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TNS Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 10, 2010 04:19PM

TNS Inc. (TNS) filed Quarterly Report for the period ended 2010-03-31. Tns Inc. has a market cap of $570.45 million; its shares were traded at around $21.96 with a P/E ratio of 10.36 and P/S ratio of 1.2. Tns Inc. had an annual average earning growth of 11% over the past 5 years.

TNS is in the portfolios of Steven Cohen of SAC Capital Advisors, George Soros of Soros Fund Management LLC, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Payments division. Revenues from the payments division increased $3.3 million, or 7.5%, to $47.7 million for the three months ended March 31, 2010, from $44.4 million for the three months ended March 31, 2009. The positive effect of foreign exchange translation on a year-over-year basis was $3.4 million. Excluding the impact of foreign exchange rates, payments revenue decreased $0.1 million, or 0.2% to $44.3 million for the three months ended March 31, 2010. This decrease was due to a $1.2 million reduction in dial up transaction revenue in the US and France, a decrease of $0.3 million related to lower development revenue from our Dialect subsidiary and a decrease of $0.3 million in revenue from our ATM switching business which we discontinued in the fourth quarter of 2009. These decreases were partially offset by an increase of $0.7 million in ATM processing revenue, primarily from our Canadian subsidiary, an increase of $0.8 million from our subsidiaries in Italy and Spain due to market share gains in those countries and an increase of $0.2 million from the sale of our managed broadband products, primarily in the US and UK.

Telecommunication services division. Revenues from the telecommunication services division increased $50.4 million, or 335.9%, to $65.5 million for the three months ended March 31, 2010, from $15.0 million for the three months ended March 31, 2009. Included in revenues were pass-through charges of $7.1 million and $1.2 million for the three months ended March 31, 2010 and 2009, respectively. Excluding the increase in pass through charges, revenues increased $44.5 million to $59.5 million for the three months ended March 31, 2010 primarily due to the inclusion of acquired CSG operations. This increase was partially offset by a decrease in revenue of $1.4 million due to volume declines from a customer following the acquisition of CSG based on the expectation that we will compete with the customer and a decrease of $0.6 million due to a reduction in volumes in our payphone fraud and validation service.

Engineering and development expense. Engineering and development expense increased $3.1 million, or 47.8%, to $9.5 million for the three months ended March 31, 2010, from $6.4 million for the three months ended March 31, 2009. On a constant dollar basis, engineering and development expenses would have increased $2.6 million, or 40.7%, to $9.0 million. Engineering and development expense represented 7.3% and 8.5% of revenues for the three months ended March 31, 2010 and 2009, respectively. Capitalized software development costs, which are offset against engineering and development costs, increased $1.0 million to $2.6 million from $1.6 million for the three months ended March 31, 2010 and 2009, respectively. The increase in capitalized software development costs is primarily due to investment in our roaming and clearing and IP registry platforms and to a lesser extent from development of our payment gateway platforms. Included in engineering and development expense for the three months ended March 31, 2010 and 2009 is stock compensation expense of $0.3 million and $0.4 million, respectively. Excluding stock compensation, the increase in capitalized software and the effects of foreign exchange, engineering and development expense would have increased $3.7 million to $11.3 million for the three months ended March 31, 2010 from $7.6 million for the three months ended March 31, 2009. The increase relates primarily to additional headcount and other costs required to support our acquisition of CSG.

Selling, general and administrative expense. Selling, general and administrative expenses increased $9.8 million, or 55.5%, to $27.6 million for the three months ended March 31, 2010, from $17.8 million for the three months ended March 31, 2009. On a constant dollar basis, selling, general and administrative expenses would have increased $9.0 million, or 50.8%, to $26.8 million. Selling, general and administrative expenses represented 21.3% of revenues for the three months ended March 31, 2010, compared to 23.6% of revenues for the three months ended March 31, 2009. Included in selling, general and administrative expenses for the three months ended March 31, 2010 and 2009 is $1.7 million and $1.4 million of stock compensation expense, respectively. Included in selling, general and administrative expenses for the three months ended March 31, 2010 is $0.5 million in severance expenses. Excluding these items and the effects of foreign exchange, selling, general and administrative expenses increased $8.3 million to $24.6 million for the three months ended March 31, 2010 from $16.4 million for the three months ended March 31, 2009. This increase was primarily attributable to additional headcount and other costs necessary to support the acquired CSG operations and to a lesser extent an increase in costs incurred to support our Canadian ATM processing business.

Amortization of intangible assets. Amortization of intangible assets increased $5.7 million, or 102.1%, to $11.3 million for the three months ended March 31, 2010, from $5.6 million for the three months ended March 31, 2009. On a constant dollar basis, amortization of intangible assets would have increased $5.5 million, or 98.5% to $11.1 million. The increase was due to additional amortization expense of $4.3 million related to the CSG acquisition and a charge of $1.9 million related to the impairment of certain customer relationship intangible assets. This was partially offset by a decrease of $0.7 million as certain intangible assets reached the end of their useful lives.

Our operations provided us cash of $27.9 million for the three months ended March 31, 2010, which was attributable to net income of $1.1 million, depreciation, amortization and other non-cash charges of $24.2 million and a decrease in working capital of $2.7 million. Our operations provided us cash of $3.7 million for the three months ended March 31, 2009, which was attributable to a net loss of $24,000, depreciation, amortization and other non-cash charges of $16.5 million and an increase in working capital of $12.8 million which related primarily to the timing of payments to suppliers.

Read the The complete Report



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