Paysign, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022; filed November 9, 2022. Paysign provides prepaid card programs, payment processing, patient affordability and related services. Plasma programs were the main revenue driver.
Financial performance
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $10.60 million | $7.77 million | $27.42 million | $20.70 million |
| Gross profit / margin | $5.75 million / 54.3% | $3.97 million / 51.1% | $15.44 million / 56.3% | $9.95 million / 48.1% |
| Operating income (loss) | $623,008 | $(277,125) | $29,829 | $(2.84) million |
| Net income (loss) | $852,109 | $(271,006) | $314,680 | $(2.83) million |
| Adjusted EBITDA (non-GAAP) | $1.93 million | $954,790 | $3.79 million | $776,750 |
Q3 revenue increased 36.4% year over year, led by plasma revenue growth of 39.7%; pharma revenue rose 5.0%. For the nine-month period, revenue grew 32.5%, with plasma up 36.3% and pharma up 4.1%; other revenue declined 24.0%. Q3 net margin was 8.0%, versus (3.5%) a year earlier; nine-month net margin was 1.1%, versus (13.7%).
Gross dollar volume loaded onto cards was $462 million in Q3 2022 versus $293 million in Q3 2021, and $1.16 billion for the first nine months versus $839 million. Revenue conversion on card loads was lower in Q3 (2.29% versus 2.65%) and for the nine-month period (2.36% versus 2.47%).
Cash flow, balance sheet and liquidity
- Nine-month operating cash flow was $30.95 million, compared with $16.03 million in 2021. The increase was substantially influenced by a $27.78 million increase in customer card funding, which represents funds loaded or available to be loaded onto customer cards.
- Investing cash outflow was $2.58 million, including $2.51 million capitalized for internally developed software. Financing cash flow was zero.
- At September 30, cash was $7.98 million and restricted cash was $89.06 million. Restricted cash is contractually limited to card programs and is matched by a $89.06 million customer card funding liability; it is not general-purpose liquidity.
- Total assets were $114.36 million, total liabilities $99.44 million and stockholders’ equity $14.93 million. Liabilities included $3.76 million of operating lease obligations. The filing reports no borrowings or other debt.
- Management said available unrestricted cash and forecast revenue and cash flows were expected to support operations for the next 12 months.
Changes, outlook and risks
- Results improved substantially from 2021 losses, reflecting higher plasma-center activity and card loads, improved gross margin, and higher interest income. SG&A rose 21.2% in both the quarter and nine-month comparison, principally due to hiring, compensation and benefits, and other growth-related costs.
- Management attributed improved plasma activity to easing pandemic restrictions, more plasma centers and donations, and a September 2022 preliminary injunction against enforcement of the ban on Mexican nationals donating plasma. Management remained cautiously optimistic but said COVID-19 developments and their financial effects could not be estimated reliably.
- The company expanded its prepaid offerings to include payroll cards in Q3 and planned continued investment in technology, sales and marketing, fraud and disputes, customer service, and regulatory compliance. No specific revenue or earnings guidance was provided.
- The securities class action and two related shareholder derivative actions remained unresolved; the company said it could not meaningfully estimate outcome or damages. The derivative cases were stayed pending a ruling on the class-action motion to dismiss.
- Two pharma customers represented 44% and 14% of accounts receivable at quarter-end. Cash balances also exceeded federal insurance limits by approximately $42.6 million. The company reported disclosure controls were effective and no material quarterly change in internal control over financial reporting.
Key facts for investors to verify
- Whether higher plasma-center activity and card loads persist, and how they translate into revenue and margins.
- How much operating cash flow is generated from underlying operations versus changes in customer card funding and other working-capital items.
- Availability and use restrictions on cash, customer card funding requirements, and the effect of customer and bank-account concentration.
- Developments and potential financial exposure in the securities and derivative litigation.
- Progress and costs associated with new programs, platform investment, and planned expansion, given the absence of quantified company guidance.