Catherine Graham EVP & Chief Financial Officer 703.653.3155 cgraham@orcc.com
ONLINE RESOURCES POSTS FIRST QUARTER 2006 RESULTS
Core Earnings at High End of Guidance
CHANTILLY, Va., April 24, 2006– Online Resources Corporation (Nasdaq: ORCC), a leading provider of Internet financial services, today reported financial and operating results for the three months ended March 31, 2006.
The following results reflect the introduction in 2006 of equity compensation and tax expensing, which were not included in first quarter 2005 results. First quarter 2005 also benefited from three large clients who were acquired and departed from the Company’s platform.
•
Revenue for the first quarter of 2006 was $16.7 million, up 11 percent from $15.1 million in first quarter 2005. After adjusting the 2005 period for the acquired clients, revenue would have increased 23 percent.
•
Earnings before interest, taxes, depreciation and amortization (Ebitda), a non-GAAP measure, was $3.1 million, an 11 percent decline from $3.5 million in the prior year. After adjusting the 2005 period for the acquired clients, Ebitda would have increased an estimated 30 percent.
•
Net income was $0.8 million, down 66 percent versus $2.2 million in the prior year. Net income per share was $0.03, down 70 percent versus $0.10 per share in 2005. After adjusting the 2005 period for the acquired clients and accounting changes, net income per share was up $0.02 per share over an estimated $0.01 per share in the prior year.
•
Core net income, a non-GAAP measure, was $1.5 million, a 34 percent decrease versus $2.3 million in 2005. Core net income per share was $0.06 versus $0.11 in the prior year. After adjusting the 2005 period for the acquired clients and accounting changes, core net income per share was up $0.02 per share over an estimated $0.04 per share in 2005.
“Operating results were strong in the quarter, as we achieved the high end of our guidance for core earnings and exceeded First Call consensus,” stated Matthew P. Lawlor, chairman and chief executive officer of the Company. “The Company got out of the blocks quickly this year with a record sequential increase in users of our banking and payment services. We took a big stride toward meeting our 2005 goal of doubling consumer billpay adoption by year-end 2007.”
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Lawlor continued, “We also proceeded with a planned expansion in development spending. These initiatives are beginning to pay-off, as reflected in the signing of a number of major clients. For the remainder of 2006, we look forward to a return to healthy sequential growth in revenue and earnings.”
2006 Business Outlook The Company provided guidance for the second quarter and reiterated guidance for full year 2006. Guidance includes equity compensation and tax expensing in 2006, but not in 2005. Guidance also does not anticipate the release of any additional valuation allowance in 2006, though the Company may do so. This guidance is in millions, except for per share data. These statements are forward-looking, and actual results may differ materially.
Second Quarter
Full Year
2005 2006
% 2005 2006
%
Actual Guidance Change Actual Guidance Change
Revenue
$
14.3
$
17.4-17.9
23
%
$
60.5
$
72.0-75.0
21
%
Ebitda(a)(b)
$
2.9
$
3.7-4.1
34
%
$
13.9
$
17.9-18.9
32
%
Per share
$
0.11
$
0.13-0.15
27
%
$
0.54
$
0.64-0.68
22
%
Net Income (e)(f)
$
1.6
$
1.0-1.3
nc
$
22.7
$
6.1-6.7
nc
Per share
$
0.06
$
0.04-0.05
nc
$
0.88
$
0.22-0.24
nc
Core Net Income(a)(c)(d)(f)
$
1.6
$
1.7-2.0
nc
$
9.4
$
8.7-9.1
nc
Per share
$
0.06
$
0.06-0.07
nc
$
0.36
$
0.31-0.33
nc
Fully Diluted Shares
26.5
27.6
4
%
25.9
27.7
7
%
nc = not comparable
(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 a pro forma measure defined as earnings before interest, taxes, depreciation, amortization and equity compensation expense.
(c)
Core net income is a pro forma measure defined as net income before the amortization of acquisition-related intangible assets, equity compensation expense, merger-related charges, restructuring-related charges, impairment charges, cumulative effect of change in accounting methods, income tax benefit from the release of valuation allowance and non-recurring tax charges. Some or all of these items may not be applicable in any given reporting period. Core net income for the 2005 periods does not reflect a full tax rate.
