JetPay® Corporation (“JetPay” or the “Company”) (NASDAQ: “JTPY”)
announced financial results for the second quarter ended June 30,
2014.
Key Highlights for the Second Quarter
2014
- Revenues were up 6.0% to $7.73 million
for the three months ended June 30, 2014 as compared to $7.29
million for the same period in 2013, and up 6.1% to $15.90 million
for the six months ended June 30, 2014 as compared to $14.98
million for the same period in 2013.
- Gross profit increased 10.4% to $3.0
million, or 39% of reported revenues, for the three months ended
June 30, 2014, up from $2.7 million, or 37% of reported revenues,
for the three months ended June 30, 2013.
- Earnings before Interest, Taxes,
Depreciation, and Amortization (“EBITDA”) adjusted for
non-recurring and non-cash items (“adjusted EBITDA”) - (see
reconciliation of operating (loss) income to EBITDA and adjusted
EBITDA below) was $500,000 for the three months ended June 30, 2014
and $1.48 million for the six months ended June 30, 2014. Adjusted
EBITDA for the three months ended June 30, 2014 of $500,000 was
6.5% of revenues as compared to adjusted EBITDA for the three
months ended June 30, 2013 of $795,000 or 10.9% of revenues. The
decrease in adjusted EBITDA in the current period was directly
related to the Company’s investment in significantly expanding its
marketing efforts and its professional sales team, including the
addition of experienced national sales directors in both the
Company’s Payment Services operations and its Payroll Services
operations. As previously disclosed, the Company also made
investments in its technology platform and new products and
services, such as its recently launched MAC prepaid Visa® card, its
Payroll Services’ Workforce Today™ human resource management
product, and enhancements to its credit and debit card processing
platform.
- The ratio of our total debt to total
capitalization, which consists of total debt of $18.8 million and
convertible preferred stock and stockholders’ equity totaling $36.8
million, was 34% at June 30, 2014.
- JetPay signed a Securities Purchase
agreement with an affiliate of Wellington pursuant to which the
Company agreed to sell to Wellington, upon the satisfaction of
certain conditions, up to 9,000 shares of Series A-1 Convertible
Preferred Stock, par value $0.001 (“Series A-1 Preferred”) for an
aggregate purchase price of up to $2.7 million. On May 5, 2014, the
Company issued 2,565 shares of Series A-1 Preferred to Wellington
for proceeds of $744,500, net of certain agreed-upon reimbursable
expenses of Wellington.
- JetPay announced the introduction of
its JetPay Payroll Services division’s comprehensive,
fully-operational, cloud-based human resource (HR) management
system -- WorkForce Today™. WorkForce Today™ combines the newest
technology with time-tested tools for managing customers’ greatest
assets, their employees, to integrate with JetPay Payroll Services’
well-established payroll and payroll tax processing services. The
system offers mid-sized businesses the same tracking and reporting
tools used by large corporations and offers large corporations a
user-friendly, comprehensive system to manage their entire
workforce.
Bipin C. Shah, Chairman and CEO of JetPay Corporation, stated:
“I continue to be encouraged by the growth we are seeing in the new
customers we are bringing to our Payments and Payroll processing
platforms and the positive growth in gross profits year over year.
I am also pleased with our positive cash flow exclusive of the
non-recurring expenses we have incurred as we continue to resolve
open litigation. These cash flow results are especially positive
considering the significant investments we are making in expanding
our professional sales organization and our investments in our
technology platforms and professionals.” Mr. Shah further
commented, “In addition to maintaining our strength in the
card-not-present processing market, I am excited about the new
products and services our team is bringing to the marketplace. I am
confident that these products and services will differentiate us
from other payment companies and strengthen the recognition and
value of our JetPay name. In addition to our organic growth, I am
also excited about our progress in searching for accretive
acquisition partners that would complement or extend our current
products and services as well as our geographic reach to accelerate
our growth.”
