Ryvyl Inc. Q2 FY2024 earnings call

Ben Errez:

• RYVYL EU continues strong growth and is expected to be the largest revenue generator in 2024. Leveraged US resources for EU customer onboarding. International Banking-as-a-Service offering led to increased customers and transaction volume. Completed first Visa Direct integration and is live in 5 countries out of 80, with plans for more integrations. Expanded partnership with Visa and implemented Visa payment enabler network. Collaboration with ACI worldwide contributed to international growth. Coyni payment software deployed in Europe. In US, strengthened corporate structure, expanded into new verticals, launched private and white label licensing, rightsized US operations, and hired fintech experts.

Fredi Nisan:

• RYVYL Generation four software is the backbone, offering customizable fintech solutions. NanoKard app provides prepaid gift card processing for merchants. RYVYL Fabric is a cost-effective blockchain solution. Expanded PayFac-as-a-Service, revamped European banking system software, added new verticals in Europe and US.### George Oliva:
• Processing volumes across all channels reached $1.055 billion in Q2 2024. Revenue in Q2 2024 was $11.9 million vs $14.8 million in Q2 2023. Gross margin was 39.9% vs 41.2% in Q2 2023. Operating expenses in Q2 2024 were $15.6 million including non-cash charges. Adjusted EBITDA was negative $1.6 million vs $900,000 in Q2 2023. Repatriated $2.5 million from Europe to shore up US capital resources. Retired $200,000 of debt and $875,000 of preferred stock.

In the second quarter of 2024, total revenue was in line with expectations. International revenue saw 134% growth compared to Q2 2023, with International processing volumes increasing from $665 million in Q1 2024 to $781 million in Q2 2024. International revenue for Q2 2024 was $8.9 million. North America was affected by US banking regulations, with revenue impacted but the company implementing a strategy to address it. The Banking-as-a-Service offering contributed to international growth, including API integration and foreign exchange services.

• Anticipate processing volumes to grow year-over-year to over $4 billion in 2024. 2024 total revenue expected in range of $65 million to $70 million. Q3 revenue projected to be $14 million to $15 million sequentially. Q4 expected to be very strong with accelerating momentum into early 2025. Expect adjusted EBITDA profitability in Q4 2024. International segment expected to be the largest portion of revenue in 2024.

• US banking regulations impacted North American revenue and required a multilayered strategy to address. Regulatory challenges in different verticals, especially in the US niche industry. Dependence on Visa's deployment pace for International initiatives, as Visa is rolling out infrastructure slowly.

Q: Good afternoon, gents. Thanks for having me on the call. So, help me understand what's happening in the U.S. exactly and how you feel you're getting your arms around it?

A: Hey good afternoon. Thank you for the question as always. In the U.S. due to certain regulations and compliance, we as a company decided to license the technology to an entity that have the infrastructure and doing it for many years to utilize our technology to run the business faster easier in more compliance way and reduce certain burdens from our side. We decided to do that because of the challenges that exist and the instability that we see moving forward if we stay in that vertical. For those reasons, we decided to license. We maybe make less money on it, but it will be stable and we can rely on that revenue for a longer time, less the burden of compliance regulatory environment changes that may occur moving forward. And that recovery takes a little bit longer due to some challenges in going live on the banking side, on the partner side. But other than that I think we're on track to recover in this vertical, in this niche.

Q: Okay Fredi, do you think that licensing agreement is exclusive? Or is there an opportunity for you to offer it to other players to capitalize more on transaction services and processing in North America?

A: This license was issued to our partner only in the retail environment, only in the current present -- or what current present environment. The moment the regulatory environment change to offer a little bit more support to the B2B, we will look into -- if we want to run it as a company for example or are we want to give it to our licensed holder to do so. We have enough verticals. We support this specific vertical. It requires extra time and effort in the compliance and regulatory environment. But at the moment, it's an exclusive license in the retail space. It's more on the retail and e-commerce.

Q: Good afternoon gentlemen. I guess going back a little bit in history and it maybe ties in with your high-risk opportunities. But what have you learned about the closed loop system? And how does coyni play a role in that in developing that type of program for high-risk customers?

A: This is Fredi this is a great question. Coyni started as a stable coin and was with the focus on make that software or that platform available in a closed loop for high risk. In the U.S. due to changes in compliance and as you know banking and crypto, they tried to stay away. We rebranded that coyni U.S. to what we call NEMS score. We're going to use that post loop in the payment environment to offer more services. But we took the coyni platform and deployed in Europe. We are fully licensed in Europe as the crypto exchange or crypto-licensed, let's call it, to be able to hold what they call tokens of crypto. In our case, it's coyni. And due to some changes now called MiCA regulation in Europe that's related to stable coin or cryptocurrency, we are implementing those. But the goal and what we see is in a closed loop environment is easier to onboard on and off ramp money, because it is more secure visible to the government visible to the bodies that oversee certain aspects of that. That's why they changed what they call MiCA regulation. It's more visibility into the ecosystem. And we believe that that structure will be adopting many, many use cases in the financial structure, including JPMorgan just released their coin and other banks and institutions will do similar things to have a better risk oversight, and of course, compliance oversight on the ecosystem.

Q: Okay. Well that sounds good. Interesting. And what are your opportunities in South America and what are the regulations like I guess compared to Europe and the U.S.?

A: Each country has their own structure and limitation, but using the Visa network, Visa is doing the heavy-lift. Visa is the body that work with the regulation and the regulatory bodies in each country. Visa is working on with us to deploy in 80 countries, and they are the body that was assigned by the government or by the banking regulatory bodies in each country to basically oversee the compliance and the structure and how money moves, and AML policy, BSA policies. And that's why they allow money to move that quick, because Visa took the responsibility for that. And I think if you go directly to each country you will face a lot of scrutiny and a lot of difficulties to operate in those countries.