JetPay 2016 Q3 Results
Center Valley, PA – November 14, 2016 – JetPay Corporation (“JetPay” or the “Company”) (NASDAQ:“JTPY”) announced financial results for the third quarter and nine months ended September 30, 2016.
- Revenues increased 47.5%, or $4.9 million, to $15.2 million for the quarter ended September 30, 2016 as compared to $10.3 million for the same period in 2015, and up 23.2% to $39.1 million for the nine months ended September 30, 2016 as compared to $31.7 million for the same period in 2015.
- Revenues within the Payment Processing Segment increased 67.0%, or $4.7 million, to $11.8 million in the third quarter of 2016 from the same period in 2015, and $6.4 million, or 29.5%, to $28.0 million in the first nine months of 2016 as compared to the first nine months of 2015.
- Revenues within the HR and Payroll Segment increased 4.9%, or $159,000, to $3.4 million for the third quarter of 2016, up from $3.2 million for the same period in 2015, and up $967,000 or 9.6%, to $11.0 million for the first nine months of 2016 as compared to the same period in 2015, primarily resulting from the new human capital management products and services, including the Affordable Care Act services.
- Gross profit increased 30.2% to $5.0 million, or 33.0% of revenues, for the quarter ended September 30, 2016, up from $3.9 million for the same period in 2015, and up 7.1% to $13.2 million, or 33.7% of revenues, for the nine months ended September 30, 2016, up from $12.3 million for the same period in 2015.
- Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) were $520,000 and $856,000 for the third quarter of 2016 and 2015, respectively, and $(5.1) million and $2.7 million for the nine months ended September 30, 2016 and 2015, respectively. EBITDA, adjusted for non-recurring and non-cash items, (“adjusted EBITDA”) - (see Non-GAAP Financial Measures definition and reconciliation of operating income to EBITDA and adjusted EBITDA below), was $909,000, or 6.0% of revenues, in the third quarter of 2016, as compared to $1.0 million, or 9.8% of revenues, in the same period in 2015. Adjusted EBITDA was $2.6 million, or 6.6% of revenues, for the nine months ended September 30, 2016, as compared to $3.5 million, or 10.9% of revenues, for the same period in 2015. The decrease in adjusted EBITDA in 2016 versus 2015 was directly related to the Company’s continued investment in sales and technology personnel and a change in the mix of revenues within the Payment Processing Segment in the current year.
- The ratio of total debt to total capitalization, which consists of total debt of $24.3 million and convertible preferred stock, common stock, subject to possible redemption, and stockholders’ equity totaling $57.2 million, was 29.8% at September 30, 2016, an increase from 23.3% at December 31, 2015 due to the settlement of litigation with Merrick Bank Corporation in July 2016.
- Payments industry veteran, Larry Stone, made a $19.6 million investment in JetPay through a combination of debt and equity and joined the Company’s Board of Directors. The debt investment of $9.5 million is in the form of a senior secured loan at JetPay’s HR & Payroll Services subsidiary. The equity investment of $10.1 million is in shares of previously authorized convertible preferred stock alongside JetPay’s existing investor, Flexpoint Ford, a Chicagobased private equity firm. The proceeds from the investment were used to repay existing debt and provide working capital to support JetPay’s growth strategy.
- Michael Collester was appointed Chief Operating Officer (“COO”). Prior to being named COO, he served as the President of JetPay’s Langhorne, PA location, and brings more than 25 years of executive experience in the strategic partner and merchant services space. Mr. Collester formed ACI Merchant Systems, LLC, which was acquired by JetPay in November 2014 and currently focuses on financial institution and other strategic partnerships.
- Named Gene M. Valentino as Chief Strategy Officer for our Payment Processing Segment. Mr. Valentino was Founder and CEO of JetPay’s most recent acquisition, CollectorSolutions, Inc. (“CSI”). The addition of CSI added both significant expertise and depth in the fast-growing government, utilities, and non-profit channels to the JetPay portfolio.
“The third quarter continued JetPay’s sequential growth pattern, positioning JetPay to meet or exceed 2015’s revenue growth of 29.5% ... We believe the addition of CSI, along with our underlying organic growth, will position JetPay for another strong growth year in 2017.”by Diane (Vogt) Faro, CEO of JetPay Corporation.
“The third quarter continued JetPay’s sequential growth pattern, positioning JetPay to meet or exceed 2015’s revenue growth of 29.5%,” stated Diane (Vogt) Faro, CEO of JetPay Corporation. “We believe the addition of CSI, along with our underlying organic growth, will position JetPay for another strong growth year in 2017. We are also thrilled to welcome Larry Stone to our Board of Directors. In addition to the significant infusion of working capital from his recent investment in the Company, which reduced our debt and secured the resources necessary to execute on our growth strategy, we are already leveraging his industry knowledge and expertise to help JetPay realize its potential.”
