May 5, 2010 (GlobeNewswire via COMTEX) — Reports $18.1 Million in Net Cash from Operating Activities, a 148% Increase over first Quarter of 2009 Company Updates Business Segment Reporting Structure to Better Align with Evolving Business Model and Improve Transparency Adjusts Financial Guidance to Reflect Impact of Recent Events S1 to Host Conference Call Today at 5:00 PM ET with Presentationwww.s1.com S1″
NORCROSS, Ga., May 5, 2010 (GLOBE NEWSWIRE) — S1 Corporation /quotes/comstock/15*!sone/quotes/nls/sone (SONE 6.23, 0.00, 0.00%) , a leading global provider of payments and financial services software solutions, today announced financial results for the first quarter ended March 31, 2010.
Financial Results and Operating Highlights
— Total revenue decreased 12% to $51.2 million in the first quarter of 2010 compared to $58.3 million in the first quarter of 2009. — U.S. GAAP net loss was $1.1 million, or $0.02 per share, in the first quarter of 2010 compared to U.S. GAAP net income of $8.9 million, or $0.16 per share, in the first quarter of 2009. these figures include stock-based compensation expense of $400,000 and a benefit of $2.5 million in the first quarters of 2010 and 2009, respectively. — Adjusted EBITDA was $2.8 million in the first quarter of 2010 compared to $10.6 million in the first quarter of 2009. Adjusted EBITDA does not include stock-based compensation expense and is described below and reconciled to the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP in Tables 4, 5, 6 and 7. — Net cash provided by operating activities was $18.1 million and $7.3 million in the first quarter of 2010 and 2009, respectively. — as of March 31, 2010, the Company had cash and cash equivalents of $48.2 million. — Added seven net new customers in the first quarter of 2010 including contracts with: — A U.S. debit network that provides ATM and point-of-sale transaction switching and settlement services for S1′s payments solution — A U.S. West-Coast based commercial bank for S1′s corporate online banking solution; and — A leading designer and manufacturer of consumer electronics, computer software and personal computers for S1′s payments solution. — Closed a number of cross-sales to existing customers including significant transactions with two of the top ten banks in Europe. — Completed the acquisition of PM Systems Corporation in March 2010.
Johann Dreyer, Chief Executive Officer of S1, said, “As I communicated last quarter, we expected a very soft first quarter largely due to the drop in business with State Farm, the impact of a number of non-recurring professional fees, and the impact of signing more deals where license revenue is recognized over the implementation period using the percentage of completion method. Additionally, our first quarter revenue was impacted by changes in estimates for certain large project implementations.
“As we continue to target larger and more complex sales opportunities, particularly with our payments and corporate online banking solutions, we are experiencing a shift to recognizing more software license revenue using the percentage of completion method. while this shift does have an impact on our current and near-term financial results, we believe it will provide greater longer-term revenue visibility. we expect to continue to see some of the effect of this revenue shift in the second quarter of 2010 with revenue for the remainder of the year increasing as these percentage of completion implementations ramp-up.”
To reflect its expectation that a greater number of software licenses will be recognized using the percentage of completion method during the remainder of 2010, S1 has reduced its 2010 financial guidance accordingly. Based on current assumptions, the Company now expects 2010 total revenue to be approximately $242 to $248 million, adjusted EBITDA to be approximately $39 to $43 million, and cash earnings per share to be approximately $0.48 to $0.54.
Segment Reporting Structure Update
S1 has redefined its business segments and will now report its financial performance based on three operating segments: (1) Payments; (2) Banking: Large Financial Institution; and (3) Banking: Community Financial Institution.
— the Payments segment includes the Company’s ATM and point-of-sale driving, card management, and merchant acquiring solutions provided to financial institutions, retailers and transaction processors of all sizes globally. — the Banking: Large Financial Institution segment includes the Company’s consumer, small business and corporate online banking, trade finance, and mobile banking solutions provided to large banks globally, and branch and call center banking solutions provided to large banks outside of the United States. this segment also contains the Company’s non-core custom projects, including State Farm, which are being separately disclosed to provide better visibility into S1′s go-forward core business. — the Banking: Community Financial Institution segment includes the Company’s consumer and small business online banking, mobile banking, voice banking, branch and call center banking solutions provided to community and regional banks and credit unions in the United States.
