Q3 2024 Paysign Inc Earnings Call
Good afternoon, my name is Kevin and I'll be your conference operator today. At this time, I'd like to welcome everyone to the pay sign in 3rd quarter, 2024 earnings conference call. After the speakers remarks, there'll be a question and answer session.
As a reminder of this conference is being recorded.
If you like to be a place into question, cue, you may press star one at any time.
Speaker Change: Paysign's earnings release will be disseminated to the SEC earlier today and can be found on the Investor Relations section of our website, Paysign.com, which includes reconciliations of non-GAAP measures to GAAP-reported amounts.
Additionally, as set forth in more detail in our earnings release,
I'd like to remind everyone that today's call will include forward-looking statements regarding Paysign's future performance.
Actual performance could differ materially from these forward-looking statements.
Information about the factors that could affect future performance is summarized at the end of Paysign's earnings release and in our recent SEC filings.
Lastly, a replay of this call will be available until February 5, 2025.
Speaker Change: Please see Payson's third quarter earnings call announcement for details on how to access the replay. It's now my pleasure to turn the call over to Mr. Mark Newcomer, CEO.
Please go ahead.
Mark Newcomer: Thank you, Kevin. Good afternoon, everyone, and welcome to Paysign's third quarter earnings call.
I'm Mark Newcomer, President and CEO of Paysign. Joining me today is Jeff Baker, our Chief Financial Officer. Later during our Q&A session, we will also be joined by Matt Turner, our President of Patient Affordability, and Matt Lanford, our Chief Payments Officer.
Today we announced our financial results for the third quarter of 2024 and I'm pleased to report that Paysign has demonstrated meaningful growth in both revenue and profitability consecutively and year-over-year.
Revenue for the third quarter was $15.3 million, an increase of 23% compared to the same period in 2023, and a 6.5% increase from the prior quarter.
Mark Newcomer: Our adjusted EBITDA rose 20.6% to $2.8 million or $0.05 per fully diluted share, up from $2.4 million or $0.04 per fully diluted share a year earlier.
Mark Newcomer: Gross margins also improved significantly, increasing by 440 basis points to 55.5% compared to 51.1% in the same period last year, driven largely by the expansion of our patient affordability business.
Mark Newcomer: Revenue from our patient affordability business grew by an impressive two hundred and nineteen percent year-over-year reaching 3.3 million in the third quarter up from roughly 1 million in the same quarter last year.
Mark Newcomer: Claims processed rose by 430% compared to the same period last year. This marks the fourth consecutive quarter of triple-digit year-over-year revenue growth for patient affordability, which continues to be a major contributor to our overall success.
Mark Newcomer: We finished the quarter with 66 patient affordability programs, with additional launches continuing throughout the remainder of the year.
Mark Newcomer: We are encouraged by the trend of existing clients bringing additional programs to us, which not only shortens the sales cycle, but also reduces the program acquisition cost while creating immediate revenue opportunities as many of these additional programs are transition programs.
Mark Newcomer: In the fourth quarter, we expect to onboard several programs from both new and existing clients, including a new cornerstone account, one of the world's largest pharmaceutical companies.
Mark Newcomer: Our forward momentum positions us well for continued growth throughout the remainder of this year and well into 2025. Our pipeline remains strong with a mix of pharmacy-based retail specialty and medical benefits programs, highlighting our strategy to diversify revenue streams.
Mark Newcomer: Our current program composition is weighted towards specialty drugs with an emphasis on oncolytics.
Mark Newcomer: Programs launched in the third quarter of this year gave us additional claim volume in the retail space, something we believe will drive further growth as we pursue new opportunities in this market.
Mark Newcomer: Our plasma donor compensation business faced some challenges this quarter with hurricanes and staffing shortages affecting operations in our client centers.
Mark Newcomer: Despite these headwinds, revenue grew to $11.4 million, representing a 3.4% increase year-over-year and a 1.5% increase from the second quarter.
