Greetings, welcome to the Paysign Inc. second quarter 2019 earnings conference call. At this time, all participants are in listen-only mode. A question- and- answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. This presentation may include forward-looking statements. To the extent that the information presented in this presentation discusses financial projections, information, or expectations about the company's business plans, results of operations, returns on equity, markets, or otherwise makes statements about future events, such statements are forward-looking. Such forward-looking statements can be identified by the use of words such as should, may, intends, anticipates, believes, estimates, projects, forecasts, expects, plans, and proposes.
Although the company believes that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. You are urged to carefully review and consider any cautionary statements and other disclosures, including the statements made under the heading Risk Factors and elsewhere in our 2018 Form 10-K. Forward-looking statements speak only as of the date of the document in which they are contained, and the company does not undertake any duty to update any forward-looking statements except as may be required by law. This presentation also includes adjusted EBITDA, a non-GAAP financial measure that is not prepared in accordance with, nor an alternative to, financial measures prepared in accordance with U.S. generally accepted accounting principles, GAAP.
In addition, adjusted EBITDA is not based on any standardized methodology prescribed by GAAP and is not necessarily comparable to similarly titled measures presented by other companies. A reconciliation of these measures to the most direct comparable GAAP measure is included in the appendix to the presentation. It is now my pleasure to introduce CEO, Mark Newcomer. Please go ahead, sir.
Thank you, and good morning, everyone. On behalf of Paysign, I'd like to welcome you to our second quarter 2019 earnings call. I'm Mark Newcomer, Chief Executive Officer here at Paysign, Inc. I will provide a brief review of some of the highlights for the second quarter and will reinforce our strategic direction. Following my remarks, I'll turn it over to our Chief Financial Officer, Mark Attinger, who will take us through the second quarter results. Following Mark's review, we will then field your questions. For those of you that are new to our story, Paysign is both a vertically integrated payment processor and a prepaid card program manager. We develop customized and innovative payment solutions in support of corporate, consumer, and government programs.
To learn more about our history and the services we provide and to review a copy of our most recent investor presentation, you may want to visit the investor section of our website at www.paysign.com. We are very pleased with our second quarter results as both revenue and profit have reached record levels as we continue forward with our growth strategy. Our ability to design, implement, and manage large-scale customized programs remains a key differentiator for the company and enables us to effectively retain and grow our existing client programs and secure new business. In summary, revenues were a record $8.6 million, an increase of 58% compared to the prior year. Net income was $1.7 million, also a record quarter, representing an increase of 138%. Adjusted EBITDA was $2.6 million, representing an increase of 123%.
We've continued to experience excellent growth in our existing client programs and from new programs onboarded in 2018 and Q1 of 2019. We expect to continue to experience strong growth, improving margins, and operational performance the balance of the year and on into 2020. There are no changes to our financial guidance, which has been previously communicated for 2019 as revenues of $38 million-$40 million and adjusted EBITDA of $10 million-$12 million. Strategically and consistently with our prior communications, we will continue to broaden and diversify our market focus for our prepaid card programs and will seek to introduce new products. With respect to Paysign Premier Card, we're wrapping up a successful internal pilot and preparing go live with the first of several existing clients that have expressed interest in the product.
You may have noticed that we've lifted in some new leadership talent, including the hiring of an experienced executive, Matt Lanford, as our Chief Product Officer. We've also added some very talented and experienced individuals to our business development and technical teams. These are important and very purposeful steps in our journey to building a leading business model and set of world-class capabilities in the payment space and beyond. Lastly, we continue to pursue suitable acquisition candidates that have demonstrated growth and profitability. At this time, I'd like to turn it over to Mark, our CFO, to take us through in a little more detail.
Thanks, Mark. I will take us through the second quarter and year-to-date top-line numbers and provide some variance commentary. As I stated last quarter, references to year-on-year improvements or percentage increases, unless stated otherwise, does refer to the second quarter ending June 30, 2019, as compared to second quarter 2018. We'll jump into it. Revenue for the quarter ending June 30, 2019, was $8,631,271, an increase of 58.2% compared to $5,460,723. This increase in revenue was attributable to continued growth in our existing clients and from the maturation of new business secured in both the second half of 2018 and early 2019.
