##### 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, 2011
 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
 o 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, 2011
 TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial Statements:Condensed Consolidated Balance Sheets as of March 31, 2011 and December 31, 2010
    
    
    3Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2011 and 2010
    
    
    4Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2010
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 4. Controls and Procedures
    
    
    20PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    21Item 1A. Risk Factors
    
    
    21Item 6. Exhibits
    
    
    21Signature
    
    
    22Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   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 AND PER SHARE DATA)
 (Unaudited)
 March 31,
    
    
    December 31,2011
    
    
    2010ASSETSCurrent assets:Cash and cash equivalents
    
    $
    59,920
    
    
    $
    61,917Accounts receivable, net
    
    
    54,862
    
    
    
    44,370Prepaid expenses
    
    
    4,566
    
    
    
    4,827Other current assets
    
    
    7,507
    
    
    
    6,612Total current assets
    
    
    126,855
    
    
    
    117,726Property and equipment, net
    
    
    21,937
    
    
    
    22,330Intangible assets, net
    
    
    11,098
    
    
    
    11,846Goodwill, net
    
    
    147,895
    
    
    
    147,544Other assets
    
    
    8,377
    
    
    
    10,207Total assets
    
    $
    316,162
    
    
    $
    309,653LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    9,194
    
    
    $
    9,779Accrued compensation and benefits
    
    
    11,593
    
    
    
    9,705Current portion of debt obligation
    
    
    56
    
    
    
    5,046Current portion of accrued restructuring
    
    
    954
    
    
    
    1,528Income taxes payable
    
    
    156
    
    
    
    1,950Deferred revenues
    
    
    48,575
    
    
    
    38,022Other current liabilities
    
    
    2,353
    
    
    
    2,853Total current liabilities
    
    
    72,881
    
    
    
    68,883Other liabilities
    
    
    3,059
    
    
    
    3,157Total liabilities
    
    
    75,940
    
    
    
    72,040Stockholders equity:Common stock, $0.01 par value per share. Authorized 350,000,000 shares. Issued
and outstanding
53,421,860 and 53,317,063 shares at March 31, 2011 and December 31, 2010, respectively
    
    
    534
    
    
    
    533Additional paid-in-capital
    
    
    1,804,147
    
    
    
    1,802,795Accumulated deficit
    
    
    (1,563,135
    )
    
    
    (1,563,817
    )Accumulated other comprehensive loss
    
    
    (1,324
    )
    
    
    (1,898
    )Total stockholders equity
    
    
    240,222
    
    
    
    237,613Total liabilities and stockholders equity
    
    $
    316,162
    
    
    $
    309,653
   3




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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 31,2011
    
    
    2010Revenue:Software licenses
    
    $
    8,836
    
    
    $
    5,739Support and maintenance
    
    
    16,130
    
    
    
    15,643Professional services
    
    
    18,767
    
    
    
    17,430Hosting
    
    
    14,107
    
    
    
    12,347Total revenue
    
    
    57,840
    
    
    
    51,159Operating expenses:Cost of software licenses (1)
    
    
    599
    
    
    
    382Cost of professional services, support and
maintenance (1)
    
    
    23,113
    
    
    
    19,414Cost of hosting (1)
    
    
    7,345
    
    
    
    6,668Selling and marketing
    
    
    7,281
    
    
    
    6,684Product development
    
    
    8,783
    
    
    
    8,720General and administrative
    
    
    6,766
    
    
    
    7,047Depreciation and amortization
    
    
    2,533
    
    
    
    2,386Total operating expenses
    
    
    56,420
    
    
    
    51,301Operating income (loss)
    
    
    1,420
    
    
    
    (142
    )Interest income
    
    
    47
    
    
    
    56Interest expense
    
    
    (152
    )
    
    
    (120
    )Other non-operating expenses
    
    
    (182
    )
    
    
    (157
    )Interest and other expense, net
    
    
    (287
    )
    
