Catherine Graham EVP & Chief Financial Officer 703.653.3155 cgraham@orcc.com
ONLINE RESOURCES POSTS SECOND QUARTER 2005 RESULTS
Revenue and Earnings Advance on Continued Strong User Growth
CHANTILLY, Va., July 20, 2005– Online Resources Corporation (Nasdaq: ORCC), a leading outsourcer of Internet financial services, today reported financial and operating results for the three months ended June 30, 2005.
•
Revenue for the second quarter of 2005 was $14.3 million, a 42 percent increase over second quarter 2004 revenue of $10.1 million. The acquisition of Incurrent contributed approximately $1.9 million in revenue for the quarter.
•
Earnings before interest, taxes, depreciation and amortization (EBITDA) was $3.1 million, a 45 percent increase over $2.1 million in the prior year. EBITDA per share was $0.12 per share, a 9 percent increase compared to $0.11 in the prior year.
•
Net income was $1.8 million, a 48 percent increase over $1.2 million in 2004. Net income per share was $0.07, a 17 percent increase compared to $0.06 per share in 2004.
“We enjoyed strong user growth during the quarter and exceeded guidance due to some unexpected non-recurring revenue,” stated Matthew P. Lawlor, chairman and chief executive of the Company. “The quarter was further highlighted by ongoing success in sales with 32 client signings, as our unique combination of account presentment, payments and consumer marketing capabilities appears to be striking a chord.”
Lawlor continued, “Looking ahead, the Company is positioned to return to more typical sequential growth rates, with the recent large client acquisitions behind us and with a highly diversified client base. During the second half of the year, we will maintain focus on driving adoption and further integrating our recent acquisitions. At the same time, we remain confident that we are establishing a sound foundation for our strategic growth, including other potential acquisitions and leveraging our real-time payments infrastructure.”
The Company further noted that second quarter results do not recognize any revenue or expenses from the June 27, 2005 acquisition of Integrated Data Systems, as the results were deemed to be immaterial. The Company’s balance sheet, however, is presented on a consolidated basis.
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2005 Business Outlook The Company provided new guidance for the third quarter 2005. To reflect its year-to-date performance and the recent acquisition of Integrated Data Systems, the Company updated full year 2005 guidance by increasing revenue and EBITDA while maintaining its earnings per share guidance. This guidance reflects increased share count and, supplementally, a higher potential discretionary equity-based bonus compensation expense. It also assumes no release of the Company’s tax loss valuation allowance. The information below is in millions except for per share data. These statements are forward-looking, and actual results may differ materially.
Third Quarter
Full Year
2004 2005
%
2004
2005
%
Actual Guidance
Change
Actual
Guidance
Change
Revenue
$
11.0
$
15.0-15.5
39
%
$
42.3
$
60.0-61.0
43
%
Gross Profit Margin
63
%
60-61
%
-4
%
60
%
60-61
%
1
%
EBITDA (1)
$
3.0
$
3.6-4.1
28
%
$
8.6
$
14.4-15.3
73
%
Per share
$
0.15
$
0.13-0.15
-7
%
$
0.43
$
0.55-0.58
31
%
Net Income
$
2.1
$
2.4-2.8
24
%
$
5.0
$
9.4-10.3
97
%
Per share
$
0.11
$
0.08-0.10
-18
%
$
0.25
$
0.36-0.39
50
%
Fully Diluted Shares
20.0
27.8
39
%
20.1
26.4
31
%
Supplemental Information –For Disclosure Purposes Only
Pro Forma Equity Compensation Expense
N/A
$
0.4-0.5
N/A
N/A
$
2.2-2.5
N/A
Per share
N/A
$
0.01-0.02
N/A
N/A
$
0.08-0.09
N/A
Tax Equivalent Net Income (2)
$
1.3
$
1.5-1.7
23
%
$
3.1
$
5.8-6.4
97
%
Per share (2)
$
0.07
$
0.05-0.06
-21
%
$
0.15
$
0.22-0.24
53
%
(1)
EBITDA is defined as earnings before interest, taxes, depreciation and amortization.
(2)
Presents the Company’s net income and net income per share expectations as if they were to be reported on a fully taxed basis, at an estimated corporate tax rate of 38 percent. The Company has approximately $90 million in tax loss carry-forwards and does not expect to pay material cash taxes in the foreseeable future.
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 July 20 until midnight on Wednesday, July 27. For the conference call playback, dial (800) 642-1687 for domestic participants and (706) 645-9291 for international participants and enter code 6977645. For web cast replay, go to the “Investors” section of www.orcc.com.
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About Online Resources Online Resources powers Internet financial services for over 700 firms nationwide. The Company’s account presentation, payment, relationship management and professional services are branded to its client banks, credit unions, card issuers and payment acquirers. The Company serves over three million consumer and business end-users and processes over $12 billion in payments annually. Founded in 1989, Online Resources (Nasdaq: ORCC, Website: www.orcc.com) has been widely recognized as one of the nation’s fastest growing technology firms.
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;dependence on the marketing efforts of third parties; potential fluctuations in operating results; ability to make and successfully integrate acquisitions of new businesses; potential need for additional capital; potential inability to prevent systems failures and security breaches; potential inability to expand services and related products in the event of substantial increases in demand; competition; ability to attract and retain skilled personnel; reliance on patents and other intellectual property; exposure to the early stage of market adoption of the services it offers; exposure to the consolidation of the banking and financial services industry; and additional 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’sForm 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.
