##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 000-24931
 S1 CORPORATION
  Delaware
    
    58-2395199
    
    (404) 923-3500(State or other jurisdiction of
    
    (I.R.S. Employer
    
    (Registrants telephone numberincorporation or organization)
    
    Identification No.)
    
    including area code)
 705 Westech DriveNorcross, Georgia
    
    30092(Address of principal executive offices)
    
    (Zip Code)
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of each exchange on which registeredCommon Stock, par value $0.01 per share
    
    The Nasdaq Stock Market
 Securities registered pursuant to Section 12(g) of the Act:
 Yes o No þ
 Yes o No þ
 Yes þ No o
 Yes o No o
 Form 10-K. o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 Yes o No þ
   Documents Incorporated by Reference




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##### 



S1 CORPORATION
FOR THE YEAR ENDED DECEMBER 31, 2010
TABLE OF CONTENTS
 PART IItem 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    8Item 1B. Unresolved Staff Comments
    
    
    16Item 2. Properties
    
    
    16Item 3. Legal Proceedings
    
    
    16Item 4. [Removed and Reserved]
    
    
    16PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
    
    
    17Item 6. Selected Financial Data
    
    
    18Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    32Item 8. Financial Statements and Supplementary Data
    
    
    34Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    65Item 9A. Controls and Procedures
    
    
    65Item 9B. Other Information
    
    
    65PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    66Item 11. Executive Compensation
    
    
    66Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    66Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    66Item 14. Principal Accounting Fees and Services
    
    
    66PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    67Signatures
    
    
    69Exhibit 10.16Exhibit 10.17Exhibit 21.1Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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##### Table of Contents



PART I
  
 Item 1.
    
    Business.
 General Information
    
    
    Maintain the highest possible level of customer satisfaction to create
opportunities to sell additional solutions and services;
 
    
    Cross-sell applications from our payments and financial services solution sets;
 
    
    Become the most efficient software company possible through continuous
operational improvements;
 
    
    Deliver innovative, quality products and services to meet current market demands
and future customer needs; and
 
    
    Broaden our product offerings and increase our market penetration through
selective acquisitions and the development of new markets.
 Descriptions of our Software Solutions
 S1 Payments Processing and Card Management
 
    
    ATM Drivingdrives a wide array of ATM terminals, whether dial-up, leased line, or
advanced-functionality devices. Our solution for ATM owners manages online connections to
networks, card schemes, and host systems, and provides sophisticated performance
monitoring, back office functionality and management information. The solution supports
magnetic stripe and EMV cards as well as a comprehensive set of value-added transactions
and services.
 
    
    Retail Paymentsdrives fast, cost-effective, and secure payment card processing for
retailers, gift card management, merchants and e-commerce operators, enabling all aspects
of a payment transaction, from the POS through to the authorizer.
  1




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
    
    Card Managementsupports secure issuance and life cycle management for credit, debit and
prepaid cards and provides extensive authorization and validation services, personal
identification number management and management information. Our solution supports magnetic
stripe, EMV, contactless and instant issuance options.
 
    
    Merchant Acquiringprovides a comprehensive processing platform for handling card
payment transactions generated at multiple sales channels including the POS, Internet, call
center and mobile phone. A wide variety of card and transaction types are supported
including EMV, prepaid and contactless.
 S1 Online Banking
 
    
    S1 Consumer Online Bankingallows our customers to offer online banking capabilities,
including personal finance management, electronic bill payment and presentment, account
transfers, alerts and reminders, and online self-service tools. We provide bill-pay
services from either our in-house bill pay solutions or through third-party partnerships.
 
    
    S1 Business Online Bankingprovides online financial solutions suited for small to
mid-market business banking customers. Our software allows our financial institution
customers to offer product packages that can satisfy an array of business customer segments
with such features as account management and enhanced reporting, payments, foreign exchange
and self-service features, including the ability to open new accounts online, report lost
cards, reset passwords, stop payments, reorder checks, request check copies, and create
electronic alerts.
 
    
    S1 Corporate Bankingprovides online cash management solutions to some of the worlds
largest banks. S1 Corporate Banking is built in a multilingual and multi-currency
framework and delivers diverse payment methods, multi-factor authentication capabilities,
electronic file delivery, check services, robust information reporting, real-time data on
account balances and transactions as well as straight-thru processing on payments from the
Automated Clearing House (ACH) to Fedwire to the Society for Worldwide Interbank Finance
Telecommunication (SWIFT).
 
    
    S1 Trade Financeprovides online trade finance solutions to some of the worlds largest
banks. S1 Trade Finance allows a banks customers to quickly and easily manage their
international buying and selling activities with one integrated system to create, process
and report on trade instruments such as letters of credit, collections, and open account
transactions.
 
    
    S1 Mobile Banking and Paymentsprovides the ability for consumers and businesses to
access and manage bank account information and perform financial transactions via the
convenience of a mobile device. S1 Out-of-Band Authentication provides security against
phishing and keystroke-logging attacks to mobile phones.
 
    
    S1 Voice Bankingdelivers a full range of voice banking functionality, including online
and offline transaction processing, call-flow management, and voice driver management.
 S1 Branch Banking
 
    
    S1 Tellerenables front-line teller employees to perform tasks from a single screen
using workflow processes that simplify and enforce adherence to a financial institutions
business rules. Efficient workflows also create opportunities for tellers to promote new
products and make referrals.
 
    
    S1 Sales and Service Platformprovides transaction functionality and embedded
relationship management tools along with a universal desktop for instant, real-time access
to complete customer and account data. S1 Sales and Service provides tools such as case
and lead management, portfolio management and pipeline management and can fill the need for
a branch automation, sales force automation and customer relationship management system at
the same time in one seamless desktop.
 
    
    S1 Call Centeris a fully integrated call center solution that offers workflows,
transactions and core services that meet the specialized needs of the call center
environment. In addition to the core services found in the teller and sales and service
platform, S1 Call Center provides the customer information, sales and service capabilities,
process flows, reporting, and fulfillment management functionality that is typically found
in call center operations.
 
    
    S1 Lendingprovides a highly configurable and robust consumer, business and credit
origination software solution that delivers straight-through processing control from
application through loan booking, with support for multiple data entry channels. The
software is differentiated in part through its ability to deliver broad application-level
strength in each area of lending through a universal platform, which provides operational
and administrative consistency and control.
  2




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Reporting Segments
  
    
    The Payments segment provides our ATM and POS driving, card management, and merchant
acquiring solutions to financial institutions, retailers and transaction processors of all
sizes globally.
 
    
    The Banking: Large FI segment provides consumer, small business and corporate online
banking, trade finance, and mobile banking solutions to large banks globally, branch and
call center banking solutions to large banks outside of the United States, and also
supports our business with State Farm (which we expect will conclude by the end of 2011).
 
    
    The Banking: Community FI segment provides consumer and small business online banking,
mobile banking, voice banking, branch and call center banking solutions to community and
regional banks and credit unions in the United States.
 Acquisitions
   Industry Background
  
    
    economic conditions and particularly the impact of the lack of liquidity in credit
markets;
 
    
    pressure to grow their businesses;
 
    
    pressure to reduce costs;
 
    
    impact of mergers and acquisitions;
 
    
    pressure on customer retention and better use of customer data;
 
    
    increasing electronic payment transaction volumes;
 
    
    increased security concerns and regulatory requirements; and
 
    
    the need to minimize information technology and infrastructure costs while meeting
the ever-rising consumer expectations for customer service and convenience.
   3




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4




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Customers and Revenue
    Revenue Backlog
   Sales and Marketing
    5




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Services
  Professional Services.
 
    
    Project Management our project managers are responsible for the oversight of
services projects throughout the implementation cycle;
 
    
    Implementation our professional services teams install and configure our software;
 
    
    Custom Software Development our software developers customize our software
solutions to meet the specific business requirements of our customers;
 
    
    Integration we assist our customers in integrating and testing our software with
core banking systems and other applications within their environment;
 
    
    Educational Services our training professionals help our customers train their
employees to use our solutions to better serve their customers; and
 
    
    Web Design Services our web design group assists with the delivery of a complete
web presence for financial institutions.
 Customer Support.
 Hosting Services.
 Competition
   6




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In-house Development Organizations.
 
    
    building, maintaining and upgrading an in-house solution can be very costly and may
lack an industry-wide best practices approach;
 
    
    attracting and retaining the necessary technical personnel can be difficult and
costly;
 
    
    the cost of and skills required to maintain regulatory compliance can prove
onerous;
 
    
    the development of third party partnerships necessary to support the primary
software product can be time consuming, costly, and require a partner management
infrastructure; and
 
    
    technological development may be too far outside the financial organizations core
competencies to be effective or successful.
 Single-Point Solution Vendors.
 
    
    integrating applications and channels from multiple vendors may greatly lengthen a
financial organizations time-to-market and implementation costs;
 
    
    managing relationships with multiple vendors may be more time consuming and require
greater management infrastructure;
 
    
    operating, supporting and upgrading solutions from multiple vendors can be more
costly; and
 
    
    combining solutions across different channels generally does not provide a single view of the customer.
 Core Processing Vendors.
 Product Development
   Government and Industry Regulation
   7




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Employees
  Patents, Trademarks, Copyrights, Licenses and Proprietary Rights
  Available Information
   
 Item 1A.
    
    Risk Factors.
 You should consider carefully the following risks. If any of the following risks actually
occur, our business, financial position or results of operations would likely suffer. In that case,
the trading price of our common stock could decline, and you may lose all or a part of the money
you paid to buy our common stock.
  8




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Our business, which depends heavily on revenue from customers in the banking and insurance
industries and other financial services firms, may be materially adversely impacted by volatile
U.S. and global market and economic conditions
  We expect that the revenue we generate from our largest customer, State Farm, will decrease as our
work efforts for them conclude by the end of 2011 which may cause our financial performance and our
stock price to suffer
  The delay or cancellation of a customer project, changes in project completion estimates, or
inaccurate project completion estimates, may adversely affect our operating results and cause our
financial performance to suffer
  Security breaches or computer viruses could harm our business by disrupting our delivery of
services, damaging our reputation and business, or resulting in material liability to us
    9




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Our quarterly operating results may fluctuate and any fluctuations could adversely affect the price
of our common stock
  
    
    implementation projects in our Payments and Banking: Large FI segments have been
increasing in size, complexity and length and, in accordance with applicable accounting
guidance, the software license revenue from these types of engagements is generally
recognized over the implementation period (referred to as the percentage of completion
method). We currently expect that the overall percentage of these types of engagements
will increase over time and, as we shift to recognizing more software license revenue
using the percentage of completion method, our current and near-term financial results
may be negatively impacted;
 
    
    software licenses and professional services revenue recognized under the percentage
of completion method can vary from quarter to quarter due to the number and size of
professional services projects, project scope changes, changes in estimates to
completion, and project delays and cancellations;
 
    
    we cannot accurately predict the value, number and timing of license or services
agreements we will sign in a period, in part because the budget constraints and
internal review processes of existing and potential customers are not within our
control;
 
    
    as we sell our products on both a perpetual license and a term or subscription
license, we cannot accurately predict the mix of perpetual licenses to term licenses
sold in any one quarter. Term licenses significantly reduce the amount of revenue
recognized in the first year of the contract, but is intended to increase the overall
revenue earned from the customer during the typical customer life cycle; perpetual
license revenue can vary significantly on a quarterly basis;
 
    
    the length of our sales cycle to large financial organizations generally lasts from
six to 18 months, which adds an element of uncertainty to our ability to forecast
revenue;
 
    
    during our sales and implementation cycles, we expend substantial time, effort and
resources preparing contract proposals, negotiating the contract and implementing the
software and, if our efforts do not result in a sale (whether during the period in
which such expenditures were incurred or at all), we will not realize any revenues to
offset these expenditures during the period in which they were incurred or at all;
 
    
    even if a sale is completed, revenue recognition can be delayed or fall below
expectations if accounting guidance requires us to recognize revenue over the
implementation period, potentially resulting in significant fluctuations in our revenue
on a quarterly basis; as such, it is difficult to accurately predict the amount of
revenue that will be recognized in any given quarter;
 
    
    if we fail to or are delayed in the introduction of new or enhanced products, or if
our competitors introduce new or enhanced products, sales of our products and services
may not achieve expected levels and/or may decline;
 
    
    our ability to expand the mix of distribution channels through which our products
are sold may be limited;
 
    
    our products may not achieve widespread market acceptance, which could cause our
revenue to be lower than expected;
 
    
    we have had significant contracts with legacy customers that have decreased or
terminated their services and we may not be able to replace this revenue and/or the
gross margins associated with this revenue;
 
    
    our sales may be constrained by the timing of releases of third-party software that
works with our products;
 
    
    a significant percentage of our expenses is relatively fixed and we may be unable to
reduce expenses in the short term if revenue decreases; and
 
    
    the migration of our license sales model to be more focused on recurring revenue
contracts may result in less predictable revenue due to an inability to predict the
rate at which it is adopted by our customers, or the rate at which it may be deferred.
 The amount of our revenue backlog is based on a number of assumptions and is subject to a number of
factors, many of which are completely outside of our control, and such revenue may not be
recognized over the next 12 months, or at all
   10




