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Payment Data Systems Announces Record 2018 Financial Results

1190 Days ago

Company Reports 72% Growth in 2018 Revenues to a Record $25 Million and Record Transaction Processing Volume of $3.4 Billion

Strong Momentum Expected to Lead to Continued Growth  in 2019

SAN ANTONIO, March 27, 2019 (GLOBE NEWSWIRE) -- Payment Data Systems (PYDS), an integrated electronic payment solutions provider, today announced financial results for the fourth quarter and fiscal year 2018, which ended December 31, 2018.

Louis Hoch, President and Chief Executive Officer of Payment Data Systems, said, “Payment Data Systems achieved record transaction processing volumes and record revenues for the second consecutive year in 2018 as our ACH, prepaid and card processing businesses all had exceptional performance.  Our success has been driven by our innovative, proprietary technology that is facilitating the transformation of the payments industry to a digital, on-demand, omnichannel environment.” 

“Our ACH business recorded the sixth consecutive quarter of sequential growth.  Prepaid’s virtual card offering continues to attract new clients.  Our technology stack is one of the industry’s most robust, and we are adding new features and increasing functionality intended to help accelerate growth.  Our card processing business also had a great year, going from virtually zero as recently as this past fall to numerous software vendors currently either integrating or implementing our industry-leading 'PayFac-In-A-Box' technology.  We continue to invest in our prepaid and PayFac card business as we believe these are markets in which we can achieve superior growth rates and returns.  This investment is possible because of the positive cash flows generated by our ACH business and our prudent balance sheet management.  We are in a solid financial condition to fund both our organic growth initiatives as well as to opportunistically capitalize on strategic acquisitions, and we will continue to invest to further strengthen these competitive advantages as well as to accelerate our growth.”

Financial Results for Fourth Quarter Ended December 31, 2018

Revenues were $6.4 million for the fourth quarter, up 14% compared from the same period last year.  The primary drivers of the revenue growth included organic growth of 20.5% for the quarter with ACH revenue growth achieving 25% growth for the fourth quarter.

Gross profits were $1.5 million, up 17% from the same period last year.  Gross margins improved to 23.7% from 23.2% in the same period last year.  The primary driver for the improved gross margin came from strong revenue growth and improved profits in our ACH operation.

Operating loss was $859,000, an improvement of over $200,000 compared to the same period last year.

Adjusted EBITDA was a loss of $83,000, improving nearly $200,000 from an adjusted EBITDA loss of $274,000 a year ago.

Net loss was $876,000, or ($0.07) per share, compared to a net loss of $1.3 million or ($0.14) per share for the same period last year.

More than $891 million of total dollars were processed in the fourth quarter, the highest quarterly processing volume in the company’s history, and up sequentially for the sixth consecutive quarter from $885 million in the third quarter of 2018.  Fourth quarter 2018 processing volumes were up 8% versus the fourth quarter last year.

Payment Data Systems continues to be in solid financial condition with $2.7 million in cash and cash equivalents and no debt at December 31, 2018.  In the first quarter of fiscal year 2019, the Company raised $2.0 million, $1.8 million net of fees, of additional equity capital.

Financial Results for Year Ended December 31, 2018

Revenues for 2018 were $25 million, up 72% from $14.6 million for the same period last year. The primary drivers of the revenue growth included 8 months of Singular Payments revenues plus consolidated organic growth of 12.1% for the year, with strong ACH growth as the primary driver.

Gross profit for the year ended December 31, 2018 was $5.6 million, up 48% from $3.8 million in 2017.

Gross margins were 22.3% for the year ended December 31, 2018 compared to 25.9% in 2017.  Current year margins reflect the evolving mix of revenues to a higher proportion of credit card transactions processing volume offset by gains for the growth experienced primarily in the ACH gross profits.

Operating loss for the year ended December 31, 2018 was $3.8 million compared to an operating loss of $2.8 million in 2017.  The increase in the current year loss was due to an increase in discretionary investment in prepaid and card processing growth initiatives, as well as an approximately $900,000 increase in non-cash expenses, including depreciation and amortization, and stock-based compensation.

Adjusted EBITDA for the year ended December 31, 2018 was a loss of $647,000, little changed from the prior year.

Net loss for the year ended December 31, 2018 was $3.8 million or ($0.31) per share compared to a loss of $3.0 million or ($0.33) per share in the same period last year.  Shares used in the EPS calculation were 12.1 million in 2018 compared to 9.0 million in 2017.

