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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

_______________

FORM 10-Q

[X]                
        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                               SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2001

OR

[  ]                          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. Employer   
|                                        
|                                        
|                                        
|                                        
|incorporation or organization)           |  | Identification No.)
|                                        
|                                        
|                                        
|                                        
|                                        
|3390 Peachtree Road, NE, Suite 1700     
|                                        
|                                        
|                                        
|                                        
|Atlanta, Georgia                         |  | 30326              
|                                        
|                                        
|                                        
|                                        
|(Address of principal executive offices) |  | (Zip Code)         

Registrants telephone number, including area code: (404) 812-6200

Not applicable
(Former name if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.

Yes X No____

Shares of common stock outstanding as of May 9, 2001: 58,638,230



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Part 1  Financial Information
Item 1  Financial Statements

S1 CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)

|                      |                                                                         |                                                                          |                                                                |                                                                                |            |           |            |              |            |   |          |   |  |  |  | 
|--------------------- | ----------------------------------------------------------------------- | ------------------------------------------------------------------------ | -------------------------------------------------------------- | ------------------------------------------------------------------------------ | ---------- | --------- | ---------- | ------------ | ---------- | - | -------- | - |  |  |  | 
|                      |                                                                         |                                                                          |                                                                |                                                                                |            | March 31, |            | December 31,
|                      |                                                                         |                                                                          |                                                                |                                                                                |            | 2001      |            | 2000        
|                      |                                                                         |                                                                          |                                                                |                                                                                |            |           |            |             
|                      |                                                                         |                                                                          |                                                                | Assets                                                                         |            |           | (Unaudited | )            |            |   | (Audited | )
|                     
|                     
|                     
|                     
|Current assets:      
|                     
|                     
|                     
|                     
|                      | Cash and cash equivalents                                               |                                                                          | $                                                              | 139,887                                                                        |            |           | $          | 173,266      |            |   |          |   | 
|                     
|                     
|                     
|                     
|                      | Investment securities available for sale (cost of $31 at                |                                                                          |                                                                |                                                                                |            |           |            |              |            |   |          |   | 
|                     
|                     
|                     
|                     
|                      |                                                                         | March 31, 2001 and $143 at December 31, 2000)                            |                                                                |                                                                                | 232        |           |            |              | 1,521      |   |          |   |  | 
|                     
|                     
|                     
|                     
|                      | Accounts receivable, net of allowance for doubtful accounts and billing |                                                                          |                                                                |                                                                                |            |           |            |              |            |   |          |   | 
|                     
|                     
|                     
|                     
|                      |                                                                         | adjustments of $8,478 at March 31, 2001 and $10,009 at December 31, 2000 |                                                                |                                                                                | 80,140     |           |            |              | 97,134     |   |          |   |  | 
|                     
|                     
|                     
|                     
|                      | Prepaid expenses                                                        |                                                                          |                                                                | 7,792                                                                          |            |           |            | 5,905        |            |   |          |   | 
|                     
|                     
|                     
|                     
|                      | Other current assets                                                    |                                                                          |                                                                | 2,025                                                                          |            |           |            | 5,139        |            |   |          |   | 
|                      |                                                                         |                                                                          |                                                                |                                                                                |            |           |            |             
|                      |                                                                         |                                                                          |                                                                | Total current assets                                                           |            |           | 230,076    |              |            |   | 282,965  |   |  |  |  | 
|                     
|                     
|                     
|                     
|                      | Property and equipment, net                                             |                                                                          |                                                                | 52,500                                                                         |            |           |            | 63,244       |            |   |          |   | 
|                     
|                     
|                     
|                     
|                      | Investment in equity interest of affiliate                              |                                                                          |                                                                | 57,871                                                                         |            |           |            |             |            |   |          |   | 
|                     
|                     
|                     
|                     
|                      | Intangible assets, net                                                  |                                                                          |                                                                | 39,740                                                                         |            |           |            | 57,798       |            |   |          |   | 
|                     
|                     
|                     
|                     
|                      | Goodwill, net                                                           |                                                                          |                                                                | 101,322                                                                        |            |           |            | 195,428      |            |   |          |   | 
|                     
|                     
|                     
|                     
|                      | Other assets                                                            |                                                                          |                                                                | 7,241                                                                          |            |           |            | 7,269        |            |   |          |   | 
|                      |                                                                         |                                                                          |                                                                |                                                                                |            |           |            |             
|                     
|                     
|                     
|                     
|                      |                                                                         |                                                                          |                                                                | Total assets                                                                   |            | $         | 488,750    |              |            | $ | 606,704  |   |  |  |  | 
|                      |                                                                         |                                                                          |                                                                |                                                                                |            |           |            |             
|                      |                                                                         |                                                                          |                                                                | Liabilities and Stockholders Equity                                           |            |           |            |              |            |   |          |   |  |  |  | 
|                     
|                     
|                     
|                     
|Current liabilities:  |                                                                         |                                                                          |                                                                |                                                                                |            |           |            |              |            |   |          |  
|                     
|                     
|                     
|                     
|                      | Accounts payable                                                        |                                                                          | $                                                              | 17,594                                                                         |            |           | $          | 15,869       |            |   |          |   | 
|                     
|                     
|                     
|                     
|                      | Accrued salaries and benefits                                           |                                                                          |                                                                | 11,652                                                                         |            |           |            | 12,766       |            |   |          |   | 
|                     
|                     
|                     
|                     
|                      | Accrued restructuring                                                   |                                                                          |                                                                | 6,954                                                                          |            |           |            | 10,561       |            |   |          |   | 
|                     
|                     
|                     
|                     
|                      | Accrued other expenses                                                  |                                                                          |                                                                | 23,317                                                                         |            |           |            | 41,870       |            |   |          |   | 
|                     
|                     
|                     
|                     
|                      | Deferred revenues                                                       |                                                                          |                                                                | 28,431                                                                         |            |           |            | 27,471       |            |   |          |   | 
|                     
|                     
|                     
|                     
|                      | Notes payable                                                           |                                                                          |                                                                | 3,496                                                                          |            |           |            | 3,822        |            |   |          |   | 
|                     
|                     
|                     
|                     
|                      | Current portion of capital lease obligation                             |                                                                          |                                                                | 5,601                                                                          |            |           |            | 8,283        |            |   |          |   | 
|                      |                                                                         |                                                                          |                                                                |                                                                                |            |           |            |             
|                      |                                                                         |                                                                          |                                                                | Total current liabilities                                                      |            |           | 97,045     |              |            |   | 120,642  |   |  |  |  | 
|                     
|                     
|                     
|                     
|                      | Deferred revenues                                                       |                                                                          |                                                                | 893                                                                            |            |           |            | 1,016        |            |   |          |   | 
|                     
|                     
|                     
|                     
|                      | Capital lease obligation, excluding current portion                     |                                                                          |                                                                | 6,947                                                                          |            |           |            | 6,226        |            |   |          |   | 
|                     
|                     
|                     
|                     
|                      | Deferred tax liability                                                  |                                                                          |                                                                | 8,930                                                                          |            |           |            | 10,380       |            |   |          |   | 
|                     
|                     
|                     
|                     
|                      | Other liabilities                                                       |                                                                          |                                                                | 359                                                                            |            |           |            | 695          |            |   |          |   | 
|                      |                                                                         |                                                                          |                                                                |                                                                                |            |           |            |             
|                      |                                                                         |                                                                          |                                                                | Total liabilities                                                              |            |           | 114,174    |              |            |   | 138,959  |   |  |  |  | 
|                      |                                                                         |                                                                          |                                                                |                                                                                |            |           |            |             
|Stockholders equity: |                                                                         |                                                                          |                                                                |                                                                                |            |           |            |              |            |   |          |  
|                     
|                     
|                     
|                     
|                      |                                                                         |                                                                          | Preferred stock, $0.01 par value. Authorized 25,000,000 shares |                                                                                |            |           |            |              |            |   |          |   |  |  | 
|                     
|                     
|                     
|                     
|                      |                                                                         |                                                                          |                                                                | Issued and outstanding 1,186,564 shares at                                     |            |           |            |              |            |   |          |   |  |  |  | 
|                     
|                     
|                     
|                     
|                      |                                                                         |                                                                          |                                                                | March 31, 2001 and December 31, 2000                                           |            |           | 252,781    |              |            |   | 252,781  |   |  |  |  | 
|                     
|                     
|                     
|                     
|                      |                                                                         | Common stock, $0.01 par value. Authorized 350,000,000                    |                                                                |                                                                                |            |           |            |              |            |   |          |   |  | 
|                     
|                     
|                     
|                     
|                      |                                                                         |                                                                          |                                                                | shares. Issued and outstanding 58,414,190 and 57,965,770                       |            |           |            |              |            |   |          |   |  |  |  | 
|                     
|                     
|                     
|                     
|                      |                                                                         |                                                                          |                                                                | shares at March 31, 2001 and December 31, 2000, respectively                   |            |           | 584        |              |            |   | 580      |   |  |  |  | 
|                     
|                     
|                     
|                     
|                      |                                                                         | Additional paid-in capital                                               |                                                                |                                                                                | 1,612,363  |           |            |              | 1,610,096  |   |          |   |  | 
|                     
|                     
|                     
|                     
|                      |                                                                         | Receivable from the sale of stock                                        |                                                                |                                                                                | (11,683    | )         |            |              | (11,454    | ) |          |   |  | 
|                     
|                     
|                     
|                     
|                      |                                                                         | Accumulated deficit                                                      |                                                                |                                                                                | (1,477,668 | )         |            |              | (1,385,605 | ) |          |   |  | 
|                     
|                     
|                     
|                     
|                      |                                                                         | Accumulated other comprehensive income (loss):                           |                                                                |                                                                                |            |           |            |              |            |   |          |   |  | 
|                     
|                     
|                     
|                     
|                      |                                                                         |                                                                          |                                                                | Net unrealized gains on investment securities available for sale, net of taxes |            |           | 123        |              |            |   | 840      |   |  |  |  | 
|                     
|                     
|                     
|                     
|                      |                                                                         |                                                                          |                                                                | Cumulative foreign currency translation adjustment                             |            |           | (1,924     | )            |            |   | 507      |   |  |  |  | 
|                      |                                                                         |                                                                          |                                                                |                                                                                |            |           |            |             
|                     
|                     
|                     
|                     
|                      |                                                                         |                                                                          |                                                                | Total stockholders equity                                                     |            |           | 374,576    |              |            |   | 467,745  |   |  |  |  | 
|                      |                                                                         |                                                                          |                                                                |                                                                                |            |           |            |             
|                      |                                                                         |                                                                          |                                                                | Total liabilities and stockholders equity                                     |            | $         | 488,750    |              |            | $ | 606,704  |   |  |  |  | 
|                      |                                                                         |                                                                          |                                                                |                                                                                |            |           |            |             

