Earnings Transcript for POSAF - Q1 Fiscal Year 2022

Operator: Good afternoon, ladies and gentlemen, and welcome to the POSaBIT Systems Corporation Q&A call. At this time, all participants have been placed on a listening mode, and we will open the floor for your questions and comments after the presentation. It's a pleasure to turn the floor over to your host, James Carbonara. Sir, the floor is yours.

James Carbonara: Thank you, operator, and good afternoon, everyone. Once again, welcome. I would like to begin the call by reading the safe harbor statement. This statement is made pursuant to the safe harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. All statements made on this call with the exception of historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although the company believes that expectations and assumptions reflected in these forward-looking statements are reasonable, it makes no assurances that such expectations will prove to have been correct. Actual results may differ materially from those expressed or implied in the forward-looking statements due to various risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those expressed or implied in the forward-looking statements, please see risk factors detailed in the company's annual report and subsequent filed reports as well as in other reports that the company files from time to time with SEDAR. Any forward-looking statements included in this call are made only as of the date of this call. We do not undertake any obligation to update or supplement any forward-looking statements to reflect subsequent knowledge, events or circumstances. The company may also be citing adjusted EBITDA in today's discussion. Adjusted EBITDA is a non-IFRS measure used by management that does not have any prescribed meaning by IFRS and that may not be comparable to similar measures presented by other companies. The company defines adjusted EBITDA as net income or loss generated for the period as reported before interest, taxes, depreciation and amortization, and it's further adjusted to remove changes in fair value and expected credit losses, foreign exchange gains and/or losses and impairments. The company believes this is a useful metric to evaluate its core operating performance. With me today are Ryan Hammer, CEO of POSaBIT; and Matthew Fowle, our CFO; as well as Tom Carrol analyst with Stansberry Research. Given the technical difficulties with the Q&A session during last week's earnings call, we thought it would be a good idea to hold the fireside chat type of discussion and go over some items. To help do this, Tom Carrol has agreed to run the discussion beginning with several of his own questions for management. At the end of the call today, we'll open it up to other investors for any other follow-ups. Tom, I'll turn the call over to you right now. Tom, please proceed.

Tom Carrol: Great. Thank you very much. Thanks, James, and thanks to Ryan and Matthew for giving us a bit more of their time. We know you guys are busy running the business. So let's get right to it. I'm quite interested, as you know, in POSaBIT, and I think this is a great idea. So to that end, I have three discussion points really to go over with you following your earnings release last week. And then after we go through each of those, let's open it up to Q&A for anybody listening online that may want to add to my line of questioning. Sound good?

Ryan Hamlin: Sounds great, Tom. Thanks.

Tom Carrol: Very good. So first discussion point really is on what I think was probably one of the hot buttons on the quarter, right, your transactional sales and noting that they declined sequentially by about 4% from third quarter into fourth quarter. In my view, this was relatively benign. And to me, not all that unexpected, right? The legal cannabis markets nationwide saw all kinds of pressure third quarter last year into fourth quarter and even into the New Year driven by all the obvious things out there, right? People getting back to work, stainless checks going away, inflation, pulling on all of our other expenses - and then cynically, I there another one in publicly traded MSOs needing to make their numbers and reducing price. So I mean it would make sense that kind of your transactional sales numbers may slow or even decline during that time period. But that said, what can you offer us additionally to kind of help explain this, right? Do you have any kind of same-store transactional sales metrics you could focus on? And are you able to see in your numbers the same kind of industry pressures that I am observing out there as an analyst?

