UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 0-26123

ONLINE RESOURCES CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

Delaware		52-1623052
(STATE OR OTHER JURISDICTION OF		(I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)		IDENTIFICATION NO.)
4795 Meadow Wood Lane		20151
Chantilly, Virginia		(ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(703) 653-3100
(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

     Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes o No þ

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

     As of October 28, 2009 there were 30,071,872 shares of the issuer’s common stock outstanding.

 

 

ONLINE RESOURCES CORPORATION

FORM 10-Q

TABLE OF CONTENTS

		Page
PART I FINANCIAL INFORMATION
Item 1: Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets (unaudited) as of September 30, 2009 and December 31, 2008			3
Condensed Consolidated Statements of Operations (unaudited) — Three and nine months ended September 30, 2009 and 2008			4
Condensed Consolidated Statements of Cash Flows (unaudited) — Nine months ended September 30, 2009 and 2008			5
Notes to Condensed Consolidated Financial Statements (unaudited)			6
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations			16
Item 3: Quantitative and Qualitative Disclosures About Market Risk			26
Item 4: Controls and Procedures			26
PART II OTHER INFORMATION
Item 1: Legal Proceedings			27
Item 1A: Risk Factors			27
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds			27
Item 3: Defaults Upon Senior Securities			27
Item 4: Submission of Matters to a Vote of Security Holders			28
Item 5: Other Information			28
Item 6: Exhibits			28
EX-31.1
EX-31.2
EX-32

PART I. FINANCIAL INFORMATION

ITEM 1.		CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

ONLINE RESOURCES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par values)

		September 30,				December 31,
		2009				2008
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	30,743			$	22,969
Short-term investments			—				1,009
Accounts receivable (net of allowance of $100 and $84, respectively)			16,256				15,742
Deferred tax asset, current portion			2,142				8,782
Prepaid expenses and other current assets			4,528				4,013
Total current assets			53,669				52,515
Property and equipment, net			26,264				28,707
Deferred tax asset, less current portion			29,927				25,295
Goodwill			181,516				181,516
Intangible assets			21,752				27,668
Deferred implementation costs, less current portion, and other assets			6,780				7,976
Total assets		$	319,908			$	323,677
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	1,414			$	1,198
Accrued expenses			3,676				3,618
Notes payable, senior secured debt, current portion			12,750				15,937
Interest payable			28				6
Deferred revenues, current portion and other current liabilities			6,975				7,513
Total current liabilities			24,843				28,272
Notes payable, senior secured debt, less current portion			51,000				59,500
Deferred revenues, less current portion and other long-term liabilities			6,189				6,377
Total liabilities			82,032				94,149
Commitments and contingencies
Redeemable convertible preferred stock:
Series A-1 convertible preferred stock, $0.01 par value; 75 shares authorized and issued at September 30, 2009 and December 31, 2008 (redeemable on July 3, 2013 at $135,815)			98,275				91,415
Stockholders’ equity:
Series B junior participating preferred stock, $0.01 par value; 297.5 shares authorized; none issued			—				—
Common stock, $0.0001 par value; 70,000 shares authorized; 30,393 issued and 30,072 outstanding at September 30, 2009 and 29,808 issued and 29,526 outstanding at December 31, 2008			3				3
Additional paid-in capital			212,133				208,079
Accumulated deficit			(69,639	)			(66,698	)
Treasury stock, 321 shares at September 30, 2009 and 282 shares at December 31, 2008			(2,629	)			(2,360	)
Accumulated other comprehensive loss			(267	)			(911	)
Total stockholders’ equity			139,601				138,113
		$	319,908			$	323,677

See accompanying notes to condensed consolidated unaudited financial statements.

ONLINE RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
		(Unaudited)								(Unaudited)
Revenues:
Account presentation services		$	2,083			$	1,860			$	5,877			$	6,121
Payment services			28,971				30,518				90,126				92,480
Relationship management services			2,015				2,074				6,055				6,091
Professional services and other			3,525				3,681				11,559				9,790
Total revenues			36,594				38,133				113,617				114,482
Costs and expenses:
Service costs			17,856				18,410				55,268				55,268
Implementation and other costs			960				1,169				3,228				3,540
Costs of revenues			18,816				19,579				58,496				58,808
Gross profit			17,778				18,554				55,121				55,674
General and administrative			6,955				7,984				23,564				26,528
Sales and marketing			4,624				6,021				15,952				18,681
Systems and development			2,247				2,456				6,630				7,498
Total expenses			13,826				16,461				46,146				52,707
Income from operations			3,952				2,093				8,975				2,967
Other (expense) income:
Interest income			22				111				104				433
Interest expense			(357	)			(1,045	)			(3,300	)			(5,073	)
Other income (expense)			14				(55	)			91				(164	)
Loss on extinguishment of debt			—				—				—				—
Total other (expense) income			(321	)			(989	)			(3,105	)			(4,804	)
Income (loss) before income tax provision (benefit)			3,631				1,104				5,870				(1,837	)
Income tax provision (benefit)			918				338				1,950				(224	)
Net income (loss)			2,713				766				3,920				(1,613	)
Preferred stock accretion			2,325				2,237				6,861				6,614
Net income (loss) available to common stockholders		$	388			$	(1,471	)		$	(2,941	)		$	(8,227	)
Net income (loss) available to common stockholders per share:
Basic		$	0.01			$	(0.05	)		$	(0.10	)		$	(0.28	)
Diluted		$	0.01			$	(0.05	)		$	(0.10	)		$	(0.28	)
Shares used in calculation of net income (loss) available to common stockholders per share:
Basic			30,048				29,211				29,898				29,013
Diluted			31,546				29,211				29,898				29,013

See accompanying notes to condensed consolidated unaudited financial statements.

