IPMT Ipayment (MM)

iPayment, Inc. (NASDAQ: IPMT) today announced financial results for the second quarter and six months ended June 30, 2005. Revenues increased 102.7% to $181,138,000 for the quarter from $89,384,000 for the second quarter of 2004. Net income rose 36.1% to $7,729,000 for the second quarter of 2005 from $5,677,000 for the second quarter last year, while earnings per diluted share increased 34.4% to $0.43 from $0.32 for the second quarter of 2004. Results for the second quarter of 2005 include pre-tax expenses of $496,000 related to the previously announced work of the Special Committee of the Board of Directors to explore strategic alternatives. The Company's results for the second quarter of 2005 were in-line with management's expectations. The Company's revenue growth for the quarter reflected an increase in charge volume to $6.6 billion from $3.2 billion for the second quarter last year. At the end of the second quarter of 2005, iPayment, Inc. and its wholly-owned subsidiaries had 340 employees. The Company has made the determination that during the pendency of the Special Committee process it will not provide financial guidance or hold a conference call to discuss its second quarter results. This press release contains forward-looking statements 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" provisions of the Private Securities Litigation Reform Act of 1995. For example, statements in the future tense, 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 the Company's current expectations as a result of numerous factors, including but not limited to the following: acquisitions; liability for merchant chargebacks; restrictive covenants governing the Company's indebtedness; actions taken by its bank sponsors; migration of merchant portfolios to new bank sponsors; the Company's reliance on card payment processors and on independent sales organizations; changes in interchange fees; risks associated with the unauthorized disclosure of data; imposition of taxes on Internet transactions; actions by the Company's competitors; and risks related to the integration of companies and merchant portfolios the Company has acquired or may acquire. These and other risks are more fully disclosed in the Company's filings with the U.S. Securities and Exchange Commission, including without limitation the Company's Annual Report on Form 10-K for 2005. The Company undertakes no obligation to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release. iPayment, Inc. is a provider of credit and debit card-based payment processing services to over 135,000 small merchants across the United States. 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. -0- *T iPayment, Inc. Financial Highlights (in thousands, except per share data) Consolidated Income Statements Three months ended Six months ended June 30, June 30, ----------------------- ----------------------- 2005 2004 2005 2004 ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenues $ 181,138 $ 89,384 $ 344,501 $ 169,353 Interchange 106,031 43,513 203,452 80,828 Other costs of services 55,091 33,683 103,866 65,385 Selling, general and administrative 4,676 2,796 8,200 5,682 ----------- ----------- ----------- ----------- Total operating expenses 165,798 79,992 315,518 151,895 ----------- ----------- ----------- ----------- Income from operations 15,340 9,392 28,983 17,458 Other expense (income) Interest expense 2,281 649 4,578 1,359 Other expense (income) 496 - 577 (339) ----------- ----------- ----------- ----------- Income before income taxes 12,563 8,743 23,828 16,438 Income tax provision 4,900 3,066 9,293 5,759 Minority interest 66 - 66 - ----------- ----------- ----------- ----------- Net income $ 7,729 $ 5,677 $ 14,601 $ 10,679 =========== =========== =========== =========== Earnings per share Basic $ 0.46 $ 0.34 $ 0.87 $ 0.65 Diluted $ 0.43 $ 0.32 $ 0.81 $ 0.60 Weighted average shares outstanding Basic 16,783 16,527 16,752 16,493 Diluted 18,214 18,113 18,247 18,083 Percentages of Revenues Interchange 58.5% 48.7% 59.1% 47.7% Other costs of services 30.4% 37.7% 30.1% 38.6% Selling, general and administrative 2.6% 3.1% 2.4% 3.4% Income from operations 8.5% 10.5% 8.4% 10.3% Effective tax rate 39.0% 35.1% 39.0% 35.0% iPayment, Inc. Consolidated Balance Sheets (in thousands) June December Assets 30, 2005 31, 2004 ----------- ----------- (Unaudited) Current assets: Cash and cash equivalents $ 2,349 $ 888 Accounts receivable, net 20,430 17,031 Prepaid expenses and other 9,453 6,765 ----------- ----------- Total current assets 32,232 24,684 Restricted cash 2,478 3,248 Property and equipment, net 2,957 2,749 Intangible assets, net 207,385 219,331 Goodwill, net 102,966 79,360 Other assets 10,063 6,876 ----------- ----------- Total assets $ 358,081 $ 336,248 =========== =========== Liabilities and stockholders' equity Current liabilities: Accounts payable $ 8,151 $ 2,418 Accrued liabilities and other 23,128 11,377 ----------- ----------- Total current liabilities 31,279 13,795 Long-term debt 152,527 168,437 ----------- ----------- Total liabilities 183,806 182,232 ----------- ----------- Minority interest in equity of subsidiary 1,330 - Stockholders' equity: Common stock 134,836 130,507 Retained earnings 38,109 23,509 ----------- ----------- Total stockholders' equity 172,945 154,016 ----------- ----------- Total liabilities and stockholders' equity $ 358,081 $ 336,248 =========== =========== iPayment, Inc. Consolidated Statements of Cash Flows (in thousands) Six months ended June 30, ----------------------- 2005 2004 ----------- ----------- Cash flows from operating activities: (Unaudited) (Unaudited) Net income $ 14,601 $ 10,679 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 20,272 9,576 Noncash interest expense 495 321 Changes in assets and liabilities: Accounts receivable (3,399) (1,064) Prepaid expenses and other current assets (2,668) (2,389) Other assets (4,368) (181) Accounts payable 5,718 1,931 Accrued liabilities and other 3,632 2,461 ----------- ----------- Net cash provided by operating activities 34,283 21,334 ----------- ----------- Cash flows from investing activities: Changes in restricted cash 770 7,797 Expenditures for property and equipment (810) (149) Acquisitions of businesses, portfolios and other intangibles (18,712) (3,760) ----------- ----------- Net cash (used in) provided by investing activities (18,752) 3,888 ----------- ----------- Cash flows from financing activities: Net repayments on line of credit (16,000) (21,500) Repayments of debt and capital lease obligations - (4,515) Proceeds from issuance of common stock 1,930 937 ----------- ----------- Net cash provided by (used in) financing activities (14,070) (25,078) ----------- ----------- Net increase (decrease) in cash 1,461 144 Cash and cash equivalents at beginning of period 888 733 ----------- ----------- Cash and cash equivalents at end of period $ 2,349 $ 877 =========== =========== *T