Earnings Call Transcript - CLBR Q2 2025

Operator, Operator

Thank you for your patience. My name is Eric, and I will be your conference operator today. I would like to welcome everyone to the PublicSquare Second Quarter 2025 Earnings Conference Call. Now, I will turn the call over to Will Kent, Senior Vice President of Corporate Affairs. Please proceed.

William Kent, Senior Vice President of Corporate Affairs

Good afternoon, everyone, and welcome to PublicSquare's Second Quarter 2025 Earnings Conference Call. Joining me today are Michael Seifert, Chairman and Chief Executive Officer; James Rinn, Chief Financial Officer; and Dusty Wonderlich, Chief Strategy Officer. Before we get started, we want to emphasize that information discussed on this call, including our outlook, is based on information as of today and contains forward-looking statements that involve risks, uncertainties and assumptions. We undertake no duty or obligation to update such statements as a result of new information or future events. Please refer to today's earnings press release and our SEC filings, including our 2024 10-K for factors that may cause actual results to differ materially from our forward-looking statements. We'd also like to point out that we present non-GAAP measures in addition to and not as a substitute for financial measures calculated in accordance with GAAP. I'll now hand the call over to Michael. Michael, please go ahead.

Michael Seifert, Chairman and CEO

Thank you, Will, and welcome, everyone, to our second quarter 2025 earnings call. We appreciate you all joining us today. And to get us started, I would like our CFO, James Rinn, to provide a financial overview on our performance in the second quarter. So James, take us away.

James Rinn, Chief Financial Officer

Thank you, Michael, and good afternoon, everyone. I'm honored to address you for the first time as CFO of PublicSquare. While I am new to this role, I have supported the company at the Board level for the past two years. I am excited to lead our finance organization and partner with our executive team during this next chapter of growth and operational execution. Let's review the key financial highlights from the second quarter and the first half of 2025. Regarding revenue growth and segment performance, we reported net revenue of $7.1 million for the quarter ended June 30, 2025, which is an 18% increase year-over-year compared to $6 million for Q2 of 2024. The breakdown by business segment in Q2 shows the strength of our current segments. Financial Technology, including PSQ Payments and Credova, earned $3.4 million in revenue, a 15.6% increase from the prior year. Revenue would have reached $3.8 million and a 28% increase year-over-year if we had not had a one-time vendor adjustment of $0.4 million during the second quarter of 2025. Our recently launched PSQ Payments generated $1 million in revenue for the quarter, which is an over 80% increase from Q1 2025. As anticipated, our credit business revenue declined year-over-year. However, the company has improved its credit portfolio performance through increased use of AI-driven underwriting and machine learning, reducing first payment default rates by 74.8% over the last nine months, surpassing competitors in a challenging environment. Brands primarily driven by EveryLife generated $3.3 million in revenue, reflecting a 45.5% increase compared to the prior period. The Marketplace earned $0.3 million during the quarter, which was softer than expected due to the pause in our marketing spend leading up to the Made in America marketplace launch in July 2025. Transitioning to operating expenses, we made significant progress in expense optimization and capital allocation. The financial results for the first half of the year showed total costs and operating expenses declining by 13%, or $4.8 million year-over-year, while revenues increased by 46%, or $4.4 million year-over-year. The net loss for the first half of 2025 improved by 46%, or $11 million, decreasing from $23.8 million to $12.8 million. General and administrative expenses decreased by 22% compared to the prior year. Sales and marketing expenses fell by 46% during the first six months compared to last year. Research and development expenses increased by $0.6 million, with $1.6 million invested in internally developed software, highlighting our commitment to enhancing our fintech platform. Regarding margin and profitability, our gross margin in Q2 was 53% compared to 67% in Q2 of the previous year, primarily due to changes in revenue mix. Additionally, fintech revenues in Q2 were more heavily weighted from credit towards our PSQ payments. Our GAAP operating loss for the quarter was $8.1 million, a significant improvement from $14 million in the same quarter of 2024. The net loss for the quarter was $8.4 million, or a loss of $0.18 per share, improving by 50% per share compared to a loss of $0.36 per share reported in Q2 of 2024. Moving on to cash flow and liquidity, as of June 30, 2025, we had $20.6 million in cash and cash equivalents, along with an additional $0.3 million in restricted cash. Net cash from operating activities decreased by $5.7 million during the first half of 2025 compared to the prior year. We had $4 million outstanding on our $10 million revolving line of credit, which we used to finance our Credova credit products. We decided to retain certain consumer finance receivables on our balance sheet, resulting in about $1 million in cash usage for the quarter, allowing us to increase our long-term return. Additionally, we invested $455,000 in money transmitter license applications for the Fintech segment during the quarter. On May 23, 2025, PublicSquare initiated an at-the-market offering. During Q2, we sold 164,971 shares via the offering, and these proceeds covered the costs associated with establishing it. We believe it is sound corporate practice for a company of our size to have this in place, and we may use it occasionally for reasons outlined in the prospectus and to help offset the costs of being a public company. As of June 30, 2025, we had 42,676,029 Class A common shares outstanding and 3,213,678 Class C common shares outstanding. In late 2024, the company implemented a strategic reorganization to enhance efficiency and reduce costs, which was expected to save approximately $11 million annually and significantly lower cash needs. We are pleased to report that the company has exceeded expectations in reducing operating expenses through these reorganization efforts, realizing about $9 million of the expected $11 million in annualized savings in the first half of 2025 alone. In summary, we are experiencing strong revenue growth, maintaining healthy margins, and significantly narrowing our operating losses, partly due to year-over-year reductions in operating costs. We believe we are well-positioned to create long-term shareholder value as we execute our strategic repositioning and work towards profitability at scale. Now let me hand it back to Michael for more on the exciting journey ahead for PublicSquare.

