Trintech Group PLC, a leading provider of secure payment infrastructure solutions, announced its first half fiscal year and second quarter results for the period ended July 31, 2002.
Highlights include the following:
— Sixth consecutive quarter of declining pro forma operating expenses, which fell strongly by 44% in Q2, compared to the corresponding period last year, indicating the Company’s commitment to reaching pro forma breakeven in FY 2003. Pro forma operating expenses declined 14% sequentially this quarter to $8.3 million.
— Revenues for Q2 FY 2003 increased 8% sequentially to $10.9 million.
— Pro forma basic and diluted net loss per equivalent ADS declined 44% sequentially and for the quarter ended July 31, 2002 was $(0.16) compared with the pro forma basic and diluted net loss per ADS of $(0.29) for the corresponding quarter ended July 31, 2001.
— Cash usage decreased 70% sequentially to $2.1 million in Q2 with Trintech’s balance sheet remaining strong with closing cash and cash equivalent balances of $50.9 million.
Cyril McGuire, Chairman and Chief Executive Officer commenting on the results said, “Our determined focus on right sizing the Company is beginning to show results. Our ongoing reduction in operating expenses is due to the constant review of our cost management program and excellent vigilance in identifying areas of cost extraction, balanced with revenue opportunities. We still see good support in the market for our licensing products despite a very tough economic environment and have implemented an action plan to enable our product business line to recover gradually over the remainder of the current fiscal year. Our balance sheet remains strong and the cash resources at hand should provide us with the flexibility, where necessary, to pursue key opportunities which we identify for our long term success without compromising our return to profitability.”
Revenue for the first half fiscal year ended July 31, 2002 was $21.0 million compared with $35.4 million for the corresponding first half ended July 31, 2001, a decrease of 41%. Revenue for the second quarter, FY 2003 was $10.9 million compared with $18.4 million for the corresponding quarter of the previous year. This was a decrease of 41%.
The first half fiscal year decrease in revenue over the prior year resulted from the ongoing fragile state of the global economy. This resulted in slower payment infrastructure investment decisions that lead to a weak demand for Trintech’s secure payment infrastructure solutions. This low demand drove first half software license revenue to $11.0 million, a decrease of 31% over first half software license revenues of $16.0 million for the corresponding half year, last year. Second quarter software license revenue was $5.8 million, a decrease of 31% over second quarter license revenue last year of $8.4 million.
First half product revenue decreased 71% to $3.6 million from $12.5 million. Second quarter product revenue decreased 72% to $1.8 million for the quarter. Product revenue shortfall for the first half and second quarter of FY 2003 can be attributed to an ongoing general weakness in the Company’s Point of Sale (PoS) business line, due mainly to a fall off in new IT investment at retail level in the German market. Despite the current weakness, the Company remains committed to the PoS market and has implemented a number of actions to return the product line to profitability. Due to the slowdown, inventory levels increased at the end of Q2. The Company has implemented an action plan which will, combined with an improvement in the PoS market in the second half of the year, see inventory reduce towards more historical levels for the remainder of the fiscal year.
First half service revenue fell 9% from $6.9 million to $6.3 million this fiscal year. Second quarter service revenue fell 8% from $3.5 million for the second quarter last year to $3.2 million for the second quarter ended July 31, 2002.
“During Q2 FY 2003 we have stabilized revenue levels, reduced expenses and decreased cash usage. Our cash position remains in excess of $50 million. We expect to see operating expenses decline again for Q3 as further benefits of cost reduction programs and restructuring are realized. Revenue and customer demand is stabilizing as we consolidate our product suite to match the new market realities. We will continue to seek expense management opportunities in line with market opportunity for the business and to conserve cash balances as we continue toward our target of pro forma breakeven in Q4 of this fiscal year,” said Paul Byrne, Chief Financial Officer.
Pro forma gross margin for the half year was $10.4 million, down 43% from $18.3 million for the corresponding first half ended July 31, 2001. Pro forma gross margin for the second quarter was $5.4 million, down 44% from $9.7 million in the corresponding fiscal year ended July 31, 2001. This reflects a decrease in traditionally high margin software license revenue and the impact of the deterioration of the product revenue line for the FY 2003 second quarter.
Decisive action was taken by the Company during the first half of FY 2003 to stabilize the business and put it on solid footing for future growth. As a result of these continuing actions on right sizing our cost base the Company saw an ongoing reduction in operating expenses in Q2. Pro forma operating expenses declined sequentially by 14% this quarter.
Trintech chose to disclose pro forma and reported figures in its quarterly results to increase transparency and provide information to investors on cash generation and utilization. This process commenced in Q1 FY 2002. Pro forma results this quarter exclude restructuring charges and non-cash items, such as stock compensation charges, inventory write downs, depreciation, amortization of goodwill and purchased intangible assets. All references to ADSs are after giving effect to the 1-for-4 reverse split of Trintech’s ADSs announced on May 15, 2002.
Pro forma basic and diluted net loss per equivalent American Depository Share (ADS) for the first half ended July 31, 2002 was $(0.46) compared with the pro forma basic and diluted net loss per ADS of $(0.66) for the corresponding half year ended July 31, 2001. Reported basic and diluted net loss per equivalent ADS for the half year ended July 31, 2002 was $(1.09) compared with the reported basic and diluted net loss per ADS of $(2.16) for the corresponding half year ended July 31, 2001.