    
    (221
    )Income (loss) before income tax expense
    
    
    1,133
    
    
    
    (363
    )Income tax expense
    
    
    (451
    )
    
    
    (693
    )Net income (loss)
    
    $
    682
    
    
    $
    (1,056
    )Net income (loss) per share:Basic
    
    $
    0.01
    
    
    $
    (0.02
    )Diluted
    
    $
    0.01
    
    
    $
    (0.02
    )Weighted average common shares outstanding  basic
    
    
    53,382,817
    
    
    
    51,743,937Weighted average common shares outstanding  fully diluted
    
    
    54,126,619
    
    
    
    51,743,937
 
 (1)
    
    Excludes charges for depreciation. Cost of software licenses includes amortization of
acquired technology.   4




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S1 CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (IN THOUSANDS)
 (Unaudited)
 Three Months EndedMarch 31,2011
    
    
    2010Cash flows from operating activities:Net income (loss)
    
    $
    682
    
    
    $
    (1,056
    )Adjustments to reconcile net income (loss) to net cash from operating activities:Depreciation and amortization
    
    
    2,825
    
    
    
    2,565Provision for doubtful accounts receivable and billing adjustments
    
    
    61
    
    
    
    48Deferred income taxes
    
    
    (30
    )
    
    
    (106
    )Stock-based compensation expense
    
    
    844
    
    
    
    373Changes in assets and liabilities:(Increase) decrease in accounts receivable
    
    
    (10,511
    )
    
    
    11,548Decrease (increase) in prepaid expenses and other assets
    
    
    1,381
    
    
    
    (405
    )(Decrease) increase in accounts payable and other liabilities
    
    
    (1,726
    )
    
    
    382Increase (decrease) in accrued compensation and benefits
    
    
    2,040
    
    
    
    (2,107
    )(Decrease) increase in income taxes payable
    
    
    (1,852
    )
    
    
    498Increase in deferred revenue
    
    
    10,431
    
    
    
    6,334Net cash provided by operating activities
    
    
    4,145
    
    
    
    18,074Cash flows from investing activities:Purchases of investment securities
    
    
    
    
    
    
    (1,117
    )Acquisitions, net of acquired cash
    
    
    
    
    
    
    (29,249
    )Purchases of property, equipment and technology
    
    
    (1,713
    )
    
    
    (908
    )Net cash used in investing activities
    
    
    (1,713
    )
    
    
    (31,274
    )Cash flows from financing activities:Proceeds (payments) from the exercise of stock awards
    
    
    309
    
    
    
    (48
    )Payments on capital leases and debt obligations
    
    
    (4,997
    )
    
    
    (332
    )Net cash used in financing activities
    
    
    (4,688
    )
    
    
    (380
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    259
    
    
    
    39Net decrease in cash and cash equivalents
    
    
    (1,997
    )
    
    
    (13,541
    )Cash and cash equivalents at beginning of period
    
    
    61,917
    
    
    
    61,784Cash and cash equivalents at end of period
    
    $
    59,920
    
    
    $
    48,243
   5




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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
    6




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##### Table of Contents



3. FAIR VALUE MEASUREMENTS
  
    
    Level 1 which is defined as observable inputs such as quoted prices in active
markets;
 
    
    Level 2 which is defined as inputs other than quoted prices in active markets
that are either directly or indirectly observable; and
 
    
    Level 3 which is defined as unobservable inputs in which little or no market data
exists therefore requiring an entity to develop its own assumptions.
   March 31, 2011
    
    
    December 31, 2010Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedValue
    
    
    Fair Value
    
    
    Value
    
    
    Fair ValueAssetsCash and cash equivalents
    
    $
    59,920
    
    
    $
    59,920
    
    
    $
    61,917
    
    
    $
    61,917Restricted fixed term deposit
    
    
    2,000
    
    
    
    2,000
    
    
    
