Ryvyl - Q2 2023

Executive Summary

• Q2 2023 delivered record revenue of $14.85M, up 31% q/q and 113% y/y; gross margin expanded to 41.2% vs 39.3% y/y, but GAAP net loss was ($12.0M) driven largely by non-operating items and restatement carryovers.
• Processing volume reached $678M (+20% q/q), led by FX/international payments ($425M) and North America acquiring ($146M); ChargeSavvy softened; American Samoa continued steady at ~$31M.
• Guidance raised: Q3 revenue to $16–$18M and Q3 volume to $720–$800M; FY revenue to exceed $60M; FY adjusted EBITDA target lowered to $2–$3M from $4M due to card scheme fees and admin costs to regain compliance.
• Strategic catalysts: Visa Direct and SEPA integrations (EU ramp), coyni spin-off and prospective special dividend, and $6M debt reduction via note exchange—with a second $16.7M exchange approved by shareholders.
• Preliminary 8‑K signaled at least $14.5M revenue and $650M volume; final actuals modestly exceeded at $14.85M and $678M, respectively.

What Went Well and What Went Wrong

What Went Well

• Record topline and improved gross margin: Revenue $14.85M (+113% y/y), gross margin 41.2% vs 39.3% y/y; “record top line results” and “improved margin profile” per management.
• International scaling and BAAS momentum: FX/international volume $425M (+23% q/q; +248% y/y from $121M); Visa Direct partnership and SEPA instant payments approvals in EU progressing.
• Balance sheet actions: Initial $6M debt reduction via convertible note exchange; shareholders approved a second tranche for an additional $16.7M reduction, supporting cash flow.

Quote: “We are thrilled with the expansion and higher margin acquiring processing volume, both internationally and domestically… Banking‑as‑a‑Service is the future of global banking”.

What Went Wrong

• GAAP profitability: Net loss of ($12.0M), vs $12.1M net income in Q2’22 mainly due to derivative liability fair value swing and non‑recurring items; adjusted EBITDA was ($0.9M) vs $3.1M in Q2’22.
• Segment softness: ChargeSavvy volume $53M (−19% q/q; −15% vs Q1’22), reflecting reduced processing from select merchants.
• Elevated operating/admin costs: Card scheme fees, legal/restatement costs, and compliance regained expenses pressed adjusted EBITDA below breakeven target; FY adjusted EBITDA cut to $2–$3M.

Transcript

Operator (participant)

Welcome to the RYVYL Q2 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following management's 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 3 months ended June 30, 2023, was filed with the SEC today. On our call today are RYVYL Chairman, Ben Errez, Interim Chief Financial Officer, Fredi Nisan. Excuse me, also, Gene Jones, excuse me, the Interim Chief Financial Officer. Fredi Nisan is the Chief Executive Officer 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. Should you need assistance, please signal a conference specialist by pressing * then 0 on your telephone keypad. 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 (Chairman)

Thank you for joining us today. Today's call is entirely produced using AI in a continued push for efficiency and cost reduction for the company. I am proud to present our fiscal Q2 2023 financial results, where we delivered record top-line revenue for the 3rd consecutive quarter of $14.8 million, an increase of nearly 113% year-over-year. This reflects a 31% sequential increase from $11.3 million in the Q1 of 2023. Revenue was also above our Q2 target range of $12.5 million-$14 million. As I covered in past calls, our focus on improving processing efficiency, workforce, and technology are paying off as we continue to see our operating margins increase.

We processed $678 million during the quarter, an increase of 20% from the Q1 of 2023 and above our target range of $580 million-$610 million. COO Min Wei will break down the various processing channels' performance later in the call. Needless to say, we are very pleased with steady processing volume growth and our improved margin profile. Now, to move on to some of our key operating initiatives and the progress we've made recently. First is our planned spin-off of coyni. We initiated this process early in Q2 as part of a broad value creation strategy and ultimately believe this is the optimal way to drive growth and unlock its tremendous potential.

