Official Payments Reports Results from First Quarter of Fiscal Year 2013: Revenue from continuing operations $33.4M for first quarter; Net loss from continuing operations narrowed to ($0.8M) for first quarter

Feb 05, 2013, 16:15 ET from Official Payments Holdings, Inc.

NORCROSS, Ga., Feb. 5, 2013 /PRNewswire/ -- Official Payments Holdings, Inc. (Nasdaq: OPAY), a leading provider of electronic payment solutions, reported results today for its fiscal year 2013 first quarter (Q1 fiscal 2013). The Company will host a call/webcast today at 5:00 p.m. EST to review its results:

Conference Call Dial-In:

888-982-4691 Participant code – "OPAY"

Webcast/Replay:

http://investors.officialpayments.com

Replay Dial-In:

888-397-5639 

–   10:00 pm ET, Tuesday, Feb. 5, 2013 to

     11:59 pm ET, Monday, Mar. 4, 2013

Q1 Fiscal 2013 Highlights: Official Payments Holdings, Inc. reported revenue from continuing operations of $33.4 million for Q1 fiscal 2013, a decrease of 4.1% compared to Q1 fiscal 2012. Q1 fiscal 2013 Payment Solutions net revenue, which reflects Payment Solutions revenues less related processing and interchange fees, was $11.3 million compared to $12.0 million in Q1 fiscal 2012. The decrease in revenue from continuing operations and Payment Solutions net revenue  was principally due to a change in payment mix. General and administrative and selling and marketing expenses decreased a combined 15.3% versus Q1 fiscal 2012, primarily as a result of a one-time restructuring charge in Q1 fiscal 2012 associated with the relocation of company headquarters to Norcross, Georgia.

Official Payments reported a net loss from continuing operations of $0.8 million, or $0.05 per share, compared to the prior year's net loss from continuing operations of $1.6 million, or $0.10 per share.  Continuing operations consists of the Payment Solutions segment, which contributed more than 99% of the company's revenue from continuing operations in fiscal 2013, with nominal revenue contributions from the legacy voice and systems automation (VSA) operations that are in the process of being wound down.

Adjusted EBITDA from continuing operations was $1.6 million in Q1 fiscal 2013 compared to $2.2 million in Q1 fiscal 2012.

Payment Solutions net revenue and Adjusted EBITDA from continuing operations are non-GAAP financial measures.  These measures are defined and reconciled to GAAP financial measures below.

Cash Position and Use of Cash Official Payments' cash and cash equivalents increased by approximately $14.2 million from $39.1 million at fiscal year-end 2012 to $53.3 million at December 31, 2012. This balance included $8.8 million of accrued discount fees and $38.4 million of funds that have settled or will settle to us that we had not yet distributed to our clients at December 31, 2012 due to the timing of bank transactions.  Offsetting these liabilities was $21.9 million of cash which we received after quarter end as credit card companies and banks settled the transactions outstanding at quarter end.

Management Overview Alex P. Hart, President and CEO, stated, "We recognize that the key to long-term success is accelerated profitable growth and we're proud to report our 5th consecutive quarter of positive Adjusted EBITDA and improved earnings per share on a year over year basis.  Payment volume increased in the first quarter compared to the previous year and we continue to see an increase in the average payment size.  We're confident that we'll have the platform, product set, and processing capabilities we'll need to facilitate our future growth when we complete our platform consolidation project at the end of the year."

Non-GAAP Financial Measures Official Payments uses the following non-GAAP financial measures in this press release:  Adjusted EBITDA from continuing operations and Payment Solutions net revenue. We define Adjusted EBITDA from continuing operations as net loss from our continuing operations before interest expense net of interest income, income taxes, depreciation and amortization, restructuring charges and share-based compensation expense. We define Payment Solutions net revenue as Payment Solutions gross revenue less discount fees. Discount fees include interchange fees and other processing-related dues, assessments and fees. Payment Solutions gross revenue is defined as revenue from continuing operations less revenue from VSA operations.

