Ryvyl Inc. (RVYL) Q3 2022 Earnings Call Transcript

Ryvyl Inc. (NASDAQ:RVYL) Q3 2022 Earnings Conference Call November 21, 2022 4:30 PM ET

Company Participants

Ben Errez – Chairman

Drew Byelick – CFO

Min Wei – COO

Fredi Nisan – CEO

Jacqueline Reynolds – Chief Marketing Officer

Conference Call Participants

Howard Halpern – Taglich Brothers

Kevin Dede – H.C. Wainwright

Chris Sakai – Singular Research

Operator

Good afternoon, ladies and gentlemen. And welcome to the RYVYL Third Quarter 2022 Earnings Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following management remarks, the conference will be open to questions. The earnings press release accompanying this conference call was issued at the close of the market today. The quarterly report which includes the company’s results of operations for the three months ended September 30, 2022, was filed with the SEC today.

On our call today, are RYVYL Chairman, Ben Errez; Chief Financial Officer, Drew Byelick; and Chief Operating Officer Min Wei.

I’d like to remind everyone that statements made on today’s call and webcast, including those regarding future financial results. And industry prospects are forward looking and may be subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call. Please refer to the company’s regulatory filings for a list of associated risks. The replay of this call and webcast will be available for the next 90 days on the company’s website under the Events section.

At this time, I’d like to turn the call over to Ben Errez, the company’s Chairman. Ben, the floor is yours.

Ben Errez

Hello, and thank you for joining our third quarter 2022 financial results conference call. It is a time of tremendous momentum. And I’m delighted to share an update during this our first earning call as RYVYL. Earlier this year in our CEO letter, we know that 2022 would be a year of repositioning for our company, as we look to put in place the infrastructure necessary to disrupt the traditional financial payment landscape. Today, I couldn’t be more pleased to report to you our significant progress towards that transition and the key achievements we have accomplished during the third quarter.

To begin, the core metrics that we focus on the RYVYL is the growth of our processing volume. In the third quarter, we once again set a quarterly record processing volume of nearly $1.3 billion. For the first nine months of 2022, we processed nearly double the transaction volume compared to the same period in 2021, highlighting our technology’s potential scalability, an incredibly successful internal sales and marketing team driving the adoption of our leading edge blockchain financial solutions. To note, this also represents an approximate 30% increase from the second quarter of 2022, an indication of our remarkable growth, even during a challenging macroenvironment.

Given the remarkable growth we’ve seen in the past two years, with the continued advancement of our technology and payment solutions, the forming of new partnerships, expanding geographically and the hiring of key personnel, we knew the time was right for the evolution of our brand and identity. To that end, at our recent Annual General Meeting, we received resounding shareholder approval to rename the company RYVYL. This initiative was spearheaded by our Chief Marketing Officer Jacqueline Reynolds, who worked tirelessly to deliver on high expectations to create a world class brand that we believe is unparalleled in the FinTech industry.

This process is vital to the next phase of our expansion, as RYVYL showcases the continued development of our payments solutions, remarkable stablecoin and blockchain processes and offerings to a global audience that we have already began to pursue aggressively. You can expect the launch of our new RYVYL website, along with the new social media platform and heavy public relations activities, and with a number of other launch activities, as we strive to drive awareness in the weeks ahead.

Shifting gears now to the Territorial Bank of American Samoa, TBAS. You may recall that in our second quarter commentary, we discussed a significant traction made with 30% market share as the island’s exclusive payment technology provider. Now, at the end of the third quarter, we are ecstatic to report that we have achieved nearly 50% market share. This is extremely significant for the island territory, as they look to modernize their economy with our innovative stablecoin and blockchain-based payment solutions. These cashless payment solutions reduce costs, improve settlement times and introduce new level have security for the residents of the island.

A surge in market share over the short time since the deployment of our technology not only demonstrates the focus and diligence of our team, but also the appetite of the developing economies, who are adopting our unique technology as a reliable and trusted solution. Our closed loop RYVYL ecosystem in American Samoa will serve as an ideal case study for our solutions, and pave the way to take advantage of opportunities around the world.

This leads me to another keynote achievement during the third quarter, which we expect to be a transformational growth driver for RYVYL. October, mark the launch of Coiny, our USD-pegged stablecoin which is available for download on Google Play, and the Apple App Store. Businesses and individuals alike can now enjoy the speed and security of blockchain payment transactions, along with the stability of the U.S. dollar from the palm of their hands and on their desktop.

