Paysign, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; filed May 12, 2021. Paysign provides prepaid card products and processing and program-management services, principally for plasma and pharmaceutical programs, as well as corporate, consumer, and government applications.
Financial performance
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $6.28 million | $10.58 million |
| Gross profit / gross margin | $2.83 million / 45.1% | $5.72 million / 54.1% |
| Operating income (loss) | $(1.63) million | $1.39 million |
| Net income (loss) | $(1.62) million; $(0.03) per diluted share | $1.54 million; $0.03 per diluted share |
| Adjusted EBITDA (non-GAAP) | $(0.40) million | $2.62 million |
| Operating cash flow | $9.90 million | $10.75 million |
| Investing cash flow | $(0.61) million | $(1.50) million |
- Revenue fell 40.6% year over year: plasma revenue declined 26.7% to $5.38 million, pharma revenue declined 70.8% to $0.88 million, and other revenue was $0.01 million.
- Gross profit decreased 50.5%; gross margin contracted 9.0 percentage points. Selling, general and administrative expense was nearly flat at $3.86 million, while depreciation and amortization rose 18.6% to $0.60 million.
- Gross dollar volume loaded on cards was $277 million versus $326 million. Revenue conversion was 2.27% versus 3.24%; gross-profit conversion was 1.02% versus 1.75%.
Financial position and liquidity
- At March 31, 2021, cash was $6.56 million and restricted cash was $58.77 million, compared with $7.83 million and $48.10 million, respectively, at year-end 2020. Restricted cash is held for card programs and is contractually restricted.
- Total assets were $77.70 million and total liabilities were $65.34 million. Current liabilities included a $58.77 million customer card funding liability, which corresponds to the restricted card-program funds.
- The filing reports no material off-balance-sheet arrangements and no conventional borrowings. Operating lease liabilities totaled $4.26 million, including $0.33 million current and $3.93 million long-term.
- Operating cash flow included a $10.67 million increase in customer card funding, so reported cash generation should be considered alongside the related restricted funds and liability. Cash and restricted cash together increased $9.40 million.
- Management said unrestricted cash on hand, together with forecast revenue and cash flows, was expected to fund operations for at least the next 12 months. The company also planned continued spending on technology, sales and marketing, customer service, and regulatory compliance.
Changes, outlook, and risks
- Management attributed lower plasma revenue mainly to fewer donations, card loads, and cardholder fees amid COVID-19-related donation-center closures and mobility restrictions. Pharma revenue was affected by delayed medicines and reduced visits to pharmacies and doctors’ offices, as well as a change in settlement-income recognition.
- For pharma settlement income, Paysign began constraining revenue on programs in 2020 and recognizing unspent balances when cards and programs expire, rather than ratably over the program lifecycle. This contributed to the year-over-year pharma decline.
- Management said COVID-19 and related stimulus packages had adversely affected and could continue to affect results, but it could not reasonably estimate future effects on results, cash flows, or financial condition. The filing provides no numerical revenue or earnings guidance.
- The company disclosed a consolidated securities class action alleging misleading statements or omissions concerning internal controls and financial statements; defendants had moved to dismiss, and Paysign could not meaningfully estimate outcome or damages. A related shareholder derivative action was stayed pending a ruling on that motion.
- Management reported disclosure controls were effective as of March 31, 2021, with no material changes to internal control over financial reporting during the quarter. The filing reported no material changes to the risk factors in the 2020 Form 10-K.
Investor facts to verify
- Whether card loads, donation volumes, and plasma-program activity recovered after the COVID-related disruptions.
- The timing and amount of revenue recognition from pharma program balances under the expiration-based settlement-income method.
- Whether operating cash flow remains positive excluding movements in customer card funding and restricted cash.
- Unrestricted liquidity and the assumptions behind management’s 12-month funding assessment, particularly given the quarterly loss and planned investments.
- Developments in the securities litigation, potential costs, and any related changes to financial reporting or controls.