Pro forma basic and diluted net loss per equivalent ADS declined 44% sequentially and for the quarter ended July 31, 2002 was $(0.16) compared with the pro forma basic and diluted net loss per ADS of $(0.29) for the corresponding quarter ended July 31, 2001. Reported basic and diluted net loss per equivalent ADS for the quarter ended July 31, 2002 was $(0.33) compared with the reported basic and diluted net loss per ADS of $(0.95) for the corresponding quarter ended July 31, 2001.
In the first half ended July 31, 2002 the Company recorded expenses totaling $9.6 million, equivalent to $0.63 per ADS, including non cash expenses of $5.2 million, which were not included in the pro forma net loss for the first half:
— Restructuring charge of $3.5 million, equivalent to $0.23 per ADS, to cover costs relating to staff reductions and the closure of excess facilities as Trintech seeks to concentrate on products with the highest earnings potential
— Provision for loss in net realizable value for excess inventory of $0.9 million, equivalent to $0.06 per ADS
— Depreciation of $1.5 million, equivalent to $0.10 per ADS
— Amortization of purchased intangible assets of $1.3 million, equivalent to $0.08 per ADS
— Amortization of acquired technology of $2.4 million, equivalent to $0.16 per ADS
— Stock compensation charge of $0.04 million, equivalent to $0.00 per ADS
In the quarter ended July 31, 2002 the Company recorded non cash expenses totaling $2.6 million, equivalent to $0.17 per ADS, which were not included in the pro forma net loss for the quarter:
— Depreciation of $0.8 million, equivalent to $0.05 per ADS
— Amortization of purchased intangible assets of $0.6 million, equivalent to $0.04 per ADS
— Amortization of acquired technology of $1.2 million, equivalent to $0.08 per ADS
— Stock compensation charge of $0.02 million, equivalent to $0.00 per ADS
In the first half ended July 31, 2001, the Company recorded expenses totaling $22.7 million, equivalent to $1.50 per ADS, including non cash expenses of $20.2 million, which were not included in the pro forma net loss for the first half:
— Re-structuring charge of $2.5 million, equivalent to $0.17 per ADS, to cover staff reductions and costs related to the closure of excess facilities as we seek to gain optimum benefits from natural synergies with the acquired businesses and seek to concentrate on products with the highest earnings potential.
— Depreciation of $1.6 million, equivalent to $0.10 per ADS — Amortization of goodwill, for our four acquisitions, of $13.8 million, equivalent to $0.91 per ADS
— Amortization of purchased intangible assets of $1.9 million, equivalent to $0.13 per ADS
— Amortization of acquired technology of $2.1 million, equivalent to $0.14 per ADS
— Stock compensation charge of $0.8 million, equivalent to $0.05 per ADS in relation to stock options granted in 1999 at market value to the members of the Company’s Advisory Board and to MasterCard as part of a strategic alliance with the Company
In the quarter ended July 31, 2001, the Company recorded non cash expenses totaling $10.0 million, equivalent to $0.66 per ADS, which were not included in the pro forma net loss for quarter two:
— Depreciation of $0.8 million, equivalent to $0.06 per ADS
— Amortization of goodwill, for our four acquisitions, of $6.9 million, equivalent to $0.46 per ADS
— Amortization of purchased intangible assets of $1.0 million, equivalent to $0.06 per ADS
— Amortization of acquired technology of $1.1 million, equivalent to $0.07 per ADS
— Stock compensation charge of $0.2 million, equivalent to $0.01 per ADS in relation to stock options granted in 1999 at market value to the members of the Company’s Advisory Board and to MasterCard as part of a strategic alliance with the Company
Quarterly highlights include:
— The Automobile Association (AA) with 12 million members is the UK’s leading motoring assistance organization. They selected Trintech’s PayWare Merchant to enable them to securely, efficiently and cost-effectively handle card payment transactions from a variety of channels, including call centers and the Internet.
— The Company recently announced that Consolidated Restaurant Operations (CRO) chose its PayWare ReconNET 6.1 to manage all their reconciliation and deposit verification requirements. The Dallas-based company owns, operates and franchises over 140 restaurants around the U.S., with annual sales of $200 million.
— AIB, Ireland’s largest card issuer and merchant acquirer, selected Trintech’s PayWare Resolve AS 5.0 to further automate the handling of their disputed card transactions in an effort to improve the processing of disputed transactions. Once Resolve AS 5.0 is installed, AIB will process a significant number of disputes with no user intervention. This will result in faster response rates, increased automation and the elimination of a significant amount of paper communication between the merchant and the acquirer.
— In addition during the quarter, the Company’s Board approved an option exchange program to further incentivize employees. During Q2 FY 2003, new options were granted to participants in the program on 17th July at a strike price of $1.47. Directors and Officers did not participate in the program.
— At Trintech’s Annual General Meeting (AGM) last July shareholders approved the terms of a share buy back agreement with Deutsche Bank AG. Trintech’s Board also voted to begin engaging the buy back of Trintech stock, subject to Irish regulatory approval, and authorized the use of $5m from the Company’s cash reserves to purchase stock.
About Trintech
Trintech is a leading provider of secure electronic payment infrastructure solutions for real world, Internet and wireless transactions. The Company, founded in 1987, offers a complete range of payment software products for credit, debit, commercial and procurement card applications. Trintech’s secure product range is deployed in over 35 countries worldwide and covers the payment requirements of consumers, card issuing banks, merchant acquiring institutions, merchants, telcos, wireless operators, ISPs/CSPs, portals and large corporations. The Group’s range of scalable, open systems architecture solutions for UNIX(R) and Windows NT(TM) platforms covers consumer, merchant and financial institution requirements for all card-based payments, including eCommerce and the emerging world of mCommerce.
For more details on Trintech’s latest results visit CardData (www.carddata.com).
