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;

• strength and growth of our small business and gateway offerings as well as our channel partners;

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

• about the prospect of international expansion representing a major opportunity for us to grow our business over the long term;

• regarding whether investments in channel relationships will attract new resellers and partners as well as strengthen our existing relationships;

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

• that our cash and cash equivalents balance as of June 30, 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. Our 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 and other 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.

Some key operating metrics that members of our senior management regularly review to evaluate our financial results include transaction volume, new customer sign-ups, authorization dollars processed and revenue. Key elements of our growth strategy include international expansion, risk and security management, and resellers and partner channels. International expansion represents a major opportunity for us to grow our business over the long term. We continue to enhance our fraud solutions with new features such as device fingerprinting and advanced levels of automation to increase the efficiency of order review and reduce fraud. Our reseller and partner channels have become an increasingly important part of our sales strategy. We believe that investing in these channel relationships will attract new resellers and partners as well as strengthen our existing relationships.

As of June 30, 2009, approximately 273,000 businesses used our solutions, an increase of approximately 20,000 customers since December 31, 2008. For the six months ended June 30, 2009, we processed approximately 1.1 billion transactions. The dollar value of all credit card authorization requests we processed during the six months ended June 30, 2009 was approximately $56.3 billion.

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 June 30, 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 operations expressed as a percentage of revenue for the periods
indicated:



                                       Three Months Ended         Six Months Ended
                                            June 30,                  June 30,
                                      2009           2008         2009         2008
    Revenues                           100.0 %        100.0 %      100.0 %     100.0 %
    Cost of revenues                    46.5           49.5         46.4        48.9


    Gross profit                        53.5           50.5         53.6        51.1
    Operating expenses:
    Product development                 10.5           10.5         10.6        10.2
    Sales and marketing                 28.0           30.4         28.5        30.8
    General and administrative           9.5           10.4         10.5        10.3


    Total operating expenses            48.0           51.3         49.6        51.3


    Income (loss) from operations        5.5           (0.8 )        4.0        (0.2 )
    Interest and other income, net       0.1            0.8          0.2         0.8


    Income before income taxes           5.6             -           4.2         0.6
    Income tax provision                 2.1             -           1.6         0.2


    Net income                           3.5 %           -  %        2.6 %       0.4 %

THREE MONTHS ENDED JUNE 30, 2009 AND 2008

Revenues. Revenues were $62.9 million for the three months ended June 30, 2009, as compared to $55.7 million for the three months ended June 30, 2008, an increase of approximately $7.2 million or 13.0%. 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 June 30, 2009 represented approximately 17% of total revenues for the three months ended June 30, 2009; while revenues from existing customers represented approximately 83% of total revenues for the three months ended June 30, 2009. Revenues from new customers that entered into contracts during the twelve months ended June 30, 2008 represented approximately 15% of total revenues for the three months ended June 30, 2008; while revenues from existing customers represented approximately 85% of total revenues for the three months ended June 30, 2008. We added approximately 38,000 gross and 11,500 net new customers during the three months ended June 30, 2009, as compared to approximately 26,000 gross and 1,000 net new customers during the three months ended June 30, 2008.

We processed approximately 579 million transactions during the three months ended June 30, 2009, as compared to approximately 449 million transactions processed during the three months ended June 30, 2008, an increase of approximately 29%. The dollar value of all credit card authorization requests we processed in the three months ended June 30, 2009 was approximately $28.6 billion, as compared to approximately $27.4 billion for the three months ended June 30, 2008, an increase of approximately 4%.

Global acquiring revenues was approximately $19.3 million, or 30.8% of total revenues for the three months ended June 30, 2009, as compared to approximately $19.7 million, or 35.3% of total revenues for the three months ended June 30, 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. We had approximately 5,900 global acquiring customers as of June 30, 2009 as we added approximately 850 new acquiring customers during the three months ended June 30, 2009. We had approximately 3,300 global acquiring customers as of June 30, 2008 as we added approximately 1,000 new acquiring customers during the three months ended June 30, 2008. The dollar value of all credit card authorization requests we processed as the merchant acquirer in the three months ended June 30, 2009 was approximately $700 million, as compared to approximately $630 million for the three months ended June 30, 2008, an increase of approximately 11%.

During the three months ended June 30, 2009, our European operations generated revenues of $4.5 million and $3.7 million for the three months ended June 30, 2009 and 2008, respectively. Revenues from our European operations consist primarily of commerce transaction fees as we currently are unable to offer acquiring services in Europe due to the lack of a sponsor bank. Transactions processed by our European operations were approximately 146.3 million transactions, or 25% of total transactions processed, for the three months ended June 30, 2009 as compared to approximately 87.8 million transactions, or 20% of total transactions processed, for the three months ended June 30, 2008, an increase of approximately 67%. Revenues from merchants domiciled outside the United States accounted for approximately 7.2% and 6.6% of our revenues for the three months ended June 30, 2009 and 2008, respectively.

