iPayment Logs Low Volume Growth, Though Gas Prices Help

Newly private iPayment Inc. this week reported a 12% increase in operating profits despite single-digit growth in charge volume. Nonetheless, the big Nashville, Tenn.-based independent sales organization posted a net loss of $5.81 million on expenses related to its May 10 management-led buyout, compared with net income of $7.73 million in 2005's second quarter. In a conference call with analysts Wednesday, chief financial officer Clay Whitson said the buyout included $6.40 million in transaction costs and $7.14 million in stock-based compensation. IPayment reported $79.4 million in second-quarter revenues net of interchange, up 6% from $75.1 million a year earlier. Earnings before interest, income taxes, depreciation and amortization (EBITDA) hit $28.7 million, up 12% from $25.6 million in 2005's second quarter. Growth in operating earnings far outpaced the 3% uptick in charge volume?$6.87 billion compared with $6.61 billion in the year-earlier quarter. Whitson tells Digital Transactions News that expense reductions, including unspecified personnel reductions, helped boost earnings. While overall charge-volume growth was low, iPayment's petroleum merchants generated outsized volume in part because of higher gas prices. “I think our petroleum companies are doing very well; they're probably 11%-12% of our business versus 6%-7% a year ago,” chairman and chief executive officer Gregory S. Daily said in the conference call. In response to an analyst's question, executives said iPayment is looking to reduce data-processing costs and may have more to report at their next call. Whitson says the company will continue to report financial data even though it is no longer publicly owned because it has $202 million in publicly traded bonds outstanding. Daily and iPayment president Carl Grimstad began arranging the $770 million buyout last year after Daily said private ownership would allow management to focus more attention on developing its merchant-acquiring business (Digital Transactions News, May 17, 2005).