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 (Date of earliest event reported): June 6, 2007 (June 5, 2007)
TRANSACTION SYSTEMS ARCHITECTS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 0-25346 | 47-0772104 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
120 Broadway, Suite 3350
New York, New York 10271
(Address of principal executive offices) (Zip Code)
Registrant’s Telephone Number, Including Area Code: (646) 348-6700
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 7.01. | Regulation FD Disclosure. |
On June 6, 2007, the Company posted investor presentation materials on its web site (www.tsainc.com) to be used in connection with meetings with investors that management expects to have from time to time. A copy of the presentation materials is attached hereto as Exhibit 99.1 and is incorporated by reference into this Item 7.01.
On June 5, 2007, the Company issued a press release announcing updates on its regulatory filing schedule and adjustments to its financial guidance. A copy of this press release is attached hereto as Exhibit 99.2.
The foregoing information (including the exhibit hereto) is being furnished under “Item 7.01 – Regulation FD Disclosure.” Such information (including the exhibit hereto) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
The filing of this Report and the furnishing of this information pursuant to Item 7.01 do not mean that such information is material or that disclosure of such information is required.
| Item 8.01 | Other Information. |
On June 6, 2007, the Board of Directors of the Company determined to implement the previously announced increase of $100 million to its current repurchase authorization previously approved by the Board of Directors, bringing the total authorization to $210 million. Under the program to date, the Company has purchased approximately 2.8 million shares for approximately $77.0 million. Purchases will be made from time to time as market and business conditions warrant, in open market, negotiated or block transactions, subject to applicable laws, rules and regulations.
| Item 9.01. | Financial Statements and Exhibits. |
| 99.1 | Investor Presentation dated June 2007 | |
| 99.2 | Press Release dated June 5, 2007 | |
SIGNATURES
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. |
| /s/ Henry C. Lyons |
| Henry C. Lyons |
| Senior Vice President and Chief Financial Officer |
Date: June 6, 2007
EXHIBIT INDEX
| Exhibit No. | Exhibit Description | |
| Exhibit 99.1 | Investor Presentation dated June 2007 | |
| 99.2 | Press Release dated June 5, 2007 | |
 Transaction Systems Architects, Inc. Investor Overview June 2007 Exhibit 99.1 |
 © 2007 Transaction Systems Architects, Inc. Page 2 Private Securities Litigation Reform Act of 1995 Safe Harbor For Forward-Looking Statements This presentation contains forward-looking statements based on current expectations
that involve a number of risks and uncertainties. The
forward-looking statements are made pursuant to safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. A discussion of
these forward-looking statements and risk factors is set forth at the end of this presentation. The Company assumes no obligation to update any forward-looking
statement in this presentation. The Company is still in the process of finalizing its financial results for the quarters
ending December 31, 2006 and March 31, 2007. These results and the
Company’s subsequent forecast for the balance of the calendar year
could result in adjustments to the Company’s financial guidance. The
Company does not intend to update publicly the timing of the future possible
adjustments to guidance going forward, except as circumstances may warrant or as required by law. |
 © 2007 Transaction Systems Architects, Inc. Page 3 Presentation Topics • Our Company • Our Industry • Our Products • How We Win • How We Grow • Our Strategic Vision • How We Measure It • Risks and Obstacles |
 © 2007 Transaction Systems Architects, Inc. Page 4 Key Takeaways* “TSA is in the catbird seat for global payments” – Phil Heasley, TSA CEO Best Payments Solutions Gold Standard for enterprise payments technology Comprehensive features for the payments value chain TSA plays an “honest broker” role Business Model Strong cash flow Long-term revenue growth Long-term backlog growth Leveraged earnings growth Leverageable balance sheet Global Presence Global distribution system Over 800 customers in 84 countries Represented in countries comprising 95% of world GDP Two thirds of business is outside U.S. Industry Fundamentals Positive industry fundamentals driven by payment volume growth, industry consolidation and regulatory pressures Payment volumes growing at 4X global gross domestic product |
