Trintech posts Q2 loss

Excluding this once-off exceptional charge, Trintech generated net income for the second quarter of $225,000.

Highlights
Revenue amounted to $12.6 million compared to $13.2 million in quarter 2 last year as a result of a slowdown in demand for Chip and PIN (EMV) solutions in Europe and delays in the adoption of EMV payment solutions.

Trintech maintained trading profitability in quarter 2 with net income, before the warranty charge of $3.9 million, of $225,000 and an Adjusted EBITDA net income of $466,000. Adjusted EBITDA net income for quarter 2 excludes interest, tax, depreciation, amortization of purchased intangible assets and the warranty charge.

Gross margin, after the warranty charge of $3.9 million, amounted to $4.4 million in quarter 2, representing 35% of revenue. Gross margin, before the warranty charge, amounted to $8.3 million, representing 66% of revenue.

Basic and diluted net loss, including the warranty charge, per equivalent ADS for the quarter ended July 31, 2005 was ($0.24), compared with basic and diluted net income per equivalent ADS of $0.02 for the corresponding quarter ended July 31, 2004.

Cyril McGuire, Chairman and Chief Executive Officer commenting on the results said: "Trintech's business remains solid despite a challenging quarter 2 performance. We remain focused on our strategy of concentrating on key products and market opportunities that can deliver profitable growth. To achieve this goal, we are committed to migrating the Trintech business model towards a software and transaction services business mix. This was further helped in quarter 2 by a strong performance in our FMS software division which provides transaction reconciliation software and services solutions. In addition, we are evaluating a number of strategic acquisitions within this area with a view to driving shareholder value."

Recent highlights include:

Trintech announced that Midas, Inc. (NYSE:MDS), selected ReconNET for use in their Company Operated Shops to automate the verification and reconciliation of cash, credit card transactions and purchase cards, which are used by stores to buy parts from third party suppliers. The installation of ReconNET is enabling the company to improve daily productivity, reduce write-offs and increase daily visibility of cash balances.

Trintech announced that Broker Network Holdings PLC selected ReconNET to automate the verification and reconciliation of its central depository account and insurance premium payments between its independent insurance brokers and insurance providers. In addition to streamlining internal operations, ReconNET can also strengthen Broker Network's financial controls.

Trintech announced that the Clarks Companies, North America (CCNA) selected Trintech's ReconNET to automate the verification and reconciliation of its bank deposits, and the DataFlow Transaction Network to collect, format and deliver its daily banking data. CCNA expects to further improve operational control and reduce exposure to risk, while decreasing costs and improving productivity.

Trintech announced that Watford Electronics, a company renowned for service excellence and its IT components and computer peripherals, selected and implemented Trintech's PayWare Merchant MPI, a powerful 3-D Secure ecommerce authentication solution for merchants, providing secure internet card payment transactions between the cardholder and card issuer.

Trintech announced the release of ReconNET ES, the latest version of its flagship reconciliation and account balancing application. ReconNET ES incorporates major advances in technology that are designed to benefit large multi-national enterprises, including high-volume processing power, significantly strengthened security controls and support for multiple languages through internationalization. ReconNET ES also includes transaction archival capabilities and improved reporting functionalities, which further reinforce its regulatory compliance capabilities.

Trintech announced SmartPIN Xpress, a cost-effective, pre-certified solution that is designed to allow small and mid-tier retailers to effortlessly migrate to Chip and PIN. SmartPIN Xpress processes card payment transactions in seconds. It also lowers the costs and certification timescales usually associated with complex point of sale integration.

Trintech held its 6th Annual General Meeting (AGM) as a public company in Dublin, Ireland on July 22, 2005. At the AGM, Cyril McGuire, Co-founder, Chairman and CEO, welcomed the approval by shareholders of all the ordinary and special resolutions including the approval of the share buy-back agreement with Deutsche Bank AG.

Trintech announced the appointment of Maurice Hickey as Chief Financial Officer. Maurice will assume responsibility for financial management and reporting functions as well as investor relations activities. He will report to Paul Byrne, former Chief Financial Officer, who will continue as President of the Company.

Results Overview:

Revenue for the quarter ended July 31, 2005 was $12.6 million compared with $13.2 million for the corresponding quarter last year.

Product revenue for the quarter ended July 31, 2005 decreased 35 percent to $2.8 million compared to $4.3 million for the corresponding quarter last year.

License revenue for the quarter ended July 31, 2005 increased 8 percent to $5.9 million from $5.5 million for quarter 2 last year.

Service revenue for the quarter ended July 31, 2005 increased 13 percent to $3.9 million from $3.4 million for the corresponding quarter last year.

Total gross margin, before the warranty charge, for the quarter ended July 31, 2005 was $8.3 million, an increase of 9 percent from $7.6 million in the corresponding period last year.

Operating expenses in quarter 2 increased to $8.2 million compared to $7.4 million in the corresponding quarter last year. Adjusted EBITDA operating expenses for quarter 2 this year were $7.7 million compared to Adjusted EBITDA operating expenses for quarter 2 last year of $6.9 million.

Trintech's balance sheet remains strong with cash and cash equivalent balances of $39.2 million as of July 31, 2005. Net cash generated for the six months ended July 31, 2005 was $36,000. Acquisition related payments of $1.2 million were made in quarter 1 in respect of acquisitions made in prior periods. Capital expenditure during the six month period amounted to $254,000 and primarily related to computer and tooling equipment. Cash outflows from investing activities were largely offset by strong cash generation from operating and financing activities of $1.7 million.

During the quarter, Trintech repurchased 80,600 ordinary shares (equivalent to 40,300 ADS) under its stock repurchase program at a cost of $164,000. As of July 31, 2005, $3.8 million remained available for future repurchases under this program.

"Trintech's second quarter results were impacted negatively by the once-off provision relating to the extension of warranty periods for certain hardware products deployed in Europe. Trintech will work closely with its customers and incur repair and rework costs with a view to resolving certain technical difficulties currently being experienced with these products. The underperformance of the payments division in quarter two was largely offset in trading terms by the strong performance of the FMS division which provides transaction reconciliation software and services solutions. This performance, combined with tight fiscal management of the Company's cost base, compensated for the reduction in hardware product revenues.

"We remain focused on addressing the current technical difficulties within the Payments business. We continue to seek expansion opportunities in software and services to grow Trintech's market share and profitability," said Paul Byrne, President.