8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 18, 2006

TRANSACTION SYSTEMS ARCHITECTS, INC.

(Exact name of registrant as specified in its charter)

Delaware	0-25346	47-0772104
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

120 Broadway, Suite 3350

New York, New York 10271

(Address of principal executive offices) (Zip Code)

Registrant’s Telephone Number, Including Area Code: (646) 348-6700

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 7.01 Regulation FD Disclosure.

On December 18, 2006, Transaction Systems Architects, Inc. posted investor presentation materials on its web site (www.tsainc.com) to be used in connection with meetings with investors that management expects to have from time to time. A copy of the presentation materials is attached hereto as Exhibit 99.1 and is incorporated by reference into this Item 7.01.

The foregoing information (including the exhibit hereto) is being furnished under “Item 7.01—Regulation FD Disclosure.” Such information (including the exhibit hereto) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

The filing of this Report and the furnishing of this information pursuant to Item 7.01 do not mean that such information is material or that disclosure of such information is required.

Item 9.01. Financial Statements and Exhibits.

Exhibit 99.1 — Investor Presentation dated December 2006.

2

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

TRANSACTION SYSTEMS ARCHITECTS, INC.

/s/ Dennis P. Byrnes

Dennis P. Byrnes

Senior Vice President and General Counsel

Date: December 18, 2006

3

EXHIBIT INDEX

Exhibit No.		Exhibit Description
Exhibit 99.1	—	Investor Presentation dated December 2006.

EX-99.1

Transaction Systems Architects

Investor Overview

December 2006

VERSION 2.0 9-14-06

Exhibit 99.1

Private Securities Litigation Reform Act of 1995

Safe Harbor For Forward-Looking Statements

This presentation contains forward-looking statements based on current expectations that involve a

number of risks and uncertainties. The forward-looking statements are made pursuant to safe harbor

provisions of the Private Securities Litigation Reform Act of 1995. A discussion of these forward-

looking statements and risk factors is set forth at the end of this presentation. The company assumes no

obligation to update any forward-looking statement in this presentation.

As  announced on October 27, 2006, the Company’s Audit Committee is conducting a voluntary review

of its historical stock option grants for all periods from 1995 through the present.  On October 27, 2006,

the

Company

also

announced

that

its

financial

statements

and

all

earnings

releases

and

similar

communications relating to financial periods since fiscal year 1995 should not be relied upon in light of

the stock option review.  The review and the related audit procedures to be performed by the

Company’s outside auditors are not complete.  As a result, on December 14, 2006, the Company

announced that the Company would not file its Annual Report on Form 10-K for the year ended

September 30, 2006 on the December 14, 2006 required filing date.  The Company intends to continue

to devote all available resources with the objective of filing its Form 10-K for such period as promptly

as practicable.

2

3

Investment Considerations

•

Leader in Global Payments Software and Solutions

–

Customers

include

~

60%

of

the

top

500

global

banks

that

use

3

rd

party

payments software and 9 of the top 20 global retailers

•

Long-Term Blue-Chip Customer Base

–

Average 18-year relationship with top ten customers

•

Significant Recurring Revenue Base

–

54% of fiscal 2006 revenue was contractually recurring on a monthly basis

–

Volume-based,

term

license

model

–

high

customer

retention

rates

•

Large Contractual Backlog

–

60-month backlog of over $1.24 billion provides significant visibility into future

operating results

•

Strong Cash Flow Generation

–

High margins combined with minimal capital expenditure $4.3 million (P&E)

excluding acquisitions and working capital requirements

4

Investment Considerations (cont’d)

•

New Opportunity With Software as a Service Business Model

–

Significantly expands potential opportunity

•

Leadership Advantages in Areas of Focus

–

30 years of providing leading payments processing solutions

–

Approximately 12% of annual revenue invested in product development

–

High degree of product integration, strong customer support and ongoing product

investment results in low customer turnover

•

Positive Industry Fundamentals

–

Global

electronic

payment

volume

estimated

to

grow

approximately

13%

annually

through 2009, 4x GDP

–

Aging legacy systems

–

Drive for better payment systems productivity

•

Experienced Management Team and Vision for the Future

–

Significant payments processing domain expertise

–

Strategy for growth

5

Business Overview

•

Leader in global enterprise electronic payment software and solutions

–

Gold standard for single-message format payments

–

Listed on the NASDAQ (ticker: TSAI)

–

Member of the S&P MidCap 400 and Russell 2000

•

Operates

through

one

operating

division

-

ACI

Worldwide

(“ACI”)

