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Online Resources Posts Second Quarter 2008 Results
Core Earnings on Track on Moderated Revenue Growth
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CHANTILLY, Va., Jul 29, 2008 (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 June 30, 2008. -- Revenue was $37.2 million, up 16 percent from $31.9 million in second quarter 2007. -- Ebitda, a non-GAAP measure adjusted for stock compensation expense and preferred stock accretion, was $7.4 million compared to $7.8 million in the prior year. -- Net loss available to common stockholders was $3.2 million, or $0.11 loss per diluted share. This result compares to a net loss of $1.2 million, or $0.04 per diluted share, in 2007. -- Core net income, a non-GAAP measure, was $1.7 million versus $1.9 million in 2007. Core net income per share was $0.06 per share, down from $0.07 per share in the prior year. The impact of previously announced departed clients on second quarter year-over-year revenue was $3.0 million. Assuming typical margins, the impact on second quarter year-over-year Ebitda and core earnings per share was $1.9 million and $0.04 per share, respectively. "Core earnings per share was on track and key underlying drivers of our business continue to progress well," said Matthew P. Lawlor, chairman and chief executive officer of the Company. "We did a good job of managing our business to the bottom line, but fell short of our revenue growth goal." Lawlor added, "Billpay transactions and usage were seasonally strong. We also see leverage in our model with a sequential expansion in Ebitda margin. The quarter was marked by key signings, including several household names, and we made good headway with our new Internet banking and collections products." "But while we did well on most fundamentals, revenue growth was less than planned. This was due primarily to low interest revenue on payment float, and a higher than expected degree of volatility in consumer-paid payments, primarily from ITS clients acquired last August." In looking forward, Lawlor added, "We are still seeing healthy growth, but we are not completely immune to struggles in the banking sector and the broader economy. Our challenges are straightforward: continue to expand distribution by taking advantage of our strong competitive position, accelerate revenue growth by implementing new clients faster, and leverage our clients' increased focus on the web channel as an important tool to deal with a soft economy." 2008 Business Outlook The Company provided guidance for third quarter and updated its guidance for full year 2008 by lowering and narrowing its revenue and earnings expectations. These statements are forward-looking, and actual results may differ materially. Guidance is stated in millions, except for per share data.
Third Quarter Full Year
----------------------------------------------------------
2007 2008 % 2007 2008 %
Actual Guidance Change Actual Guidance Change
----------------------------------------------------------
Revenue ($
millions) $34.2 $37.0-39.0 11% $135.1 $152.0-$157.0 14%
----------------------------------------------------------------------
Ebitda
(a)(b) $8.2 $8.2-9.6 9% $32.7 $33.0-$36.0 6%
----------------------------------------------------------------------
Earnings ($ per share)
----------------------------------------------------------------------
Net Income
(Loss) to
Common
(c)(d) $0.04 $(0.07)-(0.04) n/a $0.09 $(0.32)-$(0.28) n/a
----------------------------------------------------------------------
Core Net
Income
(a)(e)(f) $0.08 $0.06-0.09 -6% $0.25 $0.27-$0.33 20%
----------------------------------------------------------------------
Share Count (millions)
----------------------------------------------------------------------
Basic 27.7 29.3 6% 27.2 29.2 7%
----------------------------------------------------------------------
Fully
Diluted
Shares (g) 29.7 30.7 3% 29.2 30.6 5%
----------------------------------------------------------------------
(a) The Company uses non-GAAP (Generally Accepted Accounting
Principles) financial measures, including Ebitda and core net
income, 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) Third quarter and full year 2008 net loss available to common
stockholders per share is calculated using the number of
weighted-average shares outstanding (basic), not fully diluted
shares.
(d) Guidance does not assume the release of any additional tax
valuation allowance in 2008, though the Company may do so. Also
does not include the impact of any mark-to-market adjustments for
derivatives the Company holds or other fair value accounting
impacts.
(e) Core net income is defined as net income available to common
stockholders before the amortization of acquisition-related
intangible assets, equity compensation expense, income tax
benefit from the release of valuation allowance, income (costs)
related to the fair market valuation of certain derivatives,
preferred stock accretion related to the redemption premium and
all other non-recurring charges. Some or all of these items may
not be applicable in any given reporting period.
