##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended March 31, 2010
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period From  to
 Commission File Number: 000-24931
 S1 CORPORATION
 (Exact name of registrant as specified in its charter)
 Delaware(State or other jurisdiction of 
incorporation or organization)
    
    58-2395199(I.R.S. Employer
Identification No.)705 Westech Drive 
Norcross, Georgia(Address of principal executive
offices)
    
    30092(Zip Code)
 (404) 923-3500
 (Former name, former address and former fiscal year, if changed since last report.)
 þ o
 Yes
o No o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



S1 CORPORATION
 QUARTERLY PERIOD ENDED MARCH 31, 2010
 TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial Statements:Condensed Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009
    
    
    1Condensed Consolidated Statements of Operations for the Three Months Ended
March 31, 2010 and 2009
    
    
    2Condensed Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2010 and 2009
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    22Item 4. Controls and Procedures
    
    
    22PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    23Item 1A. Risk Factors
    
    
    23Item 6. Exhibits
    
    
    23Signature
    
    
    25Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 S1 CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(Unaudited)
 March 31,
    
    
    December 31,2010
    
    
    2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    48,243
    
    
    $
    61,784Accounts receivable, net
    
    
    53,455
    
    
    
    64,470Prepaid expenses
    
    
    5,272
    
    
    
    4,729Other current assets
    
    
    8,292
    
    
    
    4,931Total current assets
    
    
    115,262
    
    
    
    135,914Property and equipment, net
    
    
    22,394
    
    
    
    23,018Intangible assets, net
    
    
    13,881
    
    
    
    4,895Goodwill, net
    
    
    145,694
    
    
    
    126,605Other assets
    
    
    7,647
    
    
    
    9,634Total assets
    
    $
    304,878
    
    
    $
    300,066LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    8,618
    
    
    $
    7,707Accrued compensation and benefits
    
    
    9,144
    
    
    
    11,569Current portion of debt obligation
    
    
    5,830
    
    
    
    1,170Accrued restructuring
    
    
    2,278
    
    
    
    2,096Income taxes payable
    
    
    2,108
    
    
    
    1,586Deferred revenues
    
    
    33,567
    
    
    
    26,837Other current liabilities
    
    
    2,424
    
    
    
    2,007Total current liabilities
    
    
    63,969
    
    
    
    52,972Debt obligation, excluding current portion
    
    
    34
    
    
    
    5,026Accrued restructuring, excluding current portion
    
    
    857
    
    
    
    1,381Other liabilities
    
    
    2,377
    
    
    
    2,046Total liabilities
    
    
    67,237
    
    
    
    61,425Stockholders equity:Preferred stock
    
    
    10,000
    
    
    
    10,000Common stock
    
    
    518
    
    
    
    517Additional paid-in-capital
    
    
    1,788,788
    
    
    
    1,787,772Accumulated deficit
    
    
    (1,558,590
    )
    
    
    (1,557,534
    )Accumulated other comprehensive loss
    
    
    (3,075
    )
    
    
    (2,114
    )Total stockholders equity
    
    
    237,641
    
    
    
    238,641Total liabilities and stockholders equity
    
    $
    304,878
    
    
    $
    300,066Preferred shares issued and outstanding
    
    
    749,064
    
    
    
    749,064Common shares issued and outstanding
    
    
    51,753,494
    
    
    
    51,712,710
   1




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##### Table of Contents



S1 CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(Unaudited)
 Three Months EndedMarch 31,2010
    
    
    2009Revenue:Software licenses
    
    $
    5,739
    
    
    $
    9,056Support and maintenance
    
    
    15,643
    
    
    
    13,827Professional services
    
    
    17,430
    
    
    
    23,075Hosting
    
    
    12,347
    
    
    
    12,330Total revenue
    
    
    51,159
    
    
    
    58,288Operating expenses:Cost of software licenses (1)
    
    
    382
    
    
    
    840Cost of professional services, support and maintenance (1)
    
    
    19,414
    
    
    
    18,260Cost of hosting (1)
    
    
    6,668
    
    
    
    6,972Selling and marketing
    
    
    6,684
    
    
    
    6,488Product development
    
    
    8,720
    
    
    
    8,172General and administrative
    
    
    7,047
    
    
    
    4,850Depreciation and amortization
    
    
    2,386
    
    
    
    2,573Total operating expenses
    
    
    51,301
    
    
    
    48,155Operating (loss) income
    
    
    (142
    )
    
    
    10,133Interest income
    
    
    56
    
    
    
    122Interest expense
    
    
    (120
    )
    
    
    (160
    )Other non-operating (expenses) income
    
    
    (157
    )
    