One of the most significant points of distinction is that Coiny became one of the industry’s few to ensure near real time custodial account at the station via LinkedIn review of IT compliance, and specifically SOC 2 Compliance Certification from Armanino, the top accounting consulting and technology firm in the U.S.

Now what does that mean? Each coin a digital token held in a wallet on the platform is matched with one U.S. dollar held in a custodial account with a federally insured financial institution. The dollars back in Coiny are not tied up in investments and are not converted to other cryptocurrencies. Competing stablecoins that have not utilized the safety and compliance measures have failed, leading to severe market disruptions.

Thinking of this and the heightened attention to company balance sheet and cash flow in the current market environment, RYVYL took the initiative to renegotiate and restructure the terms of our $100 million convertible note financing, which we originally entered into on November 2, 2021. Through cooperation with our noteholders, we were able to come to terms to extend the maturity by one year to November of 2024, while also securing a highly valuable option to pay interest in stock, therefore reducing the cash interest expense burden and providing a significant improvement to our financials.

Additionally, and again, in the context of today’s market environment, I’d like to discuss our growth strategy. Historically, we’ve looked to grow organically and with select acquisitions to accumulate processing volumes, such as ChargeSavvy, Sky Financial, and key licensing assets like Transact Europe. In contrast, given the soaring cost of capital, raising funds to pursue acquisition no longer is as much of a focus.

With the launch of Coiny are truly differentiated stablecoin, our new brand identity and increased global capabilities, we believe the best path to continue to quickly scale is through relationships with well-established payments companies that benefit from our advanced infrastructure and technology.

In addition, we will continue to pursue select M&A strategies suitable for the current market conditions. As we continue to evolve our growth strategy, we will report more of the details of this shift.

With this, I’d like to introduce Drew Byelick, our new Chief Financial Officer, whom we brought on board in the third quarter of 2022. Drew brings a tremendous depth and breadth of functional and industry experience with startup and middle market global software, technology, and other industries. We’re truly thrilled to have his incredible experience on the team. Welcome Drew. Please take a moment to walk us through the details of our financial results.

Drew Byelick

Thank you for your kind introduction, Ben. I’m excited to be part of the team. My portion will be limited to key results of our financials. A full breakdown is available in our 10-Q filing and in the press release that will be distributed at a later date. Here, I’ll be referring to adjusted EBITDA and other non-GAAP measures. For the calculation of the adjusted EBITDA and other non-GAAP measures, please refer to the 10-Quarter MD&A which will be available on the company website under the SEC filings.

Our Q3 revenue grew to a new company quarterly record, increasing by $2.6 million or 32% to $10.6 million for the first three months ended September 30, 2022, from $8 million for the first three months ended September 30, 2021. Revenue for the nine months ended September 30 2022, increased by $3.3 million, or 17% to $22.5 million from $19.2 million for the nine months ended September 30, 2021.

The change in net revenue includes $2.9 million in penalties and fees charged to merchants in accordance with our standard service agreement for transaction fraud and minimum activity fees. Also contributing to the year-over-year growth or increases in processing volumes compared to the same three month period in 2021, offset by lower commissions from a processing partner.

Gross profit for the three months ended September 30, 2022 was $6.4 million, or 59.8% of total net revenue compared to the gross profit of $5.6 million, or 69.9% of total net revenue in the prior year same period. Gross profit for the nine months ended September 30 2022 was $11.5 million or 51.2% of total net revenue compared to gross profit of $13.8 million or 72.2% of total net revenue in the same quarter a year ago.

Our cost of net revenue gross margin will be primarily driven by our negotiated commission structure with ISOs, which are independent sales organizations and gateway fees. The decrease in gross profit was primarily due to higher processing fees paid to gateways and commission payments to ISOs.

Now let’s shift gears to our operating expenses. Once again, I would like to point out that our operating expenses are not directly correlated with our net revenue, primarily because of our scalability of our revenue from a small number of employees due to our technology, and the business we are in. We distinguish our operating expenses into two categories, ordinary operating expenses, and non-cash operating expenses.

Ordinary operating expenses include marketing, research and development, payroll, professional fees and general expenses, while non-cash operating expenses include stock compensation expenses for employees, and for service providers, as well as including depreciation and amortization.