Mark Newcomer: We did experience a slight decrease in revenue per center to $7,991 this quarter versus $8,041 last year relating to these factors.
Mark Newcomer: We added one plasma center during the quarter bringing our total to 478 centers And we plan to add another two centers by the end of the year as new center openings remain muted
Mark Newcomer: While growth in the plasma business has been tempered by external forces outside of our control, we remain committed to enhancing the productivity and efficiency of our services to the centers. Overall, we are pleased with our performance in the third quarter, which was driven primarily by outstanding growth in our inpatient affordability business.
Mark Newcomer: This segment is on its way to becoming our primary revenue driver. We believe the investments we are making in this area will yield substantial long-term growth and create significant shareholder value.
Mark Newcomer: Our commitment to developing innovative fintech solutions that address key challenges in healthcare payments, particularly patient affordability, remains strong.
Mark Newcomer: We are confident that combined with our ongoing initiatives in plasma compensation and new opportunities in the evolving payments landscape We are well positioned to deliver sustainable long-term value for our shareholders
Speaker Change: I will now pass the call over to Jeff, who will provide further details on our financial performance for the quarter.
Jeff Baker: Thank you, Mark. Good afternoon, everyone. As Mark said, we executed on another good quarter.
Jeff Baker: Plasma donor compensation revenue increased $378,000 versus the same period last year, or 3.4%.
Jeff Baker: to $11.44 million dollars.
Jeff Baker: This was primarily driven by increases in the number of plasma centers, 478 versus 462, and to a lesser extent, modest increases in gross dollar cards loads of 1.8% and gross spend volume of 0.4%.
Jeff Baker: This was offset by a modest decline in the average load amounts.
Mark Newcomer: Net-net, the year-over-year average monthly revenue per plasma center declined slightly to $7,991 versus $8,041.
Speaker Change: As Mark mentioned, our centers experience reduced availability related to weather and staffing shortages, and we expect these same issues to have an impact on the growth of our Q4 plasma donor compensation revenue.
Speaker Change: Free cash flow from this business remains strong, which is helping to support the rapid growth in our pharma patient affordability business.
Speaker Change: Pharma patient affordability revenue increased $2.25 million, or 219%, to $3.27 million, primarily driven by the addition of 32 net new pharma patient affordability programs launched over the past 12 months.
Speaker Change: Pharma patient affordability revenue equated to 21.5% of total revenue during the quarter versus 8.3% during the same period last year.
Speaker Change: We exited the quarter with 66 active pharma patient affordability programs, an increase of 23 programs since the end of 2023.
Speaker Change: Other revenue increased $230,000 or 73.5% to $542,000 due to the growth in our payroll, retail, and other corporate incentive businesses.
Mark Newcomer: We continue to look for ways to improve the profitability of this other revenue stream, which lacks the scale of our other businesses and experiences higher fraud costs as a percentage of revenue.
Speaker Change: As in previous calls, with all the details we provided in the press release and that will be available in our 10-Q filing tomorrow morning, I will simply hit the financial highlights for the third quarter of 2024 versus the same period last year.
Mark Newcomer: Third quarter, 2024 total revenues of $15.3 million increased $2.9 million, or 23% versus the same period last year.
Mark Newcomer: Gross profit margin for the quarter was 55.5% versus 51.1% during the same period last year, an improvement of 440 basis points.
Mark Newcomer: SG&A for the quarter increased 32.4% to $6.2 million, with total operating expenses increasing 35.6% to $7.8 million. $520,000 of the operating expense increase was related to higher depreciation and amortization costs.
Mark Newcomer: We continue to make significant investments in both IT and personnel to support the continued growth of our businesses, especially our patient affordability business. We exited this quarter with 164 employees versus 112 during the same period last year.
Mark Newcomer: For the quarter, we posted a net income of $1.4 million or $0.03 per fully diluted share versus net income of $1.1 million or $0.02 per fully diluted share for the same period last year. We recorded a tax expense of $54,000 during the quarter for an effective tax rate of 3.6%.