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
    
    Revenue for term licenses and hosting services are the annualized amount expected
over the next 12 months as of the date presented;
 
    
    Foreign currency exchange rates are assumed to remain constant over the 12-month
period for contracts stated in currencies other than the U.S. Dollar;
 
    
    Perpetual licenses and professional services are based on current estimates of
project completion over the next 12 months;
 
    
    Our customers may attempt to renegotiate or terminate their contracts for a number
of reasons, including mergers, changes in their financial condition or general changes
in economic conditions or geographic locations;
 
    
    We may experience delays in the development or delivery of products or services
specified in customer contracts; and
 
    
    Our estimate is based on constant hosting transaction volumes, and changes in
hosting transaction volumes may impact the amount of revenue actually recognized in
future periods.
  System failures, errors, defects or other performance problems with our products or data center
operations could cause demand for our products to decrease, impair customer relations, or result in
material liability to us
  We have engaged third-parties to assist us with certain implementation activities which may not be
successful and which may result in harm to our business, reputation and financial results
   11




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We are engaged in offshore software development activities which may not be successful and which
may put our intellectual property at risk
  
    
    communications and information flow may be less efficient and accurate as a
consequence of time zone differences, distance and language differences between our
primary development organization and the foreign based activities, resulting in delays
in development or errors in the software developed;
 
    
    potential disruption from the involvement of the United States in political and
military conflicts around the world;
 
    
    the quality of the development efforts undertaken offshore may not meet our
requirements because of language, cultural and experience differences, resulting in
potential product errors and/or delays;
 
    
    we have experienced a greater level of voluntary turnover of personnel in India than
in other development centers which could have an adverse impact on efficiency and
timeliness of development as well as the opportunity for misappropriation of our
intellectual property;
 
    
    in addition to the risk of misappropriation of intellectual property from departing
personnel, there is a general risk that the misappropriation of our intellectual
property might not be readily discoverable; and
 
    
    currency exchange rates could fluctuate and adversely impact the cost advantages
intended from maintaining these facilities.
 We are from time to time involved in litigation over intellectual property or other proprietary
rights which may be costly and time consuming to defend and our operating results would suffer if
we were subject to a protracted infringement claim or a significant damage award
  
    
    be time-consuming to investigate and defend;
 
    
    result in costly litigation and damage awards;
 
    
    divert management attention and resources;
 
    
    cause product shipment delays or suspensions;
 
    
    cause us to spend significant resources to develop non-infringing technology, which
we may not be able to do;
 
    
    result in an injunction being issued against the use and sale of our products; and
 
    
    require us to enter into royalty or licensing agreements, which may not be available
on terms acceptable to us, if at all.
 Infringement of our proprietary technology could hurt our competitive position and income potential
   12




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Our business and financial results may be negatively impacted by fluctuations in foreign currency
exchange rates
  Acquisitions may be costly and difficult to integrate, divert management resources or dilute
stockholder value
  
    
    incompatibility of business cultures;
 
    
    delays in integrating diverse technology platforms;
 
    
    difficulties in coordinating geographically separated organizations;
 
    
    difficulties in re-training sales forces to market additional products across our
intended markets;
 
    
    difficulties implementing common internal business systems and processes;
 
    
    conflicts in third-party relationships; and
 
    
    loss of customers and key employees and the diversion of the attention of management
from other ongoing business concerns.
  Our market is highly competitive and if we are unable to keep pace with evolving technology,
successfully introduce new or enhanced products, or successfully migrate customers to new versions
of our software, our financial performance maybe adversely impacted and our future prospects may
decline
  Changes in credit card association or other network rules or standards could adversely affect the
Companys business
  We are subject to government regulation which may interfere with our ability to conduct our
business, including our ability to attract and maintain customers, and could negatively impact our
business and financial results
   13




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Market volatility may affect the price of our common stock
  
    
    actual or anticipated variations in our quarterly operating results;
 
    
    approximately 36% of our common stock is owned by five institutions as of December
31, 2010, and a change in position of any one of these holders could cause a
significant drop in our stock price if market demand is insufficient to meet sales
demand;
 
    
    announcements of new products, product enhancements, technological innovations or
new services by us or our competitors;
 
    
    delays or failures in introducing new or enhanced products or in migrating customers
to new versions of our software:
 
    
    changes in financial estimates by securities analysts;
 
    
    conditions or trends in the computer software, electronic commerce and Internet
industries;
 
    
    changes in the market valuations of other technology companies;
 
    
    developments in Internet regulations;
 
    
    announcements by us or our competitors of significant acquisitions, strategic
partnerships, joint ventures or capital commitments;
 
    
    unscheduled system downtime of our products in either a hosted or in-house
environment;
 
    
    security breaches in our software or facilities may cause harm to our business and
reputation, result in a loss of customers or result in material liability to us;
 
    
    additions or departures of key personnel; and
 
    
    sales of our common stock or other securities in the open market.
 Future sales of our common stock in the public market could negatively affect our stock price
  We face added business, political, regulatory, operational, financial and economic risks as a
result of our international operations, any of which could increase our costs and hinder our growth
  
    
    fluctuations in currency exchange rates;
 
    
    governmental currency controls;
 
    
    changes in various regulatory requirements;
 
    
    political, economic and military changes and disruptions;
 
    
    difficulties in enforcing our contracts in foreign jurisdictions;
 
    
    export/import controls;
 
    
    tariff regulations;
  14




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
    
    difficulties in staffing and managing foreign sales, professional services, product
development and support operations;
 
    
    greater difficulties in trade accounts receivable collection; and
 
    
    possible adverse tax consequences.
   Our balance sheet includes significant amounts of goodwill and intangible assets. The impairment of
a significant portion of these assets would negatively affect our financial results
  We depend upon key employees and may be unable to hire or retain a sufficient number of qualified
personnel
  The adoption or modification of laws or regulations relating to the Internet, or interpretations of
existing law, could adversely affect our business
   15




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Some anti-takeover provisions contained in our charter and under Delaware law could hinder a
takeover attempt
  
 Item 1B.
    
    Unresolved Staff Comments.
  
 Item 2.
    
    Properties.
   Approximate Size
    
    
    LeasePrincipal Locations
    
    Principal Business Segment
    
    (square feet)
    
    
    ExpirationAustin, TX, USA
    
    Banking: Community FI
    
    
    26,400
    
    
    
    2015Bogotá, Colombia
    
    Payments
    
    
    7,500
    
    
    
    2012Cape Town, South Africa
    
    Payments
    
    
    35,700
    
    
    
    2013Chapin, SC, USA
    
    Banking: Community FI
    
    
    24,500
    
    
    
    2015Charlotte, NC, USA
    
    Banking: Large FI
    
    
    26,300
    
    
    
    2015Chertsey, England
    
    Payments and Banking: Large FI
    
    
    9,800
    
    
    
    2014Johannesburg, South Africa
    
    Payments
    
    
    8,100
    
    
    
    2013Norcross, GA, USA
    
    Payments, Banking: Large FI and Banking: Community FI
    
    
    71,000
    
    
    
    OwnedPune, India
    
    Banking: Large FI and Banking: Community FI
    
    
    56,400
    
    
    
    2013West Hills, CA, USA
    
    Banking: Community FI
    
    
    24,900
    
    
    
    2018
 
 Item 3.
    
    Legal Proceedings.
  
 Item 4.
    
    [Removed and Reserved.]
  16




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PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
  2010
    
    
    2009High
    
    
    Low
    
    
    High
    
    
    LowFirst Quarter
    
    $
    6.84
    
    
    $
    5.80
    
    
    $
    8.00
    
    
    $
    4.75Second Quarter
    
    $
    6.80
    
    
    $
    5.45
    
    
    $
    7.42
    
    
    $
    5.04Third Quarter
    
    $
    6.18
    
    
    $
    4.73
    
    
    $
    7.43
    
    
    $
    5.87Fourth Quarter
    
    $
    7.24
    
    
    $
    5.16
    
    
    $
    6.60
    
    
    $
    5.65
 Comparison of Cumulative Total Return from December 31, 2005 to December 31, 2010
  12/31/2005
    
    
    12/31/2006
    
    
    12/31/2007
    
    
    12/31/2008
    
    
    12/31/2009
    
    
    12/31/2010S1 Corporation
    
    $
    100
    
    
    $
    127
    
    
    $
    168
    
    
    $
    181
    
    
    $
    150
    
    
    $
    159Interactive Week Internet Index
    
    $
    100
    
    
    $
    114
    
    
    $
    131
    
    
    $
    76
    
    
    $
    133
    
    
    $
    175NASDAQ Composite
    
    $
    100
    
    
    $
    110
    
    
    $
    120
    
    
    $
    72
    
    
    $
    103
    
    
    $
    120
 
  17




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Item 6.
    
    Selected Financial Data.
  Year Ended December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4)(In thousands, except per share data)Statement of Operations Data:Total revenue
    
    $
    209,086
    
    
    $
    238,927
    
    
    $
    228,435
    
    
    $
    204,925
    
    
    $
    192,310(Loss) income from continuing operations
    
    
    (6,283
    )
    
    
    30,423
    
    
    
    21,850
    
    
    
    19,495
    
    
    
    (12,239
    )Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,141Net (loss) income
    
    
    (6,283
    )
    
    
    30,423
    
    
    
    21,850
    
    
    
    19,495
    
    
    
    17,902Revenue from significant customer (1)
    
    
    25,168
    
    
    
    38,402
    
    
    
    42,084
    
    
    
    43,425
    
    
    
    47,898Stock-based compensation expense
    
    
    3,700
    
    
    
    1,602
    
    
    
    8,092
    
    
    
    8,522
    
    
    
    5,663Basic (loss) income per share:Continuing operations
    
    $
    (0.12
    )
    
    $
    0.56
    
    
    $
    0.38
    
    
    $
    0.32
    
    
    $
    (0.17
    )Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.42Net (loss) income
    
    $
    (0.12
    )
    
    $
    0.56
    
    
    $
    0.38
    
    
    $
    0.32
    
    
    $
    0.25Diluted (loss) income per share:Continuing operations
    
    $
    (0.12
    )
    
    $
    0.55
    
    
    $
    0.38
    
    
    $
    0.32
    
    
    $
    (0.17
    )Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.42Net (loss) income
    
    $
    (0.12
    )
    
    $
    0.55
    
    
    $
    0.38
    
    
    $
    0.32
    
    
    $
    0.25Balance Sheet Data:Cash and cash equivalents
    
    $
    61,917
    
    
    $
    61,784
    
    
    $
    63,840
    
    
    $
    45,011
    
    
    $
    69,612Working capital
    
    
    48,843
    
    
    
    82,942
    
    
    
    55,804
    
    
    
    64,318
    
    
    
    83,227Goodwill
    
    
    147,544
    
    
    
    126,605
    
    
    
    124,362
    
    
    
    125,281
    
    
    
    125,300Total assets
    
    
    309,653
    
    
    
    300,066
    
    
    
    278,686
    
    
    
    281,844
    
    
    
    307,805Debt obligation, excluding current portion
    
    
    35
    
    
    
    5,026
    
    
    
    6,126
    
    
    
    8,805
    
    
    
    4,119Total liabilities
    
    
    72,040
    
    
    
    61,425
    
    
    
    69,946
    
    
    
    71,939
    
    
    
    83,576Stockholders equity
    
    
    237,613
    
    
    
    238,641
    
    
    
    208,740
    
    
    
    209,905
    
    
    
    224,229Other Selected Data:Cash provided by operating activities
    
    $
    37,249
    
    
    $
    16,035
    
    
    $
    34,147
    
    
    $
    31,332
    
    
    $
    3,460Cash (used in) provided by investing activities
    
    
    (37,704
    )
    
    
    (7,688
    )
    
    
    15,765
    
    
    
    (13,893
    )
    
    
    31,626Cash used in financing activities (2)
    
    
    (364
    )
    
    
    (12,172
    )
    
    
    (27,488
    )
    
    
    (42,490
    )
    
    
    (50,671
    )Weighted average common shares outstanding 
basic
    
    
    52,495
    
    
    
    52,584
    
    
    
    55,734
    
    
    
    59,746
    
    
    
    70,780Weighted average common shares outstanding 
diluted
    
    
    52,495
    
    
    
    53,291
    
    
    
    56,449
    
    
    
    60,596
    
    
    
    70,780
 
 (1)
    
    Revenue from State Farm.(2)
    
    Cash used in financing activities included the repurchase of common stock of $9.6
million in 2009, $25.1 million in 2008, $51.0 million in 2007 and $55.8 million in 2006
pursuant to authorized stock repurchase programs.(3)
    
    Our 2010 selected financial data reflects, as of their respective dates of acquisition,
our purchase of PM Systems Corporation for approximately $29.2 million, net of cash
acquired, in March 2010 and certain assets from a reseller in Latin America for
approximately $1.9 million, net of cash acquired, in August 2010.(4)
    
    In 2004, we acquired Mosaic Software Holdings Limited and we paid an additional
acquisition cost of $14.0 million as earn-out consideration in 2006. Discontinued
operations included our Risk and Compliance business sold in 2006 for approximately $32.6
million.
  18




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##### Table of Contents



Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Executive Overview
 Background.
      19




---



##### Table of Contents



Summary financial results.
  Revenue from Significant Customers
   20




---



##### Table of Contents



Consolidated Results of Operations
  Change2010 vs.
    