    
    48Interest and other (expense) income, net
    
    
    (221
    )
    
    
    10(Loss) income before income tax expense
    
    
    (363
    )
    
    
    10,143Income tax expense
    
    
    (693
    )
    
    
    (1,199
    )Net (loss) income
    
    $
    (1,056
    )
    
    $
    8,944(Loss) earnings per share:Basic
    
    $
    (0.02
    )
    
    $
    0.16Diluted
    
    $
    (0.02
    )
    
    $
    0.16Weighted average common shares outstanding  basic
    
    
    51,743,567
    
    
    
    52,833,689Weighted average common shares outstanding  fully diluted
    
    
    51,743,567
    
    
    
    53,433,880
 
 (1)
    
    Excludes charges for depreciation. Cost of software licenses includes amortization of
acquired technology.   2




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S1 CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(Unaudited)
 Three Months EndedMarch 31,2010
    
    
    2009Cash flows from operating activities:Net (loss) income
    
    $
    (1,056
    )
    
    $
    8,944Adjustments to reconcile net (loss) income to net cash provided by
operating activities:Depreciation and amortization
    
    
    2,565
    
    
    
    3,031Provision for doubtful accounts receivable and billing adjustments
    
    
    48
    
    
    
    399Deferred income taxes
    
    
    (106
    )
    
    
    (28
    )Stock-based compensation expense (benefit)
    
    
    373
    
    
    
    (2,531
    )Changes in assets and liabilities:Decrease (increase) in accounts receivable
    
    
    11,548
    
    
    
    (9,588
    )(Increase) decrease in prepaid expenses and other assets
    
    
    (405
    )
    
    
    310Increase (decrease) in accounts payable and other liabilities
    
    
    382
    
    
    
    (389
    )Decrease in accrued compensation and benefits
    
    
    (2,107
    )
    
    
    (2,267
    )Increase in income taxes payable
    
    
    498
    
    
    
    935Increase in deferred revenue
    
    
    6,334
    
    
    
    8,473Net cash provided by operating activities
    
    
    18,074
    
    
    
    7,289Cash flows from investing activities:Maturities of investment securities
    
    
    
    
    
    
    686Purchases of investment securities
    
    
    (1,117
    )
    
    
    Acquisition, net of acquired cash
    
    
    (29,249
    )
    
    
    Purchases of property, equipment and technology
    
    
    (908
    )
    
    
    (3,022
    )Net cash used in investing activities
    
    
    (31,274
    )
    
    
    (2,336
    )Cash flows from financing activities:(Payments) proceeds from exercise of employee stock awards
    
    
    (48
    )
    
    
    154Payments on capital leases and debt obligations
    
    
    (332
    )
    
    
    (1,930
    )Net cash used in financing activities
    
    
    (380
    )
    
    
    (1,776
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    39
    
    
    
    (629
    )Net (decrease) increase in cash and cash equivalents
    
    
    (13,541
    )
    
    
    2,548Cash and cash equivalents at beginning of period
    
    
    61,784
    
    
    
    63,840Cash and cash equivalents at end of period
    
    $
    48,243
    
    
    $
    66,388
   3




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##### Table of Contents



S1 CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. BACKGROUND AND BASIS OF PRESENTATION
     2. RECENT ACCOUNTING PRONOUNCEMENTS
   4




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##### Table of Contents



3. BUSINESS COMBINATION
    Cash
    
    $
    751Accounts receivables
    
    
    908Indentifiable intangible assets:Trade names
    
    
    121Acquired technology
    
    
    3,390Customer relationships
    
    
    5,986Goodwill
    
    
    19,695Property and equipment
    
    
    502Other assets
    
    
    506Deferred revenue
    
    
    (622
    )Liabilities
    
    
    (1,163
    )Total
    
    $
    30,074
 4. FAIR VALUE MEASUREMENTS
   5




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##### Table of Contents



March 31, 2010
    
    
    December 31, 2009Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedValue
    
    
    Fair Value
    
    
    Value
    
    
    Fair ValueCash and cash equivalents
    
    $
    48,243
    
    
    $
    48,243
    
    
    $
    61,784
    
    
    $
    61,784Included in other current assets:Fixed term deposits
    
    
    1,418
    
    
    
    1,418
    
    
    
    318
    
    
    
    318Restricted fixed term deposit
    
    
    2,000
    
    
    
    2,000
    
    
    
    2,000
    
    
    
    2,000Debt obligation, excluding current portion
    
    
    34
    
    
    
    33
    
    
    
    5,026
    
    
    
