Paysign, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; filed May 12, 2022. Paysign provides prepaid card programs, payment processing and related services, with significant activity in plasma and pharmaceutical programs.
Financial performance
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $8.22 million | $6.28 million |
| Gross profit / margin | $5.00 million / 60.8% | $2.83 million / 45.1% |
| Operating loss | $0.32 million | $1.63 million |
| Net loss | $0.31 million; $(0.01) per share | $1.62 million; $(0.03) per share |
| Adjusted EBITDA (non-GAAP) | $0.93 million | $(0.40) million |
| Operating cash flow | $5.14 million | $9.90 million |
| Investing cash flow | $(0.67) million | $(0.61) million |
Revenue increased 30.9% year over year, driven principally by plasma revenue, up 37.4% to $7.39 million. Pharma revenue declined 8.6% to $0.81 million. SG&A rose 20.1% to $4.64 million; total operating expenses increased 19.3% to $5.32 million. Plasma growth, lower cost of revenues and operating leverage lifted gross margin. The company reported $324 million of gross dollar volume loaded on cards, up 16.1% from $278.6 million.
Balance sheet and liquidity
At March 31, 2022, cash was $8.46 million and restricted cash was $64.68 million, versus $7.39 million and $61.28 million, respectively, at year-end 2021. Restricted cash is contractually dedicated to card programs and is matched by a $64.68 million customer card funding liability; it is not general-purpose liquidity. Total assets were $88.81 million, total liabilities $75.56 million and stockholders’ equity $13.25 million. The filing reports no borrowings; lease liabilities totaled $3.93 million, including $0.35 million current and $3.58 million long term.
Cash and restricted cash increased $4.46 million during the quarter. Operating cash flow was lower than a year earlier, partly because of changes in operating balances, including a smaller increase in customer card funding and the prior-year comparison involving Pharma program funds. Investing outflows included $0.64 million of capitalized internally developed software. Management said $8.46 million of unrestricted cash, together with forecast revenue and cash flows, should support operations for the next 12 months.
Management commentary, outlook and risks
- Management plans continued investment in technology, sales and marketing, customer service and regulatory compliance during 2022. It provided no quantified earnings or revenue guidance.
- COVID-19 effects remained uncertain. Plasma center closures, labor shortages, border restrictions and reduced donation incentives had weighed on results; management said operations had improved in aggregate but could not estimate when per-center activity would return to pre-pandemic levels.
- SG&A included a $354,000 increase in legal settlements versus the prior-year quarter. Other notable year-over-year changes included higher insurance, technology and telecom, travel and other operating costs.
- The company disclosed 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; the company could not meaningfully estimate the outcome or damages. Derivative litigation was also disclosed, including a new action filed May 9, 2022, not yet served as of the filing.
- Two Pharma customers represented 51% and 15% of accounts receivable at quarter-end. Approximately $29.2 million of cash and restricted cash exceeded federal deposit insurance limits. Management maintained a full valuation allowance against deferred tax assets.
- The company reported effective disclosure controls as of March 31, 2022 and no material changes in internal control over financial reporting during the quarter. It said there were no material changes to the risk factors in its 2021 Form 10-K.
Most important facts for investors to verify
- Whether plasma donation activity and related card loads continue to recover, and how dependent growth remains on that segment.
- Whether gross-margin improvement and positive Adjusted EBITDA are sustainable; Adjusted EBITDA is non-GAAP and should be considered alongside GAAP results and cash flows.
- How operating cash flow develops after accounting for changes in customer funding, payables and other working-capital balances.
- Availability of unrestricted cash after planned investment, and the distinction between that cash and restricted program funds.
- Developments and potential financial exposure from the securities and derivative lawsuits, for which the filing provides no clear estimate of damages.
- Concentration of Pharma receivables and bank deposits above insured limits, as well as ongoing COVID-19 and plasma-industry operating risks.