Online Resources Corp. says it wants to expand further in online bill payment, though its latest deal is unlikely to help much this year in curbing its losses.
The Chantilly, Va., online-banking outsourcer announced an agreement Thursday to buy the biller service provider Internet Transaction Solutions Inc. of Columbus, Ohio, which processes five million payments per year on behalf of 150 clients. Related Links
Matthew P. Lawlor, the chairman and chief executive of Online Resources, said the "tuck-in acquisition" would complement Princeton eCom Corp., which the company bought last July.
"We believe there is an excellent opportunity for Online Resources to grow in the relatively fragmented biller service, or BSP, market," Mr. Lawlor told analysts on an earnings call Thursday evening.
Even so, Online Resources is likely to remain unprofitable for the rest of the year as it deals with the loss of clients like BB&T Corp. of Winston-Salem, N.C., which shifted its bill-payment business to rival CheckFree Corp., and MBNA Corp., which was bought last year by Bank of America Corp. of Charlotte.
Online Resources reported a second-quarter loss of $1.2 million, or 4 cents per share, compared with net income of $1.4 million, or 5 cents per diluted share, the year earlier. Revenue grew 84%, to $31.9 million.
The company projected a loss of 4 to 6 cents a share in the third quarter on revenue of $33.5 million to 34.5 million. It said its full-year loss would come in at the deep end of its prior expectation, 35 to 42 cents on revenue of $130 million to $136 million. It now expects a loss this year of 39 to 42 cents per share on revenue of $135 million to $138 million.
Jennifer Roth, a senior analyst at MasterCard Inc.'s independent research unit TowerGroup, said ambitious vendors are likely to continue buying small payment specialists to gain scale in a potentially lucrative market segment.
"I don't think there are any large biller-direct service providers left on their own, but there are many small ones," she said. "I think there's still room to roll up" a business through acquisitions.
Christopher F. Penny, an analyst at Friedman, Billings, Ramsey & Co. Inc., noted that Online Resources' earnings before interest, taxes, depreciation, and amortization grew by $1.3 million from the first quarter, while its revenue grew $1.1 million.
"We like the aggressive approach that management seems to be taking toward the bill payment market," he said in a note to clients Friday.
