Paysign, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Paysign provides prepaid card programs, patient affordability services, digital banking and payment processing.
Financial results
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $7.77 million | $(0.15) million | $20.70 million | $16.87 million |
| Gross profit (margin) | $3.97 million (51.1%) | $(3.43) million | $9.95 million (48.1%) | $5.59 million (33.1%) |
| Operating loss | $(0.28) million | $(8.42) million | $(2.84) million | $(7.68) million |
| Net loss | $(0.27) million | $(6.15) million | $(2.83) million | $(4.83) million |
| Net loss per share | $(0.01) | $(0.12) | $(0.06) | $(0.10) |
- Q3 revenue rose $7.92 million year over year, but the comparison is distorted by negative Pharma revenue in Q3 2020; the filing’s reported percentage comparison is not meaningful. Plasma revenue increased 35.6% to $7.04 million, while Pharma revenue was $0.66 million versus $(5.38) million. Management attributes improvement to higher plasma donations and card loads, Pharma settlement-income accounting, and seven new Pharma programs launched in 2021.
- Nine-month revenue grew 22.7%. Plasma revenue increased 7.4% to $18.37 million and Pharma revenue increased to $2.18 million from negative $0.59 million; Other revenue declined 58.9% to $0.15 million.
- Nine-month gross margin expanded to 48.1% from 33.1%, reflecting higher revenue and operating leverage. SG&A declined 3.0% to $10.96 million, while depreciation and amortization increased 18.9% to $1.84 million.
- Adjusted EBITDA, a non-GAAP measure, was $0.95 million for Q3 and $0.78 million for the first nine months, compared with losses of $6.71 million and $3.58 million, respectively, in 2020.
Cash, liquidity and obligations
- At September 30, cash was $6.93 million and restricted cash was $63.26 million, for combined cash and restricted cash of $70.19 million. Restricted cash is held for card programs and is not freely available for general use.
- Nine-month operating cash flow was $16.03 million, investing cash outflow was $1.97 million, and financing cash inflow was $0.19 million. Operating cash flow included a $15.16 million increase in customer card funding liability, which is matched by restricted funds; it should not be viewed as equivalent to unrestricted operating liquidity.
- Customer card funding liability was $63.26 million, equal to restricted cash. The filing reports no conventional borrowings; operating lease liabilities totaled $4.10 million, including $0.34 million current.
- Management stated that available cash excluding restricted cash, together with forecast revenue and cash flows, should fund operations for the next 12 months.
Outlook, risks and unusual items
- No numerical revenue or earnings guidance was provided. Management said operating results had improved and it remained cautiously optimistic, but it could not estimate when the business would return to pre-pandemic operating levels.
- COVID-19 effects—including plasma-center labor shortages, border closures and the earlier impact of center closures and stimulus payments on donation incentives—continued to weigh on results. Management could not reasonably estimate the pandemic’s further financial impact.
- Pharma settlement income is recognized when cards and programs expire under the company’s stated approach. The prior-period negative Pharma revenue makes year-over-year comparisons especially difficult to interpret.
- The company faces a securities class action alleging misleading statements or omissions concerning internal controls and financial statements; a motion to dismiss was fully briefed, with no hearing date set. A related stockholder derivative action was stayed pending the class-action motion ruling. The company said it could not meaningfully estimate outcomes or damages.
- Management concluded disclosure controls were effective as of September 30, 2021 and reported no material changes in internal control during the quarter. The filing said there were no material changes to the risk factors in the 2020 Form 10-K.
Investor verification priorities
- Review the Pharma settlement-income accounting and the cause of the negative Q3 2020 Pharma revenue before interpreting reported growth.
- Separate restricted card-program funds and customer card funding liabilities from cash available for corporate operations; assess the basis for management’s 12-month liquidity assertion.
- Track plasma donation volumes, card loads, COVID-related operating constraints and progress of the seven new Pharma programs.
- Monitor developments in the securities class action and derivative litigation, including potential financial exposure.
- Consider ongoing net losses, stock-based compensation, and dilution: weighted-average shares increased year over year, and potential options and restricted awards were excluded from diluted EPS as anti-dilutive.