See accompanying notes to unaudited consolidated financial statements.

1



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S1 CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
(In thousands, except share and per share data)

|                                            |                                                                                                                 |                |                          |        |                    |         |            |        |        |          |  
|------------------------------------------- | --------------------------------------------------------------------------------------------------------------- | -------------- | ------------------------ | ------ | ------------------ | ------- | ---------- | ------ | ------ | -------- | -
|                                            |                                                                                                                 |                |                          |        | Three Months Ended
|                                            |                                                                                                                 |                |                          |        | March 31,         
|                                            |                                                                                                                 |                |                          |        |                   
|                                            |                                                                                                                 |                |                          |        | 2001               |         | 2000      
|                                            |                                                                                                                 |                |                          |        |                    |         |           
|Revenues:                                  
|                                           
|                                           
|                                           
|                                           
|                                            | Software licenses                                                                                               |                | $                        | 13,806 |                    |         | $          | 10,719 |       
|                                           
|                                           
|                                           
|                                           
|                                            | Professional services                                                                                           |                |                          | 38,606 |                    |         |            | 34,382 |       
|                                           
|                                           
|                                           
|                                           
|                                            | Data center                                                                                                     |                |                          | 10,238 |                    |         |            | 3,507  |       
|                                           
|                                           
|                                           
|                                           
|                                            | Other                                                                                                           |                |                          | 455    |                    |         |            | 1,761  |       
|                                            |                                                                                                                 |                |                          |        |                    |         |            |       
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                                                 | Total revenues |                          |        | 63,105             |         |            |        | 50,369 |         
|                                            |                                                                                                                 |                |                          |        |                    |         |            |       
|Operating expenses:                        
|                                           
|                                           
|                                           
|                                           
|                                            | Cost of software licenses                                                                                       |                |                          | 1,377  |                    |         |            | 1,521  |       
|                                           
|                                           
|                                           
|                                           
|                                            | Cost of professional services, including stock compensation expense
of $5 in 2000                               |                |                          | 26,246 |                    |         |            | 25,889 |       
|                                           
|                                           
|                                           
|                                           
|                                            | Cost of data center                                                                                             |                |                          | 6,750  |                    |         |            | 3,352  |       
|                                           
|                                           
|                                           
|                                           
|                                            | Cost of other revenue                                                                                           |                |                          | 360    |                    |         |            | 1,594  |       
|                                           
|                                           
|                                           
|                                           
|                                            | Selling and marketing, including stock compensation expense
of $157 in 2000                                     |                |                          | 11,822 |                    |         |            | 11,563 |       
|                                           
|                                           
|                                           
|                                           
|                                            | Product development, including stock compensation expense
of $353 in 2000                                       |                |                          | 13,517 |                    |         |            | 15,345 |       
|                                           
|                                           
|                                           
|                                           
|                                            | General and administrative, including stock compensation expense
of $245 in 2001 and $610 in 2000, respectively |                |                          | 12,833 |                    |         |            | 9,961  |       
|                                           
|                                           
|                                           
|                                           
|                                            | Depreciation and amortization                                                                                   |                |                          | 7,373  |                    |         |            | 3,404  |       
|                                           
|                                           
|                                           
|                                           
|                                            | Marketing cost from warrant issued                                                                              |                |                          |       |                    |         |            | 4,600  |       
|                                           
|                                           
|                                           
|                                           
|                                            | Merger related costs                                                                                            |                |                          |       |                    |         |            | 6,814  |       
|                                           
|                                           
|                                           
|                                           
|                                            | Amortization of acquisition intangibles                                                                         |                |                          | 20,406 |                    |         |            | 77,127 |       
|                                            |                                                                                                                 |                |                          |        |                    |         |            |       
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                                                 |                | Total operating expenses |        |                    | 100,684 |            |        |        | 161,170  |  
|                                            |                                                                                                                 |                |                          |        |                    |         |            |       
|                                            |                                                                                                                 |                | Operating loss           |        |                    | (37,579 | )          |        |        | (110,801 | )
|                                           
|                                           
|                                           
|                                           
|Interest and investment income              |                                                                                                                 |                | 2,646                    |        |                    |         | 35,593     |       
|                                           
|                                           
|                                           
|                                           
|Loss on sale of subsidiary                  |                                                                                                                 |                | (52,302                  | )      |                    |         |           |       
|                                           
|                                           
|                                           
|                                           
|Equity interest in net loss of affiliate    |                                                                                                                 |                | (5,029                   | )      |                    |         |           |       
|                                            |                                                                                                                 |                |                          |        |                    |         |            |       
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                                                 |                | (92,264                  | )      |                    |         | (75,208    | )     
|                                           
|                                           
|                                           
|                                           
|Income tax benefit                          |                                                                                                                 |                | 202                      |        |                    |         |           |       
|                                            |                                                                                                                 |                |                          |        |                    |         |            |       
|                                           
|                                           
|                                           
|                                           
|Net loss                                    |                                                                                                                 | $              | (92,062                  | )      |                    | $       | (75,208    | )     
|                                            |                                                                                                                 |                |                          |        |                    |         |            |       
|Basic and diluted net loss per common share |                                                                                                                 | $              | (1.58                    | )      |                    | $       | (1.49      | )     
|                                            |                                                                                                                 |                |                          |        |                    |         |            |       
|Weighted average common shares outstanding  |                                                                                                                 |                | 58,176,056               |        |                    |         | 50,456,210 |       
|                                            |                                                                                                                 |                |                          |        |                    |         |            |       

See accompanying notes to unaudited consolidated financial statements.

