Chairman’s Address 2006
Chairman’s Address
Trintech Group Plc Annual General Meeting
Thursday, July 27, 2006
Good afternoon fellow shareholders, colleagues, ladies and gentlemen. Welcome to the Annual General Meeting of Trintech Group plc. The time is now after 3pm, and I would therefore like to start the proceedings.
I note that the necessary quorum of members is present and I therefore have pleasure in declaring the meeting open.
I would like to preface all discussions today with the following ’safe harbour’ statement. This AGM will contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. In particular, forward-looking statements will include amongst other things, statements relating to Trintech’s expected revenues, product pipeline, overall financial performance, acquisition opportunities, strategic direction and goals, product and technological investments, product set benefits expected to result from the EMV and Chip & Pin investment upgrade programme, and cost base optimization in fiscal 2007.
These statements should be considered forward-looking in nature and subject to certain risks and uncertainties that could cause actual results to differ materially from those statements.
Actual performance may be affected by the factors more fully discussed in Trintech’s Form 20-F filed with the Securities and Exchange Commission in May 2006 and all subsequent filings made with the Securities and Exchange Commission. Lastly, please understand the company undertakes no obligation to update any information presented at this meeting or during the ensuing question and answer session.
Now, I would like to briefly introduce you to the other members of our Board of Directors who are here with us this afternoon.
I’ll start with the Executive Director team: Paul Byrne, our President who has been a Board member since 1997. Before joining us, Paul was Group Financial Controller at Lafferty Publications Limited, an international bankcard publishing house for the Financial Services Industry, and before that he was a chartered accountant with Price Waterhouse.
And myself, Co-Founder, Chief Executive Officer and Chairman of the Board. My career background was in Investment Banking having worked with the Industrial Credit Corporation - ICC for several years in the IT investment sector before co-founding Trintech with my brother John. I have been a Director since 1987 and currently serve as Chief Executive Officer and Chairman.
Also with us today are our non-executive directors: Trevor Sullivan, Robert Wadsworth, Kevin Shea and Jim Mountjoy.
Trevor has served on the Board since 1991 and for eight years Trevor was the Chairman of our Board of Directors. Since 1981 Trevor held a number of senior management positions at Memorex Ireland and Memorex International and prior to that he worked with IBM.
Having joined us before going public, Robert has served as a non executive Director since September 1998. He is a General Partner of HarbourVest Partners, a private investment company and has served as Managing Director of HarbourVest Partners since 1997. Prior to HarbourVest, Rob worked for Booz, Allen and Hamilton, an international consulting company, specializing in the areas of operations, strategy and manufacturing productivity.
Kevin Shea joined the company back in January 2000 as a director and Chief Operating Officer, a position he held until September 2001. Before joining Trintech, Kevin held senior executive roles in the US with National Data Corporation and Citicorp, among others. Kevin now serves on the Board as a non-executive director.
Finally, we have Dr. Jim Mountjoy. Jim joined the Board in June 2004 as a Non-Executive Director. Prior to this he was co-founder and CEO of Euristix Limited, a software development company which specialises in telecommunications signaling systems which was acquired by Fore Systems which in turn was acquired by Marconi Communications. Jim serves as a Non-executive Director of, and advisor to, a number of technology companies and venture capital funds.
Turning now to a review of Board activities in fiscal 2006. Your Board spent considerable time over the last year working with senior management to ensure a thorough understanding of the business in what are still difficult market conditions with considerable challenges ahead. This is an essential part of our Board responsibility, and is instrumental in building the effective corporate structures and culture that we believe are critical to Trintech’s long-term success.
As a matter of course, during the year the Board reviewed all disclosure policies and practices in line with corporate best practices.