    2,000
    
    
    
    2,000LiabilitiesDebt obligation, excluding
current portion
    
    
    32
    
    
    
    34
    
    
    
    35
    
    
    
    36Deferred compensation
    
    
    308
    
    
    
    308
    
    
    
    298
    
    
    
    298
 4. ACCOUNTS RECEIVABLE
  March 31,
    
    
    December 31,2011
    
    
    2010Billed receivables
    
    $
    48,697
    
    
    $
    35,264Unbilled receivables
    
    
    9,369
    
    
    
    12,415Allowance for doubtful accounts and
billing adjustments
    
    
    (3,204
    )
    
    
    (3,309
    )Total
    
    $
    54,862
    
    
    $
    44,370
   7




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##### Table of Contents



5. OTHER CURRENT ASSETS
  March 31,
    
    
    December 31,2011
    
    
    2010Restricted cash and escrow deposits
    
    $
    2,477
    
    
    $
    2,063Taxes receivable
    
    
    1,251
    
    
    
    1,582Deferred tax assets, net
    
    
    2,156
    
    
    
    1,859Other
    
    
    1,623
    
    
    
    1,108Total
    
    $
    7,507
    
    
    $
    6,612
 6. GOODWILL AND INTANGIBLE ASSETS
  Banking:
    
    
    Banking:Payments
    
    
    Large FI
    
    
    Community FI
    
    
    TotalGoodwill, net as of December 31, 2010
    
    $
    58,343
    
    
    $
    51,756
    
    
    $
    37,445
    
    
    $
    147,544Effect of foreign currency translations
    
    
    24
    
    
    
    307
    
    
    
    20
    
    
    
    351Goodwill, net as of March 31, 2011
    
    $
    58,367
    
    
    $
    52,063
    
    
    $
    37,465
    
    
    $
    147,895
  As of March 31, 2011Gross
    
    
    Accumulated
    
    
    NetCarrying Value
    
    
    Amortization
    
    
    Carrying ValueTrade names
    
    $
    121
    
    
    $
    (121
    )
    
    $
    Acquired technology
    
    
    25,328
    
    
    
    (21,938
    )
    
    
    3,390Customer lists
    
    
    18,190
    
    
    
    (10,482
    )
    
    
    7,708Total
    
    $
    43,639
    
    
    $
    (32,541
    )
    
    $
    11,098
 As of December 31, 2010Gross
    
    
    Accumulated
    
    
    NetCarrying Value
    
    
    Amortization
    
    
    Carrying ValueTrade names
    
    $
    121
    
    
    $
    (101
    )
    
    $
    20Acquired technology
    
    
    25,328
    
    
    
    (21,646
    )
    
    
    3,682Customer lists
    
    
    18,196
    
    
    
    (10,052
    )
    
    
    8,144Total
    
    $
    43,645
    
    
    $
    (31,799
    )
    
    $
    11,846
  8




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##### Table of Contents



Three Months EndedMarch 31,2011
    
    
    2010Trade names
    
    $
    20
    
    
    $
    10Acquired technology
    
    
    292
    
    
    
    179Customer lists
    
    
    431
    
    
    
    322Total
    
    $
    743
    
    
    $
    511
  2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015Payments
    
    $
    524
    
    
    $
    524
    
    
    $
    524
    
    
    $
    442
    
    
    $
    34Banking: Large FI
    
    
    245
    
    
    
    184
    
    
    
    
    
    
    
    
    
    
    
    Banking: Community FI
    
    
    2,089
    
    
    
    1,493
    
    
    
    1,277
    
    
    
    1,277
    
    
    
    712Total
    
    $
    2,858
    
    
    $
    2,201
    
    
    $
    1,801
    
    
    $
    1,719
    
    
    $
    746
 7. INCOME TAXES
  8. STOCK-BASED COMPENSATION PLANS
   9




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Number ofSharesGrants available under 2003 Stock Incentive Plan
    
