RocketFuel Blockchain, Inc.
Q3 2023 Earnings Call Transcript

Published: 4 Apr 2023

[Bennett Yankowitz:]

Well, hello, everybody. We'll make that another minute or 2 for everybody to join. But in the meantime, let me introduce Peter Jensen, who's our CEO, and our great leader, and he's going to walk you through some of the updates now that we've filed our 10-Q for the quarter that ended December 31, we're able to bring you up to the minute information on our company.

[Peter Jensen:]

All right. Thank you, Ben, and welcome, everyone. I see some of you are dialing in. Some of you are attending via Zoom. So you can see my screen. But this session is being recorded, and so you will be able to go in and see the entire presentation after in case you want to see some of the slides, which you cannot see through the phone. With us today, we also have Arvind Verma, who is our VP of Products based also here in San Francisco together with me. Ben is in Los Angeles. So I will get this going. I'm going to share my screen here, show you a few slides and then we do Q&A. Can you see the – okay now, Ben, does it look okay?

[Bennett Yankowitz:]

Yes. We can say it fine.

[Peter Jensen:]

Great. Thank you. All right. So just a quick reminder. I mean, we're doing this once in a while. And most of you, we've spoken to before, there's always a few people who we've not spoken to. So I always at a very high level, remind people of what it is we're doing, a little bit about the status of the company, some of our commercial traction and then a few comments, and then we do Q&A. So let me go through that and just remind you what it is we're trying to do here. We have built the foundation for a brand-new way of exchanging money between companies and people.

[And is that foundation based on modern blockchain technology and cryptocurrencies for some of our products that we are building products on top of. And you'll see how we are evolving from having one product to having several products built on the same foundation and all of them are generating revenue for us. So the idea is that anyone can send payments to anyone else, whether it's business or private people, irrespective of the currency, whether it's a cryptocurrency or fee at currency, we don't care.:]

[And we'll handle that in a way that's much more efficient, more secure and less expensive than the current payment rails out there. So as we've talked about before, our strategy is to keep adding new functionality, new products, new revenue sources. Basically, of course, we are always looking for new customers, but we also want to go back to our existing customers and sell them more. And we'll talk about how we've been successfully doing that. So as you know, we started out with our e-commerce product. That's the product that allows people or merchants to accept payment with crypto or ACH bank transfer. That was our first product. We went live with it 10 months ago.:]

[And then we've been talking about how we've been testing our B2B cross-border product that allows our customers to move larger amounts, primarily between countries, but some of them also use it to move money within the country just because the existing bank payment rails are complicated. They are not reliable. They're expensive. And we hear more and more people when they wire money from one country to another. Using the Swift system, it gets stuck, people ask questions and it's just complicated. And then we recently announced in March our new payout product.:]

[Again, this is a result of working with our large customers. We constantly learn about their pain points, and they have many, and we decide to team up with them to solve some of them. And that's the third revenue stream. And I'm you'll be seeing how we are generating revenue from all of these revenue streams, and there is more to come. So that's our strategy. I think I mentioned it here, the product, so I don't want to talk more about that. I see there's a title here, payout should be Q1 2023. But yes, you get the idea here, constantly adding value, building the value with our customers.:]

[And we have a lot of existing customers who start out with our e-commerce product and then they expand into our other products as well. And it is much cheaper and more efficient to sell more to the existing customers instead of going out and finding new customers. Not that we're not looking for new customers, but it works pretty well. So let's talk a little bit about where we are. We announced our calendar Q4. I always refer to calendar quarters, which is the October, November, December 2022. And the revenue grew, and we saw quite a big uptick in number of transactions. 14x, I think we had preannounced 13x, and we met that.:]

[We now have several enterprise customers that have more than $1 billion in revenue. And the reason I mentioned that is just that it's a testament to the quality of our product, the breadth of our product, the stability of our product. There are a lot of functions that you need to build to support large enterprise customers. It's not just that nice little front end of how you can pay with crypto. It's the holdback and how does their support team support it, how can they create refunds for their customers? How do they analyze if you're a big partner like ACI, how much revenue across all your merchants and so on? So there's a lot of additional functionality behind the scenes that is required to support these large enterprise customers.:]

