S1 Corporation News
S1 Corporation Reports 15 Percent Increase in First Quarter Revenue and GAAP EPS of $0.09
— GAAP earnings were $0.09 per share for the first quarter of 2008, a $0.04 improvement over earnings of $0.05 per share for the first quarter of 2007. — Total revenue for the first quarter of 2008 increased 15 percent to $54.7 million from $47.6 million in the first quarter of 2007, with license revenue increasing 62 percent compared with the first quarter of 2007. — Adjusted EBITDA for the first quarter of 2008 was $10.9 million compared to $7.4 million in the first quarter of 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 $4.8 million for the first quarter of 2008, a $4.5 million improvement over the first quarter of 2007. The Company ended the first quarter of 2008 with $73.2 million in cash, cash equivalents and short-term investments.
"We posted another strong quarter of year-over-year growth in revenue and earnings and continue to see our sales pipeline grow, domestically and internationally, across both segments of our business," said
The Company is updating its 2008 earnings guidance using Adjusted EBITDA, a non-GAAP measure and the primary measure used by the Company's Board of Directors and management to assess the operating performance of the business, and will cease providing guidance using GAAP earnings per share. Our calculation of Adjusted EBITDA excludes stock-based compensation expense, a portion of which 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. As more fully described below, the Company believes that a better understanding of our operating results can be gained by also considering earnings before the impact of fluctuations in our stock price and the recording of income tax provisions under the foregoing circumstances.
(1) Adjusted EBITDA Reconciliation For the three months ended March 31, 2008 Enterprise Postilion Total Adjusted EBITDA $4,496 $6,363 $10,859 Depreciation (1,155) (787) (1,942) Amortization (145) (883) (1,028) Stock-based compensation expense (1,310) (578) (1,888) ——— ——— ——— Operating income $1,886 $4,115 $6,001 Interest and other income, net 294 Income tax expense (1,105) Net income $5,190 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
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 first quarter results on
About S1
S1 Corporation (Nasdaq: SONE) 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 www.s1.com, www.postilion.com, www.S1enterprise.com, and 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 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.
S1 Corporation Condensed Consolidated Statements of Operations (In thousands, except share and per share data) (Unaudited) TABLE 1 Three Months Ended 3/31/2007 3/31/2008 —————————————- Revenues: Software licenses $5,762 $9,339 Support and maintenance 10,475 11,704 Professional services 19,432 21,070 Data center 11,700 12,267 Other 197 293 —————————————- Total revenues 47,566 54,673 —————————————- Operating expenses: Cost of software licenses (1) 892 980 Cost of professional services, support and maintenance (1) 16,002 17,475 Cost of data center (1) 5,799 6,557 Cost of other revenue 142 29 Selling and marketing 7,398 8,216 Product development 6,004 6,755 General and administrative 6,699 6,435 Depreciation 1,834 1,942 Amortization of other intangible assets 327 283 —————————————- Total operating expenses (2) 45,097 48,672 —————————————- Operating income 2,469 6,001 Interest and other income, net 871 294 Income tax expense (373) (1,105) —————————————- Net income $2,967 $5,190 =========================== Earnings per share: Basic $0.05 $0.09 =========================== Diluted $0.05 $0.09 =========================== Weighted average common shares outstanding - basic 61,505,306 56,530,569 Weighted average common shares outstanding - diluted 61,801,948 57,102,409 ———————————- (1) Excludes charges for depreciation. Cost of software license includes amortization of purchased technology. (2) Includes stock-based compensation expenses of $1.9 million for both the three months ended March 31, 2008 and 2007. Please refer to Tables 4, 5 and 6 for further details. S1 Corporation Condensed Consolidated Balance Sheets (In thousands, except share data) TABLE 2 (Unaudited) December 31, March 31, 2007 2008 —————- —————- Assets Current assets: Cash and cash equivalents $45,011 $55,123 Short-term investments 23,855 18,048 Accounts receivable, net 39,969 44,744 Prepaid expenses 3,354 3,770 Other current assets 6,389 2,020 —————- —————- Total current assets 118,578 123,705 Property and equipment, net 20,906 21,175 Intangible assets, net 11,240 10,212 Goodwill, net 125,281 125,270 Other assets 5,839 6,086 —————- —————- Total assets $281,844 $286,448 —————- —————- Liabilities and Stockholders' Equity Current liabilities: Accounts payable $2,300 $3,473 Accrued compensation and benefits 10,649 9,551 Accrued restructuring 3,043 3,199 Accrued other expenses 8,198 9,208 Deferred revenues 26,345 26,259 Current portion of debt obligation 3,725 3,751 —————- —————- Total current liabilities 54,260 55,441 Other liabilities 17,679 15,844 —————- —————- Total liabilities 71,939 71,285 —————- —————- Stockholders' equity: Preferred stock 10,000 10,000 Common stock 567 566 Additional paid-in capital 1,810,783 1,810,958 Accumulated deficit (1,609,807) (1,604,617) Accumulated other comprehensive income (1,638) (1,744) —————- —————- Total stockholders' equity 209,905 215,163 —————- —————- Total liabilities and stockholders' equity $281,844 $286,448 —————- —————- Preferred shares issued and outstanding 749,064 749,064 Common