While we have made great strides with our payment processing business, we believe the best path forward to create value for our shareholders is through the spin-off of coyni as a public company and establishing it as the premier electronic token solution in the market. During the quarter, we acquired a public shell company to transfer coyni assets to in order to facilitate the transaction, which our board of directors has approved. The name change process is underway and we expect to be finalized soon. Furthermore, we selected Simon & Edward, LLP as auditor of coyni, given their familiarity with RYVYL technology, accounting processes, and personnel. Once complete, we can look toward the next phase of a public offering. We expect to be in the $40 million range, along with Nasdaq uplist and ultimately a board-approved special dividend for RYVYL shareholders.

We'll provide more updates on this front as they come about, but expect to complete this by the end of the year. Turning now to our Banking-as-a-Service platform. We continue to gain momentum on this initiative in 2023, with 6 new partners and growing demand for the service after signing 6 global financial institutions. This is projected to process more than $100 million per month in transaction when fully ramped up. RYVYL's Banking-as-a-Service solution offers API integrations and foreign exchange capabilities in more than 40 different currencies with local settlements. The service authorizes transactions 24 hours per day on business days and enables payouts by way of approved methods such as real-time payment or direct deposits. In addition, the service allows for the ability to readily trace transactions and reduce fraud, all while maintaining strict compliance requirements.

During the Q2, we announced a strategic partnership with Intercash, a Europe-based global payment solutions provider. Through the collaboration, business customers can now offer co-branded debit and prepaid cards to untapped consumer markets, leveraging RYVYL's new Banking-as-a-Service platform as the infrastructure. White label cards can be issued as virtual or physical, allowing businesses enhanced flexibility. Intercash, which currently has over 1 million cards issued, has already initiated the 1st phase of the process by moving more than 50,000 cards to the RYVYL card program and plans to continue with the migration in phases based on card issuance. Our subsidiary, RYVYL EU, made noticeable strides in Q2, receiving approval from the European Payments Council to launch Single Euro Payments Area instant payments in Europe during the quarter.

With this approval, RYVYL EU has enabled incoming and outgoing instant transfers via SEPA, an instant credit transfer scheme that encompasses over 2,000 payment service providers in the Eurozone, a targeted business client space for RYVYL EU. This service capability allows clients to instantly send and receive payments from 36 SEPA countries, facilitating faster payment transfers.... and enhancing customer experience for our clients in the European markets. RYVYL EU also partnered with Visa to enable Visa Direct, a cutting-edge transfer solution as part of our business transformation of updating payments infrastructure. Doing so provides a superior Banking-as-a-Service offering and better serves our customers, retain their loyalty, and create new revenue streams. This collaboration in the Eastern European region will revolutionize the way funds are transferred between accounts, offering fast, convenient, and secure transactions.

When the new Visa Direct capability is integrated into RYVYL's service offerings, our customers will have the opportunity to send money to authorized accounts in over 80 countries across multiple currencies through Visa's extensive network of local banking partners. By utilizing Visa Direct, our clients will experience the benefits of faster access to funds, with money becoming available within minutes instead of days. By the end of the year, we expect to have a global payments platform integrated with SEPA and Visa Direct, enabling local settlements in the key markets we serve. We believe banking-as-a-service is the future of global banking, and we're excited to be an enabling service provider in a space that is rapidly emerging and reaching new customers every day. We also took meaningful steps to bolster our capital structure, announcing an exchange agreement with the holder of our $100 million convertible note financing.

We completed the initial exchange, resulting in a $6 million debt reduction and an increase in shareholder equity and cash flow. The 2nd exchange is also possible upon shareholder approval, which would further reduce our debt by $16.7 million, for a total of $21 million debt reduction. This type of institutional-level commitment is a major win for all RYVYL stakeholders and illustrates the conviction in our mission as a disruptive force in digital payments landscape. Operationally, during the quarter, we welcomed Gene Jones as Interim Chief Financial Officer of the company. For over 35 years, Gene has served within various executive roles, including CFO, COO, Corporate Treasurer, and Controller for public, private equity, venture-funded, and startup companies. His strong leadership and expertise in financial and operational improvements has had an immediate positive impact on our company.

