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 March 31,
2012.
Results of Operations
Second Quarter Fiscal 2012 Results
For the quarter ended March 31, 2012, Official Payments
reported revenues from Continuing Operations of $32.8 million,
an 8.4% increase over the same quarter last year. Our loss from
Continuing Operations was $1.4 million, or $0.08 per fully
diluted share, unchanged from 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
$32.5 million, or an 8.6% increase over the same quarter last
year.
Our general, administrative, selling and marketing expenses,
which support our Continuing Operations, were $9.5 million, an
increase of $2.8 million, or 41%, from the same quarter last
year. The prior year quarter included a $1.5 million credit to
expense related to the former CEO’s equity awards which were
canceled during that period.
Management’s Comments
Alex P. Hart, President and Chief Executive Officer of Official
Payments Holdings, Inc. stated, “We are encouraged by our quarterly
results, but recognize that it’s only been two in a row. We
continue to believe that we’re in a good space and that we have the
will to execute on the things that we believe are important to
creating a sustainably profitable business.”
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 and six months ended March 31, 2012 and
2011:
Adjusted EBITDA Three months ended March
31, (in thousands)
2012 2011
Change Net Loss from Continuing Operations $
(1,408 ) $ (1,372 ) $ (36 )
Adjustments: Depreciation/Amortization 1,867 1,806 61
Stock-based compensation 514 (1,434 ) 1,948
Restructuring
charge 34 — 34
Taxes — (186 ) 186
Less:
Interest income, net — 19
19
Adjusted EBITDA from
Continuing Operations $ 1,007 $ (1,205 )
$ 2,212
Adjusted
EBITDA Six months ended March 31, (in thousands)
2012 2011 Change
Net Loss from Continuing Operations $ (3,042 )
$ (2,469 ) $ (573 )
Adjustments:
Depreciation/Amortization 3,770 3,564 206
Stock-based
compensation 981 (846 ) 1,827
Restructuring charge 1,490
— 1,490
Taxes — (186 ) 186
Less: Interest income,
net 1 56
55
Adjusted EBITDA from Continuing
Operations $ 3,198 $ 7
$ 3,191
Official Payments defines 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. The following is a reconciliation of Payment Solutions
net revenue to revenue from continuing operations for the three and
six months ended March 31, 2012 and 2011.
Net Revenue Three months ended March
31, (in thousands, except percentages)
2012 2011
Change($)
Change(%)
Revenue from continuing operations $ 32,820 $ 30,266
$ 2,554 8.4 % Less: VSA revenue
350 362 (12
) (3.3 )% Payment Solutions gross revenue 32,470
29,904 2,566 8.6 % Less: Discount fees 20,938
21,884 (946 )
(4.3 )% Payment Solutions net revenue
$ 11,532
$ 8,020 $
3,512 43.8 %
Net Revenue Six months ended March 31,
(in thousands, except percentages)
2012
2011
Change($)
Change(%)
Revenue from continuing operations $ 67,657 $ 63,236
$ 4,421 7.0 % Less: VSA revenue
885 855 30
3.5 % Payment Solutions gross revenue 66,772
62,381 4,391 7.0 % Less: Discount fees 43,281
45,292 (2,011 )
(4.4 )% Payment Solutions net revenue
$ 23,491
$ 17,089 $
6,402 37.5 %
Liquidity
As of March 31, 2012, we had $39.2 million in cash and
cash equivalents. Our $39.2 million in cash, cash equivalents
and marketable securities includes funds that have settled to us
that we have not yet distributed to clients due to the timing of
bank transactions of $3.3 million and $4.3 million of
accrued discount fees. These items reduce our cash available for
company use. Therefore, the cash and cash equivalents available to
us at March 31, 2012 are $31.6 million. Using the same
calculation, we had $31.7 million available to us at September 30,
2011.
