With a new playbook in hand for achieving profitability, Online Resources Corp. met its revised fourth-quarter expectations.

The Internet banking and bill payment provider posted an operating loss of $4.2 million, or 36 cents per share, after the market closed on Thursday.

That beat by a penny consensus estimates that the company had previously guided downward. For the same period a year earlier, the company lost $4.3 million, or 39 cents per share.

In mid-January, Online Re-sources lowered expectations and introduced a five-point initiative to accelerate its path to profitability. Its revised revenue estimate of a 35% increase, to $5 million, which it ultimately met, compared to J.P. Morgan Chase & Co.’s original estimate of $5.5 million.

Online Resources’ five-point plan called for cross-selling new products; supporting cofunded marketing programs to increase consumer adoption; increasing prices for selected services; deploying technical resources to automate processes; and reducing operating costs. The company also slashed 9% of its staff, or 23 jobs.

Matthew Lawlor, chairman and chief executive of the McLean, Va.-based company, predicted that it would be profitable by mid-2002 as a result of the new initiatives. Online Resources expects to benefit as more consumers adopt online financial services, he said.

The online banking and bill payment industry now is emerging from its “first wave” of revenue stream, generated by implementation fees from financial institutions, and is moving toward fees from consumer adoption, he said. Only 5% of U.S. consumers bank online, but Mr. Lawlor said he expects the figure to reach 10% to 20% within three years.

Consumer adoption will come in three waves, he said: consumers looking at their account information online, followed by bill payment, then online brokerage and insurance services.

“The revenue picture expands with each of four sequential waves of adoption,” Mr. Lawlor said.

Online Resources had 508 financial institution clients at the end of last year, an increase of 35% from 1999, and up 6% from the end of the third quarter.

Matthew Fassnacht, a senior equity research analyst at J.P. Morgan Chase & Co., said Online Resource’s pre-announcement of lowered expectations was one of several over the last couple of years.

“We think this is probably the last time they are going to reset expectations, because they have changed strategies to focus more now on profitability rather than market share grabs in the near term, which cost a lot of money,” he said.

Like many dot-com companies, Online Resources is changing its attitude about spending heavily to gain market share, as the stock market has turned down and a general focus on profitability has returned, he said.

Though the revised earnings estimate “was disappointing, it was a good strategic move on the company’s part,” Mr. Fassnacht said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.