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OLB GROUP, INC. (OLB)·Q3 2020 Earnings Summary

Executive Summary

  • Q3 2020 revenue was $2.31M, down 6.8% year over year but up 15.4% sequentially; diluted EPS was -$0.11 vs -$0.07 YoY and -$0.09 in Q2, as higher G&A and stock-based comp offset revenue recovery .
  • Liquidity inflected: cash rose to $4.12M and working capital turned positive to $3.41M, aided by the August capital raise and debt conversion, with outstanding debt reduced to ~$8.4M post-uplisting .
  • Operationally, monthly subscription revenue scaled to $157K in Q3 vs $6K in Q3 2019; wholesale and retail transaction revenues remained below prior year amid COVID-19 impacts .
  • Structural catalysts: uplisting to NASDAQ, $6.4M gross offering, conversion of $4.6M related-party debt to equity, and covenant relief through October amendment (FCCR removed; $1.0M minimum cash added) .
  • No Wall Street consensus estimates were available via S&P Global; comparisons to Street are not provided (S&P Global data unavailable).

What Went Well and What Went Wrong

What Went Well

  • Sequential rebound in revenue: +15.4% QoQ to $2.31M, with “other revenue from monthly recurring subscriptions” rising to $157K in Q3 vs $6K YoY, indicating traction in cloud-based offerings .
  • Balance sheet and listing upgrades: “OLB closed a successful capital raise…gross proceeds of $6.4 million,” “Completed uplisting…to NASDAQ Capital Markets,” and “Reduced debt…by converting $4.6 million of debt into equity and paying down $1.5 million” .
  • Merchant mix and product upgrades: “Increased ecommerce business merchants during third quarter,” expanded support for Apple Pay/Google Pay/ACH, QuickBooks connection, and 3D Secure integration for SecurePay—all supportive of contactless/ecommerce trends .

What Went Wrong

  • Year-over-year contraction and losses: revenue fell to $2.31M from $2.48M and net loss widened to -$0.66M from -$0.40M as COVID-19 depressed transaction volumes .
  • Cost structure pressure: G&A surged to $706K (vs $317K YoY), with ~+$170K stock-based comp and higher legal/audit, driving operating loss to -$0.43M (vs -$0.09M YoY) .
  • Covenant strains and interest expense: the company was out of compliance at mid-year and required waivers; Q3 interest expense remained high at $233K despite related-party conversions earlier in the quarter .

Financial Results

P&L summary vs prior periods

MetricQ3 2019Q1 2020Q2 2020Q3 2020
Revenue ($USD)$2,477,432 $2,613,993 $2,000,035 $2,308,037
Loss from Operations ($USD)$(85,130) $(225,189) $(195,870) $(425,422)
Net Loss ($USD)$(401,859) $(542,207) $(510,409) $(657,358)
Diluted EPS ($USD)$(0.07) $(0.10) $(0.09) $(0.11)

Revenue breakdown (GAAP)

Revenue ComponentQ3 2019Q3 2020
Transaction & Processing Fees ($USD)$2,455,937 $2,128,771
Merchant Equipment Rental & Sales ($USD)$15,294 $22,018
Other Revenue – Monthly Subscriptions ($USD)$6,201 $157,248
Total Revenue ($USD)$2,477,432 $2,308,037

Disaggregated transaction revenue

SourceQ3 2019Q3 2020
Wholesale Contracts ($USD)$1,544,775 $1,293,217
Retail Contracts ($USD)$682,598 $601,118
Other Transaction & Processing Fees ($USD)$250,059 $413,702
Total ($USD)$2,477,432 $2,308,037

Operating cost and interest

MetricQ3 2019Q3 2020
Processing & Servicing Costs ($USD)$1,700,048 $1,486,257
G&A ($USD)$316,962 $706,430
Salaries & Wages ($USD)$342,338 $318,682
Amortization ($USD)$203,214 $222,090
Interest Expense ($USD)$316,729 $231,936

KPIs and liquidity

KPIQ1 2020Q2 2020Q3 2020
Cash ($USD)$434,533 $330,437 $4,122,640
Working Capital ($USD)$(1,644,401) $(1,525,475) $3,412,449
Outstanding Debt ($USD)——~$8,400,000 (post-Aug conversions)
PPP Loan ($USD)—$236,231 $236,000 (approx.; forgiveness expected)

Actual vs estimates

MetricQ3 2020 ActualQ3 2020 Consensus
Revenue ($USD)$2,308,037 N/A – S&P Global consensus unavailable
EPS ($USD)$(0.11) N/A – S&P Global consensus unavailable

