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Press release content from Globe Newswire. The AP news staff was not involved in its creation.
PRESS RELEASE: Paid content from Globe Newswire
Press release content from Globe Newswire. The AP news staff was not involved in its creation.

Payment Data Systems Announces Record First Quarter Results

May 15, 2019

Revenues up 13% to a Quarterly Record $6.6 Million

Revenue increases generated broadly across PayFac, ACH and Prepaid operations

SAN ANTONIO, May 15, 2019 (GLOBE NEWSWIRE) -- Payment Data Systems (NASDAQ: PYDS ), an integrated electronic payment solutions provider, today announced financial results for the first quarter 2019, which ended March 31, 2019.

Louis Hoch, President and Chief Executive Officer of Payment Data Systems, said, “The new year is off to a good start, sustaining the momentum we have created across our ACH, prepaid and card processing businesses. We believe this is the foundation for another year of continued growth. In ACH, we recorded our seventh consecutive quarter of sequential growth in transactions processed. Prepaid also had another growth quarter of growth due to newly implemented card programs that are now producing additional recurring revenue. Revenue is now being recognized on the PayFac platform, which is the natural progression we anticipated after boarding merchants of software vendors that have been integrated over the last several months. Our success continues to be based on our robust technology. And, in the first quarter we maintained our commitment to investing in technology to further advance our competitive advantages. We are proud our investments remain internally funded from the consistent, predictable positive cash flow generated by our ACH business. As electronic payments continue to become an integral and larger part of our economy, we believe Payment Data Systems’ comprehensive portfolio of products is ideally positioned to capitalize on this growing trend.”

Financial Results for First Quarter Ended March 31, 2019

Revenues were $6.6 million for the first quarter, up 13% compared to the same period last year. The drivers of growth included growth in our profitable ACH business coupled with revenue growth in our prepaid and PayFac initiatives.

Gross profits were $1.34 million, up 5.1% from $1.27 million in the same period last year. Gross margins were 20.3%, down from 21.7% in the same period last year. The primary driver for the change in gross margin came from a shift in volume from our profitable ACH business to our Credit Card revenues, which has a lower profit margin.

Operating loss was $1.1 million for the quarter, essentially unchanged from the same period last year.

Adjusted EBITDA was a loss of $326,000 compared to an adjusted EBITDA loss of $228,000 a year ago.

Net loss was $1.1 million, or ($0.09) per share, compared to a net loss of $1.1 million or ($0.09) per share, essentially unchanged from the same period last year. In fiscal 2019, earnings per share were based on approximately 12.6 million shares outstanding compared to approximately 12.0 million shares used in the first quarter 2018 calculation.

More than $856 million of total dollars were processed in the first quarter, up 9% year-over-year.

Payment Data Systems continues to be in solid financial condition. Cash and cash equivalents at March 31, 2019 were $4.5 million, which includes $1.8 million net of fees of additional equity capital the Company raised in the first quarter. The Company is debt free.

Conference Call and Webcast

Payment Data Systems’ management will host a conference call with a live webcast on Wednesday, May 15, 2019 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 websites: www.paymentdata.com/invest.

A replay of the call will be available approximately one hour after the end of the call through May 29, 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 10131549.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.com, www.singularpayments.com, www.payfacinabox.com, www.akimbocard.com, and www.ficentive.com. Find us on Facebook® and Twitter.

About Non-GAAP Financial MeasuresThis 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.”

FORWARD-LOOKING STATEMENTS DISCLAIMERExcept 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.

