Statement Regarding Forward-Looking Statements

This Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") adopted pursuant to the Private Securities Litigation Reform Act of 1995. Statements that are not purely historical may be forward-looking, including statements regarding our expectations, objectives, anticipations, estimations, intentions, plans, hopes, beliefs or strategies regarding the future. Such forward-looking statements include, but are not limited to statements regarding dividend payments, changes in revenue and expense levels, sufficiency of cash resources and liquidity, realization of goodwill, impact of acquisitions, valuation determinations, the effect of competition, growth levels, fraud-prevention in connection with our services and platform, intellectual property protection, legal proceedings, and regulatory impact. Such forward looking statements include, but are not limited to our expectations:

• that analysis and design early in the project lifecycle reduces the number and costs of defects that may be found in later stages;

• regarding the effectiveness of our systems and procedures to detect and prevent consumer and merchant fraud;

• regarding our ability to prevent security breaches and maintain confidential data;

• that we will be able to prevent system disruptions and accommodate increases in volume demand;

• regarding the continuity of our bank sponsor relationship;

• about the impact of our lawsuit with ReD and other litigation matters;

• regarding the level of expenses and revenue growth for the remainder of 2009; and

• that our cash and cash equivalents balance as of March 31, 2009 will be sufficient to meet our working capital and capital requirements for at least the next twelve months.

We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties and potentially inaccurate assumptions. These risks and uncertainties include, among others, those discussed in "Part II Item 1A. Risk Factors," of this Quarterly Report on Form 10-Q as well as our consolidated financial statements, related notes, and the other financial information appearing elsewhere in this report and our other filings with the Securities and Exchange Commission. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from past results and those anticipated, estimated or projected. You should bear this in mind as you consider forward-looking statements. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise.

You should read the following in conjunction with the audited consolidated financial statements and the notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Report on Form 10-K, filed with the Securities and Exchange Commission ("SEC") on February 27, 2009 (SEC File No. 000-26477).

OVERVIEW

CyberSource Corporation provides electronic payment and risk management solutions. CyberSource solutions enable electronic payment processing for Web, call center, and point-of-sale environments. We partner with and connect to a large network of payment processors and other payment service providers to offer merchants a single source solution that simplifies electronic payment management. Our payment solutions allow eCommerce merchants to accept a wide range of online payment options, from credit cards and electronic checks, to global payment options and emerging payment types. We also offer industry leading risk management solutions to help online merchants address complexities such as credit card fraud, online tax requirements, and export controls. Our professional services help to design, integrate, and optimize commerce transaction processing systems for merchants.

We primarily derive our revenues from monthly commerce transaction processing fees and global acquiring fees, and support service fees. Transaction and global acquiring revenues are recognized in the period in which the transactions occur and support service fees are recognized as the related services are provided and costs are incurred.

CRITICAL ACCOUNTING POLICIES

Our financial statements are based on the selection and application of significant accounting policies, which require management to make significant estimates and assumptions. We believe that the following are the more critical judgment areas in the application of our accounting policies that currently affect our financial condition and results of operations. A full discussion of the following accounting policies is included in our 2008 Annual Report on Form 10-K filed with the Securities and Exchange Commission and we refer you to that discussion. There were no material changes in the application of critical accounting policies during the three months ended March 31, 2009.

• Revenue Recognition

• Accounts Receivable

• Reserve for Merchant Losses

• Legal Contingencies

• Accounting for Income Taxes

• Stock-based Compensation

• Long-Lived Assets

RESULTS OF OPERATIONS

The following table sets forth certain items in our condensed consolidated
statements of income expressed as a percentage of revenue for the periods
indicated:



                                            Three Months Ended March 31,
                                              2009                 2008
         Revenues                                100.0 %              100.0 %
         Cost of revenues                         46.3                 48.3


         Gross profit                             53.7                 51.7
         Operating expenses:
         Product development                      10.7                  9.8
         Sales and marketing                      29.0                 31.2
         General and administrative               11.5                 10.3


         Total operating expenses                 51.2                 51.3


         Income from operations                    2.5                  0.4
         Interest and other income, net            0.2                  1.0


         Income before income taxes                2.7                  1.4
         Income tax provision                      1.0                  0.4


