Ryvyl - Q3 2022
November 21, 2022
Transcript
Operator (participant)
Good afternoon, ladies and gentlemen, 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 30th, 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 (Chairman)
Hello, thank you for joining Our Third Quarter 2022 Financial Results Conference Call. It is 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 noted 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 at 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, and 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 macro environment. Given the remarkable growth we have 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 payment solution, remarkable stablecoin, and blockchain processes and offerings to a global audience that we have already begun 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 13% market share as the island's exclusive payment technology provider. 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 solution. These cashless payment solutions reduce costs, improve settlement times, and introduce new level of security for the residents of the island. The 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 developing economies for 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 that we expect to be a transformational growth driver for RYVYL. October marked the launch of coyni, 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 coyni became one of the industry's few to ensure near real-time custodial account attestation via a lengthy review of IT compliance and specifically SOC 2 compliance certification from Armanino, a top accounting, consulting, and technology firm in the U.S. What does that mean? Each coyni digital token held in a wallet on the platform is matched with $1 held in a custodial account with a federally insured financial institution. The dollars backing coyni are not tied up in investments and are not converted to other cryptocurrencies. Competing stablecoins that have not utilized these safety and compliance measures have failed, leading to severe market disruptions.
Speaking 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 note holder, 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 have 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 coyni, our 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 payment 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 (CFO)
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-Q 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 were 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's 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. 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 for 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 to $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 the 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 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 reported 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. In summary, our financial position remains strong, and we remain well positioned for future growth and profitability. With that, I'll turn the call over to Min Wei, our Chief Operating Officer, to provide a review of the business operations and the outlook for the balance of 2022.
Min Wei (COO)
Thank you, Drew. As I have done in prior conference calls, I would 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 time period. On a year-to-date basis, our processing volume hit nearly $3.1 billion, which is approximately 38% higher than our processing projection. Compared to the volume for the same nine months of 2021, we are 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 are 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. 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 one 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 amazing accomplishment as we literally launched from a zero baseline at the beginning of Q2. Getting back to coyni, our development, marketing, and operations teams worked days, nights, and weekends to launch the platform on time and as promised before the end of Q3. Since the initial launch, we rolled out the platform on both the iOS and Android apps on October 12th.
As part of the coyni technology, we additionally designed the system to have foreign exchange and international payments capabilities, which we plan to be fully integrated into coyni 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 coyni with a second banking partner in Q4, which will allow us to accelerate the onboarding of domestic volume onto coyni. We ask that you stay tuned for more to follow on this development 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-$1.3 billion in Q4, projecting a total 2022 volume around $4.2 billion-$4.4 billion. This is in line with our total year target of $4 billion-$6 billion. Revenue from processing in Q3 is $10.6 million, including regular processing revenue of $7.8 million and a one-time fees of $2.9 million from legacy accounts. We expect to see a solid Q4 and project a total year revenue at $32 million-$35 million. For adjusted pro forma EBITDA, our Q3 adjusted EBITDA is -$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 -$4.9 million. Our updated Q4 projection for adjusted EBITDA is around $0-$3 million. Overall, we hit the vast majority of our operating and processing goals in Q3, launched the coyni platform as scheduled, and remain truly optimistic about our near-term growth trajectory. With this, I would like to now turn the call back over to Ben Errez, our Chairman, to begin our Q&A.
Ben Errez (Chairman)
To 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, Fredi Nisan, and CMO, Jacqueline Reynolds, are on hand to answer questions. Operator, please begin. Thank you so much.
Operator (participant)
Thank you, Ben. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Thank you. Our first question is Howard Halpern with Taglich Brothers. Please proceed with your question.
Howard Halpern (Principal Equity Analyst)
Congratulations, guys, on achieving a lot during the quarter.
Ben Errez (Chairman)
Thanks, Howard.
Howard Halpern (Principal Equity Analyst)
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, you know, low 60s% from, where you are in the third quarter?
Ben Errez (Chairman)
I will direct this question to Min as this is part of the projections for Q4 and next year. Min, go ahead.
Min Wei (COO)
Thanks, Ben. Howard, thank you for the great question. You know, I would say yes, indeed. You know, for Q3, you know, we thought that about, $1.3 billion of volume. You know, we actually overachieve and hit beyond the 60 basis point, as you referenced.
Howard Halpern (Principal Equity Analyst)
Right.
Min Wei (COO)
As a result of that, we're able to, you know, get to pretty much a break-even adjusted EBITDA number for the quarter, right?
Howard Halpern (Principal Equity Analyst)
Right.
