Planet Payment, Inc. (USA: NASDAQ: PLPM; UK: LSE: AIM: PPT and PPTR), a leading provider of international payment processing and multi-currency processing services.
Planet Payment is a leading provider of international payment processing and multi-currency processing services. We provide our services in 18 countries and territories across the Asia Pacific region, North America, the Middle East, Africa and Europe, primarily through our more than 45 acquiring bank and processor customers. Our point-of-sale and e-commerce services help merchants sell more goods and services to consumers, and with our ATM services are integrated within the payment card transaction flow enabling our acquiring customers to process and reconcile payment transactions in multiple currencies, geographies and channels.
Planet Payment: heading for profit in 2010
International payment and data processor Planet Payment (LSE: AIM: PPT and PPTR; OTCQX: PLPM) supplies banks and merchants with systems that enable them to accept, process and reconcile payments anytime, anywhere and in any currency.
The New York-based business has a network of more than 25 banks and processors, which operate around the world. Planet Payment tailors its services to meet the specific features of various industry sectors, including hospitality, retail, restaurant, travel, e-commerce and mobile commerce.
Under its previous name of Planet Group, the company floated on London’s Alternative Investment Market in 2006, when it raised £7m via the placing of 5.6 million shares at 125 pence each. Since then, its shares have traded as high as 177 pence each, during the summer of 2007, before falling as low as 40 pence each in early 2009. However, in recent months Planet Payment’s share price has improved markedly thanks to improved revenues and news that the company is moving into the black (at least from an operating profit point of view).
Planet Payment’s shares began to rally in August 2009, after the company put out upbeat interim results that showed it had significantly reduced its net loss – from $6.3m to $2.3m – during the first half, with an adjusted EBITDA profit for the second quarter. Then, in November, it reported that during the third quarter it achieved another positive adjusted EBITDA of $0.2m (Q3 2008: $1.4m loss). This morning Planet Payment served up more positive news, confirming that it had remained adjusted EBITDA positive in the fourth quarter, and now expects to be adjusted EBITDA positive for the full year (ended 31 December 2009). Total revenues for the fourth quarter rose 19%, and Planet Payment also confirmed that it was expected full year results to show total revenues of $47 million, up a healthy 30% on the previous year.
The company’s management team argues that such performances amid difficult economic conditions are testament to the robustness of Planet Payment’s business model. This model involves the provision of outsourced payment processing services to banks that have historically developed and supported such services in-house. By using Planet Payment’s systems instead banks save both time and money, allowing them to concentrate their resources on other areas of their business.
Planet Payment’s multi-currency processing service helps retailers and other merchants perform transactions with international cardholders in the cardholder’s home currency. This service is aimed at increasing revenues and reducing costs for the merchant since it makes the transaction transparent, both to the customer and the merchant. The customer is able to view the price of the transaction, and pay for it, in his own currency and in real time at the point of sale, while the merchant is still conducting business in his local currency.
This fits with Planet Payment’s strategy of targeting industry sectors (listed above) in which merchants are likely to have a proportionately large incidence of customers using credit cards denominated in currencies that are different from their own.
The company also offers ‘enhanced information management and reporting’ services because it recognises that there is a growing need for content management as merchants increasingly generate data from a wide range of internal and external sources. The company’s centralised reporting platform provides transactional data in a uniform, consolidated format across a merchant’s international operations, and it has the ability to focus on selected data according to the merchant’s particular requirements.
After signing several deals with banks and other financial services providers last year, Planet Payment scored another success by securing a contract with JCB International – one of the world’s major credit card brands. Planet Payment is now providing processing support to JCB merchants in Hong Kong, including back-end settlement and clearing processing.
Fourth quarter results showed that Planet Payment’s revenues increased by 19% to $14m during the three months ending 31 December 2009 (Q3 2009:$11.8m)), while total revenues for the 12 months to the end of December amounted to $47m – which was a 30% increase over the $23.8m turnover the company reported for the corresponding period in 2008. This revenue growth was driven by a 40% increase in its core multi-currency processing services.
The results suggest that Planet Payment should soon achieve a net profit, especially since data from several countries indicates that the economic situation around the world is recovering. Certainly, Planet Payment’s directors think so. “These strong financial results reflect the continued growth of our business and the operating leverage inherent in the Planet Payment business model, notwithstanding the past year's economic headwinds. With a robust pipeline of acquiring bank and merchant rollouts in new and existing markets, we expect to achieve further growth and increased revenues in 2010.”
The company saw its strengthening share price during the autumn as a good opportunity to raise $4m at the end of October via a placing of more than three million shares at a price of 80 pence each. Since then the shares have continued on an upward path, hitting 105 pence before the end of 2009.
Not long after the placing two funds – Kinderhook Partners and Blackrock – reported in November that they had significant stakes in the company (7.9% and 8.3% respectively). Meanwhile, Planet Payment announced it had bolstered its executive team with the addition of Robert Cox as chief financial officer. Cox was previously CFO at Harris Interactive (HPOL) and at DealerTrack, Inc, (TRAK) both Nasdaq-listed firms.
Planet Payment’s shares, which are quoted on the US’s OTCQX as well as London’s AIM, have endured a rollercoaster ride during the past couple of years. But the drop in the company’s share price to 40 pence in early 2009 can be put down largely to the Credit Crunch and the general poor sentiment shown towards small cap shares during the spring, rather than because of any fundamental issues with the business. Indeed, 2010 looks set to be the year when Planet Payment finally achieves its first ever profit.