Official Payments Reports Results from Third Quarter of Fiscal Year 2013: Seventh Consecutive Quarter of Positive Adjusted EBITDA; Company reports earnings per share from continuing operations of $0.04 for the quarter PR Newswire NORCROSS, Ga., Aug. 6, 2013 NORCROSS, Ga., Aug. 6, 2013 /PRNewswire/ --Official Payments Holdings, Inc. (Nasdaq: OPAY), a leading provider of electronic payment solutions, reported results today for its fiscal year 2013 third quarter (Q3 fiscal 2013). The Company will host a call/webcast today at 5:00 p.m. EDT to review its results: Conference Call 800-857-9646 Participant code – "OPAY" Dial-In: Webcast/Replay: http://www.OPAY.officialpayments.com Replay Dial-In: 800-685-7910– 10:00 pm ET, Tuesday, August 6, 2013 to 11:59 pm ET, Monday, September 2, 2013 Q3 Fiscal 2013 Highlights: Official Payments Holdings, Inc. reported revenue from continuing operations of $45.8 million for Q3 fiscal 2013, an increase of $6.6 million compared to Q3 fiscal 2012. Q3 fiscal 2013 Payment Solutions net revenue, which reflects Payment Solutions revenues less related processing and interchange fees, was $13.2 million compared to $11.8 million in Q3 fiscal 2012. $3.2 billion of payment transactions were processed in Q3 fiscal 2013 compared to $2.7 billion of payment transactions in Q3 fiscal 2012 with the average size of transaction processed increasing 19.3% from Q3 fiscal 2012 to Q3 fiscal 2013. General and administrative increased 6.7%, or $0.4 million in Q3 fiscal 2013 compared to Q3 fiscal 2012, while selling and marketing expenses decreased 22%, or $0.6 million from Q3 fiscal 2012 to Q3 fiscal 2013. Official Payments reportednet income from continuing operations of $0.6 million, or $0.04 per share for Q3 fiscal 2013, compared to the prior year's net loss from continuing operations of $0.6 million, or negative $0.03 per share for Q3 fiscal 2012. Continuing operations consists of the Payment Solutions segment, which contributed more than 99% of the company's revenue from continuing operations in fiscal 2013, and the legacy voice and systems automation (VSA) operations that are in the process of being wound down. Adjusted EBITDA from continuing operations was $3.4 million in Q3 fiscal 2013 compared to $1.4 million in Q3 fiscal 2012. 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. Cash Position and Use of Cash Official Payments' cash and cash equivalents increased by approximately $1.2 million from $39.1 million at September 30, 2012 to $40.3 million at June 30, 2013. Official Payments cash position for the quarter includes $3.6million of net settlement funds outstanding and $6.7million of accrued discount fees, thus leaving cash available for company use of $30 million. Management Overview Alex P. Hart, President and CEO, stated, "We're pleased to report positive Adjusted EBITDA from continuing operations for our seventh consecutive quarter and positive earnings per share for the first time in several years. Our platform consolidation project remains on target to be substantially complete by the end of the calendar year. We expect significant savings from this project in terms of both improved operational efficiency and reduced capital expenditures for the next fiscal year. We're confident that we've positioned ourselves for even better financial results in fiscal year 2014." 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 income (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: Adjusted EBITDA from continuing operations Three months ended June 30, (in thousands, except percentages) 2013 2012 Change ($) Change (%) Net income (loss) from continuing $ $ $ 174.5% operations 635 (852) 1,487 Adjustments: Depreciation/amortization 2,106 1,851 255 13.8% Stock-based compensation 367 371 (4) (1.1)% Restructuring charge 292 2 290 14,500.0% Tax provision 5 5 — 0.0% Interest expense, net 1 1 — 0.0% Adjusted EBITDA from continuing $ $ $ 147.2% operations 3,406 1,378 2,028 Adjusted EBITDA from continuing operations Nine months ended June 30, (in thousands, except percentages) 2013 2012 Change ($) Change (%) Net loss from continuing operations $ $ $ 85.8% (554) (3,894) 3,340 Adjustments: Depreciation/amortization 5,829 5,620 209 3.7% Stock-based compensation 1,412 1,352 60 4.4% Restructuring charge 292 1,493 (1,201) (80.4)% Tax provision 7 5 2 40.0% Interest expense, net 3 — 3 NM Adjusted EBITDA from continuing $ $ $ 52.7% operations 6,989 4,576 2,413 ^1NM = not meaningful Reconciliation of Payment Solutions net revenue to revenue from continuing operations: Three months ended June 30, (in thousands, except 2013 2012 Change ($) Change (%) percentages) Revenue from continuing $ 45,792 $ 39,163 $ 6,629 16.9% operations Less: Non-Payment Solutions revenue 174 257 (83) (32.3)% Payment Solutions gross 45,618 38,906 6,712 17.3% revenue Less: Payment Solutions Discount 32,376 27,134 5,242 19.3% fees Payment Solutions net revenue $ 13,242 $ 11,772 $ 1,470 12.5% Nine months ended June 30, (in thousands, except 2013 2012 Change ($) Change (%) percentages) Revenue from continuing $ 111,922 $ 106,820 $ 5,102 4.8% operations Less: Non-Payment Solutions revenue 487 1,142 (655) (57.4)% Payment Solutions gross 