Revenues for the first quarter increased 12% to $57.9 million from $51.7 million for the first quarter ended March 31, 2005. Under Generally Accepted Accounting Principles (GAAP), net income in the first quarter was $6.2 million, or $0.17 per diluted share, and represents the first quarter that included stock-based compensation expense required by FAS 123. Prior to the Company's adoption of FAS 123, for the first quarter ended March 31, 2005, GAAP net income was $5.7 million, or $0.16 per diluted share.

On a non-GAAP basis, excluding amortization of intangible assets from acquisitions, stock-based compensation expense recorded under FAS 123, and restructuring costs, net of tax, non-GAAP net income in the first quarter increased 30% to $9.1 million, or $0.25 per diluted share, from non-GAAP net income of $7.0 million, or $0.19 per diluted share, in the first quarter of 2005. A reconciliation of non-GAAP results to GAAP results is provided as part of this press release.

Expiration of Federal R&D Tax Credit Contributes to Higher Than Anticipated Effective Tax Rate

The Company's effective tax rate for GAAP and Non-GAAP net income and earnings per share (EPS) was 44.4% and 41.9% respectively - approximately 500 and 200 basis points higher than previously anticipated in the Company's guidance. Contributing factors include the recent expiration of the research and development tax credit for federal income taxes. Had the Company's income been taxed at the 39.5% rate originally anticipated in its financial guidance for the 2006 first quarter, GAAP and Non-GAAP diluted earnings per share would have been $0.02 higher and $0.01 higher, respectively, than EPS levels reported today.

Cash Flow, Balance Sheet and Share Repurchase Highlights

Cash flow from operations in the first quarter increased 36% to a record $22.3 million from $16.4 million in the first quarter a year ago. During the first quarter, the Company repurchased approximately 1.19 million common shares at an average cost of $33.13 per share. At March 31, 2006, the Company had cash and investment balances of $122.6 million and no long-term debt.

Digital Insight Chairman, President and CEO Jeff Stiefler commented, "We delivered another strong quarter highlighted by record growth in end users, revenues that exceeded expectations, record operating cash flows, and exceptional sales bookings. Most notably, we added 332,000 Internet Banking users during the quarter, surpassing our previous record performance achieved in the fourth quarter. Our cooperative marketing initiatives that promote bill pay adoption also proved highly successful, significantly benefiting our clients while improving our revenue growth outlook for 2006 as reflected in our increased guidance.

"First quarter sales bookings increased 69%, continuing the sales momentum we achieved in 2005 when sales bookings increased 67% versus 2004. We are particularly pleased that we continue to gain traction among larger financial institutions in our target market," Stiefler continued. "Our sales wins during the quarter include four financial institutions with more than $1 billion in assets that will add 130,000 revenue-generating Internet banking users upon implementation later this year. Most exciting, all four wins with larger financial institutions - $12 billion Valley National Bank representing the largest - are competitive takeaways from in-house platforms, clearly demonstrating that middle market financial institutions are increasingly gravitating towards outsourcing, in general, and Digital Insight, in particular.

"We also advanced our new growth strategy that leverages Digital Insight's distribution channel to middle market financial institutions in developing strategic partnerships," Stiefler concluded. "We entered into a strategic alliance with BankServ to provide Remote Deposit Image Capture, a critically important technology demanded by our Business Banking clients to compete effectively with large banks. The partnership offers exciting growth potential for Digital Insight, while providing an opportunity to deepen our client relationships and arm our clients with another capability to grow their market share."Download the document now 45.4 kb (Adobe Acrobat Document)