Mr. Dreyer concluded, “The new operating segments more clearly reflect S1′s evolving business model and should provide greater visibility into the growth trends of the company. despite the results of the first quarter, we believe that the fundamentals of our business are strong. the investments we have been making in customer satisfaction and product initiatives are beginning to pay off and should create significant opportunities to increase both revenue and margins in our core business. we believe our prospects are compelling as we continue to focus on creating sustainable long-term growth and value for our shareholders.”
Conference Call, Webcast and Slide Information
Management will host a conference call to discuss its first quarter 2010 results on Wednesday, May 5, 2010, at 5:00 p.m. ET. Participants may access the call by dialing (877) 899-9075 (United States) or (706) 758-0819 (international) and entering passcode 70391633. Investors also may access a slide presentation and live audio webcast of this conference call by visiting www.s1.com and entering the Investor Relations section under “About S1″.
A replay of the webcast will be available approximately two hours after the conclusion of the call. A telephone replay also will be available approximately two hours after the conclusion of the call through May 19, 2010. to access the replay, please dial (800) 642-1687 or (706) 645-9291 and enter passcode 70391633.
Financial Information
Financial segment information for the fiscal years ended December 31, 2009, 2008 and 2007, as reported under the new operating segment structure, is available in Appendix A to the Investor Presentations located on the Company’s website, www.s1.com, in the Investor Relations section under “About S1″.
Non-GAAP Measures and Reconciliation to U.S. GAAP
Our results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). in addition to U.S. GAAP financial measures, we use non-GAAP measures to evaluate our financial performance, assist management decisions, and in communications with our Board of Directors, stockholders, analysts and investors concerning our financial performance. although we believe that our presentation of non-GAAP financial measures provide useful supplemental information to investors regarding our results of operations, our non-GAAP financial measures should only be considered in addition to, and not as a substitute for or superior to, our financial measures prepared in accordance with U.S. GAAP. the use of non-GAAP financial measures is subject to inherent limitations because they do not include all the expenses that must be included under U.S. GAAP and because they involve the exercise of management’s judgment of which charges should properly be excluded from the non-GAAP financial measure. Management accounts for these limitations by not relying exclusively on non-GAAP financial measures, but only using such information to supplement U.S. GAAP financial results. our non-GAAP financial measures may be different from such measures used by other companies.
We are presenting Adjusted EBITDA, a non-GAAP financial measure, below and reconciling to the most directly comparable U.S. GAAP equivalent of which is Net income for our consolidated results and Operating income for our segment results. we define Adjusted EBITDA as, in the case of our consolidated results, Net income plus interest and other expense (income), plus income taxes or, in the case of our segment results, Operating income, in each case adjusted for depreciation, amortization of intangibles, and stock-based compensation expense. we believe that excluding depreciation, amortization, stock-based compensation expense, interest and other expense (income) and income taxes provides supplemental information and an alternative presentation useful to investors understanding our core operating results and trends. Not only are depreciation and amortization expenses based on historical costs of assets that may have little bearing on present or future replacement costs, but they are also based on management’s estimates of remaining useful lives. Additionally, while stock-based compensation is an important part of overall compensation expense, a portion of our stock-based compensation expense is the result of cash-settled stock appreciation rights that are revalued each quarter for U.S. GAAP earnings based in part on the closing price of our stock on the last day of the quarter. consequently, fluctuations in our stock price can have a significant impact on our reported U.S. GAAP earnings. see Tables 4, 5, 6 and 7 for reconciliations of non-GAAP Adjusted EBITDA.
We are presenting Cash earnings per share, a non-GAAP financial measure, below and reconciling to the most directly comparable U.S. GAAP equivalent of which is Net income and earnings per share. we define Cash earnings as Net income plus amortization of intangibles, stock-based compensation and deferred income taxes. we calculate Cash earnings per share by adding back the per share impact of adjustments from diluted earnings per share. we believe Cash earnings per share is a useful financial measure which provides supplemental information and an alternative presentation useful to investors understanding trends of our income. Amortization of intangibles is generally expensed over several periods and may not be indicative of current cash expenditures. we believe the exclusion of stock-based compensation provides useful supplemental information to help understand the changes in our earnings per share due to the fluctuations of our cash-settled stock appreciation rights included in stock compensation. we exclude the impact of deferred income taxes on earnings as the temporary differences and the changes in valuation allowances may be misleading for trend analysis. see Table 1 for reconciliation of non-GAAP Cash earnings per share to U.S. GAAP Diluted earnings per share.