–

Products sold and supported primarily through direct global distribution network

–

Solutions

are

used

to

process

retail

and

wholesale

payments

-

credit

and

debit

cards,

smartcards,

checks,

high

value

payments

and

bulk

file

payments

–

Additional capabilities for fraud management, transaction settlement, card

management and infrastructure support

•

Over 820 customers in 83 countries

–

Primary customers include large banks, retailers and payment processors

Global business with long and successful operating history

6

Company History

Over 30 years of delivering market leading e-payments solutions

1975

1975

1981

1981

1983

1983

1991

1991

1987

1987

1995

1995

1997

1997

Founded as

custom

development

firm

First

international

sale

Went public

on NASDAQ

as ACI

Purchased by

US West

Purchased by

Tandem

Computers

TSA IPO and

Secondary

Offering

Proactive Risk

Manager

product launch

1982

1982

First product offering

(BASE24)

2002

2002

Phil Heasley

joins as CEO

Restructuring of

TSA organization

to combine

business units

March

2005

March

2005

LBO

1993

1993

Closed P&H

Acquisition

September

2006

September

2006

October

2005

October

2005

BASE24-es

product launch

7

TSA Business Strategy

•

Globalization

–

Extend geographic reach

–

Global infrastructure will drive efficiencies

•

Filling in the payments “supply chain”

–

Build, buy, partner

•

Software as a Service

–

Alternative mechanisms for offering payments technology to the marketplace

–

Opens up new market opportunities

•

Payments convergence

•

Focus on growth

Management has developed a strong vision for the Industry

8

Continuation of the Strategy

Phil Heasley joins

as CEO

Acquisition

•

Payments software

•

Added customers

•

Integration completed

Acquisition

•

Payments software

•

Entered Germany, access to new

products, initiated offshore efforts

•

Integration on schedule

(Q2‘05)

(Q3‘05)

Announced global realignment of

organization structure

•

Created cost efficiencies,

consolidated brand and positioned

for payments convergence

•

Realignment completed

(Q1‘06)

(Q2‘06)

Acquisition

•

Web-based enterprise

business banking for U.S.

banks

•

Extends product family,

catalyst for broad distribution

of software as a service

•

In-house and services-based

delivery

(Q4‘06)

Timeline based on TSA September Fiscal Year End.

•

Globalization

•

Solutions Leadership

•

Software as a Service

•

Payments Convergence

•

Scale

9

An End-to-End Payments Architecture

TSA solutions can be deployed in-house or used as Software as a Service

10

Solutions Overview

•

BASE24/BASE24-es

–

Gold standard for online e-payment processing

–

Strong in ATM and POS markets

–

Customers process over 60 billion transactions

per year

–

BASE24-es opens up the IBM-centric and open

systems markets, plus secures migration path

for existing base

•

Wholesale Payments System

–

High value money transfer system

–

Strengths = scale, reliability, security

–

Customers process over $3 trillion per day

•

Proactive Risk Manager

–

Emerging leader in enterprise fraud detection

–

Includes rules and custom model deployment

options

•

Software as a Service

–

Domain management

–

ASP-based services, starts with P&H

–

Significantly expands market opportunity

•

Payments Manager

–

Back-office payment settlement

•

Smart Chip Manager

–

Smartcard lifecycle management

–

Supports Europay/Mastercard/Visa (“EMV”)

standards

–

Facilitates “multi-application”

on the chip

•

Retail Commerce Server

–

Suite of e-payments products targeted at

retailers

–

Runs on open systems including Windows and

Unix

Portfolio of products that provide end-to-end e-payments solutions architecture

11

Where TSA’s Solutions Fit –

Wholesale Payments

National

Payment

Network

SWIFT

Wholesale Bank

(e.g. BofA,

Wachovia, PNC)

Domestic

Bank

Corporate Treasurer

or Individual

e.g.. FEDWIRE, CHIPS,

LVTS, CHAPS)

Foreign

Bank

Corporate Treasurer

or Individual

Corporate Treasurer

or Individual

Notifications,

Alerts

Domestic

Payments

International

Payments

Notifications,

Alerts

Bank peer-to-peer payments

TSA facilitates multiple processing models and straight-through processing

12

Where TSA’s Solutions Fit –

Consumer Payments

Regional

Network

National

Network

ATM

Retailer

(e.g. Target, Safeway,

The Gap, Winn Dixie)

Acquiring

Institution

(e.g. BofA,

Citibank, US Bank)

Regional

Network

Issuing Institution

(e.g. BofA,

Citibank, Wells Fargo.

