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Payment Data Systems Announces Third Quarter 2016 Results

SAN ANTONIO, Nov. 14, 2016 (GLOBE NEWSWIRE) -- Payment Data Systems, Inc. (NASDAQ:PYDS), an integrated payment solutions provider, today announced financial results for the third quarter ended September 30, 2016.

Third Quarter 2016 Financial and Operating Summary

  • Revenues were $3.1 million
  • Gross margin was $965,485, or 31% of revenues
  • Operating loss was $574,897
  • Adjusted EBITDA loss1 was $129,859
  • Net loss was $565,957, or $0.07 per share
  • Total dollars processed for the third quarter of 2016 exceeded $759 million, compared to $865 million in the third quarter of 2015
  • Third quarter credit card transaction processing volume decreased 2% and credit card dollars processed decreased 9% compared with the same period in 2015
  • ACH (Electronic check) transaction volumes decreased 15%; returned check transactions processed decreased 24% compared to the third quarter of 2015

1See Reconciliation of GAAP Operating Income to Adjusted EBITDA in the accompanying financial tables

Management Commentary

“Overall transaction volumes and dollars processes increased in the third quarter compared to the previous quarter, driving sequential growth in revenues and gross margin,” said Louis Hoch, President and CEO, Payment Data Systems, Inc. “Given the year-over-year decline in ACH transaction volumes that we have experienced this year, we accelerated our marketing and promotional strategies during the third quarter and are pleased to see these efforts paying off. We are continuing to build solid traction through product innovations that support and enhance customer operations, such as the use of our prepaid card technology to support real-time provisioning to mobile wallets like Apple Pay® and instantaneous issuance and delivery of gift and incentive cards. Our new PIN-less debit product, that allows merchants to debit and credit accounts in real-time, was rolled out in October and we are very pleased with the traction we are receiving. We expect it to become a significant offering for our Company.”

Financial Results

Three Months Ended September 30, 2016

Revenues of $3.1 million decreased 14% compared to $3.6 million for the third quarter of 2015, due to a decrease in the volume of ACH transactions and returned checks processed.

Gross margin was $965,485, or 31% of revenues, compared to $1.2 million, or 34% of revenues, in the corresponding prior-year period.

Operating loss was $574,897, compared to operating income of $23,332 in the third quarter a year ago, reflecting higher selling, general and administrative expenses to support the Company’s growth, as well as higher amortization expense related to the assets acquired from Akimbo in December 2014.

Adjusted EBITDA loss was $129,859 compared to adjusted EBITDA of $589,161 in the corresponding prior-year period. Please see a reconciliation of Adjusted EBITDA loss to operating income in the accompanying financial tables.

Net loss was $565,957, or $0.07 per share, compared to net income of $117,780, or $0.01 per diluted share in the third quarter of 2015.

Balance Sheet

At September 30, 2016, the Company had $4.3 million of cash and cash equivalents.

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."

Conference Call and Webcast

Payment Data Systems, Inc.’s management will host a conference call with a live webcast today at 5:00 p.m. Eastern Time to provide a business update.

Individuals interested in dialing in to the conference call may do so by dialing (844) 883-3890 for U.S. participants or (412) 317-9246 for participants outside of the U.S., referencing “Payment Data Systems” to the operator. If you would like to submit a question via email in advance please contact Kristen Papke at kpapke@finprofiles.com.

A replay of the call will be available through Monday, November 28, 2016 by dialing (877) 344-7529 (U.S.) or (412) 317-0088 (international), using the passcode 10094994.

About Payment Data Systems, Inc.

Payment Data Systems (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 service 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 is headquartered in San Antonio, Texas, and has offices in New York, New York; and Long Beach, California.

For additional information please visit www.paymentdata.com. Websites: www.akimbocard.com and www.ficentive.com. Find us on Facebook®.

FORWARD-LOOKING STATEMENTS DISCLAIMER

Except for the historical information contained herein, the matters discussed in this release include certain forward-looking statements, which are intended to be covered by safe harbors. Those statements include, but may not be limited to, all statements regarding our management’s intent, belief and expectations, such as statements concerning our future and our operating and growth strategy. Investors are cautioned that all forward-looking statements involve risks and uncertainties including, without limitation, the factors detailed from time to time in our filings with the Securities and Exchange Commission. One or more of these factors have affected, and in the future could affect our businesses and financial results in the future and could cause actual results to differ materially from plans and projections. We believe 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 our objectives and plans will be achieved. All forward-looking statements made in this release are based on information presently available to our management. We assume no obligation to update any forward-looking statements, except as required by law.

