Paysign Inc

Previous wording

The increase in total revenues of $3,046,784 for the three months ended March 31, 2024 compared to the same period in the prior year consisted primarily of a $1,007,967 increase in Plasma revenue, a $1,799,085 increase in Pharma revenue, and a $239,735 increase in Other revenue. The increase in Plasma revenue was primarily due to a rise in the number of plasma centers and donations, and, consequently, dollars loaded to cards, cardholder fees, and interchange, as there continues to be an increase in demand for plasma which has been driven by global increases in plasma protein therapies. The increase in Pharma revenue was primarily due to the launch of new pharma patient affordability programs. The increase in Other revenue was primarily due to the growth of our payroll, retail, and corporate incentive programs.

Current wording

The increase in total revenues of $3,290,548 for the three months ended June 30, 2024 compared to the same period in the prior year consisted primarily of a $1,258,801 increase in plasma revenue, a $1,945,665 increase in pharma revenue, and a $86,082 increase in other revenue. The increase in plasma revenue was primarily due to the addition of 35 new plasma centers since June 30, 2023 and rise in the number of donations at existing plasma centers, and, consequently, dollars loaded to cards, cardholder fees, and interchange, as there continues to be an increase in demand for plasma driven by global increases in plasma protein therapies. The increase in pharma revenue was primarily due to the launch of 30 net new pharma patient affordability programs since June 30, 2023 and the subsequent growth in monthly management and setup fees, claim processing fees, and other billable services such as call center support. The increase in other revenue was primarily due to the growth and usage in the number of cardholders of our payroll, retail, and corporate incentive programs.

Previous wording

Cost of revenues for the three months ended March 31, 2024 increased $1,155,202 compared to the same period in the prior year. Cost of revenues is comprised of transaction processing fees, data connectivity and data center expenses, network fees, bank fees, card production and postage costs, customer service, program management, application integration setup, fraud charges, and sales and commission expense. Cost of revenues increased during the first quarter primarily due to an increase in cardholder usage activity and associated network expenses such as interchange and ATM costs, an increase in network expenses and sales commissions related to the growth in our pharma patient affordability business, an increase in fraud charges, postage, and an increase in customer service expenses associated with wage inflation pressures and the overall growth in our business, offset by a decline in plastics and collateral.

Current wording

Cost of revenues for the three months ended June 30, 2024 increased $1,320,525 compared to the same period in the prior year. Cost of revenues is comprised of transaction processing fees, data connectivity and data center expenses, network fees, bank fees, card production and postage costs, customer service, program management, application integration setup, fraud charges, and sales and commission expense. Cost of revenues increased during the second quarter primarily due to increases in cardholder usage activity and associated network expenses, such as interchange and ATM costs, network expenses and sales commissions related to the growth in our pharma patient affordability business, fraud charges, postage, and customer service expenses associated with wage inflation pressures and the overall growth in our business, offset by a decline in plastics and collateral.

Previous wording

Gross profit for the three months ended March 31, 2024 increased $1,891,582 compared to the same period in the prior year resulting primarily from the increase in Plasma revenue and the beneficial impact of a variable cost structure as many of the plasma transaction costs are variable in nature which are provided by third parties who charge us based on the number of active cards outstanding and the number of transactions that occurred during the period. Gross profit also benefited from the growth in our pharma patient affordability business. The increase in gross profit was offset by price increases by many of our third-party service providers, and an increase in customer service expenses mentioned above. The increase in gross margin resulted from the aforementioned factors.

Current wording

Gross profit for the three months ended June 30, 2024 increased $1,970,023 compared to the same period in the prior year, resulting primarily from the increase in plasma revenue and the beneficial impact of a variable cost structure, as many of the plasma transaction costs are variable in nature and are provided by third-parties who charge us based on the number of active cards outstanding and transactions that occurred during the period. Gross profit also benefited from the growth in our pharma patient affordability business. The increase in gross profit was offset by price increases from many of our third-party service providers, and an increase in customer service expenses mentioned above. The increase in gross margin resulted from the aforementioned factors.

Previous wording

Depreciation and amortization expense for the three months ended March 31, 2024 increased $441,389 compared to the same period in the prior year. The increase in depreciation and amortization expense was primarily due to continued capitalization of new software development costs and equipment purchases related to continued enhancements to our processing platform.

Current wording

Depreciation and amortization expense for the three months ended June 30, 2024 increased $481,621 compared to the same period in the prior year. The increase in depreciation and amortization expense was primarily due to continued capitalization of new software development costs and equipment purchases related to continued enhancements to our processing platform and employment growth.

Previous wording

Other income for the three months ended March 31, 2024, increased $147,147 primarily related to an increase in interest rates and the associated interest income received on higher average bank account balances at our sponsor bank.

Current wording

Other income for the three months ended June 30, 2024 increased $212,490 primarily related to an increase in interest rates and the associated interest income received on higher average bank account balances at our sponsor bank.