Wachovia)

Merchant Acquirer

(e.g. FDC, Paymentech,

TSYS)

(e.g. Mastercard

Visa, Cirrus, Plus)

(e.g. Star, NYCE,

Instant Cash)

TSA offers services at every point in the payment flow

13

TSA Industry Focus

•

Top 2000 world banks

•

Top 500 global retailers

•

Top 200 global and regional payment processors

•

Software as a Service

–

Designed to expand addressable market to lower tiers

–

P&H acquisition is catalyst

Dynamic industry with significant potential for growth

14

TSA’s Footprint

9 of the top 20 global

retailers, and 33 of the

top 100 U.S. retailers

11 of the top 15 U.S.

banks running the

ACI Wholesale

Payments System, and

23 of the top 500

world banks

32 of the top 500 world

banks running ACI

Proactive Risk Manager

for fraud detection

12 of the top 25 U.S.

banks running the Web

Cash Manager Suite

(with P&H)

116 of  the top 500

world banks running

Retail Payment

Engines

TSA revenue represents less than 1% of the total revenue in the

2005 “Fintech

100”

15

Blue-Chip Customer Base

Processors/Switchers

Retailers

Financial Institutions

Long term relationships with blue chip customer base

16

3-Dimensional Licensing Model –

Key Elements

•

Term (no perpetual licenses)

–

Typical term is 5 years

–

Leverages longevity of customer relationship

•

Feature/function

–

Pricing by module (TSA has thousands of modules)

–

Return from R&D initiatives

•

Business volumes

–

Usually based on transactions, can be based on cards, accounts, etc.

–

Generally results in customers paying a fee per transaction

–

Ties the company to market volume growth

Attractive financial model tied to transaction volumes and contractually recurring revenue

17

•

Maintenance provided to license customers

–

15-20% of license amount and include annual CPI adjustments

–

Includes periodic product updates in addition to usual product support

•

Professional services include design, development,

implementation, integration and installation

–

Standard is time and materials

–

Niche-specific, high-margin

•

Software as a Service

–

Offers customers options for using IP

–

Customers pay “by the drink”

–

P&H brings new ASP offering

Value-Added Services

~50% of TSA’s revenue comes from maintenance and services

18

TSA’s Next Growth Opportunities

•

Tier 1 banks where IBM is the preference

–

Increases opportunity by 2-3 times

•

Tier 2 banks and retailers

–

Via Software as a Service

–

Via open-systems platforms (Unix, Windows, Linux)

•

Expansion into countries with large and/or high growth in

payment volumes (e.g. Germany, Brazil, China)

–

Unique opportunity to replace retail AND wholesale payments infrastructures

•

Global banks, deploying global solutions

•

Cross-selling solutions into the base (e.g. fraud detection)

–

Average customer today has approximately 2 TSA products

TSA is well positioned to capitalize on significant growth opportunities

19

•

Focus is product extension,  geographic expansion and

delivery

•

Purchase of S2 Systems (product extension)

–

Adds technology and expertise

•

Purchase of eps Electronic Payment Systems AG (geographic,

product extension)

–

Leading supplier of consumer payments software in Germany

–

Created presence in key electronic payments region

–

Added strong technology and expertise in open-systems electronic payments

•

Purchase of P&H (delivery, product extension)

–

Catalyzes software as a service initiative

–

Adds gold-standard wholesale banking solutions

TSA’s Acquisition Strategy

Disciplined acquisition strategy focused on integration

Industry Overview

*

*

*

20

21

Market Trends

•

Electronic payment volumes still increasing,

especially debit

–

Movement towards single-message format

•

Focus on increasing payments productivity

•

Growing fraud losses and a focus on enterprise-wide fraud

detection and management

•

Regulatory

mandates

accelerate

–

SEPA,

Basel

II,

EMV,

TDES

•

Emerging interest in payments system convergence

–

Creating re-usable payments functions

–

Eliminating redundant systems

–

Creating homogenous systems images for global deployment

Long-term electronic payments volume growth is superior to software spend growth and GDP

22

Global Electronic Payments

Transaction Growth

Compound Annual Growth Rate, 2004 to 2009

12.9%

13.1%

13.1%

10.5%

-3.3%

10.3%

3.2%

Electronic

Retail Payments

Retail Transfers

Wholesale

Checks

Total Non-Cash

Real GDP

Global Payment Transactions

2004

Transactions

(billion)

Change in

Transactions

2004 -

2009

(billion)

2004 -

2009

Compound

Annual

Growth Rate

Electronic

209.8

174.4

12.9%

Retail Payments

140.2

119.6

13.1%

Retail Transfers

47.6

40.6

13.1%

21.9

14.2

10.5%

Checks

52.4

-8.0

-3.3%

Total Non-Cash

262.2

166.4

10.3%

Real GDP

$34,854

$6,027

3.2%

Wholesale

Source: 2006 ACI Payments Market Forecast

Electronic

Payments

Top

210

Billion

&

Double

by

2010

23

Top 15 Countries –

Electronic Payments

**

**

**

**

**

**

**

**

** Countries where TSA’s presence is limited

Source: 2006 ACI Payments Market Forecast

Electronic Payments -

2004

Top 15 Countries

Total

Transactions

(millions)

