UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended March 31, 2009
 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
    
    58-2395199(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)705 Westech DriveNorcross, Georgia
    
    30092(Address of principal executive
    
    (Zip Code)offices)
 (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
 Yes o No þ




---



##### 



S1 CORPORATION
 QUARTERLY PERIOD ENDED MARCH 31, 2009
 TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial Statements:Condensed Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008
    
    
    1Condensed Consolidated Statements of Operations for the Three Months ended March 31, 2009 and 2008
    
    
    2Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2009 and 2008
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    22Item 4. Controls and Procedures
    
    
    22PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    22Item 1A. Risk Factors
    
    
    22Item 6. Exhibits
    
    
    23Signature
    
    
    24




---



##### 



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 S1 CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (IN THOUSANDS, EXCEPT SHARE DATA)
 March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    66,388
    
    
    $
    63,840Accounts receivable, net
    
    
    51,535
    
    
    
    42,561Prepaid expenses
    
    
    5,248
    
    
    
    5,123Other current assets
    
    
    2,548
    
    
    
    3,575Total current assets
    
    
    125,719
    
    
    
    115,099Property and equipment, net
    
    
    23,706
    
    
    
    23,015Intangible assets, net
    
    
    6,845
    
    
    
    7,585Goodwill, net
    
    
    124,362
    
    
    
    124,362Other assets
    
    
    8,171
    
    
    
    8,625Total assets
    
    $
    288,803
    
    
    $
    278,686LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,823
    
    
    $
    1,366Accrued compensation and benefits
    
    
    10,476
    
    
    
    16,147Accrued restructuring
    
    
    1,942
    
    
    
    2,323Accrued other expenses
    
    
    11,079
    
    
    
    10,271Deferred revenues
    
    
    33,781
    
    
    
    25,271Current portion of debt obligation
    
    
    2,319
    
    
    
    3,917Total current liabilities
    
    
    61,420
    
    
    
    59,295Debt obligation, excluding current portion
    
    
    5,864
    
    
    
    6,196Accrued restructuring, excluding current portion
    
    
    2,923
    
    
    
    3,443Other liabilities
    
    
    975
    
    
    
    1,012Total liabilities
    
    
    71,182
    
    
    
    69,946Stockholders equity:Preferred stock
    
    
    10,000
    
    
    
    10,000Common stock
    
    
    528
    
    
    
    528Additional paid in capital
    
    
    1,792,885
    
    
    
    1,791,924Accumulated deficit
    
    
    (1,579,013
    )
    
    
    (1,587,957
    )Accumulated other comprehensive loss
    
    
    (6,779
    )
    
    
    (5,755
    )Total stockholders equity
    
    
    217,621
    
    
    
    208,740Total liabilities and stockholders equity
    
    $
    288,803
    
    
    $
    278,686Preferred shares issued and outstanding
    
    
    749,064
    
    
    
    749,064Common shares issued and outstanding
    
    
    52,841,532
    
    
    
    52,799,310
   1




---



##### 



S1 CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 (Unaudited)
 Three Months Ended March 31,2009
    
    
    2008Revenue:Software licenses
    
    $
    11,618
    
    
    $
    9,535Support and maintenance
    
    
    12,485
    
    
    
    11,703Professional services
    
    
    23,075
    
    
    
    21,122Data center
    
    
    11,110
    
    
    
    12,313Total revenue
    
    
    58,288
    
    
    
    54,673Operating expenses:Cost of software licenses (1)
    
    
    840
    
    
    
    992Cost of professional services, support and maintenance (1)
    
    
    18,351
    
    
    
    17,492Cost of data center (1)
    
    
    6,881
    
    
    
    6,557Selling and marketing
    
    
    6,822
    
    
    
    8,216Product development
    
    
    8,172
    
    
    
    6,755General and administrative
    
    
    4,516
    
    
    
    6,435Depreciation and amortization of intangible assets
    
    
    2,573
    
    
    
    2,225Total operating expenses (2)
    