Contact: Joe Hassett, Investor Relations joeh@gregoryfca.com 610-228-2110

PAYMENT DATA SYSTEMS, INC.CONSOLIDATED CONDENSED BALANCE SHEETS

March 31, 2019 December 31, 2018 -------------- -------------- (Unaudited) ASSETS Cash and cash equivalents $ 4,465,718 $ 2,695,177 Accounts receivable, net 1,134,767 1,214,355 Settlement processing assets 35,173,205 44,139,861 Prepaid expenses and other 241,569 101,722 Note receivable, net 108,750 108,750 ------------ - ------------ - Current assets before merchant reserves 41,124,009 48,259,865 Merchant reserves 11,297,894 12,645,803 ------------ - ------------ - Total current assets 52,421,903 60,905,668 Property and equipment, net 1,849,035 1,932,660 Other assets: Intangibles, net 3,426,427 3,676,427 Deferred tax asset 1,394,000 1,394,000 Operating lease right-of-use assets 2,616,128 — Other assets 320,831 306,757 ------------ - ------------ - Total other assets 7,757,386 5,377,184 -------------- -------------- Total Assets $ 62,028,324 $ 68,215,512 - ---------- - - ---------- - LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 220,375 $ 308,178 Accrued expenses 1,957,044 1,388,196 Operating lease liabilities, current portion 184,570 — Settlement processing obligations 35,173,205 44,139,861 Deferred revenues 5,000 20,000 ------------ - ------------ - Current liabilities before merchant reserve obligations 37,540,194 45,856,235 Merchant reserve obligations 11,297,894 12,645,803 ------------ - ------------ - Total current liabilities 48,838,088 58,502,038 Non-current liabilities: Operating lease liabilities, current portion 2,564,923 — Deferred rent — 79,748 ------------ - ------------ - Total liabilities 51,403,011 58,581,786 Stockholders’ equity: Preferred stock, $0.01 par value, 10,000,000 shares authorized; -0- shares — — outstanding at March 31, 2019 (unaudited) and December 31, 2018, respectively Common stock, $0.001 par value, 200,000,000 shares authorized; 17,961,132 and 17,129,680 issued, and 16,863,222 and 16,043,630 outstanding at March 31, 2019 186,392 185,561 (unaudited) and December 31, 2018, respectively Additional paid-in capital 76,429,299 74,568,627 Treasury stock, at cost; 1,097,910 and 1,086,050 shares at March 31, 2019 (1,835,368 ) (1,813,546 ) (unaudited) and December 31, 2018, respectively Deferred compensation (6,045,880 ) (6,270,675 ) Accumulated deficit (58,109,130 ) (57,036,241 ) ------------ - ------------ - Total stockholders’ equity 10,625,313 9,633,726 ------------ - Total Liabilities and Stockholders’ Equity $ 62,028,324 $ 68,215,512 - ---------- - - ---------- -

PAYMENT DATA SYSTEMS, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Ended March 31, 2019 March 31, 2018 -------------- -------------- Revenues 6,588,032 5,843,665 Cost of services 5,252,301 4,572,758 ------------ - ------------ - Gross profit 1,335,731 1,270,907 Selling, general and administrative: Stock-based compensation 283,408 374,378 Other expenses 1,661,739 1,498,651 Depreciation and amortization 486,548 458,663 ------------ - ------------ - Total operating expenses 2,431,695 2,331,692 ------------ - ------------ - Operating (loss) (1,095,964 ) (1,060,785 ) Other income: Interest income 23,074 11,521 Other income (expense) 1 (1,542 ) ------------ - ------------ - Other income and (expense), net 23,075 9,979 ------------ - ------------ - (Loss) before income taxes (1,072,889 ) (1,050,806 ) Income taxes — — Net (Loss) $ (1,072,889 ) $ (1,050,806 ) - ---------- - - ---------- - Earnings (Loss) Per Share Basic earnings (loss) per common share: $ (0.09 ) $ (0.09 ) Diluted earnings (loss) per common share: $ (0.09 ) $ (0.09 ) Weighted average common shares outstanding Basic 12,621,857 12,026,622 Diluted 12,621,857 12,026,622

PAYMENT DATA SYSTEMS, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)

