8-K: Paysign Reports Strong Third Quarter 2024 Results Driven by Patient Affordability Growth

Paysign's third quarter 2024 saw a 23% revenue increase and a 20.6% rise in adjusted EBITDA, fueled by significant growth in its patient affordability programs.

Summary

• Paysign reported a strong third quarter in 2024, with total revenues reaching $15.26 million, a 23% increase compared to the same period in 2023.
• Net income for the quarter was $1.44 million, or $0.03 per diluted share, up from $1.10 million, or $0.02 per diluted share, in the third quarter of 2023.
• Adjusted EBITDA for the quarter was $2.83 million, a 20.6% increase from $2.35 million in the prior year, with diluted adjusted EBITDA per share at $0.05 compared to $0.04.
• The company's patient affordability program revenue saw a substantial increase of 219.1% year-over-year, contributing significantly to the overall revenue growth.
• Gross margins improved to 55.5%, a 440 basis point increase from 51.1% in the third quarter of 2023, primarily due to the growth in higher-margin patient affordability programs.
• Paysign exited the quarter with 478 plasma centers and 66 active patient affordability programs.
• The company's unrestricted cash balance was $10.29 million with zero debt at the end of the quarter.
• The company expects full-year 2024 pharma patient affordability revenue to equal approximately 20% of total revenues.
• Paysign has updated its guidance to include legal fees related to the settlement of class action and derivative lawsuits, but still anticipates operating results to be within the previously provided ranges.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to strong revenue growth, improved profitability, and significant expansion in the patient affordability sector. The company's financial performance is better than expected, and management expresses confidence in future growth. However, there are some minor concerns about increased expenses and a slight decline in plasma revenue per center.

Positives

• Paysign experienced strong revenue growth of 23% in the third quarter of 2024.
• The company's net income and adjusted EBITDA both showed significant year-over-year increases.
• The patient affordability program is a major growth driver, with revenue increasing by 219.1%.
• Gross margins improved substantially, indicating increased profitability.
• Paysign maintains a strong cash position with $10.29 million in unrestricted cash and no debt.
• The company added new plasma centers and patient affordability programs, expanding its reach.
• The company's patient affordability claim volume increased by 429.6% compared to the third quarter of 2023.

Negatives

• Average revenue per plasma center per month decreased slightly to $7,991 from $8,041 in the same period last year.
• The plasma business experienced some headwinds due to weather conditions and employment shortages.
• Selling, general, and administrative expenses increased by 32.4%, primarily due to increased compensation and benefits.
• Depreciation and amortization expenses increased by 49.8% due to new software development costs and equipment purchases.
• Unrestricted cash decreased by $6.70 million from December 31, 2023, primarily due to payment timing on pass-through claim reimbursement receivables and related payables.

Risks

• The company faces risks related to its ability to maintain its current growth rate.
• Economic downturns, including those related to COVID-19, could reduce the customer base and demand for Paysign's products and services.
• Operating in a highly regulated environment poses compliance risks.
• Data security breaches could expose the company to liability and litigation.
• Changes in laws, regulations, or industry standards could negatively impact the business.

Future Outlook

Paysign expects the upward trend in gross margins to continue, with full-year 2024 pharma patient affordability revenue projected to be approximately 20% of total revenues. The company anticipates operating results to be within the previously provided ranges despite a one-time legal expense. Total revenues are expected to be in the range of $56.5 million to $58.5 million, and adjusted EBITDA is expected to be in the range of $9.0 million to $10.0 million.

Management Comments

• We are pleased to report strong third-quarter results, achieving 23.0% revenue growth and a 20.6% increase in adjusted EBITDA, said Mark Newcomer, President & CEO of Paysign.
• We expect this upward trend to continue, said Mark Newcomer, President & CEO of Paysign.
• Our patient affordability pipeline remains highly robust as we add new customers, new programs, expand programs and maintain strong relationships with some of the worlds leading pharmaceutical companies, further affirming their confidence in our offerings, said Mark Newcomer, President & CEO of Paysign.
• We are focused on identifying and leveraging additional high-growth opportunities in the payments sector to expand our current product portfolio, said Mark Newcomer, President & CEO of Paysign.
• Despite headwinds in our plasma business related to difficult weather conditions, employment conditions and a slowdown in spending by cardholders, we still experienced growth this quarter of 3.4% when compared to the same period in the prior year, said Jeff Baker, Paysign CFO.
• We still anticipate our operating results to be within the ranges we provided despite this one-time expense, said Jeff Baker, Paysign CFO.
• To reiterate, we expect total revenues to be in the range of $56.5 million to $58.5 million, and adjusted EBITDA to be in the range of $9.0 million to $10.0 million (15.0% to 17.0% of total revenues), or $0.16 to $0.18 per fully diluted share, Baker concluded.

Industry Context

Paysign's strong performance in the patient affordability sector reflects a broader trend in the healthcare industry towards digital payment solutions and patient support programs. The company's growth in this area positions it well to capitalize on the increasing demand for such services.

Comparison to Industry Standards

• Paysign's 23% revenue growth is strong compared to industry averages for payment processing companies, which often see growth in the high single digits or low double digits.
• The 219.1% growth in patient affordability revenue is exceptional and suggests Paysign is gaining significant market share in this niche.
• Companies like Wex Inc. and Global Payments Inc. also operate in the payment processing space, but Paysign's focus on healthcare and patient affordability provides a unique competitive advantage.
• The gross margin improvement of 440 basis points to 55.5% is a positive sign, indicating efficient cost management and a shift towards higher-margin services, which is a key metric for investors in the payment processing sector.
• While companies like Green Dot Corporation also offer prepaid card solutions, Paysign's specific focus on healthcare and patient affordability differentiates its business model.

Legal Proceedings

• The company expects to expense legal fees during the fourth quarter related to the settlement of class action and derivative lawsuits.

Stakeholder Impact

• Shareholders will likely view the strong financial results and growth prospects positively.
• Employees may benefit from the company's growth and expansion.
• Customers, particularly in the pharmaceutical and healthcare sectors, will benefit from Paysign's innovative payment solutions.
• Suppliers and creditors may see increased business opportunities with Paysign's growth.

Next Steps

• The company will hold a conference call on November 5, 2024, to discuss the third quarter 2024 financial results.
• The company will release its 10-Q prior to the market opening tomorrow.
• Paysign will continue to focus on identifying and leveraging additional high-growth opportunities in the payments sector.

Key Dates

Keywords

prepaid card programs, patient affordability, digital banking, payment processing, plasma, pharmaceutical, EBITDA, revenue, financial results, healthcare