OREANDA-NEWS. May 17, 2016. Payment Data Systems, Inc. (NASDAQ:PYDS), an integrated payment solutions provider, today announced financial results for the first quarter ended March 31, 2016.

First Quarter 2016 Financial and Operating Summary 

  • Revenues were \\$3.2 million
  • Gross margins were \\$1.1 million, or 33.3% of revenues
  • Operating loss was \\$46,413
  • Adjusted EBITDA1 was \\$465,499, or 14.4% of revenues
  • Net loss was \\$32,002, or \\$0.00 per diluted share
  • Total dollars processed for first quarter 2016 exceeded \\$737 million, compared to \\$797 million in the first quarter of 2015
  • Credit card transaction processing volume and credit card dollars processed in the first quarter increased 6% and 5%, respectively, over the same time period in 2015
  • ACH (Electronic check) transaction volumes decreased 11%; returned check transactions processed decreased 28% compared to the first quarter of 2015

Management Commentary

“While lower ACH volumes and a decrease in return check processing fees impacted our first quarter revenues, we continued to generate free cash flow from our ACH business, which we are using to invest in our technology and marketing platform,” said Louis Hoch, President and Chief Operating Officer of Payment Data Systems, Inc.  “ACH processing continues to be our core business and we have a strong sales pipeline for new ACH, credit card and prepaid business that we expect will generate year-over-year revenue growth for us in the second half of 2016.

“Higher first quarter 2016 operating expenses as a percent of revenues reflect the expansion of our operating platform over the past year to support future growth,” Hoch continued.  “On a sequential basis, we maintained our operating expenses at a similar level to the fourth quarter of 2015, and we expect to return to profitability in the second half of the year as our quarterly operating expenses remain consistent with first quarter levels and our revenues rebound.”

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

Financial Results

Three Months Ended March 31, 2016

Revenues of \\$3.2 million decreased 13.7% compared to \\$3.7 million for the first quarter of 2015, due to a decrease in the volume of ACH processing transactions and return transactions processed, as well as customer attrition.

Gross margins were \\$1.1 million, or 33.3% of revenues, compared to \\$1.4 million, or 38.4% of revenues, in the corresponding prior-year period.

Operating loss was \\$46,413, compared to operating income of \\$694,721 in the first quarter of 2015, reflecting higher selling, general and administrative expenses, including higher non-cash compensation expense, to support the Company’s growth, and higher amortization expense related to the amortization of assets purchased from Akimbo.

Adjusted EBITDA was \\$465,499 compared to \\$849,887 in the corresponding prior-year period. 

Net loss was \\$32,002, or \\$0.00 per share, compared to net income of \\$708,617, or \\$0.06 per diluted share in the first quarter of 2015. 

Balance Sheet

At March 31, 2016, the Company had \\$4.2 million of cash and cash equivalents and zero debt on the balance sheet. 

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 (877) 317-6789 for U.S. participants and (412) 317-6789 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 email ebrossy@finprofiles.com.

A replay of the call will be available through Monday, May 30th by dialing (877) 344-7529 (U.S.) or (412) 317-0088 (international), using the passcode 10085066.

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 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 Systems 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.ficentive.com, www.akimbocard.com, www.streamprepaid.com,  www.zbill.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
 
 March 31, 2016 December 31, 2015
 (Unaudited)  
Assets   
Current assets:   
Cash and cash equivalents\\$4,223,891  \\$4,059,606 
Accounts receivable, net 1,012,526   1,135,384 
Settlement processing assets 23,423,208   39,797,232 
Prepaid expenses and other 326,924   149,118 
Current assets before restricted cash 28,986,549   45,141,340 
Restricted cash 18,243,556   17,972,065 
Total current assets 47,230,105   63,113,405 
    
Property and equipment, net 3,001,935   3,077,421 
    
Other assets:   
Intangibles, net 301,032   341,816 
Deferred tax asset 1,621,000   1,621,000 
Note receivable 200,000   - 
Other assets 202,250   202,849 
Total other assets 2,324,282   2,165,665 
    
Total assets\\$52,556,322  \\$68,356,491 
    
Liabilities and stockholders’ equity    
Current liabilities:   
Accounts payable\\$141,853  \\$143,180 
Accrued expenses 1,345,245   1,328,738 
Deferred revenues 12,500   - 
Settlement processing obligations 23,423,208   39,797,232 
Current liabilities before restricted cash 24,922,806   41,269,150 
Restricted cash 18,243,556   17,972,065 
Total current liabilities 43,166,362   59,241,215 
    