ONLINE RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

		Nine Months Ended September 30,
		2009				2008
		(Unaudited)
Operating activities
Net income (loss)		$	3,920			$	(1,613	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Deferred tax expense			2,008				212
Depreciation and amortization			15,209				16,138
Equity compensation expense			3,307				3,971
Write off and amortization of debt issuance costs			250				282
Loss on disposal of assets			37				33
Provision for losses on accounts receivable			16				89
(Gain) loss on investments			(91	)			163
Change in fair value of stock price protection			—				1,565
Change in fair value of theoretical swap derivative			8				(689	)
Loss on cash flow hedge derivative security			—				259
Changes in operating assets and liabilities, net of acquisitions:
Consumer deposit receivable			—				8,279
Consumer deposit payable			—				(10,555	)
Changes in certain other assets and liabilities			(958	)			(2,074	)
Net cash provided by operating activities			23,706				16,060
Investing activities
Purchases of property and equipment			(6,744	)			(11,295	)
Purchases of short-term investments			—				(250	)
Sales of short-term investments			2,100				5,713
Net cash used in investing activities			(4,644	)			(5,832	)
Financing activities
Net proceeds from issuance of common stock			425				794
Repurchase of shares issued related to ITS acquisition			—				(2,117	)
Payments for ITS price protection			—				(112	)
Repayment of 2007 notes			(11,687	)			(6,375	)
Repayment of capital lease obligations			(26	)			(27	)
Net cash used in financing activities			(11,288	)			(7,837	)
Net increase in cash and cash equivalents			7,774				2,391
Cash and cash equivalents at beginning of year			22,969				13,227
Cash and cash equivalents at end of period		$	30,743			$	15,618

See accompanying notes to condensed consolidated unaudited financial statements.

ONLINE RESOURCES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

     Online Resources Corporation (the “Company”) provides outsourced, web- and phone-based financial technology services to financial institution, biller, card issuer and creditor clients and their millions of consumer end-users. End-users may access and view their accounts online and perform various self-service functions. They may also make electronic bill payments and funds transfers, utilizing the Company’s unique, real-time debit architecture, ACH and other payment methods. The Company’s value-added relationship management services reinforce a favorable user experience and drive a profitable and competitive online channel for its clients. Further, the Company provides professional services, including software solutions, which enable various deployment options, a broad range of customization and other value-added services. The Company currently operates in two business segments — Banking and eCommerce.

INTERIM FINANCIAL INFORMATION

     The accompanying condensed consolidated unaudited financial statements have been prepared in conformity with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. In the opinion of management, the condensed consolidated unaudited financial statements include all adjustments necessary (which are of a normal and recurring nature) for the fair presentation of the results of the interim periods presented. These condensed consolidated unaudited financial statements should be read in conjunction with the consolidated audited financial statements for the year ended December 31, 2008, included in the Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission (“SEC”) on March 3, 2009. The results of operations for any interim period are not necessarily indicative of the results of operations for any other interim period or for a full fiscal year. Certain amounts from prior periods have been reclassified to conform to current period presentation. The Company has evaluated all subsequent events through November 2, 2009, the date the financial statements were issued.

NEW ACCOUNTING STANDARDS

     The following describes changes or updates to the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification™, the new source of authoritative U.S. Generally Accepted Accounting Principles (“GAAP”), effective for the Company September 30, 2009. Only those changes or updates that are relevant to the Company’s business activities for the periods presented in this report are described below.

     In October 2009, the FASB changed its guidance for the accounting of multiple-deliverable revenue arrangements with customers. Current GAAP requires a vendor to use vendor-specific objective evidence or third-party evidence of selling price to separate deliverables in a multiple-deliverable arrangement. Multiple-deliverable arrangements will be separated in more circumstances with the updated guidance. The change in guidance establishes a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific nor third-party evidence is available. The best estimate to use in determining a selling price is the price as if the item were sold on a stand alone basis. Changes also include eliminating the residual method of allocation and requiring that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates discounts in the arrangement proportionally to each deliverable based on each selling price. These changes become effective, prospectively, for the Company on January 1, 2011 and early adoption is permitted. The Company has not yet determined if it will adopt early or what effect adoption will have on the Company’s consolidated financial statements.

     On September 30, 2009, the Company adopted the new source of authoritative accounting principles, the Accounting Standards Codification™ (the Codification), established by the FASB. This new source of authoritative accounting principles recognized by the FASB is to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. Accounting standards updates will not be authoritative in their own right as they will serve to update the Codification. This adoption did not impact the Company’s consolidated financial statements.

     In May 2009, the FASB changed the accounting for and disclosure of subsequent events, events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The change in guidance requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, that is, whether that date represents the date the financial statements were issued or were available to be issued. The change became effective for the Company and was adopted on July 1, 2009.

     In April 2009, the FASB issued guidance for determining fair value when the volume and level of activity for the asset or liability have significantly decreased and identifying transactions that are not orderly. Additionally, entities are required to disclose in interim and annual periods the inputs and valuation techniques used to measure fair value. This guidance became effective for the Company and was adopted on July 1, 2009. As the requirements under this guidance are consistent with our current practice, adoption did not have a material impact on the Company’s consolidated financial statements.

     In April 2009, the FASB changed guidance for all assets acquired and all liabilities assumed in a business combination that arise from contingencies. The guidance says that the acquirer will recognize such an asset or liability if the acquisition-date fair value of that asset or liability can be determined during the measurement period. If it cannot be determined during the measurement period, then the asset or liability should be recognized at the acquisition date if the following criteria are met: (1) information available before the end of the measurement period indicates that it is probable that an asset existed or that a liability had been incurred at the acquisition date, and (2) the amount of the asset or liability can be reasonably estimated. This standard was effective for the Company and adopted January 1, 2009. The impact was not material to the Company’s consolidated financial statements.

     In June 2008, the FASB issued guidance for determining whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method. Unvested securities are participating if the right to receive dividends or dividend equivalents will not be forfeited if the security does not vest. The guidance had to be applied retrospectively and was effective for the Company and adopted on January 1, 2009. The impact was not material to the Company’s consolidated financial statements.