[And then we've talked about this for a while. We have been testing our B2B cross-border product with a few customers, and we continue to do that in Q4. So that was basically the kind of Q4. Now we also preannounced the first calendar quarter of '23, and are happy to announce that our revenue continues to increase. When we make the final announcement, you'll see the actual number. But in terms of good revenue, we expect it to be 6 figures, i.e., more than $100,000, which will represent approximately 2.5x our previous quarter revenue.:]

[So that's a good growth quarter-over-quarter. If we can keep that up, that will be great. We also closed our first 6-figure enterprise deal. So one customer, they signed a large contract with us that included an upfront payment of at least more than $100,000. And what's really nice is that these large customers that get on board, they're very happy with us. We have super happy customers, we tell all potential investors. If you want to talk to our customers, go talk to them. Not that there aren't problems here and there, we're talking about software and technology. But overall, when you talk to them, they really like our technology and the way we work with them. And then we also announced the payout product.:]

[The payout product is the product that allows us or our merchants to pay out large amounts of money to and small amounts of money, to a large number of their customers. So what could an example of that be? It could be the gig economy, where you have a lot of these websites where people offer all sorts of services and these people all around the world. And the website and the company, our merchant would be the one that collects all the revenue, and then they have to pay out $100, $1,000, $500 to all these people, and they're all over the world, somewhere in Philippines, some are in India. Some are in Ukraine, somewhere in Texas and so on.:]

[And sending $500, $200, $1,000 here and there is just not very efficient through the banking system, and it takes time, and it generates a lot of support calls for them. And so more and more of their customers are saying, "Can you just send it to me in crypto, maybe a stablecoin, so I don't run any volatility risk?" And because they have the money in a minute or 2 or 3 as opposed to all the other stuff. And it doesn't have to go through bank systems and all of that, that can delay it. So that is something we're expecting a lot from. I mentioned the gig economy. Others are the gambling websites where you paid $100 on a football match, and you win and maybe the company needs to send you back $200. Well, again, these people can be all over the world.:]

[These are big billion-dollar businesses that need to distribute a lot of money to a lot of people in an efficient way, and this is where exactly blockchain technology is super, super good. So we announced the product, and we already closed some deals with this product. And we do see a big demand for this product. We just talked to a lot of people in the industry. We were at a conference over in Lisbon, I believe in February or March, and we count at least 10 customers who wanted this. I met personally with one of our larger existing customers in New York a couple of weeks ago, and they want to use this as well. So there's great demand for that.:]

[We expect a lot from that product. And just one comment in our first quarter of 2023. These 2 new products that we have rolled out, both the B2B product and the payout product in Q1 generated as much or more than our original e-commerce product, which means that we now have 3 strong revenue pillars. We're less dependent on one product. We have a diversified revenue portfolio. And of course, the more products you have, the more problems you solve the more revenue you can generate. And then, of course, we continue to roll out our e-commerce products to more and more merchants out there. And their transaction, a size and number of transactions increased to grow. So we expect all of these products to continue to grow in the foreseeable future. That was that yes. So looking ahead, it's always dangerous, but we feel really good about the continued growth here.:]

[We did, as I said, more than $100,000 this quarter. And as I mentioned, we expect the growth to continue in all 3 revenue segments, and we do expect to introduce at least one more. So we have 4 different revenue sources and products. So we'll see how that goes this quarter. But if everything goes well, then we will also see revenue from them. Then we will have 4 revenue sources that keep growing. We have some very interesting projects going on in some of the nightclubs around the world, the high-end night clubs that allow their customers to book a $20,000 table with drinks and all of that. There are more and more international tourists that want to pay with crypto, and they see a big demand in that. And so we'll see where that goes.:]

