Official Payments Holdings, Inc. (Nasdaq: OPAY), a leading
provider of electronic payment solutions for the biller direct
market, today released results for the quarter ended
December 31, 2011.
Results of Operations
First Quarter Fiscal 2012 Results
For the quarter ended December 31, 2011, Official Payments
reported revenues from Continuing Operations of $34.8 million,
a 5.7% increase over the same quarter last year. Net loss from
Continuing Operations was $1.6 million, or $0.10 per fully
diluted share, compared to net loss from Continuing Operations of
$1.1 million, or $0.06 per fully diluted share, for the same
quarter last year. Continuing Operations include Payment Solutions,
and our VSA operations, which we are winding down. On a standalone
basis, our Payment Solutions business reported quarterly revenues
of $34.3 million, or a 5.6% increase over the same quarter
last year.
Our general, administrative, selling and marketing expenses,
which support our Continuing Operations, were $9.2 million, an
increase of $3.3 million, or 55.0%, from the same quarter last
year. The quarter included a $1.5 million restructuring expense
related to the relocation of our corporate headquarters from
Reston, Virginia to Norcross, Georgia.
Management’s Comments
Alex P. Hart, President and Chief Executive Officer of Official
Payments Holdings, Inc. stated, “The first quarter was very
encouraging, and I believe that we will continue to execute on a
number of fronts to improve even more. During the quarter our
transaction volume grew 3.6% as compared with the prior year
quarter and our average transaction size grew 8.1%. More
importantly, our Payment Solutions net revenue increased $2.8
million or 30.6% as compared with the prior year quarter.”
Definition and Reconciliation
We use the following non-GAAP financial measures in this press
release: adjusted EBITDA from Continuing Operations and Payment
Solutions net revenue. Official Payments’ management believes these
measures are useful for evaluating our performance against the
performance of peer companies within the electronic payments
industry, and that these measures provide investors with additional
transparency with respect to financial measures used by management
in its financial and operational decision-making. Our 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.
Official Payments defines 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 stock-based
compensation in both equity and cash.
The following table shows a reconciliation of net loss from
Continuing Operations to adjusted EBITDA from Continuing Operations
for the three months ended December 31, 2011 and 2010 (in
thousands):
Adjusted EBITDA Three months ended December
31, 2011 2010 Change Net
Loss from Continuing Operations $ (1,635 ) $ (1,097 )
$ (538 )
Adjustments:
Depreciation/Amortization 1,903 1,758 145
Stock/Cash
based comp 467 587 (120 )
Restructuring charge 1,539 —
1,539
Taxes — 1 (1 )
Less: Interest income,
net 1 37 (36 )
Adjusted EBITDA from Continuing Operations $ 2,273
$ 1,212 $ 1,061
Official Payments defines Payment Solutions net revenue as
Payment Solutions gross revenue less 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. The following is a reconciliation of
Payment Solutions net revenue to revenue from continuing operations
for the three months ended December 31, 2011 and 2010.
Net Revenue Three months ended December
31, (in thousands) 2011
2010 Change ($)
Change (%) Revenue, from continuing operations $
34,837 $ 32,970 $ 1,867
5.7 %
Less: VSA revenue 535
493 42
8.5 %
Payment Solutions gross revenue 34,302 32,477
1,825 5.6 %
Less: Payment Solutions interchange fees and
other processing-related dues, assessments and fees
22,342 23,319
(977 ) (4.4 )%
Payment Solutions net
revenue $ 11,960 $ 9,158 $ 2,802
30.6 %
Liquidity
As of December 31, 2011, Official Payments had
$46.9 million in cash and cash equivalents. Our
$46.9 million in cash and cash equivalents includes funds that
have settled to us that we have not yet distributed to clients due
to the timing of bank transactions of $7.7 million and
$8.6 million of accrued discount fees. These items reduce our
cash available for company use. Therefore, the cash and cash
equivalents available to Official Payments is $30.6 million
(cash and cash equivalents less settlements payable and accrued
discount fees plus settlements receivable). Official Payments has
no short-term or long-term debt.
