Exhibit 99.1
S1 CORPORATION REPORTS THIRD QUARTER 2005 FINANCIAL RESULTS
Atlanta, November 3, 2005 -- S1 Corporation (Nasdaq:SONE), a leading global
provider of integrated front-office applications for financial institutions,
today announced financial results for its third quarter ended September 30,
2005.
o Revenue for the third quarter ended September 30, 2005 was $57.9
million as compared to $60.3 million for the same quarter in the
previous year and $62.0 million in the prior quarter ended June 30,
2005.
o Total license revenue for the third quarter ended September 30, 2005
was $10.6 million compared to $11.4 million in the same quarter in the
previous year and $13.9 million in the prior quarter ended June 30,
2005.
o Loss from continuing operations for the third quarter ended September
30, 2005 was ($7.5) million, or ($0.11) per share, compared to income
from continuing operations of $0.05 per share for same quarter the
previous year and $0.03 per share in the prior quarter ended June 30,
2005. Net loss for the third quarter 2005 includes restructuring costs
of $4.3 million. Excluding these restructuring costs, our net loss for
the third quarter would have been $3.2 million, or $0.05 per
share (1).
In the third quarter, the Company's FI Segment signed 15 Enterprise contracts,
of which 4 were new relationships and 11 were substantial purchases of
additional licenses and services from existing Enterprise customers. S1 also
initiated a restructuring plan, which led to a one-time charge of $4.3 million,
including $0.6 million of stock-based compensation.
"While I am disappointed in our financial performance in the third quarter, I
believe we now have the right organizational structure to more effectively align
our business with the needs of our customers and our addressable markets," said
James "Chip" S. Mahan III, chief executive officer of S1 Corporation. "We are
committed to running the business in such a way that ensures customer
satisfaction and long-term shareholder value. The streamlined organization and
our cost-reduction efforts will put our expenses more in line with our
revenues."
The Company remains dedicated to its strategy of delivering integrated
front-office solutions to financial institutions to give them a single view of
their customers and a way to more efficiently run their business. This will be
accomplished through the delivery of multiple lines of products that are
designed to meet the unique needs of the various markets S1 serves, which
include global and national financial institutions, local community banks and
credit unions. S1 remains the only provider in its space to offer the full range
of retail and wholesale banking solutions across all customer interaction
channels, including the branch, call center, internet, voice and ATM.
S1 also announced today that it will suspend the practice of providing financial
guidance.
CONFERENCE CALL INFORMATION
Company management will host a conference call to discuss its third quarter
results on Thursday, November 3, 2005, at 5:00 p.m. EST. 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 November 10, 2005 on
the Company's website.
Reconciliation of GAAP Earnings (1)
Net loss as reported $ (7,496)
Restructuring costs 4,255
---------------
Net loss excluding restructuring costs $ (3,241)
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.
Investor Contact:
Matt Hale
Chief Financial Officer, S1 Corporation
404.923.3500
Matt.hale@s1.com
Press Contact:
Chris Watson
Vice President of Marketing, S1 Corporation
404.923.6775
Chris.watson@s1.com
S1 CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
SEPTEMBER 30, DECEMBER 31,
2005 2004
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 55,907 $ 43,223
Short term investments 45,715 65,248
Accounts receivable, net of allowances 62,522 61,216
Prepaid expenses 5,897 6,113
Other current assets 3,361 5,485
------------- -------------
Total current assets 173,402 181,285
Property and equipment, net 14,020 15,150
Intangible assets, net 19,638 22,766
Goodwill, net 117,831 117,699
Other assets 2,911 3,981
------------- -------------
Total assets $ 327,802 $ 340,881
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,178 $ 6,253
Accrued salaries and benefits 9,115 14,269
Accrued other expenses and restructuring 17,385 20,706
Deferred revenues 39,557 33,302
Current portion of capital lease obligation 1,232 1,523
------------- -------------
Total current liabilities 71,467 76,053
Other liabilities 8,090 9,832
------------- -------------
Total liabilities 79,557 85,885
------------- -------------
Stockholders' equity:
Preferred stock 10,000 10,000
Common stock 744 742
Additional paid-in capital 1,915,580 1,913,913
Treasury stock (25,000) (21,593)
Accumulated deficit (1,650,607) (1,646,147)
Accumulated other comprehensive loss (2,472) (1,919)
------------- -------------
Total stockholders' equity 248,245 254,996
------------- -------------
Total liabilities and stockholders' equity $ 327,802 $ 340,881
============= =============