About S1 Corporation
Leading banks, credit unions, retailers, and processors need technology that adapts to the complex and challenging needs of their businesses. these organizations want solutions that can respond quickly to changes in the marketplace and help grow their businesses. for more than 20 years, S1 Corporation /quotes/comstock/15*!sone/quotes/nls/sone (SONE 6.23, 0.00, 0.00%) has been a leader in developing software products that offer flexibility and reliability. over 3,000 organizations worldwide depend on S1 for payments, online banking, mobile banking, voice banking, branch banking and lending solutions that deliver a competitive advantage. More information is available at www.s1.com.
Forward-Looking Statements
This press release contains forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act. these statements include statements with respect to our financial condition, results of operations and business. the words “believes,” “expects,” “may,” “will,” “should,” “projects,” “contemplates,” “anticipates,” “forecasts,” “intends” or similar terminology identify forward-looking statements. Forward-looking statements may include projections of our revenue, expenses, Adjusted EBITDA, capital expenditures, earnings per share, product development projects, future economic performance or management objectives. these statements are based on our beliefs as well as assumptions made using information currently available to us. Because these statements reflect our current views concerning future events, they involve risks, uncertainties and assumptions. Therefore, actual results may differ significantly from the results discussed in the forward-looking statements. the risk factors included in our reports filed with the Securities and Exchange Commission (and available on our web site at www.s1.com or the SEC’s web site at www.sec.gov) provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Except as provided by law, we undertake no obligation to update any forward-looking statement for any reason, even if new information becomes available.
S1 Corporation Consolidated Statements of Operations (In thousands, except share and per share data) (Unaudited) TABLE 1 three Months Ended 3/31/2010 3/31/2009 ———– ———– Revenue: Software licenses $ 5,739 $ 9,056 Support and maintenance 15,643 13,827 Professional services 17,430 23,075 Hosting 12,347 12,330 ———– ———– Total revenue 51,159 58,288 ———– ———– Operating expenses: Cost of software licenses (1) 382 840 Cost of professional services, support and maintenance (1) 19,414 18,260 Cost of hosting (1) 6,668 6,972 Selling and marketing 6,684 6,488 Product development 8,720 8,172 General and administrative 7,047 4,850 Depreciation and amortization 2,386 2,573 ———– ———– Total operating expenses 51,301 48,155 ———– ———– Operating (loss) income (142) 10,133 ———– ———– interest income 56 122 interest expense (120) (160) other non-operating (expense) income (157) 48 ———– ———– interest and other (expense) income, net (221) 10 (Loss) income before income tax expense (363) 10,143 Income tax expense (693) (1,199) ———– ———– Net (loss) income $ (1,056) $ 8,944 =========== =========== (Loss) earnings per share: Basic $ (0.02) $ 0.16 Diluted $ (0.02) $ 0.16 Weighted average common shares outstanding – basic 51,743,567 52,833,689 Weighted average common shares outstanding – diluted 51,743,567 53,433,880 Reconciliation to Cash (loss) earnings per share: Diluted (loss) earnings per share $ (0.02) $ 0.16 Amortization of intangibles 0.01 0.01 Stock-based compensation expense — (0.04) Deferred income taxes — – ———– ———– Non-GAAP Cash (loss) earnings per share $ (0.01) $ 0.13 =========== =========== (1) Excludes charges for depreciation. Cost of software licenses includes amortization of acquired technology. S1 Corporation Consolidated Balance Sheets (In thousands, except share data) (Unaudited) TABLE 2 March 31, December 31, 2010 2009 ———— ———— Assets Current assets: Cash and cash equivalents $ 48,243 $ 61,784 Accounts receivable, net 53,455 64,470 Prepaid expenses 5,272 4,729 other current assets 8,292 4,931 ———— ———— Total current assets 115,262 135,914 Property and equipment, net 22,394 23,018 Intangible assets, net 13,881 4,895 Goodwill, net 145,694 126,605 other assets 7,647 9,634 ———— ———— Total assets $ 304,878 $ 300,066 ============ ============ Liabilities and