Conference Call
Official Payments will host a conference call Monday, May 7 at
5:00 p.m. Eastern Time to discuss these results. To access the
conference call, please dial (888) 566-6141 and provide pass code
OPAYQ2. The conference call is also available live via the Internet
at www.OPAY.OfficialPayments.com. Participants via the Web will
need to provide the pass code OPAYQ2. A replay will be available at
8:00 p.m. Eastern Time on Monday, May 7, 2012 at
www.OPAY.OfficialPayments.com or by calling (866) 415-2336. The
replay will be available until 11:59 p.m. Eastern Time on May 28,
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 more than 3,500 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)
March 31, 2012
September 30, 2011 (unaudited)
ASSETS: Current
assets: Cash and cash equivalents $ 39,210 $ 39,760 Accounts
receivable, net 4,601 4,467 Settlements receivable, net 15,130
7,648 Prepaid expenses and other current assets 2,606
2,368 Total current assets 61,547
54,243 Property, equipment and software, net 17,277 18,189
Goodwill 17,521 17,460 Other intangible assets, net 2,334 4,037
Other assets 226 238
Total assets $ 98,905
$ 94,167 LIABILITIES AND
SHAREHOLDERS’ EQUITY: Current liabilities: Accounts payable $
33 $ 1,057 Settlements payable 18,461 9,812 Accrued compensation
liabilities 4,580 2,721 Accrued discount fees 4,266 4,900 Other
accrued liabilities 2,142 3,703 Accrued restructuring 362 178
Deferred income 406 439
Total current liabilities 30,250
22,801 Other liabilities: Deferred rent 102 1,556 Accrued
restructuring 1,056 —
Other liabilities 98 28
Total other liabilities 1,256
1,584
Total liabilities 31,506
24,394 Contingencies and
commitments 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: 20,772 and 20,706; shares
outstanding: 16,642 and 16,642
194,412 193,732 Treasury stock—at cost, 4,175 shares (31,383 )
(31,383 ) Accumulated deficit (95,630 )
(92,576 )
Total shareholders’ equity 67,399
69,773 Total
liabilities and shareholders’ equity $ 98,905
$ 94,167
OFFICIAL PAYMENTS
HOLDINGS, INC.
Consolidated Statements of
Operations
Three months ended
March 31,
Six months ended
March 31,
(in thousands, except per share data)
2012
2011 2012 2011 Revenues $
32,820 $ 30,266 $ 67,657
$ 63,236 Costs and expenses: Direct
costs 22,900 23,332 46,775 48,202 General and administrative 7,309
4,884 16,495 10,809 Selling and marketing 2,152 1,822 3,660 3,372
Depreciation and amortization 1,867
1,806 3,770 3,564
Total costs and expenses 34,228
31,844 70,700
65,947 Loss from continuing operations before other income
and income taxes (1,408 ) (1,578 )
(3,043 ) (2,711 ) Other income:
Interest income, net — 20
1 57 Total other income
— 20 1
57 Loss from continuing
operations before income taxes (1,408 ) (1,558 ) (3,042 ) (2,654 )
Income tax benefit — (186 )
— (185 ) Loss from
continuing operations (1,408 ) (1,372 ) (3,042 ) (2,469 ) Gain from
discontinued operations, net (3 ) 300
(12 ) 302 Net loss
$ (1,411 ) $ (1,072 ) $ (3,054 ) $
(2,167 ) Loss per share—Basic and diluted: From continuing
operations $ (0.08 ) $ (0.08 ) $ (0.18 ) $ (0.14 ) From
discontinued operations — 0.02
— 0.02 Loss per
share—Basic and diluted $ (0.08 ) $ (0.06 ) $
(0.18 ) $ (0.12 ) Weighted average common shares used
in computing: Basic and diluted loss per share 16,642 16,928 16,642
17,577
OFFICIAL PAYMENTS
HOLDINGS, INC.
