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©Copyright JetPay Corporation 2017
Payments | Payroll | Partners
Investor PresentationJune 2017
©Copyright JetPay Corporation 2017
www.jetpay.com 2
Safe Harbor Statement
This presentation shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shallthere be any sale of securities in any jurisdictions in which such offer, solicitation or sale would be unlawful priorto registration or qualification under the securities laws of any such jurisdiction.
This presentation includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. JetPay’s actual results may differ from its expectations, estimates and projections and consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Most of these factors are outside JetPay’s control and aredifficult to predict. Factors that may cause such differences include, but are not limited to, those described under the heading “Risk Factors” in the Company’s Annual Report filed with the Securities and Exchange Commission (“SEC”) on Form 10-K for the fiscal year ended December 31, 2016, the Company’s Quarterly Reports on Forms 10-Q and the Company’s Current Reports on Form 8-K.
Additional information concerning these and other risk factors is contained in JetPay’s most recent filings with the SEC. Allsubsequent written and oral forward-looking statements concerning JetPay or other matters and attributable to JetPay or any person acting on its behalf, are expressly qualified in their entirety by the cautionary statements above. JetPay cautions readers not to place undue reliance upon any forward-looking statements, which speak only as of the date made. JetPay does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based.
This information is being presented by JetPay Corporation
Forward-Looking Statements
©Copyright JetPay Corporation 2017
www.jetpay.com 4
Investment Highlights – JetPay (NASDAQ: JTPY)
Fast Growing provider of Electronic Payments Processing and Human Capital Management Solutions (HCM)
• FY ’16 Revenues + 30%⁻ Payments + 42%⁻ HCM Solutions + 6%
• 1Q ‘17 Revenues up + 62%⁻ Payments + 95%⁻ HCM Solutions 8%
Top 15, and only remaining “independent”, end-to-end Card Payments Platform• Top 50 Overall
New Management Team with proven track record:• Diane (Vogt) Faro, CEO – formerly First Data (NYSE: FDC)• Larry Stone, Board of Director – part of team that sold Mercury to Vantiv
(NYSE: VNTV) for $1.6 Billion• New experienced CIO, CMO, President of Payment Sales from industry leaders
Strong recurring revenue > 90% of revenue recurring in nature
Capital ‘light’ business model that generates attractive cash flow
©Copyright JetPay Corporation 2017
www.jetpay.com 5
Investment Highlights – Key Facts
Share Statistics
Trading Symbol (Nasdaq) .......... JTPY
Stock Price …………...................... $ 1.95
Shares Outstanding .................. 15.6 Million
52wk Range .............................. $ 1.75 - $ 3.25
12 Month Avg. Daily Volume … 10,000
Fully Diluted Shares (2) .............. 33.6 Million
Market Capitalization (3) ........... $ 65.5 Million
Enterprise Value (3) ……………….. $ 74.5 Million
Capital Structure (1)
Cash on Hand ................................. $ 7.2 Million
Long Term Debt .............................. $ 16.2 Million
Redeemable Convertible Preferred $ 50.6 Million
Shareholder Equity ......................... $ 12.0 Million
Financials (TTM) (1)
Revenue ........................................... $ 63.6 Million
Adjusted EBITDA .............................. $ 4.4 Million
EPS …………………................................ $ (0.86)
1) As of or for the twelve months ended March 31, 2017 2) Excludes UPO available to Early Bird Capital and Stock Options3) Based on Fully Diluted shares
Full-time Employees …………………..... 225 Card Volume Processed 2016 …….... $ 4.3 Billion Payroll Checks Processed 2016 …….. 4.0 Million
©Copyright JetPay Corporation 2017
www.jetpay.com 6
Investment Highlights – History and Background
2012 2014 2016 2017
Formed by Experienced Electronics Payments Executives
• Commenced operations through acquisition of JetPay HR & Payroll and JetPay Payments, Texas
• Representing ownership of last “independent” payments platform
• Enter complementary HR & Payroll for small businesses to offer “Complete Solution”
• Acquired JetPay Payments, Pennsylvania.