Conference Call and Webcast

Payment Data Systems’ management will host a conference call with a live webcast today at 5:00 p.m. Eastern time to provide a business update.  To listen to the conference call, interested parties within the U.S. should call 1-844-883-3890. International callers should call +1-412-317-9246. All callers should ask for the Payment Data Systems conference call.  The conference call will also be available through a live webcast, which can be accessed via the company’s website at www.paymentdata.com/invest.

A replay of the call will be available approximately one hour after the end of the call through April 10, 2019. The replay can be accessed via the Company’s website or by dialing 1-877-344-7529 (U.S.) or +1-412-317-0088 (international). The replay conference playback code is 10129932.

About Payment Data Systems, Inc.
Payment Data Systems, Inc. (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 services 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 Systems is headquartered in San Antonio, Texas and has offices in Franklin, Tennessee, just outside of Nashville. 

Websites: www.paymentdata.comwww.singularpayments.comwww.payfacinabox.com, www.akimbocard.com, and www.ficentive.com. Find us on Facebook® and Twitter.

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."

Except for the historical information contained herein, the matters discussed in this release include forward-looking statements which are 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 our future and our operating and growth strategy. These forward-looking statements are identified by the use of words such as "believe," "intend," "look forward," "anticipate," "schedule", 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 such risks related to the realization of the anticipated opportunities from the Singular acquisition, 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 security of our software, hardware and information, the volatility of the stock price, the need to obtain additional financing, risks associated with new tax legislation, and compliance with complex federal, state and local laws and regulations, and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission including its annual report on Form 10-K for the fiscal year ended December 31, 2018. 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. The Company 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 us or any other person that the objectives and plans will be achieved. All forward-looking statements made in this release are based on information presently available to management. The Company assumes no obligation to update any forward-looking statements, except as required by law.                                                                         

Joe Hassett, Investor Relations


    December 31,
  December 31,
Cash and cash equivalents   $ 2,695,177     $ 4,800,554  
Accounts receivable, net   1,214,355     969,674  
Settlement processing assets   44,139,861     38,027,984  
Prepaid expenses and other   101,722     176,945  
Note receivable, net   108,750     150,000  
Current assets before merchant reserves   48,259,865     44,125,157  
Merchant reserves   12,645,803     14,977,468  
Total current assets   60,905,668     59,102,625  
Property and equipment, net   1,932,660     2,105,186  
Other assets:        
Intangibles, net   3,676,427     4,676,427  
Deferred tax asset   1,394,000     1,394,000  
Other assets   306,757     157,565  
Total other assets   5,377,184     6,227,992  
Total Assets   $ 68,215,512     $ 67,435,803  
Current Liabilities:        
Accounts payable   $ 308,178     $ 300,736  
Accrued expenses   1,388,196     1,006,262  
Settlement processing obligations   44,139,861     38,027,984  
Deferred revenues   20,000        
Current liabilities before merchant reserve obligations   45,856,235     39,334,982  
Merchant reserve obligations   12,645,803     14,977,468  
Total current liabilities   58,502,038     54,312,450  
Non-current liabilities:        
Deferred rent     79,748        
Total liabilities     58,581,786       54,312,450  
Stockholders' Equity:        
Preferred stock, $0.01 par value, 10,000,000 shares authorized; -0- shares issued and outstanding in 2018 and 2017        
Common stock, $0.001 par value, 200,000,000 shares authorized; 17,129,680 and 16,874,235 issued and 16,043,630 and 16,201,634
outstanding in 2018 and 2017
  185,561     186,299  
Additional paid-in capital   74,568,627     74,041,083  
Treasury stock, at cost; 1,086,050 and 672,601 shares in 2018 and 2017   (1,813,546)     (831,059)  
Deferred compensation   (6,270,675)     (7,012,544)  
Accumulated deficit   (57,036,241)     (53,260,426)  
Total stockholders' equity   9,633,726     13,123,353  
Total Liabilities and Stockholders' Equity   $ 68,215,512     $ 67,435,803  


