SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 3, 1999
SECURITY FIRST TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 000-24931 58-2395199
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3390 PEACHTREE ROAD, NE, SUITE 1700, ATLANTA, GEORGIA 30326
(Address of principal executive offices)
Registrant's telephone number, including area code: (404) 812-6200
NOT APPLICABLE
(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS.
On August 3, 1999, Security First Technologies Corporation
("S1") issued a press release describing its results of operations for the
second quarter of 1999. That press release is filed as Exhibit 99.1 to this
report. Also on August 3, 1999, S1 held an analyst conference call during which
S1 discussed its second quarter results and presented certain other information
about S1 and its operations. The material presented is filed as Exhibit 99.2 to
this report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
Exhibit
No. Description
99.1 Press release dated August 3, 1999.
99.2 Materials presented during analyst conference call held
August 3, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SECURITY FIRST TECHNOLOGIES CORPORATION
---------------------------------------
(Registrant)
/s/ Lisa Wilkie
------------------
Lisa Wilkie
Controller
Date: August 4, 1999
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
99.1 Press release dated August 3, 1999.
99.2 Materials presented during analyst conference call held
August 3, 1999.
EXHIBIT 99.1
FOR MORE INFORMATION CONTACT:
Robert F. Stockwell Marcy Theobald
Chief Financial Officer Public Relations Manager
Security First Technologies Security First Technologies
404-812-6780 404-812-6254
[email protected] [email protected]
SECURITY FIRST TECHNOLOGIES
REPORTS 245% INCREASE IN SECOND QUARTER REVENUES
-- REVENUES INCREASED BY 31% OVER FIRST QUARTER 1999 --
ATLANTA, AUGUST 3, 1999 -Security First Technologies Corporation
(NASDAQ:SONE), a leading provider of Internet-based applications for the
financial services industry, reported revenues of $15.7 million for the quarter
ended June 30, 1999, a 245% increase from $4.5 million for the quarter ended
June 30, 1998.
Software license revenue increased to $2.3 million in the second
quarter 1999, an increase of $1.6 million over the second quarter 1998.
Professional services revenue increased to $11.3 million in the second quarter
1999, a 255% increase over the prior year quarter. Data Center revenue increased
to $2.0 million in the second quarter 1999, an increase of $1.5 million over the
second quarter 1998.
Gross margin improved to 43% in the second quarter of 1999 from 10% in
the second quarter 1998. The data center margin was positive this quarter for
the first time at 1% compared to a negative 207% in the second quarter 1998. The
improvement in the gross margin is also attributable to the increase in the
professional services margin to 40% in the second quarter 1999 compared to 30%
in the second quarter 1998.
At June 30, 1999, the estimated number of accounts powered by Security
First Technologies increased by 216% over June 30, 1998 to over 832 thousand.
The estimated total number of Virtual Financial Manager(TM) (VFM) end-users
increased to approximately 315 thousand as of June 30, 1999, a 208% increase
from June 30, 1998.
(more)
<PAGE>
Security First Technologies Second Quarter Earnings
Page 2
In the second quarter 1999, Security First Technologies incurred a net
loss from continuing operations of approximately $2.2 million, or $0.08 per
share compared to $8.1 million, or $0.38 per share, for the second quarter 1998.
The second quarter loss included approximately $250 thousand, or $0.01 per share
for cost incurred related to the previously announced acquisitions. For the six
months ended June 30, 1999, Security First Technologies incurred a net loss from
continuing operations of $5.4 million, or $0.21 per share compared to $16.2
million, or $0.76 per share for the six months ended June 30, 1998.
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
continued an improving trend to a negative $1.3 million during the second
quarter of 1999 as compared to a negative $6.4 million in the prior year
quarter.
SECOND QUARTER ANNOUNCEMENTS
During the second quarter 1999, Security First Technologies made
several strategic announcements. In support of its efforts to become the
preeminent provider of transactional financial portal solutions for financial
institutions worldwide, on May 17, 1999, Security First Technologies announced
its plans to acquire Edify Corporation of Santa Clara, California and FICS
Group, N.V., a privately held company based in Brussels, Belgium.
