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Pipeline Data Inc.


Provider of cellular phone-based credit card acceptance solutions for mobile business ... Pipeline Data has favorable search engine positioning through its ... – PowerPoint PPT presentation

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Transcript and Presenter's Notes

Title: Pipeline Data Inc.

  • Pipeline Data Inc.
  • Annual Shareholder Meeting
  • May 22, 2008

Investor Disclaimer
  • The information provided for in this investor
    presentation contains forward-looking statements
    that involve risks and uncertainties more fully
    set forth in the Company's filing. Certain
    information included in this presentation may
    contain statements that are forward-looking, such
    as statements relating to uncertainties that
    could affect performance and results of the
    Company in the future and, accordingly, such
    performance and results may materially differ
    from those expressed or implied in any
    forward-looking statements made by or on behalf
    of the Company. These risks and uncertainties
    include, but are not limited to those relating to
    the Company's growth strategy, customer
    concentration, outstanding indebtedness,
    seasonality, expansion and other activities of
    competitors, changes in federal or state laws and
    the administration of such laws, protection of
    the securities markets and other risks detailed
    in the Company's filings with the Securities and
    Exchange Commission.
  • Readers are cautioned not to place undue
    reliance on these forward-looking statements,
    which speak only as of the date the statement was
    made. The Company's actual results could differ
    significantly from those discussed and/or implied

Company Profile
Pipeline Data Inc. (PPDA) is a value-added
provider of merchant payment processing services
and other related software products. The Company
currently delivers credit and debit card-based
payment processing and related services to small
to medium-sized merchants who operate either in a
physical brick and mortar business environment
or over the Internet. Pipelines payment
processing services enable merchants to
process both traditional card-present, or swipe
transactions, as well as card not-present transact
ions. For more information please visit
Credit Card Processing and Merchant Accounts
Pipeline Companies
  • Northern Merchant Services, Inc.
  • Bank referral division representing 54 banks,
    comprising 420 bank branch
  • locations, along with 48 credit unions
  • SecurePay, Inc.
  • Custom credit card transaction processor
    serving as a gateway
  • intermediary between the customer and the
    financial networks, integrating
  • shopping cart, gateway and custom third-party
  • Pipeline Data Processing, Inc.
  • Provider of wholesale payment processing
    solutions, new account
  • boarding, underwriting and risk management
  • Charge.Com, Inc.
  • Internet industry leader in merchant account
    acquiring and marketing
  • Provider of cellular phone-based credit card
    acceptance solutions for mobile business

Industry overview
  • The use of non-cash forms of payment, such as
    credit and debit cards, has steadily increased
    over the past ten years.
  • The Nilson Report, a leading industry
    publication that tracks the transaction
    processing industry, is forecasting the
  • Global purchase volume grew at a compound annual
    growth of 14.0 over the period 2000-2006

Large and Growing Market
Merchants locations accepting credit cards
continue to grow
Traditional 28
Electronic 72
Electronic 36
Electronic 51
Traditional 49
Traditional 64
5.3 trillion transactions
6.7 trillion transactions
8.2 trillion transactions
First Annapolis Consulting Inc.
Large and Growing Market
Small merchants represent a large market
  • Pipeline Data focuses exclusively on the 5
    million small merchants that generate 422
    billion in Visa / MasterCard charge volume

2.202 trillion
  • Small merchants represent an attractive customer
  • Largest market
  • Fastest growing market
  • Difficult to identify and serve less
  • Most profitable to merchant processors

The Nilson Report
Stable and Recurring Revenue Base
  • Processing fees paid by merchant are recurring in
  • Credit card processing is vital to a merchants
  • Approximately 88 of Pipeline Datas volume

MasterCard and Visa IPOs
12 months
2 months
Efficient Model
  • Pipeline enjoys low costs related to account
  • through the Internet and strategic partners
  • Pipeline generates leads from potential merchants
    via the Internet.
  • The Company also obtains leads via call
    generation and other marketing media.
  • Pipeline owns a sophisticated call center that
    enables quick turnaround. Merchants can be
    activated for card acceptance within 24 hours.
  • Pipeline Data has favorable search engine
    positioning through its proprietary optimization
  • Optimal positioning places the Company in prime
    viewing area for potential customers who search
    via the Internet.
  • A high barrier to entry gives Pipeline Data a
    significant cost advantage over its competitors.

