FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Indicate by check mark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No ý

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve (12) months (or such shorter period that the Registrant was required to file such report) and (2) has been subject to such filing requirements for the past ninety (90) days. Yes ý No o

Indicate by checkmark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

As of March 7, 2012, 25,905,071 shares of the Registrant's common stock were outstanding. As of June 30, 2011 (the last business day of the Registrant's most recently completed second fiscal quarter), the aggregate market value of such shares held by non-affiliates of the Registrant was approximately $421 million.

Portions of the Registrant's definitive Proxy Statement relating to the 2011 Annual Meeting of Stockholders, filed with the Securities and Exchange Commission, are incorporated by reference in Part III, Items 10 - 14 of this Annual Report on Form 10-K as indicated herein.

Throughout this report, we refer to TNS, Inc., together with its subsidiaries, as "we," "us," "our," "TNS" or "the Company." "Cequint," "CityID" and the TNS and Cequint logos are our registered trademarks, and TNSLink, TNSConnect, Synapse, FusionPoint by TNS, Dialect and Secure Trading Extranet are our service marks. This report contains trade names, trademarks and service marks of other companies. We do not intend our use or display of other parties' trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of, these other parties.

We make forward-looking statements in this report based on the beliefs, expectations, estimates, targets and assumptions of our management and on information currently available to us. Forward-looking statements include information about our possible or assumed future results of operations in "Business," "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the headings "Overview," "Results of Operations," and "Liquidity and Capital Resources," and other sections throughout this report. The forward-looking statements are based on current expectations, forecasts and assumptions that are subject to known and unknown risks, uncertainties and other factors, many of which may be beyond our control, that could cause actual results to differ materially from those set forth in, or implied by, the forward-looking statements. The Company has attempted, whenever possible, to identify these forward-looking statements using words such as "may," "will," "should," "projects," "estimates," "expects," "plans," "intends," "anticipates," "believes," and variations of these words and similar expressions. Similarly, statements herein that describe the Company's business strategy, prospects, opportunities, outlook, objectives, plans, intentions or goals are also forward-looking statements.

Forward-looking statements involve risks, uncertainties and assumptions, including risks described below and other risks that we describe from time to time in our periodic filings with the SEC, and our actual results may differ materially from those expressed in our forward-looking statements. We therefore caution you not to rely unduly on any forward-looking statement. The forward-looking statements in this report speak only as of the date of the report, and we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. The forward-looking statements should not be relied upon as representing the Company's views as of any date subsequent to the date of this filing. The forward-looking statements in this document are intended to be subject to the safe harbor protection provided by Sections 27A of the Securities Act and 21E of the Securities Exchange Act of 1934, as amended.

TNS is an international data communications company which provides networking, managed connectivity, data communications and value added services to many of the world's leading telecommunication firms, retailers, banks, payment processors and financial institutions. Our services enable secure and reliable transmission of time-sensitive data critical to our customers' operations. Our customers outsource their data communications requirements to us because of our substantial expertise, comprehensive customer support and cost-effective services. We provide services to customers in the United States and increasingly to international customers in more than 60 countries including Canada and Mexico and countries in Europe, Latin America and the Asia-Pacific region. We currently maintain operations and/or employees in 25 countries.

We provide services through our data network, which is designed specifically for data-oriented applications and incorporates multi-protocol label switching, or MPLS, based topology. Our network supports a variety of widely accepted communications protocols and is designed to be scalable,

interoperable and accessible by multiple methods, including broadband, dedicated, dial-up, wireless and Internet connections.

In 2011, we reported our revenues from three distinct business divisions. Our Telecommunication Services Division (TSD) principally serves telecommunication customers in North America, but in recent years has started generating revenue outside of North America from certain products. Our Payment Services Division (PSD) is focused on the payments industry in North America, Europe and Asia Pacific. Our Financial Services Division (FSD) serves customers in the financial services industry in North America, Europe and Asia Pacific. Within TSD we operate the largest unaffiliated Signaling System No. 7 network in the United States capable of providing services nationwide, including call signaling and database access services, to the domestic telecommunication industry. We also provide roaming and clearing services to both domestic and international mobile operators. In PSD, we have more than 2,000 customers and provide services and solutions, both directly and indirectly, to more than one million merchants, making us, on the basis of total transactions transmitted, a leading provider of data communications services and other value added services to processors of credit card, debit card and ATM transactions. In FSD, we are a leading provider of secure data network services to the global financial services industry, connecting over 1,800 financial community end-points located at over 625 distinct financial services companies, representing buy and sell-side institutions, market data and software vendors, exchanges and alternative trading venues.

In each of our divisions, our revenues are generally recurring in nature and we typically enter into multi-year service contracts that require minimum volume or revenue commitments from our customers.

Our business began operations in 1991 to address the needs of the Point-of-Sale industry in the United States. The strong operating cash flows generated by our business have enabled us to invest in our data network to make our communications services more rapid, secure, reliable and cost efficient. In addition, we have leveraged these investments and used our continued strong operating cash flows to expand our service offerings to related market opportunities in the telecommunications and financial services industries in the United States and internationally. By implementing and executing this strategy, we have grown our revenues every year, from $285,000 for the year ended December 31, 1991, to $557.7 million for the year ended December 31, 2011.

Every wireline and wireless telephone call consists of the content of the call, such as the voice, data or video communication, and the signaling information necessary to establish and close the transmission path over which the call is carried. Currently, most telecommunications carriers in the United States and Canada use Signaling System No. 7, or SS7, as the signaling protocol to identify the network route required to connect individual telephone calls. Additionally, the wireless industry requires signaling information necessary to enable roaming between operators. As a significant number of operators are evolving their networks to next generation IP packet-based networks, the interoperability between legacy circuit-based networks and packet-based networks is becoming a critical element of networking solutions.

An opportunity related to the telecommunications industry's evolution to the next generation of Internet protocol, or IP, based networks is the growth of data usage by operators' subscribers. According to Pyramid Research, the telecommunications market in the United States is expected to reach $406 billion in 2014, with mobile data revenue climbing to $94 billion, surpassing fixed voice during the forecast period. This growth is expected to create opportunities associated with the interconnections needed between communication service providers to enable seamless data roaming between disparate operators and networks, and from the focus on applications to drive increased

revenue per customer via value-added applications. Additionally, the network evolution of both fixed and mobile service providers' next generation networks is expected to provide market participants with new opportunities as the operators will need to extend the life of their current infrastructure in order to experience the benefits of next-generation IP networks.

SS7 networks are data networks that transport call-signaling information separate from the public switched telecommunication network over which the call content is communicated. Communication service providers require access to an SS7 network connected to the signaling networks of other carriers to be able to provide telecommunication services to their customers. In addition to circuit set-up and tear-down, wireless operators use SS7 signaling to locate and authenticate subscribers, to determine service parameters and to update location registers.

According to Swedish provider, Ericsson, there are now more than 4 billion mobile subscribers worldwide and approximately 30% third of all handsets sold in 2011 were smartphones compared to 20% in 2010. As expected, mobile data traffic doubled between 2010 and 2011; Ericsson forecasts a 10-fold increase by 2016. In spite of being surpassed by data, voice traffic growth continues to be strong as well, doubling over the last four years (Interim Update, Traffic and Market Data Report, Ericsson, February 2012).

Demand for mobile data is driving wireless operators to migrate to IP networks and convert signaling standards from SS7 to Diameter. Diameter is a next generation signaling protocol that facilitates signaling between network elements such as mobility management elements, policy control and charging functions and home subscriber servers.

Infonetics Research predicts a 106% compound annual growth rate (CAGR) through 2016 in vendor revenue for Diameter signaling controllers (Diameter Signaling Control Worldwide and Regional Market Size and Forecasts, February 2010). Infonetics also tracked strong growth in the VoIP services market at 17% in 2011 and forecasts the global market size to reach $76 billion in 2015.

Since our formation of TSD in 1994, we have owned and operated an SS7 network and partnered with other providers to offer services delivered throughout the network. As a result of our acquisition of the Communications Services Group assets from VeriSign, Inc. in May 2009, we now operate the largest unaffiliated SS7 network in the United States capable of providing call signaling and database access services nationwide. Our SS7 network is connected with the signaling networks of all of the incumbent local exchange carriers and a significant number of wireless operators, competitive local exchange carriers, interexchange carriers, multiple service operators, also known as cable companies, and VoIP service providers. We believe that our independence and neutrality enhance our attractiveness as a provider of outsourced SS7 and other network services. Through the acquisition of the Communication Services Group assets we also own proprietary services such as identity and verification, IP-registry and roaming and clearing services.

The deployment, operation and maintenance of a nationwide SS7 network connected to all of the major signaling networks and database providers requires significant capital and specific technical expertise. For these reasons, many communication service providers have chosen not to build the networks and applications necessary to satisfy all of their SS7 signaling requirements. Rather, they turn to outsourced SS7 network service providers such as TNS to obtain the call signaling, database access and value-added services critical to their business in an effort to increase speed to market and to remain competitive.

Despite the market focus on newer technologies, SS7 presently remains the most common signaling protocol for many operators and competition between service providers has made delivering

their services in the most cost-efficient manner critical. For this reason, communication service providers are looking for flexible product offerings which decrease investments in legacy infrastructure, achieve economies of scale and increase speed to market. We believe TNS' SS7 connectivity services fit strategically in this increasingly competitive environment.

With our MPLS backbone network and our SS7 network, we believe we have an opportunity to assist our customers in evolving their networks and maximize the benefits of the next generation IP-based networks as they are deployed. Through our network we are able to help communication service providers in different phases of their transition to next generation networks while minimizing the effort and expense necessary to support legacy infrastructure and diverse connectivity needs. With the large size of the telecommunications industry's installed base in legacy circuit-switched SS7 networks, we believe that the evolution to IP communications will be gradual. Additionally, service providers that operate purely next-generation networks, must be able to terminate traffic on traditional networks using SS7. We believe these service providers will continue to require SS7 connectivity and intelligent database interoperability services into the foreseeable future.

We believe our network solutions will continue to play a critical role in delivering necessary intelligence for communication service providers to maintain a sustainable market position. Furthermore, we believe that significant opportunities exist for service providers and mobile operators with the technical and commercial strategies to capitalize on the convergence of communications networks. Accordingly, TNS' strategy is to deliver network-based intelligence and infrastructure services that enhance the service distribution capabilities of our telecommunication customers.

Within our identification and verification services we enable our wireline and wireless customers to provide intelligent network services, such as calling name identification (Caller ID), and validation services for credit card, calling card, third-party billing and collect calling. TNS owns the largest independent directly-sourced Caller ID database in the U.S., storing over 200 million of an estimated 421 million telephone numbers with reciprocal access agreements with AT&T, Verizon and CenturyLink to the remaining telephone numbers. Approximately 75% of the records in TNS' CNAM database consist of wireless telephone numbers with the remainder belonging to traditional wireline providers. To extend our identity and verification services to wireless customers, we acquired Cequint in October 2010. Cequint provides embedded original equipment manufacturer (OEM) Caller ID software that

enables a mobile operator to provide enhanced Caller ID services to its subscribers. We currently have partnerships with leading mobile network operators in the United States.

Additionally, the rapid growth of phone-based identity verification has created a market opportunity for value-added service providers currently serving the Caller ID market. These providers can improve the security measures of authenticating an individual based on telecommunication data. We believe we are in a unique position to properly use the authoritative telecommunication data, which we have historically used to provide caller name identification, to validate various forms of payment and other transactions in order to eliminate fraud and manage risk associated with card issuing and card-not-present transactions in the payments industry.

Within our registry services, we provide for the registration and resolution of addressing information within the telecommunication industry. Wireline and wireless telecommunications carriers are required to provide services that enable a subscriber to change service providers within a particular location and keep the same phone numbers. Telecommunications service providers must access local number portability databases in order to route a call appropriately. Additionally, telecommunications service providers must also access a national database of toll-free numbers in order to route a toll-free call. Our SS7 network provides access to internally managed databases that host all wireline and wireless number portability data and toll-free routing information. As more communication networks are using IP-based connectivity, our carrier electronic numbering service enables applications using IP to communicate with consumer devices addressed by telephone numbers. Our IP-registry is populated with information sourced from industry and regulatory number management systems, along with unique data sourced directly from the mobile virtual network operators (MVNOs) and application service providers delivering text-enabled applications to data only devices. Through a query or number lookup, the IP-registry provides accurate carrier-of-record information and the applicable IP address in order to enable VoIP calls, data messages, and text messages to be terminated to the proper location.

Our suite of registry services include: Local Number Portability (LNP), Toll-free databases, IP-registry services and LNP Service Order Administration.

We believe there are a number of additional factors that contribute favorably to ongoing demand for our registry services. The growth of mobile data services requires interoperability between mobile operators' radio networks, private IP networks, and the public Internet. We believe TNS' IP-registry services enable the exchange and accurate routing of mobile data communications between these networks. Additionally, mobile and IP-based communication service providers participate in the porting of telephone numbers, which complicates the accurate and efficient routing of communications data. Through our best practices in data management, we believe TNS' IP-registry services resolve these complexities on behalf of service providers in a cost effective and efficient manner.

We offer a suite of roaming and clearing services to wireless carriers using the ANSI-41 and Global Systems Mobile Communications (GSM) Mobile Application Part signaling protocols. Our roaming and clearing services allow carriers to provide support for mobile customers of other carriers visiting their service area, referred to as roamers, and for their customers when they roam outside their service area. Our service also manages signaling conversion and implementation anomalies between different countries to provide activation processing, seamless international roaming, and fraud protection. Our roaming data clearinghouse services facilitate financial settlement between carriers. We provide these services in addition to access to a pre-established international roaming footprint. We offer roaming services for carriers utilizing third Generation Packet Radio Services (3GPRS) and Code Division Multiple Access (CDMA) technologies to offer wireless roaming to their subscribers over broadband wireless networks. We also offer a variety of roaming application and value-added services

that help wireless operators better manage and maximize the profitability of their roaming operations. Additionally, we are equipping our roaming service to support next generation wireless networks such as Long Term Evolution (LTE), worldwide interoperability for microwave access (WiMax) as well as providing interoperability between mobile networks and established WiFi communities.

In October 2010, we acquired Cequint, Inc., a privately-held company providing caller identification services to wireless operators. Cequint's patented caller identification feature, which is integrated into the operating system of the mobile phone and is called City ID®, automatically displays the city and state associated with the calling party's phone number. In July 2011, Cequint launched Name ID, a new product that enables mobile operators to deploy carrier-grade caller name identification in mobile phones. This patent pending product, Name ID, will utilize a proprietary architecture and technology that will permit wireless operators to overcome certain network and technology challenges in order to deploy mobile caller-name identification similar to that which is currently available to legacy landline users. The technology supporting Name ID will also provide wireless operators with increased revenue opportunities through the ability to develop additional features and functionality. The City ID® and Name ID products, which are and will be pre-loaded applications by the OEM at the request of a wireless operator, are and will be offered by Cequint's wireless operator partners to their end user customers. TNS expects to have handsets with Name ID available with another tier-one mobile operator in the United States by the end of 2012.

For our TSD products and services, we generally enter into multi-year contracts with our customers, many of whom agree to minimum volume commitments. We generally charge fixed monthly fees for network solutions, and per-message fees for our registry services, identification and verification and roaming and clearing. Cequint generates revenue for its products through a revenue share with its wireless operator partners.

For the years ended December 31, 2010 and 2011, we generated $260.7 million and $287.2 million of revenue in TSD, which represented 49.9% and 51.5% of our total revenues, respectively.

According to The Nilson Report, credit and debit transactions in the U.S. will increase from $3.2 trillion in 2010, or 43% of all total payments transactions on a dollar volume basis, to $5.6 trillion, or 56% of all transactions, by 2015. This growth represents a 12% CAGR over the period. Additionally, while these types of payments are growing quickly in the U.S., the international market for these payment methods is expanding at an even greater rate. According to The Nilson Report, the total number of general purpose credit and debit card transactions outside of the United States increased to approximately 34.3 billion transactions in the six months ended June 30, 2011, a 16.2% increase to the prior year's period. Outside of the U.S., the regions with the highest transaction volumes were Europe, Asia-Pacific and Latin America, while Middle East/Africa and Asia-Pacific experienced the fastest growth.

A component of the growth in overall payment transactions is e-commerce. JPMorgan estimated that global e-commerce revenue in 2011 will grow to $680 billion, up 18.9% from 2010 revenue. JPMorgan estimates that in the United States alone, e-commerce was projected to grow 13.2% to $187 billion, and it is forecasted that global e-commerce revenue will reach $963 billion by 2013. From a transaction perspective, the U.S. e-commerce market is expected to grow at a three year CAGR of 8.6% from 2010 to 2013, with transactions growing from 4.3 billion in 2010 to more than 5.5 billion in 2013.

In addition to continued growth in card-based electronic payments, alternative payment methods, such as PayPal, are continuing to gain traction, particularly in the e-commerce channel. While the

volumes of alternative payment transactions currently are relatively small compared to other payment methods, they are becoming increasingly significant and represent additional displacement of cash and check transactions, providing incremental growth in electronic payments. Emerging channels such as mobile payments and television commerce are forecasted to contribute to even greater adoption of electronic payments while simultaneously migrating a portion of the existing electronic payments onto newer technologies.

