JetPay® Corporation (“JetPay” or the “Company”) (NASDAQ: “JTPY”)
announced financial results for the third quarter ended September
30, 2014.
Key Highlights for the Third Quarter
2014
- Revenues were up 3.7% to $23.63 million
for the nine months ended September 30, 2014 as compared to $22.79
million for the same period in 2013, and $7.74 million for the
three months ended September 30, 2014, comparable to revenues for
the same period in 2013 of $7.81 million.
- Gross profit increased 3.7% to $9.35
million, or 39.6% of reported revenues, for the nine months ended
September 30, 2014, up from $9.02 million, or 39.6% of reported
revenues, for the nine months ended September 30, 2013. Similarly,
gross profit increased 2.6% to $2.88 million, or 37.2% of reported
revenues, for the three months ended September 30, 2014, up from
$2.81 million, or 35.9% of reported revenues, for the three months
ended September 30, 2013.
- Earnings before Interest, Taxes,
Depreciation, and Amortization (“EBITDA”) was $(111,000) and
$180,000 for the three and nine months ended September 30, 2014,
respectively. EBITDA, adjusted for non-recurring and non-cash
items, (“adjusted EBITDA”) - (see reconciliation of operating
(loss) income to EBITDA and adjusted EBITDA below), for the nine
months ended September 30, 2014 was $1.86 million, or 7.9% of
revenues as compared to $2.92 million, or 12.8% of revenues for the
same period in 2013. The decrease in adjusted EBITDA in the current
year was largely related to the Company’s investment in
significantly expanding its professional sales team and 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, roll-out of the
OneCall program featuring American Express’ OptBlue, and other
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 $34.8
million, was 35% at September 30, 2014.
- JetPay announced the closing of the
acquisition of ACI Merchant Systems, LLC (“ACI”), a Langhorne,
Pennsylvania based debit and credit card processing company. ACI,
founded in 2004 by Michael Collester, provides debit and credit
card processing services in partnership with banks, credit unions,
and other financial institutions, as well as industry associations.
ACI delivers these high-quality products and services using scale
and service economies that individual banks and credit unions would
not be able to provide. ACI services several thousand businesses,
primarily in the Mid-Atlantic and Northeast regions of the United
States. JetPay, combined with ACI, will process approximately $20
billion in payments for approximately 14,000 businesses throughout
the United States.
Bipin C. Shah, Chairman and CEO of JetPay Corporation, stated:
“We saw significant developments in our sales and technology
platforms in 2014, positioning JetPay for solid growth in 2015. The
addition of ACI we believe will help us to accelerate that growth.”
Mr. Shah further commented, “I continue to be encouraged by the
results of our ongoing cross selling efforts and the growth we
continue to see in new customers in our Payments and Payroll
processing platforms. This growth in revenues has provided
increased gross profits year over year and positive cash flow
exclusive of the non-recurring expenses we have incurred as we
continue to resolve open litigation. These 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 to insure we maintain
our strength in the card-not-present processing market and as we
continue to develop new products and services that will
differentiate us from other payment companies and strengthen the
recognition and value of our JetPay name.”
Financial Results, Third Quarter of
2014 Compared to Third Quarter of 2013
Revenues were $7.74 million for the three months ended September
30, 2014, comparable to $7.81 million for the same period in 2013.
Revenues for JetPay’s Payroll Services division increased $71,000,
or 2.4%, for the three months ended September 30, 2014 as compared
to the same period in 2013. This increase was attributable to net
growth in volume of payroll and related payroll taxes processed.
Revenues for JetPay’s Payment Services division decreased $149,000,
or 3.1%, for the three months ended September 30, 2014 compared to
the same period in 2013. The most significant decrease was within
our JetPay Payment Services’ processing and clearing business as a
result of the loss of a large processing customer, partially offset
by an increase in revenues from one of our larger card-not-present
customers and increases in our ISO business.