Organic Growth Strategy
  • Management seeks to aggressively grow the number
    of merchant accounts serviced through the
    solicitation of new merchant accounts.
  • The Pipeline sales team intends to expand the
    portfolio of merchant clients through internal
    sales efforts augmented by expanding marketing
    and advertising. Management focused on aligning
    marketing, sales capacity and sales incentives in
    a cost-effective sales cycle.
  • The Company aims to achieve greater business
    efficiencies by creating, operating and
    continually enhancing processing and servicing
    operations in an efficient and scalable manner.
  • The Companys service and support platforms are
    completely flexible, enabling merchant
    customization to meet the their specific

Application Growth
Application Count by Month (Trailing 15 months)
  • Financial Overview

Financial Overview (,000)
  • 2007
  • Revenue of 49,903 up 19 from 41,814 in 2006
  • Gross Profit of 17,716 up from 14,926 for 2006
  • EBITDA of 5,765 compared to 3,392 for 2006
  • Adjusted EBITDA of 6,389 compared to 6,339 for
  • Net Income (loss) of (1,970) compared to
    (2,286) for 2006
  • 1st Quarter 2008
  • Revenue of 11,410 down 3.8 compared to 1Q2007
  • Gross Profit of 4,306 up 10.2 from 3,908 for
  • EBITDA of 888 compared to 1,148 for 1Q2007
  • Adjusted EBITDA of 953 compared to 1,256 for
  • Net Income (loss) of (1,161) compared to
    (1,098) for 1Q2007

Annual Financial Results
(No Transcript)
Financial Results Year End Comparative
Balance Sheets
Financial Results-Cash Flows Selected Data
1st Quarter Financial Results
Financial Results Year End and March 31 Balance
Financial Results-Cash Flows Selected Data
  • Details behind Merger

  • Combine Pipeline and COCARD together at an
    estimated 6.5X pro forma EBITDA
  • Historically this is between 1-2X the EBITDA
    multiples of most comparable trading values and
    represents a 40-50 discount to the average sale
    and going private multiples over the last several
  • Take advantage of a unique opportunity to
    incorporate Pipelines excess processing capacity
    and extremely attractive pricing into COCARD
  • Plug the COCARD sales engine into the Pipeline
    processing machine to increase the reach of
    Pipeline beyond the Internet marketing engine it
    has developed
  • Repurchase ownership of the main portfolio at NPC
    and use it to increase cash flow and drive down
  • Combining the processing volumes of the two
    companies will drive transactional pricing down
    through the Fidelity National Information
    Services contract previously negotiated.

Highly Complementary
  • Both Pipeline and COCARD are companies involved
    in the processing of credit and debit card
    transactions and related services. Each has a
    unique and complementary approach to the merchant
    service processing (MSP) business.
  • Pipeline is a leader in boarding and servicing
    e-commerce merchants. Its primary distribution
    channel is through its Internet marketing
  • COCARD is a leading marketing organization whose
    distribution channel is independent sales offices
    that focus primarily on retail merchant sales.
  • COCARD produces between 650 and 800 new merchant
    accounts each month.
  • COCARD is comprised of over 71 sales offices (as
    of December 31, 2007).
  • Pipelines risk, underwriting and customer
    service departments will be utilized for new
    COCARD merchants, as well as the approximately
    27,000 existing merchants that will be converted
    to the preferential pricing provided by the
    combined volumes of the two entities.
  • Pipeline will process and support the merchant
    base derived from the sales efforts of all of its
    combined entities, including COCARD and all of
    its sales offices and agents.

Operational Efficiencies
  • Pipeline would have processed over 75 million
    transactions and 5.1 billion in transaction
    volume per year on a pro forma basis for 2007.
  • Pipeline is qualified to provide direct-connect
    card association authorizations, which will
    magnify the Companys already significant
    processing capability.
  • COCARDs business will flow through Pipelines
    access points, providing significant leverage
    with the Companys transaction settlement
  • Pipeline has already achieved significant price
    discounts from its settlement providers. By
    combining the volume of Pipeline and COCARD, the
    Company has the ability to achieve additional
    discounts from these providers.

Roles and Capabilities
Acquiring has a fairly complex value chain which
gives rise to a number of different business
models and types of players in the market.
Merchant Services Value Chain Business Models
Network/ Clearing
Deployment Activation
Front-end Processing
Operations/ Risk Mgmt
Merchant Servicing
Relationship Mgmt
Back-end Processing
Underwriting Boarding
Sales Marketing
Product Dev. Mgmt
Fully Integrated Large Bank Acquirer (example
Fifth Third)
Fully Integrated Non-Bank Acquirers (example
Global Payments)
Bank non-Bank Alliance (ex. First Data, Wells
Fargo Merchant Services)
Regional Bank Acquirer (ex. Commerce Bank)
3rd Party Processor
More Sophisticated ISO (ex. iPayment)
3rd Party Processor (ex. TSYS)
3rd Party Processor
Less Sophisticated ISO (or Small Referral Bank)
Actual Results 2007, Pro forma and Baseline
Projections 2008
Consolidated Pipeline/COCARD Financials
Current Debt Funding Term Sheets
  • 50 million from a major financial institution at
    a cost of L450 (8)
  • 5 million from draw on revolving credit
  • further availability limited to 7 million until
    credit metrics are achieved either 1.5x EBITDA
    or 2x Gross Profit
  • 25 million term loan, 5 year maturity
  • 40 million from an institutional lending source
    at 13.5
  • No amortization, 5.5 year maturity
  • Repayable at 105 year 1, 103 year 2
  • 11 million in 12 sellers financing notes from
    COCARD and other parties to the transaction

