After Stock Falls, CEO Reassures Investors
By Zachary A. Goldfarb
Washington Post Staff Writer
Wednesday, October 31, 2007
The chief executive of Online Resources yesterday sought to soothe investors after the Chantilly company's stock price tumbled.
In an open letter, Matthew P. Lawlor told investors that the fundamentals of the company, which provides software to the financial services industry, were strong and that he would buy about 10,000 shares.
"Today Online Resources is a better investment value than ever before, with lower risk and a stronger strategic outlook for growth," Lawlor said. "I have never felt better about the company's prospects."
The stock price fell more than 30 percent on Friday after the company lowered growth estimates for next year. It fell 8 percent more on Monday before rebounding slightly yesterday, to $8.76 a share, up 90 cents.
In announcing its third-quarter earnings Thursday night, Online Resources reduced expectations for earnings and sales growth in 2008. The company said it expected revenue to increase by 20 percent next year, compared with a previous estimate of 25 percent.
The company also said it had lost major clients and that the recent acquisition of Princeton eCom, a bill-payment processor, had not turned out as hoped, with the loss of some Princeton eCom customers.
"It has been particularly painful to watch committed, long-term investors (including myself) see the value of their investment in Online Resources plummet in response to this news," Lawlor wrote.
Matthew J. McCormack, an analyst at Friedman, Billings, Ramsey, said the stock price declined so sharply because investors lost confidence in Online Resources' management.
As recently as the August meeting of analysts, Online Resources executives predicted robust growth next year, McCormack said. "Two months later, they disclosed they were losing a client they didn't expect to lose and they tempered expectations for the following year. It became a management credibility issue."
McCormack said he was not impressed by Lawlor's letter. "I think he should focus on running his company, not his stock price," McCormack said. "It's going to take several quarters of strong execution to get the stock moving materially higher."
In his letter, Lawlor said Online Resources hadn't lost major clients because of performance. "They were related to our acquisitions, or due to changes in the client's strategy or independence," he wrote.
Lawlor said the company -- which he founded 18 years ago -- is "a major player in the rapidly growing electronic payments industry" and is well-placed to expand its market share.
In its earnings announcement, the company said revenue was $34.2 million, up 21 percent from the third quarter of 2006. Profit was $1.1 million (4 cents per share), compared with a loss of $3.4 million (13 cents per share) a year earlier.
Online Resources provides Web-based billing and payment services to financial services companies and markets those services to consumers and businesses. The company claims 10 million users and $100 billion in payment processing annually.
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