    
    1,271Stock options outstanding
    
    
    5,762Restricted stock outstanding
    
    
    1,170Total
    
    
    8,203
   Three Months EndedMarch 31,2011
    
    
    2010Operating expenses:Cost of professional services, support and maintenance
    
    $
    35
    
    
    $
    67Cost of hosting
    
    
    30
    
    
    
    31Selling and marketing
    
    
    89
    
    
    
    (76
    )Product development
    
    
    93
    
    
    
    (23
    )General and administrative
    
    
    597
    
    
    
    374Total stock-based compensation expense
    
    $
    844
    
    
    $
    373Grant type:Stock options
    
    $
    363
    
    
    $
    467Restricted stock
    
    
    681
    
    
    
    598Stock appreciation rights
    
    
    (200
    )
    
    
    (692
    )Total stock-based compensation expense
    
    $
    844
    
    
    $
    373
 9. COMPREHENSIVE INCOME (LOSS)
  Three Months EndedMarch 31,2011
    
    
    2010Net income (loss)
    
    $
    682
    
    
    $
    (1,056
    )Other comprehensive income (loss):Currency translation adjustment, net of taxes
    
    
    574
    
    
    
    (961
    )Total other comprehensive income (loss)
    
    
    574
    
    
    
    (961
    )Comprehensive income (loss)
    
    $
    1,256
    
    
    $
    (2,017
    )
  10




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##### Table of Contents



10. SEGMENT REPORTING AND MAJOR CUSTOMERS
  Three Months Ended March 31, 2011
    
    
    Three Months Ended March 31, 2010Banking:
    
    
    Banking:
    
    
    
    
    
    
    
    
    
    
    Banking:
    
    
    Banking:Payments
    
    
    Large FI
    
    
    Community FI
    
    
    Total
    
    
    Payments
    
    
    Large FI
    
    
    Community FI
    
    
    TotalRevenue:Software licenses
    
    $
    4,907
    
    
    $
    1,766
    
    
    $
    2,163
    
    
    $
    8,836
    
    
    $
    3,325
    
    
    $
    645
    
    
    $
    1,769
    
    
    $
    5,739Support and maintenance
    
    
    6,060
    
    
    
    5,431
    
    
    
    4,639
    
    
    
    16,130
    
    
    
    5,301
    
    
    
    5,246
    
    
    
    5,096
    
    
    
    15,643Professional services
    
    
    4,697
    
    
    
    13,084
    
    
    
    986
    
    
    
    18,767
    
    
    
    3,904
    
    
    
    12,649
    
    
    
    877
    
    
    
    17,430Hosting
    
    
    308
    
    
    
    5,755
    
    
    
    8,044
    
    
    
    14,107
    
    
    
    306
    
    
    
    6,199
    
    
    
    5,842
    
    
    
    12,347Total revenue
    
    $
    15,972
    
    
    $
    26,036
    
    
    $
    15,832
    
    
    $
    57,840
    
    
    $
    12,836
    
    
    $
    24,739
    
    
    $
    13,584
    
    
    $
    51,159Operating expenses:Cost of software licenses
    
    
    18
    
    
    
    126
    
    
    
    455
    
    
    
    599
    
    
    
    114
    
    
    
    128
    
    
    
    140
    
    
    
    382Cost of professional
services,
support and maintenance
    
    
    5,810
    
    
    
    11,926
    
    
    
    5,377
    
    
    
    23,113
    
    
    
    4,352
    
    
    
    9,901
    
    
    
    5,161
    
    
    
    19,414Cost of hosting
    
    
    375
    
    
    
    3,642
    
    
    
    3,328
    
    
    
    7,345
    
    
    
    212
    
    
    
    3,720
    
    
    
    2,736
    
    
    
    6,668Selling and marketing
    
    
    3,458
    
    
    
    2,154
    
    
    
    1,669
    
    
    