     In April 2008, the FASB issued guidance for determining the useful life of intangible assets. This guidance is intended to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset, when the underlying arrangement includes renewal or extension of terms that would require substantial costs or result in a material modification to the asset upon renewal or extension. Companies estimating the useful life of a recognized intangible asset must now consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience, must consider assumptions that market participants would use about renewals or extensions. The guidance was effective for the Company and adopted on January 1, 2009. The impact was not material to the Company’s consolidated financial statements.

     In March 2008, the FASB changed guidance to enhance disclosures for derivative instruments and hedging activities. The disclosures improve the transparency of financial reporting by showing adequate information about how derivative and hedging activities affect an entity’s financial position, financial performance, and cash flows. The changes were effective for the Company and adopted on January 1, 2009.

     On January 1, 2008, the Company adopted changes for defining fair value of financial assets and liabilities as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In addition, the guidance specifies that the fair value should be the exit price, or price received to sell the asset or liability as opposed to the entry price, or price paid to acquire an asset or assume a liability. In February 2008, the Financial Accounting Standards Board (“FASB”) delayed the effective date for changes in defining fair value for nonfinancial assets and liabilities, except for those that are disclosed in the condensed consolidated financial statements on a recurring basis. The changes to this guidance were effective for the Company and adopted on January 1, 2009. The impact was not material to the Company’s consolidated financial statements.

2. SENIOR SECURED NOTES

     The Company has an agreement with Bank of America which finances its senior secured notes (“2007 Notes”). The agreement also provides a $15 million revolver (“Revolver”) under which the Company can secure up to $5 million in letters of credit. Currently, there are no amounts outstanding under the Revolver, but available credit under the Revolver has been reduced by approximately $1.6 million as a result of letters of credit the bank has issued. The Company has made principal payments of $4.3 million and $11.7 million on the 2007 Notes in the three and nine months ended September 30, 2009, respectively, reducing the outstanding principal to $63.8 million. The Company will make principal payments each quarter until the 2007 Notes are due in 2012 as noted in the table below.

     The interest rate on both the Revolver and the 2007 Notes is the one-month London Interbank Offered Rate (“LIBOR”) plus 225 to 275 basis points based upon the ratio of the Company’s funded indebtedness to its earnings before interest, taxes, depreciation and amortization (“EBITDA,” as defined in the 2007 Notes), and it is payable monthly. During the nine months ended September 30, 2009, the margin was 250 basis points and the average interest rate was 2.93%. The 2007 Notes and the Revolver are secured by the assets of the Company.

     Maturities of long-term debt for each of the next 3.25 years are as follows (in thousands):

		Maturing
Year		Amounts
2009 (October 1, 2009-December 31, 2009)		$	4,250
2010		$	17,000
2011		$	32,938
2012		$	9,562

3. FINANCIAL INSTRUMENTS

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Cash Flow Hedging Strategy

     On March 30, 2007, the Company entered into an interest rate cap agreement (“2007 Hedge”) that protected the cash flows on designated one-month LIBOR-based interest payments beginning on April 3, 2007 through July 31, 2009. The counter party for the 2007 Hedge became insolvent during the third quarter of 2008. As such, the Company declared the 2007 Hedge to have no fair value and the hedge was terminated.

     On October 17, 2008, the Company entered into an interest rate swap agreement, with a large commercial bank, to effectively swap the one-month LIBOR interest rate for a fixed interest rate equal to 2.9% plus 225 to 275 basis points based upon the ratio of the Company’s funded indebtedness to its EBITDA, through December 31, 2009. The interest rate swap is designated as a cash flow hedge and any unrealized gains or losses related to changes in the fair market value of the hedge will be recorded in other comprehensive income until realized. The interest rate swap had a notional value of $63.8 million and $75.4 million at September 30, 2009 and December 31, 2008, respectively, the principal amounts outstanding on the 2007 Notes for each period. Subsequent notional amounts are equal to the outstanding principal at the end of each month. The fair market value of the interest rate swap was a liability of $0.4 million at September 30, 2009 and a liability of $1.5 million at December 31, 2008. The fair value of the interest rate swap at September 30, 2009 is the amount expected to be realized in earnings in the next three months.

Theoretical Swap Derivative

The Company bifurcated the fair market value of the embedded derivative associated with the Series A-1 Redeemable Convertible Preferred Stock (“Series A-1 Preferred Stock”) issued in conjunction with the Princeton eCom acquisition on July 3, 2006 as required by GAAP. The Company determined that the embedded derivative is defined as the right to receive a fixed rate of return on the accrued, but unpaid dividends and the variable negotiated rate, which creates a theoretical swap between the fixed rate of return on the accrued, but unpaid dividends and the variable rate actually accrued on the unpaid dividends. This embedded derivative is marked to market at the end of each reporting period through earnings and an adjustment to other assets as required by the Derivative and Hedging Topic. There is no active market quote available for the fair value of the embedded derivative. Thus, management measures fair value of the derivative by estimating future cash flows related to the asset using a forecasted iMoney Net First Tier rate based on the one-month LIBOR rate adjusted for the historical spread for the estimated period in which the Series A-1 Preferred Stock will be outstanding.