    
    2009 vs.2010
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Revenue:Software licenses
    
    $
    26,237
    
    
    $
    35,196
    
    
    $
    30,230
    
    
    
    -25
    %
    
    
    16
    %Support and maintenance
    
    
    63,034
    
    
    
    59,602
    
    
    
    53,779
    
    
    
    6
    %
    
    
    11
    %Professional services
    
    
    65,180
    
    
    
    94,965
    
    
    
    92,470
    
    
    
    -31
    %
    
    
    3
    %Hosting
    
    
    54,635
    
    
    
    49,164
    
    
    
    51,956
    
    
    
    11
    %
    
    
    -5
    %Total revenue
    
    
    209,086
    
    
    
    238,927
    
    
    
    228,435
    
    
    
    -12
    %
    
    
    5
    %Operating Expenses:Cost of software licenses (1)
    
    
    2,242
    
    
    
    3,188
    
    
    
    3,986
    
    
    
    -30
    %
    
    
    -20
    %Cost of professional services, support and maintenance (1)
    
    
    82,778
    
    
    
    74,186
    
    
    
    74,095
    
    
    
    12
    %
    
    
    0
    %Cost of hosting (1)
    
    
    27,595
    
    
    
    28,147
    
    
    
    26,408
    
    
    
    -2
    %
    
    
    7
    %Selling and marketing
    
    
    28,172
    
    
    
    30,725
    
    
    
    36,432
    
    
    
    -8
    %
    
    
    -16
    %Product development
    
    
    35,508
    
    
    
    34,619
    
    
    
    29,271
    
    
    
    3
    %
    
    
    18
    %General and administrative
    
    
    27,134
    
    
    
    24,864
    
    
    
    25,826
    
    
    
    9
    %
    
    
    -4
    %Depreciation and amortization
    
    
    10,161
    
    
    
    9,593
    
    
    
    9,066
    
    
    
    6
    %
    
    
    6
    %Total operating expenses
    
    
    213,590
    
    
    
    205,322
    
    
    
    205,084
    
    
    
    4
    %
    
    
    0
    %Operating (loss) income
    
    
    (4,504
    )
    
    
    33,605
    
    
    
    23,351
    
    
    
    -113
    %
    
    
    44
    %Interest and other (expense) income, net
    
    
    (1,608
    )
    
    
    (1,218
    )
    
    
    753
    
    
    
    32
    %
    
    
    -262
    %(Loss) income before income tax benefit (expense)
    
    
    (6,112
    )
    
    
    32,387
    
    
    
    24,104
    
    
    
    -119
    %
    
    
    34
    %Income tax expense
    
    
    (171
    )
    
    
    (1,964
    )
    
    
    (2,254
    )
    
    
    -91
    %
    
    
    -13
    %Net (loss) income
    
    $
    (6,283
    )
    
    $
    30,423
    
    
    $
    21,850
    
    
    
    -121
    %
    
    
    39
    %(Loss) income per shareBasic
    
    $
    (0.12
    )
    
    $
    0.56
    
    
    $
    0.38Diluted
    
    $
    (0.12
    )
    
    $
    0.55
    
    
    $
    0.38Effective tax rate
    
    
    -3
    %
    
    
    6
    %
    
    
    9
    %Operating expenses as a percent of revenueCost of software licenses (2)
    
    
    9
    %
    
    
    9
    %
    
    
    13
    %Cost of professional services, support and maintenance
(2)
    
    
    65
    %
    
    
    48
    %
    
    
    51
    %Cost of hosting (2)
    
    
    51
    %
    
    
    57
    %
    
    
    51
    %Selling and marketing
    
    
    13
    %
    
    
    13
    %
    
    
    16
    %Product development
    
    
    17
    %
    
    
    14
    %
    
    
    13
    %General and administrative
    
    
    13
    %
    
    
    10
    %
    
    
    11
    %Depreciation and amortization of other intagible assets
    
    
    5
    %
    
    
    4
    %
    
    
    4
    %Operating (loss) income
    
    
    -2
    %
    
    
    14
    %
    
    
    10
    %Net (loss) income
    
    
    -3
    %
    
    
    13
    %
    
    
    10
    %
 (1)
    
    The Cost of software licenses, professional services, support and maintenance, and
hosting excludes charges for depreciation. The Cost of software licenses includes
amortization of acquired technology.(2)
    
    Each direct cost is a percentage of the applicable revenue type for the periods
presented.
  21




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RESULTS OF OPERATIONS  COMPARISON OF 2010 TO 2009
 Banking:
    
    
    Banking:(Dollars in thousands)
    
    Payments
    
    
    Large FI
    
    
    Community FI
    
    
    TotalTotal revenue2010
    
    $
    54,657
    
    
    $
    95,933
    
    
    $
    58,496
    
    
    $
    209,0862009
    
    
    56,543
    
    
    
    129,232
    
    
    
    53,152
    
    
    
    238,927Revenue (decline) growth
    
    
    (1,886
    )
    
    
    (33,299
    )
    
    
    5,344
    
    
    
    (29,841
    )Percentage change
    
    
    -3
    %
    
    
    -26
    %
    
    
    10
    %
    
    
    -12
    %Total operating income (loss)2010
    
    $
    5,287
    
    
    $
    (3,595
    )
    
    $
    (6,196
    )
    
    $
    (4,504
    )2009
    
    
    14,491
    
    
    
    19,781
    
    
    
    (667
    )
    
    
    33,605Change in operating
income (loss)
    
    
    (9,204
    )
    
    
    (23,376
    )
    
    
    (5,529
    )
    
    
    (38,109
    )Percentage change
    
    
    -64
    %
    
    
    -118
    %
    
    
    -829
    %
    
    
    -113
    %
 Revenue.
     22




---



##### Table of Contents



Operating (loss) income.
    Interest and other (expense) income, net.
 Income tax benefit (expense)
   23




---



##### Table of Contents



RESULTS OF OPERATIONS  COMPARISON OF 2009 TO 2008
 Banking:
    
    
    Banking:(Dollars in thousands)
    
    Payments
    
    
    Large FI
    
    
    Community FI
    
    
    TotalTotal revenue2009
    
    $
    56,543
    
    
    $
    129,232
    
    
    $
    53,152
    
    
    $
    238,9272008
    
    
    48,024
    
    
    
    125,705
    
    
    
    54,706
    
    
    
    228,435Revenue (decline) growth
    
    
    8,519
    
    
    
    3,527
    
    
    
    (1,554
    )
    
    
    10,492Percentage change
    
    
    18
    %
    
    
    3
    %
    
    
    -3
    %
    
    
    5
    %Total operating income (loss)2009
    
    $
    14,491
    
    
    $
    19,781
    
    
    $
    (667
    )
    
    $
    33,6052008
    
    
    9,031
    
    
    
    11,507
    
    
    
    2,813
    
    
    
    23,351Change in operating
income (loss)
    
    
    5,460
    
    
    
    8,274
    
    
    
    (3,480
    )
    
    
    10,254Percentage change
    
    
    60
    %
    
    
    72
    %
    
    
    -124
    %
    
    
    44
    %
 Revenue.
    Operating income (loss).
     24




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##### Table of Contents



Interest and other (expense) income, net.
 Income tax expense
 Liquidity and Capital Resources
  Year Ended December 31,2010
    
    
    2009
    
    
    2008Net cash provided by operating activities before
changes in operating assets and liabilities
    
    $
    10,078
    
    
    $
    41,378
    
    
    $
    40,460Change in operating assets and liabilities
    
    
    27,171
    
    
    
    (25,343
    )
    
    
    (6,313
    )Net cash provided by operating activities
    
    
    37,249
    
    
    
    16,035
    
    
    
    34,147Net cash (used in) provided by investing activities
    
    
    (37,704
    )
    
    
    (7,688
    )
    
    
    15,765Net cash used in financing activities
    
    
    (364
    )
    
    
    (12,172
    )
    
    
    (27,488
    )Effect of exchange rates on cash and cash equivalents
    
    
    952
    
    
    
    1,769
    
    
    
    (3,595
    )Net increase (decrease) in cash and cash equivalents
    
    $
    133
    
    
    $
    (2,056
    )
    
    $
    18,829
 As of December 31,2010
    
    
    2009Cash and cash equivalents
    
    $
    61,917
    
    
    $
    61,784Working capital (1)
    
    
    48,843
    
    
    
    82,942Total assets
    
    
    309,653
    
    
    
    300,066Total stockholders equity
    
    
    237,613
    
    
    
    238,641
 (1)
    
    Working capital included deferred revenue of $38.0 million and $26.8 million as
of December 31, 2010 and 2009, respectively.
 Operating activities.
   25




---



##### Table of Contents



Investing activities.
   Financing activities.
   Contractual Obligations and Off-Balance Sheet Arrangements
   26




---



##### Table of Contents



Less than
    
    
    1 - 3
    
    
    3 - 5
    
    
    Greater than1 year
    
    
    years
    
    
    years
    
    
    5 years
    
    
    TotalNotes payable including interest payments
    
    $
    5,094
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5,094Capital leases including interest payments
    
    
    20
    
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    56Operating leases
    
    
    10,333
    
    
    
    11,195
    
    
    
    9,362
    
    
    
    7,384
    
    
    
    38,274Purchase obligations (1)
    
    
    2,657
    
    
    
    1,622
    
    
    
    
    
    
    
    
    
    
    
    4,279Uncertain tax postitions (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    459Deferred compensation (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    298Subtotal
    
    $
    18,104
    
    
    $
    12,853
    
    
    $
    9,362
    
    
    $
    7,384
    
    
    $
    48,460Operating sublease income
    
    
    (2,692
    )
    
    
    (32
    )
    
    
    
    
    
    
    
    
    
    
    (2,724
    )Total obligations, net of sublease income
    
    $
    15,412
    
    
    $
    12,821
    
    
    $
    9,362
    
    
    $
    7,384
    
    
    $
    45,736
 (1)
    
    Our purchase obligations mainly consist of software support, hardware support and
telecommunication agreements.(2)
    
    For unrecognized tax benefits or liabilities related to uncertain tax positions, we are not
able to reasonably estimate the timing of the payments. Therefore, the table does not reflect
the expected payment in any specific date column but the amount is included in the Total
column.(3)
    
    As the specific payment dates for the deferred compensation are unknown, the related balances
have not been reflected in the future minimum payments section of the table for any specific
date column, but the amount is included in the Total column.
 Stock appreciation rights awards.
 Subsidiary funding policies.
 Capital requirements.
  27




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##### Table of Contents



Recent Accounting Pronouncements
    Critical Accounting Policies and Estimates
  
    
    revenue recognition;
 
    
    estimation of our allowance for doubtful accounts and billing adjustments;
 
    
    valuation and recoverability of long-lived assets, including goodwill;
 
    
    determination of the fair value of stock-based compensation; and
 
    
    income taxes.
 Revenue recognition
  28




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##### Table of Contents



Software licenses revenue
   Support and maintenance revenue
 Professional services revenue
 
    
    whether the fees associated with our products and services are fixed or
determinable;
 
    
    whether the collection of our fees is probable;
 
    
    whether professional services are essential to the functionality of the related
software product;
 
    
    whether we have the ability to make reasonably dependable estimates in the
application of the percentage of completion and proportional performance methods; and
 
    
    whether we have VSOE of fair value for our products and services.
  