    7,281
    
    
    
    2,982
    
    
    
    2,280
    
    
    
    1,422
    
    
    
    6,684Product development
    
    
    1,540
    
    
    
    4,188
    
    
    
    3,055
    
    
    
    8,783
    
    
    
    1,455
    
    
    
    4,221
    
    
    
    3,044
    
    
    
    8,720General and administrative
    
    
    2,249
    
    
    
    2,547
    
    
    
    1,970
    
    
    
    6,766
    
    
    
    2,034
    
    
    
    3,175
    
    
    
    1,838
    
    
    
    7,047Depreciation and
amortization
    
    
    510
    
    
    
    1,104
    
    
    
    919
    
    
    
    2,533
    
    
    
    467
    
    
    
    1,088
    
    
    
    831
    
    
    
    2,386Total operating expenses
    
    
    13,960
    
    
    
    25,687
    
    
    
    16,773
    
    
    
    56,420
    
    
    
    11,616
    
    
    
    24,513
    
    
    
    15,172
    
    
    
    51,301Operating income (loss)
    
    $
    2,012
    
    
    $
    349
    
    
    $
    (941
    )
    
    $
    1,420
    
    
    $
    1,220
    
    
    $
    226
    
    
    $
    (1,588
    )
    
    $
    (142
    )
 Major Customer.
 Geography
 Revenue
    
    
    Property and EquipmentThree Months Ended March 31,
    
    
    March 31,
    
    
    December 31,2011
    
    
    2010
    
    
    2011
    
    
    2010Americas
    
    $
    42,058
    
    
    $
    37,194
    
    
    $
    19,374
    
    
    $
    19,685International:EMEI
    
    
    9,277
    
    
    
    7,422
    
    
    
    995
    
    
    
    1,013Africa
    
    
    3,547
    
    
    
    3,305
    
    
    
    1,327
    
    
    
    1,461APAC
    
    
    2,958
    
    
    
    3,238
    
    
    
    241
    
    
    
    171Total
    
    $
    57,840
    
    
    $
    51,159
    
    
    $
    21,937
    
    
    $
    22,330
  11




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11. NET INCOME (LOSS) PER COMMON SHARE
  Three Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2011
    
    
    2010Basic income (loss) per share:Net income (loss)
    
    $
    682
    
    
    $
    (1,056
    )
    
    $
    682
    
    
    $
    (1,056
    )Amount allocated to participating restricted stockholders
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    Net income (loss) available to common
stockholders
    
    $
    667
    
    
    $
    (1,056
    )
    
    $
    682
    
    
    $
    (1,056
    )Basic weighted average common shares outstanding
    
    
    53,383
    
    
    
    51,744
    
    
    
    52,228
    
    
    
    51,744Basic income (loss) per share
    
    $
    0.01
    
    
    $
    (0.02
    )
    
    $
    0.01
    
    
    $
    (0.02
    )Diluted income (loss) per share:Net income (loss)
    
    $
    682
    
    
    $
    (1,056
    )
    
    $
    682
    
    
    $
    (1,056
    )Amount allocated to participating restricted stockholders
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    Net income (loss) available to common
stockholders
    
    $
    667
    
    
    $
    (1,056
    )
    
    $
    682
    
    
    $
    (1,056
    )Basic weighted average common shares outstanding
    
    
    53,383
    
    
    
    51,744
    
    
    
    52,228
    
    
    
    51,744Dilutive effect of employee stock options
    
    
    744
    
    
    
    
    
    
    
    
    
    
    
    Diluted weighted average common shares outstanding
    
    
    54,127
    
    
    
    51,744
    
    
    
    52,228
    
    
    
    51,744Diluted income (loss) per share
    
    $
    0.01
    
    
    $
    (0.02
    )
    
    $
    0.01
    
    
    $
    (0.02
    )
  12




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   Executive Overview
 Background
     13




