UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: February 13, 2003
(Date of earliest event reported)
-------------------------
TRANSACTION SYSTEMS ARCHITECTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-25346 47-0772104
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
224 South 108th Avenue,
Omaha, Nebraska 68154
(Address of principal executive offices, including zip code)
(402) 334-5101
(Registrant's telephone number, including area code)
-------------------------
Item 5. Other Events.
On February 13, 2003, Transaction Systems Architects, Inc. issued a press
release announcing its fiscal 2003 first quarter results.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
99.1 Press Release dated February 13, 2003.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TRANSACTION SYSTEMS ARCHITECTS, INC.
Date: February 13, 2003 By: /s/ Dwight G. Hanson
------------------------------------
Dwight G. Hanson
Chief Financial Officer, Treasurer
and Senior Vice President
EXHIBIT INDEX
Exhibit
Number Description
99.1 Press Release dated February 13, 2003
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 REPORTS FISCAL 2003
FIRST QUARTER RESULTS
Highlights -
o Revenue of $62.5 million and EPS of $.08
o Operating income of $7.5 million; operating margin of 12 percent
o Twelve month revenue backlog of $229.3 million
o Operating cash flow of $4.6 million; cash balance of $88.1 million
(OMAHA, Neb.--February 13, 2003)--Transaction Systems Architects, Inc. (Nasdaq:
TSAI), a leading global provider of enterprise e-payments and e-commerce
software, announced today that revenue for the first quarter of fiscal 2003 was
$62.5 million. Earnings per diluted share were $.08.
For the first quarter of fiscal 2003, revenue was $62.5 million with software
license fees of $31.3 million, maintenance fees of $18.6 million and services of
$12.6 million. The Company's recurring revenue was $40.0 million, or 64 percent
of revenue, and non-recurring revenue was $22.5 million, or 36 percent of
revenue. Recurring revenue consists of monthly license fees of $20.1 million,
maintenance fees of $18.6 million and facilities management fees of $1.3
million. Operating income was $7.5 million with an operating margin of 12
percent. Operating cash flow was $4.6 million with a cash balance as of December
31, 2002 of $88.1 million. Net income for the quarter was $3.0 million, or $.08
per diluted share. The results for the quarter include $0.9 million of foreign
currency transaction losses included in other expense.
The Company completed the first quarter of fiscal 2003 with $229.3 million in
backlog, consisting of $154.7 million in recurring revenue backlog and $74.6
million in non-recurring revenue backlog. The Company defines recurring revenue
backlog to be all monthly license fees, maintenance fees and facilities
management fees specified in executed contracts to the extent that the Company
believes that recognition of the related revenue will occur within one year. The
Company includes in its non-recurring revenue backlog all fees (other than
recurring) specified in executed contracts to the extent that the Company
believes that recognition of the related revenue will occur within one year.
"We are once again pleased to be able to report our 12 month backlog," said
Dwight Hanson, CFO. "Our backlog of $229 million takes into account all of the
changes we've made to our revenue recognition as well as our recent successes in
selling our newer products such as BASE24-es(TM) and ACI Payments Manager(TM).
As a result of this shift in product demand, we will experience an increase in
backlog due to differences in the timing of revenue recognition for these newer
products. Revenue from these products is typically deferred until first
production use by the customer, as compared to our more established products
which are generally recognized upon delivery of the products to the customer."
During the quarter, ACI Worldwide, the Company's largest business unit, added
seven new customers. Solutions licensed included BASE24(R), ACI Proactive Risk
Manager(TM), ACI Smart Chip Manager(R) and two BASE24-es licenses on UNIX server
technology. Also, ACI Worldwide added 12 capacity upgrades and licensed 15 new
applications to existing clients.
IntraNet has previously announced that it is migrating its customers from the
Digital VAX-based Money Transfer System(TM) (MTS(TM)) solution to the new RS6000
AIX-based MTS solution. At various times during the quarter IntraNet had up to
30 of these migration projects in process. In addition, IntraNet signed three
new MTS solutions and one capacity upgrade with an existing customer.