% of World

Transactions

% of World Real

GDP

% of World TSA

revenue

1

United States

66,014

31.5%

30.9%

41.5%

2

United Kingdom

18,446

8.8%

4.6%

9.1%

3

Germany

17,301

8.2%

5.6%

1.2%

4

France

11,488

5.5%

4.1%

0.2%

5

Brazil

10,856

5.2%

1.9%

1.6%

6

Canada

9,189

4.4%

2.3%

5.9%

7

China

5,794

2.8%

4.3%

0.0%

8

South Korea

5,591

2.7%

1.8%

1.8%

9

Australia

5,529

2.6%

1.2%

2.9%

10

Japan

4,771

2.3%

14.2%

0.4%

11

Spain

4,571

2.2%

1.9%

0.4%

12

Netherlands

4,269

2.0%

1.1%

2.5%

13

Italy

3,517

1.7%

3.2%

3.2%

14

Belgium

3,395

1.6%

0.7%

0.1%

15

Mexico

3,129

1.5%

1.8%

2.4%

Total Top 15

173,860

82.9%

79.3%

73.4%

World

209,762

--

--

--

24

Top 15 Growing Countries –

Electronic Payments

** Countries where TSA’s presence is limited

**

**

**

**

**

**

**

**

Source: 2006 ACI Payments Market Forecast

Electronic Payments -

Growth 2004 to 2009

Top 15 Countries

Change in

Transactions

(millions)

Compound

Annual Growth

Transactions

Compound

Annual Growth

Real GDP

1

United States

52,273

12.4%

3.3%

2

China

17,080

31.6%

8.1%

3

United Kingdom

10,994

9.8%

2.5%

4

Brazil

9,978

13.9%

3.4%

5

South Korea

8,317

20.0%

5.2%

6

Germany

6,433

6.5%

1.5%

7

France

5,780

8.5%

2.0%

8

Canada

5,638

10.0%

2.8%

9

Russia

4,084

18.9%

4.8%

10

Mexico

3,763

17.1%

3.7%

11

Australia

3,544

10.4%

2.5%

12

Spain

3,261

11.4%

2.7%

13

Poland

3,243

20.3%

4.6%

14

India

3,180

26.1%

6.5%

15

Singapore

2,856

17.4%

4.5%

Total Top 15

140,423

13.0%

3.5%

World

174,414

12.9%

3.2%

25

Heavy Volumes

Increased Cost/Age

Regulatory Change

Increased Risk

Today’s Payment Systems are Under Pressure

Emerging Solutions

ARC

Check Conversion

Web and

Telephone

Payments

Mobile Payments

Proximity

Payments

Stored Value

Cards

EMV

Emerged Solutions

Traditional

Solutions

PayPal

Biometrics

26

Why is Convergence Coming?

•

Banks face cost issues

–

Competitive pressures

–

Ongoing mandate compliance

•

Risk management issues

–

Authentication (ACI core competency)

–

SEPA, operational fraud, AML

•

Time-to-market needs

–

Reusable services are needed

•

Need for distinctive brand and image

TSA is well positioned as the premier provider of end-to-end payments solutions

27

Wire

Platform

Settle

Platform

Switch

Platform

ACH

Platform

Risk

Platform

Card

Platform

Wire

Platform

Settle

Platform

Switch

Platform

ACH

Platform

Risk

Platform

Card

Platform

Multiple, Redundant “Payment Engines”

Banks and processors are beginning to consolidate their payment systems

28

Common Services Can be Leveraged

POS, ATM

BRNCH

ARC, LBX

TW, WEB

BRANCH

CORE

CORE

FX

, TSVCS

ATM

, POS

BRANCH

ATM

, POS

BRANCH

CARD

CORE,

CARD

CHANNEL

MANAGE-

MENT

ATM

ENTER-

PRISE

ACCESS

TW, WEB

WEB, ATM

CORE

CORE

Check

Wire

D License

Check Card

ID+PW

TESTKEY

Credit

Debit

CARD

CARD PIN

TYPE

Cash

ID

ACH

Bill

Payment

CARD

WEB

LOGON

DDA

DDA

SORT

COMPLEX

CARD

DDA

STP

STP

AUTHORI-

ZATION

PAYMENT

PREP

Counters

Recyclers

DDA

DDA

STP

STP

GRNTY

SWIFT

RTGS

MICR

,

CARD

KEY, MAC

BIC

VISA

, MC

AMEX

, JCB

STAR

,

LINK,

NETS

BIN, CVV

EMV

PIN, EMV

NETWORK

ACCESS

AUTHENTI-

CATION

Watermark

NACHA

BACS

CHKFREE

DEST

DEST

IMAGE

CORR

RECON

RULES

NEURAL

MANY

DUAL

SINGLE

DUAL

RULES

NEURAL

RULES

NEURAL

CLEARING

SETTLE-

MENT

Paper

Based

RISK

MANAGE-

MENT

Physical

Controls

DUAL

DUAL

RULES

NEURAL

RULES

NEURAL

P

a

y

m

e

n 

t 

I 

n

s 

t  

r 

u

m

e

n 

t

Payment Value Chain

29

Payment

Systems

Reconciliation

Reconciliation

G/L

G/L

DDA

DDA

Check

Check

ACH

ACH

Debit Card

Wire

Wire

Payments

Database

Providing an “Enterprise Payments Hub”