Trintech’s Audit Committee consists of Kevin Shea as Chairman, Rob Wadsworth and Trevor Sullivan. Its primary purpose is to assist the Board in fulfilling its responsibility to oversee management’s conduct of the Company’s financial reporting process. This includes oversight review with respect to the financial reports and other financial information provided by the Company to any governmental or regulatory body, the public or other users, the Company’s systems of internal accounting and financial and disclosure controls, and the annual independent audit of the Company’s financial statements.
Before I move on to summarizing the past year for Trintech, I’d like to take this opportunity to thank my fellow Board Directors for their ongoing support and hard work in what was a challenging but rewarding year.
Business Overview
Trintech is a leading provider of secure payment infrastructure and transaction reconciliation solutions globally. In our Payments business, we develop, market and sell a comprehensive suite of software and electronic PoS systems that enable electronic payments in multiple channels. In our Funds Management Systems business, we develop, market and sell a comprehensive suite of transaction reconciliation software products and services which allow our customers to optimize enterprise funds management including account reconciliation, transaction risk management and operational control and compliance.
Built on 19 years of experience, the Company’s solutions manage each area of the payment transaction cycle - authentication, authorisation, settlement, dispute resolution and reconciliation - enabling its customers to reduce transaction costs, eliminate fraud, minimise risk, maximise cashflow and increase profitability.
Through the Company’s portfolio of feature-rich electronic PoS systems and software products, we offer solutions for use by retailers, financial institutions, payment processors, healthcare providers and network operators.
Every year, Trintech’s PayWare technology reconciles over 200 million transactions, resolves over 2 million payment disputes, and authorizes and settles over 100 million transactions for some of the world’s leading companies, such as AIB Bank, Citibank, Bank of America, Sprint, Verizon Wireless, Sears Roebuck, 7-Eleven and Taco Bell, but to mention a few.
The payments and transaction reconciliation industry that Trintech operates in is evolving in a variety of different areas: banks are reducing paper-based payment systems to offer their customers more efficient and less costly electronic payment services, businesses are leveraging opportunities offered by new automated reconciliation systems and governments and corporates are looking to implement solutions to enable consumers to access their services electronically via new global channels including the internet.
All of these developments are framed by an increasingly competitive and challenging business environment that is forcing the industry to provide more innovative value added solutions to customers and businesses.
Past Year Review
Now, moving on to the last 12 months in particular. It has been a challenging year in what is still an uncertain global IT market with difficult trading environments still existing in some markets. Despite this, our financial performance for fiscal 2006 was solid with revenue of over $46 million and a net loss of $1.5 million.
The Company operates in two business areas: Payments and Funds Management Systems. The Payments business generated revenues of approximately $27.6 million in fiscal 2006 compared with $36.7 million in fiscal 2005. This performance was due to a slowdown in demand for Chip and PIN solutions in the UK market, reduced demand for our PoS products in Germany and market delays in the adoption of Unattended Payment Solutions generally, as well as the unexpected technical issues experienced with some of our hardware products in Europe which has now been successfully resolved.
The Funds Management business generated revenues of approximately $21.1 million in fiscal 2006 compared with $19.1 million in fiscal 2005. The Funds Management business continued to perform strongly in 2006 and the Company has commenced an investment programme to drive revenue growth into new vertical markets of Financial Services and Healthcare.
Overall, I am very pleased with our performance in our core markets, which demonstrates the robustness of our business model.
New Products/Markets
During the last year, we continued to strategically assess opportunities to build exciting new products targeting profitable growth market segments. Our macro-market opportunity is growing and is being driven particularly by Chip & Pin initiatives, especially in the Unattended Payment Systems marketplace, Reconciliation and Funds Management opportunities in the US market and internationally and the continued trend towards automation of the payment and reconciliation cycle in global markets. We also sought out new market opportunities which best leverage our payment domain knowledge and transaction expertise in new areas like Gift Card programs, Pre-pay/Stored Value and Unattended Payment Systems.