    
    percentage of labor hours incurred to date to the estimated total labor hours for
each contract;
 
    
    changes to labor rates;
 
    
    milestone billing dates that become greater than 12 months from the reporting date;
 
    
    utilization and efficiency variances;
 
    
    specification and testing requirements;
 
    
    provisions for estimated losses on uncompleted contracts; and
 
    
    length or complexity of custom implementations.
  29




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##### Table of Contents



Hosting revenue
 Estimation of allowance for doubtful accounts and billing adjustments.
  Valuation and recoverability of long-lived assets, including goodwill.
 
    
    significant under-performance relative to expected historical or projected future
operating results;
 
    
    significant changes in the manner of our use of the acquired assets or the strategy
of our overall business;
 
    
    significant negative industry or economic trends;
 
    
    significant decline in our stock price for a sustained period; and
 
    
    our market capitalization relative to net book value.
   30




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##### Table of Contents



Determination of the fair value of stock-based compensation.
 For the year ended December 31,2010
    
    
    2009
    
    
    2008Operating expenses:Cost of professional services, support and maintenance
    
    $
    310
    
    
    $
    161
    
    
    $
    344Cost of data center
    
    
    133
    
    
    
    115
    
    
    
    100Selling and marketing
    
    
    504
    
    
    
    (246
    )
    
    
    2,949Product development
    
    
    270
    
    
    
    254
    
    
    
    1,034General and administrative
    
    
    2,483
    
    
    
    1,318
    
    
    
    3,665Total stock-based compensation expense
    
    $
    3,700
    
    
    $
    1,602
    
    
    $
    8,092Grant type:Stock options
    
    $
    1,656
    
    
    $
    2,342
    
    
    $
    3,955Restricted stock
    
    
    2,573
    
    
    
    1,750
    
    
    
    917Stock appreciation rights
    
    
    (529
    )
    
    
    (2,490
    )
    
    
    3,220Total stock-based compensation expense
    
    $
    3,700
    
    
    $
    1,602
    
    
    $
    8,092
 Income taxes.
  Effects of Foreign Currencies
   31




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##### Table of Contents



Year Ended December 31, 2010
    
    
    Year Ended December 31, 2009At Prior Year
    
    
    
    
    
    
    
    
    
    
    At Prior YearExchange
    
    
    Exchange Rate
    
    
    
    
    
    
    Exchange
    
    
    Exchange RateRates (1)
    
    
    Effect
    
    
    As reported
    
    
    Rates (1)
    
    
    Effect
    
    
    As reportedRevenue
    
    $
    206,936
    
    
    $
    2,150
    
    
    $
    209,086
    
    
    $
    243,127
    
    
    $
    (4,200
    )
    
    $
    238,927Operating Expenses
    
    
    210,130
    
    
    
    3,460
    
    
    
    213,590
    
    
    
    210,042
    
    
    
    (4,720
    )
    
    
    205,322Operating Income
    
    
    (3,194
    )
    
    
    (1,310
    )
    
    
    (4,504
    )
    
    
    33,085
    
    
    
    520
    
    
    
    33,605Net Income
    
    
    (5,113
    )
    
    
    (1,170
    )
    
    
    (6,283
    )
    
    
    29,523
    
    
    
    900
    
    
    
    30,423Basic (loss) income per share
    
    $
    (0.10
    )
    
    $
    (0.02
    )
    
    $
    (0.12
    )
    
    $
    0.54
    
    
    $
    0.02
    
    
    $
    0.56Diluted (loss) income per share
    
    $
    (0.10
    )
    
    $
    (0.02
    )
    
    $
    (0.12
    )
    
    $
    0.54
    
    
    $
    0.01
    
    
    $
    0.55
 (1)
    
    Current year results translated into U.S. Dollars using prior years average rate.
 
 Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk.
  Foreign currency risk.
    32




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##### Table of Contents



Interest rate risk.
  Investment risk.
  33




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##### Table of Contents



Item 8.
    
    Financial Statements and Supplementary Data
 INDEX TO FINANCIAL STATEMENTS
 PageFINANCIAL STATEMENTS:Report of Independent Registered Public Accounting Firm
    
    
    35Consolidated Balance Sheets as of December 31, 2010 and 2009
    
    
    36Consolidated Statements of Operations for the Years Ended December 31, 2010, 2009 and 2008
    
    
    37Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008
    
    
    38Consolidated Statements of Stockholders Equity and Comprehensive Income (Loss) for the Years Ended
December 31, 2010, 2009 and 2008
    
    
    39Notes to Consolidated Financial Statements
    
    
    40FINANCIAL STATEMENT SCHEDULE:For each of the three years ended December 31, 2010, 2009 and 2008Schedule IIValuation and Qualifying Accounts
    
    
    64
   34




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Report of Independent Registered Public Accounting Firm
      
  35




---



##### Table of Contents



S1 CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
 December 31,
    
    
    December 31,2010
    
    
    2009(in thousands, except shareand per share data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    61,917
    
    
    $
    61,784Accounts receivable, net of allowance for doubtful accounts and billing adjustments
of $3,309 and $2,299 at December 31, 2010 and 2009, respectively
    
    
    44,370
    
    
    
    64,470Prepaid expenses
    
    
    4,827
    
    
    
    4,729Other current assets
    
    
    6,612
    
    
    
    4,931Total current assets
    
    
    117,726
    
    
    
    135,914Property and equipment, net
    
    
    22,330
    
    
    
    23,018Intangible assets, net
    
    
    11,846
    
    
    
    4,895Goodwill
    
    
    147,544
    
    
    
    126,605Other assets
    
    
    10,207
    
    
    
    9,634Total assets
    
    $
    309,653
    
    
    $
    300,066LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    9,779
    
    
    $
    7,707Accrued compensation and benefits
    
    
    9,705
    
    
    
    11,569Current portion of debt obligation
    
    
    5,046
    
    
    
    1,170Accrued restructuring
    
    
    1,528
    
    
    
    2,096Income taxes payable
    
    
    1,950
    
    
    
    1,586Deferred revenue
    
    
    38,022
    
    
    
    26,837Other current liabilities
    
    
    2,853
    
    
    
    2,007Total current liabilities
    
    
    68,883
    
    
    
    52,972Debt obligation, excluding current portion
    
    
    35
    
    
    
    5,026Accrued restructuring, excluding current portion
    
    
    
    
    
    
    1,381Other liabilities
    
    
    3,122
    
    
    
    2,046Total liabilities
    
    $
    72,040
    
    
    $
    61,425Commitments and contingencies (Note 10)Stockholders equity:Preferred stock, $0.01 par value. Authorized 25,000,000 shares. Issued and outstanding
0 shares and 749,064 shares at December 31, 2010 and 2009, respectively
    
    $
    
    
    
    $
    10,000Common stock, $0.01 par value. Authorized 350,000,000 shares. Issued and outstanding
53,317,063 and 51,712,710 shares at December 31, 2010 and 2009, respectively
    
    
    533
    
    
    
    517Additional paid in capital
    
    
    1,802,795
    
    
    
    1,787,772Accumulated deficit
    
    
    (1,563,817
    )
    
    
    (1,557,534
    )Accumulated other comprehensive loss
    
    
    (1,898
    )
    
    
    (2,114
    )Total stockholders equity
    
    
    237,613
    
    
    
    238,641Total liabilities and stockholders equity
    
    $
    309,653
    
    
    $
    300,066
   36




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##### Table of Contents



S1 CORPORATION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Year Ended December 31,2010
    
    
    2009
    
    
    2008(in thousands, except share and per share data)Revenue:Software licenses
    
    $
    26,237
    
    
    $
    35,196
    
    
    $
    30,230Support and maintenance
    
    
    63,034
    
    
    
    59,602
    
    
    
    53,779Professional services
    
    
    65,180
    
    
    
    94,965
    
    
    
    92,470Hosting
    
    
    54,635
    
    
    
    49,164
    
    
    
    51,956Total revenue
    
    
    209,086
    
    
    
    238,927
    
    
    
    228,435Operating expenses:Cost of software licenses (1)
    
    
    2,242
    
    
    
    3,188
    
    
    
    3,986Cost of professional services, support and maintenance (1)
    
    
    82,778
    
    
    
    74,186
    
    
    
    74,095Cost of hosting (1)
    
    
    27,595
    
    
    
    28,147
    
    
    
    26,408Selling and marketing
    
    
    28,172
    
    
    
    30,725
    
    
    
    36,432Product development
    
    
    35,508
    
    
    
    34,619
    
    
    
    29,271General and administrative
    
    
    27,134
    
    
    
    24,864
    
    
    
    25,826Depreciation and amortization
    
    
    10,161
    
    
    
    9,593
    
    
    
    9,066Total operating expenses
    
    
    213,590
    
    
    
    205,322
    
    
    
    205,084Operating (loss) income
    
    
    (4,504
    )
    
    
    33,605
    
    
    
    23,351Interest income
    
    
    214
    
    
    
    433
    
    
    
    2,052Interest expense
    
    
    (455
    )
    
    
    (721
    )
    
    
    (855
    )Other non-operating expenses
    
    
    (1,367
    )
    
    
    (930
    )
    
    
    (444
    )Interest and other (expense) income, net
    
    
    (1,608
    )
    
    
    (1,218
    )
    
    
    753(Loss) income before income tax expense
    
    
    (6,112
    )
    
    
    32,387
    
    
    
    24,104Income tax expense
    
    
    (171
    )
    
    
    (1,964
    )
    
    
    (2,254
    )Net (loss) income
    
    $
    (6,283
    )
    
    $
    30,423
    
    
    $
    21,850(Loss) income per shareBasic
    
    $
    (0.12
    )
    
    $
    0.56
    
    
    $
    0.38Diluted
    
    $
    (0.12
    )
    
    $
    0.55
    
    
    $
    0.38Weighted average common shares outstanding  basic
    
    
    52,495,265
    
    
    
    52,583,832
    
    
    
    55,734,103Weighted average common shares outstanding  fully diluted
    
    
    52,495,265
    
    
    
    53,290,836
    
    
    
    56,449,371
 (1)
    
    The Cost of software licenses, professional services, support and maintenance and
hosting excludes charges for depreciation but the Cost of software licenses includes
amortization of acquired technology.
   37




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##### Table of Contents



S1 CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year Ended December 31,2010
    
    
    2009
    
    
    2008(in thousands)Cash flows from operating activities:Net (loss) income
    
    $
    (6,283
    )
    
    $
    30,423
    
    
    $
    21,850Adjustments to reconcile net (loss) income to net cash provided by operating activities:Depreciation and amortization
    
    
    11,216
    
    
    
    11,170
    
    
    
    11,591Provision for doubtful accounts receivable and billing adjustments
    
    
    1,388
    
    
    
    995
    
    
    
    159Deferred income taxes
    
    
    57
    
    
    
    (2,812
    )
    
    
    (1,895
    )Other than temporary impairments of investments
    
    
    
    
    
    
    
    
    
    
    663Stock-based compensation expense
    
    
    3,700
    
    
    
    1,602
    
    
    
    8,092Changes in assets and liabilities:Decrease (increase) in accounts receivable
    
    
    19,880
    
    
    
    (22,396
    )
    
    
    (3,095
    )(Increase) decrease in prepaid expenses and other assets
    
    
    (1,760
    )
    
    
    792
    
    
    
    (231
    )Decrease in accounts payable and other liabilities
    
    
    (292
    )
    
    
    (920
    )
    
    
    (6,250
    )(Decrease) increase in accrued compensation and benefits
    
    
    (1,985
    )
    
    
    (2,711
    )
    
    
    2,106Increase (decrease) in income taxes payable
    
    
    310
    
    
    
    (1,437
    )
    
    
    2,434Increase (decrease) in deferred revenues
    
    
    11,018
    
    
    
    1,329
    
    
    
    (1,277
    )Net cash provided by operating activities
    
    
    37,249
    
    
    
    16,035
    
    
    
    34,147Cash flows from investing activities:Maturities of investment securities
    
    
    1,384
    
    
    
    5,728
    
    
    
    24,244Purchases of investment securities
    
    
    (1,117
    )
    
    
    (3,224
    )
    
    
    (3,447
    )Purchases of restricted investment securities
    
    
    
    
    
    
    (2,000
    )
    
    
    Amounts released from escrow related to sale of business
    
    
    
    
    
    
    
    
    
    
    3,712Acquisitions, net of acquired cash
    
    
    (31,198
    )
    
    
    
    
    
    
    Purchases of property, equipment and technology
    
    
    (6,773
    )
    
    
    (8,192
    )
    
    
    (8,744
    )Net cash (used in) provided by investing activities
    
    
    (37,704
    )
    
    
    (7,688
    )
    
    
    15,765Cash flows from financing activities:Proceeds from exercise of employee stock awards
    
    
    810
    
    
    
    1,341
    
    
    
    1,305Payments on capital leases and debt obligations
    
    
    (1,174
    )
    
    
    (3,917
    )
    
    
    (3,718
    )Repurchase and retirement of common stock
    
    
    