• Adds scale with new market, e.g. Financial Institutions, ISOs and VARs
• Acquired CollectorSolutions, Inc., now JetPay Payments, Florida
• Creates scale in highly attractive recurring revenue markets, e.g. government and utilities
• Diane (Vogt) Faro (First Data) becomes Chief Executive Officer
• Noted payments expert Larry Stone invests capital in JetPay and joins board
• Resolved major litigation
• Signed landmark 6 Year contract with State of Illinois
• Repurchased 2.2 Million shares in Q1 ’17
©Copyright JetPay Corporation 2017
www.jetpay.com 8
What We Do – HCM and Payments
72%28%
PaymentsProcessingRevenues
HCM Revenues
Full range of HR and Payroll Services includes:
• Payroll Processing & Tax Filing• Human Resource Services • Time and Attendance Management• 401K Services• Affordable Care Act Assistance
Customers include:• SMEs, Governments, Higher Education,
Financial Institutions
Competitors include: • ADP, Paychex, Paycom, Paylocity
Leading provider of payments processing
Facilitate credit/debit card payments• Visa, MasterCard, Amex, Discover
Only independent with own processing technology
Customers include:• Apple Vacations, Expedia, State of Missouri, State of
Illinois
Competitors include: • First Data, Vantiv, Global Payments, Chase Paymentech,
BofA Merchant Services, WorldPay, Elavon
HCM Payments Processing
©Copyright JetPay Corporation 2017
www.jetpay.com 9
What We Do – Payment Processing Market Today
Fast Growing Market, Enjoying Steady Growth• Card payments grew 7.4% by number, and 7.1% by value from 2012 – 2015• JetPay’s growth ~ 30% last two years – 63% 1Q 2017
Fastest growing segment is the ISV market• JTPY offers ISV one of the market’s most compelling value propositions• Easy integration, superior technology provide a competitive advantage
Merchants Increasingly Demanding the Highest Security, the Greatest Flexibility• JTPY offers industry-leading security• As the only remaining “Independent” processing platform, unparalleled flexibility• Product innovator - early to market
⁻ Providing tokenization before market⁻ Mobile product concurrent with Square⁻ First AMEX Opt-Blue transaction⁻ “Discount for Cash” unique in market
©Copyright JetPay Corporation 2017
www.jetpay.com 10
What We Do – Payment Processing
Provider of Credit and Debit Card Processing • Solutions for Recurring Payments• Omnichannel Solutions• Card Present/ Card Not Present (online)• Virtual Terminal• Payments gateways – Includes: EBPP• Focus on maximizing customers’ revenue
Industry Leading Security• Security - Encryption and Tokenization
Significant Unused Processing Capacity
Multi-Channel Distribution Network• Direct • ISOs/VARs/ISVs• Financial Institutions
Serving a Variety of Fast-Growing End Markets• SMEs• Governments• Utilities
©Copyright JetPay Corporation 2017
www.jetpay.com 11
What We Do – Payment Processing Economics
Dollars Percentage
Customer Purchase $100 100%
Merchant Nets $97.77 97.77% Top line – Includes Interchange, Dues & Assessments
Total Processing Fee Paid by Merchant(1) + (2) + (3)
$2.23 2.23% Top line – Includes Interchange, Dues & Assessments
(1) Interchange – Paid to Banks $1.40 1.40% Pass-Through
(2) Dues and Assessments – Paid to V, MA
$0.15 .15% Expense Line Item
(3) JetPay Fee $.68 .68% Revenue
For Illustration
©Copyright JetPay Corporation 2017
www.jetpay.com 13
What We’ve Done – Payments Processing
Strong growth in all distribution channels• ISV, VAR, FI
Acquired CollectorSolutions, Inc. • Now JetPay Payment Services, Florida
Drove growth in government/utility• Opening new market opportunities
Financial Institution channel continues strong growth
Consolidated FY ‘16 Revenue: $ 56.3 Million + 30%
Consolidated 1Q ‘17 Revenue: $18.9 Million + 62%
8.6%
29.5% 30.%
