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