    
    
    
    (9,596
    )
    
    
    (25,075
    )Net cash used in financing activities
    
    
    (364
    )
    
    
    (12,172
    )
    
    
    (27,488
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    952
    
    
    
    1,769
    
    
    
    (3,595
    )Net increase (decrease) in cash and cash equivalents
    
    
    133
    
    
    
    (2,056
    )
    
    
    18,829Cash and cash equivalents at beginning of period
    
    
    61,784
    
    
    
    63,840
    
    
    
    45,011Cash and cash equivalents at end of period
    
    $
    61,917
    
    
    $
    61,784
    
    
    $
    63,840Noncash investing and financing activities:Equipment financed through capital leases
    
    $
    60
    
    
    $
    
    
    
    $
    1,301Supplemental schedule of cash flow data:Cash paid for income taxes
    
    $
    1,716
    
    
    $
    7,057
    
    
    $
    2,279Cash paid for interest
    
    
    455
    
    
    
    730
    
    
    
    875
   38




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##### Table of Contents



S1 CORPORATION
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS)
 (in thousands except for share data)
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalPreferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Stockholders
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Loss
    
    
    Equity
    
    
    Income (Loss)Balance at December 31, 2007
    
    
    749,064
    
    
    $
    10,000
    
    
    
    56,748,906
    
    
    $
    567
    
    
    $
    1,810,783
    
    
    $
    (1,609,807
    )
    
    $
    (1,638
    )
    
    $
    209,905Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,850
    
    
    
    
    
    
    
    21,850
    
    
    
    21,850Net unrealized loss on cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49
    
    
    
    49
    
    
    
    49Change in cumulative foreign currency translation
adjustment, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,283
    )
    
    
    (4,283
    )
    
    
    (4,283
    )Realized loss on cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    117
    
    
    
    117
    
    
    
    117Common stock issued upon the exercise of stock
Awards
    
    
    
    
    
    
    
    
    
    
    442,141
    
    
    
    4
    
    
    
    1,301
    
    
    
    
    
    
    
    
    
    
    
    1,305
    
    
    
    Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,872
    
    
    
    
    
    
    
    
    
    
    
    4,872
    
    
    
    Repurchase and retirement of common stock
    
    
    
    
    
    
    
    
    
    
    (4,391,737
    )
    
    
    (43
    )
    
    
    (25,032
    )
    
    
    
    
    
    
    
    
    
    
    (25,075
    )
    
    
    Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    17,733Balance at December 31, 2008
    
    
    749,064
    
    
    $
    10,000
    
    
    
    52,799,310
    
    
    $
    528
    
    
    $
    1,791,924
    
    
    $
    (1,587,957
    )
    
    $
    (5,755
    )
    
    $
    208,740Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,423
    
    
    
    
    
    
    
    30,423
    
    
    
    30,423Net unrealized loss on cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (69
    )
    
    
    (69
    )
    
    
    (69
    )Change in cumulative foreign currency translation
adjustment, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,710
    
    
    
    3,710
    
    
    
    3,710Common stock issued upon the exercise of stock
Awards
    
    
    
    
    
    
    
    
    
    
    420,751
    
    
    
    4
    
    
    
    1,337
    
    
    
    
    
    
    
    
    
    
    
    1,341
    
    
    
    Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,092
    
    
    
    
    
    
    
    
    
    
    
    4,092
    
    
    
    Repurchase and retirement of common stock
    
    
    
    
    
    
    
    
    
    
    (1,507,351
    )
    
    
    (15
    )
    
    
    (9,581
    )
    
    
    
    
    
    
    
    
    
    
    (9,596
    )
    
    
    Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    34,064Balance at December 31, 2009
    
    
    749,064
    
    
    $
    10,000
    
    
    
    51,712,710
    
    
    $
    517
    
    
    $
    1,787,772
    
    
    $
    (1,557,534
    )
    
    $
    (2,114
    )
    
    $
    238,641Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,283
    )
    
    
    
    
    
    
    (6,283
    )
    
    
    (6,283
    )Change in cumulative foreign currency translation
adjustment, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    216
    
    
    
    216
    
    
    
    216Conversion of preferred stock to common stock
    
    
    (749,064
    )
    
    
    (10,000
    )
    
    
    1,070,090
    
    
    
    11
    
    
    
    9,989
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock issued upon the exercise of stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    awards
    
    
    
    
    
    
    
    
    
    
    534,263
    
    
    
    5
    
    
    
    805
    
    
    
    
    
    
    
    
    
    
    
    810
    
    
    
    Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,229
    
    
    
    
    
    
    
    
    
    
    
    4,229
    
    
    
    Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (6,067
    )Balance at December 31, 2010
    
    
    
    
    
    $
    
    
    
    
    53,317,063
    
    
    $
    533
    
    
    $
    1,802,795
    
    
    $
    (1,563,817
    )
    
    $
    (1,898
    )
    
    $
    237,613
   39




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##### Table of Contents



S1 CORPORATION
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Summary of Significant Accounting Policies
 Business Overview
  Basis of presentation
   Subsequent events
  Use of estimates
  Fair value of financial instruments
    40




---



##### Table of Contents



Derivative financial instruments
  Accounts receivable and allowance for doubtful accounts and billing adjustments
  Property and equipment
   Building
    
    27 yearsBuilding improvements
    
    5 to 15 yearsLeasehold improvements
    
    shorter of lease term or 5 yearsFurniture and fixtures
    
    5 yearsComputer equipment
    
    2 to 3 years including leasesSoftware
    
    3 years
  41




---



##### Table of Contents



Leases
  Goodwill
  Other long-lived assets
   Other assets
  Cost-basis investments
   42




---



##### Table of Contents



Concentration of credit risk and uncertainties
   Revenue recognition, deferred revenue and cost of revenue
  Software license revenue.
   43




---



##### Table of Contents



Support and maintenance revenue.
 Professional services revenue.
 Hosting revenue.
 Deferred revenue.
 Cost of revenue.
 Product development costs
  Other non-operating expenses
  For the year ended December 31,2010
    
    
    2009
    
    
    2008Foreign exchange transaction (loss) gain
    
    $
    (378
    )
    
    $
    (734
    )
    
    $
    604Foreign withholding tax
    
    
    (708
    )
    
    
    (308
    )
    
    
    (350
    )Other expenses and gain (loss) on investments
    
    
    (281
    )
    
    
    112
    
    
    
    (698
    )Other non-operating expenses
    
    $
    (1,367
    )
    
    $
    (930
    )
    
    $
    (444
    )
  44




---



##### Table of Contents



Income taxes
   Other liabilities
  Stock-based compensation
     45




---



##### Table of Contents



Net (loss) income per share
  Foreign currency translation
  Comprehensive income (loss)
  Recent accounting pronouncements
     46




---



##### Table of Contents



2. Business Combinations
    PMSC
    
    
    Reseller AssetsCash
    
    $
    751
    
    
    $
    51Accounts receivables
    
    
    908
    
    
    
    452Indentifiable intangible assets:Trade names
    
    
    121
    
    
    
    Acquired technology
    
    
    3,390
    
    
    
    Customer relationships
    
    
    5,986
    
    
    
    230Goodwill
    
    
    19,497
    
    
    
    1,653Property and equipment
    
    
    502
    
    
    
    281Other assets
    
    
    506
    
    
    
    6Deferred revenue
    
    
    (622
    )
    
    
    Liabilities
    
    
    (1,107
    )
    
    
    (673
    )Total
    
    $
    29,932
    
    
    $
    2,000
 3. Fair Value Measurements
    47




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##### Table of Contents



December 31, 2010
    
    
    December 31, 2009Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedValue
    
    
    Fair Value
    
    
    Value
    
    
    Fair ValueCash and cash equivalents
    
    $
    61,917
    
    
    $
    61,917
    
    
    $
    61,784
    
    
    $
    61,784Included in other current assets:Fixed term deposits
    
    
    
    
    
    
    
    
    
    
    318
    
    
    
    318Restricted fixed term deposit
    
    
    2,000
    
    
    
    2,000
    
    
    
    2,000
    
    
    
    2,000Debt obligation, excluding current portion
    
    
    35
    
    
    
    36
    
    
    
    5,026
    
    
    
    4,911Deferred compensation
    
    
    298
    
    
    
    298
    
    
    
    
    
    
    
    
  Fair Value Measurements at Reporting Date UsingQuoted Prices in
    
    
    
    
    
    
    SignificantActive Markets for
    
    
    Significant Other
    
    
    UnobservableCarrying
    
    
    Identical Assets
    
    
    Observable Inputs
    
    
    InputsValue
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Deferred compensation
    
    $
    298
    
    
    $
    298
    
    
    $
    
    
    
    $
    Total
    
    $
    298
    
    
    $
    298
    
    
    $
    
    
    
    $
    
  48




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##### Table of Contents



Fair Value Measurements at Reporting Date  Using Signifcant Unobservable Inputs (Level 3)
 Balance at December 31, 2008
    
    $
    2,395Realized gain in earnings
    
    
    109Cash settlements
    
    
    (2,504
    )Ending balance at December 31, 2009
    
    $
    
 4. Accounts Receivable
  December 31,2010
    
    
    2009Billed receivables
    
    $
    35,264
    
    
    $
    42,862Unbilled receivables
    
    
    12,415
    
    
    
    23,907Allowance for doubtful accounts and billing adjustments
    
    
    (3,309
    )
    
    
    (2,299
    )Total
    
    $
    44,370
    
    
    $
    64,470
   5. Other Current Assets
  December 31,
    
    
    December 31,2010
    
    
    2009Restricted cash and escrow deposits
    
    $
    2,063
    
    
    $
    2,059Short-term investments
    
    
    
    
    
    
    318Taxes receivable
    
    
    1,582
    
    
    
    557Deferred tax assets, net
    
    
    1,859
    
    
    
    1,079Other
    
    
    1,108
    
    
    
    918Total
    
    $
    6,612
    
    
    $
    4,931
  49




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##### Table of Contents



6. Property and Equipment
  December 31,2010
    
    
    2009Property and building improvements
    
    $
    12,319
    
    
    $
    12,115Leasehold improvements
    
    
    2,658
    
    
    
    1,977Furniture and fixtures
    
    
    2,332
    
    
    
    2,327Computer equipment
    
    
    36,875
    
    
    
    31,891Software
    
    
    10,934
    
    
    
    10,811Property and equipment, before depreciation
    
    
    65,118
    
    
    
    59,121Accumulated depreciation and amortization
    
    
    (42,788
    )
    
    
    (36,103
    )Property and equipment, net
    
    $
    22,330
    
    
    $
    23,018
 7. Goodwill and Other Intangible Assets
   Banking:
    
    
    Banking:Payments
    
    
    Large FI
    
    
    Community FI
    
    
    TotalGoodwill, net as of December 31, 2008
    
    $
    33,943
    
    
    $
    48,697
    
    
    $
    41,722
    
    
    $
    124,362Effect of foreign currency translations
    
    
    (1,107
    )
    
    
    3,350
    
    
    
    
    
    
    
    2,243Goodwill, net as of December 31, 2009
    
    
    32,836
    
    
    
    52,047
    
    
    
    41,722
    
    
    
    126,605Acquisitions
    
    
    1,653
    
    
    
    
    
    
    
    19,497
    
    
    
    21,150Effect of foreign currency translations
    
    
    80
    
    
    
    (291
    )
    
    
    
    
    
    
    (211
    )Goodwill, net as of December 31, 2010
    
    $
    34,569
    
    
    $
    51,756
    
    
    $
    61,219
    
    
    $
    147,544
  As of December 31, 2010Gross
    
    
    Accumulated
    
    
    NetCarrying Value
    
    
    Amortization
    
    
    Carrying ValueTrade names
    
    $
    121
    
    
    $
    (101
    )
    
    $
    20Acquired technology
    
    
    25,328
    
    
    
    (21,646
    )
    
    
    3,682Customer lists
    
    
    18,196
    
    
    
    (10,052
    )
    
    
    8,144Total
    
    $
    43,645
    
    
    $
    (31,799
    )
    
    $
    11,846
 As of December 31, 2009Gross
    
    
    Accumulated
    
    
    NetCarrying Value
    
    
    Amortization
    
    
    Carrying ValueAcquired technology
    
    $
    21,938
    
    
    $
    (20,592
    )
    
    $
    1,346Customer relationships
    
    
    12,000
    
    
    
    (8,451
    )
    
    
    3,549Total
    
    $
    33,938
    
    
    $
    (29,043
    )
    
    $
    4,895
  50




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For the year ended December 31,2010
    
    
    2009
    
    
    2008Trade names
    
    $
    101
    
    
    $
    
    
    
    $
    Acquired technology
    
    
    1,055
    
    
    