Along with the growth in electronic transactions, the increase in the number of options for point-of-sale (POS) device connectivity, which now includes wireless, Internet-based and dial-up access, is adding complexity to retailers and processors running large-scale payment networks. Electronic transactions require the two-way transfer of information over a secure, reliable data network. Typically, wherever a credit, debit or ATM card is accepted, whether at a POS and off-premise ATM (an automated teller machine at a location other than a branch office of a financial institution) or online or through mail order-telephone order (MOTO), the customer's account information and transaction amount must be electronically transmitted to a payment processor or financial institution. The payment processor or financial institution then electronically communicates with the entity that issued the card to determine whether to authorize the transaction. After this determination is made, the processor or financial institution returns an authorization or rejection response to the POS, ATM terminal or online or MOTO merchant.

Financial institutions in the United States and Canada typically outsource the processing of credit and debit card accounts to payment processors who are able to leverage technical expertise and capitalize on economies of scale. Payment processors, in turn, typically have outsourced to third party service providers, such as TNS, the data networking services used to transport transaction data between the processor's host computers and the POS or ATM terminal. Outside of the United States and Canada financial institutions typically process credit and debit card accounts. Recently these institutions have looked to outsource these services to third-party providers.

POS or off-premise ATM terminals access data network connections to payment processors through a variety of methods, the most common of which are dial-up and dedicated, or leased line, services and increasingly include broadband connections. Dial-up access services allow merchants and off-premise ATMs to connect to payment processors by dialing a telephone number each time a transaction is initiated. Wireless access provides the same capability as dial-up access without a physical connection to the POS device or ATM. A leased line is a dedicated connection provided to a merchant or ATM location for the exclusive purpose of connecting the POS terminal or ATM to the payment processor. Dial-up services are less expensive than leased line services as leased line services impose greater fixed monthly communication service charges, making a leased line economically viable only in high-volume merchant or off-premise ATM locations. A broadband connection such as a digital subscriber line, or DSL, or wireless connection is an always-on connection utilized by a merchant or ATM location for various purposes including to connect a POS terminal or ATM to the payment processor. With the introduction of broadband services, merchants and other POS providers have begun to deploy integrated wide-area-network solutions. These solutions may include POS services, inventory management and other back-office solutions utilized by merchants.

Apart from the payment processors, pre-paid card providers, kiosk operators, loyalty card providers and merchants situated in locations other than brick and mortar stores, such as mobile merchants and merchants on the internet, are expanding their use of electronic transaction processing in an attempt to reduce costs, increase sales through the acceptance of credit and debit cards, and increase the reliability and efficiency of data transmission. As the number of merchants situated in locations other than brick and mortar stores increases, the number of transactions being performed without the cardholder or card present also is increasing, creating a growing need for card-not-present and other gateway services.

Another significant factor facing the electronic payment processing industry is susceptibility to fraudulent transactions and as the number of electronic payment transactions has increased, the

industry's exposure to fraud has increased. Payment processors desire secure and reliable data communications and other transaction related services while merchants desire access to tools to combat fraud. Participants in the electronic payment processing industry which handle payment card information are required to be compliant with industry security standards called the Payment Card Industry Data Security Standard, or PCI-DSS. In many cases, the requirements to be in compliance with PCI-DSS can be cost prohibitive and we believe we are in a position to help mitigate these costs for customers.

Our payments division markets services directly to payment processors, financial institutions, card associations and merchants in North America, Europe, and Asia-Pacific. We also market our data communications services to entities responsible for the transmission of state lottery transactions, federal and state electronic benefits transfer, and healthcare transactions as well as directly to select categories of merchants and retailers. Our suite of services includes: network solutions, payment gateway solutions and ATM processing and other solutions:

The core service offering in our payment division is network connectivity which enables transmission of card-based payments data between the POS device or off-premise ATM and the processor's host computer.

Our private and secure data network was designed specifically to address the data communications requirements of the payment processing industry. Our data communication services provide customized routing technology, built-in redundancy and geographic diversity and are configured to provide fast and reliable call connection and efficient network utilization. Our data network is PCI-DSS certified and is used to connect a merchant's POS terminal, an off-premise ATM or an online or MOTO merchant securely to the payment processor's host computer.

We provide multiple means for the online and MOTO merchant, POS terminal, and off-premise ATM to access our data network. Merchant POS terminals and off-premise ATMs can connect directly to our network using our dial-up service, which utilizes telephone services obtained from interexchange carriers and local exchange carriers. While our customers primarily choose to access our network using our dial-up services, they are increasingly using other methods we provide of connecting to our network, including fixed broadband, wireless and internet connectivity via our TNSLink product line.

In addition to our network connectivity services, our payments division provides card-present and card-not-present payment gateway solutions to multi-channel merchants as well as to card associations which offer services over the Internet. We have been providing these services from our operations in Australia since 2007. In 2010, we launched our card-not-present platform in the United States and in 2011, launched the card-not-present platform in Western Europe. Our payment gateway services enable a merchant (whether they be online, traditional brick and mortar, MOTO, or mobile merchants) to authorize and settle card-based payments or other alternative electronic payment methods. Our payment gateway solutions protect card details by encrypting sensitive information, such as credit and debit card numbers, and securely delivering it to the merchant's payment processor(s). Our payment gateways also provide value-added capabilities, such as card data tokenization, that merchants can use to reduce card-related fraud, improve security, and ease efforts to achieve required industry security compliance certifications. As such, our payment gateway acts as a key enabler and distribution channel for a number of merchant-facing and acquirer-facing applications.

The following diagram illustrates the route of a typical card-not-present transaction from an e-commerce merchant using our payment gateway service. The route of a typical call center transaction, where the card is also not physically present for the merchant, is similar.

TNS provides payment gateway services for both cardholder-present and cardholder-not-present merchants through our TNSPay product lines. For "brick and mortar" retail outlets that use ePOS or PC-based payment terminals, TNSPay Retail is our UK-based payment gateway service that enables authorization and settlement of in-store payment transactions. TNSPay Retail also provides other capabilities for merchants, such as support for contactless payments and specialized card encryption security services. Our wireless payment gateway platform, called TNSPay Mobile, enables merchants to process card transactions using mobile POS terminals or smartphones that have been adapted to accept payments as well as terminal management and reporting services for independent sales organizations.

With the increased number of electronic transactions, the increased focus on fraud, evolving compliance requirements and the need to support an expanding array of payment options, there has been a significant increase in the complexity of the payments industry. Our payment gateway and network connectivity solutions are highly scalable and able to transport and support a wide variety of access methods as well as payment types and channels. With these capabilities, we believe we will be able to increase the number of transactions we transport, the number of connections to our network, and the types of products and services we offer as these and other industries look to outsource the data communications requirements necessary to transmit transactions securely. We believe we have an opportunity to provide services to securely host and manage payments card information on behalf of merchants in an effort for the merchants to achieve PCI-DSS compliance and to utilize tools designed to reduce fraud.

In select markets, we provide additional value added services to our merchant, bank and processor customers. These include settlement file transfer, offline polling, outsourced payment processing and card scheme gateways (including Visa and Mastercard). In addition, we operate a software platform that caters for outsourced ATM management (including Foreign Exchange and Dynamic Currency Conversion capability) as well as a transaction processing capability for card issuers.

Additionally, we provide services to international payment processors that are not used by payment processors in the United States. These include settlement and offline polling services which enable merchants to store transaction data until the payment processor retrieves the data after business hours.

Our payment services division generally enters into multi-year contracts that usually have minimum transaction or revenue commitments. For dial-up network access services, we typically charge our customers a fixed fee per transaction plus a variable time-based charge for transactions that exceed a specified period of time. Generally, our contracts provide for a reduction in the fixed fee per transaction as our customers achieve higher monthly transaction volumes. For our fixed broadband, wireless and internet connectivity services and our payment gateway solutions we typically charge our customers a per-transaction fee, a minimum monthly fee, or a combination of both. We typically charge our customers fixed monthly fees for leased line and broadband services. We also generate revenue from usage charges, leased line circuit charges, charges for access to real-time transaction monitoring and charges for ancillary services.

For the years ended December 31, 2010 and 2011, we generated $195.5 million and $203.6 million of revenue in PSD, which represented 37.4% and 36.5% of our total revenues, respectively.

The securities trading and investment management industry requires high-speed, reliable, secure data communications services to communicate information among industry participants, including commercial banks, mutual funds, pension funds, broker-dealers, alternative trading systems (ATS), electronic communications networks (ECNs) and securities and commodities exchanges. Participants in the securities trading and investment management industry continuously seek opportunities across global markets as transaction volume in the global equity markets increases.

The emergence of new electronic trading venues such as ECNs and ATSs, and regulatory requirements such as Markets in Financial Instruments Directive (MiFID) and the shift to decimalization have placed increasing emphasis on trading and cost efficiencies. In addition, in recent years financial institutions have reduced the size of their staff even though business and trading demands have increased. In order to continue to meet the need for high quality, fast and secure data communications, market participants are increasingly using outsourced data communications service providers. These providers give industry participants access to other participants through a single, managed access point on the service provider's network. These services allow participants to cost-effectively connect to each other to conduct time-sensitive transactions and communicate real-time information.

Additionally, the growth, automation and globalization of financial markets have led to increased demand for outsourced, secure, reliable data communications services. Prior trading methods are unable to keep pace in an environment where latency is a critical competitive issue. Banks, mutual funds, pension funds, broker-dealers, ATSs, ECNs, securities and commodities exchanges and other market participants all require systems that enable them to react quickly and, thus, increasingly use data communications services to exchange trading information, distribute research and review trading positions.

Our fast, private, secure and reliable IP data networks are designed specifically to address the data communications requirements of the financial services industry. Our Financial Services Division connects more than 1,800 financial community end-points located at more than 625 distinct financial services companies, representing buy and sell-side institutions, market data and software vendors, exchanges and alternative trading venues. Our IP network services allow our customers to access multiple financial services companies through a single network connection, thereby eliminating the need for costly dedicated institution-to-institution leased line connections. Additionally, these services facilitate secure and reliable communications between financial services companies by supporting multiple communications standards and protocols, including the Financial Information eXchange (FIX) protocol. Our network has over 100 points of presence and provides services to customers in 40 countries across the Americas, Europe and the Asia Pacific region, with connections to endpoints in many more. Our financial services customers may have one or more access points to our IP network, depending on the location of their offices and other factors.

We refer to our primary financial service offering as our Secure Trading Extranet. Our Secure Trading Extranet service links financial services companies through our IP network. Through a single physical network connection, a customer is able to virtually connect with any other entity connected to our IP network. Given the large number of industry participants connected to our network, including commercial banks, mutual funds, pension funds, broker-dealers, alternative trading systems, electronic communications networks, multilateral trading facilities and securities and commodities exchanges, a single customer can use its connection to our IP network to conduct seamless, real-time electronic trading and access a variety of content including news, research and market data.

The growth of electronic trading in the global market continues to present opportunities for our Financial Services Division. There is increasing demand for low latency connectivity to trading venues and higher bandwidth connectivity as firms expand their use to include more trading partners and additional asset classes such as foreign exchange transactions.

We generate revenue in our Financial Services Division primarily from monthly recurring fees based on the number of customer connections to and through our IP network as well as the amount of bandwidth the customer requires.

For the years ended December 31, 2010 and 2011, we generated $66.2 million and $67.0 million of revenue in FSD, which represents 12.7% and 12.0% of our total revenues, respectively.

Recurring revenues and strong operating cash flows. Our established customer base enables us to generate high levels of recurring revenues and strong operating cash flows. Our business model is based upon the number of transactions and database queries we transport, the number of connections to our networks and, in the case of our roaming platform, the amount of data we transport. We enter into multi-year service contracts that usually have minimum transaction or revenue commitments from our customers. We believe that our recurring revenues and strong operating cash flows will enable us to continue to invest in the development of new products and services and to continue to expand internationally.

Established customer base. We have an established customer base of leading industry participants in each division and have experienced limited customer turnover. As of December 31, 2011, TNS provided its services to more than 2,000 customers in the Payment Services Division, to more than 850 customers in the Telecommunication Services Division, and to more than 625 customers in the Financial Services Division. Internationally we generate revenue in over 60 countries and provide services to some of the largest financial institutions, wireless operators and other services providers in those countries and neighboring countries. Additionally, within some elements of our business, the

value of our network to our customers increases for every new customer we put onto our network. The entities connected to our network form communities of interest in the industries to which we provide services and we believe these communities of interests we have established over the last 20 years differentiate us from our competition.

Well positioned to continue international growth. The solutions we have developed to serve customers in our existing geographic markets are applicable to the data communications needs of the payment processing, telecommunication and financial services industries in other regions. We believe that our data communications services and technologies, our technical expertise and our customer relationships with the largest domestic payment processors, telecommunication carriers and global financial institutions strategically position us to take advantage of substantial international opportunities. We have grown our international revenues from $33.1 million for the year ended December 31, 2002 to $168.6 million for the year ended December 31, 2011.

Highly customized data network. We operate a highly customized global network designed and configured for the transmission of time-sensitive data. Our network supports multiple communications protocols and access methods and, as a result, is able to support a wide variety of applications. The flexibility and scalability of our network and our technical expertise allow us to rapidly add new services to our existing offerings in response to emerging technologies with limited service disruptions or capital expenditures. We also believe our ability to leverage our fixed cost base provides us with significant economies of scale, resulting in a competitive advantage.

Substantial experience in our target markets. The eleven members of our executive management team have on a combined basis more than 170 years of experience in the transaction services and telecommunications industries as well as experience managing large, multinational corporations, and on average have been employees of the company for more than eight years. We have focused on creating data communications services for developing and established markets. We believe this gives us an understanding of the unique needs and risks of our target markets and provides us with a competitive advantage over larger service providers that have a broader market perspective. We also believe our extensive experience provides us with a competitive advantage over service providers of similar or smaller size.

Proven acquisition strategy. Our management team has augmented the growth of our business by successfully identifying and integrating strategic acquisitions. We have made a number of acquisitions that have accelerated the growth of the payments and telecommunication services divisions. For example, in 2010 we acquired Cequint, Inc. to expand our identity and verification platform to mobile devices. In 2009, we acquired the assets of VeriSign's Communications Services Group to increase the scale of our network and registry services as well as to expand our product offerings with the addition of identity and verification, wireless roaming and clearing and IP registry services. We also acquired Dialect Payment Technologies in 2007 to provide card-not-present payment gateway services to our customers throughout the world.

Our objective is to continue to grow our business and enhance our position as a leading provider of outsourced business-critical data communications services enabling secure and reliable transmission of time sensitive information for our transaction processing, telecommunications and financial services customers. Key elements of our strategy include:

Focus on key geographies and selectively enter new ones. We continue to focus our efforts and resources to expand our business in six countries and their surrounding areas in which we already have operations. These countries are Australia, France, Italy, Spain, the United Kingdom and the United States. We believe concentrating our efforts in this way will enable us to grow our business in these geographic markets as well as in adjacent countries, enabling us to generate growth with less capital

investment. We have also started to establish our network connectivity and gain customers in all divisions in new countries in the AsiaPacific region.

Continue to expand our customer base. We believe our experience, existing customer relationships and our ability to consistently deliver secure and reliable data communications services will enable us to expand our customer base in domestic and international markets. For example, in our payment services division we intend to expand our service offerings to certain customer segments in both the traditional and Internet-based retail industries, with a focus on selling our IP-based network services and our TNSPay gateway products, including our e-commerce, Retail and Mobile solutions. Within our telecommunication services division, we expect our expanded set of services including our network, identification and verification and roaming and clearing solutions will help us acquire new customers both domestically and internationally. Additionally, our acquisition of Cequint expanded our product offerings and we anticipate this will help us acquire new customers. In our financial services division, we will continue to increase the scope of services and leverage our existing customer base of over 625 financial services companies to acquire new customers.

Develop new product and service offerings. We will continue to expand our service offerings to address new markets for secure and reliable transmission of time-sensitive information. We will continue to enhance the IP-based network services we provide to payment processors, financial institutions and merchants in connection with the global payment industry's adoption of new technologies. Additionally, we are making investments in applications that leverage our network, helping our customers increase revenue and reduce costs. For example, we are currently offering our TNSPay e-commerce payment gateway to payments customers through the platforms we have deployed in the Asia Pacific region, North America, the United Kingdom and in Western Europe. In the United Kingdom our TNSPay Retail platform is designed for card-present transactions for a variety of merchant sizes and our TNSPay Mobile platform in the United States is designed for the mobile wireless market, including smart phones. We expect to add more functionality to our TNSPay product suite to include features such as tokenization, encryption and contactless payments. In our telecommunication services division we are deploying new products to our customers. Our enhanced roaming platform is designed to help our wireless carrier customers remain competitive with the growing demand for data roaming. We are also developing new applications in our identity and verification services to help our payments customers reduce fraud using data verified by our telecommunication carrier customers. In addition, we are rolling out our CityID and NameID products, acquired through our acquisition of Cequint, in partnership with top U.S. based mobile operators and are investing in new mobile handset technology designed to help our mobile partners continue to offer new features and functionality to their customers.

