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TNS Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 6, 2011 11:13AM
TNS Inc. (TNS) filed Quarterly Report for the period ended 2011-03-31. Tns Inc. has a market cap of $418.6 million; its shares were traded at around $16.44 with a P/E ratio of 8.3 and P/S ratio of 0.8. Tns Inc. had an annual average earning growth of 17.5% over the past 5 years.
Highlight of Business Operations:
Total revenues increased $4.1 million, or 3.2%, to $133.7 million for the three months ended March 31, 2011, from $129.6 million for the three months ended March 31, 2010. Foreign exchange translation increased revenues by $1.2 million. Excluding the positive effect of foreign exchange rates, total revenues increased $2.9 million, or 2.3%, to $132.5 million for the three months ended March 31, 2011.
Revenues from the payments division increased $0.9 million, or 1.9%, to $48.6 million for the three months ended March 31, 2011, from $47.7 million for the three months ended March 31, 2010. The positive effect of foreign exchange translation on a year-over-year basis was $0.9 million. Excluding the positive effect of foreign exchange rates, payments revenue was flat with the year ago period. We continued to see growth in our European markets driven primarily by growth in our IP-based network services in the UK and market share gains for our network services, primarily dial-up connectivity, in Italy, Spain, France and Romania. This growth was offset by declines in our North American and Asia Pacific businesses. In North America, as we have previously disclosed, we continue to see declines in our dial-up network service as a result of increased competition and transaction volume declines. These declines were partially offset by growth in our IP-based network services and card-not present payment gateway, which we introduced in this region in the second half of 2010. In Asia Pacific, we are facing challenges to our business in the first half of 2011 primarily because, as we have previously disclosed our telecommunications partner in the region lost one of its larger dial-up customers and they migrated the traffic off of our network during the second half of 2010. This decline was partially offset by growth in our IP-based network services. Our card-not-present payment gateway services in this region decreased slightly in the period from lower custom development revenue as we continue to migrate our business model towards a more transaction-based and recurring fee model. As part of our strategy to accelerate growth in this division, we have made selected investments in our IP-based network services as well as our payment gateway offerings and plan to introduce these product sets across all of our key markets over time. For example, in the second half of 2010 we introduced our card-not-present payment gateway into the North American market and plan to introduce this offering in Europe in the second half of 2011.
Revenues from the financial services division increased $0.2 million, or 1.2%, to $16.6 million for the three months ended March 31, 2011, from $16.4 million for the three months ended March 31, 2010. Foreign exchange translation increased revenues by $0.2 million for the three months ended March 31, 2011. Excluding the positive effect of foreign exchange rates, financial services division revenue was flat. Throughout 2010 we faced challenges in our
financial services business following the economic downturn in the financial services industry in 2009 which resulted in consolidation among our existing customer base as well as a reduction in the number of market participants (e.g., hedge funds) that utilize our secure trading extranet. In addition, due to changes in the competitive environment for providing low-latency market data exchange services in North America, we have experienced significant declines for this service offering. These factors resulted in year-over-year revenue declines of $1.9 million in North America and $0.4 million in the UK during the first quarter of 2011. Excluding these declines, revenues increased $1.5 million in North America, $0.4 million in Europe and $0.4 million in Asia Pacific. Revenue increased in North America primarily through growth in endpoints and bandwidth based services to participants in the foreign exchange markets. Revenue growth in Europe was primarily driven by market share gains and the introduction of our bandwidth based services offset by price compression for market data services. Revenue growth in Asia Pacific was primarily driven by our expansion efforts to capture the growth opportunities in this region for electronic trading.
Net income decreased $0.4 million to $0.7 million for the three months ended March 31, 2011 from $1.1 million for the same period in 2010. Diluted net income per common share was $0.03 for the three months ended March 31, 2011 compared to $0.04 for the same period in 2010. Adjusted net income (a non-GAAP measure) decreased $4.6 million to $10.4 million for the three months ended March 31, 2011 compared to $15.0 million for the same period in 2010. Adjusted net income per common share (a non-GAAP measure) was $0.40 per share for the three months ended March 31, 2011 compared to $0.56 per share for the same period in 2010. Included in other income (expense), net in our consolidated statements of operations are a pre-tax loss of $1.1 million for the three months ended March 31, 2011 compared to a pre-tax gain of $2.6 million for the same period in 2010 related to the revaluation of certain foreign currency denominated assets and liabilities. EBITDA before stock compensation expense (a non-GAAP measure) was $31.6 million for both the three months ended March 31, 2011 and 2010.
On October 1, 2010, we completed the acquisition of Cequint, Inc. (Cequint) in accordance with the terms and conditions of the Agreement and Plan of Merger dated September 8, 2010 (see Note 1). The purchase price, subject to working capital adjustments, included an initial payment of $49.8 million, consisting of $46.7 million in cash and $3.1 million (178,823 shares) in TNS common stock issued to certain Cequint shareholders, and may be adjusted in the future for a potential additional $52.5 million in cash based upon the achievement of four specified profit milestones not to extend past May 31, 2014, for a potential total purchase price of $102.3 million. As part of the $49.8 million purchase price, Cequint paid off approximately $6.8 million in debt and we assumed approximately $0.4 million in cash. We funded the transaction through a new $50.0 million term loan facility using a portion of the accordion feature as part of our November 2009 Credit Facility (see Note 2). Cequint provides carriergrade caller identification products and enhanced services to top U.S.-based mobile operators. We have integrated Cequint into our telecommunication services division. This acquisition has been accounted for as a business combination under FASB ASC 805, Business Combinations.
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