updated 5/4/2011 5:16:36 PM ET 2011-05-04T21:16:36

Revenue Increased 13% in the First Quarter of 2011 Compared to the First Quarter of 2010

Adjusted EBITDA Increased 82% in the First Quarter of 2011 Compared to the First Quarter of 2010

Raises Full Year 2011 Revenue and Adjusted EBITDA Guidance

NORCROSS, Ga., May 4, 2011 (GLOBE NEWSWIRE) --S1 Corporation (Nasdaq:SONE), a leading global provider of payments and financial services software solutions, today announced financial results for the first quarter ended March 31, 2011:

Financial Results and Operating Highlights

  • Total revenue increased 13% to $57.8 million in the first quarter of 2011 compared with $51.2 million in the first quarter of 2010. This increase was due primarily to growth in Software licenses revenue across all segments, higher Professional services revenue in our Payments and Banking: Large FI segments, and higher Hosting revenue in our Banking: Community FI segment primarily due to the PM Systems acquisition in March 2010.
  • U.S. GAAP net income was $0.7 million, or $0.01 per share, in the first quarter of 2011 compared with U.S. GAAP net loss of $1.1 million, or ($0.02) per share, in the first quarter of 2010. These figures include stock-based compensation expense of $0.8 million and $0.4 million in the first quarter of 2011 and 2010, respectively.
  • Adjusted EBITDA increased 82% to $5.1 million in the first quarter of 2011 compared with $2.8 million in the first quarter of 2010. 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, provided below.
  • Net cash provided by operating activities was $4.1 million in the quarter ended March 31, 2011 compared with $18.1 million in the quarter ended March 31, 2010. During the first quarter of 2011, the Company paid in full the note payable of $5.0 million related to the Company's corporate headquarters. The Company had cash and cash equivalents of $59.9 million as of March 31, 2011.
  • Revenue backlog, which is discussed in further detail below, in the Company's Payments and Banking: Large FI segments was $64.3 million as of March 31, 2011, a 57% increase compared to $41.0 million as of March 31, 2010.
  • Sales bookings in the Company's Payments and Banking: Large FI segments was $60.9 million in the six months ended March 31, 2011, a 29% increase compared to $47.2 million in the six months ended March 31, 2010.
  • Notable first quarter 2011 contract signings include:
  • A top five bank in Thailand for S1's payments solution;
  • A top three bank in Colombia for S1's payments solution;
  • Another top three bank in Colombia for S1's corporate online banking solution; and
  • A U.S. West-Coast based commercial bank for S1's business online banking solution.
  • The Company raised its full year 2011 financial guidance to $230 to $240 million in revenue and $24 to $28 million in Adjusted EBITDA, up from previous guidance of $225 to $235 million in revenue and $22 to $27 million in Adjusted EBITDA.

"We got off to a good start in 2011," said Johann Dreyer, Chief Executive Officer, S1 Corporation. "In addition to adding nine new customers in the first quarter, we had a very strong quarter of cross-sales into our existing customer base. With the shift in our business model largely behind us and the significant sales opportunities we continue to see around the world, we are raising our 2011 financial guidance."

Conference Call, Webcast and Slide Information

Management will host a conference call to discuss its first quarter 2011 results on Thursday, May 5, 2011, at 8:30 a.m. ET. Participants may access the call by dialing (877) 899-9075 (United States) or (706) 758-0819 (International) and entering passcode 62139202. Investors may also access a 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 will also be available approximately two hours after the conclusion of the call through May 19, 2011. To access the replay, please dial (800) 642-1687 or (706) 645-9291 and enter passcode 62139202.

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 provides 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.

We are presenting an estimate of revenue backlog for our Payments and Banking: Large Financial Institution segments which is defined as an estimate of revenue for software licenses, including term licenses, professional services, and hosting services, in each case as specified in executed contracts that we believe will be recognized in revenue over the next 12 months. The portion of the estimate from our Banking: Large Financial Institution segment does not include revenue associated with the State Farm business or the custom development for an international branch customer ("Custom Projects"). We believe that presenting this estimate provides supplemental information and an alternative presentation useful to investors understanding trends in our business including the shift we are experiencing toward recognizing more software license revenue using the percentage of completion method.