Financial Results, Second Quarter of
2014 Compared to Second Quarter of 2013
Revenues were $7.73 million for the three months ended June 30,
2014 as compared to $7.29 million for the same period in 2013,
representing an increase of $434,000, or 6.0%. Revenues for
JetPay’s Payroll Services division increased $120,000, or 4.1%, for
the three months ended June 30, 2014 as compared to the same period
in 2013. This increase is directly related to a rate increase
implemented in mid-2013 and net growth in the volume of payroll and
related payroll taxes processed. Revenues for JetPay’s Payment
Services division increased $313,000, or 7.2%, for the three months
ended June 30, 2014 compared to the same period in 2013, primarily
due to a change in accounting for reporting certain processing
revenues in June 2013 as a result of a transfer of its processing
to a new sponsoring bank and growth from new and existing merchant
and ISO customers.
Operating loss for the three months ended June 30, 2014 was
$(1.07) million, compared to an operating loss of $(364,000) for
the same period in 2013. Operating loss is net of depreciation and
amortization expense of $663,000 for each of the three months ended
June 30, 2014 and 2013. The increase in the operating loss was
attributable to an increase in selling, general, and administrative
(“SG&A”) expenses of $866,000 which included non-recurring
legal settlement costs of $482,000 and a non-cash loss on the
disposal of fixed assets of $237,000. The increase in SG&A
expenses included an investment in personnel in our sales and
technology areas, professional fees incurred in defending the
EarlyBirdCapital dispute and in resolving open litigation, $88,000
of non-cash stock-based compensation expense, and $112,000 of
start-up expenses relating to the Company’s new Card Services
division.
Net loss for the three months ended June 30, 2014 was $(2.3)
million, or a net loss applicable to common stockholders of $(2.9)
million after accretion of convertible preferred stock of $538,000,
a loss per share applicable to common stockholders of $(0.25) per
share, compared to a net loss of approximately $(1.7) million, or a
loss of $(0.14) per share, for the three months ended June 30,
2013. The increase in net loss was directly related to the increase
in SG&A expenses, including the non-recurring items noted
above. Net loss includes non-cash amortization of deferred
financing costs, debt discounts and conversion options of $952,000
and $956,000 for the three months ended June 30, 2014 and 2013,
respectively.
Financial Results, First Six Months of
2014 Compared to the First Six Months of 2013
Revenues were $15.90 million for the six months ended June 30,
2014 as compared to $14.98 million for the same period in 2013,
representing an increase of $914,000, or 6.1%. Revenues for
JetPay’s Payroll Services division increased $248,000, or 3.9%, for
the six months ended June 30, 2014 as compared to the same period
in 2013. This increase is directly related to a rate increase
implemented in mid-2013 and net growth in the volume of payroll and
related payroll taxes processed. Revenues for JetPay’s Payment
Services division increased $665,000, or 7.7%, for the six months
ended June 30, 2014 compared to the same period in 2013, primarily
due to a change in accounting for reporting certain processing
revenues in June 2013 as a result of a transfer of its processing
to a new sponsoring bank and growth from new and existing merchant
and ISO customers.
Operating loss for the six months ended June 30, 2014 was
$(1.03) million, compared to operating income of $482,000 for the
same period in 2013. Operating (loss) income is after subtracting
depreciation and amortization expense of $1.3 million in each of
the six months ended June 30, 2014 and 2013. The decrease in the
operating income was attributable to an increase in SG&A
expenses of $1.2 million, which included non-recurring legal
settlement costs of $482,000 and a non-cash loss on the disposal of
fixed assets of $237,000. The increase in SG&A expenses also
included an investment in personnel in our sales and technology
areas, $168,000 of non-cash stock-based compensation expense, and
$268,000 of start-up expenses relating to the Company’s new Card
Services division.
Net loss for the six months ended June 30, 2014 was
approximately $(3.8) million, or a net loss applicable to common
stockholders of $(4.8) million after accretion of convertible
preferred stock of $1.05 million, a loss per share applicable to
common stockholders of $(0.41) per share, compared to a net (loss)
of $(767,000), or a loss of $(0.07) per share, for the six months
ended June 30, 2013. The increase in net loss was directly related
to the increase in SG&A expenses, including the non-routine
items noted above and a benefit in 2013 from a non-cash favorable
change in the fair value of a derivative liability of $1.66
million. Net loss also includes non-cash amortization of deferred
financing costs, debt discounts and conversion options of $1.88
million and $1.73 million for the six months ended June 30, 2014
and 2013, respectively.
