Official Payments Holdings' CEO Discusses F3Q12 Results - Earnings Call Transcript

Official Payments Holdings, Inc. (OPAY)

F3Q12 Earnings Conference Call

August 07, 2012 5:00 PM ET

Executives

Jack Brown - Controller

Alex Hart – President and CEO

Jeffrey Hodges – SVP, CFO, Principal Accounting Officer

Analysts

Brett Huff - Stephens Inc.

Sam Bergman - Bayberry Capital Management

Presentation

Operator

Welcome and thank you all for standing by. (Operator instructions) And I’d now like to turn the meeting over to Mr. Jack Browne. Thank you, sir. You may begin.

Jack Brown

Thank you. Good afternoon. My name is Jack Brown; 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 June 30 th, 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 June 30 th, 2012.

A copy of the press release can be found in the Investor Relations section of our website www.opay.officialpayments.com. We invite shareholders and analysts who wish to speak to the 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 emailing him at Jeff.Hodges@OfficialPayments.com. A replay of this call will be available at 8 o’clock pm eastern time today at www.opay.officialpayments.com or by calling 800-925-4415. The replay will be available beginning today and will be available until 11:59 PM Eastern Time on August 28 of 2012.

I want to remind you the 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 represent 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 on these forward-looking statements. We undertake no obligations to update any such forward-looking statements. There are numerous risks and uncertainties that affect our business that may affect these statements, including but not limited to, general economic conditions which affect the company’s financial result in all of our markets, which we refer to as vertical markets or verticals, particularly the Federal Vertical, the State Local Tax Vertical and the Property Tax Vertical.

Effectiveness and performance of our systems aim at profiting platforms and operational infrastructure, our ability to grow payment solutions revenue by reducing our cost, including processor and interchange related costs. The timing, initiation, completion, renewal, extension or early termination of client or partner contractors 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 result of project performance, including the failure of software providers, processors, venders, partners or sub-contractors to satisfactorily perform and complete engagements.

For 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 th 2011 and our most recent form 10-Q filed with the Securities and Exchange Commission. In this call, references to the quarter or the third quarter, refer to the quarter ended June 30 th, 2012.

During this call, we will be referring to non-GAAP financial measures that are not prepared in accordance with generally accepted accounting principles. We define the non-GAAP financial measures used in this call and we’ve 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 received earlier today.

That press release is also an exhibit to the form 8-K that we filed earlier today. The form 8-K, including the press release is available in the investor relation section of our website www.opay.officialpayments.com under the heading ‘Investor Relations’.

With me on the call 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 Hart

Thanks, Jeff. I’m pleased to report that our results for the third quarter show meaningful increases in both payments solutions and net revenue and adjusted EBITDA from continuing operations, both of which reflect the strength of our Payments Solutions business. Our third quarter has historically been our highest volume quarter and this year we saw a modest increase in gross revenue and a significant improvement in our net revenue compared to the prior year quarter. In a few minutes I will expand on our progress related to the strategic initiatives we’ve discussed in prior calls, share our expectations for the remainder of FY2012 and share some preliminary FY2013 guidance.

But first I’d like Jeff Hodges, our CFO to cover our third quarter operating results in more details. Jeff.

Jeff Hodges

Thanks, Alex. We are pleased to report that we generated $1.4 million in adjusted EBITDA from Continuing Operations in the third quarter of fiscal 2012. This represents the 62% increase over the same period a year ago in which we reported adjusted EBITDA from Continuing Operations of 0.9 million.

As we previously reported, we define adjusted EBITDA from continuing operations and net income from our continuing operations before interest expense, net of interest income, income taxes, depreciation and amortization, stock-based compensation paid in equity or cash and restructuring charges.

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