Michael Seifert, Chairman and CEO

Thank you, James. Before we continue, I want to emphasize the importance of what James just shared. Last November, we implemented significant operational changes aimed at maximizing efficiency and streamlining our operations to ensure that every dollar we spend has a measurable impact. The year 2024 was focused on investment, and as we moved into 2025, we realized it was time to monetize those investments by increasing revenue while reducing operating expenses. In November, we informed our shareholders that these changes were expected to save the company a net of $11 million annually. Today, I want to reiterate James' comments that in just the first half of this year, we have already achieved $9 million of the anticipated $11 million in net savings, ahead of schedule. We accomplished this while also growing revenue year-over-year and meaningfully scaling the business. Expenses have decreased alongside revenue growth, strengthening both our company and our mission. James discussed our Q2 performance, and while we are pleased with the growth we are experiencing, this quarter was also marked by strategic choices that sharpen our focus and align the business for maximum impact in the near, mid, and long-term. Since the beginning, PublicSquare has been driven by a simple yet profound mission: to build commerce for a better America, using technology to serve patriotic Americans with financial products that protect life, family, and economic liberty. We have never wavered from this mission, and our conviction in it grows stronger each day. As our mission influences all our decisions, we continuously assess whether our structure and strategy are optimized for effectiveness. Recent evaluations have indicated that we can take bold steps to enhance our effectiveness and focus. Until now, our strategy involved building a financial ecosystem through three divisions: Marketplace, Fintech, and Brands, working together to provide value for customers and merchants. This model has served us well; however, as we have scaled, it has become clear that while this structure could create a good company, achieving true greatness and becoming an indispensable leader requires a tighter focus. Today, we are announcing that we will monetize EveryLife and the Marketplace by selling EveryLife and either selling or strategically repurposing the Marketplace. Moving forward, PublicSquare will concentrate solely on growing as a financial technology company. I am optimistic about the future of both EveryLife and our Marketplace, but we believe that these entities will thrive in environments dedicated to their success, while PublicSquare channels all efforts toward developing our fintech offerings to meet growing demand. The core of our economic ecosystem is the transaction experience, where customers and merchants' economic liberties are most vulnerable. This arena has seen significant debanking and cancel culture issues from major financial institutions in recent years, presenting the greatest potential for our mission’s success. We are passionate about financial technology and its ability to foster freedom and trust in transactions, and we possess the essential elements for success: a strong team, advanced technology, a respected brand, and unwavering commitment to the industries we serve. As CEO and Chairman, alongside our Board and management team, I have immense confidence in the strategic repositioning of our business. We believe this will unlock substantial growth potential, refine our operational focus, and ultimately deliver transformative value to our shareholders. Although this decision has been significant, I believe that five years from now, we will regard it as a pivotal moment in achieving the future we envision for PublicSquare. So I'd like to dive a bit deeper into the practical moves we are making here. This business evolution centers around three core initiatives. Number one, we are doubling down on fintech. Overwhelming demand over the last year from values-aligned merchants and consumers has validated our fintech model. The speed