[My objective is to generate $1 million at least in our fiscal 2023. That is our objective, and we'll see how it goes. But if we can keep the growth, I've listed some objective here on the right-hand side. And if we can keep growing between 50% and 100% quarter-over-quarter, we can also reach $1 million. With a lot of good things that need to happen in order for that to happen, but it's definitely possible. We see the need in the market. We just need to execute. So a couple of other comments. Yes. I wanted to just remind everyone that we are a payment infrastructure company in Q4. Calendar Q4 was a little tough for us. December with FTX affecting the market.:]

[And just generally, as you all know, the stock market was down, and there was not a lot of activity in terms of investments and everyone was just holding off that luckily has changed, and we see it pick up again. It helps that the cryptocurrencies are growing. In fact, where FTX was has nothing to do with crypto. It's just illegal activity that could have happened just like it did with [ Bernie Meda ] and others. We have seen some positive impact from the SBB Silicon Valley Bank problems. Fortunately, I would say, we're not in that situation. But what it has meant for the crypto industry is that people are realizing that just because you have money in the bank doesn't mean you can't lose money. And more and more people are like, "Well, hang a minute. If I own cryptocurrency on my computer on my phone, I'm not dependent on any third party and whether they survive or not. I always have my currencies.":]

[It's so nice to see that people are finally starting to get it that if you cut out the intermediaries. And imagine when we have our central bank digital coin, our digital dollar digital euro, if you have $1 million backed by the U.S. government or the European Union, you have 0 volatility risk. And unless the country goes bankrupt, your money is safe. You're not dependent on whether the bank survives or whether what the limit is and so on. So it's really good for us. So just reminding everyone that we are a payment infrastructure company. We do not own crypto, we do not hold crypto, and we are not impacted by crypto volatility. We're like Visa and Mastercard, but for modern payment solutions where we charge a percentage of the money that we process. And of course, it's less expensive than the existing rails. That doesn't mean we make less money because the new rails are more secure, more efficient.:]

[So we are able to offer a better service to our customers at a cheaper rate with more security and still making good money. And then the last thing is many of you investors, you compare us to others, and you should. We feel that we have an attractive valuation right now, especially with the growth we are seeing. I also want to remind you that sometimes when you compare us to other companies, they talk about the annual recurring revenue, ARR, and we don't. We talk about how much revenue we actually book. We are starting to look at what our ARR numbers are. But it's been a little up and down here in the beginning just because we're starting off with a small base. But over time, we may start reporting that. But our ARR is looking really good, especially compared to our valuation. So we, of course, believe we are an attractive investment. But what else would you expect to hear from me? So that's all I wanted to share right now, Ben, do you have any comments, things I have forgotten or things I should talk about?:]

[Bennett Yankowitz:]

No, I don't think so. Happy to take questions on the financial results.

[Peter Jensen:]

Yes. I mean, to summarize, growing 2.5x over the previous quarter is obviously what we want to do, and it's nice to see that compared with large customers compared with large deals, and we have a lot of deferred revenue that we will benefit from in the future quarters. So we feel good about it. But yes, let's open it up for questions and answers. So Ben, how do people ask questions?

[Bennett Yankowitz:]

[Operator Instructions] While we're waiting, maybe you want to say a couple of things about our new product lines, the payouts in the on-ramp...

[Peter Jensen:]

Well, I hope I talked about the 2 new product lines, which is B2B cross-border and our payouts, which are the product lines that generated revenue in Q1. I did also mention that we have another one, a fourth one that we expect to roll out in the current quarter. And I didn't really want to talk too much about it, Ben, other than let's talk about it when it's there. I prefer talking about what we have, what generates revenue. But my point with this whole thing is that this story, we've been consistent in our story. We started out with crypto payments, and we started really going live with our customers 10 months ago. And we told you we were testing B2B. And now we're seeing the revenue from it. We didn't tell you this so much about the payouts. It happened pretty fast, but that's our third revenue stream. And there will be more. So you should value us on our history. We try to give you our best information and of course, things don't always work out exactly the way we want it. But so far, it's worked. Adding more and more products, they equally distributed on the revenue side. And so yes, and there's more to come.