    4,911
 5. ACCOUNTS RECEIVABLE
  March 31,
    
    
    December 31,2010
    
    
    2009Billed receivables
    
    $
    34,428
    
    
    $
    42,862Unbilled receivables
    
    
    20,952
    
    
    
    23,907Allowance for doubtful accounts and billing adjustments
    
    
    (1,925
    )
    
    
    (2,299
    )Total
    
    $
    53,455
    
    
    $
    64,470
  6. OTHER CURRENT ASSETS
  March 31,
    
    
    December 31,2010
    
    
    2009Restricted cash and escrow deposits
    
    $
    3,625
    
    
    $
    2,059Short-term investments
    
    
    1,418
    
    
    
    318Deferred tax assets, net
    
    
    1,033
    
    
    
    1,079Other
    
    
    2,216
    
    
    
    1,475Total
    
    $
    8,292
    
    
    $
    4,931
  6




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##### Table of Contents



7. GOODWILL AND OTHER INTANGIBLE ASSETS
   Banking:
    
    
    Banking:Payments
    
    
    Large FI
    
    
    Community FI
    
    
    TotalGoodwill, net as of December 31, 2009
    
    $
    32,836
    
    
    $
    52,047
    
    
    $
    41,722
    
    
    $
    126,605Acquisition of PMSC
    
    
    
    
    
    
    
    
    
    
    19,695
    
    
    
    19,695Effect of foreign currency translations
    
    
    (260
    )
    
    
    (346
    )
    
    
    
    
    
    
    (606
    )Goodwill, net as of March 31, 2010
    
    $
    32,576
    
    
    $
    51,701
    
    
    $
    61,417
    
    
    $
    145,694
  As of March 31, 2010Gross
    
    
    Accumulated
    
    
    NetCarrying Value
    
    
    Amortization
    
    
    Carrying ValueTrade names
    
    $
    121
    
    
    $
    (10
    )
    
    $
    111Acquired technology
    
    
    25,328
    
    
    
    (20,771
    )
    
    
    4,557Customer lists
    
    
    17,986
    
    
    
    (8,773
    )
    
    
    9,213Total
    
    $
    43,435
    
    
    $
    (29,554
    )
    
    $
    13,881
 As of December 31, 2009Gross
    
    
    Accumulated
    
    
    NetCarrying Value
    
    
    Amortization
    
    
    Carrying ValueAcquired technology
    
    $
    21,938
    
    
    $
    (20,592
    )
    
    $
    1,346Customer lists
    
    
    12,000
    
    
    
    (8,451
    )
    
    
    3,549Total
    
    $
    33,938
    
    
    $
    (29,043
    )
    
    $
    4,895
  Three Months EndedMarch 31,2010
    
    
    2009Trade names
    
    $
    10
    
    
    $
    Acquired technology
    
    
    179
    
    
    
    457Customer lists
    
    
    322
    
    
    
    283Total
    
    $
    511
    
    
    $
    740
  7




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##### Table of Contents



2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014Payments
    
    $
    490
    
    
    $
    490
    
    
    $
    490
    
    
    $
    490
    
    
    $
    408Banking: Large FI
    
    
    245
    
    
    
    245
    
    
    
    183
    
    
    
    
    
    
    
    Banking: Community FI
    
    
    2,010
    
    
    
    2,089
    
    
    
    1,493
    
    
    
    1,277
    
    
    
    1,277Total
    
    $
    2,745
    
    
    $
    2,824
    
    
    $
    2,166
    
    
    $
    1,767
    
    
    $
    1,685
 8. DEFERRED REVENUE
  March 31,
    
    
    December 31,2010
    
    
    2009Software licenses
    
    $
    3,581
    
    
    $
    2,861Professional services
    
    
    9,204
    
    
    
    7,317Support and maintenance
    
    
    20,782
    
    
    
    16,659Deferred revenue, current
    
    
    33,567
    
    
    
    26,837Deferred revenue, non-current (1)
    
    
    191
    
    
    
    41Total deferred revenue
    
    $
    33,758
    
    
    $
    26,878
 (1)
    
    Non-current deferred revenue is included in Long-term Other liabilities.  9. INCOME TAXES
  10. STOCK-BASED COMPENSATION PLANS
   8




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Grants available under 2003 Stock Incentive Plan
    
    
    2,135Stock options outstanding
    
    
    6,151Restricted stock
    
    
    951Total
    
    
    9,237
  Three Months EndedMarch 31,2010
    
    
    2009Operating expenses:Cost of professional services, support and maintenance
    
    $
    67
    
    
    $
    (152
    )Cost of hosting
    
    
    31
    
    
    
    20Selling and marketing
    
    
    (76
    )
    
