Catherine Graham EVP & Chief Financial Officer 703.653.3155 cgraham@orcc.com
ONLINE RESOURCES POSTS THIRD QUARTER 2010 RESULTS Company Delivers Strong Results Against Expectations
CHANTILLY, Va., November 4, 2010– Online Resources Corporation (Nasdaq: ORCC), a leading provider of online financial services, today reported financial and operating results for the three months ended September 30, 2010.
•
Revenue was $36.8 million, compared to $36.6 million in the third quarter of 2009.
•
Ebitda, a non-GAAP measure, was $7.4 million, compared to $8.8 million in the same quarter of 2009.
•
Adjusted Ebitda, a non-GAAP measure that adjusts Ebitda for equity compensation and other expense, was $8.0 million, compared to $9.8 million in the prior year period.
•
Net loss available to common stockholders was $0.7 million, or $0.02 per share, compared to net income of $0.4 million, or $0.01 per diluted share, in the same quarter of 2009.
•
Core net income, a non-GAAP measure, was $1.2 million, or $0.04 per diluted share, compared to $2.9 million, or $0.09 per diluted share, in the same quarter of 2009.
“We continued our trend of performing well against expectations this year, exceeding revenue and earnings expectations in the quarter,” said Joseph L. Cowan, the company’s president and chief executive officer. “Additionally, payment transactions and consumer adoption of online banking and payments continued their quarterly upward climb.”
“Our planning process is well underway. We have presented a strategic direction to the Board of Directors and are now developing the supporting operating plan for their approval. We expect to present this plan to the Board in December and I look forward to sharing it with you once we have finalized our course of action.”
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1
Outlook for Fourth Quarter 2010
Online Resources provided the following guidance for the fourth quarter of 2010. These statements are forward-looking, and actual results may differ materially.
•
Revenue for the fourth quarter is expected to be between $35.0 and $37.0 million.
•
Ebitda1,2 for the quarter is expected to be between $5.5 and $7.0 million
•
Adjusted Ebitda1,2 for the quarter is expected to be between $6.7 and $8.0 million.
•
Core net income1,3,4,5 is expected to be between $0.03 and $0.05 per diluted share.
Should the Company make organizational changes as a part of its fourth quarter planning process, it may incur restructuring costs. These costs are not included in the above guidance.
(1)
The Company uses non-GAAP (Generally Accepted Accounting Principles) financial measures, including Ebitda, adjusted 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.
(2)
Ebitda is defined as net income before interest, taxes, depreciation and amortization expense. Adjusted Ebitda is defined as net income before interest, taxes depreciation and amortization, and equity compensation expense.
(3)
Core net income is defined as net income 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 of certain derivatives and mark-to-market investments, preferred stock accretion related to the redemption premium and all other non-recurring charges. Some or all of these items may not be applicable in any given reporting period.
(4)
Excludes estimates for amortization of acquisition-related intangible assets of $1.3 million, equity compensation expense of $0.9 million and preferred stock accretion related to the redemption premium of $0.4 million.
(5)
Core net income per share calculated using estimated fully diluted shares outstanding of 32.1 million.
Conference Call and Web Cast Management will host a conference call to discuss results at 5:00 p.m. ET 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 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 November 4th until midnight on Thursday, November 11th. For the conference call playback, dial (800) 642-1687 for domestic participants and (706) 645-9291 for international participants and enter code 19000222. For web cast replay, go to the “Investors” section of www.orcc.com.
About Online Resources Online Resources (Nasdaq: ORCC) powers financial interactions between millions of consumers and the Company’s financial institution and biller clients. Backed by its proprietary real-time 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, visitwww.orcc.com.
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.
The Company refined its definition of an Internet banking user in 1Q09 to incorporate a stricter definition of an active user. In order to make them consistent with the new definition, the Internet banking adoption rates for prior periods have been adjusted. User counts under the new definition have been estimated for the prior periods.