Teller

Teller

Call Center

Call Center

Web Site

Web Site

IVR

IVR

Mobile

Mobile

Enterprise-based services increase overall efficiency and help reduce risk

Financial Overview

30

31

Summary TSA Historical Financials –

Revenue

$348.1

$313.2

$292.8

$277.3

$0.0

$100.0

$200.0

$300.0

$400.0

2003

2004

2005

2006

($ millions)

32

Services

16%

Monthly

License Fees

20%

Maintenance

30%

Facilities

Management

4%

Initial

License Fees

30%

Revenue Mix

Asia/Pacific

10%

EMEA

38%

United States

34%

Americas Int'l

18%

Fiscal 2006 Revenue of $348.1 million

Highly recurring and geographically diverse revenue streams

Non-Recurring

Recurring 54%

33

Summary TSA Historical Financials –

EBITDA*

$62.5

$67.9

$63.7

$44.4

$0.0

$25.0

$50.0

$75.0

2003

2004

2005

2006

0

10

20

30

40

50

EBITDA

EBITDA Margin

50.0%

40.0%

30.0%

20.0%

10.0%

0.0%

21.9%

*Fiscal 2006 includes class action settlement of $8.5 million and $5.7 million of special expenses.

EBITDA non-GAAP reconciliation is provided.

16.0%

16.0%

21.7%

21.7%

21.6%

21.6%

18.0%

18.0%

34

Backlog Overview*

60-Month Backlog –

$1.24 billion

12-Month Backlog –

$291 million

Backlog provides significant visibility into future operating results

*

As

of

9/30/06,

includes

P&H

backlog

net

of

accounting

adjustment,

12

month

backlog

of

$25

million

and

60

month

backlog

of

$135

million

Americas

54%

EMEA

36%

Asia/Pacific

10%

Non-Recurring

26%

Monthly

Recurring

74%

35

Fiscal 2007 Guidance

•

Revenue Guidance for fiscal 2007 is expected to be in the

range of $430 million to $442 million

–

P&H Revenue expected to be $39 million to $41 million

•

Earnings per share guidance for fiscal 2007 is expected to

be in the range of $1.46* to $1.61*

–

P&H is expected to be dilutive on a GAAP basis of $0.17 to $0.19

per diluted share, accretive on a cash basis

•

Non-GAAP adjusted earnings per share expected to be in

the range of $1.82* to $1.97* (see Non-GAAP Financial

Measure reconciliation)

*The Company’s fiscal 2007 financial guidance excludes any financial impact that may

result from its options review and the costs associated with it.

36

Conclusion

•

TSA is the category leader in global electronic

payments software and solutions

•

Long-term blue-chip customer base

•

Significant recurring revenue base

•

Large contracted backlog

•

Strong cash flow generation

•

Leadership advantages in areas of focus

•

Positive industry fundamentals

•

Experienced management team

37

www.tsainc.com

38

Financial Appendix A

•

Sales-to-revenue discussion

•

Backlog analysis

•

Valuation considerations

39

Sales-to-Revenue Mechanics

•

Sales order mix (license fees, maintenance, services,

ASP, etc.) and delivery or other acceptance provisions

drive revenue recognition

•

Key attributes are type of sale, contract terms and

payment terms

•

Maintenance and facilities management or ASP (P&H

Solutions) revenue is generally recognized ratably over

term of contract

40

TSA Sales Cycle by Type of Deal

New accounts

Major new applications

Capacity upgrades with existing customers

Add-ons for existing customers

Services

Term renewals

Term renewals with new products

ASP/FM

90 days

90 -

180 days

180 -

450 days

Note –

TSA expenses sales commissions when the deal is signed (paid later)

Sales cycle ranges from 90 to 450 days

Core solution

renewal rates are in

excess of 97%

41

Sales-to-Revenue Flow

12-Month

and

60-Month

Backlog

(1)

Current Period Revenue

Traditional Term Renewals

No

add-ons:

Revenue

recognized

monthly

over

term, depending on payment terms. Balance in 12-

and 60-month backlog.

Term License Renewals (with add-ons or new product)

Revenue recognized upon shipment or customer acceptance. (All revenue may be in

12-

and 60-month backlog)

Services

Revenue recognized as performed.  Portion of contracted services

in 12-

month backlog.