    
    (1,220
    )Product development
    
    
    (23
    )
    
    
    (130
    )General and administrative
    
    
    374
    
    
    
    (1,049
    )Total stock-based compensation expense (benefit)
    
    $
    373
    
    
    $
    (2,531
    )Grant type:Stock options
    
    $
    467
    
    
    $
    594Restricted stock
    
    
    598
    
    
    
    213Stock appreciation rights
    
    
    (692
    )
    
    
    (3,338
    )Total stock-based compensation expense (benefit)
    
    $
    373
    
    
    $
    (2,531
    )
  9




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11. SEGMENT REPORTING AND MAJOR CUSTOMERS
  Three Months Ended March 31, 2010Banking:
    
    
    Banking:Payments
    
    
    Large FI
    
    
    Community FI
    
    
    TotalRevenue:Software licenses
    
    $
    3,325
    
    
    $
    645
    
    
    $
    1,769
    
    
    $
    5,739Support and maintenance
    
    
    5,301
    
    
    
    5,246
    
    
    
    5,096
    
    
    
    15,643Professional services
    
    
    3,904
    
    
    
    12,649
    
    
    
    877
    
    
    
    17,430Hosting
    
    
    306
    
    
    
    6,199
    
    
    
    5,842
    
    
    
    12,347Total revenue
    
    $
    12,836
    
    
    $
    24,739
    
    
    $
    13,584
    
    
    $
    51,159Operating expenses:Cost of software licenses
    
    
    114
    
    
    
    128
    
    
    
    140
    
    
    
    382Cost of professional services, support and maintenance
    
    
    4,352
    
    
    
    9,901
    
    
    
    5,161
    
    
    
    19,414Cost of hosting
    
    
    212
    
    
    
    3,720
    
    
    
    2,736
    
    
    
    6,668Selling and marketing
    
    
    2,982
    
    
    
    2,280
    
    
    
    1,422
    
    
    
    6,684Product development
    
    
    1,455
    
    
    
    4,221
    
    
    
    3,044
    
    
    
    8,720General and administrative
    
    
    2,034
    
    
    
    3,175
    
    
    
    1,838
    
    
    
    7,047Depreciation and amortization
    
    
    467
    
    
    
    1,088
    
    
    
    831
    
    
    
    2,386Total operating expenses
    
    
    11,616
    
    
    
    24,513
    
    
    
    15,172
    
    
    
    51,301Operating income (loss)
    
    $
    1,220
    
    
    $
    226
    
    
    $
    (1,588
    )
    
    $
    (142
    )
 Three Months Ended March 31, 2009Banking:
    
    
    Banking:Payments
    
    
    Large FI
    
    
    Community FI
    
    
    TotalRevenue:Software licenses
    
    $
    4,998
    
    
    $
    2,469
    
    
    $
    1,589
    
    
    $
    9,056Support and maintenance
    
    
    4,073
    
    
    
    4,971
    
    
    
    4,783
    
    
    
    13,827Professional services
    
    
    3,376
    
    
    
    18,513
    
    
    
    1,186
    
    
    
    23,075Hosting
    
    
    153
    
    
    
    7,240
    
    
    
    4,937
    
    
    
    12,330Total revenue
    
    $
    12,600
    
    
    $
    33,193
    
    
    $
    12,495
    
    
    $
    58,288Operating expenses:Cost of software licenses
    
    
    305
    
    
    
    310
    
    
    
    225
    
    
    
    840Cost of professional services, support and maintenance
    
    
    3,060
    
    
    
    11,537
    
    
    
    3,663
    
    
    
    18,260Cost of hosting
    
    
    145
    
    
    
    4,016
    
    
    
    2,811
    
    
    
    6,972Selling and marketing
    
    
    2,926
    
    
    
    2,019
    
    
    
    1,543
    
    
    
    6,488Product development
    
    
    1,113
    
    
    
    5,055
    
    
    
    2,004
    
    
    
    8,172General and administrative
    
    
    1,064
    
    
    
    2,657
    
    
    
    1,129
    
    
    
    4,850Depreciation and amortization
    
    
    423
    
    
    
    1,308
    
    
    
    842
    
    
    
    2,573Total operating expenses
    
    
    9,036
    
    
    
    26,902
    
    
    
    12,217
    
    
    
    48,155Operating income
    
    $
    3,564
    
    
    $
    6,291
    
    
    $
    278
    
    
    $
    10,133
 Major Customer.
  10




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##### Table of Contents



Geography
 Revenue
    
    
    Property and EquipmentThree Months Ended March 31,
    
    
    March 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Americas
    
    $
    37,194
    
    
    $
    42,437
    
    
    $
    19,862
    
    
    $
    20,451International:EMEI
    
    
    7,422
    
    
    