(d)
Excludes amortization of acquisition-related intangible assets of approximately $0.1 million for the first quarters of 2006 and 2005, and $0.5 and $0.4 million for the years 2006 and 2005, respectively. Excludes equity compensation expense of approximately $0.6 million for the first quarter 2006 and $2.4 million for the year 2006.
(e)
Net income and net income per share for full year 2005 include a $13.7 million benefit from the release of valuation allowance against the Company’s deferred tax asset.
(f)
Year over year comparisons for net income, core net income and their associated per share amounts are not comparable because of one or more of the following: 1) differences in tax rates, 2) tax benefit from the release of valuation allowance in full year 2005, or 3) equity compensation expense in the 2006 periods.
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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 pm ET on April 24th until midnight on Monday, May 1st. For the conference call playback, dial (800) 642-1687 for domestic participants and (706) 645-9291 for international participants and enter code 6411565. For web cast replay, go to the “Investors” section of www.orcc.com.
About Online Resources Online Resources powers web-based financial services for over 800 firms nationwide. The Company provides a suite of proprietary banking and payment services that are branded to its client banks, credit unions, card issuers and billers. The Company serves over 4 million consumer end-users and processes $15 billion in payments annually. Founded in 1989, Online Resources (Nasdaq: ORCC, Website:www.orcc.com) is a recognized leader in financial technology services.
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’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
1Q051
2Q05
3Q05
4Q05
1Q06
1Q06 vs.
1Q06 vs. 1Q05
4Q05
BANKING SERVICES
Revenue (#M)
$ 12.5
$ 12.4
$ 13.5
$ 13.9
$ 14.7
6%
18%
Users (#K)
1,195
1,243
1,346
1,475
1,631
11%
36%
Account Presentation (#K)
501
511
577
638
716
12%
43%
Bill Payment (#K)
828
858
907
984
1,072
9%
29%
Adoption Rate (%)
Account Presentation2
27.6
%
28.1
%
26.9
%
29.0
%
31.9
%
10
%
16
%
Bill Payment3
9.0
%
9.5
%
9.1
%
9.6
%
10.3
%
7
%
14
%
Other Metrics
Bill Payment Transactions (#M)
10.9
11.3
11.6
12.4
13.9
12
%
28
%
Clients
740
740
799
820
840
2
%
14
%
CARD & CREDIT SERVICES
Revenue (#M)
$
2.6
$
1.9
$
1.8
$
1.8
$
2.0
11
%
-23
%
Users (#K)
2,213
2,405
2,587
2,811
2,946
5
%
33
%
Adoption Rate (%)4
15.7
%
16.0
%
16.4
%
17.3
%
17.9
%
3
%
14
%
Clients
6
6
7
8
9
13
%
50
%
TOTAL COMPANY
Users
3,408
3,648
3,933
4,286
4,577
7
%
34
%
Clients
746
746
806
828
849
3
%
14
%
Notes:
1Client and user counts do not include Sears, a Card Services client whose portfolio had been acquired prior to our acquisition of Incurrent and came off our platform in 2Q05.
2The number of end-users divided by the 2.2 million total launched checking and other eligible accounts held with our Banking Services clients. The numbers of checking accounts are as reported to us by our clients.
3The number of end-users divided by the 10.4 million total payments-eligible launched checking accounts held with our Banking Services clients. The number of checking account are as reported to us by our clients.
4The number of users divided by the 16.5 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.
