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: January 27, 2004
(Date of earliest event reported)
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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)
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Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit
Number Description
99.1 Press Release, dated January 27, 2004.
Item 12. Results of Operations and Financial Condition.
On January 27, 2004, Transaction Systems Architects, Inc. issued a press
release announcing its results for the quarterly period ending December 31,
2003. A copy of this press release is attached hereto as Exhibit 99.1.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
TRANSACTION SYSTEMS ARCHITECTS, INC.
Date: January 27, 2004 By: /s/ David R. Bankhead
------------------------------------
David R. Bankhead
Senior Vice President,
Chief Financial Officer and Treasurer
EXHIBIT INDEX
Exhibit
Number Description
99.1 Press Release, dated January 27, 2004.
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 2004
First Quarter Results
Highlights -
o Revenue of $74.0 million and earnings per diluted share of $.27
o Operating income of $15.5 million; operating margin of 21 percent
o Twelve-month revenue backlog of $231.8 million
o Cash balance of $125.7 million
o 15 new customers signed during the quarter
o Fiscal 2004 revenue guidance revised from a range of $266 to $287 million
to a range of $271 to $287 million
o Fiscal 2004 EPS guidance revised from a range of $.60 to $.72 to a range of
$.65 to $.77
(OMAHA, Neb. -- January 27, 2004) -- Transaction Systems Architects, Inc.
(Nasdaq: TSAI), a leading global provider of enterprise e-payments and
e-commerce software, reported revenues of $74.0 million for the first quarter
of fiscal 2004 ending December 31, 2003, an increase of 18.4 percent over the
same quarter last year. Net income for the quarter was $10.0 million, or $.27
per diluted share.
For the first quarter of fiscal 2004, revenues were comprised of software
license fees of $41.2 million, maintenance fees of $21.3 million and services
fees of $11.5 million. The Company's recurring revenue was $44.3 million, or 60
percent of revenue, and non-recurring revenue was $29.7 million, or 40 percent
of revenue. Recurring revenue consisted of monthly license fees of $21.0
million, maintenance fees of $21.3 million and facilities management fees of
$2.0 million.
Operating income was $15.5 million, with an operating margin of 21 percent,
compared to operating income of $7.5 million last year, an increase of 107.5
percent.
During the quarter, the Company added 15 new customers and brought its worldwide
presence to 74 countries. ACI Worldwide, the Company's largest business unit,
added eight new customers during the quarter. Solutions licensed included
BASE24-es(TM), BASE24(R), ACI Commerce Gateway(TM), and ACI Proactive Risk
Manager(TM). ACI Worldwide also licensed capacity upgrades to five customers and
licensed thirteen new applications to existing customers during the quarter.
Insession Technologies, the Company's e-infrastructure business unit, added
seven new customers and licensed 13 new applications to existing customers
during the quarter. IntraNet, the Company's corporate banking software provider,
licensed two new applications, one capacity upgrade and entered into 11 services
contracts with existing customers during the quarter.
The Company completed the first quarter of fiscal 2004 with $231.8 million in
backlog, consisting of $166.2 million in recurring backlog and $65.6 million in
non-recurring backlog. Recurring backlog includes 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 the next twelve months. Non-recurring backlog includes all
other fees specified in executed contracts to the extent that the Company
believes that recognition of the related revenue will occur within the next
twelve months.
"The Company's first quarter financial results provide a strong start to fiscal
2004," said Gregory D. Derkacht, President and CEO. "We continue to believe the
Company is well positioned, and we look to expand our leadership role in the
e-payments market with our open-system solutions through our worldwide
channels."
The Company has revised its revenue estimate for fiscal 2004 from a range of
$266 million to $287 million to a range of $271 million to $287 million. The
Company has revised its EPS estimate from a range of $.60 to $.72 to a range of
$.65 to $.77.
The Company will provide further details regarding its financial performance for
the first quarter of fiscal 2004 in a teleconference to be held Tuesday, January
27, 2004 at 4:00 pm CST. You may access a real-time audio broadcast of the
teleconference at: www.tsainc.com/ir/ir.asp. The web cast will be archived for
ten days after the teleconference at the same web address listed above.
About Transaction Systems Architects, Inc.
The Company's software facilitates electronic payments by providing consumers
and companies access to their money. Our 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 1,680
product systems in 74 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 (i) the Company's recurring and non-recurring
backlog, (ii) the observation that "we continue to believe the Company is well
positioned, and we look to expand our leadership position in the e-payments
market with our open-system solutions through our worldwide channels", and (iii)
each of the Company's revenue estimate and EPS estimate for fiscal 2004.
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 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 attempt to renegotiate or terminate their
contracts 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
backlog will actually generate the specified revenues or that the
actual revenues will be generated within the one-year period.
o The SEC Enforcement Division has issued a formal order of private
investigation in connection with the Company's restatement of its
prior consolidated financial statements. Although the Company has
fully cooperated with the SEC in this matter and intends to continue
to fully cooperate, the SEC may find that the Company has violated
federal securities laws. The Company cannot predict when this
investigation will be completed or what the outcome will be. If the
SEC finds that the Company violated federal securities laws, the
Company may face sanctions including, but not limited to, significant
monetary penalties and injunctive relief. The outcome of the SEC
investigation may affect the class action and derivative lawsuits
that are pending. The investigation could result in substantial
costs and divert management attention and resources, which could
adversely affect the Company's business.
o The Company is currently in the process of evaluating the claims made
in various lawsuits filed against the Company relating to its
restatement of prior consolidated financial results. The Company
intends to defend these 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 judgments or settlements could have a material
adverse effect on its consolidated financial position, results of
operations and cash flows.
o The Company has insurance that provides an aggregate coverage of
$20.0 million for the period during which the above-described
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.
o Additional related suits against the Company may be commenced in the
future. The Company will fully analyze any 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.
o New accounting standards, revised interpretations or guidance regarding
existing standards, or changes in our 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 results of
operations.
