Paysign, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Paysign provides prepaid card programs, payment processing, digital banking and patient affordability solutions, with revenue primarily from plasma, pharma and other card programs.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $13.19 million | $10.14 million | +30.0% |
| Gross profit / margin | $6.94 million / 52.6% | $5.05 million / 49.8% | Margin +2.8 percentage points |
| Operating loss | $0.26 million | $0.74 million | Loss narrowed $0.48 million |
| Net income (loss) | $0.31 million | ($0.16 million) | Improved $0.47 million |
| Diluted EPS | $0.01 | ($0.00) | Turned positive |
| Operating cash flow | $8.24 million | $3.23 million | +$5.01 million |
| Adjusted EBITDA (non-GAAP) | $1.69 million | $0.72 million | +$0.97 million |
- Plasma revenue rose 10.8% to $10.37 million, attributed to more plasma centers and donations and higher card loads and usage. Pharma revenue rose 305.2% to $2.39 million, primarily from new patient affordability programs. Other revenue increased 123.8% to $0.43 million, reflecting payroll, retail and corporate incentive program growth.
- Gross profit growth outpaced revenue growth, supported by higher activity and the variable-cost structure of plasma programs. Cost of revenue increased 22.7%; SG&A increased 19.5%, and depreciation and amortization increased 52.2%, including costs associated with platform investment.
- Interest income, net, was $0.73 million, up from $0.58 million, reflecting higher interest rates and average bank balances. Income tax expense was $0.16 million, with a 34.7% effective rate.
- Gross dollar volume loaded on cards was $426 million versus $379 million. Revenue conversion rose to 3.09% from 2.68%; gross-profit conversion increased to 1.63% from 1.33%.
Financial position and liquidity
- At March 31, 2024, cash was $7.01 million and restricted cash was $108.31 million, compared with $17.00 million and $92.36 million, respectively, at December 31, 2023. Restricted cash is contractually designated for card and pharma programs and is not ordinary unrestricted liquidity.
- Accounts receivable increased to $35.47 million from $16.22 million. Customer card funding, a liability associated with funds loaded or available to be loaded to cards, increased to $108.18 million from $92.28 million.
- Total liabilities were $147.53 million, including $108.18 million of customer card funding, $36.13 million of accounts payable and accrued liabilities, and $3.22 million of operating lease liabilities. The filing reports no borrowing debt.
- Operating cash flow included substantial working-capital movements: receivables used $19.25 million, while accounts payable and accrued liabilities provided $9.62 million and customer card funding provided $15.90 million. Investing used $2.27 million, primarily for internally developed software. Cash and restricted cash increased $5.97 million.
- Management said unrestricted cash, together with forecast revenues and cash flows, is expected to support operations for the next 24 months, through the first quarter of 2026. No specific revenue or earnings guidance was provided.
Outlook, risks and unusual items
- Management plans continued investment in technology, sales and marketing, cybersecurity, fraud prevention, customer service and regulatory compliance. It may consider raising capital to diversify into new verticals, but says existing funds and internally generated cash should support current operations and expansion.
- Management cited growth in plasma demand and new pharma affordability programs as revenue drivers, while noting cost pressures from service providers, customer-service wage inflation, network activity and fraud charges.
- One pharma program customer represented 22% of accounts receivable at quarter-end. Paysign also disclosed cash concentration at a financial institution; it began a reciprocal deposit program in February 2024 to provide FDIC coverage for deposits above standard limits.
- The securities class action settlement was preliminarily approved for $3.75 million, funded entirely by the company’s directors-and-officers insurance. The court approved the settlement after quarter-end, on April 17, 2024, and entered final judgment April 18. Four derivative actions remained pending; the company said it could not meaningfully estimate their outcome or damages.
- Management stated disclosure controls were effective at March 31, 2024, with no material changes in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether the strong revenue growth, particularly in pharma affordability programs, continues and translates into operating profitability.
- Whether receivables are collected on schedule: accounts receivable rose sharply, and operating cash flow depended in part on changes in payables and customer card funding.
- How much reported cash is genuinely available for corporate use, given that most cash and restricted cash supports card programs.
- Progress and potential exposure from the four derivative actions, notwithstanding the insurance-funded resolution of the securities class action.
- Execution and returns on software-platform investment, as capitalized development spending and amortization increased.