Min Wei (COO)
You know, we expect to see further improved, gross margin contribution coming up.
Howard Halpern (Principal Equity Analyst)
That, and that's from a reduction in the expenses related to ISOs and gateways, and you're able to do it more or less, more on your own?
Min Wei (COO)
It's a combination of a few things. It's comprised of, you know, further improve gross margin because we're able to, you know, process more and continue to drive gross margin out of the high-risk acquiring space of the business. Obviously, on the cost control side, we continue to monitor closely. You know, as we launch the coyni, you know, platform, you know, we are rightsizing the continuing R&D product development efforts as well as other, you know, costs for operations.
Howard Halpern (Principal Equity Analyst)
Okay. Now in terms of coyni, I don't know if you've officially disclosed, how much funding have you put in to lease your initial bank, and are you looking for partners to put money in escrow for the second partner?
Ben Errez (Chairman)
I will take that question, Howard. coyni, moving forward is focused on a B2B vertical, and as such it is self-funding.
Howard Halpern (Principal Equity Analyst)
Okay.
Ben Errez (Chairman)
We would not be seeking additional funding for it at this time.
Howard Halpern (Principal Equity Analyst)
Okay. That sounds really good. 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 (Chairman)
I will direct that question again to Min.
Min Wei (COO)
Sure. That's a great question, Howard. As mentioned on the call earlier, we achieved, you know, basically 50% of the targeted merchant, you know, base on the island. The experience so far has been fantastic. The volume of the payment processing business on the island has grown from basically zero to, you know, close to $8 million on a monthly basis just within a number of months. We've been collecting feedbacks from the merchants, including restaurants, you know, like, you know, McDonald's, you know, Carl's Jr., as well as just, you know, collecting, you know, feedbacks directly through our banking partner, Territorial Bank of American Samoa. You know, it's what we see so far. You know, our partners expect to, you know, receive, you know, further volume coming up in the, in the next quarter or two.
So, uh-
Howard Halpern (Principal Equity Analyst)
Okay.
Min Wei (COO)
All is going well.
Howard Halpern (Principal Equity Analyst)
Okay. I guess since you're sorta almost like, you know, kinda 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 (Chairman)
Thanks again for a thoughtful question, Howard. This is Ben. Yes, we do see a potential and already inquiries by other similar systems. Closed-loop pay 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 the table.
Howard Halpern (Principal Equity Analyst)
Okay. Then, and then one technical financial question I see, with, you know, the change, I guess, in the convertible debt and interest expense, debt discount dropping significantly in this quarter. I haven't looked at the 10-Q yet, could we see that basically diminishing towards zero from the $437,000 that we recorded in the third quarter?
Ben Errez (Chairman)
I will direct that question to our Chief Financial Officer, Drew.
Howard Halpern (Principal Equity Analyst)
Oh, he might be on mute.
Drew Byelick (CFO)
Sorry. I was on mute. With the conversion of parts of the debt to stock...
Howard Halpern (Principal Equity Analyst)
Right.
Drew Byelick (CFO)
We have taken the discounts and derivative values down and recognized an expense related to those the reduction in debt.
Howard Halpern (Principal Equity Analyst)
Mm.
Drew Byelick (CFO)
The interest rate obviously is affected by the reduction in the debt. The conversion is not, you know, we can't predict the rate of conversion.
Howard Halpern (Principal Equity Analyst)
Right.
Drew Byelick (CFO)
From the debt holders at this particular point in time.
Howard Halpern (Principal Equity Analyst)
Right. The debt discount part of it, that should stay now because you've already assumed that in the in the loss on debt. You've already taken most of that.
Drew Byelick (CFO)
The discount was reduced by the.
Howard Halpern (Principal Equity Analyst)
Okay.
Drew Byelick (CFO)
By the reduction in the debt.
Howard Halpern (Principal Equity Analyst)
Okay.
Drew Byelick (CFO)
In the quarter.
Howard Halpern (Principal Equity Analyst)
Okay. Okay, that sounds great. You guys just keep up the great work.
Ben Errez (Chairman)
Thanks, Howard. operator, who's next?
Operator (participant)
Our next question is from Kevin Dede with H.C. Wainwright. Please proceed with your question.
Kevin Dede (Managing Director and Senior Technology Analyst)
Hi, Ben. maybe sort of too high level for this call. You can kick it if you don't wanna deal with it. could you just run through a transaction example that illustrates how coyni is self-funded?
Ben Errez (Chairman)
I will direct this question to CEO, Fredi Nisan.
Fredi Nisan (CEO)
Hey, Howard, how are you? Thank you for the question.
