-- Revenue in the fourth quarter was $20.9 million, a 40% increase over
the same period last year.
-- Net income for the fourth quarter of 2006 was $12.5 million on a GAAP
basis compared to $5.2 million for the fourth quarter of the prior
year. Net income for the fourth quarter of 2006 and 2005 includes a
reduction in the tax allowance of $9.9 million and $3.2 million,
respectively. Non-GAAP net income, which excludes stock-based
compensation expense, the reduction in the tax allowance, the non-cash
portion of the tax provision, depreciation and amortization expense,
and other non-recurring charges and income was $3.3 million compared to
$2.2 million for the fourth quarter of the prior year. A
reconciliation of the historical GAAP to non-GAAP measures is attached
with the financial statements.
-- GAAP earnings per share for the fourth quarter of 2006 was $0.34
compared to $0.14 in the same period last year. Non-GAAP earnings per
share for the fourth quarter was $0.09 compared to $0.06 in the same
period last year.
-- Transaction volumes increased to a record 255.2 million during the
quarter, a 32% increase over the 192.7 million transactions processed
in the same period last year.
-- CyberSource added approximately 1,800 new customers in the fourth
quarter of 2006.
Fourth quarter 2006 financial results
Revenue
-- CyberSource's fourth quarter revenue was $20.9 million, surpassing
prior guidance of $19.8 million and a 40% increase compared to
$14.9 million in the same period last year.
Gross profit
-- GAAP gross profit was $9.9 million, above prior guidance of
$9.4 million.
Operating expenses
-- GAAP operating expenses were $9.0 million, below the company's prior
guidance of $9.3 million.
Net income
-- GAAP net income was $12.5 million, above prior guidance of
$0.4 million. Our prior guidance did not take into account any
reversals of the tax allowance.
-- Non-GAAP net income was $3.3 million, above prior guidance of
$2.5 million.
Earnings per share
-- GAAP earnings per share was $0.34, above prior guidance of $0.01 per
share. Our prior guidance did not take into account any reversals of
the tax allowance.
-- Non-GAAP earnings per share was $0.09, above prior guidance of $0.07.
Balance sheet
-- Cash, cash equivalents, and short-term investments at the end of the
fourth quarter of 2006 were $54.9 million, compared to $54.5 million at
the end of the third quarter. The total includes $0.7 million in
proceeds from employee stock option exercises and excludes $1.3 million
in cash used to repurchase 136,205 shares of the company's common
stock.
Cash flow
-- Cash flow from operating activities was $1.6 million during the three
months ended December 31, 2006, compared to $1.3 million during the
same period last year.
2006 Fiscal Year Financial Highlights
Revenue
-- For the fiscal year ended December 31, 2006, total revenue was
$70.3 million compared to $50.5 million for the prior fiscal year, an
increase of 39%.
GAAP net income
-- The company recorded GAAP net income of $14.4 million or $0.39 per
share for the fiscal year ended December 31, 2006 compared to net
income of $9.2 million or $0.26 per share for the prior fiscal year, an
increase of 56%.
Non-GAAP net income
-- Non-GAAP net income was $10.5 million or $0.29 per share for the fiscal
year ended December 31, 2006 compared to non-GAAP net income of
$6.8 million or $0.19 per share for the prior fiscal year, an increase
of 54%.
Cash flow
-- Cash flow from operating activities was $9.8 million in 2006 compared
to $3.9 million in 2005.
Other developments during the quarter
-- CyberSource signed over 1,800 new customers in the fourth quarter,
including: Abe's of Maine, Iron Mountain Information Management, Next
Day Blinds, Shell Global Solutions, Sonoco Products Company and the
Smithsonian Institute.
-- Net new customers added this quarter increased the company's total
customer count to over 18,000.
-- Existing customers that added new services or renewed agreements during
the quarter include: Air Canada, BBC Worldwide, Curves International,
Eastman Kodak, Home Depot, and Seagate.
-- Approximately 150 customers selected CyberSource for merchant acquiring
account services during the quarter. CyberSource now has approximately
1,400 acquiring customers.
-- CyberSource UK customers processed a record 39.5 million transactions
in the fourth quarter of 2006.
-- Findings from CyberSource's 8th annual fraud survey were released
during the quarter. Among the key take-aways:
- Fraudsters siphoned an estimated $3 billion from U.S. eCommerce in
2006.
