see a huge demand for that already, especially in Colombia, Romania, Canada, huge demand for Visa services, and Visa fully aware of that, as we have been in communication with them on a weekly base.

George Oliver: And I don't know if you saw on our post, but Visa just took our management team to Paris, to the Olympic. We have got a relationship with Visa, and we're working hand by hand to make sure that this infrastructure is being deployed as quickly as possible. Thank you, Kevin. Thank you. And as a reminder, if you'd like to ask a question, please press star then one.

Kevin Dede: Next question comes from Howard Halpern with Tag with Brothers. Please go ahead. Good afternoon, gentlemen. Good afternoon. I guess going back a little bit in history. And it may be tied in with your high risk opportunities. But what have you learned about the closed loop system and how does Coenie play a role in that in developing that type of program for high risk customers? Very good to hear from you again. This is a great question.

Kevin Dede: Coenie started as a stable coin and was with the focus on make that software or that platform available in a closed loop for high risk. In the US, due to changes in compliance and as you know, banking and crypto, they tried to stay away. We rebranded that Coenie US to what we call name score. We're going to use that closed loop in the payment environment to also more services. But we took the Coenie platform and deployed in Europe.

Kevin Dede: We are fully licensed in Europe as the crypto exchange or crypto licenses call it to be able to hold what they call tokens or crypto in our case, it's Coenie. And due to some changes now called make a regulation in Europe that related to stable coin or cryptocurrency, we are implementing those. But the goal and what we see is in a closed loop environment is easier to on board, on and off ramp money.

Kevin Dede: Because it is more secure, visible to the government, visible to the bodies that oversee certain aspects of that. That's why they change what they call make a regulation. It's more visibility into the ecosystem and we believe that that structure will be adopting many, many use cases in the financial structure, including JP Morgan just released their coin and other banks and institutions will do similar things to have a better risk oversight. And of course, compliance oversight on the ecosystem.

Fredi Nisan: That sounds good, interesting. And what are your opportunities in South America and what are the regulations like, I guess, compared to Europe and the US? You know, each country has their own structure and limitation. But using the visa network, visa is a body that works with the regulation and the regulatory bodies in each country. Visa is working on with us to deploy in 80 countries. And they are the body that was assigned by the government or by the banking regulatory bodies in each country to basically oversee the compliance and the structure and how money moves and AML policy, BSA policies.

Fredi Nisan: And that's why they allow money to move that quick, because visa took the responsibility for that. I think if you go directly to each country, you will face a lot of scrutiny and a lot of difficulties to operate in those countries. Thank you.

Howard Halpern: Okay. All that sounds great. We'll move forward to the next couple quarters. Thanks guys. Thank you.

Operator: It looks as good as our question and answer session. I'd like to turn the back over to the company for any final remarks. While we thank everybody for listening into this conversation, we look forward to an even better quarter in three months' time. Thanks everybody and have a pleasant day. Thank you. This includes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful evening.