Exhibit 99.1
News Release
TRANSACTION SYSTEMS ARCHITECTS INC
224 SOUTH 108 AVENUE
OMAHA, NEBRASKA 68154
402.334.5101
FAX 402.390.8077
For more information contact:
William J. Hoelting
Vice President, Investor Relations
402.390.8990
FOR IMMEDIATE RELEASE
Transaction Systems Architects Announces Second Quarter Results
Highlights Include Strong International Results; Strong Cash Flow; New and
Extended Business
(OMAHA, Neb. -- April 26, 2005) -- Transaction Systems Architects, Inc. (Nasdaq:
TSAI), today announced financial results for the quarter ended March 31, 2005.
Financial results for the quarter include revenues of $75.6 million, operating
income of $16.0 million, net income of $11.2 million, diluted earnings per share
of $.29, and operating cash flow of $15.5 million. Transaction Systems
Architects will hold a conference call at 4:00 p.m. CDT today to further discuss
this information. Interested persons may access a real-time audio broadcast of
the teleconference at: www.tsainc.com/investors.
Highlights -
o Revenues of $75.6 million versus $76.5 million, a 1 percent decrease
compared to second quarter of fiscal 2004
o Recurring revenues of $43.2 million, or 57 percent of total revenues
compared to $46.8 million, or 61 percent of total revenues for the second
quarter of fiscal 2004
o Operating income of $16.0 million versus $14.1 million, a 14 percent
increase compared to second quarter of fiscal 2004
o Operating cash flow of $15.5 million versus $10.4 million, a 48 percent
increase compared to second quarter of fiscal 2004
o Diluted earnings per share of $.29 versus $.21, a 38 percent increase
compared to second quarter of fiscal 2004
o Twelve-month revenue backlog of $230.6 million versus $233.1 million, a 1
percent decrease compared to second quarter of fiscal 2004
o Extended international presence to seventy-nine countries and thirteen new
customers signed during the second quarter
o Fiscal 2005 revenue guidance revised from a range of $285 to $308 million to
a range of $296 to $312 million
o Fiscal 2005 diluted EPS guidance revised from a range of $.86 to $1.00 to a
range of $.97 to $1.12, assuming an annual effective tax rate of 37%
"We are pleased with our strong second quarter financial results. Each business
unit delivered solid, focused performance this quarter. We also extended our
worldwide presence to seventy- nine countries and added thirteen new customers
during the quarter," said Philip G. Heasley, President and CEO.
Second-Quarter Results
During the quarter, ACI Worldwide signed seven new customers and Insession
Technologies added six. Customer highlights included ACI Worldwide signing its
first BASE24-es(TM) solution in the Asia-Pacific region, and two new BASE24(R)
customers in Africa and the Middle East. Three new ACI Proactive Risk
Manager(TM)(PRM) customers were added in Canada, the Netherlands and Italy,
which brings the Company's PRM customer count to over eighty-five. ACI Worldwide
licensed nineteen capacity upgrades. Insession Technologies, through its
distributor relationship with GoldenGate(TM), signed two new customers to its
data movement and replication solution. IntraNet Worldwide signed two key
services contracts and licensed one capacity upgrade during the quarter.
The Americas' revenues were $42.7 million, as compared to $41.2 million for the
second quarter of fiscal 2004. The Americas' revenues consisted of U.S. revenues
of $29.4 million and Americas' international revenues of $13.3 million, as
compared to $31.5 million and $9.7 million, respectively, for the same period
last year. Revenues for the Europe/Middle East/Africa region were $25.1 million,
as compared to $25.7 million for the second quarter of fiscal 2004.
Asia-Pacific's revenues were $7.8 million, as compared to $9.6 million for the
second quarter of 2004. International revenues were $46.2 million, or 61 percent
of total revenues, as compared to $45.0 million, or 59 percent of total
revenues, for the second quarter of fiscal 2004.