Our estimate of revenue backlog requires substantial judgment of our management, is based on a number of assumptions, which may turn out to be inaccurate or wrong, and is subject to a number of factors and uncertainties, many of which are outside of our control. Such assumptions, factors and uncertainties include, but are not limited to, the following:

  • Revenue for term licenses and hosting services are the annualized amount expected over the next 12 months as of the date presented;
  • Foreign currency exchange rates are assumed to remain constant over the 12 month period for contracts stated in currencies other than the U.S. Dollar;
  • Perpetual licenses and professional services are based on current estimates of project completion over the next 12 months;
  • Our customers may attempt to renegotiate or terminate their contracts for a number of reasons, including mergers, changes in their financial condition or general changes in economic conditions within their industries or geographic locations;
  • We may experience delays in the development or delivery of products or services specified in customer contracts; and
  • Our estimate is based on constant hosting transaction volumes, and changes in hosting transaction volumes may impact the amount of revenue actually recognized in future periods.

Estimates of future financial results are inherently unreliable. Accordingly, there can be no assurance that the amounts included in our estimate of revenue backlog will be recognized over the next 12 months, or at all. Additionally, because our estimate of revenue backlog is an operating metric, it is not subject to the same level of internal review or control as a U.S. GAAP financial measure.

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 (Nasdaq:SONE) 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," "estimates," "forecasts," "intends" or similar terminology identify forward-looking statements. Forward-looking statements may include projections of our revenue, expenses, Adjusted EBITDA, revenue backlog, 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 
  3/31/2011 3/31/2010
     
Revenue:    
 Software licenses  $ 8,836  $ 5,739
 Support and maintenance  16,130  15,643
 Professional services  18,767  17,430
 Hosting  14,107  12,347
 Total revenue  57,840  51,159
     
Operating expenses:    
Cost of software licenses (1)  599  382
Cost of professional services, support and maintenance (1)  23,113  19,414
Cost of hosting (1)  7,345  6,668
Selling and marketing   7,281  6,684
Product development   8,783  8,720
General and administrative   6,766  7,047
Depreciation and amortization   2,533  2,386
 Total operating expenses   56,420  51,301
     
Operating income (loss)  1,420  (142)
     
 Interest income   47  56
 Interest expense   (152)  (120)
 Other non-operating expense   (182)  (157)
Interest and other expense, net  (287)  (221)
     
Income (loss) before income tax expense  1,133  (363)
 Income tax expense  (451)  (693)
Net income (loss)  $ 682  $ (1,056)
     
Income (loss) per share:    
Basic  $ 0.01  $ (0.02)
Diluted  $ 0.01  $ (0.02)
     
Weighted average common shares outstanding - basic   53,382,817  51,743,937
Weighted average common shares outstanding - diluted  54,126,619  51,743,937
     
     
Reconciliation to Cash income (loss) per share:    
Diluted income (loss) per share  $ 0.01  $ (0.02)
Amortization of intangibles  0.01  0.01
Stock-based compensation expense  0.02  -- 
Deferred income taxes  --  -- 
Non-GAAP Cash income (loss) per share  $ 0.04  $ (0.01)
     
(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, 
  2011 2010
     
 Assets     
 Current assets:     
 Cash and cash equivalents   $ 59,920  $ 61,917
 Accounts receivable, net   54,862  44,370
 Prepaid expenses   4,566  4,827
 Other current assets   7,507  6,612
 Total current assets   126,855  117,726
 Property and equipment, net   21,937  22,330
 Intangible assets, net   11,098  11,846
 Goodwill, net   147,895  147,544
 Other assets   8,377  10,207
 Total assets   $ 316,162  $ 309,653
     
 Liabilities and Stockholders' Equity     
 Current liabilities:     
 Accounts payable and accrued expenses   $ 9,194  $ 9,779
 Accrued compensation and benefits   11,593  9,705
 Current portion of debt obligation   56  5,046
 Accrued restructuring   954  1,528
 Income taxes payable   156  1,950
 Deferred revenues   48,575  38,022
 Other current liabilities   2,353  2,853
 Total current liabilities   72,881  68,883
 Other liabilities   3,059  3,157
 Total liabilities   $ 75,940  $ 72,040
     