2



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S1 CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)

|                                                     |                                                                                   |                                                                    |                                                     |         |                    |         |        |         |         |         |  
|---------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------------------------ | --------------------------------------------------- | ------- | ------------------ | ------- | ------ | ------- | ------- | ------- | -
|                                                     |                                                                                   |                                                                    |                                                     |         | Three months ended
|                                                     |                                                                                   |                                                                    |                                                     |         | March 31,         
|                                                     |                                                                                   |                                                                    |                                                     |         |                   
|                                                     |                                                                                   |                                                                    |                                                     |         | 2001               |         | 2000  
|                                                     |                                                                                   |                                                                    |                                                     |         |                    |         |       
|                                                     |                                                                                   |                                                                    |                                                     |         | (In thousands)    
|Cash flows from operating activities:               
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net loss                                                                          |                                                                    | $                                                   | (92,062 | )                  |         | $      | (75,208 | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Adjustments to reconcile net loss to net cash used in operating activities:      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Depreciation and amortization including acquisition charges        |                                                     |         | 27,779             |         |        |         | 80,531  |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Loss on sale of subsidiary                                         |                                                     |         | 52,302             |         |        |         |        |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Equity interest in net loss of affiliate                           |                                                     |         | 5,029              |         |        |         |        |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Compensation and marketing expense for stock options and warrants  |                                                     |         | 245                |         |        |         | 5,725   |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Provision for doubtful accounts receivable and billing adjustments |                                                     |         | 1,035              |         |        |         | 923     |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Gain on the sale of investment securities available for sale       |                                                     |         | (931               | )       |        |         | (34,818 | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Changes in assets and liabilities, excluding effects of divestiture:             
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Decrease in accounts receivable                                    |                                                     |         | 13,582             |         |        |         | 5,551   |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Decrease (increase) in prepaid expenses and other assets           |                                                     |         | 846                |         |        |         | (1,496  | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Increase (decrease) in accounts payable                            |                                                     |         | 1,943              |         |        |         | (11,050 | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | (Decrease) increase in accrued expenses and other liabilities      |                                                     |         | (28,034            | )       |        |         | 10,560  |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Increase (decrease) in deferred revenue                            |                                                     |         | 2,370              |         |        |         | (2,108  | )      
|                                                     |                                                                                   |                                                                    |                                                     |         |                    |         |        |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   |                                                                    | Net cash used in operating activities               |         |                    | (15,896 | )      |         |         | (21,390 | )
|                                                     |                                                                                   |                                                                    |                                                     |         |                    |         |        |        
|Cash flows from investing activities:               
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net cash transferred with subsidiary sold                                         |                                                                    |                                                     | (15,000 | )                  |         |        |        |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from sales of investment securities available for sale                   |                                                                    |                                                     | 1,044   |                    |         |        | 36,546  |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Investments in and advances to unconsolidated companies                           |                                                                    |                                                     |        |                    |         |        | (5,538  | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchases of property and equipment and purchased technology                      |                                                                    |                                                     | (2,637  | )                  |         |        | (8,933  | )      
|                                                     |                                                                                   |                                                                    |                                                     |         |                    |         |        |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   |                                                                    | Net cash (used in) provided by investing activities |         |                    | (16,593 | )      |         |         | 22,075  |  
|                                                     |                                                                                   |                                                                    |                                                     |         |                    |         |        |        
|Cash flows from financing activities:               
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from payment on subscription receivable                                  |                                                                    |                                                     |        |                    |         |        | 240     |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from sale of common stock under employee stock purchase
and option plans |                                                                    |                                                     | 1,619   |                    |         |        | 9,170   |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Payments on capital lease obligations                                             |                                                                    |                                                     | (1,961  | )                  |         |        | (315    | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Payments on borrowings                                                            |                                                                    |                                                     | (326    | )                  |         |        | (2,432  | )      
|                                                     |                                                                                   |                                                                    |                                                     |         |                    |         |        |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   |                                                                    | Net cash (used in) provided by financing activities |         |                    | (668    | )      |         |         | 6,663   |  
|                                                     |                                                                                   |                                                                    |                                                     |         |                    |         |        |        
|Effect of exchange rate changes on cash              |                                                                                   |                                                                    | (222                                                | )       |                    |         | (89    | )      
|                                                     |                                                                                   |                                                                    |                                                     |         |                    |         |        |        
|Net (decrease) increase in cash and cash equivalents |                                                                                   |                                                                    | (33,379                                             | )       |                    |         | 7,259  |        
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and cash equivalents at beginning of period     |                                                                                   |                                                                    | 173,266                                             |         |                    |         | 67,850 |        
|                                                     |                                                                                   |                                                                    |                                                     |         |                    |         |        |        
|Cash and cash equivalents at end of period           |                                                                                   | $                                                                  | 139,887                                             |         |                    | $       | 75,109 |        
|                                                     |                                                                                   |                                                                    |                                                     |         |                    |         |        |        
|Noncash investing and financing activities:         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Equity interest in affiliate received in connection with subsidiary sold          |                                                                    | $                                                   | 62,900  |                    |         |        |        |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Conversion of preferred stock to common stock                                     |                                                                    |                                                     |        |                    |         | $      | 414     |        

See accompanying notes to unaudited consolidated financial statements.

3



---



S1 CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)



|1. |  | Background and Basis of Presentation
|-- |  | ------------------------------------

S1 Corporation (S1 or the Company) is a leading global provider of
innovative eFinance solutions and services that are centered on banking,
brokerage and insurance. S1 is enabling financial service providers to create
a complete Integrated eFinance Experience by delivering the tools
necessary to meet the evolving demands of their customers across various lines
of businesses, market segments and delivery channels. Through its Open
eFinance Architecture, S1 offers a broad range of applications that
empower financial institutions to increase revenue, strengthen customer
relationships and gain competitive advantage. Additionally, through the
Companys professional services organization, S1 applications can be
implemented in-house or hosted in an S1 Data Center.

The consolidated financial statements include the accounts of S1 and its
wholly owned subsidiaries. Investments in affiliated entities, which the
Company does not manage and of which it owns between 20% and 50% are accounted
for under the equity method. Significant inter-company accounts and
transactions have been eliminated in consolidation.

The December 31, 2000 data in the Consolidated Balance Sheet is derived
from the audited consolidated financial statements included in the Companys
Annual Report on Form 10-K. The accompanying unaudited interim consolidated
financial statements and related notes should be read in conjunction with the
audited consolidated financial statements and related notes in the Companys
2000 Annual Report on Form 10-K. The interim financial statements include all
adjustments, consisting only of normal recurring adjustments, which in the
opinion of management are necessary to present fairly the Companys
consolidated financial statements. The results of operations for the three
months ended March 31, 2001 are not necessarily indicative of the expected
results for the year ending December 31, 2001.

In November 1999, the Company completed the acquisition of FICS Group,
N.V. (FICS) which included the Financial Reporting Systems (FRS) business
unit, which was held for sale. During 2001, the Company determined that a
reasonable market for the sale of FRS did not exist and determined to continue
operating these activities for the foreseeable future. Accordingly, the
results of operations, which are not considered to be material, have been
included in the Companys first quarter 2001 results in the Financial
Institutions segment. The results of operations were not included in the
Companys 2000 operating results and are considered to be immaterial.

4



---





|2. |  | Recent Accounting Pronouncements
|-- |  | --------------------------------

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities (SFAS 133). SFAS 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. The Company
adopted this statement effective January 1, 2001 and it did not have a material
impact on the consolidated financial statements. To date, the Company has not
been engaged in any derivative or hedging activities.

In September 2000, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 140, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities. This
statement replaces Statement of Financial Accounting Standards No. 125 and is
effective for transfers and servicing occurring after March 31, 2001 and, for
certain provisions, fiscal years ending after December 15, 2000. The Company
believes the adoption of this pronouncement will not have a material impact on
its consolidated financial position or results of operations. To date, the
Company has not been engaged in activities covered by this pronouncement.



|3. |  | Loss on Sale of Subsidiary and Equity Interest in Net Loss of Affiliate
|-- |  | -----------------------------------------------------------------------

On January 16, 2001, the Company merged its VerticalOne subsidiary
withYodlee.com, Inc. (Yodlee) in a stock-for-stock transaction. Under the
terms of the transaction, the Company received an approximate 33% ownership
interest in Yodlee. Upon the merger, the Company recorded a loss on sale of
$52.3 million, which represented the difference between the carrying value of
VerticalOne and the appraised value of the Companys interest in Yodlee. The
investment in Yodlee is being accounted for on the equity basis. The Company
is a reseller of account aggregation services through its relationship with
Yodlee. During the first quarter of 2001, the Company recorded a non-cash
charge of $5.0 million based on its equity interest in the net loss of the
affiliate.



|4. |  | Commitments and Contingencies
|-- |  | -----------------------------

In the second quarter of 2000, the Company was named in a number of
shareholder lawsuits, all of which subsequently were consolidated into a single
complaint. While the ultimate results and outcomes of these actions and claims
cannot be determined, management does not expect that they will have a material
adverse effect on the Companys results of operations or financial position.