"Our business units are continuing to manage their costs and focus on
opportunities within their respective markets," said Gregory Derkacht, president
and CEO. "We are beginning to experience additional opportunities with ACI's
multi-platform payment engine strategy as reflected by the two new large
customers signed in the quarter on UNIX server technology. This multi-platform
strategy enables us to expand our prospects and it provides customers with added
flexibility in their systems. In addition, our R&D investment in the
multi-platform payment engine strategy will enhance our customers' investment in
BASE24 and it will give them multiple future deployment options. Overall, we
believe our R&D investments in BASE24-es, ACI Payments Manager and ACI Proactive
Risk Manager will expand our business opportunities, allowing us to capture new
customers and sell additional solutions to our existing customer base."
The Company will provide further details regarding its financial performance for
the first quarter of fiscal 2003 in its scheduled teleconference, to be held
Thursday, February 13, 2003 at 4:00 pm CST. Interested persons may access a
real-time audio broadcast of the teleconference at: www.tsainc.com/ir/ir.asp.
The web cast will be archived for 10 days after the teleconference at the same
web address listed above.
About Transaction Systems Architects, Inc.
Transaction Systems Architects' 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. Transaction Systems Architects'
solutions are used on more than 1,670 product systems in 71 countries on six
continents.
Forward-Looking Statements
This 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," 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. Actual
results could differ materially. Factors that could cause actual results to
differ include, but are not limited to, the following:
o The Company's calculation of backlog is based on customer contracts that
exist on the date of the calculation. A number of factors may change after
the date of calculation that could result in actual revenues being less
than the amounts contained in backlog. The Company's customers may request
that contracts be renegotiated or terminated due to a number of factors,
including mergers, changes in their financial condition, or general changes
in economic conditions in the customer's industry or geographic location,
or the Company may experience delays in the development of products or
services specified in customer contracts. Accordingly, there can be no
assurance that contracts included in recurring or non-recurring revenue
backlog will actually generate the specified revenues or that the actual
revenues will be generated within the one-year period.
o The Company is currently in the process of evaluating the claims made in
various lawsuits filed against the Company relating to its recent
restatement of financial results. The Company intends to defend the
foregoing lawsuits vigorously, but cannot predict the outcome 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 these lawsuits
or if they were not settled on favorable terms, the judgment or settlement
would likely have a material adverse effect on its consolidated financial
position, results of operations and cash flows.
The Company has insurance that provides an aggregate coverage of $20.0
million for the period during which the lawsuits 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 certain liabilities relating to these
lawsuits, the Company's consolidated 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 shareholder lawsuits will likely increase the premiums the Company must
pay for director and officer liability insurance in the future, and may
make this insurance coverage prohibitively expensive or unavailable.
Increased premiums for this insurance could materially harm the Company's
financial results and cash flows in future periods. The inability to
obtain this coverage due to its unavailability or prohibitively expensive
premiums would make it more difficult for the Company to retain and attract
officers and directors. The Company has restated certain of its prior
financial statements as a result of reevaluating the accounting for
several historical transactions. The Company is uncertain whether the
lawsuits, change in the application of accounting principles and/or the
restatement of prior period financial results will have a material adverse
effect on the Company's customer, supplier or other business relationships.
o As a result of the Company's restatement of its prior consolidated
financial statements, it is likely that the Company will be subject to
inquiry or investigation by governmental authorities, including the
Securities and Exchange Commission. The Securities and Exchange Commission
has informally contacted the Company about the restatement process, but the
Company has not been notified of a formal inquiry or investigation. In the
event that the Company is subject to such an inquiry or investigation, the
Company will fully cooperate with such inquiry or investigation. There is
risk that such an inquiry or investigation could result in substantial
costs and divert management attention and resources, which could adversely
affect the Company's business.
o New accounting standards, or additional interpretations or guidance
regarding existing standards, could be issued in the future, which could
lead to unanticipated changes in the Company's current financial accounting
policies. These changes could affect the timing of revenue or expense
recognition and cause fluctuations in operating results.
o No assurance can be given that operating results will not vary.