- Though the percent of revenues lost to fraud improved slightly from
1.6% in 2005 to 1.4% in 2006, dollar losses to U.S. eCommerce grew
due to the rapid growth of eCommerce sales.
- The number of merchants using automated decision systems to reduce
the likelihood of fraud grew 30%.
-- On November 14, 2006, CustomerSat, Inc. announced that CyberSource was
one of 14 recipients of its Achievement in Customer Excellence Award.
This is the second consecutive year CyberSource has received the honor.
Companies qualify for the award through a combination of customer
satisfaction mean scores and top ratings by customers over the course
of a year.
Stock buyback program
-- The Board of Directors has authorized the use of up to $10 million for
the repurchase of CyberSource common stock. The purchases will be made
in the open market from time to time over the next twelve months as
market and business conditions warrant. All purchases are subject to
the availability of shares and, accordingly, there is no guarantee as
to the timing or number of shares to be repurchased, if any. During
2006, the Company repurchased 268,005 shares of common stock at an
average price per share of $9.18 for a total cost of approximately
$2.5 million.
Guidance for the first quarter and full fiscal year 2007:
CyberSource is providing guidance for the first quarter of 2007 and for the full fiscal year 2007 based on information available as of January 25, 2007.
-- For the first quarter ending March 31, 2007: Total revenue is expected
to be $20.6 million. Transaction and support revenue is expected to be
$19.3 million, of which $0.4 million is expected from BidPay.
Enterprise software revenue is expected to be $0.6 million and
professional services revenue is expected to be $0.7 million. The
company expects to process between 245 and 250 million transactions in
the first quarter. GAAP gross profit is expected to be $9.3 million,
while GAAP operating expenses are expected to be $10.4 million. The
company expects to record a GAAP net loss for the first quarter of
$0.3 million or ($0.01) per share based on a weighted average share
count of 37 million shares. Non-GAAP net income for the first quarter
is expected to be $1.4 million and non-GAAP earnings per share is
expected to be $0.04 based on a weighted average share count of
37 million shares.
-- For the full year 2007: Total revenue is expected to be between $90 and
$95 million, GAAP gross profit is expected to be between $44 and
$46 million, and GAAP operating expenses are expected to be between $40
and $43 million. GAAP net income for 2007 is expected to be between
$3.5 and $4 million or $0.9 to $0.11 per share. GAAP earnings per share
is based on a weighted average share count of 38 million shares.
Guidance does not take into account any further reductions in the
company's valuation allowance against its deferred tax asset, which
would result in a tax benefit during the period of the reduction.
CyberSource will continue to evaluate whether a further reduction is
appropriate. Non-GAAP net income for the full year 2007 is expected to
be between $13.5 and $14.5 million or $0.36 to $0.38 per share.
Non-GAAP earnings per share is based on a weighted average share
count of 38 million shares.
Public call/web cast details
CyberSource will host a public conference call today, January 25, 2007 at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss the fourth quarter and fiscal year results. The call can be accessed in either of the following ways:
Live web cast
http://www.cybersource.com/cgi-bin/ir.pl
A replay of this web cast will remain available at this location
through February 4, 2007.
Live conference call
Dial 888-542-8515 (U.S. and Canada) 706-634-2163 (International). The
call's ID number is: 5779846.
A taped replay of this call will be available through February 4,
2007. The dial-in numbers for the taped replay are 800-642-1687
(U.S.) 706-645-9291 (local or international). The call's ID number is
5779846.
About CyberSource
CyberSource Corporation is a leading provider of electronic payment and risk management solutions. CyberSource solutions enable electronic payment processing for Web, call center, and POS environments. CyberSource also offers industry leading risk management solutions for merchants accepting card-not-present transactions. CyberSource Professional Services designs, integrates, and optimizes commerce transaction processing systems. Over 18,000 businesses use CyberSource solutions, including half the companies comprising the Dow Jones Industrial Average. The company is headquartered in Mountain View, California, and has sales and service offices in Japan, the United Kingdom, and other locations in the United States. For more information, please visit CyberSource's web site at http://www.cybersource.com or email info@cybersource.com.