Mark Newcomer: The third quarter adjusted EBITDA, which is a non-GAAP measure that adds back stock compensation to EBITDA, was $2.8 million, or $0.05 per diluted share, versus $2.3 million, or $0.04 per diluted share for the same period last year. This equates to a 20.6% year-over-year growth in our adjusted EBITDA.
Mark Newcomer: The fully diluted share count for the quarters used in calculating the per share amount was 56.1 million shares and 53.5 million shares respectfully which reflects Additional in the money options that were previously out of the money
Mark Newcomer: The adjusted EBITDA margin declined slightly to 18.5% versus 18.9% during the same period last year due to investments being made to support our patient affordability business.
Mark Newcomer: Regarding the health of our company, we exited the quarter with $10.3 million in unrestricted cash and zero debt, despite the use of $360,000 during the quarter to repurchase shares.
Mark Newcomer: This was equal to the adjusted unrestricted cash balance of $10.3 million at the end of 2023 and an increase of $1.7 million from the adjusted unrestricted cash balance of $8.8 million at the end of Q2 2024.
Mark Newcomer: The adjusted amounts take out the impact of accounts receivable, accounts payable, and cash collections related to pass through invoicing of our patient affordability business.
Mark Newcomer: As discussed in the past, patient affordability customers are invoiced at the end of the period to reimburse funds used to cover related co-pay amounts for monthly patient affordability claims.
Mark Newcomer: The changes in these balances do not equate to the revenue per claim we charge the pharmaceutical companies for paying such claim amounts. We expect that as the business grows, so will fluctuations in AR, AP, and unrestricted cash.
Mark Newcomer: Restricted cash increased $7.9 million to $100.3 million from December 31, 2023, primarily due to increases in customer deposits for our Plasma and Pharma customers of $8.5 million, offset by a decrease in funds on card of $556,000.
Mark Newcomer: Restricted cash are funds used for customer card funding and pharmaceutical claims with a corresponding offset under current liabilities.
Mark Newcomer: We repurchase 100,000 shares of our common stock in a private purchase at an average cost per share of three dollars and sixty cents
Mark Newcomer: At the end of the quarter, $3.5 million remained outstanding under our share repurchase program.
Mark Newcomer: Now, turning your attention to our guidance for the remainder of the year, we continue to expect total revenues to be in the range of $56.5 million to $58.5 million, reflecting year-over-year growth of 20% to 24%.
Mark Newcomer: Foyer growth profit margins are still expected to be between 54% and 55%, reflecting increased revenue contribution from our pharma patient affordability business.
Mark Newcomer: Operating expenses are still expected to be between $30 million and $32 million as we continue to make investments in people and technology to support the growth of our business.
Mark Newcomer: Of this amount, depreciation and amortization is expected to be approximately $6 million, while stock-based compensation is expected to be approximately $2.6 million.
Mark Newcomer: As disclosed in the legal section of our 10-Q and in our 8-K released earlier today, we expect to have one-time legal expenses during the fourth quarter related to the settlement of our class action and derivative lawsuits.
Mark Newcomer: This expense was not anticipated at the time we provided financial guidance, but we still anticipate our operating expenses to be within the previous guided ranges.
Mark Newcomer: Given the continued increases in our average daily balances of unrestricted and restricted cash and the current interest rate environment, we expect interest income of approximately $3.1 million.
Mark Newcomer: We expect full-year tax rate to be between 19% and 19.5%, and our fully diluted share count outstanding to be between $55.5 million and $56 million.
Mark Newcomer: Taking all of the factors above into consideration, we expect net income to be in the range of $300,000.
Mark Newcomer: to $3.5 million, or approximately $0.06 per diluted share, and adjusted EBITDA to be in the range of $9 million to $10 million, which is 15% to 17% of total revenues, or $0.16 to $0.18 per diluted share. With that, I would like to turn the call back over to Kevin for questions and answers.
Kevin: Thank you. Now we're conducting a question and answer session. If you'd like to be placed into question queue, please press star 1 on your telephone keypad.
