Good afternoon, everyone and welcome to RYVYL Inc's Second Quarter 2024 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow management’s remarks. The second quarter end results press release accompanying this conference call was issued at the close of the market today. Our quarterly report on Form-10Q, which includes the company's results of operations ended June 30, 2024 was filed with the SEC today. A replay of this call is available at the Investor Relations section of the RYVYL website in the Events/Quarterly Results session. As a reminder, this call is being recorded. Before we begin, I would like to remind you that today's call contains certain forward-looking statements from our management concerning future events. These forward-looking statements are based on the company's current beliefs, assumptions and expectations regarding future events which in turn are based on information currently available to the company and contain projections of future results of operations or financial condition or state other forward-looking information. By their nature, forward-looking statements address matters that are subject to risks and uncertainties. A variety of factors could cause actual events and results to differ materially from those expressed in or contemplated by the forward-looking statements. Other risk factors affecting the company are discussed in detail in the company's filings with the SEC. The company undertakes no obligation to publicly update or revise any forward-looking statement whether as a result of new information, future events or otherwise except to the extent required by applicable laws. I will now hand the call over to Ben Errez, Chairman of Ryvyl. Please go ahead.

Good afternoon, everyone and thank you for joining us today. In the second quarter of 2024, total revenue was in line with our expectations bolstered by 134% revenue growth in International compared to the second quarter of 2023. I'll review our efforts to continue to expand our European operations to RYVYL EU, address banking changes in North America, launch new licensing arrangements and broaden our technology applications as well as other product developments. Our Chief Executive Officer, Fredi Nisan will discuss product initiatives and operations; and our Chief Financial Officer, George Oliva will discuss our financials. RYVYL EU continues to deliver strong growth and we expect it will be the largest generator of revenue in 2024. In fact, to ensure rapid onboarding of our EU customers, we've been leveraging US resources. Our International Banking-as-a-Service offering led to an increase in customers as well as an increase in international transaction volume growth which increased from $665 million in the first quarter of 2024 to $781 million in the second quarter of 2024. Our Banking-as-a-Service offering includes API integration and foreign exchange and real-time electronic fund or direct deposits which deliver benefits to our customers by ensuring compliance and streamlining operations. This offering continues to gain traction with customers and we believe offers us the opportunity for long-term growth potential. We completed our first Visa Direct integration in the first quarter and are now live in five countries out of a total of 80. And in acquiring we are processing in 150 countries with additional integrations planned for the third quarter. This initiative delivers Visa Direct's network capabilities for our customers, fortifies our revenue growth and proves our capabilities to Visa. Building upon this connection, we've expanded our partnership and are implementing the Visa payment enabler network. This new platform will provide the infrastructure and services to facilitate electronic payments and financial transactions and leverages Visa's global acceptance enabling various entities including banks, merchants and consumers to perform secure and efficient financial transactions using Visa's widespread payment system. Our collaboration with ACI Worldwide is also contributing to recent growth internationally. We fully completed this integration in July. Now active, we are offering enhanced transaction processing and security features. Coyni, our payment software that makes PayPal and other services available is being deployed exclusively across Europe in coordination with our partner First Data allowing us to operate as a payment facilitator. Our momentum in the EU has been strong over the past several quarters and we've built a well-defined pipeline of opportunities to further fuel growth in this region. In the US to drive growth, we strengthened our corporate structure, furthered our expansion into new verticals and launched private and white label licensing. As discussed in the first quarter, changes in US banking regulations impacted one niche industry customer base, as it had been a significant contributor. Our North American revenue was affected, which continued into the second quarter. We have been implementing a multilayered strategy to address this situation, which we believe is largely behind us. We began by rightsizing our US operations to better align with lower processing volumes. We strengthened our leadership in the US hiring fintech experts. As Managing Director of Northeast Merchant Systems and VP of Compliance, both newly created roles as well as a new VP of Revenue, we have been building more vertical market opportunities. We expanded a long-standing successful US banking relationship that served low and moderate risk verticals to include high-risk processing that carries higher margins. We have embedded our proprietary technology into our Northeast Merchant Systems' score offering that we call NEMS score to focus on PayFac-as-a-Service and merchant service operation. This effort aims to expand our customer base and increase business retention to leverage our technology. We are pursuing both private and white label licensing opportunities. Private labeling enables our partners to use their own banks, which increases our access to customers and we believe reduces regulatory challenges for us while improving our operating leverage. White labeling delivers customized branding to our partner while we retain the transaction processing. As announced last week, we licensed the legacy high-risk business to a third-party partner through private labeling, which uses our core technology to create revenue streams via QuickCard private label Payment-Processing-as-a-Service. While our per transaction fees under its private label structure will be lower than those based on processing volume, we will eliminate operating costs and expect to achieve higher gross margins and reduce operational risk. We are in the final stages of implementation and expect to start transactions in the fourth quarter. I'll take a moment to elaborate on the details of this agreement which are illustrative of future opportunities. We will provide a fully branded implementation and hosting of the consumer e-wallet software and mobile app along with our Merchant Management System, as well as a website landing page assistance with merchant applications and other ancillary support. We will also handle the deployment and maintenance of the RYVYL Payment-Processing-as-a-Service and its interface and collaborate on the system integration and any add-on work that our partner will manage implementation and ongoing operations of the point of banking system procure and manage its own ACH solution for consumer purchases on the platform and collaborate on systems integration. They will establish and operate banking connectivity for settlements to their merchants recruit and grow the merchant business portfolio and ensure timely payment obligations and audit rights of all overrides to RYVYL. Additional product offerings include NanoKard and RYVYL Fabric, which were introduced in August. I will now hand the call over to our CEO, Fredi Nisan who will discuss our product initiatives and operations. Fredi, please go ahead.