About JetPay Corporation
JetPay Corporation, based in Berwyn, PA, is a leading provider
of vertically integrated solutions for businesses including card
acceptance, processing, payroll, payroll tax filing and other
financial transactions. JetPay provides a one vendor solution for
payment services, debit and credit card processing, ACH services,
and payroll and tax processing needs for businesses throughout the
United States. The Company also offers low-cost payment choices for
the employees of these businesses to replace costly alternatives.
The Company’s vertically aligned services provide customers with
convenience and increased revenues by lowering payments-related
costs and by designing innovative, customized solutions for
internet, mobile, and cloud-based payments. Please visit
www.jetpaycorporation.com, www.jetpay.com, or
www.jetpaypayroll.com, for more information on what JetPay has to
offer or call (800) 834-4405.
Non-GAAP Financial
Measures
This press release includes EBITDA and adjusted EBITDA, non-GAAP
financial measures, as defined in Regulation G of the Securities
and Exchange Act of 1934, as amended. The Company reports its
financial results in compliance with GAAP, but believes that also
discussing non-GAAP measures provides investors with financial
measures it uses in the management of its business. The Company
defines EBITDA as operating income, before interest, taxes,
depreciation, amortization of intangibles, and non-cash changes in
the fair value of contingent consideration liability. The Company
defines adjusted EBITDA as EBITDA, as defined above, plus certain
non-recurring items, including certain legal costs for
non-repetitive matters, legal settlement costs, non-cash stock
option costs, and non-cash losses on the disposal of fixes assets.
These measures may not be comparable to similarly titled measures
reported by other companies. Management uses operating EBITDA and
adjusted EBITDA as indicators of the Company’s operating
performance and ability to fund acquisitions, capital expenditures
and other investments and, in the absence of refinancing options,
to repay debt obligations. Management believes operating EBITDA and
adjusted EBITDA are helpful to investors in evaluating the
Company’s operating performance because non-cash costs and other
items that management believes are not indicative of its results of
operations are excluded. EBITDA and adjusted EBITDA are
supplemental non-GAAP measures, which have limitations as an
analytical tool. Non-GAAP financial measures should not be
considered as a substitute for, or superior to, measures of
financial performance prepared in accordance with GAAP. Non-GAAP
financial measures do not reflect a comprehensive system of
accounting, differ from GAAP measures with the same names and may
differ from non-GAAP financial measures with the same or similar
names that are used by other companies. For a description of our
use of EBITDA and adjusted EBITDA and a reconciliation of EBITDA
and adjusted EBITDA to operating (loss) income, see the section of
this press release titled “EBITDA and adjusted EBITDA
Reconciliation.”
EBITDA and
adjusted EBITDA Reconciliation
(000’s omitted) Three Months Ended
Six Months Ended June 30, June 30, 2014
2013 2014 2013 Operating (loss)
income $ (1,070) $ (364) $ (1,027) $ 482
Change in fair value of contingent
consideration liability
(8)
(130)
(8)
(580)
Amortization of intangibles 560 560 1,120 1,120 Depreciation
103 103 206 199 EBITDA $ (415) $ 169 $
291 $ 1,221 Legal fees for non-repetitive matters 108 626
298 1,089 Legal settlement costs 482 - 482 - Non-cash stock option
costs 88 - 168 - Non-cash loss on disposal of fixed asset 237 - 237
- Adjusted EBITDA $ 500 $ 795 $ 1,476 $
2,310
Forward-Looking Statements
This press release includes “forward-looking statements” within
the meaning of the safe harbor provisions of the United States
Private Securities Litigation Reform Act of 1995. JetPay’s actual
results may differ from its expectations, estimates and projections
and consequently, you should not rely on these forward-looking
statements as predictions of future events. Words such as “expect,”
“estimate,” “project,” “budget,” “forecast,” “anticipate,”
“intend,” “plan,” “may,” “will,” “could,” “should,” “believes,”
“predicts,” “potential,” “continue,” and similar expressions are
intended to identify such forward-looking statements. These
forward-looking statements involve significant risks and
uncertainties that could cause the actual results to differ
materially from the expected results. Most of these factors are
outside JetPay’s control and are difficult to predict. Factors that
may cause such differences include, but are not limited to, those
described under the heading “Risk Factors” in the Company’s Annual
Report filed with the Securities and Exchange Commission (“SEC”) on
Form 10-K for the fiscal year ended December 31, 2013, the
Company’s Quarterly Reports on Form 10-Q and the Company’s Current
Reports on Form 8-K.
