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, 2010.
Financial Results and Operating Highlights
- Total revenue decreased 12% to $51.2 million in the first quarter of 2010 compared to $58.3 million in the first quarter of 2009.
- U.S. GAAP net loss was $1.1 million, or $0.02 per share, in the first quarter of 2010 compared to U.S. GAAP net income of $8.9 million, or $0.16 per share, in the first quarter of 2009. These figures include stock-based compensation expense of $400,000 and a benefit of $2.5 million in the first quarters of 2010 and 2009, respectively.
- Adjusted EBITDA was $2.8 million in the first quarter of 2010 compared to $10.6 million in the first quarter of 2009. 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.
- Net cash provided by operating activities was $18.1 million and $7.3 million in the first quarter of 2010 and 2009, respectively.
- As of March 31, 2010, the Company had cash and cash equivalents of $48.2 million.
- Added seven net new customers in the first quarter of 2010 including contracts with:
- A U.S. debit network that provides ATM and point-of-sale transaction switching and settlement services for S1's payments solution
- A U.S. West-Coast based commercial bank for S1's corporate online banking solution; and
- A leading designer and manufacturer of consumer electronics, computer software and personal computers for S1's payments solution.
- Closed a number of cross-sales to existing customers including significant transactions with two of the top ten banks in Europe.
- Completed the acquisition of PM Systems Corporation in March 2010
Johann Dreyer, Chief Executive Officer of S1, said, "As I communicated last quarter, we expected a very soft first quartter largely due to the drop in business with State Farm, the impact of a number of non-recurring professional fees, and the impact of signing more deals where license revenue is recognized over the implementation period using the percentage of completion method. Additionally, our first quarter revenue was impacted by changes in estimates for certain large project implementations.
"As we continue to target larger and more complex sales opportunities, particularly with our payments and corporate online banking solutions, we are experiencing a shift to recognizing more software license revenue using the percentage of completion method. While this shift does have an impact on our current and near-term financial results, we believe it will provide greater longer-term revenue visibility. We expect to continue to see some of the effect of this revenue shift in the second quarter of 2010 with revenue for the remainder of the year increasing as these percentage of completion implementations ramp-up."
To reflect its expectation that a greater number of software licenses will be recognized using the percentage of completion method during the remainder of 2010, S1 has reduced its 2010 financial guidance accordingly. Based on current assumptions, the Company now expects 2010 total revenue to be approximately $242 to $248 million, adjusted EBITDA to be approximately $39 to $43 million, and cash earnings per share to be approximately $0.48 to $0.54.
Segment Reporting Structure Update
S1 has redefined its business segments and will now report its financial performance based on three operating segments: (1) Payments; (2) Banking: Large Financial Institution; and (3) Banking: Community Financial Institution.
- The Payments segment includes the Company's ATM and point-of-sale driving, card management, and merchant acquiring solutions provided to financial institutions, retailers and transaction processors of all sizes globally.
- The Banking: Large Financial Institution segment includes the Company's consumer, small business and corporate online banking, trade finance, and mobile banking solutions provided to large banks globally, and branch and call center banking solutions provided to large banks outside of the United States. This segment also contains the Company's non-core custom projects, including State Farm, which are being separately disclosed to provide better visibility into S1's go-forward core business.
- The Banking: Community Financial Institution segment includes the Company's consumer and small business online banking, mobile banking, voice banking, branch and call center banking solutions provided to community and regional banks and credit unions in the United States.
Mr. Dreyer concluded, "The new operating segments more clearly reflect S1's evolving business model and should provide greater visibility into the growth trends of the company. Despite the results of the first quarter, we believe that the fundamentals of our business are strong. The investments we have been making in customer satisfaction and product initiatives are beginning to pay off and should create significant opportunities to increase both revenue and margins in our core business. We believe our prospects are compelling as we continue to focus on creating sustainable long-term growth and value for our shareholders."
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