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 June 30,
2012.
Results of Operations
Third Quarter Fiscal 2012 Results
For the quarter ended June 30, 2012, Official Payments
reported revenues from Continuing Operations of $39.2 million,
a 1.9% increase over the same quarter last year. Our loss from
Continuing Operations was $0.9 million, or $0.05 per fully
diluted share, as compared with a loss of $0.08 per fully diluted
share 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 $38.9 million, or a 2.1%
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 $2.0 million, or 28%, from the same quarter last
year. Approximately $1.5 million of this increase was due to
management incentive plan accruals in the third quarter 2012 versus
reversals of the incentive plan accrual in the same period in
2011.
Management’s Comments
Alex P. Hart, President and Chief Executive Officer of Official
Payments Holdings, Inc. stated, “We’ve produced three quarters in a
row of positive improvement over the prior year and I’m pleased
with how we’re positioned. I believe our strategy is sound and that
we’re executing well.”
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 nine months ended June 30, 2012 and
2011:
Adjusted EBITDA Three months ended June
30, (in thousands)
2012 2011
Change Net Loss from Continuing Operations $
(852 ) $ (1,356 ) $ 504
Adjustments:
Depreciation/Amortization 1,851 1,856 (5 )
Stock-based
compensation 371 324 47
Restructuring charge 2 — 2
Taxes 5 46 (41 )
Less: Interest (expense) income,
net (1 ) 19
(20 )
Adjusted EBITDA from Continuing Operations $ 1,378
$ 851 $ 527
Adjusted EBITDA Nine months ended June 30, (in
thousands)
2012 2011
Change Net Loss from Continuing Operations $ (3,894 )
$ (3,825 ) $ (69 )
Adjustments:
Depreciation/Amortization 5,620 5,420 200
Stock-based
compensation 1,352 (522 ) 1,874
Restructuring charge
1,493 — 1,493
Taxes 5 (139 ) 144
Less: Interest
income, net — 76
(76 )
Adjusted EBITDA from Continuing
Operations $ 4,576 $ 858 $
3,718
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
nine months ended June 30, 2012 and 2011:
Net Revenue Three months ended June 30,
(in thousands, except percentages)
2012
2011 Change ($) Change (%)
Revenue from continuing operations $ 39,163 $ 38,443
$ 720 1.9 % Less: VSA revenue 257
353 (96 ) (27.2 )% Payment Solutions
gross revenue 38,906 38,090 816 2.1 % Less: Discount fees
27,134 29,170 (2,036 )
(7.0 )% Payment Solutions net revenue
$ 11,772
$ 8,920 $ 2,852
32.0 % Net Revenue
Nine months ended June 30, (in thousands, except
percentages)
2012 2011
Change ($) Change (%) Revenue from continuing
operations $ 106,820 $ 101,679 $ 5,141 5.1 % Less: VSA revenue
1,142 1,208 (66 )
(5.5 )% Payment Solutions gross revenue 105,678 100,471 5,207 5.2 %
Less: Discount fees 70,415
74,462 (4,047 ) (5.4 )% Payment Solutions net
revenue
$ 35,263 $ 26,009
$ 9,254 35.6 %
Liquidity
As of June 30, 2012, we had $40.8 million in cash and
cash equivalents. Our $40.8 million in cash, cash equivalents
and marketable securities includes $6.9 million of accrued discount
fees and funds of $1.1 million we have not yet paid to clients
due to the timing of bank transactions. These items reduce our cash
available for our use. Therefore, the cash and cash equivalents
available to us at June 30, 2012 are $32.8 million. Using the
same calculation, we had $32.7 million available to us at September
30, 2011.
Conference Call
Official Payments will host a conference call Tuesday, August 7
at 5:00 p.m. Eastern Time to discuss these results. To access the
conference call, please dial (877) 917-3616. The conference call
will also be broadcast live via the Internet at
www.OPAY.OfficialPayments.com.
