Online Resources Corp. remains an appealing target for acquisition, analysts say, despite posting a first-quarter loss and being ordered by a court to pay $5.3 million to its founder.
The processor reported a loss of $7.2 million to common shareholders; it reported a $157,000 loss in the first quarter last year. The latest loss includes the legal judgment and other costs associated with the case. Revenue rose 1.8%, to $39.3 million.
Though the company benefited from increased transaction levels in its eCommerce and Banking Services units and is appealing the court’s verdict, it has set aside $7.7 million for legal fees, compensatory damages and estimated pre-judgment interest.
On May 3, a Virginia circuit court awarded former chief executive Matthew Lawlor, who founded the company in 1989 and departed after losing a proxy battle in 2009, $5.3 million for wrongful termination and breaching a stock plan and severance agreements (
The company also reported a nonrecurring charge of $900,000 in restructuring costs related to a strategic evaluation by its board.
In a May 11 research note, analyst John Kraft, from institutional equity research firm D.A. Davidson & Co. of Lake Oswego, Ore., wrote that “we continue to believe the company is in the beginning stages of a turnaround that will eventually culminate in a sale.”
In 2010, Online Resources received several unsolicited bids from potential buyers.
Investment research firm Janney Capital Markets, a unit of Janney Montgomery Scott LLC. of Philadelphia, also said it thought the company was an acquisition target, and it had a somewhat more muted reaction to the earnings.
Joseph L. Cowan, Online Resources president and chief executive, said during a conference call with analysts that he is “encouraged by the transaction trends we’re seeing, particularly the year-over-year comparison in our biller business.”
Biller-paid transactions increased 33% from a year earlier in the company’s eCommerce unit, to 20.5 million, while bill-payment transactions in the Banking Services unit increased 6% to 11.6 million.
“This uptick is a reflection of the performance of our sales team over the past few quarters,” Cowan said.
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