Online Resources Shows Profit for Quarter, Loss for Year

Online Resources Corp. (Nasdaq: ORCC), a provider of web-based financial services, reported a profit for the fourth quarter, but a loss for the year and cautioned investors that its interest income will be softer in 2008 due to the Federal Reserve’s reduction in interest rates.

Preliminary net income in the quarter was $600,000, compared with a net loss of $2.7 million in the fourth quarter of 2006. The results are preliminary as Online Resources resolves several tax issues. The company generated revenues of $38.1 million in the quarter, compared with $29.4 million in the year ago period.

Revenues for 2007 rose 47 percent to $135.1 million. For the year, the company lost $8.9 million, compared with a $4 million loss in 2006.

Online Resources blamed the poor results on the loss of some large clients and the ongoing costs associated with its acquisition of Princeton eCom and Transaction Solutions. The company said it added several clients, including three Web-based collection customers and a top five bank during the fourth quarter. The earnings from those new clients are expected to grow in 2008 because they will be customers for the entire year

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. 

“We executed well and invested heavily in our future,” said company chairman and CEO Matthew P. Lawlor during the company’s conference call following the earnings release, adding that the company was surprised by the defection of some customers. Another loss is expected in 2008, though the company expects double-digit revenue growth.

Another loss, of 12 to 15 cents per share, is expected in the first quarter of 2008, while the lower net interest earnings is expected to lead to a net loss for the year of 14 to 26 cents per share, higher than the previous estimated loss of 12 to 24 cents per share.