Glastonbury, Connecticut – (The Hosting News) – August 8, 2006 – Web host and integrated enabling financial technologies firm, Open Solutions Inc., reported revenues for the second quarter of 2006 increased 127 percent to $107.1 million, from $47.1 million for the second quarter of 2005.
Revenues for the six months ended June 30, 2006, increased 105 percent to $173.8 million, from $84.8 million for the same period of the prior year. GAAP net income per diluted share for the second quarter of 2006 increased 6 percent to $0.19 per diluted share, from $0.18 per diluted share in the second quarter of 2005. GAAP net income per diluted share for the six months ended June 30, 2006, increased 25 percent to $0.40 per diluted share, from $0.32 per diluted share for the same period of the prior year.
Earnings before interest, taxes, depreciation, amortization, stock compensation expense and nonrecurring gain as a result of an acquisition (adjusted EBITDA) for the second quarter of 2006 increased 204 percent to $28.3 million, from $9.3 million for the second quarter of 2005. Adjusted EBITDA for the six months ended June 30, 2006, increased 149 percent to $42.0 million, from $16.9 million for the same period of the prior year. Net income per diluted share adjusted for stock compensation expense and nonrecurring gain as a result of an acquisition (non-GAAP net income) for the second quarter of 2006 increased 33 percent to $0.24 per diluted share, from $0.18 per diluted share in the second quarter of 2005. Non-GAAP net income per diluted share for the six months ended June 30, 2006, increased 21 percent to $0.40 per diluted share, from $0.33 per diluted share for the same period of the prior year. A reconciliation of EBITDA, adjusted EBITDA and non-GAAP net income follows later in this release.
Open Solutions’ management uses non-GAAP measures to evaluate the performance of core business, to estimate future core performance and to compensate employees. Since management finds this measure to be useful, Open Solutions believes that investors benefit from seeing results in the same manner as management. This information facilitates management’s internal comparisons to historical operating results, as well as to the operating results of competitors.
Open Solutions’ Chairman and CEO Louis Hernandez, Jr. explained, ”We saw continued strong demand for Open Solutions’ full suite of financial industry-focused products and services in the second quarter, as demonstrated by total revenue increasing by 127 percent and total signed contract value increasing by 55 percent over the same period in 2005. We also demonstrated increased operating leverage in the quarter, with a 10 percent decrease in operating expenses as a percentage of revenue from last year. For the remainder of 2006, we will seek to continue to balance our growth with investments in the future while maintaining improved operating leverage.”
Second Quarter 2006 Highlights include:
— New signed contracts valued at $56.6 million in the second quarter of 2006 compared to $36.4 million in the second quarter of the prior year, representing an increase of 55 percent over the prior year. Contract value is defined as total revenues to be received over the life of the contract for all elements of the contract, including license, hardware, installation, maintenance and other services, and do not include contract renewals in this figure. License revenues were $9.2 million in the second quarter of 2006, a 9 percent increase over the second quarter of 2005, excluding the $2.9 million of BISYS license revenues recognized that quarter. Open Solutions no longer recognizes license revenue from BISYS, subsequent to the acquisition of BISYS Information Services, we recognize increased data center revenues.
— Recurring revenue for the second quarter of 2006 was 77 percent of total revenue compared to 63 percent for the second quarter of 2005. We define recurring revenue as revenue from maintenance and data center hosting contracts and quarterly minimum payments from resellers.
— Continued the company’s integration efforts for the completed BISYS Information Services Group acquisition. As previously stated, this transaction provides Open Solutions greater scale to our core business, expands check imaging business, and extends processing presence to insurance, healthcare and corporate banking.
— Hosted the company’s Annual Client Conference and Solutions Expo at Caesars Palace, Las Vegas between April 8 and 12. With more than 1,500 attendees representing clients from Open Solutions’ full product line, this event marked the company’s largest client conference to date, eclipsing last year’s event by nearly 50 percent.
— Expanded the company’s product mix to include processing for Health Savings Accounts (HSAs), Corporate Money Management Accounts (CMMAs), and Customer Asset Accounts (CAAs).
— Expanded the company’s growing international presence with the announced signing of City of Bridgetown Co-operative Credit Union in Bridgetown, Barbados.
Activity Subsequent to June 30, 2006 includes:
— Announced that Eastman Credit Union, a U.S. based credit union with $1.6 billion in assets, and G and F Financial Group, a Canadian based credit union with CDN $875 million in assets, has selected Open Solutions to handle its enterprise-wide data processing needs.
— Released version 2006.1 of our enterprise-wide processing platform which upgraded core features, incorporated .NET architecture, introduced our shared application framework and improved end-user navigation further improving scalability, security, connectivity and workflow.
— Added Ross Curtis as Executive Vice President, Group Sales to lead domestic sales and account management organizations for the banking, credit union, complementary and imaging product groups.
The effective tax rate used for the nonrecurring gain as a result of an acquisition and the non-GAAP calculation is 39%, which is derived by calculating the effective annual tax rate without the effects of the stock compensation expense. For the three months ended June 30, 2006, the tax effected impact of the stock compensation expense was $1,676,000; however, in that period Open Solutions also realized a nonrecurring tax benefit related to recent changes in Canadian tax laws that resulted in a benefit of $282,000, which aggregates to a net reconciling item of $1,394,000.
Diluted earnings per share for the three and six months ended June 30, 2006 and the three and six months ended June 30, 2005, includes the impact of the convertible notes, which is calculated by adding back to net income the tax effected interest cost associated with the convertible notes and by adding the if-converted shares to the shares used to compute net income per share. The tax effected interest cost associated with the convertible notes was $716,397 for the three months ended June 30, 2006, $1,421,148 for the six months ended June 30, 2006, $702,602 for the three months ended June 30, 2005, and $1,166,948 for the six months ended June 30, 2005. For the three months ended June 30, 2006, and 2005 and for the six months ended June 30, 2006, 4,964,204 if-converted shares were added to the shares used to compute net income per share. For the six months ended June 30, 2005, 4,086,555 if-converted shares were added to the shares used to compute net income per share.
Open Solutions Inc. offers a product platform designed to integrate core data processing applications built on a single centralized Oracle relational database, with Internet banking, cash management, CRM/business intelligence, financial accounting tools, imaging, Check 21, interactive voice response, network services, web hosting and design, and payment and loan origination solutions. Open Solutions’ full suite of products and provides services to banks, thrifts and credit unions in the United States and Canada.
To learn more, please visit: www.opensolutions.com.