Catherine Graham EVP & Chief Financial Officer 703.653.3155 cgraham@orcc.com
ONLINE RESOURCES RECOGNIZES 4TH QUARTER AND YEAR 2007 TAX BENEFITS
Filing 10-K Cures Nasdaq Staff Determination
CHANTILLY, Va., April 9, 2008– Online Resources Corporation (Nasdaq: ORCC), a leading provider of web-based financial services, today announced that it has recognized an additional $11.6 million in net tax benefit to fourth quarter and full year 2007 net income available to common shareholders. The Company has adjusted its previously disclosed results for the periods and filed its 2007 Annual Report on Form 10-K with the Securities and Exchange Commission.
Based on its earnings history and expectations over the next five years, the Company has determined that it is more likely than not to use the majority of its tax loss carry-forwards. As prescribed by SFAS No. 109,Accounting for Income Taxes, the Company has released most of its valuation allowance and has recognized an unreserved deferred tax asset of $33.8 million on its balance sheet dated December 31, 2007, out of a total remaining deferred tax asset of $39.7 million.
The $11.6 million additional benefit to earnings consists of a $13.7 million benefit from the Company’s release of valuation allowance, offset by the reduction of goodwill by a $1.4 million state tax loss sale previously recognized as a tax benefit. The Company also recognized $700,000 in additional tax provision to reconcile state tax loss carry-forwards, which reduced core net income. All these adjustments are non-cash and the Company continues to pay no material cash taxes.
The following summarizes the changes to previously announced preliminary fourth quarter and 2007 earnings results. There is no impact on revenue or the Company’s cash accounts.
Fourth Quarter 2007 Full Year 2007
Preliminary Final
Preliminary Final
Net Income (Loss) Available to Common ($ mil)
$
0.6
$
12.1
$
(8.9
)
$
2.6
Per share
$
0.02
$
0.40
$
(0.33
)
$
0.09
Core Net Income*($ mil)
$
3.9
$
3.2
$
7.9
$
7.2
Per share
$
0.13
$
0.10
$
0.27
$
0.25
*The Company uses non-GAAP (Generally Accepted Accounting Principles) financial measures, including core net income, to evaluate performance and establish goals. It believes that these measures are valuable to investors in assessing its operating results when viewed in conjunction with GAAP results. Core net income is defined as net income available to common stockholders 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, non-recurring tax charges, income (costs) related to the fair market valuation of certain derivatives and preferred stock accretion related to the redemption premium. Some or all of these items may not be applicable in any given reporting period.
1
(more)
By filing its Annual Report on Form 10-K, Online Resources cured the delinquency for which it received a Nasdaq Staff Determination of potential delisting under Marketplace Rule 4310(c)(14) on April 2, 2008. The Company is now in compliance with the listing standard regarding filing of required reports.
About Online Resources Online Resources powers financial technology services for thousands of financial institutions, billers and credit service providers. Its proprietary suite of account presentation and payment services are branded to its clients, and augmented by marketing services to drive consumer and business end-user adoption. The Company serves over 10 million end-users and processes more than $100 billion in bill payments annually. Founded in 1989, Online Resources (www.orcc.com) is recognized as one of the nation’s fastest growing technology companies.
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.
###
2
Online Resources Corporation Consolidated Statement of Operations
(In thousands, except per share data)
THREE MONTHS ENDED DECEMBER 31,
TWELVE MONTHS ENDED
DECEMBER 31,
2007
2006
2007
2006
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Revenues:
Account presentation services
$
2,296
$
2,177
$
8,998
$
8,051
Payment services
29,806
22,554
104,228
65,500
Relationship management services
2,231
1,907
8,138
8,022
Professional services and other
3,765
2,756
13,768
10,163
Total revenues
38,098
29,394
135,132
91,736
Expenses:
Cost of revenues
18,099
13,115
64,083
41,317
Gross profit
19,999
16,279
71,049
50,419
General and administrative
7,808
5,513
28,933
19,780
Selling and marketing
5,904
6,195
23,446
18,009
Systems and development
2,597
2,520
9,196
7,382
Total expenses
16,309
14,228
61,575
45,171
Income from operations
3,690
2,051
9,474
5,248
Other (expense) income
Interest income
191
352
1,242
1,961
Interest expense and debt issuance costs
(2,653
)
(2,996
)
(6,848
)
(5,953
)
Loss on extinguishment of debt
—
—
(5,625
)
—
Total other (expense) income
(2,462
)
(2,644
)
(11,231
)
(3,992
)
