NORCROSS, Ga., Aug. 5 /PRNewswire-FirstCall/ -- S1 Corporation , a leading global provider of customer interaction financial and payment solutions, today announced financial results for the second quarter ended June 30, 2008.
-- GAAP earnings were $5.1 million or $0.09 per share for the second quarter of 2008, a $0.01 increase over earnings of $4.9 million or $0.08 per share for the second quarter of 2007. GAAP earnings were $10.3 million or $0.18 per share for the six months ended June 30, 2008, a $0.05 increase over earnings of $7.9 million or $0.13 per share for the six months ended June 30, 2007.
-- Total revenue for the second quarter of 2008 increased seven percent to $56.5 million from $52.6 million in the second quarter of 2007. Total revenue for the six months ended June 30, 2008 increased 11 percent to $111.2 million from $100.2 million in the six months ended June 30, 2007.
-- Adjusted EBITDA for the second quarter of 2008 was $11.1 million compared to $10.8 million in the second quarter of 2007. Adjusted EBITDA for the six months ended June 30, 2008 was $22.0 million compared to $18.2 million in the six months ended June 30, 2007. Adjusted EBITDA does not include stock based compensation expense, and is described and reconciled to GAAP net income below. (1)
-- Net cash provided by operating activities was $16.3 million for the six months ended June 30, 2008, a $3.1 million improvement over the six months ended June 30, 2007. The Company ended the second quarter of 2008 with $80.7 million in cash, cash equivalents and short-term investments.
-- Total revenue from international operations for the second quarter of 2008 increased 24 percent to $15.7 million from $12.6 million in the second quarter of 2007. Total revenue from international operations for the six months ended June 30, 2008 increased 37 percent to $30.5 million from $22.3 million in the six months ended June 30, 2007.
-- Two of the top 25 banks in the United States licensed the S1 Enterprise Corporate Banking application, the second S1 Enterprise application licensed by each of these financial institutions in the past year.
-- We expect $40 - $43 million in revenue from State Farm in 2008, $35 - $39 million in revenue in 2009, and that this annual spend will continue to decrease thereafter as our work for State Farm concludes by the end of 2011.
"I am pleased with our operating results and believe that our second quarter performance continues to demonstrate the value of having a broad range of products and customers around the world," said Johann Dreyer, Chief Executive Officer of S1. "Our sales pipeline remains strong and we expect full-year 2008 revenue and Adjusted EBITDA to be on the higher end of the guidance we provided last quarter. I am also pleased with the progress we are making towards defining the scope and effort State Farm will require from us through 2011, including determining the range of their expected revenue contribution in 2009. I believe that this longer-term visibility will enable us to shift the resources and capital that have been focused on supporting the work at State Farm to efforts associated with supporting the worldwide growth opportunities we see in other parts of our business."
(1) Adjusted EBITDA Reconciliation For the three months ended June 30, 2008 Enterprise Postilion Total Adjusted EBITDA $6,447 $4,675 $11,122 Depreciation (1,110) (811) (1,921) Amortization (61) (882) (943) Stock-based compensation expense (1,410) (895) (2,305) ------- ------- ------- Operating income $3,866 $2,087 $5,953 Interest and other income, net 124 Income tax expense (941) ------- Net income $5,136 ======= For the six months ended June 30, 2008 Enterprise Postilion Total Adjusted EBITDA $10,944 $11,038 $21,982 Depreciation (2,265) (1,598) (3,863) Amortization (207) (1,765) (1,972) Stock-based compensation expense (2,720) (1,473) (4,193) -------- ------- ------- Operating income $ 5,752 $6,202 $11,954 Interest and other income, net 418 Income tax expense (2,046) ------- Net income $10,326 ======= See tables 4, 5 and 6 for reconciliations of Adjusted EBITDA
This press release includes references to Adjusted EBITDA, a non-GAAP financial measure, the most directly comparable GAAP equivalent of which is Net income. We define Adjusted EBITDA as Net income less net interest income, plus income taxes, depreciation, amortization of intangibles, and stock-based compensation expense. A reconciliation of our non-GAAP financial measure to the most directly comparable financial measure is detailed in the reconciliation of GAAP to non-GAAP financial measures above. We believe that the presentation of this non-GAAP financial measure provides useful information to investors regarding our results of operations.
We believe that excluding depreciation, amortization, stock-based compensation expense, net interest income and income tax expense provides supplemental information and an alternative presentation useful to investors' understanding of the Company's 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 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 GAAP earnings based on the closing price of the Company's stock on the last day of the quarter. Consequently, fluctuations in our stock price can have a significant impact on the Company's reported GAAP earnings. Additionally, it is possible that the Company may begin recording income tax provisions for GAAP earnings despite being able to reduce taxes payable through the potential use of net operating loss carry forwards and other tax credits.