Ryan Hamlin: Yeah. No. Thanks, Tom. And great first question to start with because I think we solicited feedback from our investors afterwards when we had the technical difficulties and certainly, a lot of questions came in on this. So glad we're addressing it upfront. I think for us, it comes down to three primary reasons, and you touched on some of them, but one that we didn't talk about and I wanted to make sure we addressed in this call, as we were in Q4, we made a conscious decision to really migrate over from - we had a more traditional, what they call cashless ATM service or point of banking sometimes referred to that where it rounds up to the nearest $5. We were able to secure a true debit solution. And so we made the business decision to move forward and really onboard all new merchants on that new platform. The good part of that is, obviously, there's no rounding. It's a much more compliant solution. And so it's all - it's good from that perspective. I guess the downside is that due to the rigorous compliance we have to put merchants through underwriting takes quite a bit of time. So kind of quite unexpectedly, we encountered kind of a pretty significant delay in just getting these merchants through underwriting. So that was one big kind of condition that we saw. The good news is as we learn that new underwriting process and even as we got into the New Year, we were still kind of learning and getting this going. By the time we hit February, we hit our stride, new merchants were coming on board. In fact, not to talk Q1 here, but March saw our largest month ever in the history of the company, and we grew at about 22%, I think, over February. So good news is we've kind of come out of that a little bit of a delay. The other point that I kind of want to make up front here is that we did do a hardware change. For those of you that follow the payment industry, there was a pretty significant security leak with PAX terminals, PAX terminals. In fact, the FBI actually rated their facility. That was made known to us, and we felt like it was prudent to evaluate other hardware solutions. So we had to get compliant and standardize on a new piece of hardware, which we did, that slowed us down a little bit coming out of Q4. And then really the last is you hit on it, which is, yes, there is some seasonality and not so much even seasonality, we just saw a downturn in the industry in Q4. I mean all companies kind of across the board had a lower-than-expected fourth quarter in cannabis sales. And I think, yes, it's stimulus check. Maybe they want to spend money on gasoline versus cannabis or something like that. But we definitely saw kind of a downtick. As far as the industry pressures, yes, I mean, we, especially maybe even more so than some of the other technology providers in the space see it because we are in the payment space. And so we're going to see a real-time hit when consumer spending has issues, whether that be inflation related or whatnot. So we're going to see that hit almost immediately. And then we saw the greater hit with just the cannabis industry as a whole with the MSO pricing pressures and some other things. So that's kind of the big one. You mentioned same-store growth, and you and I have talked about this in the past. And it's a good metric, and I'm glad you asked because for a lot of our investors, as we grow and we gave - we had over $21 million this year this last year and we gave our guidance of 37 to $40. How we get there is not just new stores. It's through same-store growth. In fact, we went back and we looked at our top 25 stores that were with us in 2020, and those same 25 stores were with us in 2021. That says a couple of things. Number one, we don't churn a lot. But number two, we are able to baseline those stores over the course of a 24-month period, and we saw a 47% increase in 2021. So that's a very impactful number for us because that tells us that as long as we're not turning merchants off, we're able to grow those same-store merchants, particularly in the first year, 18 months of operations by 47%. So that really helps give us the confidence, and I know we're going to talk guidance here in a bit, but that gives us some confidence on guidance as well. And then I've got to say one last thing just because this was a big question that came up, but I just want to cover it because I know our investors are interested. But we've got a couple of questions on just stores and store counts. And so we are stating that we have now over 400 stores live using our payments in our POS we think that's a great metric. And people always want to know store count. For us, store count is important when it comes to the POS and the SaaS fees because that's a monthly SaaS recurring fee. But on the payment side, it's really not as relevant because we have some stores like stores in Vegas that rent off the strip that we'll process $10 million for them versus a small mom and pop out in some rural area may only process a couple of hundred thousand through us. So we make our money on that transactional sales revenue. And so we put more of an emphasis on our transactional growth, really than our store growth, but I did want to publicly state that we're in over 400 stores now because that was something that our investors were asking. So sorry for the long answer if question, but I definitely wanted to knock off a few of the big items.

James Carbonara: Yes, I do have a follow-up on that. So you're pointing to kind of the underwriting process as well as the hardware change as well as just normal seasonality. I guess, if you put the underwriting and the hardware change into one bucket and you put just industry pressures in the other, and again, we're not talking about a big decline third to fourth quarter, but how much of it was it 50-50, was it 70-30? - which was the bigger impact on the transactional sales decline.?

Ryan Hamlin: It was definitely the down fourth quarter in the cannabis industry. In fact, if you looked at...

James Carbonara: We looked at some of the...

Ryan Hamlin: Yes, yes. We looked at our Q4 in 2020 and the growth that we happened back there, and we actually had a decent growth in Q4. And so really, again, baseline those exact same merchants, you saw a decline in the fourth quarter. So that tells you that the cannabis industry as a whole was down that this really was tied to the industry and the seasonality in Q4.

James Carbonara: Okay. And then one other. You mentioned the 47% same-store increase number for 2020. Do you have that number specifically for fourth quarter over fourth quarter?

Ryan Hamlin: I don't have it handy, but that will be something we can come back with. I know later this month, we'll be talking again with our Q1. And I like that. That will be something we can share with you in our Q1.

James Carbonara: Right. Okay. My second discussion point here again is let's chat a little bit about your guidance, which was $37 million to $40 million on about $700 million in transactional sales, great growth, no matter how you look at it. But the implied take rate in your guidance is about 5.5%, right, which is roughly 50 bps lower than where you ended the year, even more than that on the -- any specific reason for that conservatism are you baking in? Or maybe this goes back to the mix shift you were referring to increased competition? Can you talk about that?