 © 2007 Transaction Systems Architects, Inc. Page 5 Our Company* TSA has a highly differentiated global presence in the payments industry Strategic Centers Regional Sales Office Distributors/Sales Agents Key Metrics Over 800 customers 84 countries, 33 offices Over 2,100 staff > 800 engineers > 180 sales staff Over 75 billion retail payments per year Over $5 trillion in wire transfers per day FY06 Financials Revenue - $348 million 60-mo backlog - $1.226 billion OFCF - $44 million CY07 Financials (est.) Revenue - $428 - 447 million 60-mo backlog - $1.309 - 1.339 billion OFCF - $57- 67 million |
 © 2007 Transaction Systems Architects, Inc. Page 6 Our Industry |
 © 2007 Transaction Systems Architects, Inc. Page 7 Our Industry Position Today and Tomorrow* Position Today Position Tomorrow Target Segments Segments Less than 25% of the top 500 world banks have TSA solutions Leadership in U.S. wholesale banking Leadership in North American retailer segment Less than 5% presence in top 500 banks for fraud solutions Geographies Limited presence in key geos Distributor-led model in key geos Business model On Demand business limited to U.S. based cash management Tactical view of services offerings Top 2000 world banks Top 500 world retailers Top 500 global payment processors Smaller banks and retailers via On Demand offering Segments 30-40% penetration in top 500 world banks Leadership in international wholesale banking segment Leadership in global retailer segment 10-20% of top 500 banks with TSA’s fraud solutions Geographies Deeper penetration in key geos Direct model in key geos Business model On Demand offering expanded to more solutions and more geos Expanded services offerings |
 © 2007 Transaction Systems Architects, Inc. Page 8 The Wholesale Banking Segment TSA’s highest potential growth segment , with significant international
opportunities The Segment TSA is a leader in the U.S. Target is top 2000 world banks TSA currently has over 120 customers Smaller banks addressed via ACI On Demand offering Key Sources of Competition In-house developed solutions Third-party software vendors, including FundTech, Logica, Tieto Enator, Clear2Pay and local providers Key Dynamics Regulatory compliance (e.g. SEPA) Many home-grown systems, many old systems Banking consolidation has created redundancies and silos The Opportunity International markets Adding to wholesale solutions offering Adding to existing ACI On Demand offering Payment systems convergence |
 © 2007 Transaction Systems Architects, Inc. Page 9 The Retail Banking Segment TSA is investing to win additional market share in its traditional sweet spot The Segment TSA is a global software leader Target is top 2000 world banks TSA currently has over 470 customers Smaller banks to be addressed via ACI On Demand offering Key Sources of Competition 3 rd -party processors In-house developed solutions Third-party software vendors, including eFunds, S1, Fair Isaac and local providers Key Dynamics Payment volumes on the increase Regulatory compliance (e.g. EMV) Many home-grown systems, many old systems Banking consolidation has created redundancies and silos The Opportunity New share in under-penetrated countries ACI On Demand offering expands industry potential Payments systems convergence The IBM segment |
 © 2007 Transaction Systems Architects, Inc. Page 10 The Retailer Segment TSA offers a compelling cost advantage for payments processing to large retailers
The Segment TSA has a leadership position in North America Target is top 500 global retailers TSA currently has over 100 customers Smaller retailers to be addressed via ACI On Demand offering Key Sources of Competition 3 rd party processors In-house developed solutions Third-party software vendors, including eFunds, S1, AJB and local software providers Key Dynamics Payment volumes increasing Regulatory compliance Many home-grown systems, many old systems Industry consolidation has created redundancies and silos The Opportunity Displacing 3 rd -party processors Replacing aging technology Facilitating payment systems consolidation The IBM segment |
 © 2007 Transaction Systems Architects, Inc. Page 11 The 3 rd -Party Processor Segment TSA is replacing aging technology and consolidating platforms for payment processors
The Segment TSA is the global software leader Target is top 500 global and local processors TSA currently has over 140 customers Key Sources of Competition In-house developed solutions Third-party software vendors, including eFunds, Fair Isaac and local software providers Key Dynamics Payment volumes increasing Regulatory compliance Many home-grown systems, many old systems Industry consolidation has created redundancies and silos The Opportunity Replacing aging technology Facilitating payment systems consolidation The IBM segment |