4
Online Resources Corporation Consolidated Statement of Operations
(In thousands, except per share data)
THREE MONTHS ENDED MARCH 31,
TWELVE MONTHS ENDED DECEMBER 31,
2006
2005
2005
2004
(Unaudited)
(Unaudited)
Revenues:
Account presentation services
$
1,928
$
2,827
$
8,826
$
3,030
Payment services
10,395
8,443
35,841
28,277
Relationship management services
2,097
2,045
7,716
7,895
Professional services and other
2,297
1,797
8,118
3,084
Total revenues
16,717
15,112
60,501
42,286
Expenses:
Cost of revenues
7,661
6,235
24,517
18,059
Gross profit
9,056
8,877
35,984
24,227
General and administrative
4,425
3,364
13,126
9,107
Selling and marketing
2,708
2,145
10,174
7,416
Systems and development
1,143
1,125
4,788
3,793
Total expenses
8,276
6,634
28,088
20,316
Income from operations
780
2,243
7,896
3,911
Other income (expense)
Interest income
599
29
1,303
147
Interest expense
(2
)
(4
)
(4
)
(3
)
Total other income
597
25
1,299
144
Income before taxes
1,377
2,268
9,195
4,055
Income tax provision (benefit)
620
60
200
146
Net income
$
757
$
2,208
$
8,995
$
3,909
Net income per share
Basic
$
0.03
$
0.11
$
0.38
$
0.22
Diluted
$
0.03
$
0.10
$
0.35
$
0.19
Shares used in calculation of net income per share:
Basic
25,303
19,358
23,434
18,057
Diluted
27,447
21,606
25,880
20,128
Reconciliation of net income to Ebitda (See Note 1):
Net income
$
757
$
2,208
$
8,995
$
3,909
Depreciation and amortization
1,746
1,283
5,959
3,665
Equity compensation expense
617
—
Other income
(597
)
(25
)
(1,299
)
(144
)
Income tax provision
620
60
200
146
Ebitda (See Note 1)
$
3,143
$
3,526
$
13,855
$
7,576
Reconciliation of net income to core net income (See Note 2):
Net income
$
757
$
2,208
$
23,434
$
18,057
Equity compensation expense
617
—
5,959
3,665
Amortization of intangible assets
138
78
(0
)
(0
)
Core net income (see Note 2)
$
1,512
$
2,286
$
29,393
$
21,722
Notes:
1.
Ebitda represents earnings before interest, taxes, depreciation and amortization, and equity compensation expense.
2.
Core net income represents net income before the amortization of acquisition-related intangible assets, equity compensation expense, merger-related charges, restructuring-related charges, impairment charges, cumulative effect of change in accounting methods, income tax benefit from the release of valuation allowance and non-recurring tax charges. Some or all of these items may not be applicable in any given reporting period.
Deferred implementation costs, less current portion
546
521
Other assets
608
527
Total assets
$
116,753
$
115,596
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable, accrued expenses and other current liabilities
$
3,410
$
4,524
Deferred revenues
2,793
2,638
Deferred rent obligation
172
161
Capital lease obligation
1
8
Total current liabilities
6,376
7,331
Deferred revenues, less current portion
1,121
1,213
Deferred rent obligation, less current portion
1,829
1,796
Other long-term liabilities
1,595
2,220
Total liabilities
10,921
12,560
Stockholders’ equity
105,832
103,036
Total liabilities and stockholders’ equity
$
116,753
$
115,596
6
Online Resources Corporation Condensed Consolidated Statement of Cash Flows
(In thousands)
THREE MONTHS ENDED MARCH 31,
2006
2005
(Unaudited)
(Unaudited)
Operating activities:
Net income
$
757
$
2,208
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
1,746
1,283
Provision for losses on accounts receivable
—
2
Amortization of discount premium
—
(1
)
Equity compensation expense
617
—
Deferred tax expense
617
—
Changes in assets and liabilities
(1,990
)
10
Net cash provided by operating activities
1,747
3,502
Investing activities:
Purchases of property and equipment
(2,983
)
(1,496
)
Net purchases of available-for-sale securities
—
(1,000
)
Net cash used by operating activities
(2,983
)
(2,496
)
Financing activities:
Proceeds from the issuance of common stock
1,422
848
Repayment of capital lease obligations
(7
)
(4
)
Net cash provided by financing activities
1,415
844
Net increase in cash and cash equivalents
179
1,850
Cash and cash equivalents at beginning of period
55,864
3,342
Cash and cash equivalents at end of period
$
56,043
$
5,192
7
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