Ryan Hamlin: Yes. It's primarily mix shift that transition from a POB transaction, the point of banking roundup transaction to a Truepin [ph] debit transaction. And the reality is it costs us a little bit more, not only just from a compliance cost to get them onboarded, but just our cost of processing is a little bit more. So we saw both kind of a little bit less top line and a little bit less margin on those. But we think in the long run, that's the better solution. It's a more compliant solution. Frankly, it's directionally where the industry is going and all of our customers that have migrated over to debit are happy because it's to the penny, right? It's a nice solution. And so we feel like in the end, it's going to result in more transactions over time. And given that we really just don't have much of a churn right now, that's going to mean more revenue in the long run for us.

James Carbonara: Yes. Okay. And also on the call, you spoke about a pipeline of 100 stores getting on board over the next 60 days. I think I have that right -- or was it 60 stores in the next 100 days. But of that cohort, you said it's expected to drive about $5.5 million in revenue. And I wasn't completely sure if that was part of your guidance or in addition to it.

Ryan Hamlin: Yes. No. So it was 100 source in 60 days, first of all. But it's - the way we think about it is it's going to drive an annualized $5.5 million. So over the next 12 months, it's 5.5%. So roughly that's going to be poor rated this year, so call it roughly $4 million, and that is included in our guidance. So you can count, so to speak, that $4 million already on the books or booked revenue. It just -- and it will be going live in the next 60 days.

James Carbonara: Okay. So said differently, I guess, looking at your guidance, you've got to increase revenue, $17 million or so, $4 million of that is already spoken for basically.

Ryan Hamlin: Yes. Yes, exactly. So here's how I would kind of do the math. I would say 4 of that's kind of spoken for. We've got about another 300 or so merchants in our pipeline that we're actively working on right now to close later this quarter, which then we'll see the effects of those being rolled out in Q3 and Q4. Then you have to look at our same-store growth, which we just covered, which is that 47% number. So you got revenue increases coming across from just your same stores. We have some new products coming out that we haven't actually modeled. So that's going to be upside to our guidance. And I think I'd say my final point on guidance is as we came out this year and kind of got through some of the hardware issues and some of the onboarding issues of underwriting, we're really seeing this -- for lack of a better word, contracted revenue or that we booked revenue that we want to start to account for. So when we have our Q1 call at the end of this month, we're going to forecast and talk a little bit more about our books because it's important to understand that we have these merchants already under contract. So the revenue is coming. They just got to get through our underwriting. And I guess I would say the other point on guidance is historically, I think this is good. We've been conservative in our guidance. And we - least to date, we've exceeded our guidance every single time we've done that. So we feel good about where we are today. We feel good about where we are so far as we've entered into this year and kind of stand behind that $37 million to $40 million guidance.

James Carbonara: And maybe I'm dumbing [ph] down too much, but could we - or is this something you guys think about internally? Like for every 100 new stores that you sign up, you're going to generate $5.5 million in revenue. I mean, is that kind of a rule of thumb because you got -- what did you say, you have 200 in the pipeline kind of after these 100 I mean that's another $10 million, right?

Ryan Hamlin: Yes, yes. And so the way I would think about it, and you're right, I mean, that math is kind of a simple map to math way to look at it. The one thing that's always going to be the variable is when you land an MSO and those are stores and so you get a higher transactional volume, that 100 stores might generate $150 million in transactional sales versus maybe $100 million. So it's a general rule of thumb that you could kind of do that rough math that way. But with our strategy being really focused on a lot more higher volume stores and MSOs, we would hope that, that's going to go up and obviously be a bigger number than what we're stating today.

James Carbonara: Yes. So besides payment processing, how much of your guidance is inclusive of things like point of service and the kiosks that you guys are putting into dispensaries.

Ryan Hamlin: Yes. The point of sale the PLS is included in our overall guidance. And that's going to be our SaaS fees, or much recurring stasis as well as some hardware revenue. The kiosk isn't the way I view the kiosk because that's all upside. It basically just helps give us more payments penetration. So instead of the customer just paying at the counter, maybe they place an order online and they come and pay at our kiosks. So that's going to be upside. That's all about that 47% growth that we talked about year-over-year in ways that we can encourage our merchants to start to use our debit processing more than cash and create -- honestly, create a much safer environment than what's in place today.

James Carbonara: So how many of the 100 in the pipeline over the next 60 days are interested in these add-on services?

Ryan Hamlin: Again, like you've got an - well, the POS has been really successful. And I think we even addressed this on the call last week, where we had a doubling last year. And we just -- again, we'll have our Q1 stuff coming out, but I can tell you we're having a really nice quarter with our point of sale so far. So which is great. So really good adoption on the POS and the kiosks, we anticipate that more and more of our just stand-alone payments customers will want to use this because it's just another way to be a limebuster, particularly in busy stores that have lineups. If you know what you want, you walk some kiosk, you order it, you pay and you just wait for your name to be called. It's really kind of we're seeing modern retail move that way, a lot of fast food restaurants, McDonald's, everybody is really moving to this kiosk model. So more and more, it's going to be something that consumers frankly expect, and that's why we're the first to market with that to have our payment capability built in.