Thank you, Ben. We pride ourselves on delivering innovative technology and solutions for our customers and our latest product releases build on our proprietary capabilities, with enhanced functionality and features for our clients. Additionally, we incorporated our latest Generation four RYVYL software into all our solutions, exclusively. RYVYL Generation four software is our backbone technology and offers highly customizable, advanced, and efficient fintech payment solutions to businesses and merchants. Our NanoKard app offers users alternatives to cash or charge cards, and we deliver merchants processing capabilities for these prepaid gift cards. By targeting select verticals for these gifts of convenience and security, we are bringing online a new product for high-margin processing. RYVYL Fabric is an innovative and cost-effective solution that offers tools and building blocks to ensure easy blockchain access, with multilayer security that is compatible with both R3's Corda and its Hyperledger. RYVYL's Fabric software layer enables customers to implement blockchain at a faster pace due to low-cost pay-per-API structure. Our partnership with R3 expands our reach for Enterprise Distributed Ledger Technology and Services in regulated industries where trust is critical. Turning to operations. During the second quarter, several significant achievements highlighted our commitment to innovation, growth and expansion in key markets. We expanded PayFac-as-a-Service, which has been instrumental in broadening and growing our merchant base. Notably, we revamped our banking system software in Europe to improve efficiencies and create more revenue streams. Additionally, as Ben mentioned, we added new verticals in both Europe and the US to further diversify our market presence. We expect these key strategic initiatives to broaden our verticals, lower overhead and reduce certain risks yet they will change our financial model. As licensing increases, as part of the revenue mix, processing volumes and associated revenue are expected to be lower. However, gross margins are expected to be higher as licensing will earn transactional fees. Going forward, we will track the number of transactions with strong business relationships, emerging private and white label licensing partnerships, our proprietary RYVYL technology as well as new products coming online. We are extremely excited about our growth prospects in the second half of 2024 and momentum leading into 2025. We have good visibility into our pipeline and are well positioned to further diversify our customer base and revenue streams. With that, I'll now hand the call to George Oliva, our CFO, who will review the financial results and provide an update for our 2024 financial guidance.