62.7%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
2014 2015 2016 2017
Year Over YearConsolidated Revenue Growth
Q1
©Copyright JetPay Corporation 2017
www.jetpay.com 14
What We’ve Done – HCM
Leading provider of a full range of Human Capital Management Solutions
Customized Products for Employers Large and Small• WorkForce Today - Full suite of human capital management services for employers
with 50 + employees• WebPay - Smaller employer payroll and related services solution
Full Range of High Growth Services• Payroll Processing• Payroll Tax Processing• Human Resource Services with Integrated Onboarding Platform• Time and Attendance• 401K Services• Affordable Care Act Assistance
Target Markets• Small and Medium Sized Businesses • Government• Financial Institutions
©Copyright JetPay Corporation 2017
www.jetpay.com 15
What We’ve Done – HR & Payroll
HCM Growth Drivers• HCM growth driven by the launch of WorkForce Today• Continued success in enhancing WebPay for small employers
2016 Volume - $ 5.2 Billion
2016 Customers - ~ 5,300
2016 Payroll Checks – 4.0 Million
Growth Strategies• Migrate customers to full HCM Solutions platform• Create JetPay Portal with access to all JetPay services –
Payments, Payroll, Time and Attendance, etc.• Leverage tax filing platform
©Copyright JetPay Corporation 2017
www.jetpay.com 17
Who We Are – Executive Management Team
Diane (Vogt) Faro - Chief Executive Officer, Member of the Board since 2014President of National Benefit Programs, LLCPresident of Global Merchant Services at First Data CorporationPresident of First Data’s Alliance GroupChief Executive Officer of Chase Merchant Services LLC
Peter B. Davidson - Chief Administrative Officer and Corporate Secretary Vice-ChairmanChief Executive Officer of Brooks FI Solutions, LLCExecutive Vice President of Genpass, Inc. President of Speer & AssociatesEVP - HSBC USA and President of HSBC Mortgage; SVP - CoreStates Financial
Gregory M. Krzemien - Chief Financial Officer Chief Financial Officer, Treasurer & Corp Secretary of Mace Security International, Inc.Chief Financial Officer & Treasurer of Eastern Environmental Services, Inc.Ernst & Young LLP, Senior Audit Manager
Michael C. Collester - Chief Operating OfficerPresident of ACI Merchant Systems, LLC More than 25 years in the merchant services space
©Copyright JetPay Corporation 2017
www.jetpay.com 18
Milestones – 2016 Significant Progress
Acquired CollectorSolutions, Inc.• Leader in Government, Utilities payments processing• Added New Recurring Revenue Clients• Kansas City Parking Authority, City of Albany, City of Pittsburgh
Welcomed Larry Stone to Board of Directors• Invested $19.6 Million in JetPay
Strengthened Management Team• Michael Collester, Chief Operating Officer• John Crouch, Chief Information Officer• Gene M. Valentino, Chief Strategy Officer• Vinny Breault, President Payment Sales• Michelle Jenkins, Chief Marketing Officer
Settled “Direct Air” Matter (from 2012)
• Removed any future liability in the matter - potential for partial recovery
©Copyright JetPay Corporation 2017
www.jetpay.com 19
Milestones – 2017 Strong Start
Won 6-year contract with the Office of the State Treasurer of Illinois• State’s ePAY program• Starting in the Q4 ‘17 will add 600 plus ePAY program participants
Repurchased 2.2 Million shares• Reducing common shares by 12.4% and fully diluted shares by 6%
Re-signed a key customer• ~ $2 Million in incremental 2017 Net Revenue
Launched a program as an exclusive provider to Service Finance Company• Exclusive payments provider to several home improvement dealers including
Lennox’s 6,000 + dealers (potential $6 Billion volume)
©Copyright JetPay Corporation 2017
www.jetpay.com 20
Quarterly Review
Date Payments HCM Mar 16 $ 7.3 $ 4.3Jun 16 $ 8.8 $ 3.4Sep 16 $ 11.8 $ 3.4Dec 16 $ 12.7 $ 4.6Mar 17 $ 14.3 $ 4.6