 Stockholders' equity:     
 Common stock   534  533
 Additional paid-in-capital   1,804,147  1,802,795
 Accumulated deficit   (1,563,135)  (1,563,817)
 Accumulated other comprehensive loss   (1,324)  (1,898)
 Total stockholders' equity   240,222  237,613
 Total liabilities and stockholders' equity   $ 316,162  $ 309,653
     
     
Common shares issued and outstanding  53,421,860  53,317,063
 
 S1 Corporation 
 Consolidated Statements of Cash Flows 
 (In thousands) 
 (Unaudited) 
TABLE 3
 
  Three Months Ended
  3/31/2011 3/31/2010
     
 Cash flows from operating activities:     
 Net income (loss)   $ 682  $ (1,056)
 Adjustments to reconcile net income (loss) to net cash from operating activities:     
 Depreciation and amortization   2,825  2,565
 Provision for doubtful accounts receivable and billing adjustments   61  48
 Deferred income taxes   (30)  (106)
 Stock-based compensation expense   844  373
 Changes in assets and liabilities:     
 (Increase) decrease in accounts receivable   (10,511)  11,548
 Decrease (increase) in prepaid expenses and other assets   1,381  (405)
 (Decrease) increase in accounts payable and other liabilities   (1,726)  382
 Increase (decrease) in accrued compensation and benefits   2,040  (2,107)
 (Decrease) increase in income taxes payable   (1,852)  498
 Increase in deferred revenue   10,431  6,334
 Net cash provided by operating activities   4,145  18,074
 Cash flows from investing activities:     
 Purchases of investment securities  --   (1,117)
 Acquisitions, net of acquired cash  --   (29,249)
 Purchases of property, equipment and technology  (1,713)  (908)
 Net cash used in investing activities   (1,713)  (31,274)
 Cash flows from financing activities:     
 Proceeds (payments) from the exercise of stock awards  309  (48)
 Payments on capital leases and debt obligations  (4,997)  (332)
 Net cash used in financing activities   (4,688)  (380)
 Effect of exchange rate changes on cash and cash equivalents   259  39
 Net decrease in cash and cash equivalents   (1,997)  (13,541)
 Cash and cash equivalents at beginning of period   61,917  61,784
 Cash and cash equivalents at end of period   $ 59,920  $ 48,243
 
 
 S1 Corporation 
 Consolidated Statements of Operations 
 (In thousands) 
 (Unaudited) 
TABLE 4
     
   Three Months Ended 
  3/31/2011 3/31/2010
     
Revenue:    
 Software licenses  $ 8,836  $ 5,739
 Support and maintenance  16,130  15,643
 Professional services  18,767  17,430
 Hosting  14,107  12,347
 Total revenue  57,840  51,159
     
Operating expenses:    
Cost of software licenses  599  382
Cost of professional services, support and maintenance   23,113  19,414
Cost of hosting  7,345  6,668
Selling and marketing   7,281  6,684
Product development   8,783  8,720
General and administrative   6,766  7,047
Depreciation and amortization   2,533  2,386
 Total operating expenses (1)  56,420  51,301
     
Operating income (loss)  1,420  (142)
     
 Interest income   47  56
 Interest expense   (152)  (120)
 Other non-operating expense   (182)  (157)
Interest and other expense, net  (287)  (221)
     
Income (loss) before income tax expense  1,133  (363)
 Income tax expense  (451)  (693)
Net income (loss)  $ 682  $ (1,056)
     
Reconciliation to Adjusted EBITDA:    
Net income (loss)   $ 682  $ (1,056)
Interest and other expense, net  287  221
Income tax expense  451  693
Depreciation  2,082  2,054
Amortization  743  511
Stock-based compensation expense  844  373
Non-GAAP Adjusted EBITDA  $ 5,089  $ 2,796
     
(1) Includes stock-based compensation expense of:    
 Cost of professional services, support and maintenance  $ 35  $ 67
 Cost of hosting  30  31
 Selling and marketing  89  (76)
 Product development  93  (23)
 General and administrative  597  374
 Stock-based compensation expense   $ 844  $ 373
 
 
 S1 Corporation 
 Payments Segment 
 Statements of Operations 
 (In thousands) 
 (Unaudited) 
TABLE 5
     