    1,577
    
    
    
    2,525Customer lists
    
    
    1,601
    
    
    
    1,113
    
    
    
    1,130Total
    
    $
    2,757
    
    
    $
    2,690
    
    
    $
    3,655
  2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015Payments
    
    $
    525
    
    
    $
    525
    
    
    $
    525
    
    
    $
    443
    
    
    $
    35Banking: Large FI
    
    
    245
    
    
    
    183
    
    
    
    
    
    
    
    
    
    
    
    Banking: Community FI
    
    
    2,089
    
    
    
    1,493
    
    
    
    1,277
    
    
    
    1,277
    
    
    
    712Total
    
    $
    2,859
    
    
    $
    2,201
    
    
    $
    1,802
    
    
    $
    1,720
    
    
    $
    747
 8. Restructuring Costs
  2003 and2006 Plan
    
    
    2005 Plan
    
    
    Prior PlansPersonnel
    
    
    
    
    
    
    PersonnelCosts
    
    
    Lease Costs
    
    
    Costs
    
    
    Lease Costs
    
    
    Lease Costs
    
    
    TotalBalance, December 31, 2007
    
    $
    833
    
    
    $
    3,712
    
    
    $
    33
    
    
    $
    2,356
    
    
    $
    2,290
    
    
    $
    9,224Amounts utilized
    
    
    (323
    )
    
    
    (1,210
    )
    
    
    
    
    
    
    (1,207
    )
    
    
    (796
    )
    
    
    (3,536
    )Adjustments
    
    
    (510
    )
    
    
    208
    
    
    
    (33
    )
    
    
    544
    
    
    
    (131
    )
    
    
    78Balance, December 31, 2008
    
    
    
    
    
    
    2,710
    
    
    
    
    
    
    
    1,693
    
    
    
    1,363
    
    
    
    5,766Amounts utilized
    
    
    
    
    
    
    (1,163
    )
    
    
    
    
    
    
    (968
    )
    
    
    (835
    )
    
    
    (2,966
    )Adjustments
    
    
    
    
    
    
    324
    
    
    
    
    
    
    
    167
    
    
    
    186
    
    
    
    677Balance, December 31, 2009
    
    
    
    
    
    
    1,871
    
    
    
    
    
    
    
    892
    
    
    
    714
    
    
    
    3,477Amounts utilized
    
    
    
    
    
    
    (1,061
    )
    
    
    
    
    
    
    (667
    )
    
    
    (521
    )
    
    
    (2,249
    )Adjustments
    
    
    
    
    
    
    (38
    )
    
    
    
    
    
    
    198
    
    
    
    140
    
    
    
    300Balance, December 31, 2010
    
    $
    
    
    
    $
    772
    
    
    $
    
    
    
    $
    423
    
    
    $
    333
    
    
    $
    1,528
 Restructuring in 2006.
  51




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##### Table of Contents



Restructuring in 2005.
 Restructuring in 2003 and prior.
 9. Retirement Savings Plan
 4 01(k) retirement savings plan.
 Deferred compensation plan
 10. Commitments, Contingencies and Debt Obligations
 Operating lease commitments.
  Operating Lease
    
    
    Sublease
    
    
    Net Operating LeaseCommitments (1)
    
    
    Income (1)
    
    
    Commitments2011
    
    $
    10,333
    
    
    $
    (2,692
    )
    
    $
    7,6412012
    
    
    5,932
    
    
    
    (32
    )
    
    
    5,9002013
    
    
    5,263
    
    
    
    
    
    
    
    5,2632014
    
    
    3,158
    
    
    
    
    
    
    
    3,1582015
    
    
    6,204
    
    
    
    
    
    
    
    6,204Thereafter
    
    
    7,384
    
    
    
    
    
    
    
    7,384$
    38,274
    
    
    $
    (2,724
    )
    
    $
    35,550
 (1)
    
    Includes amounts for vacated facilities recorded in our restructuring
reserves of $4.1 million for operating lease commitments and $2.6 million of
related sublease income.
  52




---



##### Table of Contents



Debt obligations.
 December 31,2010
    
    
    2009Note payable due Feb. 2011 in monthly installments of $40 thousand
which include interest at 7.6%
    
    $
    4,972
    
    
    $
    5,060Note payable due Aug. 2011 in monthly installments of $7 thousand
which include interest at 12.0%
    
    
    54
    
    
    
    128Capital lease obligation with maturity dates through Sep. 2013
    
    
    55
    
    
    
    1,008$
    5,081
    
    
    $
    6,196Less: Current maturities included in current liabilities
    
    
    (5,046
    )
    
    
    (1,170
    )Debt obligation, excluding current portion
    
    $
    35
    
    
    $
    5,026
  Notes Payable
    
    
    Capital Leases
    
    
    Total2011
    
    $
    5,094
    
    
    $
    20
    
    
    $
    5,1142012
    
    
    
    
    
    
    20
    
    
    
    202013
    
    
    
    
    
    
    16
    
    
    
    16$
    5,094
    
    
    $
    56
    
    
    $
    5,150Less amount representing interest
    
    
    (68
    )
    
    
    (1
    )
    
    
    (69
    )$
    5,026
    
    
    $
    55
    
    
    $
    5,081
 Contractual commitments.
 Guarantees and indemnifications.
 Litigation.
  11. Stock-based Compensation
   53




---



##### Table of Contents



SharesGrants available under 2003 Stock Incentive Plan
    
    
    1,214Stock options outstanding
    
    
    5,907Restricted stock
    
    
    1,236Total
    
    
    8,357
  For the year ended December 31,2010
    
    
    2009
    
    
    2008Operating expenses:Cost of professional services, support and maintenance
    
    $
    310
    
    
    $
    161
    
    
    $
    344Cost of data center
    
    
    133
    
    
    
    115
    
    
    
    100Selling and marketing
    
    
    504
    
    
    
    (246
    )
    
    
    2,949Product development
    
    
    270
    
    
    
    254
    
    
    
    1,034General and administrative
    
    
    2,483
    
    
    
    1,318
    
    
    
    3,665Total stock-based compensation expense
    
    $
    3,700
    
    
    $
    1,602
    
    
    $
    8,092Grant type:Stock options
    
    $
    1,656
    
    
    $
    2,342
    
    
    $
    3,955Restricted stock
    
    
    2,573
    
    
    
    1,750
    
    
    
    917Stock appreciation rights
    
    
    (529
    )
    
    
    (2,490
    )
    
    
    3,220Total stock-based compensation expense
    
    $
    3,700
    
    
    $
    1,602
    
    
    $
    8,092
 Stock Options.
 For the year ended December 31,2010
    
    
    2009
    
    
2008Expected dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Expected volatility
    
    
    46.6
    %
    
    
    49.1
    %
    
    
    44.4
    %Risk-free interest rate
    
    
    1.8
    %
    
    
    2.5
    %
    
    
    3.1
    %Expected life
    
    
    4.4 years
    
    
    
    4.4 years
    
    
    
    4.4 yearsWeighted average fair value per share grant during year
    
    $
    2.42
    
    
    $
    3.01
    
    
    $
    2.58
  Weighted-Weighted-
    
    
    Average
    
    
    AggregateAverage
    
    
    Remaining
    
    
    IntrinsicShares
    
    
    Exercise
    
    
    Contractual
    
    
    Value(000s)
    
    
    Price
    
    
    Life (Yrs)
    
    
    ($000s)Outstanding at December 31, 2009
    
    
    6,287
    
    
    $
    6.96Granted
    
    
    520
    
    
    
    6.05Exercised
    
    
    (290
    )
    
    
    4.81
    
    
    
    
    
    
    $
    310Forfeited
    
    
    (610
    )
    
    
    12.74Outstanding at December 31, 2010
    
    
    5,907
    
    
    
    6.38
    
    
    
    5.6
    
    
    
    6,707Exercisable at December 31, 2010
    
    
    4,648
    
    
    
    6.39
    
    
    
    4.9
    
    
    
    5,912
  54




---



##### Table of Contents



Non-Vested
    
    
    Weighted-Number of
    
    
    AverageShares
    
    
    Grant-Date(000s)
    
    
    Fair ValueNon-vested balance at December 31, 2009
    
    
    1,510
    
    
    $
    2.65Granted
    
    
    520
    
    
    
    2.42Vested
    
    
    (682
    )
    
    
    2.63Forfeited
    
    
    (89
    )
    
    
    2.56Non-vested balance at December 31, 2010
    
    
    1,259
    
    
    
    2.58
  Options Outstanding
    
    
    Options ExercisableWeighted-Average
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-Number
    
    
    Remaining
    
    
    Average
    
    
    Number
    
    
    AverageOutstanding
    
    
    Contractual
    
    
    Exercise
    
    
    Exercisable
    
    
    ExerciseRange of Exercise Price
    
    (000s)
    
    
    Life (Yrs)
    
    
    Price
    
    
    (000s)
    
    
    Price$3.51  4.00
    
    
    158
    
    
    
    2.7
    
    
    $
    3.60
    
    
    
    158
    
    
    $
    3.604.01  5.00
    
    
    1,735
    
    
    
    5.0
    
    
    
    4.54
    
    
    
    1,735
    
    
    
    4.545.01  6.00
    
    
    655
    
    
    
    5.7
    
    
    
    5.30
    
    
    
    536
    
    
    
    5.286.01  7.00
    
    
    1,816
    
    
    
    7.6
    
    
    
    6.33
    
    
    
    922
    
    
    
    6.447.01  8.00
    
    
    532
    
    
    
    7.0
    
    
    
    7.19
    
    
    
    322
    
    
    
    7.208.01  9.00
    
    
    708
    
    
    
    3.6
    
    
    
    8.34
    
    
    
    672
    
    
    
    8.359.01  19.30
    
    
    303
    
    
    
    1.2
    
    
    
    15.10
    
    
    
    303
    
    
    
    15.103.51  19.30
    
    
    5,907
    
    
    
    5.6
    
    
    
    6.38
    
    
    
    4,648
    
    
    
    6.39
  Restricted Stock Activity.
 Weighted-AverageRemaining
    
    
    AggregateShares
    
    
    Contractual
    
    
    Intrinsic(000s)
    
    
    Life (Yrs)
    
    
    Value ($000s)Unvested at December 31, 2009
    
    
    1,007Granted
    
    
    606Vested
    
    
    (338
    )
    
    
    
    
    
    $
    2,083Forfeited
    
    
    (39
    )Unvested at December 31, 2010
    
    
    1,236
    
    
    
    2.7
    
    
    
    8,526Expected to Vest
    
    
    1,236
    
    
    
    2.7
    
    
    
    8,526
  55




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##### Table of Contents



Stock Appreciation Rights Activity.
 As of December 31,2010
    
    
    2009
    
    
    2008Expected dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Expected volatility
    
    
    27.8
    %
    
    
    54.9
    %
    
    
    51.5
    %Risk-free interest rate
    
    
    0.5
    %
    
    
    0.8
    %
    
    
    0.9
    %Expected life
    
    
    1.5 years
    
    
    
    1.5 years
    
    
    
    2.6 yearsClosing stock price
    
    $
    6.90
    
    
    $
    6.52
    
    
    $
    7.89
  Weighted-Weighted-
    
    
    Average
    
    
    AggregateAverage
    
    
    Remaining
    
    
    IntrinsicShares
    
    
    Exercise
    
    
    Contractual
    
    
    Value(000s)
    
    
    Price
    
    
    Life (Yrs)
    
    
    ($000s)Outstanding at December 31, 2009
    
    
    1,165
    
    
    $
    4.87Granted
    
    
    
    
    
    
    Exercised
    
    
    (213
    )
    
    
    4.86
    
    
    
    
    
    
    $
    267Forfeited
    
    
    
    
    
    
    Outstanding at December 31, 2010
    
    
    952
    
    
    
    4.88
    
    
    
    5.0
    
    
    
    1,926Exercisable at December 31, 2010
    
    
    952
    
    
    
    4.88
    
    
    
    5.0
    
    
    
    1,926
  12. Income Taxes
  2010
    
    
    2009
    
    
    2008U.S. operations
    
    $
    (9,584
    )
    
    $
    11,537
    
    
    $
    7,223Foreign operations
    
    
    3,472
    
    
    
    20,850
    
    
    
    16,881$
    (6,112
    )
    
    $
    32,387
    
    
    $
    24,104
  56




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##### Table of Contents



2010
    
    
    2009
    
    
    2008Current:Federal
    
    $
    (1,408
    )
    
    $
    (79
    )
    
    $
    27Foreign
    
    
    1,516
    
    
    
    4,551
    
    
    
    3,412State
    
    
    6
    
    
    
    304
    
    
    
