Company Reports 72% Growth in 2018 Revenues to a Record $25 Million and Record Transaction Processing Volume of $3.4 Billion
Strong Momentum Expected to Lead to Continued Growth in 2019
SAN ANTONIO, March 27, 2019 (GLOBE NEWSWIRE) -- Payment Data Systems (PYDS), an integrated electronic payment solutions provider, today announced financial results for the fourth quarter and fiscal year 2018, which ended December 31, 2018.
Louis Hoch, President and Chief Executive Officer of Payment Data Systems, said, “Payment Data Systems achieved record transaction processing volumes and record revenues for the second consecutive year in 2018 as our ACH, prepaid and card processing businesses all had exceptional performance. Our success has been driven by our innovative, proprietary technology that is facilitating the transformation of the payments industry to a digital, on-demand, omnichannel environment.”
“Our ACH business recorded the sixth consecutive quarter of sequential growth. Prepaid’s virtual card offering continues to attract new clients. Our technology stack is one of the industry’s most robust, and we are adding new features and increasing functionality intended to help accelerate growth. Our card processing business also had a great year, going from virtually zero as recently as this past fall to numerous software vendors currently either integrating or implementing our industry-leading 'PayFac-In-A-Box' technology. We continue to invest in our prepaid and PayFac card business as we believe these are markets in which we can achieve superior growth rates and returns. This investment is possible because of the positive cash flows generated by our ACH business and our prudent balance sheet management. We are in a solid financial condition to fund both our organic growth initiatives as well as to opportunistically capitalize on strategic acquisitions, and we will continue to invest to further strengthen these competitive advantages as well as to accelerate our growth.”
Financial Results for Fourth Quarter Ended December 31, 2018
Revenues were $6.4 million for the fourth quarter, up 14% compared from the same period last year. The primary drivers of the revenue growth included organic growth of 20.5% for the quarter with ACH revenue growth achieving 25% growth for the fourth quarter.
Gross profits were $1.5 million, up 17% from the same period last year. Gross margins improved to 23.7% from 23.2% in the same period last year. The primary driver for the improved gross margin came from strong revenue growth and improved profits in our ACH operation.
Operating loss was $859,000, an improvement of over $200,000 compared to the same period last year.
Adjusted EBITDA was a loss of $83,000, improving nearly $200,000 from an adjusted EBITDA loss of $274,000 a year ago.
Net loss was $876,000, or ($0.07) per share, compared to a net loss of $1.3 million or ($0.14) per share for the same period last year.
More than $891 million of total dollars were processed in the fourth quarter, the highest quarterly processing volume in the company’s history, and up sequentially for the sixth consecutive quarter from $885 million in the third quarter of 2018. Fourth quarter 2018 processing volumes were up 8% versus the fourth quarter last year.
Payment Data Systems continues to be in solid financial condition with $2.7 million in cash and cash equivalents and no debt at December 31, 2018. In the first quarter of fiscal year 2019, the Company raised $2.0 million, $1.8 million net of fees, of additional equity capital.
Financial Results for Year Ended December 31, 2018
Revenues for 2018 were $25 million, up 72% from $14.6 million for the same period last year. The primary drivers of the revenue growth included 8 months of Singular Payments revenues plus consolidated organic growth of 12.1% for the year, with strong ACH growth as the primary driver.
Gross profit for the year ended December 31, 2018 was $5.6 million, up 48% from $3.8 million in 2017.
Gross margins were 22.3% for the year ended December 31, 2018 compared to 25.9% in 2017. Current year margins reflect the evolving mix of revenues to a higher proportion of credit card transactions processing volume offset by gains for the growth experienced primarily in the ACH gross profits.
Operating loss for the year ended December 31, 2018 was $3.8 million compared to an operating loss of $2.8 million in 2017. The increase in the current year loss was due to an increase in discretionary investment in prepaid and card processing growth initiatives, as well as an approximately $900,000 increase in non-cash expenses, including depreciation and amortization, and stock-based compensation.
Adjusted EBITDA for the year ended December 31, 2018 was a loss of $647,000, little changed from the prior year.
Net loss for the year ended December 31, 2018 was $3.8 million or ($0.31) per share compared to a loss of $3.0 million or ($0.33) per share in the same period last year. Shares used in the EPS calculation were 12.1 million in 2018 compared to 9.0 million in 2017.