Increase sales to existing customers. We will continue our efforts to further expand our existing customer relationships to increase business domestically and abroad. For example, we intend to encourage: our domestic and international payments division customers to increase their number of connections to our networks and to transmit a greater percentage of their transaction volume with us; our telecommunication services customers to increase the number of signaling routes they establish through our network and to increase the amount of data we store on their behalf in our databases; and our financial services customers to connect more endpoints and virtual connections to, and use greater bandwidth on, our data network. Our longstanding relationships with our customers provide us with an opportunity to increase the sales we make to our existing customers as they and we expand internationally. Within payments, our domestic processing customers are looking for growth outside the United States, opening up new opportunities for cross-border routing of transactions. In TSD, we are focused in four main areas: network services, identity and verification, roaming and clearing, and mobile applications. Within each solution, we have various products that we offer to our customers on a stand-alone basis or as a bundled service. We intend to work closely with our customers to increase our knowledge of their businesses and technical requirements in an effort to identify additional sales opportunities.

Pursue strategic acquisitions. We will continue to seek opportunities to acquire businesses that expand our range of services, build scale in our network, provide opportunities to increase our customer base and enter into new domestic and international markets.

We operate a highly-customized data network specifically designed and configured for the transmission of time-sensitive data. Our diverse data network architecture supports a variety of widely accepted communications protocols and is accessible through a variety of methods, including dial-up, leased line, wireless and secure Internet connections. We have designed our data network to be scalable and to allow easy adoption of new access technologies. The hardware utilized in our network is installed at 129 points of presence worldwide, 42 of which are in North America. We connect these points of presence with digital circuits leased from multiple telecommunication services providers. In addition, our network control centers allow us to administer our network and enable us to monitor our customers' transactions in real time. We believe that our network provides the following important benefits to our customers:

Our network is designed specifically to address the data communications needs of our diverse customer base. Our data network supports multiple communications protocols over our MPLS backbone and includes customized hardware, software and value- added features developed by us or by vendors to our specifications. The following is a description of the various protocols we operate within our network:

Our network is reliable, redundant and secure. We believe we have configured the major components of our network to eliminate any single point of failure. The reliability of our data network is enhanced significantly because we have deployed our network with redundant hardware installed at geographically diverse facilities connected by multiple telecommunications carriers. Our facilities are deployed with battery back-up and emergency generator power systems. We coordinate the physical routing of the digital circuits connecting our facilities with multiple telecommunication service providers to ensure the availability of diverse paths for routing any transaction or data, thereby enhancing network reliability. Due to such physical diversity, minor outages or failures typically do not require the immediate intervention of our technicians. We are able to respond quickly to service problems because the network monitoring, management and troubleshooting systems we use permit our network control

centers to correct problems remotely. Our data network contains industry standard firewalls and protections, and security is further enhanced by limiting access. Our network is PCI DSS certified.

Our IP and X.25 protocols incorporate several customized, value-added features that distinguish our services and performance from our competitors. We believe that various value-added features we have developed permit our PSD customers accessing our data network through dial-up services to process a greater volume of transactions than other dial-up service providers. These features include:

Our network can accommodate growth in our business. Our network is deployed with sufficient capacity to accommodate significant growth in transaction volumes without incurring delays relating to the provisioning and deployment of additional hardware and telecommunications circuits. We have also designed the network so that we may easily increase capacity as necessary.

Our network operations centers continuously monitor and manage our network. We provide 24-hour, seven days a week network control coverage domestically through our network control centers located in Reston, Virginia and internationally through our network control centers located in Sheffield, England and Sydney, Australia. Each of these network control centers serves as the backup network control center for the other control center. Our network control centers are staffed with skilled technicians experienced with the services we offer. Our network control centers remotely monitor the components of our data network and manage our network using sophisticated network management tools we have either developed internally or licensed from others.

As of December 31, 2011, we provided our services to more than 2,000 customers in our payments division, to more than 850 customers in our telecommunications division and to more than 625 financial services division customers. Historically, we have experienced limited customer turnover and attribute that to our strong relationships with those customers. For the year ended December 31, 2011, we derived approximately 19.6% of our total revenues from our five largest customers. No customer accounted for more than 10% of our total revenues for the year ended December 31, 2011. We typically enter into multi-year service contracts with our customers with minimum commitments. The contracts with our five largest customers contain minimum transaction or revenue commitments on an annual or contract term basis. The contracts with our five largest customers expire from 2012 to 2014.

We sell our services directly to customers through geographically dispersed sales teams. In our telecommunication service divisions, we have a specialized sales team to sell our telecommunications services division products in North America and Asia Pacific. Globally we have a specialized sales team for our financial services division. In the payments division, our sales teams are organized geographically with each team responsible for selling all of our payments services in the country in which the team is based and, in some cases, proximate countries. Our payments division and FSD sales

teams are based in Australia, Canada, France, Germany, Hong Kong, India, Ireland, Italy, Japan, Poland, Romania, Singapore, South Korea, Spain, Thailand, the United Kingdom and the United States. Generally, each sales team includes a managing director or sales manager, account representatives, business development personnel, sales engineers and customer service representatives experienced in the industries of our customers and the services we offer.

We also have dedicated product development and marketing teams for our payments and telecommunications services divisions that specialize in the industries of our customers and the services we offer. These teams are responsible for working with our customers, prospects and other industry specialists to expand our current suite of solutions to address the evolving demands of the industry they serve. These teams also consider the applicability of our solutions outside of the specific industries to which they are dedicated.

When a customer initially purchases services from us, the customer may purchase some, but not all, of the services we offer. Our sales teams then strive to increase the services purchased by existing customers and to expand the range of services we provide to our customers. Our sales teams consult with our customers to identify the new business-critical services we may provide.

Our global marketing group works with our sales teams around the world and the product group to promote interest in our services and to generate new sales prospects. In addition they ensure that any news associated with the company is distributed in a timely manner to all of the company's stakeholders.

The operation of our networks depends upon the capacity, reliability and security of services provided to us by a limited number of telecommunication service providers. We have no control over the operation, quality or maintenance of those services or whether the vendors will improve their services or continue to provide services that are essential to our business. In addition, telecommunication service providers may increase the prices at which they provide services.

Some key components we use in our networks are available only from a limited number of suppliers. The number of available suppliers of components for our X.25 networks is particularly limited. The Company has entered into long term contracts with two vendors for the provision of network equipment and the maintenance of hardware and software utilized on our network.

Telecommunication services division. Our telecommunication services division competes on the basis of industry expertise, network service quality and reliability, transaction speed, customer support, cost-efficiency and value-added services. The primary competitors of our telecommunication services division include telecommunication carriers such as AT&T Corp., CenturyLink, Syniverse Technologies, Inc., NetNumber, NeuStar and TARGUSinfo (recently acquired by NeuStar).

Payment services division. Our payment services division competes on the basis of industry expertise, network service quality and reliability, transaction speed, value-added features, customer support and cost-efficiency. In the United States the primary competitors for our Payments dial-up services are interexchange carriers such as Verizon Business Solutions, an operating unit of Verizon Communications, Inc., AT&T Corp, and Phoenix Managed Networks, Inc. The carriers typically do not aggressively pursue transaction-oriented business as a stand-alone service but rather offer it in conjunction with other products and services.

The primary competitors of our payment services division's counter-top integration and IP-based network services are Cybera, Inc. and broadband access providers such as MegaPath Networks, Inc. The primary competitor of our payment services division's wireless services in the United States is APRIVA.

Outside the United States our payment services division competes on a similar basis as in the United States. Primary competitors of our payment services are incumbent telephone companies in the geographic location, such as BT Group PLC in the United Kingdom, France Telecom in France, Telecom Italia in Italy, Telefonica in Spain and Telstra in Australia. The primary competitor of our processing services in the United Kingdom is Avantra. The primary competitors of our multichannel gateway services in the United Kingdom are Commidea and Logic Group.

Financial services division. Our financial services division competes on the basis of access to multiple financial services companies, security, support services, cost-efficiency and discrete service offerings. The primary competitors of our financial services division are other private communications networks and telecommunications carriers including AT&T Corp. and BT Group PLC, providers of quote terminals and market data services such as Bloomberg, Reuters and Thomson Financial, and other network service providers such as SAVVIS, Inc.

The Federal Communications Commission, or FCC, retains general regulatory jurisdiction over the sale of interstate telecommunications services. We believe that TNS' services in general are properly characterized as "information" or "enhanced" services rather than "telecommunications services." Providers of information services are not required to maintain a certificate of public convenience and necessity with the FCC, to contribute directly to the Universal Service Fund, to file tariffs with the FCC, or to comply with any of the other FCC regulations applicable to telecommunications carriers. The application of the "information" and "telecommunications" categories to particular services and activities is an evolving standard with no bright lines of demarcation. TNS continues to monitor its businesses to ensure that its services remain properly characterized for regulatory purposes.

Further, the FCC has found information (or enhanced) services to be inherently interstate in nature. In addition, nearly all TNS services cross state boundaries and are thus interstate offerings. Consequently, our services are not subject to state public utility commission regulation.

Even though we provide unregulated services, federal and state regulations can affect the costs of business for us and our competitors by changing the rate structure for access services purchased from local exchange carriers to originate and terminate calls. Under the Telecommunications Act of 1996 ("the 1996 Act"), the FCC implemented rules and regulations known as Access Charge Reform to reform the system of interstate access charges. The FCC's implementation of these rules increased some components of our costs for access while decreasing others. The FCC is currently considering additional rulemaking proceedings concerning this intercarrier compensation scheme, and we currently cannot predict whether any rule changes will be adopted or the impact these rule changes might have on our access charges if they are adopted. Recent and pending decisions of the FCC and state regulatory commissions may limit the availability and increase pricing used by our suppliers to provide telecommunication services to us. We cannot predict whether the rules will change or, if they do, whether the changes will increase the cost or availability of services we purchase from our suppliers.

The third party telecommunications service suppliers for our information services are obligated to contribute directly to the Federal Universal Service Fund. Our telecommunications service suppliers, in turn, recover the cost of their contribution obligations by imposing surcharges on us and our competitors based upon a percentage of their interstate and international end-user telecommunications revenues. If the Federal Universal Service Fund surcharges increase, our telecommunications service suppliers will pass those increased surcharges on to us. We in turn will pass those potential increased Federal Universal Service Fund surcharges on to our customers to the extent permitted under our contracts with them. The United States Congress and the FCC are considering modifying the way in which Federal Universal Service Fund charges are calculated, including considering whether to assess universal service charges on a flat-fee basis, such as a per-line, per-telephone number or per-account charge. We currently cannot predict whether Congress will mandate or the FCC will adopt changes in

the calculation of Federal Universal Service Fund contributions or whether these changes, if adopted, would increase our Federal Universal Service Fund surcharges. If the FCC implements any legislation, adopts any proposal or takes any administrative action that increases our Federal Universal Service Fund surcharges, our network operating costs will increase. In addition, if the FCC implements any legislation, adopts any proposal, or takes any administrative action that increases our supplier's Federal Universal Service Fund obligations, these telecommunications service suppliers may seek to pass through cost-recovery charges to us, which would result in an increase in our cost of network services, an increased cost which the Company may or may not be able to pass on to our customers.

Our success is dependent in part upon our proprietary technology. While we own patents with respect to certain of the services we provide, we rely principally upon trade secret and copyright law to protect our technology, including our software and network design. We enter into confidentiality or license agreements with our employees, distributors, customers and potential customers and limit access to and distribution of our software, documentation and other proprietary information. We believe, however, that because of the rapid pace of technological change in the data communications industry, the legal protections for our services are less significant factors in our success than the knowledge, ability and experience of our employees and the timeliness and quality of services provided by us.

As of December 31, 2011, we employed 1,303 persons worldwide, of whom 905 were engaged in systems operation, development and engineering, 243 of whom were engaged in sales and sales support, 144 of whom were engaged in finance and administration and 11 comprised executive management. Of our total employees as of December 31, 2011, 821 were employed domestically and the remaining employees were in other countries, including 315 in Europe and 167 in Asia Pacific. None of our employees are currently represented by a labor union. We have not experienced any work stoppages and consider our relationship with our employees to be good.

Our internet address is www.tnsi.com. On the investor relations portion of our web site, we provide a link to our electronic SEC filings, including our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and any amendments to these reports. All such filings are available free of charge and are available as soon as reasonably practicable after filing. The reference to our website address does not constitute incorporation by reference of the information contained in the website and such information should not be considered part of this report.

We are subject to various risks that could have a negative effect on the Company and its financial condition. You should understand that these risks could cause results to differ materially from those expressed in forward-looking statements contained in this report and in other Company communications. Because there is no way to determine in advance whether, or to what extent, any present uncertainty will ultimately impact our business, you should give equal weight to each of the following.

We derive a substantial portion of our revenue from a small number of customers. If one or more of our top five customers were to cease doing business with us, or to substantially reduce its dealings with us, our revenues and earnings could decline.

For the year ended December 31, 2011, we derived approximately 19.6% of our total revenues from our five largest customers. We expect to continue to depend upon a relatively small number of customers for a significant percentage of our revenues. No customers accounted for more than 10% of revenues for the year ended December 31, 2011. The loss of any of our largest customers or a decision by one of them to purchase our services at a reduced level could negatively impact our revenues, earnings and business.

The contracts with our five largest customers contain minimum transaction or revenue commitments on an annual or contract term basis. Upon meeting these commitments, the customers are no longer obligated to purchase services from us and may elect not to make further use of our services. In addition, our customers may elect not to renew their contracts when they expire. Even if contracts are renewed, the renewal terms may be less favorable to us than under the current contracts. The contracts with our five largest customers expire from 2012 to 2014.

We face significant pressure on the prices for our services from our competitors and customers. Our failure to sustain pricing could impair our ability to maintain profitability or positive cash flow.

Our competitors and customers have caused and may continue to cause us to reduce the prices we charge for services. We may not be able to offset the effects of these price reductions by increasing the number of transactions we transport using our networks or by reducing our costs. The primary sources of pricing pressure include:

Our businesses are highly dependent upon our customers' transaction volumes and connections to our network, as well as our ability to expand into new markets.

We already serve most of the largest payment processors in the United States and Europe. Accordingly, our payment services division is highly dependent on the number of transactions transmitted by our existing customers through our networks in the United States and the United Kingdom. Factors which may reduce the number of credit and debit card and ATM transactions include economic downturns, acts of war or terrorism and other events that reduce consumer spending. Revenues from PSD have decreased primarily as a result of a decline in transaction volumes which we attribute to the continued softness in the economy and its impact on small mid-size merchants, as well as a decrease in revenue per transaction as a result of negotiated price reductions upon renewal of certain contracts.

We may be unable to increase our business from IP-based network services as well as our Payment gateway service offerings that we have identified as potential sources of future growth for our Payments

business in the United States and abroad. Factors that may interfere with our ability to expand further into these areas include:

Our Telecommunications Services business is also dependent on our customers' transaction volumes. In the past, consolidation among our TSD customers has caused us to lose transaction volume. In addition, certain of our TSD customers have developed in-house solutions to replace part or all of the services we provide to them. In the future, consolidation among our customers or the decision by existing customers to deploy in-house solutions to replace our services could cause us to lose volume and our revenues to decline.

The business of our financial services division is dependent upon the number of financial services companies connected to our network and the number of trading partners our customers connect to using our network. In the past industry consolidation and the economic downturn have caused companies to trade with fewer entities connected to our network or to disconnect connections on our network. Future consolidation or the decision by existing customers to disconnect connections to our network could cause our revenues to decline.

Our efforts to integrate recent or future acquisitions into our operations could be disruptive, and we may not be able to successfully integrate them on a timely basis. Even if we are able to successfully integrate an acquisition into our operations, we may not realize the anticipated benefits of the acquisition on the timetable contemplated, or at all. Recent or future acquisitions could negatively affect our operating results and could dilute the interests of existing stockholders.

In October 2010 we acquired Cequint, Inc., a Seattle based company providing caller identification services to wireless operators. Cequint currently provides City ID®, a caller identification feature for some wireless operators that automatically displays on the wireless handsets of customers of those operators the city and state in which the caller's phone number is registered. In July 2011, Cequint launched Name ID, a new product that enables mobile operators to deploy carrier-grade caller name identification in mobile phones.

We have begun to integrate the City ID® and Name ID application to be pre-loaded onto the handsets of wireless operators. This integration may prove to be more difficult and may take longer than we currently anticipate for the application to work as intended, which could result in the Cequint business failing to meet expectations. Furthermore, we may experience unanticipated difficulties and delays in the process of having wireless operators request and ensure that our applications are pre-loaded onto their wireless handsets by their manufacturers. Even if we are successful in integrating our service and having the applications pre-loaded onto wireless operator's handsets, our anticipated revenues from such service are highly dependent on adoption rates by the customers of the wireless operators and the revenue share and pricing to be determined for such application by the wireless operators. We may fail to achieve the revenues anticipated from this Cequint acquisition despite incurring substantial costs of the business, which may adversely affect our future financial position, results of operations, and customer relationships.

In addition, we expect to continue to seek selective acquisitions and investments as an element of our growth strategy. Recent and future acquisitions could subject us to risks including:

Our strategy to expand internationally may fail, which may impede our growth and harm our operating results.

During the year ended December 31, 2011, we did not generate positive operating cash flows in 5 out of the 25 countries in which we have operations and provide services outside of North America. In addition, we are planning expansion into new and existing international markets. Key challenges we will face in pursuing our international strategy include the need to:

If we fail to address the challenges and risks associated with international expansion, we may encounter difficulties implementing our strategy, which could impede our growth or harm our operating results.

