- Third quarter net loss of $6.2 million, or diluted earnings
per share (EPS) of ($0.12)
- Third quarter total revenue of negative $153 thousand, a
decrease of $9.2 million, and includes a $6.3 million charge for a
change in accounting estimate
- Third quarter gross dollar load volume up 1.1% versus the
year-ago period and up 16.3% versus previous quarter, returning to
positive territory
- Third quarter purchase volume down 12% versus the year-ago
period and up 10% versus previous quarter, returning to positive
territory
Paysign, Inc. (NASDAQ: PAYS), a leading provider of prepaid card
programs, digital banking services, and payment processing, today
reported financial results for the third quarter of 2020.
“The pandemic continues to have a meaningful impact on our
business due to its adverse effect on our clients in the pharma and
plasma industries. However, we remain cautiously optimistic in
their recovery and we continue to target a return to year-over-year
growth, subject to the ongoing effects of the pandemic,” said Mark
Newcomer, Paysign CEO. “The company remains well-capitalized and
positioned to weather continued impacts from the pandemic.
Meanwhile, we have seen a partial recovery this quarter related to
the easing of government restrictions in the latter portion of the
second quarter, and expect an additional upturn in the fourth
quarter resulting from onboarding new client programs.”
PAYSIGN, INC. SUMMARY OF CONSOLIDATED FINANCIAL RESULTS
(Unaudited) Quarter EndedSeptember 30, Nine Months
EndedSeptember 30,
2020
2019
2020
2019
Revenues Plasma industry
$
5,186,566
$
6,937,066
$
17,102,415
$
19,364,298
Pharma industry
(5,383,887
)
2,071,051
(594,945
)
5,537,380
Other
44,780
-
359,527
-
Total revenues
(152,541
)
9,008,117
16,866,997
24,901,678
Cost of revenues
3,281,888
3,641,595
11,275,758
10,721,769
Gross profit (loss)
(3,434,429
)
5,366,522
5,591,239
14,179,909
Gross margin % NA
59.6
%
33.1
%
56.9
%
Operating expenses Selling, general and administrative
4,070,211
2,765,961
11,299,036
8,483,882
Impairment/loss on abandonment of assets
382,414
-
425,312
-
Depreciation and amortization
537,792
318,508
1,546,645
1,047,779
Total operating expenses
4,990,417
3,084,469
13,270,993
9,531,661
Income (loss) from operations
$
(8,424,846
)
$
2,282,053
$
(7,679,754
)
$
4,648,248
Net income (loss) attributable to Paysign, Inc.
$
(6,152,135
)
$
2,960,078
$
(4,830,404
)
$
5,570,540
The following additional details are provided to aid in
understanding Paysign’s third quarter 2020 results, versus the
year-ago period:
- Total revenue decreased $9.2 million, which includes a charge
resulting from a change in accounting estimate related to revenue
recognition for settlement income for all Pharma programs and the
impacts of COVID-19. The decline was driven by the impact of the
following factors:
- The $1.8 million (or 25%) decrease in Plasma revenue was
primarily due to the impact of COVID-19 which resulted in a
significant decrease in plasma donations and dollars loaded to
card.
- The Pharma revenue decline of $7.5 million included a $6.3
million adjustment resulting from a change in accounting estimate
related to the recognition of settlement income on Pharma programs
based on substantially different performance, current trends and
new information available in dollar loads and spending patterns
compared to historical experience. This change in accounting
estimate resulted in the Company constraining revenue in accordance
with ASC 606 by changing its estimate of breakage to the remote
method of revenue recognition for settlement income whereby the
unspent balances will be recognized as revenue at the expiration of
the cards and the respective program. This has resulted in the
reversal of all previously recognized settlement income for current
Pharma programs. The Company had previously recognized and recorded
revenue from these programs ratably throughout the program
lifecycle based on historical experience and expected spending
patterns.
- Cost of revenues decreased 10% or $360 thousand versus the
year-ago period. Cost of revenues is comprised of transaction
processing fees, data connectivity and data center expenses,
network fees, bank fees, card production costs, customer service,
program management, application integration setup, and sales and
commission expense. The decrease was primarily due to the decrease
in transactions, offset by an unfavorable rate variance resulting
from a decrease in higher margin revenue business.
