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Online Resources Posts Third Quarter 2007 Results
Revenue and Earnings Increase on Strong Transaction Growth and Key Sales
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CHANTILLY, Va., Oct 25, 2007 (BUSINESS WIRE) -- Online Resources Corporation (Nasdaq:ORCC), a leading provider of web-based financial services, today reported financial and operating results for the three months ended September 30, 2007. -- Revenue was $34.2 million, up 21 percent from $28.3 million in third quarter 2006. -- Earnings before interest, taxes, depreciation and amortization (Ebitda), a non-GAAP measure, was $8.2 million, an increase of 38 percent compared to $5.9 million in the prior year. -- Net income available to common stockholders was $1.1 million, or $0.04 per diluted share, compared to net loss of $3.4 million, or $0.13 per diluted share, in the prior year. -- Core net income, a non-GAAP measure, was $2.3 million, or $0.08 per diluted share, compared to a loss of $37,000, or $0.00 per diluted share, in the prior year. "Our solid results in the third quarter were due primarily to continued growth in transactions and consumer adoption of bill pay," stated Matthew P. Lawlor, chairman and chief executive officer of the Company. "Our sales pipeline showed early signs of opening up during the quarter with several key client signings, including many of our new products and service options." "We also continue to execute on our strategic priorities," added Lawlor. "Billpay adoption growth remains on track, we launched four products in the last quarter, and integration of the Internet Transaction Solutions (ITS) acquisition is moving forward as planned." "Looking ahead, we believe we have a clearer, though moderated, view into the next year," said Lawlor. "Our view is tempered by a higher mix of volume-priced bill payments from large clients. We are also making some more conservative assumptions on the deployment of expedited payment services for banks and billers. At the same time, we are increasingly confident that client retention risk from Princeton's acquisition is behind us, and that our sales pipeline is opening up." 2007 Business Outlook The Company provided guidance for the fourth quarter and updated its full year 2007 guidance. Guidance does not assume the release of any additional tax valuation allowance in 2007, though the Company may do so. These statements are forward-looking, and actual results may differ materially.
Fourth Quarter Full Year
---------------------------------------------------------
2006 2007 % 2006 2007 %
Actual Guidance Change Actual Guidance Change
---------------------------------------------------------
Revenue ($
millions) $29.4 $37.3-38.8 29% $91.7 $134.3-135.8 47%
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Ebitda
(a)(b) $7.3 $9.6-10.4 37% $20.5 $31.9-32.7 58%
----------------------------------------------------------------------
Earnings ($ per share)
----------------------------------------------------------------------
Net Loss to
Common (c) $(0.11) $0.00-(0.03) n/a $(0.16) $(0.38)-(0.35) n/a
----------------------------------------------------------------------
Core Net
Income
(a)(d)(e) $0.03 $0.10-0.13 283% $0.16 $0.25-0.28 66%
----------------------------------------------------------------------
Share Count (millions)
----------------------------------------------------------------------
Basic 25.7 28.9 12% 25.5 27.3 6%
----------------------------------------------------------------------
Fully
Diluted
Shares (f) 27.1 30.9 14% 27.0 29.2 8%
----------------------------------------------------------------------
(a) The Company uses non-GAAP (Generally Accepted Accounting Principles) financial measures, including Ebitda and core net income (loss), to evaluate performance and establish goals. It believes that these measures are valuable to investors in assessing the Company's operating results when viewed in conjunction with GAAP results. (b) Ebitda is defined as earnings before interest, taxes, depreciation, amortization, preferred stock accretion and equity compensation expense. (c) Fourth quarters 2007 and 2006 and full years 2007 and 2006 net loss available to common stockholders per share is calculated using the number of weighted-average shares outstanding (basic), not fully diluted shares. (d) Excludes amortization of acquisition-related intangible assets of approximately $1.6 and $2.3 million for the fourth quarters of 2007 and 2006, respectively, and $7.9 and $5.0 million for the years 2007 and 2006, respectively. Excludes equity compensation expense of approximately $1.5 and $0.6 million for the fourth quarters of 2007 and 2006, respectively, and $3.9 and $2.5 million for the years 2007 and 2006, respectively. Excludes write-off of fees and other expenses related to senior debt refinancing of approximately $5.6 