We are subject to risks associated with operating in foreign countries, including:

We face risks related to movements in foreign exchange rates that could have a material adverse effect on our business, financial position and results of operations.

Our revenues and earnings are affected by fluctuations in the value of the U.S. dollar as compared with foreign currencies, predominantly the Euro, the British Pound and the Australian dollar as the functional currency of each of our foreign subsidiaries is the local currency. To the extent that the U.S. dollar appreciates in value against these currencies, the reported value of our revenues, earnings and financial position may be materially adversely affected.

We conduct business in many international markets with complex and evolving tax rules, which subjects us to international tax compliance risks.

While we obtain advice from tax and legal advisors as necessary to help ensure compliance with tax and regulatory matters, most tax jurisdictions in which we operate have complex and subjective rules regarding the valuation of inter-company services, cross-border payments between affiliated companies and the related effects on the taxes to which we are subject, including income tax, value-added tax and transfer tax. From time to time, our foreign subsidiaries are subject to tax audits and may be required to pay additional taxes, interest or penalties should the taxing authority assert different interpretations, or different allocations or valuations of our services. There is a risk, if one or more taxing authorities significantly disagrees with our interpretations, allocations or valuations, that any additional taxes, interest or penalties which may result could be material and could reduce our income and cash flow from our international subsidiaries.

Our dependence on third-party providers for network connectivity, network equipment, software, hardware, maintenance and hosting or co-location services exposes us to a variety of risks we cannot control.

To deliver our services successfully, we depend on network connectivity, network equipment, software, hardware, maintenance, and hosting or co-location services supplied by our vendors and customers. We cannot assure that we will be able to continue to purchase all of these necessary components of our services from these third-party vendors on acceptable terms or at all. Our third-party vendors have increased and in the future may increase the prices charged for their services, which have increased and would further increase our costs.

Our business also depends on the capacity, reliability and security of the network infrastructure owned and managed by third parties, including our vendors and customers. Our payments services, telecommunication services, and financial services, including technology interoperability services, payment processing services, network services, database services, call signaling and roaming and clearing services, all depend to some extent on the capacity, reliability and security of the infrastructure of third parties. We have no control over the operation, quality, or maintenance of a significant portion of that infrastructure and whether these third parties will upgrade or improve their equipment, software and services to meet our and our customers' evolving requirements. We depend on these companies to maintain the operational integrity of our services. If one or more of these companies is unable or unwilling to supply or expand its levels of services to us in the future, our operations and customer services could be negatively impacted or severely interrupted.

Our customers may develop in-house networks or direct connections and divert part or all of their data communications from our network to their networks.

As a payment processor's business grows larger and generates a greater number of credit card and debit card transactions, it could become economically advantageous for the processor to develop its own network for transmitting transaction data, including credit card and debit card transactions. Currently, some of the largest processors and some very large merchants globally, such as supermarkets, department stores and major discount stores, operate their own networks to transmit some or all of their transactions. Also, as the number of outsourced providers of network services has decreased, payment processors and large merchants have developed, and may continue to seek to develop, their own networks in order to maintain multiple sources of supply. In addition, our telecommunication services division customers may elect to connect their call signaling networks directly to the call signaling networks of other telecommunications carriers, thus decreasing their need for our services. As a result of any of these events, we could experience lower revenues.

System failures or slowdowns, security breaches and other problems could harm our reputation and business, cause us to lose customers and revenue, and expose us to customer liability.

Our business is based upon our ability to securely, rapidly and reliably receive and transmit data through our networks. One or more of our networks could slow down significantly or fail, or be breached, for a variety of reasons, including:

We may not have sufficient redundant systems or backup telecommunications facilities to allow us to receive and transmit data in the event of significant system failures. Any significant security breach degradation or failure of one or more of the networks on which we rely, including the networks of our vendors and customers could disrupt the operation of our network and cause our customers to suffer delays in transaction processing, which could damage our reputation, increase our service costs, or cause us to lose customers and revenues.

Our customers' inability to successfully implement our services could negatively impact our business.

Significant technological challenges may arise for our customers when they implement our services. Our customers' ability to support the deployment of our services and integrate them successfully within their operations depends, in part, on our customers' technological capabilities and the level of technological complexity involved. Difficulty in deploying our services could increase our customer service support costs, delay the recognition of revenues received until the services are implemented and reduce our operating margins.

Our capacity limits on current network and application platforms may be difficult to manage and project, and we may not be able to expand or upgrade our systems to meet increased demand or use.

As customers' usage of our services increase, we will need to expand our network and application platforms. We may not be able to accurately project the rate of increase in usage of our services. In addition, we may not be able to expand and upgrade our systems, networks, and application platforms in a timely manner to accommodate increased usage of our services. If we do not timely and appropriately expand and upgrade our systems, networks, and application platforms, we may limit our ability to add new customers or lose customers and our operating performance may suffer.

We depend on a limited number of network equipment suppliers and do not have supply contracts. Our inability to obtain necessary network equipment or technical support could harm our business.

Some key components we use in our networks are available only from a limited number of suppliers. The number of available suppliers of components and technical support for our SS7 and X.25 networks are particularly limited. We do not have long-term supply contracts with these or any other limited source vendors, and we purchase data network equipment on a purchase order basis. If we are unable to obtain sufficient quantities of limited source equipment and required technical support, or to develop alternate sources as required in the future, our ability to deploy equipment in our networks could be delayed or reduced, or we may be forced to pay higher prices for our network components. Delays or reductions in supplies could lead to slowdowns or failures of our networks.

We may experience fluctuations in quarterly results because of the seasonal nature of our business and other factors outside of our control, which could cause the market price of our common stock to decline.

Credit card and debit card transactions account for a major percentage of the transaction volume processed by our customers. The volume of these transactions on our networks generally is greater in the fourth quarter holiday season than during the rest of the year. Consequently, revenues and earnings from credit card and debit card transactions in the first quarter generally are lower than revenues and earnings from credit card and debit card transactions in the fourth quarter of the immediately preceding year. We expect that our operating results in the foreseeable future will be significantly affected by seasonal trends in the credit card and debit card transaction market.

In addition, a variety of other factors may cause our results to fluctuate from one quarter to the next, including but not limited to:

We may not be able to adapt to changing technology and our customers' technology needs.

We face rapidly changing technology and frequent new service offerings by competitors that can render existing services obsolete or unmarketable. Our future success depends on our ability to enhance existing services and to develop, introduce and market, on a timely and cost effective basis, new services that keep pace with technological developments and customer requirements.

We may be unable to protect our proprietary technology, which would allow competitors to duplicate our services. This would make it more difficult for us to compete with them.

We may not be able to protect sufficiently our proprietary technology, which could make it easier for competitors to develop services that compete with our services. We rely principally on copyright and trade secret laws and contractual provisions to protect our proprietary technology. The laws of some countries in which we sell our services and products may not protect software and intellectual property rights to the same extent as the laws of the United States. If these measures do not adequately prevent misappropriation of our technology, competitors may be able to use and adapt our technology. Our failure to protect our technology could diminish our competitive advantage and cause us to lose customers to competitors.

We may face claims of infringement of proprietary rights, which could harm our business and operating results.

Third parties may assert claims that we are infringing their proprietary rights. If infringement claims are asserted against us, we could incur significant costs in defending those claims. We may be required to discontinue using and selling any infringing technology and services, to expend resources to develop non-infringing technology or to purchase licenses or pay royalties for other technology. We may be unable to acquire licenses for the other technology on reasonable commercial terms or at all. As a result, we may find that we are unable to continue to offer the services and products upon which our business depends.

Growth may strain our management systems and resources. We may need to make additional investments in the following areas:

If we fail to develop systems, procedures and controls to handle current and future growth on a timely basis, we may be less efficient in the management of our business or encounter difficulties implementing our strategy, either of which could harm our results of operations.

We may lack the capital required to maintain our competitive position or to sustain our growth.

We have historically relied on cash flow from operations and proceeds from equity and debt to fund our operations, capital expenditures and expansion. If we are unable to obtain sufficient capital in the future, we may face the following risks:

As of December 31, 2011, we had $373.1 million in debt outstanding, which was subsequently refinanced in February 2012 (the February 2012 Credit Facility). The February 2012 Credit Facility includes a $350.0 million term loan and a five-year revolving credit facility, under which $25.0 million was drawn at closing.

This level of debt could have important consequences. Below, we have identified some of the material potential consequences resulting from this debt:

We cannot assure that we will continue to generate sufficient cash flow or that we will be able to borrow funds under our senior secured credit facility in amounts sufficient to enable us to service our debt, or meet our working capital and capital expenditure requirements. We must satisfy borrowing base restrictions in order to borrow additional amounts under our February 2012 Credit Facility (see Note 6). If we are not able to generate sufficient cash flow from operations or to borrow sufficient funds to service our debt, due to borrowing base restrictions or otherwise, we may be required to sell assets, reduce capital expenditures, refinance all or a portion of our existing debt, or obtain additional financing. We cannot assure that we will be able to refinance our debt, sell assets or borrow more money on terms acceptable to us, if at all.

If we do not compete effectively, we may lose market share to competitors and suffer a decline in revenues.

Many of our competitors have greater financial, technical, marketing and other resources than us. As a result, they may be able to support lower pricing and margins and to devote greater resources to marketing their current and new products and services.

Our success depends largely on the ability and experience of a number of key employees, including Henry H. Graham, Jr., our Chief Executive Officer, and Michael Q. Keegan, our President and Chief Operating Officer. If we lose the services of any of our key employees, our business may be adversely affected.

The trading price of our common stock could be subject to wide fluctuations in response to various factors, some of which are beyond our control, such as:

Federal and state regulations can affect the costs of business for us and our competitors by changing the rate structure for access services purchased from local exchange carriers to originate and terminate calls, by restricting access to dedicated connections available from local exchange carriers, by changing the basis for computation of other charges, such as universal service charges, or by revising the basis for taxing the services we purchase or provide. The Federal Communications Commission ("FCC") is currently considering changes to the rate structure for services provided by local exchange carriers, including the rate structure for access services, and we currently cannot predict whether these rule changes will be adopted or the impact these rule changes may have on our charges for access and other services if they are adopted.

Recent and pending decisions of the FCC may limit the availability and increase pricing of network elements used by our suppliers to provide telecommunications services to us. We cannot predict whether these rule changes will increase the cost of services we purchase from our suppliers. Further, the United States Congress and the FCC is considering modifying the way in which Federal Universal Service Fund charges are calculated, including considering whether to assess universal service charges on a flat-fee basis, such as a per-line, per-telephone number or per-account charge. We currently cannot predict whether Congress will mandate or the FCC will adopt changes in the calculation of Federal Universal Service Fund contributions or whether these changes, if adopted, would increase our Federal Universal Service Fund surcharges. If the FCC implements any legislation, adopts any proposal or takes any administrative action that increases our Federal Universal Service Fund surcharges, our network operating costs will increase. In addition, if the FCC implements any legislation, adopts any

proposal, or takes any administrative action that increases our telecommunications service supplier's Universal Service Fund obligations, these suppliers may seek to pass through cost-recovery charges to us. We in turn will pass those potential increased Federal Universal Service Fund surcharges on to our customers to the extent permitted under our contracts with them. An increase in the Federal Universal Service Fund surcharges that we are required to pay would result in an increase in our cost of network services, a cost which the Company may or may not be able to pass on to our customers.

The business of our telecommunication services division customers is or may become subject to regulation that indirectly affects our business. Many of our telecommunication services division customers are subject to federal and state regulations applicable to the telecommunications industry. Changes in these regulations could cause our customers to alter or decrease the services they purchase from us.

In addition, the payment processing industry in which our payment services division operates has implemented comprehensive standards to enhance payment card data security. These standards, which are known as the PCI Data Security Standard (PCI DSS), provide a framework for developing a payment card data security process, which includes the prevention, detection and reaction to security incidents. We have made investments in our network and systems to be PCI DSS compliant because PCI DSS applies to our payment customers and to certain of the products and services we provide. While we expect we will continue to invest to be compliant with PCI DSS standards, these standards may change and this could cause us to incur additional costs. The payment processing industry also may become subject to regulation as a result of recent data security breaches that have exposed consumer data to potential fraud. As a result of the implementation of PCI DSS, and to the extent regulation occurs, our customers could impose additional technical, contractual or other requirements as a condition to doing business with them. These requirements could cause us to incur additional costs, which could be significant, or to lose revenues to the extent we do not comply with PCI DSS or other requirements.

We cannot predict when, or upon what terms and conditions, further regulation or deregulation might occur or the effect future regulation or deregulation may have on our business. Our operating costs may be increased because our service providers and several services that we offer may be indirectly affected by federal and state regulations. In addition, future services we may provide could become subject to direct regulation.

We face risks related to securities litigation that could have a material adverse effect on our business, financial position and results of operations.

In the past we have been named as a defendant in a securities class action lawsuit. We are generally obliged, to the extent permitted by law, to indemnify our current and former directors and officers who are named as defendants in lawsuits. Defending against existing and potential securities litigation may divert financial and management resources that would otherwise be used to benefit our operations. Regardless of the outcome, securities litigation can result in significant legal expenses. A materially adverse resolution of a securities lawsuit could have a material adverse effect on our business, financial position and results of operations.

Due to uncertainties associated with the future performance of acquired businesses and assets, we may not realize the full fair value of associated intangible assets and goodwill. Our financial results may be adversely affected if we have to write-off a material portion of our intangible assets or goodwill.

As a result of our acquisitions, a significant portion of our total assets consists of intangible assets including goodwill. Goodwill and intangible assets, net of amortization, together accounted for approximately 50% of the total assets on our balance sheet as of December 31, 2011. We may not realize the full fair value of our intangible assets and goodwill. We also expect to engage in additional

acquisitions, which may result in our recognition of additional intangible assets and goodwill. Under current accounting standards, we are able to amortize certain intangible assets over the useful life of the asset, while goodwill is not amortized. We evaluate on a regular basis whether all or a portion of our goodwill intangible assets may be impaired. Under current accounting rules, any determination that impairment has occurred would require us to write-off the impaired portion of goodwill and such intangible assets, resulting in a charge to our earnings. Such a write-off could adversely affect our financial condition and results of operations.

The current national and world-wide economic conditions could adversely affect our operating results and stock price in a material manner.

General world-wide economic conditions have resulted in slower economic activity, concerns about inflation and deflation, volatility in energy costs, decreased consumer confidence, reduced corporate capital spending, adverse business conditions and liquidity concerns in the wireless communications markets. These conditions make it difficult for our customers, our vendors and us to accurately forecast and plan future business activities, and they could cause U.S. and foreign businesses to slow spending on our services. Furthermore, during challenging economic times, our customers may face issues gaining timely access to sufficient credit, which could impair their ability to make timely payments to us. If that were to occur, we may be required to increase our allowance for doubtful accounts and our accounts receivable outstanding would be negatively impacted. And any future downturn may reduce our revenue or our percentage of revenue growth on a quarter-to-quarter basis. We cannot predict the timing, strength or duration of any economic slowdown or subsequent economic recovery, world-wide, or in the telecommunications industry or the wireless communications markets. If the economy or the markets in which we operate do not improve from their current condition or if they deteriorate, our customers or potential customers could continue to reduce or further delay their use of our services, which would adversely impact our revenues and ultimately our profitability. In addition, we may record additional charges related to the restructuring of our business and the impairment of our goodwill and other long-lived assets, and our business, financial condition and results of operations could be materially and adversely affected.

Our principal executive offices are located in Reston, Virginia and consist of approximately 46,157 square feet of office space under a lease expiring in February 2013. Our primary network control center is also located in Reston, Virginia and consists of approximately 44,500 square feet of separate office space under a lease expiring in June 2013. In addition, we lease the following additional principal facilities:

Use	Location		Lease expiration date

European technology and finance center	Dublin, Ireland	14,500	January 2022
United Kingdom headquarters and network control centre	Sheffield, England	16,000	April 2015
United Kingdom processing centre	Welwyn Garden City, England	21,680	June 2012
Operations and Engineering	Overland Park, Kansas	17,940	January 2018
Sales and Development	Tampa, Florida	12,560	December 2013
Cequint Sales and Development	Seattle, Washington	29,232	February 2018
Australia Operations and Engineering	Brisbane, Australia	14,010	July 2016
Systems Integration Center	Chantilly, Virginia	13,650	January 2013

We also lease and occupy regional sales offices in various cities. We house our remote network switching equipment in facilities owned and maintained by some of our digital telecommunications circuit providers and also in leased telecommunications point-of-presence facilities located in various cities. These leases total approximately 48,088 square feet and expire on dates ranging from February 2012 to June 2018. We believe that our existing facilities are adequate to meet current requirements and that suitable additional space will be available as needed to accommodate the expansion of our operations and development.

In addition, we also own approximately 67,500 square feet of office space in Lacey, Washington, which is being used for Operations and Development. This property was acquired through our acquisition of the Communication Services Group from VeriSign, Inc. on May 1, 2009.

We are from time to time a party to other legal proceedings, which arise in the normal course of business. We are not currently involved in any material litigation the outcome of which could, in management's judgment based on information currently available, have a material adverse effect on our results of operations or financial condition. Management is not aware of any material litigation threatened against us.

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock trades on The New York Stock Exchange ("NYSE") under the symbol "TNS". The following tables reflect the range of high and low sale prices for the period indicated as reported by the NYSE.