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 $29.2 million or 46.5% of revenues for the three months ended June 30, 2009, as compared to $27.6 million or 49.5% of revenues for the three months ended June 30, 2008. The increase in absolute dollars is primarily due to an increase in headcount and related compensation expense of approximately $1.0 million and an increase in depreciation expense of approximately $0.4 million. 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 $6.6 million for the three months ended June 30, 2009, as compared to $5.9 million for the three months ended June 30, 2008, an increase of approximately $0.7 million or 12.8%. The increase is primarily due to an increase in headcount and related compensation expense of approximately $0.6 million. As a percentage of revenues, product development expenses were 10.5% in both the three months ended June 30, 2009 and 2008. We expect product development expenses in the three months ended September 30, 2009 to moderately increase in absolute dollars as compared to the three months ended June 30, 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 September 30, 2009 to be relatively consistent with the three months ended June 30, 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 June 30, 2009, as compared to $16.9 million for the three months ended June 30, 2008, an increase of approximately $0.7 million or 4.0%. The increase is primarily due to an increase in commissions paid to outside sales agents of approximately $0.7 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 28.0% for the three months ended June 30, 2009, as compared to the 30.4% for the three months ended June 30, 2008. The decrease is primarily due to the increase in revenues for the three months ended June 30, 2009, offset to a certain extent, by the increase in sales and marketing expenses. We expect sales and marketing expenses in the three months ended September 30, 2009 to moderately increase in absolute dollars as compared to the three months ended June 30, 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 September 30, 2009 to be relatively consistent as a percentage of revenues as compared to the three months ended June 30, 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 $6.0 million for the three months ended June 30, 2009, as compared to $5.8 million for the three months ended June 30, 2008, an increase of approximately $0.2 million or 3.6%. As a percentage of revenues, general and administrative expenses were 9.5% for the three months ended June 30, 2009, as compared to the 10.4% for the three months ended June 30, 2008. The decrease is primarily due to the increase in revenues for the three months ended June 30, 2009. We expect that general and administrative expenses in the three months ended September 30, 2009 will be relatively consistent in absolute dollars as compared to the three months ended June 30, 2009. As a percentage of revenues, we expect general and administrative expenses in the three months ended September 30, 2009 to slightly decrease due primarily to expected revenue growth.

Other Income (Loss), net. Other income (loss), net consists primarily of joint venture income from CyberSource K.K. and other miscellaneous gains and losses. Other loss, net was approximately $14,000 for the three months ended June 30, 2009, as compared to other income, net of approximately $92,000 for the three months ended June 30, 2008. Other loss, net for the three months ended June 30, 2009 consisted of approximately $0.2 million of proceeds from a legal settlement and $0.1 million of income from CyberSource K.K., offset by approximately $0.4 million of loss due to foreign currency fluctuations.

Interest Income. Interest income which consists of interest earnings on cash and cash equivalents was $74,000 for the three months ended June 30, 2009 as compared to $0.4 million for the three months ended June 30, 2008. The decrease is due to lower interest rates. We expect interest income in the three months ended September 30, 2009 to be relatively consistent with the three months ended June 30, 2009.

Income Tax Provision. Income tax expense, including discrete items, for the three months ended June 30, 2009 was approximately $1.3 million on pre-tax income of $3.5 million, as compared to $26,000 on pre-tax losses of $19,000 for the three months ended June 30, 2008. The increase is primarily due to higher pre-tax income for the three months ended June 30, 2009 as compared to the three months ended June 30, 2008. The effective tax rate for the three months ended June 30, 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 second quarter of 2008 differs from the U.S. federal statutory rate of 35% primarily due to the pre-tax losses for the quarter.

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.

SIX MONTHS ENDED JUNE 30, 2009 AND 2008

Revenues. Revenues were $123.4 million for the six months ended June 30, 2009, as compared to $109.1 million for the six months ended June 30, 2008, an increase of approximately $14.3 million or 13.1%. 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 June 30, 2009 represented approximately 15% of total revenues for the six months ended June 30, 2009; while revenues from existing customers represented approximately 85% of total revenues for the six months ended June 30, 2009. Revenues from new customers that entered into contracts during the twelve months ended June 30, 2008 represented approximately 12% of total revenues for the six months ended June 30, 2008; while revenues from existing customers represented approximately 88% of total revenues for the six months ended June 30, 2008. We added approximately 69,500 gross and 20,400 net new customers during the six months ended June 30, 2009, as compared to approximately 51,000 gross and 10,000 net new customers during the six months ended June 30, 2008.