Thank you, Fredi. I'll review our second quarter of 2024 financial performance. Processing volumes across all channels reached a total of $1.055 billion, exceeding our guidance and 6% higher than the first quarter of 2024 and 55% higher than the second quarter of 2023. The growth in volumes is being driven by our banking business in Europe, Banking-as-a-Service, and ACH payments. These have a lower residual rate than processing for acquiring business but have very low cost of revenues and therefore, contribute to higher overall blended gross margins. International processing volumes were $902 million and North America processing volumes were $153 million reflecting, as Ben discussed, the growth in the EU partially offset by the subdued merchant activity in the US. Revenue in the second quarter of 2024 was $11.9 million compared to $14.8 million in the second quarter of 2023. International revenue increased 134% to $8.9 million for the second quarter of 2024 compared to the second quarter of 2023. Cost of revenue decreased $1.6 million to $7.2 million for the second quarter of 2024 compared to $8.7 million in the second quarter of 2023 due to decreased processing volumes of acquiring in North America. Gross margin in the second quarter 2024 was 39.9% versus 41.2% in the second quarter 2023, reflecting the shift in product mix. Operating expenses in the second quarter of 2024 were $15.6 million, including $8.3 million of mostly non-cash charges for goodwill impairment, restructuring costs, and employee severance. This compares to $9.6 million in operating expenses in the second quarter of 2023. Excluding the non-recurring charges, operating expenses were lower by $2.3 million primarily consisting of $1.3 million in lower professional fees and $700,000 in lower G&A costs. Other expense totaled $800,000 in the second quarter of 2024 and mostly related to debt discount accretion compared to $8.5 million in the second quarter of 2023, of which $5.0 million was related to debt interest, debt discount accretion, and changes in fair value of the derivative liability. Adjusted EBITDA in the second quarter of 2024 was negative $1.6 million compared to $900,000 in the second quarter of 2023. We are carefully managing our working capital. Continuing to leverage our strong growth in the EU during the second quarter of 2024, we repatriated $2.5 million from Europe to shore up the US capital resources. At the Corporate level, as of June 30, 2024, cash and restricted cash balance was $75.2 million. Unrestricted cash was $6.4 million and net working capital was slightly negative. During the second quarter of 2024, $200,000 of debt and $875,000 of preferred stock was retired as our investor converted these securities into approximately 736,000 shares of common stock. Turning to guidance. We continue to anticipate processing volumes to grow year-over-year to over $4 billion in 2024. However, as discussed, several factors are impacting the timing of revenue. As such, we believe our revenue recovery in North America may be prolonged by two quarters. Now we expect 2024 total revenue to be in the range of $65 million to $70 million. Specifically, we project third quarter revenue to grow sequentially and be in the range of $14 million to $15 million and Q4 to be very strong with accelerating momentum into early 2025. We believe that any growth in revenue will largely be driven by our International segment, which we expect will comprise the largest portion of revenue in 2024. We expect to achieve adjusted EBITDA profitability in Q4 2024. I'll now hand the call back over to Ben for some final remarks before Q&A. In conclusion, RYVYL remains a dynamic company in a dynamic industry. We made the right adjustments in the first and second quarters of this year as one niche industry customer-based market in the US experienced regulatory issues that impacted our business. We are now poised to rebuild that market via a white label partner and believe these transitory issues in the US are largely behind us. Europe has not slowed down at all and continues to deliver ongoing growth and strong execution. We expect renewed sequential growth in the third and fourth quarters of 2024 positioning us for further growth in 2025. Before we go to the Q&A session, I want to mention some upcoming conferences we will be attending. We'll be at the H.C. Wainwright Conference in New York City September 9th to 11th and at the LD Micro Main Event in Los Angeles on October 28th to 30th. Before we open the call to analysts, there are several questions we received in advance of the call that we will address.

So here are some of the questions that we received prior to this call. First question will go to both George and Fredi. George will open. Fredi will continue. The question is what are the areas in which you are focused to reach profitability? George please begin.

Well, we focused on reducing costs in the US primarily with a reduction in payroll headcount, approximately 25%. Due to severance and vacation payouts and such, we should start to see the benefit of the reduced head count in the second half of the year. We also have been controlling discretionary costs in the US, and we are maximizing cash flow in Europe and repatriating cash to cover the deficit in the US. That's basically what we're doing in the short term.

Thank you, George, and thank you everyone for tuning in. As George mentioned, we have made several adjustments recently and will continue to do so moving forward. Our company is concentrating on two main areas. The first is licensing, where we see significant opportunities in PayFac-as-a-Service and Banking-as-a-Service. The second area involves collaborating directly with our partner ISOs and banks to drive traffic to our platforms, as this approach yields higher margins compared to licensing. On the licensing side, we also see great potential due to regulatory changes across various sectors, with increasing demand for compliance, KYC, ledgering services, and other banking services like foreign exchange, bank accounts, and card issuing to support the evolving financial landscape. We are extremely excited about these developments.

Fredi, will continue with the next question. Can you provide some color on trends in verticals? And what you believe are or will be the most attractive opportunities in the coming year?

