S1 Corp. said banks continue to license its software at a good clip despite the ailing economy, and that it plans to expand its product lineup and have its different business lines collaborate.
"We're not seeing a slowdown; our pipelines are growing," Johann Dreyer, S1's chief executive, said on a conference call with analysts Wednesday morning. "Where we're seeing traction is where we sell software that actually generates business for banks."
Corporate cash management software has proven especially popular. In the second quarter S1 licensed its Enterprise Corporate Banking product to two of the top 25 U.S. banks, both of which had already been using the vendor's other products. "Corporate banking is the one area where banks make money, and therefore that's the area where we find they spend money," Mr. Dreyer said.
He said the company's Enterprise customers — large banks — could benefit from capabilities built for S1's Postilion unit, which serves smaller institutions.
"Those segments are really run as separate businesses," he said, and historically there was little opportunity for customers of one segment to use products or features developed for the other. "After all the investment that we did over the last two years, we are now at a point where we can start leveraging some of our capabilities between our Enterprise and Postilion segments."
For example, Postilion has stronger capabilities for monitoring payment systems, and Enterprise has stronger capabilities for processing automated clearing house transactions. Each capability is to be migrated to the other product line, Mr. Dreyer said.
S1 also outlined its plans for State Farm Mutual Automobile Insurance Co., the only nonbank client of S1's Enterprise line. S1 projects that it will bring in revenue of $40 million to $43 million from State Farm this year but just $35 million to $39 million in 2009, and it will continue to drop until the 10-year contract with State Farm ends in 2011. The insurer owns the computer code, but S1 will no longer support it after that.
State Farm is "a great customer for us," Mr. Dreyer said, but he said he is comfortable with the direction of the relationship. "We are really a software products company" whose products can be licensed to more than one customer, he said. S1 employees working with the State Farm technology would be reassigned to other parts of the company.
By contrast, S1 built custom applications for State Farm that it was unable to sell to other insurance companies, an arrangement that runs counter to S1's strategy, Mr. Dreyer said. "I don't believe that we should be a professional services body shop," he said.
S1, of Norcross, Ga., said late Tuesday that its second-quarter revenue grew 7%, to $56.5 million, from a year earlier. Its net income grew 4%, to $5.1 million.
S1's chief financial officer, John Stone, resigned Tuesday to address a personal matter that Mr. Dreyer said is "totally unrelated to the operations of the company."
Mr. Stone will stay on as a consultant to S1's board. Steve Dexter, S1's vice president and corporate controller, was appointed as its principal accounting officer.