 © 2007 Transaction Systems Architects, Inc. Page 12 What Our Products Do Enterprise support for the payments value chain Retail Payment Engines Device driving Authentication Switching Authorization Interface to payment networks Stand-in processing and disaster recovery Payments Management Settlement and reconciliation Reporting Customer dispute management Card management Smartcard lifecycle management Wholesale Payment Engines Online banking Authentication and authorization Payment messaging and reporting Interface to payment networks Liquidity management Trade finance Risk Management Enterprise-level fraud prevention and detection Rules or model-based fraud detection Real-time or post-transaction fraud detection Fraud case management and workflow Custom models |
 © 2007 Transaction Systems Architects, Inc. Page 13 How We Win* End-to-end solution Investment in regulatory compliance Scale, availability and manageability Platform for payments convergence Full-service offering, including On Demand Lower cost per transaction More control for the customer over pricing, packaging and service levels More flexibility in deployment options Better integration with back-end systems Global reach and support More complete, more scalable solutions Investment in ongoing R&D Corporate strength and track record Key partnerships Reduced cost of operations Better, more timely regulatory compliance Integrated solutions suite, supports convergence More current technology TSA has key points of differentiation vs the alternatives Overall differentiators Versus home-grown solutions Versus 3 rd -party processors |
 © 2007 Transaction Systems Architects, Inc. Page 14 How We Grow |
 © 2007 Transaction Systems Architects, Inc. Page 15 Elements of Our Growth* Volumes On Demand, Services Cross-sell Share Selling capacity-based licenses in an industry where electronic payment
volumes are growing Replacing aging technology, including
IBM-compatible and open-systems segments, and winning in
the international wholesale payments space, plus refining the
distribution model Selling value-added solutions to existing
customers and driving towards converged payments systems Going to smaller prospects, offering more choice for access to TSA’s solutions, and investing to offer more services to the base TSA has both organic and acquisition-based growth opportunities
|
 © 2007 Transaction Systems Architects, Inc. Page 16 How We Measure It |
 © 2007 Transaction Systems Architects, Inc. Page 17 Key Financial Metrics* Revenue - $ millions Backlog - $ millions Operating Free Cash Flow* - $ millions Adjusted Non-GAAP EPS* *Free cash flow calculated as operating cash flow minus capex, adjusted for one-time items. For an explanation of why management believes this is a useful measure and for a reconciliation to the closest GAAP measure, see “Non-GAAP Financial Measures Reconciliations” at the end of this presentation. -50 25 100 175 250 325 400 475 550 625 700 FY2004 FY2005 FY2006 CY2007E ACI S2 P&H $292.8 $313.2 $347.9 $428 - $447 0 250 500 750 1000 1250 1500 1750 2000 9/30/2005 9/30/2006 12/31/2007(e) 60 Month Backlog 12 Month Backlog $250 $1,027 $289 $1,226 $1,309 - $1,339 -5 20 45 70 95 120 FY2004 FY2005 FY2006 CY2007E OFCF $54 $48 $44 $57 - 67 0 0.25 0.5 0.75 1 1.25 1.5 1.75 2 2.25 2.5 2.75 3 3.25 3.5 FY2004 FY2005 FY2006 CY2007E Earnings per Share $1.51 - $1.80 $1.29 $1.13 $1.22 *Adjusted non-GAAP eps is calculated as GAAP eps less intangible amortization from acquisitions, stock-based compensation expense and special items. For an explanation of why management believes this is a useful measure and for a reconciliation to the closest GAAP measure, see “Non-GAAP Financial Measures Reconciliations” at the end of this presentation |
 © 2007 Transaction Systems Architects, Inc. Page 18 Key Financial Metrics - Revenue Revenue by Geo Revenue by Type Revenue by Product Line Product Revenue Mix Over Time Americas Int'l 18% US 34% Asia- Pacific 10% EMEA 38% Maint 30% Facilities Mgmt. 4% Services 16% Software License Fees (MLF) 20% Software License Fees (ILF) 30% Payments Mgmt 4% Risk Mgmt. 5% Cross Industry 14% Wholesale Payments 8% Retail Payment Engine 69% Payments Mgmt 5% Risk Mgmt. 9% Cross Industry 6% Wholesale Payments 23% Retail Payment Engine 57% FY2006 FY2006 FY2006 CY2010E 53% of TSA’s revenue recurs on a monthly basis. On Demand revenue is expected to comprise 15-20% of total revenue in 2010 |
