Current Report

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

     
Date of Report (Date of Earliest Event Reported):   October 28, 2009

Online Resources Corporation
__________________________________________
(Exact name of registrant as specified in its charter)

     
Delaware 0-26123 52-1623052
_____________________
(State or other jurisdiction 		_____________
(Commission 		______________
(I.R.S. Employer
of incorporation) File Number) Identification No.)
      
4795 Meadow Wood Lane, Chantilly, Virginia   20151
_________________________________
(Address of principal executive offices) 		  ___________
(Zip Code)
     
Registrant’s telephone number, including area code:   703-653-3100

Not Applicable
______________________________________________
Former name or former address, if changed since last report

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Top of the Form

Item 2.02 Results of Operations and Financial Condition.

On October 28, 2009, we announced our financial results for the third quarter ended September 30, 2009. A copy of our press release containing the announcement is included as Exhibit 99.1 to this Current Report on Form 8-K.





Item 9.01 Financial Statements and Exhibits.

A copy of our press release containing the announcement is included as Exhibit 99.1 to this Current Report on Form 8-K.





The attached press release contains non-GAAP financial measures. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles, or GAAP. To supplement our financial statements presented in accordance with GAAP, we report Ebitda and Core Net Income, non-GAAP financial measures commonly used in our industry as measures of performance. Ebitda epresents earnings before interest, taxes, depreciation, preferred stock accretion and amortization, including non-cash equity compensation expense. Core net income is a non-GAAP measure defined as net income available to common stockholders before the amortization of acquisition-related intangible assets, equity compensation expense, income tax benefit from the release of valuation allowance, income (costs) related to the fair market valuation of certain derivatives, preferred stock accretion related to the redemption premium and all other non-recurring charges. These measures should be considered in addition to results prepared in accordance with GAAP, and are not substitutes for, or superior to, GAAP results. The non-GAAP measures are provided to enhance the investors’ overall understanding of our current financial performance and our prospects for the future. Consistent with our historical practice, these non-GAAP measures have been reconciled to the nearest GAAP measure.

The information contained in this Item 2.02, including the exhibit referenced herein, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be incorporated by reference into any registration statement we file under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated by reference.


Top of the Form

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

         
    Online Resources Corporation
          
October 28, 2009   By:   Catherine A. Graham
       
        Name: Catherine A. Graham
        Title: Executive Vice President, Chief Financial Officer

Top of the Form

Exhibit Index


     
Exhibit No.   Description
 
99.1
  Results of Operations and Financial Condition


News—For Immediate Release

     
Media Contact:
  Investor Contact:
Beth Halloran
Sr. Dir., Corporate Communications
703.653.2248
bhalloran@orcc.com
  Catherine Graham
EVP & Chief Financial Officer
703.653.3155
cgraham@orcc.com

ONLINE RESOURCES POSTS THIRD QUARTER 2009 RESULTS
Core Earnings Per Share Up 50 Percent Over Prior Year

CHANTILLY, Va., October 28, 2009 – 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, 2009.

•   Revenue was $36.6 million, down 4 percent from $38.1 million in the third quarter 2008.  

•   Adjusted Ebitda, a non-GAAP measure, was $9.8 million, up 19 percent from $8.3 million in the prior year.  

•   Net income available to common stockholders was $0.4 million, or $0.01 per diluted share. This result compares to a net loss of $1.5 million, or $0.05 loss per diluted share, in 2008.   

•   Core net income, a non-GAAP measure, was $2.9 million, up 50 percent from $1.9 million in 2008. On a per share basis, core net income was $0.09, up 50 percent from $0.06 in 2008.  

“True to our priorities, we delivered excellent earnings and cash flow growth in the third quarter, while continuing to reduce debt,” said Matthew P. Lawlor, chairman and chief executive officer of the Company. “Revenue was lower than expected, however, due to weaker consumer transactions and a $0.5 million fee expected in the third quarter that was recognized early in the fourth quarter.”

