Release Date: November 26, 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 free cash flow and adjusted EBITDA for the second consecutive quarter, indicating financial stability.
- The company launched its 1.0 e-comm and menu service, which is expected to add over a million dollars in new revenue with margins in the 70% range over the next 12 to 18 months.
- POSaBIT Systems Corp (POSAF) increased its point of sale merchants by 33% year-over-year, demonstrating growth in its core business.
- The company settled a lawsuit for $350,000, reducing ongoing legal expenses and improving financial health.
- POSaBIT Systems Corp (POSAF) is preparing for potential regulatory changes in the cannabis industry, such as rescheduling cannabis to a schedule three drug, which could positively impact its business operations.
Negative Points
- Total revenue for the third quarter of 2024 was down 5% compared to the previous quarter, indicating a decline in sales.
- Gross profit margin decreased from 51% in the prior quarter to 40% in the current quarter, primarily due to a one-time channel partner revenue sharing payment.
- Operating expenses increased to 3.4 million in the third quarter, up from 2.8 million in the prior quarter, driven by higher administrative and employee expenses.
- Net loss for the third quarter of 2024 was approximately 2.1 million, compared to a net loss of 454,000 in the previous quarter.
- Cash on hand decreased from 1.1 million as of June 30th, 2024, to approximately 908,000 as of September 30th, 2024, despite being cash flow positive.
Q & A Highlights
Q: Ryan, it looks like revenue and gross margin are down slightly in Q3 versus Q2. Why?
A: Ryan Hamlin, CEO: The decrease was primarily due to a one-time hit to our cost of goods sold (COGS) from revenue recognition adjustments related to a revenue share with an agent, amounting to about $180,000. Additionally, Q2 typically benefits from the 420 holiday, which boosts revenue. However, our point of sale (POS) revenue increased, indicating growth in that area.
Q: Can you talk a little more about the reason cash actually went down by $200K in Q3 versus Q2, but yet you are saying you were cash flow positive in Q3?
A: Ryan Hamlin, CEO: The cash decrease was due to paying off aged payables and prepaying for a significant portion of our 2024 audit. These were strategic moves to manage our financial health, despite appearing as a cash outflow in the quarter.
Q: If 280E comes to an end, how will that impact the company?
A: Ryan Hamlin, CEO: The end of 280E would allow our customers to deduct expenses like software and payment fees, freeing up capital for them. This could lead to more business opportunities for us as our customers would have better cash flow.
Q: What do you tell an investor who's considering POSaBIT right now?
A: Ryan Hamlin, CEO: We believe we are undervalued, especially given our growth and profitability in a challenging cannabis market. We are optimistic about the industry's future and potential regulatory changes that could benefit us, such as rescheduling cannabis.
Q: What are your focus areas for 2025?
A: Ryan Hamlin, CEO: Our focus is on growing cash reserves, maintaining adjusted EBITDA profitability, and achieving consistent growth across all business lines. We are preparing for potential regulatory changes that could positively impact our operations, particularly in credit card processing for cannabis.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