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. The
Company's foreign subsidiaries could face challenges from various
foreign tax authorities and 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 it
intends to defend its positions. Although the Company believes it
has adequately provided for any probable outcome related to these
matters and does not anticipate any material earnings impact from
their ultimate settlement or resolution, differing positions on
certain issues could be upheld by foreign tax authorities, which
could adversely affect the Company's financial condition and results
of operations.
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 technology
sector and changing market conditions in the software industry. The
Company's stock price may also become volatile, in part, due to the
various lawsuits filed against the Company relating to its
restatement of prior financial results and the announced SEC formal
order of private investigation related to the Company's restatement
of its prior consolidated financial statements.
o The Company has historically derived a majority of its total revenue
from international operations and anticipates continuing to do so and
is thereby 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 Historically, a majority of the Company's total revenue resulted from
licensing its BASE24 family of software products 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
results of operations.
o The Company has historically derived a substantial portion of its
revenues from licensing of software products that operate on HP
NonStop servers. Prior to its 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. Any reduction in demand for the HP NonStop 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. 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 condition or results of
operations.
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 results
of operations could be materially adversely affected.
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.
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 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 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, and 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 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. 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. 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, or
require the Company to pay significant damages or even require the
Company to stop selling certain products.
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 results of
operations.
Any or all of the Company's forward-looking statements may turn out to be wrong.
They may be based on inaccurate assumptions or may not account for known or
unknown risks and uncertainties. Consequently, no forward-looking statement is
guaranteed and the Company's actual future results may vary materially from the
results expressed or implied in the Company's forward-looking statements.
The cautionary statements in this press release and any other cautionary
statements that may accompany the Company's forward-looking statements, whether
written or oral, expressly qualify all of the Company's forward-looking
statements. In addition, the Company disclaims any obligation to update any of
its forward-looking statements at any time unless an update is required by
applicable securities laws.
For a detailed discussion of these and other risk factors, interested parties
should review the Company's filings with the SEC, including each of the
Company's Form 10-Q filed on February 13, 2003, the Company's Form 10-Q filed on
May 15, 2003, the Company's Form 10-Q filed on August 14, 2003 and the Company's
Form 10-K filed on December 23, 2003.
FINANCIAL HIGHLIGHTS FOLLOW
TRANSACTION SYSTEMS ARCHITECTS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, September 30,
2003 2003
------------ -------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 125,684 $ 113,986
Marketable securities 1,155 1,296
Billed receivables, net 42,812 42,225
Accrued receivables 15,284 9,592
Recoverable income taxes 9,631 11,985
Deferred income taxes, net 8,716 10,316
Other 4,048 5,104
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Total current assets 207,330 194,504
Property and equipment, net 8,883 9,405
Software, net 1,923 2,319
Goodwill, net 46,603 46,425
Deferred income taxes, net 9,846 9,638
Other 1,457 1,609
--------- ---------
Total assets $ 276,042 $ 263,900
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of debt - financing agreements $ 14,034 $ 15,493
Accounts payable 4,932 6,965
Accrued employee compensation 9,461 9,822
Accrued liabilities 11,829 9,714
Deferred revenue 75,616 70,798
Other 438 628
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Total current liabilities 116,310 113,420
Debt - financing agreements 5,671 9,444
Deferred revenue 16,126 17,689
Other 646 473
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Total liabilities 138,753 141,026
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Stockholders' equity:
Class A Common Stock 191 188
Treasury stock, at cost (35,258) (35,258)
Additional paid-in capital 242,086 235,767
Accumulated deficit (59,561) (69,602)
Accumulated other comprehensive loss, net (10,169) (8,221)
--------- ---------
Total stockholders' equity 137,289 122,874
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Total liabilities and stockholders' equity $ 276,042 $ 263,900
========= =========
TRANSACTION SYSTEMS ARCHITECTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share amounts)
Three Months Ended
December 31,
-----------------------
2003 2002
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Revenues:
Software license fees $ 41,233 $ 31,330
Maintenance fees 21,313 18,604
Services 11,471 12,555
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Total revenues 74,017 62,489
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Expenses:
Cost of software license fees 6,639 5,939
Cost of maintenance and services 14,979 14,808
Research and development 9,433 7,950
Selling and marketing 13,790 13,736
General and administrative 13,668 12,583
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Total expenses 58,509 55,016
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Operating income 15,508 7,473
--------- ---------
Other income (expense):
Interest income 523 310
Interest expense (531) (956)
Other, net 2,205 (1,139)
--------- ---------
Total other income (expense) 2,197 (1,785)
--------- ---------
Income before income taxes 17,705 5,688
Income tax provision (7,664) (2,693)
--------- ---------
Net income $ 10,041 $ 2,995
========= =========
Earnings per share information:
Weighted average shares outstanding:
Basic 36,382 35,437
========= =========
Diluted 37,641 35,550
========= =========
Earnings per share:
Basic $ 0.28 $ 0.08
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Diluted $ 0.27 $ 0.08
========= =========