EX-99.1 2 v112449_ex99-1.htm

S1 Corporation Reports 15 Percent Increase in
First Quarter Revenue and GAAP EPS of $0.09
Raises 2008 Full Year Guidance

Norcross, Georgia, May 1, 2008 -- S1 Corporation (Nasdaq:SONE), a leading global provider of customer interaction financial and payment solutions, today announced financial results for the first quarter ended March 31, 2008.

 
n
GAAP earnings were $0.09 per share for the first quarter of 2008, a $0.04 improvement over earnings of $0.05 per share for the first quarter of 2007.
     
 
n
Total revenue for the first quarter of 2008 increased 15 percent to $54.7 million from $47.6 million in the first quarter of 2007, with license revenue increasing 62 percent compared with the first quarter of 2007.
     
 
n
Adjusted EBITDA for the first quarter of 2008 was $10.9 million compared to $7.4 million in the first quarter of 2007. Adjusted EBITDA does not include stock based compensation expense, and is described and reconciled to GAAP net income below. (1)
     
 
n
Net cash provided by operating activities was $4.8 million for the first quarter of 2008, a $4.5 million improvement over the first quarter of 2007. The Company ended the first quarter of 2008 with $73.2 million in cash, cash equivalents and short-term investments.

“We posted another strong quarter of year-over-year growth in revenue and earnings and continue to see our sales pipeline grow, domestically and internationally, across both segments of our business,” said Johann Dreyer, Chief Executive Officer of S1. “While we remain sensitive to the macroeconomic concerns that exist in the marketplace, we have not seen a slowdown in our business to date and are raising our full-year guidance. We now expect 2008 revenue of $220 to $226 million and Adjusted EBITDA of $41.5 to $43.5 million.”

The Company is updating its 2008 earnings guidance using Adjusted EBITDA, a non-GAAP measure and the primary measure used by the Company's Board of Directors and management to assess the operating performance of the business, and will cease providing guidance using GAAP earnings per share.  Our calculation of Adjusted EBITDA excludes stock-based compensation expense, a portion of which is the result of cash-settled stock appreciation rights that are revalued each quarter for GAAP earnings based on the closing price of the Company's stock on the last day of the quarter. Consequently, fluctuations in our stock price can have a significant impact on the Company's reported GAAP earnings.  Additionally, it is possible that the Company may begin recording income tax provisions for GAAP earnings despite being able to reduce taxes payable through the potential use of net operating loss carry forwards and other tax credits. As more fully described below, the Company believes that a better understanding of our operating results can be gained by also considering earnings before the impact of fluctuations in our stock price and the recording of income tax provisions under the foregoing circumstances.
 
 
 

 

(1) Adjusted EBITDA Reconciliation

For the three months ended March 31, 2008

   
Enterprise
 
 Postilion
 
Total
 
Adjusted EBITDA
 
$
4,496
 
$
6,363
 
$
10,859
 
Depreciation
   
(1,155
)
 
(787
)
 
(1,942
)
Amortization
   
(145
)
 
(883
)
 
(1,028
)
Stock-based compensation expense
   
(1,310
)
 
(578
)
 
(1,888
)
Operating income
 
$
1,886
 
$
4,115
 
$
6,001
 
Interest and other income, net
               
294
 
Income tax expense
               
(1,105
)
Net income
             
$
5,190
 

See tables 4, 5 and 6 for reconciliations of Adjusted EBITDA

This press release includes references to Adjusted EBITDA, a non-GAAP financial measure, the most directly comparable GAAP equivalent of which is Net income. We define Adjusted EBITDA as Net income less net interest income, plus income taxes, depreciation, amortization of intangibles, and stock-based compensation expense. A reconciliation of our non-GAAP financial measure to the most directly comparable financial measure is detailed in the reconciliation of GAAP to non-GAAP financial measures above. We believe that the presentation of this non-GAAP financial measure provides useful information to investors regarding our results of operations.

