Exhibit 99.1
S1 Corporation Reports First Quarter 2005 Results;
Significant Cross-Sales Driven by S1 Enterprise Strategy
ATLANTA--(BUSINESS WIRE)--May 5, 2005--S1 Corporation
(Nasdaq:SONE), a leading global provider of integrated front-office
applications for financial institutions, today announced financial
results for its first quarter ended March 31, 2005.
-- Revenue for the quarter ended March 31, 2005 was $62.4 million
as compared to $56.1 million for the same quarter in the
previous year and $65.2 million in the quarter ended December
31, 2004.
-- Total license revenue was $13.2 million for the quarter ended
March 31, 2005 compared to $11.6 million in the same quarter
in the previous year and $17.3 million in the quarter ended
December 31, 2004.
-- Income from continuing operations for the quarter ended March
31, 2005 was $0.7 million, or $0.01 per share, compared to
income from continuing operations of $0.01 per share for same
quarter the previous year and $0.04 per share for the quarter
ended December 31, 2004.
-- The Company signed 25 Enterprise contracts, of which eight
were new relationships and 17 were substantial add-on
purchases from existing Enterprise customers.
-- The Company added 60 new customers to its growing family of
more than 4,000 financial institutions and closed
approximately 260 cross-sales to existing customers.
-- The transition to a recurring revenue model prompted the
Company to provide new metrics associated with Annualized
Recurring Revenue and discontinue providing annual guidance
for 2005.
"The large number of add-on contracts signed with existing
Enterprise customers this quarter is an important indicator that our
customers are seeing real value in purchasing multiple applications
and services from a single source," said Jaime Ellertson, chief
executive officer of S1 Corporation. "Additional substantiation of our
strategy is evidenced by our expanding contractual relationship with
Misys, one of the largest international core processors, who agreed to
distribute our entire Enterprise suite, which doubles the number of
Enterprise products available to be sold by Misys' retail and
wholesale banking divisions."
Q1 Operating Highlights
-- Signed two multi-channel contracts with financial
institutions: United Nations Federal Credit Union,
the credit union for the 40,000 plus United Nations' employees
and members around the world, and St. Louis Bank, a de novo
bank.
-- Our ATM/POS solution was selected by several organizations,
including New York Community Bank, to drive its 200+ ATM
network.
-- Global distribution partner Misys extended its relationship to
include the right to distribute all S1 Enterprise retail
applications, including branch, call center and Internet
solutions.
-- Global compliance initiatives continue to fuel growth in the
FRS business, with a strategic new Basel II win in the German
market at Hypo Real Estate Bank International.
-- Shortly after the end of Q1, the Company hired Andrew Kass as
senior vice president of product development to lead our
global engineering team and David Wyatt as vice president of
quality to establish a continuous quality improvement program.
Annual Recurring Revenue Metric
The Company is providing a supplemental schedule of the Annual
Recurring Revenue (ARR) for the Financial Institutions segment. ARR is
the annualized amount of recurring revenue included in revenue
reported during a period. Maintenance and support revenue is
considered to be recurring due to the high renewal rate of customers
who have previously licensed software. Data Center revenue is also
considered to be recurring as customers tend to contract these
services under long term agreements with a high rate of renewal.
Within License revenue, only the repeating periodic portion of
subscription or term licenses is considered to be recurring.
Subscription licenses typically have terms between 18 and 48 months.
Payment of subscription fees entitles the customer to use the software
as well as receive maintenance, support and unspecified enhancements.
At the end of the initial subscription term, customers do not
typically have the right to continue to use the software without
renewing the subscription. Professional services revenue is not
considered to be recurring as it is typically earned over a discrete
period of an implementation. "Other" revenues are not considered to be
recurring. The difference between the amount of quarterly recurring
revenue reported in the supplemental schedule and revenue reported in
accordance with generally accepted accounting principles for the
Financial Institutions segment, is comprised principally of
professional services revenue and perpetual license revenue.
Guidance Quarter Ended June 30, 2005
Revenue in millions, per share amounts in dollars
FI Segment Low High
------- ------
Revenue $ 56.0 $ 57.0
EPS $ 0.01 $ 0.02
Edify Segment
Revenue $ 7.5 $ 8.5
EPS $ - $ 0.01
Consolidated
Revenue $ 63.0 $ 64.5
EPS $ 0.01 $ 0.03
Minimum recurring revenue guidance
Recurring Subscription Revenue $ 1.3
FI Segment ARR $ 100.0
Conference Call Information
Company management will host a conference call to discuss its
first quarter results on Thursday, May 5, 2005, at 5:00 p.m. EDT.
Interested parties may access a live webcast of the call 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 through May 12, 2005.
