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Pipeline Data Inc.


Credit cards will comprise 47.7% of all transactions by 2009, up from 38.8% in 2004 ... 50,000 100,000 small merchants begin accepting credit cards every month ... – PowerPoint PPT presentation

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Title: Pipeline Data Inc.

  • Pipeline Data Inc.

Secure, Affordable Payment Solutions
(OTC BB PPDA) September 2007
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
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 for Merchant Accounts
Pipeline Companies
  • Northern Merchant Services, Inc.
  • Bank referral division representing over 50
    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.
  • Industry leader in Internet merchant
    account acquiring and marketing
  • Provider of cellular phone-based credit card
    acceptance solutions for mobile merchants

How it Works
Pipeline Data Economics of a Credit Card
On a typical 100.00 retail and e-commerce
credit card purchase, Pipeline recognizes 2.14
and 2.65, respectively, in gross revenue and
0.54 and 1.01, respectively, in processing
margin. Pipeline has an opportunity to generate
more income via e-commerce accounts as they are
more likely to procure value- added services.
Market Growth
  • The use of non-cash forms of payment, such as
    credit and debit cards, has steadily increased
    over the past 10 years
  • The Nilson Report, the leading industry
    publication that tracks the transaction
    processing industry, is forecasting the
  • Purchase volume by U.S. consumers using credit
    cards will grow from 1.89 trillion in 2003 to
    2.81 trillion in 2008 (8 CAGR)
  • Credit cards will comprise 47.7 of all
    transactions by 2009, up from 38.8 in 2004
  • Additional forecasts estimate that purchase
    volume by U.S. consumers using Visa credit cards
    will increase 63 from 2003 through 2008, while
    MasterCard usage is projected to increase by 46
    during the same period
  • The Internet marketplace is growing at a rate of
    20 annually
  • Pipeline is poised to capitalize on this rapid

Large and Growing Market
Merchants accepting credit cards continue to grow
Traditional Payments
Traditional Payments
Traditional Payments
Large and Growing Market
The small merchant market represents a
significant growth opportunity
Businesses Accepting Credit Cards
  • There are an estimated 23 million businesses in
    the United States
  • Only 27 accept card-based payment
  • 50,000 100,000 small merchants begin accepting
    credit cards every month
  • 80 of activations come from new businesses
  • An estimated 580,000 new small businesses open
    every year in the U.S.

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

Recurring Revenue Model
  • High recurring revenue
  • Processing fees paid by merchants are recurring
    in nature
  • Smaller merchants typically do not focus on
    processing fee once initial buying decision is
  • Credit card processing is vital to a merchants
  • Significant visibility due to higher merchant
    volume retention
  • Approximately 88 of card processing revenue
    recurs every year
  • Numerous opportunities to grow merchant volume

Loss Volume 12
Recurring Volume 88
Portfolio Valuation
  • There is a well-established and liquid market for
    merchant portfolios
  • The average multiple of EBITDA paid was 3.69
    times in 2005 and 2006
  • First Annapolis appraised merchant portfolio
    alone at 60 million in December 2005

Efficient Model
  • Pipeline enjoys low costs related to account
  • through the Internet and strategic partners
  • Pipeline Data
  • Generates leads from potential merchants via the
  • Obtains leads via call generation and other
    marketing media
  • Owns a sophisticated call center that enables
    quick turnaround merchants can be activated for
    card acceptance within 24 hours
  • Enjoys favorable search engine positioning
    through its proprietary optimization tools
  • Benefits from favorable positioning because it
    places the Company in prime viewing area for
    potential Internet customers
  • By being well-established in the Internet
    marketplace, the Company maintains a competitive
    advantage over would-be entrants due to high
    barriers of entry

Strong and Broad Operating Platform
  • 11,250,000 annual e-commerce transactions
  • 850 million in transactions / volume
  • Proprietary gateway and shopping cart solution
  • 8,750,000 annual retail transactions
  • 850 million annual in trans. / volume
  • Solid regional bank relationships

