Online Resources Posts Third Quarter 2012 Results
Online Resources Posts Third Quarter 2012 Results
- Better than expected results as growth investments accelerate -
Business Wire
CHANTILLY, Va. -- November 08, 2012
Online Resources Corporation (NASDAQ: ORCC), a leading provider of digital
financial services, today reported its financial and operating results for the
three months ended September 30, 2012.
* Revenue was $41.3 million, compared to $38.4 million in the third quarter
of 2011.
* Net loss available to common stockholders was $0.2 million, or $0.01 per
share, compared to a net loss of $1.7 million, or $0.05 per share, in the
third quarter of 2011.
* Ebitda, a non-GAAP measure, was $6.8 million, compared to $5.7 million in
the third quarter of 2011.
* Adjusted Ebitda, a non-GAAP measure that adjusts Ebitda for equity
compensation expense and other expenses, was $7.8 million, compared to
$7.1 million in the third quarter of 2011.
* Core net income, a non-GAAP measure, was $1.8 million, or $0.05 per
diluted share, compared to $0.7 million, or $0.02 per diluted share, in
the third quarter of 2011.
“Revenue and earnings were better than expected in the third quarter,” said
Joseph L. Cowan, president and chief executive officer of Online Resources.
“During the quarter we benefited from higher professional services revenue in
our banking business that is non-recurring in nature. Excluding the higher
professional services revenue, revenue and earnings would still have been at
the high end of guidance.”
“As can be seen from the sequential decline in earnings in the third quarter,
we have entered the major investment stage of our strategic growth plan,” he
added. “We anticipate that these investments will continue to grow in the
fourth quarter of 2012. These investments in product management, marketing,
sales and client services, operations and technology should allow us to drive
increased revenue and earnings growth in late 2013 and beyond.”
Outlook for Fourth Quarter 2012
Online Resources provided the following guidance for the fourth quarter of
2012. These statements are forward-looking, and actual results may differ
materially.
* Revenue for the quarter is expected to be between $39.1 and $41.1 million.
* Ebitda^1,2 for the quarter is expected to be between $3.5 and $5.0 million
* Adjusted Ebitda^1,2,5 for the quarter is expected to be between $4.9 and
$6.2 million.
* Core net income^1,3,4,5,6 is expected to be between $0.00 and $0.02 per
share.
The Company uses non-GAAP (Generally Accepted Accounting Principles)
financial measures, including Ebitda, adjusted Ebitda and core net
(1) 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.
Ebitda is defined as net income (loss) before interest, taxes,
depreciation and amortization expense. Adjusted Ebitda is defined as net
income (loss) before interest, taxes, depreciation and amortization,
(2) equity compensation expense, reserve for potential legal liability,
strategic alternatives process costs, transition costs (including
severance, retention, advisory and ORCC India start up costs) and other
income (expense). Some or all of these items may not be applicable in
any given reporting period.
Core net income is defined as net income (loss) available to common
stockholders before, on a pre-tax basis unless otherwise noted, the
amortization of acquisition-related intangible assets, equity
compensation expense, income tax benefit or expense from the change in
valuation allowance, income (costs) related to the fair market valuation
(3) of certain derivatives and mark-to-market investments, preferred stock
accretion related to the redemption premium, reserve for potential legal
liability, net of tax, strategic alternatives process costs, net of tax,
transition costs (including severance, retention, advisory and ORCC
India start up costs), net of tax, and all other non-recurring charges.
Some or all of these items may not be applicable in any given reporting
period.
Excludes estimates for amortization of acquisition-related intangible
(4) assets of $0.6 million, equity compensation expense of $0.9 million and
preferred stock accretion related to the redemption premium of $0.4
million.
Adjusted Ebitda and core net income exclude $0.3 million in transition
(5) costs. These costs are tax-effected in the calculation of core net
income.
(6) Core net income per share calculated using estimated shares outstanding
of 33.3 million.
Conference Call and Web Cast
The Company’s management will host a conference call to discuss the results at
5:00 p.m. EST today. The conference call dial-in number is (877) 303-6496 for
domestic participants and (707) 287-9318 for international participants.
Alternatively, a live web cast of the conference call will be available
through the "Investors" section of Online Resources' web site at www.orcc.com.