Revenues were comprised of software license fees of $43.0 million, maintenance
fees of $22.6 million, and services of $10.0 million. Monthly license fees of
$18.3, all maintenance fees of $22.6 million and $2.3 million of services
(facilities management fees) represent recurring revenue.
Operating income was $16.0 million, with an operating margin of 21 percent. This
compared to operating income of $14.1 million, with an operating margin of 18
percent in the second quarter
of fiscal 2004. Operating cash flow was $15.5 million compared to operating cash
flow of $10.4 million in the second quarter of fiscal 2004, an increase of 48
percent. Net income was $11.2 million, or $.29 per diluted share, compared to
$8.0 million, or $.21 per diluted share in the second quarter of fiscal 2004,
increases of 40 percent and 38 percent, respectively.
Year-to-Date Results
As of March 31, 2005, year-to-date revenues totaled $156.2 million, as compared
to $150.5 million for the same six-month period in fiscal 2004, an increase of 4
percent. Operating income was $38.1 million as compared to $29.6 million for the
same period last year, an increase of 29 percent. Net income was $24.1 million,
or $.62 per diluted share, compared to $18.0 million, or $.48 per diluted share,
an increase of 34 percent and 29 percent, respectively.
As of March 31, 2005, the Company's backlog was $230.6 million, as compared to
$233.1 million for the same period in fiscal 2004. The recurring portion of
backlog, which includes monthly license fees, maintenance fees and facilities
management fees, amounted to $166.7 million. The non-recurring portion of
backlog, which totaled $63.9 million, includes other software license fees and
services.
Operating cash flow was $30.5 million compared to operating cash flow of $21.5
million for the same period last year, an increase of 42 percent. During the
quarter the Company repurchased approximately 351,000 shares of its common stock
for $8.0 million, at an average price of $22.89 per share. Total shares
outstanding were 38.1 million as of March 31, 2005. The Company's cash, cash
equivalents and marketable securities as of March 31, 2005, were $195.9 million.
"We believe we are well-positioned with our global presence, strong financial
position and market-leading solutions and services," Heasley continued. "We look
forward to continued growth of our franchise during the second half of fiscal
2005."
The Company has revised its revenue estimate for fiscal 2005 from a range of
$285 million to $308 million to a range of $296 million to $312 million. The
Company has revised its diluted EPS estimate from a range of $.86 to $1.00 to a
range of $.97 to $1.12. This guidance assumes an annual effective tax rate of
37%.
About Transaction Systems Architects, Inc.
The Company's software facilitates electronic payments by providing consumers
and companies access to their money. Its products are used to process
transactions involving credit cards, debit cards, secure electronic commerce,
mobile commerce, smart cards, secure electronic document delivery and payment,
checks, high-value money transfers, bulk payment clearing and settlement, and
enterprise e-infrastructure. The Company's solutions are used on more than 1,770
product systems in 79 countries on six continents.
Forward-Looking Statements
This press release contains forward-looking statements based on current
expectations that involve a number of risks and uncertainties. Generally,
forward-looking statements do not relate strictly to historical or current
facts, and include words or phrases such as "management anticipates," "the
Company believes," "the Company anticipates," "the Company expects," "the
Company plans," "the Company will," "the Company is well-positioned" and words
and phrases of similar impact, and include but are not limited to statements
regarding future operations, business strategy and business environment. The
forward-looking statements are made pursuant to safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements in
this press release include the Company's recurring and non-recurring backlog,
the Company's revenue estimate and EPS estimate for fiscal 2005 and that we look
forward to continued growth of our franchise during the second half of fiscal
2005.
The Company's actual results could differ materially from the results discussed
in its forward-looking statements.
The Company operates in a rapidly changing technological and economic
environment that presents numerous risks. Many of these risks are beyond the
Company's control and are driven by factors that often cannot be predicted. The
following discussion highlights some of these risks:
o The Company's backlog estimate is based on management's assessment of the
customer contracts that exist as of the date the estimate is made. Included
in the backlog estimate are all software license fees, maintenance fees and
services specified in executed contracts to the extent that the Company
believes that recognition of the related revenues will occur within the
next twelve months. A number of factors could result in actual revenues
being less than the amounts reflected in backlog. The Company's customers
may attempt to renegotiate or terminate their contracts for a number of
reasons, including mergers, changes in their financial condition, or
general changes in economic conditions in their industries or geographic
locations, or the Company may experience delays in the development or
delivery of products or services specified in customer contracts.