(f) Excludes amortization of acquisition-related intangible assets of
approximately $2.1 and $2.2 million for third quarters 2008 and
2007, respectively, and $9.4 million for full years 2008 and
2007. Excludes equity compensation expense of approximately $1.4
and $0.8 million for third quarters 2008 and 2007, respectively,
and $5.8 and $3.2 million for full years 2008 and 2007,
respectively. Excludes write-off of fees and other expenses
related to senior debt refinancing of approximately $5.6 million
for full year 2007. Excludes preferred stock accretion related to
the redemption premium of $0.4 million for third quarters 2008
and 2007, and $1.6 and $1.5 million for full years 2008 and 2007,
respectively. Excludes income (costs) related to the fair market
valuation of certain derivatives of $2.2 million for third
quarter 2007, and $(1.1) and $1.5 million for full years 2008 and
2007, respectively. Excludes a $13.7 million tax benefit from the
release of tax valuation allowance for full year 2007. Includes
preferred stock accretion of approximately $1.8 million for third
quarters 2008 and 2007, and $7.3 and $6.8 million for full years
2008 and 2007, respectively.
(g) Only used for the purposes of calculating third quarter and full
year 2007 net income available to common stockholders per share
and third quarters and full years 2008 and 2007 core net income
per share.
Today's Conference Call and Web Cast Management will host a conference call to discuss the results today at 4:15 pm 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 pm ET on July 29th until midnight on Tuesday, August 5th. For the conference call playback, dial (800) 642-1687 for domestic participants and (706) 645-9291 for international participants and enter code 53565192. 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
---------------------------------- -----------
2Q08 2Q08
vs. vs.
2Q07 3Q07 4Q07 1Q08 2Q08 1Q08 2Q07
BANKING SERVICES
Users (#K) 4,317 4,404 4,367 4,709 4,629 -2% 7%
Account
Presentation (#K) 989 1,013 1,101 1,180 1,287 9% 30%
Payments (#K)(1) 3,522 3,564 3,459 3,731 3,574 -4% 1%
From Continuing
Clients (#K)(2) 2,882 3,069 3,224 3,487 3,574 2% 24%
Adoption Rate (%)(3)
Account
Presentation(4) 27.7% 30.7% 32.8% 34.3% 39.8% 16% 44%
Payments(5) 6.7% 6.8% 8.7% 9.0% 9.4% 4% 40%
Full Service(5) 10.7% 11.3% 11.5% 11.7% 12.3% 5% 15%
Same Store(6) 12.0% 12.7% 13.1% 13.1% 13.9% 6% 16%
From Continuing
Clients(2) 7.6% 7.9% 8.5% 8.9% 9.4% 6% 24%
Bill Payment
Transactions (#M) 42.1 42.1 41.8 41.8 39.0 -7% -7%
Full Service (#M) 8.7 8.8 9.4 9.8 10.0 2% 15%
Remittance Only
(#M) 33.4 33.3 32.4 32.0 29.0 -9% -13%
From Continuing
Clients (#M)(2) 31.3 33.1 35.1 37.6 38.4 2% 23%
eCOMMERCE SERVICES
Users (#K)(1) 6,143 7,154 7,956 8,805 7,986 -9% 30%
Account
Presentation (#K) 2,709 2,925 3,066 3,201 2,299 -28% -15%
From Continuing
Clients (#K)(2) 1,918 2,095 2,217 2,333 2,299 -1% 20%
Payments (#K) 3,434 4,229 4,890 5,604 5,687 1% 66%
Bill Payment
Transactions (#M) 7.7 9.2 10.5 12.0 12.2 1% 58%
TOTAL COMPANY
Users (#K)(1) 10,460 11,558 12,323 13,514 12,615 -7% 21%
Bill Payment
Transactions (#M) 49.8 51.3 52.3 53.8 51.2 -5% 3%
Notes:
1. Only includes users that have been active over the past 90 days or
were otherwise billable.
2. Excludes the following clients that departed in the last twelve
months: Branch Banking and Trust Company, Jack Henry, Corporate
Network eCom and Certegy.
3. Checking accounts are reported by clients and reviewed annually by
the Company.
4. The number of account presentation end-users with checking accounts
divided by the 1.9 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 (21.5 million) and our banking services full
service payments clients (6.9 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 6.4 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.