The conference call and web cast will be recorded and available for playback
from 8:00 p.m. EST on November 8^th until midnight on Thursday, November
15^th. For the conference call playback, dial (855) 859-2056 for domestic
participants and (404) 537-3406 for international participants and enter code
58810948. For web cast replay, go to the “Investors” section of www.orcc.com.
About Online Resources Corporation
Online Resources Corporation (NASDAQ: ORCC) powers financial interactions
between millions of consumers and the company’s financial institution and
biller clients. Backed by its proprietary payments gateway that links banks
directly with billers, the company provides web and phone-based financial
services, electronic payments and marketing services to drive consumer
adoption. Founded in 1989, Online Resources is the largest financial
technology provider dedicated to the online channel. For more information,
visit www.orcc.com.
This news release contains forward-looking statements based on Online
Resources Corporation management's current expectations and beliefs and a
number of assumptions concerning future events made with information that is
currently available. The words "will," "would," "may," "should," "estimate,"
"project," "forecast," "intend," "expect," "believe," "target," "designed,"
"plan," and similar expressions are intended to identify forward-looking
statements. Readers are cautioned not to place undue reliance on such
forward-looking statements, which are not a guarantee of any results or
performance and are subject to a number of known and unknown risks,
uncertainties and other factors which could cause actual performance or
results to differ materially and adversely from any results or performance
expressed or implied by such forward-looking statements. Certain factors that
might cause such a difference include, but are not limited to: a history of
losses and anticipation of future losses; potential fluctuations in operating
results; dependence on the marketing efforts of third parties; potential loss
of one or more material clients; potential need for additional capital;
potential inability to prevent systems failures and security breaches;
potential inability to expand certain services and products in the event of a
substantial increase in demand for such services and products; competitive
pressures; ability or inability to attract and retain skilled personnel;
reliance on patents and other intellectual property; potential change in the
rate of user adoption of certain products and services; exposure to
consolidation in the financial services industry; and government regulatory
developments. For a more detailed description of the factors that could cause
such differences, readers are advised to review Online Resources Corporation’s
latest filings with the Securities and Exchange Commission, including (but not
limited to) the information provided under the heading "Risk Factors" in our
latest Annual Report on Form 10-K (which filings are available, among other
places, from the SEC's EDGAR database at www.sec.gov and via the Company's
website at www.ORCC.com). Online Resources assumes no obligation to, and
expressly disclaims any obligation to, update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.
Online Resources Corporation
Quarterly Operating Data
(In millions, Unaudited)
4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12
BANKING
SERVICES
Payment
Services - Full
Service
Revenue $8.2 $8.4 $8.1 $7.8 $7.9 $7.8 $7.6 $7.5
Bill Payment 11.1 11.6 11.3 11.3 11.4 11.5 11.4 11.5
Transactions
Payment
Services -
Remittance
Revenue $6.5 $5.9 $5.6 $5.5 $5.1 $5.3 $4.8 $4.5
Bill Payment
Transactions - 6.3 6.6 6.7 6.0 6.0 6.1 6.0 5.8
LCR
Bill Payment
Transactions - 20.5 19.8 19.3 19.4 19.0 19.8 19.3 18.9
Non LCR
Other Revenue $7.7 $6.8 $7.2 $6.9 $7.2 $6.7 $6.3 $8.2
EBPP SERVICES
Payment
Services - User
Paid
Revenue $3.9 $4.7 $4.5 $4.7 $4.7 $5.8 $5.4 $5.5
Bill Payment 1.4 1.6 1.6 1.7 1.7 1.9 1.6 1.7
Transactions
Payment
Services -
Biller Paid
Revenue $8.8 $10.8 $10.0 $10.1 $10.1 $12.0 $11.6 $11.9
Bill Payment 17.9 20.5 19.6 20.5 21.0 22.8 23.2 23.9