Accordingly, there can be no assurance that contracts included in recurring
or non-recurring backlog will actually generate the specified revenues or
that the actual revenues will be generated within a 12-month period.
o In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment."
This revised accounting standard requires most public entities to record
noncash compensation expense related to payment for employee services by
equity awards, such as stock options, in their financial statements
commencing in the first annual or interim period that begins after June 15,
2005. In April 2005, the SEC issued a new rule that allows companies to
implement the provisions of SFAS No. 123R at the beginning of their next
fiscal year, instead of the next reporting period, that begins after June
15, 2005. The Company does not plan to adopt this revised accounting
standard prior to its first quarter of fiscal 2006. The adoption of SFAS
No. 123R and the noncash expense that will be recorded thereby will have a
negative impact on the Company's results of operations and will reduce the
Company's earnings per share. Future grants of stock options will also
increase the noncash expenses the Company must record, which will
negatively impact the Company's results of operations and earnings per
share.
o The Company is subject to income taxes, as well as non-income based taxes,
in the United States and in various foreign jurisdictions. Significant
judgment is required in determining the Company's worldwide provision for
income taxes and other tax liabilities. In addition, the Company has
benefitted from, and expects to continue to benefit from, implemented
tax-saving strategies. The Company believes that implemented tax-saving
strategies comply with applicable tax law. However, taxing authorities
could disagree with the Company's positions. If the taxing authorities
decided to challenge any of the Company's tax positions and were successful
in such challenges, the Company's financial condition and/or results of
operations could be adversely affected.
The Company's tax positions in its income tax returns filed for its 1999
through 2003 tax years are the subject of an ongoing examination by the
Internal Revenue Service ("IRS"). The Company believes that its tax
positions comply with applicable tax law. This examination has resulted in
the IRS issuing proposed adjustments, the majority of which relate to the
timing of revenue recognition. The IRS could issue additional proposed
adjustments that could adversely affect the Company's financial condition
and/or results of operations.
Three of the Company's foreign subsidiaries are the subject of tax
examinations by the local taxing authorities. Other foreign subsidiaries
could face challenges from various foreign tax authorities. It is not
certain that the local authorities will accept the Company's tax positions.
The Company believes its tax positions comply with applicable tax law and
intends to vigorously defend its positions. However, differing positions on
certain issues could be upheld by foreign tax authorities, which could
adversely affect the Company's financial condition and/or results of
operations.
o The Company's business is concentrated in the financial services industry,
making it susceptible to a downturn in that industry. Consolidation
activity among financial institutions has increased in recent years. There
are several potential negative effects of increased consolidation activity.
Continuing consolidation of financial institutions may result in a fewer
number of existing and potential customers for the Company's products and
services. Consolidation of two of the Company's customers could result in
reduced revenues if the combined entity were to negotiate greater volume
discounts or discontinue use of certain of the Company's products.
Additionally, if a non-customer and a customer combine and the combined
entity in turn decided to forego future use of the Company's products, the
Company's revenues would decline.
o No assurance can be given that operating results will not vary from quarter
to quarter, and any fluctuations in quarterly operating results may result
in volatility in the Company's stock price. The Company's stock price may
also be volatile, in part, due to external factors such as announcements by
third parties or competitors, inherent volatility in the technology sector
and changing market conditions in the software industry. The Company's
stock price may also become volatile, in part, due to developments in the
various lawsuits filed against the Company relating to its restatement of
prior consolidated financial results.
o The Company has historically derived a majority of its revenues from
international operations and anticipates continuing to do so, and is
thereby subject to risks of conducting international operations. One of the
principal risks associated with international operations is potentially
adverse movements of foreign currency exchange rates. The Company's
exposures resulting from fluctuations in foreign currency exchange rates
may change over time as the Company's business evolves and could have an
adverse impact on the Company's financial condition and/or results of
operations. The Company has not entered into any derivative instruments or
hedging contracts to reduce exposure to adverse foreign currency changes.