Online Resources Corporation
Consolidated Statements of Operations
(In thousands, except per share data)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- ------------------
2008 2007 2008 2007
--------- --------- -------- ---------
(Unaudited) (Unaudited)
Revenues:
Account presentation services $ 1,889 $ 2,203 $ 4,261 $ 4,465
Payment services 30,084 23,880 61,962 47,260
Relationship management
services 2,047 2,061 4,017 4,224
Professional services and
other 3,133 3,797 6,109 6,841
--------- --------- -------- ---------
Total revenues 37,153 31,941 76,349 62,790
Expenses:
Cost of revenues 19,454 14,677 39,229 29,762
--------- --------- -------- ---------
Gross profit 17,699 17,264 37,120 33,028
General and administrative 8,601 6,440 18,544 13,526
Selling and marketing 6,427 6,090 12,660 11,822
Systems and development 2,229 2,123 5,042 4,451
--------- --------- -------- ---------
Total expenses 17,257 14,653 36,246 29,799
--------- --------- -------- ---------
Income from operations 442 2,611 874 3,229
Other (expense) income
Interest income 110 400 322 737
Interest expense, debt
issuance costs and other
expense (1,707) (1,960) (4,137) (4,499)
Loss on extinguishment of
debt - - - (5,625)
--------- --------- -------- ---------
Total other (expense)
income (1,597) (1,560) (3,815) (9,387)
--------- --------- -------- ---------
(Loss) income before tax
(benefit) provision (1,155) 1,051 (2,941) (6,158)
Income tax (benefit) provision (181) 81 (562) 291
--------- --------- -------- ---------
Net (loss) income (974) 970 (2,379) (6,449)
Preferred stock accretion 2,199 2,128 4,376 4,163
--------- --------- -------- ---------
Net loss available to common
stockholders $ (3,173) $ (1,158) $(6,755) $(10,612)
========= ========= ======== =========
Net loss available to common
stockholders per share:
Basic $ (0.11) $ (0.04) $ (0.23) $ (0.41)
Diluted $ (0.11) $ (0.04) $ (0.23) $ (0.41)
Shares used in calculation of
net loss available to common
stockholders per share:
Basic 28,998 26,184 28,913 26,056
Diluted 28,998 26,184 28,913 26,056
Online Resources Corporation
Condensed Consolidated Balance Sheets
(In thousands)
JUNE 30, DECEMBER 31,
2008 2007
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 15,440 $ 13,227
Consumer deposits receivable - 8,279
Short-term investments 3,193 9,135
Accounts receivable, net 14,645 16,546
Deferred tax asset, current portion 819 902
Prepaid expenses and other current assets 5,173 7,595
------------ ------------
Total current assets 39,270 55,684
Property and equipment, net 29,638 26,852
Deferred tax asset, less current portion 33,632 32,914
Goodwill 184,410 184,300
Intangible assets 31,701 36,924
Deferred implementation costs, less current
portion, and other assets 5,761 4,043
------------ ------------
Total assets $ 324,412 $ 340,717
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,311 $ 2,001
Consumer deposits payable - 10,555
Accrued expenses 4,601 7,513
Notes payable, senior secured debt,
current portion 13,813 9,562
Interest payable 12 72
Deferred revenues, current portion, and
other current liabilities 5,963 8,356
------------ ------------
Total current liabilities 25,700 38,059
Notes payable, senior secured debt, less
current portion 68,000 75,438
Deferred revenues, less current portion, and
other long-term liabilities 6,734 6,508
------------ ------------
Total liabilities 100,434 120,005
Redeemable convertible preferred stock 86,917 82,542
Stockholders' equity 137,061 138,170
------------ ------------
Total liabilities and stockholders'
equity $ 324,412 $ 340,717
============ ============
Online Resources Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
SIX MONTHS ENDED
JUNE 30,
---------------------
2008 2007
----------- ---------
(Unaudited)
Operating activities
Net loss $ (2,379) $ (6,449)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Deferred tax benefit (633) -
Depreciation and amortization 10,955 9,583
Equity compensation expense 2,950 1,199
Write off and amortization of debt issuance
costs 190 4,111
Loss on disposal of assets 33 166
Provision (benefit) for losses on accounts
receivable 68 (64)
Loss on investments 108 -
Change in fair value of stock price protection 1,565 -
Change in fair value of theoretical swap
derivative (500) 134
