Official Payments Reports Results from Fiscal Year 2012 and its
Fourth Fiscal Quarter:
NORCROSS, Ga., Dec. 12, 2012 /PRNewswire/ -- Official
Payments Holdings, Inc. (Nasdaq: OPAY), a leading provider of
electronic payment solutions, reported results today for its fiscal
2012 fourth quarter (Q4 '12) and fiscal year ended September 30, 2012 (Fiscal 2012 or FY '12). The
Company will host a call/webcast today at 5:00 p.m. EST to review its results:
Conference Call Dial-In:
|
800-857-9792 Participant code – "OPAY"
|
Webcast/Replay:
|
http://investors.officialpayments.com
|
Replay
Dial-In:
|
800-873-2149
|
–
10:00 pm ET, Wednesday, Dec. 12, 2012 to
|
|
|
11:59 pm ET, Wednesday, Jan. 2, 2013
|
FY' 12 Highlights:
Official Payments Holdings, Inc.
reported revenue from continuing operations of $135.7 million for fiscal 2012, an increase of
4.3% over fiscal 2011. Fiscal 2012 Payment Solutions net revenue,
which reflects Payment Solutions revenues less related processing
and interchange fees, improved by 36.2% in fiscal 2012 versus
fiscal 2011. The improvement was principally due to lower debit
card fees established by the Durbin Amendment in October 2011, as well as negotiated reductions in
credit interchange rates and other processing costs. General and
administrative and selling and marketing expenses increased a
combined 31.0% versus 2011, primarily as a result of increases in
performance-based compensation, a one-time restructuring charge
associated with the relocation of company headquarters to
Norcross, Georgia, an increase in
share based compensation and an increase in technology-related
personnel expense.
Official Payments reported a net loss from continuing operations
of $6.0 million, or $0.36 per share, compared to the prior year's net
loss from continuing operations of $7.4
million, or $0.43 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 2012, 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 improved to positive
$4.8 million in fiscal 2012 from
negative $0.5 million in fiscal
2011.
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.
Q4 '12 Overview:
Q4 is seasonally the Company's
slowest period of payment volume, given the timing of annual taxes,
semiannual tuition and other non-monthly payments. Fiscal Q4 2012
revenue from continuing operations improved by 1.5% versus fiscal
Q4 2011, Payment Solutions net revenue improved by 38.5% versus
fiscal Q4 2011, while general and administrative and selling and
marketing expenses increased a combined 14.8% to $9.5 million versus fiscal Q4 2011.
Official Payments reported a net loss from continuing operations
of $2.1 million in fiscal Q4 2012, or
$0.12 per share, as compared with a
loss of $3.6 million, or $0.21 per share, in fiscal Q4 2011.
Adjusted EBITDA from continuing operations rose to positive
$0.2 million in fiscal Q4 2012 versus
negative $1.4 million in fiscal Q4
2011. This marks the fourth consecutive quarter of positive
Adjusted EBITDA from continuing operations and the first time since
2004 that the Company has recorded positive Adjusted EBITDA from
continuing operations in all four quarters of a fiscal year.
Cash Position and Use of Cash
Official Payments'
year-end cash and cash equivalents decreased by approximately
$0.7 million from $39.8 million at fiscal year-end 2011 to
$39.1 million at fiscal year-end
2012, and by approximately $1.7
million versus June 30, 2012.
Our $39.1 million in cash and cash
equivalents included $5.6 million of
accrued discount fees and $17.0 million of funds that have settled or
will settle to us that we had not yet distributed to our clients
due to the timing of bank transactions. Offsetting these
liabilities was $15.3 million of cash
which we received within two days of the fiscal year end as
settlements from credit card companies or banks.
Management Overview
Alex P.
Hart, President and CEO, stated, "In the fourth quarter of
fiscal 2010 we initiated a plan to turn around the Company's
operations and financial performance. Our Q4 and full fiscal year
operating results in 2012 highlight the significant progress we
have made in this effort."
"Central to the turnaround were major upgrades we made to our
payment services infrastructure. During fiscal 2012 we completed
the bulk of the upgrade work, allowing us to shift our focus to the
consolidation of our three payment processing platforms onto a
single platform. We now expect to be substantially complete with
this process by the end of calendar 2013 at an anticipated cost of
approximately $3 million – well below
the $10 to $12 million we projected
two years ago. Upon completion of this consolidation we
expect to realize significant ongoing cost savings and to be able
to deploy new products and services more quickly and
efficiently."