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 high-technology sector and changing
market conditions in the industry. The Company's stock price may also
become volatile, in part, due to the announced change in the application
of certain accounting principles and/or the restatement of prior period
financial results.
o The Company will continue to derive a majority of its total revenue from
international operations and is subject to risks of conducting
international operations including: difficulties in staffing and
management, reliance on independent distributors, longer payment cycles,
volatilities of foreign currency exchange rates, compliance with foreign
regulatory requirements, variability of foreign economic conditions, and
changing restrictions imposed by U.S. export laws.
o The Company will continue to derive a substantial majority of its total
revenue from licensing its BASE24 family of software products and providing
services and maintenance related to those products. Any reduction in demand
for, or increase in competition with respect to, BASE24 products would have
a material adverse effect on the Company's financial condition and results
of operations.
o Prior to its May 2002 merger with HP, Compaq Computer Corporation announced
a plan to consolidate its high-end performance enterprise servers on the
Intel Corp. Itanium microprocessor by 2004. The Company has not determined
whether consolidation of the high-end servers, if it occurs as announced,
will materially affect the Company's business, financial position or
results of operations.
o The Company will continue to derive a substantial portion of its revenues
from licensing of software products that operate on HP NonStop Himalaya
servers. Any reduction in demand for these servers or in HP's ability to
deliver products on a timely basis could have a material adverse effect on
the Company's financial condition and results of operations.
o The Company's business is concentrated in the banking industry, making it
susceptible to a downturn in that industry. Further, banks are continuing
to consolidate, decreasing the overall number of potential buyers of the
Company's products and services.
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 January 13, 2003.
TRANSACTION SYSTEMS ARCHITECTS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, September 30,
2002 2002
------------- -------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 88,122 $ 87,894
Marketable securities 3,187 3,757
Billed receivables, net 50,771 35,755
Accrued receivables 10,613 13,132
Deferred income taxes, net 18,211 17,554
Other 4,803 4,560
------------- -------------
Total current assets 175,707 162,652
Property and equipment, net 10,981 11,597
Software, net 4,878 5,609
Goodwill, net 56,194 55,947
Deferred income taxes, net 26,174 27,546
Other 2,874 3,168
------------- -------------
Total assets $ 276,808 $ 266,519
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of debt - financing
agreements $ 16,250 $ 18,444
Accounts payable 7,214 7,348
Accrued employee compensation 7,717 7,583
Accrued liabilities 11,556 11,494
Income taxes payable 5,135 7,847
Deferred revenue 82,225 59,598
Other 823 872
------------- -------------
Total current liabilities 130,920 113,186
Debt - financing agreements 22,423 24,866
Deferred revenue 16,623 23,860
Other 1,561 1,749
------------- -------------
Total liabilities 171,527 163,661
------------- -------------
Stockholders' equity:
Class A Common Stock 183 183
Treasury stock, at cost (35,258) (35,258)
Additional paid-in capital 228,744 228,465
Accumulated deficit (80,932) (83,927)
Accumulated other comprehensive loss, net (7,456) (6,605)
------------- -------------
Total stockholders' equity 105,281 102,858
------------- -------------
Total liabilities and stockholders'
equity $ 276,808 $ 266,519
============= =============
TRANSACTION SYSTEMS ARCHITECTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share amounts)
Three Months Ended December 31,
-------------------------------
2002 2001
------------- -------------
(Restated)
Revenues:
Software license fees $ 31,330 $ 40,831
Maintenance fees 18,604 18,782
Services 12,555 13,624
------------- -------------
Total revenues 62,489 73,237
------------- -------------
Expenses:
Cost of software license fees 5,939 9,218
Cost of maintenance and services 14,808 16,038
Research and development 7,950 9,049
Selling and marketing 13,736 14,257
General and administrative 12,583 12,896
------------- -------------
Total expenses 55,016 61,458
------------- -------------
Operating income 7,473 11,779
------------- -------------
Other income (expense):
Interest income 310 311
Interest expense (956) (1,619)
Other, net (1,139) (4,471)
------------- -------------
Total other income (expense) (1,785) (5,779)
------------- -------------
Income before income taxes 5,688 6,000
Income tax provision (2,693) (3,583)
------------- -------------
Net income $ 2,995 $ 2,417
============= =============
Earnings per share information:
Weighted average shares outstanding:
Basic 35,437 35,255
============= =============
Diluted 35,550 35,461
============= =============
Earnings per share:
Basic $ 0.08 $ 0.07
============= =============
Diluted $ 0.08 $ 0.07
============= =============