JetPay cautions that the foregoing list of factors is not
exclusive. Additional information concerning these and other risk
factors is contained in JetPay’s most recent filings with the
Securities and Exchange Commission. All subsequent written and oral
forward- looking statements concerning JetPay or other matters and
attributable to JetPay or any person acting on its behalf, are
expressly qualified in their entirety by the cautionary statements
above. JetPay cautions readers not to place undue reliance upon any
forward-looking statements, which speak only as of the date made.
JetPay does not undertake or accept any obligation or undertaking
to release publicly any updates or revisions to any forward-looking
statements to reflect any change in its expectations or any change
in events, conditions or circumstances on which any such statement
is based.
JetPay Corporation Condensed Consolidated
Statements of Operations (Unaudited)
(in thousands, except share and per share
information)
For the Three Months Ended For the Six
Months Ended June 30, June 30, 2014
2013 2014 2013 Processing
revenues $ 7,726 $ 7,292 $ 15,895 $ 14,981 Cost of processing
revenues 4,733 4,581 9,421 8,765
Gross profit 2,993 2,711 6,474 6,216 Selling, general and
administrative expenses 3,408 2,542 6,183 4,995 Change in fair
value of contingent consideration liability (8) (130) (8) (580)
Amortization of intangibles 560 560 1,120 1,120 Depreciation
103 103 206 199 Operating (loss) income
(1,070) (364) (1,027) 482 Other expenses (income) Interest
expense 409 556 815 1,121 Amortization of deferred financing costs,
debt discounts and conversion options 952
956
1,875
1,731
Change in fair value of derivative liability (110) (255) (60)
(1,660) Other income (2) - (4) (1)
Loss before income taxes (2,319) (1,621) (3,653) (709)
Income tax expense 52 31 104 58
Net loss (2,371) (1,652) (3,757) (767) Accretion of
convertible preferred stock (538) - (1,047)
- Net loss applicable to common stockholders $
(2,909) $ (1,652) $ (4,804) $ (767) Basic and diluted loss
per share applicable to common stockholders $ (0.25) $ (0.14) $
(0.41) $ (0.07) Weighted average shares outstanding: Basic
and diluted 11,852,834 11,526,346 11,692,329
11,522,740
JetPay Corporation
Condensed Consolidated Balance Sheets
(In thousands, except share and par value
information)
June 30, December 31, 2014
2013 ASSETS (Unaudited) (Audited)
Current assets: Cash and cash equivalents $ 4,117 $ 4,799
Restricted cash 169 121 Accounts receivable, less allowance for
doubtful accounts 1,320 2,089 Settlement processing assets 13,171
18,876 Prepaid expenses and other current assets 697
614
Current assets before funds held for clients 19,474
26,499 Funds held for clients 48,112 32,521
Total
current assets 67,586 59,020 Property and equipment, net 1,086
1,252 Goodwill 31,166 31,166 Identifiable intangible assets, net
21,691 22,811 Deferred financing costs, net 1,210 2,335 Other
assets 4,906 5,151
Total assets $ 127,645 $
121,735
LIABILITIES Current liabilities:
Current portion of long-term debt and capital lease obligation $
11,259 $ 10,674 Accounts payable and accrued expenses 8,898 12,154
Settlement processing liabilities 12,301 18,140 Deferred revenue,
derivative liability and other current liabilities 2,467
2,605
Current liabilities before client fund
obligations 34,925 43,573 Client fund obligations 48,112
32,521
Total current liabilities 83,037 76,094
Long-term debt and capital lease obligation, net of current portion
7,582 8,071 Deferred income taxes 239 239 Other liabilities
22 109
Total liabilities 90,880 84,513
Commitments and Contingencies Redeemable
Convertible Preferred Stock 11,394 8,221
Stockholders’ Equity 25,371 29,001
Total
Liabilities and Stockholders’ Equity $ 127,645 $ 121,735
JetPay CorporationPeter Davidson, Vice ChairmanChief Marketing
Officer484-324-7980Peter.Davidson@jetpaycorp.comorJoan Wurzel, Senior
Vice PresidentDirector of Corporate
Communications610-747-0256Joan.Wurzel@jetpaycorp.com
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