We believe that excluding depreciation, amortization, stock-based compensation expense, net interest income and income tax expense provides supplemental information and an alternative presentation useful to investors' understanding of the Company's core operating results and trends. Not only are depreciation and amortization expenses based on historical costs of assets that may have little bearing on present or future replacement costs, but they are also based on management estimates of remaining useful lives. Additionally, while stock-based compensation is an important part of overall compensation expense, a portion of our stock-based compensation expense is the result of cash-settled stock appreciation rights that are revalued each quarter for GAAP earnings based on the closing price of the Company's stock on the last day of the quarter. Consequently, fluctuations in our stock price can have a significant impact on the Company's reported GAAP earnings.  Additionally, it is possible that the Company may begin recording income tax provisions for GAAP earnings despite being able to reduce taxes payable through the potential use of net operating loss carry forwards and other tax credits.

Although we believe, for the foregoing reasons, that our presentation of non-GAAP financial measure provides useful supplemental information to investors regarding our results of operations, our non-GAAP financial results should only be considered in addition to, and not as a substitute for or superior to, our financial measures prepared in accordance with GAAP.

Use of non-GAAP financial measures is subject to inherent limitations because they do not include all the expenses that must be included under GAAP and because they involve the exercise of judgment of which charges should properly be excluded from the non-GAAP financial measure. Management accounts for these limitations by not relying exclusively on non-GAAP financial measures, but only using such information to supplement GAAP financial results. We urge investors not to consider non-GAAP financial measures as a substitute for, or superior to, any measure of financial performance prepared in accordance with GAAP. Our non-GAAP financial measure may be different from such measures used by other companies.

Adjusted EBITDA is not a measure of liquidity calculated in accordance with accounting principles generally accepted in the United States, and should be viewed as a supplement to -- not a substitute for -- our results of operations presented on the basis of accounting principles generally accepted in the United States. Adjusted EBITDA does not purport to represent cash flow provided by, or used in, operating activities as defined by accounting principles generally accepted in the United States. Our statement of cash flows presents our cash flow activity in accordance with accounting principles generally accepted in the United States. Furthermore, Adjusted EBITDA is not necessarily comparable to similarly-titled measures reported by other companies.
We believe Adjusted EBITDA is used by and is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across companies and across periods. We believe that Adjusted EBITDA is widely used by investors to measure a company's operating performance without regard to items such as interest expense, taxes, depreciation and amortization, and stock-based compensation expense which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired.
 
 
 

 

Our management uses Adjusted EBITDA as a measure of operating performance to assist in comparing performance from period to period on a consistent basis; as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations; and in communications with the Board of Directors, stockholders, analysts and investors concerning our financial performance.

Conference Call Information
 
Company management will host a conference call for interested parties to discuss its first quarter results on Friday, May 2, 2008, at 8:00 a.m. ET. A webcast of the call will be available through the Company's website, www.s1.com. The conference call will contain forward-looking statements and other material information. A replay of the call will be available for two weeks following the call on the Company's website.

About S1
 
S1 Corporation (Nasdaq: SONE) delivers customer interaction software for financial and payment services and offers unique solution sets for financial institutions, retailers, and processors under three brand names: Postilion, S1 Enterprise and FSB Solutions. Additional information about S1 solutions is available at www.s1.com <http://www.s1.com/>, www.postilion.com <http://www.postilion.com/>, www.S1enterprise.com <http://www.s1enterprise.com/>, and www.fsb-solutions.com <http://www.fsb-solutions.com/>. 

Forward Looking Statements

This press release contains forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act. These statements include statements with respect to our financial condition, results of operations and business. The words "believes," "expects," "may," "will," "should," "projects," "contemplates," "anticipates," "forecasts," "intends" or similar terminology identify forward-looking statements. These statements are based on our beliefs as well as assumptions made using information currently available to us. Because these statements reflect our current views concerning future events, they involve risks, uncertainties and assumptions. Therefore, actual results may differ significantly from the results discussed in the forward-looking statements. The risk factors included in our reports filed with the Securities and Exchange Commission (and available on our web site at www.s1.com or the SEC's web site at www.sec.gov) provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Except as provided by law, we undertake no obligation to update any forward-looking statement.