Ordinary operating expenses were $6.5 million and $3.9 million for Q3, 2022 and 2021 respectively, an increase of $2.6 million. Our ordinary operating expenses were $21.9 million and $9.2 million, but the nine months ended September 30, 2022 and 2021 respectively. The increase of $12.7 million was due primarily to software development, marketing expenses related to rebranding and payroll and payroll taxes. Non-cash operating expenses for nine months ended September 30, 2022 decreased $9.2 million from the prior year nine months due primarily to lower employee stock compensation and stock issued for services.

We ended Q3, 2022, with a loss from operations of $3.1 million compared to a loss of approximately $2.8 million in the same quarter the prior year. For the nine months ended September 30, 2022 we culminated with a loss from operations of $18 million, compared to $12.2 million in the same period the prior year. The increase in net loss from operations is due to increased operating expenses.

Other expenses of $8 million for the nine months ended September 30, 2022 increased by $4 million over the same period prior year. Interest expense related to the $100 million convertible note issued in November of 2021, amortization of discount fees associated with the note and the derecognition expense on conversion of a convertible debt were offset by favorable changes in the fair value of derivative liability of $14.6 million for the nine months ended September 30, 2022 and none in the previous year same quarter.

The company sustained a net loss us for the nine months ended September 30, 2022 of $26.1 million or $0.59 per basic and diluted share, compared to a net loss of $19.4 million or $0.49 per basic and diluted share in the same period the prior year. The company recorded a net loss in the third quarter of 2022 of $15.2 million or $0.32 per basic and diluted share, compared to a net loss of $6 million or $0.14 per basic and diluted share in the same quarter a year ago.

The increase in net loss for the nine months and Q3 ended September 30, 2022 was primarily due to increases in research and development, interest and other expenses related to the $100 million note, general and administrative, payroll and payroll taxes and professional fees as we continue to add staff and infrastructure related to our growth offset by the favorable change in the fair value of the derivative liability.

Adjusted EBITDA for the third quarter was a loss of $0.1 million just short of breakeven. We ended the quarter with cash and cash equivalents of $37.6 million as of September 30, 2022. And in summary, our financial position remains strong and we remain well positioned for future growth and profitability.

So with that, I’ll turn the call over to Min Wei, our Chief Operating Officer to provide review of a business operations and the outlook for the balance of 2022.

Min Wei

Thank you, Drew. As I have done in in conference calls, I’d like to take this time to walk us through the material revenue contributors and provide an update first, before turning to our outlook for the remainder of the year.

Q3 volume across all channels is about $1.3 billion, about 35% ahead of our processing targets for the prior period. On a year-to-date basis, our processing volume hit nearly $3.1 billion, which is approximately 38% higher than our processing projection, while compared to the volume for the same nine months of 2021, we’re looking at a 98% improvement. Our acquiring business, Q3 volume, including the Sky Financial portfolio, is $685 million, which exceeded our expectations by about 12%. ChargeSavvy is also approximately 14% higher than planned, processing $64 million in Q3. When compared to the same period in 2021, this quarter’s volume is 42% more favorable.

In our ACH business, we saw a 47% increase over Q2, with volume at $25 million in Q3. We’re currently in the process of moving our service to a new processing channel to increase processing capacity. As a result, we are behind the targeted monthly volume of $50 million. When the new platform is ready in Q4, we expect processing to pick up steam. For our FX and international payments business line, including Transact Europe, we reported over $500 million in business volume, of which $480 million is attributable to FX conversion and international payments transactions. This volume is 53% higher than our original budget estimates for the quarter.

Now, let’s update on American Samoa. We are incredibly pleased to share that our services have been rolled out to over 240 merchants, representing approximately 50% of the overall merchant target market. This Phase 1 goal was achieved ahead of our schedule, and in Q3, we were able to process nearly $17 million for the businesses and residents on the island. This is an amazing accomplishment as we literally launched from a zero baseline at the beginning of Q2.

Getting back to Coiny, our development, marketing and operations teams work days, nights and weekends to launch the platform on time and as promised before the end of Q3. Since the initial launch, we’ve rolled out the platform on both the iOS and Android apps on October 12. As part of the Coiny technology, we additionally designed the system to have foreign exchange and international payments capabilities, which we plan to be fully integrated into Coiny as an FX module.

While the module is not fully integrated, the starting volume of $480 million in the quarter gave us confidence about its full potential in the international payments business. In addition, we are scheduled to enable Coiny with a second banking partner in Q4, which will allow us to accelerate the onboarding of domestic volume on the Coiny. We ask that you stay tuned for more to follow on these developments next quarter.