As we stand today, the Q2 exceeded our expectations with record top-line results, and we saw positive momentum for our business transformation of updating payments infrastructure. Doing so provides a superior banking-as-a-service offering with partners at Visa, European Payments Council and Intercash. We remain highly focused on executing towards this large opportunity ahead of us in the lucrative digital payments landscape. We are thrilled with the expansion and higher margin acquiring processing volume, both internationally and domestically. coyni's spin-off strategy is moving forward and has taken meaningful steps towards completion. We remain confident we are on the path to creating significant long-term value for our shareholders. Now to discuss the details of our financial results, I'd like to turn the call over to our Interim Chief Financial Officer, Gene Jones. Gene, the floor is yours.

Gene Jones (Interim CFO)

Thank you, Ben. I'll be referring to adjusted EBITDA and other non-GAAP measures. For the calculation of adjusted EBITDA and other non-GAAP measures, please refer to our 10-Q filing, which will be available on the company website under SEC Filings. Our revenue increased by $7.9 million, or 113%, to $14.8 million for the quarter ended June 30, 2023, from $6.9 million for the year earlier quarter. The increase was principally attributable to an increase in processing volume in Q2 2023 compared to the year earlier quarter, and an increase in revenues from our acquiring businesses, including ChargeSavvy, RYVYL EU, and American Samoa. North America Q2 revenue increased 86% from $5.9 million in Q2 2022 to $11 million for the quarter ended June 30, 2023.

EU Q2 revenue is $3.8 million, increasing by 270% from $1 million for the year-earlier quarter. Cost of revenue increased by $4.5 million, or 106%, to $8.7 million for the quarter ended June 30, 2023, from $4.2 million for the year-earlier quarter. Gross margins increased to 41% in the quarter ended June 30, 2023, compared to 39% in the year-earlier quarter. Payment processing consists of various processing fees paid to gateways and commission payments to the independent sales organizations, or ISOs, responsible for establishing and maintaining merchant relationships from which the processing transactions ensue.

Cost of revenues increased chiefly due to increased volume, resulting in higher processing fees paid to gateways, commission payments to ISOs, and cost of revenue of acquired businesses in the US and EU. Operating expenses increased by $0.2 million, or 1.4%, to $11.8 million for the quarter ended June 30, 2023, from $11.6 million for the year-earlier quarter. The increase was due primarily to higher general, administrative, and professional fees for the quarter ended June 30, 2023, offset by decreases in advertising and marketing, stock-based compensation expense, and depreciation and amortization.

The higher general and administrative expenses in the quarter ended June 30, 2023, are mainly attributable to non-recurring legal settlements and some ongoing matters and related legal fees, writing off some non-continuing legacy accounts and accounting fees related to the restatement of prior period financial statements. Other expense was $6.4 million for the quarter ended June 30, 2023, compared to other income of $20.1 million for the quarter ended June 30, 2022. The biggest portion of this change was in the highly volatile change in the fair value of derivative liability. That amount was a charge of $500,000 for the quarter ended June 30, 2023, compared to a credit of $26.4 million in the year earlier quarter, a swing of nearly $27 million.

Interest expense, including expense related to the accretion of debt discount related to the $100 million convertible note, decreased by $3 million from the year earlier quarter, due primarily to a lower level of amount of debt outstanding. Additionally, we incurred a charge of $0.2 million in the quarter ended June 30, 2023, related to the conversion of debt, and we recognized a loss of $0.8 million in the year earlier quarter in connection with the settlement of debt. You may recall that we had a restatement of previously issued financial statements, and so there are some carryover effects from that, including a $1.2 million charge in the Q2. This was a challenging mission, but we believe we have substantially all the restatement effects behind us.

