Digital Insight Corp. announced solid results for the quarter ended June 30, 2001, demonstrating progress ahead of expectations on its path to profitability.
Revenues for the second quarter were $22.7 million, an increase of 104% from $11.1 million reported in the same period last year, and a sequential increase of 11% from the first quarter of 2001.
Pro forma net loss for the quarter excluding non-cash charges for stock- based compensation and amortization of goodwill and intangibles was $3.1 million, or ($0.10) per share based on 29.3 million weighted average common shares outstanding which exceeds the consensus forecast reported by First Call of ($0.11) per share. Pro forma net loss for the second quarter excluding non-cash charges for stock-based compensation, amortization of goodwill and intangibles, and restructuring charges improved 46% from $5.6 million in the first quarter of 2001. During the corresponding quarter in 2000, the pro forma net loss excluding non-cash charges for stock-based compensation, amortization of goodwill and intangibles was $5.0 million, or ($0.21) per share based on 23.4 million weighted average common shares outstanding.
Net loss for the quarter was $13.3 million or ($0.45) per share, compared to a net loss of $5.8 million, or ($0.25) per share, for the corresponding period in 2000.
For the six months ending June 30, 2001, revenues were $43.1 million, an increase of 117% from $19.9 million reported in the same period last year. Pro forma net loss for the six months ended June 30, 2001 excluding non-cash charges for stock-based compensation, amortization of goodwill and intangibles and restructuring charges was $8.7 million, or ($0.30) per share based on 29.1 million weighted average common shares outstanding. During the corresponding period in 2000 the pro forma net loss excluding non-cash charges for stock-based compensation, amortization of goodwill and intangibles, restructuring and merger-related charges, and the cumulative effect of the accounting change as a result of implementing SAB 101 was $12.9 million, or ($0.56) per share based on 23.1 million weighted average common shares outstanding. Net loss for the first six months was $33.3 million or ($1.14) per share, compared to a net loss of $29.2 million, or ($1.26) per share, for the corresponding period in 2000.
“We achieved record revenue, expanded margins from the prior quarter and continued to leverage operating expenses resulting in, as expected, a substantially narrowed pro forma net loss,” said John Dorman, chairman and CEO of Digital Insight. “We are particularly pleased with the improvement in gross margins this quarter, resulting from a favorable shift in our revenue mix and the positive impact of our activities initiated in the first quarter to restructure our lending operations. Our achievements this quarter position the Company to achieve EBITDA profitability next quarter and pro forma profitability in the fourth quarter of this year and beyond.”
Business Highlights
* New contracts signed during the quarter added approximately 1,100,000 potential end-users and 51 new financial institutions with 47 new Internet banking and 19 new cash management clients. Average potential end-users for the new Internet banking clients signed increased to about 23,000 from 18,000 in the prior quarter. Additionally, the Company cross-sold nearly $800,000 worth of additional services to existing customers during the quarter.
* There were 11,682 active cash management users at the end of the quarter, up 27% from the prior quarter and 211% from the prior year. During the quarter, 79 clients were implemented with the cash management service.
* The Company added 237,000 active end-users during the quarter. The number of active end-users at quarter end was impacted by the previously discussed acquisition of one financial institution, and another financial institution’s non-renewal of its service agreement. Net of this impact, active end-users increased 169,000 during the quarter to 1,977,000. Subsequent to the second quarter, the Company exceeded 2 million active end-users. Digital Insight is the first outsourced Internet banking service provider to exceed this milestone.
* The Company had a total of 888 Internet banking clients with “live” sites at June 30, 2001, with 100 going live during the quarter. Live Internet banking clients represented 23.8 million potential end-users and an overall penetration of 8.3%, up from 7.8% in the prior quarter. The total number of potential end-users of the 1,100 contracted Internet banking institutions was 27.0 million.
* Lending applications processed during the quarter totaled 87,338, a 31% increase over the seasonally low first quarter. Internet-based applications represented about 40% of the total applications processed, up from 35% in the first quarter. Coupled with the cost of restructuring actions taken in the first quarter, this helped to drive substantial improvement in the gross margin of the Lending Division, contributing to the overall strong margin performance of the Company.
* As part of the initiatives identified in the first quarter to improve the margins of the Lending Division, the Company has been actively managing its client base to optimize profit opportunities. As a result, during the quarter the Lending Division discontinued services to 20 customers that were determined to be below the scale, which can be served profitably.
* Bill payment users increased to nearly 197,000, up 19,000 or 11% sequentially. Bills paid increased to 2.3 million from 2.1 million in the prior quarter.
* Product platform migration to AXIS(TM) Internet Banking is progressing as planned with 58 live clients converted at quarter-end. In addition, over 100 AXIS Cash Management clients are utilizing Release 3.1 at the end of the quarter.
Year 2001 Business Outlook
The Company expects third quarter revenues in 2001 to be between $24.5 million and $25.0 million. The pro forma net loss per diluted share in the third quarter is expected to be between ($0.04) and ($0.05), excluding non-cash charges for stock-based compensation, amortization of goodwill and intangibles.
The Company expects full year 2001 revenues to be between $96.0 and $98.0 million with a net loss per diluted share for the full year expected to be between ($0.29) and ($0.30), excluding non-cash charges for stock-based compensation, amortization of goodwill and intangibles, and restructuring charges.
For complete details on Digital Insight’s 2Q performance visit CardData ([www.carddata.com][1]).
[1]: http://www.carddata.com
