Despite the economic slowdown, the banking technology vendor S1 Corp. reported strong first-quarter earnings and raised its guidance for the year, and an analyst said the poor conditions could be helping S1's sales.
Revenue rose 15%, to $54.7 million, from a year earlier, and net income rose 75%, to $5.2 million.
John Stone, S1's chief financial officer, said in a conference call with analysts Friday that "all the growth we are achieving in revenue, all this growth is organic. There were no acquisitions in" this year's first quarter or last year's.
The Norcross, Ga., company raised its full-year guidance to a range of $220 million to $226 million, from $216 million to $220 million.
Johann Dreyer, S1's chief executive officer, said in the conference call that "those numbers are very achievable and we are really looking forward to the remainder of this year."
Revenue in the Enterprise division, which sells mainly to large banks, rose 14%, to $29.5 million. Operating income for the segment rose 92%, to $1.9 million, reflecting both the higher revenue and improved gross profit margins, Mr. Stone said.
Revenue for S1's Postilion division, which focuses on smaller banks, rose 16%, to $25.2 million, and operating income for the segment rose 177%, to $4.1 million. Mr. Stone said those gains were driven by a hefty increase in license revenue.
John Kraft, an analyst with the investment firm D.A. Davidson & Co. in Great Falls, Mont., said the spike in license revenue is a good sign because "license is where you're going to see the most risk" in the current economic environment.
"These guys are really proving themselves to be a top-quality management team and executing well and just doing everything right," he said.
The change in guidance, though not massive, was encouraging, Mr. Kraft said. "I can't imagine people would raise numbers at Q1 in the year and not feel good about it," he said.
Mr. Kraft also said that S1 may be benefitting from the ailing economy.
"Their customer base, the banking world in the U.S., is really having challenges, so you've got to assume that whoever sells to them is going to see a difficult time," he said.
However, S1's products, which are designed to help boost deposits and reduce costs through automation, are "things the banks arguably care about more in a difficult environment," Mr. Kraft said.
"That's a pretty easy sell to a bank that's struggling."
S1's first-quarter results show the results of a strategic shift that dates to November 2006, when Mr. Dreyer became CEO. He began to pay more attention to the Postilion division, which he headed before taking over the company, and that led to a renewed focus on selling to small and midsize banks.
S1 was hurting when Mr. Dreyer took the reins, and its financial condition was a common topic during its earnings calls well into his first year as CEO. Its financial troubles were so extensive that it stopped giving guidance in November 2005, and in 2006 an investment management company pressured S1 to sell itself.
S1 settled with the company, Ramius Capital Group LLC, and resumed giving guidance shortly after Mr. Dreyer was promoted to the CEO post.
Mr. Kraft called S1 a "turnaround story."
It "has changed markedly from what has been there in the past," he said. "I hope that investors start to realize that these guys are excelling, and it seems like credibility really should be improving."
