- The Washington Times - Monday, September 5, 2005

Online Resources Corp. posted a 62 percent increase in net income in the last quarter as it tries to capitalize on its unique status as both a banking and bill-payment Internet service.

The Chantilly company provides outsourced Internet banking and credit card services to about 700 financial institutions, which consist mostly of small- and medium-size banks and credit unions.

Major customers include credit card issuer MBNA America, First Command Bank and Guaranty Bank.

Industry stock analysts say the company can look forward to strong earnings in the near future if it continues to offer customers more services than its competitors.

“They’re a vendor of Internet banking” and Internet bill paying, said John Kraft, a stock analyst for the financial firm D.A. Davidson & Co., which engages in investment banking dealings with Online Resources but does not own its stock. “They’re the only ones who have both. The rest of the Internet vendors out there are either Internet bankers or Internet bill payers.”

Online Resources’ growth plans include more acquisitions and leveraging its unique combination of banking and bill-paying services to expand market share, company officials said.

In the past year, the company added 25 percent more consumers.

Online Resources was founded in 1989 and rode the dot-com boom upward before the dot-com bust that started in the late 1990s and continued through the beginning of 2001.

Unlike some competitors, it survived and has posted a profit in all but two quarters in the past three years.

Online Resources earned net income of $1.6 million (6 cents per diluted share) on $14.3 million in revenue in the second quarter of this year, compared with $1.0 million (5 cents per diluted share) on $10.1 million in revenue a year earlier.

Diluted shares reflect the value of options and warrants.

Although profits are up significantly, the company’s stock value has risen only slightly from the beginning of the year.

“That’s because we did a secondary [stock] offering so we have about 6 million more shares outstanding this quarter,” said Catherine Graham, Online Resources’ chief financial officer. “It diluted the value per share.”

Its shares have gradually climbed from a low of 92 cents per share after the bust to a high of $11 in March.

Online Resources’ stock closed up Friday by 2 percent, or 21 cents, at $9.53 per share. U.S. markets were closed yesterday for Labor Day.

The company has 394 employees, 325 of them in the Washington area.

More than 2.5 million consumers use Online Resources’ banking or bill-paying services to make over $10 billion in payments a year.

However, Craig Peckham, an analyst for financial firm Jefferies & Co., said the company must adapt to industry trends.

“Going forward, we think it will be critical for Online to maintain and grow its base of financial institution clients, despite the ongoing consolidation of the banking industry in the United States,” said Mr. Peckham, whose company has investment banking dealings with Online Resources but does not own its stock.

The company says one of its challenges involves phasing in divisions within the organization to manage growth, according to Matthew Lawlor, Online Resources’ chief executive officer.

“We have continued to execute on our traditional banking services business,” Mr. Lawlor said.

Recent acquisitions have included Incurrent Solutions, a Web-based account presentation service provider, in December, and Integrated Data Systems, an Internet banking software company, in June.


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