In connection with the FICS transaction, Security First Technologies
will issue approximately 18 million shares of its stock and convert the
outstanding FICS options into approximately 2 million Security First
Technologies options. In the Edify transaction, Security First Technologies and
Edify have agreed to a fixed exchange ratio whereby Security First Technologies
will issue 0.330969 shares for each share of Edify stock or approximately 5.8
million shares and convert the outstanding Edify options into approximately 1.6
million Security First Technologies options. The acquisitions are expected to
close in the fourth quarter of this year.
The combined reported revenue for the three companies on a proforma
basis for the second quarter 1999 (excluding $3.1 million in revenues Edify
received from its Employee Relationship Management products which was divested
early in the third quarter) was $46.9 million. The net loss for the same period
on a proforma basis, excluding $3.1 million in revenues noted above and $2.2
million in costs associated with acquisitions, was $10.8 million.
In connection with the FICS and Edify transactions, Security First
Technologies believes that the parties have now complied with all applicable
worldwide merger notification requirements, including receipt of early
termination of the Hart-Scott-Rodino waiting period in the United States.
(more)
<PAGE>
Security First Technologies Second Quarter Earnings
Page 3
Also on May 17, Security First Technologies and Intuit Inc.
(NASDAQ:INTU) and its affiliates announced that the companies entered into a
strategic alliance to deliver online personal financial software and services to
financial institutions. Under the terms of the multi-faceted agreement, the
companies will exchange technologies in an effort to deliver the world's leading
interactive financial management software and Internet-based financial tools to
financial institutions. In exchange for an investment of $50 million, Intuit
received approximately 971,000 shares of Security First Technologies stock at a
price of $51.50 per share. Additionally, Intuit received options to purchase an
additional 5,429,000 shares of Security First Technologies at $51.50 per share
if the planned acquisitions of Edify and FICS are completed.
Also in the second quarter, 17 financial institutions have launched
online financial solutions powered by VFM through third-party processing
partners. Further, Security First Technologies successfully completed all
upgrades to VFM 4.0 required by customers.
On May 7, 1999, Security First Technologies completed a 2-for-1 stock
split to shareholders of record on April 26, 1999. All share and per share
information contained in this release has been presented to reflect the stock
split.
"Undoubtedly, the second quarter contains the most important milestones
in the history of our company," said James S. Mahan III, chief executive officer
of Security First Technologies. "As financial institutions quickly recognize the
value of online financial services, we have taken significant steps to ensure
our leadership position as a provider in this space. Once the planned
acquisitions of FICS and Edify are complete, our position as the established
innovator and leading enabler in the rapidly evolving market of Internet-based
financial services worldwide will be further solidified."
REVENUE AND OPERATING MARGINS
Security First Technologies' gross margin increased to 43% in the
second quarter 1999 compared to a gross margin of 10% in the second quarter
1998. The improvement in gross margin was related to the 245% increase in
revenue while direct costs increased only 119%.
The Data Center gross margin was positive for the first time in the
second quarter of 1999 at 1% compared to a negative 207% in the second quarter
of 1998. In the second quarter 1999, revenues increased by $1.5 million or 244%
over the second quarter 1998, while costs increased by $204 thousand.
Software license revenues increased to $2.3 million in the second
quarter 1999 from $770 thousand in the second quarter 1998.
(more)
<PAGE>
Security First Technologies Second Quarter Earnings
Page 4
Professional services revenue increased to $11.3 million in the second
quarter 1999, a 255% increase over the second quarter 1998. Included in
professional services revenue was approximately $3.2 million for product
enhancement projects. One of the product enhancement projects completed in the
second quarter was the first phase of a multi-phase insurance product.
OPERATING EXPENSES
Excluding goodwill amortization and acquisition costs, operating
expenses increased by 37% in the second quarter 1999 compared to the similar
quarter in 1998. Product development investments increased 25% in the second
quarter 1999 compared to the second quarter 1998 due to an increase in staff to
expand Security First Technologies' product set. General and administrative
expenses increased 72% in the second quarter 1999 as compared to second quarter
1998 primarily as a result of establishing infrastructure related to the
company's growth.
