PAYS - NASDAQ

Good afternoon. My name is Shyamali, and I will be your conference operator today. At this time, I would like to welcome everyone to the PaySign, Inc. Third Quarter 2025 Earnings Conference Call. After the speakers' remarks, there will be a question and answer session. As a reminder, this conference call is being recorded. The comments on today's call regarding PaySign's financial results will be on a GAAP basis unless otherwise noted. PaySign's earnings release was disseminated to the SEC earlier today, and can be found on the Investor Relations section of our website, PaySign.com, which includes reconciliations of non-GAAP measures to GAAP reported amounts. Additionally, as set forth in more detail in the earnings release, I would like to remind everyone that today's call will include forward-looking statements regarding PaySign's future performance. Actual performance could differ materially from these forward-looking statements. Information about the factors that could affect future performance is summarized at the end of PaySign's earnings release, and in its recent SEC filings. Lastly, a replay of this call will be available until February 12, 2026. Please see PaySign's third quarter 2025 earnings call announcement for details on how to access the replay. It is now my pleasure to turn the call over to Mr. Newcomer, President and CEO. Please go ahead. Thank you, and good afternoon, everyone.

I appreciate you joining us as we review our third quarter 2025 results. I'm Mark Newcomer, President and CEO of PaySign. Joining me today is our CFO, Jeff Baker. Also on the call are Matt Turner, President of Patient Affordability, and Matt Lanford, our Chief Payments Officer, both of whom will be available for Q&A following our prepared remarks. I'm pleased to report another outstanding quarter of growth for PaySign. Earlier today, we announced record revenue of $21.6 million, up 41.6% year over year. Adjusted EBITDA reached a record $5 million, an increase of 78%, and net income rose 54% to $2.2 million, or $0.04 per fully diluted share. Alongside these financial results, we achieved meaningful operational efficiencies that Jeff will discuss in more detail shortly. Our patient affordability business continues its exceptional growth trajectory, generating $7.9 million in revenue, up 142% from the prior year's quarter. We ended the quarter with 105 active programs and expect to add 20 to 30 more by year-end, including 13 launched in October. This would bring us to 125 to 135 active programs by the end of the year compared to 76 at the end of 2024, a clear indicator of our sustained momentum and future growth potential. During the quarter, we announced the opening of our new 30,000 square foot patient support center, a major milestone for PaySign. This expansion quadruples our support capacity, allowing us to meet growing demand and deliver an exceptional service experience for our clients, patients, and providers. This facility also supports a growing high-value offering: dedicated patient support representatives, which has become increasingly popular across our client base. Our growth is driven by comprehensive product offerings, best-in-class service, transparent pricing, and our proprietary dynamic business rules technology. By integrating dynamic business rules into the traditional commoditized pharmacy claims process, our pharmaceutical clients save hundreds of millions of dollars while unlocking new revenue streams across the patient affordability ecosystem. Our success in specialty pharmaceutical programs continues to open doors in the pharmaceutical space, where higher claims volumes and multi-product manufacturer engagements present significant opportunities. Expanding our presence in this area remains a top priority of our sales teams. Our pipeline remains robust, fueled by both new and existing clients across retail and specialty. We anticipate activity from new drug launches and transition programs already in the queue, with the sales cycle holding steady at roughly ninety days, a strong signal of consistent execution and demand. Our mission extends well beyond payments. We're redefining how financial support is delivered across healthcare, removing cost barriers to treatment and generating measurable savings for patients and our pharmaceutical partners alike. The continued strength of the patient affordability business underscores the power and scalability of our model. Turning to our plasma donor compensation business, revenue grew 12.4% year over year to a record $12.9 million, despite a net loss of 12 centers, leaving us with a total of 595 active centers at quarter-end. As we have previously discussed, the plasma industry continues to face an oversupply of sourced plasma, which we expect to normalize in 2026. Encouragingly, average donor compensation per donation increased during the quarter, and that trend has carried into Q4. Combined with positive client discussions, we see potential for organic growth at the center level sooner than previously anticipated. We are executing on our strategy to expand our role in the blood and plasma ecosystem, evolving from a trusted payments provider to a technology partner. Our Software as a Service engagement platform, which includes a donor app, plasma-specific CRM, and a donor management system, also known as a blood establishment computer system or BECCS, continues to generate strong interest both domestically and internationally. As we await FDA 510 clearance for the BECCS, we are actively showcasing the platform to the blood and plasma industry, who are eager to find efficient, user-friendly, cost-effective alternatives to the current offerings. The reception has been overwhelmingly positive, reinforcing our confidence in the long-term opportunity for this business line. In summary, Q3 was a stellar quarter of strong execution and innovation. We are scaling efficiently, expanding into new markets, and delivering transformative value across both patient affordability and plasma, two sectors where we're redefining expectations and disrupting the status quo. I'm incredibly proud of our team's continued focus and discipline. Their dedication to delivering results with purpose continues to drive our momentum. Looking ahead, we remain confident in our growth trajectory and firmly committed to building long-term value for our shareholders. With that, I'll turn it over to Jeff for a closer look at the financials.