  • Pipeline provides wireless processing through its
    subsidiary, AIRCHARGE
  • AIRCHARGE is a newly acquired entity in mid Q3-05
    that provides remote processing
  • Pipeline has a strategic relationship with Nextel
    that has carried over to Sprint
  • One of the premier products in the field
  • 4 transactions in the last twelve months
  • Charge.Com
  • Paynet
  • Valadata

Organic Growth Strategy
  • Aggressively grow the number of merchant accounts
    serviced through the solicitation of new merchant
  • Expand the portfolio of merchant clients through
    internal sales efforts augmented by expanding
    marketing and advertising. Management is focused
    on aligning marketing, sales capacity and
    incentives in a cost-effective sales cycle
  • Achieve greater business efficiencies by
    creating, operating and continually enhancing
    processing and servicing operations in an
    efficient and scalable manner
  • Leverage the flexibility of the Companys service
    and support platforms enabling merchant
    customization to meet specific requirements

Application Growth
Merchant and Charge Volume Growth
Proven History of Growth Performance
Significant Growth Drivers
  • Proprietary technology 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 e-commerce and retail merchant
    portfolio market
  • Consolidating market with diminishing number of
    purchasers of small to medium-sized portfolios
  • Operating model leverage
  • Increased transactional volume and growing
    merchant base allows Pipeline to effectively
    negotiate advantageous processing contracts
  • Proven ability to improve portfolio margins and
    reduce attrition post acquisition
  • Highly scalable

Competitive Advantages
  • Pipeline has a strong industry presence and is
    considered to be one of a select group of
    providers who are able to provide an end-to-end
    VISA certified card acceptance solution
  • Pipeline is one of only a handful of companies to
    be certified by Visa as both PCI compliant and an
    authorized third-party processor (TPP)
  • Pipelines technology includes
  • Online proprietary digital merchant application
  • Proprietary shopping cart and secure payment
    gateway services
  • Wireless cellular phone software to enable mobile
    card payment acceptance
  • Pipeline has higher gross profit margins (as a
    of revenue) than its competitors

Strategic Partnerships
Declining Processing and Sponsoring Costs
  • Vendor relationships and increasing volume are
    driving lower processing costs
  • Overcapacity in the industry continues to benefit
    Pipeline with lower processing costs
  • Costs are expected to continue to decline in the
    future, as contract negotiations with the
    Companys largest processing vendor have
    successfully concluded

2nd Quarter of 2007 and 2006 Financial Results
  • 2nd Quarter of 2007
  • Revenue increased 57 YOY to a second quarter
    record of 13.1 million
  • Gross Profit increased 34 YOY to 4.4 million
  • Adjusted EBITDA of 1.6 million, up 25 YOY
  • Adjusted EBITDA rose 45 from the first quarter
    ended March 31, 2007
  • 2006
  • Revenue of 41.8 million, up 74 YOY
  • Gross Margin of 35.7, up from 27.1 YOY
  • Gross Profit increased 129 to 14.9 million YOY
  • EBITDA of 5.1 million, up 320 YOY
  • Operating Income of 2.6 million, or 6.3 of
  • Net Income of (2.3) million compared to 370,000
    YOY includes 2.1 million charge for early
    retirement of debt

Financial Overview YTD Financial Results
First Quarter 2007 Compared to Second Quarter 2007
Selected Statement of Cash Flows Data
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


2nd Quarter Press Release
  • "Our operating results for the second quarter
    were marked by excellent growth in our core
    businesses. Pipeline will continue to expand
    gross profit and EBITDA through aggressive
    organic growth and the reinvestment of our
    positive cash flows. As previously stated, we
    expect gross profit margin to expand further in
    the third quarter of this year due to more
    favorable pricing from key vendors."
  • -MacAllister Smith, CEO

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
  • Or
  • phil_at_pipelinedata.com