- Gross profit (loss) decreased $8.8 million due to the reduction
in revenue, and the disproportionate decrease in cost of
sales.
- Total operating expenses increased 62% or 40% excluding charges
in the quarter of $659 thousand for intangible impairment and legal
fees pertaining to mergers and acquisitions activity. The remaining
increase was primarily related to an increase in staffing and
compensation, professional services, stock-based compensation,
technologies and telecom, depreciation, amortization, and rent
costs slightly offset by a decrease in travel.
- Net income (loss) decreased $9.1 million. The overall change in
net income (loss) attributable to Paysign, Inc. relates to the
aforementioned factors.
The following additional details are provided to aid in
understanding Paysign’s year-to-date 2020 results, versus the
year-ago period.
- Total revenues decreased 32% or $8.0 million compared to the
same period in the prior year. The decrease was primarily due to a
$6.3 million adjustment resulting from a change in accounting
estimate related to our recognition of settlement income based on
substantially different performance, current trends and new
information available in dollar loads and spending patterns
compared to historical experience, and the effects of COVID-19 in
the second and third quarter, offset by an increase of
approximately 20% in new card programs year over year.
- Cost of revenues increased $554 thousand compared to the same
period in the prior year. Cost of revenues constituted
approximately 67% and 43% of total revenues for the nine months
ended September 30, 2020 and 2019, respectively. Cost of revenues
is comprised of transaction processing fees, data connectivity and
data center expenses, network fees, bank fees, card production
costs, customer service, program management, application
integration setup, and sales and commission expense. Cost of
revenues as a percentage of revenues increased due to a mix change
towards lower gross margin non-Pharma business, partially offset by
lower transaction volumes in non-Pharma lines of business.
- Gross profit for the first nine months of 2020 decreased 61%
versus the year-ago period. Overall gross margins were 33% and 57%
during the nine months ended September 30, 2020 and 2019,
respectively, a decrease of 2,379 bps consistent with the change in
cost of revenues as a percent of revenues.
- Total operating expenses increased 39%, including charges $659
thousand for intangible impairment and legal fees pertaining to
mergers and acquisitions activity. The remaining variance was
primarily due to an increase in staffing and wages, professional
services, stock-based compensation, depreciation, amortization and
rent.
- Net income (loss) attributable to Paysign, Inc. for the nine
months ended September 30, 2020 decreased $10.4 million or 187%.
The overall change in net income attributable to Paysign, Inc.
relates to the aforementioned factors.
COVID-19 Update
The outbreak of a novel coronavirus and the incidence of the
related disease (COVID-19) starting in late 2019 has continued,
spreading throughout the United States and much of the world
beginning in the first quarter of 2020. In March 2020, the World
Health Organization declared the outbreak as a pandemic. While the
disruption is currently expected to be temporary, there is
uncertainty around the duration. The COVID-19 outbreak has had and
will continue to have an adverse effect on the Company’s results of
operations. Given the uncertainty around the extent and timing of
the potential future spread or mitigation of COVID-19 and around
the imposition or relaxation of protective measures, management
cannot reasonably estimate the impact to the Company’s future
results of operations, cash flows, or financial condition.
Third Quarter 2020 Financial Results Conference Call
Details
At 5:00 p.m. ET today, the company will host a conference call
to discuss its third quarter 2020 results. The dial-in information
for this call is 877.407.2988 (within the U.S.) and 201.389.0923
(outside the U.S.). A replay of the call will be available for at
least 90 days and can be accessed by dialing 877.660.6853 (within
the U.S.) and 201.612.7415 (outside the U.S.), using passcode
13713279.