James Carbonara: All right. Can you talk a little bit about -- I know you and I have China in the past again about kind of how you want to shift the focus away from gross profit margin to kind of absolute dollars. And certainly, doing whatever you did this last year, $5 million change going to, what, 9 to 10, you're doubling it -- but if you look at the absolute dollar increase, and again, kind of throwing it back to the direction you want to change the narrative in, you added about $4 million gross profit last year. Your midpoint in your guidance calls for a little less than that. So like -- and again, we're talking about small numbers, but like $3.7 million. I mean is -- I guess it depends on how confident you are in the outlook for this year. And again, we'll hear more about that in a few weeks -- but is there a sense that you expect this number to maybe accelerate off of last year or kind of be the same?

Ryan Hamlin: No. And a good question. And again, I would say this was probably the #2 most frequently asked question by our investors. And as they should. I mean, I think everybody, as we evaluate companies, you look at top line revenue growth and you look at how is the company being fiscally responsible and how close are they getting to EBITDA and in this case, gross profit dollars. So it's certainly something we don't take lightly, and we talk about it quite a bit. But I will tell you there was a very specific reason why the number we put out was at that 9% to 10%, and it does show, yes, roughly kind of growing by the same amount. But you're right, if you look at pure dollars, it's a little bit less. Last year, we grew 232% over the prior year. So that was a massive year of growth. This year, we're relatively flat, doubling, maybe call it a little bit more than that or a little bit less than that. And the reason is we're in high-growth mode. If you look at companies like us right now where you have a track record of doubling your revenue, you're going from $20 million this year to $40 million next year. You're making great headway on signing up new merchants. The brand is getting more recognized in the industry. It behooves us as a management team to invest in that acceleration of growth. And so yes, we're not saying we're going to be foolish with our money, but we also want to reinvest our revenue back into our business. And as we stated, we want to win larger accounts, MSOs. When you have an MSO that has some price sensitivity. You have to maybe take a little bit of a margin hit to win that bigger account. But in the end, winning that account is going to pay dividends down the road because you're going to grow that account with same-store revenue growth, they're going to add more stores. So we are making an absolute specific called out effort to say we're reinvesting that capital. And yes, we're going to have a little bit less total growth, but we're still going to come in at a strong 9% to 10%. And again, I would hope that like we always do, historically beating our guidance, and that's certainly kind of our goal. So that's why we made this shift. And I think, I guess someone reminded me that when Square went public, their gross margins were about where we are ironically And so I guess it turned out okay for them. Not saying we're going to be to be square, but let's hope so. But this is very common, right? This is common for companies like us. You invest to grow and you do it in a fiscally responsible way.

James Carbonara: Yes. Well, that's a good comparative data point, like it. Let's shift over to kind of some of the pressures on the business. We've already talked about just the industry cannabis pressures over the last 6 to 8 months. Again, you've mentioned -- you just said March was at one of your best months ever. I had a large MSO telling me that they saw a 15% average price increases in March. So it looks like things are flattening out or at least not getting less bag, so to speak. And it sounds like you have seen that. But what are the -- besides just the overall market impact, what else is impacting or could really hurt the guidance you've given out there. So maybe talk a little bit about competition. You mentioned going after larger MSOs. I imagine they squeeze you more than mom-and-pops do. Any pushback from your revenue sharing partners? If you could talk candidly to us a bit about that.