    8,832
    
    
    
    987
    
    
    
    985Africa
    
    
    3,305
    
    
    
    2,538
    
    
    
    1,450
    
    
    
    1,494APAC
    
    
    3,238
    
    
    
    4,481
    
    
    
    95
    
    
    
    88Total
    
    $
    51,159
    
    
    $
    58,288
    
    
    $
    22,394
    
    
    $
    23,018
 12. NET(LOSS) INCOME PER COMMON SHARE
  Three Months EndedMarch 31,2010
    
    
    2009Basic (loss) earnings per share:Net (loss) income
    
    $
    (1,056
    )
    
    $
    8,944Amount allocated to participating preferred stockholders
    
    
    
    
    
    
    (176
    )Amount allocated to participating restricted stockholders
    
    
    
    
    
    
    (53
    )Net (loss) income available to common stockholders
    
    $
    (1,056
    )
    
    $
    8,715Basic weighted average common shares outstanding
    
    
    51,744
    
    
    
    52,834Basic (loss) earnings per share
    
    $
    (0.02
    )
    
    $
    0.16Diluted (loss) earnings per share:Net (loss) income
    
    $
    (1,056
    )
    
    $
    8,944Amount allocated to participating preferred stockholders
    
    
    
    
    
    
    (175
    )Amount allocated to participating restricted stockholders
    
    
    
    
    
    
    (52
    )Net (loss) income available to common stockholders
    
    $
    (1,056
    )
    
    $
    8,717Basic weighted average common shares outstanding
    
    
    51,744
    
    
    
    52,834Dilutive effect of employee stock options
    
    
    
    
    
    
    600Diluted weighted average common shares outstanding
    
    
    51,744
    
    
    
    53,434Diluted (loss) earnings per share
    
    $
    (0.02
    )
    
    $
    0.16
 13. COMPREHENSIVE (LOSS) INCOME
  Three Months EndedMarch 31,2010
    
    
    2009Net (loss) income
    
    $
    (1,056
    )
    
    $
    8,944Other comprehensive loss:Currency translation adjustment
    
    
    (961
    )
    
    
    (970
    )Realized gain on securities, net of tax
    
    
    
    
    
    
    (54
    )Total other comprehensive loss
    
    
    (961
    )
    
    
    (1,024
    )Comprehensive (loss) income
    
    $
    (2,017
    )
    
    $
    7,920
  11




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   Executive Overview
      12




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##### Table of Contents



Summary financial results.
 Revenue from Significant Customers
  Recent Accounting Pronouncements
   Critical Accounting Policies and Estimates
   
    
    revenue recognition;
    
    estimation of our allowance for doubtful accounts and billing adjustments;
    
    valuation and recoverability of long-lived assets, including goodwill;
  13




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##### Table of Contents




    
    determination of the fair value of stock-based compensation;
    
    recognition of costs in connection with restructuring plans; and
    
    income taxes.
 Revenue recognition.
 Stock-based compensation.
 Three Months EndedMarch 31,2010
    
    
    2009Operating expenses:Cost of professional services, support and maintenance
    
    $
    67
    
    
    $
    (152
    )Cost of hosting
    
    
    31
    
    
    
    20Selling and marketing
    
    
    (76
    )
    
    
    (1,220
    )Product development
    
    
    (23
    )
    
    
    (130
    )General and administrative
    
    
    374
    
    
    
    (1,049
    )Total stock-based compensation expense (benefit)
    
    $
    373
    
    
    $
    (2,531
    )Grant type:Stock options
    
    $
    467
    
    
    $
    594Restricted stock
    
    
    598
    
    
    
    213Stock appreciation rights
    
    
    (692
    )
    
    
    (3,338
    )Total stock-based compensation expense (benefit)
    
    $
    373
    
    
    $
    (2,531
    )
  14




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##### Table of Contents



Effects of Foreign Currencies
   Three Months Ended March 31, 2010At Prior YearExchange
    
    
    Exchange RateRates (1)
    
    
    Effect
    
    
    As reportedRevenue
    
    $
    50,129
    
    
    $
    1,030
    
    
    $
    51,159Operating expenses
    
    
    49,711
    
    
    
    1,590
    
    
    
    51,301Operating income (loss)
    
    
    418
    
    
    
    (560
    )
    
    
    (142
    )Net loss
    
    
    (686
    )
    
    
    (370
    )
    
    
    (1,056
    )Basic loss per share
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.02
    )Diluted loss per share
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.02
    )
 (1)
    