    
    48,155
    
    
    
    48,672Operating income
    
    
    10,133
    
    
    
    6,001Interest and other income, net
    
    
    10
    
    
    
    294Income before income tax expense
    
    
    10,143
    
    
    
    6,295Income tax expense
    
    
    1,199
    
    
    
    1,105Net income
    
    $
    8,944
    
    
    $
    5,190Earnings per share:Basic
    
    $
    0.16
    
    
    $
    0.09Diluted
    
    $
    0.16
    
    
    $
    0.09Weighted average common shares outstanding  basic
    
    
    52,833,689
    
    
    
    56,551,448Weighted average common shares outstanding  fully diluted
    
    
    53,433,880
    
    
    
    57,074,788
 
 (1)
    
    Excludes charges for depreciation. Cost of software licenses includes amortization of
acquired technology.(2)
    
    Includes stock-based compensation (benefit) expense of ($2.5 million) and $1.9 million
for the three months ended March 31, 2009 and 2008, respectively. For further discussion,
please refer to Note 9 of the unaudited condensed consolidated financial statements.   2




---



##### 



S1 CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(Unaudited)
 Three Months Ended March 31,2009
    
    
    2008Cash flows from operating activities:Net income
    
    $
    8,944
    
    
    $
    5,190Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    3,031
    
    
    
    2,970Provision for doubtful accounts receivable and billing adjustments
    
    
    (399
    )
    
    
    343Stock-based compensation (benefit) expense
    
    
    (2,531
    )
    
    
    1,888Changes in assets and liabilities:Increase in accounts receivable
    
    
    (8,791
    )
    
    
    (5,265
    )Decrease in prepaid expenses and other assets
    
    
    282
    
    
    
    240Increase in accounts payable
    
    
    415
    
    
    
    1,026Decrease in accrued expenses and other liabilities
    
    
    (2,135
    )
    
    
    (1,493
    )Increase (decrease) in deferred revenues
    
    
    8,473
    
    
    
    (140
    )Net cash provided by operating activities
    
    
    7,289
    
    
    
    4,759Cash flows from investing activities:Maturities of short-term investment securities
    
    
    686
    
    
    
    5,855Purchases of short-term investment securities
    
    
    
    
    
    
    (181
    )Amounts released from escrow related to sale of business
    
    
    
    
    
    
    3,712Purchases of property, equipment and technology
    
    
    (3,022
    )
    
    
    (2,211
    )Net cash (used in) provided by investing activities
    
    
    (2,336
    )
    
    
    7,175Cash flows from financing activities:Proceeds from exercise of employee stock options
    
    
    154
    
    
    
    775Payments on capital leases and debt obligations
    
    
    (1,930
    )
    
    
    (933
    )Repurchase of common stock
    
    
    
    
    
    
    (1,739
    )Net cash used in financing activities
    
    
    (1,776
    )
    
    
    (1,897
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (629
    )
    
    
    75Net increase in cash and cash equivalents
    
    
    2,548
    
    
    
    10,112Cash and cash equivalents at beginning of period
    
    
    63,840
    
    
    
    45,011Cash and cash equivalents at end of period
    
    $
    66,388
    
    
    $
    55,123
   3




---



##### 



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




---



##### 



5




---



##### 



3. FAIR VALUE MEASUREMENTS
  March 31, 2009
    
    
    December 31, 2008Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedValue
    
    
    Fair Value
    
    
    Value
    
    
    Fair ValueCash and cash equivalents
    
    $
    66,388
    
    
    $
    66,388
    
    
    $
    63,840
    
    
    $
    63,840Short-term investments included
in other current assets:Mutual fund trust
    
    
    822
    
    
    
    822
    
    
    
    1,493
    
    
    
    1,493Derivative assets
    
    
    
    
    
    
    
    
    
    
    69
    
    
    
    69Long-term investments included
in non-current other assets:Mutual fund trust
    
    
    902
    
    
    
    902
    
    
    
    902
    
    
    
