S1 swings to Q2 net loss

Source: S1

S1 Corporation (Nasdaq:SONE), a leading global provider of payments and financial services software solutions, today announced financial results for the second quarter ended June 30, 2010.

Financial Results and Operating Highlights

-- Total revenue decreased 15% to $51.8 million in the second quarter of 2010 compared with $60.8 million in the second quarter of 2009. The decrease in revenue was primarily attributed to a $4.8 million reduction in revenue from State Farm and the custom development for an
international branch customer ("Custom Projects"), the impact of recognizing a lower amount of software licenses upon software delivery, and changes in estimates for certain project implementations. Total revenue for the six months ended June 30, 2010 decreased 14% to $102.9 million from $119.1 million in the six months ended June 30, 2009.
-- U.S. GAAP net loss was $1.8 million, or $0.03 per share (diluted), in the second quarter of 2010 compared with U.S. GAAP net income of $4.6 million, or $0.08 per share (diluted), in the second quarter of 2009. U.S. GAAP net loss was $2.8 million, or $0.05 per share (diluted), in
the six months ended June 30, 2010 compared with U.S. GAAP net income of $13.6 million, or $0.25 per share (diluted), in the six months ended June 30, 2009. These figures include stock-based compensation expense of $0.8 million and $3.1 million in the second quarter of 2010 and 2009, respectively, and $1.2 million and $0.6 million in the six months ended June 30, 2010 and 2009, respectively.
-- Adjusted EBITDA was $3.2 million in the second quarter of 2010 compared with $11.6 million in the second quarter of 2009. Adjusted EBITDA in the six months ended June 30, 2010 was $6.0 million compared with $22.2 million in the six months ended June 30, 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, provided below.
-- Net cash provided by operating activities increased 41% to $23.3 million in the six months ended Juhs ended June 30, 2010 compared with $16.5 million in the six months ended June 30, 2009.
-- As of June 30, 2010, the Company had cash and cash equivalents of $51.7 million.
-- Revenue backlog, which is discussed in further detail below, in the Company's Payments and Banking: Large Financial Institution segments increased 23% to $48.2 million as of June 30, 2010 compared with $39.2 million as of December 31, 2009.

Notable second quarter 2010 contract signings include:

-- A top 5 U.S. bank for S1's corporate online banking solution;
-- One of the largest financial services groups in Asia for S1's corporate, business, consumer and trade finance online banking solutions and S1's mobile solution;
-- One of the world's leading producers and distributors of non-alcoholic beverages for S1's payments solution;
-- One of the largest building societies in Australia for S1's payments solution; and
-- Three new customers in Africa for S1's payments solution.

"As evidenced by our bookings, the increase in revenue backlog in our Payments and Banking: Large Financial Institution segments, and cash flow, we are achieving sales goals that are not yet transferring to our bottom line," said Johann Dreyer, Chief Executive Officer. "Last quarter I communicated that we were experiencing a shift to recognizing more software license revenue using the percentage of completion method as we targeted larger and more complex sales opportunities, particularly with our payments and corporate online banking solutions. Since then, we have seen this shift continue and now anticipate that an even greater percentage of software licenses will be accounted for using the percentage of completion method during the remainder of 2010 and beyond. With the increase in the amount of revenue backlog and a strong pipeline of new business opportunities, we believe we are on course to achieve more sustainable long-term growth. However, although we expect to gain greater visibility and predictability in our business model once this transition is completed, it has negatively impacted our current and near-term financial results and made it more difficult to forecast our 2010 financial performance. Consequently, we are withdrawing our prior annual financial guidance."

Mr. Dreyer continued, "While it can be somewhat difficult to predict exactly when some of the larger and more complex sales opportunities will be signed, we expect to enter 2011 with a greater amount of revenue backlog, which we believe will translate to our bottom line in future periods, and we expect some normalization in our Adjusted EBITDA by the end of the fourth quarter. Our fundamentals remain strong and we are confident in our growth prospects and in our ability to close business as we continue to win new contracts with some of the leading financial institutions and retailers in the world," Mr. Dreyer concluded.

Read the full statement here.

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