Maintenance & Facilities Mgmt

Capacity Upgrades

Revenue recognized ratably over term. Balance in

12-

and 60-month backlog.

Add-ons, Tools

New Application to Existing Customer

Revenue recognized upon shipment or customer acceptance assuming

some

customization. (All revenue in 12-

and 60-month backlog)

New Customer

Revenue recognized upon shipment or customer acceptance. (All revenue may be in

60-month backlog)

P&H Solutions

License fees recognized over term of contract

-

1/5th

in

current

year,

4/5th

to

12-

and

60-month

backlog.

Maintenance fees recognized ratably over term.

Annual minimum

ASP

processing

fees

(escalate

annually)

recognized

over

term

of

contract

and

balance

in

12-

and

60-month

backlog.

(1) At September 30, 2006, 12-

and 60-month backlog were $291.5M and $1.24B, respectively.

Revenue associated with up-front payment

generally recognized in current period, balance to 12-

and 60-month backlog. 

Revenue generally

recognized in current period.

42

General Payment Terms

•

Paid monthly, quarterly or annually

Maintenance

•

Paid as performed

Services

•

50% of up-front payment at contract signing

•

50% of up-front payment at shipment or acceptance

•

Periodic payments for maintenance or ongoing license fees (monthly, quarterly,

annually) once system is up and running (90-day warranty before maintenance begins)

Term Fees

TSA Products

•

Paid as performed

Services

•

Maintenance paid annually

•

Minimum

ASP

processing

fees

paid

annually

(minimums

increase

over

term

of

contract)

On-going Fees

•

100% paid of up-front payment at contract signing

License Fees

P&H Products

43

TSA Backlog/Revenue Correlation

TSA’s

current

12

month

($291.5M)

(1)

and

60

month

($1.24B)

(1)

backlogs

support

long-term

growth

objectives and recurring nature of revenue reduces the risk profile of the business

Revenue growth estimated to be in the low double digits (company’s stated goal)

Backlog

excludes

services

(2)

revenue

not

yet

contracted

and

transaction

volume

capacity

upgrades.

However,

based

on

historical

results,

they

can

be

considered

recurring

components

of

TSA’s

business.

(1) As of September 30, 2006.

(2) Services under contract are included in the 12-month backlog.

Backlog

Existing contracts renewed at

historical renewal rates

Excludes non-contracted

services, no capacity upgrades,

no COLA, no up-front payments

assumed for renewals

Gap Fill

Services (not yet contracted):

historically ~20% of revenue

Capacity upgrades:

historically

~10% of revenue

New business represents revenue

from sales of new applications or

new customers 

2007

2008

2009

2010

2011

Revenue Breakdown Estimates

Revenue to come from current backlog

66%

49%

46%

43%

40%

Gap to revenue target

34%

51%

54%

57%

60%

Total Revenue %

100%

100%

100%

100%

100%

Operational View of Revenue Breakdown

Contracted Revenue

From 12-month and 60-month backlog

66%

49%

46%

43%

40%

Sources of Revenue from Existing Clients

Services not already in the backlog

10%

20%

20%

20%

20%

Transaction volume capacity upgrades

10%

10%

10%

10%

10%

Revenue from New Customers/Accounts

14%

21%

24%

27%

30%

Total Revenue %

100%

100%

100%

100%

100%

44

Valuation Considerations of 60-month Backlog

Split backlog and gap fill into two components over 5-year forecast

–

Backlog: Year 1 equals TSA’s

12-month backlog, Years 2-5 assume equal amounts of remaining backlog (60-month less

12-month backlog) with minimal growth

–

Gap Fill: equals revenue target less backlog 

Assume operating margins ~25%

Applied different discount rates to backlog and gap fill over 5-year forecast to reflect risk of forecast

–

Backlog: lower discount rate (risk-free rate + premium) due to reduced risk related to contracted revenue

–

Gap Fill: traditional WACC

–

Blended discount rate lower compared to companies without significant backlog because of lower risk profile

Assume historical investment in the business

Standard terminal value approaches (e.g., current market multiples)

Discounted Cash Flow Analysis Methodology

Reviewed sample of application software vendors that report backlog greater than their 2007 revenue estimates

Mean and Median Enterprise Value to Backlog Multiple estimated at approximately 1.4x

TSA valued at approximately 1.0x 60-month backlog

Comparable Backlog Analysis

Long-term recurring nature of TSA’s

business and significant backlog represent a compelling

and differentiated value proposition for long-term investors and should be considered when

valuing the company.

45

Forward-Looking Statements

This presentation contains forward-looking statements based on current expectations that involve a number of risks and uncertainties. The forward

looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. A discussion of these forward

looking statements and risk factors is set forth below. The company assumes no obligation to update any forward-looking statement in this presentation.