If we exclude the effects of that highly volatile change in the fair value of our derivative liability and the non-recurring carryover effects of financial statement restatements, other non-operating expenses increased by about $300,000 in the Q2 compared to the year earlier period. In summary, we recorded a net loss of $12 million in the Q2. This compares to $12 million in net income in the year earlier period, primarily due to $26.4 million income related to the change in the fair value of our derivative liability last year versus this year's change in fair value of derivative liability expense of $0.2 million. There were also several non-recurring items in this year's quarter.

Our Q2 2023 adjusted EBITDA is a loss of $0.9 million compared to $3.1 million in the Q2 of last year. Non-recurring items totaled $5.5 million for the quarter and include legal settlements, legal matters and related fees, charge-offs of some non-continuing legacy accounts, and accounting fees related to the restatement of prior period financial statements. We ended the quarter with cash, cash equivalents, and restricted cash of $63.9 million, with $13.2 million of that being unrestricted cash. I'll now turn the call over to Min Wei, our Chief Operating Officer, to provide a review of business operations and our outlook.

Min Wei (COO)

Thank you, Gene. We will walk through our processing volumes for the verticals we serve and discuss our 2023 outlook. Please note that all the figures are exclusive of the Sky Financial portfolio. Our Q2 processing volume across all channels exceeded $678 million, versus our published indication of $580 million-$610 million for the quarter. This is about 20% better than our Q1 2023 volume of $565 million and an increase of about 85% from our Q2 2022 volume, not including the Sky Financial volume. Our Q2 North America acquiring business volume was $146 million, which is 30% higher than the Q1 $112 million volume and is 77% higher than the same period 1 year earlier.

Q2 ChargeSavvy processing was $53 million, or about 19% lower than Q1 2023 processing volume. When compared to the $62 million volume in Q1 2022, it is a 15% decline. The year-over-year decline is due to reduced processing from select merchant base. For our FX and international payments portfolio, including the acquired Transact Europe business and our new banking-as-a-service offering, we processed $425 million in the Q2 compared to $344 million in business volume in Q1, an increase of over 23%. This is a 248% increase from Q2 of 2022 seconds, $121 million. For an update on American Samoa, we are now servicing about 60% of the target merchants market for our plan.

In Q2, our processing volume was about $31 million, or a 10% improvement from the prior quarter, and our monthly volume is sustaining at about $10 million. With respect to coyni, as Ben spoke to earlier, we continue to work towards executing our spin-off plan. We just announced the release of the coyni mPOS app that enables simple setup of point of sales terminal using compatible smartphones and users for convenient contactless payments. Furthermore, we discussed our near-term focuses on rolling out the platform in the European market due to the U.S. regulatory environment and digital banking changes, as well as the increasing demand in the European market. Our efforts to establish the European business is well underway. Now, I'd like to turn to our outlook for the Q3 and the total year.

With respect to the processing volume in Q3, we are targeting a range of $720 million-$800 million. For the total year of 2023, without the Sky Financial volume, we are estimating a range of $3 billion-$4 billion. Given the strength of our Q2 revenue of $14.8 million and continuing momentum, we are raising our Q3 revenue outlook to $16 million-$18 million, which will bring our total year revenue to exceed $60 million. With regard to adjusted pro forma EBITDA, our Q2 figure is a negative $0.9 million. This is lower than our targeted break even for the quarter, which is due to higher than planned expenses associated with cost scheme fees and administrative expenses to regain compliance.

We are adjusting our 2023 target for this year, down from $4 million to a range of positive adjusted EBITDA of $2 million-$3 million. Our projection for Q3 is $1 million-$2 million. Overall, we remain optimistic about our growth trajectory domestically in the U.S. and in the international markets. As a result, expect to deliver great results. This concludes my remarks for the quarter. I'd like to now turn the call back over to Ben Errez, our chairman, to begin our Q&A.

Ben Errez (Chairman)

Thank you, Min. Operator, please proceed with the Q&A.

Operator (participant)

We will now begin the question. Go ahead, sir.

Gene Jones (Interim CFO)

Thank you, operator.

