With a recapitalization completed this month, Goldleaf Financial Solutions Inc. slashed its debt, reduced its obligations to a major private-equity backer, and is ready to pursue additional acquisitions, its president and chief executive said last week.
The Brentwood, Tenn., vendor of financial software and services also is expanding its list of alliances with other banking service providers.
The company plans to announce today that the core processing outsourcer RDSI Banking Systems, a Defiance Ohio, unit of Rurban Financial Corp., has agreed to sell banks Goldleaf’s check image-capture service, Remote Deposit Express.
“We’ve come a long way in a short time,” said Lynn Boggs, Goldleaf’s president and CEO.
Analysts said that the recapitalization should improve its profitability, and that the experienced management adds legitimacy to a company that has come together in its present form only in the past two years through a series of deals.
(Before joining what is now Goldleaf in December, Mr. Boggs was the chief operating officer at InterCept Inc., an Atlanta provider of data processing services.)
John Kraft, an analyst at D.A. Davidson & Co., initiated coverage of the stock last week with a “neutral” rating. He cautioned that Goldleaf’s ability to make mergers and acquisitions could be hobbled by the somewhat disappointing secondary stock offering, completed two weeks ago.
“They don’t have as much cash as they had hoped when they started this process,” Mr. Kraft said.
The offering raised only $5.50 a share, rather than the $8 that had been projected earlier, he said.
Even so, the offering was oversubscribed, and the underwriters — led by Friedman, Billings, Ramsey & Co. Inc., with JMP Securities LLC and D.A. Davidson as co-managers — took an additional 1.5 million shares on behalf of clients beyond the 10 million initially planned.
That gave Goldleaf enough cash to pay the balance of its credit line with Bank of America Corp. and to retire preferred stock held by Lightyear PBI Holdings LLC, a private equity fund that owned 55% of Goldleaf and controlled four of the seven seats on its board. Now Lightyear owns less than 15% of Goldleaf and has one board seat.
Mr. Boggs said he hoped to make two or three acquisitions in the next year. “There are products” and services “we would like to add,” such as online bill payment, digital imaging, and electronic payment processing.
Goldleaf will evaluate core processing acquisitions according to the seller’s location, he said. “If we could acquire the right company, we would do it to get geography.”
For example, “Texas has a tremendous number of banks,” Mr. Boggs said. “We have customers there, but we don’t have a presence.”
By combining five small vendors, mostly in the Southeast, over the past fifteen months, Goldleaf has assembled a portfolio of 50 products and services, with eight to 12 main ones, including ACH processing, core processing, and Web hosting. But its 2,500 community bank clients on average use only 1.2 of its offerings, Mr. Boggs said. “There’s a lot of cross-selling opportunity.”
Christopher Penny, an analyst at Friedman Billings, initiated coverage of Goldleaf’s stock last week with an “outperform” rating. He said the plan of small acquisitions and targeting smaller banks than other vendors made sense.
“Such a model has worked very well, as many of the company’s smaller-sized clients create great products but have limited capital to grow,” Mr. Penny said.
“With the larger processors setting their sights on larger targets, … [Goldleaf] now is in a position to acquire smaller vendors that are more meaningful to the company.”