Previous wording

At March 31, 2024, our income tax expense was $163,896, which equates to an effective tax rate of 34.7%primarily as a result of tax benefits related to our stock-based compensation and changes to the Company’s valuation allowance recorded on its net deferred tax assets. We recorded an income tax expense of $1,530 for the three months ended March 31, 2023, which equates to an effective tax rate of (1.0%) primarily as a result of state taxes, a pretax loss and full valuation on our deferred tax asset.

Current wording

At June 30, 2024, our income tax expense was $241,932, which equates to an effective tax rate of 25.8%primarily as a result of tax benefits related to our stock-based compensation and changes to the Company’s valuation allowance recorded on its net deferred tax assets. We recorded an income tax expense of $58,137 for the three months ended June 30, 2023, which equates to an effective tax rate of (126.3%) primarily as a result of state taxes, a pretax loss, and full valuation on our deferred tax asset.

Previous wording

The net income for the three months ended March 31, 2024 was $309,096, an improvement of $469,226 compared to the net loss of $160,130 for the three months ended March 31, 2023. The overall change in net income relates to the aforementioned factors.

Current wording

The net income for the three months ended June 30, 2024 was $697,102, an improvement of $801,258 compared to the net loss of $104,156 for the three months ended June 30, 2023. The overall change in net income relates to the aforementioned factors.

Previous wording

Selling, general and administrative expenses for the three months ended March 31, 2024 increased $965,748 compared to the same period in the prior year and consisted primarily of an increase in (i) compensation and benefits of approximately $891,000 due to continued hiring to support the Company’s growth, a tight labor market and increased benefit costs; (ii) an increase in stock-based compensation expense of approximately $46,000; (iii) an increase in technologies and telecom of approximately $312,000; (iv) an increase in all other operating expenses of approximately $24,000. This increase was offset by a decrease in non-IT professional services of approximately $89,000, a $218,000 increase in the amount of capitalized platform development costs.

Current wording

Selling, general and administrative expenses for the six months ended June 30, 2024 increased $1,681,587 compared to the same period in the prior year and consisted primarily of an increase in (i) compensation and benefits of approximately $2,191,000 due to continued hiring to support the Company’s growth, a tight labor market, and increased benefit costs; (ii) technologies and telecom expense of approximately $684,000 primarily related to ongoing platform security investments; and (iii) all other operating expenses of approximately $38,000. This increase was offset by a decrease in non-IT professional audit and legal services of approximately $251,000, a decrease in stock compensation of approximately $115,000 and an $865,000 increase in the amount of capitalized platform development costs.

Previous wording

For the three months ended March 31, 2024, we recorded a loss from operations of $258,352 representing an improvement of $484,445 compared to loss from operations of $742,797 during the same period last year related to the aforementioned factors.

Current wording

For the six months ended June 30, 2024, we recorded a loss from operations of $132,675 representing an improvement of $1,257,008 compared to loss from operations of $1,389,683 during the same period in the prior year related to the aforementioned factors.

Previous wording

Gross Dollar Volume Loaded on Cards: Represents the total dollar volume of funds loaded to all of our prepaid card programs. Our gross dollar volume loaded on cards was $426 million and $379 million for the three months ended March 31, 2024 and 2023, respectively. We use this metric to analyze the total amount of money moving into our prepaid card programs.

Current wording

Gross Dollar Volume Loaded on Cards: Represents the total dollar volume of funds loaded to all of our prepaid card programs. Our gross dollar volume loaded on cards was $456 million and $405 million for the three months ended June 30, 2024 and 2023, respectively. Our gross dollar volume loaded on cards was $882 million and $783 million for the six months ended June 30, 2024 and 2023, respectively. We use this metric to analyze the total amount of money moving into our prepaid card programs.

Previous wording

Conversion Rates on Gross Dollar Volume Loaded on Cards: Represents revenues, gross profit or net income (loss) conversion rates of gross dollar volume loaded on cards which are calculated by taking our total revenues, gross profit or net income (loss), respectively, as a numerator and dividing by the gross dollar volume loaded on cards as a denominator. As we derive a number of our financial results from cardholder fees, we utilize these metrics as an indication of the amount of money that is added to cards and will eventually be converted to revenues, gross profit and net income (loss). Our total revenue conversion rates for the three months ended March 31, 2024 and 2023 were 3.09% or 309 basis points (“bps”), and 2.68% or 268 bps, respectively, of gross dollar volume loaded on cards. Our total gross profit conversion rates for the three months ended March 31, 2024 and 2023 were 1.63% or 163 bps, and 1.33% or 133 bps, respectively, of gross dollar volume loaded on cards. Our net income (loss) conversion rates for the three months ended March 31, 2024 and 2023 were 0.11% or 11 bps, and (0.04)% or (4) bps, respectively, of gross dollar volume loaded on cards.

