Official Payments Holdings' CEO Discusses Q2 2012 Results - Earnings Call Transcript

Official Payments Holdings (OPAY)

Q2 2012 Earnings Call

May 07, 2012 5:00 pm ET

Executives

Jack Browne -

Alex P. Hart - Chief Executive Officer, President and Director

Jeffrey W. Hodges - Chief Financial Officer, Principal Accounting Officer and Senior Vice President

Analysts

Elizabeth Murphy Lilly - Gabelli Funds, LLC

Gary F. Prestopino - Barrington Research Associates, Inc., Research Division

Presentation

Operator

Welcome and thank you for joining the Official Payments Holdings, Inc.'s Fiscal 2012 Second Quarter Earnings Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now I'll turn today's meeting over to your host, Mr. Jack Browne. Sir, you may begin.

Jack Browne

Thank you. Good afternoon. My name is Jack Browne. I'm the controller for Official Payments. At this time, I would like to welcome everyone to the Official Payments Holdings, Inc. Earnings Conference Call for the quarter ended March 31, 2012. Today's call is scheduled for one hour.

After the market closed today, we issued a press release announcing OPAY's financial results for the quarter ended March 31, 2012. A copy of the press release can be found on the Investor Relations section of our website, www.opay.officialpayments.com. We invite shareholders and analysts who wish to speak to management about the company and its performance to schedule a meeting by contacting our Chief Financial Officer, Jeff Hodges, by calling him at (770) 325-3102 or by e-mailing him at jeff.hodges@officialpayments.com.

A taped replay of this call will be available on the company's website from 8:00 a.m. Eastern Time, Tuesday, May 8, 2012, until Tuesday, May 29, 2012, at 11:45 p.m. Eastern Time. Alternatively, you can hear a replay by dialing (866) 415-2336, starting at 8:00 a.m. Eastern Time Tuesday, May 8, 2012.

I want to remind you that various remarks that we make about the company's future expectations, plans and prospects constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. The forward-looking statements discussed on this call represents management's current expectations about the company's future financial performance, based on the information available to us today. This information may change and our actual results may differ materially from these forward-looking statements. We undertake no obligation to update any such forward-looking statements.

There are numerous risks and uncertainties that affect our business and may affect these statements, including but not limited to, general economic conditions, which affect the company's financial results in all of our markets, which we refer to as vertical markets, or verticals, particularly, the federal vertical, the state and local tax vertical and the property tax vertical; effectiveness and performance of our systems, payment processing platforms and operational infrastructure; our ability to grow Payment Solutions revenue while reducing our costs, including processor and interchange-related costs; the timing, initiation, completion, renewal, extension or early termination of client or partner contracts or projects; our ability to execute on our sales and product strategy and realize revenues from our business development opportunities; the impact of regulatory requirements and unanticipated claims as a result of project performance, including due to the failure of software providers, processors, vendors, partners or subcontractors to satisfactorily perform and complete engagements.

For a discussion of these and other factors which may cause our actual events or results to differ from those projected, please refer to our annual report on Form 10-K for the period ended September 30, 2011 and our most recent Form 10-Q filed with the Securities and Exchange Commission. In this call, references to “the quarter” or “the second quarter” refer to the quarter ended March 31, 2012.

During this call, we will be referring to non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with Generally Accepted Accounting Principles. We defined the non-GAAP financial measures used in this call, and we have presented reconciliations of these non-GAAP financial measures on a historical basis to the most directly comparable GAAP measures in the press release that we issued earlier today. That press release is also an exhibit to the Form 8-K that we filed earlier today. Form 8-K, including the press release, is available on the Investor Relations section of our website, www.opay.officialpayments.com, under the heading, Investor Relations.

With me on the call is today are Jeff Hodges, our Chief Financial Officer; and Alex Hart, our President and Chief Executive Officer. We'll begin the call with Alex. Alex?

Alex P. Hart

Thanks, Jack. On our last call, I said that I felt that we were on the right track in terms of realizing the benefits of the investments we've made both last year and earlier this year. In the second quarter of fiscal 2012, we continue to see meaningful increases in both net revenue and adjusted EBITDA in our Payment Solutions business. Our second quarter has, historically, not been as strong as our first quarter, but this year, we saw a slight improvement in our net revenue margin compared to our first quarter. Further evidence that the actions we've taken are bearing fruit.

I'll expand on our progress related to the strategic initiatives we've discussed in prior calls and share our expectations for the remainder of fiscal year 2012 in a few minutes. But first, I'd like Jeff Hodges, our CFO, to cover our second quarter operating results in more detail. Jeff?

Jeffrey W. Hodges

Thanks, Alex. We're pleased to report that we generated $1 million in adjusted EBITDA from Continuing Operations for the second quarter of fiscal year 2012. This represents 184% increase over the same period a year ago, in which we reported negative adjusted EBITDA from Continuing Operations of $1.2 million.

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