million in the full year 2007. Excludes preferred stock accretion related to the redemption premium of $0.4 million for the fourth quarters of 2007 and 2006 and $1.5 and $0.8 million for the years 2007 and 2006, respectively. Excludes income (costs) related to the fair market valuation of certain derivatives of $(0.1) million for the fourth quarter of 2006 and $2.1 and $(0.2) million for the full years 2007 and 2006, respectively. Includes preferred stock accretion of approximately $1.8 million for the fourth quarters of 2007 and 2006 and $7.0 and $3.5 million for the years 2007 and 2006, respectively. (e) Core net income is defined as net income available to common stockholders before the amortization of acquisition-related intangible assets, equity compensation expense, merger-related charges, restructuring-related charges, impairment charges, cumulative effect of change in accounting methods, income tax benefit from the release of valuation allowance, non-recurring tax charges, income (costs) related to the fair market valuation of certain derivatives and preferred stock accretion related to the redemption premium. Some or all of these items may not be applicable in any given reporting period. (f) Only used for the purposes of calculating core net income (loss) per share. Preliminary Targets for 2008 In addition to its 2007 guidance, the Company provided direction for 2008 financial targets. These targets are not intended to substitute for specific guidance for 2008, which will be provided in early December. These statements are forward-looking, and actual results may differ materially. -- Annual revenue growth for 2008 is targeted to be 20 percent. -- Annual Ebitda growth is targeted to be 25 percent. -- Annual core net income per share growth is targeted to be 30 percent. Each of the above measures has a range of plus or minus 5 percentage points. Today's Conference Call and Web Cast The Company's management will host a conference call to discuss the results today at 5:00 p.m. ET. The conference call dial-in number is (800) 938-1087 for domestic participants and (706) 679-7266 for international participants. Alternatively, a live web cast of the call will be available through the "Investors" section of Online Resources' web site at www.orcc.com. The call and web cast will be recorded and available for playback from 8:00 p.m. ET on October 25th until midnight on Thursday, November 1st. For the conference call playback, dial (800) 642-1687 for domestic participants and (706) 645-9291 for international participants and enter code 18228615. For web cast replay, go to the "Investors" section of www.orcc.com. About Online Resources Online Resources powers financial technology services for thousands of financial institutions, billers and credit service providers. Its proprietary suite of account presentation and payment services are branded to its clients, and augmented by marketing services to drive consumer and business end-user adoption. The Company serves over 10 million end-users and processes $100 billion in bill payments annually. Founded in 1989, Online Resources (www.orcc.com) is recognized as one of the nation's fastest growing companies. This news release contains statements about future events and expectations, which are "forward-looking statements." Any statement in this release that is not a statement of historical fact may be deemed to be a forward-looking statement. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the company's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Specifically factors that might cause such a difference include, but are not limited to: the company's history of losses and anticipation of future losses; the company's dependence on the marketing efforts of third parties; the potential fluctuations in the company's operating results; the company's potential need for additional capital; the company's potential inability to expand the company's services and related products in the event of substantial increases in demand for these services and related products; the company's competition; the company's ability to attract and retain skilled personnel; the company's reliance on the company's patents and other intellectual property; the early stage of market adoption of the services it offers; consolidation of the banking and financial services industry; and those risks and uncertainties discussed in filings made by the company with the Securities and Exchange Commission, including those risks and uncertainties contained under the heading "Risk Factors" in the company's Form 10-K, latest 10-Q, and S-3 as filed with the Securities and Exchange Commission. These factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements.
Online Resources Corporation
Quarterly Operating Data
(Unaudited)
Total % Change
----------------------------------- -----------
3Q07 3Q07
vs. vs.
