Digital Insight reports flat Q2

Revenues for the second quarter increased 18% to $61.6 million from $52.3 million for the second quarter ended June 30, 2005. Under Generally Accepted Accounting Principles (GAAP), net income in the second quarter was $6.3 million, or $0.18 per diluted share, and included stock-based compensation expense required by FAS 123. Prior to the Company's adoption of FAS 123, for the second quarter ended June 30, 2005, GAAP net income was $6.4 million, or $0.18 per diluted share.

On a non-GAAP basis, excluding amortization of intangible assets from acquisitions, stock-based compensation expense recorded under FAS 123, and restructuring costs, net of tax, non-GAAP net income in the second quarter increased 19% to $9.1 million, or $0.26 per diluted share, from non-GAAP net income of $7.6 million, or $0.21 per diluted share, in the second quarter of 2005. A reconciliation of non-GAAP results to GAAP results is provided as part of this press release.

The Company continued to experience a higher tax rate during the second quarter of 2006 - 41.6% (GAAP) and 40.7% (Non-GAAP) compared to an effective tax rate of 36.8% (GAAP) and 37.2% (Non-GAAP) for the second quarter of 2005 - due to expiration of the research and development tax credit for federal income taxes in 2006, as well as other factors that contributed to a lower-than-normal effective tax rate in the second quarter of 2005.

Cash Flow, Balance Sheet and Share Repurchase Highlights

The Company generated $9.4 million in cash flow from operations during the second quarter and continued to utilize its free cash flow to repurchase stock. In total, Digital Insight repurchased approximately 1.16 million common shares during the second quarter at an average cost of $32.51 per share. At June 30, 2006, the Company had cash and investment balances of $106.8 million and no long-term debt.

Digital Insight Chairman, President and CEO Jeff Stiefler commented, "We delivered another quarter with strong financial results, highlighted by top-line growth of 18% - our best showing in more than two years. Healthy growth in Internet banking and bill payment revenue led to predictable and profitable results that underscore the consistency of our on-demand business model."

"Financial results within our other two segments were mixed during the quarter," Stiefler continued. "Operational cost-savings achieved by outsourcing our call center requirements to PSCU Financial Services led to a considerable improvement in Lending gross profit margins, but revenues and overall operating profitability within the Lending segment remain disappointing as we continue to pursue new sales channels for the Lending platform. Business Banking, on the other hand, continues to benefit from our focused commitment to turn around our Corporate Banking business for larger financial institutions, where we continue to realize great progress."