$-
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
$14.0
$16.0
$18.0
$20.0
Mar-16 Jun-16 Sep-16 Dec-16 Mar-17
Quarterly Revenue( in m i l l io n s )
Payment HCM
©Copyright JetPay Corporation 2017
www.jetpay.com 21
Quarterly EBITDA & Adjusted EBITDA
Date EBITDA AdjustedMar 16 $ 436 $ 1,079Jun 16 $ (6,008) $ 579Sep 16 $ 520 $ 909Dec 16 $ 826 $ 1,216Mar 17 $ 1,401 $ 1,659
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
MAR-16 JUN-16 SEP-16 DEC-16 MAR-17
Quarterly EBITDA & Adjusted EBITDA(in thousands)
EBITDA AdjustedEBITDA
©Copyright JetPay Corporation 2017
www.jetpay.com 22
Strategy – JetPay Growth
2012 - 2016
2016
2017
Establish Payments Processing, HCM Platform Gain Scale Through Acquisitions Build Infrastructure to Support Growth
New Management Reorganize Sales & Marketing Organization Enter New Markets - Government, Utilities
Lever new Sales & Marketing organization Accelerate organic growth Generate attractive margins on incremental Volume
©Copyright JetPay Corporation 2017
www.jetpay.com 23
Strategy – JetPay Growth
How does the market value Payments Companies?• Mercury ( Vantiv 2014) – 7.0x EV/R• Litle (Vantiv 2012) – 7.1x EV/R• Merchant e-Solutions (Cielo 2012) – 5.4x EV/R• EPX (North American 2014) – 5.6x EV/R• SecureNet (WorldPay 2014) – 5.0x EV/R• Heartland (Global 2015) – 5.1x EV/R• Transfirst (TSYS 2016) – 3.9x EV/R• CardConnect (FDC 2017) – 5.1x EV/R
Public Valuations• 4.0x – 5.5x EV/R
How does the market value HR & Payroll Companies?
• Payroll 1 ( Heartland 2015) – 2.5x EV/R• PayChoice (Sage 2014) – 4.1x EV/R
Public Valuations• ADP – 3.3x EV/R• Paychex – 6.1x EV/R• Paycom – 7.0x EV/R• Paylocity – 5.9x EV/R
JetPay Valuation – ~ 1.0x EV/R
©Copyright JetPay Corporation 2017
www.jetpay.com 25
Addendum – Income Statement
(000's Omitted) 2016 2015 2017 2016
Processing revenues $ 56,330 $ 43,322 $ 18,942 $ 11,643
Cost of processing revenues 37,453 26,229 12,585 7,400
Gross profit 18,877 17,093 6,357 4,243
Selling, general and administrative expenses 16,911 13,291 4,956 3,807
Settlement of legal matter 6,192 - - -
Change in fair value of contingent consideration liability (103) 56 74 46
Amortization of intangibles 3,244 3,062 874 733
Depreciation 721 499 231 179
Operating (loss) income (8,088) 185 222 (522)
Other expenses (income)
Interest expenses 1,243 819 295 253
Non-cash interest costs 170 373 34 91
Change in fair value of derivative liability 151 - - 88
Other income (8) (6) (2) (2)
Loss before income taxes (9,644) (1,001) (105) (952)
Income tax expense (benefit) (1,429) 197 62 53
Net loss (8,215) (1,198) (167) (1,005)
Accretion of convertible preferred stock (6,378) (5,158) (2,123) (1,414)
Net loss applicable to common stockholders $ (14,593) $ (6,356) $ (2,290) $ (2,419)
Basic and diluted loss per share applicable to common stockholders $ (0.89) $ (0.46) $ (0.14) $ (0.17)
Weighted average shares outstanding: Basic and diluted 16,311,243 13,892,716 16,686,696 14,401,480
For the Years Ended
December 31,
For the Three Months Ended
March 31,
(Unaudited)(Audited)
©Copyright JetPay Corporation 2017
www.jetpay.com 26
Addendum – EBITDA & Adjusted EBITDA
(000’s omitted) 2016 2015 2017 2016
Operating income (loss) $ (8,088) $ 185 $ 222 $ (522)
Change in fair value of contingent consideration liability (103) 56 74 46
Amortization of intangibles 3,244 3,062 874 733
Depreciation 721 499 231 179
EBITDA $ (4,226) $ 3,802 $ 1,401 $ 436
Professional fees for non-repetitive matters 1,339 887 74 565
Legal settlement costs 6,192 208 - -
Non-cash stock option costs 446 278 184 78
Non-cash loss on disposal of fixed asset 32 - - -
Adjusted EBITDA $ 3,783 $ 5,175 $ 1,659 $ 1,079
Years Ended
December 31,
Three Months Ended
March 31,