Ryan Hamlin: Yes. So a couple of things there. I think the first is correct. I mean what you said March was -- and I mentioned as March was our highest month growing about 22% over February, Highpower for us. So we're definitely coming out of it. I don't know if you can -- consumer spending habits maybe are coming out at the end of the year after the holidays, have a little bit more free capital. I'm not sure what it is, but we're definitely seeing it maybe some of the end of the year MSO pressures are kind of relieved a little bit. But yes, so we're seeing definitely the trend coming out, and that's good. And we'll share more in our Q1 at the end of the month about that. Competition you brought up -- for us, it's an interesting question because we compete actually in 2 pretty different areas. One is our point-of-sale business, which is a traditional SaaS business, and the other is our payments business and which is transactional fees. On the POS side of it, competition wouldn't lie, I hear, mean it's competitive. There's definitely 10 to 20 different POSs out there, I would say probably 10 kind of notable ones. And we're in the probably the 5%, 6%, 7% range right now as far as where we fit in. And so we know we have room to compete and win, and our plan is definitely to get into that top three soon but there's competitive pressure. So when you're competing in that kind of space, you've got to remember the cannabis industry only has 9,000 retailers. So you've got a relatively small market with a lot of competition. So what does that do? Usually, some people do price drops and give away software for free, give away hardware for free. We're not doing that. We think we have a great product. We will win on the quality of our products. But yes, that kind of POS pressures are being felt by us as we go out in the POS market. On the payment side, kind of the flip side of that, though, is we're still -- there's not a lot of competition, particularly in the true debit space. There is the POB competition out there and they're being successful. They're still out there. But the biggest competition is still the ATM in cash. I mean when you look at these stores, it's surprising that still probably 70% of all transactions are still cash-based in this industry. And so it's creating safety concern issues here in the state of Washington, we've got 80 stores broken into in just the first part of the year. So a little bit of a side topic to your competition, but I think that helps us. I mean, as we are out there promoting our cashless services and our ability to make it a safer environment for our customers, we're seeing we can win in that space when it comes to this straight competition because we can compete against cash. The last thing I think you mentioned was just around some of the MSOs, and I kind of mentioned that already, but we made the decision as an executive team last year -- really the second half of last year to really focus on MSOs, and we've landed a few. One of them, I mentioned on the phone last week, Loom, which is the largest chain in Michigan. We have a couple of others, and we hope to announce some of that in our Q1 or at least talk about some of our MSO wins recently. But to win those deals, they take a little bit of time and they take a little bit, like I said, margin squeeze. But in the end, we think that's the right trade-off.

James Carbonara: How about - the other thing I noted where your operating costs in the quarter were -- went up quite a bit. you earlier, you talked about just investment in the business, and I imagine that's what it was. But maybe talk a little bit to why they're up so much? And do you expect that to flatten out a little bit in the next few quarters.

Ryan Hamlin: Yes. That's a great question for Matt. Matt in next and who wants to talk. So I'm going to let him answer that one as well.

Tom Carrol: Tom, Yes, our headcount did increase, which drove our OpEx. Q3, we had about 33 employees. That grew to 41% at the end of Q4. So we're up about 24% in headcount. We've been bringing on these additional head count to support our growth, which really accelerates the revenue generation. These new team members are primarily in sales, product development, underwriting and the onboarding all those items that make the revenue flywheel move a little faster. It does take a little bit of time to onboard these 18 members and get that flywheel moving. And as Ryan mentioned, we saw that impact in our March results. Another item that increased during the quarter as personal fees. This was tied to just no legal work that was needed for contract negotiations with those large MSOs. We also did some redesign work on our birthing agreements, and that was really just to make them simpler and more efficient. In addition, we saw a higher stock comp expense. That was tied to bringing on new headcount. And it's important number, of course, that is a non-cash expense. In addition to non-cash expenses, there is the derivative liability. I think...

Ryan Hamlin: The with the drive liability - this is because our convertible debt that we did was in U.S. dollars, and it is settled in shares in Canadian dollars. And because of this U.S. to Canadian dollar exchange rate, it is not possible to estimate what the true conversion will cost us. Under IFRS, we are required to mark-to-market that adjustment every quarter and that's make expense or gain from that conversion of those shares. And this is, remember, a non-cash adjustment, but it does flow through our P&L. In short, the increase in our share price is that is one of the main inputs in the derivative liability has really amplified this in our financials? Norman all they wanted to know about derivative liabilities.

Tom Carrol: Well, again, I think the main point there is non-cash.

Ryan Hamlin: Correct...

Tom Carrol: On that particular item. Yes.

Ryan Hamlin: So actually, I just -- I have a follow-up on something you said, Ryan, a little earlier. We talked about the however, 8,000, 9,000 cannabis retailers in the country. I think half of them are in California and Oklahoma. What states -- I mean, are you continuing to focus on those particular states into this year? Or do you expect to maybe migrate to some of the new markets that are -- like New Jersey, they're transitioning from medical to adult use and hopefully some other states come November.

Tom Carrol: Yes. No, good question. we are in 18 states today, just to remind all of our investors and on the call last week, I said we're going to be migrating into 8 to 10 new states this year. New Jersey is a great example of that, right? Where they're just opening up now. Another one that just opened up in April was New Mexico. We were there day 1. We already have a pretty good presence already in New Mexico. So our philosophy is to be there on day 1, when a lot of these new states open. And then for the ones that have been out there already, we already have a plan that we're addressing and looking at each of the markets. But specific to your point about Oklahoma, California, we kind of joke and laugh about that. But honestly, Oklahoma, and we do have a fair number of stores in Okoma. -- so I hope I'm not upsetting anyone from Oklahoma or anyone that might be listening on this call from there. But that model is not probably the ideal model of having 1,400 dispensaries in a very small state. You literally have more dispensers, I think, than Starbucks in that state. But we look at them and we evaluate a couple of things, the market size, market opportunity, who are the big strategic players are the MSOs here? Are there a handful of stores that would drive high revenue if we sign them up from a payment standpoint. What are the specific needs that we have to do from an engineering standpoint to be ready to serve that market. Those are all the things that go in -- factored into that decision. So yes, we are -- our West Coast, that's where we started. So we have a heavy presence in Washington, Oregon, California, Arizona, Nevada, Colorado, those are our big states, clearly, but we got that large franchise in Michigan. So now we have the #1 store in all of Michigan with Loom. So we're definitely making inroads more. And I think I even said on our call last week, we're really going to focus on the mid-Atlantic, East Coast states really this next year.