Revenue for the first half of 2019 was $15,893,561, an increase of 56.8% compared to $10,137,042. Gross profit increased 92.3% to $5.0 million, or 58.3% of revenues, compared to $2.6 million and 48.0% of revenues in 2018. This 1,036 basis point improvement resulted primarily from favorable client and industry mix, and a continued optimization of our network costs. The operating expenses were $3.4 million compared to $1.9 million. The quarter two year-on-year increase consisted primarily of $0.9 million in incremental salaries and benefits, and $0.4 million as an increase in stock-based compensation, both primarily driven by investments in new personnel the second half of 2018. However, as expected, we are continuing to see improved operating leverage as OPEX increased just 17.5% compared to fourth quarter 2018. Similarly, OPEX as a percentage of revenue decreased 240 basis points compared to the prior year.
Benefiting from consolidated cash balance of $48.9 million, interest income was $132,000 compared to just $33,000 the prior year. Net income for the second quarter ended June 30th, 2019 was $1,738,791, or $0.04 per basic share, an increase of 137.5% compared to $732,056, or $0.02 per basic share the prior year. For the first half of 2019, net income was $2,610,462, or $0.06 per basic share, an increase of 128.1% compared to $1,144,563 or $0.03 per basic share the prior year. The first half fully diluted earnings per share was $0.05 versus $0.02 the same period prior year. Non-GAAP adjusted EBITDA was $2,593,675 or $0.05 per basic share, an increase of 123.3% compared to $1,161,769 or $0.03 per basic share the prior year. Furthermore, the adjusted EBITDA margin improved to 30.0%, up 876 basis points from 21.3% in the second quarter 2018.
Non-GAAP earnings per share was $0.04 versus $0.02 the prior year. First half non-GAAP adjusted EBITDA was $4,311,154 or $0.09 per basic share, an increase of 122.6% compared to the $1,936,609 or $0.04 per basic share the same six-month period the prior year. We loaded $205 million to the card for the quarter versus $149 million the same period the prior year, and our revenue conversion rate of gross dollar volume loaded on cards was 4.21% or 421 basis points, compared to 3.66% or 366 basis points the prior year. From a balance sheet perspective, consolidated cash has increased 54% or $17.2 million to $48.9 million, compared to $31.7 million at year-end 2018. Restricted cash was $42.6 million versus $26.0 million in December 2018. Please note, restricted cash represents both dollars loaded to card and dollars to be loaded at a point in time.
Clients provide funds at various points in time by one month to as many as six months in advance. Furthermore, not all products generating revenue in 2019 will require cash to be loaded to the card, as has typically been the case in our prepaid card business. Working capital, current assets less current liabilities increased to $9.5 million from $5.9 million at year-end due to increased consolidated cash, increased accounts receivable from higher client billings, and decreases in accounts payable, partially offset by smaller increases in the card funding liability. Our liquidity, as measured by an adjusted current ratio, excluding restricted cash and cardholder funds from both sides of the balance sheet, respectively, was 8.2, up from 5.4 at year-end. Finally, there remains no debt on the balance sheet.
As we continue to execute against our operating plan in the second half of 2019, we expect to see continued increase in revenues. We also expect, on average, similar gross margins to those experienced this quarter. Lastly, we anticipate further improvements to our operating leverage and therefore higher net income and adjusted EBITDA margins. I think that's about it for my remarks. Thank goodness. At this time, I'll turn it back over to our moderator, Kevin, to begin a question- and- answer session. Thank you.
Thank you. We'll now be conducting a question- and- answer session. If you'd like to be placed into the question queue, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star one. One moment please, while we poll for questions. Our first question today is coming from Austin Moldow from Canaccord Genuity. Your line is now live.
Hi. Thanks for taking my questions. Congrats on the nice quarter. My first one is on the pharma business. Wondering if you can provide how much pharma revenue contributed to the quarter, in percent terms or something else. If you could just give more color on what materialized in the pharma segment this quarter and what kind of traction you're seeing. Maybe if you can talk about success you're having with channel partners. Thank you.
Yeah. Great question, Austin Moldow. Thank you for that. For the quarter, pharma represented approximately 20% of our revenue, up from 15% the prior quarter. In the third quarter of last year and in the first quarter of this year, we implemented several new pharma client programs, and we've seen a maturation of those. We are preparing to onboard additional programs as well. We're seeing good success in our channel partner relationships, and in overall, our execution, really on plan as we expected.