    Current year results translated into U.S. Dollars using prior years period average
exchange rates.  15




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##### Table of Contents



Consolidated Results of Operations
  Three Months EndedMarch 31,2010
    
    
    2009
    
    
    ChangeRevenue:Software licenses
    
    $
    5,739
    
    
    $
    9,056
    
    
    
    -37
    %Support and maintenance
    
    
    15,643
    
    
    
    13,827
    
    
    
    13
    %Professional services
    
    
    17,430
    
    
    
    23,075
    
    
    
    -24
    %Hosting
    
    
    12,347
    
    
    
    12,330
    
    
    
    0
    %Total revenue
    
    
    51,159
    
    
    
    58,288
    
    
    
    -12
    %Operating Expenses:Cost of software licenses (1)
    
    
    382
    
    
    
    840
    
    
    
    -55
    %Cost of professional services, support and maintenance (1)
    
    
    19,414
    
    
    
    18,260
    
    
    
    6
    %Cost of hosting (1)
    
    
    6,668
    
    
    
    6,972
    
    
    
    -4
    %Selling and marketing
    
    
    6,684
    
    
    
    6,488
    
    
    
    3
    %Product development
    
    
    8,720
    
    
    
    8,172
    
    
    
    7
    %General and administrative
    
    
    7,047
    
    
    
    4,850
    
    
    
    45
    %Depreciation and amortization
    
    
    2,386
    
    
    
    2,573
    
    
    
    -7
    %Total operating expenses
    
    
    51,301
    
    
    
    48,155
    
    
    
    7
    %Operating (loss) income
    
    
    (142
    )
    
    
    10,133
    
    
    
    -101
    %Interest and other (expense) income, net
    
    
    (221
    )
    
    
    10
    
    
    
    -2310
    %(Loss) income before income tax expense
    
    
    (363
    )
    
    
    10,143
    
    
    
    -104
    %Income tax expense
    
    
    (693
    )
    
    
    (1,199
    )
    
    
    -42
    %Net (loss) income
    
    $
    (1,056
    )
    
    $
    8,944
    
    
    
    -112
    %(Loss) earnings per shareBasic
    
    $
    (0.02
    )
    
    $
    0.16Diluted
    
    $
    (0.02
    )
    
    $
    0.16Effective tax rate
    
    
    -191
    %
    
    
    12
    %Operating expenses as a percent of revenue:Cost of software licenses (2)
    
    
    7
    %
    
    
    9
    %Cost of professional services, support and maintenance (2)
    
    
    59
    %
    
    
    49
    %Cost of hosting (2)
    
    
    54
    %
    
    
    57
    %Selling and marketing
    
    
    13
    %
    
    
    11
    %Product development
    
    
    17
    %
    
    
    14
    %General and administrative
    
    
    14
    %
    
    
    8
    %Depreciation and amortization of other intagible assets
    
    
    5
    %
    
    
    4
    %Operating (loss) income
    
    
    0
    %
    
    
    17
    %Net (loss) income
    
    
    -2
    %
    
    
    15
    %
 (1)
    
    The Cost of software licenses, professional services, support and maintenance, and hosting
excludes charges for depreciation. The Cost of software licenses includes amortization of
acquired technology.(2)
    
    Each cost of revenue is a percentage of the applicable revenue type for the periods
presented.  16




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##### Table of Contents



Consolidated Results  Comparison of the Three Months Ended March 31, 2010 and 2009
 Revenue.
 Operating (loss) income.
 Interest and other (expense) income, net.
 Income tax expense
  17




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##### Table of Contents



Payments Segment Results of Operations
 Three Months EndedMarch 31,2010
    
    
    2009
    
    
    ChangeRevenue:Software licenses
    
    $
    3,325
    
    
    $
    4,998
    
    
    
    -33
    %Support and maintenance
    
    
    5,301
    
    
    
    4,073
    
    
    
    30
    %Professional services
    
    
    3,904
    
    
    
    3,376
    
    
    
    16
    %Hosting
    
    
    306
    
    
    
    153
    
    
    
    100
    %Total revenue
    
    
    12,836
    
    
    
    12,600
    
    
    
    2
    %Operating Expenses:Cost of software licenses
    
    
    114
    
    
    
    305
    
    
    
    -63
    %Cost of professional services, support and maintenance
    
    
    4,352
    
    
    
    3,060
    
    
    
    42
    %Cost of hosting
    
    
    212
    
    
    
    145
    
    
    
    46
    %Selling and marketing
    
    
    2,982
    
    
    
    2,926
    
    
    
    2
    %Product development
    
    
    1,455
    
    
    