Three Months Ended March 31, 2019 March 31, 2018 -------------- -------------- Operating Activities Net (loss) (1,072,889 ) (1,050,806 ) Adjustments to reconcile net (loss) to net cash (used) by operating activities: Depreciation 236,548 208,662 Amortization 250,000 250,001 Non-cash stock based compensation 283,408 374,378 Amortization of warrant costs 8,985 — Changes in operating assets and liabilities: Accounts receivable 79,588 77,518 Prepaid expenses and other (139,847 ) (192,569 ) Operating lease right-of-use assets (2,616,128 ) — Other assets (14,074 ) (25,125 ) Accounts payable and accrued expenses 481,045 (74,161 ) Operating lease liabilities 2,749,493 — Merchant reserves (1,347,909 ) 102,765 Deferred revenue (15,000 ) 90,250 Deferred rent (79,748 ) — ------------ - ------------ - Net cash (used) by operating activities (1,196,528 ) (239,087 ) Investing Activities Purchases of property and equipment (152,923 ) (29,502 ) ------------ - ------------ - Net cash (used) by investing activities (152,923 ) (29,502 ) Financing Activities Proceeds from public offering, net of expenses 1,793,905 — Purchases of treasury stock (21,822 ) (956,134 ) ------------ - ------------ - Net cash provided (used) by financing activities 1,772,083 (956,134 ) ------------ - ------------ - Change in cash, cash equivalents and merchant reserves 422,632 (1,224,723 ) Cash, cash equivalents and merchant reserves, beginning of year 15,340,980 19,778,022 ------------ - ------------ - Cash, Cash Equivalents and Merchant Reserves, End of Period $ 15,763,612 $ 18,553,299 - ---------- - - ---------- - Supplemental disclosures of cash flow information Cash paid during the period for: Interest $ — $ — Income taxes — —

PAYMENT DATA SYSTEMS, INC.CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Common Stock Additional Deferred Accumulated Total Paid - In Treasury Stock Compensation Deficit Stockholder’s Shares Amount Capital Equity ----------- ---------- ------------- -------------- -------------- --------------- -------------- Balance at December 31, 17,129,680 $ 185,561 $ 74,568,627 $ (1,813,546 ) $ (6,270,675 ) $ (57,036,241 ) $ 9,633,726 2018 Issuance of common stock, 769,230 769 1,793,136 — — — 1,793,905 public offering Issuance of common stock under equity 62,222 62 58,551 — — — 58,613 incentive plan Warrant compensation — — 8,985 — — — 8,985 costs Deferred compensation — — — — 224,795 — 224,795 amortization Purchase of treasury — — — (21,822 ) — — (21,822 ) stock Net (loss) — — — — — (1,072,889 ) (1,072,889 ) for the year ---------- --------- ------------ ------------ - ------------ - ------------- - ------------ - Balance at March 31, 17,961,132 $ 186,392 $ 76,429,299 $ (1,835,368 ) $ (6,045,880 ) $ (58,109,130 ) $ 10,625,313 2019 Balance at December 31, 16,874,235 $ 186,299 $ 74,041,083 $ (831,059 ) $ (7,012,544 ) $ (53,260,426 ) $ 13,123,353 2017 Issuance of common stock under equity 68,889 69 147,231 — — — 147,300 incentive plan Deferred compensation — — — — 227,078 — 227,078 amortization Purchase of treasury — — — (956,134 ) — — (956,134 ) stock Net (loss) — — — — — (1,050,806 ) (1,050,806 ) for the year ---------- --------- ------------ ------------ - ------------ - ------------- - ------------ - Balance at March 31, 16,943,124 $ 186,368 $ 74,188,314 $ (1,787,193 ) $ (6,785,466 ) $ (54,311,232 ) $ 11,490,791 2018

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (UNAUDITED) ------------------------------ Three Months Ended March 31, March 31, 2019 2018 -------------- ------------- Reconciliation from Operating (Loss) to Adjusted EBITDA: Operating (Loss) $ (1,095,964 ) $ (1,060,785 ) Depreciation and amortization 486,548 458,663 ------------ - ------------ - EBITDA (609,416 ) (602,122 ) Non-cash stock-based compensation expense, net 283,408 374,378 Adjusted EBITDA $ (326,008 ) $ (227,744 ) - ---------- - - ---------- - Calculation of Adjusted EBITDA margins: Revenues 6,588,032 5,843,665 Adjusted EBITDA (326,008 ) (227,744 ) ------------ - ------------ - Adjusted EBITDA margins -4.9 % -3.9 % ------------ - ------------ -