at which we've been able to accumulate and process substantial GMV, especially from enterprise merchants on a rapidly expedited timeline compared to our competitors, by the way, communicates a clear trust in our payment stack. And the desire for our key differentiators, most notably our bill checkout product offering of payments and credit services paired with our intentional commitment to serve industries previously ignored by mainstream financial institutions, has proven tremendously accretive to both our top and bottom line. When we combine our debit and credit card processing capabilities, consumer financing activities and ACH processing, we have the opportunity to facilitate the movement of all money in and out for our merchants. And this positioning has allowed us to ensure that in every step of the transaction, we are securing economic liberty for the community we're grateful to serve. In the near future, you'll see us add additional features to our payment stack, including crypto payments, donations technology, private label credit card programs, tools to drive increased loyalty for our merchants, and more. Number two, we are monetizing noncore segments. So as I mentioned, we are monetizing our EveryLife brand via a strategic sale and exploring a sale or strategic repurposing for the Marketplace. Both have built substantial brand equity with their respective consumers, and we have received positive early indicators regarding the demand for both of these entities. The divestiture of these entities should provide nondilutive and tax-efficient capital to the go-forward company, while also providing an environment for EveryLife and Marketplace where they can both thrive with the whole focus of their new ownership dedicated to their long-term success. We expect to complete these efforts by the end of the fourth quarter of 2025. And while this is certainly a bittersweet move for us as a company, we believe this repositioning will unlock tremendous value for both EveryLife and Marketplace as well as the go-forward PublicSquare Fintech entity. Number three, as we mentioned in our press release from late May, a significant aspect of our go-forward vision includes building and deploying cryptocurrency solutions that empower consumers and merchants, while opening up new high-margin revenue streams for our company. We have also explored and are in the process of deploying a diversified digital assets treasury strategy to complement our efforts as we productize our payment stack in favor of alternative financial systems that mark a departure from traditional payment rails. We recently welcomed Caitlin Long, a renowned cryptocurrency and finance expert to our Board of Directors, to help guide and spearhead this effort. With the recent regulatory and legislative wins regarding cryptocurrency, the merchant demand we've witnessed for diversified payment methods, and our passion for digital assets because of their positive impact on the economic liberty movement, we are excited to press forward in this space with intentionality in the weeks, months, and years ahead. Finally, to dive far deeper into the strategy of our go-forward fintech company, we will be hosting an analyst and investor meeting in September. We will share details regarding the date, the time, and participation opportunities of this event in the coming weeks. We're at an exciting inflection point as a company, but we're also at an inflection point as a nation. The economy and the world, at large, are transforming quickly due to the technological revolution happening before our eyes, with the rise of AI and alternative financial systems. We, the people's pursuit of financial freedom more than ever before. With the bold moves we are making as a company here today, we believe we are positioned to lead with excellence and principle in this new era of technology. We believe our performance over the coming months, quarters, and years will bear a testament to that reality, and we are immeasurably grateful that you're on the journey with us. We are just getting started. So now, let's head to Q&A.