    710Total current
    
    $
    114
    
    
    $
    4,776
    
    
    $
    4,149Deferred:Federal
    
    $
    
    
    
    $
    
    
    
    $
    Foreign
    
    
    57
    
    
    
    (2,812
    )
    
    
    (1,895
    )State
    
    
    
    
    
    
    
    
    
    
    Total deferred
    
    $
    57
    
    
    $
    (2,812
    )
    
    $
    (1,895
    )Total income tax expense
    
    $
    171
    
    
    $
    1,964
    
    
    $
    2,254
  2010
    
    
    2009
    
    
    2008Income tax (benefit) expense at federal statutory rate of 35%
    
    $
    (2,139
    )
    
    $
    11,336
    
    
    $
    8,436State income tax expense, net of federal benefit
    
    
    56
    
    
    
    198
    
    
    
    457Changes related to tax assessments/prior period taxes
    
    
    347
    
    
    
    286
    
    
    
    317Deferred tax valuation allowance increase (release)
    
    
    1,820
    
    
    
    (3,114
    )
    
    
    (2,048
    )Increase (decrease) in valuation allowance related to
current year operations
    
    
    2,081
    
    
    
    (4,913
    )
    
    
    (3,150
    )Foreign operations tax rate differences
    
    
    (873
    )
    
    
    (2,426
    )
    
    
    (2,447
    )International research credits
    
    
    (1,276
    )
    
    
    
    
    
    
    Constructive dividend
    
    
    1,055
    
    
    
    86
    
    
    
    215Net operating loss carryback
    
    
    (1,408
    )
    
    
    
    
    
    
    Other foreign taxes
    
    
    47
    
    
    
    309
    
    
    
    Other permanent items
    
    
    461
    
    
    
    202
    
    
    
    474Income tax expense
    
    $
    171
    
    
    $
    1,964
    
    
    $
    2,254
  2010
    
    
    2009Deferred income tax assets:Net operating loss carryforwards
    
    $
    97,626
    
    
    $
    98,633Equity in net loss of affiliate
    
    
    18,438
    
    
    
    18,438Accrued expenses
    
    
    2,938
    
    
    
    2,532Deferred revenue
    
    
    1,099
    
    
    
    353Tax credit carryforwards
    
    
    3,058
    
    
    
    2,948Restructuring
    
    
    596
    
    
    
    1,356Property and equipment depreciation
    
    
    2,290
    
    
    
    3,317Unrealized translation adjustments
    
    
    917
    
    
    
    1,066Identifiable intangibles
    
    
    753
    
    
    
    613Stock-based compensation
    
    
    5,300
    
    
    
    5,189Other
    
    
    277
    
    
    
    276Total gross deferred income tax assets
    
    
    133,292
    
    
    
    134,721Valuation allowance for deferred income tax assets
    
    
    (124,551
    )
    
    
    (127,260
    )Total deferred income tax assets
    
    $
    8,741
    
    
    $
    7,461
  57




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##### Table of Contents



2010
    
    
    2009Deferred income tax liabilities:Future reversals of branch deferred tax assets
    
    $
    1,510
    
    
    $
    631Other
    
    
    
    
    
    
    180Total deferred income tax liabilities
    
    $
    1,510
    
    
    $
    811Net deferred income taxes
    
    $
    7,231
    
    
    $
    6,650
 2010
    
    
    2009Included in:Other current assets
    
    $
    1,859
    
    
    $
    1,079Other noncurrent assets
    
    
    5,390
    
    
    
    5,620Other noncurrent liabilities
    
    
    (18
    )
    
    
    (49
    )Net deferred income taxes
    
    $
    7,231
    
    
    $
    6,650
      58




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##### Table of Contents



2010
    
    
    2009
    
    
    2008Beginning balance
    
    $
    8,053
    
    
    $
    8,095
    
    
    $
    11,385Additions for tax positions in current year
    
    
    1,564
    
    
    
    
    
    
    
    Reductions for tax positions of prior years
    
    
    
    
    
    
    (42
    )
    
    
    (3,290
    )Ending balance
    
    $
    9,617
    
    
    $
    8,053
    
    
    $
    8,095
     13. Related Party Transactions
  14. Convertible Preferred Stock
  15. Equity Transactions
   59




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##### Table of Contents



16. Segment Reporting, Geographic Disclosures and Major Customers
   Year Ended December 31, 2010Banking:
    
    
    Banking:Payments
    
    
    Large FI
    
    
    Community FI
    
    
    TotalRevenue:Software licenses
    
    $
    14,402
    
    
    $
    5,879
    
    
    $
    5,956
    
    
    $
    26,237Support and maintenance
    
    
    22,291
    
    
    
    20,696
    
    
    
    20,047
    
    
    
    63,034Professional services
    
    
    16,796
    
    
    
    44,037
    
    
    
    4,347
    
    
    
    65,180Hosting
    
    
    1,168
    
    
    
    25,321
    
    
    
    28,146
    
    
    
    54,635Total revenue
    
    $
    54,657
    
    
    $
    95,933
    
    
    $
    58,496
    
    
    $
    209,086Operating expenses:Cost of software licenses
    
    
    121
    
    
    
    1,073
    
    
    
    1,048
    
    
    
    2,242Cost of professional services,
support and maintenance
    
    
    19,735
    
    
    
    41,233
    
    
    
    21,810
    
    
    
    82,778Cost of hosting
    
    
    868
    
    
    
    14,648
    
    
    
    12,079
    
    
    
    27,595Selling and marketing
    
    
    12,338
    
    
    
    9,994
    
    
    
    5,840
    
    
    
    28,172Product development
    
    
    5,856
    
    
    
    16,412
    
    
    
    13,240
    
    
    
    35,508General and administrative
    
    
    8,453
    
    
    
    11,787
    
    
    
    6,894
    
    
    
    27,134Depreciation and amortization
    
    
    1,999
    
    
    
    4,381
    
    
    
    3,781
    
    
    
    10,161Total operating expenses
    
    
    49,370
    
    
    
    99,528
    
    
    
    64,692
    
    
    
    213,590Operating income (loss)
    
    $
    5,287
    
    
    $
    (3,595
    )
    
    $
    (6,196
    )
    
    $
    (4,504
    )
 Year Ended December 31, 2009Banking:
    
    
    Banking:Payments
    
    
    Large FI
    
    
    Community FI
    
    
    TotalRevenue:Software licenses
    
    $
    18,063
    
    
    $
    9,003
    
    
    $
    8,130
    
    
    $
    35,196Support and maintenance
    
    
    18,905
    
    
    
    21,265
    
    
    
    19,432
    
    
    
    59,602Professional services
    
    
    18,814
    
    
    
    70,710
    
    
    
    5,441
    
    
    
    94,965Hosting
    
    
    761
    
    
    
    28,254
    
    
    
    20,149
    
    
    
    49,164Total revenue
    
    $
    56,543
    
    
    $
    129,232
    
    
    $
    53,152
    
    
    $
    238,927Operating expenses:Cost of software licenses
    
    
    1,359
    
    
    
    798
    
    
    
    1,031
    
    
    
    3,188Cost of professional services,
support and maintenance
    
    
    15,914
    
    
    
    42,240
    
    
    
    16,032
    
    
    
    74,186Cost of hosting
    
    
    674
    
    
    
    15,794
    
    
    
    11,679
    
    
    
    28,147Selling and marketing
    
    
    11,344
    
    
    
    12,136
    
    
    
    7,245
    
    
    
    30,725Product development
    
    
    5,380
    
    
    
    21,071
    
    
    
    8,168
    
    
    
    34,619General and administrative
    
    
    5,766
    
    
    
    12,578
    
    
    
    6,520
    
    
    
    24,864Depreciation and amortization
    
    
    1,615
    
    
    
    4,834
    
    
    
    3,144
    
    
    
    9,593Total operating expenses
    
    
    42,052
    
    
    
    109,451
    
    
    
    53,819
    
    
    
    205,322Operating income (loss)
    
    $
    14,491
    
    
    $
    19,781
    
    
    $
    (667
    )
    
    $
    33,605
  60




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##### Table of Contents



Year Ended December 31, 2008Banking:
    
    
    Banking:Payments
    
    
    Large FI
    
    
    Community FI
    
    
    TotalRevenue:Software licenses
    
    $
    16,991
    
    
    $
    7,755
    
    
    $
    5,484
    
    
    $
    30,230Support and maintenance
    
    
    15,624
    
    
    
    18,159
    
    
    
    19,996
    
    
    
    53,779Professional services
    
    
    14,801
    
    
    
    71,011
    
    
    
    6,658
    
    
    
    92,470Hosting
    
    
    608
    
    
    
    28,780
    
    
    
    22,568
    
    
    
    51,956Total revenue
    
    $
    48,024
    
    
    $
    125,705
    
    
    $
    54,706
    
    
    $
    228,435Operating expenses:Cost of software licenses
    
    
    1,103
    
    
    
    1,338
    
    
    
    1,545
    
    
    
    3,986Cost of professional services,
support and maintenance
    
    
    14,335
    
    
    
    44,761
    
    
    
    14,999
    
    
    
    74,095Cost of hosting
    
    
    319
    
    
    
    15,607
    
    
    
    10,482
    
    
    
    26,408Selling and marketing
    
    
    12,209
    
    
    
    15,660
    
    
    
    8,563
    
    
    
    36,432Product development
    
    
    4,003
    
    
    
    18,229
    
    
    
    7,039
    
    
    
    29,271General and administrative
    
    
    5,551
    
    
    
    13,990
    
    
    
    6,285
    
    
    
    25,826Depreciation and amortization
    
    
    1,473
    
    
    
    4,613
    
    
    
    2,980
    
    
    
    9,066Total operating expenses
    
    
    38,993
    
    
    
    114,198
    
    
    
    51,893
    
    
    
    205,084Operating income
    
    $
    9,031
    
    
    $
    11,507
    
    
    $
    2,813
    
    
    $
    23,351
 Geography.
 Revenue
    
    
    Property and Equipment2010
    
    
    2009
    
    
    2008
    
    
    2010
    
    
    2009Americas
    
    $
    151,582
    
    
    $
    170,874
    
    
    $
    164,642
    
    
    $
    19,685
    
    
    $
    20,451InternationalEMEI
    
    
    30,049
    
    
    
    36,639
    
    
    
    40,503
    
    
    
    1,013
    
    
    
    985Africa
    
    
    13,974
    
    
    
    10,925
    
    
    
    9,215
    
    
    
    1,461
    
    
    
    1,494APAC
    
    
    13,481
    
    
    
    20,489
    
    
    
    14,075
    
    
    
    171
    
    
    
    88Total
    
    $
    209,086
    
    
    $
    238,927
    
    
    $
    228,435
    
    
    $
    22,330
    
    
    $
    23,018
 Major customer.
  61




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##### Table of Contents



17. Net (Loss) Income Per Share
  2010
    
    
    2009
    
    
    2008(in thousands, except per share data)Basic (loss) income per share:Net (loss) income
    
    $
    (6,283
    )
    
    $
    30,423
    
    
    $
    21,850Amount allocated to participating preferred stockholders
    
    
    
    
    
    
    (598
    )
    
    
    (410
    )Amount allocated to participating restricted stockholders
    
    
    
    
    
    
    (406
    )
    
    
    (83
    )Net (loss) income available to common stockholders
    
    $
    (6,283
    )
    
    $
    29,419
    
    
    $
    21,357Basic weighted average common shares outstanding
    
    
    52,495
    
    
    
    52,584
    
    
    
    55,734Basic (loss) income per share
    
    $
    (0.12
    )
    
    $
    0.56
    
    
    $
    0.38Diluted (loss) income per share:Net (loss) income
    
    $
    (6,283
    )
    
    $
    30,423
    
    
    $
    21,850Amount allocated to participating preferred stockholders
    
    
    
    
    
    
    (591
    )
    
    
    (405
    )Amount allocated to participating restricted stockholders
    
    
    
    
    
    
    (401
    )
    
    
    (82
    )Net (loss) income available to common stockholders
    
    $
    (6,283
    )
    
    $
    29,431
    
    
    $
    21,363Basic weighted average common shares outstanding
    
    
    52,495
    
    
    
    52,584
    
    
    
    55,734Dilutive effect of employee stock options
    
    
    
    
    
    
    707
    
    
    
    715Diluted weighted average common shares outstanding
    
    
    52,495
    
    
    
    53,291
    
    
    
    56,449Diluted (loss) income per share
    
    $
    (0.12
    )
    