[So there was one question here in the Q&A. Are you actively raising funds or pitching investors like VCs? Yes, we will be doing that in the current quarter. We have been holding off a little bit only because we could see how the momentum is increasing. So yes, we will be raising some money this year. And that's just like any other startup, as you know. We want to grow as quickly as we can. So the answer is yes. If you know of anyone who is interested in investing, of course, people can buy our shares in the open market. But if they have a bigger amount that they'd like to invest, then contact Ben, and we can discuss it.:]

[How big of a market opportunity is then payout? How big are your clients who signed up for this product? Okay. So it's still early for us, but we see a very big opportunity. And here's why. If you think about what we call pay in where a shopper wants to pay for a product using crypto, usually it's instead of a credit card. There are some verticals where we have bigger adoption, but the mainstream, I don't think will be really taking off until we have the CBDC, the Central Bank Digital Coins. So of course, it's growing, and more and more people get experience, especially outside the U.S. I was in Dubai in December. I was in Rome in I think January. And it's amazing how quickly it's going. And if you look at the European Union's legislation around crypto, it's happening much faster. But there's still only a subset who want to receive or pay with crypto. But if you look at the payouts, for example, you asked how big are the clients.:]

[One of the clients we signed up for this product, they have more than $1 billion in revenue. They pay out hundreds of millions of dollars each year. And so to a group of customers that they have and the adoption there is expected to be much higher based on -- there are other products out in the market. And so we expect the adoption there to be between 25% and 50%. So if you think about it, you're sitting out in the Philippines and you owed $800, why not just get it in USDC? Peg to the dollar, no volatility risk paid out within minutes. So we expect a lot of that only because it really solves a big problem, both for the recipient as well as the merchant that pays it out. And these people talk to each other, the recipients. They talk to sit there and like, "You know what, you waited a week for your money via a bank transfer and you had to pay $30 for that? I got my money in a few minutes and I have it right here on my phone." And it's usually young people that use these kinds of whether it's gambling or it's the gig economy and some of the other verticals that are also interested in this. So yes, very large clients. And yes, some of our biggest clients have signed up for this.:]

[Based on current information and numbers, by what date or time frame you believe you'll reach breakeven or become profitable, I keep getting this answered. When are you going to be profitable? And I keep saying the same thing. We're following the model proven model here in Silicon Valley, which is grow as fast as you can and use venture capital or investment capital to become number thousands of companies have been successful here. This is how I've done all my other 5 companies. You grow fast, and that's how Salesforce was built, that's how Tesla was built, that's how they all build like that. And I know very few companies that became #1 organically without raising money or yes, without burning money. So our goal is not to become profitable or break even, not that we don't want to, and we may do it at some point, but it's not a goal per se. Our goal is to grow as fast as we can. And when I compare us to some of the other players in the market who have raised private capital, we've come quite far without raising too much money. So it's not that we just should burn money like crazy, and we're not. But we need to be prudent about how we spend our money, but we prioritize growth over profitability right now.:]

[All right. And I just want to repeat again, it's the proven model that works. As I said, very few companies have become #1 in the tech industry by being profitable from the early days because you simply can't hire the people and do the PR to the marketing and expand globally that way. Okay. What other products or revenue streams are on the road for 2023? As I said, we have one more, and I don't really want to talk about it now other than there's one and it's also because I know you guys are going to be asking me about it in the quarter. And everything looks really good. It's something we've worked on for a long time. Our B2B product took a quarter longer to get out than we had thought, mainly because we need the right banking partners and contracts. It's getting harder and harder, and there's more and more due diligence and just legal stuff that you have to get through to get the right agreements and the right contracts. And it's not so much the technology that takes time. It's much more all the other stuff. And the new product that will be coming out with we have been working on for a while. We're very close. In fact, I was talking to some of my colleagues, and I think we'll test it with the first customers next week. So if everything goes well, we will generate revenue and see revenue from that product this current quarter. But yes, that's all I want to say about that right now.:]