 © 2007 Transaction Systems Architects, Inc. Page 19 0 25 50 75 100 125 150 FY2004 FY2005 FY2006 CY2007E EBITDA 23% 20% 22% 21% 10 20 30 40 50 0 25 50 75 100 125 150 FY2004 FY2005 FY2006 CY2007E Op Margin 19% 21% 18% 17% 10 20 30 40 50 Key Financial Metrics - Profitability EBITDA* - $ millions Operating Income - $ millions $61 $69 $71 $54 $64 $62 $68 to $83 $94 to $110 Operating margin and EBITDA are adjusted for one-time items. *EBITDA is a Non-GAAP measure. For an explanation of why management believes this is a useful measure and for a reconciliation to the closest GAAP measure, see “Non-GAAP Financial Measures Reconciliations” at the end of this presentation. |
 © 2007 Transaction Systems Architects, Inc. Page 20 TSA’s Balance Sheet and ROIC Equity, 50% Note Payable, 14% Other, 17% Deferred Revenue, 19% Goodwill, 36% Receivables, 16% Software, 6% Other, 21% Cash and Cash Equivalents, 21% Assets Liabilities Return on Equity and Invested Capital 9/30/06 9/30/06 Key Takeaways Strong, leverageable balance sheet Minimum $75 million unused line available Significant incremental borrowing capacity High return on equity and invested capital relative to industry peers 0 10 20 30 40 50 2002 2003 2004 2005 2006 Fiscal Year ROE ROIC |
 © 2007 Transaction Systems Architects, Inc. Page 21 Closing TSA is a solid investment for the long-term growth investor Best Payments Solutions Gold Standard for enterprise payments technology Comprehensive features for the payments value chain TSA plays an “honest broker” role Business Model Strong cash flow Long-term revenue growth Long-term backlog growth Leveraged earnings growth Leverageable balance sheet Global Presence Over 800 customers in 84 countries Represented in countries comprising 95% of world GDP Direct sales model, supplemented by in- country distributors Industry Fundamentals Positive industry fundamentals driven by payment volume growth, industry consolidation and regulatory pressures Payment volumes growing at 4X global gross domestic product |
 www.tsainc.com Page 22 * * * * * •* * * * * * * * * * •* * * * * * * * * * * •* * * * * * * * * * * •* * * * * * * * * * * •* * * * * * * * * * * •* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * |
 © 2007 Transaction Systems Architects, Inc. Page 23 Forward-Looking Statements This presentation 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 may include words or phrases such as the Company “believes,” “ will,” “expects,” “looks forward to,” and words and phrases of similar impact, and include but are not limited to statements regarding future operations, business strategy and business environment and specifically include amounts estimated in the 12-month and 60-month backlogs, the Company’s revenue and earnings guidance, and the Company’s long-term revenue and earnings growth objectives. 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 presentation include, but are not limited to, statements regarding the: • Company’s expectations regarding positive industry fundamentals driven
by payment volume growth, industry consolidation and regulatory pressure; • Company’s expectations regarding penetration in top 500 world banks,
leadership position in international wholesale banking segment, leadership position in global retailer segment and penetration of top 500 world banks
with its fraud solutions; • Company’s expectation regarding its growth rate and industry growth rate in excess of traditional capital expenditure growth rates; • Company’s expectation regarding the wholesale banking segment as its
highest potential growth segment, with significant international opportunities; • Company’s expectation regarding investing in the retail banking segment
will lead to additional market share; • Company’s expectation regarding its organic and acquisition-based
growth opportunities; • Company’s expectation its leading, gold standard payment engines will
create leading market positions in additional geographies and possibly in new industry segments; • Company’s operating free cash flow, backlog, adjusted non-GAAP eps
estimates; • Company’s revenues and EPS estimates for calendar 2007; • Company’s product revenue mix over time; • Company’s expectation regarding its significant incremental borrowing
capacity; and • Company’s high return on equity and invested capital relative to
industry peers. . |
 © 2007 Transaction Systems Architects, Inc. Page 24 Forward-Looking Statements (continued) Any or all of the forward-looking statements may turn out to be wrong. They can be affected by the judgments and estimates underlying such 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. In addition, the Company disclaims any obligation to update any forward-looking statements after the date of this presentation. All of the foregoing forward-looking statements are expressly qualified
by the risk factors discussed in the Company’s filings with the Securities and Exchange Commission. For a detailed discussion of these risk factors,