Lawlor continued, “Consumer adoption of online banking continued to climb nicely, and same store billpay transactions grew in line with recent quarters. New client sales were especially strong, as our fully integrated one-stop internet banking offering continues to resonate with community banks and credit unions. We also entered into two potentially large distributor partnerships. We renewed all of our expiring large client contracts, but as previously stated, we expect continued client turnover as the industry consolidates and competition intensifies.”

“New client activity was also strong in our e-commerce business,” Lawlor added. “We signed a major healthcare services provider for enrollment and payment services, and significantly expanded our web-based collections relationship with a top 3 U.S. card issuer. While consumer transactions continued to grow year over year, the recession has had a major impact on our accounts receivable management clients, contributing to a decline in user-paid fees.”

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Lawlor concluded, “Looking forward, I believe we are positioned well competitively, with our comprehensive product set and focus on the online channel. We expect to continue to grow earnings and cash flow, as we benefit from prior strategic cost initiatives. There are also some promising revenue indicators such as stepped-up client signings, new products and a possible bottoming of consumer transaction declines. However, until we see some firmer signs of an economic turnaround and stability in the markets we serve, we must assume on-going challenges to the top line.”

Business Outlook
The Company provided guidance for fourth quarter, and updated its guidance for full year 2009. These statements are forward-looking, and actual results may differ materially. Guidance is stated in millions, except for per share data.

                                                 
    Fourth Quarter   Full Year
     2008        2009           %          2008         2009           %     
     Actual     Guidance     Change     Actual     Guidance     Change 
Revenue ($ millions)
  $ 37.2     $ 37.4-39.4       3 %   $ 151.6     $ 151.0-153.0       0 %
Adjusted Ebitda (a)(b)
  $ 9.6     $ 10.0-11.5       12 %   $ 32.7     $ 37.5-39.0       17 %
                                                                                               Earnings ($    per share)    
 
Net (Loss) Income to
Common (c)(d)
  $0.04

  $(0.02)-0.00

  n/a

  $(0.24)

  $(0.12)-(0.10)

  n/a

Core Net Income (a)(e)(f)
  $ 0.07     $ 0.10-0.12       57 %   $ 0.24     $ 0.34-0.36       46 %
                                                                                               Share Count (millions)   
 
Basic
    29.4       30.2       3 %     29.1       29.9       3 %
Fully Diluted Shares (g)
    30.1       31.8       6 %     30.5       31.1       2 %

  (a)   The Company uses non-GAAP (Generally Accepted Accounting Principles) financial measures, including 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.

  (b)   Adjusted Ebitda is defined as earnings before interest, taxes, depreciation and amortization, preferred stock accretion and equity compensation expense.

  (c)   Fourth quarter 2009 and years 2009 and 2008 net loss available to common stockholders per share are calculated using the number of weighted-average shares outstanding (basic), not fully diluted shares.

  (d)   Guidance does not assume the release of any additional tax valuation allowance in 2009, though the Company may do so. Also does not include the impact of any mark-to-market adjustments for derivatives the Company holds or other fair value accounting impacts.

  (e)   Core net income is defined as net income available to common stockholders before, on a pre-tax basis, the amortization of acquisition-related intangible assets, equity compensation expense, income tax benefit from the release of 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.

  (f)   Excludes amortization of acquisition-related intangible assets of $1.7 and $2.2 million for the fourth quarters 2009 and 2008, respectively, and $7.6 and $9.5 million for the years 2009 and 2008, respectively. Excludes equity compensation expense of $1.7 and $0.7 million for the fourth quarters 2009 and 2008, respectively, and $5.1 and $4.7 million for the years 2009 and 2008, respectively. Excludes preferred stock accretion related to the redemption premium of $0.4 million for the fourth quarters 2009 and 2008 and $1.6 million for the years 2009 and 2008. Excludes income (costs) related to the fair market valuation of certain derivatives of $2.8 for the fourth quarter 2008 and $1.9 million for the year 2008. Excludes income (costs) related to mark-to-market investments of $(0.4) million for the fourth quarter 2008 and $0.1 and $(0.6) million for the years 2009 and 2008, respectively. Excludes a tax valuation allowance benefit of $0.2 million for the fourth quarter and year 2008. Includes preferred stock accretion of $1.9 million for the fourth quarters 2009 and 2008 and $7.6 and $7.3 million for the years 2009 and 2008, respectively .