S1 CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- -----------------------------
9/30/2005 9/30/2004 9/30/2005 9/30/2004
------------ ------------ ------------ ------------
REVENUES:
Software licenses $ 10,593 $ 11,397 $ 37,780 $ 32,347
Support and maintenance 17,518 15,472 52,937 46,727
Professional services 18,935 23,956 60,577 66,720
Data center 10,181 9,153 29,728 28,022
Other 648 332 1,304 2,000
------------ ------------ ------------ ------------
Total revenues 57,875 60,310 182,326 175,816
------------ ------------ ------------ ------------
DIRECT COSTS:
Software licenses 2,060 2,128 5,290 6,569
Professional services, support and maintenance 20,862 18,497 60,850 53,292
Data center 4,245 4,056 12,467 12,891
Other 434 135 697 1,583
------------ ------------ ------------ ------------
Total direct costs 27,601 24,816 79,304 74,335
------------ ------------ ------------ ------------
Gross margin 30,274 35,494 103,022 101,481
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Selling and marketing 11,032 8,870 32,334 25,964
Product development 12,764 12,991 39,279 40,269
General and administrative 7,509 6,984 23,915 19,983
Restructuring costs 4,255 - 4,255 -
Depreciation and amortization 2,314 2,625 7,428 7,721
Amortization of other intangibles 358 222 1,015 687
------------ ------------ ------------ ------------
Total operating expenses 38,232 31,692 108,226 94,624
------------ ------------ ------------ ------------
Operating (loss) income (7,958) 3,802 (5,204) 6,857
Interest, investment and other income (expense), net 655 180 1,548 (526)
------------ ------------ ------------ ------------
(Loss) income before income taxes (7,303) 3,982 (3,656) 6,331
Income tax expense (193) (635) (1,228) (1,096)
------------ ------------ ------------ ------------
(Loss) income from continuing operations (7,496) 3,347 (4,884) 5,235
Discontinued operations:
Loss from operations of discontinued operations - (128) (31) (952)
Gain on disposal of discontinued operations, net of tax - - 455 -
------------ ------------ ------------ ------------
Net (loss) income $ (7,496) $ 3,219 $ (4,460) $ 4,283
============ ============ ============ ============
NET (loss) INCOME PER SHARE:
BASIC:
Continuing operations (0.11) 0.05 (0.07) 0.07
Discontinued operations - (0.00) 0.01 (0.01)
------------ ------------ ------------ ------------
Net (loss) income $ (0.11) $ 0.05 $ (0.06) $ 0.06
============ ============ ============ ============
DILUTED:
Continuing operations (0.11) 0.04 (0.07) 0.07
Discontinued operations - (0.00) 0.01 (0.01)
------------ ------------ ------------ ------------
Net (loss) income $ (0.11) $ 0.04 $ (0.06) $ 0.06
============ ============ ============ ============
Weighted average common shares outstanding - basic 70,303,365 70,506,931 70,361,627 70,692,776
Weighted average common shares and equivalents - diluted n/a 72,699,694 n/a 73,106,864
Common shares outstanding at end of period 70,346,563 70,195,318 70,346,563 70,195,318
GROSS MARGIN PERCENTAGES:
Software licenses 81% 81% 86% 80%
Professional services, support and maintenance 43% 53% 46% 53%
Data center 58% 56% 58% 54%
Other 33% 59% 47% 21%
------------ ------------ ------------ ------------
Total gross margin 52% 59% 57% 58%
============ ============ ============ ============
S1 CORPORATION
STATEMENTS OF OPERATIONS BY SEGMENT
FOR THE QUARTER ENDED SEPTEMBER 30, 2005
(In thousands, except share and per share data)
(Unaudited)
FINANCIAL
INSTITUTIONS EDIFY ELIMINATIONS TOTAL
------------ ------------ ------------ ------------
Software licenses $ 6,684 $ 3,980 $ (71) $ 10,593
Support and maintenance 12,938 4,870 (290) 17,518
Professional services 17,697 1,238 18,935
Data center 10,181 - 10,181
Other 648 - 648
------------ ------------ ------------ ------------
Total Revenue: 48,148 10,088 (361) 57,875
------------ ------------ ------------ ------------
DIRECT COSTS:
Software licenses 1,025 1,106 (71) 2,060
Professional services, support and maintenance 18,729 2,423 (290) 20,862
Data center 4,245 - 4,245
Other 434 - 434
------------ ------------ ------------ ------------
Total direct costs 24,433 3,529 (361) 27,601
------------ ------------ ------------ ------------
Gross margin 23,715 6,559 - 30,274
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Selling and marketing 8,352 2,680 11,032
Product development 11,331 1,433 12,764
General and administrative 6,610 899 7,509
Restructuring costs 4,255 - 4,255
Depreciation and amortization 2,198 116 2,314
Amortization of other intangibles 358 - 358
------------ ------------ ------------ ------------
Total operating expenses 33,104 5,128 - 38,232
------------ ------------ ------------ ------------
Operating (loss) (9,389) 1,431 - (7,958)
Interest, investment and other income (expense), net 781 (126) 655
Income tax expense (192) (1) (193)
------------ ------------ ------------ ------------
Loss from continuing operations $ (8,800) $ 1,304 $ - $ (7,496)
============ ============ ============ ============
Loss from continuing operations - basic $ (0.13) $ 0.02 $ (0.11)