About S1
S1 Corporation (NASDAQ: SONE) is a leading global provider of
integrated front-office applications for more than 4,000 banks, credit
unions and insurance providers around the world. Comprised of
applications that address virtually every market segment and delivery
channel, S1 solutions help integrate and optimize an institution's
entire front office, resulting in increased operational efficiencies,
revenue opportunities and overall customer satisfaction. S1 is the
only provider with the proven experience, breadth of products and
financial strength to empower financial services companies' enterprise
strategies. Additional information about S1 is available at
www.s1.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.
S1 Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands)
(Unaudited)
March 31, December 31,
2005 2004
-------------- --------------
Assets
Current assets:
Cash and cash equivalents $ 40,531 $ 43,223
Short term investments 58,913 65,248
Accounts receivable, net of allowances 68,817 61,216
Prepaid expenses 5,967 6,113
Other current assets 4,841 5,485
-------------- --------------
Total current assets 179,069 181,285
Property and equipment, net 14,633 15,150
Intangible assets, net 21,533 22,766
Goodwill, net 117,786 117,699
Other assets 3,416 3,981
-------------- --------------
Total assets $ 336,437 $ 340,881
============== ==============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 5,374 $ 6,253
Accrued salaries and benefits 8,893 14,269
Accrued other expenses and
restructuring 16,604 20,706
Deferred revenues 41,687 33,302
Current portion of capital lease
obligation 1,459 1,523
-------------- --------------
Total current liabilities 74,017 76,053
Other liabilities 8,788 9,832
-------------- --------------
Total liabilities 82,805 85,885
-------------- --------------
Stockholders' equity:
Preferred stock 10,000 10,000
Common stock 742 742
Additional paid-in capital 1,914,190 1,913,913
Treasury stock (23,234) (21,593)
Accumulated deficit (1,645,427) (1,646,147)
Accumulated other comprehensive
income (2,639) (1,919)
-------------- --------------
Total stockholders' equity 253,632 254,996
-------------- --------------
Total liabilities and
stockholders' equity $ 336,437 $ 340,881
============== ==============
S1 CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except share and per
share data)
(Unaudited)
Three Months Ended
3/31/2004 3/31/2005
-------------- --------------
Revenues:
Software licenses $ 11,601 $ 13,246
Support and maintenance 15,064 17,875
Professional services 19,349 21,317
Data center 9,110 9,664
Other 990 312
-------------- --------------
Total revenues 56,114 62,414
-------------- --------------
Direct costs:
Software licenses 1,365 801
Professional services, support and
maintenance 16,901 19,980
Data center 4,374 4,203
Other 900 169
-------------- --------------
Total direct costs 23,540 25,153
-------------- --------------
Gross margin 32,574 37,261
-------------- --------------
Operating expenses:
Selling and marketing 8,064 9,795
Product development 13,664 13,801
General and administrative 5,905 8,808
Depreciation and amortization 2,621 2,560
Amortization of acquisition
intangibles 836 1,234
-------------- --------------
Total operating expenses 31,090 36,198
-------------- --------------
Operating income 1,484 1,063
Interest, investment and other income,
net 47 136
Income tax expense (460) (479)
-------------- --------------
Income from continuing operations $ 1,071 $ 720
Discontinued operations:
Loss from operations of discontinued
operations (627) -
-------------- --------------
Net income $ 444 $ 720
============== ==============
Net income per share:
Basic:
Continuing operations $ 0.02 $ 0.01
Discontinued operations (0.01) 0.00
-------------- --------------
Net income $ 0.01 $ 0.01
============== ==============
Diluted:
Continuing operations $ 0.01 $ 0.01
Discontinued operations 0.00 0.00
-------------- --------------
Net income $ 0.01 $ 0.01
============== ==============
Weighted average common shares
outstanding - basic 70,983,164 70,593,614
Weighted average common shares and
equivalents - diluted 73,073,801 72,494,535
Common shares outstanding at end of
period 70,571,261 70,433,052
Gross margin percentages:
Software licenses 88% 94%
Professional services, support and
maintenance 51% 49%
Data center 52% 57%
Other 9% 46%
-------------- --------------
Total gross margin 58% 60%
============== ==============
S1 Corporation
Financial Institutions Segment Statements of Operations
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended
3/31/2004 12/31/2004 3/31/2005
------------ ------------ ------------
Software licenses $ 8,603 $ 13,681 $ 11,415
Support and maintenance 10,921 11,909 13,566