    902Fixed term deposits
    
    
    284
    
    
    
    284
    
    
    
    289
    
    
    
    289Long-term borrowings
    
    
    5,864
    
    
    
    5,772
    
    
    
    6,196
    
    
    
    6,103
     6




---



##### 



Fair Value Measurements at Reporting Date UsingQuoted Prices in
    
    
    
    
    
    
    SignificantActive Markets for
    
    
    Significant Other
    
    
    UnobservableCarrying
    
    
    Identical Assets
    
    
    Observable Inputs
    
    
    InputsValue
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)March 31, 2009:Mutual fund
trust (1)
    
    $
    1,724
    
    
    $
    
    
    
    $
    
    
    
    $
    1,724Total
    
    $
    1,724
    
    
    $
    
    
    
    $
    
    
    
    $
    1,724December 31, 2008:Mutual fund
trust (1)
    
    $
    2,395
    
    
    $
    
    
    
    $
    
    
    
    $
    2,395Derivative assets
    
    
    69
    
    
    
    
    
    
    
    69
    
    
    
    Total
    
    $
    2,464
    
    
    $
    
    
    
    $
    69
    
    
    $
    2,395
 (1)
    
    Represents the combined short-term and long-term portion of the mutual fund
trust.  Fair Value Measurements at Reporting Date 
Using Signifcant Unobservable Inputs (Level 3)
 Balance at December 31, 2008
    
    $
    2,395Unrealized gain in other comprehensive loss
    
    
    15Settlements
    
    
    (686
    )Ending balance at March 31, 2009
    
    $
    1,724
 4. ACCOUNTS RECEIVABLE
  5. GOODWILL AND INTANGIBLE ASSETS
   Gross
    
    
    Accumulated
    
    
    NetCarrying Value
    
    
    Amortization
    
    
    Carrying ValueAcquired technology
    
    $
    21,938
    
    
    $
    (19,473
    )
    
    $
    2,465Customer relationships
    
    
    12,000
    
    
    
    (7,620
    )
    
    
    4,380Total
    
    $
    33,938
    
    
    $
    (27,093
    )
    
    $
    6,845
  7




---



##### 



2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013Enterprise
    
    $
    245
    
    
    $
    245
    
    
    $
    245
    
    
    $
    184
    
    
    $
    Postilion
    
    
    2,445
    
    
    
    1,335
    
    
    
    1,282
    
    
    
    706
    
    
    
    490Total Company
    
    $
    2,690
    
    
    $
    1,580
    
    
    $
    1,527
    
    
    $
    890
    
    
    $
    490
 6. ACCRUED OTHER EXPENSES
  March 31,
    
    
    December 31,2009
    
    
    2008Accrued service fees payable
    
    $
    3,501
    
    
    $
    3,148Accrued third party products and
royalties
    
    
    1,075
    
    
    
    1,530Sales and income taxes payable
    
    
    4,292
    
    
    
    3,588Other
    
    
    2,211
    
    
    
    2,005Total
    
    $
    11,079
    
    
    $
    10,271
 7. DEFERRED REVENUE
  March 31,
    
    
    December 31,2009
    
    
    2008Software licenses
    
    $
    5,489
    
    
    $
    4,008Professional services
    
    
    9,540
    
    
    
    7,056Support and maintenance
    
    
    18,752
    
    
    
    14,207Deferred revenue, current
    
    
    33,781
    
    
    
    25,271Deferred revenue, non-current (1)
    
    
    75
    
    
    
    160Total deferred revenue
    
    $
    33,856
    
    
    $
    25,431
 (1)
    
    Non-current deferred revenue is included in long-term Other liabilities.  8. INCOME TAXES
   8




---



##### 



9. STOCK OPTION PLANS
    As of March 31,2009
    
    
    2008Expected dividend yield
    
    
    0.0
    %
    
    
    0.0
    %Expected volatility
    
    
    55.9
    %
    
    
    43.6
    %Risk-free interest rate
    
    
    0.9
    %
    
    
    1.9
    %Expected life
    
    2.3 years
    
    
    3.3 years
  Three Months Ended March 31,2009
    
    
    2008Direct and operating expenses:Cost of
professional
services, support
and maintenance
    
