TNS Inc. (TNS, Financial) filed Quarterly Report for the period ended 2009-03-31.
TNS Inc provides data communications services to processors of credit card and other card-based transactions. TNS Inc. has a market cap of $428.4 million; its shares were traded at around $17.04 with a P/E ratio of 10.6 and P/S ratio of 1.2.
POS division. Revenues from the POS division decreased $0.4 million, or 2.1%, to $18.0 million for the three months ended March 31, 2009, from $18.4 million for the three months ended March 31, 2008. POS dial-up transaction volumes decreased 9.7% to 1.18 billion transactions for the three months ended March 31, 2009, from 1.31 billion transactions for the three months ended March 31, 2008. Revenues from the POS division decreased $1.1 million for the three months ended March 31, 2009 due to lower transaction volumes, as mentioned above, which we primarily attribute to softness in the economy, and $1.1 million due to a decrease in revenue per transaction for our dial-up POS offering mainly resulting from the renewal of certain customer contracts. This was partially offset by a $1.0 million increase in revenue from our managed broadband products, a $0.6 million increase from sales of our ATM processing products, primarily in Canada, and a $0.2 million increase in sales of our wireless payment gateway platform.
Engineering and development expense. Engineering and development expense decreased $0.8 million, or 11.0%, to $6.4 million for the three months ended March 31, 2009, from $7.2 million for the three months ended March 31, 2008. On a constant dollar basis, engineering and development expenses would have decreased $0.1 million, or 1.4%, to $7.1 million. Engineering and development expense represented 8.5% and 8.6% of revenues for the three months ended March 31, 2009 and 2008, respectively. Included in engineering and development expense for the three months ended March 31, 2009 and 2008 is stock compensation expense of $0.4 million and $0.5 million, respectively. Capitalized software development costs, which are offset against engineering and development costs, increased $0.4 million to $1.6 million from $1.2 million for the three month period ended March 31, 2009 and 2008, respectively. The increase in capitalized software development costs is primarily due to our planned investment to enhance our card-not-present payment gateway, and to a lesser extent from development of our back-office systems to enhance our internal reporting and network monitoring capabilities. Excluding the items mentioned above and the effects of foreign exchange, engineering and development expense before the capitalization of software development costs would have decreased $0.4 million to $5.1 million, or 6.7% of revenues, for the three months ended March 31, 2009 from $5.5 million, or 6.5% of revenues, for the three months ended March 31, 2008.
Selling, general and administrative expense. Selling, general and administrative expenses decreased $1.7 million, or 8.7%, to $17.8 million for the three months ended March 31, 2009, from $19.4 million for the three months ended March 31, 2008. On a constant dollar basis, selling, general and administrative expenses would have increased $0.2 million, or 1.0%, to $19.6 million. Selling, general and administrative expenses represented 23.6% of revenues for the three months ended March 31, 2009, compared to 23.1% of revenues for the three months ended March 31, 2008. Included in selling, general and administrative expenses for the three months ended March 31, 2009 and 2008 is $1.4 million and $2.2 million of stock compensation expense, respectively. The decrease in stock compensation expense is due to a reduction in performance related stock compensation as a result of fewer grants made during the three months ended March 31, 2009. Included in selling, general and administrative expenses for the three months ended March 31, 2009 are $0.6 million in professional fees related to our acquisition of CSG. Included in selling, general and administrative expenses for the three months ended March 31, 2008 was a $0.9 million pre-tax benefit associated with the settlement of a state sales tax liability. Excluding these items and the effects of foreign exchange, selling, general and administrative expenses would have decreased $0.5 million to $17.6 million, or 23.4% of revenues, for the three months ended March 31, 2009 from $18.1 million, or 21.5% of revenues, for the three months ended March 31, 2008 primarily as a result of our efforts to reduce our overall costs.