Professional services 17,741 21,321 20,521
Data center 9,110 9,332 9,664
Other 990 291 312
------------ ------------ ------------
Total revenue: 47,365 56,534 55,478
------------ ------------ ------------
Direct costs:
Software licenses 970 91 726
Professional services,
support and maintenance 14,304 18,392 18,100
Data center 4,374 4,171 4,203
Other 900 132 169
------------ ------------ ------------
Total direct costs 20,548 22,786 23,198
------------ ------------ ------------
Gross margin 26,817 33,748 32,280
------------ ------------ ------------
Operating expenses:
Selling and marketing 5,259 8,118 7,512
Product development 12,108 10,546 12,283
General and administrative 4,930 7,582 7,866
Depreciation and
amortization 2,405 2,336 2,408
Amortization and
impairment of acquisition
intangibles 761 1,046 1,234
------------ ------------ ------------
Total operating
expenses 25,463 29,628 31,303
------------ ------------ ------------
Operating income 1,354 4,120 977
Interest, investment and other
(expense) income 138 (1,173) 190
Income tax (expense) benefit (439) (296) (478)
------------ ------------ ------------
Income from continuing
operations $ 1,053 $ 2,651 $ 689
============ ============ ============
Income from continuing
operations - basic $ 0.02 $ 0.04 $ 0.01
============ ============ ============
Income from continuing
operations - diluted $ 0.02 $ 0.04 $ 0.01
============ ============ ============
Weighted average common shares
outstanding - basic 70,983,164 70,375,301 70,593,614
Weighted average common shares
outstanding - diluted 73,073,801 73,237,477 72,494,535
Consolidated income statements
include intersegment revenues
and direct costs of $ 656 $ 464 $ 580
Variance
Prior Yr Previous
Qtr Qtr
-------- --------
Software licenses 33% -17%
Support and maintenance 24% 14%
Professional services 16% -4%
Data center 6% 4%
Other -68% 7%
Total revenue: 17% -2%
Direct costs:
Software licenses -25% 698%
Professional services, support and maintenance 27% -2%
Data center -4% 1%
Other -81% 28%
Total direct costs 13% 2%
Gross margin 20% -4%
Operating expenses:
Selling and marketing 43% -7%
Product development 1% 16%
General and administrative 60% 4%
Depreciation and amortization 0% 3%
Amortization and impairment of acquisition
intangibles 62% 18%
Total operating expenses 23% 6%
Operating income -28% -76%
Interest, investment and other (expense) income 38% -116%
Income tax (expense) benefit 9% 61%
Income from continuing operations -35% -74%
S1 Corporation
Edify Segment Statements of Operations
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended
3/31/2004 12/31/2004 3/31/2005
------------ ------------ ------------
Software licenses $ 3,306 $ 3,775 $ 2,050
Support and maintenance 4,431 4,691 4,670
Professional services 1,668 691 796
Data center - - -
Other - - -
------------ ------------ ------------
Total revenue: 9,405 9,157 7,516
------------ ------------ ------------
Direct costs:
Software licenses 703 1,024 294
Professional services,
support and maintenance 2,945 2,167 2,241
Data center - - -
Other - - -
------------ ------------ ------------
Total direct costs 3,648 3,191 2,535
------------ ------------ ------------
Gross margin 5,757 5,966 4,981
------------ ------------ ------------
Operating expenses:
Selling and marketing 2,805 2,968 2,283
Product development 1,556 1,410 1,518
General and administrative 975 1,309 942
Depreciation and
amortization 216 169 152
Amortization and
impairment of acquisition
intangibles 75 - -
------------ ------------ ------------
Total operating
expenses 5,627 5,856 4,895
------------ ------------ ------------
Operating income 130 110 86
Interest, investment and other
(expense) income (91) 161 (54)
Income tax (expense) benefit (21) 2 (1)
------------ ------------ ------------
Income from continuing
operations $ 18 $ 273 $ 31
============ ============ ============
Income from continuing
operations - basic $ 0.00 $ 0.00 $ 0.00
============ ============ ============
Income from continuing
operations - diluted $ 0.00 $ 0.00 $ 0.00
============ ============ ============
Weighted average common shares
outstanding - basic 70,983,164 70,375,301 70,593,614
Weighted average common shares
outstanding - diluted 73,073,801 73,237,477 72,494,535
Consolidated income statements
include intersegment revenues
and direct costs of $ 656 $ 464 $ 580
Variance
Prior Yr Previous
Qtr Qtr
-------- --------
Software licenses -38% -46%
Support and maintenance 5% 0%
Professional services -52% 15%
Data center
Other
Total revenue: -20% -18%
Direct costs:
Software licenses -58% -71%
Professional services, support and maintenance -24% 3%
Data center
Other
Total direct costs -31% -21%
Gross margin -13% -17%