Ben Errez (Chairman)

All right. Before we take questions from the floor, we had a few questions submitted to us by email, and we will address those prior to the continued conversation online. The first question is the, an update, or pertains to an update on the matter of the Nasdaq minimum compliance. The update that we have for you all today is that the company has indeed regained compliance. We had a continued conversation with the hearing panel following that, and the company is going to stay on a 6-month watch list. We will prepare shortly a simple 8-K announcing that, and they are planning to continue and maintain compliance.

Question number 2, pertains to, an update on how things are progressing with the latest announcement on financial partnership, including Visa and SEPA integrations, and what are our expectations moving forward? We did discuss some of that on the call. Min, I will turn to you should you want to, provide a further brief on that.

Min Wei (COO)

Thanks, Ben. I'd like to share exciting, yeah, progress for both Visa Direct program and the SEPA, SEPA program. The SEPA program, you know, the SEPA system is already working with our current system, being processed to turn on and fully integrate with SEPA Instant. We expect that to commence in the Q3. As a result of that, we should see a further increase processing volume when it comes to banking that's, that's offering. We respect Visa Direct program and working diligently with the Visa program manager. We target to go live with the initial list of countries in the Q3.

As we mentioned during the, you know, press release, you know, the great potential of this Visa Direct program is when it's fully up and running, we will have access to local payouts to over 80 countries, with a large range of different, you know, foreign currencies. All in all, great momentum for banking service offering. We mentioned that also earlier during the call, that we have seen further increasing volume for banking service, you know, portfolio we have. You know, when we're looking at the monthly volume, we already constantly hitting north of $100 million- [audio distortion]. While we compare to the Q2 banking service offering to the previous quarter, you know, we definitely have seen double-digit growth.

Good news, across the board, and we expect to see Visa Direct and SEPA Instant further, you know, help us.

Ben Errez (Chairman)

Thank you, Min. The next question will be answered by CEO, Fredi Nisan. With the PayPal launching stablecoin and other digital currency projects in the works, such as FedNow, what are your thoughts on the competitive landscape? What's the strategy there to stay in the hunt or ahead of the game? Fredi, go ahead.

Fredi Nisan (CEO)

Thank you, Ben. From PayPal announcing the stablecoin, I think, is great news for everybody, especially when we see big companies like PayPal joining the crypto and the stablecoin technology space and offering. I think, from regulation, it will help as well because we have a big company like PayPal pushing an agenda, it will help everybody in the space. From the FedNow and how all of that interact with the stablecoin, I think we need to understand that FedNow is just local payment, just like ACH, and it will not help with, you know, transfer money on a global scale. The stablecoin is a little bit different, but from a competitive landscape, we see it as a good thing because we can later on maybe interact with PayPal.

We're talking about global payment movement, so PayPal is a big player, and I think it will help us and our business. I want to mention as well that PayPal is in the low-risk space, and they don't touch the medium to high risk. I think we have a great opportunity with our technology and our offering, there's something that PayPal not necessarily can offer to their client. I see a great opportunity for all of us in that space, and again, it's just the beginning of it, so I'm very excited.

Ben Errez (Chairman)

Thanks, Fredi. I'll take the next question. A subject that is very close to my heart. Can you clarify, as much as possible as to the timeline of the coyni spin-off and the related dividend? I very much like the dividend idea for all shareholders, and we are diligently pursuing that opportunity, and pushing it forward as quickly as we can. As it stands right now, we have acquired the launch vehicles for the coyni spin-off. We have filed articles of merger with the State of Nevada and have those approved, and we have filed for a name change and a ticker change, appropriately for coyni, with FINRA, and are awaiting that confirmation. We suspect that that will happen fairly shortly.

With that on hand, we will go ahead and file the registration statement for the shares that are going to be used for the dividends. We anticipate that registration statement to be considered and approved by the SEC in a fairly short timeline, perhaps 30 to 60 days. Following that, we will announce the date of record for the dividend and take steps towards distributing that dividend. As we said on the, on the call, we anticipate that to be completed by the end of the year. I will also take the next question. Does the company have any updates on pursuing the entitlements under the Sky Financial purchase agreement? Very quick update on that. We are pursuing that option for us on the legal front.