CAPITAL RESOURCES AND CASH FLOW
At June 30, 1999, Security First Technologies had $70.9 million in cash
available to fund operations. For the six months ended June 30, 1999, cash used
in continuing operations was $2.6 million, which included $15 million received
from VFM license sales. This compares to cash used in continuing operations of
$9.0 million for the six months ended June 30, 1998.
As indicated above, Intuit completed its $50 million investment in
Security First Technologies on May 27, 1999 by purchasing 970,813 shares of
Security First Technologies common stock at a price of $51.50 per share.
Additionally, Intuit received an option to purchase additional shares of
Security First Technologies stock, which will become exercisable if Security
First Technologies completes its planned acquisition of Edify Corporation. The
option allows for Intuit to purchase 3,629,187 shares if Security First
Technologies completes its acquisition of Edify and an additional 1,800,000
shares if Security First Technologies also completes its planned acquisition of
FICS Group, N.V. The option provides for a per share purchase price of $51.5032.
Upon issuing the option, S1 will record purchased technology for the fair market
value of the options.
On May 3, 1999, Security First Technologies received investments of $4
million from Andersen Consulting for the sale of 72,800 shares of Security First
Technologies stock and $10 million from Hewlett Packard for the sale of 182,004
shares of Security First Technologies stock. Also during the second quarter,
Security First Technologies received $2.5 million from the exercise of an option
issued to the Royal Bank of Canada.
(more)
<PAGE>
Security First Technologies Second Quarter Earnings
Page 5
ABOUT SECURITY FIRST TECHNOLOGIES
Security First Technologies (NASDAQ: SONE) builds, delivers and
operates integrated, transactional and brandable Internet applications for
financial institutions. Security First Technologies' secure solutions are
available for in-house implementations or can be outsourced to the Security
First Technologies Data Center. Security First Technologies also offers
training, product integration and customer service center outsourcing. Security
First Technologies, through direct sales and channel partnerships, has agreed to
provide software applications and technology to more than 100 financial
entities. Security First Technologies can be reached at www.S1.com.
On May 17, 1999, Security First Technologies announced agreements to
acquire FICS Group, N.V. and Edify Corporation in separate transactions valued
at approximately $1.5 billion. The transactions, which are subject to various
conditions and approvals, are expected to position Security First Technologies
as the preeminent provider of financial portal solutions to the financial
services industry.
FORWARD-LOOKING STATEMENTS
Statements in this news release concerning future results, performance,
expectations or intentions are forward-looking statements. Actual results,
performance or developments may differ materially from forward-looking
statements as a result of known or unknown risks, uncertainties and other
factors, including those identified in the Company's filings with the Securities
and Exchange Commission, press releases and other public communications.
# # #
3390 Peachtree Rd., Ste. 1700
Atlanta, Georgia 30326
(more)
<PAGE>
SECURITY FIRST TECHNOLOGIES CORPORATION AND
SECURITY FIRST TECHNOLOGIES, INC.
Selected Financial Data
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------------------------------------
1999 1998 1999 1998
----------------------------- ------------------------------
<S> <C> <C> <C> <C>
Revenues:
Software licenses $2,330 $770 $4,638 $1,439
Professional services 11,301 3,185 9,446 5,634
Data center 2,044 594 ,591 904
----------------------------- ------------------------------
Total revenues 15,675 4,549 27,675 7,977
----------------------------- ------------------------------
Direct costs:
Software licenses 99 20 232 40
Professional services 6,796 2,230 12,118 3,800
Data center 2,029 1,825 3,716 3,648
----------------------------- ------------------------------
Total direct costs 8,924 4,075 16,066 7,488
----------------------------- ------------------------------
Gross margin 6,751 474 11,609 489
----------------------------- ------------------------------
Operating expenses:
Selling and marketing 1,174 1,137 2,253 2,208
Product development 4,514 3,607 8,889 6,990
General and administrative 2,132 1,236 3,724 2,440
Depreciation and amortization 1,267 652 2,461 1,289
Amortization of goodwill and
acquisition charges 353 2,083 456 4,171
----------------------------- ------------------------------