Speaker Change: Once again, that's star one to be placed in the question queue.
Speaker Change: One moment please while we poll for questions.
Kevin: Our first question today is coming from Pete Heckman from D.A. Davis who's line is now live.
Pete Heckman: Good afternoon, gentlemen. Thanks for taking the question. I wanted to see if you could go back and talk a little bit about
Pete Heckman: the additional pharma campaigns added.
Speaker Change: during the quarter and then some of the comments you made around the certain types of pharma campaigns as well as the comment about a I think it was a very large, I don't think you used the word large, but important campaign from one of the largest drug manufacturers.
Speaker Change: Could you just go into that a little bit more detail that went by really quickly, I didn't have the time to take all the notes, and I'd like to get any incremental detail we could in terms of where you are now having success and where you're moving to with these patient assistance programs.
Speaker Change: So, this is Matt Turner.
Speaker Change: Let's kind of start with the cornerstone account, you know, if you kind of look at the business as a whole right now, we're sitting on
Speaker Change: 3 or 4 what we would consider cornerstone or strategic accounts.
Speaker Change: These typically represent larger manufacturers that have broad portfolios of products.
Speaker Change: covering a variety of therapeutic classes.
Speaker Change: I like the medical insurance side, not the pharmacy side. Kind of the legacy stuff we used to call buy-and-bill. So we added a, you know,
Speaker Change: We completed a contract with one and will launch programs for them in this quarter of this year. Your other question was around...
Speaker Change: The, like the new programs that we launched, can you kind of repeat that part of the question, because I didn't understand exactly what you were asking there. Sure, I was just trying to get a better feel as you...
Speaker Change: grow the total number of of uh... campaigns or programs
Speaker Change: In-office treatments versus retail, it just makes it so that an average is just not really that relevant.
Speaker Change: Yeah, and average is not, it's not relevant here. And it also depends on the types of claims that we're running as to the revenue per claim, things like that. So, you know, you may have one program that's going to run 30, 40, 50,000 claims a month, and you could have another program that's going to run two if it's in a rare disease state.
Speaker Change: So, you know, obviously those aren't priced exactly the same, so there's not really a place to put an average to where it would make sense, to where you'd say, hey, every program you're going to bring on now is going to...
Speaker Change: effectively add X thousands of dollars a month. There's obviously some kind of minimums that are in there around some administrative fees and things like that, but when you get into the transactional area, there's no real way to average that out.
Speaker Change: Got it. Okay. And then last question and I'll get back in the queue, but just based upon the really strong growth that you've seen in pharma.
Speaker Change: year-to-date, and I'm sure you have some decent visibility to the fourth quarter.
Speaker Change: on how you think this segment might grow in 2025.
Speaker Change: I mean if you're asking for a number I'll have to defer that one to Jeff and let him you know let him issue the numbers guidance.
Speaker Change: I think I'd kind of stand by the comment that we have a really strong pipeline.
Speaker Change: These additional, the cornerstone accounts that we currently have and the one that we just added, really open up the ability to what we call farm inside. So, you know, if you were to, if you were to be able to see everything we're doing over here, you would.
Speaker Change: You would see one or two programs come over. It's kind of a test bed for them to make sure we know what we're doing, that our solutions work the way we say they're going to work. And the moment that comes along and we start saving them money or execute really well, we start to see other programs shift over.
Speaker Change: And that's, you know, we're going to see.
Speaker Change: I think we're going to see increased business from current clients moving into next year. That's, you know, what has helped fuel some of the growth this year. You know, certainly not all of it, but it has helped. And then as we move into...
Speaker Change: We've been selling for 2025 for the last two quarters now, as we look at FDA approvals and things like that.
Speaker Change: So, I mean, we obviously haven't given any guidance, you know, this year.
Speaker Change: It's looking like for the full year, we still stand by that patient affordability is going to be about 20% of total revenues for the year. It was 21.5% for the quarter. Next year, that's obviously going to increase, whether that's 25-ish percent or so. I think it's definitely doable.
