Welcome to the RYVYL second quarter earnings conference call. [Operator Instructions] The earnings press release accompanying this conference call is 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 who is 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. [Operator Instructions] At this time, I'd like to turn the call over to Ben Errez, the company's Chairman. Ben, the floor is yours.

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 second quarter 2023 financial results, where we delivered record top line revenue for the third 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 first quarter of 2023. Revenue was also above our Q2 target range of $12.5 million to $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 first quarter 2023 and above our target range of $580 million to $610 million. COO, Min Wei will break down the various processing channels performance later in the call, but needless to say, we are very pleased with steady processing volume growth in 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…

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 the second quarter of 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 U.S. 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…

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 to $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 first quarter $112 million volume and is 77% higher than the same period 1 year early. 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 reduce 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 second quarter 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…

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

Go ahead, sir.

Thank you, operator. All right. So 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 an update or pertains to an update on the matter of NASDAQ minimum compliance. And 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.

Thanks, Ben. I'd like to share exciting progress for both Visa Direct Program and the SEPA program. The SEPA program -- the SEPA system is already working with our current system. I mean the process is turned on and fully integrate with SEPA instance. We expect that to commence in the third quarter as a result of that, which you see further increase processing volume when it comes to banking as well as offering. We respect the Visa Direct Program and working diligently with the visa program manager, we target to go live with the initial list of countries in the third quarter. As we mentioned during the press release, 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 foreign currencies. So all in all, great momentum for Banking-as-a-Service offering. As we mentioned also earlier during the earnings call that we have seen further increasing volume for Banking-as-a-Service portfolio we have. When we're looking at the monthly volume, we're already constantly hitting north of $100 million [indiscernible] and while we compare it to the Q2 Banking-as-a-Service offering to the previous quarter, we definitely have seen double-digit growth. So good news across the board, and we expect to see Visa Direct and SEPA instant further help us.

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.

Thank you, Ben. From PayPal announcing the stablecoin, I think is a 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 so we will have everybody in the space. From the FedNow and how all of that interacts with the stablecoin, I think we need to understand that FedNow is just local payment, just like ACH, and it will not help with transfer money on a global scale. So 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. But I want to mention as well that PayPal is in the low-risk space and they don't touch the medium to high risk. So 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. So 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.

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 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? So 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. And as it stands right now, we don't have any further substantive updates to share with everybody, but we will obviously share alternate information as that comes about. Here's the next question. Can you talk about the strategy to scale up into a larger or bigger economy 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.

That's a great question. In terms of 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. For example, in the U.S., our block processing volumes growing -- continue to grow very robustly, right? We have seen more than 15% to 20% growth from Q1 to Q2. We expect to continue to focus on the verticals we serve today to achieve double-digit growth in the U.S. market, focus on the specific verticals we target on. Now separately, we are also looking at new verticals and new geographics where we have less competition, where we expect to generate higher profit margin. For example, our plan to roll coyni in the European market will focus on specific medium to high risk, high return verticals. We have a plan in the process of establishing the business entities, loading out the product platform in the second half [indiscernible] of the European market. In the U.S., we're also in the process of progressing the rollout of our coyni services for e-commerce programs and some additional wallet programs as well. So I would say all-in-all, we focus on select verticals. We focus on select business portfolios that's going to generate a good profit margin. As a result of that we can generate better returns for our shareholders.

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.

Thank you, Ben. The mPOS is an extension to coyni. We developed this product for 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 challenges when they arrive, set up. All of that time-consuming tasks are related to an older technology that related to merchant services called the POS, the actual terminal. So we developed 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. And that allows you to go live from the moment you get approved very quickly. You don't have to wait for the device to be shipped to you. You don't have to do downloads. You don't have to set it up and we can deploy it globally with the same exact app. So it does 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. So in the end of the day, the benefits are simple faster deployment, help with global deployment and help with the cost effective for our merchant, meaning they don't need to buy a terminal. And the last thing will be to help us -- actually help them to support reduced 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 of the operation and on the front of the commission.

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

[Operator Instructions] And we have a question from Kevin Dede with H.C. Wainwright.

This is Michael Donovan calling on behalf of Kevin Dede. So in your press release you state that you expect to have a full global payment platform covering over 100 local currencies and local sediments. I want to clarify, is this going to be using Visa's network or will coyni also be handling multiple currencies as well?

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

No problem. 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 a very impressive coverage visa offer outside of the conventional SWIFT transfer, right? It's going to be faster, it's going to be cheaper for our business and consumer customers. But that's not to say that we don't process and interface with conventional programs. We do have full capability working with SWIFT, working with SEPA we talked about earlier, as well as Visa Direct. In terms of coyni, yes, it is our plan. As I mentioned earlier, we have the coyni rollout plan covers both the U.S. market as [indiscernible] pushing the business processing capability for the European market. We fully expect with integrated banking solutions with the coyni platform, we have the capability of handling the multi-currency in the kind of a expeditious processing way for our customers.

And for coyni's Mobile Point of Sale app are you -- which specific geographical regions are you targeting in the beginning? And have you had feedback from the merchants already? I know it's been only a few days, but get a little bit more color on that front? That would be appreciated.

Thanks Michael for that question, we are going back to Fredi.

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

Michael, you can go ahead.

Certainly. Thanks, Fredi. So for coyni's Mobile Point of Sale app, are there specific geographical regions that you're targeting in the beginning? And also, I know it's only been a few days, but have you received feedback from merchants already?

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 approached us and want to start utilizing that in a very specific vertical that we are comfortable with as well. But the next goal is as we are deploying coyni as well in Europe, you will be deployed there in a few verticals that we believe we can be very successful, but at the moment we start with the U.S.

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

So that's -- I'll take this one. So that's an interesting topic. And 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. And the certificates were awarded in July of this year. Out of the 100-or-so participants, only 41 as of now are certified. And a big portion of that are not standard financial institutions, they are more service providers. And by the way, the government includes itself as one of those successful completions for 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 spin-off 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 playing field, everybody understands it, banks are participating in very large companies and penetration is sort of defined. So 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.

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

So I'd like to thank everyone 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.

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