# # #
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Online Resources Corporation Quarterly Operating Data (Unaudited)
Total
% Change
2Q04
3Q04
4Q041
1Q051
2Q05
2Q05 vs. 1Q05
2Q05 vs. 2Q04
ACCOUNT PRESENTATION
Banking Services
Users (#K)
439
463
485
501
481
-4
%
10
%
Adoption Rate2
19.3
%
21.1
%
22.4
%
27.6
%
28.1
%
2
%
46
%
Clients
195
180
183
182
180
-1
%
-8
%
Card Services
Users (#K)
n/a
n/a
1,986
2,213
2,405
9
%
n/a
Adoption Rate3
n/a
n/a
14.9
%
15.7
%
16.0
%
2
%
n/a
Clients
n/a
n/a
6
6
6
0
%
n/a
PAYMENTS
Banking Services
Users (#K)
651
728
776
828
858
4
%
32
%
Adoption Rate4
6.2
%
6.8
%
8.2
%
9.0
%
9.5
%
6
%
53
%
Transactions (#M)
9.0
9.6
10.2
10.9
11.3
4
%
26
%
Clients
687
697
716
740
7405
0
%
8
%
RELATIONSHIP MANAGEMENT
Banking Services
Products/User
1.28
1.30
1.31
1.31
1.31
0
%
2
%
Upsells6
18,693
17,060
18,980
19,897
17,961
-10
%
-4
%
Clients
333
341
356
372
388
4
%
17
%
TOTAL ENTERPRISE
Unique Users7 (#K)
Banking Services
972
1,065
1,125
1,195
1,213
2
%
25
%
Card Services
n/a
n/a
1,986
2,213
2,405
9
%
n/a
Total
972
1,065
3,111
3,408
3,618
6
%
272
%
Adoption Rate (Total)8
9.2
%
10.0
%
13.6
%
14.6
%
15.1
%
3
%
64
%
Payment Transactions (#M)
9.0
9.6
10.2
10.9
11.3
4
%
26
%
Unique Clients
687
697
722
746
746
0
%
9
%
Notes:
1Does not include Sears, a Card & Credit Services division client that was acquired and left in 2Q05.
2The number of users divided by the 1.6 million total launched checking accounts held with our Banking Services clients. The numbers of checking accounts are as reported to us by our clients.
3The number of users divided by the 15.0 million active card accounts held with our Card Services clients. Based on industry averages, we have defined active card accounts to be 50% of total card accounts, and like the industry, are reporting adoption rates against the active card account base.
4The number of users divided by the 9.0 million total payments-eligible launched checking accounts held with our Banking Services clients. The numbers of checking accounts are as reported to us by our clients.
5This number is a result of 32 new client sales, net of 20 non-core (paper draft only) clients and 12 other clients (of which 4 were acquired).
6The number of additional services (e.g., bill payment, Money HQ, Quicken) that banking users enrolled in during the quarter.
7The number of unique users that use either account presentation services and/or payment services. Some may be counted in both account presentation and payments.
8The number of users divided by the sum of 15.0 million active card accounts held with our Card Services clients and the 9.0 million launched checking accounts held with our Banking Services clients.
4
Online Resources Corporation Consolidated Statement of Operations
(In thousands, except per share data)
(Unaudited)
THREE MONTHS ENDED JUNE 30,
SIX MONTHS ENDED JUNE 30,
2005
2004
2005
2004
Revenues:
Account presentation services
$
2,198
$
777
$
5,025
$
1,562
Payment services
8,695
6,791
17,138
13,127
Relationship management services
1,912
1,933
3,957
3,864
Professional services and other
1,524
568
3,321
1,283
Total revenues
14,329
10,069
29,441
19,836
Expenses:
Cost of revenues
5,870
4,135
11,553
8,584
Gross profit
8,459
5,934
17,888
11,252
General and administrative
3,353
2,086
6,548
4,198
Selling and marketing
2,491
1,784
4,966
3,651
Systems and development
1,024
879
2,299
1,814
Total expenses
6,868
4,749
13,813
9,663
Income from operations
1,591
1,185
4,075
1,589
Other income
Interest income
322
26
351
52
Interest expense
5
1
9
3
Total other income
317
25
342
49
Income before taxes
1,908
1,210
4,417
1,638
Income tax provision
135
9
195
18
Net income
$
1,773
$
1,201
$
4,222
$
1,620
Net income per share
Basic
$
0.07
$
0.07
$
0.19
$
0.09
Diluted
$
0.07
$
0.06
$
0.18
$
0.08
Shares used in calculation of net income per share:
Basic
24,155
18,004
21,770
17,944
Diluted
26,509
20,030
24,124
20,085
Reconciliation of net income to EBITDA (See Note 1):
Net income
$
1,773
$
1,201
$
4,222
$
1,620
Depreciation and amortization
1,513
961
2,796
1,930
Other income
(317
)
(25
)
(342
)
(49
)
Income tax provision
135
9
195
18
EBITDA (See Note 1)
$
3,104
$
2,146
$
6,871
$
3,519
Notes:
1.
EBITDA represents earnings before interest, taxes, depreciation and amortization.
Deferred implementation costs, less current portion
507
420
Other assets
526
351
Total assets
$
93,562
$
44,617
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable, accrued expenses and other current liabilities
$
4,321
$
4,972
Deferred revenues
1,723
973
Deferred rent obligation
158
158
Capital lease obligation
29
11
Total current liabilities
6,231
6,114
Deferred revenues, less current portion
678
379
Deferred rent obligation, less current portion
1,728
1,525
Other long-term liabilities
38
133
Total liabilities
8,675
8,151
Stockholders’ equity
84,887
36,466
Total liabilities and stockholders’ equity
$
93,562
$
44,617
6
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