Speaker Change: We do have a strong pipeline, like Matt just mentioned, but a lot of it comes into timing when some of these programs launch. Also keep in mind, as far as guidance goes,
Speaker Change: You know, keep my first quarter is going to be strong for this business because of everything resets at 1231 from a claims perspective, some of these programs, the claims.
Speaker Change: Because people reach their out-of-pocket maximums, they don't get paid as you go through the, you know, remainder as you get towards the second half of the year. So, typically, this business will show...
Speaker Change: stronger growth in the first and the second quarter.
Speaker Change: You should see some pretty strong numbers in the first or second quarter for sure, and we'll get more I'll get more information as we get closer To giving guidance as we get through the first quarter and we have some more visibility on what programs exactly have launched You know as we go through the year
Speaker Change: I appreciate it.
Speaker Change: Thank you. Next question today is coming from Gary Prestapino from Barrington Research, your line is now live.
Gary Prestapino: Thank you. Thank you.
Gary Prestapino: Yeah Gary, I'm smart. You know I would say so I don't know that I would I would say it's because the economy is strong that that we can't get people to work. It's just you know there's a lot as new centers have grown over time they've they've kind of picked and pulled from their competitors and it's just become more competitive to get access to that labor.
Gary Prestapino: Okay.
Speaker Change: And then, switching over to the...
Speaker Change: Thank you. Bye.
Gary Prestapino: specialty business or the patient affordability business. Could you give us an idea of, as you size the market, how big is it for the services that you provide?
Speaker Change: Yeah, I think the last call...
Speaker Change: We covered a little bit of this. I think our conservative estimate that we're looking at right now We consider this TAM to be north of half a billion so You know and again, that's where we really have to work hard to piece together some numbers But that's where we're pretty Confident saying that we we feel like this TAM is north of 500 million
Speaker Change: So is this all, this market right now, is this a situation where you're winning this business through competitive takeaways? Are you winning this business because various pharmaceuticals are signing up for your program because they can see the benefit it gives to them?
Speaker Change: You know, maybe not living up to the standards that the the pharma manufacturer is looking for or they're not being innovative We've we've come out with some
Speaker Change: With some very innovative stuff in this space, there hasn't really been a lot of innovation for the better part of a decade, and the solutions that we're bringing in some areas are, I mean, I guess the best way to put it,
Speaker Change: We're light years beyond where some of our competitors are even though they've been in this space longer
Speaker Change: So, we've got a good mix of, hey, brand new to market drug, never been seen before, we're going to be the first vendor touching that product, and as well as
Speaker Change: Established Products
Speaker Change: have a good mix of Transitions, so we're not waiting for that drug to ramp up Patient acquisition the patient acquisition has already been done over the last two or three years And so now they're established and you know when we onboard that program we might immediately onboard, you know 15,000 claims day one
Speaker Change: as opposed to, you know, it took them two years to get to 15,000 claims. And we...
Speaker Change: diversification of our revenue streams to where we know there's programs we're going to bring to have immediate impact on revenue and then there's some that it's just going to take a while to build.
Speaker Change: And then just once again, who are some of the other players in this space?
Speaker Change: So we're pretty unique in the space in the fact that we only do patient affordability. There may be one or two other companies out there that that are just doing patient affordability, but if you kind of look at the broader market of who else offers the services that we offer, you would see companies like ConnectiveRx, TrialCard, Eversana.
Speaker Change: Those are all I think private equity-backed companies and then IQVIA and
Speaker Change: McKesson has a subsidiary called Cover My Meds.
Speaker Change: and both of those companies are publicly traded. But again, it's kind of important to mention that those people offer a breadth of services.
Speaker Change: and to the marketplace appear like big box stores, whereas we offer expertise in one specific area of this, which is why we think we're being, you know,
Speaker Change: as effective as we are at capturing this business.
Gary Prestapino: Okay, and then lastly, Jeff, is there any reason we have to wait for the 10Qs published to get what that legal expense was for the quarter or for that's going to be hit in Q4?