With a strong performance thus far, I’d like to share our current estimates for the remaining year. For processing volume, we closed the first three quarters at $3.1 billion and expect to process $1.1 billion to $1.3 billion in Q4 projecting a total 2022 volume around $4.2 billion to $4.2 billion. This is in line with our total year target of $4 billion to $6 billion. Revenue from processing in Q3 is $10.6 million, including regular processing revenue of $7.8 million and a onetime fees of $2.9 million from legacy accounts. We expect to see a solid Q4 and project a total year revenue at $32 million to $35 million.

Our adjusted performance EBITDA Q3 adjusted EBITDA is a minus $0.1 million, which is just a tick below the breakeven target for the quarter. We’re very proud to have accomplished this major improvement from last quarter’s negative $4.9 million. Our updated Q4 projection for adjusted EBITDA is around zero to a positive $3 million. Overall, we hit the vast majority of our trading and processing goals in Q3, launched the Coiny platform as scheduled, and remain truly optimistic about our near-term growth trajectory.

With this, I’d like to now turn the call back over to Ben Errez, our Chairman to begin our Q&A.

Ben Errez

So the folks listening to this call. Thank you for your interest and commitment to RYVYL. We are genuinely grateful for your ongoing support.

With that, I’d like to begin our Q&A session. In addition to Drew, Min and myself, other members of our executive leadership team including our CEO of Fredi Nisan, and CMO, Jacqueline Reynolds are on hand to answer questions.

Operator, please begin. Thank you so much.

Question-and-Answer Session

Operator

Thank you, Ben. We will now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question is Howard Halpern with Taglich Brothers. Please proceed with your question.

Howard Halpern

Congratulations guys on achieving a lot during the quarter.

Ben Errez

Thanks, Howard.

Howard Halpern

Based on Q3 results that we see out there, have we really reached in this year, an inflection point in the gross margin at trajectory and that we’ll start seeing it creep into the low-60s from where you are in the third quarter?

Ben Errez

I will direct this question to Min. This is part of the projections for Q4 and next year. Min, go ahead.

Min Wei

Hi, Ben. Thank you for the great question. And I would say yes, indeed, for Q3, we bought about $1.3 billion of volume. We had overachieved and hit beyond the 60 basis points as you reference. As a result of that, we’re able to get to pretty much a breakeven adjusted EBITDA number for the quarter. So, we expect to see further improved gross margin contribution coming up.

Howard Halpern

And that and that’s from a reduction in expenses related to ISOs and gateways and you’re able to do it more or less, more on your own?

Min Wei

Well, it’s a combination of a few things. It’s comprised off in a further improved gross margin, because we’ll be able to process more, and continue to drive gross margin out of the high-risk acquiring space of the business. But obviously, on a cost control side, we continue to monitor closely, as we launched Coiny platform. We are rightsizing the continuing R&D product development efforts as well as other costs for operations.

Howard Halpern

Okay. And now, in terms of Coiny. I don’t know if you’ve officially disclosed, how much funding have you put in to least your initial bank? And are you looking for partners to put in as put money in escrow for the second partner?

Ben Errez

I will take that question, Howard. So Coiny, moving forward is focused on a B2B vertical, and as such, it is self-funding. Therefore, we would not be seeking additional funding for it at this time.

Howard Halpern

Okay, that sounds really good. And in terms of how you’ve gained momentum with American Samoa, what have you been receiving or what kind of feedback have you been receiving from the merchants? I don’t know whether you’d receive it from the customers, but what is the reception so far that you are receiving from your operations there?

Ben Errez

I will direct us the question again, to Min.

Min Wei

It is a great question Howard. As mentioned on the call earlier, we achieved basically 50% of the targeted merchant base on the island. The experience has been fantastic. The volume of the payment processing business on island has gone from basically zero to close to $8 million on a monthly basis, just within the number of months.

All the lateral feedbacks from the merchants, including the restaurants, like McDonald’s, [Indiscernible] as well as [Indiscernible] feedbacks directly through our banking partner to reward Territorial Bank of American Samoa. It’s well received so far. Our partner expect to receive further volume coming up in the next quarter or two. So, it’s going well.

Howard Halpern

Okay. And I guess, since you’re sort of almost like kind of halfway into the American Samoa, are there others now that are developing in the pipeline that might occur next year or are you waiting to develop that pipeline till American Samoa is fully deployed?