    $
    0.55
    
    
    $
    0.38
   62




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##### Table of Contents



18. Quarterly Financial Information
 (Unaudited)
   Three Months EndedDec. 31,
    
    
    Sept. 30,
    
    
    June 30,
    
    
    Mar. 31,
    
    
    Dec. 31,
    
    
    Sept. 30,
    
    
    June 30,
    
    
    Mar. 31,2010
    
    
    2010
    
    
    2010
    
    
    2010
    
    
    2009
    
    
    2009
    
    
    2009
    
    
    2009(in thousands, except per share data)Software licenses
    
    $
    8,902
    
    
    $
    6,764
    
    
    $
    4,832
    
    
    $
    5,739
    
    
    $
    8,978
    
    
    $
    7,444
    
    
    $
    9,718
    
    
    $
    9,056Support and maintenance
    
    
    16,598
    
    
    
    15,648
    
    
    
    15,145
    
    
    
    15,643
    
    
    
    15,905
    
    
    
    14,919
    
    
    
    14,951
    
    
    
    13,827Professional services
    
    
    12,498
    
    
    
    17,382
    
    
    
    17,870
    
    
    
    17,430
    
    
    
    22,013
    
    
    
    25,787
    
    
    
    24,090
    
    
    
    23,075Hosting
    
    
    14,475
    
    
    
    13,886
    
    
    
    13,927
    
    
    
    12,347
    
    
    
    12,564
    
    
    
    12,187
    
    
    
    12,083
    
    
    
    12,330Total revenue
    
    
    52,473
    
    
    
    53,680
    
    
    
    51,774
    
    
    
    51,159
    
    
    
    59,460
    
    
    
    60,337
    
    
    
    60,842
    
    
    
    58,288Operating expenses (1)
    
    
    56,798
    
    
    
    53,181
    
    
    
    52,310
    
    
    
    51,301
    
    
    
    50,650
    
    
    
    51,274
    
    
    
    55,243
    
    
    
    48,155Operating (loss) income
    
    
    (4,325
    )
    
    
    499
    
    
    
    (536
    )
    
    
    (142
    )
    
    
    8,810
    
    
    
    9,063
    
    
    
    5,599
    
    
    
    10,133Net (loss) income
    
    $
    (4,345
    )
    
    $
    892
    
    
    $
    (1,774
    )
    
    $
    (1,056
    )
    
    $
    9,938
    
    
    $
    6,910
    
    
    $
    4,631
    
    
    $
    8,944(Loss) income per share:Basic
    
    $
    (0.08
    )
    
    $
    0.02
    
    
    $
    (0.03
    )
    
    $
    (0.02
    )
    
    $
    0.18
    
    
    $
    0.13
    
    
    $
    0.09
    
    
    $
    0.16Diluted
    
    $
    (0.08
    )
    
    $
    0.02
    
    
    $
    (0.03
    )
    
    $
    (0.02
    )
    
    $
    0.18
    
    
    $
    0.12
    
    
    $
    0.08
    
    
    $
    0.16(1) Includes stock
based compensation
expense (benefit
    
    $
    2,269
    
    
    $
    249
    
    
    $
    809
    
    
    $
    373
    
    
    $
    1,181
    
    
    $
    (139
    )
    
    $
    3,091
    
    
    $
    (2,531
    )
  63




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##### Table of Contents



Schedule II
 VALUATION AND QUALIFYING ACCOUNTS
 FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
 Balance
    
    
    Additionsat
    
    
    Charged to
    
    
    Charged to
    
    
    
    
    
    
    Balance atbeginning
    
    
    costs and
    
    
    other
    
    
    
    
    
    
    end ofDescription
    
    of period
    
    
    expenses
    
    
    accounts
    
    
    Deductions
    
    
    period(in thousands)Year ended December 31, 2010:Allowance for doubtful accounts
    
    $
    2,299
    
    
    
    1,388
    
    
    
    
    
    
    
    (378
    )
    
    $
    3,309Valuation allowance for deferred taxes
    
    $
    127,260
    
    
    
    1,820
    
    
    
    (4,529
    )
    
    
    
    
    
    $
    124,551Year ended December 31, 2009:Allowance for doubtful accounts
    
    $
    1,388
    
    
    
    995
    
    
    
    
    
    
    
    (84
    )
    
    $
    2,299Valuation allowance for deferred taxes
    
    $
    140,110
    
    
    
    (3,114
    )
    
    
    (9,736
    )
    
    
    
    
    
    $
    127,260Year ended December 31, 2008:Allowance for doubtful accounts
    
    $
    3,858
    
    
    
    159
    
    
    
    
    
    
    
    (2,629
    )
    
    $
    1,388Valuation allowance for deferred taxes
    
    $
    145,346
    
    
    
    (2,048
    )
    
    
    (3,188
    )
    
    
    
    
    
    $
    140,110
  64




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##### Table of Contents



Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A.
    
    Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures.
 Managements Report on Internal Control Over Financial Reporting.
  Internal Control  Integrated Framework
  Changes in Internal Control Over Financial Reporting.
 
 Item 9B.
    
    Other Information.
   65




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##### Table of Contents



PART III
 
 Item 10.
    
    Directors, Executive Officers and Corporate Governance.
  
 Item 11.
    
    Executive Compensation.
  
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
  
 Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence.
  
 Item 14.
    
    Principal Accounting Fees and Services.
   66




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##### Table of Contents



PART IV
 
 Item 15.
    
    Exhibits and Financial Statement Schedules.
    ExhibitNo
    
    Exhibit Description3.1
    
    
    Amended and Restated Certificate of Incorporation of S1 Corporation (S1) (filed as Exhibit
1 to S1s Registration Statement on Form 8-A (File No. 000-24931) filed with the Securities
and Exchange Commission (the SEC) on September 30, 1998 and incorporated herein by
reference).3.2
    
    
    Certificate of Amendment of Amended and Restated Certificate of Incorporation of S1 dated
June 3, 1999 (filed as Exhibit 4.2 to S1s Registration Statement on Form S-8 (File No.
333-82369) filed with the SEC on July 7, 1999 and incorporated herein by reference).3.3
    
    
    Certificate of Amendment of Amended and Restated Certificate of Incorporation of S1 dated
November 10, 1999 (filed as Exhibit 3.3 to S1s Annual Report on Form 10-K filed with the SEC
on March 30, 2000 and incorporated herein by reference).3.4
    
    
    Certificate of Designation for S1s Series B Redeemable Convertible Preferred Stock (filed as
Exhibit 2 to S1s Registration Statement on Form 8-A (File No. 000-24931) filed with the SEC
on September 30, 1998 and incorporated herein by reference).3.5
    
    
    Amended and Restated Bylaws of S1, as amended (filed as Exhibit 3.6 to S1s Quarterly Report
on Form 10-Q for the quarterly period ended March 31, 2006 and incorporated herein by
reference).4.1
    
    
    Specimen certificate for S1s common stock (filed as Exhibit 4 to S1s Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 2000 and incorporated herein by reference).10.1
    
    
    Stock Purchase Agreement, dated as of June 29, 1998, by and among SFNB, S1 and State Farm
Mutual Automobile Insurance Company (filed as Exhibit 10.4 to Pre-Effective Amendment No. 2 to
the S1s Registration Statement on Form S-4 (File No. 333-56181) filed with the SEC on August
21, 1998 and incorporated herein by reference).10.2
    
    
    Security First Technologies Corporation Amended and Restated 1995 Stock Option Plan (filed as
Appendix B to S1s Definitive Proxy Statement on Schedule 14A filed with the SEC on May 7,
1999 and incorporated herein by reference).*10.3
    
    
    Amendment to Security First Technologies Corporation Amended and Restated 1995 Stock Option
Plan (filed as Exhibit 10.3 to S1s Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2000 and incorporated herein by reference).*10.4
    
    
    Security First Network Bank Amended and Restated Directors Stock Option Plan (filed as
Exhibit 10.2 to Pre-Effective Amendment No. 2 to S1s Registration Statement on Form S-4 (File
No. 333-56181) filed with the SEC on August 21, 1998 and incorporated herein by reference).*10.5
    
    
    Amendment to Security First Network Bank Amended and Restated Directors Stock Option Plan
(filed as Exhibit 10.1 to S1s Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2000 and incorporated herein by reference).*
  67




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##### Table of Contents



ExhibitNo
    
    Exhibit Description10.6
    
    
    Security First Technologies Corporation 1998 Directors Stock Option Plan (filed as Exhibit
10.3 to Pre-Effective Amendment No. 1 to S1s Registration Statement on Form S-4 (File No.
333-56181) filed with the SEC on July 30, 1998 and incorporated herein by reference).*10.7
    
    
    Amendment to Security First Technologies Corporation 1998 Directors Stock Option Plan (filed
as Exhibit 10.2 to S1s Quarterly Report on Form 10-Q for the quarterly period ended September
30, 2000 and incorporated herein by reference).*10.8
    
    
    S1 Corporation 2003 Stock Option Plan, As Amended and Restated Effective February 26, 2008
(filed as Attachment B to S1s Definitive Proxy Statement on Schedule 14A filed with the SEC
on April 13, 2008 and incorporated herein by reference).*10.9
    
    
    Form of Indemnification Agreement by and between S1 and each of its directors and certain
executive officers (filed as Exhibit 10 to S1s Current Report on Form 8-K filed with the SEC
on November 14, 2006 and incorporated herein by reference).10.10
    
    
    Master Software Development and Consulting Services Agreement between S1 Corporation and
State Farm, dated as of March 31, 2000 (filed as Exhibit 10.18 to S1s Amended Annual Report
on Form 10-K/A filed with the SEC on July 26, 2006 and incorporated herein by reference).10.11
    
    
    Description of Arrangement for Directors Fees, effective as of June 5, 2010 (filed as
Exhibit 10.11 to S1s Current Report on Form 8-K filed with the SEC on June 9, 2010 and
incorporated herein by reference).10.12
    
    
    Agreement with Paul Parrish (filed as Exhibit 10.1 to S1s Current Report on Form 8-K filed
with the SEC on December 17, 2008 and incorporated herein by reference).*10.13
    
    
    Agreement with Johann Dreyer dated December 24, 2008 (filed as Exhibit 10.1 to S1s Current
Report on Form 8-K filed with the SEC on December 24, 2008 and incorporated herein by
reference).*10.14
    
    
    Agreement with Jan Kruger dated December 24, 2008 (filed as Exhibit 10.2 to S1s Current
Report on Form 8-K filed with the SEC on December 24, 2008 and incorporated herein by
reference).*10.15
    
    
    Amendment to Agreement between S1 and Paul Parrish dated August 18, 2009 (filed as Exhibit
10.1 to S1s Current Report on Form 8-K filed with the SEC on August 18, 2009 and incorporated
herein by reference).*10.16
    
    
    Agreement with Pierre Naude dated December 24, 2008.*10.17
    
    
    Agreement with Francois van Schoor dated December 24, 2008.*10.18
    
    
    Directors Deferred Compensation Plan, effective as of January 1, 2010 (filed as Exhibit
10.1 to S1s Current Report on Form 8-K filed with the SEC on December 19, 2009 and
incorporated herein by reference).10.19
    
    
    S1 Corporation 2010 Management Incentive Plan (filed as Exhibit 10.1 to S1s Current Report
on Form 8-K filed with the SEC on February 4, 2010 and incorporated herein by reference).*21.1
    
    
    Subsidiaries of S1.23.1
    
    
    Consent of Independent Registered Public Accounting Firm31.1
    
    
    Certificate of Chief Executive Officer31.2
    
    
    Certificate of Chief Financial Officer32.1
    
    
    Certificate of Chief Executive Officer pursuant to §906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certificate of Chief Financial Officer pursuant to §906 of the Sarbanes-Oxley Act of 2002
 *
    
    Management contract or compensatory plan, contract or arrangement.
  68




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##### Table of Contents



SIGNATURES
  S1 CORPORATIONBy:
    /s/ PAUL M. PARRISHPaul M. ParrishChief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)  Name
    
    Title
    
    Date/s/ JOHN W. SPIEGEL
    
    Chairman of the Board
    
    March 11, 2011John W. Spiegel/s/ JOHANN DREYER
    
    Chief Executive Officer and Director
    
    March 11, 2011Johann Dreyer
    
    (Principal Executive Officer)/s/ PAUL M. PARRISH
    
    Chief Financial Officer
    
    March 11, 2011Paul M. Parrish
    
    (Principal Financial Officer andPrincipal Accounting Officer)/s/ RAM GUPTA
    
    Director
    
    March 11, 2011Ram Gupta/s/ M. DOUGLAS IVESTER
    
    Director
    
    March 11, 2011M. Douglas Ivester/s/ THOMAS P. JOHNSON, JR.
    
    Director
    
    March 11, 2011Thomas P. Johnson, Jr./s/ GREGORY J. OWENS
    
    Director
    
    March 11, 2011Gregory J. Owens/s/ EDWARD TERINO
    
    Director
    
    March 11, 2011Edward Terino
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