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##### Table of Contents



Summary financial results.
  Revenue from Significant Customers
  Revenue Backlog
 .
  14




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##### Table of Contents



CONSOLIDATED RESULTS OF OPERATIONS
  Three Months EndedMarch 31,2011
    
    
    2010
    
    
    ChangeRevenue:Software licenses
    
    $
    8,836
    
    
    $
    5,739
    
    
    
    54
    %Support and maintenance
    
    
    16,130
    
    
    
    15,643
    
    
    
    3
    %Professional services
    
    
    18,767
    
    
    
    17,430
    
    
    
    8
    %Hosting
    
    
    14,107
    
    
    
    12,347
    
    
    
    14
    %Total revenue
    
    
    57,840
    
    
    
    51,159
    
    
    
    13
    %Operating Expenses:Cost of software licenses (1)
    
    
    599
    
    
    
    382
    
    
    
    57
    %Cost of professional services,
support and maintenance (1)
    
    
    23,113
    
    
    
    19,414
    
    
    
    19
    %Cost of hosting (1)
    
    
    7,345
    
    
    
    6,668
    
    
    
    10
    %Selling and marketing
    
    
    7,281
    
    
    
    6,684
    
    
    
    9
    %Product development
    
    
    8,783
    
    
    
    8,720
    
    
    
    1
    %General and administrative
    
    
    6,766
    
    
    
    7,047
    
    
    
    -4
    %Depreciation and amortization
    
    
    2,533
    
    
    
    2,386
    
    
    
    6
    %Total operating expenses
    
    
    56,420
    
    
    
    51,301
    
    
    
    10
    %Operating income (loss)
    
    
    1,420
    
    
    
    (142
    )
    
    
    1100
    %Interest and other expense, net
    
    
    (287
    )
    
    
    (221
    )
    
    
    30
    %Income (loss) before income tax expense
    
    
    1,133
    
    
    
    (363
    )
    
    
    412
    %Income tax expense
    
    
    (451
    )
    
    
    (693
    )
    
    
    -35
    %Net income (loss)
    
    $
    682
    
    
    $
    (1,056
    )
    
    
    165
    %Net income (loss) per share:Basic
    
    $
    0.01
    
    
    $
    (0.02
    )Diluted
    
    $
    0.01
    
    
    $
    (0.02
    )Effective tax rate
    
    
    40
    %
    
    
    -191
    %Operating expenses as a percent of revenue:Cost of software licenses (2)
    
    
    7
    %
    
    
    7
    %Cost of professional services,
support and maintenance (2)
    
    
    66
    %
    
    
    59
    %Cost of hosting (2)
    
    
    52
    %
    
    
    54
    %Selling and marketing
    
    
    13
    %
    
    
    13
    %Product development
    
    
    15
    %
    
    
    17
    %General and administrative
    
    
    12
    %
    
    
    14
    %Depreciation and amortization
    
    
    4
    %
    
    
    5
    %Operating income (loss)
    
    
    2
    %
    
    
    0
    %Net income (loss)
    
    
    1
    %
    
    
    -2
    %
 (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.  15




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##### Table of Contents



RESULTS OF OPERATIONS  COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010
 Banking:
    
    
    Banking:(In thousands)
    
    Payments
    
    
    Large FI
    
    
    Community FI
    
    
    TotalTotal revenueThree months ended March 31, 2011
    
    $
    15,972
    
    
    $
    26,036
    
    
    $
    15,832
    
    
    $
    57,840Three months ended March 31, 2010
    
    
    12,836
    
    
    
    24,739
    
    
    
    13,584
    
    
    
    51,159Revenue growth
    
    
    3,136
    
    
    
    1,297
    
    
    
    2,248
    
    
    
    6,681Percentage change
    
    
    24
    %
    
    
    5
    %
    
    
    17
    %
    
    
    13
    %Total operating income (loss)Three months ended March 31, 2011
    
    $
    2,012
    
    
    $
    349
    
    
    $
    (941
    )
    