    1,113
    
    
    
    31
    %General and administrative
    
    
    2,034
    
    
    
    1,064
    
    
    
    91
    %Depreciation and amortization
    
    
    467
    
    
    
    423
    
    
    
    10
    %Total operating expenses
    
    
    11,616
    
    
    
    9,036
    
    
    
    29
    %Operating income
    
    $
    1,220
    
    
    $
    3,564
    
    
    
    -66
    %
 Payments Results  Comparison of the Three Months ended March 31, 2010 and 2009
 Revenue.
 Operating income.
  18




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##### Table of Contents



Banking: Large FI Segment Results of Operations
 Three Months EndedMarch 31,2010
    
    
    2009
    
    
    ChangeRevenue:Software licenses
    
    $
    645
    
    
    $
    2,469
    
    
    
    -74
    %Support and maintenance
    
    
    5,246
    
    
    
    4,971
    
    
    
    6
    %Professional services
    
    
    12,649
    
    
    
    18,513
    
    
    
    -32
    %Hosting
    
    
    6,199
    
    
    
    7,240
    
    
    
    -14
    %Total revenue
    
    
    24,739
    
    
    
    33,193
    
    
    
    -25
    %Operating Expenses:Cost of software licenses
    
    
    128
    
    
    
    310
    
    
    
    -59
    %Cost of professional services, support and maintenance
    
    
    9,901
    
    
    
    11,537
    
    
    
    -14
    %Cost of hosting
    
    
    3,720
    
    
    
    4,016
    
    
    
    -7
    %Selling and marketing
    
    
    2,280
    
    
    
    2,019
    
    
    
    13
    %Product development
    
    
    4,221
    
    
    
    5,055
    
    
    
    -16
    %General and administrative
    
    
    3,175
    
    
    
    2,657
    
    
    
    19
    %Depreciation and amortization
    
    
    1,088
    
    
    
    1,308
    
    
    
    -17
    %Total operating expenses
    
    
    24,513
    
    
    
    26,902
    
    
    
    -9
    %Operating income
    
    $
    226
    
    
    $
    6,291
    
    
    
    -96
    %
 Banking: Large FI Segment Results  Comparison of the Three Months ended March 31, 2010 and
2009
 Revenue.
 Operating income.
  19




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##### Table of Contents



Banking: Community FI Segment Results of Operations
 Three Months EndedMarch 31,2010
    
    
    2009
    
    
    ChangeRevenue:Software licenses
    
    $
    1,769
    
    
    $
    1,589
    
    
    
    11
    %Support and maintenance
    
    
    5,096
    
    
    
    4,783
    
    
    
    7
    %Professional services
    
    
    877
    
    
    
    1,186
    
    
    
    -26
    %Hosting
    
    
    5,842
    
    
    
    4,937
    
    
    
    18
    %Total revenue
    
    
    13,584
    
    
    
    12,495
    
    
    
    9
    %Operating Expenses:Cost of software licenses
    
    
    140
    
    
    
    225
    
    
    
    -38
    %Cost of professional services, support and maintenance
    
    
    5,161
    
    
    
    3,663
    
    
    
    41
    %Cost of hosting
    
    
    2,736
    
    
    
    2,811
    
    
    
    -3
    %Selling and marketing
    
    
    1,422
    
    
    
    1,543
    
    
    
    -8
    %Product development
    
    
    3,044
    
    
    
    2,004
    
    
    
    52
    %General and administrative
    
    
    1,838
    
    
    
    1,129
    
    
    
    63
    %Depreciation and amortization
    
    
    831
    
    
    
    842
    
    
    
    -1
    %Total operating expenses
    
    
    15,172
    
    
    
    12,217
    
    
    
    24
    %Operating (loss) income
    
    $
    (1,588
    )
    
    $
    278
    
    
    
    -671
    %
 Banking: Community FI Segment Results  Comparison of the Three Months ended March 31, 2010
and 2009
 Revenue.
 Operating (loss) income.
  20




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##### Table of Contents



Liquidity and Capital Resources
  Three Months ended March 31,2010
    
    
    2009Net cash provided by operating activities before
changes in operating assets and liabilities
    
    $
    1,824
    
    
    $
    9,815Change in operating assets and liabilities
    
    
    16,250
    
    
    
    (2,526
    )Net cash provided by operating activities
    
    
    18,074
    
    
    
    7,289Net cash used in investing activities
    
    
    (31,274
    )
    
    
    (2,336
    )Net cash used in financing activities
    
    
    (380
    )
    
    
    (1,776
    )Effect of exchange rates on cash and cash equivalents
    
    
    39
    
    
    