As of February 20, 2012, there were 37 stockholders of record of our common stock, excluding shares held in street name by various brokerage firms. We estimate that there are approximately 3,000 beneficial owners of our common stock.

We do not anticipate paying any regular cash dividends in the foreseeable future. Under our senior secured credit agreement, we are subject to restrictions on paying dividends.

During the period covered by this report, we did not sell any equity securities without registration under the Securities Act.

		Average Price Paid per Share			Average Price Paid per Share

Period:
1/1/11 – 1/31/11	49,894	$	20.95	—		—	—
2/1/11 – 2/28/11	3,737	$	18.72	—		—	—
4/1/11 – 4/30/11	15,370	$	16.18	—		—	—
5/1/11 – 5/31/11	642	$	16.52	—		—	—
7/1/11 – 7/31/11	10,935	$	16.87	—		—	—
8/1/11 – 8/31/11	—		—	569,800	$	15.62	—
9/1/11 – 9/30/11	—		—	617,415	$	18.34	—
10/1/11 – 10/31/11	3,401	$	19.79	162,039	$	18.96	—
11/1/11 – 11/30/11	4,924	$	18.53	34,700	$	18.95	—

	88,903	$	19.32	1,383,954	$	17.30	389,058

The following selected consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this report. The consolidated statements of operations data for the years ended December 31, 2009, 2010 and 2011, and the consolidated balance sheet data as of December 31, 2010 and 2011, are derived from our consolidated financial statements, which are included elsewhere in this report. The consolidated statements of operations data for the years ended December 31, 2007 and 2008, and the balance sheet data as of December 31, 2007, 2008, and 2009 are derived from our consolidated financial statements, which are not included in this report. Certain reclassifications have been made to previously reported financial data to reflect the financial condition, results of operations and cash flows of the ATM processing assets in Canada as discontinued operations. These assets were divested on August 31, 2011. See the discussion of discontinued operations in Note 4 in our accompanying financial statements.

The historical results are not necessarily indicative of the results to be expected for any future period.

	Year ended December 31,

	2007			2008			2009			2010			2011
Consolidated Statements of Operations Data:
Revenues	$	325,564		$	343,991		$	471,418		$	522,490		$	557,723
Cost of network services		163,559			162,423			222,985			258,578			275,824
Engineering and development		27,626			29,149			36,226			38,014			43,686
Selling, general and administrative		75,287			78,104			99,224			95,522			103,275
Contingent consideration fair value adjustment		—			—			—			1,794			(3,107	)
Depreciation and amortization of property and equipment		23,114			25,286			32,220			47,495			46,978
Amortization of intangible assets		25,656			25,734			32,346			39,540			40,124

Total operating expenses		315,242			320,696			423,001			480,943			506,780
Income from continuing operations before income taxes and equity in net income (loss) of unconsolidated affiliates		10,322			23,295			48,417			41,547			50,943

Interest expense		(16,655	)		(10,868	)		(58,553	)		(24,556	)		(25,658	)
Interest income		1,105			707			497			307			246
Other income (expense), net		2,356			(241	)		437			4,492			(80	)
Income tax (provision) benefit		(586	)		(9,213	)		6,930			(12,279	)		(7,354	)
Equity in net income (loss) of unconsolidated affiliates		643			(202	)		(115	)		(288	)		—

(Loss) income from continuing operations		(2,815	)		3,478			(2,387	)		9,223			18,097
Income (loss) from discontinued operations, net of income tax		—			—			328			(679	)		(1,025	)

Net (loss) income		(2,815	)		3,478			(2,059	)		8,544			17,072

Per Share Information:
Basic
Continuing operations	$	(0.12	)	$	0.14		$	(0.09	)	$	0.36		$	0.72
Discontinued operations		—			—			0.01			(0.03	)		(0.04	)
Diluted
Continuing operations	$	(0.12	)	$	0.14		$	(0.09	)	$	0.35		$	0.71
Discontinued operations		—			—			0.01			(0.03	)		(0.04	)
Basic weighted average common shares outstanding		24,204			24,763			25,403			25,949			25,111
Diluted weighted average common shares outstanding		24,204			24,196			25,403			26,471			25,397

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

We are an international data communications company which provides network managed connectivity, data communications and value added services to many of the world's leading retailers, banks and payment processors. We are also a leading provider of secure data network services to the global financial services industry. We operate the largest unaffiliated Signaling System No. 7 network in the United States capable of providing services nationwide, and we utilize this network to provide call signaling and database access services to the domestic telecommunications industry. We also provide roaming and clearing services to both domestic and international mobile phone operators. Our data communications services enable secure and reliable transmission of time-sensitive, transaction-related information critical to our customers' operations. Our customers outsource their data communications requirements to us because of our substantial expertise, comprehensive customer support and cost-effective services. We provide services to customers in the United States and increasingly to international customers in over 60 countries, including Canada and Mexico and countries in Europe, Latin America and the Asia-Pacific region. We currently maintain operations and/or employees in 25 countries.

We provide services through our data network, which is designed specifically for transaction oriented applications. Our network supports a variety of widely accepted communications protocols and is designed to be scalable, interoperable and accessible by multiple methods, including dial-up, dedicated, wireless, fixed broadband and internet connections.

Our most significant expense is cost of network services, which is comprised primarily of the following: telecommunications charges, including data transmission and database access, leased digital capacity charges, circuit installation charges and activation charges; salaries and other costs related to supporting our data platforms and systems; and compensation paid to providers of calling name and line information database records. The cost of data transmission is based on a contract, or in the United

States potentially a tariff rate per minute of usage in addition to a prescribed rate per transaction for some vendors. The costs of database access, circuits, installation charges and activation charges are based on fixed fee contracts with local exchange carriers and interexchange carriers. The cost of accessing database records from external providers is based on a per query fee for the use of that data. The compensation charges paid to providers of calling name and line information database records are based on a percentage of query revenue generated from our customers accessing those records. Depreciation expense on our network equipment amortization of capitalized software and amortization of developed technology is excluded from our cost of network services and is included in depreciation and amortization of property and equipment and amortization of intangible assets in our consolidated statements of operations.

Our engineering and development expenses include salaries and other costs related to product development, engineering, hardware maintenance and materials. The majority of these costs are expensed as incurred, including costs related to the development of internal use software in the preliminary project, the post-implementation and operation stages. Development costs we incur during the software application development stage are capitalized and amortized over the estimated useful life of the developed software.

Our selling, general and administrative expenses include costs related to sales, marketing, administrative and management personnel, as well as external legal, accounting and consulting services.

On August 31, 2011, we divested our ATM processing assets in Canada for a sale price of $1. Upon closing of the transaction, we recorded a loss on the sale of this business of $27,000. Management made the decision to divest this business in order to focus our resources more on our network services offerings in Canada and investments in our payment gateway initiatives. In accordance with FASB ASC 205 "Presentation of Financial Statements" we have reported the results of our ATM processing business in Canada as discontinued operations in the accompanying condensed consolidated statements of operations for all periods presented. See Note 4 for additional information.

On October 1, 2010, we completed the acquisition of Cequint, Inc. (Cequint) in accordance with the terms and conditions of the Agreement and Plan of Merger dated September 8, 2010 (see Note 3). The purchase price, following working capital adjustments, included an initial payment of $50.0 million, consisting of $46.9 million in cash and $3.1 million (178,823 shares) in TNS common stock issued to certain Cequint shareholders, and may be adjusted in the future for a potential additional $52.5 million in cash based upon the achievement of four specified profit milestones not to extend past May 31, 2014, for a potential total purchase price of $102.5 million. In addition to the contingent consideration of up to $52.5 million, there are additional performance payments which may be payable to key personnel, based on the achievement of the same four profit-related milestones of up to $10.0 million. To the extent the additional $10.0 million is probable to be earned, it will be included in operating expenses in our condensed consolidated statements of operations. We funded the transaction through a new $50.0 million term loan facility using a portion of the accordion feature of our November 2009 Credit Facility (see Note 6). As of December 31, 2010, the Company recorded a liability of $33.6 million representing the estimated fair value of the contingent purchase consideration of $52.5 million based on a probability weighted scenario approach to determine the likelihood and timing of the achievement of the relevant milestones. In calculating this liability, the Company applied a rate of probability to each scenario, as well as a risk-adjusted discount factor, to derive the estimated fair value of the consideration as of the acquisition date. This fair value is based on significant unobservable inputs, including management estimates and assumptions, and accordingly is classified as Level 3 within the fair value hierarchy prescribed by ASC Topic 820, Fair Value Measurements and

Disclosures. This liability is re-measured each reporting period and changes in the fair market value are recorded under the contingent consideration fair value adjustment item in the Company's consolidated statements of operations. Increases or decreases in the fair value of the contingent consideration liability can result from changes in discount periods and rates, as well as changes in the timing and likely achievement of the relevant milestones. As of December 31, 2011, the company recorded a liability of $30.5 million. During 2010 and 2011, the Company has recognized a $1.8 million increase and a $3.1 million decrease, respectively, in the fair value of the contingent consideration related primarily to changes in the expected timing of the achievement of the performance milestone targets. These timing changes are due to updates to our projections as of the dates on which our carrier customers plan to release new handset devices with the caller ID product to the market. See Note 3 for additional information.

Cequint provides carrier grade caller identification products and enhanced services to top U.S.-based mobile operators. We have integrated Cequint into our telecommunication services division. This acquisition has been accounted for as a business combination under the Financial Accounting Standards Board (FASB) ASC 805, Business Combinations.

On March 2, 2009, we entered into an asset purchase agreement with VeriSign, Inc. pursuant to which we agreed to purchase from Verisign, Inc. certain assets and assume certain liabilities of CSG. On May 1, 2009, we completed the acquisition in accordance with the terms and conditions of the asset purchase agreement. The initial purchase price was approximately $226.2 million in cash and was subject to a post-closing working capital adjustment. During the third quarter of 2009 and fourth quarter of 2009, working capital and other adjustments were negotiated resulting in a $4.5 million increase in the purchase price to $230.7 million. We funded the transaction through a new $230.0 million term loan facility as part of the May 2009 Credit Facility (see further discussion below). CSG provides call signaling services, intelligent database services such as caller identification, toll-free call routing and local number portability to the U.S. telecommunications industry. In addition, CSG provides wireless roaming and clearing services to mobile phone operators. We integrated CSG into our telecommunication services division. See Note 3 for additional information.

On May 1, 2009, we entered into a $423.5 million amended and restated senior secured credit facility (May 2009 Credit Facility) to finance the acquisition of the CSG assets from VeriSign, Inc. and to refinance the 2007 Credit Facility. The May 2009 Credit Facility consisted of a fully funded term loan facility with an outstanding principal amount equal to $178.5 million, a new fully funded term loan facility with an outstanding principal amount equal to $230.0 million, and a senior secured revolving credit facility in an aggregate principal amount of $15.0 million. Interest on the outstanding balances under the term loan facilities was payable, at our option, at a rate equal to the higher of the prime rate announced by Suntrust Bank, the federal funds rate plus 50 basis points, or the one-month London Interbank Offered Rate ("LIBOR") plus 100 basis points (the "Base Rate"), plus in each case a margin of 5.0%, or at LIBOR plus a margin of 6.0%. Interest on the outstanding balances under the senior secured revolving credit facility were payable, at our option, at the Base Rate plus a margin of 5.0%, or at LIBOR plus a margin of 6.0%. Additionally, in no event would the LIBOR rate be less than 3.5%. In connection with the closing of the May 2009 Credit Facility, we wrote off approximately $1.7 million in unamortized deferred financing costs related to the 2007 Credit Facility which has been included in interest expense in the accompany consolidated statements of operations for the year ended December 31, 2009. On closing the May 2009 Credit Facility, we incurred approximately $5.4 million in financing costs, which were deferred and were amortized using the effective interest method over the life of the May 2009 Credit

Facility. A debt discount of $23.0 million was created by recording the new debt at fair value and was amortized to interest expense over the life of the May 2009 Credit Facility.

On November 19, 2009 we entered into a secured credit facility (November 2009 Credit Facility) to refinance our May 2009 Credit Facility principally to take advantage of a more favorable interest rate environment. The November 2009 Credit Facility consisted of a fully funded $325 million term loan facility and a senior secured revolving credit facility in an aggregate principal amount of $75 million, of which $49.4 million was funded at closing. Interest on outstanding balances under the November 2009 Credit Facility is payable, at our option, at the Base Rate plus a margin of 3.0%, or at LIBOR plus a margin of 4.0%. Additionally, in no event will the LIBOR rate be less than 2.0%. The November 2009 Credit Facility also provides for optional incremental term loan(s) and revolving loan(s) to increase the term and revolving facilities in an aggregate principal amount not to exceed $100 million. In connection with the closing of the November 2009 Credit Facility, we wrote-off $21.9 million in unamortized deferred financing costs and debt discount related to the May 2009 Credit Facility and incurred a $3.3 million term loan call premium charge. These items have been included in interest expense in the accompanying consolidated statements of operations for the year ended December 31, 2009. On closing of the November 2009 Credit Facility, we incurred approximately $2.9 million in financing costs. These financing costs have been deferred and are being amortized using the effective interest method over the life of the November 2009 Credit Facility.

On October 1, 2010 we amended our November 2009 Credit Facility to allow for the Cequint acquisition and to amend certain covenants, including restrictions on fundamental changes, incurrence of indebtedness, restricted payments (including the share repurchase plan described below) and financial covenants (and related definitions). In addition, we increased the amount of the term loan and revolving credit facilities by $50 million and $25 million, respectively, to fund the Cequint acquisition and for general working capital purposes. In connection with the amendment we incurred approximately $1.9 million in financing costs. These financing costs have been deferred and are being amortized using the effective interest method over the life of the November 2009 Credit Facility. See Note 6 for additional information.

On February 3, 2012 we completed a refinancing of the November 2009 Credit Facility principally to take advantage of a more favorable interest rate environment. The new senior secured credit facilities are comprised of a fully funded $350 million five-year term loan and a $100 million, five-year revolving credit facility, under which $25 million was drawn at closing (February 2012 Credit Facility). Interest on the outstanding balances under the February 2012 Credit Facility will initially be payable at the Company's option at the Base Rate plus a margin of 2.0% or at LIBOR plus a margin of 3.0%. There is no LIBOR floor in the February 2012 Credit Facility. The applicable margins on the February 2012 Credit Facility are subject to step downs based on the Company's leverage ratio. The other terms of the February 2012 Credit Facility are substantially similar to those of the November 2009 Credit Facility. We have used the proceeds from the February 2012 Credit Facility to repay all amounts outstanding under the November 2009 Credit Facility, as well as to pay associated fees and expenses of approximately $6.3 million.

On September 1, 2010 our Board of Directors approved a share repurchase plan authorizing the repurchase of a maximum of $50.0 million of our common stock over the period expiring March 31, 2012. We commenced repurchasing shares on October 1, 2010 and as of December 31, 2011, had repurchased 2,434,201 shares for a total of $43.1 million under this program. In addition, the Company repurchased 88,903 and 150,141 shares during the years ended December 31, 2011 and 2010, respectively, for a total cost of $1.7 million and $3.6 million, respectively, to satisfy the minimum employee tax withholdings upon vesting of restricted stock units.

The Company retired 1,206,462 and 205,497 treasury shares during the years ended December 31, 2011 and 2010, respectively. On February 29, 2012, the Company's board of directors approved the retirement of 1,460,430 shares of treasury stock.

We acquired the assets of the CSG business on May 1, 2009 and have included its results since that date. We completed the acquisition of Cequint on October 1, 2010, and have included its results since that date in our statements of operations for the years ended December 31, 2010 and December 31, 2011. On August 31, 2011, we divested our ATM processing assets in Canada. In accordance with FASB ASC 205 "Presentation of Financial Statements" we have reported the results of our ATM processing business in Canada as discontinued operations in the accompanying condensed consolidated statements of operations for all periods presented.

The following tables set forth, for the periods indicated, the selected statements of operations data (in thousands):

	Year ended December 31,

	2009			2010			2011
Statements of Operations Data:
Revenues	$	471,418		$	522,490		$	557,723
Operating expenses:
Cost of network services, exclusive of the items shown separately below		222,985			258,578			275,824
Engineering and development		36,226			38,014			43,686
Selling, general and administrative		99,224			95,522			103,275
Contingent consideration fair value adjustment		—			1,794			(3,107	)
Depreciation and amortization of property and equipment		32,220			47,495			46,978
Amortization of intangible assets		32,346			39,540			40,124

Total operating expenses		423,001			480,943			506,780

Income from continuing operations		48,417			41,547			50,943
Interest expense		(58,553	)		(24,556	)		(25,658	)
Interest income		497			307			246
Other income (expense), net		437			4,492			(80	)

(Loss) income from continuing operations before income taxes and equity in net loss of unconsolidated affiliates		(9,202	)		21,790			25,451
Income tax benefit (provision)		6,930			(12,279	)		(7,354	)
Equity in net (loss) of unconsolidated affiliates		(115	)		(288	)		—

(Loss) income from continuing operations		(2,387	)		9,223			18,097
Income (loss) from discontinued operations, net of income taxes		328			(679	)		(1,025	)

Net (loss) income	$	(2,059	)	$	8,544		$	17,072

Revenues. Total revenues increased $35.2 million, or 6.7%, to $557.7 million for the year ended December 31, 2011, from $522.5 million for the year ended December 31, 2010. The positive effect of foreign exchange translation on a year-over-year basis was $9.5 million. Excluding the effect of foreign exchange rates, total revenues increased $25.6 million, or 4.9%, to $548.1 million for the year ended December 31, 2011.

