In addition to financial results presented on a GAAP basis, the company has provided non-GAAP measures of operating expenses, net income and earnings per share, which are adjusted to exclude certain items that the company believes are appropriate to enhance the overall understanding of its 2005 financial results as compared to previous periods.

For purposes of this release, non-GAAP net income and earnings per share for the fourth quarter and full year 2005 exclude a $3.2 million tax benefit resulting from the reduction of a portion of the company's valuation allowance against its deferred tax asset. In addition, non-GAAP operating expenses, net income and earnings per share exclude approximately $300,000 in non-recurring acquisition expenses. Non-GAAP operating expenses, net income and earnings per share for the fourth quarter 2004 and full year 2004 exclude the reversal of $1.5 million of previously recorded restructuring charges relating to the company's lease of its Mountain View facility.

Revenue in the fourth quarter grew to $14.9 million, a 43% increase over the same period last year.

Net income for the fourth quarter was $5.2 million on a GAAP basis. Reported GAAP net income includes a reduction of the tax allowance of $3.2 million and non-recurring acquisition expenses of $300,000. Excluding these items, non-GAAP net income was $2.3 million compared to $1.2 million in the fourth quarter of the prior year, an increase of 93%. Non-GAAP net income for the fourth quarter of 2004 excludes a restructuring charge reversal of $1.5 million.

GAAP earnings per share was $0.14 compared to $0.07 in the same period last year. Non-GAAP earnings per share was $0.06 compared to $0.03 in the same period last year.

Transaction volumes increased to 192.7 million during the quarter, a 51% increase over the 127.2 million transactions processed in the same period last year.

CyberSource added approximately 1,800 new customers in the fourth quarter, a 13% increase over the approximately 1,600 customers added in the fourth quarter of 2004.

Fourth quarter 2005 financial results

Summarized below are CyberSource's fourth quarter financial results.

Revenue: CyberSource's fourth quarter revenue was $14.9 million compared to $10.4 million in the same period last year, an increase of 43%, and surpassing the company's guidance of $13.8 million.

Gross profit: Gross profit was $8.7 million compared to $6.7 million in the same period last year, an increase of 30%.

Gross margin: Gross margin was 58% compared to 64% in the same period last year, equaling prior guidance. The decline in gross margin is due in part to an increase in global acquiring revenue, which has a lower associated gross margin, but higher gross profit contribution per transaction compared to our gateway services. Global acquiring revenue represented approximately 25% of total revenue in the fourth quarter of 2005 compared to approximately 12% in the same period last year.

GAAP operating expenses: GAAP operating expenses were $7.0 million compared to $4.2 million in the same period last year.

Non-GAAP operating expenses: Non-GAAP operating expenses were $6.8 million compared to $5.7 million in the same period last year, and exceeding guidance of $6.3 million.

GAAP net income: GAAP net income was $5.2 million compared to $2.7 million in the same period last year, an increase of 94%.

Non-GAAP net income: Non-GAAP net income was $2.3 million compared to $1.2 million in the same period last year, an increase of 93%, and surpassing guidance of $2.0 million.

GAAP earnings per share: GAAP earnings per share was $0.14 compared to $0.07 in the same period last year, an increase of 100%.

Non-GAAP earnings per share: Non-GAAP earnings per share was $0.06 as compared to $0.03 in the same period last year, an increase of 100%, and surpassing guidance of $0.05.

Balance sheet: Cash, cash equivalents, and short-term investments at the end of the fourth quarter in 2005 were $47.0 million compared to $44.7 million as of December 31, 2004. The company has no long term debt. No stock was repurchased during the quarter.

Fiscal Year Financial Highlights

Revenue: For the fiscal year ended December 31, 2005, total revenue was $50.5 million compared to $36.7 million for the prior fiscal year, an increase of 38%.

GAAP net income: The company recorded net income of $9.2 million or $0.26 per share for the fiscal year ended December 31, 2005 compared to net income of $4.5 million or $0.12 per share for the prior fiscal year, an increase of 107%.

Non-GAAP net income: Non-GAAP net income was $6.3 million or $0.18 per share for the fiscal year ended December 31, 2005 compared to non-GAAP net income of $3.0 million or $0.08 per share for the prior fiscal year, an increase of 113%.

Other developments during the quarter

Customer growth detail

CyberSource signed approximately 1,800 new customers in the fourth quarter of 2005 including: B&H Foto and Electronics, Curves International, LOT Polish Airlines, Primedia Entertainment, Yahoo! Hot Jobs, and XM Satellite Radio. New customers added this quarter increase the company's total customer count to over 13,000.

Existing customers that added new services or renewed agreements during the quarter include: Air Canada, Eastman Kodak, Fujitsu, Google, Overstock and Vonage.Download the document now 36.4 kb (Adobe Acrobat Document)