Ben Errez

Thanks, again, for a thoughtful question, Howard, this has Ben? Yes, we do see the potential and already, inquiries by other similar systems. Closed loop systems are all over the world. We have been approached by several to duplicate the success and technology platforms for American Samoa. We will discuss those in due course. They are not yet at the point where we would disclose any of that. But definitely we have several opportunities on title.

Howard Halpern

Okay, and then one technical financial question I see with the change, I guess, in the convertible debt and interest expense that discount dropping significantly in this quarter. I haven’t looked at the Q yet, but could we see that basically diminishing towards zero from the $437,000 that we recorded in the third quarter?

Ben Errez

I will direct that question to our Chief Financial Officer, Drew.

Drew Byelick

Sorry I was on mute. With the conversion of parts of the debt to stock we have taken the discounts and derivative values down and recognize an expense related to those reduction in debt. The interest rate obviously is affected by the reduction in the debt, but the conversion is not we can’t predict the rate of conversion from the debt holders at this particular point in time.

Howard Halpern

Right but the debt discount part of it that should stay now because you’ve already assume that in in the get in now or from that you’ve already taken most of that?

Drew Byelick

The discount was reduced by the reduction in the debt in the quarter.

Howard Halpern

Okay. Okay, that sounds great. And you guys just keep up the great work.

Ben Errez

Thanks, Howard. Operator, who’s next?

Operator

Our next question is from Kevin Dede with H.C. Wainwright. Please proceed with your question.

Kevin Dede

Hi, Ben. Maybe sort of too high level for this call, you can kick it if you don’t want to deal with it. But could you just run through and a transaction example that illustrates how Coiny is self-funded?

Ben Errez

I will direct this question to CEO, Fredi Nisan.

Fredi Nisan

Hey, Howard, how are you? Thank you for the question. Kevin, sorry, from H.C. Wainwright. Sorry about that. So Coiny in the B2B space, the way transaction coming in is a B2B, our business will find these coin wallet with their money wants, and then request to do certain things, for example, affect, send money, invoices, everything related to business or payout vendors or other in different businesses, he will find his own wallet.

When it comes from a credit card processing, we basically hold the money for 24 hours and then released when we get the funds for the ecosystem is funding itself. We do have instant funding if needed and then we can access liquidity if needed, but at this point, we don’t see it happening.

Fredi Nisan

The New York Fed and I’m sure you’ve seen this, has recently started testing not just a central bank digital coin, but also a tokenized blockchain-backed transaction processing engine that seemed to me to be very similar to the one that you folks have developed. Can you help me understand how should their tests be successful? How you’d expect — how you’d expect vendors to come to your platform versus using one that was offered by the Fed?

Ben Errez

Kevin, thanks for this question. So this is my view. I think that development is a great thing for Coiny. The future is necessary next step for the industry in general, and will continue to grab legitimacy traction, as larger player, enter the space. And the government sets up the regulatory oversights. Coiny can provide the same or superior technology as an equalizing agent, so that smaller banks can have the same capabilities as this major player.

Coiny’s infrastructure is built to be able to integrate with the pilot, or the larger banks down the track. We expect this trend to continue as this pilot program takes place.

Kevin Dede

Okay. You’re sort of taking a step back and looking at your objectives this year? You’re basing your — I mean, obviously, we’re halfway through the quarter, but you’re not expecting to close any acquisitions through balance of this year. Could you characterize, I mean, I know in your prepared remarks, Ben, you spoke to the opportunity. I’m just hoping given sort of a general reset and valuations, you could give us your perspective on how that market looks and know what type of currency you would use to pull the trigger on a new deal.

Ben Errez

Again, thanks for this insight. So, obviously, as we are all interfacing, dry powder in the capital markets, standard debt and equity raises are less likely. This does not mean that M&A activity is hauled to a stop. We are still looking at several opportunities. Obviously, these opportunities will need to be in the context of both the $100 million existing note on our books, and an opportunity to reset market cap when we join forces with other accredited businesses.

Although you are correct in saying that it is highly unlikely that Q4, we’ll see a completion of such activity. We do think that the days when this will happen, are nearing. And I do expect that to happen in the near future maybe in the next couple of quarters.