We primarily enter into arrangements with our customers in the currency of the markets we operate in. As a result, our reported results are affected by fluctuations in the value of the U.S. dollar as compared to foreign currencies, predominantly the British Pound, the Euro and the Australian dollar. The following table shows the currency composition of our revenues for the year ended December 31, 2011 and 2010 and the weighted average exchange rates used to translate our local currency results to the U.S. dollar:

A $0.01 change in exchange rates for each of the major foreign currencies we operate in would have the following annual impact on revenue: British Pound, $0.4 million, Euro, $0.4 million and Australian Dollar, $0.3 million.

We generate revenues through three business divisions: the telecommunication services division (TSD), the payment services division (PSD), and the financial services division (FSD).

Telecommunication services division. Revenues from the telecommunication services division increased $26.5 million, or 10.1%, to $287.2 million for the year ended December 31, 2011, from $260.7 million for the year ended December 31, 2010. Included in the years ended December 31, 2011 and 2010 were revenues of $11.4 million and $2.3 million, respectively, from Cequint, Inc. Excluding the contribution from Cequint, revenues increased 6.7%, or $17.4 million, as follows:

Future revenue growth in the telecommunication services division depends on a number of factors including the number of database access queries we transport, the number of call signaling routes our customers purchase, and the success of our new product offerings, which potentially may be offset by customers seeking pricing discounts due to industry consolidation or other reasons, as well as the successful integration of the products acquired through our purchase of Cequint (see Note 3).

Payment services division. Revenue from the payment services division increased $8.0 million, or 4.1%, to $203.6 million for the year ended December 31, 2011 from $195.6 million for the year ended December 31, 2010. The positive effect of foreign currency translation on a year-over-year basis was $8.3 million. Excluding the effect of foreign exchange rates, revenues decreased $0.2 million, or 0.1%, to $195.3 million as follows:

Network services decreased $3.2 million, or 2.0%, to $158.4 million, as follows:

Payment gateway services increased $2.1 million, or 8.6%, to $26.7 million, as follows:

Payment processing and other services increased $0.9 million, or 9.9%, to $10.2 million, as follows:

Future revenue growth in the payment services division depends on a number of factors including the success of our IP-related network services and payment gateway applications, the success of our

payments products in countries we have recently entered, the total number of transactions we transport, and global economic conditions. Smaller merchants, which represent a large portion of the user base for our dial-up services, in our opinion have been more adversely impacted by recent global economic conditions than the larger merchants and may take longer to recover if and when the global economy improves. We have continued to see a reduction in the growth rates of our dial-up transaction volumes in many of the markets in which we operate, which we primarily attribute to the overall weakness of the global economy.

Financial services division. Revenues from the financial services division increased $0.8 million, or 1.2%, to $67.0 million for the year ended December 31, 2011, from $66.2 million for the year ended December 31, 2010. The positive effect of foreign exchange translation on a year-over-year basis was $0.8 million. Excluding the impact of foreign exchange rates, financial services revenue decreased $0.1 million, or 0.2%, to $66.1 million as follows:

Future revenue growth in the financial services division depends on a number of factors including the number of connections to and through our network as well as the success of our new product offerings. During the second half of 2010 and throughout 2011, a number of our equity trading customers, primarily in North America, consolidated the number of connections to other customers on our network resulting in lower average revenue per endpoint.

Cost of network services. Cost of network services increased $17.2 million, or 6.7%, to $275.8 million for the year ended December 31, 2011, from $258.6 million for the year ended December 31, 2010. The negative effect of foreign exchange translation on a year-over-year basis was $3.5 million. Excluding the impact of foreign exchange rates, cost of network services expense increased $13.8 million, or 5.4%. This was due to the following increases: $1.0 million in our payments division due to $3.0 million in dial access rates in North America partially offset by $2.0 million due to reduced transaction volumes; $2.9 million from the inclusion of Cequint; $5.5 million due to higher volumes in our telecommunications services division, primarily related to increased demand for our identity and verification services; $1.6 million in our financial services division due primarily to increased connectivity costs in North America and to a lesser extent increases to support revenue growth in Europe and Asia Pacific; and $2.8 million in shared network, payroll and overhead expense primarily to support our IP network services, roaming and clearing and payment gateway platforms, partially offset by cost reductions achieved through the integration of the legacy CSG operations.

Future cost of network services depends on a number of factors including total transaction and query volumes, the relative growth and contribution to total transaction volume of each of our customers, changes in revenue share within our identity and verification services, the success of our new service offerings, the timing and extent of our network expansion and the timing and extent of any network cost increases or reductions.

Gross profit. Gross profit represented 50.5% of total revenues for the year ended December 31, 2011 and remained flat year over year. On a constant dollar basis, gross margins for the year ended December 31, 2011 decreased 20 basis points to 50.3% of total revenues. This decrease was primarily due to investment in personnel and systems to support our growth initiatives, and to a lesser extent from a decrease in the financial services division due to a reduction in trading connections between endpoints, and declines in our North American payment services division dial-based network services margin due to increased access costs and lower average pricing. These decreases were partially offset by an increase related to the inclusion and increased scale of Cequint revenue year over year which carries a higher gross margin, and an increase in the telecommunication services division which was driven by the roaming and clearing market share growth.

Engineering and development expense. Engineering and development expense increased $5.7 million, or 15.0%, to $43.7 million for the year ended December 31, 2011, from $38.0 million for the year ended December 31, 2010. On a constant dollar basis, engineering and development expenses would have increased $5.0 million, or 13.2%, to $43.0 million and represented 7.8% and 7.3% of revenues for the years ended December 31, 2011 and 2010, respectively. The increase in engineering and development costs was primarily due to the following: $9.9 million in costs resulting from the inclusion of Cequint, primarily from headcount and related costs; $2.3 million in additional headcount and related costs, as well as $1.8 million in system maintenance costs to support our support our payment gateway, verification and IP registry services; and $0.9 million in performance-based cash compensation. This was partially offset by an increase in capitalized software development costs, which are offset against engineering and development costs of $10.0 million due to incremental investments in our initiatives to support future growth, including $6.5 million for Cequint.

Selling, general and administrative expense. Selling, general and administrative expenses increased $7.8 million, or 8.2%, to $103.3 million for the year ended December 31, 2011, from $95.5 million for the year ended December 31, 2010. On a constant dollar basis, selling, general and administrative expenses would have increased $5.7 million, or 6.0%, to $101.2 million and would have represented 18.1% of revenues for the year ended December 31, 2011, compared to 18.3% of revenues for the year ended December 31, 2010. This was due to the following increases: $4.9 million in costs resulting from the inclusion of Cequint, inclusive of $0.6 million of earnout milestone compensation, and $3.2 million in performance-based compensation. These increases were partially offset by the following decreases: $0.6 million in stock compensation due primarily to a decrease in performance related stock compensation; $0.8 million reduction in commission payable to a financial services division customer in connection with the restructuring of their agreement on October 1, 2011, $0.7 million in headcount and other cost synergies related to the integration of CSG; and $0.4 million in severance charges in North America.

Contingent consideration fair value adjustment. Contingent consideration fair value adjustment decreased $4.9 million to a gain of $3.1 million for the year ended December 31, 2011, from a $1.8 million charge for the year ended December 31, 2010. The contingent consideration represents the change in the fair value of the liability recorded for the additional consideration which may be payable in relation to the acquisition of Cequint, Inc. This liability is re-measured each reporting period and changes in the fair value are recorded through this line item in our consolidated statements of operations. The change in the fair value of the contingent consideration related primarily to changes in the expected timing of the achievement of the performance milestone targets. These timing changes are

due to updates to our projections as of the dates on which our carrier customers plan to release new handset devices with the caller ID product to the market. See Note 3 for additional information.

Depreciation and amortization of property and equipment. Depreciation and amortization of property and equipment decreased $0.5 million, or 1.1%, to $47.0 million for the year ended December 31, 2011, from $47.5 million for the year ended December 31, 2010. On a constant dollar basis, depreciation and amortization of property and equipment decreased $1.1 million to $46.4 million and represented 8.5% and 9.1% of revenue for the years ended December 31, 2011 and 2010, respectively. Included in depreciation and amortization of property and equipment are accelerated depreciation charges of $0.7 million and $5.5 million recorded for the years ended December 31, 2011, and 2010, respectively. These accelerated depreciation charges relate to the phasing out of $6.2 million of surplus network assets and software as a result of the integration of the CSG and TNS networks. In addition, in December 2011, the Company recorded a charge of $0.4 million on certain capitalized software assets which were no longer intended to be utilized. Excluding these charges, depreciation and amortization of property and equipment increased $3.4 million due to capital expenditures to support our growth initiatives, including Cequint.

Amortization of intangible assets. Amortization of intangible assets increased $0.6 million, or 1.5%, to $40.1 million for the year ended December 31, 2011, from $39.5 million for the year ended December 31, 2010. On a constant dollar basis, amortization of intangible assets would have increased $0.1 million, or 0.3% to $39.6 million. Included in amortization of intangible assets for the year ended December 31, 2011 and 2010 was $0.5 million and $2.6 million, respectively, related to the impairment of certain customer relationship intangible assets. Excluding these items, amortization of intangible assets increased $2.2 million as a result of incremental amortization of $5.5 million related to intangible assets from the Cequint acquisition, partially offset by $3.3 million due to certain intangible assets reaching the end of their economic useful lives.

Interest expense. Interest expense increased $1.1 million, or 4.5%, to $25.7 million for the year ended December 31, 2011, from $24.6 million for the year ended December 31, 2010. Amortization of deferred financing fees and original issue discount for the year ended December 31, 2011 and 2010 was $2.0 million in both periods. Cash interest expense increased primarily due to the impact of higher borrowing levels as a result of our acquisition of Cequint on October 1, 2010 partially offset by debt repayments.

Other (expense) income, net. Other (expense) income was a loss of $0.1 million for the year ended December 31, 2011 compared to a gain of $4.5 million for the year ended December 31, 2010. Included in other (expense) income was a loss of approximately $0.3 million related to foreign currency revaluation compared to a gain of $4.1 million for the year ended December 31, 2011 and 2010, respectively. These revaluation amounts were due to fluctuations in the value of the U.S. dollar, principally against the Euro and Australian dollar.

Income tax provision. For the year ended December 31, 2011, our income tax provision was approximately $7.4 million compared to $12.3 million for the year ended December 31, 2010. The decrease in our income tax provision is primarily due to an increase in the valuation allowance of $8.6 million on domestic deferred tax assets in 2010, which was partially offset by changes in our FASB ASC 740 reserves for uncertain tax positions relative to 2010 and an increase in the valuation allowance in 2011 relating to a true-up of acquired net operating loss carryforwards. Our effective tax rate was 28.9% and 57.5% for the year ended December 31, 2011 and 2010, respectively. Our effective tax rate differs from the U.S. federal statutory rate primarily due to the valuation allowance against certain U.S. tax attributes, and profits of our international subsidiaries being taxed at rates different than the U.S. federal statutory rate.

Revenues. Total revenues increased $51.1 million, or 10.8%, to $522.5 million for the year ended December 31, 2010, from $471.4 million for the year ended December 31, 2009. The positive effect of foreign exchange translation on a year-over-year basis was $1.2 million. Excluding the positive effect of foreign exchange rates, total revenues increased $49.9 million, or 10.6%, to $521.3 million for the year ended December 31, 2010.

We enter into arrangements with our customers in the currency of the markets we operate in. As a result, our reported results are affected by fluctuations in the value of the U.S. dollar as compared to foreign currencies, predominantly the British Pound, the Euro and the Australian dollar. The following table shows the currency composition of our revenues for the year ended December 31, 2010 and 2009 and the weighted average exchange rates used to translate our local currency results to the U.S. dollar:

We generate revenues through three business divisions: the telecommunication services division (TSD), the payments division, and the financial services division (FSD).

Telecommunication services division. Revenues from the telecommunication services division increased $48.0 million, or 22.5%, to $260.7 million for the year ended December 31, 2010, from $212.7 million for the year ended December 31, 2009. This was due to the following:

Payment services division. Revenues from the payment services division increased $2.2 million, or 1.1%, to $195.6 million for the year ended December 31, 2010, from $193.4 million for the year ended December 31, 2009. The positive effect of foreign exchange translation on a year-over-year basis was $0.5 million. Excluding the impact of foreign exchange rates, payments revenue increased $1.7 million, or 0.7%, to $195.1 million for the year ended December 31, 2010. This was due to the following:

Financial services division. Revenues from the financial services division increased $0.9 million, or 1.4%, to $66.2 million for the year ended December 31, 2010, from $65.3 million for the year ended December 31, 2009. The positive effect of foreign exchange translation on a year-over-year basis was

$0.4 million. Excluding the impact of foreign exchange rates, financial services revenue increased $0.6 million, to $65.8 million as of December 31, 2010 due to the following:

Cost of network services. Cost of network services increased $35.6 million, or 16.0%, to $258.6 million for the year ended December 31, 2010, from $223.0 million for the year ended December 31, 2009. The effect of foreign exchange translation on cost of network services was not significant.

The increase in cost of network services was primarily due to the following increases: $34.6 million related to the incremental full-year combined CSG and TSD operations; $3.0 million due to higher payroll and related costs to support our IP registry, roaming and clearing and payment gateway platforms; $1.5 million due to higher dial access rates in North America; $1.6 million to support the growth in our payments business in Europe; $1.1 million in regulatory charges which are passed through to our customers; and $0.8 million to support the growth in our FSD business in Europe and Asia Pacific. This was partially offset by the following decreases: $5.0 million in cost reductions achieved through the integration of the legacy CSG operations; $1.0 million in lower variable incentive cash compensation; and $0.4 million due to reduced stock compensation due to the full vesting of stock granted in prior periods and a reduction in the number of grants issued in 2010.

Gross profit. Gross profit represented 50.5% of total revenues for the year ended December 31, 2010, compared to 52.7% for the year ended December 31, 2009. On a constant dollar basis, gross margins for the year ended December 31, 2010 decreased 230 basis points to 50.4% of total revenues. Included in revenue and margins for the year ended December 31, 2009, were $3.8 million and $3.7 million, respectively, related to our ATM Software product which we ceased selling in the fourth quarter of 2009. Excluding these revenues and gross margin, gross profit would have decreased 190 basis points from 52.3% for the year ended December 31, 2009. This decrease was primarily due to the following items: 170 basis points related to incremental investments in our gateway, roaming and clearing and IP registry services; 80 basis points due to the decline in margins in our payments division in North America; and 95 basis points due to anticipated price reductions on the renewal of certain legacy CSG customer contracts. These decreases were partially offset by the following increases: 100 basis points due to cost savings achieved through the integration of legacy CSG operations and 55 basis points due to growth in our payments division internationally.

Engineering and development expense. Engineering and development expense increased $1.8 million, or 5.0%, to $38.0 million for the year ended December 31, 2010, from $36.2 million for the year ended December 31, 2009. On a constant dollar basis, engineering and development expenses would have increased $1.4 million, or 4.0%, to $37.7 million and represented 7.2% and 7.6% of revenues for the years ended December 31, 2010 and 2009, respectively.

The increase in engineering and development costs was primarily due to the following: $7.0 million related to the incremental full-year CSG and TSD operations; and $2.0 million in costs resulting from our acquisition of Cequint. This was partially offset by the following decreases: an increase in

capitalized software development costs, which are offset against engineering and development costs, of $3.3 million due to incremental investment of $2.3 million in our roaming and clearing, IP registry and payment gateway platforms and $1.0 million in our mobile caller identification products developed through Cequint; $1.9 million in variable incentive cash compensation due to performance thresholds not being achieved; $1.2 million from cost reduction achieved through the integration of the legacy CSG operations; $1.1 million from our ATM software product which we ceased selling in the fourth quarter of 2009; and $0.4 million in stock compensation expense due to the full vesting of stock granted in prior periods and a reduction in the number of grants issued in 2010.

Selling, general and administrative expense. Selling, general and administrative expenses decreased $3.7 million, or 3.7%, to $95.5 million for the year ended December 31, 2010, from $99.2 million for the year ended December 31, 2009. On a constant dollar basis, selling, general and administrative expenses would have decreased $5.7 million, or 5.7%, to $94.9 million and would have represented 18.0% of revenues for the year ended December 31, 2010, compared to 21.2% of revenues for the year ended December 31, 2009. Included in selling, general and administrative expense for the year ended December 31, 2010 and 2009 were stock compensation expense of $4.9 million and $8.2 million, respectively. The decrease in stock compensation expense was due to the full vesting of stock awards granted in prior periods and a reduction in the number of performance based awards achieved in 2010. Included in selling, general and administrative expense for the years ended December 31, 2010 and 2009 were acquisition related costs of $0.7 million and $2.2 million related to the acquisition of Cequint and CSG, respectively. These costs were expensed in accordance with the provisions of FASB ASC 805, Business Combinations.