parties that are relying on the forward-looking statements should review the Company's filings with the Securities and Exchange Commission, including the
Company's Form 10-K filed on May 11, 2007, and specifically the section entitled “Factors That May Affect the Company's Future Results
or the Market Price of the Company's Common Stock.” |
 © 2007 Transaction Systems Architects, Inc. Page 25 Forward-Looking Statements (continued) The risks identified in the Company’s filings with the Securities and
Exchange Commission include: • Risks associated with the restatement of the Company’s financial
statements; • Risks associated with not having current financial information available and
the Company will be limited in its ability to register its securities for offer and sale until the Company is deemed a current filer
with the SEC; • Risks associated with the delays in filing its periodic reports, including
the need to obtain additional extensions from the lender in the future in order to comply with the financial reporting requirements of the
Company’s bank debt, the failure to do so which could have a material adverse effect on the Company’s business, liquidity and
financial conditions; • Risks associated with the delay in filing its Quarterly Report on Form
10-Q for the quarter ended December 31, 2006 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 with the SEC
and any failure to satisfy other NASDAQ listing requirements could cause the NASDAQ to commence suspension or delisting procedures with respect to its common stock; • Risks associated the Company’s performance which could be materially
adversely affected by a general economic downturn or lessening
demand in the software sector; • Risks associated with the complexity of the Company’s software
products; • Risks inherent in making an estimate of the Company’s backlogs which
many not be accurate and may not generate the predicted revenue; • Risks associated with tax positions taken by the Company which require
substantial judgment and with which taxing authorities may not
agree; • Risks associated with consolidation in the financial services industry which
may adversely impact the number of customers and the Company’s revenues in the future; • Risks associated with the Company’s stock price which may be
volatile; • Risks associated with conducting international operations; • Risks regarding the Company’s newly introduced BASE24-eps
product which may prove to be unsuccessful in the marketplace; • Risks associated with the Company’s future profitability which depends on demand for its products; lower demand in the future could adversely affect the Company’s business; • Risks associated with the Company’s software products which may contain undetected errors or other defects, which could damage its reputation with customers, decrease profitability, and expose the Company to
liability; • Risks associated with future acquisitions and investments which could materially adversely affect the Company; • Risks associated with the Company’s ability to protect its intellectual
property and technology and may be subject to increasing litigation over its intellectual property rights; • Risks associated with the Company’s restructuring plan which may not
achieve expected efficiencies; • Risks associated with litigation that could materially adversely affect our
business financial condition and/or results of operations; • Risks associated with new accounting standards or revised interpretations or
guidance regarding existing standards; and • Risks associated with the assessment and maintenance of internal controls
over the Company’s financial reporting. |
 © 2007 Transaction Systems Architects, Inc. Page 26 Forward-Looking Statements (continued) Backlog Estimates The Company’s 12-month and 60-month backlog estimates are based on the Company’s judgment about future events which, as described above, involve a number of risks and uncertainties. The Company estimates backlog using the methodology described in the Company’s Form 10-Q filed on August 9, 2006 in the section entitled “Backlog” under Item 2. – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION – and on the Company’s website at www.tsainc.com. Non-GAAP Financial Measures Reconciliation This presentation includes non-GAAP information: EBITDA, Operating Free Cash Flow and Adjusted Non-GAAP EPS. EBITDA is defined as net income before interest, taxes, depreciation and amortization. The Company uses EBITDA as a performance measure and provides EBITDA to investors to complement results provided in accordance with GAAP, as management believes the measure helps illustrate underlying