Thank you, Ben. That's a great question. The financial market's collaboration with Visa, Mastercard, and other vendors, as well as our perspectives on the future, are centered around three areas that will experience significant demand. First, there is a growing need for faster real-time payment options. We anticipate a substantial demand for instant payment solutions, with businesses seeking real-time payment available 24/7. I expect this trend to increase in the near future. Second, international settlement, particularly through our partnership with Visa on the new Visa Direct, is seeing major demand, especially in regions like South America and Asia, and significantly between the US and Europe. Finally, as financial systems evolve, cryptocurrency is also gaining traction. We are exploring partnerships in Europe to meet the rising demand for crypto solutions, and we are very excited about its growth in the coming years. Those are the key areas. On the flip side, there is a trend with licensing marketplaces seeking technology and services to assist their clients within a compliance and regulatory framework. We believe our software technology can help streamline and accelerate the process for numerous companies and partners in this space.

Thanks, Fredi. The next question pertains to our growth in Europe. Why is Europe doing so well? As this is going to be the major growth driver in the balance of the year, can you elaborate on your strategy and operations there? What gives you the confidence in your financial projections?

Thank you, Ben. Another great question. We're working really hard in the last 2.5 years, since we purchased the entity implementing, a lot of the infrastructure that's needed. Europe is changing as well. And we implemented a lot of partnerships including Visa, ACI and others to offer our PayFac-as-a-Service business, Banking-as-a-Service. And Europe has a huge, huge demand for high-risk. We as a company register with Visa and Mastercard as a high-risk provider, and we see a huge, huge growth in the gaming, adult and crypto business. And those are three verticals that are being scrutinized right now by a lot of banks that don't want to touch it. But we have welcomed this business and we have the full support of Visa and Mastercard and other banks to onboard such vertical and we are very excited to support them and that's why we see a huge growth in our portfolio.

Thanks, Fredi. All right. We're going to give George an opportunity to answer the next question. George, what are the data science points that you track and monitor to manage the health of the business?

Historically, our revenues have largely come from processing credit card payments, with transaction volume being a key revenue driver. As the balance between the US and Europe changes and we increase our banking volumes, we need to analyze the residual rates across different segments. In the past, we achieved a 2% revenue from processing volume in acquiring, but the banking sector has a lower residual rate and varying gross margins. Therefore, as our business mix evolves, we must examine the residual rates across various verticals and revenue types between acquiring and banking, while also assessing gross margins. This analysis allows us to predict changes in our mix, aiding in our forecasts. This is the data I am currently focused on.

Thanks George. Operator, at this point, we'll open it up for questions from the floor. Please proceed.

Yes sir. Our first question today comes from Kevin Dede at H.C. Wainwright. Please go ahead.

Good afternoon, gents. Thanks for having me on the call.

Hello Kevin.

So, help me understand what's happening in the U.S. exactly and how you feel you're getting your arms around it?

Okay, Fredi take it away.

Hey good afternoon. Thank you for the question as always. In the U.S. due to certain regulations and compliance, we as a company decided to license the technology to an entity that has the infrastructure and doing it for many years to utilize our technology to run the business faster, easier, in a more compliant way and reduce certain burdens from our side. We decided to do that because of the challenges that exist and the instability that we see moving forward if we stay in that vertical. For those reasons, we decided to license. We maybe make less money on it, but it will be stable and we can rely on that revenue for a longer time, less the burden of compliance regulatory environmental changes that may occur moving forward. And that recovery takes a little bit longer due to some challenges in going live on the banking side, on the partner side. But other than that I think we're on track to recover in this vertical, in this niche.

So, Fredi, do you think that licensing agreement is exclusive? Or is there an opportunity for you to offer it to other players to capitalize more on transaction services and processing in North America?

This license was granted to our partner solely for the retail sector. If the regulatory environment shifts to provide greater support for B2B, we will consider whether to operate it ourselves or allow our licensed holder to manage it. We have sufficient verticals and are committed to this specific one, which demands extra time and effort regarding compliance and regulations. For now, it remains an exclusive license in the retail sector, focusing primarily on retail and e-commerce.

Hey Kevin. I'll work here on this. So, obviously, we are in an election year and depending on the administration we end up with, the handling of our economy, our digital currency, our blockchain stance, and a lot of other variables that impact our business may be dramatically different. And it's prudent for the company to set itself up for success regardless of who ends up in the White House. So, as such we put emphasis and focus on our European operations and we push forward as quickly as we can on these fronts in parallel to maintaining our position with the U.S.