“Finally, we also made several key moves to position JetPay for future long-term growth,” continued Ms. Faro. “The long-standing dispute with Merrick Bank was settled, which allows us to focus our energy on the future. We also made several key executive appointments, including naming Michael Collester as Chief Operating Officer of JetPay and Gene Valentino as Chief Strategy Officer of our Payment Processing Segment. While we continue to actively recruit for key positions, we believe we have the right core team in place to make effective strategic decisions as we integrate our Payment Processing and HR and Payroll Services segments. This includes expanding in new payment verticals, as well as focusing on human capital management initiatives and cross selling efforts within our customer base.”
Financial Results, Third Quarter 2016 Compared to Third Quarter 2015
Revenues were $15.2 million for the three months ended September 30, 2016, as compared to $10.3 million for the same period in 2015, an increase of $4.9 million, or 47.5%. Revenues for the Payment Processing Segment increased $4.7 million, or 67.0%, for the three months ended September 30, 2016 as compared to the same period in 2015. This increase was largely related to our acquisition of CSI on June 2, 2016, contributing $4.6 million of revenues in the period. Revenues for the HR and Payroll Segment increased $159,000, or 4.9%, for the three months ended September 30, 2016 as compared to the same period in 2015. This increase was attributable to the sale of new human capital management products and services, including the Affordable Care Act services.
Operating loss for the three months ended September 30, 2016 was $(922,000), compared to $(34,000) for the same period in 2015. Operating loss is after subtracting depreciation and amortization expense of $1.04 million and $891,000 for the three months ended September 30, 2016 and 2015, respectively. The increase in operating loss was attributable to an increase in selling, general, and administrative (“SG&A”) expenses of $1.5 million and a $404,000 unfavorable non-cash charge for the change in fair value of contingent consideration liability, both partially offset by an increase in gross profit of $1.2 million. SG&A expenses in the third quarter of 2016 were affected by our acquisition of CSI and the significant investment in sales and technology personnel in 2015, as well as the first nine months of 2016.
Net loss for the three months ended September 30, 2016 was $(1.3) million, or a net loss applicable to common stockholders of $(2.9) million after accretion of convertible preferred stock of $1.6 million, a loss of $(0.16) per share of common stock, compared to a net loss of approximately $(384,000), or a net loss applicable to common stockholders of $(1.7) million after accretion of convertible preferred stock of $1.3 million, a loss of $(0.12) per share of common stock for the three months ended September 30, 2015. The increase in net loss was primarily related to the items contributing to operating loss described above and an increase in interest expense
JetPay will conduct a conference call on Monday, November 21, 2016 at 9:00 AM ET (6:00 AM PT) to discuss the financial results and conduct a question and answer session. The participant conference call number is (855) 793-3263 (International Dial-In (631) 485-4960), conference ID: 19278205. There will also be access to a digital recording of the teleconference by calling (855) 859-2056 and entering the conference ID: 19278205. This will be available from two hours following the teleconference until Monday, November 28, 2016.
About JetPay Corporation
JetPay Corporation, based in Center Valley, PA, is a leading provider of vertically integrated solutions for businesses including card acceptance, processing, payroll, payroll tax filing, human capital management services, and other financial transactions. JetPay provides a single vendor solution for payment services, debit and credit card processing, ACH services, and payroll and human capital management needs for businesses throughout the United States. The Company also offers low-cost payment choices for the employees of these businesses to replace costly alternatives. The Company's vertically aligned services provide customers with convenience and increased revenues by lowering payments-related costs and by designing innovative, customized solutions for internet, mobile, and cloud-based payments.
Forward Looking Statements
This press release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. JetPay’s actual results may differ from its expectations, estimates and projections and consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Most of these factors are outside JetPay’s control and are difficult to predict. Factors that may cause such differences include, but are not limited to, those described under the heading “Risk Factors” in the Company’s Annual Report filed with the Securities and Exchange Commission (“SEC”) on Form 10-K for the fiscal year ended December 31, 2015, the Company’s Quarterly Reports on Forms 10-Q and the Company’s Current Reports on Form 8-K.
Additional information concerning these and other risk factors is contained in JetPay’s most recent filings with the SEC. All subsequent written and oral forward-looking statements concerning JetPay or other matters and attributable to JetPay or any person acting on its behalf, are expressly qualified in their entirety by the cautionary statements above. JetPay cautions readers not to place undue reliance upon any forward-looking statements, which speak only as of the date made. JetPay does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based.