Operator, Operator

Your first question comes from Darren Aftahi with ROTH.

Darren Aftahi, Analyst

A couple, if I may. First, I know last quarter you talked about onboarding a bunch of payment customers and then there'd be sort of significant ramp-up in the second half of the year. Just wondering if that kind of thesis is still holding true?

Michael Seifert, Chairman and CEO

Absolutely. Yes. Thank you, Darren. So the thesis is certainly still holding true. I would say that onboarding has taken a bit longer than we had anticipated, but actually for kind of an exciting reason. Many of our merchants are finding the desire for our bundled checkout offering, meaning combining our credit services as well as our payments, more than we had even anticipated. So because of that, many of these merchants are actually wanting to migrate their entire checkout stack, not just payments, at the same time, which is obviously just a slightly larger technical lift. But we certainly reiterate the thesis that the second half of this year is when we should begin to see very material revenue even over and above the 80% increase we saw from Q1 to Q2.

Darren Aftahi, Analyst

Great. And then two more, if I may. Just on the EveryLife potential sale, just kind of curious when that official process sort of started and what kind of inbound interest you've kind of seen thus far?

Michael Seifert, Chairman and CEO

Yes, great question. So this process started very recently. This is really the week where we're officially starting the process, beginning ultimately with this announcement here to our shareholders. As we've had preliminary conversations to gauge interest, we've been very positively received. And ultimately, we believe that the fundamentals of EveryLife stand incredibly strong. It is a business that I love dearly and believe in passionately. It has a very strong economic outlook based upon, not only its track record from the last two years, but also the increased demand we've even witnessed over the past few months for greater bulk order partners and opportunities with nonprofits at scale and being able to unlock future distribution models. So I'd say that value, both the track record and its go-forward forecast, has been very positively received, and we believe that we as a company are going to receive a very accretive deal for the sale of this brand. And ultimately, we're very excited about it landing in the hands of an ownership either as a single individual or a firm or a network of investors that share two things. Number one, a positive outlook on the financial opportunity of EveryLife as a brand, as well as the values that have guided EveryLife from the beginning. We've always said at EveryLife that customers will come to EveryLife for the values, and they will stay for the quality of the products. These are clean, premium quality products that serve the life, health, and well-being of the most precious people we have in our home, which is the next generation. And ultimately, that value has been very, very positively received by potential investors or suitors that really believe that they can transform this brand into a positive force as it continues to move and scale forward. So, as I said in the statements, we anticipate wrapping up this process by the end of Q4 of this year, which really sets us up for a clean 2026 as a go-forward fintech company.

Operator, Operator

Your next question comes from the line of Francesco Marmo with Maxim Group.

Francesco Marmo, Analyst

Congrats on the quarter. Just a quick one. I was wondering whether you guys could expand on your AI-driven initiatives in credit? And now that the company is going to pivot even further into its fintech businesses, how do you think AI will impact your operation and cost structure going forward?

Michael Seifert, Chairman and CEO

Thank you, Francesco. I'll start with one point, but then I'd actually love for Dusty Wunderlich, our Chief Strategy Officer, to extrapolate, especially related to AI's utilization within our credit stack. At the whole business in the go-forward fintech environment, AI has played an instrumental role in really helping make us, as a team, operate with greater efficiency, efficacy, and speed. We've really leveraged AI to help us in all aspects of the business, especially engineering and product, aside from the financial operations of the business that Dusty will touch on. So, we're excited to continue implementing these toolings that are very innovative in nature and really allow for us as a small company to produce outsized output. And we've had very positive benefits thus far, and we would assume that those will only continue as we move forward. Dusty, do you want to address Francesco's question related to credit in our AI underwriting?

