Digital Insight Corp. credited healthy first-quarter profits to online bill payment and better relationships with acquired customers.
In reporting results Tuesday, the Calabasas, Calif., vendor of online banking technology also announced a new $25 million stock repurchase plan, and said it wants to buy more shares if it can allocate additional funds.
A $25 million program, in which Digital bought back 1.5 million shares, was announced in October and completed March 22.
Net income rose 38% from a year earlier, to $5.7 million, or 16 cents a share. Revenue rose 13%, to $51.7 million.
"We're off to a great start in 2005," said Jeff Stiefler, Digital Insight's chairman, president, and chief executive, in a conference call with analysts Tuesday evening.
Mr. Stiefler raised full-year earning guidance to 64 to 68 cents a share, from 60 to 65 cents. Revenue for 2005 is now forecast at between $211 million and $214 million; the previous forecast was $209 million to $214 million.
Digital Insight's online banking software supports 1,370 banking Web sites, 1.1% more than a year ago.
Bill-pay enrollment grew 50% from last year's first quarter, to 1.1 million end users. That lifted earnings, despite virtually no increase in Internet banking clients, Mr. Stiefler said. "Bill-pay users generate four to five times the revenue of Internet banking customers" who do not pay bills online, he said.
In the fourth-quarter earnings announcement he had said that consumer bill-pay was a "significant growth opportunity" but that he also wanted to generate more revenue from other businesses.
Digital Insight appears to have succeeded in the most recent quarter, particularly in the cash management operations.
In November 2003 the company bought the cash management software vendor Magnet Communications Inc., which brought a product line for large corporate customers.
Mr. Stiefler said the Atlanta company had solid technology "but didn't have the processes in place that allowed them to provide consistently good service." Some customers had been alienated by backlogged projects and missed deadlines, and he said he has been trying to rebuild those relationships.
In March, ABN Amro Services Co. Inc. of Chicago renewed a contract it had originally signed with Magnet in 1998 to design and support its CashPro Web portal for corporate customers.
Mr. Stiefler said the deal is unique for Digital Insight because it involves custom work in which it builds and maintains software for ABN, as well as upgrading that company's existing programs.
Digital Insight also announced in March a new agreement with Regions Financial Corp. of Birmingham, Ala., another customer of the former Magnet.
"While there's still lots of work left to do, we're beginning to see progress," Mr. Stiefler said. "Our clients are beginning to reward us with new business."
John Kraft, an analyst with the investment firm D.A. Davidson & Co., in Great Falls, Mont., said observers had generally held low expectations for the Magnet deal because it was a business different from the buyer's core online banking operation.
"It was a very difficult - to put it mildly - acquisition for them," Mr. Kraft said. "That has been a drag on the company, and now it looks like it's helping them."
Online bill-payers are "one of the secrets that's starting to get out about this company," he said. "These guys have such an untapped opportunity."
Digital Insight said 20% of its clients' online banking customers use bill-pay, but that represents just 3% of their total customers; Mr. Kraft said the company can expand those numbers.