111,435 105,678 5,757 5.4% revenue Less: Payment Solutions Discount 74,802 70,415 4,387 6.2% fees Payment Solutions net revenue $ 36,633 $ 35,263 $ 1,370 3.9% 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; timely consolidation of our payment platforms; maintaining secure systems and protecting against security breaches, loss of privacy/data, and fraud; litigation; 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. Consolidated Balance Sheets September 30, June 30, 2013 (in thousands) 2012 (unaudited) ASSETS: Current assets: Cash and cash equivalents $ 40,298 $ 39,071 Accounts receivable, net 3,353 5,304 Settlements receivable 20,337 15,291 Prepaid expenses and other current assets 1,608 1,692 Total current assets 65,596 61,358 Property, equipment and software, net 19,456 17,368 Goodwill 17,673 17,582 Other intangible assets, net 631 1,107 Other assets 706 509 Total assets $ 104,062 $ 97,924 LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Accounts payable $ 114 $ 74 Settlements payable 23,911 17,019 Accrued compensation liabilities 3,070 6,373 Accrued discount fees 6,671 5,616 Other accrued liabilities 3,084 2,201 Deferred income 263 284 Total current liabilities 37,113 31,567 Other liabilities: Deferred rent 3 67 Other liabilities 884 1,103 Total other liabilities 887 1,170 Total liabilities 38,000 32,737 Contingencies and commitments 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: 20,905 196,689 195,126 and 20,817; shares outstanding: 16,730 and 16,642 Treasury stock—at cost, 4,175 shares (31,383) (31,383) Accumulated deficit (99,244) (98,556) Total shareholders' equity 66,062 65,187 Total liabilities and shareholders' $ 104,062 $ 97,924 equity OFFICIAL PAYMENTS HOLDINGS, INC. Consolidated Statements of Operations (unaudited) Three months ended Nine months ended June 30, June 30, (in thousands, except per share 2013 2012 2013 2012 data) Revenues $ 45,792 $ 39,163 $ 111,922 $ 106,820 Costs and expenses: Direct costs 33,946 28,922 79,477 75,697 General and administrative 7,044 6,601 20,851 23,096 Selling and marketing 2,055 2,635 6,309 6,296 Depreciation and 2,106 1,851 5,829 5,620 amortization Total costs and expenses 45,151 40,009 112,466 110,709 Income (loss) from continuing operations before 641 (846) (544) (3,889) other expense and income taxes Other expense : Interest expense, net 1 1 3 — Total other expense 1 1 3 — Income (loss) from continuing operations before 640 (847) (547) (3,889) income taxes Income tax provision 5 5 7 5 Income (loss) from continuing 635 (852) (554) (3,894) operations Loss from discontinued (88) (1) (134) (13) operations, net Net income (loss) $ 547 $ (853) $ (688) $ (3,907) Earnings (loss) per share—Basic: From continuing operations $ $ $ $ 0.04 (0.05) (0.03) (0.23) From discontinued (0.01) — (0.01) — operations Earnings (loss) per $ $ $ $ share—Basic 0.03 (0.05) (0.04) (0.23) Earnings (loss) per share—Diluted: From continuing operations $ $ $ $ 0.04 (0.05) (0.03) (0.23) From discontinued (0.01) — (0.01) — operations Earnings (loss) per $ $ $ $ share—Diluted 0.03 (0.05) (0.04) (0.23) Weighted average common shares used in computing per share amounts: Basic 16,727 16,642 16,697 16,642 Diluted 16,912 16,642 16,697 16,642 OFFICIAL PAYMENTS HOLDINGS, INC. Consolidated Statements of Cash Flows (unaudited) Nine months ended June 30, (in thousands) 2013 2012 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (688) $ (3,907) Less: Loss from discontinued operations, net (134) (13) Loss from continuing operations, (554) (3,894) net Non-cash items included in net loss: Restructuring costs 256 803 Depreciation and amortization 5,829 5,620 Provision for doubtful accounts — 26 Deferred rent (34) (3) Share-based compensation 1,121 1,008 Net effect of changes in assets and liabilities: Accounts receivable, net 1,951 91 Settlement processing assets and 1,846 (1,023) obligations, net Prepaid expenses and other assets 294 524 Accounts payable and accrued liabilities (1,932) 1,526 Other long term liabilities (283) 161 Deferred income (21) (195) Cash provided by operating 8,473 4,644 activities from continuing operations Cash used in operating activities (134) (13) from discontinued operations Cash provided by operating 8,339 4,631 activities CASH FLOWS FROM INVESTING ACTIVITIES: Capitalized internally developed (6,236) (1,911) software Purchase of equipment and software (1,213) (1,610) ChoicePay acquisition (91) (91) Cash used in investing activities (7,540) (3,612) CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of common 442 — stock Capital lease obligations and other (14) (26) financing arrangements Cash provided by (used in) 428 (26) financing activities Net increase in cash and cash equivalents 1,227 993 Cash and cash equivalents at beginning of 39,071 39,760 period Cash and cash equivalents at end of period $ 40,298 $ 40,753 SOURCE Official Payments Holdings, Inc. Website: http://www.opay.officialpayments.com Contact: Jeff Hodges, CFO, 770-325-3102, Investorrelations@officialpayments.com
Official Payments Reports Results from Third Quarter of Fiscal Year 2013: Seventh Consecutive Quarter of Positive Adjusted
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