Total operating expenses 9,440 8,715 17,783 17,098
----------------------------- ------------------------------
Operating loss (2,689) (8,241) (6,174) (16,609)
Interest income 527 135 754 390
----------------------------- ------------------------------
Loss from continuing operations (2,162) (8,106) (5,420) (16,219)
Loss from discontinued operations - (862) - (1,327)
----------------------------- ------------------------------
Net loss $(2,162) $(8,968) $(5,420) $(17,546)
----------------------------- ------------------------------
Net loss per common share:
Loss per common share from
continuing operations
before one time charges,
amortization of goodwill and
acquisition charges $(0.07) $(0.28) $(0.20) $(0.56)
Loss per common share from one
time charges, amortization of
goodwill and acquisition charges $(0.01) $(0.10) $(0.01) $(0.20)
----------------------------- ----------------------------------
Loss per common share from
continuing operations $(0.08) $(0.38) $(0.21) $(0.76)
Loss per common share from
discontinued operations $- $(0.04) $- $(0.06)
----------------------------- ----------------------------------
Net loss per common share $(0.08) $(0.42) $(0.21) $(0.82)
----------------------------- ----------------------------------
Weighted average common shares
outstanding 26,051,942 21,526,298 25,378,877 21,288,392
Common shares outstanding at end of
period 27,554,999 21,687,830 27,554,999 21,687,830
June 30, December 31,
1999 1998
-----------------------------------
Cash 70,862 14,504
Investment securities 9,071 3,936
Accounts receivable, net 17,028 17,520
Other current assets 4,091 1,310
Noncurrent assets 18,703 11,023
Total assets 119,755 48,293
Liabilities 35,003 31,064
Stockholders' equity 84,752 17,229
</TABLE>
<PAGE>
SECURITY FIRST TECHNOLOGIES CORPORATION AND
SECURITY FIRST TECHNOLOGIES, INC.
Consolidated Statements of Operations
(Dollars in thousands, except per share, per customer and per employee data)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended
6/30/98 9/30/98
------- --------
<S> <C> <C>
Revenues:
Software licenses $770 $1,069
Professional services 3,185 4,549
Data center 594 927
---------------------------------------------
Total revenues 4,549 6,545
------------------------------------------ --
Direct costs:
Software licenses 20 20
Professional services 2,230 2,806
Data center 1,825 1,937
---------------------------------------------
Total direct costs 4,075 4,763
---------------------------------------------
Gross margin 474 1,782
---------------------------------------------
Operating expenses:
Selling and marketing 1,137 955
Product development 3,607 3,717
General and adminstrative 1,236 1,370
Depreciation and amortization 652 761
Amortization of goodwill and acquisition charges 2,083 110
---------------------------------------------
Total operating expenses 8,715 6,913
---------------------------------------------
Operating loss (8,241) (5,131)
Interest income 135 52
---------------------------------------------
Loss from continuing operations (8,106) (5,079)
Loss from discontinued operations (862) (750)
---------------------------------------------
Net loss $(8,968) $(5,829)
---------------------------------------------
EBITDA $(6,368) $(5,010)
Net loss per common share:
Loss per common share from continuing
operations before one time charges,
amortization of goodwill and acquistion charges $(0.28) $(0.22)
Loss per common share from one time charges
and amortization of goodwill and acquisition charges (0.10) (0.01)
---------------------------------------------
Loss per common share from continuing operations (0.38) (0.23)
Loss per common share from discontinued operations (0.04) (0.03)
---------------------------------------------
Net loss per common share $(0.42) $(0.26)
---------------------------------------------
Weighted average common shares outstanding 21,526,298 22,351,474
Common shares outstanding at end of period 21,687,830 22,606,688
Gross margin percentages:
Software licenses $750 $1,049
Percentage 97% 98%
Professional services $955 $1,743
Percentage 30% 38%
Data center $(1,231) $(1,010)
Percentage (207%) (109%)
---------------------------------------------
Total gross margin $474 $1,782
---------------------------------------------
Percentage 10% 27%
---------------------------------------------
Data center revenue per quarterly average customers $13.34 $14.75
Professional services revenue per average professional services FTE(2) $42,000 $54,000
Number of end-users:
Data center 58,100 77,000
Third party data processors 4,000 7,500
Direct software licensees(1) 40,000 67,000
---------------------------------------------
Total 102,100 151,500