operating trends in the Company’s business and uses the measure to establish internal budgets and goals, manage the business and evaluate performance. Because EBITDA excludes some, but not all, items that affect net income and the definition of EBITDA may vary among other companies, the EBITDA measure presented by the Company may not be calculated and presented in accordance with GAAP. Operating Free Cash Flow is defined as net cash flow from operating activities adjusted for selected one-time items minus capital expenditures. The Company utilizes this non-GAAP financial measure, as an indicator of cash flow available for debt repayment and other investing activities, such as acquisitions. The Company utilizes operating free cash flow as a further indicator of operating performance and for planning investing activities. Adjusted non-GAAP EPS is defined as GAAP earnings per share adjusted for selected one-time times plus amortization of acquisition-related intangibles and non-cash equity-based compensation. The Company believes that providing earnings per share on an adjusted, non-GAAP basis is useful to it investors as an operating measure because it excludes certain expenses and therefore provides a consistent basis for comparison of the Company’s expenses from period to period. |
  © 2007 Transaction Systems Architects, Inc. Page 27 Forward-Looking Statements (continued) Reconciliation of EBITDA ($ thousands) FY ended Sept 30, 2004 2005 2006 CY2007e Operating income 54,294 64,251 53,778 68,000 to 83,000 Selected one-time items Lawsuit - - 8,450 - Goodwill impairment charge - - - - Severance - - - 1,000 to 2,000 Stock Option Review - - - 4,000 Operating income adjusted for selected one-time items 54,294 64,251 62,228 73,000 to 89,000 Depreciation & Amortization 6,571 5,180 8,362 21,000 EBITDA 60,865 69,431 70,590 94,000 to 110,000 Reconciliation of Operating Free Cash Flow ($ thousands) FY ended Sept 30, 2004 2005 2006 CY2007e Net cash flow from operating activities 58,091 53,151 60,701 63,000 to 71,000 Selected one-time items Lawsuit - - - - Stock Option Review - - - 4,000 IRS Settlement - - (10,900) - Net cash flow from operating activities adjusted for selected one-time
items 58,091 53,151 49,801 70,000 to 78,000 Capital Expenditures 3,862 5,405 5,988 10,000 to 8,000 Operating Free Cash Flow 54,229 47,746 43,813 57,000 to 67,000 Reconciliation of GAAP EPS to Adjusted Non-GAAP EPS ($ thousands)
FY ended Sept 30, 2004 2005 2006 CY2007e GAAP Earnings Per Share (Diluted) 1.21 1.12 1.45 1.05 to 1.34 Selected one-time items One-time tax benefit - - (0.46) - Lawsuit settlement cost - - 0.14 - Incremental compensation expense - - - 0.03 Cost of stock options review - - - 0.07 Adjusted earnings per share after selected one-time items 1.22 1.12 1.13 1.15 to 1.44 Amortization of acquisition-related intangibles - 0.01 0.05 0.22 Non-cash equity-based compensation - - 0.11 0.14 Adjusted Non-GAAP earnings per share 1.22 1.13 1.29 1.51 to 1.80 |
 www.tsainc.com Page 28 |
Exhibit 99.2
|
|
TRANSACTION SYSTEMS ARCHITECTS INC 120 BROADWAY, SUITE 3350 NEW YORK, NEW YORK 10271 646.348.6700 FAX 212.479.4000 |
News Release |
For more information contact:
William J. Hoelting
Vice President, Investor Relations
402.390.8990
FOR IMMEDIATE RELEASE
Transaction Systems Architects Updates Regulatory Filing Schedule and
Adjusts Financial Guidance
Calendar Year 2007 Guidance Adjusted for Previously-Disclosed Items
(NEW YORK, N.Y. — June 5, 2007) — Transaction Systems Architects, Inc. (Nasdaq:TSAI), today announced its expected timing for regulatory filings and adjusted financial guidance for calendar year 2007. We are adjusting our calendar year 2007 financial guidance based on items disclosed in our recent regulatory filings.
Update on Regulatory Filings
As previously disclosed, we received a written notification from the Staff of NASDAQ stating that the NASDAQ Listing Qualifications Panel has granted our request for continued listing on NASDAQ Global Select Market, subject to the condition that we file our Form 10-K for the fiscal year ended September 30, 2006, and our Form 10-Q for the quarter ended December 31, 2006, and all required restatements, by July 2, 2007. Our Form 10-K for fiscal 2006 was filed on May 11, 2007, and we are targeting to file our Form 10-Q for December 31, 2006 by July 2,
2007. Once we file our Form 10-Q for the quarter ending December 31, 2006, our current estimate is that it will take approximately four to five weeks to file each of our Form 10-Q’s for the quarters ending March 31, 2007 and June 30, 2007. We do not expect to issue preliminary financial results for these respective quarters prior to completing our normal quarter-closing procedures.