5



---





|5. |  | Comprehensive Loss
|-- |  | ------------------

The components of comprehensive loss are as follows (in thousands):

|                                                                                   |                    |   |                    |         |      |   |         |         |  
|---------------------------------------------------------------------------------- | ------------------ | - | ------------------ | ------- | ---- | - | ------- | ------- | -
|                                                                                   |                    |   | Three Months Ended
|                                                                                   |                    |   | March 31,         
|                                                                                   |                    |   |                   
|                                                                                   |                    |   | 2001               |         | 2000
|                                                                                   |                    |   |                    |         |     
|Net loss                                                                           |                    | $ | (92,062            | )       |      | $ | (75,208 | )      
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Foreign currency translation adjustment                                            |                    |   | (2,431             | )       |      |   | 192     |        
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Unrealized gain (loss) on investment securities
available for sale,   net of taxes |                    |   | 213                |         |      |   | (243    | )      
|                                                                                   |                    |   |                    |         |      |   |         |        
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Comprehensive loss |   | $                  | (94,280 | )    |   | $       | (75,259 | )
|                                                                                   |                    |   |                    |         |      |   |         |        



|6. |  | Restructuring Charge
|-- |  | --------------------

In November 2000, the Company approved a restructuring plan related to the
streamlining of its worldwide operations. During the fourth quarter of 2000,
the Company recorded approximately a $14.7 million charge for the costs
associated with the restructuring plan and utilized approximately $4.2 million
of the charge during the fourth quarter. The table below reflects the activity
in accrued restructuring during the first quarter of 2001 (in thousands):

|                                                |  |              |        |          |  |           |        |            |  |   |       | 
|----------------------------------------------- |  | ------------ | ------ | -------- |  | --------- | ------ | ---------- |  | - | ----- | 
|                                                |  | Reserve      |        |          |  |           |        | Reserve   
|                                                |  | Balance at   |        |          |  |           |        | Balance at
|                                                |  | December 31, |        | Amounts  |  | March 31,
|                                                |  | 2000         |        | Utilized |  | 2001     
|                                                |  |              |        |          |  |          
|Severance and other employee
temination   costs |  | $            | 3,170  |          |  | $         | (2,506 | )          |  | $ | 664   | 
|                                               
|                                               
|                                               
|                                               
|Lease termination costs                         |  |              | 6,762  |          |  |           | (838   | )          |  |   | 5,924 | 
|                                               
|                                               
|                                               
|                                               
|Other                                           |  |              | 629    |          |  |           | (263   | )          |  |   | 366   | 
|                                                |  |              |        |          |  |           |        |            |  |   |       | 
|                                               
|                                               
|                                               
|                                               
|                                                |  | $            | 10,561 |          |  | $         | (3,607 | )          |  | $ | 6,954 | 
|                                                |  |              |        |          |  |           |        |            |  |   |       | 

6



---





|7. |  | Segment Reporting
|-- |  | -----------------

During 2001, we are operating and managing the Company in two business
segments: Financial Institutions and Call Center Technology. The Financial
Institutions segment builds, delivers and operates integrated, transactional
and brandable Internet applications for financial institutions worldwide,
available as an in-house solution or outsourced to the S1 Data Centers.
Through the Call Center Technology segment, we offer interactive voice response
and voice e-commerce technology. In 2000, through our VerticalOne subsidiary
we operated a third segment, the Internet Aggregation Services segment, which
provided technology that enables consumers to aggregate personal account
information from multiple sources. In January 2001, we merged our VerticalOne
subsidiary with Yodlee, and accordingly, in 2001 we no longer operate this
segment.

We evaluate the performance of the operating segments based on revenues,
direct costs and operating income, excluding depreciation and amortization,
marketing cost from warrant issued, merger related costs and amortization of
acquisition intangibles. In addition, the Company provides general and
administrative services to the operating segments on a shared service basis and
therefore, the general and administrative costs are included in the other
category. The Company does not produce reports that measure the performance
according to any asset-based metrics.

|                        |                            |   |              |        |            |   |                                               |       |          |   |                |   |  |   |         |        |  |   |        |        | 
|----------------------- | -------------------------- | - | ------------ | ------ | ---------- | - | --------------------------------------------- | ----- | -------- | - | -------------- | - |  | - | ------- | ------ |  | - | ------ | ------ | 
|                        |                            |   |              |        |            |   | Three Months Ended March 31, 2001 (Unaudited)
|                        |                            |   |              |        |            |   |                                              
|                        |                            |   |              |        |            |   |                                               |       |          |   | (in thousands)
|                        |                            |   |              |        |            |   | Call                                          |       | Internet
|                        |                            |   | Financial    |        | Center     |   | Aggre-                                       
|                        |                            |   | Institutions |        | Technology |   | gation                                        |       | Other    |   | Total         
|                        |                            |   |              |        |            |   |                                               |       |          |   |               
|Revenues                |                            | $ | 52,398       |        |            | $ | 10,707                                        |       |          | $ |               |   |  | $ |        |        |  | $ | 63,105 |       
|                       
|                       
|                       
|                       
|Operating expenses:    
|                       
|                       
|                       
|                       
|                        | Cost of revenue            |   |              | 31,672 |            |   |                                               | 3,061 |          |   |                |  |  |   |         |       |  |   |        | 34,733 | 
|                       
|                       
|                       
|                       
|                        | Selling and marketing      |   |              | 6,700  |            |   |                                               | 5,122 |          |   |                |  |  |   |         |       |  |   |        | 11,822 | 
|                       
|                       
|                       
|                       
|                        | Product development        |   |              | 11,046 |            |   |                                               | 2,471 |          |   |                |  |  |   |         |       |  |   |        | 13,517 | 
|                       
|                       
|                       
|                       
|                        | General and administrative |   |              |       |            |   |                                               |      |          |   |                |  |  |   |         | 12,833 |  |   |        | 12,833 | 
|                        |                            |   |              |        |            |   |                                               |       |          |   |                |   |  |   |         |        |  |   |        |       
|                       
|                       
|                       
|                       
|Total operating expense |                            |   | 49,418       |        |            |   | 10,654                                        |       |          |   |               |   |  |   | 12,833  |        |  |   | 72,905 |       
|                        |                            |   |              |        |            |   |                                               |       |          |   |                |   |  |   |         |        |  |   |        |       
|Operating income (loss) |                            | $ | 2,980        |        |            | $ | 53                                            |       |          | $ |               |   |  | $ | (12,833 | )      |  | $ | (9,800 | )     
|                        |                            |   |              |        |            |   |                                               |       |          |   |                |   |  |   |         |        |  |   |        |       

|                        |                            |   |              |        |            |   |                                               |       |          |   |                |       |  |   |        |       |  |   |         |        | 
|----------------------- | -------------------------- | - | ------------ | ------ | ---------- | - | --------------------------------------------- | ----- | -------- | - | -------------- | ----- |  | - | ------ | ----- |  | - | ------- | ------ | 
|                        |                            |   |              |        |            |   | Three Months Ended March 31, 2000 (Unaudited)
|                        |                            |   |              |        |            |   |                                              
|                        |                            |   |              |        |            |   |                                               |       |          |   | (in thousands)
|                        |                            |   |              |        |            |   | Call                                          |       | Internet
|                        |                            |   | Financial    |        | Center     |   | Aggre-                                       
|                        |                            |   | Institutions |        | Technology |   | gation                                        |       | Other    |   | Total         
|                        |                            |   |              |        |            |   |                                               |       |          |   |               
|Revenues                |                            | $ | 39,589       |        |            | $ | 10,466                                        |       |          | $ | 314            |       |  | $ |       |       |  | $ | 50,369  |       
|                       
|                       
|                       
|                       
|Operating expenses:    
|                       
|                       
|                       
|                       
|                        | Cost of revenue            |   |              | 28,123 |            |   |                                               | 4,030 |          |   |                | 203   |  |   |        |      |  |   |         | 32,356 | 
|                       
|                       
|                       
|                       
|                        | Selling and marketing      |   |              | 6,871  |            |   |                                               | 3,538 |          |   |                | 1,154 |  |   |        |      |  |   |         | 11,563 | 
|                       
|                       
|                       
|                       
|                        | Product development        |   |              | 11,263 |            |   |                                               | 1,556 |          |   |                | 2,526 |  |   |        |      |  |   |         | 15,345 | 
|                       
|                       
|                       
|                       
|                        | General and administrative |   |              |       |            |   |                                               |      |          |   |                |      |  |   |        | 9,961 |  |   |         | 9,961  | 
|                        |                            |   |              |        |            |   |                                               |       |          |   |                |       |  |   |        |       |  |   |         |       
|                       
|                       
|                       
|                       
|Total operating expense |                            |   | 46,257       |        |            |   | 9,124                                         |       |          |   | 3,883          |       |  |   | 9,961  |       |  |   | 69,225  |       
|                        |                            |   |              |        |            |   |                                               |       |          |   |                |       |  |   |        |       |  |   |         |       
|Operating income (loss) |                            | $ | (6,668       | )      |            | $ | 1,342                                         |       |          | $ | (3,569         | )     |  | $ | (9,961 | )     |  | $ | (18,856 | )     
|                        |                            |   |              |        |            |   |                                               |       |          |   |                |       |  |   |        |       |  |   |         |       

7



---





|8. |  | Stockholders Equity
|-- |  | --------------------

Basic net loss per share is calculated as loss available to common
stockholders divided by the weighted average number of common shares
outstanding during the period. Diluted earnings per share is calculated to
reflect the potential dilution that would occur if stock options or other
contracts to issue common stock were exercised and resulted in additional
common stock that would share in the earnings of the Company. Because of the
Companys net losses, the issuance of additional shares of common stock under
stock options and warrants or upon the conversion of preferred stock would be
antidilutive. The total number of common shares that would have been used in
the Companys computation of diluted earnings per share for the three month
period ended March 31, 2001 and 2000 was 69,435,649 and 66,757,024,
respectively.