---------------------------------------------
Number of end-user accounts:
Data center 94,600 128,000
Third party data processors 8,400 15,000
Direct software licensees(1) 160,000 244,000
---------------------------------------------
Total 263,000 387,000
---------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended
12/31/98 3/31/99 6/30/99
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Software licenses $2,273 2,308 $2,330
Professional services 6,035 8,145 11,301
Data center 1,350 1,547 2,044
------------------------------------------------
Total revenues 9,658 12,000 15,675
------------------------------------------------
Direct costs:
Software licenses 443 133 99
Professional services 3,921 5,322 6,796
Data center 1,633 1,687 2,029
------------------------------------------------
Total direct costs 5,997 7,142 8,924
------------------------------------------------
Gross margin 3,661 4,858 6,751
------------------------------------------------
Operating expenses:
Selling and marketing 1,560 1,079 1,174
Product development 3,918 4,375 4,514
General and adminstrative 2,184 1,592 2,132
Depreciation and amortization 3,297 1,194 1,267
Amortization of goodwill and acquisition charges 103 103 353
------------------------------------------------
Total operating expenses 11,062 8,343 9,440
------------------------------------------------
Operating loss (7,401) (3,485) (2,689)
Interest income 141 227 527
------------------------------------------------
Loss from continuing operations (7,260) (3,258) (2,162)
Loss from discontinued operations (170) - -
------------------------------------------------
Net loss $(7,430) $(3,258) $(2,162)
------------------------------------------------
EBITDA $(4,171) $(2,188) $(1,319)
Net loss per common share:
Loss per common share from continuing
operations before one time charges,
amortization of goodwill and acquistion charges $(0.20) $(0.13) $(0.07)
Loss per common share from one time charges
and amortization of goodwill and acquisition charges (0.11) - (0.01)
------------------------------------------------
Loss per common share from continuing operations (0.31) (0.13) (0.08)
Loss per common share from discontinued operations (0.01) - -
------------------------------------------------
Net loss per common share $(0.32) $(0.13) $(0.08)
------------------------------------------------
Weighted average common shares outstanding 23,193,948 24,698,334 26,051,942
Common shares outstanding at end of period 24,527,004 25,076,292 27,554,999
Gross margin percentages:
Software licenses $1,830 $2,175 $2,231
Percentage 81% 94% 96%
Professional services $2,114 $2,823 $4,505
Percentage 35% 35% 40%
Data center $(283) $(140) $15
Percentage (21%) (9%) 1%
------------------------------------------------
Total gross margin $3,661 $4,858 $6,751
------------------------------------------------
Percentage 38% 40% 43%
------------------------------------------------
Data center revenue per quarterly average customers $15.21 $15.99 $18.34
Professional services revenue per average professional services FTE(2) $50,000 $59,000 $64,000
Number of financial institutions:
S1 Data Center
Third Party Data Processors
Direct license in-house
Number of completed implementations:
S1 Data Center
Financial institutions using third party data processors
Direct license in-house
Number of end-users:
Data center 93,000 100,200 114,500
Third party data processors 16,000 24,000 38,000
Direct software licensees(1) 104,000 139,000 162,000
------------------------------------------------
Total 213,000 263,200 314,500
------------------------------------------------
Number of end-user accounts:
Data center 148,000 161,000 181,000
Third party data processors 42,000 62,000 104,000
Direct software licensees(1) 352,000 469,000 547,000
------------------------------------------------
Total 542,000 692,000 832,000
------------------------------------------------
</TABLE>
(1) Information is based on discussions with officials of direct licensees.
(2)Excludes revenue from pass through costs.
Exhibit 99.2
SLIDE 1
SECURITY FIRST TECHNOLOGIES
Second Quarter Teleconference
James S. (Chip) Mahan, III, CEO
Daniel H. Drechsel, COO
Robert F. (Bob) Stockwell, CFO
August 3, 1999
SLIDE 2
FORWARD LOOKING STATEMENT
THE PRESENTATION MAY INCLUDE A DISCUSSION OF CERTAIN SUBJECTS THAT WILL CONTAIN
FORWARD-LOOKING INFORMATION, INCLUDING PROJECTIONS ON REVENUES, EXPENSES, CASH
FLOWS, PRODUCT ROLLOUTS AND PRODUCT PRICING. INFORMATION CONCERNING
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
CONTAINED IN THE FORWARD-LOOKING STATEMENTS IN THIS PRESENTATION ARE
AVAILABLE IN THE COMPANY'S MOST RECENT ANNUAL REPORT ON FORM 10-K.