During last year, we launched a new release of the OpenPay platform, which is targeted at the emerging Unattended Payment systems environment. This product set is targeted at large corporate OEM customers who wish to benefit from our 19 years of payment domain knowledge and expertise to ‘payment enable’ their own product set with our ‘PayWare Inside’ technology. In this regard, we announced at the Cartes Tradeshow in Paris the OpenPay 4000 range which is targeted at fuel retailers, convenience stores and forecourt system integrators that need compact, powerful, pay-at-pump payment terminals that are compliant with the latest payment security standards. We also announced that PayWare OpenPay had been awarded the new Visa, MasterCard and JCB Payment Card Industry Certification for encrypting Pin Pads (PCI). This certification was another industry first and positioned Trintech at the forefront of this new unattended market opportunity whilst ensuring that PayWare OpenPay customers were the first to achieve compliance with the latest standards for PIN security. This product set will be further helped by the new investment cycle that is underway in respect of the upgrade programme for EMV and Chip & PIN throughout Europe, Asia and other parts of the world because PIN entry instead of signature will boost secure payment in unattended environments.
Finally, we also announced in January the appointment of Shaun Gray as the new Head of our Payments business which we are branding as PayWare Technologies. Shaun has a wealth of management experience and a strong background in the Payments Industry.
Moving onto the Funds Management side of the business, during the year we continued to invest in this product set, both in terms of R&D for new products and Sales & Marketing for new markets. We intend to increase our investment in the development of the next generation of our product platform in this business to facilitate international expansion and the entry into new vertical markets such as financial services and healthcare. We are also expanding our ‘go to market’ capability by investing additional sales and marketing resources to position us to enter these new markets both directly and indirectly through channel partners.
The launch of Treasure eNET in partnership with Kyriba Corporation and the launch of AssureNET in partnership with Assurity Technologies Inc, which we successfully acquired last year, demonstrate our determination to expand our product/technology capability in this business area. The acquisition of Assurity provided us with a feature rich workflow process management system for enterprise reconciliation that will help businesses to manage risk and conform with Sarbanes-Oxley compliance requirements. We also launched our new ‘On Demand’ solutions offering to customers, which is a further step in Trintech’s growth strategy in the funds management market. Combining ‘on demand’ transaction solutions with our ReconNET software product set is consistent with our strategic direction of moving the Company’s business model towards a software and transaction services business mix with high levels of recurring revenue.
Other recently launched products were the latest release of our ReconNET Bank Fee Analysis product, targeted at enhancing profitability by helping companies significantly reduce bank fees and transaction costs by detecting and recovering fee overcharges, as well as providing detailed analysis for optimizing banking processes and services. Trintech also announced the availability of its new DataFlow Transaction Network for business access to commercial bank account data. With this new service offering, Trintech provides businesses with timely access to validated financial data that can help reduce their exposure to fraud, maximize the use of their available funds for income generation, and automate manual reconciliation processes.
The launch of our latest releases of ReconNET and AssureNET and the successful rollout of our ‘On-Demand’ solutions including the DataFlow Transaction Network are further steps in Trintech’s growth strategy in the funds and cash management market. Combining transaction services with our new software product set delivers a uniquely competitive offering to our target market.
These new products featured prominently at our Customer Conference held in Florida in June 2006, where over 200 people representing over 100 of our top corporate and financial customers in the US market such as North Fork Bank, Brinker International and Verizon Wireless. Our conference was also sponsored by leading organizations such as Bank of America, Capital One, Solutran Software, TranSource, Chase Paymentech and was a great customer experience and success.
At the conference, an Executive Circle brought together thought leaders for one day to discuss best practices, unique business experiences, and roadmaps for the future. Maggie Scarborough from IDC Financial Insights moderated the day’s proceedings and led the executive round table discussion. Other key guest presenters included Kyle Didier, Vice President, Regis Corporation, and Jim Fox, Partner, DataServ.
