Transaction Systems Architects, Inc. 2006 Annual Report
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Transaction Systems Architects, Inc. 2006 Annual Report Transaction Systems Architects, Inc. 120 Broadway Suite 3350 New York, New York 10271 www.tsainc.com tsa_Cover.indd 1 4/13/07 11:48:16 PM Transaction Systems Architects, Inc. is a global provider of software and services for electronic payments. The company supports more Board of Directors Principal Offi ces than 800 customers in the fi nance, retail and transaction processing industries. Harlan F. Seymour Corporate Headquarters Chairman of the Board – Transaction Systems Architects, Inc. Transaction Systems Architects, United States – New York, New York Customers use TSA solutions to: Principal – HFS LLC Offi ces Process transactions generated at ATMs, merchant point-of-sale devices, mobile devices, Philip G. Heasley Argentina Australia Bahrain Internet commerce sites and bank branches President and Chief Executive Offi cer – Transaction Systems Architects, Inc. Brazil Canada France Germany Greece India Process high-value payments and enable Web banking on behalf of corporate clients Roger K. Alexander Ireland Italy Japan Detect and prevent debit and credit card fraud, merchant fraud and money laundering Chief Executive Offi cer – euroConex Technologies Ltd Korea Malaysia Mexico The Netherlands Romania Russia Authorize checks written in retail locations John D. Curtis Singapore South Africa Spain Establish frequent shopper programs Attorney United Arab Emirates United Kingdom United States Automate transaction settlement, card management and claims processing Jim D. Kever Issue and manage applications on smart cards Partner – Voyent Partners LLC Facilitate communication, data movement, transaction processing and systems monitoring John M. Shay, Jr. Investor Information across heterogeneous computing systems President – Fairway Consulting LLC A copy of the Company’s Annual Report on Form 10-K for the year ended John E. Stokely September 30, 2006, as fi led with the Securities and Exchange Commis- TSA maintains its global presence with sales and support offi ces throughout North and South President – JES, Inc. LLC sion will be sent to stockholders free of charge upon written request to: America, Europe, the Middle East, Africa, Asia and Australia. Investor Relations Department Transaction Systems Architects, Inc. 224 South 108th Avenue Omaha, Nebraska 68154 Transfer Agent Communications regarding change of address, transfer of stock owner- The world is embracing electronic payments, as evidenced by continued ship or lost stock certifi cates should be directed to: From steady growth in transaction volumes. For TSA, 2006 represented a trans- Wells Fargo Shareowner Services formational year in preparing us to leverage the opportunities ahead. the 161 North Concord Exchange We drove top line revenue growth of 11 percent at the same time we South St. Paul, Minnesota 55075 President invested in the business for growth and globalization and worked to integrate our strategic acquisitions. We ended the year with more than Stock Listing $110 million in cash and cash equivalents and had an unused borrowing The Company’s common stock trades on the NASDAQ Global Select capacity of $75 million in a senior revolving credit facility. With strong Market® under the symbol TSAI. cash fl ows and a strong balance sheet, we are well-positioned for strategic opportunities. Annual Meeting At the start of 2006, we consolidated what had been three independent The Annual Meeting of Shareholders will be held at 9 a.m. on Tuesday, operating units to help drive effi ciencies and better leverage the power June 5, 2007, at Transaction Systems Architects, Inc., 120 Broadway, of the ACI Worldwide brand. This integration began to pay dividends Suite 3350, New York, New York 10271. during the year, as we built on our reputation in retail payments to license our fi rst ACI Wholesale Payments System in Europe in several years. Independent Public Accountants A primary element of our vision revolves around payment systems conver- KPMG LLP gence, or the reuse of common payment functions, to help our customers Two Central Park Plaza improve productivity. During 2006, consultants at GartnerGroup and Suite 1501 Financial Insights noted TSA’s unique ability to help clients improve their Omaha, Nebraska 68102 effi ciency through converged payment systems. With our global reach and end-to-end offerings, we act as the honest broker for banks, retailers and processors who require gold-standard solutions that can be leveraged across the enterprise. ©2007 Transaction Systems Architects, Inc. All rights reserved. 