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 $15.3 million and an increase in working capital of $11.6 million. The increase in working capital relates primarily to the timing of payments. We expect a large portion of this working capital change to reverse itself in subsequent quarters. Our operations provided us cash of $15.7 million for the three months ended March 31, 2008, which was attributable to net income of $1.6 million, depreciation, amortization and other non-cash charges of $13.3 million and a decrease in working capital of $0.7 million.
In our foreign operations we conduct business in each of our foreign jurisdictions local currency. Due to the recent strengthening of the U.S. Dollar relative to several major foreign currencies, we expect revenues and operating income to be negatively impacted by foreign currency translation. As a point of reference, for the year ended December 31, 2008, the weighted average exchange rate used to translate the Companys Statement of Operations (U.S. Dollar rate for one unit of foreign currency) was $1.85 for the British Pound, $1.47 for the Euro, and $0.84 for the Australian dollar. For the year ended December 31, 2008, approximately 21%, 14% and 8% of our consolidated revenues were generated in the British Pound, Euro and Australian dollar, respectively. For the year ended December 31, 2008, approximately 16%, 11% and 6% of our consolidated operating expenses were generated in the British Pound, Euro and Australian dollar, respectively. A $0.01 change in exchange rates for each of the major foreign currencies we operate in would have the following impact on revenue for the year ended December 31, 2008: British Pound, $0.4 million, Euro, $0.4 million and Australian Dollar, $0.3 million. The foreign currency exchange rates which impact our revenues and operating income have been volatile recently and are beyond our control. (See Item 3, Foreign Currency Risk, below)
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TNS Inc provides data communications services to processors of credit card and other card-based transactions. TNS Inc. has a market cap of $428.4 million; its shares were traded at around $17.04 with a P/E ratio of 10.6 and P/S ratio of 1.2.
Highlight of Business Operations:
International services division. Revenues from the international services division decreased $7.0 million, or 18.7%, to $30.2 million for the three months ended March 31, 2009, from $37.2 million for the three months ended March 31, 2008. The adverse effect of foreign exchange translation on a year-over-year basis was $8.4 million. Excluding the adverse impact of foreign exchange rates, international services division increased $1.4 million, or 3.7%, to $38.6 million from $37.2 million for the three months ended March 31, 2009 and 2008, respectively. The increase was the result of an additional $0.7 million from increased sales of our payment gateway services, higher transaction volumes and increased broadband connections from POS customers in Asia Pacific and $0.7 million from additional connections from financial services customers. Revenues from our United Kingdom subsidiaries decreased $5.0 million, or 29.2%, to $12.3 million for the three months ended March 31, 2009, from $17.3 million for the three months ended March 31, 2008. On a constant dollar basis, revenue from the United Kingdom subsidiaries for the three months ended March 31, 2009 would have decreased $0.4 million, or 2.6%, to $16.9 million due to a decrease in transaction volumes which was partially offset by increased revenue from sales of our payment gateway and IP services.POS division. Revenues from the POS division decreased $0.4 million, or 2.1%, to $18.0 million for the three months ended March 31, 2009, from $18.4 million for the three months ended March 31, 2008. POS dial-up transaction volumes decreased 9.7% to 1.18 billion transactions for the three months ended March 31, 2009, from 1.31 billion transactions for the three months ended March 31, 2008. Revenues from the POS division decreased $1.1 million for the three months ended March 31, 2009 due to lower transaction volumes, as mentioned above, which we primarily attribute to softness in the economy, and $1.1 million due to a decrease in revenue per transaction for our dial-up POS offering mainly resulting from the renewal of certain customer contracts. This was partially offset by a $1.0 million increase in revenue from our managed broadband products, a $0.6 million increase from sales of our ATM processing products, primarily in Canada, and a $0.2 million increase in sales of our wireless payment gateway platform.