shares issued and outstanding 56,748,906 56,612,353 S1 Corporation Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) TABLE 3 Three Months Ended March 31, March 31, 2007 2008 ———— ———— Cash flows from operating activities: Net income $2,967 $5,190 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,980 2,970 Provision for doubtful accounts receivable and billing adjustments 682 343 Stock based compensation expense 1,905 1,888 Changes in assets and liabilities Decrease (increase) in accounts receivable 4,076 (5,265) (Increase) decrease in prepaid expenses and other assets (2,703) 107 (Decrease) increase in accounts payable (640) 1,026 Decrease in accrued expenses and other liabilities (4,671) (1,325) Decrease in deferred revenues (4,274) (140) ———— ———— Net cash provided by operating activities 322 4,794 Net cash provided by investing activities 12,810 7,308 Net cash provided by (used in) financing activities 569 (2,065) Effect of exchange rate changes on cash and cash equivalents 19 75 ———— ———— Net increase in cash and cash equivalents 13,720 10,112 Cash and cash equivalents at beginning of period 69,612 45,011 ———— ———— Cash and cash equivalents at end of period $83,332 $55,123 ———— ———— S1 Corporation Condensed Consolidated Statements of Operations (In thousands) (Unaudited) TABLE 4 Three Months Ended 3/31/2007 3/31/2008 ——————————————— Revenues: Software licenses $5,762 $9,339 Support and maintenance 10,475 11,704 Professional services 19,432 21,070 Data center 11,700 12,267 Other 197 293 ——————————————— Total revenues 47,566 54,673 ——————————————— Operating expenses: Cost of software licenses 892 980 Cost of professional services, support and maintenance * 16,002 17,475 Cost of data center * 5,799 6,557 Cost of other revenue 142 29 Selling and marketing * 7,398 8,216 Product development * 6,004 6,755 General and administrative * 6,699 6,435 Depreciation 1,834 1,942 Amortization of other intangible assets 327 283 ——————————————— Total operating expenses 45,097 48,672 ——————————————— Operating income 2,469 6,001 Interest and other income, net 871 294 Income tax expense (373) (1,105) ——————————————— Net income $2,967 $5,190 ============================== Reconciliation to Adjusted EBITDA: Net income $2,967 $5,190 Depreciation 1,834 1,942 Amortization 1,146 1,028 Stock based compensation expense 1,905 1,888 Interest income, net (871) (294) Income tax expense 373 1,105 ——————————————— Adjusted EBITDA $7,354 $10,859 ============================== * Includes stock based compensation expense of: Cost of professional services, support and maintenance $87 $46 Cost of data center 15 25 Selling and marketing 919 724 Product development 342 322 General and administrative 542 771 ——————————————— $1,905 $1,888 ============================== S1 Corporation Enterprise Segment Condensed Statements of Operations (In thousands) (Unaudited) TABLE 5 Three Months Ended 3/31/2007 3/31/2008 ——————————————- Revenues: Software licenses $1,055 $1,423 Support and maintenance 3,416 3,723 Professional services 15,473 17,090 Data center 5,705 7,057 Other 155 195 ——————————————- Total revenues 25,804 29,488 ——————————————- Operating expenses: Cost of software licenses 298 322 Cost of professional services, support and maintenance * 9,926 10,615 Cost of data center * 3,281 3,945 Cost of other revenue 42 29 Selling and marketing * 3,184 4,187 Product development * 3,015 4,099 General and administrative * 3,810 3,250 Depreciation 1,219 1,155 Amortization of other intangible assets 45 - ——————————————- Total operating expenses 24,820 27,602 ——————————————- Operating income $984 $1,886 ============================= Reconciliation to Adjusted EBITDA: Operating income $984 $1,886 Depreciation 1,219 1,155 Amortization 282 145 Stock based compensation expense 1,041 1,310 ——————————————- Adjusted EBITDA $3,526 $4,496 ============================= * Includes stock based compensation expense of: Cost of professional services, support and maintenance $64 $23 Cost of data center 13 13 Selling and marketing 479 558 Product development 185 279 General and administrative 300 437 ——————————————- $1,041 $1,310 ============================= S1 Corporation Postilion Segment Condensed Statements of Operations (In thousands) (Unaudited) TABLE 6 Three Months Ended 3/31/2007 3/31/2008 ——————————————- Revenues: Software licenses $4,707 $7,916 Support and maintenance 7,059 7,981 Professional services 3,959 3,980 Data center 5,995 5,210 Other 42 98 ——————————————- Total revenues 21,762 25,185 ——————————————- Operating expenses: Cost of software licenses 594 658 Cost of professional services, support and maintenance * 6,076 6,860 Cost of data center * 2,518 2,612 Cost of other revenue 100 - Selling and marketing * 4,214 4,029 Product development * 2,989 2,656 General and administrative * 2,889 3,185 Depreciation 615 787 Amortization of other intangible assets 282 283 ——————————————- Total operating expenses 20,277 21,070 ——————————————- Operating income $1,485 $4,115 ============================= Reconciliation to Adjusted EBITDA: Operating income $1,485 $4,115 Depreciation 615 787 Amortization 864 883 Stock based compensation expense 864 578 ——————————————- Adjusted EBITDA $3,828 $6,363 ============================= * Includes stock based compensation expense of: Cost of professional services, support and maintenance $23 $23 Cost of data center 2 12 Selling and marketing 440 166 Product development 157 43 General and administrative 242 334 ——————————————- $864 $578 =============================
SOURCE S1 Corporation
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