  (g)   Only used for the purposes of calculating core net income per share and net (loss) income to common for the year 2008.

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Today’s 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 (888) 352-6798 for domestic participants and (719) 325-2469 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 October 28th until midnight on Thursday, November 5th. For the conference call playback, dial (888) 203-1112 for domestic participants and (719) 457-0820 for international participants and enter code 4460134. 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 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 has been recognized for its high growth and product innovation. It is the largest financial technology provider dedicated to the online channel. For more information, visit www.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’s Form 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.

###

3

Online Resources Corporation
Quarterly Operating Data 1
(Unaudited)

                                                                 
    4Q07   1Q08   2Q08   3Q08   4Q08   1Q09   2Q09   3Q09
BANKING SERVICES                                
Payment Services 2
                                                               
Revenue
  $ 20.2     $ 19.7     $ 18.1     $ 18.4     $ 17.9     $ 17.5     $ 17.2     $ 17.1  
Bill Payment Transactions
    41.8       41.8       39.0       39.1       39.4       39.0       37.3       38.5  
 
                                                               
Other Revenue
  $ 5.6     $ 4.5     $ 5.1     $ 5.6     $ 5.3     $ 5.4     $ 5.9     $ 5.7  
 
                                                               
eCOMMERCE SERVICES
                                                               
Payment Services — User Paid
                                                               
Revenue
  $ 5.5     $ 7.0     $ 6.4     $ 6.2     $ 5.8     $ 6.5     $ 5.8     $ 4.7  
Bill Payment Transactions
    1.4       1.7       1.7       1.7       1.6       1.7       1.6       1.4  
 
                                                               
Payment Services — Biller Paid
                                                               
Revenue
  $ 4.1     $ 5.2     $ 5.6     $ 6.0     $ 6.2     $ 7.1     $ 7.0     $ 7.2  
Bill Payment Transactions
    9.1       10.3       10.5       11.3       11.8       12.7       13.5       13.7  
 
                                                               
Other Revenue 3
  $ 2.8     $ 2.8     $ 2.0     $ 1.9     $ 2.0     $ 2.7     $ 1.9     $ 1.9  
 
                                                               
OTHER KEY METRICS
                                                               
Internet Banking Adoption Rate 4
    26.9 %     28.2 %     32.8 %     33.6 %     35.4 %     38.3 %     40.8 %     43.2 %
Banking Billpay Adoption Rate
    8.7 %     9.0 %     9.4 %     10.0 %     10.2 %     10.4 %     10.7 %     11.1 %
Enterprise Users
    12.3       13.5       12.6       13.0       13.2       13.8       14.0       14.3  

Notes:

  1.   In millions except adoption rates.  

  2.   Includes the revenues and transactions for the following large, departed clients: Jack Henry (departed 4Q07) and Corporate Network eCom (departed 1Q08).  

  3.   Includes revenues for large client Certegy, which departed in 2Q08.  

  4.   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.  

4

Online Resources Corporation
Consolidated Statements of Operations
(In thousands, except per share data)

                                                 
        Three Months Ended       Nine Months Ended
        September 30,       September 30,
        2009       2008       2009       2008
        (Unaudited)       (Unaudited)
Revenues:
                                               
Account presentation services
      $ 2,083         $ 1,860         $ 5,877         $ 6,121  
Payment services
        28,971           30,518           90,126           92,480  
Relationship management services
        2,015           2,074           6,055           6,091  
Professional services and other
        3,525           3,681           11,559           9,790  
 
                                               
Total revenues
        36,594           38,133           113,617           114,482  
 
                                               
Expenses:
                                               
Cost of revenues
        18,816           19,579           58,496           58,808  
 
                                               
Gross profit
        17,778           18,554           55,121           55,674  
 
                                               
General and administrative
        6,955           7,984           23,564           26,528  
Selling and marketing
        4,624           6,021           15,952           18,681  
Systems and development
        2,247           2,456           6,630           7,498  
 