Thank you, Mark. Good afternoon, everyone. As Mark said, we had another strong quarter as we continue to build momentum heading into 2026. We had some nice wins in our patient affordability business, from both new relationships bringing us multiple programs to existing customers bringing us additional programs. Our plasma business posted year-over-year growth during the quarter with the additions of the new centers we won in the second quarter. We exited the quarter with 595 active plasma centers and 105 active patient affordability programs. More importantly, we ended October with 118 active patient affordability programs, with additional programs being added weekly. Our consolidated gross profit margins continue to improve on a year-over-year basis despite the new plasma centers weighing on the margin due to their lack of maturity. We expect improvement from these levels as the new centers mature over the next six to nine months. We also expect improvement in our consolidated gross profit margins as we ramp up our new customer service contact center that we opened in September. As our business continues to grow and we continue to make the necessary investments in people and infrastructure to ensure the success of our growing business, we expect our operating margins and adjusted EBITDA margins to continue to expand on a year-over-year basis, demonstrating the operating leverage inherent in our business. In summary, we could not be more excited about the prospects of our business for the remainder of this year and throughout 2026. I encourage everyone to read our 10-Q for more details about our financial results, which is expected to be filed tomorrow morning before the market opens. Now turning your attention to the results for the third quarter. Revenue and adjusted EBITDA results exceeded the guidance we provided last quarter. Third quarter 2025 total revenues of $21.6 million increased $6.3 million or 41.6%. Adjusted EBITDA of $5 million increased $2.2 million or 78.1%. Plasma revenue increased 12.4% to $12.9 million, while our revenue per plasma center declined to $7,122 as the new plasma centers added in the second quarter have not reached full maturity and our legacy centers continue to be impacted by the industry-wide oversupply of plasma. Gross dollars loaded to cards increased 21%, total number of loads increased 19.3%, and gross spend volume increased 19.2% due mainly to the new centers added in the second quarter. Patient affordability revenues increased 142% to $7.9 million and accounted for 36.7% of quarterly revenues. This is a significant increase from the 21.5% of revenue that Pharma represented just during the same period last year. We added eight net programs, exiting the quarter with 105 pharma patient affordability programs and grew the number of claims processed by over 60% versus the same period last year. Gross profit margin for the quarter improved 72 basis points to 56.3%. SG&A excluding depreciation and amortization and stock-based compensation improved by 410 basis points to 32.9% of revenue, while total operating expenses improved by 210 basis points to 48.9% of revenue. Having made significant investments in our employee base over the past year to support the continued growth in our businesses, compensation and benefits increased 20.3% to $7.2 million. We exited this quarter with 222 employees versus 162 during the same period last year. Stock compensation increased 32% to $1.3 million related to the issuance of additional restricted stock units for new hires and employee retention. Depreciation and amortization expense increased 39.9% to $2.2 million due primarily to the amortization of continued enhancements in our technology platform. Net income for the quarter was $2.2 million or $0.04 per fully diluted share versus $1.4 million or $0.03 per fully diluted share for the same period last year. Positively impacting net income was a lower income tax provision resulting mainly from the recent changes in tax code offset by lower net interest income mainly related to the implied interest expense of future cash payments for the Gamma acquisition. Third quarter adjusted EBITDA, which is a non-GAAP measure that adds back stock compensation to EBITDA, was $5 million or $0.08 per diluted share versus $2.8 million or $0.05 per diluted share for the same period last year. The fully diluted share count for the quarters used in calculating the per share amounts was 61.8 million and 56.1 million respectively, an increase of 5.7 million shares. Regarding the health of our company, we exited the quarter with an adjusted unrestricted cash balance of $16.9 million and zero debt as we generated strong operating cash flow and continue to experience operational benefits of our Gamma acquisition. Just a reminder, the adjustment to our unrestricted cash balance reflects the short-term impact of our account receivable and account payable balances related to our pharma patient affordability business. Now turning your attention to our revised guidance for 2025, which now incorporates Q3 actuals. We are raising our revenue guidance to a range of $80.5 million to $81.5 million, reflecting year-over-year growth of 38.7% at the midpoint. Plasma is estimated to make up approximately 57% of total revenue, representing a modest year-over-year growth, while pharma patient affordability revenue is expected to make up approximately 41% of total revenue, representing year-over-year growth of over 155%. Full-year gross profit margins are expected to be approximately 60%. We expect operating expenses to be between $41.5 million and $42.5 million, with depreciation and amortization expense of approximately $8.4 million and stock-based compensation of approximately $4.3 million. We expect interest income to be approximately $2.6 million, our full-year tax rate to be 18.7%, and our fully diluted share count to be 59.76 million shares. Taking all the factors above into consideration, we have raised our net income estimates to be between $7 million and $8 million for the year, or $0.12 to $0.13 per diluted share. Adjusted EBITDA is now expected to be in the range of $19 million to $20 million, or $0.32 to $0.34 per diluted share. With that, I would like to turn the call back over to the moderator for questions and answers. Thank you.

