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: April 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 April 27, 2004.
Item 12. Results of Operations and Financial Condition.
On April 27, 2004, Transaction Systems Architects, Inc. issued a press
release announcing its results for the quarterly period ending March 31, 2004.
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: April 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 April 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
Second Quarter Results
Highlights -
o Revenue of $76.5 million and earnings per diluted share of $.21
o Operating income of $14.1 million; operating margin of 18.4 percent
o Twelve-month revenue backlog of $233.1 million
o Cash balance of $137.2 million
o Eighteen new customers signed during the quarter
o Fiscal 2004 revenue guidance revised from a range of $271 to $287 million
to a range of $282 to $292 million
o Fiscal 2004 EPS guidance revised from a range of $.65 to $.77 to a range of
$.74 to $.83
(OMAHA, Neb.--April 27, 2004)-- Transaction Systems Architects, Inc. (Nasdaq:
TSAI), a leading global provider of enterprise e-payments and e-commerce
software, achieved strong results for the second quarter of fiscal 2004 ending
March 31, 2004, with revenues of $76.5 million, an increase of 10.5 percent over
the same quarter last year. Net income increased 96.0 percent to $8.0 million,
or $.21 per diluted share, compared to $4.1 million, or $.11 per diluted share,
for the second quarter of fiscal 2003.
For the second quarter of fiscal 2004, revenues were comprised of software
license fees of $42.4 million, maintenance fees of $22.3 million and services
fees of $11.8 million. The Company's recurring revenue was $46.8 million, or 61
percent of revenue, and non-recurring revenue was $29.7 million, or 39 percent
of revenue. Recurring revenue consisted of monthly license fees of $22.2
million, maintenance fees of $22.3 million and facilities management fees of
$2.3 million.
Operating income was $14.1 million, with an operating margin of 18.4 percent,
compared to operating income of $11.3 million in the second quarter of 2003, an
increase of 24.7 percent.
For the six months ended March 31, 2004, revenue totaled $150.5 million,
compared to $131.7 million for the same six-month period in fiscal 2003, an
increase of 14.3 percent. Operating income was $29.6 million for the first six
months of the current year as compared to $18.8 million for the same period last
year, an increase of 57.7 percent. Net income was $18.0 million, compared to
$7.1 million, an increase of 155.0 percent over the first half of fiscal 2003.
During the quarter, the Company added eighteen new customers and brought its
worldwide presence to 76 countries. ACI Worldwide, the Company's largest
business unit, added fourteen new customers during the quarter. Solutions
licensed to these customers included BASE24(R), ACI Payments Manager(TM),
NET24-XPNET(TM), ACI Smart Chip Manager(TM) and ACI Proactive Risk Manager(TM).
ACI Worldwide also licensed capacity upgrades to 17 customers and licensed 12
new applications to existing customers during the quarter, including a
BASE24-es(TM) solution on the HP UX platform.
Insession Technologies, the Company's e-infrastructure business unit, added four
new customers and licensed four new applications to existing customers during
the quarter. Solutions licensed include GoldenGate(TM), AutoDBA(TM), Automated
Operator(TM) and WorkPoint(R).
IntraNet, the Company's international payments and message processing solutions
provider, licensed four new applications and entered into nineteen services
contracts with existing customers during the quarter.
The Company completed the second quarter of fiscal 2004 with $233.1 million in
backlog. Included in backlog 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 revenue will occur within the next twelve
months. Recurring backlog includes all monthly license fees, maintenance fees
and facilities management fees and amounted to $170.8 million. Non-recurring
backlog includes other software license fees and services and amounted to $62.3
million.
"We are pleased with our financial results as market demand for the Company's
products has improved through the first half of fiscal 2004," said Gregory D.
Derkacht, President and CEO. "With the increased market demand across our
geographic channels, we were able to deliver a ten and a half percent increase
in second quarter revenues and a ninety-six percent increase in net income as
compared with the second quarter results for fiscal 2003."
The Company has revised its revenue estimate for fiscal 2004 from a range of
$271 to $287 million to a range of $282 to $292 million. The Company has also
revised its EPS estimate from a range of $.65 to $.77 to a range of $.74 to
$.83.
The Company will provide further details regarding its financial performance for
the second quarter of fiscal 2004 in its scheduled teleconference to be held
Tuesday, April 27, 2004 at 4:00 pm CDT. Interested persons may access a
real-time audio broadcast of the teleconference at: www.tsainc.com/investors.