============ ============ ============
Loss from continuing operations - diluted $ (0.13) $ 0.02 $ (0.11)
============ ============ ============
Weighted average common shares outstanding - basic 70,303,365 70,303,365 70,303,365
Weighted average common shares outstanding - diluted n/a n/a n/a
S1 CORPORATION
STATEMENTS OF OPERATIONS BY SEGMENT
FOR THE QUARTER ENDED JUNE 30, 2005
(In thousands, except share and per share data)
(Unaudited)
FINANCIAL
INSTITUTIONS EDIFY ELIMINATIONS TOTAL
------------- ------------- ------------- -------------
Software licenses $ 11,797 $ 2,256 $ (112) $ 13,941
Support and maintenance 13,268 4,631 (355) 17,544
Professional services 19,194 1,131 - 20,325
Data center 9,883 - - 9,883
Other 344 - - 344
------------- ------------- ------------- -------------
Total Revenue: 54,486 8,018 (467) 62,037
------------- ------------- ------------- -------------
DIRECT COSTS:
Software licenses 1,421 215 (112) 1,524
Professional services, support and maintenance 18,046 2,317 (355) 20,008
Data center 4,019 - - 4,019
Other 94 - - 94
------------- ------------- ------------- -------------
Total direct costs 23,580 2,532 (467) 25,645
------------- ------------- ------------- -------------
Gross margin 30,906 5,486 - 36,392
------------- ------------- ------------- -------------
OPERATING EXPENSES:
Selling and marketing 9,014 2,493 - 11,507
Product development 11,304 1,410 - 12,714
General and administrative 6,780 818 - 7,598
Depreciation and amortization 2,425 129 - 2,554
Amortization of other intangibles 328 - - 328
------------- ------------- ------------- -------------
Total operating expenses 29,851 4,850 - 34,701
------------- ------------- ------------- -------------
Operating income 1,055 636 - 1,691
Interest, investment and other income (expense), net 794 (37) - 757
Income tax expense (552) (4) - (556)
------------- ------------- ------------- -------------
Income from continuing operations $ 1,297 $ 595 $ - $ 1,892
============= ============= ============= =============
Income from continuing operations - basic $ 0.02 $ 0.01 $ 0.03
============= ============= =============
Income from continuing operations - diluted $ 0.02 $ 0.01 $ 0.03
============= ============= =============
Weighted average common shares outstanding - basic 70,191,090 70,191,090 70,191,090
Weighted average common shares outstanding - diluted 70,872,560 70,872,560 70,872,560
S1 CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
NINE MONTHS
-----------------------------
SEPTEMBER 30, SEPTEMBER 30,
2005 2004
------------- -------------
Cash flows from operating activities:
Net (loss) income $ (4,460) $ 4,283
Adjustments to reconcile net (loss) income to net cash used in
operating activities:
Depreciation and amortization and goodwill impairment charge 11,163 10,433
Equity in net loss of unconsolidated subsidiary - 750
Compensation expense for stock options 570 -
Provision for doubtful accounts receivable and billing adjustments 3,211 1,087
Changes in assets and liabilities, excluding effects of acquisition:
Increase in accounts receivable (4,842) (11,584)
Decrease in prepaid expenses and other assets 3,472 913
Decrease in accounts payable (1,831) (1,148)
Decrease in accrued expenses and other liabilities (9,067) (11,177)
Increase (decrease) in deferred revenue 5,654 (7,764)
------------- -------------
Net cash provided by (used in) operating activities 3,870 (14,207)
Net cash provided by investing activities 12,937 4,121
Net cash used in financing activities (3,585) (8,935)
Effect of exchange rate changes on cash and cash equivalents (538) (53)
------------- -------------
Net increase (decrease) in cash and cash equivalents 12,684 (19,074)
Cash and cash equivalents at beginning of period 43,223 76,713
------------- -------------
Cash and cash equivalents at end of period $ 55,907 $ 57,639
============= =============
Property and equipment acquired through leases $ 527 $ 1,547
Maintenance agreement financed through vendor - 1,201
S1 CORPORATION
SUPPLEMENTAL SCHEDULE OF
FINANCIAL INSTITUTIONS SEGMENT RECURRING REVENUE
(In thousands)
(Unaudited)
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
---------------------------------
9/30/2004 6/30/2005 9/30/2005
--------- --------- ---------
Recurring subscription fees $ 596 $ 1,349 $ 1,390
Support and maintenance 11,294 13,268 12,938
Data center 9,153 9,883 10,181
--------- --------- ---------
Total recurring revenue $ 21,043 $ 24,500 $ 24,509
Percent of total segment revenue 40% 45% 51%
Non-recurring license revenue 7,856 10,448 5,294
Professional services revenue 22,822 19,194 17,697
Other revenue 332 344 648
--------- --------- ---------
Total segment revenue $ 52,053 $ 54,486 $ 48,148
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.
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. 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 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. 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.
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.