Partnerships
During the year, we also continued to execute our strategy of building a strong network of sales channels and partnerships with the announcement of a partnership with Dresser Wayne in the Unattended Payments vending systems market. We also announced Kyriba Corporation as a partner for Treasury opportunities in the US market and Technolab International as a partner for our Reconciliation Solutions in Mexico and Latin America.
We are confident that these new product initiatives and increased focus on new channels and markets are generating a good pipeline of products and a platform for revenue growth for future quarters.
Now turning to cost management, I am happy to report that we continued to optimise our cost base during the fiscal year 2006 reducing total operating costs from $31.7 million in fiscal 2005 to $29.1 million in fiscal 2006 representing a $2.6 million or 8% reduction in the year. We will continue to focus closely on our costs moving forward, but realistically there is modest scope for further cost optimisation in our operating cost base. We have now consolidated our facilities to five global locations and our headcount is now at a sustainable level of approximately 315 people worldwide.
We continue to believe that the correct business strategy is to have strong management focus on executing our core business profitability and leveraging our core competencies to identify and deliver key new products, technologies and solutions into growth markets that will enhance our competitive position. Although operating environments have improved, they continue to be challenging with slow enterprise IT spending. As a result, customers have become even more demanding regarding the benefits and the return on investment they want from the technologies and products they invest in.
For over 19 years, Trintech’s financial performance has been driven by our diversified customer base, product innovation and strong product set and a solid balance sheet which had closing cash and cash equivalent balances of almost $35 million at the end of our fiscal year 2006.
In summary, our primary goal is to increase shareholder value by making the Company more competitive, more responsive to customer needs and better positioned to pursue new growth opportunities. Our business strategy is to focus on our key profitable products and leverage our core competency in transaction and payment solutions into new profitable growth markets that will enhance our competitive position. In addition, the Company is continuing to evaluate potential acquisition opportunities that have a strong strategic fit with our Funds Management Systems business and which will drive growth and global scale in this business area.
Our management team is proven, capable and motivated. Our people are committed and eager to deliver success and value to you, our shareholders.
Moving onto shareholder communications, I would like to take the opportunity this afternoon to draw your attention to the Investor Relations section of our website. You will note that it includes sections overviewing our AGM, Corporate Governance and Frequently Asked Questions. We’ve included a comprehensive ‘investor feedback’ form, bookmark options and information sections for holders of ADRs and Ordinary Shares. We are pleased with our website and believe that it utilizes the latest technological advancements to provide up to the minute information regarding the company to our shareholders.
It is one of our ongoing objectives to ensure that we are proactive on the investor relations front and that all shareholders receive company information at the same time. A copy of this Address is posted on the Trintech Investor Website. The web is a unique tool which helps us achieve this goal and update our investors promptly and informatively. I would encourage you to visit our site www.trintech.com if you are not familiar with it along with our independent daily overview website of the payment industry www.epaynews.com which now receives over 15,000 user sessions weekly.
I have shared with you today our review of Trintech over the last 12-18 months. Our experiences over the last year have reinforced our understanding of what we must do to deliver sustainable growth in the short and long term regardless of turbulent operating environments.
In the short term we must continue to run the business tightly, drive it hard, aggressively control costs and focus on reaching new customers profitably.
Looking to the future, the Group’s long-term growth strategies must continue to be focused and fully supported by management. We will continue to drive growth opportunities for our core business, concentrate on customer needs, focus on the delivery of shareholder value and move the Company’s business model towards a software and transaction services business mix with high levels of recurring revenue. With our continued determination and your support we strive to become one of the leading transaction reconciliation and payment infrastructure providers globally.
Finally before we proceed with today’s main business I would like to reiterate that Trintech is a company steered by high calibre and committed people at all levels throughout the Group. I would like to take this opportunity to thank them, for all their hard work and pay tribute to their dedication during this challenging year. I would also like to thank you, our shareholders, for your courtesy to me at this meeting and for your continued support and commitment through your ownership of our stock.
With that I’d like to proceed with today’s voting which will be followed by a question and answer session.