“We continue to work hard to get back to a regular schedule for our regulatory filings and financial reporting,” said Philip G. Heasley, TSA’s CEO. “This process has certainly been time-consuming and expensive. Despite this, our team has continued its focus on providing world-class solutions to our customers worldwide, and on enhancing our overall global infrastructure so we can take advantage of the opportunities ahead of us in this dynamic and growing market.”
Adjusted Financial Guidance
Based on items noted in our Form 10-K for fiscal year 2006 filed on May 11, 2007, and our Form 8-K filed on May 16, 2007, we are adjusting our financial guidance for calendar year 2007. Our adjusted guidance reflects the following items:
| • | The revisions to our historical 60-month and 12-month backlog estimates as disclosed in our Form 10-K for fiscal 2006. These revisions have created a new baseline for our backlog metrics entering calendar year 2007. The impact on our calendar year 2007 guidance due to these revisions is as follows: |
| • | 60-month backlog at December 31, 2007, will be reduced by approximately $22 million; and |
| • | 12-month backlog entering calendar year 2007 was reduced between $3 million and $4 million, which reduces both our revenue and operating free cash flow by the same amount, and results in a reduction in our GAAP and adjusted non-GAAP earnings per share guidance of approximately $0.06. |
| • | The impact of higher expenses related to our review of historical stock option granting practices. Our previous guidance assumed total expenses from this review of approximately $6 million. Due to the length of the review, our new estimate of expenses for the review is approximately $7 million. This expense impacts the quarters ending December 31, 2006 and March 31, 2007 by approximately $3 million each, and the quarter ending June 30, 2007 by approximately $1 million. |
| • | Incremental compensation expense between $1 million and $2 million primarily related to a post-employment agreement with a former executive officer. |
We now expect our revenue in the second half of calendar year 2007 to be approximately 20 to 25 percent higher than in the first half of the year. In addition, we expect our reported GAAP expenses in the second half of calendar year 2007 to be approximately one to two percent higher than in the first half of the year.
Based on the specific items noted above, our adjusted financial guidance for calendar year 2007 calculates as follows:
| • | Operating free cash flow between $57 million and $67 million; |
| • | Revenue between $428 million and $447 million; |
| • | 60-month backlog on December 31, 2007 between $1.309 billion and $1.339 billion; |
| • | GAAP earnings per share between $1.05 and $1.34; and |
| • | Adjusted non-GAAP earnings per share between $1.51 and $1.80. |
March Quarter Operating Highlights
“We had solid contracting and strong cash generation in the March quarter,” added Heasley. “We continue to see the need for major financial institutions, retailers and payment processors to replace or update their legacy payment infrastructures in the face of ongoing regulatory pressures, ever-increasing electronic payment volumes and the costs and complexity of supporting older technologies.”
We signed a major wholesale payments deal in Europe with a top 20 world bank, who licensed our ACI Money Transfer System to help them upgrade their global payments infrastructure and comply with the impending SEPA regulations. We signed new BASE24-eps deals with two of the top ten banks in France, our first retail payment engine deals in France in many years. We signed a top U.S. bank to run our ACI Enterprise Banker product in a hosted model, validation that our ACI On Demand initiative has interest within the banking community. We signed
several deals in the quarter with financial institutions in the United Kingdom to help them meet the new requirements for the U.K.-based Faster Payments initiative. In addition to the contracts we signed in France, we signed several significant BASE24-eps deals across our geographic channels, with both new and existing accounts, and on a range of operating platforms. Overall, we signed thirteen new accounts, licensed twenty-five new applications with existing customers and we signed 28 capacity upgrade licenses over $100 thousand.
About Transaction Systems Architects, Inc.