We processed approximately 1.1 billion transactions during the six months ended June 30, 2009, as compared to approximately 894 million transactions processed during the six months ended June 30, 2008, an increase of approximately 23%. The dollar value of all credit card authorization requests we processed in the six months ended June 30, 2009 was approximately $56.3 billion, as compared to approximately $54.0 billion for the six months ended June 30, 2008, an increase of approximately 4%.

Global acquiring revenues was approximately $38.3 million, or 31.1% of total revenues, for the six months ended June 30, 2009, as compared to approximately $36.7 million, or 33.6% of total revenues, for the six months ended June 30, 2008. We had approximately 5,900 global acquiring customers as of June 30, 2009 as we added approximately 1,950 new acquiring customers during the six months ended June 30, 2009. We had approximately 3,300 global acquiring customers as of June 30, 2008 as we added approximately 1,800 new acquiring customers during the six months ended June 30, 2008. The dollar value of all credit card authorization requests we processed as the merchant acquirer in the six months ended June 30, 2009 was approximately $1.4 billion, as compared to approximately $1.2 billion for the six months ended June 30, 2008, an increase of approximately 17%.

During the six months ended June 30, 2009, our European operations generated revenues of $8.3 million and $7.1 million for the six months ended June 30, 2009 and 2008, respectively. Transactions processed by our European operations were approximately 283.1 million transactions, or 26% of total transactions processed, for the six months ended June 30, 2009 as compared to approximately 174.0 million transactions, or 19% of total transactions processed, for the six months ended June 30, 2008, an increase of approximately 63%. Revenues from merchants domiciled outside the United States accounted for 6.8% and 6.6% of our revenues for the six months ended June 30, 2009 and 2008, respectively.

Cost of Revenues. Cost of revenues was $57.2 million or 46.4% of revenues for the six months ended June 30, 2009, as compared to $53.4 million or 48.9% of revenues for the six months ended June 30, 2008. The increase in absolute dollars is primarily due to an increase in headcount and related compensation expense of approximately $2.7 million and an increase in depreciation expense of approximately $0.6 million. 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 were $13.1 million for the six months ended June 30, 2009, as compared to $11.1 million for the six months ended June 30, 2008, an increase of approximately $2.0 million or 17.6%. The increase is primarily due to an increase in headcount and related compensation expense of approximately $1.5 million. As a percentage of revenues, product development expenses was 10.6% in the six months ended June 30, 2009, relatively consistent with 10.2% for the six months ended June 30, 2008.

Sales and Marketing. Sales and marketing expenses were $35.2 million for the six months ended June 30, 2009, as compared to $33.6 million for the six months ended June 30, 2008, an increase of approximately $1.6 million or 4.8%. The increase is primarily due to an increase in commissions paid to outside sales agents of approximately $1.5 million and an increase in compensation-related expense of approximately $1.0 million, offset by a decrease of approximately $0.9 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 28.5% for the six months ended June 30, 2009, as compared to the 30.8% for the six months ended June 30, 2008. The decrease is primarily due to the increase in revenues for the six months ended June 30, 2009, offset to a certain extent, by the increase in sales and marketing expenses.

General and Administrative. General and administrative expenses were $13.0 million for the six months ended June 30, 2009, as compared to $11.3 million for the six months ended June 30, 2008, an increase of approximately $1.7 million or 15.0%. The increase is primarily due to a $1.1 million increase in legal fees and outside services. In addition, during the six months ended June 30, 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 10.5% for the six months ended June 30, 2009, as compared to the 10.3% for the six months ended June 30, 2008. The increase is primarily due to the increase in legal fees and outside services as well as restructuring charges in the six months ended June 30, 2009, offset to a certain extent, by the increase in revenues.

Other Income (Loss), net. Other loss, net was approximately $32,000 for the six months ended June 30, 2009, as compared to other income, net of $0.2 million for the six months ended June 30, 2008. Other loss, net for the six months ended June 30, 2009 consisted of approximately $0.2 million of proceeds from a legal settlement and $0.2 million of income from CyberSource K.K., offset by approximately $0.4 million of loss due to foreign currency fluctuations.

Interest Income. Interest income was $0.2 million for the six months ended June 30, 2009 as compared to $0.8 million for the six months ended June 30, 2008. The decrease is due to lower interest rates.

Income Tax Provision. Income tax expense for the six months ended June 30, 2009 was approximately $2.0 million on pre-tax income of $5.1 million, as compared to $0.2 million on pre-tax income of $0.7 million for the six months ended June 30, 2008. The increase is primarily due to higher pre-tax income for the six months ended June 30, 2009 as compared to the six months ended June 30, 2008. The effective tax rate for the six months ended June 30, 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, partially offset by the favorable impact of tax credits and lower foreign statutory tax rates. The effective tax rate for the six months ended June 30, 2008 differs from the U.S. federal statutory rate of 35% primarily due to the favorable impact of lower . . .