Release Date: June 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- POSaBIT Systems Corp (POSAF, Financial) achieved a significant improvement in adjusted EBITDA, reducing the loss from $2.5 million in Q4 2023 to $800,000 in Q1 2024.
- The company reported a 50% adjusted gross margin for Q1 2024, a substantial increase from the previous quarter's 13%.
- POSaBIT Systems Corp (POSAF) is now cash flow positive, indicating a strong fiscal position moving forward.
- The company has diversified revenue streams, including payments, point-of-sale software, and software licensing contracts, which provide a stable source of recurring monthly revenue.
- POSaBIT Systems Corp (POSAF) has successfully reduced operating expenses by 30%, primarily through headcount reduction and other cost-saving measures.
Negative Points
- Total revenue for Q1 2024 was $3.78 million, down 25% compared to the previous quarter.
- The company faced significant payment challenges at the end of 2023 and the beginning of 2024, impacting revenue.
- There was a notable drop in top-line revenue due to changes in billing practices, now only charging consumers instead of both merchants and consumers.
- Cash on hand decreased from $1.5 million as of December 31, 2023, to $900,000 as of March 31, 2024.
- The process of listing on the TSX Venture Exchange (TSXV) has been delayed, primarily due to internal decisions to ensure the company is in a strong position before listing.
Q & A Highlights
Q: Why did POSaBIT's top-line revenue decline this quarter?
A: Ryan Hamlin, CEO, explained that the decline was due to payment challenges at the end of 2023 and early 2024, and a change in billing methods for payment services. Previously, both merchants and consumers were charged, but now only consumers are charged, which has reduced top-line revenue but improved gross profit margins.
Q: Why are insiders not buying more stock at current low prices?
A: Ryan Hamlin, CEO, noted that insiders have been in a blackout period, limiting their ability to buy shares. With the blackout period ending, there may be more insider purchases, but it remains a personal decision for each insider.
Q: How would potential legislative changes in the cannabis industry impact POSaBIT?
A: Ryan Hamlin, CEO, stated that either outcome—whether changes occur or not—could benefit POSaBIT. If changes do not occur, the competitive pool remains small. If changes do occur, POSaBIT could see increased transaction volumes and potentially become an acquisition target for larger companies entering the market.
Q: Why has POSaBIT not achieved the same market share in other states as it has in Washington?
A: Ryan Hamlin, CEO, explained that each state has different regulations, requiring POSaBIT to adapt its products for each market. The company has focused its resources on markets with the best opportunities, such as Oregon, where they are starting to see success.
Q: Why has investor communication been limited over the past 24 months?
A: Ryan Hamlin, CEO, acknowledged the reduction in marketing and PR efforts, attributing it to a focus on executing the business plan with limited resources. He mentioned that more frequent updates and new product announcements are forthcoming.
Q: What specific cost reduction measures have been implemented to achieve positive free cash flow by Q2 2024?
A: Ryan Hamlin, CEO, highlighted a significant reduction in headcount, which has lowered overall costs by about 30%. Other areas of cost reduction include marketing, travel, and administrative expenses.
Q: What is the status of POSaBIT's application to list on the TSX Venture Exchange (TSXV)?
A: Ryan Hamlin, CEO, stated that the delay is due to POSaBIT's internal decision to ensure the company is in a strong financial position before listing. The company is focused on meeting all regulatory requirements and expects to proceed when ready.
Q: Why did revenue drop from Q1 2023 to Q1 2024?
A: Ryan Hamlin, CEO, reiterated that the drop was due to the change in billing methods and the payment outages at the end of Q4 2023. Despite the lower top-line revenue, adjusted gross margins have remained stable.
Q: Can you provide more details on the new POSaBIT One product?
A: Ryan Hamlin, CEO, described POSaBIT One as a device that allows multiple payment options on a single terminal, including card payments and ACH transfers. The new product is now available in the market.
Q: How has POSaBIT achieved cash flow positivity?
A: Ryan Hamlin, CEO, explained that the company is now bringing in more cash than it is spending on monthly operations. This has been achieved through cost reductions, particularly in headcount and operational expenses.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