Operating expenses:
Selling and marketing -19% -23%
Product development -2% 8%
General and administrative -3% -28%
Depreciation and amortization -30% -10%
Amortization and impairment of acquisition
intangibles -100%
Total operating expenses -13% -16%
Operating income -34% -22%
Interest, investment and other (expense) income -41% -134%
Income tax (expense) benefit -95% -150%
Income from continuing operations 72% -89%
S1 Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
March 31, March 31,
2005 2004
--------- ---------
Cash flows from operating activities:
Net income $ 720 $ 444
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization and goodwill
impairment charge 3,793 3,546
Provision for doubtful accounts receivable
and billing adjustments 1,150 605
Changes in assets and liabilities,
excluding effects of acquisition:
Increase in accounts receivable (9,233) (9,050)
Decrease (increase) in prepaid expenses
and other assets 1,321 (969)
Decrease in accounts payable (879) (186)
Decrease in accrued expenses and other
liabilities (10,148) (10,258)
Increase in deferred revenue 8,227 3,606
--------- ---------
Net cash used in operating
activities (5,049) (12,262)
Net cash provided by (used in)
investing activities 4,292 (3,991)
Net cash used in financing
activities (1,731) (4,535)
Effect of exchange rate changes on cash and cash
equivalents (204) (58)
--------- ---------
Net decrease in cash and cash equivalents (2,692) (20,846)
Cash and cash equivalents at beginning of period 43,223 76,713
--------- ---------
Cash and cash equivalents at end of period $ 40,531 $ 55,867
========= =========
Property and equipment acquired through leases $ - $ 615
S1 Corporation
Supplemental
Schedule of
Financial Institutions Segment Recurring Revenue
(In thousands)
(Unaudited)
RECURRING REVENUE
-------------------
The table below presents the recurring amounts of revenue by type
included in the financial institutions segment results for each period
presented, including the recurring portion of subscription revenue
(which is part of license revenue) along with all support and
maintenance and data center revenue.
Three Months Ended
3/31/2004 6/30/2004 9/30/2004 12/31/2004
----------- ----------- ----------- ------------
Recurring
subscription fees $ 247 $ 263 $ 486 $ 636
Support and
maintenance 10,921 11,756 11,294 11,909
Data center 9,110 9,759 9,153 9,332
----------- ----------- ----------- ------------
Total recurring
revenue $ 20,278 $ 21,778 $ 20,933 $ 21,877
Percent of total
segment revenue 43% 43% 40% 39%
Non-recurring
license revenue 8,356 6,152 7,966 13,045
Professional
services revenue 17,741 21,793 22,822 21,321
Other revenue 990 678 332 291
----------- ----------- ----------- ------------
Total segment
revenue $ 47,365 $ 50,401 $ 52,053 $ 56,534
Variance
to
Previous Prior
Quarter Year
3/31/2005 Quarter
----------- --------- ---------
Recurring subscription fees $ 957 50% 287%
Support and maintenance 13,566 14% 24%
Data center 9,664 4% 6%
-----------
Total recurring revenue $ 24,187 11% 19%
Percent of total segment revenue 44%
Non-recurring license revenue 10,458
Professional services revenue 20,521
Other revenue 312
-----------
Total segment revenue $ 55,478
ANNUAL RECURRING REVENUE (ARR)
--------------------------------
The table below reflects the annualized amounts of recurring revenue
in each period presented.
3/31/2004 6/30/2004 9/30/2004 12/31/2004
----------- ----------- ----------- ------------
Recurring
subscription fees $ 988 $ 1,052 $ 1,944 $ 2,544
Support and
maintenance 43,684 47,024 45,176 47,636
Data center 36,440 39,036 36,612 37,328
----------- ----------- ----------- ------------
Total ARR $ 81,112 $ 87,112 $ 83,732 $ 87,508
Variance
to
Previous Prior
Quarter Year
3/31/2005 Quarter
----------- --------- ---------
Recurring subscription fees $ 3,828 50% 287%
Support and maintenance 54,264 14% 24%
Data center 38,656 4% 6%
-----------
Total ARR $ 96,748 11% 19%
Recurring revenue is only a component of revenue reported under
generally accepted accounting principles. Annual recurring revenue
(ARR) is the amount of recurring revenue included in any given period
annualized to present a proforma full year amount. Recurring revenue
and ARR are metrics that provide an indication of the financial
institution segment's transition to the subscription, or term,
licensing model. Subscription revenues are included in license revenue
in the Company's GAAP financial statements and includes the
right-to-use the licensed software as well as the right to receive
support and maintenance.
CONTACT: S1 Corporation, Atlanta
Investor Contact
Matthew Hale, 404/923-3500
Matt.hale@s1.com
or
Press Contact
Peter Herbert, 404/923-6647
Peter.herbert@s1.com