PLEASE CONTACT SANDY MITCHELSON AT 404-812-6426 TO OBTAIN A
COPY OF THE ANNUAL REPORT OR FORM 10-K.
We welcome you all to the second quarter earnings conference call. With me is
Chip Mahan, our CEO and Dan Drechsel, our COO.
The presentation materials we will be reviewing have been faxed out
to everyone in advance. If you have not received the presentation
materials, please call Anita Mazur at 602-614-3021. Additionally, the entire
presentation is on the Web at www.s1.com/analyst.
The first item on the agenda is to remind everyone that we will
be making forward looking statements which are conditioned on the
information noted on slide 2.
SLIDE 3
AGENDA
- - First Quarter Financial Review
- - Operational Update
<PAGE>
- - Market Overview
- - Merger Update
If you will now turn to the third slide, I will briefly review the agenda.
I will review the financial highlights of the quarter, Dan will
review the operations for the quarter and Chip will review the market
and other company developments.
SLIDE 4
FINANCIAL RESULTS
<TABLE>
<CAPTION>
ACTUAL CONSENSUS VARIANCE
<S> <C> <C> <C>
TOTAL REVENUE $ 15.7 $ 12.6 $ 3.1
DIRECT COST 8.9 7.0 (1.9)
----- ----- -----
GROSS MARGIN 6.8 5.6 1.2
OPERATING EXPENSES 7.8 7.1 (0.7)
INTEGRATION EXPENSES 0.3 -- (0.3)
----- ----- -----
EBITDA (1.3) (1.5) 0.2
DEPRECIATION & AMORTIZATION (1.4) (1.3) (0.1)
INTEREST INCOME 0.5 0.2 0.3
----- ----- -----
NET LOSS (2.2) (2.6) 0.4
----- ----- -----
LOSS PER SHARE (0.08) (0.11) 0.03
</TABLE>
We are extremely please with the quarterly financial results both from a year
over year comparison and a sequential quarterly comparison.
During the second quarter, revenues of $15.7 million surged by near 25% above
the consensus estimate. As a result of the revenue increase, the gross margin
was also well above the consensus. Operating expenses, excluding integration
expenses related to the announced acquisitions of FICS and Edify, came in
slightly above the consensus estimate by approximately $700 thousand. This
increase in operating costs was primarily driven by the need to expand the
infrastructure necessary to support the increased growth.
The loss per share was $0.08, which was $0.03 per share better than expected.
SLIDE 5
QUARTERLY YEAR OVER YEAR COMPARISON
- - Total revenues up 245%
- - Software licenses up 203%
- - Services revenues up 255%
- - Data center revenues up 244%
- - Gross margin at 43%
- - Operating expenses up 37%*
* Excludes goodwill amortization and acquisition cost.
A year over year comparison continues to reflects the significant
progress S1 is making financially.
Comparing the second quarters, revenues are up 245% while expenses, excluding
goodwill and integration expenses, are up only 37%.
<PAGE>
Professional services revenues were up 255% reflecting the large amount
of work being done to bring several major institutions online as well
as new product implementations for other existing customers.
Additionally, the gross margin continued to improve and was at
43% for the second quarter of 1999.
SLIDE 6
2ND QUARTER 1999 VS. 1ST QUARTER 1999
- - Total revenues up 31%
- - Services revenues up 39%
- - Gross margin up to 43%
- - Operating expenses up 10%*
* Excludes goodwill amortization and acquisition costs.
Looking at sequential quarterly growth, we also continue
to see excellent progress.
Total revenues are up 31%, while operating expenses, excluding
goodwill and integration expenses, increased by only 10%.
As we noted in the last teleconference, software licenses
remained stable at $2.3 million.