    $
    (152
    )
    
    $
    46Cost of data center
    
    
    20
    
    
    
    25Selling and marketing
    
    
    (1,220
    )
    
    
    724Product development
    
    
    (130
    )
    
    
    322General and administrative
    
    
    (1,049
    )
    
    
    771Total stock-based compensation (benefit) expense
    
    $
    (2,531
    )
    
    $
    1,888Grant type:Stock options
    
    $
    594
    
    
    $
    964Restricted stock
    
    
    213
    
    
    
    174Stock appreciation
rights
    
    
    (3,338
    )
    
    
    750Total stock-based compensation (benefit) expense
    
    $
    (2,531
    )
    
    $
    1,888
  9




---



##### 



Unrecognized
    
    
    WeightedExpense
    
    
    Average Period(in thousands)
    
    
    (in years)Stock Options
    
    $
    4,161
    
    
    
    1.3Restricted Stock
    
    
    1,781
    
    
    
    1.5
  10. SEGMENT REPORTING AND MAJOR CUSTOMERS
    Three Months Ended March 31, 2009
    
    
    Three Months Ended March 31, 2008Enterprise
    
    
    Postilion
    
    
    Total
    
    
    Enterprise
    
    
    Postilion
    
    
    TotalRevenue:Software licenses
    
    $
    2,787
    
    
    $
    8,831
    
    
    
    11,618
    
    
    $
    1,589
    
    
    $
    7,946
    
    
    $
    9,535Support and maintenance
    
    
    4,665
    
    
    
    7,820
    
    
    
    12,485
    
    
    
    3,706
    
    
    
    7,997
    
    
    
    11,703Professional services
    
    
    18,574
    
    
    
    4,501
    
    
    
    23,075
    
    
    
    17,090
    
    
    
    4,032
    
    
    
    21,122Data center
    
    
    7,240
    
    
    
    3,870
    
    
    
    11,110
    
    
    
    7,103
    
    
    
    5,210
    
    
    
    12,313Total revenue
    
    $
    33,266
    
    
    $
    25,022
    
    
    $
    58,288
    
    
    $
    29,488
    
    
    $
    25,185
    
    
    $
    54,673Operating expenses:Direct costs
    
    
    15,917
    
    
    
    10,155
    
    
    
    26,072
    
    
    
    14,911
    
    
    
    10,130
    
    
    
    25,041Selling and marketing
    
    
    2,386
    
    
    
    4,436
    
    
    
    6,822
    
    
    
    3,838
    
    
    
    4,378
    
    
    
    8,216Product development
    
    
    5,055
    
    
    
    3,117
    
    
    
    8,172
    
    
    
    4,098
    
    
    
    2,657
    
    
    
    6,755General and administrative
    
    
    2,323
    
    
    
    2,193
    
    
    
    4,516
    
    
    
    3,600
    
    
    
    2,835
    
    
    
    6,435Depreciation and
amortization
of intangible assets
    
    
    1,308
    
    
    
    1,265
    
    
    
    2,573
    
    
    
    1,155
    
    
    
    1,070
    
    
    
    2,225Total operating expenses
    
    
    26,989
    
    
    
    21,166
    
    
    
    48,155
    
    
    
    27,602
    
    
    
    21,070
    
    
    
    48,672Operating income
    
    $
    6,277
    
    
    $
    3,856
    
    
    $
    10,133
    
    
    $
    1,886
    
    
    $
    4,115
    
    
    $
    6,001
  10




---



##### 



Geography
 Revenue
    
    
    Property and EquipmentThree Months Ended March 31,
    
    
    March 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Americas
    
    $
    42,437
    
    
    $
    39,868
    
    
    $
    22,124
    
    
    $
    21,669InternationalEMEI
    
    
    8,832
    
    
    
