Prospectus Summary
This summary is not complete and does not contain all of the information that may be important to you. You should read the entire prospectus carefully, including the financial data and related notes, before making an investment decision.
CyberSource Corporation We are a leading developer and provider of real-time, or on-demand, e- commerce transaction services. Through our Internet Commerce Suite, we offer services to online merchants for global payment processing, fraud prevention, tax calculation, export compliance, territory management, delivery address verification and fulfillment management. Our services enable online merchants to focus their resources on areas where they can most effectively differentiate themselves, such as marketing, Web site content, merchandising and customer support. By outsourcing their e-commerce transaction processing needs to us, online merchants can speed their time to market, reduce their overall operating costs and process orders from around the world in local currencies. Our services are comprehensive, scalable (adaptable to meet increases in the number of transactions), highly reliable and performed via a secure messaging protocol, or transmission format. Our merchants have used our services to process more than 34.0 million transactions since January 1998, of which approximately 25.5 million were processed in the first nine months of 1999.
As the Internet has become an important communications medium, merchants and consumers have embraced using the Internet to buy and sell goods and services. International Data Corporation, or IDC, forecasts that the actual number of Web buyers worldwide will expand from approximately 48 million in 1999 to approximately 183 million in 2003 and that the amount of commerce conducted over the Web will increase from approximately $111 billion in 1999 to approximately $1.3 trillion in 2003 worldwide. To succeed online, a merchant must attract customers to its Web site and provide an appealing and easy-to-use environment that encourages customers to place an order by clicking on the "buy" button. Once the customer places an order, the merchant must then process the order by executing numerous transactions, such as credit card authorization, calculation of sales tax and fulfillment of the order, often while the customer is waiting.
While early adopters of e-commerce business models often developed custom transaction processing systems, today many online merchants are seeking to outsource their transaction processing requirements. Our services offer online merchants a solution to the challenges of e-commerce transaction processing. Key benefits of our services include:
. Faster time-to-market, . Access to a comprehensive suite of services, . Enhanced merchant flexibility and control, . Global reach, and . Reduced overall costs.
More than 800 customers have chosen to use our services. Our merchants include Amazon.com, Beyond.com, BUY.COM, Casio, Compaq Computer, Egghead.com, Remedy and Shopping.com. We target merchants worldwide through a direct sales force as well as through an indirect sales channel. Our indirect sales channel partners include resellers, solution resellers, Web/systems integrators and commerce server vendors. We have also entered into strategic relationships with General Electric Capital Corp., or GE Capital, and Visa to penetrate new e- commerce markets.
CyberSource Corporation was incorporated by Beyond.com in Delaware in December 1997 under the name Internet Commerce Services Corporation. Beyond.com, whose original name was CyberSource Corporation, contributed all the assets and liabilities comprising its Internet commerce services business to Internet Commerce Services Corporation and spun off Internet Commerce Services Corporation to Beyond.com's stockholders in December 1997. In October 1998 we changed our name to CyberSource Corporation. Our headquarters are located at 550 S. Winchester Blvd., Suite 301, San Jose, California 95128, and our telephone number is (408) 556-9100. Information contained on our Web site at www.cybersource.com does not constitute part of this prospectus.
Recent Developments
Visa Agreement. In September 1999, we announced an agreement with Visa U.S.A. to jointly develop and promote the CyberSource Internet Fraud Screen enhanced by Visa. The agreement is mutually exclusive for two years and includes a preferred pricing discount for merchants accepting Visa cards. We believe this agreement will allow us to further refine and augment our existing fraud screen offering by leveraging Visa's fraud modeling expertise.
International Payment Solution. In June 1999, we announced an international payment processing gateway using the services of National Westminster Bank allowing merchants to accept payments in over 150 different currencies while crediting merchant accounts in 19 currencies, including the Euro.
New Merchants. At September 30, 1999, over 800 merchants have chosen to use our services, representing an increase of over 200 merchants since June 30, 1999. New merchants since June 30, 1999 include Amazon.com, eCampus.com, GUESS? and Register.com. During the same period, transaction volume grew over 48%.
The Offering
Common stock offered by CyberSource................. 2,000,000 shares Common stock offered by the selling stockholders.... 1,000,000 shares Common stock to be outstanding after this offering.. 23,989,957 shares(1) Use of proceeds..................................... For general corporate purposes, including sales and marketing, product development, potential strategic acquisitions and other corporate expenses. Nasdaq National Market symbol....................... CYBS (1) This figure is based on 21,989,957 shares outstanding at September 30, 1999 and excludes 3,137,395 shares of common stock issuable upon exercise of options outstanding at a weighted average exercise price of $7.08 per share and 135,941 shares available for grant at September 30, 1999 under our 1998 Stock Option Plan and our 1999 Stock Option Plan. Also excludes an additional 500,000 shares reserved for issuance under our 1999 Employee Stock Purchase Plan and an additional 1,100,000 shares reserved for issuance under our 1999 Nonqualified Stock Option Plan. See "Description of Capital Stock -- Authorized and Outstanding Capital Stock" and Note 5 of Notes to Consolidated Financial Statements.
Summary Consolidated Financial Data
Period From Nine Months
March 20, 1996 Years Ended Ended
(Inception) to December 31, September 30,
December 31, ----------------- -----------------
1996 1997 1998 1998 1999
(in thousands, except per share data)
Consolidated Statements of Operations Data: Revenues.................. $ 144 $ 968 $ 3,384 $ 2,281 $ 7,883 Gross profit (loss)....... 7 644 (87) 84 1,048 Total operating expenses.. 1,150 4,969 9,950 6,637 19,370 Loss from operations...... (1,143) (4,325) (10,037) (6,553) (18,322) Net loss.................. $(1,143) $(4,338) $(10,085) $(6,574) $(17,763) Basic and diluted net loss per share................ $ (2.05) $ (1.38) $ (1.58) Shares used in computing basic and diluted net loss per share(1)........ 4,918 4,763 11,246 Pro forma basic and diluted net loss per share.................... $ (0.86) $ (0.98) Shares used in computing pro forma basic and diluted net loss per share(1)................. 11,740 18,124 Selected Non-Financial Operating Data: Number of transactions processed................ 8,560 4,536 25,526 September 30, 1999 Actual As Adjusted(2)
Consolidated Balance Sheet Data (in thousands): Cash, cash equivalents and short-term investments.... $38,251 $130,851 Working capital...................................... 35,547 128,147 Total assets......................................... 48,375 140,975 Total stockholders' equity .......................... 41,946 134,546
(1) See Note 1 of Notes to Consolidated Financial Statements for an explanation of the number of shares used in computing per share amounts. (2) Adjusted to reflect the sale by CyberSource of 2,000,000 shares in this offering, based on an assumed public offering price of $49.00 per share.