Conference Call
Official Payments will host a conference call Wednesday,
February 8 at 5:00 p.m. Eastern Time to discuss these results. To
access the conference call, please dial (800) 988-9768 and provide
pass code OPAYQ1. The conference call is also available live via
the Internet at www.OPAY.OfficialPayments.com. Participants via the
Web will need to provide conference ID # 1921847 and pass code
OPAYQ1. A replay will be available at 8:00 p.m. Eastern Time on
Wednesday, February 8, 2012 at www.OPAY.OfficialPayments.com or by
calling (866) 460-9737 and entering conference ID # 1921847. The
replay will be available until 11:59 p.m. Eastern Time on March 8,
2012.
About Official Payments Holdings, Inc.
Official Payments Holdings, Inc. (Nasdaq: OPAY) is a leading
provider of electronic payment solutions in the biller direct
market. Headquartered in Norcross, Georgia, the company provides
enhanced electronic payment services that include multiple payment
choices, payment channels, and bill payment products and services
to over 4,700 clients in all 50 states and the District of
Columbia. Official Payments serves clients in multiple markets
including federal, state, and local governments, educational
institutions, and utilities. Consumers may pay federal taxes, state
and local taxes, property taxes, and other bills such as utilities
and college tuition with credit cards, debit cards, electronic
checks and alternative payment methods via online, telephone, point
of sale and other channels by visiting www.OfficialPayments.com.
Corporate information is available at
www.OPAY.OfficialPayments.com.
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: general
economic conditions, which affect Official Payments’ financial
results in all our markets, which we refer to as “vertical
markets”, particularly the federal vertical market, the state and
local tax vertical market and the property tax vertical market;
effectiveness and performance of our systems, payment processing
platforms and operational infrastructure; our ability to grow
Payment Solutions revenue while reducing our costs, including
processor and interchange related costs; the potential loss of
funding by clients, including due to government budget shortfalls
or revisions to mandated statutes; the timing, initiation,
completion, renewal, extension or early termination of client or
partner contracts or projects; our ability to execute on our sales
and product strategy and realize revenues from our business
development opportunities; the impact of regulatory requirements;
and unanticipated claims as a result of project performance,
including due to the failure of software providers, processors,
vendors, partners, or subcontractors to satisfactorily perform and
complete engagements. 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 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)
December 31, 2011
September 30, 2011 (unaudited)
ASSETS:
Current assets: Cash and cash equivalents $ 46,851 $ 39,760
Accounts receivable, net 5,537 4,467 Settlements receivable, net
23,708 7,648 Prepaid expenses and other current assets 2,185
2,368 Total current
assets 78,281 54,243 Property, equipment and software, net
17,545 18,189 Goodwill 17,489 17,460 Other intangible assets, net
3,177 4,037 Other assets 233
238
Total assets $ 116,725
$ 94,167
LIABILITIES AND SHAREHOLDERS’ EQUITY: Current liabilities:
Accounts payable $ 69 $ 1,057 Settlements payable 31,423 9,812
Accrued compensation liabilities 3,625 2,721 Accrued discount fees
8,601 4,900 Other accrued liabilities 2,229 3,703 Accrued
restructuring 612 178 Deferred income 367
439 Total current liabilities
46,926 22,801 Other
liabilities: Deferred rent 100 1,556 Accrued restructuring 1,148 —
Other liabilities 87 28
Total other liabilities 1,335
1,584
Total liabilities
48,261 24,394
Contingencies and commitments Shareholders’
equity: Preferred stock, no par value; authorized shares: 4,579; no
shares issued and outstanding — — Common stock and paid-in capital;
shares authorized: 44,260; shares issued: 20,817 and 20,817; shares
outstanding: 16,642 and 16,642 194,066 193,732 Treasury stock—at
cost, 4,175 shares
(31,383
) (31,383 ) Accumulated deficit (94,219 )
(92,576 )
Total shareholders’ equity
68,464 69,773
Total liabilities and shareholders’ equity $
116,725 $ 94,167
OFFICIAL PAYMENTS
HOLDINGS, INC.
