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LML Payment Systems Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 13, 2009 08:18AM

LML Payment Systems Inc. (LMLP) filed Quarterly Report for the period ended 2009-06-30. LML Payment Systems Inc. is a financial payment processor that provides check processing solutions for national regional and local retail merchants in the United States. LML\'s processing services include check verification and collection services along with electronic processing services. LML Payment Systems Inc. has a market cap of $18.7 million; its shares were traded at around $0.6899 with a P/E ratio of 69 and P/S ratio of 1.5.

Highlight of Business Operations:

Revenue pertaining to our TPP segment consists of one-time set-up fees, monthly gateway fees, and transaction fees. TPP segment revenue for the three months ended June 30, 2009 was approximately $2,169,000, an increase of approximately $215,000 or approximately 11.0% from TPP segment revenue of approximately $1,954,000 for the three months ended June 30, 2008. TPP segment revenue originating in Canadian dollars was approximately $2,528,000CAD for the three months ended June 30, 2009 compared to $1,973,000CAD for the three months ended June 30, 2008, an increase of approximately $555,000CAD or approximately 28.1%. Due to a weakening Canadian dollar in relation to the U.S. dollar, which decreased approximately 13% from the prior fiscal first quarter, the increase in revenue originating from Canada in the amount of approximately $555,000 or approximately 28.1% was offset by a weakening Canadian dollar for the three months ended June 30, 2009 as compared to the three months ended June 30, 2008. Transaction fees for the three months ended June 30, 2009 were approximately $1,781,000 compared to approximately $1,610,000 for the three months ended June 30, 2008, an increase of approximately $171,000 or approximately 10.6%; the amortized portion of one-time set-up fees recognized was approximately $43,000 for the three months ended June 30, 2009 compared to approximately $35,000 for the three months ended June 30, 2008, an increase of approximately $8,000 or approximately 22.9%; and monthly gateway fees for the three months ended June 30, 2009 were approximately $266,000 compared to approximately $244,000 for the three months ended June 30, 2008, an increase of approximately $22,000 or approximately 9.0%.

Revenue from licensing our patented intellectual property increased by approximately $37,000 or approximately 9.1% from approximately $406,000 for the three months ended June 30, 2008 to approximately $443,000 for the three months ended June 30, 2009. The increase was primarily attributable to an increase in our running royalties provided by our existing licensees. The licensing revenue of approximately $443,000 consists of: (i) approximately $306,000, net of legal fees, representing the recognized current period portion of deferred revenue from one granted license; and (ii) approximately $137,000 related to aggregate licenses providing running royalties and other paid-up license fees.

Costs of revenue increased from approximately $1,513,000 for the three months ended June 30, 2008, to approximately $1,624,000 for the three months ended June 30, 2009, an increase of approximately $111,000 or approximately 7.3%. TPP segment cost of revenue was approximately $1,222,000 for the three months ended June 30, 2009 as compared to approximately $1,077,000 for the three months ended June 30, 2008, an increase in TPP segment costs of approximately $145,000 or approximately 13.5%. This increase was primarily attributable to an increase in customer service representation staff levels in the TPP segment. CP/SL segment cost of revenue was approximately $366,000 for the three months ended June 30, 2009 as compared to approximately $399,000 for the three months ended June 30, 2008, a decrease in CP/SL segment costs of approximately $33,000 or approximately 8.3%.

General and administrative expenses decreased to approximately $949,000 from approximately $1,065,000 for the three months ended June 30, 2009 and 2008, respectively, a decrease of approximately $116,000 or approximately 10.9%. TPP segment expenses increased to approximately $174,000 from approximately $145,000 for the three months ended June 30, 2009 and 2008 respectively, an increase of approximately $29,000 or approximately 20.0%. CP/SL segment expenses decreased to approximately $113,000 from approximately $176,000 for the three months ended June 30, 2009 and 2008 respectively, a decrease of approximately $63,000 or approximately 35.8%. The decrease in CP/SL segment general and administrative expenses is primarily attributable to staff reductions and cost savings relating to the relocation of our Wichita, Kansas office during the third quarter of our prior fiscal year.

Sales and marketing increased to approximately $99,000 from approximately $82,000 for the three months ended June 30, 2009 and 2008, respectively, an increase of $17,000 or 20.7%. The increase is primarily attributable to an increase in TPP segment sales and marketing expenses of approximately $18,000 or approximately 24% from approximately $75,000 for the three months ended June 30, 2008 to approximately $93,000 for the three months ended June 30, 2009. The increase in TPP segment sales and marketing expenses is primarily attributable to an increase in wages and commissions.

Our liquidity and financial position consisted of approximately $2,931,000 in working capital as of June 30, 2009 compared to approximately $2,762,000 in working capital as of March 31, 2009. The increase in working capital was primarily attributable to cash provided by operating activities. Cash provided by operating activities was approximately $113,000 for the three months ended June 30, 2009, as compared to cash used in operating activities of approximately $225,000 for the three months ended June 30, 2008. The increase in cash provided by operating activities was primarily attributable to a decrease in cash used in discharging accounts payable and accrued liabilities of approximately $137,000 for the three months ended June 30, 2009 as compared to a decrease in cash used in discharging accounts payable and accrued liabilities of approximately $739,000 for the three months ended June 30, 2008. Cash used in investing activities was approximately $10,000 for the three months ended June 30, 2009 as compared to approximately $49,000 for the three months ended June 30, 2008, a decrease in cash used in investing activities of approximately $39,000. The decrease in cash used in investing activities was primarily attributable to a reduction in acquisition of property and equipment of approximately $40,000 for the three months ended June 30, 2009 as compared to the three months ended June 30, 2008. Cash used in financing activities was approximately $2,372,000 for the three months ended June 30, 2009 as compared to approximately $2,892,000 for the three months ended June 30, 2008, a decrease in cash used in financing activities of approximately $520,000. The decrease in cash used in financing activities was primarily due to the difference in the payments on the promissory notes relating to the acquisition of Beanstream. During the three months ended June 30, 2009, we made the second and final payment of approximately $2,321,000 on the promissory notes as compared to the first payment of approximately $2,844,000 on the promissory notes made during the three months ended June 30, 2008, a difference in payments of approximately $523,000.

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