Kevin Dede (Managing Director and Senior Technology Analyst)
Yes.
Fredi Nisan (CEO)
Kevin, sorry. From HRI, sorry about that. coyni in the B2B space, the way transactions are coming in is a B2B. Our business will fund this coyni wallet with the amount he wants and then request to do certain things, for example, send money, invoices, everything related to his business or pay out vendors or other different businesses. He will fund his own wallet. When you come from a critical processing, we basically hold the money for 24 hours and then release when we get the funds. The ecosystem is funding itself. We do have instant funding is needed, and then we can access a liquidity if needed, but at this point we don't see it happen.
Kevin Dede (Managing Director and Senior Technology Analyst)
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 test be successful, how you'd expect vendors to come to your platform vs using one that was offered by the Fed?
Ben Errez (Chairman)
Kevin, thanks for this question. This is my view. I think that development is a great thing for coyni. The feature is necessary next step for the industry in general, and we'll continue to grab legitimacy traction as larger player enter the space, and the government steps up the regulatory oversight. coyni can provide the same or superior technology as an equalizing agent so that smaller banks can have the same capabilities as these major player. coyni'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 (Managing Director and Senior Technology Analyst)
You know, sort of taking a step back and looking at your objectives this year, you're basing your... I mean, obviously, right, we're halfway through the quarter, but you're not expecting to close any acquisitions the 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, you know, given sort of the general reset and valuations, you could give us your perspective on how that market looks and, you know, what type of currency you would use to pull the trigger on a new deal.
Ben Errez (Chairman)
Again, thanks for this insight. Obviously, as we are all interfacing dry powder in the capital market, standard debt and equity raises are less likely. This does not mean that M&A activity is halt 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 accreted businesses. Although you are correct in saying that it is highly unlikely that Q4 will see a completion of such activity, we do think that the days when this will happen are nearing.
I do expect that to happen in the near future, maybe in the next couple of quarters.
Kevin Dede (Managing Director and Senior Technology Analyst)
Can you just give us an idea of, you know, 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 the management teams there realize that there's a better opportunity and scale?
Ben Errez (Chairman)
The second is more likely. We will not be looking to provide an exit to anybody. That business, potential business that 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 today. 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, sorry, 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 (Managing Director and Senior Technology Analyst)
Okay. Could you offer just a high-level view on your sales and marketing approach, given where coyni is now, where your processing business is 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 (Chairman)
Okay. I will direct that question to Min.
Min Wei (COO)
Hey, Kevin, it's a great question. You know, I'll put it this way, right? The way we look at, you know, how we go to market and pursue further sales growth for coyni is that we have a strong foundational business that covering both high risk and no risk, you know, merchant space. In addition to that, you know, with the launched platform, we see additional verticals being opened up, you know, in our near-term business plan that we see that domestically we will have, you know, one or two new market verticals through strong partnerships we can bring to the table. In addition to that, you know, through the B2B partners, we see, you know, transaction processing for the end users, for the business customers, for both on-ramp and off-ramp capabilities.
As you mentioned also, you know, given that we have a unique, you know, business, you know, presence in European market already, leveraging the various business licenses we have, you know, we can look at, you know, how to do on-ramp, off-ramp for both sides of the Atlantic Ocean. In addition to that, you know, for the FX and the international payment space, you know, we also see that being very complementary as well. I'm very optimistic, you know, to see the volume growth, you know, across multiple verticals, you know, as well as the geographics between the two sides of the Atlantic Ocean.
Ben Errez (Chairman)
Kevin, I'm going to allow for another point of view from Chief Marketing, Jacqueline. Jacqueline, go ahead.
Kevin Dede (Managing Director and Senior Technology Analyst)
I appreciate that, Ben. Thank you.
Jacqueline Reynolds (CMO)
It's not necessarily another point of view. Hi, Kevin. It's just to augment and piggyback on what Min 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. In this case, we sort of named them the progressive pragmatic. I have a ton of information and research that sort of supports who it is that we are really going for and who has the biggest disposition to adopt the coyni brand. 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 wanna make sure people know who coyni is.
That gives you a little bit of background on the marketing side.
Kevin Dede (Managing Director and Senior Technology Analyst)
Could you, Jackie, help me understand how I mean, maybe how to quantify that target customer in terms of your the entire transaction market and maybe the amount of volume that they're processing on a, you know, if you were able to generalize, on a per customer basis? Also help us understand how you're able to rationalize two brands in the market, right? You've got the Ex-Greenbox. Now that's gone. That's water under the bridge. You're still offering both RYVYL and coyni. Help me understand how are you going to communicate both of those brands and their advantages?