     The following table presents the fair values of derivative instruments included within the condensed consolidated balance sheet at September 30, 2009 (in thousands):

		September 30, 2009
		Fair Value				Balance Sheet Location
Asset Derivatives:
Theoretical swap (1)		$	4,554			Other assets
Liability Derivatives:
Interest rate swap (1)		$	(428	)		Other current liabilities

     The following tables present the amounts affecting the condensed consolidated statement of operations for the three and nine months ended September 30, 2009 (in thousands):

		Amount of gain (loss) recognized in income on
		derivative, pre tax
		Three Months				Nine Months
		Ended September 30				Ended September 30
Derivative Not Designated as Hedging Instrument:
Theoretical Swap (1)		$	694			$	(8	)

Amount of loss recognized in OCI on

Amount of loss reclassified from OCI into

derivative, after tax

income, pre tax

Three Months

Nine Months

Three Months

Nine Months

Ended September 30

Ended September 30

Ended September 30

Ended September 30

Derivative Cash Flow Hedging Relationships:

Interest Rate Swap (2)

$

201

$

715

$

451

$

1,358

4. REDEEMABE CONVERTIBLE PREFERRED STOCK

Series A-1 Redeemable Convertible Preferred Stock

     Pursuant to the restated certificate of incorporation, the Board of Directors has the authority, without further action by the stockholders, to issue up to 3,000,000 shares of preferred stock in one or more series. Of these 3,000,000 shares of preferred stock, 75,000 shares have been designated Series A-1. The Series A-1 Preferred Stock has a redemption value of 115% of the face value of the stock, on or after seven years from the date of issuance, or July 3, 2013. The Company recognized $0.4 million for each of the three months ended September 30, 2009 and 2008 and $1.2 million for each for the nine months ended September 30, 2009 and 2008 respectively, to adjust for the redemption value at maturity.

     Additionally, the Series A-1 Preferred Stock has a feature that grants holders the right to receive interest-like returns on accrued, but unpaid, dividends that accumulate at 8% per annum. For each of the three months and nine months ended September 30, 2009 and 2008, $1.5 million and $4.5 million, respectively of preferred stock accretion was recognized in the condensed consolidated statements of operations, for the 8% per annum cumulative dividends. The right to receive the accrued, but unpaid dividends is based on a variable interest rate, and as such the difference between the fixed and variable rate of returns is a theoretical swap derivative. The Company bifurcates this feature and accretes it to the Series A-1 Preferred Stock over the life of the security. For the three months ended September 30, 2009 and 2008, $0.2 million and $0.1 million, respectively, of preferred stock accretion expense were recognized, and for the nine months ended September 30, 2009 and 2008, $0.6 million and $0.4 million, respectively, of preferred stock accretion were recognized for the theoretical swap derivative in the condensed consolidated statement of operations.

     Finally, the cost to issue the Series A-1 Preferred Stock of $5.1 million is being accreted back to the redemption value of the Series A-1 Preferred Stock through July 2013, and generated an additional $0.2 million and $0.5 million of preferred stock accretion for each of the three months and nine months ended September 30, 2009 and 2008, respectively, in the condensed consolidated statements of operations.

5. REPORTABLE SEGMENTS

     The Company manages its business through two reportable segments: Banking and eCommerce. The Banking segment’s market consists primarily of banks, credit unions and other depository financial institutions in the United States. The segment’s fully integrated suite of account presentation, bill payment, relationship management and professional services are delivered through the Internet. The eCommerce segment’s market consists of billers, card issuers, processors, and other creditors such as payment acquirers and very large online billers. The segment’s account presentation, payment, relationship management and professional services are distributed to these clients through the Internet.

     Factors used to identify the Company’s reportable segments include the organizational structure of the Company and the financial information available for evaluation by the chief operating decision-maker in making decisions about how to allocate resources and assess performance. The Company’s operating segments have been broken out based on similar economic and other qualitative criteria. The Company operates both reporting segments in one geographical area, the United States. The Company’s management assesses the performance of its assets in the aggregate, and accordingly, they are not presented on a segment basis.

     The Company changed the way it determines operating results of the business segments at the end of 2008. The Company allocated $2.2 million and $6.3 million of system operations and other processing costs, included in costs of revenues, from the eCommerce segment to the Banking segment in the three and nine months ended September 30, 2008, respectively, to reflect the change in the utilization of these resources.

     The results of operations from these reportable segments were as follows for the three and nine months ended September 30, 2009 and 2008 (in thousands):

		Banking				eCommerce				Corporate(1)				Total
Three months ended September 30, 2009:
Revenues		$	22,793			$	13,801			$	—			$	36,594
Costs of revenues			11,220				7,596				—				18,816
Gross profit			11,573				6,205				—				17,778
Operating expenses			5,458				4,594				3,774				13,826
Income (loss) from operations		$	6,115			$	1,611			$	(3,774	)		$	3,952
Three months ended September 30, 2008:
Revenues		$	24,048			$	14,085			$	—			$	38,133
Costs of revenues			11,930				7,649				—				19,579
Gross profit			12,118				6,436				—				18,554
Operating expenses			6,698				5,629				4,134				16,461
Income (loss) from operations		$	5,420			$	807			$	(4,134	)		$	2,093
Nine months ended September 30, 2009:
Revenues		$	68,723			$	44,894			$	—			$	113,617
Costs of revenues			33,701				24,795				—				58,496
Gross profit			35,022				20,099				—				55,121
Operating expenses			17,874				15,023				13,249				46,146
Income (loss) from operations		$	17,148			$	5,076			$	(13,249	)		$	8,975
Nine months ended September 30, 2008:
Revenues		$	71,392			$	43,090			$	—			$	114,482
Costs of revenues			35,132				23,676				—				58,808
Gross profit			36,260				19,414				—				55,674
Operating expenses			20,932				17,565				14,210				52,707
Income (loss) from operations		$	15,328			$	1,849			$	(14,210	)		$	2,967

6. INVESTMENTS

     The Company’s investment in the Columbia Strategic Cash Portfolio (the “Fund”) was liquidated in September 2009. The value of the investment was $0.0 million and $2.0 million at September 30, 2009 and December 31, 2008, respectively. During the nine months ended September 30, 2009, the Company received $2.1 million in liquidation payments from the Fund administrator and recognized a gain of $0.1 million. During the nine months ended September 30, 2008, the Company received $5.7 million in liquidation payments from the Fund administrator and recognized a loss of $0.1 million related to the payments. The Company also recognized a loss of less than $0.1 million for the nine months ended September 30, 2008 related to the fair value of the investment in the Fund, as other expense in the condensed consolidated statement of operations.