         Net income                                1.7 %                1.0 %

THREE MONTHS ENDED MARCH 31, 2009 AND 2008

Revenues. Revenues were $60.5 million for the three months ended March 31, 2009, as compared to $53.4 million for the three months ended March 31, 2008, an increase of approximately $7.1 million or 13.2%. The increase in revenues was primarily from new customers as well as an increase in total transactions processed. Revenues from new customers that entered into contracts during the twelve months ended March 31, 2009 represented approximately 16% of total revenues for the three months ended March 31, 2009; while revenues from existing customers represented approximately 84% of total revenues for the three months ended March 31, 2009. Revenues from new customers that entered into contracts during the twelve months ended March 31, 2008 represented approximately 14% of total revenues for the three months ended March 31, 2008; while revenues from existing customers represented approximately 86% of total revenues for the three months ended March 31, 2008. We processed approximately 553 million transactions during the three months ended March 31, 2009, as compared to approximately 445 million transactions processed during the three months ended March 31, 2008, an increase of approximately 24%. Global acquiring revenues represented 31.4% of our revenues for the three months ended March 31, 2009, as compared to 31.9% for the three months ended March 31, 2008. Our global acquiring revenue may also include fees generated for gateway services as it is becoming more common to charge the customer a bundled price for global acquiring and gateway services.

Cost of Revenues. Cost of revenues consist primarily of costs incurred in the delivery of eCommerce transaction services, including personnel costs in our operations and customer support functions, processing and interchange fees paid relating to our global acquiring services, other third-party fees, depreciation of capital equipment used in our network infrastructure and costs related to the hosting of our servers at third-party hosting centers in the United States and the United Kingdom. Cost of revenues was $28.0 million or 46.3% of revenues for the three months ended March 31, 2009, as compared to $25.8 million or 48.3% of revenues for the three months ended March 31, 2008. The increase in absolute dollars is primarily due to higher processing fees paid to third parties such as the credit card issuing banks, payment processors and card associations related to our global acquiring services. These costs are variable and increase in absolute dollars as the related revenue increases and decrease as the related revenue decreases. The decrease in cost of revenues as a percentage of revenues is due primarily to efficiencies resulting from the increase in transactions processed as well as the increase in revenues.

Product Development. Product development expenses consist primarily of compensation and related costs of employees engaged in the research, design and development of new services, and to a lesser extent, facility costs and related overhead. Product development expenses were $6.5 million for the three months ended March 31, 2009, as compared to $5.2 million for the three months ended March 31, 2008, an increase of approximately $1.2 million or 23.0%. The increase is primarily due to an increase in headcount and related compensation expense of approximately $0.9 million. As a percentage of revenues, product development expenses increased to 10.7% in the three months ended March 31, 2009, as compared to 9.8% for the three months ended March 31, 2008. The increase is primarily due to the increase in headcount to support existing and new development projects during the three months ended March 31, 2009, offset to a certain extent, by the increase in revenues. We expect product development expenses in the three months ended June 30, 2009 to moderately increase in absolute dollars as compared to the three months ended March 31, 2009 as we continue to increase headcount to support existing and additional development projects. As a percentage of revenues, we expect product development expenses in the three months ended June 30, 2009 to be relatively consistent with the three months ended March 31, 2009 due primarily to expected revenue growth.

Sales and Marketing. Sales and marketing expenses consist primarily of compensation of sales and marketing personnel, commissions paid to outside sales agents, market research and advertising costs, and, to a lesser extent, facility costs and related overhead. Sales and marketing expenses were $17.6 million for the three months ended March 31, 2009, as compared to $16.6 million for the three months ended March 31, 2008, an increase of approximately $0.9 million or 5.6%. The increase is primarily due to an increase in commissions paid to outside sales agents of approximately $0.8 million and an increase in compensation-related expense of approximately $0.5 million, offset by a decrease of approximately $0.4 million in intangible asset amortization expense related to the Authorize.Net trade name, partner contracts and related relationships as well as merchant contracts and related relationships. As a percentage of revenues, sales and marketing expenses decreased to 29.0% for the three months ended March 31, 2009, as compared to the 31.2% for the three months ended March 31, 2008. The decrease is primarily due to the increase in revenues for the three months ended March 31, 2009, offset to a certain extent, by the increase in sales and marketing expenses. We expect that sales and marketing expenses in the three months ended June 30, 2009 to moderately increase in absolute dollars as compared to the three months ended March 31, 2009 as we continue to develop sales and marketing infrastructure to support expected revenue growth. As a percentage of revenues, we expect sales and marketing expenses in the three months ended June 30, 2009 to be relatively consistent as a percentage of revenues as compared to the three months ended March 31, 2009 due primarily to expected revenue growth.