Kevin Dede

Can you just give us an idea of how you see the target environment? Do you just think there are I guess privately held companies that have investors that are looking for an exit or maybe met the management teams, they are realized that there’s a better opportunity and scale. And —

Ben Errez

The second is more likely. We will not be looking to provide an exit to anybody. That business, potential businesses we’re discussing here will have to be something that is extremely accretive to our business model our business lines, and perhaps provide traction in a vertical that we don’t have to date. Also, it has to be accretive to scaling for both Greenbox and RYVYL and this potential partner.

Also, as I look into this opportunity, obviously, I’m looking at a rebalancing of equity through a true up event, meaning some metrics to value will have to be revisited down the road, maybe 12 months, maybe 24 months such that the accretive additions to both businesses will have to be realized in the future. We anticipate the current equity markets to remain stagnant as they are now for some duration, maybe four or five quarters down the road. And we will act accordingly. We would seek to do a rebalancing true up after that.

Kevin Dede

Okay, could you offer just a high level view on your sales and marketing approach given where Coiny is now, where you’re processing businesses here in the U.S., the opportunity to engage further both with credit cards and on the FOREX side? And obviously the touch on businesses you have in Europe?

Ben Errez

Okay, I will direct that question to Min.

Min Wei

Hey, Kevin. It’s a great question. I’ll put it this way, right. So the way we look at how we go to market and pursue further sales growth for Coiny is that we have a strong foundation or business, that covering both high risk and low risk margins space. So in addition to that, with the launched platform, we see additional verticals has been opened up in our near term business plan that we see that domestically will have one or two new market verticals, through strong partnerships, we can bring to the table.

In addition to that, through the B2B partners that we see transaction processing, for the end users, for the business customers, for both on-ramp and off-ramp capabilities. As you imagine also, given that we have a unique business presence in European market already, leveraging the various business licenses we have, we can look at, how to do on-ramp off ramp for both sides of the Atlantic Ocean. But in addition to that, for the FX and international payments space, we also see that even very complimentary as well. So, I’m very optimistic to see the volume growth across multiple verticals as well as the geographics between the two sides of the Atlantic Ocean.

Ben Errez

Kevin, I’m going to allow for another point of view from Chief Marketing, Jacqueline. Jacqueline, go ahead.

Kevin Dede

I appreciate that, Ben, thank you.

Jacqueline Reynolds

Well, it’s not necessarily another point of view. Hi, Kevin. It’s just to augment and piggyback on what Ben was saying, from a sales standpoint. From a marketing standpoint, we’ve done quite a bit of work to really understand who the target customer is. And in this case, we sort of named them the progressive pragmatic, I have a ton of information and research that sort of support, who is that we are really going for, and who has the biggest disposition to adopt the Coiny brand.

But we see a lot of potential and we will be using platforms such as public relations, social media, to really engage with this progressive pragmatic B2B customer, to drive awareness. Obviously, we’re in the very nascent stages of launch, and we want to make sure people know who Coiny is. So that gives you a little bit of background on the marketing front.

Kevin Dede

Could you, Jackie help me understand, how I mean, maybe how to quantify that target customer in terms of the entire transaction market, and maybe the amount of volume that they’re processing on a — if you were able to generalize on a per customer basis? And then also help us understand how you’re able to rationalize two brands in the market? You’ve got the ex-Greenbox, now that’s gone. That’s water under the bridge, but you’re still offering, both RYVYL and Coiny. So help me understand how are you going to communicate both of those brands and their advantages?

Jacqueline Reynolds

Absolutely. And I am going to tackle the second question first, Kevin. So tackling two brands launching in the marketplace is not any different from what the Clorox Company does with their stable of brands, or what the Coca-Cola Company does with their stable brand. RYVYL to us is the mother brand. It’s the brand that sort of is the umbrella for all the other products that we offer on our roster. And so, obviously, we want to drive the awareness and we want to drive a sense of trust and security with our mother brand. The Coiny is really going to be our workhorse. And for that reason, we are investing in Coiny, to ensure that we are truly laser-focused on this target that I just mentioned.

So each one has their own brand positioning and their own messaging, et cetera. But we will make sure that those two are differentiated. And if you’ll notice on some of our communication, our tagline is Provoke Possibilities. So RYVYL is the one that provokes those possibilities for all others.

The second question, I’m going to actually turn it over to Min in one second, but we’re working very, very closely with our sales team to distinguish exactly who our target customers are, what channels and to really put a number to that to quantify that volume opportunity. So Min, if you’ll take the sales conversations with you.

