Paysign, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparative period is Q1 2022. Paysign provides prepaid card programs, payment processing, patient affordability and related services. The filing is unaudited.
Financial performance
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $10.14 million | $8.22 million | +23.4% |
| Gross profit / margin | $5.05 million / 49.8% | $5.00 million / 60.8% | Profit +1.0%; margin down 11.0 percentage points |
| Operating loss | $0.74 million | $0.32 million | Loss increased $0.42 million |
| Net loss | $0.16 million | $0.31 million | Loss narrowed $0.15 million |
| Adjusted EBITDA (non-GAAP) | $0.72 million | $0.93 million | Down $0.21 million |
| Cash from operating activities | $3.23 million | $5.14 million | Down $1.91 million |
- Plasma revenue rose 26.6% to $9.36 million, driven by more plasma centers and donations, increased card loads and related fees. Pharma revenue fell 26.9% to $0.59 million, mainly reflecting the end of certain prepaid programs, partly offset by new copay programs. Other revenue increased to $0.19 million, largely from new payroll and retail programs.
- Cost of revenue grew 58.1%, outpacing revenue growth. Management cited higher card usage and production-related costs, Pharma network expenses, a new direct Mastercard connection, provider price increases and customer-service costs. SG&A rose 6.6%; depreciation and amortization rose 24.4%.
- Interest income, net was $0.58 million versus $0.01 million in Q1 2022, primarily reflecting higher rates and bank balances. This helped reduce the net loss despite a larger operating loss. Basic and diluted loss per share was reported as $0.00, rounded.
Financial position and liquidity
- At March 31, 2023, cash was $6.40 million and restricted cash was $84.40 million. Restricted cash is contractually designated for card and Pharma programs and should not be treated as unrestricted operating liquidity.
- Total assets were $115.37 million; total liabilities were $99.29 million; stockholders’ equity was $16.09 million. The filing reports no borrowings; liabilities included operating lease obligations of $3.58 million and customer card funding of $84.40 million, substantially matched by restricted cash.
- Operating cash flow was positive, but lower year over year, primarily due to increased accounts receivable and prepaid assets; higher accounts payable and customer card funding partly offset those uses. Investing outflow was $1.66 million, including $1.61 million capitalized software development. Financing outflow was $0.67 million for share repurchases.
- Management said unrestricted cash, together with forecast revenue and cash flows, was expected to support operations for the next 18 months. The company said it financed operations with internally generated funds.
Developments, outlook and risks
- Gross dollar volume loaded on cards increased to $379 million from $324 million. Revenue conversion improved to 2.68% from 2.54%, while gross-profit conversion declined to 1.33% from 1.54%.
- Management plans continued investment in technology, sales and marketing, customer service and regulatory compliance in 2023. It stated that new capital could support expansion into new verticals, while believing internally generated funds could also support expansion. No specific revenue or earnings guidance was provided.
- Management described plasma donation activity and results as improving, citing increased donation activity, including from Mexican nationals following a 2022 preliminary injunction, and higher donation loads. It cautioned that COVID-19 variants and related uncertainty could still affect operations; labor shortages and other donation restrictions have also affected historical results.
- Cash and restricted cash are concentrated primarily at one U.S. financial institution; approximately $41.97 million exceeded federally insured limits at quarter end. Two Pharma customers represented 23% and 27% of accounts receivable, creating customer concentration exposure.
- A securities class action concerning alleged statements about financial reporting and internal controls had a motion to dismiss granted in part and denied in part in February 2023. Two related stockholder derivative cases were stayed. Paysign said it could not meaningfully estimate outcomes or damages.
- The company repurchased 200,000 shares for $0.67 million, or $3.33 per share, under a board-authorized program of up to $5 million. It reported effective disclosure controls as of March 31, 2023 and no material change in internal control over financial reporting during the quarter.
Investor verification points
- Track whether plasma donation volumes and Plasma revenue growth persist, and whether Pharma program launches offset discontinued programs.
- Assess the drivers of gross-margin compression and whether cost growth moderates as revenue expands.
- Monitor receivable collection, Pharma customer concentration and operating cash conversion.
- Distinguish restricted program funds from cash available for corporate operations; review bank concentration and uninsured deposits.
- Follow developments in the securities and derivative litigation, including any potential financial exposure.
- Review subsequent filings for execution of the stated investment plans, liquidity outlook and share repurchase authorization.