General and Administrative. General and administrative expenses consist primarily of compensation for executive and administrative personnel, fees for outside professional services and, to a lesser extent, facility costs and related overhead. General and administrative expenses were $7.0 million for the three months ended March 31, 2009, as compared to $5.5 million for the three months ended March 31, 2008, an increase of approximately $1.5 million or 26.9%. The increase is primarily due to a $0.9 million increase in legal fees and outside services. In addition, during the three months ended March 31, 2009, we recorded a restructuring accrual of approximately $0.9 million as a result of updating our assumptions associated with our excess office space in Burlington, Massachusetts and American Fork, Utah. As a percentage of revenues, general and administrative expenses were 11.5% for the three months ended March 31, 2009, as compared to the 10.3% for the three months ended March 31, 2008. The increase is primarily due to the increase in legal fees and outside services as well as restructuring charges in the three months ended March 31, 2009, offset to a certain extent, by the increase in revenues. We expect that general and administrative expenses in the three months ended June 30, 2009 will decrease in absolute dollars and as a percentage of revenues due primarily to a decrease in restructuring charges and expected revenue growth.

Other Income, net. Other income, net consists primarily of joint venture income from CyberSource K.K. and other miscellaneous gains and losses. Other loss, net was approximately $18,000 for the three months ended March 31, 2009, as compared to other income, net of $0.1 million for the three months ended March 31, 2008.

Interest Income. Interest income which consists of interest earnings on cash and cash equivalents was $0.1 million for the three months ended March 31, 2009 as compared to $0.4 million for the three months ended March 31, 2008. The decrease is primarily due to lower investment yields. We expect interest income in the three months ended June 30, 2009 to be relatively consistent with the three months ended March 31, 2009.

Income Tax Provision. Income tax expense for the three months ended March 31, 2009 was approximately $0.6 million on pre-tax income of $1.6 million, as compared to $0.2 million on pre-tax income of $0.8 million for the three months ended March 31, 2008. The effective tax rate for the three months ended March 31, 2009 differs from the U.S. federal statutory rate of 35% primarily due to the unfavorable impact of stock-based compensation and state income taxes. The effective tax rate for the first quarter of 2008 differs from the U.S. federal statutory rate of 35% primarily due to foreign operation tax benefits.

Our effective tax rate could fluctuate significantly on a quarterly basis and could be adversely affected to the extent earnings are lower than anticipated in jurisdictions where we have lower statutory rates and higher than anticipated in jurisdictions where we have higher statutory rates, by changes in the valuation of our deferred tax assets or liabilities, or by changes in tax laws, regulations, accounting principles, or interpretations thereof. In addition, we are subject to the examination of our income tax returns by the Internal Revenue Service and other tax authorities.

LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalents were $79.2 million as of March 31, 2009 compared to $73.3 million as of December 31, 2008, an increase of approximately $5.9 million. The increase is primarily due to cash provided by operating activities of approximately $7.7 million, which is net of bonuses paid under the company-wide bonus plan of approximately $4.5 million, and proceeds from the issuance of the Company's common stock resulting from stock option exercises of approximately $0.9 million, offset by capital expenditures of approximately $2.5 million.

We believe that our cash and cash equivalents, which consist of only money market funds, as of March 31, 2009 will be sufficient to meet our working capital and capital requirements for at least the next twelve months. Our future capital requirements will depend on many factors including the level of investment we make in new businesses, new products or new technologies. We currently have no agreements or understandings with respect to any future investments or acquisitions. To the extent that our existing cash resources and future earnings are insufficient to fund our future activities, we may need to obtain additional equity or debt financing. Additional funds may not be available or, if available, we may not be able to obtain them on favorable terms.

The following is a table summarizing our significant commitments as of March 31, 2009, consisting of future minimum lease payments under all non-cancelable operating leases (in thousands):

                                           Less than 1
     Contractual obligations    Total         year         1 - 3 years     3 - 5 years
     Operating leases          $ 16,180   $       4,974   $      11,206   $          -

     Total commitments         $ 16,180   $       4,974   $      11,206   $          -

We have excluded tax contingencies totaling approximately $2.0 million from the table above as there is a high degree of uncertainty regarding the timing of future cash outflows and, as a result, we are not able to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities.

Recent Pronouncements

None

Factors That May Affect Future Results

A description of the risk factors associated with our business is included under "Risk Factors" in Item 1A of Part II of this report.