Release Date: August 27, 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 positive Adjusted EBITDA for the first time, with nearly $100,000 in profit.
- The company reported positive free cash flow, adding $200,000 to its cash reserves.
- Revenue increased by 13% quarter-over-quarter, with payments revenue up by 24%.
- Gross margin percentage reached a historic high of 59%, reflecting effective cost control and increased revenue.
- The launch of new products, such as the POSaBIT Pay application and an e-commerce platform, shows promising adoption and potential for future growth.
Negative Points
- Despite the positive financial metrics, POSaBIT Systems Corp (POSAF) reported a net loss of $454,000 for the second quarter of 2024.
- Gross revenue decreased year-over-year due to a change in the processing method, which eliminated merchant fees.
- Operating expenses remain high at $2.8 million, although they have decreased from the previous year.
- The company has a debt balance of $4.5 million, which includes an SBA loan and a five-year term loan.
- The stock price remains low, and the company has not considered a stock buyback due to limited cash reserves.
Q & A Highlights
Q: Can you speak a little bit about the results of the share consolidation that was described as part of the annual shareholder meeting and in the information circular?
A: We had something on the ballot which would allow us to do a reverse stock split to create more visibility and attract more investor attention. This could also be useful if we aim to uplift to a bigger exchange like the TSX or in case of a potential merger. Nothing is planned currently, but we wanted to have it as an available tool for the next 12 months.
Q: Why does the company feel it's not important to be updating the market and investors outside of adjusted earnings calls?
A: It's not that we don't think it's important. We've been very focused on our business, executing and getting our position back to where it is today. We will communicate more as we have more product releases, but our primary focus has been on getting back on track.
Q: Has the board considered a stock buyback? And why have insiders not bought more stock when the price is so low?
A: We are not considering a stock buyback as it doesn't make financial sense given our current cash reserves. Regarding insider purchases, blackout periods and material events often restrict us from buying. Insiders already own about 40% of the company, so we are very invested in its future.
Q: Your investor presentation on the website is quite old. When can we expect an updated version?
A: We apologize for that. An updated version of our investor deck will be available on the website within the next seven days.
Q: The cannabis market and POSaBIT's stock have been hit hard over the last 12 months. What can you say to investors to instill confidence in the company for the next year, and why is the stock price so low?
A: The entire market, especially cannabis, has been hit hard. However, we are seeing more money coming into the sector. Our focus is on execution, growing our gross margin dollars, staying profitable, and putting more cash in the bank. We believe that if we execute well, good things will happen to the company and the stock.
Q: How do I think about the trajectory of the growth of the business going forward?
A: We saw nice growth between Q1 and Q2, especially in our payments business. Our point of sale (POS) growth has been excellent, and we expect this to continue. As our POS base grows, our payments business will follow. Additionally, our new menu platform will create a new source of revenue.
Q: How do I think about the penetration within the base of the 500+ stores you have of anything that you monetize through recurring revenue and payment penetration into that base?
A: About 50% of our POS customers use our payments. This percentage is higher outside of Washington. We aim to grow both the percentage of recurring revenue and the percentage of POS merchants using our payments, which will have a significant impact on revenue and customer relationships.
Q: Last year, your guidance was for $12-14 million gross profit. You've now returned to this run rate level, but the stock is at $0.09 versus $0.60-$0.70 last year. How do you make sense of this?
A: We signaled improvements in Q1 and are now showing those results. The hope is that through these results, people will see that we are turning things around. The stock price is certainly depressed in our view.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
