If "What's in your wallet?" is Capital One's (NYSE:COF) tagline, then "What's in your bank?" might as well be the tagline for financial software maker S1 (NASDAQ:SONE). The company, previously known as "Security First Technologies," provides the software that enables more than 4,000 banks, credit unions, investment firms, and insurance companies to do business with you.

The company had a pretty rough year, numbers-wise, back in 2003, losing more than $38 million for the year. But most of that loss was noncash, arising from depreciation and amortization charges and impairment to good will. The fact of the matter is that in 2003, S1 was free cash flow positive, generating $16 million worth of the green stuff and ending the year with a cash hoard of nearly $76 million.

Actually, its 2003 10-K filing with the SEC claims $164 million in cash, equivalents, and short-term investments. I'm at a loss as to how that figure was cut in half between the time of that filing and last week's earnings release, which shows a different cash and equivalents figure for 2003 than in the 10-K. It may have something to do with the company's recent divestiture of its Davidge unit, but given that when the divestiture was announced five months ago, it was described as being done to "strengthen the Company's cash reserves," that explanation doesn't seem to make much sense either.

Regardless of how the discrepancy between the two sets of 2003 numbers came about, things seem to have taken a 180-degree turn for S1 in 2004. In the year just ended, S1 turned profitable under generally accepted accounting principles (GAAP) -- but experienced negative free cash flow.

Revenues declined year on year from $248 million to $241 million (again, presumably because of the divestiture). Yet through a combination of decreased costs of revenue and better operating efficiency, S1 emerged into profitability, earning $0.21 per diluted share for its owners, of which roughly half came from continuing operations. Meanwhile, free cash flow reversed course in 2004. Because the company's cash flow statement does not break out funds spent on capital expenditures, it's not possible to determine exactly how negative the FCF numbers worked out. But considering that cash from operations totaled -$15 million, we know that the number has to be somewhere north of that.

As for the year ahead, S1 predicted continued GAAP profitability of $0.20 to $0.40 per share. Investors may take that as evidence that the company is finally able to generate consistent profits (last year was its first GAAP-profitable year ever). But unless the company is able to back up that GAAP performance with positive cash flow, those "profits" may not be worth having.

Fool contributor Rich Smith owns no shares in either company mentioned in this article.