    $
    1,420Three months ended March 31, 2010
    
    
    1,220
    
    
    
    226
    
    
    
    (1,588
    )
    
    
    (142
    )Change in operating income (loss)
    
    
    792
    
    
    
    123
    
    
    
    647
    
    
    
    1,562Percentage change
    
    
    65
    %
    
    
    54
    %
    
    
    41
    %
    
    
    1100
    %
 Revenue.
    Operating income (loss).
  16




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##### Table of Contents



Interest and other expense, net.
 Income tax expense
 Liquidity and Capital Resources
  Three Months ended March 31,2011
    
    
    2010Net cash provided by operating activities before
changes in operating assets and liabilities
    
    $
    4,382
    
    
    $
    1,824Change in operating assets and liabilities
    
    
    (237
    )
    
    
    16,250Net cash provided by operating activities
    
    
    4,145
    
    
    
    18,074Net cash used in investing activities
    
    
    (1,713
    )
    
    
    (31,274
    )Net cash used in financing activities
    
    
    (4,688
    )
    
    
    (380
    )Effect of exchange rates on cash and cash equivalents
    
    
    259
    
    
    
    39Net decrease in cash and cash equivalents
    
    $
    (1,997
    )
    
    $
    (13,541
    )
  17




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##### Table of Contents



March 31,
    
    
    December 31,2011
    
    
    2010Cash and cash equivalents
    
    $
    59,920
    
    
    $
    61,917Working capital (1)
    
    
    53,974
    
    
    
    48,843Total assets
    
    
    316,162
    
    
    
    309,653Total stockholders equity
    
    
    240,222
    
    
    
    237,613
 (1)
    
    Working capital includes deferred revenue of $48.6
million and $38.0 million as of March 31, 2011 and December 31,
2010, respectively. Operating Activities
 Investing Activities
 Financing Activities
 Contractual Obligations and Off-Balance Sheet Arrangements.
 Stock appreciation rights awards.
 Capital requirements.
 Recent Accounting Pronouncements
   18




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##### Table of Contents



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;
 
    
    determination of the fair value of stock-based compensation; and
 
    
    income taxes.
 Effects of Foreign Currencies
  Three Months Ended March 31, 2011At Prior YearExchange
    
    
    Exchange RateRates (1)
    
    
    Effect
    
    
    As reportedRevenue
    
    $
    57,400
    
    
    $
    440
    
    
    $
    57,840Operating expenses
    
    
    55,760
    
    
    
    660
    
    
    
    56,420Operating income
    
    
    1,640
    
    
    
    (220
    )
    
    
    1,420Net income
    
    
    892
    
    
    
    (210
    )
    
    
    682Diluted net income per share
    
    $
    0.02
    
    
    $
    (0.01
    )
    
    $
    0.01
 (1)
    
    Current year results translated into U.S. Dollars using prior years period
average exchange rates.  19




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##### Table of Contents



Stock-based Compensation
  Three Months EndedMarch 31,2011
    
    
    2010Operating expenses:Cost of professional services, support and maintenance
    
    $
    35
    
    
    $
    67Cost of hosting
    
    
    30
    
    
    
    31Selling and marketing
    
    
    89
    
    
    
    (76
    )Product development
    
    
    93
    
    
    
    (23
    )General and administrative
    
    
    597
    
    
    
    374Total stock-based compensation expense
    
    $
    844
    
    
    $
    373Grant type:Stock options
    
    $
    363
    
    
    $
    467Restricted stock
    
    
    681
    
    
    
    598Stock appreciation rights
    
    
    (200
    )
    
    
    (692
    )Total stock-based compensation expense
    
    $
    844
    
    
    $
    373
 
 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.
  20




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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 Description3.1
    
    
    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 September 30, 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 September 30, 2000 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.
  21




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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)  22