Stockholders’ equity:   
Preferred stock, \\$0.01 par value, 10,000,000 shares authorized; -0- shares outstanding at March 31, 2016 (unaudited) and December 31, 2015 -   - 
Common stock, \\$0.001 par value, 200,000,000 shares authorized; 12,407,316 and 12,379,537 issued, and 12,057,684 and 12,029,905 outstanding at March 31, 2016 (unaudited) and December 31, 2015, respectively 185,561   185,533 
Additional paid-in capital 64,379,182   64,302,498 
Treasury stock, at cost; 349,632  and 349,632  shares (286,394)  (286,394)
Deferred compensation (5,801,387)  (6,031,362)
Accumulated deficit (49,087,002)  (49,054,999)
Total stockholders’ equity 9,389,960   9,115,276 
    
Total liabilities and stockholders’ equity\\$52,556,322  \\$68,356,491 
        

The accompanying notes to interim condensed consolidated financial statements in our Form 10-Q are an integral part of these financial statements.

PAYMENT DATA SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
    
 Three Months Ended March 31,
  2016   2015 
    
Revenues\\$  3,228,631  \\$  3,742,460 
    
Operating expenses:   
Cost of services 2,154,783   2,303,999 
Selling, general and administrative:   
Stock-based compensation 287,689   233,531 
Cancellation of stock-based compensation -   (163,936)
Other expenses 608,349   588,574 
Depreciation and amortization 224,223   85,571 
Total operating expenses 3,275,044   3,047,739 
    
Operating income (46,413)  694,721 
    
Other income and (expense):   
Interest income 22,011   19,000 
Other income (expense) (600)  (104)
Total other income and (expense), net 21,411   18,896 
    
Income (loss) before income taxes (25,002)  713,617 
Income taxes 7,000   5,000 
    
Net income (loss)\\$  (32,002) \\$  708,617 
    
    
Basic earnings per common share:\\$0.00  \\$0.10 
Diluted earnings per common share:\\$0.00  \\$ 0.06 
Weighted average common shares outstanding   
Basic 7,719,248   7,359,314 
Diluted   7,719,248   12,122,431 
    

The accompanying notes to interim condensed consolidated financial statements in our Form 10-Q are an integral part of these financial statements.

PAYMENT DATA SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
 Three months Ended March 31, 
  
  2016   2015  
     
Operating activities:    
Net income\\$(32,002) \\$708,617  
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation 183,437   75,651  
Amortization 40,784   9,921  
Non-cash stock based compensation 287,689   233,531  
Cancellation of stock based compensation -   (163,936) 
Issuance of stock to consultant 19,000   -  
Changes in current assets and current liabilities:    
Accounts receivable 122,858   125,377  
Prepaid expenses and other (177,806)  (111,126) 
Other assets 599   (4,741) 
Accounts payable and accrued expenses 15,180   (48,719) 
Deferred revenues 12,500   -  
Settlement processing assets, net -   -  
Net cash provided by operating activities: 472,239   824,575  
     
     
Investing activities:    
Purchases of property and equipment (107,954)  (253,933) 
Note receivable (200,000)  -  
Net cash (used) by investing activities: (307,954)  (253,933) 
     
Financing activities:    
  -   -  
Net cash (used) by financing activities: -   -  
     
Change in cash and cash equivalents 164,285   570,641  
Cash and cash equivalents, beginning of period 4,059,606   2,803,455  
     
Cash and cash equivalents, end of period\\$4,223,891  \\$3,374,096  
     
     
Supplemental disclosure of cash flow information:    
Cash paid during the period for:    
Interest -   -  
Income taxes\\$7,000  \\$50,000  
     

The accompanying notes to interim condensed consolidated financial statements in our Form 10-Q are an integral part of these financial statements.

Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands)
(Unaudited)
      
  Three Months Ended March 31, 
      
In thousands  2016   2015  
      
Reconciliation from Operating Income to Adjusted EBITDA:     
Operating income \\$(46,413) \\$694,721  
Depreciation and amortization  224,223  \\$85,571  
EBITDA  177,810   780,292  
      
Expenses related to NASDAQ uplisting and reverse stock split  -   -  
Acquisition costs  -   -  
Non-cash stock compensation expense (net) 287,689   69,595  
Adjusted EBITDA \\$465,499  \\$849,887  
      
Calculation of Adjusted EBITDA margins:     
Revenues \\$3,228,631  \\$3,742,460  
Adjusted EBITDA \\$465,499  \\$849,887  
Adjusted EBITDA margins  14.4%  22.7%