  Three Months Ended   Twelve Months Ended
  December 31,
  December 31,
  December 31,
  December 31,
Revenues $ 6,422,841     $ 5,621,120     $ 25,024,124     $ 14,571,158  
Cost of services 4,902,990     4,316,345     19,454,611     10,802,932  
Gross profit 1,519,851     1,304,775     5,569,513     3,768,226  
Selling, general and administrative:              
Stock-based compensation 289,886     312,256     1,251,779     968,141  
Other expenses 1,602,885     1,578,936     6,216,605     4,378,969  
Depreciation and amortization 486,474     487,525     1,875,638     1,258,132  
Total operating expenses 2,379,245     2,378,717     9,344,022     6,605,242  
Operating (loss) (859,394)     (1,073,942)     (3,774,509 )   (2,837,016)  
Other income:              
Interest income 26,307     12,037     76,551     100,964  
Other income (expense) 462     1,704     (77)     1,583  
Other income and (expense), net 26,769     13,741     76,474     102,547  
(Loss) before income taxes (832,625)     (1,060,201)     (3,698,035)     (2,734,469)  
Income taxes 43,780     237,639     77,780     274,316  
Net (Loss) $ (876,405)     $ (1,297,840)     $ (3,775,815)     $ (3,008,785)  
Earnings (Loss) Per Share              
Basic earnings (loss) per common share: $ (0.07)     $ (0.14)     $ (0.31)     $ (0.33)  
Diluted earnings (loss) per common share: $ (0.07)     $ (0.14)     $ (0.31)     $ (0.33)  
Weighted average common shares outstanding              
Basic 12,129,283     8,954,831     12,128,816     8,995,883  
Diluted 12,129,283     8,954,831     12,128,816     8,995,883  



    December 31,
  December 31,
Operating Activities        
Net (loss)   $ (3,775,815)     $ (3,008,785)  
Adjustments to reconcile net (loss) to net cash (used) by operating activities:        
Depreciation   875,638     761,660  
Amortization   1,000,000     496,472  
Bad debt expense   36,250     71,667  
Non-cash stock-based compensation   1,251,779     968,141  
Amortization of warrant costs   8,985      
Issuance of stock to consultant   7,911     40,200  
Deferred income tax         227,000  
Changes in operating assets and liabilities:        
Accounts receivable   (244,681)     (133,591)  
Prepaid expenses and other   75,223     (34,916)  
Other assets   (149,192)     43,243  
Accounts payable and accrued expenses   389,376     458,632  
Merchant reserves   (2,331,665)     (826,173)  
Deferred revenue   20,000      
Deferred rent   79,748      
Net cash (used) by operating activities   (2,756,443)     (936,450)  
Investing Activities        
Purchases of property and equipment   (703,112 )   (372,337)  
Purchase of Singular Payments, LLC       (900,000)  
Advance to Singular Payments, LLC       (600,000)  
Repayment of note receivable   5,000     50,000  
Net cash (used) by investing activities   (698,112)     (1,822,337)  
Financing Activities        
Proceeds from public offering, net of expenses         2,725,340  
Purchases of treasury stock   (982,487)     (112,910)  
Net cash (used) provided by financing activities   (982,487)     2,612,430  
Change in cash, cash equivalents and merchant reserves   (4,437,042)     (146,357)  
Cash, cash equivalents and merchant reserves, beginning of year   19,778,022     19,924,379  
Cash, Cash Equivalents and Merchant Reserves, End of Year   $ 15,340,980     $ 19,778,022  
Supplemental disclosures of cash flow information        
Cash paid during the period for:        
Interest   $     $  
Income taxes   49,000     45,000  
Non-cash transactions:        
Issuance of common stock in exchange for purchases of Singular Payments, LLC       3,500,000  
Forgiveness of note receivable in exchange for purchase of Singular Payments, LLC       600,000  
Issuance of deferred stock compensation   303,750     3,713,688  


  Three Months Ended   Twelve Months Ended
  December 31,   December 31,   December 31,   December 31,
2018 2017   2018 2017
Reconciliation from Operating (Loss) to Adjusted EBITDA:              
Operating (Loss) $ (859,394)     $ (1,073,942)     $ (3,774,509)     $ (2,837,016)  
Depreciation and amortization 486,474     487,525     1,875,638     1,258,132  
EBITDA (372,920)     (586,417)     (1,898,871)     (1,578,884)  
Non-cash stock-based compensation expense, net 289,886     312,256     1,251,779     968,141  
Adjusted EBITDA $ (83,034)     $ (274,161)     $ (647,092)     $ (610,743)  
Calculation of Adjusted EBITDA margins:              
Revenues $ 6,422,841     $ 5,621,120     $ 25,024,124     $ 14,571,158  
Adjusted EBITDA (83,034)     (274,161)     (647,092)     (610,743)  
Adjusted EBITDA margins -1.3%     -4.9%     -2.6%     -4.2%  

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