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Online Resources' Earnings, Expenses Up
Online Resources Corp. posted good third-quarter results but warned about growing expenses from completed acquisitions.
The Chantilly, Va., banking technology company said revenue in the quarter rose 38%, to $15.3 million, and that net income was $2.4 million, 31% more than a year earlier. It plans to announce 2006 guidance at the end of November.
This was the first quarterly report to include full financial details from the June purchase of the banking software vendor Integrated Data Systems Inc., which is now Online Resources' custom solutions group.
Online Resources paid $5 million in cash and stock for Integrated and assumed $300,000 of debt.
Raymond T. Crosier, Online Resources' president and chief operating officer, said during a conference call with analysts Wednesday that the custom solutions group has had strong sales.
Its sales "have outpaced our implementation capacity," he said. To help meet that demand, "we've got to ramp up staffing."
Mr. Crosier also said that Online Resources must expand the sales team for Incurrent Solutions Inc. of Parsippany, N.J., which Online Resources bought last year for $8 million in cash and 1 million shares of stock to create its cards group.
Catherine A. Graham, Online Resources' executive vice president and chief financial officer, said "there should be a relatively short lag in which those people's salaries will be uncovered" by the increased sales they are expected to generate.
Chairman and chief executive, Matthew P. Lawlor said it was a solid three months for Online Resources. "Our sequential increase of over 100,000 users of our banking services was our highest quarter on record," he said.
John Kraft of the investment firm D.A. Davidson & Co. said in a report to investors published Thursday that Online Resources had 39 new contracts, "the strongest numbers we have seen for years." Two-thirds of the contracts were conversions from competitors.
Net income of 9 cents a share beat Mr. Kraft's expectation of 8 cents, and he increased his 2006 projections. He expects earnings of 48 cents instead of his earlier forecast of 46 cents, and revenue of $71.5 million instead of $69.5 million
E-Trade Profit Rises More than 35%
E-Trade Financial Corp. reported that third-quarter earnings rose 35.6%, to $107.5 million, driven in part by growth in its banking and loans businesses.
Earnings per share were 28 cents, versus 21 cents in last year's third quarter, the New York company said Wednesday.
Revenue rose 26%, to a record $422.8 million. Wall Street analysts had been expecting revenue of $406.7 million and earnings of 27 cents.
"We're doing a great job with the core retail customer, servicing them with cash products, credit products, and investment products," said R. Jarrett Lilien, E-Trade's president and chief operating officer, in an interview.
He also said that mortgage and loan origination rose sharply in the three months. Net loans receivable rose to 65%, to $17 million.
E-Trade added 48,728 net new accounts in the quarter, 86% more than it had at the end of the second quarter. Assets per customer rose 9%, to $36,276, from the second quarter. The company also holds a record 19.5% of customer assets in cash; that reflects customers' comfort in using E-Trade for banking and cash transactions, Mr. Lilien said.
The company also increased its full-year 2005 profit forecasts to a range of $1.04 to $1.09 a share; it had estimated 96 cents to $1.06 a share. Analysts are expecting full-year earnings of $1.05 a share.
Mr. Lilien noted that his company's $700 million acquisition of Harrisdirect LLC from Bank of Montreal closed on Oct. 6, a quarter ahead of schedule, and that the majority of Harrisdirect customers have stayed with E-Trade. "The thing you most fear in an acquisition is customer attrition," he said. "We haven't seen that yet."
E-Trade is in the middle of buying the online trader BrownCo, a unit of JPMorgan Chase & Co. E-Trade, which announced the deal last month, agreed to pay $1.6 billion for BrownCo and its 200,000 customers, whose account balances are the second-highest in online trading.