Investor Contact:
John Stone
Chief Financial Officer, S1 Corporation
404.923.3500
john.stone@s1.com
 
 
 

 

S1 Corporation
Condensed Consolidated Statements of Operations
(In thousands, except share and per share data)
(Unaudited)
TABLE 1
           
   
Three Months Ended
 
   
3/31/2007
 
3/31/2008
 
           
Revenues:
         
Software licenses
 
$
5,762
 
$
9,339
 
Support and maintenance
   
10,475
   
11,704
 
Professional services
   
19,432
   
21,070
 
Data center
   
11,700
   
12,267
 
Other
   
197
   
293
 
Total revenues
   
47,566
   
54,673
 
               
Operating expenses:
             
Cost of software licenses (1)
   
892
   
980
 
Cost of professional services, support and maintenance (1)
   
16,002
   
17,475
 
Cost of data center (1)
   
5,799
   
6,557
 
Cost of other revenue
   
142
   
29
 
Selling and marketing
   
7,398
   
8,216
 
Product development
   
6,004
   
6,755
 
General and administrative
   
6,699
   
6,435
 
Depreciation
   
1,834
   
1,942
 
Amortization of other intangible assets
   
327
   
283
 
Total operating expenses (2)
   
45,097
   
48,672
 
               
Operating income
   
2,469
   
6,001
 
Interest and other income, net
   
871
   
294
 
Income tax expense
   
(373
)
 
(1,105
)
Net income
 
$
2,967
 
$
5,190
 
               
Earnings per share:
             
Basic
 
$
0.05
 
$
0.09
 
Diluted
 
$
0.05
 
$
0.09
 
               
Weighted average common shares outstanding - basic
   
61,505,306
   
56,530,569
 
Weighted average common shares outstanding - diluted
   
61,801,948
   
57,102,409
 
 
________________________
 
(1)
Excludes charges for depreciation. Cost of software license includes amortization of purchased technology.
   
(2)
Includes stock-based compensation expenses of $1.9 million for both the three months ended March 31, 2008 and 2007. Please refer to Tables 4, 5 and 6 for further details.
 
 
 

 

S1 Corporation
Condensed Consolidated Balance Sheets
(In thousands, except share data)
TABLE 2
           
       
(Unaudited)
 
 
 
December 31,
 
March 31,
 
   
2007
 
2008
 
           
Assets
         
Current assets:
         
Cash and cash equivalents
 
$
45,011
 
$
55,123
 
Short-term investments
   
23,855
   
18,048
 
Accounts receivable, net
   
39,969
   
44,744
 
Prepaid expenses
   
3,354
   
3,770
 
Other current assets
   
6,389
   
2,020
 
Total current assets
   
118,578
   
123,705
 
Property and equipment, net
   
20,906
   
21,175
 
Intangible assets, net
   
11,240
   
10,212
 
Goodwill, net
   
125,281
   
125,270
 
Other assets
   
5,839
   
6,086
 
Total assets
 
$
281,844
 
$
286,448
 
               
Liabilities and Stockholders' Equity
             
Current liabilities:
             
Accounts payable
 
$
2,300
 
$
3,473
 
Accrued compensation and benefits
   
10,649
   
9,551
 
Accrued restructuring
   
3,043
   
3,199
 
Accrued other expenses
   
8,198
   
9,208
 
Deferred revenues
   
26,345
   
26,259
 
Current portion of debt obligation
   
3,725
   
3,751
 
Total current liabilities
   
54,260
   
55,441
 
Other liabilities
   
17,679
   
15,844
 
Total liabilities
   
71,939
   
71,285
 
Stockholders' equity:
             