8



---



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

This quarterly report contains forward-looking statements and information
relating to our subsidiaries and us. The words believes, expects, may,
will, should, projects, contemplates, anticipates, forecasts,
intends or similar terminology identify forward-looking statements. These
statements are based on the beliefs of management as well as assumptions made
using information currently available to management. Because these statements
reflect the current views of management concerning future events, they involve
risks, uncertainties and assumptions. Therefore, actual results may differ
significantly from the results discussed in the forward-looking statements.
You are urged to read the risk factors described in our Form 10-K, as amended
for the year ended December 31, 2000, as filed with the Securities and Exchange
Commission on April 2, 2001. Except as required by law, we undertake no
obligation to update publicly any forward-looking statement for any reason,
even if new information becomes available.

The following discussion should be read in conjunction with the unaudited
consolidated financial statements and notes appearing elsewhere herein and in
our Form 10-K, as amended for the year ended December 31, 2000.

General

During 2000, we operated and managed our Company in three business
segments: Financial Institutions, Call Center Technology and Internet
Aggregation. In January 2001, we merged our VerticalOne subsidiary, which
comprised the Internet Aggregation segment, with Yodlee. Accordingly, in 2001
the Internet Aggregation segment has been eliminated.

During the fourth quarter of 2000, the Company approved a restructuring
plan related to the streamlining of its worldwide operations. The Company
continues to review its cost structure on a worldwide basis and continues to
look for additional ways to streamline its operations. As a result of this
review, the Company may implement additional restructuring plans in future
periods.

Financial Institutions Segment

The Financial Institutions segment builds, delivers and operates
integrated, transactional and brandable Internet applications for financial
institutions worldwide, available as an in-house solution or outsourced to an
S1 Data Center. The Financial Institutions segment provides highly customized
solutions to large global and national financial institutions, as well as
solutions that require little or no customization and are primarily sold to
community and regional banks.

In August 1999, we opened a new Data Center in the U.S. to accommodate our
clients increasing outsourcing needs. In 2000, we established a Data Center
in the U.K. for our European operations and a Data Center in Singapore for our
Asia/Pacific regional operations. We generally earn recurring revenues for end
users processed for our clients through our Data Centers.

9



---



Call Center Technology Segment

Through our Edify subsidiary, our Call Center Technology segment offers
interactive voice response and voice e-commerce solutions that allow
organizations to automate, integrate and personalize interactions with
customers through multiple channels, yielding stronger, more profitable
relationships. Using customer-determined profiles and interests, our clients
can notify their customers about new products or services. Calls that do
require human assistance can automatically be routed to the most appropriate
person. All of these goals can be accomplished through a combination of
channels, including telephone, Internet, e-mail, fax, and pager. In addition,
we offer a natural language speech recognition product and an optional
marketing campaign management component that enables businesses to deliver
products and services to targeted prospects consistently through multiple
channels.

10



---



S1 Corporation and Subsidiaries
Selected Financial Data
(Dollars in thousands)

|                                   |                     |                           |                    |   |                    |        |          |   |        |        | 
|---------------------------------- | ------------------- | ------------------------- | ------------------ | - | ------------------ | ------ | -------- | - | ------ | ------ | 
|                                   |                     |                           |                    |   | Three Months Ended
|                                   |                     |                           |                    |   | March 31,         
|                                   |                     |                           |                    |   |                   
|                                   |                     |                           |                    |   | 3/31/01            |        | 3/31/00 
|                                   |                     |                           |                    |   |                    |        |         
|Revenues:                         
|                                  
|                                  
|                                  
|                                  
|                                   |                     | Software licenses         |                    | $ | 13,806             |        |          | $ | 10,719 |       
|                                  
|                                  
|                                  
|                                  
|                                   |                     |                           |                    |   |                    |        |          |  
|                                  
|                                  
|                                  
|                                  
|                                   |                     | Professional services     |                    |   | 38,606             |        |          |   | 34,382 |       
|                                  
|                                  
|                                  
|                                  
|                                   |                     | Data center               |                    |   | 10,238             |        |          |   | 3,507  |       
|                                  
|                                  
|                                  
|                                  
|                                   |                     | Other                     |                    |   | 455                |        |          |   | 1,761  |       
|                                   |                     |                           |                    |   |                    |        |          |  
|                                  
|                                  
|                                  
|                                  
|                                   |                     |                           | Total revenues     |   |                    | 63,105 |          |   |        | 50,369 | 
|                                   |                     |                           |                    |   |                    |        |          |  
|Direct costs:                     
|                                  
|                                  
|                                  
|                                  
|                                   |                     | Software licenses         |                    |   | 1,377              |        |          |   | 1,521  |       
|                                  
|                                  
|                                  
|                                  
|                                   |                     | Professional services     |                    |   | 26,246             |        |          |   | 25,889 |       
|                                  
|                                  
|                                  
|                                  
|                                   |                     | Data center               |                    |   | 6,750              |        |          |   | 3,352  |       
|                                  
|                                  
|                                  
|                                  
|                                   |                     | Other                     |                    |   | 360                |        |          |   | 1,594  |       
|                                   |                     |                           |                    |   |                    |        |          |  
|                                   |                     |                           | Total direct costs |   |                    | 34,733 |          |   |        | 32,356 | 
|                                   |                     |                           |                    |   |                    |        |          |  
|                                   |                     |                           | Gross margin       |   |                    | 28,372 |          |   |        | 18,013 | 
|                                   |                     |                           |                    |   |                    |        |          |  
|Operating expenses:               
|                                  
|                                  
|                                  
|                                  
|                                   |                     | Selling and marketing     |                    |   | 11,822             |        |          |   | 11,563 |       
|                                  
|                                  
|                                  
|                                  
|                                   |                     | Product development       |                    |   | 13,517             |        |          |   | 15,345 |       
|                                  
|                                  
|                                  
|                                  
|                                   |                     | General and adminstrative |                    |   | 12,833             |        |          |   | 9,961  |       
|                                   |                     |                           |                    |   |                    |        |          |  
|                                  
|                                  
|                                  
|                                  
|                                   |                     |                           | 38,172             |   |                    |        | 36,869   |  
|                                   |                     |                           |                    |   |                    |        |          |  
|                                  
|                                  
|                                  
|                                  
|                                   |                     |                           | (9,800             | ) |                    |        | (18,856  | )
|                                  
|                                  
|                                  
|                                  
|Depreciation and amortization      |                     |                           | 7,373              |   |                    |        | 3,404    |  
|                                  
|                                  
|                                  
|                                  
|Marketing cost from warrant issued |                     |                           |                   |   |                    |        | 4,600    |  
|                                  
|                                  
|                                  
|                                  
|Merger related costs               |                     |                           |                   |   |                    |        | 6,814    |  
|                                  
|                                  
|                                  
|                                  
|Amortization of intangibles        |                     |                           | 20,406             |   |                    |        | 77,127   |  
|                                   |                     |                           |                    |   |                    |        |          |  
|                                  
|                                  
|                                  
|                                  
|Net loss from operations           |                     |                           | (37,579            | ) |                    |        | (110,801 | )
|                                  
|                                  
|                                  
|                                  
|Loss on sale of subsidiary         |                     |                           | (52,302            | ) |                    |        |         |  
|                                  
|                                  
|                                  
|                                  
|Equity in net loss of affiliate    |                     |                           | (5,029             | ) |                    |        |         |  
|                                  
|                                  
|                                  
|                                  
|Interest & investment income       |                     |                           | 2,646              |   |                    |        | 35,593   |  
|                                   |                     |                           |                    |   |                    |        |          |  
|                                  
|                                  
|                                  
|                                  
|                                   |                     |                           | (92,264            | ) |                    |        | (75,208  | )
|                                  
|                                  
|                                  
|                                  
|Income tax benefit                 |                     |                           | 202                |   |                    |        |         |  
|                                   |                     |                           |                    |   |                    |        |          |  
|                                  
|                                  
|                                  
|                                  
|                                   |                     | $                         | (92,062            | ) |                    | $      | (75,208  | )
|                                   |                     |                           |                    |   |                    |        |          |  
|Gross margin %:                   
|                                  
|                                  
|                                  
|                                  
|                                   |                     | Software licenses         |                    |   | 90                 | %      |          |   | 86     | %     
|                                  
|                                  
|                                  
|                                  
|                                   |                     | Professional services     |                    |   | 32                 | %      |          |   | 25     | %     
|                                  
|                                  
|                                  
|                                  
|                                   |                     | Data center               |                    |   | 34                 | %      |          |   | 4      | %     
|                                  
|                                  
|                                  
|                                  
|                                   |                     | Other                     |                    |   | 21                 | %      |          |   | 9      | %     
|                                   |                     |                           |                    |   |                    |        |          |  
|                                  
|                                  
|                                  
|                                  
|                                   |                     |                           | 45                 | % |                    |        | 36       | %
|                                   |                     |                           |                    |   |                    |        |          |  
|% of total revenues:              
|                                  
|                                  
|                                  
|                                  
|                                   | Operating expenses:
|                                  
|                                  
|                                  
|                                  
|                                   |                     | Selling and marketing     |                    |   | 19                 | %      |          |   | 23     | %     
|                                  
|                                  
|                                  
|                                  
|                                   |                     | Product development       |                    |   | 21                 | %      |          |   | 30     | %     
|                                  
|                                  
|                                  
|                                  
|                                   |                     | General and adminstrative |                    |   | 20                 | %      |          |   | 20     | %     
|                                   |                     |                           |                    |   |                    |        |          |  
|                                  
|                                  
|                                  
|                                  
|                                   |                     |                           | 60                 | % |                    |        | 73       | %
|                                   |                     |                           |                    |   |                    |        |          |  