[Okay. Do you have any plans to add other payment gateways other than ACI? Yes, definitely. ACI is a great partner. They were one of the first, and we're super happy with the partnership. We are happy that they are expanding with other things. But we work with many others. We have already added other gateways and PSPs that integrate to us and that generate revenue to us. As a reminder, our go-to-market model is to go out to gateway providers, PSPs and others and have them offer our solutions to their existing customers, customers that they have had for many years where they have processed credit cards for them for 5, 10 years and say, we've been doing your credit cards.:]

[We've been doing your Apple Pay. Now we can also do crypto payments. And now we can do more than just crypto payments, i.e., pay in, we can also do payouts. We can do B2B and many others. And so I mean, we had one customer that did more than $1 billion – not $1 billion, $1 billion in B2B cross-border transfers. And it came into a partner. And that was wonderful, right? And the partner makes some money. We got access to a customer. It was actually from Latin America. So we're not down there, but we're a good partner. We have a good partner there, and they make the introduction. We got $1 million in volume and made some good revenue on that. And they got their commission, everyone's happy. It's a model that scales well because we can't be all over the world right now, but our partners are and they already have existing relationships with our customers.:]

[Okay. Those were the questions that were submitted in the Q&A. Is there anyone who wants to ask anything live then?:]

[Bennett Yankowitz:]

No. Nobody's raised their hand.

[Peter Jensen:]

No one has raised their hand. Is there a way -- if they're on their phones, they probably can't raise their hand, they can't press the button. Is there something they can press on their phone? Or can they just unmute and talk? Or can you open up all the line Ben?

[Bennett Yankowitz:]

I believe so. Let me try.

[Peter Jensen:]

You are our high-tech expert, I know. So if you can just open the line, then people can just answer.

[Bennett Yankowitz:]

In this version of the webinar, they're not letting me do it.

[Peter Jensen:]

Okay. All right. So if you have other questions, type them in. Okay, there is one more question here. Can you support offline payments and process batch transactions? I don't think we do that. Do we, Arvind?

[Arvind Verma:]

Assuming by off-line payments, you mean in-store payments, because the launch in, nothing is off-line. So we are piloting our in-store payments. But again, in blockchain, we do process transactions that we can in batches, but there's not going to be a daily batch. It's to increase efficiency and reduce the cost, but it's still near real-time.

[Peter Jensen:]

But it's a good question. We do support in-store payments today. And we have some customers that they -- we actually had one customer that said, "Oh, I can't use your system. I really have customers coming in wanting to pay with crypto. But our Internet connection is so unstable where we are." And we said, don't worry about it, do you have cell phone coverage? Yes. So we actually bought him a little tablet, little iPad tablet with one of the GSM cards phone number. And then you're not dependent on the Internet, and you can just have that in the store, accept crypto payments. And so as long as you have a mobile cell phone connection or an Internet connection, we can accept payments in the store. Online, I don't think it makes sense. There might be use cases, but I don't think we would say we supported offline today. So cool?

[Bennett Yankowitz:]

All right. I think that's all the questions.

[Peter Jensen:]

Ben, what have I said that I shouldn't have said about the future?

[Bennett Yankowitz:]

I'll tell you in private. I think we're fine.

[Peter Jensen:]

All right. Well, thank you, everyone, and you're always welcome to reach out to us directly. We'd be happy to get on a one-on-one call with anyone who needs it. But just to summarize, it's always hard the first 10 months of seeing transaction volume and all of that. But we feel really good about where we're going now, additional customers, additional products, increased volume, increased revenue. So we just need to continue on this path. And follow the same path many other start-ups have done in our shoes.

[So thank you for participating, and we look forward to speaking to you in the future. Have a wonderful day. Bye-bye.:]