3Q06(1) 4Q06(1) 1Q07 2Q07 3Q07 2Q07 3Q06
BANKING SERVICES
Users (#K) 3,638 3,836 3,899 4,317 4,404 2% 21%
Account
Presentation (#K) 849 916 826 989 1,013 2% 19%
Payments (#K)(2) 2,962 3,097 3,260 3,522 3,564 1% 20%
Adoption Rate (%)(3)
Account
Presentation(4) 26.3% 26.5% 26.4% 27.7% 30.7% 11% 17%
Payments(5) 5.7% 6.0% 6.3% 6.7% 6.8% 1% 19%
Full Service(5) 9.5% 9.9% 10.3% 10.7% 11.2% 5% 18%
Remittance
Only(5) 4.9% 5.2% 5.5% 5.8% 5.7% -2% 16%
Same Store(6) 11.0% 11.3% 11.6% 12.0% 12.7% 6% 15%
Other Metrics
Bill Payment
Transactions (#M) 36.0 38.0 40.8 42.1 42.1 0% 17%
Clients 2,344 2,360 2,381 2,425 2,483 2% 6%
eCOMMERCE SERVICES
Users (#K)(2) 4,474 5,001 5,610 6,143 7,154 16% 60%
Account
Presentation (#K) 1,960 2,375 2,598 2,709 2,925 8% 49%
Payments (#K) 2,514 2,626 3,012 3,434 4,229 23% 68%
Other Metrics
Bill Payment
Transactions (#M) 5.3 5.7 6.7 7.7 9.2 21% 171%
Clients(7) 244 258 278 295 482 63% 98%
TOTAL COMPANY
Users (#K)(2) 8,112 8,837 9,509 10,460 11,558 10% 42%
Bill Payment
Transactions (#M) 41.3 43.7 47.5 49.8 51.3 3% 24%
Clients 2,588 2,618 2,659 2,720 2,965 9% 15%
Notes: (1)Excludes Citizens Bank of Rhode Island, a legacy Princeton eCom client that departed in December 2006. (2)Only includes users that have been active over the past 90 days or were otherwise billable. (3)Checking accounts are reported by clients and reviewed annually by the Company. In the first quarter 2007 the Company retroactively adjusted quarterly adoption rates to reflect those increases. (4)The number of account presentation end-users with checking accounts divided by the 1.8 million total launched checking accounts held with our account presentation banking services clients. (5)The number of payment services end-users divided by the total launched checking accounts held with all of our banking services payments clients (34.4 million), our banking services full service payments clients (6.5 million) and our banking services remittance only payments clients (27.9 million). The calculation only includes banking services payments clients for which we are the exclusive processor of the type of bill payment(s) we process for the client. (6)The number of payment services end-users divided by the 7.9 million total launched checking accounts held with our banking services payments clients that were launched on or before December 31, 2004. The calculation only includes banking services payments clients for which we are the exclusive processor of the type of bill payment(s) we process for the client. (7)Does not include 2,338 direct biller endpoints, bringing our total number of biller relationships to 2,636.