(Financial Tables Follow)


PAYMENT DATA SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2016 December 31, 2015
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $4,293,590 $4,059,606
Accounts receivable, net 1,001,206 1,135,384
Settlement processing assets 41,115,815 39,797,232
Prepaid expenses and other 178,944 149,118
Current assets before restricted cash 46,589,555 45,141,340
Restricted cash 18,110,544 17,972,065
Total current assets 64,700,099 63,113,405
Property and equipment, net 2,675,836 3,077,421
Other assets:
Intangibles, net 213,682 341,816
Deferred tax asset 1,621,000 1,621,000
Note receivable 200,000 -
Other assets 199,746 202,849
Total other assets 2,234,428 2,165,665
Total assets $69,610,363 $68,356,491
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $166,959 $143,180
Accrued expenses 810,799 1,328,738
Settlement processing obligations 41,115,815 39,797,232
Current liabilities before restricted cash 42,093,573 41,269,150
Restricted cash 18,110,544 17,972,065
Total current liabilities 60,204,117 59,241,215
Stockholders’ equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized; -0- shares outstanding at September 30, 2016 (unaudited) and December 31, 2015 - -
Common stock, $0.001 par value, 200,000,000 shares authorized; 12,592,591 and 12,379,537 issued, and 12,242,959 and 12,029,905 outstanding at September 30, 2016 (unaudited) and December 31, 2015, respectively 185,751 185,533
Additional paid-in capital 64,859,920 64,302,498
Treasury stock, at cost; 349,632 and 349,632 shares (286,393) (286,394)
Deferred compensation (5,344,769) (6,031,362)
Accumulated deficit (50,008,263) (49,054,999)
Total stockholders’ equity 9,406,246 9,115,276
Total liabilities and stockholders’ equity $69,610,363 $68,356,491
See notes to interim consolidated financial statements.


PAYMENT DATA SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended September 30, Nine Months Ended September 30,
2016 2015 2016 2015
Revenues $3,067,335 $3,550,463 $9,186,027 $10,717,679
Operating expenses:
Cost of services 2,101,850 2,336,270 6,291,072 7,138,450
Selling, general and administrative:
Stock-based compensation 264,154 338,488 835,590 965,544
Cancellation of stock-based compensation (44,875) - (44,875) (163,936)
Other expenses 1,095,344 758,573 2,505,233 1,695,415
Depreciation and amortization 225,759 93,800 675,536 272,320
Total operating expenses 3,642,232 3,527,131 10,262,556 9,907,793
Operating income (loss) (574,897) 23,332 (1,076,530) 809,886
Other income and (expense):
Interest income 25,754 20,097 72,739 58,455
Other income (expense) (480) 90,600 97,199 58,190
Total other income and (expense), net 25,274 110,697 169,938 116,645
Income (loss) before income taxes (549,623) 134,029 (906,592) 926,531
Income taxes 16,334 16,249 46,668 75,285
Net income (loss) $(565,957) $117,780 $(953,259) $851,246
Basic earnings per common share: $(0.07) $0.02 $(0.12) $0.12
Diluted earnings per common share: $(0.07) $0.01 $(0.12) $0.07
Weighted average common shares outstanding
Basic 7,819,608 7,373,656 7,759,205 7,373,656
Diluted 7,819,608 12,057,255 7,759,205 12,057,255
See notes to interim consolidated financial statements.


PAYMENT DATA SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine months Ended September 30,
2016 2015
Operating activities:
Net income (loss) $(953,259) $851,246
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 553,182 242,558
Amortization 122,354 29,762
Non-cash stock based compensation 835,590 965,544
Cancellation of stock based compensation (44,875) (163,936)
Issuance of stock to consultant 34,300 -
Changes in current assets and current liabilities:
Accounts receivable 134,178 155,803
Prepaid expenses and other (29,826) (26,663)
Other assets 3,103 28,563
Accounts payable and accrued expenses (69,166) (361,231)
Deferred revenue - -
Settlement processing assets, net - -
Net cash provided by operating activities: 585,581 1,721,646
Investing activities:
Purchases of property and equipment (151,597) (726,476)
Note receivable (200,000) -
Net cash (used) by investing activities: (351,597) (726,476)
Financing activities:
Purchase of treasury stock - (26,541)
Net cash (used) by financing activities: - (26,541)
Change in cash and cash equivalents 233,984 968,629
Cash and cash equivalents, beginning of period 4,059,606 2,803,455
Cash and cash equivalents, end of period $4,293,590 $3,772,084
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest - -
Income taxes $- 77,369
See notes to interim consolidated financial statements.



RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS)
(UNAUDITED)
Three Months Ended September 30, Nine Months Ended September 30,
In thousands 2016 2015 2016 2015
Reconciliation from Operating Income to Adjusted EBITDA:
Operating income $(574,897) $23,332 $(1,076,532) $809,886
Depreciation and amortization 225,759 $93,800 675,536 272,320
EBITDA (349,138) 117,132 (400,996) 1,082,206
Expenses related to NASDAQ uplisting and reverse stock split - 133,541 - 315,903
Acquisition costs - - 20,000
Non-cash stock compensation expense (net) 219,279 338,488 790,715 801,608
Adjusted EBITDA $(129,859) $589,161 $389,719 $2,219,717
Calculation of Adjusted EBITDA margins:
Revenues $3,067,335 $3,550,463 $9,186,026 $10,717,679
Adjusted EBITDA $(129,859) $589,161 $389,719 $2,219,717
Adjusted EBITDA margins -4.2% 16.6% 4.2% 20.7%

Investor Contacts: Kristen Papke Financial Profiles ir@paymentdata.com

Source:Payment Data Systems, Inc.