Mr. Hart added, "With the operational turnaround largely
complete and our platform consolidation project expected to be
substantially concluded in a year, we are now able to focus our
attention on increasing adoption within our existing client base
and expanding our list of clients through direct sales, expanded
alliances, and tuck-in acquisitions. A key to increasing both
adoption and new client acquisition is the delivery of new products
and services that enable our customers to pay their bills where,
when, and how they want to pay them. Two of the exciting
products that we'll be launching after the first of the year will
give our customers unprecedented levels of convenience and ease of
use – an electronic bill presentment solution that will enable our
clients to deliver interactive ebills with all of the rich
functionality that customers have come to expect from their online
service providers, and mobile payment apps for the iPad, iPhone,
and Android phones and tablets that extend that great online
experience to wherever they happen to be when they have a moment to
pay a bill."
Financial Guidance
Based on the Company's current
expectations of continued operational improvements and initial
benefits from its sales and marketing efforts, it is providing the
following financial guidance for fiscal 2013:
- The Company believes that Adjusted EBITDA from continuing
operations will be approximately $7.2
million in fiscal year 2013, approximately 50% above fiscal
year 2012;
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)
|
Q4 Fiscal 2012
|
Q4 Fiscal 2011
|
Change
|
|
Fiscal 2012
|
Fiscal 2011
|
Change
|
Net loss from continuing operations
|
$
(2,072)
|
$
(3,606)
|
+$
1,534
|
|
$
(5,966)
|
$
(7,432)
|
+$
1,466
|
Adjustments:
|
|
|
|
|
|
|
|
Depreciation/Amortization
|
1,734
|
1,894
|
(160)
|
|
7,354
|
7,314
|
+40
|
Share based compensation
|
477
|
305
|
+172
|
|
1,830
|
(216)
|
+2,046
|
Restructuring charge
|
—
|
—
|
—
|
|
1,493
|
—
|
+1,493
|
Taxes
|
49
|
39
|
+10
|
|
53
|
(100)
|
+153
|
Interest (income) expense, net
|
1
|
(6)
|
+7
|
|
1
|
(82)
|
+83
|
Adjusted EBITDA from continuing
operations
|
$
189
|
$
(1,374)
|
+$
1,563
|
|
$
4,765
|
$
(516)
|
+$
5,281
|
Reconciliation of Payment Solutions net revenue to
revenue from continuing operations:
|
(in
thousands, except percentages)
|
Q4
Fiscal 2012
|
Q4
Fiscal 2011
|
Change
|
|
Fiscal
2012
|
Fiscal
2011
|
Change
|
Revenue
from continuing operations
|
$
28,922
|
$
28,491
|
+1.5%
|
|
$
135,741
|
$
130,170
|
+4.3%
|
Less: VSA revenue
|
194
|
319
|
(39.2)%
|
|
1,335
|
1,526
|
(12.5)%
|
Payment
Solutions gross revenue
|
28,728
|
28,172
|
+2.0%
|
|
134,406
|
128,644
|
+4.5%
|
Less: Discount fees
|
18,052
|
20,463
|
(11.8)%
|
|
88,468
|
94,925
|
(6.8)%
|
Payment
Solutions net revenue
|
$
10,676
|
$
7,709
|
+38.5%
|
|
$
45,938
|
$
33,719
|
+36.2%
|
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. AND
SUBSIDIARY
Consolidated Balance Sheets
|
(in
thousands, except per share data)
|
September 30,
2012
(unaudited)
|
September 30,
2011
|
ASSETS:
|
|
|
Current assets:
|
|
|
Cash and cash equivalents
|
$
39,071
|
$
39,760
|
Accounts receivable, net
|
5,304
|
4,467
|
Settlements receivable
|
15,291
|
7,648
|
Prepaid expenses and other current assets