Min Wei

Yeah. Thank you, Jacqueline. And Kevin’s to help, really a couple of ways to look at the metrics. One of the metrics, pretty established philosophy already we see this every day, and we’re very comfortable with it is the number of merchant locations and monthly processing volume per location, that’s a pretty reliable metric.

Now, the other point I’d like to share with you is that we have hundreds of agents and ISOs. We’ve been basically putting them on standby until now we’ve launched the platform, we’ll be able to work with ISOs and partners to bring the volume through. So in the user thing verticals we have good metrics already for the new verticals. We plan to bring up screen over on board. We are working diligently on that. Obviously, as we finalize our business plan for 2023 and steady metrics with the new verticals will we’ll be able to articulate and share this particular call as part of the ongoing guidance.

So, I think that’s probably the quick way to answer the question. Hopefully that’s okay with you.

Kevin Dede

Yeah. No, I appreciate, Min. Thank you. Thank you for entertaining it. I appreciate it. One last one for me. And I think maybe you gents and Jackie addressed this for Howard already. And that’s the sequential change, the sequential increase in percent of processing volume that was revenue and I just kind of — I wanted to understand those, there’s a nicely sequentially positive trend from March this year. And I get that what you’ve said. It’s based on both your internal improvements, and also increases in scale. But I’m wondering how you think we should look at it going forward? How much more can that improve?

Min Wei

Kevin, it’s an open-ended question. I’ll put it this way —

Kevin Dede

If you find what that way, Min, then I’ve done my job.

Min Wei

You’re doing a great job. So I’ll put it this way. Really, we continue to expect roles for the targeted business verticals, we have put a once we have visibility in our sales pipeline. We know they will generate higher than the average residual percentage right now, we know that, because we have pricing strategy.

We know what our cost base is, so we do that. Going forward for the longer term as we get into new verticals, we’ll be working closely with our CFO to ensure that we segment business so that way for each of the major business lines will continue to articulate volume and corresponding revenue and margin as such an analyst will be able to look at the math and be able to model it out.

Ben Errez

So, Min, if I was to distill that for my simple mind, we could expect that RYVYL will start to break down business lines and give us a little more insight on an operating segment basis?

Min Wei

That’s correct.

Ben Errez

And see that even during the earnings calls, in my operating highlights area, I tend to break them down by each of the business lines and give you the data points?

Kevin Dede

Okay, are those are those figures in the Q or will they be in the Q?

Ben Errez

They’re currently not in the queue. Obviously, we will be compliant as we continue to drag rolls and hit a certain scale, we’ll be looking at the probable time to break them down, and particularly into Q2.

Kevin Dede

Okay. That sounds great. Thank you so much, everyone, for entertaining my questions. I’m really, really appreciated. Apologies that so many of them were not necessarily quarter related, but sort of business, strategic business perspectives. I definitely appreciate the time and attention. Thank you very much.

Ben Errez

Thanks, Kevin. Going back to your point, with the Min. If you go through the transcripts of this call, and or just listen to Min’s section, you’ll see the breakdown by verticals as a contributor to overall earnings. So we already have that, and we began doing that. But as we grow bigger, and as we scale in market cap in an equity appreciation, we will obviously need to provide further breakdown and further clarity. But we expect and anticipate that.

We don’t have a lot of time. And I do want to get to some of the questions that were submitted ahead of time. And in particular, one that the actually, as I was traveling last week, I received three calls from different analysts and the stakeholders about one particular issue. And I wanted to address it on this call. And then we’ll continue and have questions until time runs out. And operator, please keep us honest on this.

So the matter that I wanted to discuss, and that I’ve received calls about, was the issue of the FTX bankruptcy and how it impacts our business. So the direct answer to that is that the FTX collapse has no negative impact on RYVYL, not whatsoever. The price of crypto is a multifaceted question. And this would be my personal opinion here. Bitcoin and all related altcoins have no intrinsic value.

And their main advantage is the detachment from government. An oversight increases and stablecoin money matures, there will be less need for it and decreasing values. Stablecoin that is properly pegged to Fiat, both in coverage and compliance reporting is equivalent to Fiat, and will eventually be better than Fiat as it has the potential of being adjusted or hedge by commodity.

Regulation space will increase for the remainder of the current administration, the Department of Treasury will likely push the space oversight as fast as they can and will have bipartisan support for it.

Operator, I assume there are no further calls. So I can continue on written.

Operator

We have one question in queue.

Ben Errez

Go ahead.

Operator

Our next question is from Chris Sakai with Singular Research. Please proceed with your questions.

