🎙️ POSaBIT, CEO, Ryan Hamlin
POSaBIT (CSE: PBIT) is a FinTech company providing POS (Point-of-Sale) and cashless payment to the cannabis industry.
I spoke with POSaBIT’s CEO, Ryan Hamlin on the podcast today. POSaBIT’s stock price closed today at $0.85 (52-week range of $0.26–$1.24) and its market cap is currently at ~$120M, which may surprise some given where most of the public cannabis tech stocks are currently trading. While the notes below provide a good overview of POSaBIT, I recommend listening to the conversation in its entirety as not all comments have been written up.
Background. Ryan Hamlin spent 16 years at Microsoft before jumping into the startup world. In 2011, he founded Placefull, an online marketplace connecting event and party planners with trusted venues. Through that experience, he saw that small businesses needed an ability to take online payments for items that weren’t goods (events and activity). The idea of POSaBIT started to come around in 2014 –Washington had legalized in 2012 and the first stores opened in 2014. Ryan attended a trade show with his eventual co-founder in 2014 and they noticed that software was non-existent (much more focused on soil and lighting). That, combined with the idea that Cannabis is a Schedule 1 drug, and needed a payments solution because of the cash only nature led to the idea for POSaBIT. POSaBIT started out providing blockchain-enabled payment processing and POS systems for cash-only businesses, but the product offering has expanded far beyond that over the past four years.
Product. The company has a SaaS based POS and Payments (% of sales based on volume, typically around 3.5%). POSaBIT was previously 95% Payments and is now around 88% Payments, with the goal to get down to 80% payments over time. Which is in line with vertical payments companies like Toast, Square, and Mindbody (80% Payments / 20% SaaS). The company built a standalone payments business (allowing customers to use their preferred POS) which includes robust reporting (40% of payment installs are not using their POS).
Funding. POSaBIT has only raised $11.8M total to date (prior to the announcement for up to $11M from Friday’s announcement).
$2.45M Seed in June 2017
$2.9M Series A in May 2018
RTO in April 2019 to list on the CSE, concurrently raising $2.8M
$3.7M PIPE in June 2022
M&A. This isn’t the company’s first acquisition. In February 2018, POSaBIT completed the acquisition of DoubleBeam, which specializes in POS payment processing for the Hospitality sector. DoubleBeam processed $100M+ in sales transactions annually, capturing customer data, behavior shopping experience and habits while providing retailers the ability to make targeted in-app offers quickly and easily, all while running quietly in the background. POSaBIT divested the company to OLG Group in May 2020. In addition, several members of the six-person Board have experience in Finance and M&A, including Bruce Jaffe (ex-VP Corporate Development at Microsoft), Don Tringali (Augusta Advisory Group, interim CEO and M&A advisory), Louis Camhi (RLH Capital, a SPAC focused investment management and advisory firm).
MJ Platform, Leaf Data Systems and Ample Organics Transaction Overview. POSaBIT to acquire certain assets from Akerna (MJ Platform, Leaf Data Systems and Ample Organics) for $4M cash, adding 423 dispensaries generating ~$2B in GMV. The Acquired Companies are expected to generate ~$11.0M in revenue (68% GM) during the 12 months ended December 31, 2022 on a standalone basis, meaning POSaBIT acquired the company at 0.4x 2022E Revenue. The acquisition will help accelerate the adoption of the company’s fully compliant PIN Debit payments solution as POSaBIT will now serve ~1,000 dispensaries. Additionally, the Company announced that it has secured up to $8M in debt and $3M in equity financing (4,533,333 Units to Perga Capital Partners at C$0.90/Unit, each Unit consists of one Common Share and 0.95 of one Warrant, exercisable for one Common Share at C$1.25 per Common Share for a period of 36 months following closing). The $8M unsecured credit facility will have an initial 3-year term, at an initial interest rate of 10% per annum for the first two years and a final interest rate of 12% per annum for the last year. MJ Platform is the retail business that includes POS, as well as modules to support cultivation and analytics. MJ Platform had a large install base that did not overlap with POSaBIT. Leaf Data Systems is a state “seed to sale” tracking business with State contracts with Pennsylvania and Utah. Ample Organics is Canada’s leading seed-to-sale compliance tracking and eCommerce platform, providing a scaled ecosystem (software, payments, data, analytics, marketplace) for POSaBIT to learn more about operating in the largest federally legal market.
Fully integrated Point of Sale and Payments. POSaBIT’s competitive differentiation is due to it being a standalone payment provider and having started on the payments side before entering the POS space (whereas competitors have started on the opposite end).
Cannabis retailers adoption of cashless at <15% vs. ~90% in traditonal retail. While traditional retail is ~90% cashless, dispensaries have a long way to go at an estimated 10%–15% today. When POSaBIT is adopted, the typical cashless transaction % typically goes to ~30%. A big part of the company’s revenue growth is expected to come from converting dispensaries over to card payments.
Transcript from January 30, 2023 Conference Call
Dutchie sues Akerna over barriers of entry to the Pennsylvania market. Dutchie filed suit against Akerna in January, claiming that the company deliberately created systemic barriers to ensure that medical establishments in Pennsylvania chose Akerna over Dutchie. While the lawsuit likely came up in due diligence, it didn’t deter POSaBIT from the transaction
The acquisition of Leaf Data Systems will see POSaBIT go head-to-head with Metrc and BioTrack. POSaBit wants to be in the RFP process as new states stand up their cannabis program. Every state is different (which is part of the frustration) but these state contracts are multi-million/multi-year opportunities
Revenue Per Employee. POSaBIT expects to do ~$38.5M in 2022E revenue with ~60 FTEs, which compares favorably to other Cannabis tech companies, Springbig ($27.5M 2022E Revenue/170 Employees) and Leafly ($47.5M 2022E Revenue/267 Employees, pre-workforce reduction of 56 positions). Note: I used the mid-point of any 2022E revenue guidance and tried to use comparable employee numbers to when guidance was provided.
👋 The Highly Objective Podcast is hosted by Dai Truong, who leads Cannabis Investment Banking at Arlington Capital Advisors.. Third-party information presented here and links to third-party content are for informational purposes only and are not intended as a recommendation, offer or solicitation for the purchase or sale of any financial instrument, security or investment. The information provided is not warranted as to completeness or accuracy and is subject to change without notice. Linking to third-party sites in no way implies an endorsement or affiliation of any kind between Arlington Capital Advisors, LLC, or its affiliates and any third party. The information in this blog constitutes my own opinions (and any opinions posted by guest bloggers from time to time) and it should not be regarded as a description of services provided by Arlington Capital Advisors, LLC or any affiliate.