11



---



Comparison of the three months ended March 31, 2001 and March 31, 2000

In 2001, we operate and manage our business in two segments: Financial
Institutions and Call Center Technology. The following is a discussion of the
results of the Company for 2001 as compared to 2000. The discussion includes
an analysis of costs that are not allocated to segments, including depreciation
and amortization, marketing cost from warrants issued, merger related and
restructuring costs and amortization and impairment of acquisition intangibles.
In addition, we provide general and administrative services to the operating
segments and we do not allocate these costs to the individual segments. A
discussion of the operating segments, including revenues, direct costs, gross
margins, sales and marketing costs and product development costs follows the
consolidated operations discussion.

Consolidated Operations

Revenues, Direct Costs and Gross Margins.Total revenues increased by
$12.7 million to $63.1 million for the three months ended March 31, 2001 from
$50.4 million for the three months ended March 31, 2000, an increase of 25%.
Approximately $7.1 million of the increase in total revenues is attributable to
the two acquisitions completed in the second quarter of 2000 and the inclusion
in the current period of the results of operation of certain activities related
to financial reporting that had previously been held for sale. The primary
components of revenue for the three months ended March 31, 2001 were $13.8
million in software license fees, $38.6 million in professional services fees,
$10.2 million in data center fees and $0.5 million in other revenue. Direct
costs increased by $2.4 million to $34.7 million for the three months ended
March 31, 2001 from $32.4 million for the three months ended March 31, 2000,
and increase of 7%. Approximately $2.4 million of the increase in direct costs
is attributed to the two acquisitions completed in the second quarter of 2000.
Gross margins were 45% and 36% of total revenues for the first quarter of 2001
and 2000, respectively.

Selling and Marketing and Product Development Expenses.Total selling and
marketing and product development expenses decreased by $1.6 million to $25.3
million for the three months ended March 31, 2001 from $26.9 million for the
three months ended March 31, 2000. These expenses are discussed further in the
Segment Analysis section.

General and Administrative Expenses.General and administrative expenses
increased by $2.9 million to $12.8 million for the three months ended March 31,
2001 from $10.0 million for the three months ended March 31, 2000. General and
administrative expenses represented 20% and 20% of total revenues for the first
quarter of 2001 and 2000, respectively. The increase in general and
administrative expenses resulted from expenses to increase personnel required
to manage the growth of our business as well as to establish a global
infrastructure.

Depreciation and Amortization.Depreciation and amortization expenses
increased by $4.0 million to $7.4 million for the three months ended March 31,
2001 from $3.4 million for the three months ended March 31, 2000, an increase
of 117%. Depreciation and amortization expenses were 12% and 7% of total
revenues for the three months ended March 31, 2001 and 2000, respectively. The
increase is primarily the result of the acquisition of additional equipment

12



---



for data center customers and the build out of the new data centers in
Singapore and the UK. We anticipate that the depreciation and amortization
related to the new data centers will continue to increase as the new UK data
center went into full production during the fourth quarter of 2000 and as new
and existing customers expand their activities in the data centers.

Marketing Cost for Warrant Issued.The Company recorded $4.6 million of
marketing costs for the three months ended March 31, 2000 for a warrant issued
in connection with a pilot project and distribution agreement between a
third-party and one of our subsidiaries. The fair value of the warrant was
determined based on the Black-Scholes option-pricing model.

Merger Related and Restructuring Costs.During the first quarter of 2000
the Company incurred merger-related costs of $6.8 million. The merger related
costs were related to the three acquisitions completed in the fourth quarter of
1999. These costs were incurred to integrate the products and platforms of the
acquired companies, to train personnel on the new products acquired, and to
build the infrastructure necessary to support a global operation.

Amortization of Acquisition Intangible Assets. Amortization of
acquisition intangible assets decreased $56.7 million to $20.4 million for the
three months ended March 31, 2001 from $77.1 million for the three months ended
March 31, 2000. The decrease in amortization of goodwill and other
identifiable intangible assets resulted from an impairment charge taken in the
fourth quarter of 2000. We continually monitor the results of operations and
other developments within the industry to adjust cash flow forecasts, as
necessary, to determine if any adjustment is necessary to the carrying value of
the our intangible assets. Management determined that no such charge was
required in the first quarter of 2001.

Loss on Sale of Subsidiary and Equity Interest in Net Loss of Affiliate.
On January 16, 2001, the Company merged its VerticalOne subsidiary with
Yodlee.com, Inc. in a stock-for-stock merger. Under the terms of the
transaction, the Company received an approximate 33% ownership interest in
Yodlee. Upon the sale, the Company recorded a loss on sale of $52.3 million,
which represented the difference between the carrying value of VerticalOne and
the appraised value of the Companys interest in Yodlee. The investment in
Yodlee is being accounted for on the equity basis. The Company is a reseller
of account aggregation services through its relationship with Yodlee. During
the first quarter of 2001, the Company recorded a non-cash charge of $5.0
million based on its equity interest in the net loss of the affiliate.

13



---



Financial Institutions Segment

|                                |                     |                       |                       |                    |    |                    |        |         |    |        |        | 
|------------------------------- | ------------------- | --------------------- | --------------------- | ------------------ | -- | ------------------ | ------ | ------- | -- | ------ | ------ | 
|                                |                     |                       |                       |                    |    | Three Months Ended
|                                |                     |                       |                       |                    |    | March 31,         
|                                |                     |                       |                       |                    |    |                   
|                                |                     |                       |                       |                    |    | 3/31/01            |        | 3/31/00
|                                |                     |                       |                       |                    |    |                    |        |        
|                                |                     |                       |                       |                    |    | (in thousands)    
|Revenues:                      
|                               
|                               
|                               
|                               
|                                |                     |                       | Software licenses     |                    | $  | 8,101              |        |         | $  | 3,666  |       
|                               
|                               
|                               
|                               
|                                |                     |                       | Professional services |                    |    | 33,604             |        |         |    | 30,969 |       
|                               
|                               
|                               
|                               
|                                |                     |                       | Data center           |                    |    | 10,238             |        |         |    | 3,193  |       
|                               
|                               
|                               
|                               
|                                |                     |                       | Other                 |                    |    | 455                |        |         |    | 1,761  |       
|                                |                     |                       |                       |                    |    |                    |        |        
|                               
|                               
|                               
|                               
|                                |                     |                       |                       | Total revenues     |    |                    | 52,398 |         |    |        | 39,589 | 
|                                |                     |                       |                       |                    |    |                    |        |        
|Direct costs:                  
|                               
|                               
|                               
|                               
|                                |                     |                       | Software licenses     |                    |    | 67                 |        |         |    | 24     |       
|                               
|                               
|                               
|                               
|                                |                     |                       | Professional services |                    |    | 24,495             |        |         |    | 23,351 |       
|                               
|                               
|                               
|                               
|                                |                     |                       | Data center           |                    |    | 6,750              |        |         |    | 3,154  |       
|                               
|                               
|                               
|                               
|                                |                     |                       | Other                 |                    |    | 360                |        |         |    | 1,594  |       
|                                |                     |                       |                       |                    |    |                    |        |        
|                               
|                               
|                               
|                               
|                                |                     |                       |                       | Total direct costs |    |                    | 31,672 |         |    |        | 28,123 | 
|                                |                     |                       |                       |                    |    |                    |        |        
|                                |                     |                       |                       | Gross margin       |    |                    | 20,726 |         |    |        | 11,466 | 
|                                |                     |                       |                       |                    |    |                    |        |        
|Operating expenses:            
|                               
|                               
|                               
|                               
|                                |                     |                       | Selling and marketing |                    |    | 6,700              |        |         |    | 6,871  |       
|                               
|                               
|                               
|                               
|                                |                     |                       | Product development   |                    |    | 11,046             |        |         |    | 11,263 |       
|                                |                     |                       |                       |                    |    |                    |        |        
|                               
|                               
|                               
|                               
|                                |                     |                       | 17,746                |                    |    |                    | 18,134 |        
|                                |                     |                       |                       |                    |    |                    |        |        
|Segment operating
income (loss) |                     | $                     | 2,980                 |                    |    | $                  | (6,668 | )      
|                                |                     |                       |                       |                    |    |                    |        |        
|Gross margin %:                
|                               
|                               
|                               
|                               
|                                |                     | Software licenses     |                       |                    | 99 | %                  |        |         | 99 | %     
|                               
|                               
|                               
|                               
|                                |                     | Professional services |                       |                    | 27 | %                  |        |         | 25 | %     
|                               
|                               
|                               
|                               
|                                |                     | Data center           |                       |                    | 34 | %                  |        |         | 1  | %     
|                               
|                               
|                               
|                               
|                                |                     | Other                 |                       |                    | 21 | %                  |        |         | 9  | %     
|                                |                     |                       |                       |                    |    |                    |        |        
|                               
|                               
|                               
|                               
|                                |                     |                       | 40                    | %                  |    |                    | 29     | %      
|                                |                     |                       |                       |                    |    |                    |        |        
|% of segment revenues:         
|                               
|                               
|                               
|                               
|                                | Operating expenses:
|                               
|                               
|                               
|                               
|                                |                     |                       | Selling and marketing |                    |    | 13                 | %      |         |    | 17     | %     
|                               
|                               
|                               
|                               
|                                |                     |                       | Product development   |                    |    | 21                 | %      |         |    | 28     | %     
|                                |                     |                       |                       |                    |    |                    |        |        
|                               
|                               
|                               
|                               
|                                |                     |                       | 34                    | %                  |    |                    | 45     | %      
|                                |                     |                       |                       |                    |    |                    |        |        