   Three Months Ended 
  3/31/2011 3/31/2010
     
Revenue:    
 Software licenses  $ 4,907  $ 3,325
 Support and maintenance  6,060  5,301
 Professional services  4,697  3,904
 Hosting  308  306
 Total revenue  15,972  12,836
     
Operating expenses:    
Cost of software licenses  18  114
Cost of professional services, support and maintenance   5,810  4,352
Cost of hosting  375  212
Selling and marketing   3,458  2,982
Product development   1,540  1,455
General and administrative   2,249  2,034
Depreciation and amortization   510  467
 Total operating expenses (1)  13,960  11,616
     
Operating income  $ 2,012  $ 1,220
     
     
Reconciliation to Adjusted EBITDA:    
Operating income  $ 2,012  $ 1,220
Depreciation  379  345
Amortization  131  122
Stock-based compensation expense   302  158
Non-GAAP Adjusted EBITDA  $ 2,824  $ 1,845
     
     
(1) Includes stock-based compensation expense of:    
 Cost of professional services, support and maintenance  $ 21  $ 16
 Cost of hosting  1  4
 Selling and marketing  73  26
 Product development  24  20
 General and administrative  183  92
 Stock-based compensation expense   $ 302  $ 158
 
 S1 Corporation 
 Banking: Large Financial Institution Segment 
 Statements of Operations 
 (In thousands) 
 (Unaudited) 
TABLE 6
     
   Three Months Ended 
  3/31/2011 3/31/2010
     
Revenue:    
 Software licenses  $ 1,766  $ 645
 Support and maintenance  5,431  5,246
 Professional services  13,084  12,649
 Hosting  5,755  6,199
 Total revenue  26,036  24,739
     
Operating expenses:    
Cost of software licenses  126  128
Cost of professional services, support and maintenance   11,926  9,901
Cost of hosting  3,642  3,720
Selling and marketing   2,154  2,280
Product development   4,188  4,221
General and administrative   2,547  3,175
Depreciation and amortization   1,104  1,088
 Total operating expenses (1)  25,687  24,513
     
Operating income  $ 349  $ 226
     
     
Reconciliation to Adjusted EBITDA:    
Operating income  $ 349  $ 226
Depreciation  1,104  1,088
Amortization  61  61
Stock-based compensation expense   304  124
Non-GAAP Adjusted EBITDA  $ 1,818  $ 1,499
     
     
(1) Includes stock-based compensation expense of:    
 Cost of professional services, support and maintenance  $ (3)  $ 44
 Cost of hosting  7  12
 Selling and marketing  (2)  (119)
 Product development  48  (17)
 General and administrative  254  204
 Stock-based compensation expense   $ 304  $ 124
 
 S1 Corporation 
 Banking: Community Financial Institution Segment 
 Statements of Operations 
 (In thousands) 
 (Unaudited) 
TABLE 7
     
   Three Months Ended 
  3/31/2011 3/31/2010
     
Revenue:    
 Software licenses  $ 2,163  $ 1,769
 Support and maintenance  4,639  5,096
 Professional services  986  877
 Hosting  8,044  5,842
 Total revenue  15,832  13,584
     
Operating expenses:    
Cost of software licenses  455  140
Cost of professional services, support and maintenance   5,377  5,161
Cost of hosting  3,328  2,736
Selling and marketing   1,669  1,422
Product development   3,055  3,044
General and administrative   1,970  1,838
Depreciation and amortization   919  831
 Total operating expenses (1)  16,773  15,172
     
Operating loss   $ (941)  $ (1,588)
     
     
Reconciliation to Adjusted EBITDA:    
Operating loss  $ (941)  $ (1,588)
Depreciation  599  621
Amortization  551  328
Stock-based compensation expense   238  91
Non-GAAP Adjusted EBITDA  $ 447  $ (548)
     
     
(1) Includes stock-based compensation expense of:    
 Cost of professional services, support and maintenance  $ 17  $ 7
 Cost of hosting  22  15
 Selling and marketing  18  17
 Product development  21  (26)
 General and administrative  160  78
 Stock-based compensation expense   $ 238  $ 91
CONTACT:  Investor Contact:
          Paul M. Parrish
          Chief Financial Officer
          404.923.3500
          paul.parrish@s1.com

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