Conference Call and Webcast
Payment Data Systems’ management will host a conference call with a live webcast today at 5:00 p.m. Eastern time to provide a business update. To listen to the conference call, interested parties within the U.S. should call 1-844-883-3890. International callers should call +1-412-317-9246. All callers should ask for the Payment Data Systems conference call. The conference call will also be available through a live webcast, which can be accessed via the company’s website at www.paymentdata.com/invest.
A replay of the call will be available approximately one hour after the end of the call through April 10, 2019. The replay can be accessed via the Company’s website or by dialing 1-877-344-7529 (U.S.) or +1-412-317-0088 (international). The replay conference playback code is 10129932.
About Payment Data Systems, Inc.
Payment Data Systems, Inc. (Nasdaq: PYDS), a leading integrated payment solutions provider, offers a wide range of payment solutions to merchants, billers, banks, service bureaus, and card issuers. The Company operates credit, debit/prepaid, and ACH payment processing platforms to deliver convenient, world-class payment solutions and services to their clients. The strength of the Company lies in its ability to provide tailored solutions for card issuance, payment acceptance, and bill payments as well as its unique technology in the prepaid sector. Payment Data Systems is headquartered in San Antonio, Texas and has offices in Franklin, Tennessee, just outside of Nashville.
Websites: www.paymentdata.com, www.singularpayments.com, www.payfacinabox.com, www.akimbocard.com, and www.ficentive.com. Find us on Facebook® and Twitter.
About Non-GAAP Financial Measures
This press release includes non-GAAP financial measures, EBITDA and adjusted EBITDA, 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 (loss), before interest, taxes, depreciation and amortization of intangibles. The Company defines adjusted EBITDA as EBITDA, as defined above, plus non-cash stock option costs and certain non-recurring items, such as acquisitions. These measures may not be comparable to similarly titled measures reported by other companies. Management uses 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 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, may 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 income (loss), see the section of this press release titled "Non-GAAP Reconciliation."
FORWARD-LOOKING STATEMENTS DISCLAIMER
Except for the historical information contained herein, the matters discussed in this release include forward-looking statements which are covered by safe harbors. Those statements include, but may not be limited to, all statements regarding management's intent, belief and expectations, such as statements concerning our future and our operating and growth strategy. These forward-looking statements are identified by the use of words such as "believe," "intend," "look forward," "anticipate," "schedule", and "expect" among others. Forward-looking statements in this press release are subject to certain risks and uncertainties inherent in the Company's business that could cause actual results to vary, including such risks related to the realization of the anticipated opportunities from the Singular acquisition, the management of the Company's growth, the loss of key resellers, the relationships with the Automated Clearinghouse network, bank sponsors, third-party card processing providers and merchants, the security of our software, hardware and information, the volatility of the stock price, the need to obtain additional financing, risks associated with new tax legislation, and compliance with complex federal, state and local laws and regulations, and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission including its annual report on Form 10-K for the fiscal year ended December 31, 2018. One or more of these factors have affected, and in the future, could affect the Company’s businesses and financial results in the future and could cause actual results to differ materially from plans and projections. The Company believes that the assumptions underlying the forward-looking statements included in this release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the objectives and plans will be achieved. All forward-looking statements made in this release are based on information presently available to management. The Company assumes no obligation to update any forward-looking statements, except as required by law.