7. STOCK BASED COMPENSATION

     At September 30, 2009, the Company had three stock-based employee compensation plans, which are described in detail in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. The Company used the modified-prospective transition method, as required, to recognize compensation costs; which include (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the estimated grant date fair value, and (b) compensation cost for all share-based payments granted on or subsequent to January 1, 2006, based on the estimated grant-date fair value. The compensation expense for stock-based compensation was $1.1 million and $1.0 million for the three months ended and $3.3 million and $4.0 million for the nine months ended September 30, 2009 and 2008, respectively. A portion of the stock based compensation cost has been capitalized as part of software development costs. For the three months ended September 30, 2009 and 2008, approximately $38,000 and $30,000, respectively, was capitalized as part of software development costs. For the nine months ended September 30, 2009 and 2008, approximately $142,000 and $137,000, respectively, was capitalized as part of software development costs.

     The fair value of each option award is estimated on the date of grant using a Black-Scholes-Merton option-pricing formula that uses the assumptions noted in the table and discussion that follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
Dividend yield			—				—				—				—
Expected volatility			64	%			53	%			62	%			51	%
Risk-free interest rate			2.63	%			3.38	%			1.90	%			3.37	%
Expected life in years			5.1				6.3				5.8				5.8

     Dividend Yield. The Company has never declared or paid dividends and has no plans to do so in the foreseeable future.

     Expected Volatility. Volatility is a measure of the amount by which a financial variable, such as a share price, has fluctuated (historical daily volatility) or is expected to fluctuate (expected volatility) during a period. The Company uses the historical average daily volatility over the average expected term of the options granted to estimate expected volatility.

     Risk-Free Interest Rate. The risk-free interest rate is the average U.S. Treasury rate for the week of each option grant during the period having a term that most closely resembles the expected term of the option.

Expected Life of Option Term. Expected life of option term is the period of time that the options granted are expected to remain unexercised. Options granted during the period have a maximum term of seven to ten years. The Company uses historical expected terms, with further consideration given to the class of employees to whom the equity awards were granted, to estimate the expected life of the option term.

     Forfeiture Rate. Forfeiture rate is the estimated percentage of equity awards granted that are expected to be forfeited or canceled on an annual basis before becoming fully vested. The Company estimates forfeiture rates based on past turnover data for the previous five quarters with further consideration given to the class of employees to whom the equity awards were granted.

     A summary of stock option activity under the 1989, 1999 and 2005 Plans as of September 30, 2009, and changes in the period then ended is presented below (in thousands, except exercise price and remaining contract term data):

										Weighted-
						Weighted-				Average
						Average				Remaining				Aggregate
						Exercise				Contract				Intrinsic
		Shares				Price				Term				Value
Outstanding at January 1, 2009			2,952			$	6.14
Granted			734			$	3.53
Exercised			(230	)		$	2.97
Forfeited or expired			(153	)		$	12.45
Outstanding at September 30, 2009			3,303			$	5.49				4.0			$	6,432
Vested or expected to vest at September 30, 2009			3,268			$	5.50				4.0			$	6,350
Exercisable at September 30, 2009			2,191			$	5.69				3.2			$	4,044

     During the second quarter of 2008, the stockholders approved the 2005 Amended and Restated Restricted Stock and Option Plan (“2005 Plan”), which increased the number of authorized shares under the 2005 Plan from 1,700,000 to 3,500,000. The amended 2005 Plan was filed by the Company on Form 8-K with the Securities and Exchange Commission on April 22, 2008.

     The weighted-average grant-date fair value of options granted was $3.58 and $3.99 per share during the three months ended September 30, 2009 and 2008, respectively and $2.01 and $5.31 per share for the nine months ended September 30, 2009 and 2008, respectively. In the table above, the total intrinsic value is calculated as the difference between the market price of the Company’s stock on the last trading day of the quarter and the exercise price of the options. For options exercised, intrinsic value is calculated as the difference between the market price on the date of exercise and the grant price. The intrinsic value of options exercised in the three months ended September 30, 2009 and 2008 was $0.1 million and $0.7 million, respectively, and $0.4 million and $1.6 million, respectively, for the nine months ended September 30, 2009 and 2008.

     As of September 30, 2009, there was $2.0 million of total unrecognized compensation cost related to stock options granted under the 1999 and 2005 Plans. That cost is expected to be recognized over a weighted average period of 1.8 years.

     Cash received from option exercises under all share-based payment arrangements was $0.1 millions and $0.2 million for each of the three months ended September 30, 2009 and 2008, respectively, and $0.7 million and $0.8 million for the nine months ended September 30, 2009 and 2008, respectively. The tax benefits related to the deductions from option exercises of the share-based payment arrangements will be recognized when those deductions, currently being carried forward as net operating losses, reduce taxes payable.

     A summary of the Company’s non-vested restricted stock units as of the nine months ended September 30, 2009, and changes for the period then ended, is presented below (in thousands, except grant-date fair value data):

						Weighted-
						Average
						Grant-Date
		Shares				Fair Value
Non-vested at January 1, 2009			786			$	11.06
Granted			1,235			$	3.61
Vested			(299	)		$	10.80
Forfeited			(187	)		$	11.40
Non-vested at September 30, 2009			1,535			$	5.22

     The fair value of non-vested units is determined based on the opening trading price of the Company’s shares on the grant date. As of September 30, 2009, there was $3.1 million of total unrecognized compensation cost related to non-vested restricted stock units granted under the 2005 Plan. That cost is expected to be recognized over a weighted average period of 1.4 years.

8. INCOME TAXES

     The Company recorded income tax expense based on the estimated effective tax rate for the full year. The Company’s effective tax rate was 25.3% and 30.6% for the three months ended September 30, 2009 and 2008, respectively and 33.2% and 12.2% for the first nine months of 2009 and 2008, respectively. The year over year change in the effective tax rate relates primarily to permanent differences and state taxes. The permanent items primarily include interest expense for the accretion of the Series A-1 Preferred Stock and changes in investment activity in the Columbia Strategic Cash Portfolio.

