TNS Increased Revenue 4.9% in First Quarter

Gross margin in the first quarter of 2005 of 52.1% increased 310 basis points from first quarter 2004 gross margin of 49.0%. First quarter 2005 GAAP net income was $1.5 million, or $0.05 per share, versus a first quarter 2004 GAAP net loss attributable to common stockholders of $5.1 million, or $(0.34) per share. Included in selling, general and administrative expenses (SG&A) for the first quarter of 2005 is a pre-tax benefit to earnings of $1.0 million, comprised of a $3.2 million charge related to a legal settlement and a $4.2 million benefit from a reduced state sales tax liability assessment. First quarter 2005 GAAP net income excluding the $1.0 million pre-tax SG&A benefit was $0.9 million, or $0.03 per share. Earnings before interest, taxes, depreciation, and amortization (EBITDA) before stock compensation expense for the first quarter of 2005 was $16.4 million, or $15.4 million excluding the $1.0 million pre-tax SG&A benefit, versus first quarter 2004 EBITDA before stock compensation expense of $15.1 million. Adjusted earnings for the first quarter of 2005 was $6.3 million, or $0.22 per share. Excluding the $1.0 million pre-tax SG&A benefit, adjusted earnings for the first quarter of 2005 increased 15% to $5.7 million or $0.20 per share from first quarter 2004 adjusted earnings of $4.9 million, or $0.33 per share. (EBITDA before stock compensation expense, adjusted earnings and adjusted earnings per share are non-GAAP measures. See Financial Measures below for a discussion of these metrics.) As previously announced during the quarter, the Company won the following customer contracts: -- A three-year agreement to provide FreeStar Technology Corporations Rahaxi subsidiary with high-speed, cross-border retail transaction delivery across Finland and Sweden; -- An agreement to provide Linedata Services Inc. with a specialized trading network for its order management system; -- An expansion into the Japanese retail point-of-sale market through five-year deal with Japan Card Network (CARDNET) to provide dial-up transaction transport; -- A two-year contract with Cedecra Group outsourcing end-to-end transactional data transmission to TNS in Italy; -- An agreement with MIXIT, Inc. to transport trading information for MIXITs order management system, and provide connectivity and disaster recovery hosting facilities; -- A preferred supplier arrangement with AKJ Group to provide TNS Secure Trading Extranet, giving AKJs clients accelerated access to AKJs global trading network; -- A renewal of CardSystems Solutions selection of TNS as its primary transaction network provider in the United States; and -- A three-year contract with First Data Iberica, First Datas subsidiary for Spain and Portugal, to act as sole provider of dial-up connectivity in Spain. On April 5, 2005, TNS also commenced a modified Dutch auction tender offer to purchase up to 9 million common shares, or 32% of shares outstanding, at a price between $18.00 and $18.50 per share. TNS controlling stockholder, GTCR Golder Rauner L.L.C. and its affiliated investment funds, has committed to tender 6,000,000 shares pursuant to this tender offer. TNS has obtained a commitment letter for a $240 million credit facility, a portion of which will be used to finance the tender offer. The tender offer expires, unless extended, at 5:00 p.m., New York City time, on May 3, 2005. Financial Review: -- First quarter 2005 total revenue increased 4.9% to $63.1 million from first quarter 2004 revenue of $60.2 million. Included in revenue are the following components. -- Revenue from the International Serv