James Carbonara: So I thought of another philosophical follow-up. Does it matter between whether you want to focus on limited license states that might have fewer dispensaries and cultivators but drive higher prices over the longer term versus states that are more open to having many licenses and many dispensaries. And maybe it's a price volume answer. But have you guys internally thought about that longer term?

Tom Carrol: Yes. I mean I would think it's very similar to how a lot of businesses think about entering into a new state. We look at the market to us, Nevada is a great example where there's not a whole lot of licenses, but the ones that we do have, for example, we have the reef. And the Reef is probably the second largest store in the United States. And so having a store like that is very strategic for us. So yes, we look at it as not just appear how many dispensaries are in the state. We try to look at is what's the real opportunity and how can we meet that opportunity at a fast pace, right? How do we accelerate our growth? And does that stake make sense for us to enter into?

James Carbonara: All right. That's great. Just looking at the clock here, why don't I hang it up for now? And thank you, Ryan and Matthew. I really appreciate your time again. And operator, maybe we can open it up if there are any questions.

Operator: Certainly. [Operator Instructions] Your first question is coming from Joshua Horowitz from Palm. Our line is live.

Q – Joshua Horowitz: Thanks, everybody, and thanks for taking the time to put this event together. I think it's very helpful and great progress on all fronts. I had a question on the CBD business. Yes. A couple of weeks ago, the announcement was made about moving into that vertical. Maybe you can talk a little bit about what's attractive about it and if you've been able to win any business? And if so, who are you taking business away from?

Ryan Hamlin: Good question. Good job with you, Joshua. Yes. Let's talk about a couple of things. One is just the industry itself. So the industry, I think it was Forbes that came out with their numbers, not too long ago. I think it's $4.5 billion of the CBD industry. If you compare that to the cannabis industry this last year at, call it, $22 billion, $23 billion. So you're looking at a market that's probably 25% of the total canvas market. So it's a real opportunity, and it's why we decided to go into it. So it's not small, but it is smaller than recreational cannabis. The other reason we decided to enter that market was they have the same needs, frankly, that a traditional recreational store needs. They need a great POS. They need to be able to track their products through great inventory management, they need to be able to track their customer information. So it's not typically a POS that just Clover or a Square or somebody would use. It does require more of the compliance-related technology that we had already built for recreational cannabis. So it made kind of a natural step for us to do that. The second thing is they need payments, too. And while payments are a little bit more friendly in that space, which is great, we were able to secure the ability to do credit card processing in a traditional CBD environment, which is a huge win for us. So we will and have started to process on the credit with the CBD side. So we won a couple of reasonable size. In fact, we won one account, which I think is over 20 locations. That's a CBD retailer that I'd love to give the name, but I haven't got their permission. So I can't say their name, but I can tell you that it's a chain of over 20 stores that we have won. So yes. I mean I would look at CBD, by the way, as upside in our forecast in our guidance. Matt sitting next in the years as our CFO. And I know we didn't really model anything into our guidance for CBD in this year. But part of that is opportunistic. We're going to enter those markets, start processing for them, have our POS out there and then see that this business could be a pretty interesting business for us as we go into the next couple of years.

Q – Joshua Horowitz: Thank you.

Operator: Thank you. [Operator Instructions] Your next question is coming from Chris Bolster [ph] from Propel Advisory. Your line is live.

Q – Unidentified Analyst: Thank you. Thanks, guys, for arranging this. It's really great to have the opportunity to ask a few questions because there's not that much information about the company out there. A question about when legalization happens. Do you see the importance of POS being even higher as a means of funneling transactions to pass a bit rather than other new entrants when the payment space perhaps becomes more competitive?