  • VS 1.5X LTM trailing EBITDA.
  • Example- Estimated LTM EBITDA at close will be
    24 million in adjusted pro forma EBITDA
  • Availability would be 1.5X 24 million36
    million plus reimbursement of 2 million in cash
    expenses already paid plus 500,000 estimated
    cash on hand
  • Thus, availability 36m2m500,000 38.5
  • Funding available to support the transaction
    38.5m-10.00m in working capital28.5 million

Comp Loan Metrics and Key Terms
Estimated Capital Structure Pro forma
Estimated Cash Flow and Potential Debt
Amortization Pro forma (low end case 09)
Total Estimated Sources and Uses
  • The combination of Pipeline and COCARD brings an
    opportunity to rationalize the operating
    structures of both companies.
  • Pipeline possesses a significant Internet
    service, as well as a back office and information
    technology structure capable of servicing the
    combined companies.
  • As a cooperative, COCARD did not build its own
    infrastructure. Instead, it entered into an
    agreement with National Processing Company
    (NPC) for the back-end settlement of
    transactions. Under the terms of the agreement,
    each ISO provides its own services and is
    responsible for its own selling, general and
    administrative expenses.

Significant Growth Drivers
  • Proprietary advantages and sales engines
  • Top-tier search engine placement
  • Advanced underwriting and application processing
  • Proprietary gateway and shopping cart solutions
  • Proprietary wireless payment solutions
  • Acquisitions
  • Highly fragmented merchant portfolio market in
    e-commerce and retail
  • Consolidating market with diminishing number of
    purchasers of small-to-medium portfolios
  • Operating model leverage
  • Increased transactional volume and growing
    merchant base improves Pipelines ability to
    effectively negotiate advantageous processing
  • Proven model to improve portfolio margins after
    acquisition and alleviate attrition
  • Highly scalable model

Experienced and Vested Management Team
  • Experienced and Vested Management Team
  • The Companys combined management team has more
    than 150 years of industry experience.
  • Management team members average 16 years of
    experience each.
  • Managements solid industry underpinnings and
    business know-how is unique in that its breadth
    spans almost every major processor and processing
    system in the credit card industry today.
  • Management is deeply vested in the industry as
    evidenced by its combined 50 plus years of
    service on industry association boards and

Experienced integration execution
Investment Highlights
  • Emerging Growth Company in Large and Growing
  • Strong and Broad Operating Platform
  • Significant Growth Drivers
  • Strategic Partnerships
  • Stable and Recurring Revenue Base
  • Cash-efficient Model
  • Strong, Committed Management Team

Contact Us
  • Pipeline Data Inc.
  • 1515 Hancock Street, Suite 301
  • Quincy, MA 02169
  • Phone 617-405-2600
  • Fax 617-405-2619
  • Web site www.pipelinedata.com
  • For more information
  • ceo_at_pipelinedata.com

