Record second quarter revenues boost Trintech

Record second quarter revenues of $10.7 million boosted shares in Irish electronic payment software company, Trintech, to a high of nearly 10 per cent on the German Neuer Markt yesterday to finally finish 5 per cent up at €28.8.

Strong revenue growth resulted in first half fiscal year revenues of $19.5 million, compared with $13.2 million for the same period last year. In later trading on the US Nasdaq stock exchange the shares rose 9 per cent to $26.

Trintech's software license revenues - a major focus of its growth strategy - grew 153 per cent year on year to $8.5 million, but only grew 5 per cent on this year's first quarter. Trintech executive chairman, Mr Cyril McGuire, attributed this to "sequential factors", adding that software revenues grew in absolute terms, but accounted for less as a proportion of the larger revenue base which was dominated by physical product revenues powering ahead.

Trintech's gross margins for the half year rose 85 per cent to $9.3 million for the year on year period, but continue to reflect limited gross margins from software licenses. Mr McGuire said this was due to a write off charge for the acquisition of security technology from RSA. He said this charge will continue to appear for the next two quarters.

The results coincided with Trintech's announcement it has acquired Checkline, a privately held UK transaction processing software company, in a $44 million cash and stock deal. It is Trintech's first major acquisition, and provides it with a foothold in the UK market and a direct route to mobile communications operators for its mobile commerce products.

Under the arrangement Trintech will pay $10 million in cash and issue Checkline with 1.2 million American depository shares, valued at $29 million. The shares will be issued with a two year sale restriction, while an additional $5 million earn out scheme will be targeted at senior Checkline management based on its financial performance and integration with Trintech's operations following the acquisition. Checkline also has operations in Spain, and Trintech says it plans to leverage its presence in both the UK and Spanish markets. Its product range includes the UK's first bank-approved mobile credit card payment system using GSM phone technology.

Mr McGuire indicated there are further acquisitions outside Ireland in the pipeline for Trintech. "It is fair to say acquisition has become part of our growth strategy, and we will continue to review potential targets on a case by case basis."

Checkline's 65 staff will now join Trintech's workforce, while Checkline's chief executive officer, Mr Suresh Mirpuri, will retain his current role.

Over the first half of this year, Trintech increased its sales and marketing spend by 87 per cent to $7.3 million, while research and development spending grew by 133 per cent to $8.4 million from $3.6 million over the corresponding half last year.