You may press 2 to remove yourself from the queue. Our first question comes from the line of Jacob Stephan with Lake Street Capital Markets. Please proceed with your question.

Hey, guys. Appreciate you taking the questions. Congrats on a nice quarter here. Maybe just first, wondering if you could help us think through some of the comments Mark made on retail versus specialty pharmacy. Do you have a current mix number you maybe could give us? Or, I mean, maybe you could talk through pipeline mix a little bit as well between the two?

Hi. This is Matt Turner. We don't I don't have that information in front of me. We can you know, Jeff can follow back up with you on that. And we'd probably want to give more of a maybe a percentage there. But we do have a decent mix right now of retail versus specialty. As you look at the pipeline moving into next year, there is the addition of more retail programs I don't know the exact number. If you were to look at overall program count, but it's a higher percentage moving into next year in the pipe and that would kind of be all stages of the pipeline that would have a retail versus a special component.

Okay. Got it. Maybe so it sounds like this is a is a little bit bigger opportunity. Maybe you know, higher claims volumes on the retail side? Maybe you could just kind of elaborate on that a little bit.

Yes. So retail products, due to their cost and the propensity are to be prescribed, because they're dealing with a lot more what I would call generic types of ailments. You'll you tend to see just a higher percentage of people be prescribed those drugs. Sometimes it's for acute issues. Sometimes it's for chronic. If you if you were to look at the retail programs right now that we have, we, you know, we have some in the, you know, in, like, the pulmonary space. So some inhalers, things like that. There's a component of people who will be a written inhaler they have asthma and they're gonna have an inhaler every day for the rest of their And then you have people that come down with bronchitis, and they'll use it for a month or two, and then they're off of it. So the the mix that you see of utilization tends to be a little bit higher, so you get a higher patient count. Inside of those programs. Whereas the specialty drug, lot of times, you know, the number of people that are taking that drug is obviously lower because it's a specialty product. And you don't typically get an acute indication for a specialty drug that we would represent or that would have a program with us. So just the ability to onboard more patients in the programs tend to be higher with retail products than it does with specialty. So that's why you'll see the increased claim volumes as well as the offer value on a retail product is gonna be substantially different. So patients will not necessarily burn through their out of pocket max on a retail product like they would on a specialty product. Specialty product is $25,000 and a patient has an, you know, a $7,000 out of pocket max, they can get through their entire out of pocket maximum, you know, in a couple of fills. Whereas with a retail product where the offer value is, say, 2 or $300, they could use that 12 times a year. So instead of only getting two or three claims for that patient on a specialty space, we would get 12 in a retail space.

Okay. Got it. That's that's very helpful. Maybe second one. Jeff, you kinda talked a little bit about gross profit margins expanding as you know, the patient success center continues to ramp. I'm wondering if you could kinda help us think through, you know, current capacity utilized and and maybe, you know, where you expect to be with with these 22 ish new centers, online in the second half or in the last quarter here?

Well, that's this I think you're of mixing the The centers, we didn't say there would be 22. We were saying in the second half of the year on the patient affordability pharma side. Where we would add between twenty and thirty. The centers, we don't really you know, we're going into the end of the year. Don't really expect those to change too much, you know, plus or minus a couple here or there. And but the comment about the majority of those relates to those centers coming up to the average of our our core base. So there are fees that typically don't kick in for you know, ninety plus days afterwards where we start to see the benefit of a fully you know, mature centers. The centers have been open for quite some time, but from our revenue opportunity, it just takes time for it to come through. For example, inactivity, fees and things of that nature. So as those become more mature, as we see, also see a return to growth, etcetera, I expect the gross profit margins in the plasma business to to to improve, from where they were this quarter.

