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Payment Data Systems Announces First Quarter Results

SAN ANTONIO, May 15, 2017 (GLOBE NEWSWIRE) -- Payment Data Systems, Inc. (NASDAQ:PYDS), an integrated electronic payment solutions provider, today announced financial results for the first quarter ended March 31, 2017.

First Quarter 2017 Financial and Operating Summary

  • Revenues were $2.8 million
  • Gross margin was $0.9 million, or 33.5% of revenues
  • Operating loss was $321,938
  • Adjusted EBITDA1 was $114,527, or 4.1% of revenues
  • Net loss was $286,583, or $0.03 per basic and diluted share
  • Total dollars processed for the first quarter of 2017 were $695 million, down 5.8% from $738 million in the first quarter of 2016
  • First quarter transactions processed at 2.8 million were down 13.7% from a year ago

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

“While our first quarter revenues were impacted by lower ACH volumes, credit card and return check processing fees, prepaid revenues increased as the result of our product enhancements and momentum in our PINless debit services continues to accelerate,” said President and CEO Louis Hoch. “We are pleased to report that our operating expenses were down year-over-year on an absolute basis. Additionally, we continued to generate cash from operations, and our balance sheet remains strong with cash of $3.6 million and no debt as of March 31, 2017. We remain enthusiastic about our key revenue generating initiatives and resources as we proceed toward a return to top-line growth.”

Financial Results

Three Months Ended March 31, 2017

Revenues of $2.8 million decreased 12.9% compared to $3.2 million for the first quarter of 2016. The decline was due to lower ACH and credit card processing fees, as well as a net loss of some customers. This was offset somewhat by the new PINless debit product which was launched in October 2016, as well as an increase in debit card processing fees.

Gross margin dollars were $942,799, or 33.5% of revenues, compared to $1.1 million, or 33.3% of revenues, in the corresponding prior-year period. The decline in gross margin dollars were due to the lower revenue but was offset somewhat by a 13% decline in cost of service expenses.

Operating loss was $321,938, compared to an operating loss of $46,413 in the first quarter of 2016, reflecting lower gross margin as well as higher selling, general and administrative expenses.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization adjusted for non-recurring and non-cash items) was $114,527, or 4.1% of revenue, compared with $465,499, or 14.4% of revenue, in the first quarter of 2016.

Net loss was $286,583, or $0.03 per basic and diluted share, compared to a net loss of $32,002, or $0.00 per basic and diluted share in the first quarter of 2016, reflecting lower revenue base and higher expenses in the first quarter of 2017.

Balance Sheet

At March 31, 2017, the Company had $3.6 million of cash and cash equivalents and no debt.

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 and (412) 317-9246 for participants outside the U.S., referencing “Payment Data Systems”. The call may also be accessed via webcast on the Company’s website at www.paymentdata.com/invest. If you would like to submit a question via email in advance please contact Allyson Pooley at apooley@finprofiles.com.

A replay of the call will be available through Monday, May 29, 2017 by dialing (877) 344-7529 (U.S.) or (412) 317-0088 (international), using the passcode 10105760.

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."

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 management’s intent, belief and expectations, such as statements concerning the Company’s future and operating and growth strategy. These forward-looking statements are identified by the use of words such as “believe,” “proceed,” “continue” 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 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 loss of key personnel, growing competition in the electronic commerce market, the security of the Company’s software, hardware and information, and compliance with complex federal, state and local laws and regulations, and other risks detailed from time to time in its filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the fiscal year ended December 31, 2016. 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. Management 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 the Company or any other person that the Company’s objectives and plans will be achieved. All forward-looking statements made in this release are based on information presently available to management. Management assumes no obligation to update any forward-looking statements, except as required by law.