     The Company has determined that there have been no material changes in tax positions taken in the prior periods, tax positions taken in the current period settlements with taxing authorities resulting from lapses in the statute of limitations and unrecognized tax benefits that if recognized would affect the effective tax rate and amount of interest and penalties recognized in the condensed consolidated statement of operations and the condensed consolidated balance sheets.

     The tax return years since 2000 in the Company’s major tax jurisdictions, both federal and various states, have not been audited and are not currently under audit. The Company does not have reason to expect any changes in the next twelve months regarding uncertain tax positions.

9. NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS PER SHARE

The following table sets forth the computation of basic and diluted net income (loss) available to common stockholders per share (in thousands, except per share amounts):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
Net income (loss)		$	2,713			$	766			$	3,920			$	(1,613	)
Preferred stock accretion			2,325				2,237				6,861				6,614
Net income (loss) available to common shareholders		$	388			$	(1,471	)		$	(2,941	)		$	(8,227	)
Weighted average shares outstanding used in calculation of net loss available to common stockholders per share:
Basic			30,048				29,211				29,898				29,013
Dilutive stock options			1,498				—				—				—
Diluted			31,546				29,211				29,898				29,013
Net income (loss) available to common stockholders per share:
Basic		$	0.01			$	(0.05	)		$	(0.10	)		$	(0.28	)
Diluted		$	0.01			$	(0.05	)		$	(0.10	)		$	(0.28	)

     Approximately 8,443,768 and 7,580,909 shares of common stock equivalents for the three months ended September 30, 2009 and 2008, and approximately 8,541,372 and 7,480,408 shares of common stock equivalents for the nine months ended September 30, 2009 and 2008, respectively were excluded from the calculation of diluted earnings per share because of their anti-dilutive effect.

10. COMPONENTS OF COMPREHENSIVE NET INCOME (LOSS)

     Shown below are items defined as comprehensive income (loss) that are separately classified in the financial statements. The following table reconciles the Company’s net income (loss) available to common stockholders and its total comprehensive net income (loss) for the three and nine months ended September 30, 2009 and 2008 (in thousands):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
Net income (loss) available to common stockholders		$	388			$	(1,471	)		$	(2,941	)		$	(8,227	)
Other comprehensive income (loss):
Realized loss on hedging activity			451				59				1,358				195
Net unrealized loss on hedging activity			(201	)			—				(715	)			(4	)
Comprehensive net income (loss)		$	638			$	(1,412	)		$	(2,298	)		$	(8,036	)

11. FAIR VALUE MEASUREMENTS

          Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In addition, fair value should be the exit price, or price received to sell the asset or liability as opposed to the entry price, or price paid to acquire an asset or assume a liability.

     The following is a fair value hierarchy used for measuring fair value. The hierarchy prioritizes inputs for valuation techniques used to measure fair value into three categories:

	(1)		Level 1 inputs, which are considered the most reliable, are quoted prices in active markets for identical assets or liabilities.
	(2)		Level 2 inputs are those that are observable in the market place, either directly or indirectly for the asset or liability.
	(3)		Level 3 inputs are unobservable due to unavailability and as such the entity’s own assumptions are used.

     The tables below show how the Company categorizes certain financial assets and liabilities based on the types of inputs used in valuation techniques for measuring fair value:

		Fair Value Measurements at September 30, 2009
		Quoted
		Prices in
		Active
		Markets				Significant
		for				Other				Significant
		Identical				Observable				Unobservable
		Assets				Inputs				Inputs
		(Level 1)				(Level 2)				(Level 3)				Total
Financial assets (in thousands):
Merrill Lynch Institutional Fund		$	20,614			$	—			$	—			$	20,614
Investment in Strategic Cash Fund(1)			—				—				—				—
Theoretical swap derivative(2)			—				—				4,554				4,554
		$	20,614			$	—			$	4,554			$	25,168
Financial liabilities (in thousands):
Interest Rate Swap(3)			—				(428	)			—				(428	)
		$	—			$	(428	)		$	—			$	(428	)

		Fair Value Measurements at December 31, 2008
		Quoted
		Prices in
		Active
		Markets				Significant
		for				Other				Significant
		Identical				Observable				Unobservable
		Assets				Inputs				Inputs
		(Level 1)				(Level 2)				(Level 3)				Total
Financial assets (in thousands):
Merrill Lynch Institutional Fund		$	11,030			$	—			$	—			$	11,030
Investment in Strategic Cash Fund(1)			—				—				2,009				2,009
Theoretical swap derivative(2)			—				—				4,562				4,562
		$	11,030			$	—			$	6,571			$	17,601
Financial liabilities (in thousands):
Interest Rate Swap(3)			—				(1,454	)			—				(1,454	)
		$	—			$	(1,454	)		$	—			$	(1,454	)

     The following tables are summaries of the Company’s financial assets that use Level 3 inputs to measure fair value (in thousands):

		Strategic
		Cash				Theoretical
		Fund				Swap
		Investment				Derivative
Balance as of January 1, 2009		$	2,009			$	4,562
Realized and unrealized gain/(loss) (1)			91				(8	)
Redemptions (2)			(2,100	)			—
Balance as of September 30, 2009		$	—			$	4,554

		Strategic
		Cash				Theoretical
		Fund				Swap
		Investment				Derivative
Balance as of January 1, 2008		$	9,135			$	988
Realized and unrealized (loss)/gain(1)			(163	)			689
Redemptions(2)			(5,713	)			—
Balance as of September 30, 2008		$	3,259			$	1,677

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

CAUTIONARY NOTE

     The following management’s discussion and analysis should be read in conjunction with the accompanying Condensed Consolidated Unaudited Financial Statements and Notes thereto. This Quarterly Report on Form 10-Q may contain “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, including, but not limited to:

	•		Any statements that are not statements of historical fact;
	•		Statements regarding trends in our revenues, expense levels, and liquidity and capital resources;
	•		Statements about the sufficiency of the proceeds from the sale of securities and cash balances to meet currently planned working capital and capital expenditure requirements for at least the next twelve months; and
	•		Other statements identified or qualified by words such as “likely”, “will”, “suggest”, “may”, “would”, “could”, “should”, “expects”, “anticipates”, “estimates”, “plans”, “projects”, “believes”, “seeks”, “intends” and other similar words that signify forward-looking statements.