Okay. Got it. And then maybe just last one. You know, I I think when you kinda run the numbers as you look at Q4 here, and what you're communicating with pharma revenue growth. You know, it it implies a sequential step down in in average quarterly revenue. Per program. Maybe maybe you could kinda help us think through, you know, what the the difference is And maybe contrast that with what you see this year Last year when it was actually a sequential step up from Q3 to Q4. Yeah. I mean, last year, we had more newer programs with fewer claims. Now this year, we have a lot more programs with claims and the claims will fall off in the second half of the know, year. It's a seasonal seasonal businesses. Matt alluded to earlier. When everything reset. So that's the that's the difference. Know, we just have we have more we we have it's a it's a mixed issue where where the, mix is more geared towards claims versus initial launch. Fees?

Okay. Understood. I appreciate all the color. Nice work.

Thank you. And and the other thing I will say, Jacob, is you can't look but I appreciate you calling us out, you cannot look sequentially at these numbers. You have to look on a year over year basis. So last year, we did $56,700 in the fourth quarter. Revenue per program. That will be up year over year that will be up year over year versus the versus last year. This year, we did in the third quarter, 75,434. Last year, we did, you know, just under 50,000. So you have to look at this business on a year over year basis. Sequential numbers are absolutely meaningless.

Okay. Very helpful. Thank you.

Yep. Thank you. Our next question comes from the line of Gary Prestopino with Barrington Research. Please proceed with your question.

Hi, everyone. Is there well, of all, could you kind of tell us what a mature program would do in an average revenue basis versus, you know, you say 75,000 now, but you've got obviously got some programs that are just coming into the mix or have just come in the next what does the mature program do? Per quarter?

Gary, it really it really depends. I don't I don't mean to skip or overlook the question, but I mean we have programs that that do $2,000 a month, and we have programs that do, you know, 20 x that. It's it just it really depends on the program. So when it's mature, I mean, we see it coming into the numbers and there are things that a a drug may do and may get another indication which causes that claim to go up. On a year over year basis. Some some of the programs, it's just, you know, just pretty much flat year over year once it becomes mature. It it's really hard to say. But to to say what a mature program is, is it's it's it's too variable.

Well, how about how about this? Is there a difference between a specialty versus just a regular retail program in terms of the average revenues?

Yeah. Hi, Gary. This is Matt. So when you look at the different product suites that those programs would use, We would typically value a specialty program as being worth more money provided it has the appropriate indications. But again, it's all in the mix, right? So I, you know, I can name off 20 drugs right now that you've never once heard of. Right? You've you've never heard of these drugs. Then I can name off five that you've heard of. And you'd be like, oh, if you have that drug because I've seen 500 TV ads it, you've gotta be making a ton of money with that drug. And that could be right or it could be wrong. It depends on the patient population of that drug. How old are they? They're mostly on Medicare? Are they mostly on Medicaid? Yeah. It's it's a very complex thing to look at this and say, okay, well, I've heard of insert name of giant drug, you know, and you you think of golf, you know, the golf people talking about their psoriatic arthritis. And you think, oh, well, that's a great drug. Yeah. That could be because that's not impacting you know, the the lion's share of the patients taking that drug aren't 70 years old and on Medicare. So that could be a good one. But then I could bring up other drugs you've heard about that are cancer therapies. And, you know, or for Alzheimer's. And even though those are huge drugs for their company, right, for the manufacturer, they're not gonna make us any money. So you really have to look at how big a program's gonna be based on what's the patient population, right? What's the cohort of the patient population that can utilize our products. And then what other you know, additional pieces can we stack on top of that? Mark talked about dynamic business rules. That's in the specialty space. We currently don't have that active on any of our retail programs. So a specialty program utilizing dynamic business rules gonna be far more profitable to us and have higher top line revenue numbers than a retail program that could be doing 10 times the claim book. So it's it's a it you really have to understand the drugs specifically, their patient populations, and the cohorts of those patients that would potentially utilize copay inside of the overall eco or, you know, the overall numbers of the patients.