Other potential risks associated with the Company's international
operations include difficulties in staffing and management, reliance on
independent distributors, longer payment cycles, potentially unfavorable
changes to foreign tax rules, compliance with foreign regulatory
requirements, reduced protection of intellectual property rights,
variability of foreign economic conditions, changing restrictions imposed
by U.S. export laws, and general economic and political conditions in the
countries where the Company sells its products and services.
o The Company's BASE24-es product is a significant new product for the
Company. If the Company is unable to generate adequate sales of BASE24-es,
if market acceptance of BASE24-es is delayed, or if the Company is unable
to successfully deploy BASE24-es in production environments, the Company's
business, financial condition and/or results of operations could be
materially adversely affected.
o Historically, a majority of the Company's total revenues resulted from
licensing its BASE24 product line and providing related services and
maintenance. Any reduction in demand for, or increase in competition with
respect to,
the BASE24 product line could have a material adverse effect on the
Company's financial condition and/or results of operations.
o The Company has historically derived a substantial portion of its revenues
from licensing of software products that operate on Hewlett-Packard ("HP")
NonStop servers. Any reduction in demand for HP NonStop servers, or any
change in strategy by HP related to support of its NonStop servers, could
have a material adverse effect on the Company's financial condition and/or
results of operations.
o The Company's software products are complex. They may contain undetected
errors or failures when first introduced or as new versions are released.
This may result in loss of, or delay in, market acceptance of the Company's
products and a corresponding loss of sales or revenues. Customers depend
upon the Company's products for mission-critical applications. Software
product errors or failures could subject the Company to product liability,
as well as performance and warranty claims, which could materially
adversely affect the Company's business, financial condition and/or results
of operations.
o The Company may acquire new products and services or enhance existing
products and services through acquisitions of other companies, product
lines, technologies and personnel, or through investments in other
companies. Any acquisition or investment may be subject to a number of
risks, including diversion of management time and resources, disruption of
the Company's ongoing business, difficulties in integrating acquisitions,
dilution to existing stockholders if the Company's common stock is issued
in consideration for an acquisition or investment, the incurring or
assuming of indebtedness or other liabilities in connection with an
acquisition, and lack of familiarity with new markets, product lines and
competition. The failure to manage acquisitions or investments, or
successfully integrate acquisitions, could have a material adverse effect
on the Company's business, financial condition and/or results of
operations.
o To protect its proprietary rights, the Company relies on a combination of
contractual provisions, including customer licenses that restrict use of
the Company's products, confidentiality agreements and procedures, and
trade secret and copyright laws. Despite such efforts, the Company may not
be able to adequately protect its proprietary rights, or the Company's
competitors may independently develop similar technology, duplicate
products or design around any rights the Company believes to be
proprietary. This may be particularly true in countries other than the
United States because some foreign laws do not protect proprietary rights
to the same extent as certain laws of the United States. Any failure or
inability of the Company to protect its proprietary rights could materially
adversely affect the Company.
o There has been a substantial amount of litigation in the software industry
regarding intellectual property rights. The Company anticipates that
software product developers and providers of electronic commerce solutions
could increasingly be subject to infringement claims, and third parties may
claim that the Company's present and future products infringe upon their
intellectual property rights. Any claims, with or without merit, could be
time-consuming, result in costly litigation, cause product delivery delays
or require the Company to enter into royalty or licensing agreements. A
successful claim by a third party of intellectual property infringement by
the Company could compel the Company to enter into costly royalty or
license agreements, pay significant damages or even stop selling certain
products. Royalty or licensing agreements, if required, may not be
available on terms acceptable to the Company or at all, which could
adversely affect the Company's business.