Management believes these measures are useful for evaluating our performance against the performance of peer companies within the electronic payments industry, and that they provide investors with additional transparency on the financial measures used in management's decision-making.  Management believes that Payment Solutions net revenue provides additional information about our business, as we wind-down our VSA operations.  We also use Adjusted EBITDA from continuing operations, together with other criteria, in our executive compensation program. Non-GAAP financial measures should not be considered a substitute for the reported results prepared in accordance with generally accepted accounting principles in the United States, or US GAAP.  Our definitions used to calculate non-GAAP financial measures may differ from those used by other companies.

These measures are reconciled to GAAP financial measures in the tables below:  

Reconciliation of Adjusted EBITDA from continuing operations to net loss from continuing operations:

(in thousands)

Q1 2013

Q1 2012

Change (%)

Net loss from continuing operations

$         (828)

$     (1,635)

49.4%

Adjustments:

Depreciation/amortization

1,799

1,903

(5.5)%

Stock-based compensation

677

467

45.0%

Restructuring charge

1,456

(100.0)%

Tax benefit

(7)

          nm

Interest (income) expense, net

1

(1)

(200.0)%

Adjusted EBITDA from continuing

operations

$       1,642

$       2,190

(30.6)%

nm - not meaningful

Reconciliation of Payment Solutions net revenue to revenue from continuing operations: 

(in thousands, except percentages)

 Q1 2013

Q1 2012

Change (%)

Revenue from continuing operations

$      33,416

$    34,837

(4.1)%

Less:

Non-Payment Solutions revenue

134

535

(75.0)%

Payment Solutions gross revenue

33,282

34,302

(3.0)%

Less: Discount fees

21,948

22,342

(1.8)%

Payment Solutions net revenue

$      11,334

$    11,960

(5.2)%

About Official Payments Holdings, Inc. (www.OPAY.OfficialPayments.com): Official Payments provides electronic payment solutions for over 3,000 clients across all 50 states, Puerto Rico and the District of Columbia. During the past year more than 12 million Customers and Constituents of our Clients utilized our services. Official Payments' solutions enable government agencies, educational institutions, utility companies, charitable organizations, and other billers to seamlessly accept secure, convenient payments by credit card, debit card and electronic check via mobile, web (www.OfficialPayments.com), telephone and point of sale.

Forward looking statements Statements made in this press release that are not historical facts are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements relate to future events or Official Payments' future financial and/or operating performance and generally can be identified as such because the context of the statement includes words such as "may," "will," "intends," "plans," "believes," "anticipates," "expects," "estimates," "shows," "predicts," "potential," "continue," or "opportunity," the negative of these words or words of similar import.  Official Payments undertakes no obligation to update any such forward-looking statements.  Each of these statements is made as of the date hereof based only on current information and expectations that are inherently subject to change and involve a number of risks and uncertainties.  Actual events or results may differ materially from those projected in any of such statements due to various factors, including, but not limited to: intense competition in the marketplace; our ability to increase Payment Solutions revenues and reduce operating costs, including discount fees; our ability to execute on our sales, marketing and product development strategy and expand our business including introduction of new services, products, and product enhancements into the marketplace; completion of our infrastructure upgrade and timely consolidation of our payment platforms; maintaining secure systems and protecting against security breaches, loss of privacy/data, and fraud; unanticipated claims as a result of the failure of software providers, processors, vendors, or subcontractors to satisfactorily perform and complete engagements; the renewal, extension or early termination of client contracts or projects; and compliance with government regulations and the impact of regulatory requirements.    For a discussion of these and other factors which may cause our actual events or results to differ from those projected, please refer to the sections, "Risk Factors" and "Management Discussion and Analysis of Financial Condition and Results of Operations" in the periodic reports on Form 10-K and Form 10-Q that we file with the Securities and Exchange Commission.

OFFICIAL PAYMENTS HOLDINGS, INC.

Consolidated Balance Sheets

(in thousands, except per share data)

December 31,

2012

(unaudited)

September 30,

2012

ASSETS:

Current assets:

Cash and cash equivalents

$    53,291

$    39,071

Accounts receivable, net

5,680

5,304

Settlements receivable

21,878

15,291

Prepaid expenses and other current assets

1,726

1,692

Total current assets

82,575

61,358

Property, equipment and software, net

17,730

17,368

Goodwill

17,642

17,582

Other intangible assets, net

954

1,107

Other assets

466

509

Total assets

$ 119,367

$    97,924

LIABILITIES AND SHAREHOLDERS' EQUITY:

Current liabilities:

Accounts payable

$            76

$            74

Settlements payable

38,423

17,019

Accrued compensation liabilities

2,530

6,373

Accrued discount fees

8,793

5,616

Other accrued liabilities

2,871

2,201

Deferred income

298

284

Total current liabilities

52,991

31,567

Other liabilities:

Deferred rent

57

67

Other liabilities

1,051

1,103

Total other liabilities

1,108

1,170

Total liabilities

54,099

32,737

Commitments and contingencies

Shareholders' equity:

Preferred stock, no par value; authorized shares:  4,579;

no shares issued and outstanding

Common stock, $0.01 par value, and paid-in capital; shares authorized: 44,260;

shares issued: 20,885 and 20,817; shares outstanding: 16,710 and 16,642

196,035

195,126

Treasury stock—at cost, 4,175 shares

(31,383)

(31,383)

Accumulated deficit

(99,384)

(98,556)

Total shareholders' equity

$    65,268

65,187

Total liabilities and shareholders' equity

$  119,367

$    97,924

OFFICIAL PAYMENTS HOLDINGS, INC.

Consolidated Statements of Operations

(unaudited)

Three months ended

December 31,

(in thousands, except per share data)

2012

2011

Revenues(1)

$       33,416

$       34,837

Costs and expenses:

Direct costs

23,501

23,876

General and administrative

6,810

9,186

Selling and marketing

2,140

1,508

Depreciation and amortization

1,799

1,903

Total costs and expenses

34,250

36,473

Loss from continuing operations before other income and income taxes

(834)

(1,636)

Other (expense) income:

Interest (expense) income, net

(1)

1

Total other (expense) income

(1)

1

Loss from continuing operations before income taxes(2)

(835)

(1,635)

Income tax benefit

7

Loss from continuing operations

(828)

(1,635)

Loss from discontinued operations, net

(8)

Net loss

$           (828)

$        (1,643)

Loss per share—Basic and diluted:

From continuing operations

$          (0.05)

$          (0.10)

From discontinued operations

Loss per share—Basic and diluted

$          (0.05)

$          (0.10)

Weighted average common shares used in computing:

Basic and diluted loss per share

16,649

16,642

(1) Reflects revenues from the company's legacy VSA operations which are being wound down of $0.1 million and $0.5 million, respectively, in Q1 fiscal 2013, and Q1 fiscal 2012.

(2) Reflects VSA income from continuing operations before and after taxes of $0.1 million and $0.3 million, respectively, in Q1 fiscal 2013 and Q1 fiscal 2012.

 

OFFICIAL PAYMENTS HOLDINGS, INC.

Consolidated Statements of Cash Flows

(unaudited)

Three months ended

December 31,

(in thousands)

2012

2011

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$          (828)

$       (1,643)

Less: loss from discontinued operations, net

(8)

Loss from continuing operations, net

(828)

(1,635)

Non-cash items included in net loss:

Restructuring costs

1,196

Depreciation and amortization

1,799

1,903

Deferred rent

(10)

(1)

Share-based compensation

568

467

Net effect of changes in assets and liabilities:

Accounts receivable, net

(376)

(1,073)

Settlement processing assets and obligations, net

14,817

5,551

Prepaid expenses and other assets

350

192

Accounts payable and accrued liabilities

11

1,947

Other long term liabilities

14

79

Deferred income

(51)

(71)

Cash provided by operating activities from continuing operations

16,294

8,555

Cash used in operating activities from discontinued operations

(8)

Cash provided by operating activities

16,294

8,547

CASH FLOWS FROM INVESTING ACTIVITIES:

Capitalized internally developed software

(1,272)

(600)

Purchase of equipment and software

(736)

(818)

Earn out payments—ChoicePay

(60)

(30)

Cash used in investing activities

(2,068)

(1,448)

CASH FLOWS FROM FINANCING ACTIVITIES:

Capital lease obligations and other financing arrangements

(6)

(8)

Cash used in financing activities

(6)

(8)

Net increase in cash and cash equivalents

14,220

7,091

Cash and cash equivalents at beginning of period

39,071

39,760

Cash and cash equivalents at end of period

$      53,291

$      46,851

 

SOURCE Official Payments Holdings, Inc.



RELATED LINKS

http://www.officialpayments.com