We're still looking through different strategies to maximize recovery under that liability. As it stands right now, we don't have any further substantive updates to share with everybody, but we will obviously share all pertinent information as that comes about. Here's the next question. Can you talk about the strategy to scale up into a larger or bigger economies? Or is that the focus on maximizing opportunity in smaller economies and face less competition, such as Bulgaria or Samoa, et cetera? Min, I'll hand you the baton to take a crack at that first.

Min Wei (COO)

That's a great question. You know, in terms of our growth strategy, we've been very selective. Rather than categorize into larger versus smaller economies, we'd rather look at our focus on specific verticals and geographics. You know, for example, in the U.S., our block processing volumes continue to grow very, you know, robustly. Right? You know, we have seen more than 15%-20%, you know, growth from Q1 to Q2. You know, we expect to continue to focus on the verticals we serve today to achieve double-digit, you know, growth in the U.S. market, focused on the specific verticals we target on. Separately, you know, we are also looking at new verticals and new geographics where, you know, we have less competition, where we expect to generate higher profit margin.

For example, our plan to roll out coyni in the European market, we're focused on specific medium to high, risk, high return verticals. We have a plan. We're in the process of establishing the business entities, rolling out the product platform in the H2, those in European market. In the U.S., we are also in the process of progressing the rollout of our coyni services for e-commerce programs, for some additional e-wallet programs as well. I would say, all in all, we focus on select verticals. We focus on select business portfolios that's going to generate us good profit margin. As a result of that, we can generate better return for our shareholders. Over.

Ben Errez (Chairman)

Thanks, Min. The next question will go to Fredi. Can you elaborate on the mPOS capabilities and how that's being marketed? Any estimate impact on financials and timing that you can provide? This follows a PR that we just released about this new product of ours. Fredi, go ahead.

Fredi Nisan (CEO)

Thank you, Ben. The mPOS is an extension to coyni. We developed this product from internal understanding of what are the challenges that exist today in the market when you run a payment company. One of the biggest challenges are the hardware, the terminals, the time to deployment, the, the challenges when they arrive, set up. All of that time-consuming tasks are related to older technology that related to merchant services called the POS, the actual terminal. We develop a new technology that you can turn any phone into that terminal as long as you accept coyni, and you're part of the coyni merchant program. That allow you to go live from the moment you get approved very quickly. You don't have to wait for a device to be shipped to you.

You don't have to do downloads. You don't have to set it up. We can deploy it globally with the same exact app. We don't, it not require certain certification in different countries, and it's allowing us to reduce operation costs, deployment costs, and other support that need to be exist in a company like a payment processing company, to allow to support that. In the end of the day, the benefits are simple. Faster deployment, help with a global deployment, and help with the cost-effective for our merchant, meaning they don't need to buy a terminal.

The last thing will be to help us actually help them to support reduce fraud, chargeback, give us visibility into the transaction, and give us the ability as well to get into a new vertical that may be considered today a little bit riskier. All of it together will allow us to increase volume, increase the profitability of the company on both sides, the operation and on the front from the commissions.

Ben Errez (Chairman)

Thanks, Fredi. Operator Drew, please proceed with the Q&A and the to the rest of the conversation.

Operator (participant)

Yes. To begin the audio, question and answer session, to ask a question, you may press * 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press Star 2. At this time, we will pause momentarily to assemble our roster. We have a question from Kevin Dede with H.C. Wainwright. Please go ahead.

Michael Dobbins (Analyst)

Thank you for taking my question, operator. This is Michael Dobbins, calling on behalf of Kevin Dede. In your press release, you, you state that you expect to have a full global payment platform covering over 100 local currencies and local settlements. I want to clarify, is, is this going to be using Visa's network, or, or will coyni also be handling multiple currencies as well?

Ben Errez (Chairman)

Min, I'll, I'll have you take that. It's part of your conversation.