    (629
    )Net (decrease) increase in cash and cash equivalents
    
    $
    (13,541
    )
    
    $
    2,548
 March 31,
    
    
    December 31,2010
    
    
    2009Cash and cash equivalents
    
    $
    48,243
    
    
    $
    61,784Working capital (1)
    
    
    51,293
    
    
    
    82,942Total assets
    
    
    304,878
    
    
    
    300,066Total stockholders equity
    
    
    237,641
    
    
    
    238,641
 (1)
    
    Working capital includes deferred revenue of $33.6 million and $26.8 million as of March 31,
2010 and December 31, 2009, respectively. Operating Activities
 Investing Activities
 Financing Activities
 Contractual Obligations and Off-Balance Sheet Arrangements.
  21




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##### Table of Contents



Restructuring.
 Stock appreciation rights awards.
 Capital requirements.
 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
 Changes in Internal Control over Financial Reporting.
  22




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  You should consider carefully the Risk Factors. If any of these risks actually occur, our
business, financial condition or results of operations would likely suffer. In that case, the
trading price of our common stock could decline, and you may lose all or a part of the money you
paid to buy our common stock.
 
 Item 6. Exhibits
 Exhibit No.
    
    Exhibit Description2.1
    
    
    Stock Purchase Agreement dated as of March 4, 2010 by and among S1 Corporation (S1),
PM Systems Corporation, James A. Krakeel and Robert M. Broadwell, Jr. (filed as Exhibit 2.1
to S1s Current Report on Form 8-K filed with the Securities and Exchange Commission
(theSEC) on March 10, 2010 and incorporated herein by reference).3.1
    
    
    Amended and Restated Certificate of Incorporation of S1 (filed as Exhibit 1 to S1s
Registration Statement on Form 8-A (File No. 000-24931) filed with the SEC on September 30,
1998 and incorporated herein by reference).3.2
    
    
    Certificate of Amendment of Amended and Restated Certificate of Incorporation of S1
dated June 3, 1999 (filed as Exhibit 4.2 to S1s Registration Statement on Form S-8 (File
No. 333-82369) filed with the SEC on July 7, 1999 and incorporated herein by reference).3.3
    
    
    Certificate of Amendment of Amended and Restated Certificate of Incorporation of S1
dated November 10, 1999 (filed as Exhibit 3.3 to S1s Annual Report on Form 10-K filed with
the SEC on March 30, 2000 and incorporated herein by reference).3.4
    
    
    Certificate of Designation for S1s Series B Redeemable Convertible Preferred Stock
(filed as Exhibit 2 to S1s Registration Statement on Form 8-A (File No. 000-24931) filed
with the SEC on September 30, 1998 and incorporated herein by reference).3.5
    
    
    Amended and Restated Bylaws of S1, as amended (filed as Exhibit 3.6 to S1s Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 2006 and incorporated herein
by reference).4.1
    
    
    Specimen certificate for S1s common stock (filed as Exhibit 4 to S1s Quarterly Report
on Form 10-Q for the quarterly period ended March 31, 2000 and incorporated herein by
reference).4.2
    
    
    Specimen certificate for S1s Series B Redeemable Convertible Preferred Stock (filed as
Exhibit 4.3 to S1s Annual Report on Form 10-K for the fiscal year ended December 31, 1998
and incorporated herein by reference).10.1
    
    
    Description of Arrangement for Directors Fees (filed as Exhibit 10.11 to S1s Annual
Report on Form 10-K for the fiscal year ended December 31, 2009, filed with the SEC on
March 5, 2010 and incorporated herein by reference).
  23




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##### Table of Contents



Exhibit No.
    
    Exhibit Description10.2
    
    

Separation and Consulting Agreement between S1 and Meigan Putnam dated January 12, 2010
(filed as Exhibit 10.1 to S1s Amendment No. 1 to Current Report on Form 8-K filed with the
SEC on January 15, 2010 and incorporated herein by reference).10.3
    
    
    S1 Corporation 2010 Management Incentive Plan (filed as Exhibit 10.1 to S1s Current
Report on Form 8-K filed with the SEC on February 4, 2010 and incorporated herein by
reference).31.1
    
    
    Certification of Chief Executive Officer.31.2
    
    
    Certification of Chief Financial Officer.32.1
    
    
    Certificate of Chief Executive Officer pursuant to §906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certificate of Chief Financial Officer pursuant to §906 of the Sarbanes-Oxley Act of 2002.
  24




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##### Table of Contents



SIGNATURE
  S1 CORPORATIONBy:
    /s/ PAUL M. PARRISHPaul M. ParrishChief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)  25