o The Company continues to evaluate the claims made in various lawsuits filed
against the Company and certain directors and officers relating to its
restatement of prior consolidated financial results. The Company intends to
defend these lawsuits vigorously, but cannot predict their outcomes and is
not currently able to evaluate the likelihood of its success or the range
of potential loss, if any. However, if the Company were to lose any of
these lawsuits or if they were not settled on favorable terms, the judgment
or settlement could have a material adverse effect on its financial
condition, results of operations and/or cash flows.
o The Company has insurance that provides an aggregate coverage of $20.0
million for the period during which the claims were filed, but cannot
evaluate at this time whether such coverage will be available or adequate
to cover losses, if any, arising out of these lawsuits. If these policies
do not adequately cover expenses and liabilities relating to these
lawsuits, the Company's financial condition, results of operations and cash
flows could be materially harmed. The Company's certificate of
incorporation provides that it will indemnify, and advance
expenses to, its directors and officers to the maximum extent permitted by
Delaware law. The indemnification covers any expenses and liabilities
reasonably incurred by a person, by reason of the fact that such person is
or was or has agreed to be a director or officer, in connection with the
investigation, defense and settlement of any threatened, pending or
completed action, suit, proceeding or claim. The Company's certificate of
incorporation authorizes the use of indemnification agreements and the
Company enters into such agreements with its directors and certain officers
from time to time. These indemnification agreements typically provide for a
broader scope of the Company's obligation to indemnify the directors and
officers than set forth in the certificate of incorporation. The Company's
contractual indemnification obligations under these agreements are in
addition to the respective directors' and officers' rights under the
certificate of incorporation or under Delaware law.
Additional related suits against the Company may be commenced in the
future. The Company will fully analyze such suits and intends to vigorously
defend against them. There is a risk that the above-described litigation,
as well as any additional suits, could result in substantial costs and
divert management attention and resources, which could adversely affect the
Company's business, financial condition and/or results of operations.
o From time to time, the Company is involved in litigation relating to claims
arising out of its operations. Any claims, with or without merit, could be
time-consuming and result in costly litigation. Failure to successfully
defend against these claims could result in a material adverse effect on
the Company's business, financial condition and/or results of operations.
o Beginning in fiscal 2005, Section 404 of the Sarbanes-Oxley Act of 2002
will require the Company's annual report on Form 10-K to include (1) a
report on management's assessment of the effectiveness of the Company's
internal controls over financial reporting, (2) a statement that the
Company's independent auditor has issued an attestation report on
management's assessment of the Company's internal controls over financial
reporting, and (3) a report by the Company's independent auditor on their
assessment of the effectiveness of the Company's internal controls over
financial reporting. There are no assurances that the Company will discover
and remediate all deficiencies in its internal controls, including any
significant deficiencies or material weaknesses, as it implements new
documentation and testing procedures to comply with the Section 404
reporting requirements. If the Company is unable to remediate such
deficiencies or is unable to complete the work necessary to properly
evaluate its internal controls over financial reporting, there is a risk
that management and/or the Company's independent auditor may not be able to
conclude that the Company's internal controls over financial reporting are
effective. If the Company reports any such deficiencies, negative publicity
and/or a decline in the Company's stock price could result.
o New accounting standards, revised interpretations or guidance regarding
existing standards, or changes in the Company's business practices could
result in future changes to the Company's revenue recognition or other
accounting policies. These changes could have a material adverse effect on
the Company's business, financial condition and/or results of operations.
Any or all of the forward-looking statements may turn out to be wrong. They can
be affected by inaccurate assumptions or by known or unknown risks and
uncertainties. Many of these factors will be important in determining the
Company's actual future results. Consequently, no forward-looking statement can
be guaranteed. Actual future results may vary materially from those expressed or
implied in any forward-looking statements.
These cautionary statements and any other cautionary statements that may
accompany such forward-looking statements, whether written or oral, expressly
qualify all of the forward-looking statements. In addition, the Company
disclaims any obligation to update any forward-looking statements after the date
of this release unless applicable securities laws require it to do so.