GAAP versus non-GAAP Results and Guidance
In addition to financial results presented on a GAAP basis, the company has provided non-GAAP measures of gross profit, operating expenses, net income and earnings per share, which are adjusted to exclude certain non-cash items. For purposes of this release, non-GAAP gross profit, operating expenses, net income and earnings per share exclude stock based compensation expense under SFAS 123R, the non-cash portion of the income tax provision, a reduction in the tax allowance, depreciation and amortization expense, and other non- recurring charges and income. A reconciliation of the historical GAAP to non- GAAP measures is attached with the financial statements. The company believes that presentation of non-GAAP financial measures may provide investors with additional meaningful and relevant financial information. Management believes the non-GAAP measures help indicate trends in the company's business, and management uses the non-GAAP measures to plan and forecast future periods. Non-GAAP information is not determined using GAAP and should not be considered superior to or as a substitute for GAAP measures or data prepared in accordance with GAAP. Furthermore, non-GAAP information may not be comparable across companies, as other companies may use different non-GAAP measures. The company does not provide guidance for certain financial measures such as depreciation and stock-based compensation expense and as a result, is not able to provide a reconciliation of GAAP and Non-GAAP financial measures for forward-looking data. The company intends to calculate the various Non-GAAP financial measures in future periods consistent with the methodology used in the three and twelve months ended December 31, 2006, as presented in this release.
"Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995
Statements in this release that are not purely historical are forward- looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding the company's expectations, objectives, anticipations, plans, hopes, beliefs, intentions or strategies regarding the future. Forward-looking statements in this release include, without limitation, statements regarding: financial guidance including, without limitation, those regarding revenue, transaction volume, gross profit, operating expenses, net income, earnings per share, and deferred tax assets. Factors that could cause actual results to differ materially from the forward looking statements include risks and uncertainties such as changes in Generally Accepted Accounting Principles and the application thereof, changes in customer needs, new products and services offerings by the company and its competitors, any unforeseen event or any unforeseen system failures, and other risks indicated in our filings with the Securities and Exchange Commission. It is important to note that actual outcomes could differ materially from those in such forward-looking statements. Readers should also refer to the documents filed by CyberSource with the Securities and Exchange Commission, specifically the annual report filed on Form 10-K for the year ended December 31, 2005, filed with the Securities and Exchange Commission on March 10, 2006, and our quarterly reports filed on Form 10-Q from time to time, all of which identify important risk factors.
NOTE: CyberSource is a registered trademark in the U.S. and other countries. BidPay is a registered trademark in the U.S. All other brands and product names are trademarks or registered trademarks of their respective companies.
CyberSource Corporation
GAAP Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2006 2005 2006 2005
Revenues:
Transaction and
support $19,270 $13,326 $63,304 $43,184
Enterprise software 756 695 3,041 3,693
Professional services 883 889 3,905 3,634
Total revenues 20,909 14,910 70,250 50,511
Cost of revenues:
Transaction and
support 10,484 5,561 32,343 17,689
Enterprise software 100 178 272 842
Professional services 421 515 2,012 1,961
Total cost of
revenues 11,005 6,254 34,627 20,492
Gross profit 9,904 8,656 35,623 30,019
Operating expenses:
Product development 2,467 2,143 9,283 8,000
Sales and marketing 3,804 2,964 14,443 11,140
General and
administrative 2,777 1,922 9,861 6,031
Total operating
expense 9,048 7,029 33,587 25,171
Income from operations 856 1,627 2,036 4,848
Other income (59) -- 341 --
Interest income, net 676 424 2,344 1,324
Income before taxes 1,473 2,051 4,721 6,172
Income tax benefit (10,987) (3,146) (9,690) (3,074)
Net income 12,460 $5,197 14,411 $9,246
Basic net income
per share $0.36 $0.15 $0.42 $0.28
Diluted net income
per share $0.34 $0.14 $0.39 $0.26
Weighted average number
of shares used
in computing basic
net income per share 34,888 33,839 34,623 33,464
Weighted average number
of shares used in