    10,478
    
    
    
    755
    
    
    
    893Africa
    
    
    2,538
    
    
    
    2,714
    
    
    
    736
    
    
    
    374APAC
    
    
    4,481
    
    
    
    1,613
    
    
    
    91
    
    
    
    79Total
    
    $
    58,288
    
    
    $
    54,673
    
    
    $
    23,706
    
    
    $
    23,015
 Major Customer.
 11. NET INCOME PER COMMON SHARE
     11




---



##### 



Three Months Ended March 31,2009
    
    
    2008(in thousands, except per share data)Basic earnings per share:Net income
    
    $
    8,944
    
    
    $
    5,190Amount allocated to participating preferred stockholders
    
    
    (176
    )
    
    
    (96
    )Amount allocated to participating restricted stockholders
    
    
    (53
    )
    
    
    (13
    )Net income available to common stockholders
    
    $
    8,715
    
    
    $
    5,081Basic weighted average common shares outstanding
    
    
    52,834
    
    
    
    56,551Basic earnings per share
    
    $
    0.16
    
    
    $
    0.09Diluted earnings per share:Net income
    
    $
    8,944
    
    
    $
    5,190Amount allocated to participating preferred stockholders
    
    
    (175
    )
    
    
    (95
    )Amount allocated to participating restricted stockholders
    
    
    (52
    )
    
    
    (13
    )Net income available to common stockholders
    
    $
    8,717
    
    
    $
    5,082Basic weighted average common shares outstanding
    
    
    52,834
    
    
    
    56,551Dilutive effect of employee stock options
    
    
    600
    
    
    
    524Diluted weighted average common shares outstanding
    
    
    53,434
    
    
    
    57,075Diluted earnings per share
    
    $
    0.16
    
    
    $
    0.09
 12. COMPREHENSIVE INCOME
  Three Months Ended March 31,2009
    
    
    2008Net income
    
    $
    8,944
    
    
    $
    5,190Other comprehensive loss:Currency translation adjustment
    
    
    (970
    )
    
    
    (219
    )Cash flow hedges, net of tax
    
    
    (69
    )
    
    
    113Unrealized gain on securities, net of
tax
    
    
    15
    
    
    
    Total other comprehensive loss
    
    
    (1,024
    )
    
    
    (106
    )Comprehensive income
    
    $
    7,920
    
    
    $
    5,084
  12




---



##### 



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




---



##### 



Enterprise
    
    
    PostilionS1 Enterprise
    
    
    Postilion
    
    
    FSBSelf Service BankingOnline BankingPersonal Banking
    
    Global
    
    US
    
    
    Business Banking
    
    Global
    
    US
    
    
    Bill pay services
    
    US
    
    US
    
    
    Corporate Banking
    
    Global
    
    
    
    
    
    
    Trade Finance
    
    Global
    
    
    
    
    
    
    Mobile Banking
    
    Global
    
    Global
    
    
    Voice Banking
    
    Global
    
    US
    
    
    Full Service BankingTeller
    
    Global
    
    
    
    
    
    USSales and Service
    
    Global
    
    
    
    
    
    USCall Center
    
    Global
    
    
    
    
    
    USLending
    
    
    
    
    
    
    
    
    
    USPayments
    
    
    
    
    
    Global
    
    
    Insurance
    
    US
    
    
    
    
    
    
    
 Revenue from Significant Customers
  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 technological feasibility and capitalization of software development costs;
    
    determination of the fair value of employee stock options and stock appreciation rights
awards;
    
    recognition of costs in connection with restructuring plans;
    
    reserves for contingencies; and
    
    income taxes.
  14




---



##### 



Recent Accounting Pronouncements
  Effects of Foreign Currencies
   Three Months Ended March 31, 2009At PriorYearExchange
    
    
    ExchangeRates (1)
    
    
    Rate Effect
    
    
    As reportedRevenue
    
    $
    61,128
    
    
    $
    (2,840
    )
    
