iPayment Reports Second-Quarter Results; Announces Acquisition of Card Payment Solutions, Inc.Business Editors NASHVILLE Nashville, city (1990 pop. 487,969), state capital, coextensive with Davidson co., central Tenn., on the Cumberland River, in a fertile farm area; inc. as a city 1806, merged with Davidson co. 1963. , Tenn.--(BUSINESS WIRE)--Aug. 6, 2003 iPayment, Inc. (Nasdaq: IPMT IPMT International Peace Monitoring Team IPMT Integrated Project Management Team IPMT Interventional Pain Management Techniques IPMT Intraductal Papillary and Mucinous Tumor (pancreatic tumor) IPMT Interest Payment ) today announced financial results for the second quarter and six months ended June June: see month. 30, 2003. For the second quarter, revenues increased 152% to $54,308,000 from $21,540,000 for the second quarter of 2002. Income from operations for the quarter increased to $5,534,000 or 10.2% of revenues from $871,000 or 4.0% of revenues for the second quarter of 2002. The Company had a net loss allocable al·lo·ca·ble adj. Capable of being allocated. Adj. 1. allocable - capable of being distributed allocatable, apportionable distributive - serving to distribute or allot or disperse to common shareholders for the second quarter of 2003 of ($796,000), or ($0.06) per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, which included a non-cash pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta charge of $4,437,000, recognized as interest expense, due to the acceleration of amortization of debt warrant discounts as a result of early repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan of debt with proceeds from the initial public offering. For the second quarter of 2002, the net loss allocable to common shareholders was ($953,000), or ($0.21) per diluted share. Commenting on the announcement, Gregory S. Daily, Chairman and Chief Executive Officer of iPayment, said, "As a newly public company, we are proud to report continued growth in revenues and operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. in the second quarter. Our focus on treating the ISO (1) See ISO speed. (2) (International Organization for Standardization, Geneva, Switzerland, www.iso.ch) An organization that sets international standards, founded in 1946. The U.S. member body is ANSI. as our first customer continues to stimulate growth, with charge volume increasing to $1.556 billion in the second quarter from $415 million in the second quarter of 2002. We have successfully integrated the three significant acquisitions we completed last fall, and continue to be encouraged by their ongoing growth. Looking forward, we are confident in our ability to execute our growth strategy both from our ISO channel and additional acquisitions in the highly fragmented frag·ment n. 1. A small part broken off or detached. 2. An incomplete or isolated portion; a bit: overheard fragments of their conversation; extant fragments of an old manuscript. 3. small-merchant segment of the payment processing industry. "Yesterday we closed the acquisition of Card Payment Solutions, Inc. (CPS (1) (Characters Per Second) The measurement of the speed of a serial printer or the speed of a data transfer between hardware devices or over a communications channel. CPS is equivalent to bytes per second. ), an ISO with a portfolio of over 4,000 small merchants and annual charge volume of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $400 million. The purchase price was approximately $16 million, consisting of $12 million cash, approximately $3 million stock and the assumption of approximately $1 million of debt, plus a contingent payment based upon performance up to a maximum $3 million. We are pleased to announce CPS as our first transaction as a public company because it contains several elements we find attractive in the ISO field. We are gaining an entrepreneurial en·tre·pre·neur n. A person who organizes, operates, and assumes the risk for a business venture. [French, from Old French, from entreprendre, to undertake; see enterprise. management team with a proven marketing approach generating over 300 small merchants per month. We currently expect the transaction to provide approximately $0.04 in accretion The act of adding portions of soil to the soil already in possession of the owner by gradual deposition through the operation of natural causes. The growth of the value of a particular item given to a person as a specific bequest under the provisions of a will between the to our earnings per diluted share in fiscal 2004." Outlook The following statements summarize sum·ma·rize intr. & tr.v. sum·ma·rized, sum·ma·riz·ing, sum·ma·riz·es To make a summary or make a summary of. sum the Company's guidance for long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. growth in revenues and expansion in its operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: , as well as specific guidance for fiscal 2003 and 2004. The Company's long-term goal for annual growth in revenues remains 20%, with 10% to 15% growth excluding acquisitions. The Company reiterates its target annual range for its operating margin of 10% to 15% of revenues, with gradual The Gradual (Latin: graduale, sometimes called the Grail) is a chant in the extraordinary form of the Roman Catholic Mass, sung after the reading or singing of the Epistle and before the Alleluia, or, during