Professional services revenues were up nearly 40% and the services
gross margin increased to 40% which is our target level for this
line item.This line item also includes product enhancement fees or funded
development of approximately $3.0 million.
Data center revenues continued on a positive trend and were up
32% to over $2.0 million for the quarter.
<PAGE>
SLIDE 7
GROSS MARGIN PERCENTAGES
<TABLE>
<CAPTION>
Q3 98 Q4 98 Q1 99 Q2 99
<S> <C> <C> <C> <C>
SOFTWARE
LICENSES 98% 81% 94% 96%
PROFESSIONAL
SERVICES 38% 35% 35% 40%
DATA CENTER (109)% (21)% (9)% 1%
TOTAL 27% 38% 40% 43%
</TABLE>
Overall, we continue to see strong growth in the gross margin, starting
at 10% in the second quarter of 1998 and moving up to 43% in the second
quarter of this year. As you can see, for the first time in the company's
history, the gross margin in the data center was positive for the period.
This in spite of the fact that the data center cost increased as a result
of the significant expansion of the data center facilities during
the period.
As I previously noted, professional services have finally reached our
target gross margin of 40%.
<PAGE>
SLIDE 8
VFM USERS AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
GROWTH OVER AVERAGE
NUMBER JUNE 30, 1998 REV/CUSTOMER
<S> <C> <C> <C>
END USERS:
DATA CENTER 114,500 97% $ 18.34
3RD PARTY DATA 38,000 850%
PROCESSORS
DIRECT LICENSES 162,000 305%
TOTAL 314,500 208%
ACCOUNTS 832,000 216%
</TABLE>
During the quarter end user customers increased to over 314 thousand, a
19% increase over the first quarter of 1999.
The average revenue per customer increased from $15.99 to $18.34. Again,
this increase is the result of minimum fees and technical support
fees being implemented during the period. This number may in fact increase
again in future quarters but will then decline as volume of accounts drives
the average revenue per customer back down towards the $9 level during the
later stages of 1999.
Also of note is the strong increase in accounts using VFM through our
direct license channel and third party data processors.
Lets move to the next slide to look at the growth graphically.
SLIDE 9
TOTAL END USER CUSTOMERS
Graph of end user customers for past eight quarters
<PAGE>
SLIDE 10
CASH FLOW
<TABLE>
<CAPTION>
Q3 98 Q4 98 Q1 99 Q2 99
<S> <C> <C> <C> <C>
EBITDA $ (4.3) $ (4.0) $ (2.2) $ (1.3)
CASH FROM (USED IN)
CONTINUING OPERATIONS 0.6 (3.5) 7.7 (10.2)
PP&E (0.8) (0.6) (0.7) (3.3)
EQUITY 10.7 2.8 1.9 67.5
</TABLE>
As we anticipated in the last call, the positive cash flow from operations
in the first quarter was reversed and cash used to fund operations for the
second quarter came in at a $10.2 million. The significant change was
primarily the result of an increase in accounts receivable related to the
revenue increases as well as certain capitalized costs associated with
the acquisitions.
Also note that the EBITDA trend continues on a positive trend. As indicated
in prior calls, we still anticipate that S1 on a stand alone basis would
reach EBITDA break even on a recurring basis in the latter part of 1999.
We ended the quarter with approximately $71 million available to
fund operations. The significant increase in cash was primarily due to the
closing of the $50 million Intuit transaction, the $10 million HP transaction
and the $4 million Andersen Consulting transaction during the quarter.
Chip added -- We're proud that we're right on track with what we said 2
years ago and actually 1Q ahead, on the EBITDA.
<PAGE>
SLIDE 11
PROFORMA RESULTS
<TABLE>
<CAPTION>
S1 EDIFY* FICS TOTAL
<S> <C> <C> <C> <C>
SOFTWARE LICENSES $ 2.3 $ 9.2 $ 3.8 $ 15.3
PROFESSIONAL SERVICES 11.3 7.9 10.3 29.5
DATA CENTER 2.1 -- -- 2.1
TOTAL REVENUE 15.7 17.1 14.1 46.9
</TABLE>
* Excludes $3.1 million in revenues from Employee Relationship
Management products.