Preferred stock
   
10,000
   
10,000
 
Common stock
   
567
   
566
 
Additional paid-in capital
   
1,810,783
   
1,810,958
 
Accumulated deficit
   
(1,609,807
)
 
(1,604,617
)
Accumulated other comprehensive income
   
(1,638
)
 
(1,744
)
Total stockholders' equity
   
209,905
   
215,163
 
Total liabilities and stockholders' equity
 
$
281,844
 
$
286,448
 
               
               
Preferred shares issued and outstanding
   
749,064
   
749,064
 
Common shares issued and outstanding
   
56,748,906
   
56,612,353
 
 
 
 

 

S1 Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
TABLE 3
           
   
Three Months Ended
 
   
March 31,
 
March 31,
 
   
2007
 
2008
 
           
Cash flows from operating activities:
         
Net income
 
$
2,967
 
$
5,190
 
Adjustments to reconcile net income to net cash provided by operating activities:
             
Depreciation and amortization
   
2,980
   
2,970
 
Provision for doubtful accounts receivable and billing adjustments
   
682
   
343
 
Stock based compensation expense
   
1,905
   
1,888
 
Changes in assets and liabilities
             
Decrease (increase) in accounts receivable
   
4,076
   
(5,265
)
(Increase) decrease in prepaid expenses and other assets
   
(2,703
)
 
107
 
(Decrease) increase in accounts payable
   
(640
)
 
1,026
 
Decrease in accrued expenses and other liabilities
   
(4,671
)
 
(1,325
)
Decrease in deferred revenues
   
(4,274
)
 
(140
)
Net cash provided by operating activities
   
322
   
4,794
 
               
Net cash provided by investing activities
   
12,810
   
7,308
 
 
             
Net cash provided by (used in) financing activities
   
569
   
(2,065
)
Effect of exchange rate changes on cash and cash equivalents
   
19
   
75
 
Net increase in cash and cash equivalents
   
13,720
   
10,112
 
Cash and cash equivalents at beginning of period
   
69,612
   
45,011
 
Cash and cash equivalents at end of period
 
$
83,332
 
$
55,123
 
 
 
 

 

S1 Corporation
Condensed Consolidated Statements of Operations
(In thousands)
(Unaudited)
TABLE 4
           
   
Three Months Ended
 
   
3/31/2007
 
3/31/2008
 
           
Revenues:
         
Software licenses
 
$
5,762
 
$
9,339
 
Support and maintenance
   
10,475
   
11,704
 
Professional services
   
19,432
   
21,070
 
Data center
   
11,700
   
12,267
 
Other
   
197
   
293
 
Total revenues
   
47,566
   
54,673
 
               
Operating expenses:
             
Cost of software licenses
   
892
   
980
 
Cost of professional services, support and maintenance *
   
16,002
   
17,475
 
Cost of data center *
   
5,799
   
6,557
 
Cost of other revenue
   
142
   
29
 
Selling and marketing *
   
7,398
   
8,216
 
Product development *
   
6,004
   
6,755
 
General and administrative *
   
6,699
   
6,435
 
Depreciation
   
1,834
   
1,942
 
Amortization of other intangible assets
   
327
   
283
 
Total operating expenses
   
45,097
   
48,672
 
               
Operating income
   
2,469
   
6,001
 
Interest and other income, net
   
871
   
294
 
Income tax expense
   
(373
)
 
(1,105
)
Net income
 
$
2,967
 
$
5,190
 
               
Reconciliation to Adjusted EBITDA:
             
Net income
 
$
2,967
 
$
5,190
 
Depreciation
   
1,834
   
1,942
 
Amortization
   
1,146
   
1,028
 
Stock based compensation expense
   
1,905
   
1,888
 
Interest income, net
   
(871
)
 
(294
)
Income tax expense
   
373
   
1,105
 
Adjusted EBITDA
 
$
7,354
 
$
10,859
 
               
               
* Includes stock based compensation expense of:
             