Excluding the abovementioned decreases in stock compensation expense, expensed acquisition costs and the effect of foreign exchange, selling, general and administrative expense decreased $1.2 million primarily due to the following: $3.2 million in variable cash incentive compensation; $3.0 million in cost reductions achieved through the integration of the legacy CSG operations; $0.9 million in severance. This was partially offset by the following: $4.8 million related to the incremental full-year CSG and TSD operations; and $1.1 million related to incremental overhead from our acquisition of Cequint.

Contingent consideration fair value adjustment. Contingent consideration fair value adjustment of $1.8 million for the year ended December 31, 2010, represents the change in the fair value of the liability recorded for the additional consideration which may be payable in relation to the acquisition of Cequint, Inc. See Note 3 for further details regarding the Cequint contingent consideration. This liability is re-measured each reporting period and changes in the fair value are recorded through this line item in our consolidated statements of operations.

Depreciation and amortization of property and equipment. Depreciation and amortization of property and equipment increased $15.3 million, or 47.5%, to $47.5 million for the year ended December 31, 2010, from $32.2 million for the year ended December 31, 2009. On a constant dollar basis, depreciation and amortization of property and equipment would have increased $15.0 million or 46.7% to $47.3 million and represented 9.0% and 6.8% of revenue for the year ended December 31, 2010 and 2009, respectively.

This increase in depreciation and amortization of property and equipment was due to the following: $5.5 million due to an accelerated depreciation charge following a decision made during the second quarter to phase out surplus network assets and office equipment that will no longer be required following the integration of the legacy CSG and TNS operations; $5.5 million due to capital expenditures primarily to support our revenue growth and to a lesser extent the integration of back office systems; $3.9 million due to a full year of depreciation on the acquired CSG assets and $0.1 million due to our acquisition of Cequint.

Amortization of intangible assets. Amortization of intangible assets increased $7.1 million, or 21.9%, to $39.5 million for the year ended December 31, 2010, from $32.4 million for the year ended December 31, 2009. On a constant dollar basis, amortization of intangible assets would have increased $7.0 million, or 21.6% to $39.4 million.

The increase in amortization of intangible assets was due to the following: $5.8 million related to a full year of amortization on the acquired CSG assets; $2.5 million due the impairment of certain customer relationship intangibles and $1.8 million related to the acquisition of Cequint. This was partially offset by a reduction of $3.1 million as certain intangible assets reached the end of their economic useful lives during 2010.

Interest expense. Interest expense decreased $34.0 million to $24.6 million for the year ended December 31, 2010, from $58.6 million for the year ended December 31, 2009. Included in interest expense for the year ended December 31, 2009 were charges of $1.7 million related to the write-off of deferred financing fees following the refinancing of the 2007 Credit Facility in May 2009 and the write-off of $21.9 million in debt discount and deferred financing fees related to the May 2009 Credit Facility in November 2009. Also included was a $3.3 million term loan call premium related to the refinancing of the May 2009 credit facility in November 2009. Amortization of deferred financing fees and discount for the years ended December 31, 2010 and December 31, 2009 was $2.0 million and $7.1 million, respectively. Excluding these charges, cash interest expense decreased $6.1 million due to a reduction in interest rates which was partially offset by an increase of $4.1 million due to higher borrowing levels.

Other income. For the year ended December 31, 2010 other income was $4.5 million compared to $0.4 million for the year ended December 31, 2009. Included in other income for the year ended December 31, 2010 are foreign currency revaluation gains of approximately $4.1 million due to fluctuations in the value of the U.S. dollar, principally against the Euro, versus a gain on foreign currency revaluation of $0.3 million for the year ended December 31, 2009.

Income tax provision. For the year ended December 31, 2010, our income tax provision was approximately $12.3 million compared to an income tax benefit of $6.9 million for the year ended December 31, 2009. The increase in our income tax provision is primarily related to higher income from continuing operations, an increase in valuation allowance on net domestic deferred tax assets, and increases in FASB ASC 740 reserves due to certain income tax exposures. Our effective tax rate was 57.5% and 74.4% for the year ended December 31, 2010 and 2009, respectively. Our effective tax rate differs from the U.S. Federal statutory rate of 34% primarily due to an increase in valuation allowance on net domestic deferred tax assets, increases in FASB ASC 740 reserves due to certain income tax exposures, and profits of our international subsidiaries being taxed at rates different than the U.S. Federal statutory rate.

To supplement our consolidated financial statements presented on a GAAP basis, we disclose certain non-GAAP measures, including EBITDA before stock compensation expense, adjusted net income and adjusted net income per share. These non-GAAP measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States. Reconciliations of each of these non-GAAP measures to the corresponding GAAP measure are included elsewhere in this 10-K.

EBITDA before stock compensation expense is determined by adding the following items to Net Income, the closest GAAP financial measure: income (loss) from discontinued operations, equity in net loss of unconsolidated affiliate, income tax provision, other income (expense), interest expense, depreciation and amortization of property and equipment, amortization of intangibles, contingent consideration fair value adjustment, earnout milestone compensation and stock compensation expense.

Adjusted net income is determined by adding the following items to Net Income, the closest GAAP financial measure: income (loss) on discontinued operations, provision for income taxes, certain non-cash items, including amortization of intangible assets, contingent consideration fair value adjustment, earnout milestone compensation, stock compensation expense and the amortization of debt issuance costs, and the result is tax effected at an assumed long-term tax rate of 20%, which excludes the effect of our net operating losses. The assumed long-term tax rate of 20% takes into consideration the following primary factors: the income generated outside of the U.S. which is taxed at substantially lower rates than U.S. statutory rates; the cash benefit of our tax-deductible amortization of intangible assets and tax-deductible goodwill; and the cash benefit of tax-deductible stock compensation expense.

We believe that the disclosure of EBITDA before stock compensation expense and adjusted net income and related per-share amounts are useful to investors as these non-GAAP measures form the basis of how our management team reviews and considers our operating results. We also rely on adjusted net income as the primary measure of our earnings exclusive of certain non-cash charges. By disclosing these non-GAAP measures, we believe that we create for investors a greater understanding of, and an enhanced level of transparency into, the means by which our management team operates our company. We also believe these measures can assist investors in comparing our performance to that of other companies on a consistent basis exclusive of selected significant non-cash items.

EBITDA before stock compensation expense, adjusted net income and adjusted net income per share have limitations as analytical tools, and you should not rely upon them or consider them in isolation or as a substitute for GAAP measures, such as net income and other consolidated income or other cash flows statement data prepared in accordance with GAAP. In addition, these non-GAAP measures may not be comparable to other similarly titled measures of other companies. Because of these limitations, EBITDA before stock compensation expense should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. Adjusted net income and adjusted net income per share also should not be considered as a replacement for, or a measure that should be used or analyzed in lieu of, net income or net income per share. We attempt to compensate for these limitations by relying primarily upon our GAAP results and using EBITDA before stock compensation expense, adjusted net income and adjusted net income per share as supplemental information only.

All references to the effect of foreign currency exchange rates on a constant dollar basis were determined by applying the prior year foreign currency rates to the current year results. This information is presented to provide a basis for evaluating operating results excluding the effect of foreign currency fluctuations.

Adjusted net income and related per share amounts, EBITDA before stock compensation expense and revenue comparisons at constant exchange rates are not measures prepared in accordance with U.S. GAAP. The following is a reconciliation of our results of operations prepared in accordance with U.S. GAAP to those adjusted results considered by management (in thousands):

	For the year ended December 31,

	2009			2010			2011
EBITDA before stock compensation expense:
Net (loss) income (GAAP)	$	(2,059	)	$	8,544		$	17,072
Add back the following items:
(Income) loss on discontinued operations		(328	)		679			1,025
Equity in net loss of unconsolidated affiliate		115			288			—
(Benefit) provision for income taxes		(6,930	)		12,279			7,354
Other (income) expense, net		(934	)		(4,799	)		(166	)
Interest expense		58,553			24,556			25,658
Depreciation and amortization of property and equipment		32,220			47,495			46,978
Amortization of intangible assets		32,346			39,540			40,124
Contingent consideration fair value adjustment(1)		—			1,794			(3,107	)
Earnout milestone compensation(2)		—			—			568
Stock compensation expense		10,446			6,418			6,269

EBITDA before stock compensation expense	$	123,429		$	136,794		$	141,775

Adjusted Net Income:
Net (loss) income (GAAP)	$	(2,059	)	$	8,544		$	17,072
Add back the following items:
(Income) loss on discontinued operations		(328	)		679			1,025
(Benefit) provision for income taxes		(6,930	)		12,279			7,354
Amortization of intangible assets		32,346			39,540			40,124
Contingent consideration fair value adjustment		—			1,794			(3,107	)
Earnout milestone compensation		—			—			568
Other debt related costs		34,046			2,021			1,991
Stock compensation expense		10,446			6,418			6,269

Adjusted Net Income before income taxes		67,521			71,275			71,296
Income tax provision at 20%		(13,504	)		(14,255	)		(14,259	)

Adjusted Net Income	$	54,017		$	57,020		$	57,037

(1): The contingent consideration change in fair value represents the change in the fair value of the liability recorded for the additional consideration which may be payable in relation to the acquisition of Cequint, Inc. This liability is re-measured each reporting period and changes in the fair value are recorded through this line item in our consolidated statements of operations. The contingent consideration fair value adjustment decreased $4.9 million from December 31, 2010 to December 31, 2011. A gain of $3.1 million was recognized for the year ended December 31, 2011, compared to a charge of $1.8 million for the year ended December 31, 2010. The decrease in the fair value of the contingent consideration during 2011 related primarily to changes in the expected timing of the achievement of the performance milestone targets. These timing changes are due to updates to our projections as of the dates on which our carrier customers plan to release new handset devices to the market. See Note 3.
(2): Earnout milestone compensation represents performance payments which may be payable to certain key personnel in addition to the contingent consideration, based on the achievement of four profit-related milestones of up to $10.0 million. To the extent the additional $10.0 million is payable, it will be recorded as compensation expense. During 2011, $0.6 million was recognized as earnout milestone compensation based on expected timing of achievement of required milestone targets by certain key personnel. See Note 3.

Credit card and debit card transactions account for a major percentage of the transaction volume processed by the customers of our payment services division. The volume of these transactions on our networks generally is greater in the third and fourth quarter vacation and holiday seasons than during the rest of the year. Consequently, revenues and earnings from credit card and debit card transactions in the first and second quarter generally are lower than revenues and earnings from credit card and debit card transactions in the third and fourth quarters of the immediately preceding year. We expect that our operating results in the foreseeable future will be significantly affected by seasonal trends in the credit card and debit card transaction market.

Call volumes from business users account for a major percentage of the database access volume of our identity and verification and registry services in our telecommunications services division. As a result, we generally see higher database access volumes on business days as opposed to weekends and holidays. The volume of these database access volumes is generally greater in the second and third quarters than during the rest of the year. In addition, the levels of roaming and clearing traffic processed by our mobile operator customers is generally greater in the second and third quarter vacation and travel seasons than during the rest of the year. We expect that our operating results in the foreseeable future will be significantly affected by seasonal trends in the telecommunications industry.

Our primary liquidity and capital resource needs are to finance the costs of our operations, to make capital expenditures and to service our debt. Based upon our current level of operations, we expect that our cash flow from operations, together with the amounts we are able to borrow under our amended February 2012 Credit Facility, will be adequate to meet our anticipated needs for the foreseeable future.

Our operations provided us cash of $87.6 million for the year ended December 31, 2011, which was attributable to net income of $17.1 million, depreciation, amortization and other non-cash charges of $93.0 million and an increase in working capital of $22.5 million. Our operations provided us cash of $119.6 million for the year ended December 31, 2010, which was attributable to net income of $8.5 million, adjusted by depreciation, amortization and other non-cash charges of $106.5 million and a decrease in working capital of $4.6 million. Our operations provided us cash of $105.4 million for the year ended December 31, 2009, which was attributable to a net loss of $2.0 million, adjusted by depreciation, amortization and other non-cash charges of $96.5 million and a decrease in working capital of $10.9 million. From 2009 – 2011, the cumulative impact on working capital was a $7.0 million increase, or $2.3 million average increase each year. Working capital changes are due to timing differences of transactions each year.

We used cash of $53.6 million in investing activities for the year ended December 31, 2011, which was comprised primarily of $53.4 million of capital expenditures to support our revenue growth. We used cash of $101.8 million in investing activities for the year ended December 31, 2010, which was comprised primarily of $55.0 million of capital expenditures to support revenue growth and integration activities, $46.3 million to fund our acquisition of Cequint and $0.5 million related to the finalization of our acquisition of CSG. We used cash of $271.3 million in investing activities for the year ended December 31, 2009 which included $230.0 million to fund our acquisition of CSG and $40.6 million to fund capital expenditures primarily to support our revenue growth.

We used $58.3 milllion of cash from financing activities for the year ended December 31, 2011, which included $15.0 million dollar payment on our revolving credit facility, $19.4 million of payments on the November 2009 senior secured credit facility, $25.7 million which was used to repurchase stock as part of the Company's authorized share repurchase plan and $1.8 million from the exercise of employee stock options. Our financing activities provided us cash of $10.6 million for the year ended

December 31, 2010. This consisted of proceeds (net of debt discount and financing fees) from the amended November 2009 Credit Facility of $63.1 million and $1.9 million from the exercise of employee stock options less $31.9 million in scheduled payments and voluntary pre-payments on the November 2009 Credit Facility and $22.6 million which was used to repurchase stock primarily as part of the Company's authorized share repurchase plan as well as to satisfy employee tax withholding requirements on the vesting of restricted stock units. Our financing activities provided us cash of $162.5 million for the year ended December 31, 2009. This consisted of proceeds (net of debt discount, financing fees and term loan call premium) from the May and November 2009 Credit Facilities of $201.6 million and $363.2 million of which $48.5 million was from the Revolver Credit Facility, respectively, less the payment of the 2007 and May 2009 credit facilities of $178.5 million and $230.0 million, respectively. In addition, $1.8 million was used to repurchase stock to satisfy employee tax withholding requirements on the vesting of restricted stock units and we received $8.1 million from the exercise of employee stock options.

The covenants in our amended February 2012 Credit Facility do not, and are not reasonably likely to, limit our ability to pursue strategic acquisitions as part of our growth strategy to a material extent. To the extent that we are not able to fund a strategic acquisition through cash flow from operations or additional amounts that we are able to borrow under our existing February 2012 Credit Facility, we would need to undertake additional debt or equity financing.

During the year ended December 31, 2011, the Company concluded that a portion of the undistributed earnings of certain foreign subsidiaries would no longer be considered indefinitely reinvested. After comparing the forecasted excess earnings of its domestic and select foreign subsidiaries to the opportunities for reinvestment, the Company changed its indefinite reinvestment assertion with respect to the current and future earnings of its UK and Irish subsidiaries, as it no longer has specific plans for reinvestment of those earnings in the foreseeable future. During the year ended December 31, 2011, the Company repatriated approximately $36.6 million and has utilized the funds to primarily prepay its domestic long term debt and repurchase outstanding shares of corporate stock. As of December 31, 2011, approximately $21.0 million of our cash balances were held at international locations for which earnings were considered indefinitely reinvested. We believe that our current plans with respect to the current and future earnings of our UK and Irish subsidiaries, along with our other liquidity sources discussed above, provide sufficient sources of liquidity to finance our domestic operations and support our assertions that the undistributed earnings held by foreign subsidiaries may be considered indefinitely reinvested.

The following table summarizes our contractual obligations as of December 31, 2011 that require us to make future cash payments (in thousands):

Long-term debt under the senior secured credit facility. Long-term debt represents the principal payments based on when payments are contractually due. Not included in the table above are

commitments to make interest payments under the terms of our February 2012 Credit Facility due to the variable nature of the interest rates. See Note 6 to the consolidated financial statements for further details on interest rates and other terms and conditions of this facility.

Supplier commitments. Certain key components used in the Company's network are currently available only from limited sources. The Company has entered into long term contracts with certain vendors for the provision of network equipment and the maintenance of hardware and software utilized on our network.

Operating lease obligations. The Company leases office space and certain office equipment under various non-cancelable operating leases that expire through February 2019. Rental expense is recognized on a straight-line basis over the term of the lease, regardless of when payments are due.

Due to uncertainty with respect to the timing of future cash flows associated with unrecognized tax benefits at December 31, 2011, the Company is unable to make reasonably reliable estimates of the period of cash settlement. Therefore, $8.9 million of liabilities for unrecognized tax benefits have been excluded from the contractual obligations table above. See Note 8 to the Consolidated Financial Statements for further discussion of income tax.

In addition, the table above does not include contingent consideration of up to $52.5 million or performance payments of up to $10 million, which may be payable to certain key personnel in conjunction with the Cequint acquisition based on the achievement of four profit related milestones. These payments are excluded from the table since the amounts are not contractually certain to be paid. See Note 3 for additional information.

We expect that we will be able to fund our remaining obligations and commitments with cash flow from operations. To the extent we are unable to fund these obligations and commitments with cash flow from operations, we intend to fund these obligations and commitments with proceeds from borrowings under our February 2012 Credit Facility or future debt or equity financings.