A replay will be available at 8:00 p.m. Eastern Time on Tuesday,
August 7, 2012 at www.OPAY.OfficialPayments.com or by calling (800)
925-4415. The replay will be available from 10:00 p.m. Eastern
Time, Tuesday August 7, 2012 until 11:59 p.m. Eastern Time on
August 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 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
September 30, (in thousands)
June 30,
2012 2011 (unaudited)
ASSETS: Current
assets: Cash and cash equivalents $ 40,753 $ 39,760 Accounts
receivable, net 4,350 4,467 Settlements receivable, net 12,848
7,648 Prepaid expenses and other current assets
1,497 2,368 Total current assets
59,448 54,243 Property, equipment and software, net 17,617
18,189 Goodwill 17,551 17,460 Other intangible assets, net 1,491
4,037 Other assets 585
238
Total assets $ 96,692
$ 94,167 LIABILITIES
AND SHAREHOLDERS’ EQUITY: Current liabilities: Accounts payable
$ 63 $ 1,057 Settlements payable 13,989 9,812 Accrued compensation
liabilities 4,778 2,721 Accrued discount fees 6,933 4,900 Other
accrued liabilities 2,260 3,703 Accrued restructuring charges 314
178 Deferred income 244
439 Total current liabilities 28,581
22,810 Other liabilities: Deferred rent
78 1,556 Accrued restructuring charges 991 — Other liabilities
168 28 Total other
liabilities 1,237 1,584
Total liabilities 29,818
24,394 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: 20,817 and
20,817; shares outstanding: 16,642 and 16,642
194,740 193,732 Treasury stock—at cost, 4,175 shares (31,383 )
(31,383 ) Accumulated deficit (96,483 )
(92,576 )
Total shareholders’ equity
66,874 69,773
Total liabilities and shareholders’ equity
$ 96,692 $ 94,167
OFFICIAL PAYMENTS HOLDINGS, INC.
Consolidated Statements of Operations (unaudited)
Three months ended Nine
months ended June 30, June 30, (in
thousands, except per share data)
2012
2011
2012 2011 Revenues
$ 39,163 $ 38,443 $
106,820 $ 101,679 Costs and
expenses: Direct costs 28,922 30,696 75,697 78,898 General and
administrative 6,601 5,530 23,096 16,339 Selling and marketing
2,635 1,690 6,296 5,062 Depreciation and amortization
1,851 1,856
5,620 5,420 Total costs and expenses
40,009 39,772
110,709 105,719
Loss from continuing operations before other income and income
taxes (846 )
(1,329 ) (3,889 )
(4,040 ) Other income: Interest
(expense) income, net (1 ) 19
— 76
Total other income (1 )
19 —
76 Loss from continuing
operations before income taxes (847 )
(1,310 ) (3,889 ) (3,964
) Income tax provision (benefit) 5
46 5
(139 )
Loss from continuing operations
(852 ) (1,356 ) (3,894 )
(3,825 ) (Loss) gain from discontinued operations,
net (1 ) (76 )
(13 ) 226
Net loss
$ (853 ) $ (1,432
) $ (3,907 )
$ (3,599 ) (Loss) gain per share—Basic
and diluted: From continuing operations $ (0.05 ) $ (0.08 ) $ (0.23
) $ (0.22 ) From discontinued operations —
— —
0.01 Loss per share—Basic and diluted
$ (0.05 ) $ (0.08
) $ (0.23 )
$ (0.21 ) Weighted average common
shares used in computing: Basic and diluted loss per share 16,642
16,951 16,642 17,252
OFFICIAL PAYMENTS HOLDINGS,
INC. Consolidated Statements of Cash Flows
(unaudited) Nine months ended June
30, (in thousands)
2012 2011
CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $
(3,907 ) $ (3,599 ) Less: (Loss) gain from discontinued operations,
net (13 ) 226 Loss from
continuing operations, net (3,894 ) (3,825 ) Non-cash items
included in net loss: Restructuring costs 803 — Depreciation and
amortization 5,620 5,420 Provision for doubtful accounts 26 457
Deferred rent (3 ) 415 Share-based compensation 1,008 (523 )
Capitalized software impairment loss — 268 Net effect of changes in
assets and liabilities: Accounts receivable, net 91 710 Settlement
processing assets and obligations, net (1,023 ) 1,991 Prepaid
expenses and other assets 524 (273 ) Accounts payable and accrued
liabilities 1,526 (3,226 ) Income taxes receivable — (62 ) Other
long term liabilities 161 — Deferred income
(195 ) (150 ) Cash provided by operating activities