(Financial Tables Follow)

PAYMENT DATA SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2017 2016
(UNAUDITED)
ASSETS
Cash and cash equivalents $ 3,618,305 $ 4,120,738
Accounts receivable, net 850,832 907,750
Settlement processing assets 34,138,949 43,851,311
Prepaid expenses and other 272,586 142,029
Note receivable 700,000 200,000
Current assets before restricted cash 39,580,672 49,221,828
Restricted cash 14,725,430 15,803,641
Total current assets 54,306,102 65,025,469
Property and equipment, net 2,516,801 2,494,510
Other assets:
Intangibles, net 132,114 172,899
Deferred tax asset 1,621,000 1,621,000
Other assets 229,571 200,808
Total other assets 1,982,685 1,994,707
Total Assets $ 58,805,588 $ 69,514,686
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $231,648 $145,044
Accrued expenses 807,821 703,322
Settlement processing obligations 34,138,949 43,851,311
Current liabilities before restricted cash 35,178,418 44,699,677
Restricted cash 14,725,430 15,803,641
Total current liabilities 49,903,848 60,503,318
Stockholders' Equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized; -0- shares issued and outstanding at March 31, 2017 (unaudited) and December 31, 2016 - -
Common stock, $0.001 par value, 200,000,000 shares authorized; 12,449,249 and 12,392,288 issued and 11,829,645 and 11,795,939 outstanding at March 31, 2017 (unaudited) and December 31, 2016 181,874 181,818
Additional paid-in capital 63,913,124 63,881,365
Treasury stock, at cost; 619,604 and 596,349 shares at March 31, 2017 (unaudited) and December 31, 2016 (749,113) (718,149)
Deferred compensation (3,905,921) (4,082,025)
Accumulated deficit (50,538,224) (50,251,641)
Total stockholders' equity 8,901,740 9,011,368
Total Liabilities and Stockholders' Equity $58,805,588 $69,514,686


PAYMENT DATA SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended March 31,
2017 2016
Revenues $ 2,810,744 $ 3,228,631
Operating expenses:
Cost of services 1,867,945 2,154,783
Selling, general and administrative:
Stock-based compensation 207,920 287,689
Other expenses 828,272 608,349
Depreciation and amortization 228,545 224,223
Total operating expenses 3,132,682 3,275,044
Operating income (loss) (321,938) (46,413)
Other income:
Interest income 33,816 22,011
Other income (expense) 1,539 (600)
Other income (expense), net 35,355 21,411
Income (loss) before income taxes (286,583) (25,002)
Income taxes (benefit) expense - 7,000
Net Income (Loss) $ (286,583) $ (32,002)
Earnings (Loss) Per Share
Basic earnings (loss) per common share: $ (0.03) $ (0.00)
Diluted earnings (loss) per common share: $ (0.03) $ (0.00)
Weighted average common shares outstanding
Basic 8,485,183 7,719,248
Diluted 8,485,183 7,719,248

PAYMENT DATA SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31,
2017 2016
Operating Activities
Net income (loss) $ (286,583) $ (32,002)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 187,760 183,437
Amortization 40,785 40,784
Non-cash stock based compensation 207,920 287,689
Issuance of stock to consultant - 19,000
Changes in operating assets and liabilities:
Accounts receivable 56,918 122,858
Prepaid expenses and other (130,557) (177,806)
Other assets (28,763) 599
Accounts payable and accrued expenses 191,103 15,180
Deferred revenues - 12,500
Net cash provided by operating activities 238,583 472,239
Investing Activities
Purchases of property and equipment (210,052) (107,954)
Note receivable (500,000) (200,000)
Net cash (used) by investing activities (710,052) (307,954)
Financing Activities
Purchases of treasury stock (30,964) -
Net cash (used) by financing activities (30,964) -
Change in cash and cash equivalents (502,433) 164,285
Cash and cash equivalents, beginning of year 4,120,738 4,059,606
Cash and Cash Equivalents, End of Year $ 3,618,305 $ 4,223,891
Supplemental Disclosures
Cash paid for interest - -
Cash paid for income taxes $ - $ 7,000

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Three Months Ended
March 31, March 31,
2017 2016
Reconciliation from Operating Income (Loss) to Adjusted EBITDA:
Operating Income (Loss) $ (321,938) $ (46,413)
Depreciation and amortization 228,545 224,223
EBITDA (93,393) 177,810
Non-cash stock-based compensation expense, net 207,920 287,689
Adjusted EBITDA $ 114,527 $ 465,499
Calculation of Adjusted EBITDA margins:
Revenues $ 2,810,744 $ 3,228,631
Adjusted EBITDA 114,527 465,499
Adjusted EBITDA margins 4.1% 14.4%


Investor Contact: Allyson Pooley Financial Profiles PYDS@finprofiles.com

Source:Payment Data Systems, Inc.