Operating loss for the three months ended September 30, 2014 was
$(763,000), compared to an operating loss of $(402,000) for the
same period in 2013. Operating loss is after subtracting
depreciation and amortization expense of $654,000 and $653,000 for
the three months ended September 30, 2014 and 2013, respectively.
The increase in the operating loss was attributable to an increase
in selling, general, and administrative (“SG&A”) expenses of
$446,000 which included non-recurring legal settlement costs of
$89,000, start-up expenses relating to the Company’s new Card
Services division of $150,000, and professional fees incurred in
resolving open litigation legal and for acquisition related costs
of $313,000. The increase in SG&A is part of the positioning of
the Company for growth in 2015.
Net loss for the three months ended September 30, 2014 was
$(2.1) million, or a net loss applicable to common stockholders of
$(2.6) million after accretion of convertible preferred stock of
$574,000, a loss per share applicable to common stockholders of
$(0.22) per share, compared to a net loss of approximately $(3.5)
million, or a loss of $(0.30) per share, for the three months ended
September 30, 2013. The decrease in net loss was primarily related
to a change in fair value of derivative liability resulting in a
$1.7 million improvement over the same period in the prior year and
a decrease in interest expense of $200,000, partially offset by the
increase in SG&A expenses described above.
Financial Results, First Nine Months of
2014 Compared to the First Nine Months of 2013
Revenues were $23.63 million for the nine months ended September
30, 2014 as compared to $22.79 million for the same period in 2013,
representing an increase of $836,000, or 3.7%. Revenues for
JetPay’s Payroll Services division increased $320,000, or 3.4%, for
the nine months ended September 30, 2014 as compared to the same
period in 2013. This increase is directly related to a 3% rate
increase implemented in the second quarter of 2013 combined with
net growth in volume of payroll and related payroll taxes
processed. Revenues for JetPay’s Payment Services division
increased $516,000, or 3.8%, for the nine months ended September
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 nine months ended September 30, 2014 was
$(1.79) million, compared to operating income of $81,000 for the
same period in 2013. Operating (loss) income is after subtracting
depreciation and amortization expense of $2.0 million in each of
the nine months ended September 30, 2014 and 2013. The decrease in
the operating income was attributable to an increase in SG&A
expenses of $1.6 million, which included non-recurring legal
settlement costs of $571,000 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, $260,000 of non-cash stock-based compensation expense,
$611,000 of professional fees incurred in resolving open litigation
legal and for acquisition related costs, and $417,000 of start-up
expenses relating to the Company’s new Card Services division.
Net loss for the nine months ended September 30, 2014 was
approximately $(5.8) million, or a net loss applicable to common
stockholders of $(7.4) million after accretion of convertible
preferred stock of $1.6 million, a loss per share applicable to
common stockholders of $(0.63) per share, compared to a net loss of
$(4.3) million, or a loss of $(0.37) per share, for the nine months
ended September 30, 2013. The increase in net loss was directly
related to the increase in SG&A expenses noted above partially
offset by a decrease in interest expense of $512,000. Net loss also
includes non-cash amortization of deferred financing costs, debt
discounts and conversion options of $2.86 million and $2.64 million
for the nine months ended September 30, 2014 and 2013,
respectively. A significant part of these non-cash expenses will
not recur in 2015 as a majority of these expenses relate to the $10
million convertible secured notes due to mature in December
2014.
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.jetpay.com for more information on what JetPay has to offer or
call 866-4JetPay (866-453-8729).