Dustin Wunderlich, Chief Strategy Officer

Yes. Yes, happy to. Francesco, thanks for the question. Yes, on the Credova side, we were fairly early to start adopting artificial intelligence into our credit underwriting, and working with third parties to really solve AI with credit underwriting. The big problem the industry has and a lot of technologists have with credit specifically is you can't use BlackRock solutions. From a regulatory perspective, we have to be able to tell consumers why we are either approving or denying them credit. So we were able, very early on, to get with and partner with groups that were solving this problem. And effectively, what it's done, and this was as early as 2021, that we started training models. So we started adopting this and really spent the first couple of years just training models with the over 300 data points we were already getting from either public records or the credit bureaus. And so over that time, Francesco, we've been able to curate a very specific credit underwriting score that is specific to our consumer dataset. And about last year, we really started to implement this across our entire portfolio and underwriting system, and we have seen drastic changes in our quality of our delinquency and charge-offs in that portfolio. It's part of the reason we're now balance-sheeting more of our papers to completely change some of the unit economics. And we're very bullish on what we've seen with this and continuing to press forward with how we implement this, not only in credit, but throughout the organization as we look to the future. But we've been very pleased with what we've seen there and very glad that we made an early investment and really took time and patience to train these models correctly before we implement it. And I think we're seeing the fruits of that labor now.

Operator, Operator

I would now like to turn the call back over to Will Kent to answer some more questions submitted ahead of time. Please go ahead.

William Kent, Senior Vice President of Corporate Affairs

Thank you, Eric. We'll now address some questions that we received from the Say Technologies platform before closing up the call. First question, in Q1 you stated that no capital raise was needed for 1 to 2 years. Yet weeks later you filed a $50 million ATM. Was it closed? Any funds raised, received?

Michael Seifert, Chairman and CEO

Thank you for the question. It's a great question. I'd like to start by making something even further clear regarding the purpose of the ATM and its filing for our company. Not needing to raise for us is different than ensuring we have the opportunity to do so cleanly and efficiently should an opportunity arise that would be ultimately accretive for the business and beneficial to our shareholders. So absolutely, we reiterate the fact that we did not need to file the ATM. But for us, it was more a matter of good corporate housekeeping to ensure that, as James mentioned earlier in his comments, that a company of our size has optionality. And ultimately, that’s what we look to do to ensure that we are constantly thinking about best ways in which we can serve the go-forward vision of this company and ultimately, its benefit that we want to produce for shareholders. So that's number one. And I really appreciate the question there. The second thing I'll highlight is that, as James mentioned, we sold 164,971 shares via the ATM in Q2, which was really used to cover the cost of establishing the ATM in the first place. And ultimately, we will continue to keep the street updated as any relevant next steps are taken via the ATM. But ultimately, at the end of the day, I want to reiterate that point that for us, ATM is a good example of corporate housekeeping that ensures we have optionality to best benefit our company going forward and the shareholders.

William Kent, Senior Vice President of Corporate Affairs

Next question. As a shareholder, I'm curious what the Board has been doing to help move PublicSquare forward? Any example over the past two quarters how Michael, Blake, Nick, Don Jr., Dusty, or others have helped with growth strategy or visibility?

Michael Seifert, Chairman and CEO

Yes, I love this question. We are very grateful as a management team to have a Board of Directors that is actively involved in the operations and the strategy and the marketing of this company. I love the names that you mentioned. Blake is obviously a tech wiz. He has a long career in the intersection of technology, politics, and economics, and his help from a strategic point of view in guiding this company forward has truly been invaluable, especially as, by the way, we are migrating toward more and more of this fintech focus. I look at Nick, and I'm blessed by Nick's wisdom and strategic guidance related to the operations of the company, how to structure a company in a streamlined fashion for success. Paired with the fact that Nick has a tremendous level of influence and value in the faith-based community, which is obviously a community that we hold very dear and we're honored to serve. I look at Don Jr. and reflect on the marketing expertise that he carries, the deal flow that he's initiated for this company, the real marketing brilliance, specifically for the gun industry as well. A lot of people obviously know Don Jr. as a businessman or as really a force of nature in the next generation and their views on politics. We're grateful for all of that and more because we get to see Don's passion for the firearms industry and the outdoor space come to life and how we grow this business forward and protect economic liberty for these industries we are dedicated towards serving. You just heard from Dusty on the call. Dusty serves as not only a Board member, but Chief Strategy Officer as well. He's also one of the best economists I've ever met in my entire life. If you ever want a deep dive on how to structure this company for economic success, given the macroeconomic environment we find ourselves in, Dusty is my first call. And so I'm just really grateful for the Board members we just mentioned as well as the rest of our Board members as well, Willie and Davis and Caitlin Long, who just joined this past week and James Rinn, our CFO. We really have an incredible Board. We feel like we're outkicking our coverage here, and we believe that they'll continue to be instrumental as we move forward.

