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CyberSource Announces Fourth Quarter 2008 Financial Results

Fourth quarter revenue was a record $62.3 million, a 37% increase; Billable transactions processed was a record 547 million, a 31% increase;

MOUNTAIN VIEW, Calif. - January 29, 2009

CyberSource Corporation (NASDAQ: CYBS), a leading provider of electronic payment and risk management solutions, today announced financial results for its fourth quarter ended December 31, 2008.

• Fourth quarter revenue was a record $62.3 million, a 37% increase compared to $45.4 million in the same period the previous year. Fourth quarter 2007 includes two months of Authorize.Net results, as the acquisition closed on November 1, 2007.
• On a GAAP basis, net income for the fourth quarter of 2008 was $10.0 million and earnings per share was $0.14, compared to net income of $1.2 million or $0.02 earnings per share in the fourth quarter of 2007. Fourth quarter 2008 and 2007 GAAP net income include tax benefits of $9.7 and $1.0 million, respectively, resulting primarily from reversals of the company's valuation allowance against its deferred tax assets.
• Non-GAAP net income for the fourth quarter was $13.6 million, a 47% increase compared to $9.2 million for the fourth quarter of 2007. Non-GAAP earnings per share for the fourth quarter was $0.19, a 27% increase compared to $0.15 per share for the fourth quarter of 2007. Non-GAAP net income excludes stock-based compensation expense, the reduction in the deferred tax asset valuation allowance, the non-cash portion of the tax provision, depreciation and amortization expense, and certain non-recurring items. A reconciliation of certain historical GAAP to non-GAAP measures is attached.
• During the fourth quarter, CyberSource processed a record 547 million billable transactions, a 31% increase over the same period the previous year. The value of transactions processed was $28.0 billion, a 33% increase over Q4 2007.
• CyberSource signed a record 27,700 new customers in the quarter increasing the installed base to approximately 253,000 active customers.

"CyberSource had an exceptionally strong fourth quarter and an outstanding year in 2008. I am very pleased with our extraordinary operating and financial results for the year, especially in light of the challenging economic environment. In 2008 we saw gains in market share, channel penetration, customer satisfaction and in virtually every financial metric. We also completed a very successful integration of Authorize.Net. Cash flow from operating activities was $10.6 million in the fourth quarter of 2008, compared to $3.5 million for the fourth quarter of 2007 and we ended the year with $61 million in cash, which excludes funds payable to merchants at quarter-end," said Bill McKiernan, chairman and chief executive officer of CyberSource. "With the global economy struggling, the online channel represents one bright spot of economic news and remains an area of intense focus for many businesses as they look to shift share from traditional channels. Similarly, consumers continue to be attracted to the Internet as a source of good value and convenience. I do not believe that these shifts to online channels will abate in the foreseeable future. Our business reflected these trends in both the $28 billion in transactions we processed and the 27,700 new customers we signed last quarter, the highest numbers in CyberSource's history."

Business Highlights

• International: CyberSource continues to see strong momentum outside the US. CyberSource's European operations processed a record 127.4 million transactions in the fourth quarter, an increase of 72% over the same period last year. The Company's European business is comprised of revenue generated by merchants domiciled outside the US, and represented about 7% of revenue in the fourth quarter.
• Global acquiring: CyberSource generated approximately $21.7 million of global acquiring revenue during the fourth quarter, up 37% over the previous year. CyberSource added 1,000 new acquiring customers during the quarter, and now has approximately 4,700 global acquiring customers.
• Customers: CyberSource added approximately 27,700 new customers in the quarter, bringing its installed base of customers to approximately 253,000. New enterprise customer wins this quarter include: Avis Car Rental, the Democratic National Committee, Facebook, Fandango, Obama Transition Project, and Sony BMG Music Entertainment. Existing customers that added new services or renewed agreements during the quarter include: Educational Testing Service, NCO Financial Systems, a leading provider of business process outsourced solutions, and ScanSource, a distributor of specialty technology products such as automatic identification and data capture solutions.
• Channel Partners: CyberSource continues to grow its partner relationships and the number of new merchants they are bringing to the CyberSource platform. In the fourth quarter, CyberSource signed up 450 new ISO and Affiliate resellers. CyberSource also continues to be a preferred provider of payment processing solutions for leading financial institutions and system integrators. CyberSource is pleased to announce a new referral agreement with First Data Merchant Services. First Data will now actively send customer referrals to the CyberSource sales team, who in turn will sell the full range of CyberSource's payment and risk offerings to First Data merchants. CyberSource also set-up a new reseller agreement with HSBC Mexico to resell CyberSource fraud solutions to HSBC customers through their Mexican Payment Gateway.

Annual financial highlights

For the year ended December 31, 2008, total revenue was $229 million compared to $117 million for the prior year, an increase of 96%. On a GAAP basis, net income for the year ended December 31, 2008 was $10.7 million and earnings per share was $0.15 compared to $2.4 million and $0.06 in the prior year, an increase of 342% and 150% respectively. Non-GAAP net income was $48.1 million and earnings per share was $0.67 for the year ended December 31, 2008 compared to $18.1 million and $0.42 per share in the prior year, an increase of 165% and 60% respectively.

Stock buyback program

During the fourth quarter, we repurchased 596,081 shares of common stock at an average stock price of $13.15 per share under the stock repurchase plans that were approved by the Board of Directors in May 2008 and November 2008.

Guidance for the first quarter and full year 2009

CyberSource is providing guidance for the first quarter of 2009 and full year 2009 based on information available as of January 29, 2009.