General.In the second quarter of 2000, we completed the acquisitions of
Q-Up and Davidge whose results are included in the Financial Institutions
segment. Approximately $7.1 million of $12.8 million increase segment revenues
is attributable to these acquisitions and the inclusion in the current period
of the results of operations of FRS that had previously been held for sale.

Revenues, Direct Costs and Gross Margins.Total revenues increased by
$12.8 million to $52.4 million for the three months ended March 31, 2001 from
$39.6 million for the three months ended March 31, 2000, an increase of 32%.
The primary components of revenue in the first quarter of 2001 were $8.1 million
in software license fees, $33.6 million in professional service fees, $10.2 million
in data center fees and $0.5 million of other revenue. Direct costs

14



---



increased by $3.5 million to $31.7 million for the three months ended March 31,
2001 from $28.1 million for the three months ended March 31, 2000, an increase
of 13%. The gross margin for the first quarter of 2001 was 40% compared to 29%
of total revenues in the first quarter of 2000.

Software licenses.Software license fees increased by $4.4 million to
$8.1 million for the three months ended March 31, 2001 from $3.7 million for
the three months ended March 31, 2000, an increase of 121%. Software license
fees represented 15% of total segment revenues for the three months ended March
31, 2001 as compared to 9% of total segment revenues for the three months ended
March 31, 2000. Substantially all of the increase in license revenue relates
to the acquisitions of Q-Up and Davidge in the second quarter of 2000.

Direct software license costs are minimal as the segment builds most of
the components of its software products. The gross margin on software licenses
was 99% for the three months ended March 31, 2001 and 2000.

Professional services.Professional services revenues increased by $2.6
million to $33.6 million for the three months ended March 31, 2001 from $31.0
million for the three months ended March 31, 2000, an increase of 9%.
Professional services revenues represented 64% of total revenues for the three
months ended March 31, 2001 compared to 78% of total revenues for the three
months ended March 31, 2000.

Direct professional services costs consist primarily of personnel and
related infrastructure costs. Direct costs associated with professional
services increased by $1.1 million to $24.5 million for the three months ended
March 31, 2001 from $23.4 million for the three months ended March 31, 2000, an
increase of 5%. Gross margin on professional services for the first quarter of
2001 and 2000 was 27% and 25%, respectively.

Data Center.Data Center revenues increased by $7.0 million to $10.2
million for the three months ended March 31, 2001 from $3.2 million for the
three months ended March 31, 2000, an increase of 221%. Data Center revenues
represented 20% of total segment revenues for the three months ended March 31,
2001 compared to 8% of total segment revenues for the three months ended March
31, 2000. We anticipate that data center revenues will continue to grow both
domestically and internationally as a result of the new data centers in the UK
and Singapore, which were opened in 2000.

Direct data center costs consist of personnel and infrastructure to
support customer installations. Direct costs associated with data center
services increased by $3.6 million to $6.8 million for the three months ended
March 31, 2001 from $3.2 million for the three months ended March 31, 2000, an
increase of 114%. The increase in cost is primarily attributed to additional
personnel and infrastructure necessary to support new customers, to add new
applications for our existing customers and to operate our new data centers in
the UK and Singapore. The gross margin for the data centers was 34% for the
three months ended March 31, 2001, compared to 1% for the three months ended
March 31, 2000.

Other.Other revenues are primarily related to the sale of third party
hardware and software that is used in connection with our products. Other
revenues decreased by $1.3 million to

15



---



$0.5 million for the three months ended March 31, 2001 from $1.8 million for
the three months ended March 31, 2000, a decrease of 74%. Other revenues
represented 1% and 4% of total segment revenues for the three months ended
March 31, 2001 and 2000, respectively.

Operating Expenses.Operating expenses, which includes selling and marketing
and product development expenses remained stable for the three months ended
March 31, 2001 and 2000. Selling and marketing expenses were 13% and 17% of
total revenues for the three months ended March 31, 2001 and 2000,
respectively. Product development expenses were 21% and 28% of total revenues
for the three months ended March 31, 2001 and 2000, respectively.

16



---



Call Center Technology Segment

|                         |                     |                       |                       |                    |    |                    |        |         |    |       |        | 
|------------------------ | ------------------- | --------------------- | --------------------- | ------------------ | -- | ------------------ | ------ | ------- | -- | ----- | ------ | 
|                         |                     |                       |                       |                    |    | Three Months Ended
|                         |                     |                       |                       |                    |    | March 31,         
|                         |                     |                       |                       |                    |    |                   
|                         |                     |                       |                       |                    |    | 3/31/01            |        | 3/31/00
|                         |                     |                       |                       |                    |    |                    |        |        
|                         |                     |                       |                       |                    |    | (in thousands)    
|Revenues:               
|                        
|                        
|                        
|                        
|                         |                     |                       | Software licenses     |                    | $  | 5,705              |        |         | $  | 7,053 |       
|                        
|                        
|                        
|                        
|                         |                     |                       | Professional services |                    |    | 5,002              |        |         |    | 3,413 |       
|                         |                     |                       |                       |                    |    |                    |        |        
|                        
|                        
|                        
|                        
|                         |                     |                       |                       | Total revenues     |    |                    | 10,707 |         |    |       | 10,466 | 
|                         |                     |                       |                       |                    |    |                    |        |        
|Direct costs:           
|                        
|                        
|                        
|                        
|                         |                     |                       | Software licenses     |                    |    | 1,310              |        |         |    | 1,497 |       
|                        
|                        
|                        
|                        
|                         |                     |                       | Professional services |                    |    | 1,751              |        |         |    | 2,533 |       
|                         |                     |                       |                       |                    |    |                    |        |        
|                        
|                        
|                        
|                        
|                         |                     |                       |                       | Total direct costs |    |                    | 3,061  |         |    |       | 4,030  | 
|                         |                     |                       |                       |                    |    |                    |        |        
|                         |                     |                       |                       | Gross margin       |    |                    | 7,646  |         |    |       | 6,436  | 
|                         |                     |                       |                       |                    |    |                    |        |        
|Operating expenses:     
|                        
|                        
|                        
|                        
|                         |                     |                       | Selling and marketing |                    |    | 5,122              |        |         |    | 3,538 |       
|                        
|                        
|                        
|                        
|                         |                     |                       | Product development   |                    |    | 2,471              |        |         |    | 1,556 |       
|                         |                     |                       |                       |                    |    |                    |        |        
|                        
|                        
|                        
|                        
|                         |                     |                       | 7,593                 |                    |    |                    | 5,094  |        
|                         |                     |                       |                       |                    |    |                    |        |        
|                        
|                        
|                        
|                        
|Segment operating income |                     | $                     | 53                    |                    |    | $                  | 1,342  |        
|                         |                     |                       |                       |                    |    |                    |        |        
|Gross margin %:         
|                        
|                        
|                        
|                        
|                         |                     | Software licenses     |                       |                    | 77 | %                  |        |         | 79 | %    
|                        
|                        
|                        
|                        
|                         |                     | Professional services |                       |                    | 65 | %                  |        |         | 26 | %    
|                         |                     |                       |                       |                    |    |                    |        |        
|                        
|                        
|                        
|                        
|                         |                     |                       | 71                    | %                  |    |                    | 61     | %      
|                         |                     |                       |                       |                    |    |                    |        |        
|As a percent of revenue:
|                        
|                        
|                        
|                        
|                         | Operating expenses:
|                        
|                        
|                        
|                        
|                         |                     |                       | Selling and marketing |                    |    | 48                 | %      |         |    | 34    | %     
|                        
|                        
|                        
|                        
|                         |                     |                       | Product development   |                    |    | 23                 | %      |         |    | 15    | %     
|                         |                     |                       |                       |                    |    |                    |        |        
|                        
|                        
|                        
|                        
|                         |                     |                       | 71                    | %                  |    |                    | 49     | %      
|                         |                     |                       |                       |                    |    |                    |        |        