Loss on cash flow hedge derivative security 184 142
Changes in operating assets and liabilities,
net of acquisitions:
Consumer deposit receivable 8,279 -
Consumer deposit payable (10,555) -
Changes in certain other assets and
liabilities 648 (1,834)
----------- ---------
Net cash provided by operating activities 10,913 6,988
Investing activities
Purchases of property and equipment (8,291) (6,816)
Sale of short-term investments 4,334 -
----------- ---------
Net cash used in investing activities (3,957) (6,816)
Financing activities
Net proceeds from issuance of common stock 693 2,731
Repurchase of shares issued related to ITS
acquisition (2,117) -
Payments for ITS stock protection (112) -
Purchase of cash flow derivative - (121)
Sale of cash flow derivative - 23
Debt issuance costs and prepayment penalty on
refinancing of senior notes - (3,178)
Repayment of 2006 notes - (85,000)
Proceeds from issuance of 2007 notes - 85,000
Repayment of 2007 notes (3,188) -
Repayment of capital lease obligations (19) (20)
----------- ---------
Net cash used in financing activities (4,743) (565)
----------- ---------
Net increase (decrease) in cash and cash
equivalents 2,213 (393)
Cash and cash equivalents at beginning of year 13,227 31,189
----------- ---------
Cash and cash equivalents at end of period $ 15,440 $ 30,796
=========== =========
Online Resources Corporation
Reconciliation of Non-GAAP Measures
(In thousands, except per share data)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
2008 2007 2008 2007
--------- -------- -------- ---------
(Unaudited) (Unaudited)
Reconciliation of net (loss)
income to Ebitda (See Note 1):
Net (loss) income $ (974) $ 970 $(2,379) $ (6,449)
Depreciation and amortization
(incl. loss on disposal of
assets) 5,454 4,927 10,988 9,749
Equity compensation expense 1,534 219 2,950 1,199
Other expense 1,597 1,560 3,815 9,387
Income tax (benefit) provision (181) 81 (562) 291
--------- -------- -------- ---------
Ebitda (See Note 1) $ 7,430 $ 7,757 $14,812 $ 14,177
========= ======== ======== =========
Reconciliation of net loss
available to common
stockholders to core net income
(See Note 2):
Net loss available to common
stockholders $(3,173) $(1,158) $(6,755) $(10,612)
Loss on extinguishment of debt - - - 5,625
Preferred stock accretion
related to redemption premium 389 381 775 700
Change in fair value of stock
price guarantee 177 - 1,565 -
Change in fair value of
theoretical swap derivative 181 61 (500) 134
Equity compensation expense 1,534 219 2,950 1,199
Amortization of intangible
assets 2,598 2,347 5,216 4,693
--------- -------- -------- ---------
Core net income (see Note 2) $ 1,706 $ 1,850 $ 3,251 $ 1,739
========= ======== ======== =========
Reconciliation of diluted net
loss available to common
stockholders per share to core
net income per share:
Diluted net loss available to
common stockholders $ (0.11) $ (0.04) $ (0.23) $ (0.41)
Loss on extinguishment of debt - - - 0.22
Preferred stock accretion
related to redemption premium 0.01 0.01 0.03 0.03
Change in fair value of stock
price guarantee 0.01 - 0.05 -
Change in fair value of
theoretical swap derivative 0.01 - (0.02) 0.01
Equity compensation expense 0.05 0.01 0.10 0.05
Amortization of intangible
assets 0.09 0.09 0.18 0.18
Other, including impact of
treasury method (0.00) (0.00) (0.00) (0.02)
--------- -------- -------- ---------
Core net income per share 0.06 0.07 0.11 0.06
========= ======== ======== =========
Notes:
1. Ebitda is a non-GAAP measure defined as earnings before
interest, taxes, depreciation and amortization, preferred
stock accretion and equity compensation expense.
2. Core net income is a non-GAAP measure defined as net income
available to common stockholders before the amortization of
acquisition-related intangible assets, equity compensation
expense, income tax benefit from the release of valuation
allowance, income (costs) related to the fair market
valuation of certain derivatives, preferred stock accretion
related to the redemption premium and all other non-
recurring charges. Some or all of these items may not be
applicable in any given reporting period.
SOURCE: Online Resources Corporation Online Resources Corporation Media Contact: Beth Halloran Sr. 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 2008 News Provided by COMTEX |