Online Resources Expects Loss in 2008

Online Resources Corp. (Nasdaq: ORCC), a provider of web-based financial services, is expecting to grow clients and revenue in 2008, but the company doesn’t expect positive impact to the bottom line, the company said during its recent earnings release and subsequent conference call.

"We expect that 2008 will be another high growth year for Online Resources,” said Matthew Lawlor, the company’s chairman and CEO in a prepared statement. “We foresee continued strong consumer adoption of bill pay and other Web-based financial services, and the opportunity to build market share in both the banking and e-commerce markets. At the same time, we will continue to provide a strong foundation for the future with deployment of a host of new premium services.” 

Catherine Graham, Online Resource’s executive vice president and chief financial officer, said during the conference call that the company expects a loss for the full year of 2008 as Online continues to digest the costs of the acquisitions of Princeton eCom and Transaction Solutions. However, “we expect to return to profitability at the end of 2008.” 

Online Resources did not provide specifics on its Web-based collections unit, the Virtual Collection Agent, which it markets to creditors and third-party collectors. 

There are a few reasons for the expected upturn at the end of the year, Graham added. The company typically has a weak first quarter because seasonal expenses tend to outstrip seasonal revenues. The company is also continuing to make up for the loss of some large clients at the end of 2007. While new signings are expected in 2008, they are unlikely to help the bottom line until 2009, according to Lawlor. 

Yet Lawlor added that remaining large clients are locked into multi-year contracts, so no additional major runoff of revenues is expected. He expects three-quarters of the company’s businesses to come from small and mid-sized financial institutions.