The web cast will be archived for 10 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. 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 1,715
product systems in 76 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,
and 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 backlog estimate is based on management's assessment of
the customer contracts that exist as of the date the estimate is
made. 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 twelve-month period.
o The Company is currently in the process of evaluating 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 cash flows.
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.
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 results of operations.
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 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 positions in its amended income tax returns filed for its
1999 through 2002 tax years are the subject of an ongoing tax
examination by the Internal Revenue Service ("IRS"). This examination
may result in the IRS issuing proposed assessments. The Company
believes that its tax positions comply with applicable tax law and it
intends to defend its positions through the IRS appeals process.
However, if the IRS positions on certain issues are upheld after all
the Company's administrative and legal options are exhausted, a
material impact on the Company's financial condition and results of
operations could result.
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.
o The Company has historically derived a majority of its total revenues
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 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 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, which
is expected to be completed by 2005. 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 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 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 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.
FINANCIAL HIGHLIGHTS FOLLOW
TRANSACTION SYSTEMS ARCHITECTS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, September 30,
2004 2003
------------ -------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 137,218 $ 113,986
Marketable securities - 1,296
Billed receivables, net 51,928 42,225
Accrued receivables 13,476 9,592
Recoverable income taxes 11,202 11,985
Deferred income taxes, net 5,667 10,316
Other 5,923 5,104
--------- ---------
Total current assets 225,414 194,504
Property and equipment, net 8,425 9,405
Software, net 1,547 2,319
Goodwill, net 46,689 46,425
Deferred income taxes, net 9,497 9,638
Other 1,126 1,609
--------- ---------
Total assets $ 292,698 $ 263,900
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of debt - financing agreements $ 10,577 $ 15,493
Accounts payable 5,782 6,965
Accrued employee compensation 10,648 9,822
Accrued liabilities 11,421 9,714
Deferred revenue 83,017 70,798
Other 292 628
--------- ---------
Total current liabilities 121,737 113,420
Debt - financing agreements 4,627 9,444
Deferred revenue 14,243 17,689
Other 753 473
--------- ---------
Total liabilities 141,360 141,026
--------- ---------
Stockholders' equity:
Class A Common Stock 193 188
Treasury stock, at cost (35,258) (35,258)
Additional paid-in capital 247,748 235,767
Accumulated deficit (51,585) (69,602)
Accumulated other comprehensive loss, net (9,760) (8,221)
--------- ---------
Total stockholders' equity 151,338 122,874
--------- ---------
Total liabilities and stockholders' equity $ 292,698 $ 263,900
========= =========
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,
------------------------- -------------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Revenues:
Software license fees $ 42,380 $ 38,167 $ 83,613 $ 69,497
Maintenance fees 22,370 19,461 43,683 38,065
Services 11,777 11,622 23,248 24,177
--------- --------- --------- ---------
Total revenues 76,527 69,250 150,544 131,739
--------- --------- --------- ---------
Expenses:
Cost of software license fees 6,189 6,289 12,828 12,228
Cost of maintenance and services 14,739 15,693 29,718 30,501
Research and development 9,572 8,357 19,005 16,307
Selling and marketing 16,127 13,529 29,917 27,265
General and administrative 15,834 14,104 29,502 26,687
--------- --------- --------- ---------
Total expenses 62,461 57,972 120,970 112,988
--------- --------- --------- ---------
Operating income 14,066 11,278 29,574 18,751
--------- --------- --------- ---------
Other income (expense):
Interest income 349 285 872 595
Interest expense (381) (787) (912) (1,743)
Other, net (131) 79 2,074 (1,060)
--------- --------- --------- ---------
Total other income (expense) (163) (423) 2,034 (2,208)
--------- --------- --------- ---------
Income before income taxes 13,903 10,855 31,608 16,543
Income tax provision (5,927) (6,785) (13,591) (9,478)
--------- --------- --------- ---------
Net income $ 7,976 $ 4,070 $ 18,017 $ 7,065
========= ========= ========= =========
Earnings per share information:
Weighted average shares outstanding:
Basic 36,846 35,486 36,613 35,462
========= ========= ========= =========
Diluted 38,027 35,573 37,835 35,562
========= ========= ========= =========
Earnings per share:
Basic $ 0.22 $ 0.11 $ 0.49 $ 0.20
========= ========= ========= =========
Diluted $ 0.21 $ 0.11 $ 0.48 $ 0.20
========= ========= ========= =========