Revenues, Direct Costs and Gross Margins.Total revenues increased by
$0.2 million to $10.7 million for the three months ended March 31, 2001 from
$10.5 million for the three months ended March 31, 2000, an increase of 2%.
The primary components of revenue were $5.7 million in software license fees
and $5.0 million in professional service fees. Direct costs decreased by $1.0
million to $3.1 million for the three months ended March 31, 2001 from $4.1
million for the three months ended March 31, 2000, a decrease of 24%. As a
result of the decrease in direct costs, the gross margin for 2001 was 71% as
compared to 61% of total segment revenues in 2000.

Software licenses.Software license fees decreased by $1.3 million to
$5.7 million for the three months ended March 31, 2001 from $7.1 million for
the three months ended March 31, 2001, a decrease of 19%. Software license
fees represented 53% of total segment revenues for the three months ended March
31, 2001 as compared to 67% of total segment revenues for the three months
ended March 31, 2000.

17



---



Direct software license costs consist primarily of the cost of third-party
software used in the Call Center products. Direct costs associated with
software licenses decreased by $0.2 million to $1.3 million for the three
months ended March 31, 2001 from $1.5 million for the three months ended March
31, 2000. Gross margins of software licenses were 77% and 79% for the first
quarter of 2001 and 2000, respectively. The decrease in gross margins of
software licenses is the result of selling more products that include
third-party software in 2001 as compared to 2000.

Professional services.Professional services revenues increased by $1.6
million to $5.0 million for the three months ended March 31, 2001 from $3.4
million for the three months ended March 31, 2000, an increase of 47%.
Professional services revenues represented 47% of total revenues for the three
months ended March 31, 2001 compared to 33% of total segment revenues for the
three months ended March 31, 2000.The growth in professional services
revenues is primarily attributable to the growth in support and maintenance
fees charged to existing holders of software licenses.

Direct professional services costs consist primarily of personnel and
related infrastructure costs. Direct costs associated with professional
services decreased by $0.8 million to $1.8 million for the three months ended
March 31, 2001 from $2.5 million for the three months ended March 31, 2000, a
decrease of 31%. As a result of the increasing professional services revenue
and declining direct costs due to a reduction in the use of outside
contractors, the gross margin on professional services for the first quarter of
2001 and 2000 were 65% and 26%, respectively.

Operating Expenses.Total operating expenses, which includes sales and
marketing and product development expenses, increased by $2.5 million to $7.6
million for the three months ended March 31, 2001 from $5.1 million for the
three months ended March 31, 2000. Selling and marketing expenses increased by
$1.6 million to $5.1 million for the three months ended March 31, 2001 from
$3.5 million for the three months ended March 31, 2000, an increase of 45%.
Selling and marketing expenses were 48% and 34% of total segment revenues for
the first quarter of 2001 and 2000, respectively. Product development expenses
increased by $0.9 million to $2.5 million for the three months ended March 31,
2001 from $1.6 million for the three months ended March 31, 2000, an increase
of 59%. Product development expenses were 23% and 15% of total revenues for
the first quarter of 2001 and 2000, respectively. Both marketing and product
development expenses increased primarily as a result of new product development
efforts that were started in the latter half of 2000 and of marketing campaigns
that started in the first quarter of 2001.

18



---



Liquidity and Capital Resources

Total stockholders equity decreased to $374.6 million as of March 31,
2001 from $467.7 million at December 31, 2000. The decrease in stockholders
equity is primarily attributable to a net loss of $92.1 million for the three
months ended March 31, 2001.

As of March 31, 2001, we had cash and cash equivalents of $139.9 million
compared to $173.3 million at December 31, 2000.

During the three months ended March 31, 2001, cash used in operations was
$16.0 million compared to cash used in operations of $21.4 million for the
three months ended March 31, 2000. The decrease in cash used in operations
between the first quarter of 2001 and 2000 is primarily the result of the net
loss of $92.1 million for the period offset by non-cash charges of $85.3
million. In addition, accounts payable and accrued expenses declined by of
$26.1 million and accounts receivable increased by $13.6 million.

Cash used in investing activities was $16.6 million for the three months
ended March 31, 2001 compared to net cash provided by investing activities of
$22.1 million in the comparable period of 2000. During the first quarter of
2001, the Company sold its VerticalOne subsidiary, which had $15.0 million in
cash on its balance sheet, to Yodlee. During the first quarter of 2000, the
Company sold $36.5 million of investment securities held for sale. During the
three months ended March 31, 2000 a total of $5.5 million of investments were
made in companies that are considered to have technology or products that
complement our product and services offerings. No such investments were made
in 2001. In the first quarter of 2001, the Company purchased $2.6 million of
property and equipment as compared to $8.9 million in the prior year quarter.
The purchases of property and equipment made in 2000 were primarily related to
the purchase of equipment required for the US Data Center.

Cash used by financing activities was $0.7 million for the three months
ended March 31, 2001 compared to cash provided by financing activities of $6.7
million in the comparable period of 2000. The primary difference between the
two periods is the receipt of $9.2 million in proceeds from common stock sold
under the Employee Stock Purchase and Option Plans during the three months
ended March 31, 2000.

At March 31, 2001, we had approximately $3.5 million borrowings
outstanding and approximately $0.2 million available under various line of
credit facilities.

We believe that our current cash and cash equivalents will be sufficient
to meet our anticipated cash needs for working capital and capital expenditures
for at least the next 12 months. If cash generated from operations is
insufficient to satisfy our liquidity requirements, we may seek to sell
additional equity or debt securities or establish an additional credit
facility. The sale of additional equity or convertible debt securities could
result in additional dilution to our stockholders. The addition of
indebtedness would result in increased fixed obligations and could result in
operating covenants that would restrict our operations. We cannot assure you
that financing will be available in amounts or on terms acceptable to us, if at
all.

19



---



Item 3. Quantitative and Qualitative Disclosures about Market Risk

Quantitative and qualitative disclosures about market risk were included
in Item 7A of the Companys 2000 Annual Report on Form 10-K. There have been
no significant changes in the Companys market risk from December 31, 2000.

PART II  OTHER INFORMATION

Item 1. Legal proceedings.



| |                
| | ---------------
| | Not applicable.

Item 2. Changes in Securities and Use of Proceeds.



| |                    
| | -------------------
| | (a) Not applicable.
|
| | (b) Not applicable.
|
| | (c) Not applicable.
|
| | (d) Not applicable.

Item 3. Defaults Upon Senior Securities.



| |                
| | ---------------
| | Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders.



| |                
| | ---------------
| | Not applicable.

Item 5. Other Information.



| |      
| | -----
| | None.

20



---



Item 6. Exhibits and Reports on Form 8-K.



| |                         
| | ------------------------
| | (a) Exhibits.           
|
| | (b) Reports on Form 8-K.

S1 filed the following Current Reports on Form 8-K with the Securities and
Exchange Commission (the SEC) during the quarter ended March 31, 2001:

Current Report on Form 8-K filed with the SEC on January 18, 2001 (date of
report January 18, 2001) (regarding a press release and an analyst conference
call related to fourth quarter 2000 results and S1 and its operations).

Current Report on Form 8-K filed with the SEC on February 14, 2001 (date
of report February 13, 2001) (regarding a press release and an analyst
conference call related to fourth quarter 2000 results and S1 and its
operations).

Current Report on Form 8-K filed with the SEC on April 9, 2001 (date of
report April 6, 2001) (regarding date of S1s 2001 annual meeting of
shareholders).

21



---



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, as of May 14, 2001.

|                            |                                 
|--------------------------- | --------------------------------
|S1 CORPORATION             
|                           
|                           
|                           
|                           
|                           
|By: /s/ Robert F. Stockwell
|                            |                                 
|                            | Robert F. Stockwell             
|                           
|                           
|                           
|                           
|                            | Chief Financial Officer         
|                           
|                           
|                           
|                           
|                            | (Principal Financial Officer and
|                           
|                           
|                           
|                           
|                            | Principal Accounting Officer)   

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