June 22, 2009
Dear Shareholders:
In August of this year, we will be
recognizing the sixth anniversary of the formation of Payment Data Systems.
Since the closing of Billserv and the inauguration of PDS in 2003, it is amazing
to us how quickly time has passed. Therefore, we thought it might be of
interest to review our success over this period and look forward a bit as we
anticipate what the future may hold for us in the coming years.
2003
The first five months of our existence in a new form focused a great deal on
getting the basis of our technology, key partnerships, and relationships in
place that allows us to provide the many faceted products and services that we
offer our customers and prospects today. Some examples of those were the
establishment of our ACH processing gateway, our merchant services gateway, and
our initial relationship with Harris Bank as our sponsor into the Visa© and
MasterCard© Associations.
2004
In 2004, the first full year of operations, we experienced a number of new
developments such as the roll out of our Interactive Voice Response (IVR)
capabilities on a national scale. In March of that year we filed our
application for patent protection of our bill payment/debit card methodology.
During the year we continued aggressive signing of key customers, strengthened
our key partnerships by adding Merrick as a sponsor bank, and enjoyed record
growth. We also secured our initial equity line of credit of $10,000,000.
We also implemented our highly flexible and rapid deployment website development
tools for delivery of bill payment.
2005
2005 saw our continued business development and record setting pace. We
submitted the final documents regarding the bill payment patent and successfully
entered the insurance industry for payment processing, and we also issued our
first celebrity endorsed stored value and gift card programs. We expanded
our payment processing into the telecommunications industry and into highly
successful national marketing organizations. In early 2005 we became the
first MicrosoftÒ Certified .net web services provider for acceptance and
processing of ACH/eCheck transactions.
2006
Continuing trends of success followed in 2006. In April, the U. S. Patent
Office issued our patent # 7,021,530 for bill payment/debit card processing
methodology. Partnership development continued with our joining the Green
Dot network and the signing of our Shelby Systems referral program. Shelby
Systems is the nation’s leading church management software development company.
Through this exclusive agreement, we are providing merchant services and ACH
processing for the churches’ e-giving programs for tithing and other giving
needs such as building programs. Once again, PDS enjoyed record setting
growth during this period.
2007
During 2007, we continued the successful growth trends we experienced in the
prior years. One of our goals was to complete in early 2007 our PCI Level One
certification as a Third Party Processor. This certification validates our
ability to properly process and store credit card transactions within published
compliance standards. This certification is important to us because it
signifies a level of competence and security that is required for us to earn the
business of larger companies and perform processing for banks. The certification
positions our company among the elite service providers in the industry and is a
must for any large organization to consider us as a potential partner or an
acquisition candidate.
We also signed the Natalie Gulbis gift card program agreement, and delivered our
mobile application for credit card acceptance on Smart Phones.
2008
2008 was a great year for us in that we completed the sale of our patent but
retained all rights without license fee or royalty payments. We also
formed two wholly-owned subsidiaries, FiCentive and Zbill, in order to
separately brand our stored value and bill payment products, respectively.
This action clearly delivered on our expectations of creating three pure play
models which enhances our ability to market payment processing (merchant
services and ACH) through PDS, stored value and gift card programs through
FiCentive, and bill payment through Zbill. It has also increased our
ability to cross sell these products to our existing and prospective customers.
We expanded our ability to offer tailored stored value and gift card programs by
being selected by American Express and Discover Card to join their innovative
programs. We also expanded our bank relationship and joined with HSBC as a key
sponsor bank into the card associations.
2009 and Beyond
In March of this year, we announced that February was our highest processing
month since 2007. Even in the headwinds of a difficult economy, consumers
continue to use plastic for payments and purchases. So our processing
volumes, as those of Visa and MasterCard, continue to improve as consumers move
away from paper checks.
We continue to work toward the implementation of our portfolio acquisition
strategy. For those that may not be familiar with this strategy it is
really straightforward. It is to utilize leverage to acquire cash flow and
ensure that the associated debt service is less than the cash flow acquired. The
acquisitions we have been looking at could significantly change our financial
metrics in a positive manner by moving us into a positive cash flow situation
and contributing greatly to our drive towards profitability. Furthermore,
it should eliminate the reliance on outside funding to support operational
activities, and potentially lead to a stronger share price and therefore
increased shareholder value.
I would classify our sales pipeline as strong in all three of our product
offerings. We continue to attract large businesses to our merchant
services, and our debit card programs are expanding with new opportunities that
began to open up in early 2008. We have continued our strong commitment to
our stored value card programs and additional contract signings as evidenced by
the signing of Natalie Gulbis to her signature gift card. Meanwhile, our
private bill payment labeling opportunities continue to be significant.
However, as you might imagine, the sales cycles in all three of these areas are
somewhat more protracted than we would experience in the smaller retail market.
However the upside is more productive in terms of revenue opportunity.
This year we stepped up our sales process and continue to add new merchants at
an average rate of over 60 new accounts per quarter.
We will continue to execute and report with a vision toward a move of our stock
to a national market listing – NASDAQ or AMEX. However, as you know,
a great many things must be accomplished before that becomes reality.
However, a strong and successful implementation of our acquisition strategy
should go a long way to helping us reach the market listing requirements.
Additionally, I believe you will see that Payment Data Systems will continue to
deliver innovative products and services to the marketplace thus bringing some
significant revenue-producing opportunities to our company.
We also believe that we are well positioned, provided our strategic initiatives
and forecasts are realized, to cross into the area of profitability during the
2009 - 2010 timeframe. We still believe 2009 could very well be the start
of the creation of significant value for shareholders and will carry us
positively into the next decade.
I would also encourage you to take a few moments and visit our website’s press
section (http://www.paymentdata.com/pressrelease.htm)
to review the numerous and exciting news releases we have issued over the years.
I believe you will come away enthusiastic about your company in terms of the
past accomplishments and the future it holds for each of us.
Sincerely,
Michael R.
Long
Chairman and CEO
Email:
michael.long@paymentdata.com
Phone: 210.249.4040
FORWARD-LOOKING STATEMENTS DISCLAIMER
Except for the historical information contained herein, the matters discussed in this release include certain forward-looking statements, which are intended to be covered by safe harbors. Those statements include, but may not be limited to, all statements regarding our and management’s intent, belief and expectations, such as statements concerning our future and our operating and growth strategy. Investors are cautioned that all forward-looking statements involve risks and uncertainties including, without limitation, the factors detailed from time to time in our filings with the Securities and Exchange Commission. One or more of these factors have affected, and in the future could affect, our businesses and financial results in the future and could cause actual results to differ materially from plans and projections. We believe that the assumptions underlying the forward-looking statements included in this release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. All forward-looking statements made in this release are based on information presently available to our management. We assume no obligation to update any forward-looking statements, except as required by law.