Digital Insight and PSCU Financial Services sign outsourcing and distribution deal

Source: Digital Insight

Digital Insight Corp. (Nasdaq: DGIN), the leading online banking provider, announced today that it has entered into a multi-year strategic partnership with PSCU Financial Services Inc., a leading provider of traditional and online financial services to financial institutions.

Digital Insight expects the alliance to drive material improvements in operating profitability within its Lending division and significantly expanded distribution for its other product lines. The agreements announced today contain three major components:

  • Digital Insight will outsource its Sacramento, CA-based call center operations to PSCU Financial Services. The outsourcing agreement is expected to result in a reduced cost structure for Digital Insight's Lending operations and improved service quality and consistency for Digital Insight clients.
  • PSCU Financial Services has agreed to license Digital Insight's loan origination system (LOS), DeskTopLender Premium. Under the terms of this agreement, PSCU Financial Services has committed revenue streams to Digital Insight from remarketing Digital Insight's DeskTopLender Premium and related lending products to PSCU Financial Services clients and prospects.
  • PSCU Financial Services will resell Digital Insight products to clients and prospects, naming Digital Insight as a preferred provider of Internet Banking, Business Banking and Lending Solutions. The appointment of PSCU Financial Services as a reseller significantly expands Digital Insight's distribution reach, as PSCU Financial Services will market Digital Insight offerings across all three of the Company's product lines to PSCU Financial Services' base of more than 500 financial institutions.

"This is a very important relationship for Digital Insight across several dimensions," commented Jeff Stiefler, Digital Insight Chairman, President and CEO. "First and foremost, the partnership will help return the Lending business to profitability as a result of increased revenue and lower operating costs. Second, the reseller agreement with PSCU Financial Services represents meaningful expansion of our distribution network by adding one of the largest and most respected service providers to what is already the industry's largest and most productive middle market distribution channel. Finally, being selected by PSCU Financial Services as a preferred provider of online banking and lending solutions further strengthens and validates our position as the industry's clear market leader."

"This is a mutually beneficial relationship in which Digital Insight gains the world class service offered by our Contact Centers," said PSCU Financial Services President David J. Serlo. "At the same time, the reseller agreement rounds out our product offerings with the addition of consumer lending and business banking solutions. Adding Digital Insight's solutions to our product set advances our mission to provide credit unions with quality financial service solutions to enhance their member relationships."

Call Center Outsourcing Agreement: Additional Details and Client Migration Timeframe

PSCU Financial Services will serve as Digital Insight's exclusive provider of 24 x 7 call center support services to Digital Insight's Contact Center and Branch Services clients. In addition, PSCU Financial Services has been appointed Digital Insight's preferred provider for Tier 1 consumer Internet Banking customers. Digital Insight expects to realize more than $1 million in annualized cost savings as the Company continues to focus on the development and distribution of its core Lending, consumer Internet Banking, and Business Banking technology platforms. Digital Insight will begin migrating current clients to PSCU Financial Services' multimedia-capable call centers in December 2005, with a target of completing the transition during the first quarter of 2006.

Reseller and License Agreement Summary

Separately, PSCU Financial Services agreed to license the Digital Insight lending solution and entered into an agreement to resell all three Digital Insight product lines - consumer Internet Banking, Business Banking (ASP) and Lending - into its prospect and client base. The agreement includes monthly minimum payments that ensure a guaranteed revenue stream for Digital Insight. The agreement also includes a provision that permits PSCU Financial Services to co-fund future enhancements to Digital Insight's lending platform in exchange for an increased share of product revenues resulting from sales to PSCU Financial Services clients.

Estimated One-Time Exit Costs and Financial Guidance

Digital Insight expects to record one-time exit costs related to the shut down of its call center operations. The one-time exit costs, estimated at approximately $1.9 million, or $.04 per diluted share, relate primarily to the write down of call center infrastructure and severance payments and will be recognized in Q4 2005 and the first half of 2006.

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