  • MacAllister Smith, President,Chief Executive
    Officer and Director Mr. Smith has served as
    Pipeline Datas president and CEO since March
    2002. He has over fifteen years of experience in
    the merchant processing industry and has held
    ownership positions in three companies that have
    been merged with public corporations. Mr. Smith
    was most recently regional vice president of
    Elavon, formerly Nova Information Systems
    (acquired by U.S. Bank (NYSEUSB)), a
    multi-billion dollar corporation and one of the
    three largest credit card processors in the
    industry. He was president and CEO of Pinnacle
    Financial Technologies, Inc., a nationally
    recognized firm and a pioneer in electronic
    benefits transfer programs. Pinnacle Financial
    Technologies, Inc. merged with Nova Information
    Systems in 1998. Mr. Smith was also co-founder
    and senior partner of AccesServices, Inc.
    (AccesServices). He was part of the team that
    designed and built a nationwide network
    processing switch for retail and online
    MasterCard, Visa, American Express and debit card
    transactions. AccesServices was sold to Digital
    Courier Technologies, Inc. (NASDAQDCTI) in 1999.
  • Don Gruneisen, Chief Financial Officer Mr.
    Gruneisen has over 20 years of experience in the
    volatile, high-growth telecommunications
    industry, with expertise in the areas of finance,
    management, accounting and top executive
    corporate management. Mr. Gruneisen holds an MBA
    from Clarkson University in Accounting and
    Management Information Systems and is a Certified
    Public Accountant with twelve years
    experience as a corporate officer (including
    serving in positions of chief executive
    officer/general manager). He has been the
    Treasurer and Director of Finance of NMSI since
    July 2001. From June 2000 to July 2001, Mr.
    Gruneisen was a consultant providing strategic
    guidance with specialization in billing,
    accounting, and tax issues associated with the
    telecommunications industry and financial
    management. From January 1999 to June 2000, he
    was a senior accountant at Whalen, Davey
    Looney, and LLP. From 1977 to 1998, he worked
    for Nicholville Telephone Company, a 3.5 million
    ESOP-owned local exchange carrier/utility. He
    started with the company in 1977 as an accountant
    and accounting manager and ultimately became
    Chief Executive Officer.
  • Kevin Smith, Chief Operating Officer Mr. Smith
    has served as Pipeline Datas chief operating
    officer since May 2004, and as the president and
    director of Pipeline Data subsidiary, Pipeline
    Data Processing. He has over 14 years of
    experience in the merchant processing industry.
    Mr. Smith was employed by Concord EFS (acquired
    by First Data (NYSEFDC)) from 1998 to 2004,
    serving as its senior vice president of ISO Sales
    and as COO of Concord Payment Systems, a wholly
    owned subsidiary of Concord EFS. Mr. Smith was
    responsible for the wholesale credit card
    processing division, which included all aspects
    of operations and sales. Prior to that, he served
    as operations director for Bancard Systems.  

  • Thomas Tesmer, Chief Technology Officer Mr.
    Tesmer has served as Pipeline Datas chief
    technology officer since July 2004. Mr. Tesmer is
    an experienced senior operations executive with
    more than 25 years in the transaction processing
    business. Prior to joining Pipeline, he was the
    president of Symmetrex, Inc., a processing
    company supporting third-party clients that
    operated stored value card programs in the United
    States and foreign markets. Mr. Tesmer was the
    executive vice president of Front End Systems for
    Heartland Payment Systems (NYSE HPY), one the
    nations largest merchant processing companies.
    He served as president and chief executive
    officer of Access Services, Inc.
    (AccesServices), a credit card payment
    processing corporation servicing merchant sales
    agencies and financial institutions nationwide.
    Mr. Tesmer is also the chairman of the board of Q
    Comm International, Inc. (AmexQMM).
  • Jack Rubinstein, Chairman Mr. Rubinstein has
    served as Pipeline Datas chairman since the
    Companys inception. He has been the general
    partner of DICA Partners, an investment hedge
    fund, since the commencement of its operations in
    1991. Mr. Rubinstein also acts as a management
    and financial consultant to various public
    companies in the telecommunications industry. He
    was a founding public board member of CD Radio,
    Inc. (Sirius Satellite Radio (NASDAQSIRI)) and
    aided in the funding of the Molloy Group, a help
    desk software developer. Mr. Rubinstein is also a
    founding member of The Capital Advisory Services,
    a consortium of consultants aiding the capital
    market needs of emerging private and smaller
    public companies. Mr. Rubinstein has been a
    securities analyst with Shearson Hammill Co.,
    and was employed at Bear Stearns Co. where he
    was a director, managing the proceeds of
    corporate insider securities sales. Prior to Bear
    Stearns, Mr. Rubinstein joined Morgan Stanley
    Co. where, in addition to serving corporate
    officers and select individual clients, he
    provided his expertise to private investment
    partnerships. Mr. Rubinstein is a graduate of
    Cornell University and received an MBA in Finance
    from New York University.
  • James Plappert, Chief Marketing Officer Mr.
    Plappert has served as Pipeline Datas chief
    marketing officer since October 2005. Mr.
    Plappert is a seasoned executive with over 24
    years experience in the payment systems and
    merchant bankcard industry. He has held a number
    of executive level positions in prominent
    companies including National Processing Company
    NPC, PNC Bank and First National Processing
    acquired by iPayment Holdings in 2001. He also
    served as executive vice president MA of First
    American Payment Systems from January 2002 to
    April 2003 culminating in a private equity
    transaction with Lindsay, Goldberg and Bessemer.
    He co-founded ACH Payment Solutions Inc. in 2002
    where he remains a director. Additionally, for
    over eleven years, Mr. Plappert held a number of
    executive level board positions, including
    president, with the Electronic Transaction
    Association (ETA), the leading international
    trade association in the merchant processing
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