Ben Errez

Hi, Chris.

Chris Sakai

Hi, Ben. I just had a question about on your cash burn. It looks like cash burn for the quarter was about $18 million. How comfortable are you with this? And what’s it going to look like next quarter?

Ben Errez

Chris, I will direct this question to a Drew our Chief Financial Officer.

Drew Byelick

Well, most of most of the cash is obviously used by operations in the quarter, we do see an improvement in operating — project improvement in operating results in Q4, given the completion of the Coiny development project, and then going into more of a maintenance and supportive role there. We’ve also made deposits for small acquisitions in the quarter related to licensing fee, licenses in the UK, as well as some technology also supported in Europe.

Chris Sakai

Okay, thanks for that. And then did I hear this right? So Coiny had $480 million processing volume for the quarter, what was that Min said?

Ben Errez

I will send that to Min.

Min Wei

Hey, Chris. So in the FX international payments space, we have $480 million of processing volume. That’s what we consider the FX module. We intend to – we plan to integrate that we Coiny. It’s not fully connected yet, but it’s the starting foundation for that module and for that business, just to be very clear about it.

Chris Sakai

So for example —

Min Wei

So for example every time we do a foreign exchange conversion, we earn a fee for each of the spot conversion. Each time we do a corporate payout for international payments space, we’re entitled to a feat of revenue.

Chris Sakai

Right. Okay. Thanks. And then for the year, what you’re forecasting $4.2 billion to $4.4 billion. How much of that is coming from Coiny?

Min Wei

We do the necessary — and I don’t have the data in front of me. But we do have a start — so we have start seeing the volume showing up on Coiny. And the $480 million is the FX, which eventually will be the Coiny FX module. I might have to get back to you, Chris. I know we maintain communication with you. So I have to get probably get back to you to make sure I give you the right number rather than give me an incorrect number on the phone here.

Chris Sakai

Okay, and last for me. Can you provide any color as far as what sort of processing volume you’ll see from the second banking partner?

Min Wei

Well, very good question, Chris. Okay, actually, Fredi Nisan would like you to help address the question. Over to Fredi.

Fredi Nisan

Hey, Chris. Pleasure hearing from you. In regarding the banking relationship, what’s important for us to grow with volume and profit is to add as many partnerships as possible to support the volume in different countries. So we have in the relationship in the U.S. in Europe, that we engage in working on to support the global growth and expansion of Coiny. In Q4, as part of our business expansion of course, we have different channels. And one of them, we’re going to hear very soon, but in the end of it is not about the volume. It’s about the support of the volume that we want to put on Coiny. And for that reason, you need more banking partnerships.

Chris Sakai

Okay. And then I forgot to ask about a Cross River. How’s that going? Can you mention anything there?

Fredi Nisan

Yeah, absolutely. Cross River and RYVYL are working together on creating the product. We already have a contract with them, as I mentioned in the PR, but it’s taking longer as banking related partnership takes some time longer than expected. So this time of the year, just for your knowledge, Chris, and everybody out there on the call, usually in November, all of the banks acquires going into a freeze until the beginning of January. So some of those things will delay for first few — first quarter of next year. But other than that, we have a great progress, and hopefully we can announce some of it soon.

Chris Sakai

Okay, thanks for that, Fredi.

Fredi Nisan

Thank you, Chris.

Ben Errez

Thank you. Okay. I’ll assume that Chris has done. So operator, do you want to add anything?

Operator

No, I’ll turn it back to you, Ben, for any writing question.

Ben Errez

Okay. So one last question that was submitted beforehand in writing. And I would like the team to address is, can you elaborate on the R&D expense for Coiny and the company strategy to scale it? Is the wallet necessary if you’re focused in B2B?

And I will direct that question to Min.

Min Wei

Thank you, Ben. This year, we invested in our R&D efforts and as a result, successfully launched Coiny platform. Our future development we’ll continue to focus on product roadmap work and functionality to support our growth in payment solution, acquiring business, foreign exchange and international payments business by label platform and API work. And yes, as we transition much in business volume on the Coiny, we expect to see increase in B2B volume in the ecosystem accordingly.

Ben Errez

Thank you, Min. And with that, we are concluding today’s calls. Thanks, everybody for your continued support, and great questions submitted during this call and before it. Operator, you are okay to conclude.

Operator

Thank you for joining us today. You may now disconnect your lines. Have a nice day.

Ben Errez

Thank you all.

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