    $
    58,288Operating expenses
    
    
    51,485
    
    
    
    (3,330
    )
    
    
    48,155Operating income
    
    
    9,643
    
    
    
    490
    
    
    
    10,133Net income
    
    
    8,584
    
    
    
    360
    
    
    
    8,944Diluted earnings per share
    
    $
    0.16
    
    
    $
    
    
    
    $
    0.16
 (1)
    
    Current year results translated into U.S. Dollars using prior years average exchange rates.  15




---



##### 



Comparison of the Three Months Ended March 31, 2009 and 2008
 Revenue
 Three Months Ended March 31,Enterprise
    
    
    Postilion
    
    
    Total2009
    
    
    2008
    
    
    Chg
    
    
    2009
    
    
    2008
    
    
    Chg
    
    
    2009
    
    
    2008
    
    
    ChgRevenue:Software licenses
    
    $
    2,787
    
    
    $
    1,589
    
    
    
    75
    %
    
    $
    8,831
    
    
    $
    7,946
    
    
    
    11
    %
    
    $
    11,618
    
    
    $
    9,535
    
    
    
    22
    %Support and maintenance
    
    
    4,665
    
    
    
    3,706
    
    
    
    26
    %
    
    
    7,820
    
    
    
    7,997
    
    
    
    -2
    %
    
    
    12,485
    
    
    
    11,703
    
    
    
    7
    %Professional services
    
    
    18,574
    
    
    
    17,090
    
    
    
    9
    %
    
    
    4,501
    
    
    
    4,032
    
    
    
    12
    %
    
    
    23,075
    
    
    
    21,122
    
    
    
    9
    %Data center
    
    
    7,240
    
    
    
    7,103
    
    
    
    2
    %
    
    
    3,870
    
    
    
    5,210
    
    
    
    -26
    %
    
    
    11,110
    
    
    
    12,313
    
    
    
    -10
    %Total revenue
    
    $
    33,266
    
    
    $
    29,488
    
    
    
    13
    %
    
    $
    25,022
    
    
    $
    25,185
    
    
    
    -1
    %
    
    $
    58,288
    
    
    $
    54,673
    
    
    
    7
    %
   Three Months Ended March 31,2009
    
    
    2008Subscription revenue:Enterprise
    
    $
    696
    
    
    $
    547Postilion
    
    
    3,038
    
    
    
    2,031Total Company
    
    $
    3,734
    
    
    $
    2,578
    16




---



##### 



Stock-based compensation.
 Three Months Ended March 31,2009
    
    
    2008Direct and operating expenses:Cost of professional services, support and
maintenance
    
    $
    (152
    )
    
    $
    46Cost of data center
    
    
    20
    
    
    
    25Selling and marketing
    
    
    (1,220
    )
    
    
    724Product development
    
    
    (130
    )
    
    
    322General and administrative
    
    
    (1,049
    )
    
    
    771Total stock-based compensation (benefit) expense
    
    $
    (2,531
    )
    
    $
    1,888Grant type:Stock options
    
    $
    594
    
    
    $
    964Restricted stock
    
    
    213
    
    
    
    174Stock appreciation rights
    
    
    (3,338
    )
    
    
    750Total stock-based compensation (benefit) expense
    
    $
    (2,531
    )
    
    $
    1,888
  17




---



##### 



Direct costs
 Three Months Ended March 31,Enterprise
    
    
    Postilion
    
    
    Total2009
    
    
    %
    
    
    2008
    
    
    %
    
    
    2009
    
    
    %
    
    
    2008
    
    
    %
    
    
    2009
    
    
    %
    
    
    2008
    
    
    %Direct costs:Cost of software licenses
    
    $
    310
    
    
    
    11
    %
    
    $
    334
    
    
    
    21
    %
    
    $
    530
    
    
    
    6
    %
    
    $
    658
    
    
    
    8
    %
    
    $
    840
    
    
    
    7
    %
    
    $
    992
    
    
    