I would now like to turn to the pro-forma consolidated revenues for S1, FICS
and Edify for the second quarter. For purposes of this presentation,
we have excluded $3.1 million in revenues Edify earned on the Human Resources
product which was recently sold. As you will note on the slide, total
combined revenues were nearly $47 million.
<PAGE>
SLIDE 12
MERGER REGULATORY MILESTONES
- - Merger notifications completed
- - Proxy statement filed with SEC
- - Secondary offering documents to be filed shortly after receipt of
approval of proxy statement
As noted in the press release, we believe that all the parties to
the mergers have now complied with all applicable worldwide merger
notification requirements, including the receipt of early termination
on the Hart-Scott-Rodino waiting period in the US.
As many of you have seen, in early July we filed a proxy statement
concerning the mergers with the SEC. As part of the proxy statement we
have disclosed that we will record approximately $1.4 billion in goodwill
and approximately $60 million in In-process R&D. We anticipate the
goodwill will be amortized over a three year period and the IPR&D will
be immediately charged off upon closing the transaction.
Also, as previously disclosed in public filings, concurrent with the
closing of the transactions, S1 will have a secondary offering for
approximately 1 million shares owned by the largest shareholder of FICS.
While the acquisition is tax free to US shareholders, it is taxable to
non-US FICS shareholders. This offering will allow non-US shareholders
of FICS to met their potential tax liability. With that, I would like to
turn it over to Dan Drechsel, our COO.
<PAGE>
SLIDE 13
SERVICES UPDATE
- - All required conversions to VFM 4.0 completed by June 30, 1999
- - 14 active services projects
- - Bank of America Military Bank live in S1 data center
- - First insurance product live with a customer
- - Andersen Consulting is implementing first two projects
Dan -- Expansion services capacity through hiring from 6 or 7 projects
one year ago to 14 active implementation projects.
S1 has 425 employees, 90 contractors and 100 open requisitions. Of
those contractors, half is Andersen Consulting.
New insurance module is live, not in beta.
SLIDE 14
OPERATIONAL UPDATE
- - New data center facility is operational
- - 5.X product development on track for end of year delivery
- - First phase of multi-phase insurance product development completed
Dan -- Significant growth now possible with data center's capacity raised
by 10x
Data center set to fulfill customer needs for at least 5 years. Looking to
expand geographically (west coast) after Norcross data center's capacity is
reached.
Chip -- Intuit --TurboTax will be able to be populated by VFM in time for
next tax season. No date for delivery of Small Business populating
QuickBooks -- currently working on interfaces.
SLIDE 15
NEW PRODUCT SALES
- - First Sierra - VFM Banking & Relationship Management
- - Atlantic Bank
- - 3 VFM Investments
<PAGE>
SLIDE 16
MARKET UPDATE
- - Wingspan
- - Fiserv & M&I
- - Citicorp
- - Andersen Consulting et al
30 deals in the works -- 95% are estimated to be potential
data center customers that represents 98 million households.
12 cross-selling opportunities with Edify
6 cross-selling opportunities with FICS
of the 30 deals, 13 deals with Andersen Consulting
4 international
2 US-based
1 brokerage
4 insurance
1 monoline
Wingspan is Edify's customer. Wingspan spending $150 m on marketing.
American Express is a customer of Fiserv and Fiserv is our partner.
S1 to see Amex revenues on a per customer/per month basis just like
all other third party data processing partner agreements.
Unnamed S1 customer spending $125 million on marketing.
Dan -- Business continues to be constrained by fulfillment of
contracts, which is the #1 risk in this business.
SLIDE 17
INTEGRATION UPDATE
- - Finance and administration
- - Sales
- S1 - Board level
- FICS - corporate versus retail
- Edify - OEM and resellers
- - Products
- - Organization chart in place
Regarding integration of VFM and EBS -- It is not our plan to
immediately try to integrate those products. It is our plan to put a
stake in the ground as to when we would look at a successor platform to
those two products by the end of the year. There is so much demand for
the products currently, that S1 needs to focus on support FI's first.
The new S1 will continue to target large FI's with a mix of products.
<PAGE>
The new S1 will have one sales force.
THANK YOU FOR YOUR TIME.