  • MacAllister Smith, President, Chief Executive
    Office and Director - has been president, chief
    executive officer and director since March 2002.
    Mr. Smith has over sixteen years of experience in
    the merchant processing industry and has held
    ownership positions in three companies that have
    been merged with public corporations. From 1996
    to 1998, Mr. Smith was regional vice president of
    Nova Information Systems (NYSEUSB), a 2 billion
    corporation and one of the three largest credit
    card processors in the industry. He founded and
    was president and CEO of Pinnacle Financial
    Technologies, Inc. from 1994 to 1998, 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. from 1997 to 1998. 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.
    In 1999, Mr. Smith founded and served as
    president and CEO of Cardaccept, Inc., a
    specialty payment processor. After completing
    two strategic e-commerce acquisitions, the
    company merged with Pipeline Data in 2002.
  • Donald W. Gruneisen, Chief Financial Officer
    has served as CFO since September 2002. He has
    been chief financial officer of Northern Merchant
    Services, Inc. (NMSI) since July 2001.
    Mr. Gruneisen has over 20 years of experience in
    the telecommunications industry, with expertise
    in the areas of finance, management, accounting
    and top executive corporate management. He holds
    a B.S in Accounting and Law and an MBA from
    Clarkson University. Mr. Gruneisen is a Certified
    Public Accountant with eighteen years experience
    as a corporate officer (including serving in the
    positions of chief executive officer/general
    manager). He has been the treasurer and director
    of finance for 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.
  • Kevin Smith, Chief Operating Officer has served
    as chief operating officer since May 2004, as
    well as president and director of Pipelines
    subsidiary, Pipeline Data Processing.. Mr. Smith
    has over 14 years experience in the merchant
    processing industry. He 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 chief operating officer of
    Concord Payment Systems, a wholly owned
    subsidiary of Concord EFS. During his tenure,
    Mr. Smith was responsible for the wholesale
    credit card processing division, which included
    all aspects of operations and sales. Prior to
    that, Mr. Smith served as operations director for
    Bancard Systems of Irvine, CA.

  • James Plappert, Chief Marketing Officer has
    served as chief marketing officer since October
    2005. Mr. Plappert is a seasoned executive with
    over 24 years of 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 (acquired by Bank of
    America), PNC Bank and First National Processing
    (acquired by iPayment). Mr. Plappert also served
    as executive vice president of mergers and
    acquisitions for First American Payment Systems
    from January 2002 to April 2003, which culminated
    in a private equity transaction with Lindsay,
    Goldberg and Bessemer. He co-founded ACH Payment
    Solutions, Inc. in 2002, where he remains a
    director. For over eleven years, Mr. Plappert has
    held a number of executive level board positions,
    including president, with the Electronic
    Transactions Association (ETA), the leading
    international trade association in the merchant
    processing industry.
  • Thomas Tesmer, Chief Technology Officer - has
    served as chief technology officer since July
    2004. Mr. Tesmer is an experienced and competent
    senior operations executive with more than 25
    years of experience in the transaction processing
    industry. Prior to joining Pipeline, he was the
    president of Symmetrex, Inc., a processing
    company supporting third-party clients that
    operate stored value card programs in the U.S.
    and foreign markets. Mr. Tesmer was the
    executive vice president, front end systems, of
    Heartland Payment Systems (NYSEHPY), one of the
    largest merchant acquiring processing companies
    in the nation. He served as president and chief
    executive officer of AccesServices, Inc., 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. Mr. Tesmer is currently a
    member of the board of directors of Q Comm
    International, Inc.

  • Jack Rubinstein, Chairman - has been chairman of
    the board since inception. Mr. Rubinstein has
    been the general partner of DICA Partners, an
    investment hedge fund located in Hartsdale, New
    York, 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 ( NASDAQ SIRI)) 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 began his
    business career as a securities analyst with
    Shearson Hamill Co., specializing in the
    electrical equipment and business services
    industries. After seven years as an analyst, he
    joined Bear Stearns Co. where he was a
    director, managing the proceeds of corporate
    insider securities sales. At Bear Stearns, he
    also managed the derivatives investments of
    several senior officers, as well as a few select
    individual clients. In 1988, 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.
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