Transactions
Other Revenue $2.6 $2.7 $3.1 $3.4 $3.7 $3.7 $4.7 $3.7
Online Resources Corporation
Consolidated Statements of Operations
(In thousands, except per share data)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2012 2011 2012 2011
(Unaudited) (Unaudited)
Revenues:
Account presentation $ 2,744 $ 2,918 $ 8,548 $ 8,378
services
Payment services 29,384 28,082 89,662 85,948
Relationship management 1,505 1,664 4,565 5,195
services
Professional services 7,661 5,747 20,234 16,497
and other
Total revenues 41,294 38,411 123,009 116,018
Expenses:
Cost of revenues 21,691 21,194 62,362 63,960
Gross profit 19,603 17,217 60,647 52,058
General and 8,743 7,966 26,556 27,127
administrative
Reserve for potential - - - 7,700
legal liability
Selling and marketing 5,001 4,760 14,674 15,165
Systems and development 2,470 2,605 7,849 7,951
Total expenses 16,214 15,331 49,079 57,943
Income (loss) from 3,389 1,886 11,568 (5,885 )
operations
Other income (expense)
Interest income 29 21 78 77
Interest expense (463 ) (308 ) (1,261 ) (376 )
Other income (expense) 11 (2 ) (16 ) (2 )
Total other income (423 ) (289 ) (1,199 ) (301 )
(expense)
Income (loss) before tax 2,966 1,597 10,369 (6,186 )
provision (benefit)
Income tax provision 602 771 3,671 (2,383 )
(benefit)
Net income (loss) 2,364 826 6,698 (3,803 )
Preferred stock 2,590 2,501 7,671 7,389
accretion
Net loss available to $ (226 ) $ (1,675 ) $ (973 ) $ (11,192 )
common stockholders
Net loss available to
common stockholders per
share:
Basic $ (0.01 ) $ (0.05 ) $ (0.03 ) $ (0.35 )
Diluted $ (0.01 ) $ (0.05 ) $ (0.03 ) $ (0.35 )
Shares used in
calculation of net loss
available to common
stockholders per share:
Basic 32,723 32,032 32,512 31,815
Diluted 32,723 32,032 32,512 31,815
Online Resources Corporation
Condensed Consolidated Balance Sheets
(In thousands)
SEPTEMBER 30, DECEMBER 31,
2012 2011
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 34,455 $ 31,290
Accounts receivable, net 19,900 17,596
Deferred tax asset, current portion 2,189 2,189
Prepaid expenses and other current assets 5,661 5,751
Total current assets 62,205 56,826
Property and equipment, net 18,351 20,987
Deferred tax asset, less current portion 23,590 26,713
Goodwill 181,516 181,516
Intangible assets 6,493 9,288
Deferred implementation costs, less current 9,193 9,042
portion, and other assets
Total assets $ 301,348 $ 304,372
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,417 $ 1,251
Accrued expenses 15,754 17,566
Notes payable, senior secured debt, current 11,250 12,750
portion
Deferred revenues, current portion, and other 8,053 8,412
current liabilities
Total current liabilities 36,474 39,979
Notes payable, senior secured debt, less - 7,500
current portion
Deferred revenues, less current portion, and 4,132 4,979
other long-term liabilities
Total liabilities 40,606 52,458
Redeemable convertible preferred stock 127,765 120,095
Stockholders' equity 132,977 131,819
Total liabilities and stockholders' equity $ 301,348 $ 304,372
Online Resources Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
NINE MONTHS ENDED
SEPTEMBER 30,
2012 2011
(Unaudited)
Operating activities
Net income (loss) $ 6,698 $ (3,803 )
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Deferred tax expense (benefit) 3,123 (2,579 )
Depreciation and amortization 9,795 12,274
Equity compensation expense 2,136 1,785
Write off and amortization of debt issuance costs 439 187
Loss on disposal of assets 828 5
Provision for losses on accounts receivable 304 73
Change in fair value of theoretical swap derivative (244 ) (555 )
Reserve for potential legal liability - 7,700
Changes in certain other assets and liabilities (5,706 ) 1,108
Net cash provided by operating activities 17,373 16,195
Investing activities
Purchases of property and equipment (5,168 ) (5,630 )
Net cash used in investing activities (5,168 ) (5,630 )
Financing activities
Net proceeds from issuance of common stock (72 ) 750
Repayment of 2007 notes (9,000 ) (14,500 )
Debt issuance costs - (815 )
Net cash used in financing activities (9,072 ) (14,565 )
Net increase (decrease) in cash and cash 3,133 (4,000 )