Consolidated Statements of
Operations
(unaudited)
Three months endedDecember 31, (in
thousands, except per share data)
2011
2010 Revenues $ 34,837
$ 32,970 Costs and
expenses: Direct costs 23,876 24,870 General and administrative
9,186 5,925 Selling and marketing 1,508 1,550 Depreciation and
amortization 1,903
1,758 Total costs and expenses
36,473 34,103 Loss from
continuing operations before other income and income taxes
(1,636 ) (1,133 )
Other income: Interest income, net 1 37 Gain on investments
— — Total
other income 1
37 Loss from continuing operations before
income taxes (1,635 ) (1,096 ) Income tax provision
— 1 Loss
from continuing operations (1,635 ) (1,097 ) Gain (loss) from
discontinued operations, net (8 )
2 Net loss $
(1,643 ) $ (1,095 ) Loss per
share—Basic and diluted: From continuing operations $ (0.10 ) $
(0.06 ) From discontinued operations —
— Loss per share—Basic and
diluted $ (0.10 ) $ (0.06 )
Weighted average common shares used in computing: Basic and
diluted loss per share 16,642 18,200
OFFICIAL PAYMENTS
HOLDINGS, INC.
Consolidated Statements of Cash
Flows
(unaudited)
Three months ended
December 31,
(in thousands) 2011 2010 CASH
FLOWS FROM OPERATING ACTIVITIES: Net loss $ (1,643 ) $ (1,095 )
Less: Gain (loss) from discontinued operations, net
(8 ) 2 Loss from
continuing operations, net (1,635 ) (1,097 ) Non-cash items
included in net loss: Restructuring charges 1,196 — Depreciation
and amortization 1,903 1,758 Provision for doubtful accounts — 131
Deferred rent (1 ) 113 Share-based compensation 467 587 Capitalized
software impairment loss — 251 Net effect of changes in assets and
liabilities: Accounts receivable, net (1,073 ) 23 Settlement
processing assets and obligations, net 5,551 4,654 Prepaid expenses
and other assets 192 130 Accounts payable and accrued liabilities
1,947 1,744 Income taxes receivable — (10 ) Other long term
liabilities 79 — Deferred income (71 )
(34 ) Cash provided by operating activities
from continuing operations 8,555 8,250 Cash provided by (used in)
operating activities from discontinued operations
(8 ) 2 Cash provided by
operating activities 8,547
8,252 CASH FLOWS FROM INVESTING
ACTIVITIES: Purchases of available-for-sale securities — (5,998 )
Maturities of available-for-sale securities — 8,250 Maturities of
restricted investments — 983 Capitalized internally developed
software (600 ) (542 ) Purchase of equipment and software (818 )
(756 ) Additions to goodwill—ChoicePay acquisition
(30 ) (20 ) Cash (used in)
provided by investing activities (1,448 )
1,917 CASH FLOWS FROM FINANCING
ACTIVITIES: Net proceeds from issuance of common stock — 259
Capital lease obligations and other financing arrangements
(8 ) (8 ) Cash (used in)
provided by financing activities (8 )
251 Net increase in cash and cash
equivalents 7,091 10,420 Cash and cash equivalents at beginning of
period 39,760
45,757 Cash and cash equivalents at end of period
$ 46,851 $ 56,177
OFFICIAL PAYMENTS
HOLDINGS, INC.
Consolidated Statement of
Operations—Continuing Operations
(unaudited)
(in thousands)
Payment Solutions VSA
Total Three months ended December 31, 2011:
Revenues $ 34,302 $ 535
$ 34,837 Costs and expenses: Direct costs
23,784 92 23,876 General and administrative 9,056 130 9,186 Selling
and marketing 1,508 — 1,508 Depreciation and amortization
1,903 —
1,903 Total costs and expenses
36,251 222
36,473 (Loss) income from continuing operations
before other income and income taxes (1,949 )
313 (1,636 ) Other
income (expense): Interest income 1
— 1 Total
other income 1 —
(Loss) income from continuing
operations before taxes (1,948 ) 313 (1,635 ) Income tax provision
— —
—
(Loss) income from continuing
operations $ (1,948 )
$ 313 $
(1,635 ) (in thousands)
Payment Solutions VSA
Total Three months ended December 31, 2010: Revenues
$ 32,477 $ 493
$ 32,970 Costs and expenses: Direct costs 24,817 53
24,870 General and administrative 5,939 (14 ) 5,925 Selling and
marketing 1,550 — 1,550 Depreciation and amortization
1,758 —
1,758 Total costs and expenses
34,064 39
34,103 (Loss) income from continuing operations before other
income and income taxes (1,587 )
454 (1,331 ) Other income
(expense): Interest income 37
— 37 Total other
income 37 —
37 (Loss) income from continuing
operations before taxes (1,550 ) 454 (1,096 ) Income tax provision
1 —
1
(Loss) income from continuing
operations $ (1,551 )
$ 454 $
(1,097 )
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