Engineering and development expense. Engineering and development expense decreased $0.8 million, or 11.0%, to $6.4 million for the three months ended March 31, 2009, from $7.2 million for the three months ended March 31, 2008. On a constant dollar basis, engineering and development expenses would have decreased $0.1 million, or 1.4%, to $7.1 million. Engineering and development expense represented 8.5% and 8.6% of revenues for the three months ended March 31, 2009 and 2008, respectively. Included in engineering and development expense for the three months ended March 31, 2009 and 2008 is stock compensation expense of $0.4 million and $0.5 million, respectively. Capitalized software development costs, which are offset against engineering and development costs, increased $0.4 million to $1.6 million from $1.2 million for the three month period ended March 31, 2009 and 2008, respectively. The increase in capitalized software development costs is primarily due to our planned investment to enhance our card-not-present payment gateway, and to a lesser extent from development of our back-office systems to enhance our internal reporting and network monitoring capabilities. Excluding the items mentioned above and the effects of foreign exchange, engineering and development expense before the capitalization of software development costs would have decreased $0.4 million to $5.1 million, or 6.7% of revenues, for the three months ended March 31, 2009 from $5.5 million, or 6.5% of revenues, for the three months ended March 31, 2008.
Selling, general and administrative expense. Selling, general and administrative expenses decreased $1.7 million, or 8.7%, to $17.8 million for the three months ended March 31, 2009, from $19.4 million for the three months ended March 31, 2008. On a constant dollar basis, selling, general and administrative expenses would have increased $0.2 million, or 1.0%, to $19.6 million. Selling, general and administrative expenses represented 23.6% of revenues for the three months ended March 31, 2009, compared to 23.1% of revenues for the three months ended March 31, 2008. Included in selling, general and administrative expenses for the three months ended March 31, 2009 and 2008 is $1.4 million and $2.2 million of stock compensation expense, respectively. The decrease in stock compensation expense is due to a reduction in performance related stock compensation as a result of fewer grants made during the three months ended March 31, 2009. Included in selling, general and administrative expenses for the three months ended March 31, 2009 are $0.6 million in professional fees related to our acquisition of CSG. Included in selling, general and administrative expenses for the three months ended March 31, 2008 was a $0.9 million pre-tax benefit associated with the settlement of a state sales tax liability. Excluding these items and the effects of foreign exchange, selling, general and administrative expenses would have decreased $0.5 million to $17.6 million, or 23.4% of revenues, for the three months ended March 31, 2009 from $18.1 million, or 21.5% of revenues, for the three months ended March 31, 2008 primarily as a result of our efforts to reduce our overall costs.
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 $15.3 million and an increase in working capital of $11.6 million. The increase in working capital relates primarily to the timing of payments. We expect a large portion of this working capital change to reverse itself in subsequent quarters. Our operations provided us cash of $15.7 million for the three months ended March 31, 2008, which was attributable to net income of $1.6 million, depreciation, amortization and other non-cash charges of $13.3 million and a decrease in working capital of $0.7 million.
In our foreign operations we conduct business in each of our foreign jurisdictions local currency. Due to the recent strengthening of the U.S. Dollar relative to several major foreign currencies, we expect revenues and operating income to be negatively impacted by foreign currency translation. As a point of reference, for the year ended December 31, 2008, the weighted average exchange rate used to translate the Companys Statement of Operations (U.S. Dollar rate for one unit of foreign currency) was $1.85 for the British Pound, $1.47 for the Euro, and $0.84 for the Australian dollar. For the year ended December 31, 2008, approximately 21%, 14% and 8% of our consolidated revenues were generated in the British Pound, Euro and Australian dollar, respectively. For the year ended December 31, 2008, approximately 16%, 11% and 6% of our consolidated operating expenses were generated in the British Pound, Euro and Australian dollar, respectively. A $0.01 change in exchange rates for each of the major foreign currencies we operate in would have the following impact on revenue for the year ended December 31, 2008: British Pound, $0.4 million, Euro, $0.4 million and Australian Dollar, $0.3 million. The foreign currency exchange rates which impact our revenues and operating income have been volatile recently and are beyond our control. (See Item 3, Foreign Currency Risk, below)
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