IPMT Ipayment (MM)

iPayment, Inc. (NASDAQ: IPMT) today announced financial results for the third quarter and nine months ended September 30, 2005. Revenues grew 87.6% to $175,176,000 for the quarter from $93,388,000 for the third quarter of 2004. Net income was $8,129,000 for the third quarter of 2005, up 26.2% from $6,439,000 for the third quarter of 2004. Earnings per diluted share increased 25.0% to $0.45 from $0.36 for the third quarter of 2004. Results for the third quarter of 2005 include pre-tax expenses of $334,000 related to the previously announced work of the Special Committee of the Board of Directors as it continues to explore strategic alternatives. The Company's revenue growth for the quarter reflected an increase in charge volume to $6.4 billion from $3.3 billion for the third quarter of 2004. At September 30, 2005, iPayment, Inc. and its wholly-owned subsidiaries had 353 employees. The Company has made the determination that during the pendency of the Special Committee process it will not provide financial guidance or hold a conference call to discuss its third quarter results. This press release contains forward-looking statements about iPayment, Inc. within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. For example, statements in the future tense, words such as "anticipates," "estimates," "expects," "intends," "plans," "believes," and words and terms of similar substance used in connection with any discussion of future results, performance or achievements identify such forward-looking statements. Those forward-looking statements involve risks and uncertainties and are not guarantees of future results, performance or achievements, and actual results, performance or achievements could differ materially from the Company's current expectations as a result of numerous factors, including but not limited to the following: acquisitions; liability for merchant chargebacks; restrictive covenants governing the Company's indebtedness; actions taken by its bank sponsors; migration of merchant portfolios to new bank sponsors; the Company's reliance on card payment processors and on independent sales organizations; changes in interchange fees; risks associated with the unauthorized disclosure of data; imposition of taxes on Internet transactions; actions by the Company's competitors; and risks related to the integration of companies and merchant portfolios the Company has acquired or may acquire. These and other risks are more fully disclosed in the Company's filings with the U.S. Securities and Exchange Commission, including without limitation the Company's Annual Report on Form 10-K for 2005. The Company undertakes no obligation to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release. iPayment, Inc. is a provider of credit and debit card-based payment processing services to over 135,000 small merchants across the United States. iPayment's payment processing services enable merchants to process both traditional card-present, or "swipe," transactions, as well as card-not-present transactions, including transactions over the internet or by mail, fax or telephone. -0- *T iPayment, Inc. Financial Highlights (in thousands, except per share data) Consolidated Income Three months ended Nine months ended Statements September 30, September 30, --------------------------------------------------- 2005 2004 2005 2004 ------------ ------------ ------------ ------------ (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenues $175,176 $93,388 $519,677 $262,741 Interchange 101,351 46,125 304,803 126,953 Other costs of services 53,710 33,704 157,576 99,089 Selling, general and administrative 4,789 3,019 12,989 8,701 ------------ ------------ ------------ ------------ Total operating expenses 159,850 82,848 475,368 234,743 ------------ ------------ ------------ ------------ Income from operations 15,326 10,540 44,309 27,998 Other expense (income) Interest expense 2,132 623 6,710 1,982 Other expense (income) 334 5 911 (334) ------------ ------------ ------------ ------------ Income before income taxes 12,860 9,912 36,688 26,350 Income tax provision 5,015 3,473 14,308 9,232 Minority interest 284 - 350 - ------------ ------------ ------------ ------------ Net income $8,129 $6,439 $22,730 $17,118 ============ ============ ============ ============ Earnings per share Basic $0.47 $0.39 $1.35 $1.04 Diluted $0.45 $0.36 $1.26 $0.96 Weighted average shares outstanding Basic 17,123 16,565 16,877 16,517 Diluted 18,245 18,107 18,249 18,091 Percentages of Revenues Interchange 57.9% 49.4% 58.7% 48.3% Other costs of services 30.7% 36.1% 30.3% 37.7% Selling, general and administrative 2.7% 3.2% 2.5% 3.3% Income from operations 8.7% 11.3% 8.5% 10.7% Effective tax rate 39.0% 35.0% 39.0% 35.0% iPayment, Inc. Consolidated Balance Sheets (in thousands) Sept. 30, Dec. 31, Assets 2005 2004 ------------ --------- (Unaudited) Current assets: Cash and cash equivalents $623 $888 Accounts receivable, net 19,236 17,031 Prepaid expenses and other 9,815 6,765 ------------ --------- Total current assets 29,674 24,684 Restricted cash 3,857 3,248 Property and equipment, net 2,659 2,749 Intangible assets, net 199,470 219,331 Goodwill, net 102,625 79,360 Other assets 10,512 6,876 ------------ --------- Total assets $348,797 $336,248 ============ ========= Liabilities and stockholders' equity Current liabilities: Accounts payable $7,735 $2,418 Accrued liabilities and other 24,711 11,377 ------------ --------- Total current liabilities 32,446 13,795 Long-term debt 118,000 168,437 Minority interest in equity of subsidiary 858 - ------------ --------- Total liabilities 151,304 182,232 ------------ --------- Stockholders' equity: Common stock 151,255 130,507 Retained earnings 46,238 23,509 ------------ --------- Total stockholders' equity 197,493 154,016 ------------ --------- Total liabilities and stockholders' equity $348,797 $336,248 ============ ========= iPayment, Inc. Consolidated Statements of Cash Flows (in thousands) Nine months ended September 30, ------------------------- 2005 2004 ------------ ------------ Cash flows from operating activities: (Unaudited) (Unaudited) Net income $22,730 $17,118 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 30,472 14,740 Noncash interest expense 741 501 Changes in assets and liabilities: Accounts receivable (2,205) (2,222) Prepaid expenses and other current assets (3,030) (2,111) Other assets (4,979) (515) Accounts payable 5,302 331 Accrued liabilities and other 3,759 2,307 ------------ ------------ Net cash provided by operating activities 52,790 30,149 ------------ ------------ Cash flows from investing activities: Changes in restricted cash (609) 7,902 Expenditures for property and equipment (929) (268) Acquisitions of businesses, portfolios and other intangibles (18,953) (16,839) Deferred payments for acquisition of businesses - (2,000) ------------ ------------ Net cash (used in) provided by investing activities (20,491) (11,205) ------------ ------------ Cash flows from financing activities: Net repayments on line of credit (34,500) (15,500) Repayments of debt and capital lease obligations (696) (4,525) Proceeds from issuance of common stock 2,632 1,480 ------------ ------------ Net cash provided by (used in) financing activities (32,564) (18,545) ------------ ------------ Net increase (decrease) in cash (265) 399 Cash and cash equivalents at beginning of period 888 733 ------------ ------------ Cash and cash equivalents at end of period $623 $1,132 ============ ============ *T