                                               
Total expenses
        13,826           16,461           46,146           52,707  
 
                                               
Income from operations
        3,952           2,093           8,975           2,967  
 
                                               
Other income (expense)
                                               
Interest income
        22           111           104           433  
Interest expense
        (357 )         (1,045 )         (3,300 )         (5,073 )
Other income (expense)
        14           (55 )         91           (164 )
 
                                               
Total other income (expense)
        (321 )         (989 )         (3,105 )         (4,804 )
 
                                               
Income (loss) before tax provision (benefit)
        3,631           1,104           5,870           (1,837 )
Income tax provision (benefit)
        918           338           1,950           (224 )
 
                                               
Net income (loss)
        2,713           766           3,920           (1,613 )
Preferred stock accretion
        2,325           2,237           6,861           6,614  
 
                                               
Net income (loss) available to common stockholders
      $ 388         $ (1,471 )       $ (2,941 )       $ (8,227 )
 
                                               
 
                                               
Net income (loss) available to common stockholders per share:
                                               
Basic
      $ 0.01         $ (0.05 )       $ (0.10 )       $ (0.28 )
Diluted
      $ 0.01         $ (0.05 )       $ (0.10 )       $ (0.28 )
 
                                               
Shares used in calculation of net income (loss) available to
common stockholders per share:
 
  		 
  		 
  		 
  		 
  		 
  		 
  		 
 
Basic
        30,048           29,211           29,898           29,013  
Diluted
        31,546           29,211           29,898           29,013  

5

Online Resources Corporation
Condensed Consolidated Balance Sheets

(In thousands)

                         
        September 30,       December 31,
        2009       2008
        (Unaudited)
ASSETS
                       
Current assets:
                       
Cash and cash equivalents
      $ 30,743         $ 22,969  
Short-term investments
        —           1,009  
Accounts receivable, net
        16,256           15,742  
Deferred tax asset, current portion
        2,142           8,782  
Prepaid expenses and other current assets
        4,528           4,013  
 
                       
Total current assets
        53,669           52,515  
 
                       
Property and equipment, net
        26,264           28,707  
Deferred tax asset, less current portion
        29,927           25,295  
Goodwill
        181,516           181,516  
Intangible assets
        21,752           27,668  
Deferred implementation costs, less current portion, and other assets
    6,780           7,976  
 
                   
Total assets
      $ 319,908         $ 323,677  
 
                       
 
                       
LIABILITIES AND STOCKHOLDERS’ EQUITY
                       
Current liabilities:
                       
Accounts payable
      $ 1,414         $ 1,198  
Accrued expenses
        3,676           3,618  
Notes payable, senior secured debt, current portion
        12,750           15,937  
Interest payable
        28           6  
Deferred revenues, current portion, and other current liabilities
        6,975           7,513  
 
                       
Total current liabilities
        24,843           28,272  
 
                       
Notes payable, senior secured debt, less current portion
        51,000           59,500  
Deferred revenues, less current portion, and other long-term liabilities
    6,189           6,377  
 
                   
Total liabilities
        82,032           94,149  
 
                       
Redeemable convertible preferred stock
        98,275           91,415  
 
                       
Stockholders’ equity
        139,601           138,113  
 
                       
Total liabilities and stockholders’ equity
      $ 319,908         $ 323,677  
 
                       
 
                       

6

Online Resources Corporation
Condensed Consolidated Statements of Cash Flows

(In thousands)

                                 
    Nine Months Ended
    Septmeber 30,
    2009       2008
                    (Unaudited)
 
                   
Operating activities
                               
Net income (loss)
          $ 3,920             $ (1,613 )
Adjustments to reconcile net loss to net cash provided by operating activities:
                               
Deferred tax expense
            2,008               212  
Depreciation and amortization
            15,209               16,138  
Equity compensation expense
            3,307               3,971  
Write off and amortization of debt issuance costs
            250               282  
Loss on disposal of assets
            37               33  
Provision for losses on accounts receivable
            16               89  
(Gain) loss on investments
            (91 )             163  
Change in fair value of stock price protection
            —               1,565  
Change in fair value of theoretical swap derivative
            8               (689 )
Loss on cash flow hedge derivative security
            —               259  
Changes in operating assets and liabilities, net of acquisitions:
                               