penitential seasons, before the Tract. improvement each year. As in the past, the operating margin may fluctuate on a quarterly basis, and the percentage may change as a result of acquisitions with higher or lower operating margins than the Company's margins. For fiscal 2003, the Company is currently comfortable with a range for annual revenues of $205 million to $215 million, including the CPS acquisition, and an operating margin of approximately 11.5% to 12.5%. For the second half of 2003, the Company currently expects net interest expense of approximately $200,000 per quarter, an effective tax rate of 30% or less, and approximately 18.0 million diluted weighted average shares outstanding, including 663,000 share equivalents from outstanding convertible promissory notes promissory note, unconditional written promise to pay a certain sum of money at a definite time to bearer or to a specified person on his order. Promissory notes are generally used as evidence of debt. . For fiscal 2004, the Company is currently comfortable with a range for annual revenues of $235 million to $250 million and a range for diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of $1.00 to $1.06, including approximately $0.04 accretion from the CPS acquisition. Conference Call Information The Company will host a conference call to discuss this release tomorrow at 10:30 a.m. Eastern time. Participants will have the opportunity to listen to the conference call over the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the by going to www.ipaymentinc.com or www.companyboardroom.com. Participants are encouraged to go to the selected web sites at least 15 minutes early to register, download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. , and install any necessary audio software. The online replay will be available at approximately 1:30 p.m. (Eastern Time) and continue for 30 days. A telephone replay of the call will also be available through August 14, 2003, at 719-457-0820 (Confirmation Number 141993). This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. about iPayment, Inc. within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and pursuant to the "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. For example, statements in the future tense future tense n. A verb tense expressing future time. Noun 1. future tense - a verb tense that expresses actions or states in the future future , words such as "anticipates," "estimates," "expects," "intends," "plans," "believes," and words and terms of similar substance used in connection with any discussion of future results, performance or achievements identify such forward-looking statements. Those forward-looking statements involve risks and uncertainties and are not guarantees of future results, performance or achievements, and actual results, performance or achievements could differ materially from our current expectations as a result of numerous factors, including but not limited to the following: acquisitions; liability for merchant chargebacks; restrictive covenants Restrictive covenants Provisions that place constraints on the operations of borrowers, such as restrictions on working capital, fixed assets, future borrowing, and payment of dividends. governing gov·ern v. gov·erned, gov·ern·ing, gov·erns v.tr. 1. To make and administer the public policy and affairs of; exercise sovereign authority in. 2. our indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. ; actions taken by our bank sponsors; migration of merchant portfolios to new bank sponsors; our reliance on card payment processors and on independent sales organizations This article or section deals primarily with the English-speaking world and does not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. ; changes in interchange fees Interchange fee is a term used in the payment card industry to describe a fee that bank card networks such as Visa and MasterCard require merchants to pay card-issuing banks when merchants accept their credit and debit cards for purchases. ; risks associated with the unauthorized disclosure of data; imposition The printing of pages on a single sheet of paper in a particular order so that they come out in the correct sequence when cut and folded. of taxes on Internet transactions; actions by our competitors; and risks related to the integration of companies and merchant portfolios we have acquired or may acquire. These and other risks are more fully disclosed in the registration statement on Form S-1 for our initial public offering filed with the U.S. Securities and Exchange Commission. We undertake no obligation to revise or update any forward-looking statements in order to reflect events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or that may arise after the date of this release. iPayment, Inc. is a provider of credit and debit A monetary amount that is subtracted from an account balance. A debit from one account is a credit to another. See credit. card-based payment processing services to over 66,000 small merchants across the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . iPayment's payment processing services enable merchants to process both traditional card-present, or "swipe," transactions, as well as card-not-present transactions, including transactions over the internet or by mail, fax or telephone.
iPayment, Inc.