equivalents
Impact of foreign currency 32 (35 )
Cash and cash equivalents at beginning of year 31,290 29,127
Cash and cash equivalents at end of period $ 34,455 $ 25,092
Online Resources Corporation
Reconciliation of Non-GAAP Measures
(In thousands, except per share data)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2012 2011 2012 2011
(Unaudited) (Unaudited)
Reconciliation of ebitda
(See Note 1):
Net income (loss) $ 2,364 $ 826 $ 6,698 $ (3,803 )
Depreciation and
amortization (incl. loss 3,386 3,819 10,623 12,279
on disposal of assets)
Interest expense, net 434 287 1,183 299
Income tax provision 602 771 3,671 (2,383 )
(benefit)
Ebitda (See Note 1) $ 6,786 $ 5,703 $ 22,175 $ 6,392
Reconciliation of adjusted
ebitda (See Note 2):
Net income (loss) $ 2,364 $ 826 $ 6,698 $ (3,803 )
Depreciation and
amortization (incl. loss 3,386 3,819 10,623 12,279
on disposal of assets)
Equity compensation 712 585 2,136 1,785
expense
Reserve for potential - - - 7,700
legal liability
Strategic process costs - - - 874
Transition costs 332 844 2,782 3,396
Other (income) expense 423 289 1,199 301
Income tax provision 602 771 3,671 (2,383 )
(benefit)
Adjusted Ebitda (See Note $ 7,819 $ 7,134 $ 27,109 $ 20,149
2)
Reconciliation of core net
income (See Note 3):
Net loss available to $ (226 ) $ (1,675 ) $ (973 ) $ (11,192 )
common stockholders
Preferred stock accretion
related to redemption 423 415 1,263 1,238
premium
Change in fair value of
theoretical swap 35 (36 ) 244 (555 )
derivative
Reserve for potential
legal liability, net of - - - 4,736
tax
Strategic alternatives - - - 538
process costs, net of tax
Transition costs, net of 265 436 1,797 2,089
tax
Change in tax valuation - (192 ) - (192 )
allowance
Equity compensation 712 585 2,136 1,785
expense
Amortization of intangible 603 1,135 2,809 3,767
assets
Core net income (see Note $ 1,812 $ 668 $ 7,276 $ 2,214
3)
Reconciliation of core net
income per share:
Diluted net loss available $ (0.01 ) $ (0.05 ) $ (0.03 ) $ (0.35 )
to common stockholders
Preferred stock accretion
related to redemption 0.01 0.01 0.04 0.04
premium
Change in fair value of
theoretical swap - - 0.01 (0.02 )
derivative
Reserve for potential
legal liability, net of - - - 0.15
tax
Strategic alternatives - - - 0.02
process costs, net of tax
Transition costs, net of 0.01 0.01 0.05 0.07
tax
Change in tax valuation - (0.01 ) - (0.01 )
allowance
Equity compensation 0.02 0.02 0.06 0.06
expense
Amortization of intangible 0.02 0.04 0.08 0.12
assets
Other, including impact of
treasury method and - - (0.01 ) (0.01 )
rounding
Core net income per share $ 0.05 $ 0.02 $ 0.22 $ 0.07
Notes:
1. Ebitda is a non-GAAP measure we define as net income (loss) before
interest, taxes, depreciation and amortization expense.
Adjusted Ebitda is a non-GAAP measure we define as net income (loss)
before interest, taxes, depreciation and amortization, equity
compensation expense, reserve for potential legal liability, strategic
2. alternatives process costs, transition costs (including severance,
retention and ORCC India start up costs), restructuring costs and other
expense. Some or all of these items may not be applicable in any given
reporting period.
Core net income is a non-GAAP measure we define as net income (loss)
available to common stockholders before the amortization of
acquisition-related intangible assets, equity compensation expense,
income tax benefit or expense from the change in valuation allowance,
income (costs) related to the fair market valuation of certain
3. derivatives and mark to market investments, preferred stock accretion
related to the redemption premium, reserve for legal liability, net of
tax, strategic alternatives process costs (including severance, retention
and ORCC India start up costs), net of tax, transition costs, net of tax,
restructuring costs, net of tax, and all other non-recurring charges.
Some or all of these items may not be applicable in any given reporting
period.
Contact:
Online Resources Corporation
Investor Contact:
Billy Newman
VP, Finance
703-653-2223
wnewman@orcc.com
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