|
1,692
|
2,368
|
Total current assets
|
61,358
|
54,243
|
|
|
|
Property, equipment and software, net
|
17,368
|
18,189
|
Goodwill
|
17,582
|
17,460
|
Other intangible assets, net
|
1,107
|
4,037
|
Other assets
|
509
|
238
|
Total assets
|
$
97,924
|
$
94,167
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY:
|
|
|
Current liabilities:
|
|
|
Accounts payable
|
$
74
|
$
1,057
|
Settlements payable
|
17,019
|
9,812
|
Accrued compensation liabilities
|
6,373
|
2,721
|
Accrued discount fees
|
5,616
|
4,900
|
Other accrued liabilities
|
2,201
|
3,881
|
Deferred income
|
284
|
439
|
Total current liabilities
|
31,567
|
22,810
|
Other liabilities:
|
|
|
Deferred rent
|
67
|
1,556
|
Other liabilities
|
1,103
|
28
|
Total other liabilities
|
1,170
|
1,584
|
Total liabilities
|
32,737
|
24,394
|
|
|
|
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: 20,817 and 20,817; shares outstanding:
16,642 and 16,642
|
195,126
|
193,732
|
Treasury stock—at cost, 4,175 and 4,175
shares
|
(31,383)
|
(31,383)
|
Accumulated other comprehensive loss
|
—
|
—
|
Accumulated deficit
|
(98,556)
|
(92,576)
|
Total shareholders' equity
|
65,187
|
69,773
|
Total liabilities and shareholders'
equity
|
$
97,924
|
$
94,167
|
OFFICIAL PAYMENTS HOLDINGS, INC. AND
SUBSIDIARY
Consolidated Statements of
Operations
|
|
Three
months ended
September 30,
|
Year
ended
September 30,
|
(in
thousands, except per share data)
|
2012
|
2011
|
2012
|
2011
|
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
|
Revenues
(1)
|
$
28,922
|
$
28,491
|
$
135,741
|
$
130,170
|
|
|
|
|
|
Costs and
expenses:
|
|
|
|
|
Direct costs
|
19,676
|
21,866
|
95,373
|
100,764
|
General and
administrative
|
7,361
|
6,426
|
30,457
|
22,766
|
Selling and
marketing
|
2,173
|
1,878
|
8,468
|
6,940
|
Depreciation and
amortization
|
1,734
|
1,894
|
7,354
|
7,314
|
Total costs and expenses
|
30,944
|
32,064
|
141,652
|
137,784
|
Loss
from continuing operations before other
income and income
taxes
|
(2,022)
|
(3,573)
|
(5,911)
|
(7,614)
|
|
|
|
|
|
Other
income:
|
|
|
|
|
Interest (expense)
income, net
|
(1)
|
6
|
(1)
|
82
|
Total other income
|
(1)
|
6
|
(1)
|
82
|
|
|
|
|
|
Loss
from continuing operations before income taxes
(2)
|
(2,023)
|
(3,567)
|
(5,912)
|
(7,532)
|
Income tax
provision (benefit)
|
49
|
39
|
54
|
(100)
|
|
|
|
|
|
Loss
from continuing operations
|
(2,072)
|
(3,606)
|
(5,966)
|
(7,432)
|
(Loss)
gain from discontinued operations, net
|
(2)
|
(7)
|
(14)
|
219
|
|
|
|
|
|
Net
loss (2)
|
$
(2,074)
|
$
(3,613)
|
$
(5,980)
|
$
(7,213)
|
|
|
|
|
|
(Loss)
gain per share—Basic and diluted:
|
|
|
|
|
From continuing operations
(2)
|
$
(0.12)
|
$
(0.21)
|
$
(0.36)
|
$
(0.43)
|
From discontinued
operations
|
—
|
—
|
—
|
0.01
|
Loss per share—Basic and diluted
(2)
|
$
(0.12)
|
$
(0.21)
|
$
(0.36)
|
$
(0.42)
|
|
|
|
|
|
Weighted
average common shares used in computing:
|
|
|
|
|
Basic and diluted loss per
share
|
16,642
|
16,951
|
16,642
|
17,112
|
|
|
(1)
|
Reflects
revenues from the company's legacy VSA subsidiary which is being
wound down of $0.2 million, $0.3 million, $1.3
|
|
million
and $1.5 million, respectively in the fiscal fourth quarter 2012,
the fiscal fourth quarter 2011, fiscal 2012, and fiscal
2011.