Okay, Ben. It seems that the European business just reflects a lower residual rate. Is it fair to assume that will be consistent going forward?

I'll let George take that.

Yes. I mean, it's a function of a blend between the banking and the acquiring over there. So the banking has a lower residual rate, but it also has a lower processing cost and is therefore, high-margin. So, we'll have to look at it separately to be able to understand it, but the blended residual rate has come down to about 1%.

Could you elaborate on your outlook for growth in Europe and your confidence in the $65 million to $70 million targets you've set for this year?

Well, that includes significant growth in Q4. We have business to onboard and it won't be easy. They will need to execute to meet those numbers. Regardless of when the ramp finally starts, we are poised to begin 2025 on a strong note. I hope we achieve the target in Q4, but even if there's a slight delay, we are still generating substantial momentum heading into 2025. So, I feel quite optimistic about everything that's happening.

George, can you talk to the visibility that you have with Visa? I know, that program is still sort of ramping up. Maybe you can give us some insight on that?

I will take that, Kevin. As you know, Visa is a brand new product that only a few companies in Europe have access to, and we are one of them. Visa is rolling out their infrastructure very slowly to ensure everything functions properly, and we are collaborating with them at their pace. We have already launched in five countries and aim to expand to about one new country every couple of weeks, but ultimately, we are dependent on Visa's rollout of this new infrastructure. This infrastructure is available only to a limited number of companies, and they are thoroughly testing every aspect of it, including how money moves and how banks respond. We see significant demand for these services, especially in Colombia, Romania, and Canada, and Visa is fully aware of this as we communicate with them weekly. You may have noticed that Visa recently invited our management team to Paris for the Olympics. We have a strong relationship with Visa and are working closely with them to ensure this infrastructure is deployed as quickly as possible.

Okay. Thanks, Fredi. I'll turn the floor over.

Thank you, Kevin.

Thank you. Our next question comes from Howard Halpern with Taglich Brothers. Please go ahead.

Good afternoon, gentlemen. I guess going back a little bit in history and it maybe ties in with your high-risk opportunities. But what have you learned about the closed loop system? And how does Coyni play a role in that in developing that type of program for high-risk customers?

Hey, how are you? Good to hear from you again. This is Fredi, and this is a great question. Coyni started as a stable coin and was with the focus on making that software or that platform available in a closed loop for high risk. In the U.S. due to changes in compliance and as you know banking and crypto, they tried to stay away. We rebranded that Coyni U.S. to what we call NEMS score. We're going to use that post loop in the payment environment to offer more services. But we took the Coyni platform and deployed in Europe. We are fully licensed in Europe as the crypto exchange or crypto-licensed, let's call it, to be able to hold what they call tokens of crypto. In our case, it's Coyni. And due to some changes now called MiCA regulation in Europe that's related to stable coin or cryptocurrency, we are implementing those. But the goal and what we see is in a closed loop environment is easier to onboard on and off-ramp money, because it is more secure, visible to the government and visible to the bodies that oversee certain aspects of that. That's why they changed what they call MiCA regulation. It's more visibility into the ecosystem. And we believe that that structure will be adopting many, many use cases in the financial structure, including JPMorgan just released their coin and other banks and institutions will do similar things to have a better risk oversight, and of course, compliance oversight on the ecosystem.

Okay. Well that sounds good. Interesting. And what are your opportunities in South America and what are the regulations like I guess compared to Europe and the U.S.?

Each country has its own structure and limitation, but using the Visa network, Visa is doing the heavy-lifting. Visa is the body that works with the regulation and the regulatory bodies in each country. Visa is working with us to deploy in 80 countries, and they are the body that was assigned by the government or by the banking regulatory bodies in each country to basically oversee the compliance and the structure and how money moves, and AML policy, BSA policies. And that's why they allow money to move that quick, because Visa took the responsibility for that. And I think if you go directly to each country you will face a lot of scrutiny and a lot of difficulties to operate in those countries.

Okay. All that sounds great. Looking forward to the next couple quarters. Thanks guys. Thanks all of you.

Thank you.

Thank you. And this concludes our question-and-answer session. I'd like to turn it back over to the company for any final remarks.

Well, we thank everybody for listening into this conversation. We look forward to an even better quarter in three months' time. Thanks everybody and have a pleasant day.

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful evening.