Okay. I mean, that's that's helpful on that. You you can't really know, peg a drug to or you you it's hard for us to ask ascertain what's gonna add layer. You just on on a drug basis or a program basis or retail versus specialty as as Jeff said, just look at the average revenue per program quarter over quarter. Right? Yeah. And and I think, look, if we were able to if our client would let us just come out and tell you, we won this brand I think you guys would be in a much better situation. Right? Because you'd say, oh, hey, Seen it on TV. And the people that take that drug are, you know, most of them are gonna be under 65. So, hey. Right. We you know, Payson's probably gonna do really well with that. Or, This is an oncology product and it's, you know, it's tiered towards breast cancer. You know, so in that instance, We're probably gonna do really well with that program. And you can also look at the information coming out of the manufacturer as far as how big is that drug, how much revenue are they generating from it. Unfortunately, we don't we don't we can't do that. Almost every one of our master services agreements requires us to not disclose who our clients are. And the brands that we represent. And it's certainly not for trying on our part to get them to allow us to talk about those, you know, those brands. And I think if you look back at previous earnings calls where we've been able to discuss specific brands or discuss specific clients, If you, you know, you kinda chat GPT some some questions out there, you might, you know, you might be able to get a better indication of the types of programs that we have running right now.

Okay. And then just Mark, you mentioned something about this BECCS. Which you hadn't heard of that at all. So could they maybe you could go into that and how that that is gonna help you going forward?

Yeah. That is what we refer to as a blood establishment computer system or a BECCS. It's really a donor management system and it allows us to place into the plasma blood space. We have a suite of products that we have built out. It's a Software as a Service. That is, you know, we're we're dealing with donor app, a plasma-specific CRM, and the donor management system. And so what that allows us to do is gain a diff it's really an additional business line that is is going to allow us once approved with the FDA. It is going to allow us to start running down that path.

Okay. Thank you.

Thank you. Our next question comes from the line of Peter Heckmann with D. A. Davidson. Please proceed with your question.

Hey, good afternoon. Thanks for taking the question. I'm just curious in the plasma business, it's probably hard to disaggregate, but I guess, have you sensed any uptick in donors given some of the issues around, withholding SNAP benefits? As part of the government shutdown and and then conversely, what type of of headwind are you feeling in terms of just the increased ICE activity with detaining immigrants and deporting immigrants in terms of donors? You think on a net basis, do you think those offset each other? Or could you just comment on any dynamics you're seeing?

I I Peter on the on the latter question. I can tell you, we haven't seen any change. Remember, when you when you give plasma, there you have to present an ID. So so they can track you and do everything else. So people that are here illegally in The States, without the proper identification aren't given plasma. So there's been zero impact related to the change of our our immigration population. As for the the other with the shutdown, the shutdown's only been around you know, a couple of weeks. We I haven't seen, maybe Mark's seen, but I I we really haven't seen any change, in the in the donors on that. Mark, have you what have you seen? Anything? No. We haven't seen haven't seen it.

Okay. Haven't seen it yet. Alright.

No. And and and not really not really expecting to at this point. Obviously, we've seen in the past, we've seen kind of it looks like it's starting to loosen up a little bit coming into the fourth quarter, and we expect it to loosen up probably the second half of the year. And that is around the the donor that is around the the the donor what we're doing with the donors in regards to payments. So we're seeing the the the payments that we're sending out are starting to go up. And we would expect that to continue for probably the next six to twelve months.

Okay. I see. And then just on that latter question on the on the donor management CRM engagement platform, I guess, any insights into the timing for when that approval might come through? And then in terms of, like, just sizing that opportunity, is is that something where there's you know, hundreds of customers and and and each system could be you know, hundreds of thousands of dollars? Or how should we be thinking about that in terms of the potential benefit?

Yeah. I mean, we were to get through the FDA approval sometime in fourth quarter. Going into first quarter. We obviously didn't expect the shutdown and we certainly expect it to last as long as it has. Obviously, that will push us back probably first quarter, second quarter. Hopefully, earlier. And regarding how to think about it, no. There's not you know, in The US market, you can you know, it's a readily available number of how many clients are out there. I wouldn't call it hundreds. Of clients in The US market. However, there are, you know, you know, there is a ton of center by center basis that we would would license, but it's early days and I don't really wanna get into the model by which we're gonna go out at this point in time.

Alright. Well, just stay tuned. Appreciate it.

Yep. You're welcome. Thank you.

And as a reminder, if there are any additional questions. And we have reached the end of the question and answer session. I'd like to turn the floor back to Mark Newcomer for closing remarks.

Thank you. Obviously, we're proud of our progress. Optimistic about the future. Dedicated to delivering substantial growth and long-term shareholder value. And we look forward to updating you again next quarter.