Paysign, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; comparisons are with FY2021. This is an annual filing, not a standalone fourth-quarter report.
Business context
Paysign provides prepaid card programs, payment processing, patient affordability services and digital banking products for corporate, consumer and government applications. It relies on issuing-bank partners for its cards. At year-end, the company reported approximately 5.3 million cardholders across 550 programs and said it served approximately 40% of U.S. plasma collection centers.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $38.03 million | $29.46 million |
| Gross profit / margin | $20.95 million / 55.1% | $14.71 million / 49.9% |
| Operating income (loss) | $0.34 million | $(2.74) million |
| Net income (loss) | $1.03 million | $(2.72) million |
| Net margin | 2.7% | (9.2)% |
| Operating cash flow | $25.32 million | $15.23 million |
| Investing cash flow | $(4.09) million | $(2.68) million |
| Financing cash flow | $0 | $0.19 million |
| Adjusted EBITDA (non-GAAP) | $5.53 million | $2.04 million |
Revenue grew 29.1%. Plasma revenue rose 34.0% to $34.74 million; Pharma revenue fell 10.6% to $3.01 million; Other revenue increased to $0.29 million. Basic and diluted earnings per share were $0.02, compared with a $0.05 loss per share in 2021.
At December 31, 2022, cash was $9.71 million and restricted cash was $80.19 million. Restricted cash is held for card programs and is matched by a $80.19 million customer card funding liability; it is not freely available for general corporate use. Total liabilities were $91.95 million, including the customer funding liability and $3.67 million of operating lease liabilities. The filing reports no debt borrowings. Management said unrestricted cash, anticipated revenue, operating profits and free cash flow were expected to sustain operations for the next 21 months.
Material changes and management commentary
- Plasma growth reflected more locations and donations, increased card loads, inflation-related demand for supplemental income, and renewed participation by Mexican nationals at border-area centers following a September 2022 preliminary injunction.
- Pharma revenue declined as prepaid contracts ended, partly offset by new copay programs. Pharma prepaid revenue was $1.53 million versus $2.75 million in 2021, while Pharma copay revenue rose to $1.48 million from $0.61 million.
- Gross margin improved by 5.2 percentage points, largely from operating leverage in Plasma, partly offset by a shift toward lower-margin Pharma copay programs and newly launched Other programs that had not yet matured.
- Operating cash flow increased, but included an $18.91 million increase in customer card funding. Investing outflows rose mainly because capitalized internally developed software increased to $3.80 million.
- Gross dollar volume loaded onto cards increased to $1.595 billion from $1.066 billion. Revenue conversion declined to 2.38% from 2.76%; gross-profit conversion was 1.31% versus 1.38%.
- The company added payroll cards in Q3 2022 and retail disbursement and prepaid gift-card products in Q4. For 2023, management planned further investment in technology, sales and marketing, customer service and regulatory compliance, and anticipated expanding into new verticals.
Risks, contingencies and unusual items
- COVID-19-related disruptions, plasma-center labor constraints and uncertainty around future variants could affect plasma donations and results. Management reported improving donation activity but said it could not reliably estimate future pandemic effects.
- The business depends on issuing-bank relationships, card networks and third-party service providers. Regulatory change, interchange-rate reductions, competition, cybersecurity incidents and processing interruptions could raise costs or impair growth.
- A securities class action concerning alleged disclosures about internal controls and financial statements survived in part a motion to dismiss in February 2023. Two related derivative actions were stayed. Paysign said it could not meaningfully estimate likely outcomes or damages.
- Management concluded that disclosure controls and internal control over financial reporting were effective as of year-end 2022. The company’s auditor was not engaged to audit internal controls; no auditor attestation was included.
- The company recorded $459,755 of employee retention credit in 2022 as a reduction of payroll expense and reported $1.30 million of related refunds in other receivables. It maintained a full valuation allowance against deferred tax assets.
- Two Pharma programs represented 35% and 24% of accounts receivable at year-end; both balances were current. Approximately $43.52 million of cash and restricted cash was above federally insured limits.
Important facts for investors to verify
- Whether Plasma donation volumes and card loads continue to support growth, and how exposed results remain to pandemic, labor and border-policy developments.
- Whether Pharma contract transitions and newer copay, payroll, retail-disbursement and gift-card programs can sustain revenue and margins as they scale.
- How much operating cash flow is attributable to operating performance versus changes in customer card funding and related working-capital balances.
- Whether unrestricted liquidity and management’s stated 21-month runway remain adequate after planned investment and contractual obligations.
- Developments in the securities and derivative litigation, including any potential financial or operational consequences.
- Progress in maintaining effective financial-reporting controls and managing bank, vendor, cybersecurity and regulatory dependencies.