S1 Corp. says its new Enterprise software platform was instrumental in its improved profits and that it expects the product to provide an earnings lift through next year.
"S1 is at the very early stages of a growth cycle," chief executive Jaime Ellertson said in a phone interview Thursday. "We're gaining momentum. Enterprise is fueling that."
The online banking software vendor announced Thursday that net income for the third quarter was $3.2 million, compared with a $4.4 million loss a year earlier. Revenue rose 8%, to $62.3 million.
In August, S1 released the 3.0 versions of its Enterprise programs, which are designed to communicate with each other across multiple bank channels. They have been well received by banks, which have long wanted a system of integrated products that could share customer data and let service representatives in different areas of the bank see the same information.
John Kraft, an analyst with D.A. Davidson & Co., said Friday that "there's a lot of interest in what they're trying to do, but it's a tough sale." Banks like the idea of having software that communicates across channels, but buying all the S1 products in order to get all the benefits of the technology means doing an overhaul that few are prepared to make, Mr. Kraft said.
"Their progress is steady," he said. "I think they can continue that." But he said he is not sure "this can take off like a rocket like Jaime claims."
Mr. Ellertson announced during a conference call with analysts Thursday night that a fellow Atlanta company, SunTrust Banks Inc., had signed on to use S1's Internet Business Banking product; S1 is to earn $5 million over the next two to three years from the deal.
SunTrust has asked S1 to host the Internet banking software so that it will not have to install it in its own systems, Mr. Ellertson said. "There's a large bank going up in our data center - that doesn't happen every day," he said.
Seven new bank customers have purchased Enterprise products, and eight existing customers bought new Enterprise software in the third quarter.
Mr. Ellertson called the SunTrust deal "fertile soil, because as we put in the Enterprise platform, that enables us to go back and provide the next channel when SunTrust needs it."
Mr. Kraft called the SunTrust deal is a good sign but said it is no guarantee of a surge in business for S1.
"At a big bank like SunTrust, they make their decisions independently, in the silo, and I doubt that SunTrust has this great plan to buy all the Enterprise channels," Mr. Kraft said. "That said, I think that an incumbent always has a better chance at selling a new product than a new vendor."
Brad Adrian, a senior analyst for financial services with Gartner Inc. in Stamford, Conn., said "it's encouraging" that these newly signed clients "are institutions we've heard of" instead of smaller banks that would be less profitable for S1.
Mr. Adrian agreed that banks might be slow to install more than one Enterprise product but said he does not believe they have a "mind-set of only using one or two modules … they're going to start small and build up."
Mr. Ellertson told investors about an upcoming product developed with Wells Fargo & Co. of San Francisco. In November the two will release a "foreign exchange module" that can communicate with other Enterprise software; Wells and S1 are to share revenues in the venture.
Mr. Kraft called it "encouraging that a bank like Wells," which is "very well respected technologically, is partnering with S1 to build something like that. It's a vote of confidence."
S1 also announced it will introduce Enterprise 3.5 in mid-2005. Mr. Ellertson said the new versions of its branch, call center, customer relationship management, and Internet banking software will be released in more scalable versions, and a new version of its voice banking software will follow in the second half of 2005.