Online Resources Corporation
Consolidated Statement of Operations
(In thousands, except per share amounts)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-----------------------------------------------
2007 2006 2007 2006
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues:
Account
presentation
services $ 2,238 $ 1,990 $ 6,702 $ 5,874
Payment services 27,162 21,702 74,423 42,947
Relationship
management
services 1,683 1,960 5,907 6,114
Professional
services and other 3,161 2,613 10,003 7,407
----------- ----------- ----------- -----------
Total revenues 34,244 28,265 97,035 62,342
Expenses:
Cost of revenues 16,222 12,949 45,985 28,202
----------- ----------- ----------- -----------
Gross profit 18,022 15,316 51,050 34,140
General and
administrative 7,599 5,559 21,125 14,267
Selling and
marketing 5,719 6,255 17,541 11,813
Systems and
development 2,148 2,655 6,599 4,862
----------- ----------- ----------- -----------
Total expenses 15,466 14,469 45,265 30,942
----------- ----------- ----------- -----------
Income from operations 2,556 847 5,785 3,198
Other income (expense)
Interest income 313 327 1,051 1,607
Interest expense
and debt issuance
costs 305 (2,955) (4,195) (2,956)
Loss on
extinguishment of
debt - - (5,625) -
----------- ----------- ----------- -----------
Total other
income
(expense) 618 (2,628) (8,769) (1,349)
----------- ----------- ----------- -----------
Income before tax
provision (benefit) 3,174 (1,781) (2,984) 1,849
Income tax provision
(benefit) 84 (510) 375 966
----------- ----------- ----------- -----------
Net income (loss) 3,090 (1,271) (3,359) 883
Preferred stock
accretion 1,967 2,158 6,130 2,158
----------- ----------- ----------- -----------
Net income (loss)
available to common
stockholders $ 1,123 $ (3,429) $ (9,489) $ (1,275)
=========== =========== =========== ===========
Net income (loss)
available to common
stockholders per
share
Basic $ 0.04 $ (0.13) $ (0.36) $ (0.05)
Diluted $ 0.04 $ (0.13) $ (0.36) $ (0.05)
Shares used in
calculation of net
income (loss)
available to common
stockholders per
share:
Basic 27,699 25,627 26,610 25,481
Diluted 29,666 25,627 26,610 25,481
Reconciliation of net
income (loss) to
Ebitda (See Note 1):
Net income (loss) $ 3,090 $ (1,271) $ (3,359) $ 883
Depreciation and
amortization
(incl. loss on
disposal of
assets) 4,809 4,460 14,513 8,116
Equity compensation
expense 834 642 2,033 1,875
Other expense (618) 2,628 8,769 1,349
Income tax
provision
(benefit) 84 (510) 375 966
----------- ----------- ----------- -----------
Ebitda (See Note
1) $ 8,199 $ 5,949 $ 22,331 $ 13,189
=========== =========== =========== ===========
Reconciliation of net
income (loss)
available to common
stockholders to core
net income (See Note
2):
Net income (loss)
available to
common
stockholders $ 1,123 $ (3,429) $ (9,489) $ (1,275)
Loss on
extinguishment of
debt - - 5,625 -
Preferred stock
accretion related
to redemption
premium 383 402 1,084 402
Derivative fair
market valuation (2,233) 102 (2,069) 102
Equity compensation
expense 834 642 2,033 1,875
Amortization of
intangible assets 2,151 2,246 6,843 2,521
----------- ----------- ----------- -----------
Core net income
(loss) (see
Note 2) $ 2,258 $ (37) $ 4,027 $ 3,625
=========== =========== =========== ===========
Notes: 1. Ebitda is a pro forma measure defined as earnings before interest, taxes, depreciation and amortization, preferred stock accretion and equity compensation expense. 2. Core net income is a pro forma measure defined as net income available to common stockholders before the amortization of acquisition-related intangible assets, equity compensation expense, merger-related charges, restructuring-related charges, impairment charges, cumulative effect of change in accounting methods, income tax benefit from the release of valuation allowance, non-recurring tax charges, income (costs) related to the fair market valuation of certain derivatives and preferred stock accretion related to the redemption premium. Some or all of these items may not be applicable in any given reporting period.