Ryan Hamlin: Yes. No, good question. And thanks for actually bringing that up because we did get a few people talk specifically about legalization. So I'm going to - probably two things real quick. I mean I'll give you my 2 second on legalization even though that wasn't your direct question. All I'll say is, obviously, we're supportive of federal legalization. We think it's a good thing for our country as we open up. I think it's going to be a good thing for our market because it's going to probably double -- at least double the size of the market for us that we can go after. The flip side of that is, I think it's been challenging to have any form of legalization or even the Safe Banking Act make much progress. I would say that we'll see what happens. We have midterms coming up. I'm not expecting a whole lot of change anytime soon. But let's -- to your question specifically, let's assume legalization does happen. Yes, it's definitely one of the reasons why we've continued to make our investment into the POS. We think it's strategic -- the POS is the hub of the business. And traditional POS is like a retail POS that you might run in a coffee shop or at a restaurant, they're just not going to meet the need of the cannabis industry because even when you're legalized, you're still going to have all of the compliance and regulatory requirements, much like you do in a pharmaceutical industry, Oregon and some other like alcohol tobacco kind of industries where all those sales have to be tracked. There's taxation that's very different in this space than a traditional retail environment. So the amount of work you have to put in your POS to make it work in this environment is substantial. And so yes, we think the POS is a hub. We think that we -- in a leadership role, we continue to be able to fend off the competition even from the bigger guys, so to speak, when they come in post utilization. I think you have been to is payments, right? So having our payments business out there, it puts us in a really good position as payments open up and things like say banking pass and credit becomes available, we can instantly plug that in because we have that known relationship with that merchant today. We understand their banking needs. We already have their banking information. We've already underwritten them. So it really puts us in a leadership role as we go forward even post legalization.

Q – Unidentified Analyst: Thank you for that. So maybe a quick follow-up, if I might. Just thinking purely about the POS and perhaps also the software for managing operations, payroll and inventory and things like that. But excluding the payments piece, how strong do you see your competitive position vis-à-vis some of the leading competitors, especially, I think Dutch is number one. There are a few others that are close on their heels like BioTrack and Flowhub, and MJ Freeway and so forth. But how would you say you stack up against particularly Dutchy but some of the others? And then what are the most significant strengths you would cite that would make a dispensary choose you over some other solution in this very competitive market.

Ryan Hamlin: Yes, good question. A couple of things. And I think I mentioned even in the last call, the POS market, you're right, is very competitive in there. And Dutch,, you said that correctly, I would put them in the lead position, particularly when they did the acquisition of Lease Logic and Green bit. So it definitely accelerated their presence in the industry. we position ourselves probably right now, like I said, in that kind of 5, 5, 6, maybe even 7 position. So if you're just looking at sheer numbers, position us that way. If you look at us from a feature by feature and just put us up next to any POS out there, I would stand behind ours, and I'm not going to tell you we're the best across the board, but we definitely will compete and do compete with the leaders. I mean, we compete with Dutch and will beat Dutche sometimes they'll beat us. But we're there in those conversations, which really matters right now. I think the big differentiators for us is we've made it very clear that we are going to be the open platform in this industry. We're not going to force our customers to have to use any one particular thing. So if you like your loyalty, let's say, with Springbrig, you can have Springbrig fully integrated into our solution. That's not something that Adachi and others can do. And so we've made the choice to be a very open platform and compete on that. We think consumer choice and, frankly, merchant choice is going to win at the end of the day. So that's our big differentiation. Our -- we have a lot of key features we've been building out for multi-franchise and for MSO. We think that's going to be a big differentiator for us as we go forward. Clearly, our integrated payments is a huge differentiator that a lot of others in the POS space can't bring to market. So long question, but - or a long answer to your question, but that's kind of where we stand. If you just want to look at numbers, we're probably in that fifth to seventh place. If you're looking at feature by feature, I would put us up against anybody in the industry.

Q – Unidentified Analyst: Thank you

Operator: Your next question is coming from Scott Weis from CIMCO Capital [ph]

Q – Unidentified Analyst: Hey, guys. Thanks for doing the call. I appreciate it as well. Following up on the POS discussion, can you talk about the margin differential between the POS business and the traditional processing? And what is the current revenue mix today? And how do you see the mix in 12 months and in 24 months?