Although we believe, for the foregoing reasons, that our presentation of non-GAAP financial measure provides useful supplemental information to investors regarding our results of operations, our non-GAAP financial results should only be considered in addition to, and not as a substitute for or superior to, our financial measures prepared in accordance with GAAP.
Use of non-GAAP financial measures is subject to inherent limitations because they do not include all the expenses that must be included under GAAP and because they involve the exercise of 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 GAAP financial results. We urge investors not to consider non-GAAP financial measures as a substitute for, or superior to, any measure of financial performance prepared in accordance with GAAP. Our non-GAAP financial measure may be different from such measures used by other companies.
Adjusted EBITDA is not a measure of liquidity calculated in accordance with accounting principles generally accepted in the United States, and should be viewed as a supplement to -- not a substitute for -- our results of operations presented on the basis of accounting principles generally accepted in the United States. Adjusted EBITDA does not purport to represent cash flow provided by, or used in, operating activities as defined by accounting principles generally accepted in the United States. Our statement of cash flows presents our cash flow activity in accordance with accounting principles generally accepted in the United States. Furthermore, Adjusted EBITDA is not necessarily comparable to similarly-titled measures reported by other companies.
We believe Adjusted EBITDA is used by and is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across companies and across periods. We believe that Adjusted EBITDA is widely used by investors to measure a company's operating performance without regard to items such as interest expense, taxes, depreciation and amortization, and stock-based compensation expense which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired.
Our management uses Adjusted EBITDA as a measure of operating performance to assist in comparing performance from period to period on a consistent basis; as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations; and in communications with the Board of Directors, stockholders, analysts and investors concerning our financial performance.
Conference Call Information
Company management will host a conference call for interested parties to discuss its second quarter results on Wednesday, August 6, 2008, at 8:30 a.m. ET. A webcast of the call will be available through the Company's website, http://www.s1.com/. The conference call will contain forward-looking statements and other material information. A replay of the call will be available for two weeks following the call on the Company's website.
About S1
S1 Corporation delivers customer interaction software for financial and payment services and offers unique solution sets for financial institutions, retailers, and processors under three brand names: Postilion, S1 Enterprise and FSB Solutions. Additional information about S1 solutions is available at http://www.s1.com/, http://www.postilion.com/, http://www.s1enterprise.com/, and http://www.fsb-solutions.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. 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 http://www.s1.com/ or the SEC's web site at http://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.
S1 Corporation Consolidated Statements of Operations (In thousands, except share and per share data) (Unaudited) TABLE 1 Three Months Ended Six Months Ended 6/30/2007 6/30/2008 6/30/2007 6/30/2008 ---------------------- ---------------------- Revenues: Software licenses $7,755 $8,055 $13,517 $17,394 Support and maintenance 11,227 12,584 21,702 24,288 Professional services 21,681 23,657 41,113 44,727 Data center 11,730 11,921 23,430 24,188 Other 205 271 402 564 ------------------ ------------------- Total revenues 52,598 56,488 100,164 111,161 ------------------ ------------------- Operating expenses: Cost of software licenses 940 1,090 1,832 2,070 Cost of professional services, support and maintenance 16,722 18,008 32,724 35,483 Cost of data center 6,390 6,401 12,189 12,958 Cost of other revenue 130 80 272 109 Selling and marketing 7,767 9,343 15,165 17,559 Product development 5,906 7,028 11,910 13,782 General and administrative 7,710 6,382 14,409 12,818 Depreciation 1,737 1,921 3,571 3,863 Amortization of other intangible assets 283 282 610 565 ------------------ ------------------ Total operating expenses 47,585 50,535 92,682 99,207 ------------------ ------------------ Operating income 5,013 5,953 7,482 11,954 Interest and other income, net 784 124 1,655 418 Income tax expense (848) (941) (1,221) (2,046) ------------------ ------------------ Net income $4,949 $5,136 $7,916 $10,326 Earnings per share: Basic $0.08 $0.09 $0.13 $0.18 ================== ================== Diluted $0.08 $0.09 $0.13 $0.18 ================== ================== Weighted average common shares outstanding - basic 61,217,364 56,622,937 61,360,540 56,576,868 Weighted average common shares outstanding - diluted 62,226,463 57,435,766 61,969,133 57,273,585 S1 Corporation Consolidated Balance Sheets (In thousands, except share data) TABLE 2 (Unaudited) December 31, June 30, 2007 2008 ----------- ----------- Assets Current assets: Cash and cash equivalents $45,011 $67,433 Short-term investments 23,855 13,258 Accounts receivable, net 39,969 48,765 Prepaid expenses 3,354 4,000 Other current assets 6,389 1,945 ------- ------- Total current assets 118,578 135,401 Property and equipment, net 20,906 21,760 Intangible assets, net 11,240 9,268 Goodwill, net 125,281 125,073 Other assets 5,839 6,055 ------- ------- Total assets $281,844 $297,557 ======= ======= Liabilities and Stockholders' Equity Current liabilities: Accounts payable $2,300 $3,672 Accrued compensation and benefits 10,649 12,154 Accrued restructuring 3,043 2,682 Accrued other expenses 8,198 9,557 Deferred revenues 26,345 30,926 Current portion of debt obligation 3,725 3,559 ------- ------- Total current liabilities 54,260 62,550 Other liabilities 17,679 14,190 ------- ------- Total liabilities 71,939 76,740 ------- ------- Stockholders' equity: Preferred stock 10,000 10,000 Common stock 567 566 Additional paid-in capital 1,810,783 1,812,255 Accumulated deficit (1,609,807) (1,599,481) Accumulated other comprehensive income (1,638) (2,523) ------- ------- Total stockholders' equity 209,905 220,817 ------- ------- Total liabilities and stockholders' equity $281,844 $297,557 ======= ======= Preferred shares issued and outstanding 749,064 749,064 Common shares issued and outstanding 56,748,906 56,635,296 S1 Corporation Consolidated Statements of Cash Flows (In thousands) (Unaudited) TABLE 3 Six Months Ended June 30, June 30, 2007 2008 ------- ------- Cash flows from operating activities: Net income $7,916 $10,326 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 5,665 5,835 Provision for doubtful accounts receivable and billing adjustments 994 (385) Stock based compensation expense 5,013 4,194 Changes in assets and liabilities Decrease (increase) in accounts receivable 2,947 (8,627) Increase in prepaid expenses and other assets (1,969) (23) (Decrease) increase in accounts payable (1,429) 1,157 Decrease in accrued expenses and other liabilities (5,284) (612) (Decrease) increase in deferred revenues (666) 4,473 ------ ------ Net cash provided by operating activities 13,187 16,338 Net cash provided by investing activities 19,521 9,592 Net cash used in financing activities (14,758) (2,947) Effect of exchange rate changes on cash and cash equivalents 204 (561) ------ ------ Net increase in cash and cash equivalents 18,154 22,422 Cash and cash equivalents at beginning of period 69,612 45,011 ------ ------ Cash and cash equivalents at end of period $87,766 $67,433 ====== ====== S1 Corporation Consolidated Statements of Operations (In thousands) (Unaudited) TABLE 4 Three Months Ended Six Months Ended 6/30/07 6/30/08 6/30/07 6/30/08 ----------------- ----------------- Revenues: Software licenses $7,755 $8,055 $13,517 $17,394 Support and maintenance 11,227 12,584 21,702 24,288 Professional services 21,681 23,657 41,113 44,727 Data center 11,730 11,921 23,430 24,188 Other 205 271 402 564 --------------- ---------------- Total revenues 52,598 56,488 100,164 111,161 --------------- ---------------- Operating expenses: Cost of software licenses 940 1,090 1,832 2,070 Cost of professional services, support and maintenance * 16,722 18,008 32,724 35,483 Cost of data center * 6,390 6,401 12,189 12,958 Cost of other revenue 130 80 272 109 Selling and marketing * 7,767 9,343 15,165 17,559 Product development * 5,906 7,028 11,910 13,782 General and administrative * 7,710 6,382 14,409 12,818 Depreciation 1,737 1,921 3,571 3,863 Amortization of other intangible assets 283 282 610 565 --------------- ---------------- Total operating expenses 47,585 50,535 92,682 99,207 --------------- ---------------- Operating income 5,013 5,953 7,482 11,954 Interest and other income, net 784 124 1,655 418 Income tax expense (848) (941) (1,221) (2,046) --------------- ---------------- Net income $4,949 $5,136 $7,916 $10,326 =============== ================ Reconciliation to Adjusted EBITDA: Net income $4,949 $5,136 $7,916 $10,326 Interest and other income, net (784) (124) (1,655) (418) Income tax expense 848 941 1,221 2,046 Depreciation 1,737 1,921 3,571 3,863 Amortization 948 943 2,095 1,972 Stock based compensation expense 3,108 2,305 5,013 4,193 --------------- ---------------- Adjusted EBITDA $10,806 $11,122 $18,161 $21,982 =============== ================ * Includes stock based compensation expense of: Cost of professional services, support and maintenance $191 $27 $278 $73 Cost of data center 20 22 35 47 Selling and marketing 1,495 882 2,414 1,606 Product development 665 262 1,007 584 General and administrative 737 1,112 1,279 1,883 --------------- ---------------- $3,108 $2,305 $5,013 $4,193 =============== ================ S1 Corporation Enterprise Segment Statements of Operations (In thousands) (Unaudited) TABLE 5 Three Months Ended Six Months Ended 6/30/07 6/30/08 6/30/07 6/30/08 ------------------ ---------------- Revenues: Software licenses $1,287 $2,419 $2,342 $3,842 Support and maintenance 3,972 4,497 7,388 8,220 Professional services 17,303 18,105 32,776 35,195 Data center 6,089 6,913 11,794 13,970 Other 158 138 313 333 --------------- ---------------- Total revenues 28,809 32,072 54,613 61,560 --------------- ---------------- Operating expenses: Cost of software licenses 361 419 659 741 Cost of professional services, support and maintenance * 10,645 10,974 20,571 21,589 Cost of data center * 3,733 3,735 7,014 7,680 Cost of other revenue 24 24 66 53 Selling and marketing * 3,545 4,133 6,729 7,971 Product development * 2,965 4,472 5,980 8,570 General and administrative * 3,948 3,339 7,758 6,939 Depreciation 1,142 1,110 2,361 2,265 Amortization of other intangible assets - - 45 - --------------- ---------------- Total operating expenses 26,363 28,206 51,183 55,808 --------------- ---------------- Operating income $2,446 $3,866 $3,430 $5,752 =============== ================ Reconciliation to Adjusted EBITDA: Operating income $2,446 $3,866 $3,430 $5,752 Depreciation 1,142 1,110 2,361 2,265 Amortization 127 61 409 207 Stock based compensation expense 1,750 1,410 2,791 2,720 --------------- ---------------- Adjusted EBITDA $5,465 $6,447 $8,991 $10,944 =============== ================ * Includes stock based compensation expense of: Cost of professional services, support and maintenance $172 $15 $236 $38 Cost of data center 15 10 28 23 Selling and marketing 796 570 1,275 1,128 Product development 374 228 559 507 General and administrative 393 587 693 1,024 --------------- ---------------- $1,750 $1,410 $2,791 $2,720 =============== ================ S1 Corporation Postilion Segment Statements of Operations (In thousands) (Unaudited) TABLE 6 Three Months Ended Six Months Ended 6/30/07 6/30/08 6/30/07 6/30/08 ------------------ ---------------- Revenues: Software licenses $6,468 $5,636 $11,175 $13,552 Support and maintenance 7,255 8,087 14,314 16,068 Professional services 4,378 5,552 8,337 9,532 Data center 5,641 5,008 11,636 10,218 Other 47 133 89 231 -------------- --------------- Total revenues 23,789 24,416 45,551 49,601 -------------- --------------- Operating expenses: Cost of software licenses 579 671 1,173 1,329 Cost of professional services, support and maintenance * 6,077 7,034 12,153 13,894 Cost of data center * 2,657 2,666 5,175 5,278 Cost of other revenue 106 56 206 56 Selling and marketing * 4,222 5,210 8,436 9,588 Product development * 2,941 2,556 5,930 5,212 General and administrative * 3,762 3,043 6,651 5,879 Depreciation 595 811 1,210 1,598 Amortization of other intangible assets 283 282 565 565 -------------- --------------- Total operating expenses 21,222 22,329 41,499 43,399 -------------- --------------- Operating income $2,567 $2,087 $4,052 $6,202 ============== =============== Reconciliation to Adjusted EBITDA: Operating income $2,567 $2,087 $4,052 $6,202 Depreciation 595 811 1,210 1,598 Amortization 821 882 1,686 1,765 Stock based compensation expense 1,358 895 2,222 1,473 -------------- --------------- Adjusted EBITDA $5,341 $4,675 $9,170 $11,038 ============== =============== * Includes stock based compensation expense of: Cost of professional services, support and maintenance $19 $12 $42 $35 Cost of data center 5 12 7 24 Selling and marketing 699 312 1,139 478 Product development 291 34 448 77 General and administrative 344 525 586 859 -------------- --------------- $1,358 $895 $2,222 $1,473 ============== ===============
