CyberSource Q1 revenue up, net income down

Source: CyberSource

CyberSource Corporation (Nasdaq: CYBS), a leading provider of electronic payment and risk management solutions, today announced financial results for its first quarter ended March 31, 2008.

  • First quarter revenue was a record $53.4 million, a 141% increase compared to $22.1 million in the same period the previous year. First quarter 2008 includes a full quarter of Authorize.Net results, as the acquisition closed on November 1, 2007.
  • On a GAAP basis, net income for the first quarter of 2008 was $533,000 and earnings per share was $0.01, compared to $736,000 or $0.02 per share in the first quarter of 2007.
  • Non-GAAP net income was $11.5 million or $0.16 per share, a 281% increase compared to $3.0 million or $0.08 per share for the first quarter of 2007. Non-GAAP net income excludes stock-based compensation expense, the reduction in the deferred tax asset allowance, the non-cash portion of the tax provision, depreciation and amortization expense, and certain non-recurring items. A reconciliation of certain historical GAAP to non-GAAP measures is attached.
  • During the first quarter, CyberSource processed a record 445 million billable transactions, a 68% increase over the same period the previous year, up 7% from the fourth quarter of 2007. The value of transactions processed was $26.6 billion, a 153% increase over Q1 2007.
  • CyberSource signed a record of approximately 25,000 new customers in the quarter increasing the customer base to approximately 237,000.

"We started off 2008 with a very strong first quarter, adding to our customer base, our product portfolio and delivering financial results that reflect the power of our business model and the strength of the eCommerce market. Cash flow from operating activities was $11.7 million in first quarter 2008, compared to $2.3 million for the first quarter of 2007," said Bill McKiernan, Chairman and Chief Executive Officer of CyberSource. "We continue to expand our UK-based operations to service the payment requirements of our non-US customers. We also are benefiting from our large US based customers who continue to sell aggressively to consumers outside of the US. We processed approximatd approximately $26.6 billion in payments for the quarter, up 153% from a year ago. Approximately 25% of that volume was non-US dollar transactions which originated outside the US. This highlights the strength of our international business and the increasing globalization of eCommerce."

Business Highlights
  • International: CyberSource continues to see significant momentum outside the US. CyberSource's European operations processed a record 86.2 million transactions in the first quarter, an increase of 94% over the same period last year, and approximately 19% of total transaction volume. The Company's European business represents about 6% of revenue, which doesn't include transactions originated by consumers outside the US who purchased from CyberSource's US-based merchants.
  • Global acquiring: CyberSource achieved significant growth in its global acquiring services during the first quarter, generating approximately $17.0 million of revenue, up 92% over the previous year. Over 800 customers selected CyberSource for global acquiring services in the quarter up from about 350 in the fourth quarter 2007, which is the highest number of new acquiring customers CyberSource has added in a quarter.
  • Customers: CyberSource added approximately 25,000 new customers in the quarter, bringing its installed base of customers to approximately 237,000. New enterprise customer wins this quarter included Circuit City, Cox Communications, TAP Portugal, Travelex, and Vera Wang. Existing customers that added new services or renewed agreements during the quarter include : Craigslist, H&R Block, and Nike.
  • Fraud Management: CyberSource continues to enhance its fraud solutions with new features and advanced levels of automation to increase the efficiency of order review and speed the processing of orders. CyberSource also added device fingerprinting to its comprehensive fraud detection systems. Device fingerprinting creates a digital fingerprint of the computer being used by the buyer and can expose fraudsters who use the same computer to place multiple orders using different identities or addresses. As fraud detection and complex order management becomes more of a burden on merchants, CyberSource also offers managed fraud services. Managed fraud services provides customers with a team of CyberSource experts who complement internal customer staff and procedures to help mitigate the risk of fraud.
  • Authorize.Net: The acquisition of Authorize.Net has added tremendous value as CyberSource addresses the small business market. CyberSource continues to work to ensure a smooth integration and has combined these two great teams with virtually no attrition of employees or channel partners. Examples of the financial and business synergies from the combination are CyberSource's improving net operating margin and rapid customer growth. CyberSource is now able to sell a wide range of customers comprehensive payment solutions through approximately 4,000 channel partners as well as its direct sales force.

Stock buyback program

The Board of Directors has authorized the use of up to $10 million for the repurchase of CyberSource common stock. The purchases will be made in the open market from time to time over the next twelve months as market and business conditions warrant. All purchases are subject to the availability of shares and, accordingly, there is no guarantee as to the timing or number of shares to be repurchased, if any. During 2007, the Company repurchased 420,800 shares of common stock at an average price per share of $11.96.

Guidance for the second quarter and full year 2008

CyberSource is providing guidance for the second quarter of 2008 and full year 2008 based on information available as of April 29, 2008. Guidance does not take into account any further reductions in the company's valuation allowance against its deferred tax assets, which would result in a tax benefit during the period of the reduction. CyberSource will continue to evaluate whether a further reduction is appropriate.

For the second quarter ending June 30, 2008:
  • Total revenue is expected to be between $54.0 and $54.5 million.
  • The company expects to process between 445 million and 455 million billable transactions.
  • GAAP gross profit is expected to be between $27.0 and $27.2 million, while GAAP operating expenses are expected to be between $28.2 and $28.4 million.
  • The company expects to record a GAAP net loss in the second quarter of ($500,000) to ($600,000) and a loss per share of ($0.01) based on a weighted average share count of 71.5 million shares.
  • Non-GAAP net income for the second quarter is expected to be between $9.8 and $10.0 million and non-GAAP earnings per share is expected to be $0.14 based on a weighted average share count of 71.5 million shares.

CyberSource is reiterating its guidance for full year 2008.
  • Total revenue for 2008 is expected to be between $215.0 and $220.0 million.
  • GAAP net income for 2008 is expected to be between breakeven and a ($1.0) million loss.
  • GAAP earnings per share is expected to be between breakeven and a($0.01) loss per share, based on a weighted average share count of 72 million shares.
  • Non-GAAP net income for the full year 2008 is expected to be between $42.5 and $44.0 million.
  • Non-GAAP earnings per share is expected to be between $0.59 and $0.61 based on a weighted average share count of 72 million shares.

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