Cost of professional services, support and maintenance
 
$
87
 
$
46
 
Cost of data center
   
15
   
25
 
Selling and marketing
   
919
   
724
 
Product development
   
342
   
322
 
General and administrative
   
542
   
771
 
   
$
1,905
 
$
1,888
 
 
 
 

 

S1 Corporation
Enterprise Segment
Condensed Statements of Operations
(In thousands)
(Unaudited)
TABLE 5
           
           
   
Three Months Ended
 
   
3/31/2007
 
3/31/2008
 
           
Revenues:
         
Software licenses
 
$
1,055
 
$
1,423
 
Support and maintenance
   
3,416
   
3,723
 
Professional services
   
15,473
   
17,090
 
Data center
   
5,705
   
7,057
 
Other
   
155
   
195
 
Total revenues
   
25,804
   
29,488
 
               
Operating expenses:
             
Cost of software licenses
   
298
   
322
 
Cost of professional services, support and maintenance *
   
9,926
   
10,615
 
Cost of data center *
   
3,281
   
3,945
 
Cost of other revenue
   
42
   
29
 
Selling and marketing *
   
3,184
   
4,187
 
Product development *
   
3,015
   
4,099
 
General and administrative *
   
3,810
   
3,250
 
Depreciation
   
1,219
   
1,155
 
Amortization of other intangible assets
   
45
   
-
 
Total operating expenses
   
24,820
   
27,602
 
               
Operating income
 
$
984
 
$
1,886
 
               
               
Reconciliation to Adjusted EBITDA:
             
Operating income
 
$
984
 
$
1,886
 
Depreciation
   
1,219
   
1,155
 
Amortization
   
282
   
145
 
Stock based compensation expense
   
1,041
   
1,310
 
Adjusted EBITDA
 
$
3,526
 
$
4,496
 
               
               
* Includes stock based compensation expense of:
             
Cost of professional services, support and maintenance
 
$
64
 
$
23
 
Cost of data center
   
13
   
13
 
Selling and marketing
   
479
   
558
 
Product development
   
185
   
279
 
General and administrative
   
300
   
437
 
   
$
1,041
 
$
1,310
 
 
 
 

 

S1 Corporation
Postilion Segment
Condensed Statements of Operations
(In thousands)
(Unaudited)
TABLE 6
           
           
   
Three Months Ended
 
   
3/31/2007
 
3/31/2008
 
           
Revenues:
         
Software licenses
 
$
4,707
 
$
7,916
 
Support and maintenance
   
7,059
   
7,981
 
Professional services
   
3,959
   
3,980
 
Data center
   
5,995
   
5,210
 
Other
   
42
   
98
 
Total revenues
   
21,762
   
25,185
 
               
Operating expenses:
             
Cost of software licenses
   
594
   
658
 
Cost of professional services, support and maintenance *
   
6,076
   
6,860
 
Cost of data center *
   
2,518
   
2,612
 
Cost of other revenue
   
100
   
-
 
Selling and marketing *
   
4,214
   
4,029
 
Product development *
   
2,989
   
2,656
 
General and administrative *
   
2,889
   
3,185
 
Depreciation
   
615
   
787
 
Amortization of other intangible assets
   
282
   
283
 
Total operating expenses
   
20,277
   
21,070
 
               
Operating income
 
$
1,485
 
$
4,115
 
               
               
Reconciliation to Adjusted EBITDA:
             
Operating income
 
$
1,485
 
$
4,115
 
Depreciation
   
615
   
787
 
Amortization
   
864
   
883
 
Stock based compensation expense
   
864
   
578
 
Adjusted EBITDA
 
$
3,828
 
$
6,363
 
               
               
* Includes stock based compensation expense of:
             
Cost of professional services, support and maintenance
 
$
23
 
$
23
 
Cost of data center
   
2
   
12
 
Selling and marketing
   
440
   
166
 
Product development
   
157
   
43
 
General and administrative
   
242
   
334
 
   
$
864
 
$
578