    10
    %Cost of professional
services,
support and maintenance
    
    
    11,591
    
    
    
    50
    %
    
    
    10,632
    
    
    
    51
    %
    
    
    6,760
    
    
    
    55
    %
    
    
    6,860
    
    
    
    57
    %
    
    
    18,351
    
    
    
    52
    %
    
    
    17,492
    
    
    
    53
    %Cost of data center
    
    
    4,016
    
    
    
    55
    %
    
    
    3,945
    
    
    
    56
    %
    
    
    2,865
    
    
    
    74
    %
    
    
    2,612
    
    
    
    50
    %
    
    
    6,881
    
    
    
    62
    %
    
    
    6,557
    
    
    
    53
    %Total direct costs
    
    $
    15,917
    
    
    
    48
    %
    
    $
    14,911
    
    
    
    51
    %
    
    $
    10,155
    
    
    
    41
    %
    
    $
    10,130
    
    
    
    40
    %
    
    $
    26,072
    
    
    
    45
    %
    
    $
    25,041
    
    
    
    46
    %
  Cost of software licenses.
 Cost of professional services, support and maintenance.
 Cost of data center.
  18




---



##### 



Operating expenses.
 Three Months Ended March 31,Enterprise
    
    
    Postilion
    
    
    Total2009
    
    
    %
    
    
    2008
    
    
    %
    
    
    2009
    
    
    %
    
    
    2008
    
    
    %
    
    
    2009
    
    
    %
    
    
    2008
    
    
    %Operating expenses:Selling and marketing
    
    $
    2,386
    
    
    
    7
    %
    
    $
    3,838
    
    
    
    13
    %
    
    $
    4,436
    
    
    
    18
    %
    
    $
    4,378
    
    
    
    17
    %
    
    $
    6,822
    
    
    
    12
    %
    
    $
    8,216
    
    
    
    15
    %Product development
    
    
    5,055
    
    
    
    15
    %
    
    
    4,098
    
    
    
    14
    %
    
    
    3,117
    
    
    
    12
    %
    
    
    2,657
    
    
    
    11
    %
    
    
    8,172
    
    
    
    14
    %
    
    
    6,755
    
    
    
    12
    %General and administrative
    
    
    2,323
    
    
    
    7
    %
    
    
    3,600
    
    
    
    12
    %
    
    
    2,193
    
    
    
    9
    %
    
    
    2,835
    
    
    
    11
    %
    
    
    4,516
    
    
    
    8
    %
    
    
    6,435
    
    
    
    12
    %Depreciation and
amortization of intangible
assets
    
    
    1,308
    
    
    
    4
    %
    
    
    1,155
    
    
    
    4
    %
    
    
    1,265
    
    
    
    5
    %
    
    
    1,070
    
    
    
    4
    %
    
    
    2,573
    
    
    
    4
    %
    
    
    2,225
    
    
    
    4
    %Total operating expenses
    
    $
    11,072
    
    
    
    33
    %
    
    $
    12,691
    
    
    
    43
    %
    
    $
    11,011
    
    
    
    44
    %
    
    $
    10,940
    
    
    
    43
    %
    
    $
    22,083
    
    
    
    38
    %
    
    $
    23,631
    
    
    
    43
    %
  Selling and marketing expenses
 Product development expenses
  General and administrative expenses
 Depreciation and amortization of other intangible assets
 Interest and other income, net
 Income tax expense.
 
    
    for tax expense in certain subsidiaries or jurisdictions for which we do not have
NOLs to utilize;
 
    
    in the United States due to limitations on the use of our federal NOLs for
alternative minimum tax purposes which will be paid in cash; and
 
    
    for tax expense in certain subsidiaries or jurisdictions for which we have not
fully reserved the deferred tax assets.
  19




---



##### 



Liquidity and Capital Resources
  Three Months Eended March 31,2009
    
    
    2008Net cash provided by operating activities before
changes in operating assets and liabilities
    
