Trintech fiscal year profits and revenues drop; buys Assurity Technologies

Highlights

• Revenue amounted to $11.5 million compared to $15.1 million in Q4 last year, primarily because of lower product revenues. The technical issues associated with certain hardware products have now been resolved.
  
• Revenue decreased 13 percent for the fiscal year to $48.6 million compared to $55.8 million in the prior fiscal year.
  
• Gross margin amounted to $6.0 million in Q4, representing 52% of revenue, compared to 61% in Q4 last year.
  
• Gross margin amounted to $26.3 million in the fiscal year, representing 54% of revenue, compared to 59% in the prior fiscal year.
  
• The successful mediation of litigation against the vendors of Checkline, resulted in a net gain on the legal settlement of $3.1 million being recorded during the quarter. Additionally, Trintech booked an increase in its warranty provision of $1.0 million relating to the resolution of technical issues associated with certain hardware products.
  
• Trintech generated net income of $2.1 million in Q4 and broke-even on an Adjusted EBITDA net income basis.
  
• Trintech incurred a loss of $1.5 million for the fiscal year, but generated an Adjusted EBITDA net income of $0.9 million.
  
• Basic and diluted net income per equivalent ADS for the quarter ended January 31, 2006 was $0.14 and $0.13 respectively, compared with basic and diluted net income per equivalent ADS of $0.07 for the corresponding quarter ended January 31, 2005.
  
• Basic and diluted net loss per equivalent ADS for the year ended January 31, 2006 was ($0.10) compared with basic and diluted net income per equivalent ADS of $0.13 and $0.12 respectively for the corresponding year ended January 31, 2005.

Cyril McGuire, Chairman and Chief Executive Officer, commenting on the results said "Trintech's performance in Q4 was solid as we continue to invest in key products and markets. Our Funds Management Business achieved its performance targets and we continue to seek investment opportunities both organically and through acquisitions to scale this business globally. Our investment in new international markets and the acquisition of Assurity Technologies Inc are milestones in that profitable growth plan."

He added, "Our investment program for Payments is focused on building a strong market position in the emerging unattended payment systems and integrated EFT market. Our go to market strategy will be further strengthened by our recent senior management appointment in this area who will lead this plan."

Recent Highlights include:

Earlier today, Trintech announced the acquisition of Assurity Technologies Inc., a private company, for a total consideration of up to $5 million. The consideration comprises an initial cash consideration of $2 million and a performance based earn-out over three years, which is estimated at between $2 million and $3 million. Trintech expects that the transaction will be accretive to earnings for the second half of the current fiscal year excluding the impact of any amortization of the purchase price.

Trintech announced that NationsRent selected Trintech's ReconNET, DataFlow Transaction Network and Bank Fee Analysis software solutions to optimize their funds management processes. NationsRent will use 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. Bank Fee Analysis is intended to further streamline the company's finance and treasury processes and reduce costs by detecting and recovering fee overcharges.

Trintech announced that PayWare OpenPay was awarded the new Visa, MasterCard and JCB Payment Card Industry Certification for Encrypting PIN Pads (PCI EPP). The certification is another industry first for Trintech's Unattended Payments Business and ensures that PayWare OpenPay customers are the first to achieve compliance with the latest standards for PIN security.

Trintech unveiled its latest unattended payment terminal at the Cartes 2005 Exposition in Paris, France. The OpenPay UPT 4000 is targeted at petrol stations, convenience stores and supermarkets that need a compact, powerful, pay-at-pump terminal that is compliant with the latest terminal security standards and technologies. Trintech's primary route to market for this product will be through channel partners including pump manufacturers, forecourt Point-of-Sale suppliers and retail system integrators.

In partnership with Kyriba Corporation, a leading provider of real time, web-based, on-demand, cash management solutions, Trintech announced the availability of Treasure eNET, a treasury and cash management system that aggregates all banking, market and third-party data to and from financial partners through a unique data exchange point enabling enterprises to manage current and future cash flows centrally. As a fully hosted solution, Treasure eNET requires no local installation and can be deployed immediately to provide businesses with rich functionality, including dynamic cash positioning, cash flow forecasting, variance analysis, administrative controls to delegate workflow and Sarbanes-Oxley compliant controls.

Paul Byrne, President of Trintech, stated: "The Funds Management business continues to perform strongly and we have commenced an investment program to drive reconciliation revenue growth in new vertical markets. Whilst these investments will have a negative impact on earnings in the short term, they, combined with the acquisition of Assurity Technologies Inc, open up opportunities in the broader corporate market and position Trintech for solid long term growth for FY07 and beyond."