For a detailed discussion of these and other risk factors, interested parties
should review the Company's filings with the Securities and Exchange Commission,
including the Company's Form 10-K filed on December 14, 2004, and the Company's
Form 10-Q/A filed on February 18, 2005.
FINANCIAL HIGHLIGHTS FOLLOW
TRANSACTION SYSTEMS ARCHITECTS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, September 30,
2005 2004
----------- -------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 188,779 $ 169,632
Marketable securities 7,159 -
Billed receivables, net 52,484 44,487
Accrued receivables 7,821 11,206
Recoverable income taxes 3,462 11,524
Deferred income taxes, net - 230
Other 8,565 6,901
--------- ---------
Total current assets 268,270 243,980
Property and equipment, net 7,974 8,251
Software, net 1,861 1,454
Goodwill 46,905 46,706
Deferred income taxes, net 28,999 22,943
Other 2,941 2,124
--------- ---------
Total assets $ 356,950 $ 325,458
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of debt - financing agreements $ 3,799 $ 7,027
Accounts payable 7,856 6,974
Accrued employee compensation 12,397 13,354
Deferred income taxes 363 -
Deferred revenue 89,491 82,647
Accrued and other liabilities 10,601 9,890
--------- ---------
Total current liabilities 124,507 119,892
Debt - financing agreements 807 2,327
Deferred revenue 16,348 15,427
Other 1,314 851
--------- ---------
Total liabilities 142,976 138,497
--------- ---------
Stockholders' equity:
Class A Common Stock 200 196
Treasury stock, at cost (43,293) (35,258)
Additional paid-in capital 265,763 254,715
Retained earnings (accumulated deficit) 1,199 (22,917)
Accumulated other comprehensive loss (9,895) (9,775)
--------- ---------
Total stockholders' equity 213,974 186,961
--------- ---------
Total liabilities and stockholders' equity $ 356,950 $ 325,458
========= =========
TRANSACTION SYSTEMS ARCHITECTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share amounts)
Three Months Ended Six Months Ended
March 31, March 31,
---------------------- ----------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Revenues:
Software license fees $ 42,953 $ 42,380 $ 90,759 $ 83,613
Maintenance fees 22,649 22,370 44,729 43,683
Services 10,024 11,777 20,744 23,248
--------- --------- --------- ---------
Total revenues 75,626 76,527 156,232 150,544
--------- --------- --------- ---------
Expenses:
Cost of software license fees 5,725 6,189 11,631 12,828
Cost of maintenance and services 13,818 14,739 27,654 29,718
Research and development 10,223 9,572 20,138 19,005
Selling and marketing 15,368 16,127 30,669 29,917
General and administrative 14,449 15,834 28,012 29,502
--------- --------- --------- ---------
Total expenses 59,583 62,461 118,104 120,970
--------- --------- --------- ---------
Operating income 16,043 14,066 38,128 29,574
--------- --------- --------- ---------
Other income (expense):
Interest income 864 349 1,448 872
Interest expense (137) (381) (305) (912)
Other, net 255 (131) (992) 2,074
--------- --------- --------- ---------
Total other income (expense) 982 (163) 151 2,034
--------- --------- --------- ---------
Income before income taxes 17,025 13,903 38,279 31,608
Income tax provision (5,832) (5,927) (14,163) (13,591)
--------- --------- --------- ---------
Net income $ 11,193 $ 7,976 $ 24,116 $ 18,017
========= ========= ========= =========
Earnings per share information:
Weighted average shares outstanding:
Basic 38,121 36,846 37,949 36,613
========= ========= ========= =========
Diluted 38,903 38,027 38,731 37,835
========= ========= ========= =========
Earnings per share:
Basic $ 0.29 $ 0.22 $ 0.64 $ 0.49
========= ========= ========= =========
Diluted $ 0.29 $ 0.21 $ 0.62 $ 0.48
========= ========= ========= =========