Consolidated Statements of Cash
Flows
Six months ended
March 31,
(in thousands)
2012 2011
CASH FLOWS FROM OPERATING ACTIVITIES: Net loss
$ (3,054 ) $ (2,167 ) Less: Gain from discontinued operations, net
(12 ) 302 Loss from continuing
operations, net (3,042 ) (2,469 ) Non-cash items included in net
loss: Restructuring costs 962
—
Depreciation and amortization 3,770 3,564 Provision for doubtful
accounts
—
192 Deferred rent 21 224 Share-based compensation 680 (846 )
Capitalized software impairment loss
—
246 Net effect of changes in assets and liabilities: Accounts
receivable, net (135 ) (920 ) Settlement processing assets and
obligations, net 1,167 (363 ) Prepaid expenses and other assets
(225 ) 171 Accounts payable and accrued liabilities (1,251 ) 290
Income taxes receivable — (22 )
Other long term liabilities
70
—
Deferred income (33 ) (69 ) Cash (used
in) provided by operating activities from continuing operations
1,714 (2 ) Cash used in operating activities from discontinued
operations (12 ) (7 ) Cash (used in)
provided by operating activities 1,702
(9 )
CASH FLOWS FROM INVESTING ACTIVITIES: Purchases
of available-for-sale securities — (5,998 ) Maturities of
available-for-sale securities — 14,576 Maturities of restricted
investments — 983 Capitalized internally developed software (1,192
) (1,496 ) Purchase of equipment and software (35 ) (954 )
ChoicePay acquisition (61 ) (35 ) Cash
provided by investing activities from continuing operations (2,235
) 7,076 Cash provided by investing activities from discontinued
operations — 309 Cash
provided by investing activities (2,235 )
7,385
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock — 289 Purchase of
company stock — (10,363 ) Capital lease obligations and other
financing arrangements (17 ) (16 ) Cash
used in financing activities (17 )
(10,090 ) Net (decrease) increase in cash and cash equivalents (550
) (2,714 ) Cash and cash equivalents at beginning of period
39,760 45,757 Cash and cash
equivalents at end of period $ 39,210 $ 43,043
OFFICIAL PAYMENTS
HOLDINGS, INC.
Consolidated Statement of
Operations—Continuing Operations
(in thousands)
Payment
Solutions VSA Total Three months
ended March 31, 2012: Revenues $ 32,470
$ 350 $ 32,820 Costs and expenses:
Direct costs 22,539 361 22,900 General and administrative 7,266 43
7,309 Selling and marketing 2,152 — 2,152 Depreciation and
amortization 1,867 —
1,867 Total costs and expenses
33,824 404
34,228 (Loss) income from continuing operations before other
income and income taxes (1,354 )
(54 ) (1,408 ) Other income: Interest income, net
— —
— Total other income —
— — (Loss) income from
continuing operations before taxes (1,354 ) (54 ) (1,408 ) Income
tax benefit — —
—
(Loss) income from continuing
operations $ (1,354 )
$ (54 ) $ (1,408 )
(in thousands)
Payment Solutions
VSA Total Three months ended March
31, 2011 Revenues $ 29,904 $ 362
$ 30,266 Costs and expenses: Direct costs
23,266 66 23,332 General and administrative 4,871 13 4,884 Selling
and marketing 1,822 — 1,822 Depreciation and amortization
1,806 —
1,806 Total costs and expenses 31,765
79 31,844 Loss
from continuing operations before other income and income taxes
(1,861 ) 283
(1,578 ) Other income: Interest income, net
20 — 20
Total other income 20 —
20 Loss from continuing operations
before taxes (1,841 ) 283 (1,558 ) Income tax benefit
(186 ) — (186 )
Loss
from continuing operations $ (1,655
) $ 283 $
(1,372 ) (in thousands)
Payment Solutions VSA Total
Six months ended March 31, 2012:
Revenues $ 66,772 $ 885 $ 67,657
Costs and expenses: Direct costs 46,323 452 46,775 General
and administrative 16,322 173 16,495 Selling and marketing 3,660 —
3,660 Depreciation and amortization 3,770
— 3,770 Total costs and
expenses 70,075 625
70,700 (Loss) income from continuing
operations before other income and income taxes
(3,303 ) 260 (3,043 ) Other
income: Interest income, net 1
— 1 Total other income
1 — 1 (Loss)
income from continuing operations before taxes (3,302 ) 260 (3,042
) Income tax benefit — —
—
(Loss) income from continuing
operations $ (3,302 )
$ 260 $ (3,042 )
(in thousands)
Payment Solutions
VSA Total Six months ended March 31,
2011: Revenues $ 62,381 $ 855
$ 63,236 Costs and expenses: Direct costs 48,083 119
48,202 General and administrative 10,809 — 10,809 Selling and
marketing 3,372 — 3,372 Depreciation and amortization
3,564 — 3,564
Total costs and expenses 65,828
119 65,947 (Loss) income from
continuing operations before other income and income taxes
(3,447 ) 736 (2,711 )
Other income: Interest income, net 57
— 57 Total other income
57 — 57
(Loss) income from continuing operations before taxes (3,390 ) 736
(2,654 ) Income tax benefit (185 )
— (185 )
(Loss) income from continuing
operations $ (3,205 )
$ 736 $ (2,469 )
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