Every second of every day, TSA solutions are at work processing electronic payments, managing risk, automating back office systems and providing application infrastructure services. TSA is a leading international provider of solutions for banking, retail and cross-industry systems. TSA serves more than 800 customers in 84 countries including many of the world’s largest financial institutions, retailers and payment processors. Visit Transaction Systems Architects at www.tsainc.com.
Non GAAP Financial Measures
This press release includes (1) operating free cash flow and (2) earnings per share guidance on an adjusted, non-GAAP basis. TSA is presenting these non-GAAP guidance measures to provide more transparency to its earnings, focusing on operations before selected non-cash items and operating free cash flow.
The Company believes that providing earnings per share on an adjusted, non-GAAP basis is useful to its investors as an operating measure because it excludes certain expenses and therefore provides a consistent basis for comparison of the Company’s expenses from period to period. TSA is also presenting operating free cash flow, which is defined by the Company as net cash provided by operating activities, adjusted for one-time items, minus capital expenditures. The
Company utilizes this non-GAAP financial measure, and believes it is useful to investors, as an indicator of cash flow available for debt repayment and other investing activities, such as acquisitions. The Company utilizes operating free cash flow as a further indicator of operating performance and for planning investing activities.
The presentation of these non-GAAP financial measures should be considered in addition to the Company’s GAAP results and is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. A reconciliation of (1) net cash provided by operating activities to operating free cash flow and (2) GAAP earnings per share to non-GAAP adjusted earnings per share follows.
| Calendar 2007 Guidance | ||||
| Table A: Reconciliation of Operating Free Cash Flow | ||||
| CY07 Previous | CY07 Update | |||
| Net cash provided by operating activities |
$66 million to $74 million | $63 million to $71 million | ||
| One-time items: |
||||
| Net after-tax cash payments associated with stock option review |
$4 million |
$4 million | ||
| Capital expenditures | ($10 million to $8 million) |
($10 million to $8 million) | ||
| Operating free cash flow
|
$60 million to $70 million
|
$57 million to $67 million
| ||
| Calendar 2007 Guidance | ||||
| Table B: Reconciliation of Adjusted Non-GAAP earnings per share | ||||
| CY07 Previous | CY07 Update | |||
| GAAP earnings per share |
$1.16 to $1.45 | $1.05 to $1.34 | ||
| Incremental compensation expense |
n/a | 0.03 | ||
| Cost of stock options review |
0.05 | 0.07 | ||
| Adj. earnings per share after selected one-time items | $1.21 to $1.50 | $1.15 to $1.44 | ||
| Amortization of acquisition-related intangibles | 0.22 | 0.22 | ||
| Non-cash equity-based compensation |
0.14 | 0.14 | ||
| Adjusted Non-GAAP earnings per share
|
$1.57 to $1.86
|
$1.51 to $1.80
| ||
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 may include words or phrases such as the Company “believes,” “will,” “expects,” “looks forward to,” and words and phrases of similar impact, and include but are not limited to statements regarding future operations, business strategy and business environment and specifically include amounts estimated in the 12-month and 60-month backlogs, the Company’s revenue and earnings guidance and the expected timing of the Company’s regulatory filings.
There can be no assurance that (i) the Company will satisfy the other condition for continued listing regarding its December 31, 2006 10-Q, (ii) the Company will be granted any extension of time to meet such condition, if necessary, (iii) NASDAQ will not require the Company to file its March 31, 2007 and June 30, 2007 10-Qs by specified deadlines as additional conditions for continued listing on NASDAQ Global Select Market or that it would be able to meet any such additional conditions, or (iv) that the Company’s common stock will remain listed on NASDAQ Global Select Market.
Any or all of the forward-looking statements may turn out to be wrong. They can be affected by the judgments and estimates underlying such 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. In addition, the Company disclaims any obligation to update any forward-looking statements after the date of this release.
All of the foregoing forward-looking statements are expressly qualified by the risk factors discussed in the Company’s filings with the Securities and Exchange Commission. For a detailed discussion of these risk factors, parties that are relying on the forward-looking statements should review the Company’s filings with the Securities and Exchange Commission, including the Company’s Form 10-K filed on May 11, 2007 and specifically the section entitled “Factors That May Affect the Company’s Future Results or the Market Price of the Company’s Common Stock.”
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