from continuing operations 4,644 1,202 Cash used in operating
activities from discontinued operations (13 )
(138 )
Cash provided by operating activities
4,631 1,064
CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of
available-for-sale securities — (13,248 ) Maturities of
available-for-sale securities — 14,576 Maturities of restricted
investments — 983 Capitalized internally developed software (1,911
) (1,063 ) Purchase of equipment and software (1,610 ) (2,111 )
ChoicePay acquisition (91 ) (56
) Cash used in investing activities from continuing operations
(3,612 ) (919 ) Cash provided by investing activities from
discontinued operations —
364
Cash used in investing activities
(3,612 ) (555 )
CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from
issuance of common stock — 482 Purchase of company stock — (10,363
) Capital lease obligations and other financing arrangements
(26 ) (25 )
Cash used in financing
activities (26 )
(9,906 ) Net increase (decrease) in cash and
cash equivalents 993 (9,397 ) Cash and cash equivalents at
beginning of period 39,760
45,757
Cash and cash equivalents at end of
period $ 40,753
$ 36,360 OFFICIAL PAYMENTS
HOLDINGS, INC. Consolidated Statement of
Operations—Continuing Operations (unaudited)
Payment (in thousands)
Solutions
VSA Total Three months ended June
30, 2012: Revenues
$ 38,906 $ 257 $ 39,163 Costs
and expenses: Direct costs 28,776 146 28,922 General and
administrative 6,584 17 6,601 Selling and marketing 2,635 — 2,635
Depreciation and amortization 1,851
— 1,851 Total costs and expenses
39,846 163 40,009
(Loss) income from continuing operations before other income and
income taxes (940 ) 94
(846 ) Other income: Interest income, net (1 )
— (1 ) Total other income (1 )
— (1 ) (Loss) income from continuing
operations before taxes (941 ) 94 (847 ) Income tax provision
5 — 5
(Loss) income from continuing operations $
(946 ) $ 94 $
(852 ) Payment (in thousands)
Solutions VSA Total Three
months ended June 30, 2011: Revenues $ 38,090
$ 353 $ 38,443 Costs and expenses: Direct
costs 30,622 74 30,696 General and administrative 5,519 11 5,530
Selling and marketing 1,690 — 1,690 Depreciation and amortization
1,856 — 1,856
Total costs and expenses 39,687
85 39,772 (Loss) income from continuing
operations before other income and income taxes
(1,597 ) 268 (1,329 ) Other income:
Interest income, net 19 —
19 Total other income 19
— 19 (Loss) income from continuing
operations before taxes (1,578 ) 268 (1,310 ) Income tax provision
46 — 46
(Loss) income from continuing operations $
(1,624 ) $ 268 $
(1,356 ) Payment (in
thousands)
Solutions VSA
Total Nine months ended June 30, 2012: Revenues
$ 105,678 $ 1,142 $ 106,820
Costs and expenses: Direct costs 75,099 598 75,697 General and
administrative 22,906 190 23,096 Selling and marketing 6,296 —
6,296 Depreciation and amortization 5,620
— 5,620 Total costs and expenses
109,921 788
110,709 (Loss) income from continuing operations before
other income and income taxes (4,243 )
354 (3,889 ) Other income: Interest income, net
— — — Total
other income — — —
(Loss) income from continuing operations before taxes (4,243
) 354 (3,889 ) Income tax benefit (5 )
— (5 )
(Loss) income from continuing
operations $ (4,248 )
$ 354 $ (3,894 )
Payment (in thousands)
Solutions
VSA Total Nine months ended June 30,
2011: Revenues $ 100,471 $ 1,208 $
101,679 Costs and expenses: Direct costs 78,705 193 78,898
General and administrative 16,328 11 16,339 Selling and marketing
5,062 — 5,062 Depreciation and amortization 5,420
— 5,420 Total costs and
expenses 105,515 204
105,719 (Loss) income from continuing operations
before other income and income taxes (5,044 )
1,004 (4,040 ) Other income: Interest income,
net 76 — 76
Total other income 76 —
76 (Loss) income from continuing operations before
taxes (4,968 ) 1,004 (3,964 ) Income tax benefit (139
) — (139 )
(Loss) income from
continuing operations $ (4,829 )
$ 1,004 $ (3,825 )
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