Paysign, Inc. — FY2023 Form 10-K
Business context and reporting period. Paysign provides prepaid card programs, payment processing, patient affordability services and related digital banking products. This annual report covers the fiscal year ended December 31, 2023, with comparisons to FY2022; it does not provide standalone fourth-quarter results. At year-end, Paysign managed approximately 600 programs serving 6.4 million cardholders. Its cards are issued through bank partners.
Key financial metrics
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Revenue | $47.27 million | $38.03 million | Up 24.3% |
| Gross profit | $24.14 million | $20.95 million | Up 15.2% |
| Gross margin | 51.1% | 55.1% | Down 4.0 percentage points |
| Operating income (loss) | $(0.17) million | $0.34 million | Declined $0.51 million |
| Net income | $6.46 million | $1.03 million | Up $5.43 million |
| Diluted EPS | $0.12 | $0.02 | |
| Adjusted EBITDA | $6.71 million | $5.53 million | Up 21.4% |
| Net cash from operating activities | $27.62 million | $25.32 million |
Revenue mix: Plasma revenue was $41.95 million, up 20.8%; Pharma revenue was $4.05 million, up 34.7%; and Other revenue was $1.27 million, up 340.1% from a smaller base. Plasma generated about 89% of total revenue.
Cash, liquidity and obligations: Year-end unrestricted cash was $16.99 million, up from $9.71 million. Restricted cash was $92.36 million, largely associated with customer card funding, with a corresponding $92.28 million customer card funding liability. Total assets were $146.60 million and total liabilities $122.11 million. The filing reports no borrowings; operating lease liabilities totaled $3.31 million. Operating cash flow exceeded investing outflows of $7.05 million and financing outflows of $1.12 million. Management said unrestricted cash, anticipated revenues, operating profits and free cash flow were expected to support operations for the next 21 months.
Material changes and management commentary
- Revenue growth reflected increased plasma centers, donations and card loads; new pharma patient affordability programs; and expansion in payroll, retail and corporate incentives. Paysign added 20 net new plasma programs and launched 24 net new pharma programs.
- Costs grew faster than revenue: cost of revenues rose 35.5%, while operating expenses rose 17.9%. Higher card usage, network and ATM charges, card production, pharma commissions, customer-service costs, hiring and software amortization contributed. Gross margin contracted, and the company moved from operating income to a small operating loss.
- Net income included a $4.09 million income tax benefit, primarily from releasing $4.59 million of valuation allowance on deferred tax assets. The benefit was non-operating and materially lifted reported earnings. Interest income increased to $2.53 million from $0.79 million, reflecting higher rates and average bank balances.
- Investing outflows mainly funded internally developed software; capitalization of software costs was $6.79 million. The company repurchased 394,558 shares for $1.13 million during 2023, with $3.87 million remaining under its $5 million authorization at year-end.
- For 2024, Paysign plans further investment in technology, sales and marketing, fraud prevention, customer service and regulatory compliance. It says it may evaluate raising capital for expansion, but believes internal funds can support existing operations and expansion into new verticals. No quantitative revenue or earnings guidance is provided.
Risks, contingencies and unusual items
- Litigation: A securities class action settlement of $3.75 million received preliminary court approval in January 2024; the company said the full amount was covered by D&O insurance. Four shareholder derivative actions remained pending or stayed, with no meaningful estimate of outcome or damages.
- Bank and cash concentration: Paysign depends on issuing-bank relationships and held approximately $59.96 million above FDIC-insured limits at year-end, primarily at one financial institution. In February 2024 it began a deposit-swapping program intended to provide FDIC insurance on deposits above the standard limit.
- Receivables concentration: Two pharma customers represented 30% and 12% of accounts receivable, respectively, at year-end.
- Operational and regulatory exposure: Key risks include cybersecurity and service interruptions, data privacy, compliance and card-network rules, competition, interchange-rate changes, and dependence on third-party vendors and bank issuers. Management reported no cybersecurity threat or incident that had materially affected the company to date.
- Controls: Management concluded disclosure controls and internal control over financial reporting were effective at December 31, 2023. The independent auditor audited the financial statements but was not engaged to opine on internal-control effectiveness.
Important facts for investors to verify
- Whether the strong reported net income is sustainable apart from the valuation-allowance release and higher interest income; compare operating performance and cash generation with GAAP earnings.
- Whether revenue growth can continue while recovering the 4.0-point gross-margin decline and controlling higher operating costs.
- How plasma concentration, pharma-customer receivables and new-program ramp-up affect revenue quality and working capital.
- Whether the deposit-swapping arrangement adequately reduces uninsured cash exposure, and how much cash is genuinely available after excluding restricted customer funds.
- Final resolution and insurance coverage of the securities settlement, plus the status and potential exposure of derivative litigation.
- Progress on planned 2024 investments, software capitalization and the stated 21-month liquidity outlook.