|
(2)
|
Reflects
VSA income from continuing operations before and after taxes of
$0.1 million, $0.3 million, $0.5 million and $1.3
|
|
million,
respectively, in the fiscal fourth quarter 2012, the fiscal fourth
quarter 2011, fiscal 2012 and fiscal 2011, amounting to
|
|
$0.01,
$0.02, $0.03 and $0.07 per share, respectively.
|
OFFICIAL PAYMENTS HOLDINGS, INC. AND
SUBSIDIARY
Consolidated Statements of Cash
Flows
|
|
Year
ended September 30,
|
(In
thousands)
|
2012
(unaudited)
|
2011
|
2010
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
Net loss
|
$
(5,980)
|
$
(7,213)
|
$
(6,193)
|
Less: (Loss) income from discontinued operations,
net
|
(14)
|
219
|
(245)
|
Loss from continuing operations, net
|
(5,966)
|
(7,432)
|
(5,948)
|
Non-cash items included in net loss:
|
|
|
|
Restructuring costs
|
435
|
178
|
(21)
|
Depreciation and amortization
|
7,354
|
7,314
|
6,712
|
Provision for doubtful accounts
|
26
|
363
|
1,304
|
Deferred rent
|
(14)
|
204
|
388
|
Share-based compensation
|
1,394
|
(217)
|
1,012
|
Capitalized software impairment loss
|
—
|
268
|
—
|
(Gain) loss on trading investments
|
—
|
—
|
(31)
|
Gain on sale of equipment
|
—
|
—
|
(10)
|
Other
|
—
|
—
|
1
|
Net effect of changes in assets and
liabilities:
|
|
|
|
Accounts receivable, net
|
(863)
|
53
|
(1,396)
|
Settlement processing assets and obligations,
net
|
(436)
|
(195)
|
(960)
|
Prepaid expenses and other assets
|
405
|
(1,034)
|
629
|
Accounts payable and accrued liabilities
|
1,763
|
(624)
|
(196)
|
Income taxes receivable
|
—
|
7
|
84
|
Deferred income
|
(155)
|
(119)
|
(303)
|
Other long term liabilities
|
160
|
(268)
|
731
|
Cash provided by (used in) operating activities from
continuing operations
|
4,103
|
(1,502)
|
1,996
|
Cash used in operating activities from discontinued
operations
|
(14)
|
(149)
|
(855)
|
Cash provided by (used in) operating
activities
|
4,089
|
(1,651)
|
1,141
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
Purchases of available-for-sale securities
|
—
|
(13,248)
|
(23,587)
|
Sales and maturities of available-for-sale
securities
|
—
|
21,826
|
19,886
|
Sales of trading securities
|
—
|
—
|
31,200
|
Restricted investments matured, sold and released
from restriction
|
—
|
6,983
|
—
|
Purchase of equipment and software
|
(1,833)
|
(7,532)
|
(1,681)
|
Capitalized internally developed software
|
(2,789)
|
(2,749)
|
(3,563)
|
Earn out payments—ChoicePay
|
(122)
|
(79)
|
(52)
|
Collection of note receivable
|
—
|
—
|
527
|
Proceeds from sale of equipment
|
—
|
—
|
10
|
Cash (used in) provided by investing activities from
continuing operations
|
(4,744)
|
5,201
|
22,740
|
Cash provided by investing activities from
discontinued operations
|
—
|
368
|
610
|
Cash (used in) provided by investing
activities
|
(4,744)
|
5,569
|
23,350
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
Purchase of company stock
|
—
|
(10,363)
|
(749)
|
Net proceeds from issuance of common stock
|
—
|
482
|
82
|
Capital lease obligations and other financing
arrangements
|
(34)
|
(34)
|
(36)
|
Cash used in financing activities
|
(34)
|
(9,915)
|
(703)
|
Net
(decrease) increase in cash and cash equivalents
|
(689)
|
(5,997)
|
23,788
|
Cash and
cash equivalents at beginning of period
|
39,760
|
45,757
|
21,969
|
Cash and
cash equivalents at end of period
|
$
39,071
|
$
39,760
|
$
45,757
|
SOURCE Official Payments Holdings, Inc.