Contact:
Joe Hassett, Investor Relations
joeh@gregoryfca.com
610-228-2110
PAYMENT DATA SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
| December 31, 2018 | December 31, 2017 | |||||||||
| ASSETS | ||||||||||
| Cash and cash equivalents | $ | 2,695,177 | $ | 4,800,554 | ||||||
| Accounts receivable, net | 1,214,355 | 969,674 | ||||||||
| Settlement processing assets | 44,139,861 | 38,027,984 | ||||||||
| Prepaid expenses and other | 101,722 | 176,945 | ||||||||
| Note receivable, net | 108,750 | 150,000 | ||||||||
| Current assets before merchant reserves | 48,259,865 | 44,125,157 | ||||||||
| Merchant reserves | 12,645,803 | 14,977,468 | ||||||||
| Total current assets | 60,905,668 | 59,102,625 | ||||||||
| Property and equipment, net | 1,932,660 | 2,105,186 | ||||||||
| Other assets: | ||||||||||
| Intangibles, net | 3,676,427 | 4,676,427 | ||||||||
| Deferred tax asset | 1,394,000 | 1,394,000 | ||||||||
| Other assets | 306,757 | 157,565 | ||||||||
| Total other assets | 5,377,184 | 6,227,992 | ||||||||
| Total Assets | $ | 68,215,512 | $ | 67,435,803 | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
| Current Liabilities: | ||||||||||
| Accounts payable | $ | 308,178 | $ | 300,736 | ||||||
| Accrued expenses | 1,388,196 | 1,006,262 | ||||||||
| Settlement processing obligations | 44,139,861 | 38,027,984 | ||||||||
| Deferred revenues | 20,000 | — | ||||||||
| Current liabilities before merchant reserve obligations | 45,856,235 | 39,334,982 | ||||||||
| Merchant reserve obligations | 12,645,803 | 14,977,468 | ||||||||
| Total current liabilities | 58,502,038 | 54,312,450 | ||||||||
| Non-current liabilities: | ||||||||||
| Deferred rent | 79,748 | — | ||||||||
| Total liabilities | 58,581,786 | 54,312,450 | ||||||||
| Stockholders' Equity: | ||||||||||
| Preferred stock, $0.01 par value, 10,000,000 shares authorized; -0- shares issued and outstanding in 2018 and 2017 | — | — | ||||||||
| Common stock, $0.001 par value, 200,000,000 shares authorized; 17,129,680 and 16,874,235 issued and 16,043,630 and 16,201,634 outstanding in 2018 and 2017 | 185,561 | 186,299 | ||||||||
| Additional paid-in capital | 74,568,627 | 74,041,083 | ||||||||
| Treasury stock, at cost; 1,086,050 and 672,601 shares in 2018 and 2017 | (1,813,546) | (831,059) | ||||||||
| Deferred compensation | (6,270,675) | (7,012,544) | ||||||||
| Accumulated deficit | (57,036,241) | (53,260,426) | ||||||||
| Total stockholders' equity | 9,633,726 | 13,123,353 | ||||||||
| Total Liabilities and Stockholders' Equity | $ | 68,215,512 | $ | 67,435,803 | ||||||
PAYMENT DATA SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended | Twelve Months Ended | ||||||||||||||
| December 31, 2018 | December 31, 2017 | December 31, 2018 | December 31, 2017 | ||||||||||||
| Revenues | $ | 6,422,841 | $ | 5,621,120 | $ | 25,024,124 | $ | 14,571,158 | |||||||
| Cost of services | 4,902,990 | 4,316,345 | 19,454,611 | 10,802,932 | |||||||||||
| Gross profit | 1,519,851 | 1,304,775 | 5,569,513 | 3,768,226 | |||||||||||
| Selling, general and administrative: | |||||||||||||||
| Stock-based compensation | 289,886 | 312,256 | 1,251,779 | 968,141 | |||||||||||
| Other expenses | 1,602,885 | 1,578,936 | 6,216,605 | 4,378,969 | |||||||||||
| Depreciation and amortization | 486,474 | 487,525 | 1,875,638 | 1,258,132 | |||||||||||
| Total operating expenses | 2,379,245 | 2,378,717 | 9,344,022 | 6,605,242 | |||||||||||
| Operating (loss) | (859,394) | (1,073,942) | (3,774,509 | ) | (2,837,016) | ||||||||||
| Other income: | |||||||||||||||
| Interest income | 26,307 | 12,037 | 76,551 | 100,964 | |||||||||||
| Other income (expense) | 462 | 1,704 | (77) | 1,583 | |||||||||||
| Other income and (expense), net | 26,769 | 13,741 | 76,474 | 102,547 | |||||||||||
| (Loss) before income taxes | (832,625) | (1,060,201) | (3,698,035) | (2,734,469) | |||||||||||
| Income taxes | 43,780 | 237,639 | 77,780 | 274,316 | |||||||||||
| Net (Loss) | $ | (876,405) | $ | (1,297,840) | $ | (3,775,815) | $ | (3,008,785) | |||||||
