Earnings shortfall sends S1 shares sharply lower
Shares of S1 drop 29 percent after the financial software maker reports quarterly earnings that fall short of analysts' expectations.
The Atlanta-based company, which makes software that enables financial institutions to do business on the Internet, reported a net loss of $75.2 million, or 35 cents a share, excluding interest, taxes and amortization. That compared to a loss of $3.3 million, or 8 cents a share, for the year-earlier quarter.
Revenue increased 320 percent to $50.4 million from $12 million during the year-ago quarter. The revenue gain was attributed to several acquisitions during the past year.
Analysts were expecting the company to lose 23 cents, the average estimate of nine analysts polled by First Call.
The company attributed the loss to lower software license revenue because of changes in the business practices of the acquired companies.
Shares of S1 fell $17.06 to $42.31 on a volume of 10 million shares, about 10 times the average daily volume. The stock has traded in a range of $142.25 to $25.12 during the past 52 weeks.
Most analysts that issued reports after the release were not overly concerned by the earnings shortfall. Only Pacific Crest Securities downgraded the stock from a "strong buy" to a "buy" rating.
"Their core business revenue was very good," said Jeff Baker of SunTrust Equitable Securities.
S1's data center unit more than doubled its revenue to $3.5 million from $1.5 million. Financial institutions use the data center as an out-source database to store customer information.
Revenue from the company's professional services unit, which includes the integration of a customer institution's legacy computer systems with S1's software, jumped to $34.4 million from $7.7 million. Both units provide the company with a more stable revenues stream than software licensing fees.
A key obstacle for the year is integrating the recent acquisitions into the company's businesses, such as Edify, said analysts.
"The challenges ahead continue to be integrating the personnel and changing the business model of the Edify acquisition," Baker said.
Edify's business model relied more on license revenues, and Baker said S1 is moving to a recurring revenues model that will provide a steadier flow of cash into the company. The product integration is not as much an issue as getting the new personnel "all on the same page," he added. "We think all this will be worked out over the next few quarters."
Bloomberg News contributed to this report.