William Kent, Senior Vice President of Corporate Affairs

Our next question, what specific strategy is PublicSquare pursuing to sustainably increase profitability without compromising its core values?

Michael Seifert, Chairman and CEO

I love this question, and I find it really fascinating because it's a good point to call out that in many cases sometimes people feel like the pursuit of profitability is at odds with their mission or their core values. For us, we actually are very lucky and blessed that for our company, pursuing profitability means holding fast to our core values. We actually unlock greater profitable potential by holding fast to our core values. And I'll give you an example. One of the reasons we've been able to scale so fast in fintech, for example, is our commitment to our core value for economic liberty and protecting a cancel-proof transaction. That core promise that wakes us up every morning excited to produce value in this business is also the thing that leads to greater merchant onboarding. Our commitment to support families across this great country that have felt underserved by the existing financial institutional incumbents has been a major driver in onboarding and getting our message out in a grassroots effort to millions of customers and merchants that want to feel like there are financial services out there that are built for them. So, to wrap that up, I would say across this entire business, a key strategy to driving sustainable increases of profitability is by holding fast to our core values, making sure that those values are messaged and marketed frequently. And that ultimately, we're living them out, that we're holding fast to our convictions, upholding our promises to our merchants and our customers and being a force for change through the power of this economic ecosystem we've created.

William Kent, Senior Vice President of Corporate Affairs

And our last question. Stablecoins, DeFi, and crypto were briefly discussed on the last call, what sounded like concrete plans to both adopt crypto as payments as well as buying Bitcoin to strengthen the balance sheet when the time is right. After some recent SEC clarity, where does PublicSquare stand on this as of today?

Michael Seifert, Chairman and CEO

I really appreciate the recent clarity from the SEC and the legislative victories we've seen, like the GENIUS Act. There is unprecedented institutional interest in digital assets, and as someone who has believed in this space for the past decade—along with many on our management team and Board of Directors—it's incredible to witness digital assets and cryptocurrency becoming integral to both economic and political discussions. We see a significant opportunity to lead in this space by turning the economic advantages of cryptocurrency into tangible products. Historically, the push for cryptocurrency has been driven by engineering, but we anticipate a shift where it will become more product-focused, enabling us to harness cryptocurrencies as real tools for our consumers and merchants. We've invested considerable strategic effort into envisioning our future in this area. We're eager to share more details on our September Analyst and Investor Day about our cryptocurrency strategy going forward. Importantly, we have approached this situation carefully, not rushing into Bitcoin just because others have. We believe a successful treasury strategy involves not only using crypto but also integrating it into our fintech framework. We aim to blend these aspects seamlessly. We're committed to moving forward with determination, and we'll be excited to disclose more in the upcoming months. Additionally, having strong leadership with experience and influence in this realm is crucial. With Caitlin Long joining our Board, we feel confident in having the right team and talent at the right time to effectively execute our plans. Thank you all for your questions today. We’re looking forward to sharing more details soon about the date, time, and participation opportunities for our Investor and Analyst Day in September. Thank you for being part of this journey with us. We appreciate everyone who joined today and those who asked questions, and we wish you a wonderful evening.

Operator, Operator

Ladies and gentlemen, this concludes today's call. Thank you all for joining, and you may now disconnect.