Non-GAAP Financial MeasuresThese comments include a discussion of non-GAAP financial measures as defined in Regulation G of the Securities and Exchange Act of 1934, as amended. We report our financial results in compliance with GAAP, but believe that also discussing non-GAAP measures provides investors with financial measures it uses in the management of our business. This presentation includes EBITDA and adjusted EBITDA measurements. We define EBITDA as operating income (loss), before interest, taxes, depreciation, amortization of intangibles, and non-cash changes in the fair value of contingent consideration liability. We define adjusted EBITDA as EBITDA, as defined above, plus certain non-recurring items, including certain legal and professional costs for non-repetitive matters, legal settlement costs, non-cash stock option costs, and non-cash losses on the disposal of fixed assets. These measures may not be comparable to similarly titled measures reported by other companies. Management uses EBITDA and adjusted EBITDA as indicators of the Company’s operating performance and ability to fund acquisitions, capital expenditures and other investments and, in the absence of refinancing options, to repay debt obligations. Management believes EBITDA and adjusted EBITDA are helpful to investors in evaluating the Company’s operating performance because non-cash costs and other items that management believes are not indicative of its results of operations are excluded. EBITDA and adjusted EBITDA are supplemental non-GAAP measures and should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP such as net income or income from operations. Non-GAAP financial measures do not reflect a comprehensive system of accounting, may differ from GAAP measures with the same names, and may differ from non-GAAP financial measures with the same or similar names that are used by other companies.
©Copyright JetPay Corporation 2017
www.jetpay.com 27
Addendum – Balance Sheet
(000's Omitted) December 31, March 31 December 31, March 31
2016 2017 2016 2017
ASSETS (Audited) (Unaudited) LIABILITIES (Audited) (Unaudited)
Current assets: Current liabilities:
Cash and cash equivalents $ 12,584 $ 7,224 Current portion of long-term debt and capital lease obligation $ 8,074 $ 3,061
Restricted cash 2,129 2,554 Accounts payable and accrued expenses 10,821 10,620
Accounts receivable, less allowance for doubtful accounts 4,677 2,810 Settlement processing liabilities 35,079 55,954
Settlement processing assets 35,240 57,741 Deferred revenue, derivative liability and other current liabilities 1,487 385
Prepaid expenses and other current assets 5,849 820 Current liabilities before client fund obligations 55,461 70,020
Current assets before funds held for clients 60,479 71,149 Client fund obligations 49,154 65,807
Funds held for clients 49,154 65,807 Total current liabilities 104,615 135,827
Total current assets 109,633 136,956 Long-term debt and capital lease obligation, net of current portion 13,794 13,180
Property and equipment, net 2,125 2,273 Deferred income taxes 520 520
Goodwill 48,978 48,978 Other liabilities 1,228 1,900
Identifiable intangible assets, net 26,090 25,216 Total liabilities 120,157 151,427
Deferred financing costs, net - - Mezzanine Equity 56,844 54,102
Other assets 384 601 Stockholders’ Equity 10,209 8,495
Total assets $ 187,210 $ 214,024 Total Liabilities and Stockholders’ Equity $ 187,210 $ 214,024
©Copyright JetPay Corporation 2017
www.jetpay.com 28
Addendum – Debt
$-
$5.0
$10.0
$15.0
$20.0
$25.0
Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17
Debt(i n mi l l i ons)
Date DebtDec - 15 $ 16.7Mar - 16 $ 18.0Jun - 16 $ 18.3Sep - 16 $ 24.3Dec - 16 $ 21.9Mar - 17 $ 16.2
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