Got it. My second question is on the Premier card. You mentioned you're doing an internal test, but you have some interest from other customers. Can you talk about maybe the potential scale of what could be in your pipeline for when you roll that out, and maybe if you could update on timing of a potential launch?
I believe we included a little bit of that in the press release, and I'll just reiterate that aspect of it and then talk about kind of directional. We have a commitment from one client that we are preparing to implement by the end of August. Probably the latest would be the early part of September. We do expect to go live by the end of August. We have been piloting that program to date and are very pleased with how it's progressing. We have several clients that are interested in being able to offer this product to their customers as well. We're continuing to evaluate that. One of the advantages we have is we have over 2.5 million cardholders on our platform. Therefore, they are a captive audience.
A portion of those are active cardholders, and a portion of those are historical cardholders on our platform. It's important that we continue to learn from the acceptance rate and the performance of those before we make any further comments about the growth. We do expect this to be a material contributor to our earnings in 2020.
Great.
One more comment, Austin, is as we talked about before and shared, we have not included any of the Paysign Premier in our projections for this year.
Understood. My final question, if I could, I'd love to ask about the plasma business, in terms of the number of plasma centers you now have on your network. I know you have in the past provided a penetration rate, which I think was 33% last time you updated it. I'm wondering if you can share any progress on flipping new centers over to your network and what kind of success you're seeing in maybe winning them from other card programs they're currently on.
Yeah. We won't comment in detail on that, but I can tell you we're having success, and we're continuing to grow in absolute dollars as well as in market share.
Great. Thanks for taking my questions.
Thank you. As a reminder, that's star one to be placed into question queue. Our next question is coming from John Hickman from Ladenburg Thalmann. Your line is now live.
Hi. Thanks for taking my questions. Nice quarter. Could you elaborate a little bit more on the personnel that you're adding to the platform? You went through that pretty fast. If you could, would you go through that again for me?
Hey, John.
Hi.
As our CEO pointed out, we did bring on Matt Lanford as the Chief Product Officer. With respect to technologies, we have a core processing platform and a well-built team and set of capabilities around that and have continued to add to that infrastructure and to that development effort. We've also continued to add development resources for mobile application development and for some of the new products that we're implementing just to round out the team. Nothing beyond continued strengthening of development and infrastructure resources to enable our growth.
That's both on the business development and the technology teams.
Yeah, good point. As Mark stated, hopefully you heard that, so that's biz dev as well as the technology development.
The previous questioner asked most of my questions and answered them, and thank you for that. I don't know who wants to answer this, but is there something that is a gating factor that you're most concerned about right now?
That's a great question. It's always about execution, and it's always about continuing to implement as has been done for many quarters and the last number of years on our growth trajectory. We have been successful in securing business and successful in implementing and retaining business, and we will continue to work hard to do that each and every quarter. There's not something in particular that keeps us up at night, if that's your question.
Okay. One last one for me. On an organic basis, you seem to be executing quite well. Could you make any comments about growth through maybe tuck-in acquisitions or whatever other kind of acquisitions? Is that on your radar?
Yeah. As our CEO has stated in prior earnings releases, as well as our calls, we are continuing to evaluate opportunities, and we will seek to find companies that are a good strategic fit that we can bring value to and that maybe round out some of our product offerings that's accretive to our shareholders. We're going to be very selective, but that's been an ongoing process that was communicated as recently as, or I should say, as long ago as fourth quarter of last year and has been reiterated on each of the calls. To address it head on, that's purposefully why the shelf offering is out there, so we can be ready when the opportunity presents itself.
Okay. Thank you.
Thank you. As a reminder, if you'd like to be placed into question queue, please press star one at this time. One moment, please, while we poll for further questions. We've reached the end of our question- and- answer session. I'd like to turn the floor back over to management for any further or closing comments.
Yeah. Once again, we'd like to thank everyone for listening to our call, for following us, and we are very pleased with how this quarter went. Solid revenue growth, gross margins, and net margins, and we continue to execute on plan for the year. Thank you, and have a great rest of your day.
Thank you. That does conclude today's teleconference. You may disconnect your line at this time, and have a wonderful day.