Official Payments Reports Fiscal 2012 First Quarter Results

Official Payments Holdings, Inc. (Nasdaq: OPAY), a leading provider of electronic payment solutions for the biller direct market, today released results for the quarter ended December 31, 2011.

Results of Operations

First Quarter Fiscal 2012 Results

For the quarter ended December 31, 2011, Official Payments reported revenues from Continuing Operations of $34.8 million, a 5.7% increase over the same quarter last year. Net loss from Continuing Operations was $1.6 million, or $0.10 per fully diluted share, compared to net loss from Continuing Operations of $1.1 million, or $0.06 per fully diluted share, for the same quarter last year. Continuing Operations include Payment Solutions, and our VSA operations, which we are winding down. On a standalone basis, our Payment Solutions business reported quarterly revenues of $34.3 million, or a 5.6% increase over the same quarter last year.

Our general, administrative, selling and marketing expenses, which support our Continuing Operations, were $9.2 million, an increase of $3.3 million, or 55.0%, from the same quarter last year. The quarter included a $1.5 million restructuring expense related to the relocation of our corporate headquarters from Reston, Virginia to Norcross, Georgia.

Management’s Comments

Alex P. Hart, President and Chief Executive Officer of Official Payments Holdings, Inc. stated, "The first quarter was very encouraging, and I believe that we will continue to execute on a number of fronts to improve even more. During the quarter our transaction volume grew 3.6% as compared with the prior year quarter and our average transaction size grew 8.1%. More importantly, our Payment Solutions net revenue increased $2.8 million or 30.6% as compared with the prior year quarter.”

Definition and Reconciliation

We use the following non-GAAP financial measures in this press release: adjusted EBITDA from Continuing Operations and Payment Solutions net revenue. Official Payments’ management believes these measures are useful for evaluating our performance against the performance of peer companies within the electronic payments industry, and that these measures provide investors with additional transparency with respect to financial measures used by management in its financial and operational decision-making. Our management believes that Payment Solutions net revenue provides additional information about our business, as we wind-down our VSA operations. We also use Adjusted EBITDA from Continuing Operations, together with other criteria, in our executive compensation program. Non-GAAP financial measures should not be considered a substitute for the reported results prepared in accordance with generally accepted accounting principles in the United States, or US GAAP. Our definitions used to calculate non-GAAP financial measures may differ from those used by other companies.

Official Payments defines adjusted EBITDA from Continuing Operations as net loss from our Continuing Operations before interest expense net of interest income, income taxes, depreciation and amortization, restructuring charges and stock-based compensation in both equity and cash.

The following table shows a reconciliation of net loss from Continuing Operations to adjusted EBITDA from Continuing Operations for the three months ended December 31, 2011 and 2010 (in thousands):

Official Payments defines Payment Solutions net revenue as Payment Solutions gross revenue less interchange fees and other processing-related dues, assessments and fees. Payment Solutions gross revenue is defined as revenue from continuing operations less revenue from VSA operations. The following is a reconciliation of Payment Solutions net revenue to revenue from continuing operations for the three months ended December 31, 2011 and 2010.

Liquidity

As of December 31, 2011, Official Payments had $46.9 million in cash and cash equivalents. Our $46.9 million in cash and cash equivalents includes funds that have settled to us that we have not yet distributed to clients due to the timing of bank transactions of $7.7 million and $8.6 million of accrued discount fees. These items reduce our cash available for company use. Therefore, the cash and cash equivalents available to Official Payments is $30.6 million (cash and cash equivalents less settlements payable and accrued discount fees plus settlements receivable). Official Payments has no short-term or long-term debt.

Conference Call

Official Payments will host a conference call Wednesday, February 8 at 5:00 p.m. Eastern Time to discuss these results. To access the conference call, please dial (800) 988-9768 and provide pass code OPAYQ1. The conference call is also available live via the Internet at www.OPAY.OfficialPayments.com. Participants via the Web will need to provide conference ID # 1921847 and pass code OPAYQ1. A replay will be available at 8:00 p.m. Eastern Time on Wednesday, February 8, 2012 at www.OPAY.OfficialPayments.com or by calling (866) 460-9737 and entering conference ID # 1921847. The replay will be available until 11:59 p.m. Eastern Time on March 8, 2012.

About Official Payments Holdings, Inc.

Official Payments Holdings, Inc. (Nasdaq: OPAY) is a leading provider of electronic payment solutions in the biller direct market. Headquartered in Norcross, Georgia, the company provides enhanced electronic payment services that include multiple payment choices, payment channels, and bill payment products and services to over 4,700 clients in all 50 states and the District of Columbia. Official Payments serves clients in multiple markets including federal, state, and local governments, educational institutions, and utilities. Consumers may pay federal taxes, state and local taxes, property taxes, and other bills such as utilities and college tuition with credit cards, debit cards, electronic checks and alternative payment methods via online, telephone, point of sale and other channels by visiting www.OfficialPayments.com. Corporate information is available at www.OPAY.OfficialPayments.com.

Forward looking statements

Statements made in this press release that are not historical facts are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to future events or Official Payments’ future financial and/or operating performance and generally can be identified as such because the context of the statement includes words such as "may,” "will,” "intends,” "plans,” "believes,” "anticipates,” "expects,” "estimates,” "shows,” "predicts,” "potential,” "continue,” or "opportunity,” the negative of these words or words of similar import. Official Payments undertakes no obligation to update any such forward-looking statements. Each of these statements is made as of the date hereof based only on current information and expectations that are inherently subject to change and involve a number of risks and uncertainties. Actual events or results may differ materially from those projected in any of such statements due to various factors, including, but not limited to: general economic conditions, which affect Official Payments’ financial results in all our markets, which we refer to as "vertical markets”, particularly the federal vertical market, the state and local tax vertical market and the property tax vertical market; effectiveness and performance of our systems, payment processing platforms and operational infrastructure; our ability to grow Payment Solutions revenue while reducing our costs, including processor and interchange related costs; the potential loss of funding by clients, including due to government budget shortfalls or revisions to mandated statutes; the timing, initiation, completion, renewal, extension or early termination of client or partner contracts or projects; our ability to execute on our sales and product strategy and realize revenues from our business development opportunities; the impact of regulatory requirements; and unanticipated claims as a result of project performance, including due to the failure of software providers, processors, vendors, partners, or subcontractors to satisfactorily perform and complete engagements. For a discussion of these and other factors which may cause our actual events or results to differ from those projected, please refer to the periodic reports on Form 10-K and Form 10-Q that we file with the Securities and Exchange Commission.