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Online Resources Corporation Consolidated Statements of Operations (In thousands, except per share data)
THREE MONTHS ENDED
NINE MONTHS ENDED
SEPTEMBER 30,
SEPTEMBER 30,
2010
2009
2010
2009
(Unaudited)
(Unaudited)
Revenues:
Account presentation services
$
2,237
$
2,083
$
6,676
$
5,877
Payment services
27,699
28,971
85,576
90,126
Relationship management services
2,358
2,015
6,498
6,055
Professional services and other
4,501
3,525
12,986
11,559
Total revenues
36,795
36,594
111,736
113,617
Expenses:
Cost of revenues
19,394
18,816
58,406
58,496
Gross profit
17,401
17,778
53,330
55,121
General and administrative
7,399
6,955
23,427
23,564
Selling and marketing
4,900
4,624
14,657
15,952
Systems and development
2,277
2,247
7,403
6,630
Total expenses
14,576
13,826
45,487
46,146
Income from operations
2,825
3,952
7,843
8,975
Other income (expense)
Interest income
18
22
39
104
Interest expense
286
(357
)
450
(3,300
)
Other income (expense)
—
14
(99
)
91
Total other income (expense)
304
(321
)
390
(3,105
)
Income before tax provision
3,129
3,631
8,233
5,870
Income tax provision
1,427
918
3,282
1,950
Net income
1,702
2,713
4,951
3,920
Preferred stock accretion
2,413
2,325
7,124
6,861
Net income (loss) available to common stockholders
$
(711
)
$
388
$
(2,173
)
$
(2,941
)
Net income (loss) available to common stockholders per share:
Basic
$
(0.02
)
$
0.01
$
(0.07
)
$
(0.10
)
Diluted
$
(0.02
)
$
0.01
$
(0.07
)
$
(0.10
)
Shares used in calculation of net loss available to common stockholders per share:
Deferred implementation costs, less current portion, and other assets
9,175
7,067
Total assets
$
310,875
$
308,490
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
2,344
$
2,008
Accrued expenses
5,143
3,739
Notes payable, senior secured debt, current portion
21,625
8,250
Interest payable
3
27
Deferred revenues, current portion, and other current liabilities
7,496
6,793
Total current liabilities
36,611
20,817
Notes payable, senior secured debt, less current portion
19,125
40,500
Deferred revenues, less current portion, and other long-term liabilities
6,699
6,888
Total liabilities
62,435
68,205
Redeemable convertible preferred stock
107,747
100,623
Stockholders’ equity
140,693
139,662
Total liabilities and stockholders’ equity
$
310,875
$
308,490
5
Online Resources Corporation Condensed Consolidated Statements of Cash Flows
(In thousands)
NINE MONTHS ENDED
SEPTEMBER 30,
2010
2009
(Unaudited)
Operating activities
Net income
$
4,951
$
3,920
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred tax benefit
3,899
2,008
Depreciation and amortization
13,983
15,209
Equity compensation expense
2,095
3,307
Write off and amortization of debt issuance costs
250
250
Loss on disposal of assets
—
37
Provision for losses on accounts receivable
169
16
Gain on investments
—
(91
)
Change in fair value of theoretical swap derivative
(1,676
)
8
Changes in certain other assets and liabilities
(1,501
)
(958
)
Net cash provided by operating activities
22,170
23,706
Investing activities
Purchases of property and equipment
(10,793
)
(6,744
)
Sale of short-term investments
—
2,100
Net cash used in investing activities
(10,793
)
(4,644
)
Financing activities
Net proceeds from issuance of common stock
777
425
Repayment of 2007 notes
(8,000
)
(11,687
)
Repayment of capital lease obligations
(19
)
(26
)
Net cash used in financing activities
(7,242
)
(11,288
)
Net increase in cash and cash equivalents
4,135
7,774
Cash and cash equivalents at beginning of year
22,907
22,969
Cash and cash equivalents at end of period
$
27,042
$
30,743
6
Online Resources Corporation Reconciliation of Non-GAAP Measures
(In thousands, except per share data)
THREE MONTHS ENDED
NINE MONTHS ENDED
SEPTEMBER 30,
SEPTEMBER 30,
2010
2009
2010
2009
(Unaudited)
(Unaudited)
Reconciliation of ebitda (See Note 1):
Net income
$
1,702
$
2,713
$
4,951
$
3,920
Depreciation and amortization (incl. loss on disposal of assets)
4,620
4,822
13,983
15,246
Interest expense, net
(304
)
335
(489
)
3,196
Income tax provision
1,427
918
3,282
1,950
Ebitda (See Note 1)
$
7,445
$
8,788
$
21,727
$
24,312
Reconciliation of adjusted ebitda (See Note 2):
Net income
$
1,702
$
2,713
$
4,951
$
3,920
Depreciation and amortization (incl. loss on disposal of assets)
4,620
4,822
13,983
15,246
Equity compensation expense
516
1,069
2,095
3,307
Other (income) expense
(304
)
321
(390
)
3,105
Income tax provision
1,427
918
3,282
1,950
Adjusted Ebitda (See Note 2)
$
7,961
$
9,843
$
23,921
$
27,528
Reconciliation of core net income (See Note 3):
Net income (loss) available to common stockholders
$
(711
)
$
388
$
(2,173
)
$
(2,941
)
Preferred stock accretion related to redemption premium
406
398
1,213
1,189
Change in fair value of theoretical swap derivative
(649
)
(694
)
(1,676
)
8
Change in fair value of mark to market investments
—
(14
)
—
(91
)
Change in tax valuation allowance
258
—
358
—
Restructuring costs, net of tax
—
—
823
—
Equity compensation expense
516
1,069
2,095
3,307
Amortization of intangible assets
1,348
1,753
4,633
5,917
Core net income (see Note 3)
$
1,168
$
2,900
$
5,273
$
7,389
Reconciliation of core net income per share:
Diluted net income (loss) available to common stockholders
$
(0.02
)
$
0.01
$
(0.07
)
$
(0.10
)
Preferred stock accretion related to redemption premium
0.01
0.01
0.04
0.04
Change in fair value of theoretical swap derivative
(0.02
)
(0.02
)
(0.05
)
—
Change in fair value of mark to market investments
—
—
—
—
Change in tax valuation allowance
0.01
—
0.01
—
Restructuring costs, net of tax
—
—
0.03
—
Equity compensation expense
0.02
0.03
0.07
0.11
Amortization of intangible assets
0.04
0.06
0.15
0.19
Other, including impact of treasury method and rounding
—
—
(0.01
)
—
Core net income per share
$
0.04
$
0.09
$
0.17
$
0.24
Notes:
1.
Ebitda is a non-GAAP measure we define as net income before interest, taxes, depreciation and amortization expense.
2.
Adjusted ebitda is a non-GAAP measure we define as net income before interest, taxes, depreciation and amortization and equity compensation expense.
3.
Core net income is defined as net income 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 of certain derivatives and mark-to-market investments, preferred stock accretion related to the redemption premium and all other non-recurring charges. Some or all of these items may not be applicable in any given reporting period.
7
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