Generally,

forward-looking

statements

do

not

relate

strictly

to

historical

or

current

facts

and

may

include

words

or

phrases

such

as

the

Company

“believes,”

“

will,”

“expects,”

“looks

forward

to,”

and

words

and

phrases

of

similar

impact,

and

include

but

are

not

limited

to

statements

regarding

future operations, business strategy and business environment and specifically include amounts estimated in the 12-month and 60-month backlogs, the

Company’s revenue and earnings guidance, and the Company’s long-term revenue and earnings growth objectives.

The forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking

statements

in

this

presentation

include,

but

are

not

limited

to,

statements

regarding

the:

Company’s expectations regarding the timing of completing the review of its historical stock option practices;

Company’s

expected

timing

regarding

completion

of

the

audit

of

its

2006

consolidated

financial

statements

and

the

filing

of

its

Annual

Report

on

Form 10-K;

Results of the option review;

Expected amounts of the charges relating to the settlement of the class-action lawsuit;

Company’s 12-month and 60-month backlog estimates;

Company’s calculation of recurring and non-recurring backlog;

Company’s revenues and EPS estimates for fiscal 2007;

Company’s belief of emerging interest in payments system convergence; and

Company’s belief of electronic payment volumes increasing.

Any or all of the forward-looking statements may turn out to be wrong. They can be affected by the judgments and estimates underlying such

assumptions or by known or unknown risks and uncertainties. These factors include, without limitation, the risk that additional information may arise

from the preparation of the Company’s financial statements or other subsequent events that would require the Company to make additional adjustments

than

those

previously

disclosed.

Consequently,

no

forward-looking

statement

can

be

guaranteed.

Actual

future

results

may

vary

materially

from

those

expressed or implied in any forward-looking statement. In addition, the Company disclaims any obligation to update any forward-looking statements

after the date of this presentation.

46

Forward-Looking Statements (continued)

All

of

the

foregoing

forward-looking

statements

are

expressly

qualified

by

the

risk

factors

discussed

in

the

Company’s

filings

with

the

Securities

and

Exchange

Commission.

For

a

detailed

discussion

of

these

risk

factors,

parties

that

are

relying

on

the

forward-looking

statements

should

review

the

Company’s

filings

with

the

Securities

and

Exchange

Commission,

including

the

Company’s

form

10-K

filed

on

December

14,

2005,

the

Company’s

form

10-Q

filed

on

February

9,

2006,

the

Company’s

form

10-Q

filed

on

May

10,

2006,

the

Company’s

form

10-Q

filed

on

August

9,

2006

and

specifically

the

sections

entitled

“Factors

That

May

Affect

the

Company’s

Future

Results

or

the

Market

Price

of

the

Company’s

Common

Stock.”

The

risks

identified

in

the

Company’s

filings

with

the

Securities

and

Exchange

Commission

include:

•

Risks

inherent

in

making

an

estimate

of

the

Company’s

12-month

and

60-month

backlog

which

involve

substantial

judgment

and

estimates;

•

Risks

associated

with

tax

positions

taken

by

the

Company

which

require

substantial

judgment

and

with

which

taxing

authorities

may

not agree;

•

Risks

associated

with

litigation

in

the

software

industry

regarding

intellectual

proprietary

rights;

•

Risks

associated

with

the

Company’s

ability

to

protect

its

proprietary

rights;

•

Risks

associated

with

the

Company’s

concentration

of

business

in

the

financial

services

industry;

•

Risks

associated

with

fluctuations

in

quarterly

operating

results

and

resulting

stock

price

volatility;

•

Risks

associated

with

conducting

international

operations;

•

Risks

regarding

the

Company’s

new

BASE24-es

product;

•

Risks

associated

with

the

Company’s

dependence

on

its

BASE24

solution;

•

Risks

associated

with

the

Company’s

dependence

on

the

licensing

of

software

products

that

operate

on

Hewlett-Packard

NonStop

servers;

•

Risks

associated

with

the

complexity

of

the

Company’s

software

products;

•

Risks

associated

with

the

Company’s

acquisition

of

new

products

and

services

or

enhancement

of

existing

products

and

services

through

acquisitions

of

other

companies,

product

lines,

technologies

and

personnel,

or

through

investments

in

other

companies;

•

Risks

associated

with

the

acquisition

of

S2

Systems

and

the

integration

of

its

operations

and

customers,

including,

without     

limitation,

the

risks

described

in

the

Company’s

Form

8-K

filed

July

1,

2005;

•

Risks

associated

with

the

integration

of

its

eps

Electronic

Payment

Systems

AG’s

operations

and

customers,

including,

without

limitation,

the

risks

described

in

the

Company’s

Form

8-K

filed

May

11,

2006;

•

Risks

associated

with

the

acquisition

of

its

P&H

operations

and

customers,

including,

without

limitation,

the

risks

described

in

the  

Company’s Form 8-K filed September 1, 2006;

•

Risks

associated

with

new

accounting

standards

or

revised

interpretations

or

guidance

regarding

existing

standards;

and

•

Risks

associated

with

the

assessment

and

maintenance

of

internal

controls

over

the

Company’s

financial

reporting.

