S1 stumbles on margin worries

S1 (Nasdaq: SONE) crumbled 28 percent Wednesday despite topping estimates with its first quarter earnings report. Gross margins had analysts worried.

Shares were down 16 3/4 to 42 5/8. The stock got a boost recently on a strong buy rating from Warburg Dillon Read.

Analysts said it was S1's EBITDA (earnings before interest, taxes, depreciation and amortization) number that caused the disappointment. The company reported an EBITDA loss of $17.7 million or 35 cents a share, compared to an expectation of about $10 million, or 22 cents a share. Gross margins were also worse than expected due to higher operating expenses, and higher-than-expected costs for the integration of the company's three purchases last year.

Pacific Crest Securities downgraded the stock from "strong buy" to "buy" Wednesday following the news.

The provider of software and services for online banks reported a first quarter operating loss of $110.8 million, or $2.20 per share. First Call consensus predicted a loss of $2.26 per share.

First quarter revenue increased 320 percent year-over-year to $50.4 million from $12 million. License revenue rose 364 percent. Services revenue gained 345 percent. Data center revenue rose 127 percent.

At the end of the first quarter, the Company had cash on hand of $83.0 million and marketable securities of $38.5 million.

S1 competes with Concentrex (Nasdaq: CCTX), Digital Insight (Nasdaq: DGIN) and First Data (NYSE: FDC).