Jacqueline Reynolds (CMO)
Absolutely. I'm gonna tackle the second question first, Kevin. 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. Obviously we wanna drive the awareness, and we want to drive a sense of trust and security with our mother brand. coyni is really gonna be our workhorse, and for that reason, we are investing in coyni to ensure that we are truly laser-focused on this target that I just mentioned. Each one has their own brand positioning and their own messaging, et cetera.
We will make sure that those two are differentiated. If you'll notice on some of our communication, our tagline is "Provoke possibilities." RYVYL is the one that provokes those possibilities for all our brands. The second question, I'm gonna actually turn it over to Min in one second, 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. Min, if you'll take the sales conversation from here.
Min Wei (COO)
Yeah. Thank you, Jacqueline. Kevin, just to help, you know, really, you know, a couple ways to look at the metrics, right? You know, one of the metrics pretty essential for us, and we see this every day, and we're very comfortable with it, is, you know, the number of merchant locations and the, you know, monthly processing volume per location, right? That's a pretty reliable metric for us. The other point I'd like to, you know, share with you is that we have 100s of, you know, agents and ISOs. You know, we've been, you know, basically putting them on standby until now we've launched the platform. We'll be able to work with the ISOs and partners to bring the volume through, right? In the existing verticals, we have good metrics already.
For the new verticals, you know, we plan to, you know, bring over on board. We are working, you know, diligently on that. Obviously, you know, as we finalize our business plan for 2023 and set the, you know, metrics, you know, with the new verticals, we'll be able to articulate and share, you know, in this particular call as part of the ongoing guidance. I think that's probably the quick way to, you know, answer the question. Hopefully, that's okay with you.
Kevin Dede (Managing Director and Senior Technology Analyst)
Yeah. No, I appreciate, Min. Thank you. Thank you for entertaining it. I appreciate it. One last one for me, I think maybe you gents and Jackie addressed this for Howard already, and that's the sequential change, the sequential increase in % of processing volume that was revenue. I just kinda wanted to understand. There's a nicely sequentially positive trend from March this year. I get that, what you've said, right? It's based on both your internal improvement and also increases in scale. I'm wondering how you think we should look at it going forward. How much more can that improve?
Min Wei (COO)
You know, Kevin has an open-ended question. I'll put it this way, right? You know,
Kevin Dede (Managing Director and Senior Technology Analyst)
If you find it that way, Min, then I've done my job.
Min Wei (COO)
You're doing a great job. I'll put it this way. Really we continue to expect growth, you know, for the targeted, you know, business verticals we have. For the ones we have visibility in our sales pipeline, we know they will generate higher than the average residual percentage right now. We know that 'cause we have pricing strategy, we know what our cost base is, so we do that. You know, 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. That way, for each of the major business lines, we'll continue to articulate volume and corresponding, you know, revenue and margin. As such, analysts will be able to, you know, look at the math and, you know, be able to model it out, right?
Over.
Kevin Dede (Managing Director and Senior Technology Analyst)
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 (COO)
That's just correct. You can see that, even during the earnings calls, you know, if that's in my operating highlights area, I tend to, you know, break them down by each of the business lines and give you the data points.
Kevin Dede (Managing Director and Senior Technology Analyst)
Are those figures in the 10-Q, or will they be in the 10-Q?
Min Wei (COO)
They're currently not in the Q. Obviously, you know, we will be compliant as we continue to drive growth. Hit a certain scale, we'll be looking at, you know, the proper time to, you know, break them down and articulate in the Q2.
Kevin Dede (Managing Director and Senior Technology Analyst)
Okay. That sounds great. Thank you so much, everyone, for entertaining my question. I really appreciate it. 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 (Chairman)
Thanks, Kevin. Going back to your point with Min, if you go through the transcript for this call, and/or just listen to Min's section, you'll see the breakdown by verticals as a contributor to overall earnings. We already have that, and we began doing that. As we grow bigger and as the we scale in market cap and equity appreciation, we will obviously need to provide further breakdown and further clarity. 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. Any particular one that...
Actually, as I was traveling last week, I received three calls from different analysts and stakeholders about one particular issue, and I wanted to address it on this call. We'll continue and have questions until time runs out. Operator, please keep us honest on this. 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. 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.
As oversight increases and stablecoin 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 hedged by commodity. Regulation space will increase through the remainder of the current Administration. The Department of the 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.
Operator (participant)
We have.
Ben Errez (Chairman)
With the written...
Operator (participant)
We have one question in-.
Ben Errez (Chairman)
Go ahead.