Min Wei (COO)

No problem. That's, that's a very fair question. When we refer to the potential, obviously in the context of the press release, we refer to the Visa Direct program. It is, very impressive, you know, coverage Visa offer, you know, outside of the conventional, you know, SWIFT transfer, right? It's going to be faster, it's going to be cheaper for our business and consumer customers. That's not to say that we don't, you know, process and interface with conventional programs. We do have full capability, working with SWIFT, working with SEPA, we talked about earlier, and as well as Visa Direct. In terms of coyni, yes, it is, you know, our plan, as I mentioned earlier, we have the coyni world plan covers both the U.S. market, as pushing the processing capability for the European market.

We fully expect with integrated banking solutions, with the coyni platform, we have the capability of handling the multicurrency in a kind of a expeditious processing way for our customers. Over.

Michael Dobbins (Analyst)

Okay. Thank you, Min. For coyni's mobile point of sale app, which specific geographical regions are you targeting in the beginning? Have you had feedback from merchants right, already? I know it's been only a few days, but, get a little bit more color on that front. That'll be appreciated.

Ben Errez (Chairman)

Thanks, Michael, for that question. We're going back to Frediy.

Fredi Nisan (CEO)

My apologies, guys, but for some reason, I can hear only a couple of sentences, so Ben, if you don't mind, repeat the question.

Ben Errez (Chairman)

Michael-

Michael Dobbins (Analyst)

Sorry. Thanks, Fredi. For coyni's mobile point of sale app, are there specific geographical regions that you're targeting, in the beginning? Also, I know it's only been a few days, but, have you received feedback from merchants already?

Fredi Nisan (CEO)

Thank you for repeating the question. At the moment, we are focusing on the U.S. We do have a couple merchants that already kind of approach us and want to start utilizing that in a very specific verticals, and that we are comfortable with as well. The next, the next goal is as we are deploying coyni as well in Europe, it will be deployed there in a, in a few verticals that we believe we can be very successful, but at the moment, we start with the U.S.

Michael Dobbins (Analyst)

Thank you so much for that clarity. For the regulatory landscape in the U.S., I know Min touched upon this a bit, but how, how are things changing in the U.S.? What's, what's your take on the stable regulatory bill that's going through the House right now?

Ben Errez (Chairman)

Let's say... I'll take this one. That's an interesting topic. Michael, you and Kevin have been persistent on that front, much more than what we see centrally from the government and from the Federal Reserve. The FedNow initiative declared the pilot program back in 2020. At the time, 1% of all financial institutions around the country, and there are about 10,000 of those, were signed up to participate in this pilot program, so about 100. Back in April of this year, the certification program was announced for FedNow. The certificates were awarded in July of this year. Out of the 100 or so participants, only 41, as of now, are certified.

A big portion of that are not standard financial institutions, they are more service providers. By the way, the government includes itself as one of those successful completions of this course. The harsh reality is that this landscape is very challenging in the U.S. The world is not waiting for us to figure it out. This is part of the reason why coyni spinoff is primarily targeting operations in Europe, where the landscape is maybe a lot more competitive, but a lot more finite. The regulators have already established the, the playing field. Everybody understands it. Banks are participating in very large quantities, and penetration is sort of defined.

I guess this is a longer answer to a short question, but I think it gives you a little bit of a flavor of where we're going with all of this.

Michael Dobbins (Analyst)

Well, that's, that's certainly quite helpful. That's all I have for, for today. I appreciate your time, Ben, Min, Fredi, and Gene. I'll hop back into queue.

Operator (participant)

I would like to go back to Ben Errez for closing remarks.

Ben Errez (Chairman)

I'd like to thank everyone to... for participating on this conversation and signing up to listen to our quarterly results. As we stated in the beginning of the conversation, the entire remark sections were produced using AI, I think very effectively, and we will continue to use this technology moving forward. Looking forward to our next call with you all. The shareholder meeting is coming up in the end of October, and hopefully at that point, we will have further clarity on the dividend outlay for everybody. With this, I thank you all, and we'll see you next time.

Operator (participant)

This concludes today's conference call. Thank you. You may now disconnect.