     These forward-looking statements represent our best judgment as of the date of the Quarterly Report on Form 10-Q, and we caution readers not to place undue reliance on such statements. Actual performance and results of operations may differ materially from those projected or suggested in the forward-looking statements due to certain risks and uncertainties, including but not limited to, the risks and uncertainties described or discussed in the section “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 3, 2009. These risks include, among others, the following:

	•		our history of prior losses and the lack of certainty of maintaining consistent profitability;
	•		our dependence on the marketing assistance of third parties to market our services;
	•		the possibility that we may not be able to expand to meet increased demand for our services and related products;
	•		the potential adverse impact that client departures may have on our financial results;
	•		our inability to attract and retain qualified management and technical personnel and our dependence on our executive officers and key employees;
	•		potential security breaches or system failures disrupting our business and the liability associated with these disruptions;
	•		the failure to properly develop, market or sell new products;
	•		the potential impact of the consolidation of the banking and financial services industry;
	•		the effect of adoption of government regulations on our business may be problematic;
	•		our need to maintain satisfactory ratings from federal depository institution regulators;
	•		exposure to increased compliance costs and risks associated with increasing and new regulation of corporate governance and disclosure standards;
	•		the liquidation preference rights and redemption rights associated with our outstanding shares of preferred stock;
	•		the voting rights of our preferred stock restricting our right to take certain actions;
	•		the potential losses we may incur from the impairment of the goodwill we have obtained from our acquisitions;
	•		our inability to obtain additional financing to grow our business;

	•		the concentration of our clients in a small number of industries, including the financial services industry, and changes within those industries reducing demand for our products and services;
	•		the failure to retain existing end-users or changes in their continued use of our services adversely affecting our operating results;
	•		demand for low-cost or free online financial services and competition placing significant pressure on our pricing structure and revenues;
	•		exposure to greater than anticipated tax liabilities;
	•		our quarterly financial results being subject to fluctuations and having a material adverse effect on the price of our stock;
	•		our limited ability to protect our proprietary technology and other rights;
	•		the need to redesign our products, pay royalties or enter into license agreements with third parties as a result of our infringing the proprietary rights of third parties;
	•		the potential obsolescence of our technology or the offering of new, more efficient means of conducting account presentation and payments services negatively impacting our business;
	•		errors and bugs existing in our internally developed software and systems as well as third-party products;
	•		the disruption of our business and the diversion of management’s attention resulting from breach of contract or product liability suits;
	•		difficulties in integrating acquired businesses;
	•		our having limited knowledge of, or experience with, the industries served and products provided by our acquired businesses;
	•		the increase in the size of our operations and the risks described herein from acquisitions or otherwise;
	•		the liabilities or obligations that were not or will not be adequately disclosed from acquisitions we have made and may make;
	•		the claims that may arise from acquired companies giving us limited warranties and indemnities in connection with their businesses;
	•		the effect on the trading price of our stock from the sale of the substantial number of shares of common and convertible preferred stock outstanding, including shares issued in connection with certain acquisitions and shares that may be issued upon exercise of grants under our equity compensation plans;
	•		the significant amount of debt which will have to repay;
	•		the adverse effect to the market price of our common stock from future offerings of debt and preferred stock which would be senior to our common stock upon liquidation; and
	•		the acceleration of repayment of borrowed funds if a default under the terms of our credit agreement arises.

OVERVIEW

     We provide outsourced web- and phone- based financial technology services branded to financial institution, biller, card issuer and creditor clients and their millions of consumer end-users. We currently derive approximately 80% of our revenues from payments and 20% from other services including account presentation, relationship management, professional services, and custom software solutions. End-users may access and view their accounts online and perform various self-service functions. They may also make electronic bill payments and funds transfers utilizing our unique, real-time debit architecture, ACH and other payment methods. Our value-added relationship management services reinforce a favorable user experience and drive a profitable and competitive online channel for our clients. Further, we provide professional services, including software solutions, which enable various deployment options, a broad range of customization and other value-added services.

     We currently operate in two business segments — Banking and eCommerce. The operating results of these business segments exclude general corporate overhead expenses and intangible asset amortization. Within each business segment, we face differing opportunities, challenges and risks. In our Banking segment we have the opportunity to deploy the new and enhanced products we have developed to deepen the relationships we have with our existing clients. Our differentiated account presentation and payments products, as well as our ability to deliver a full suite of remote delivery financial services, provide the opportunity for us to increase market share particularly among mid-sized financial institutions. In the bank market, a very large percentage of financial institutions now offer internet banking and bill payment to their customers. We therefore face competition in our efforts to obtain new clients from other established providers of these services. The end-user base within these clients is not highly penetrated, however, so we benefit from continuing adoption increases.

     Additionally, financial service providers have recently been adversely affected by significant illiquidity and credit tightening trends in the financial markets in which they operate. Unfavorable economic conditions adversely impacting those types of business could have a material adverse effect on our business.

     In our eCommerce segment, there are still a significant number of potential clients who do not offer services such as those we are in a position to provide to their customer base. Further, the competition to provide these services is more fragmented than it is in the banking market. These factors provide us with the opportunity to expand our client base. We also offer an innovative debt collection product that is attractive to a number of large and mid-sized potential clients. For a portion of our eCommerce business, our revenue is tied to the value of the payment being made which exposes us to the impact of economic factors on these payments. We also continuously monitor the potential risks that we face due to the interfaces we have with, and our reliance on, various payments networks.