Forward-Looking Statements
Certain statements contained in this press release may be deemed
to be forward-looking statements under federal securities laws, and
the company intends that such forward-looking statements be subject
to the safe-harbor created thereby. All statements, other than
statements of fact, included in this release, are forward-looking
statements. Such forward-looking statements include, among others,
that the pandemic continues to have a meaningful impact on the
company’s business and operations; the company’s optimistic outlook
in the recovery of the pharma and plasma industries; the company’s
ability to return to year-over-year growth; the company remains
well-capitalized and positioned to weather the pandemic; and that
the company expects an upturn in the fourth quarter resulting from
new client programs. We caution that these statements are qualified
by important risks, uncertainties, and other factors that could
cause actual results to differ materially from those reflected by
such forward-looking statements. Such factors include, among
others, the inability to continue our current growth rate in future
periods; identified material weaknesses in our internal control
over financial reporting which could, if not remediated, adversely
affect our ability to report our financial condition and results of
operations in a timely and accurate manner; that a downturn in the
economy, including as a result of COVID-19, could reduce our
customer base and demand for our products and services, which could
have an adverse effect on our business, financial condition,
profitability, and cash flows; operating in a highly regulated
environment; failure by us or business partners to comply with
applicable laws and regulations; changes in the laws, regulations,
credit card association rules or other industry standards affecting
our business; that a data security breach could expose us to
liability and protracted and costly litigation; and other risk
factors set forth in our Form 10-K for the year ended December 31,
2019. Except to the extent required by federal securities laws, the
company undertakes no obligation to publicly update or revise any
statements in this release, whether as a result of new information,
future events, or otherwise.
About Paysign, Inc.
Paysign, Inc., (NASDAQ: PAYS), is an experienced and trusted
prepaid debit card payment solutions provider as well as an
integrated payment processor that has managed millions of prepaid
debit cards in its portfolio. Paysign conceptualizes, develops and
manages payment solutions, prepaid card programs, and customized
payment services. Paysign’s corporate incentive prepaid cards are
changing the way corporations reward, motivate, and engage their
current and potential customers, employees, and agents. Paysign’s
customizable solutions offer significant cost savings while
improving brand recognition and customer loyalty. For over 15 years
healthcare companies, major pharmaceutical companies,
multinationals, prestigious universities, and social media
companies have relied on Paysign to provide state-of-the-art
prepaid payment programs tailored to their unique requirements.
Paysign® is a registered trademark of Paysign, Inc. in the United
States and other countries. For more information visit us at
paysign.com or follow us
on LinkedIn, Twitter and Facebook.
PAYSIGN, INC. CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited) Quarter EndedSeptember 30,
Nine Months EndedSeptember 30,
2020
2019
2020
2019
Revenue Plasma industry
$
5,186,566
$
6,937,066
$
17,102,415
$
19,364,298
Pharma industry
(5,383,887
)
2,071,051
(594,945
)
5,537,380
Other
44,780
-
359,527
-
Total revenues
(152,541
)
9,008,117
16,866,997
24,901,678
Cost of revenues
3,281,888
3,641,595
11,275,758
10,721,769
Gross profit (loss)
(3,434,429
)
5,366,522
5,591,239
14,179,909
Operating expenses Selling, general and administrative
4,070,211
2,765,961
11,299,036
8,483,882
Impairment of intangible asset
382,414
-
382,414
-
Loss on abandonment of assets
-
-
42,898
-
Depreciation and amortization
537,792
318,508
1,546,645
1,047,779
Total operating expenses
4,990,417
3,084,469
13,270,993
9,531,661
Income (loss) from operations
(8,424,846
)
2,282,053
(7,679,754
)
4,648,248
Other income Interest income
12,184
113,667
77,475
364,652
Income (loss) before income tax benefit
(8,412,662
)
2,395,720
(7,602,279
)
5,012,900
Income tax benefit
(2,260,527
)
(563,854
)
(2,771,875
)
(556,068
)
Net income (loss) before noncontrolling interest
(6,152,135
)
2,959,574
(4,830,404
)
5,568,968
Net loss attributable to noncontrolling interest
-
504
-
1,572
Net income (loss) attributable to Paysign, Inc.