    $
    9,045
    
    
    $
    10,391Change in operating assets and liabilities
    
    
    (1,756
    )
    
    
    (5,632
    )Net cash provided by operating activities
    
    
    7,289
    
    
    
    4,759Net cash (used in) provided by investing activities
    
    
    (2,336
    )
    
    
    7,175Net cash used in financing activities
    
    
    (1,776
    )
    
    
    (1,897
    )Effect of exchange rates on cash and cash equivalents
    
    
    (629
    )
    
    
    75Net increase in cash and cash equivalents
    
    $
    2,548
    
    
    $
    10,112
 As ofMarch 31, 2009
    
    
    December 31, 2008Cash and cash equivalents
    
    $
    66,388
    
    
    $
    63,840Working capital
    
    
    64,299
    
    
    
    55,804Total assets
    
    
    288,803
    
    
    
    278,686Total stockholders equity
    
    
    217,621
    
    
    
    208,740
 Operating Activities
  
    
    net income of $8.9 million;
 
    
    depreciation and amortization expense of $3.0 million;
 
    
    stock based compensation benefit of $2.5 million;
 
    
    an increase of $8.8 million in accounts receivable offset by an increase of $8.5
million in deferred revenue; and
 
    
    a decrease of $2.1 million mainly due to a decrease in our variable compensation
accruals.
  20




---



##### 




    
    net income of $5.2 million;
 
    
    depreciation and amortization expense of $3.0 million;
 
    
    stock based compensation expense of $1.9 million;
 
    
    an increase of $5.3 million in accounts receivable primarily due to an increase in
unbilled receivables;
 
    
    an increase in accounts payable of $1.0 million primarily due to the timing of
invoices; and
 
    
    a decrease of $1.5 million for payments made from the restructuring reserve and
for a decrease in our variable compensation accruals partially offset by increased
sales and income taxes payable.
 Investing Activities
  
    
    converted $700 thousand, net, from short-term investments to cash and cash
equivalents; and
 
    
    purchased $3.0 million of property and equipment for hardware, software and
building improvements.
  
    
    converted $5.8 million, net, from short-term investments to cash and cash
equivalents;
 
    
    received $3.7 million from the release of an escrow related to the sale of our
Risk and Compliance segment held since August 2006; and
 
    
    purchased $2.2 million of property and equipment for hardware expenditures and
building improvements.
 Financing Activities
  
    
    received $150 thousand from the exercise of options under our employee stock
option plans; and
 
    
    paid $1.9 million for capital lease and debt obligations.
  
    
    paid $1.7 million for the repurchase of our common stock pursuant to an authorized
stock repurchase program;
 
    
    received $800 thousand from the exercise of options under our employee stock
option plans; and
 
    
    paid $900 thousand for capital lease and debt obligations.
 Off-Balance Sheet Arrangements.
 Stock Repurchase Program.
  21




---



##### 



Restructuring.
 SARs.
 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.
 
 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.
  22




---



##### 



Item 6. Exhibits
 Exhibit No.
    
    Exhibit Description3.1
    
    
    Amended and Restated Certificate of Incorporation of S1 Corporation (S1) (filed as
Exhibit 1 to S1s Registration Statement on Form 8-A filed with the Securities and Exchange
Commission (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 for the
fiscal year ended December 31, 1999, 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 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 filed with the SEC on May
8, 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, filed with the SEC on May 15,
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,
filed with the SEC on March31, 1999 and incorporated herein by reference).10.1
    
    
    S1 Corporation 2009 Management Incentive Plan (filed as Exhibit 10.1 to S1s Current
Report on Form 8-K with SEC on January 29, 2009 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.
   23




---



##### 



SIGNATURE
  S1 CORPORATIONBy:
    /s/ PAUL M. PARRISHPaul M. ParrishChief Financial Officer
(Principal Financial Officer)  24




---



##### 



EXHIBIT INDEX
 Exhibit No.
    
    Exhibit Description31.1
    
    
    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.
 *
    
    Management contract or compensatory plan.  25