2957_Cover_rev.indd 2 4/24/07 11:43:21 AM Clearly much of TSA’s future growth potential lies in international markets. Continued globalization of our corporate infrastructure will be an important factor in our ability to grow as effi ciently as possible. In 2006 we established a company in Shannon, Ireland, to become the coordinating entity for housing our international intellectual property and offshore development activities. Irish tax structures and intellectual property protec- tions make it an excellent location for an operation of this type, and we join other technology companies like Microsoft and IBM in taking advantage of this structure. The international intellectual property for BASE24-eps is now housed in the Irish entity. One of TSA’s clear differentiators is the breadth of our electronic payments solutions. In late 2006 we acquired P&H Solutions. P&H expands our wholesale payments offering with their acclaimed Enterprise Banker solution. In addition, their success as an application service provider will now form the basis for our overall “software as a service” strategy. In addition to continuing to drive growth from the core P&H business, we will seek to take their solutions to international markets while we leverage their well-developed infrastructure and skills to offer more of our solutions on a services basis. We made some key management changes during 2006. In addition to the talent we added through acquisitions, we were fortunate to bring on Henry Lyons as our new CFO and Craig Maki to lead corporate development. Henry and Craig bring valuable experience to the management team and will play important roles in our growth and globalization strategies. Both are located in our New York corporate headquarters offi ce. Finally, we appointed Mark Vipond as chief operating offi cer for TSA. Mark has been with the company since 1985. His expanded role in leading our new ACI Global Solutions product and services organization is well-deserved. As we ended fi scal 2006, we announced a plan to rebrand the corporation under the ACI Worldwide name. This move will leverage a trusted brand and refl ect our transition to a single operating company and Another key element of our growth strategy revolves around acquisitions. global infrastructure. Subsequently we announced the completion of During the past year, we fully integrated the operations of S2 Systems our voluntary review of historical stock option grants and the resulting into ACI Worldwide. The acquisition brought us more than 100 active non-cash adjustments to historical fi nancials. With the completion of the customers, an expanded presence in key regions like the Middle East, and review, we will soon be back to a regular reporting schedule. We are additional talent in open systems-based payment solutions. pleased to have the legacy issues of the stock options review and the class We conducted a market study in 2006 with Global Insight, Inc., a leading action lawsuit behind us as we enter the new year. Finally, we announced econometric forecasting company, to quantify the size of our potential a shift to a December fi scal year, which should better align us with our market and highlight areas with signifi cant growth potential. The fi ndings customers, peers and the capital markets, and we announced an showed that electronic payment volumes are expected to grow at roughly increased authorization for our share repurchase program, bringing the four times the growth in global gross domestic product over the next fi ve total authorization to date to $210 million. years, a clear indication that our core market is expanding. As we look ahead to 2007, we see continued growth opportunities for The study also noted that Germany is the third largest electronic pay- TSA. The combination of positive industry dynamics and our internal ment systems market in the world. Historically TSA has had limited work to transform and reorganize the company for growth and globalization success in the region. To develop a foothold in this key market, we acquired will serve us well. I appreciate the commitment and hard work of our eps Electronic Payment Systems AG, a leader in providing payments staff around the world, both in terms of executing against our organic growth software in Germany. The eps acquisition brought us a leadership position plans and integrating our strategic acquisitions. I am confi dent that in the country, expanded our pool of talented people, accelerated we can leverage our differentiated capabilities to create an even stronger our offshore development activities with an operation in Romania, and company, and as always, I appreciate the continued support of our brought us value-added solutions that we will drive through our global customers, partners and shareholders. distribution channel. We are well on our way to integrating eps’ operations into ACI Worldwide, and its founders have taken senior leadership roles in the company. Philip G. Heasley, President and Chief Executive Offi cer 22957_Inserts.indd957_Inserts.indd 1 44/27/07/27/07 3:11:073:11:07 PMPM Transaction Growth Compound Annual Growth Rate 2004 to 2009 Electronic . 12.9% Retail Payments . 13.1% Retail Transfers . 13.1% Wholesale Payments . 10.5% Checks . -3.3% Total Non-cash . .10.3% Real GDP. 3.2% Source: 2006 ACI Payments Market Forecast Retail Payments include credit/debit card payments, direct debit, paperless and electronic credit payments. Retail Transfers include ATM transactions. Wholesale Payments include large-value, automated clearing house and real-time gross settlements.