computing diluted
net income per share 36,667 36,158 36,593 35,811
Non-GAAP Financial Metrics:
Gross profit $10,440 $8,789 $37,313 $30,504
Operating expenses 7,813 6,974 29,049 24,881
Net income 3,283 2,193 10,515 6,829
Basic net income
per share 0.09 0.07 0.30 0.20
Diluted net income
per share $0.09 $0.06 $0.29 $0.19
CyberSource Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share data)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2006 2005 2006 2005
GAAP gross profit $9,904 $8,656 $35,623 $30,019
Add FAS123R expense 195 -- 596 --
Add depreciation
expense 319 133 1,020 485
Add amortization of
intangible assets 22 -- 74 -
Non-GAAP gross profit 10,440 8,789 37,313 30,504
GAAP operating
expenses 9,048 7,029 33,587 25,171
Less FAS123R expense (1,095) -- (4,090) --
Less depreciation
expense (129) (55) (410) (290)
Less amortization of
intangible assets (11) -- (38) --
Non-GAAP operating
expenses 7,813 6,974 29,049 24,881
GAAP net income 12,460 5,197 14,411 9,246
Add FAS123R expense 1,290 -- 4,686 --
Add depreciation
expense 448 188 1,430 775
Add amortization of
intangible assets 33 -- 112 --
Less reversal of
valuation allowance (10,948) (3,192) (9,724) (3,192)
Less settlement
proceeds* -- -- (400) --
Non-GAAP net income 3,283 2,193 10,515 6,829
GAAP basic net
income per share 0.36 0.15 0.42 0.28
Add FAS123R expense 0.04 -- 0.14 --
Add depreciation expense 0.01 0.01 0.04 0.02
Add amortization of
intangible assets -- -- -- --
Less reversal of
valuation allowance (0.32) (0.09) (0.29) (0.10)
Less settlement
proceeds* -- -- (0.01) --
Non-GAAP basic net
income per share 0.09 0.07 0.30 0.20
GAAP diluted net
income per share 0.34 0.14 0.39 0.26
Add FAS123R expense 0.04 -- 0.13 --
Add depreciation
expense 0.01 0.01 0.04 0.02
Add amortization of
intangible assets -- -- -- --
Less reversal of
valuation allowance (0.30) (0.09) (0.26) (0.09)
Less settlement
proceeds* -- -- (0.01) --
Non-GAAP diluted net
income per share $0.09 $0.06 $0.29 $0.19
* In April 2006, CyberSource received $400,000 as consideration for dismissing a lawsuit that CyberSource filed against CardSystems Solutions, Inc. in October 2005.
CyberSource Corporation
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
December 31, December 31,
2006 2005
Assets
Current assets:
Cash and cash equivalents $21,701 $14,383
Short-term investments 33,243 32,618
Accounts receivable, net 9,614 8,592
Prepaid expenses and other current assets 1,823 2,843
Deferred income taxes 2,320 3,192
Total current assets 68,701 61,628
Property and equipment, net 3,618 2,542
Intangible assets, net 2,845 --
Non-current deferred income taxes 9,629 --
Other noncurrent assets 2,250 1,157
Total assets $87,043 $65,327
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $409 $519
Other accrued liabilities 6,056 5,944
Deferred revenue 1,950 1,931
Total current liabilities 8,415 8,394
Total stockholders' equity 78,628 56,933
Total liabilities and
stockholders' equity $87,043 $65,327
CyberSource Corporation
Consolidated Statements of Cash Flows
(In thousands, except per share data)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2006 2005 2006 2005
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income $12,460 $5,197 $14,411 $9,246
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization 481 188 1,542 775
Tax benefit from
employee stock options -- 93 -- 93
Gain on investment
in joint venture (41) -- (41) --
Stock-based
compensation 1,290 -- 4,686 --
Changes in operating
assets and
liabilities:
Accounts receivable (1,307) (1,609) (1,022) (1,992)
Prepaid expenses and
other current assets (40) 51 1,020 (722)
Deferred income
taxes (10,985) (3,192) (9,756) (3,192)
Other noncurrent
assets (169) (355) (1,021) (872)
Accounts payable (230) (59) (110) 127
Accrued liabilities 320 864 112 395
Deferred revenue (197) 163 19 91
Net cash provided by
operating activities 1,582 1,341 9,840 3,949
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchases of property
and equipment (625) (401) (2,506) (1,571)
Acquisition of
BidPay.com -- -- (1,990) --
Purchases of short-
term investments (18,368) (17,702) (58,842) (67,515)
Maturities of short-
term investments 17,928 17,416 58,239 66,572
Net cash used in
investing activities (1,065) (687) (5,099) (2,514)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Issuance of notes
receivable -- (175) -- (175)
Proceeds from issuance
of common stock 691 649 4,672 2,966
Repurchase of common
stock (1,338) -- (2,461) (2,405)
Net cash provided
(used) in financing
activities (647) 474 2,211 386
Effect of exchange
rate changes on cash 197 (327) 366 (490)
Increase in cash and
cash equivalents 67 801 7,318 1,331
Cash and cash
equivalents at
beginning of period 21,634 13,582 14,383 13,052
Cash and cash
equivalents at end
of period $21,701 $14,383 $21,701 $14,383