Unaudited Financial Highlights
(In thousands, except share and per share data)
Three months ended Six months ended
June 30, June 30,
2003 2002 2003 2002
--------- --------- --------- ---------
Consolidated
Statements of
Income
Revenues $ 54,308 $ 21,540 $ 100,983 $ 38,019
Interchange 28,336 7,637 52,346 14,343
Other costs
of services 18,529 11,631 34,806 19,592
Selling, general
and administrative 1,909 1,401 3,738 2,570
--------- --------- --------- ---------
Total operating
expenses 48,774 20,669 90,890 36,505
--------- --------- --------- ---------
Income from
operations 5,534 871 10,093 1,514
Interest
expense, net 6,366 1,305 9,656 2,511
--------- --------- --------- ---------
Income before
income taxes (832) (434) 437 (997)
Income tax
provision
(benefit) (250) 155 131 310
--------- --------- --------- ---------
Net income (loss) (582) (589) 306 (1,307)
Accretion of
mandatorily
redeemable
convertible
preferred stock (214) (364) (652) (703)
--------- --------- --------- ---------
Net loss allocable
to common
shareholders $ (796) $ (953) $ (346) $ (2,010)
========= ========= ========= =========
Loss per share
Basic $ (0.06) $ (0.21) $ (0.04) $ (0.45)
Diluted $ (0.06) $ (0.21) $ (0.04) $ (0.45)
Weighted average
shares
outstanding
Basic 12,383 4,480 9,870 4,480
Diluted (1) 12,383 4,480 9,870 4,480
(1) Excludes weighted average common share equivalents for all
periods because of net losses allocable to common shareholders.
For the second quarter of 2003, weighted average common share
equivalents were 1,208,671.
Percentages of Revenues
Interchange 52.2% 35.5% 51.8% 37.7%
Other costs of
services 34.1% 54.0% 34.5% 51.5%
Selling, general,
and administrative 3.5% 6.5% 3.7% 6.8%
Income from
operations 10.2% 4.0% 10.0% 4.0%
iPayment, Inc.
Consolidated Balance Sheets
(In thousands)
June 30, December 31,
Assets 2003 2002
--------- ---------
(Unaudited)
Cash and cash equivalents $ 25,260 $ 1,831
Accounts receivable, net 9,152 6,687
Prepaid expenses and other 1,807 1,287
--------- ---------
Total current assets 36,219 9,805
Restricted cash 4,719 3,070
Property and equipment, net 1,679 1,610
Intangible assets, net 28,796 31,758
Goodwill, net 59,969 60,790
Other assets 6,744 9,948
--------- ---------
Total assets $ 138,126 $ 116,981
========= =========
Liabilities and stockholders' equity
Reserve for merchant losses $ 3,291 $ 4,411
Accounts payable and accrued expenses 7,900 12,192
Current portion of long-term debt 5,056 7,383
--------- ---------
Total current liabilities 16,247 23,986
Long-term debt 15,286 70,688
Other liabilities 1,175 2,118
--------- ---------
Total liabilities 32,708 96,792
--------- ---------
Mandatorily redeemable convertible preferred
stock -- 6,670
Common stock 121,956 29,736
Accumulated deficit (16,538) (16,217)
--------- ---------
Total stockholders' equity 105,418 13,519
--------- ---------
Total liabilities and stockholders' equity $ 138,126 $ 116,981
========= =========
iPayment, Inc.
Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
June 30,
2003 2002
--------- ---------
Cash flows from operating activities:
Net income (loss) $ 306 $ (1,307)
Depreciation and amortization 3,925 2,387
Noncash interest expense 6,366 414
Changes in assets and liabilities:
Accounts receivable (2,465) (1,344)
Prepaid expenses and other current assets (520) 495
Other assets 2,785 (1,636)
Reserve for merchant losses, accounts
payable and accrued liabilities (3,754) 3,009
Other liabilities 13 55
--------- ---------
Net cash provided by operating activities 6,656 2,073
--------- ---------
Cash flows from investing activities:
Changes in restricted cash (1,649) (600)
Expenditures for property and equipment (380) (126)
Acquisitions of businesses, portfolios
and other (234) 1,320
Deferred payment for acquisition of business (2,099) --
--------- ---------
Net cash (used) provided by investing
activities (4,362) 594
--------- ---------
Cash flows from financing activities:
Repayments of debt (53,728) (2,610)
Net borrowings on line of credit (1,050) 36
Proceeds from issuance of common stock 75,913 --
--------- ---------
Net cash provided (used) by financing
activities 21,135 (2,574)
--------- ---------
Net increase in cash 23,429 93
Cash at beginning of period 1,831 290
--------- ---------
Cash at end of period $ 25,260 $ 383
========= =========
Supplemental disclosure of cash flow
information:
Cash paid during the period for income
taxes $ 57 $ 34
Cash paid during the period for interest $ 3,262 $ 2,454
Supplemental disclosure of noncash
investing and financing activities:
Accretion of mandatorily redeemable
convertible preferred stock $ 652 $ 703
Conversion of debt to common stock $ 9,000 $ --
Conversion of convertible preferred
stock to common stock $ 7,322 $ --
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