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Financial guidanceFY2020/Q4None disclosedNone disclosedMaintained (no formal guidance)
Credit Covenant – FCCRTrailing 12M (pre-Oct)FCCR ≥ 1.20x FCCR covenant removed (Oct 23, 2020) Removed
Credit Covenant – Minimum CashOngoing post-OctNoneMaintain ≥ $1,000,000 in controlled operating account Added
Credit Covenant – Net RevenueTrailing 12M≥ $9M until 6/30/21; ≥ $10M thereafter Unchanged Maintained
PPP Loan Use/Outcome2020–2021Use for permitted expensesIntends full forgiveness (not assured) Clarification

Earnings Call Themes & Trends

(No Q3 2020 earnings call transcript was filed; themes are drawn from 10-Q MD&A and press releases.)

TopicQ1 2020 (MD&A)Q2 2020 (MD&A/PR)Q3 2020 (MD&A/PR)Trend
COVID-19 impactMarch volumes -15% vs Feb; April ~-40%; expected depressed transactions; cost controls outlined Sequential recovery: May +5%, June +7%; still depressed vs PY; waivers obtained Jul/Aug/Sep MoM +3%, +3%, +7%; still below PY, but improving Gradual recovery
Technology/contactlessSecurePay integrations; ShopFast omni-commerce; contactless/ecommerce emphasis ACH integration; DoubleBeam merchant acquisition; contactless support Apple/Google Pay support expanded; QuickBooks connection; 3D Secure Expanded features
Capital markets/ListingPlanning offering; covenant amendments $6.45M raised; NASDAQ uplisting; debt conversions Balance sheet strengthened; working capital positive Strengthening
Credit covenantsAmend. No. 4; FCCR ≥1.20x; revenue thresholds Waiver (Aug 10); same thresholds Amend. No. 5 removes FCCR; adds $1.0M min cash Enhanced flexibility

Management Commentary

  • “OLB closed a successful capital raise with Aegis Capital receiving gross proceeds of $6.4 million…Completed uplisting…Reduced debt by approximately $6.1 to approximately $7.6 million by converting $4.6 million of debt into equity and paying down $1.5 million…” .
  • CEO letter on COVID response: “Most of our merchants have contactless payment acceptance capabilities…We launched an initiative to deploy contactless payment acceptance equipment…as well as integration with Apple Pay and Android pay.” .
  • “Increased ecommerce business merchants during third quarter compared to retail (brick and mortar) merchants…Integration of a comprehensive 3D Secure service…through its proprietary Secure Pay payment gateway.” .

Q&A Highlights

  • No Q3 2020 earnings call transcript filed; no Q&A disclosures were available in SEC or earnings materials [ListDocuments for earnings-call-transcript returned none].

Estimates Context

  • Wall Street consensus estimates via S&P Global were unavailable for OLB’s Q3 2020 (request returned errors due to access limits), so actual vs consensus comparisons cannot be provided. Coverage appears limited for a micro-cap issuer; investors should rely on company-reported actuals and monitor for future initiation/updates (S&P Global data unavailable).

Key Takeaways for Investors

  • Sequential operational improvement: revenue rebounded 15.4% QoQ to $2.31M as subscription revenue scaled, but remains 6.8% below prior year; watch durability of monthly subscription growth as a margin lever .
  • Cost discipline needed: G&A doubled YoY (+123%), materially pressuring operating income; near-term EPS improvement likely requires normalization of legal/audit and stock comp .
  • Liquidity improved and covenants eased: cash to $4.12M and positive working capital post raise; October amendment removed FCCR and added a $1.0M minimum cash covenant—reduces default risk and adds flexibility .
  • Balance sheet de-risking: conversion of $4.6M related-party debt and paydown of $1.5M senior debt lowered outstanding debt to ~$8.4M; lower interest cost should aid future net income as volumes normalize .
  • Product/merchant mix shift: increased ecommerce merchants and expanded contactless and security features (Apple/Google Pay, 3D Secure) align with COVID-era purchasing patterns—supporting transaction volume recovery .
  • Monitor covenant net revenue thresholds ($9M/$10M TTM) and cash minimum compliance; sustained revenue growth and cash retention are critical into 2021 .
  • No Street estimates available; trading likely driven by company-specific catalysts (merchant growth, cost trend, covenant compliance) and micro-cap liquidity; consider position sizing accordingly (S&P Global data unavailable).