Operator (participant)
We have one question in queue.
Ben Errez (Chairman)
Go ahead.
Operator (participant)
Our next question is from Chris Sakai with Singular Research. Please proceed with your question.
Ben Errez (Chairman)
Hey, Chris.
Chris Sakai (Director of Research)
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? You know, what's it gonna look like next quarter?
Ben Errez (Chairman)
Chris, I will direct this question to Drew, Chief Financial Officer.
Drew Byelick (CFO)
Well, most of the cash is obviously used by operations in the quarter. We do see an improvement in operating or project improvement in operating results in Q4, given the completion of the coyni 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 U.K. as well as some technology also supported in Europe.
Chris Sakai (Director of Research)
Okay. Thanks for that. Did I hear this right? coyni had $480 million processing volume for the quarter? What was that Min said?
Ben Errez (Chairman)
I will send that to Min.
Min Wei (COO)
Hey, hey, Chris. You know, in the FX international payment space, we have $480 million, you know, of processing volume. That's what we consider the FX module. You know, we plan to integrate that with coyni. It's not fully connected yet, you know, but it's the starting foundation for that module and for that business, just to be very clear about it.
Chris Sakai (Director of Research)
Okay.
Min Wei (COO)
For example, every time we do a, you know, a foreign exchange conversion, you know, we earn a fee for each of the spot conversion. Each time we do a corporate, you know, payout for international payment space, we're entitled to, you know, a fee for revenue. Okay?
Chris Sakai (Director of Research)
Right. Okay, thanks. Then for the year, what you're forecasting $4.2 billion-$4.4 billion, how much of that is coming from coyni?
Min Wei (COO)
You know, we didn't necessarily. You know, I don't have the data in front of me, but we have start seeing the volume showing up on coyni. You know, $480 million is the FX, you know, which eventually will be the coyni FX module. I might have to get back to you, Chris. I know we, you know, we maintain communication with you, so I have to probably get back to you to make sure I give you the right number rather than giving you the incorrect number on the phone here.
Chris Sakai (Director of Research)
Okay. Last from me, can you provide any color as far as what sort of processing volume you'll see from the second banking partner?
Min Wei (COO)
Well, very good question, Chris Sakai. Okay, actually, Fredi Nisan would like to, you know, help address the question. Over to Fredi.
Fredi Nisan (CEO)
Hey, Chris. Pleasure hearing from you. In regarding the banking relationship, what important for us to grow with volume and profit is to add as many partnership as possible to support the volume in different countries. 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 coyni. In Q4, as part of our business expansion, of course, we have different channels and one of them, we're gonna hear very soon. In the end of it's not about the volume, it's about the support of the volume that we wanna put on coyni, and for that reason, you need more banking partnerships.
Chris Sakai (Director of Research)
Okay, yeah. I forgot to ask about Cross River. How is that going? You know, can you mention anything there?
Fredi Nisan (CEO)
Yeah, absolutely. Cross River and RYVYL are working together on creating the product. We already have a contract with them, as we mentioned in a PR, it takes longer as banking-related partnerships take some time longer than expected. This time of the year, just for your knowledge, Chris, and everybody on the call, usually November, all of the banks acquires going into a freeze until the beginning of January. Some of those things will delay for first quarter of next year. Other than that, we have a great progress, hopefully we can announce some of it soon.
Chris Sakai (Director of Research)
Okay. Thanks for that, Fredi.
Fredi Nisan (CEO)
Thank you, Chris.
Operator (participant)
Thank you.
Ben Errez (Chairman)
Okay. I'll assume that, Chris is done. I'm sorry. Operator, did you wanna add anything?
Operator (participant)
No, I'll turn it back to you, Ben, for any writing questions.
Ben Errez (Chairman)
Okay. Okay. 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 coyni and the company's strategy to scale it? Is the wallet necessary if you're focused in B2B? I will direct that question to Min.
Min Wei (COO)
Thank you, Ben. This year we invested, you know, on the efforts, and as a result, successfully launched our coyni platform. Our future development will continue to focus on product roadmap work and functionality to support our growth in payment solutions, acquiring business, foreign exchange and international payments business, white-label platform and API work. As we transition merchant business volume on the coyni, we expect to see an increasing B2B volume in the ecosystem accordingly.
Ben Errez (Chairman)
Thank you, Min. With that, we are concluding today's call. Thanks everybody for your continued support and great questions submitted during this call and before it. Operator, you are okay to complete.
Operator (participant)
Thank you for joining us today. You may now disconnect your lines. Have a nice day.
Ben Errez (Chairman)
Thank you all.