Online Resources Corporation
Condensed Consolidated Balance Sheets
(In thousands)
SEPTEMBER 30, DECEMBER 31,
2007 2006
------------- -------------
(Unaudited) (Unaudited)
(See Note 1)
ASSETS
Current assets:
Cash, cash equivalents and short-term
investments $ 15,595 $ 31,189
Restricted cash 11,948 4,884
Accounts receivable, net 16,052 14,291
Deferred implementation costs 1,361 1,598
Deferred tax asset 371 2,561
Debt issuance cost 295 890
Prepaid expenses and other current
assets 3,244 2,653
------------- -------------
Total current assets 48,866 58,066
Property and equipment, net 25,456 19,110
Deferred tax asset 4,533 11,635
Goodwill 200,832 168,085
Intangible assets 39,292 25,128
Deferred implementation costs, less
current portion 1,580 1,015
Debt issuance cost, less current portion 1,006 3,116
Other assets 1,175 436
------------- -------------
Total assets $ 322,740 $ 286,591
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued expenses and
other current liabilities $ 21,260 $ 8,672
Deferred revenues 5,224 4,919
Deferred rent obligation 183 304
Notes payable, senior secured debt 6,375 -
Interest payable 57 2,688
------------- -------------
Total current liabilities 33,099 16,583
Notes payable, senior secured debt, less
current portion 78,625 85,000
Deferred revenues, less current portion 4,077 3,374
Deferred rent obligation, less current
portion 2,083 2,144
Other long-term liabilities 67 4,047
------------- -------------
Total liabilities 117,951 111,148
Redeemable convertible preferred stock 80,370 72,108
Stockholders' equity 124,419 103,335
------------- -------------
Total liabilities and stockholders'
equity $ 322,740 $ 286,591
============= =============
Note 1 - The financial statements presented here include preliminary valuations of intangible assets and a short-term liability for price protection related to the acquisition of Internet Transaction Solutions (ITS). These valuations will be finalized as a part of completing the purchase accounting for that transaction. If there are any material changes to these valuations finalized prior to the Company filing its Quarterly Report on Form 10-Q due November 9, 2007, balance sheet, statements of operations and statement of cash flows results may differ somewhat from the ones presented here.
Online Resources Corporation
Condensed Consolidated Statement of Cash Flows
(In thousands)
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
2007 2006
----------- -----------
(Unaudited) (Unaudited)
Operating activities:
Net (loss) income $ (3,359) $ 883
Adjustments to reconcile net (loss) income
to net cash provided by operating
activities:
Depreciation and amortization 14,345 8,116
Gain on preferred stock derivative
security (551) 103
Gain on put option derivative security (1,518) -
Loss on cash flow hedge derivative
security 211 -
Loss on disposal of assets 168 1
Provision for losses on accounts
receivable (64) 15
Write off and amortization of debt
issuance costs 4,184 222
Equity compensation expense 2,033 1,875
Deferred tax expense 1,550 -
Changes in operating assets and
liabilities, net of acquisitions (1,873) (1,124)
----------- -----------
Net cash provided by operating
activities 15,126 10,091
Investing activities:
Purchases of property and equipment (11,676) (8,062)
Acquisition of Princeton eCom Corporation,
net of cash acquired - (184,322)
Acquisition of Internet Transaction
Solutions, Inc., net of cash acquired (19,277) -
----------- -----------
Net cash used by investing activities (30,953) (192,384)
Financing activities:
Proceeds from the issuance of common stock 3,533 2,891
Purchase of derivative (121) (455)
Sale of derivative 23 -
Debt issuance costs on refinancing of long-
term debt (3,179) -
Borrowing under 2006 senior secured notes - 80,556
Net proceeds from issuance of preferred
stock - 69,954
Repayment of 2006 senior secured notes (85,000) -
Borrowing under 2007 senior secured notes 85,000 -
Repayment of capital lease obligations (28) (17)
----------- -----------
Net cash provided (used) by financing
activities 228 152,929
----------- -----------
Net (decrease) increase in cash and cash
equivalents (15,599) (29,364)
Cash and cash equivalents at beginning of
period 31,189 55,864
----------- -----------
Cash and cash equivalents at end of period $ 15,590 $ 26,500
=========== ===========
SOURCE: Online Resources Corporation Online Resources Corporation Media Contact: Beth Halloran Mng. Dir., Corporate Communications 703-653-2248 bhalloran@orcc.com or Investor Contact: Catherine Graham EVP & Chief Financial Officer 703-653-3155 cgraham@orcc.com Copyright Business Wire 2007 News Provided by COMTEX |