47

Forward-Looking Statements (continued)

Backlog Estimates

The

Company’s

12-month

and

60-month

backlog

estimates

are

based

on

the

Company’s

judgment

about

future

events

which,

as

described

above,

involve

a

number

of

risks

and

uncertainties.

The

Company

estimates

backlog

using

the

methodology

described

in

the

Company’s

Form

10-Q

filed

on

August

9,

2006

in

the

section

entitled

“Backlog”

under

Item

2.

–

MANAGEMENT’S

DISCUSSION

AND

ANALYSIS

OF

FINANCIAL

CONDITION

AND

RESULTS

OF

OPERATION

–

and

on

the

Company’s

Web

site

at

www.tsainc.com.

Non-GAAP Financial Measures

This

presentation

includes,

EBITDA,

a

non-GAAP

financial

measure.

EBITDA

is

defined

as

net

income

before

interest,

taxes,

depreciation

and

amortization.

The

Company

uses

EBITDA

as

a

performance

measure

and

provides

EBITDA

to

investors

to

complement

results

provided

in

accordance

with

GAAP,

as

management

believes

the

measure

helps

illustrate

underlying

operating

trends

in

the

Company's

business

and

uses

the

measure

to

establish

internal

budgets

and

goals,

manage

the

business

and

evaluate

performance.

Because

EBITDA

excludes

some,

but

not

all,

items

that

affect

net

income

and

the

definition

of

EBITDA

may

vary

among

other

companies,

the

EBITDA

measure

presented

by

the

Company

may

not

be

comparable

to

EBITDA

measures

of

other

companies.

EBITDA

should

not

be

considered

in

isolation

or

as

a

substitute

for

comparable

measures

calculated

and

presented

in

accordance

with

GAAP.

EBITDA

reconciliation

table:

($ thousands)

TSA

Net Income

Taxes

Interest Expense

Depreciation & Amortization

Interest Income

EBITDA

2003

14,347

19,288

2,999

9,015

(1,211)

44,438

2004

46,685

10,750

1,434

6,571

(1,762)

63,678

2005

43,246

22,861

510

5,180

(3,843)

67,954

2006

55,804

5,986

185

8,362

(7,825)

62,512

48

Non-GAAP Financial Measure

Non GAAP Financial Measure

This

presentation

includes

earnings

per

share

guidance

on

an

adjusted,

non-GAAP

basis.

TSA

is

presenting

this

non-GAAP

guidance

to

provide

more

transparency

to

its

earnings,

focusing

on

operations

before

selected

non-cash

items.

The

Company

believes

that

providing

this

non-GAAP

financial

measure

is

useful

to

its

investors

as

an

operating

measure

because

it

excludes

certain

expenses

and

therefore

provides

a

consistent

basis

for

comparison

of

the

Company's

expenses

from

period

to

period.

The

presentation

of

this

non-GAAP

financial

measure

should

be

considered

in

addition

to

the

Company’s

GAAP

results

and

is

not

intended

to

be

considered

in

isolation

or

as

a

substitute

for

the

financial

information

prepared

and

presented

in

accordance

with

GAAP.

A

reconciliation

of

GAAP

earnings

per

share

to

non-GAAP

adjusted

earnings

per

share

is

below.

FY06 Preliminary

FY07 Guidance

GAAP earnings per share

$1.46

$1.46

to $1.61**

Tax benefit (first and third quarter FY06)

(0.46)

n/a

Lawsuit settlement cost

0.14

n/a

Adjusted earnings per share after selected one-time items

$1.14

$1.46 to $1.61**

Amortization of acquisition-related intangibles

0.05

0.22

Non-cash equity-based compensation

0.11

0.14

Non-GAAP adjusted earnings per share

$1.30*

$1.82 to $1.97**

*FY06 Not adjusted for special expenses of $0.10 for the fourth quarter

**Reflects P&H dilution in fiscal 2007 (detail as follows):

Projected contribution of P&H

$0.06 to   $0.08

Amortization of intangible assets from P&H          

($0.12) to ($0.12)

P&H non cash stock based compensation               

($0.02) to ($0.02)

P&H deferred revenue impact                         

($0.10) to ($0.10)

Other net

($0.01) to ($0.01)

Total P&H dilution for fiscal 2007                   

($0.17) to ($0.19)

www.tsainc.com