Current wording

Conversion Rates on Gross Dollar Volume Loaded on Cards: Represents revenues, gross profit or net income (loss) conversion rates of gross dollar volume loaded on cards which are calculated by taking our total revenues, gross profit or net income (loss), respectively, as a numerator and dividing by the gross dollar volume loaded on cards as a denominator. As we derive a number of our financial results from cardholder fees, we utilize these metrics as an indication of the amount of money that is added to cards and will eventually be converted to revenues, gross profit and net income (loss). Our total revenue conversion rates for the three months ended June 30, 2024 and 2023 were 3.14% or 314 basis points (“bps”), and 2.73% or 273 bps, respectively, of gross dollar volume loaded on cards. Our total gross profit conversion rates for the three months ended June 30, 2024 and 2023 were 1.66% or 166 bps, and 1.39% or 139 bps, respectively, of gross dollar volume loaded on cards. Our net income (loss) conversion rates for the three months ended June 30, 2024 and 2023 were 0.14% or 14 bps, and (0.03)% or (3) bps, respectively, of gross dollar volume loaded on cards. Our total revenue conversion rates for the six months ended June 30, 2024 and 2023 were 3.12% or 312 basis points bps, and 2.70% or 270 bps, respectively, of gross dollar volume loaded on cards. Our total gross profit conversion rates for the six months ended June 30, 2024 and 2023 were 1.65% or 165 bps, and 1.36% or 136 bps, respectively, of gross dollar volume loaded on cards. Our net income (loss) conversion rates for the six months ended June 30, 2024 and 2023 were 0.11% or 11 bps, and (0.03)% or (3) bps, respectively, of gross dollar volume loaded on cards.

Previous wording

During the three months ended March 31, 2024 and 2023, we financed our operations through internally generated funds.

Current wording

During the six months ended June 30, 2024 and 2023, we financed our operations through internally generated funds.

Previous wording

Operating activities provided $8,244,499 of cash in the first quarter of 2024, an increase of $5,013,894 compared to the same period last year. This change in cash flow is primarily due to increases in operating assets and liabilities. The changes in accounts receivable, accounts payable, and customer card funding are primarily related to the growth in our pharma patient affordability business and timing of payments as we are invoiced by third-party service providers at the end of the period and are due monies from our pharma patient affordability customers to cover these third-party payables. The increase in cash flows from operating activities was also impacted by net income and non-cash adjustments for depreciation and amortization, stock-based compensation, and lease expenses.

Current wording

Operating activities provided $28,796,693 of cash as of June 30, 2024, an increase of $28,645,345 compared to the same period last year. This change in cash flow is primarily due to increases in operating assets and liabilities. The changes in accounts receivable, accounts payable, and customer card funding are primarily related to the growth in our pharma patient affordability business and timing of payments as we are invoiced by third-party service providers at the end of the period and are due monies from our pharma patient affordability customers to cover these third-party payables. The increase in cash flows from operating activities was also impacted by net income and non-cash adjustments for depreciation and amortization, deferred income taxes, stock-based compensation, and lease expenses.

Previous wording

We used net cash in investing activities during the three months ended March 31, 2024 and 2023 of $2,273,081 and $1,657,896, respectively. Cash used for investing activities was primarily attributed to an increase in the capitalization of internally developed software as we continue to invest in our technology platform.

Current wording

We used net cash in investing activities during the six months ended June 30, 2024 and 2023 of $4,640,045 and $3,044,110, respectively. Cash used for investing activities was primarily attributed to an increase in the capitalization of internally developed software as we continue to invest in our technology platform.

Previous wording

Cash used in financing activities of $666,018 for the three months ended March 31, 2023 was primarily attributed to the repurchase of 200,000 shares of the Company’s common stock at a weighted average price of $3.33 per share.

Current wording

Finance activities provided cash of $24,000 during the six months ended June 30, 2024, related to the proceeds received for the exercise of stock options. Financing activities during the six months ended June 30,2023 used $968,067 in cash, attributable to the repurchase of 319,558 shares of the Company’s common stock at a weighted average price of $3.06 per share offset by proceeds received of $9,600 for the exercise of stock options.

Previous wording

We believe that our available cash on hand, excluding restricted cash, at March 31, 2024 of $7,013,306, along with our forecast for revenues and cash flows for the remainder of 2024 and through the first quarter of 2026, will be sufficient to sustain our operations for the next twenty-four months. In light of the recent bank failures, we continue to monitor the health and soundness of our bank relationships through publicly available information. Based on recent SEC filings, we have not discovered any issues that would cause us to alter our bank relationships.

Current wording

Unrestricted cash was $31,290,865 as of June 30, 2024, an increase of $23,620,188 compared to the same period in the prior year. The increase resulted primarily from the improvement in our operating results and payment timing on passthrough claim reimbursement receivables and related payables associated with our patient affordability business, in the amount of $22,708,655. We believe that our available cash on hand, excluding restricted cash, at June 30, 2024 of $31,290,865, along with our forecast for revenues and cash flows for the remainder of 2024 and through the second quarter of 2026, will be sufficient to sustain our operations for the next twenty-four months. In light of the elevated interest rates and increased refinancing risks related to commercial real estate holdings on bank balance sheets, we continue to monitor the health and soundness of our bank relationships through publicly available information. Based on recent SEC filings, we have not discovered any issues that would cause us to alter our bank relationships.