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 and professional costs
for non-repetitive matters, legal settlement costs, non-cash stock
option costs, and non-cash losses on the disposal of fixed 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
September 30,
Nine Months Ended
September 30,
2014 2013
2014 2013 Operating
(loss) income $ (763 ) $ (402 ) $ (1,790 ) $ 81 Change in fair
value of contingent
consideration liability
(2
)
10
(10
)
(570
)
Amortization of intangibles 560 560 1,680 1,680 Depreciation
94 93 300 292
EBITDA $ (111 ) $ 261 $ 180 $ 1,483 Professional fees
for non-repetitive matters 313 235 611 1,324 Legal settlement costs
89 - 571 - Non-cash stock option costs 92 110 260 110 Non-cash loss
on disposal of fixed asset - - 237 -
Adjusted EBITDA $ 383 $ 606 $ 1,859 $ 2,917
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 Nine
Months Ended September 30, September 30,
2014 2013 2014 2013
Processing revenues $ 7,735 $ 7,813 $ 23,630 $ 22,794 Cost
of processing revenues 4,856 5,008
14,277 13,773 Gross profit 2,879
2,805 9,353 9,021 Selling, general and administrative
expenses 2,990 2,544 9,173 7,538 Change in fair value of contingent
consideration liability (2 ) 10 (10 ) (570 ) Amortization of
intangibles 560 560 1,680 1,680 Depreciation 94
93 300 292
Operating (loss) income (763 ) (402 ) (1,790 ) 81 Other
expenses (income) Interest expense 411 619 1,226 1,738 Amortization
of deferred financing costs, debt discounts and conversion options
980
905
2,855
2,636
Change in fair value of derivative liability (150 ) 1,560 (210 )
(100 ) Other income (1 ) - (5 )
(1 ) Loss before income taxes (2,003 ) (3,486 ) (5,656 )
(4,192 ) Income tax expense 51 27
155 85 Net loss (2,054 )
(3,513 ) (5,811 ) (4,277 ) Accretion of convertible preferred stock
(574 ) - (1,621 ) -
Net loss applicable to common stockholders $ (2,628 ) $
(3,513 ) $ (7,432 ) $ (4,277 ) Basic and diluted loss per
share applicable to common stockholders $ (0.22 ) $ (0.30 ) $ (0.63
) $ (0.37 ) Weighted average shares outstanding: Basic and
diluted 11,863,823 11,529,094
11,750,122 11,524,881
JetPay
Corporation Condensed Consolidated Balance Sheets
(In thousands, except share and par value
information)
September 30, December 31, 2014
2013 ASSETS (Unaudited) (Audited)
Current assets: Cash and cash equivalents $ 3,936 $ 4,799
Restricted cash 180 121 Accounts receivable, less allowance for
doubtful accounts 1,345 2,089 Settlement processing assets 12,328
18,876 Prepaid expenses and other current assets 788
614
Current assets before funds held for clients 18,577
26,499 Funds held for clients 30,651 32,521
Total
current assets 49,228 59,020 Property and equipment, net 1,104
1,252 Goodwill 31,166 31,166 Identifiable intangible assets, net
21,131 22,811 Deferred financing costs, net 622 2,335 Other assets
4,505 5,151
Total assets $ 107,756 $ 121,735
LIABILITIES Current liabilities: Current
portion of long-term debt and capital lease obligation $ 11,058 $
10,674 Accounts payable and accrued expenses 9,263 12,154
Settlement processing liabilities 11,554 18,140 Deferred revenue,
derivative liability and other current liabilities 2,393
2,605
Current liabilities before client fund
obligations 34,268 43,573 Client fund obligations 30,651
32,521
Total current liabilities 64,919 76,094
Long-term debt and capital lease obligation, net of current portion
7,776 8,071 Deferred income taxes 239 239 Other liabilities
20 109
Total liabilities 72,954 84,513
Commitments and Contingencies Redeemable
Convertible Preferred Stock 11,967 8,221
Stockholders’ Equity 22,835 29,001
Total
Liabilities and Stockholders’ Equity $ 107,756 $ 121,735
JetPay CorporationPeter Davidson, Vice ChairmanChief Marketing
Officer484-324-7980Peter.Davidson@jetpaycorp.comorJetPay
CorporationJoan Wurzel, Senior Vice PresidentDirector of Corporate
Communications610-747-0256Joan.Wurzel@jetpaycorp.com
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