Results Overview:

Revenue for the year ended January 31, 2006 was $48.6 million compared with $55.8 million for the year ended January 31, 2005, a decrease of 13 percent.

Product revenue for the year ended January 31, 2006 decreased 43 percent to $10.8 million this year from $18.8 million last year. Product revenue in the fourth quarter decreased 49 percent to $2.7 million compared with the corresponding quarter last year.

Software license revenue for the year ended January 31, 2006 remained at $23.6 million. In the fourth quarter, software license revenue decreased 19 percent to $5.2 million from $6.5 million in the corresponding quarter last year.

Service revenue for the year ended January 31, 2006 increased 6 percent to $14.2 million from $13.4 million last year. Service revenue increased 8 percent to $3.6 million for the fourth quarter compared to $3.3 million in the corresponding quarter last year.

Total gross margin for the year ended January 31, 2006 was $26.3 million, a decrease of 21 percent from $33.2 million in the corresponding period last year. Total gross margin for the fourth quarter was $6.0 million, a decrease of 35 percent from $9.1 million in the corresponding quarter last year.

Total operating expenses for the year ended January 31, 2006 decreased 8 percent to $29.1 million from $31.7 million in the corresponding period last year. Adjusted EBITDA operating expenses for the year ended January 31, 2006 were $30.2 million, an increase of 1 percent on the Adjusted EBITDA operating expenses for last year.

Operating expenses in the fourth quarter decreased 45 percent to $4.6 million compared to $8.4 million in the corresponding quarter last year. Adjusted EBITDA operating expenses in the fourth quarter were $6.9 million, a decrease of 16 percent on the Adjusted EBITDA operating expenses for the corresponding quarter last year.

Trintech's balance sheet remains strong with cash and cash equivalent balances of $34.7 million as of January 31, 2006. Net cash usage for the twelve months ended January 31, 2006 was $4.4 million, which includes acquisition related payments of $1.2 million made in the first quarter of the fiscal year in respect of an acquisition made in a prior period. Capital expenditure during the same twelve-month period amounted to $1.1 million and primarily related to computer and tooling equipment and improvements to leasehold premises

During the quarter ended January 31, 2006, Trintech did not repurchase any stock under its stock repurchase program. As of January 31, 2006, $3.8 million remained available for future repurchases under this program.

Trintech received 266,860 ADRs in February, 2006 as part of the settlement of the litigation taken by the company against the vendors of Checkline.


Separately, Trintech Group today announced the acquisition of Assurity Technologies Inc., a private company, for a total consideration of up to $5 million.

The consideration comprises initial cash consideration of $2 million and a performance based earn out over three years, which is estimated at between $2 million and $3 million. Trintech expects that the transaction will be accretive to earnings for the second half of the current fiscal year excluding the impact of any amortization of the purchase price.

Assurity Technologies Inc. is a Kansas based private company. Assurity provides an enterprise process management system for general ledger account reconciliation, review and certification. The product, AssureNET is designed to increase workflow efficiencies and mitigate risk by strengthening internal controls to support Sarbanes-Oxley compliance programs. The company was established in 2004 and employs 7 staff and services 6 customers. In 2005, Trintech formed a strategic partnership with Assurity.

Commenting on the acquisition, Cyril McGuire, CEO of Trintech said, "This acquisition of Assurity Technologies is another step in Trintech's growth strategy in the reconciliation and risk management market. It will allow us to accelerate the growth of our flagship product ReconNET into new markets, which is an important component in the execution of our strategic plan for this business." Paul Byrne, President, added "The acquisition strengthens our market position with customers benefiting from AssureNET functionality being integrated into Trintech's ReconNET, to provide an end-to-end solution for general ledger account reconciliation, review, certification and risk management for every business."

"We are confident that as part of Trintech, we can provide the best combination of service, expertise and value to our customers and partners," said Heather Lynds, President of Assurity Technologies. "Trintech's global reach, sales and marketing expertise and reputation for secure reliable performance and quality service is the ideal partner platform to scale and grow the business into new markets globally".

This acquisition reinforces Trintech's commitment to the Funds Management System market, which is a key focus for growth in 2006. Further information on this acquisition will be given to Trintech's fourth quarter earnings call on Wednesday, March 1st, 2006.

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