Ryan Hamlin: All right. Good to talk to you, Scott. Yes. So a couple of things. So margin, definitely better margins on the POS. That's your traditional kind of SaaS revenue. So you're going to get margins in the 60% to 70%, which is kind of traditional, even sometimes higher than that. And if you look across the board, that's kind of what you would expect for POS. Obviously, the margins on the payment side, much harder because we're paying a lot. We're paying interchange. We're paying our processor fees. And we have our referral programs out there, driving inbounds. We have our software hosted fees there. So that's why our margin and we probably stated is that 9 to 10, call it, 25 to whatever x percent. So definitely, that's kind of your mix shift between -- or your mix between your POS and your payments. As far as how we see that going, I think you talked -- the next part was how do we see that in 12 months overseeing 24 months. I mean our business today, as you know, Scott, when we've talked, I mean, we -- a lot of our revenue today is driven off our payments business. I mean we started as a payments company. And frankly, that's how we learned the industry and cut our teeth and then we added a POS. And the good news is even though we were somewhat late to the game in the POS market and entering 2018 we've really covered a lot of ground. And so now we're becoming more and more of a really interesting player in the POS space. So the mix on the revenue side is still not very much on the SaaS, but maybe 900 or 910 from -- if you include kind of your SaaS fees and hardware. So we're still predominantly payments. As we go forward, as I already shared, we're making a lot of progress for the POS. So I would see that transitioning in the next 12 to 24 months, maybe get into that 80-20. But if you look at traditional businesses out there, payment still is a high revenue business, and it's where you make your money. It's the transactional side of it. And SaaS businesses, I always give the analogy of like a locomotive. It takes a lot of work to get them up the hill, but once they get gone, they really just kind of continue to pay with those recurring revenues. So we're still pushing up the hill a little bit, so to speak, to use that analogy with the train. But I do think those SaaS revenues are going to kick in. And eventually, we'll get to maybe as high as 70-30% on 30% and SaaS and 70% of payments.

Q – Unidentified Analyst: Great, thanks And then second question - can you provide an update on the NASDAQ uplist and the latest there?

Ryan Hamlin: Yes, I was going to wait for somebody to do that. Matt, do you want to take that one?

A – Unidentified Company Representative: Sure. Yes. We're continuing to explore the possibility of a NASDAQ uplift. When appropriate, we'll update the market on that. We're also exploring other opportunities to help improve liquidity of our stock and the tradability, but there's no comment on that now until it's appropriate.

Q – Unidentified Analyst: Okay. Thanks, guys.

Ryan Hamlin : Thanks, Scott. Other questions? I know we've just got a couple of minutes left.

Operator: Certainly. Your next question is coming from David Johnson. Your line is live.

Q – Unidentified Analyst: Hey, Ryan, David Johnson. Good job. Thanks for the great results. My question was related to the NASDAQ listing so I don't have another question. Thanks.

Ryan Hamlin: No. Well, it was good talking you, David.

Q – Unidentified Analyst: Thanks.

Operator: Thank you. Your next question is from Joshua - sorry, your next question come from the...

Ryan Hamlin: Yes. I guess I would just say we're just - yes, we can wrap it up here shortly. If there's any other remaining questions we're a little over time, but we'll take maybe one more question.

Operator: Certainly. Your last question is coming from Joshua Horowitz from Palm.

Joshua Horowitz: Thanks. I just had a follow-up. As you talk about that and some of the other ones, I'm just curious, like if we were a private company and we went to a venture fund or something and said, we need $25 million. What forward sales multiple would they put on this company if it was private?

Ryan Hamlin: Great question, Joshua. I think if you - we already mentioned Dutch let's just - Dutch raised, I think, at $3.4 billion, $3.5 billion, and they've raised several hundred million, but I think that multiple was like literally in the three digits, like 100 times multiple to get to that that valuation. I think others out there that are raising money that I see right now in this private sector, they're raising at 20 to 30 times. And here we are. So we're positive, we are public, and that's fine. We've made that decision. But yes, I mean, right now, as you guys can see, buy our stock, we're trading at like 4 times, 5 times or multiple. So yes. I think Dutch Matt helped me out there, that she traded, it looked like it was about 100 tons multiple on their sales. So yeah. It's kind of crazy. But yes, that's what it is.

Tom Carrol: And there's nothing particularly special about it versus our capabilities or growth. It's not like they have something that we only have that.

Ryan Hamlin: Yes. No. I mean I think, if anything, they have distribution, Dache, when they made their acquisition of LeafLogix and Greenmix [ph] that gained a lot of distribution from those existing players. But yes, I mean, again, like the previous caller had said something about how we stack up, I'll stack our technology up any day against the competitors out there in the POS space. And then we clearly have a lead in the payment space, and we've kind of proven that execution over the last 5 years that I said. The last thing I will say is we've done everything and got our company to where we are today and literally on about $8 million in funding. So I think we've also proven to our investors that we're fiscally responsible, and we make good business decisions with the limited cash we've had, and we've reinvested in our company to create the growth that we have today.

Joshua Horowitz: You've done a phenomenal job and all the shareholders are very appreciative. It's really been a great story again execution. So thank you.

Ryan Hamlin: Thanks, Joshua. All right. Well, I think the operator, I'll hand it back to you, but just I guess my comments for just thank you, everyone, for joining on this call. I really appreciate it. And again, I apologize for the staff. And I look forward to talking to you, hopefully, all of you again at the end of the month when we release our Q1 earnings.

Operator: Thank you. Ladies and gentlemen, this concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.