Stockholders’ Equity Current liabilities: Accounts payable and accrued expenses $ 8,618 $ 7,707 Accrued compensation and benefits 9,144 11,569 Current portion of debt obligation 5,830 1,170 Accrued restructuring 2,278 2,096 Income taxes payable 2,108 1,586 Deferred revenues 33,567 26,837 other current liabilities 2,424 2,007 ———— ———— Total current liabilities 63,969 52,972 Debt obligation, excluding current portion 34 5,026 Accrued restructuring, excluding current portion 857 1,381 other liabilities 2,377 2,046 ———— ———— Total liabilities $ 67,237 $ 61,425 ———— ———— Stockholders’ equity: Preferred stock 10,000 10,000 Common stock 518 517 Additional paid-in-capital 1,788,788 1,787,772 Accumulated deficit (1,558,590) (1,557,534) Accumulated other comprehensive loss (3,075) (2,114) ———— ———— Total stockholders’ equity 237,641 238,641 ———— ———— Total liabilities and stockholders’ equity $ 304,878 $ 300,066 ============ ============ Preferred shares issued and outstanding 749,064 749,064 Common shares issued and outstanding 51,753,494 51,712,710 S1 Corporation Consolidated Statements of Cash Flows (In thousands) (Unaudited) TABLE 3 three Months Ended 3/31/2010 3/31/2009 ———- ——— Cash flows from operating activities: Net (loss) income $ (1,056) $ 8,944 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 2,565 3,031 Provision for doubtful accounts receivable and billing adjustments 48 399 Deferred income taxes (106) (28) Stock based compensation expense (benefit) 373 (2,531) Changes in assets and liabilities: Decrease (increase) in accounts receivable 11,548 (9,588) (Increase) decrease in prepaid expenses and other assets (405) 310 Increase (decrease) in accounts payable and other liabilities 382 (389) Decrease in accrued compensation and benefits (2,107) (2,267) Increase in income taxes payable 498 935 Increase in deferred revenue 6,334 8,473 ———- ——— Net cash provided by operating activities 18,074 7,289 Cash flows from investing activities: Maturities of investment securities — 686 Purchases of investment securities (1,117) — Acquisition, net of acquired cash (29,249) — Purchases of property, equipment and technology (908) (3,022) ———- ——— Net cash used in investing activities (31,274) (2,336) Cash flows from financing activities: (Payments) proceeds from exercise of employee stock awards (48) 154 Payments on capital leases and debt obligations (332) (1,930) ———- ——— Net cash used in financing activities (380) (1,776) Effect of exchange rate changes on cash and cash equivalents 39 (629) ———- ——— Net (decrease) increase in cash and cash equivalents (13,541) 2,548 Cash and cash equivalents at beginning of period 61,784 63,840 ———- ——— Cash and cash equivalents at end of period $ 48,243 $ 66,388 ========== ========= S1 Corporation Consolidated Statements of Operations (In thousands) (Unaudited) TABLE 4 three Months Ended 3/31/2010 3/31/2009 ———- ———- Revenue: Software licenses $ 5,739 $ 9,056 Support and maintenance 15,643 13,827 Professional services 17,430 23,075 Hosting 12,347 12,330 ———- ———- Total revenue 51,159 58,288 ———- ———- Operating expenses: Cost of software licenses 382 840 Cost of professional services, support and maintenance 19,414 18,260 Cost of hosting 6,668 6,972 Selling and marketing 6,684 6,488 Product development 8,720 8,172 General and administrative 7,047 4,850 Depreciation and amortization 2,386 2,573 ———- ———- Total operating expenses (1) 51,301 48,155 ———- ———- Operating (loss) income (142) 10,133 ———- ———- interest income 56 122 interest expense (120) (160) other non-operating (expense) income (157) 48 ———- ———- interest and other (expense) income, net (221) 10 (Loss) income before income tax expense (363) 10,143 Income tax expense (693) (1,199) ———- ———- Net (loss) income $ (1,056) $ 8,944 ========== ========== Reconciliation to Adjusted EBITDA: Net (loss) income $ (1,056) $ 8,944 interest and other expense (income), net 221 (10) Income tax expense 693 1,199 Depreciation 2,054 2,291 Amortization 511 740 Stock-based compensation expense (benefit) 373 (2,531) ———- ———- Non-GAAP Adjusted EBITDA $ 2,796 $ 10,633 ========== ========== (1) Includes stock-based compensation expense (benefit) of: Cost of professional services, support and maintenance $ 67 $ (152) Cost of hosting 31 20 Selling and marketing (76) (1,220) Product development (23) (130) General and administrative 374 (1,049) ———- ———- Stock based compensation expense (benefit) $ 373 $ (2,531) ========== ========== S1 Corporation Payments Segment Statements of Operations (In thousands) (Unaudited) TABLE 5 three Months Ended 3/31/2010 3/31/2009 ——— ——— Revenue: Software licenses $ 3,325 $ 4,998 Support and maintenance 5,301 4,073 Professional services 3,904 3,376 Hosting 306 153 ——— ——— Total revenue 12,836 12,600 ——— ——— Operating expenses: Cost of software licenses 114 305 Cost of professional services, support and maintenance 4,352 3,060 Cost of hosting 212 145 Selling and marketing 2,982 2,926 Product development 1,455 1,113 General and administrative 2,034 1,064 Depreciation and amortization 467 423 ——— ——— Total operating expenses (1) 11,616 9,036 ——— ——— Operating income $ 1,220 $ 3,564 ========= ========= Reconciliation to Adjusted EBITDA: Operating income $ 1,220 $ 3,564 Depreciation 345 301 Amortization 122 428 Stock-based compensation expense (benefit) 158 (434) ——— ——— Non-GAAP Adjusted EBITDA $ 1,845 $ 3,859 ========= ========= (1) Includes stock-based compensation expense (benefit) of: Cost of professional services, support and maintenance $ 16 $ (198) Cost of hosting 4 — Selling and marketing 26 50 Product development 20 29 General and administrative 92 (315) ——— ——— Stock based compensation expense (benefit) $ 158 $ (434) ========= ========= S1 Corporation Banking: Large Financial Institution Segment Statements of Operations (In thousands) (Unaudited) TABLE 6 three Months Ended 3/31/2010 3/31/2009 ——— ———- Revenue: Software licenses $ 645 $ 2,469 Support and maintenance 5,246 4,971 Professional services 12,649 18,513 Hosting 6,199 7,240 ——— ———- Total revenue 24,739 33,193 ——— ———- Operating expenses: Cost of software licenses 128 310 Cost of professional services, support and maintenance 9,901 11,537 Cost of hosting 3,720 4,016 Selling and marketing 2,280 2,019 Product development 4,221 5,055 General and administrative 3,175 2,657 Depreciation and amortization 1,088 1,308 ——— ———- Total operating expenses (1) 24,513 26,902 ——— ———- Operating income $ 226 $ 6,291 ========= ========== Reconciliation to Adjusted EBITDA: Operating income $ 226 $ 6,291 Depreciation 1,088 1,308 Amortization 61 61 Stock-based compensation expense (benefit) 124 (1,514) ——— ———- Non-GAAP Adjusted EBITDA $ 1,499 $ 6,146 ========= ========== (1) Includes stock-based compensation expense (benefit) of: Cost of professional services, support and maintenance $ 44 $ 38 Cost of hosting 12 2 Selling and marketing (119) (1,074) Product development (17) (170) General and administrative 204 (310) ——— ———- Stock based compensation expense (benefit) $ 124 $ (1,514) ========= ========== S1 Corporation Banking: Community Financial Institution Segment Statements of Operations (In thousands) (Unaudited) TABLE 7 three Months Ended 3/31/2010 3/31/2009 ———- ——— Revenue: Software licenses $ 1,769 $ 1,589 Support and maintenance 5,096 4,783 Professional services 877 1,186 Hosting 5,842 4,937 ———- ——— Total revenue 13,584 12,495 ———- ——— Operating expenses: Cost of software licenses 140 225 Cost of professional services, support and maintenance 5,161 3,663 Cost of hosting 2,736 2,811 Selling and marketing 1,422 1,543 Product development 3,044 2,004 General and administrative 1,838 1,129 Depreciation and amortization 831 842 ———- ——— Total operating expenses (1) 15,172 12,217 ———- ——— Operating (loss) income $ (1,588) $ 278 ========== ========= Reconciliation to Adjusted EBITDA: Operating (loss) income $ (1,588) $ 278 Depreciation 621 682 Amortization 328 251 Stock-based compensation expense (benefit) 91 (583) ———- ——— Non-GAAP Adjusted EBITDA $ (548) $ 628 ========== ========= (1) Includes stock-based compensation expense (benefit) of: Cost of professional services, support and maintenance $ 7 $ 8 Cost of hosting 15 18 Selling and marketing 17 (196) Product development (26) 11 General and administrative 78 (424) ———- ——— Stock based compensation expense (benefit) $ 91 $ (583) ========== =========
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SOURCE: S1 Corporation
CONTACT: S1 CorporationInvestor Contact:Paul M. Parrish, Chief Financial Officer404.923.3500paul.parrish@s1.com
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S1 Corporation Reports first Quarter 2010 Financial Results
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