For the first quarter ending March 31, 2009:

• Total revenue is expected to be approximately $60.0 million.
• The company expects to process between 520 to 525 million billable transactions.
• GAAP gross profit is expected to be approximately $31.2 million, while GAAP operating expenses are expected to be approximately $31.3 million. The company expects to record GAAP net income in the first quarter of approximately $200,000 and breakeven earnings per share based on a weighted average share count of 71 million shares.
• Non-GAAP net income for the first quarter is expected to be approximately $10.5 million and non-GAAP earnings per share to be $0.15 based on a weighted average share count of 71 million shares.

For the full year 2009:

• Total revenue for 2009 is expected to be between $258 and $263 million.
• Total gross profit for 2009 is expected to be between $135 and $138 million.
• Total operating expenses for 2009 is expected to be between $127 and $129 million.
• GAAP net income for 2009 is expected to be between $6.0 and $6.5 million.
• GAAP earnings per share is expected to be between $0.08 and $0.09 per share based on a weighted average share count of 73 million shares.
• Non-GAAP net income for the full year 2009 is expected to be between $52.5 and $54.0 million. Non-GAAP earnings per share is expected to be between $0.72 and $0.74 based on a weighted average share count of 73 million shares.

Public call/web cast details

CyberSource will host a public conference call today, January 29, 2009 at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss the fourth quarter results. The call can be accessed in either of the following ways:

Live conference call
888-585-4496 (U.S. and Canada), 706-634-9580 (local and international). The call's conference ID number is: 80579494. A taped replay of this call will be available through February 28, 2009. The dial-in numbers for the taped replay are: 800-642-1687 (U.S.) 706-645-9291 (local and international). Conference ID is as above.

Live web cast
http://www.cybersource.com/cgi-bin/ir.pl
A replay of this web cast will remain available at this location through April 30, 2009.

About CyberSource

CyberSource Corporation is a leading provider of electronic payment and risk management solutions. CyberSource solutions enable electronic payment processing for Web, call center, and POS environments. CyberSource also offers industry leading risk management solutions for merchants accepting card-not-present transactions. CyberSource Professional Services designs, integrates, and optimizes commerce transaction processing systems. Approximately 253,000 businesses use CyberSource solutions, including half the companies comprising the Dow Jones Industrial Average. The company is headquartered in Mountain View, California, and has sales and service offices in Japan, the United Kingdom, and other locations in the United States including Bellevue, Washington and American Fork, Utah. For more information on CyberSource please visit www.cybersource.com or email info@cybersource.com. For more information on Authorize.Net small business solutions, please visit www.authorize.net or email sales@authorize.net.

GAAP versus non-GAAP Results and Guidance

In addition to financial results presented on a GAAP basis, the company has provided non-GAAP measures of gross profit, operating expenses, net income and earnings per share, which are adjusted to exclude certain non-cash items. For purposes of this release, non-GAAP gross profit, operating expenses, net income and earnings per share exclude stock based compensation expense under SFAS 123R, the non-cash portion of the income tax provision, a reduction in the deferred tax asset allowance, depreciation and amortization expense, and certain non-recurring items. A reconciliation of these historical GAAP to non-GAAP measures is attached with the financial statements. The company believes that presentation of non-GAAP financial measures may provide investors with additional meaningful and relevant financial information. Management believes the non-GAAP measures help indicate trends in the company's business, and management uses the non-GAAP measures to plan and forecast future periods. Non-GAAP information is not determined using GAAP and should not be considered superior to or as a substitute for GAAP measures or data prepared in accordance with GAAP. Furthermore, non-GAAP information may not be comparable across companies, as other companies may use different non-GAAP measures. The company does not provide guidance for certain financial measures such as depreciation and stock-based compensation expense, and, as a result, is not able to provide a reconciliation of GAAP and non-GAAP financial measures for forward-looking data. The company intends to calculate the various non-GAAP financial measures in future periods consistent with the methodology used in the three months ended December 31, 2008, as presented in this release.

Cautionary Statement under the Private Securities Litigation Reform Act of 1995

Statements in this release that are not purely historical are 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. Forward-looking statements include, without limitation, statements regarding expectations, objectives, anticipations, plans, hopes, beliefs, intentions or strategies regarding the future. Forward-looking statements in this release include, without limitation, statements regarding: (1) success of the Authorize.Net integration; (2) the online channel representing a bright spot of economic news and being an area of intense focus for many businesses; (3) consumers being attracted to the Internet as a source of good value and convenience; (4) trends not abating in the foreseeable future; (5) strength of momentum outside the U.S.; (6) CyberSource continuing to be the preferred provider for leading financial institutions and systems integrators; (7) financial guidance including, without limitation, those regarding revenue, transaction volume, gross profit, operating expenses, net income, earnings per share, and deferred tax assets; and (8) the intention to calculate the various non-GAAP financial measures in future periods consistent with the methodology used in the three months ended December 31, 2008. There is no assurance that any forward-looking statement will be realized. Achievement of future results is subject to risks, uncertainties, and potentially inaccurate assumptions. These risks and uncertainties include, among others, those discussed under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in CyberSource's most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q as well as the consolidated financial statements, related Notes, and the other financial information appearing elsewhere in those reports and other CyberSource filings with the Securities and Exchange Commission. The factors that could cause actual results to differ materially from the forward-looking statements include risks and uncertainties such as: changes in Generally Accepted Accounting Principles and the application thereof; changes in customer needs; the risks of failures, disruptions or illiquidity in the national and global banking, credit and financial systems and the impact of those risks on CyberSource's business; the risk of the economy, in general, and online economy, in particular, slowing down; security breaches; new products and services offerings by CyberSource and its competitors; and any unforeseen system failures. 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. Readers should bear this in mind when considering forward-looking statements. CyberSource undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise.

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