| Earnings (Loss) Per Share | |||||||||||||||
| Basic earnings (loss) per common share: | $ | (0.07) | $ | (0.14) | $ | (0.31) | $ | (0.33) | |||||||
| Diluted earnings (loss) per common share: | $ | (0.07) | $ | (0.14) | $ | (0.31) | $ | (0.33) | |||||||
| Weighted average common shares outstanding | |||||||||||||||
| Basic | 12,129,283 | 8,954,831 | 12,128,816 | 8,995,883 | |||||||||||
| Diluted | 12,129,283 | 8,954,831 | 12,128,816 | 8,995,883 | |||||||||||
PAYMENT DATA SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| December 31, 2018 | December 31, 2017 | |||||||
| Operating Activities | ||||||||
| Net (loss) | $ | (3,775,815) | $ | (3,008,785) | ||||
| Adjustments to reconcile net (loss) to net cash (used) by operating activities: | ||||||||
| Depreciation | 875,638 | 761,660 | ||||||
| Amortization | 1,000,000 | 496,472 | ||||||
| Bad debt expense | 36,250 | 71,667 | ||||||
| Non-cash stock-based compensation | 1,251,779 | 968,141 | ||||||
| Amortization of warrant costs | 8,985 | — | ||||||
| Issuance of stock to consultant | 7,911 | 40,200 | ||||||
| Deferred income tax | — | 227,000 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (244,681) | (133,591) | ||||||
| Prepaid expenses and other | 75,223 | (34,916) | ||||||
| Other assets | (149,192) | 43,243 | ||||||
| Accounts payable and accrued expenses | 389,376 | 458,632 | ||||||
| Merchant reserves | (2,331,665) | (826,173) | ||||||
| Deferred revenue | 20,000 | — | ||||||
| Deferred rent | 79,748 | — | ||||||
| Net cash (used) by operating activities | (2,756,443) | (936,450) | ||||||
| Investing Activities | ||||||||
| Purchases of property and equipment | (703,112 | ) | (372,337) | |||||
| Purchase of Singular Payments, LLC | — | (900,000) | ||||||
| Advance to Singular Payments, LLC | — | (600,000) | ||||||
| Repayment of note receivable | 5,000 | 50,000 | ||||||
| Net cash (used) by investing activities | (698,112) | (1,822,337) | ||||||
| Financing Activities | ||||||||
| Proceeds from public offering, net of expenses | — | 2,725,340 | ||||||
| Purchases of treasury stock | (982,487) | (112,910) | ||||||
| Net cash (used) provided by financing activities | (982,487) | 2,612,430 | ||||||
| Change in cash, cash equivalents and merchant reserves | (4,437,042) | (146,357) | ||||||
| Cash, cash equivalents and merchant reserves, beginning of year | 19,778,022 | 19,924,379 | ||||||
| Cash, Cash Equivalents and Merchant Reserves, End of Year | $ | 15,340,980 | $ | 19,778,022 | ||||
| Supplemental disclosures of cash flow information | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | — | $ | — | ||||
| Income taxes | 49,000 | 45,000 | ||||||
| Non-cash transactions: | ||||||||
| Issuance of common stock in exchange for purchases of Singular Payments, LLC | — | 3,500,000 | ||||||
| Forgiveness of note receivable in exchange for purchase of Singular Payments, LLC | — | 600,000 | ||||||
| Issuance of deferred stock compensation | 303,750 | 3,713,688 | ||||||
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
| Three Months Ended | Twelve Months Ended | ||||||||||||||
| December 31, | December 31, | December 31, | December 31, | ||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Reconciliation from Operating (Loss) to Adjusted EBITDA: | |||||||||||||||
| Operating (Loss) | $ | (859,394) | $ | (1,073,942) | $ | (3,774,509) | $ | (2,837,016) | |||||||
| Depreciation and amortization | 486,474 | 487,525 | 1,875,638 | 1,258,132 | |||||||||||
| EBITDA | (372,920) | (586,417) | (1,898,871) | (1,578,884) | |||||||||||
| Non-cash stock-based compensation expense, net | 289,886 | 312,256 | 1,251,779 | 968,141 | |||||||||||
| Adjusted EBITDA | $ | (83,034) | $ | (274,161) | $ | (647,092) | $ | (610,743) | |||||||
| Calculation of Adjusted EBITDA margins: | |||||||||||||||
| Revenues | $ | 6,422,841 | $ | 5,621,120 | $ | 25,024,124 | $ | 14,571,158 | |||||||
| Adjusted EBITDA | (83,034) | (274,161) | (647,092) | (610,743) | |||||||||||
| Adjusted EBITDA margins | -1.3% | -4.9% | -2.6% | -4.2% | |||||||||||