Speaker Change: Where can you give it to us now?
Speaker Change: and that will be paid by our insurance company. They're still finalizing documentation and other things like that. So without, you know, saying too much, some of that cost is on us, it's six figures and that's about all I'm gonna say about it right now.
Speaker Change: Okay so so without these these legal fees it's safe to say we would have got a raise and
Speaker Change: the range of adjusted EBITDA for the year.
Speaker Change: Well, I mean, the range we gave right now, Gary, I mean, the range we gave last quarter was we raised it to nine to ten million. We still feel comfortable coming in that for the full year. Through this quarter, we're in at
Speaker Change: 6.7 million so you kind of can extrapolate back from that but we'll still be in that range.
Speaker Change: Ahem.
Speaker Change: Yeah, there's a couple of moving pieces, but there will be an expense in there that's six figures that was not there when we gave this nine to ten million.
Gary Prestapino: Okay, thank you.
Speaker Change: Yeah.
Speaker Change: Oh, gee.
Speaker Change: Hi, I was just wondering if you, Jeff, if you could elaborate a little bit on where you think gross margins might go for
Speaker Change: later this year and into next as the patient affordability stuff.
Speaker Change: becomes 25-30% of the business?
Jeff Baker: Yes, sir. So for the year, you know, we've given guidance to 54 to 55 percent. Obviously, we're lowering the first half of the year and higher in the second half of the year because of the percentage of revenue coming from patient affordability. So I think it'll be up sequentially over where we were this quarter. And going forward, you know, as that mix changes, I think we could, you know,
Jeff Baker: on a blended basis year-over-year.
Speaker Change: There's a lot of moving pieces, like I said, patient affordability, when the program is launched, etc. What's going on with plasma?
Speaker Change: You know, we think fourth quarter is going to see some impacts from the weather again and employment. So, margins in the plasma business were up this, you know, sequentially and up year over year.
Speaker Change: You know, we're trying to do everything we can to continue to maximize the operating performance out of that business and and garner the cash to help deploy that and other other growth areas of the of our company. So, but, you know, looking at my crystal ball, it's about all I can say.
Speaker Change: Okay, so one other question.
Speaker Change: Are you starting to attract some...
Speaker Change: attention in the market space because of your unique technology and
Speaker Change: Are you is that technology protected somehow patents or is there just secret sauce?
Speaker Change: So we have, there's a couple of things. One, we talked about this in the past, I mean we, one thing that we do differently than our competitors, we've opened up pricing to our customers.
Speaker Change: This industry in the past really hasn't been that transparent on pricing. We're very transparent on pricing, number one. Number two, we do have some IP that our competitors don't have. It is not patented, per se.
Speaker Change: I think the best way to say it is we're the only ones privy to that technology.
Speaker Change: Because we put it in our message so no one else has it
Speaker Change: I don't know, Matt, if there's anything else you want to add? Yeah, no, I mean, it's processes and process patents are...
Speaker Change: right with problems. We did, you know, look at patenting what we were doing and...
Speaker Change: after some discussion determined it wasn't an appropriate use of funds.
Speaker Change: So, uh, I think.
Speaker Change: If you look at what we're doing, we've got a group of people here that have worked together to figure out a way to write some algorithms and do some stuff with claims that
Speaker Change: nobody else figured out and that's that's the industry but that's where we're attracting attracting
Speaker Change: attracting that interest is in the amount of money we're able to save some of our manufacturer clients that are trying to combat some things that insurance companies and PBMs are doing.
Speaker Change: And I'd also say the last thing is that we're really the only company out there that you're going to find that's paying.
Speaker Change: electronic claims via ACH or virtual debit card or paying claims via checks or I mean we're a payments company and that's the value that we bring to our customers so we can pay those claims regardless where historically the
Speaker Change: The industry has been mostly paper-based through check and other means.
Speaker Change: Okay.
Speaker Change: Thank you. Appreciate it.
Speaker Change: Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over for any further closing comments.