Consumer deposit receivable
            —               8,279  
Consumer deposit payable
            —               (10,555 )
Changes in certain other assets and liabilities
            (958 )             (2,074 )
                     
Net cash provided by operating activities
            23,706               16,060  
Investing activities
                               
Purchases of property and equipment   (6,744)             (11,295 )
Purchases of short-term investments
            —               (250 )
Sale of short-term investments
            2,100               5,713  
                     
Net cash used in investing activities   (4,644)             (5,832 )
Financing activities
                               
Net proceeds from issuance of common stock
            425               794  
Repurchase of shares issued related to ITS acquisition
            —               (2,117 )
Payments for ITS stock protection
            —               (112 )
Repayment of 2007 notes   (11,687)             (6,375 )
Repayment of capital lease obligations
            (26 )             (27 )
                     
Net cash used in financing activities   (11,288)             (7,837 )
                     
Net increase in cash and cash equivalents
            7,774               2,391  
Cash and cash equivalents at beginning of year
            22,969               13,227  
                     
Cash and cash equivalents at end of period
  $         30,743             $ 15,618  
                     

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Online Resources Corporation
Reconciliation of Non-GAAP Measures

(In thousands, except per share data)

                                                         
    Three Months Ended       Nine Months Ended
    September 30,       September 30,
    2009       2008       2009       2008
    (Unaudited)           (Unaudited)
 
                                                       
Reconciliation of adjusted ebitda (See Note 1):
                                                       
Net income (loss)
  $ 2,713             $ 766             $ 3,920             $ (1,613 )
Depreciation and amortization (incl. loss on disposal of assets)
    4,822               5,183               15,246               16,171  
Equity compensation expense
    1,069               1,021               3,307               3,971  
Other (income) expense
    321               989               3,105               4,804  
Income tax provision (benefit)
    918               338               1,950               (224 )
 
                                                       
Ebitda (See Note 1)
  $ 9,843             $ 8,297             $ 27,528             $ 23,109  
 
                                                       
Reconciliation of core net income (See Note 2):
                                                       
Net loss (loss) available to common stockholders
  $ 388             $ (1,471 )           $ (2,941 )           $ (8,227 )
Preferred stock accretion related to redemption premium
    398               391               1,189               1,166  
Change in fair value of stock price protection
    —               —               —               1,565  
Change in fair value of theoretical swap derivative
    (694 )             (189 )             8               (689 )
Change in fair value of mark to market investments
    (14 )             55               (91 )             163  
Equity compensation expense
    1,069               1,021               3,307               3,971  
Amortization of intangible assets
    1,753               2,132               5,917               7,348  
 
                                                       
Core net income (see Note 2)
  $ 2,900             $ 1,939             $ 7,389             $ 5,297  
 
                                                       
Reconciliation of core net income per share:
                                                       
Diluted net income (loss) available to common stockholders
  $ 0.01             $ (0.05 )           $ (0.10 )           $ (0.28 )
Preferred stock accretion related to redemption premium
    0.01               0.01               0.04               0.04  
Change in fair value of stock price protection
    —               —               —               0.05  
Change in fair value of theoretical swap derivative
    (0.02 )             (0.01 )             —               (0.02 )
Change in fair value of mark to market investments
    —               —               —               0.01  
Equity compensation expense
    0.03               0.03               0.11               0.14  
Amortization of intangible assets
    0.06               0.07               0.20               0.25  
Other, including impact of treasury method and rounding
    —               0.01               (0.01 )             (0.02 )
 
                                                       
Core net income per share
  $ 0.09             $ 0.06             $ 0.24             $ 0.17  
 
                                                       
 
                                                       

    Notes:

1.   Adjusted ebitda is a non-GAAP measure we define as earnings before interest, taxes, depreciation and amortization, preferred stock accretion and equity compensation expense.  

2.   Core net income is a non-GAAP measure we define as net income available to common stockholders before, on a pre-tax basis, the amortization of acquisition-related intangible assets, equity compensation expense, income tax benefit from the release of 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.  

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