     Across our markets, we are exposed to interest rate risk as we earn float interest in clearing accounts that hold funds collected from end-users until they are disbursed to receiving merchants or financial institutions. We also closely monitor covenant and other compliance requirements under our debt and preferred stock agreements, as well as other potential risks associated with our capital structure.

     We have experienced, and expect to continue to experience, significant user and transaction growth. This growth has placed, and will continue to place, significant demands on our personnel, management and other resources. We will need to continue to expand and adapt our infrastructure, services and related products to accommodate additional clients and their end-users, increased transaction volumes and changing end-user requirements.

     Registered end-users using account presentation, bill payment or both, and the payment transactions executed by those end-users are the major drivers of our revenues. At September 30, 2009 in comparison to December 31, 2008, the number of users of our account presentation services decreased 3%, and the number of users of our payment services increased 13%, for an overall 8% increase in users. The decline in account presentation services users is primarily due to the departure of a card account presentation services client in the second quarter of 2008.

     We have long-term service contracts with most of our clients. The majority of our revenues are recurring, though these contracts also provide for implementation, set-up and other non-recurring fees. Account presentation services revenues are based on either a monthly license fee, allowing our clients to register an unlimited number of customers, or a monthly fee for each registered customer. Payment services revenues are either based on a monthly fee for each customer enrolled, a fee per executed transaction, or a combination of both. Our clients pay nearly all of our fees and then determine if or how they want to pass these costs on to their users. They typically provide account presentation services to users free of charge, as they derive significant potential benefits including account retention, delivery and paper cost savings, account consolidation and cross-selling of other products.

     As a network-based service provider, we have made substantial up-front investments in infrastructure, particularly for our proprietary systems. We invested approximately $5.0 million for the nine months September 30, 2009, and $7.4 million and $6.3 million for the years ended December 31, 2008 and 2007, respectively. These investments were made to create new products, enhance the functionality of existing products and improve our infrastructure. Product enhancements allow us to remain competitive, retain existing clients and attract new clients. New products allow us to increase revenue and attract new clients. Infrastructure investments allow us to leverage ongoing advances in technology to improve our operating efficiency and capture cost savings.

     While we continue to incur ongoing development and maintenance costs, we believe the infrastructure we have built provides us with significant operating leverage. We continue to automate processes and develop applications that allow us to make only small increases in labor and other operating costs relative to increases in customers and transactions. We believe our financial and operating performance will be based primarily on our ability to leverage additional end-users and transactions over this relatively fixed cost base.

Results of Operations

     The following table presents the summarized results of operations for our two reportable segments, Banking and eCommerce. We changed the way we determine operating results of the business segments at the end of 2008. We allocated $2.2 million and $6.3 million of system operations and other processing costs, included in costs of revenues, from the eCommerce segment to the Banking segment in the three and nine months ended September 30, 2008, respectively, to reflect the change in the utilization of these resources. (dollars in thousands):

		Three Months Ended September 30,																Nine Months Ended September 30,
		2009								2008								2009								2008
		Dollars				%				Dollars				%				Dollars				%				Dollars				%
Revenues:
Banking		$	22,793				62%			$	24,048				63%			$	68,723				60%			$	71,392				62%
eCommerce			13,801				38%				14,085				37%				44,894				40%				43,090				38%
Total		$	36,594				100%			$	38,133				100%			$	113,617				100%			$	114,482				100%

		Dollars				Margin				Dollars				Margin				Dollars				Margin				Dollars				Margin
Gross profit:
Banking		$	11,573				51%			$	12,118				50%			$	35,022				51%			$	36,260				51%
eCommerce			6,205				45%				6,436				46%				20,099				45%				19,414				45%
Total		$	17,778				49%			$	18,554				49%			$	55,121				49%			$	55,674				49%

		Three Months Ended September 30,																Nine Months Ended September 30,
		2009								2008								2009								2008
		Dollars				%				Dollars				%				Dollars				%				Dollars				%
Operating expenses:
Banking		$	5,458				40%			$	6,698				41%			$	17,874				39%			$	20,932				40%
eCommerce			4,594				33%				5,629				34%				15,023				32%				17,565				33%
Corporate(1)			3,774				27%				4,134				25%				13,249				29%				14,210				27%
Total		$	13,826				100%			$	16,461				100%			$	46,146				100%			$	52,707				100%

		Dollars				Margin				Dollars				Margin				Dollars				Margin				Dollars				Margin
Income from operations:
Banking		$	6,115				27%			$	5,420				23%			$	17,148				25%			$	15,328				21%
eCommerce			1,611				12%				807				6%				5,076				11%				1,849				4%
Corporate(1)			(3,774	)							(4,134	)							(13,249	)							(14,210	)
Total		$	3,952				11%			$	2,093				5%			$	8,975				8%			$	2,967				3%

THREE MONTHS ENDED SEPTEMBER 30, 2009 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2008

Revenues

     We generate revenues from account presentation, payment, relationship management and professional services and other revenues. Revenues decreased $1.5 million, or 4%, to $36.6 million for the three months ended September 30, 2009.

		Three Months Ended
		September 30,								Change
		2009(1)				2008(1)				Difference(1)				%
Revenues:
Account presentation services		$	2,083			$	1,860			$	223				12	%
Payment services			28,971				30,518				(1,547	)			(5	)%
Relationship management services			2,015				2,074				(59	)			(3	)%
Professional services and other			3,525				3,681				(156	)			(4	)%
Total revenues		$	36,594			$	38,133			$	(1,539	)			(4	)%
Payment metrics:
Banking payment transactions			38,524				39,062				(538	)			(1	)%
Biller payment transactions			15,123				12,967				2,156				17	%