$
(6,152,135
)
$
2,960,078
$
(4,830,404
)
$
5,570,540
Net income (loss) per share Basic
$
(0.12
)
$
0.06
$
(0.10
)
$
0.12
Diluted
$
(0.12
)
$
0.05
$
(0.10
)
$
0.10
Weighted average common shares Basic
49,433,473
47,371,083
49,055,492
47,215,625
Diluted
49,433,473
54,291,368
49,055,492
54,588,470
PAYSIGN, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2020
2019
(Unaudited)
(Audited)
ASSETS Current assets Cash
$
7,497,579
$
9,663,746
Restricted cash
48,014,599
35,908,559
Accounts receivable
792,143
891,936
Prepaid expenses and other current assets
1,306,433
1,413,208
Total current assets
57,610,754
47,877,449
Fixed assets, net
1,679,839
937,185
Intangible assets, net
3,658,809
3,816,232
Operating lease right-of-use asset
4,430,385
-
Deferred tax assets
3,677,706
917,480
Total assets
$
71,057,493
$
53,548,346
LIABILITIES AND EQUITY Current liabilities Accounts
payable and accrued liabilities
$
1,941,082
$
1,523,604
Operating lease, current portion
315,874
-
Customer card funding
48,014,599
32,723,227
Total current liabilities
50,271,555
34,246,831
Operating lease liability, long term portion
4,095,565
-
Total liabilities
54,367,120
34,246,831
Stockholders' equity Common stock: $0.001 par value;
150,000,000 shares authorized, 49,888,907 and 48,577,712 issued at
September 30, 2020 and December 31, 2019, respectively
49,889
48,578
Additional paid-in-capital
13,532,403
11,577,539
Treasury stock at cost, 303,450 shares
(150,000
)
(150,000
)
Retained earnings
3,258,081
8,088,485
Total Paysign, Inc. stockholders' equity
16,690,373
19,564,602
Noncontrolling interest
-
(263,087
)
Total equity
16,690,373
19,301,515
Total liabilities and equity
$
71,057,493
$
53,548,346
Paysign, Inc. Non-GAAP Measures
To supplement Paysign’s financial results presented on a GAAP
basis, we use non-GAAP measures that exclude from net income the
following cash and non-cash items: interest, taxes, amortization
and depreciation, stock-based compensation, impairment of
intangible asset, change in accounting estimate, and loss on
abandonment of assets. We believe these non-GAAP measures help
investors better evaluate our past financial performance and
potential future results. Non-GAAP measures should not be
considered in isolation or as a substitute for comparable GAAP
accounting, and investors should read them in conjunction with the
company’s financial statements prepared in accordance with GAAP.
The non-GAAP measures of net income we use may be different from,
and not directly comparable to, similarly titled measures used by
other companies.
“EBITDA” is defined as earnings before interest, taxes,
depreciation and amortization expense. “Adjusted EBITDA” reflects
the adjustment to EBITDA to exclude stock-based compensation
charges, loss on abandonment of assets and impairment of intangible
asset.
Adjusted EBITDA is not intended to represent cash flows from
operations, operating income (loss) or net income (loss) as defined
by U.S. GAAP as indicators of operating performances. Management
cautions that amounts presented in accordance with Paysign’s
definition of Adjusted EBITDA may not be comparable to similar
measures disclosed by other companies because not all companies
calculate Adjusted EBITDA in the same manner.
PAYSIGN, INC. RECONCILIATION OF ADJUSTED EBITDA TO NET
INCOME (LOSS) (Unaudited) Quarter EndedSeptember 30,
Nine Months EndedSeptember 30,
2020
2019
2020
2019
Net income (loss) attributable to Paysign, Inc.
$
(6,152,135
)
$
2,960,078
$
(4,830,404
)
$
5,570,540
Income tax benefit
(2,260,527
)
(563,854
)
(2,771,875
)
(556,068
)
Interest income
(12,184
)
(113,667
)
(77,475
)
(364,652
)
Depreciation and amortization
537,792
318,508
1,546,645
1,047,779
EBITDA
(7,887,054
)
2,601,065
(6,133,109
)
5,697,599
Impairment of intangible asset
382,414
-
382,414
-
Loss on disposal of assets
-
-
42,898
-
Stock-based compensation
798,849
651,267
2,123,807
1,865,887
Adjusted EBITDA
$
(6,705,791
)
$
3,252,332
$
(3,583,990
)
$
7,563,486
Non-GAAP EPS - basic
$
(0.14
)
$
0.07
$
(0.07
)
$
0.16
Non-GAAP EPS - diluted
$
(0.14
)
$
0.06
$
(0.07
)
$
0.14
Weighted average common shares Basic
49,433,473
47,371,083
49,055,492
47,215,625
Diluted
49,433,473
54,291,368
49,055,492
54,588,470
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201117006243/en/
Investor Relations: Jim McCroy ir@paysign.com 702.749.7269
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