Income before income tax (benefit) provision
1,228
(593
)
(1,757
)
1,256
Income tax (benefit) provision
(13,077
)
(31
)
(12,703
)
935
Net income (loss)
14,305
(562
)
10,946
321
Preferred stock accretion
2,172
2,151
8,302
4,309
Net income (loss) available to common stockholders
$
12,133
$
(2,713
)
$
2,644
$
(3,988
)
Net income (loss) available to common stockholders per share
Basic
$
0.42
$
(0.11
)
$
0.10
$
(0.16
)
Diluted
$
0.40
$
(0.11
)
$
0.09
$
(0.16
)
Shares used in calculation of net income (loss) available to common stockholders per share:
Basic
28,764
25,719
27,153
25,546
Diluted
30,511
25,719
29,150
25,546
Reconciliation of net income (loss) to Ebitda (See Note 1):
Net income (loss)
$
14,305
$
(562
)
$
10,946
$
321
Depreciation and amortization (incl. loss on disposal of assets)
5,478
4,656
19,991
12,772
Equity compensation expense
1,165
637
3,198
2,512
Other expense
2,462
2,644
11,231
3,992
Income tax (benefit) provision
(13,077
)
(31
)
(12,703
)
935
Ebitda (See Note 1)
$
10,333
$
7,344
$
32,663
$
20,532
Reconciliation of net income (loss) available to common stockholders to core net income (See Note 2):
Net income (loss) available to common stockholders
$
12,133
$
(2,713
)
$
2,644
$
(3,988
)
Loss on extinguishment of debt
—
—
5,625
—
Preferred stock accretion related to redemption premium
Ebitda is a pro forma measure defined as earnings before interest, taxes, depreciation and amortization, preferred stock accretion and equity compensation expense.
2.
Core net income is a pro forma measure defined as net income available to common stockholders 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, non-recurring tax charges, income (costs) related to the fair market valuation of certain derivatives and preferred stock accretion related to the redemption premium. Some or all of these items may not be applicable in any given reporting period.
Deferred implementation costs, less current portion
1,628
1,015
Debt issuance cost, less current portion
782
3,116
Other assets
1,633
436
Total assets
$
340,717
$
286,591
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable, accrued expenses and other current liabilities
$
22,534
$
8,672
Deferred revenues
5,673
4,919
Deferred rent obligation
218
304
Notes payable, senior secured debt
9,562
-
Interest payable
72
2,688
Total current liabilities
38,059
16,583
Notes payable, senior secured debt, less current portion
75,438
85,000
Deferred revenues, less current portion
3,916
3,374
Deferred rent obligation, less current portion
2,539
2,144
Other long-term liabilities
53
4,047
Total liabilities
120,005
111,148
Redeemable convertible preferred stock
82,542
72,108
Stockholders’ equity
138,170
103,335
Total liabilities and stockholders’ equity
$
340,717
$
286,591
4
Online Resources Corporation Condensed Consolidated Statement of Cash Flows
(In thousands)
TWELVE MONTHS ENDED
DECEMBER 31,
2007
2006
(Unaudited)
(Unaudited)
Operating activities:
Net income
$
10,946
$
321
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred tax benefit
(13,694
)
(531
)
Depreciation and amortization
19,811
12,772
Change in fair value of theoretical swap derivative
(1,145
)
158
Change in fair value of stock price guarantee
(355
)
-
Loss on cash flow hedge derivative security
350
-
Loss on disposal of assets
180
1
Loss on short-term investment
117
-
Benefit from losses on accounts receivable
(12
)
(21
)
Write off and amortization of debt issuance costs
4,330
445
Equity compensation expense
3,198
2,512
Changes in operating assets and liabilities, net of acquisitions
(5,501
)
1,353
Net cash provided by operating activities
18,225
17,010
Investing activities:
Purchases of property and equipment
(16,360
)
(9,823
)
Purchase of short-term investments
(10,167
)
(965
)
Sales of short-term investments
1,880
-
Acquisition of Princeton eCom Corporation, net of cash acquired
-
(184,362
)
Acquisition of Internet Transaction Solutions, Inc., net of cash acquired
(12,220
)
-
Net cash used by investing activities
(36,867
)
(195,150
)
Financing activities:
Proceeds from the issuance of common stock
3,998
3,486
Purchase of derivative
(121
)
(455
)
Sale of derivative
22
—
Debt issuance costs and prepayment penalty on refinancing of long-term debt
(3,179
)
-
Borrowing under 2006 senior secured notes
-
80,549
Net proceeds from issuance of preferred stock
-
69,912
Repayment of 2006 senior secured notes
(85,000
)
-
Borrowing under 2007 senior secured notes
85,000
-
Repayment of capital lease obligations
(40
)
(27
)
Net cash provided by financing activities
680
153,465
Net decrease in cash and cash equivalents
(17,962
)
(24,675
)
Cash and cash equivalents at beginning of period
31,189
55,864
Cash and cash equivalents at end of period
$
13,227
$
31,189
5
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