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2011-04, which amends Accounting Standards Codification (ASC) topic 820, Fair Value Measurements and Disclosures, to achieve common fair value measurement and disclosure requirements required by GAAP. This standard gives clarification for the highest and best use valuation concepts. The ASU also provides guidance on fair value measurements relating to instruments classified in stockholders' equity and instruments managed within a portfolio. Further, ASU 2011-04 clarifies disclosures for financial instruments categorized within level 3 of the fair value hierarchy that require companies to provide quantitative information about unobservable inputs used, the sensitivity of the measurement to changes in those inputs, and the valuation processes used by the reporting entity. Early adoption is not permitted. Implementation of this standard is effective in the first fiscal year beginning after December 15, 2011. We are currently evaluating the newly prescribed standard, but do not expect it will have a material impact on our consolidated financial statements.

In June 2011, the FASB issued guidance on presentation of comprehensive income. The new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. Instead, an entity will be required to present net income and other comprehensive income either in one continuous statement or in two separate but consecutive statements. The new guidance was adopted on January 1, 2012 and will impact our financial statement presentation of comprehensive income for the period ending March 31, 2012 and the comparative period presented. The new guidance also requires presentation of reclassification adjustments from other comprehensive income to net income on the face of the financial statements. However, the effective date pertaining to this requirement was deferred indefinitely.

Our significant accounting policies are described in Note 2 to our consolidated financial statements included elsewhere in this report. We consider the accounting policies related to revenue and related cost recognition, valuation of goodwill, other intangible assets and contingent consideration related to business combinations, stock based compensation and accounting for income taxes to be critical to the understanding of our results of operations. Critical accounting policies include the areas where we have made, what we consider to be, particularly subjective or complex judgments in making estimates and where these estimates can significantly impact our financial results under different assumptions and conditions. We prepare our financial statements in conformity with U.S. generally accepted accounting principles. As such, we are required to make certain estimates, judgments and assumptions that we believe are reasonable based upon the information available. These estimates, judgments and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. Actual results could be different from these estimates.

The following is a discussion on the most significant accounting estimates affecting the financial statements:

We account for acquisitions in accordance with FASB ASC 805, Business Combinations (ASC 805). We preliminarily record the fair value of assets acquired and liabilities assumed based on guidance defined in ASC 820, Fair Value Measurements and Disclosures and adjust these values once valuations are finalized within 12 months of the close of the acquisition. When the valuations are finalized, any changes to the preliminary valuation of assets acquired and liabilities assumed may result in significant adjustments to the fair value of net identifiable assets acquired and goodwill.

Pursuant to the guidance in ASC 805, in those circumstances where an acquisition involves a contingent consideration arrangement, we recognize a liability equal to the estimated fair value of the contingent payments we expect to make as of the acquisition date. We re-measure this liability each reporting period and record changes in the fair value through a separate line item within our consolidated statements of operations. Increases or decreases in the fair value of the contingent consideration liability can result from changes in discount periods and rates, as well as changes in our expectations as the timing and probability of achievement of milestones on which the contingent consideration is based.

We account for goodwill and intangible assets in accordance with FASB ASC 350, Intangibles—Goodwill and Other (ASC 350). Under this standard, goodwill and intangible assets deemed to have indefinite lives are not amortized and are subject to annual impairment tests. We have elected to perform the impairment test annually as of October 1 of each year. An interim goodwill impairment test is performed if an event occurs or circumstances change between annual tests that would more likely than not reduce the fair value of a reporting unit below its carrying amount. If facts and circumstances indicate goodwill may be impaired, we perform a recoverability evaluation based upon a determination of fair value.

For the Company's customer relationship intangible assets, the Company evaluates impairment upon the significant loss of revenue from a customer. The fair value measurement of a customer relationship intangible is primarily based on an income approach using significant inputs that are not observable in the market, therefore representing a Level 3 measurement as defined in FASB ASC 820, Fair Value Measurements and Disclosures. The income approach indicates value for a subject asset based on the present value of cash flows projected to be generated by the asset. Projected cash flow is

discounted at a rate of return that reflects the relative risk of achieving the cash flow and the time value of money. Included in amortization of intangibles expense for the years ended December 31, 2009, 2010 and 2011 is approximately $0.4 million, $2.6 million and $0.5 million, respectively, in accelerated amortization in connection with the impairment of certain customer relationships, primarily payments division customers, during those respective periods. As a result, these customer relationships intangible assets were written down to their fair values of nil, $1.3 million and nil during December 31, 2009, 2010 and 2011, respectively.

The calculation of fair value in accordance with ASC 350 contains uncertainties due to judgment in estimates and assumptions, including projections of future income and cash flows, the identification of appropriate market multiples and the choice of an appropriate discount rate. The Company's estimates of anticipated future income and cash flows used in determining fair value contain uncertainties due to uncontrollable events that could positively or negatively impact the anticipated future economic and operating conditions. Therefore, those estimates could be reduced significantly in the future due to changes in technologies, regulation, available financing, competition or other circumstances. As a result, the carrying amount of the Company's long-lived assets could be reduced through impairment charges in the future. Additionally, changes in the timing of estimated future cash flows could result in a shortening of estimated useful lives for intangibles.

In accordance with FASB ASC 360, Property, Plant and Equipment (ASC 360), the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. To determine the recoverability of long-lived assets, the Company evaluates the probability that future estimated undiscounted net cash flows will be less than the carrying amount of the assets. If the Company estimates that assets are impaired, the assets are written down to their fair value. For purposes of measuring and recognizing impairment of long-lived assets, the Company will assess at the lowest level whether separate cash flows can be attributed to the individual asset. The Company groups long-lived assets where separately identifiable cash flows are available. In the event that long-lived assets are abandoned or otherwise disposed of, the Company recognizes an impairment charge upon disposition.

During the three months ended June 30, 2010, the Company made a decision to phase out $6.2 million of surplus network monitoring assets that would no longer be required following the integration of the CSG and TNS networks. The Company recorded accelerated depreciation expense related to these assets of $0.7 million and $5.5 million during the years ended December 31, 2011 and 2010, respectively. As of December 31, 2011, the net book value of these assets was nil.

During the three months ended December 31, 2011, the Company recorded a charge of $0.4 million related to the impairment of certain capitalized software assets which were no longer intended to be utilized. The net book value of these assets at December 31, 2011 was nil.

The calculation of fair value in accordance with ASC 360 contains uncertainties due to judgment in estimates and assumptions, including projections of future income and cash flows, the identification of appropriate market multiples and the choice of an appropriate discount rate. The Company's estimates of anticipated future income and cash flows used in determining fair value contain uncertainties due to uncontrollable events that could positively or negatively impact the anticipated future economic and operating conditions. Therefore, those estimates could be reduced significantly in the future due to changes in technologies, regulation, available financing, competition or other circumstances. As a result, the carrying amount of the Company's long-lived assets could be reduced through impairment charges in the future. Additionally, changes in the timing of estimated future cash flows could result in a shortening of estimated useful lives for long-lived assets.

We account for income taxes pursuant to the provisions of FASB ASC 740, Income Taxes. Under this method, deferred tax assets or liabilities are computed based upon the difference between the financial statement and income tax bases of assets and liabilities using the enacted marginal tax rate. Deferred income tax expense or benefits are based upon the changes in the asset or liability from period to period. We provide a valuation allowance on net deferred tax assets when it is not more likely than not that such assets will be realized. We must exercise significant judgment in evaluating the amount and timing of recognition of deferred tax liabilities and assets, and related valuation allowance, including projections of future taxable income. These judgments and estimates are reviewed on a continual basis as regulatory and business factors change. We have not recorded a valuation allowance for certain deferred tax assets. We expect to realize the benefit of these deferred tax assets as we generate sufficient taxable income in future years. During 2011, we decreased the valuation allowance on domestic deferred tax assets by $2.4 million due to a decrease in our net deferred tax assets.

From time to time, we engage in transactions in which the tax consequences may be subject to uncertainty. Significant judgment is required in assessing and estimating the tax consequences of these transactions. We prepare and file tax returns based on interpretation of tax laws and regulations. In the normal course of business, our tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing authorities. For financial reporting purposes, we only recognize tax benefits taken or expected to be taken on the tax return that we believe are "more likely than not" of being sustained. We record a liability (or a reduction of the associated tax asset, as applicable) for the difference between the benefit recognized and measured pursuant to the accounting guidance for income taxes and the tax position taken or expected to be taken on our tax return. This analysis is performed in accordance with the requirements of ASC 740 and is based on a two-step process. Both steps presume that the tax position will be examined by the appropriate taxing authority that has full knowledge of all relevant information. The first step is to evaluate the tax position for recognition by determining if, based on the weight of available evidence, it is more likely than not that the position will be sustained on examination. The second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement with a taxing authority. It is inherently difficult and subjective to estimate such amounts, as this may require us to determine the probability of various possible outcomes. We reevaluate these uncertain tax positions on a periodic basis. This evaluation is based on factors including, but not limited to, current year tax positions, expiration of statutes of limitations, litigation, legislative activity, or other changes in facts and circumstances. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision in that period. The amounts ultimately paid upon resolution of such uncertain tax positions could be materially different from the amounts previously included in our income tax expense and therefore could have a material impact on our consolidated results of operations. The tax liabilities for uncertain tax positions are recorded as a separate component in our long-term income taxes payable balance.

Our monetary assets, consisting primarily of cash and receivables, and our non-monetary assets, consisting primarily of intangible assets and goodwill, are not affected significantly by inflation. However, the rate of inflation affects our expenses, such as those for employee compensation and costs of network services, which may not be readily recoverable in the price of services offered by us.

Our principal exposure to market risk relates to changes in interest rates. As of December 31, 2011 we had $373.1 million outstanding under our November 2009 Credit Facility. Under the November 2009 Credit Facility, interest on outstanding balances was payable, at the Company's option, at the base rate plus a margin of 2%, or at LIBOR plus a margin of 3%. At December 31, 2011 the 1 month LIBOR rate was 0.28%. As previously noted, the November 2009 Credit Facility was refinanced in February 2012. Under the February 2012 Credit Facility, interest on the outstanding balance will initially be payable at the Company's option at the Base Rate plus a margin of 2.0% or at LIBOR plus a margin of 3.0%. There is no LIBOR floor in the February 2012 Credit Facility. The applicable margins on the February 2012 Credit Facility are subject to step downs based on the Company's leverage ratio. Based upon the outstanding borrowings on December 31, 2011 and assuming repayment of the Term Loan in accordance with scheduled maturities of the February 2012 Credit Facility, each 1.0% increase or decrease in the interest rates could affect our annual interest expense by $3.8 million.

As of December 31, 2011, we did not hold derivative financial or commodity instruments and all of our cash and cash equivalents were held in money market or commercial accounts.

We primarily enter into arrangements with our customers in the currency of the markets in which we operate. As a result, our reported results are affected by fluctuations in the value of the U.S. dollar as compared to foreign currencies, predominantly the British Pound, the Euro and the Australian dollar. The following table shows the currency composition of our revenues for the year ended December 31, 2011 and 2010 and the weighted average exchange rates used to translate our local currency results to the U.S. dollar:

A $0.01 change in exchange rates for each of the major foreign currencies we operate in would have the following annual impact on:

We provide services to customers in the United States and increasingly to international customers in over 60 countries including Canada and Mexico and countries in Europe, Latin America and the Asia-Pacific region. We currently maintain operations and/or employees in 25 countries. We provide services in these countries using networks deployed in each country. We manage foreign exchange risk through the structure of our business. In the substantial majority of our transactions, we receive

payments denominated in the U.S. dollar, British Pound, Euro or Australian dollar. Therefore, we do not rely on international currency markets to obtain and pay illiquid currencies. The foreign currency exposure that does exist is limited by the fact that the majority of transactions are paid according to our standard payment terms, which are generally short-term in nature. Our policy is not to speculate in foreign currencies, and we promptly buy and sell foreign currencies as necessary to cover our net payables and receivables, denominated in foreign currencies. However, in December 2009 our subsidiary in Ireland entered into a $25.8 million loan agreement with our subsidiary in Bermuda to provide it with the ability of making loans and working capital funding to our subsidiaries. This loan is denominated in U.S. dollars and therefore fluctuations in the euro to the U.S. dollar exchange rate were recorded as revaluation gains or losses in our income statement prior to January 1, 2011. As of January 1, 2011, we no longer intended to settle this specific loan amount for the foreseeable future, and as such in accordance with ASC 830, Foreign Currency Matters, from this date, fluctuations in the euro to the U.S. dollar exchange rates are recorded to other comprehensive income in our balance sheet.

For the year ended December 31, 2011, we recorded a loss on foreign currency revaluation of approximately $0.3 million. This is primarily due to the revaluation of a U.S. dollar denominated loan balance between our subsidiaries in Ireland and Australia. This loan relates to amounts advanced by our subsidiary in Ireland to fund our card-not-present payment gateway development activities in Australia.

We have audited the accompanying consolidated balance sheets of TNS, Inc. as of December 31, 2010 and 2011, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2011. Our audits also included the financial statement schedule listed in Item 15B. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of TNS, Inc. at December 31, 2010 and 2011, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), TNS, Inc.'s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 13, 2012 expressed an unqualified opinion thereon.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING

We have audited TNS, Inc.'s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). TNS, Inc.'s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying management report located in Item 9A. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, TNS, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the COSO criteria.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of TNS, Inc. as of December 31, 2010 and 2011, and the related consolidated statements of operations, stockholders' equity, and cash flows of TNS, Inc. for each of the three years in the period ended December 31, 2011 and our report dated March 13, 2012 expressed an unqualified opinion thereon.

TNS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	December 31,

	2010			2011
ASSETS
Current assets:
Cash and cash equivalents	$	56,689		$	32,937
Accounts receivable, net of allowance for doubtful accounts of $3,977 and $4,282, respectively		86,988			94,366
Prepaid expenses		7,937			10,101
Deferred tax assets		220			—
Inventory		2,259			2,908
Other current assets		3,960			6,358

Total current assets		158,053			146,670

Property and equipment, net		135,418			141,662
Identifiable intangible assets, net		306,077			266,094
Goodwill		36,785			36,761
Deferred tax assets, net		2,932			2,163
Other assets		5,475			8,418

Total assets	$	644,740		$	601,768

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued expenses and other current liabilities	$	71,481		$	67,834
Deferred revenue		12,061			11,607
Current portion of long term debt, net of discount		18,488			17,871

Total current liabilities		102,030			97,312

Long-term debt, net of current portion and discount		385,136			352,358
Deferred tax liabilities		1,912			1,562
Contingent consideration		33,594			30,487
Other liabilities		6,787			5,452

Total liabilities		529,459			487,171

Stockholders' equity:
Common stock, $0.001 par value; 130,000,000 shares authorized; 26,515,823 shares issued and 25,359,255 shares outstanding and 25,732,645 shares issued and 24,309,682 shares outstanding, respectively		27			27
Treasury stock, 1,156,568 shares and 1,422,963 shares, respectively		(21,523	)		(24,662	)
Additional paid-in capital		176,633			162,151
Accumulated deficit		(34,315	)		(17,243	)
Accumulated other comprehensive loss		(5,541	)		(5,676	)

Total stockholders' equity		115,281			114,597

Total liabilities and stockholders' equity	$	644,740		$	601,768

TNS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

	Year ended December 31,

	2009			2010			2011
Revenues	$	471,418		$	522,490		$	557,723
Operating expenses:
Cost of network services, exclusive of the items shown separately below		222,985			258,578			275,824
Engineering and development		36,226			38,014			43,686
Selling, general, and administrative		99,224			95,522			103,275
Contingent consideration fair value adjustment		—			1,794			(3,107	)
Depreciation and amortization of property and equipment		32,220			47,495			46,978
Amortization of intangible assets		32,346			39,540			40,124

Total operating expenses		423,001			480,943			506,780

Income from continuing operations		48,417			41,547			50,943
Interest expense		(58,553	)		(24,556	)		(25,658	)
Interest income		497			307			246
Other income (expense), net		437			4,492			(80	)

(Loss) income from continuing operations before income tax provision and equity in net loss of unconsolidated affiliates		(9,202	)		21,790			25,451
Income tax benefit (provision)		6,930			(12,279	)		(7,354	)
Equity in net loss of unconsolidated affiliates		(115	)		(288	)		—

(Loss) income from continuing operations		(2,387	)		9,223			18,097
Income (loss) from discontinued operations, net of income taxes		328			(679	)		(1,025	)

Net (loss) income	$	(2,059	)	$	8,544		$	17,072

Basic
Continuing operations	$	(0.09	)	$	0.36		$	0.72
Discontinued operations		0.01			(0.03	)		(0.04	)
Basic net (loss) income per common share	$	(0.08	)	$	0.33		$	0.68
Diluted
Continuing operations	$	(0.09	)	$	0.35		$	0.71
Discontinued operations		0.01			(0.03	)		(0.04	)
Diluted net (loss) income per common share	$	(0.08	)	$	0.32		$	0.67
Basic weighted average common shares outstanding		25,402,506			25,949,139			25,110,513
Diluted weighted average common shares outstanding		25,402,506			26,471,472			25,397,118

TNS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands, except share data)

	Common Stock														Accumulated other comprehensive loss

	Common Stock					Treasury Stock			Additional paid-in capital			Accumulated deficit						Total stockholders' equity			Comprehensive (loss) income
	Shares			Amount		Treasury Stock			Additional paid-in capital			Accumulated deficit						Total stockholders' equity			Comprehensive (loss) income
Balance, December 31, 2008		25,082,007		$	25	$	(578	)	$	150,839		$	(40,800	)	$	(6,671	)	$	102,815
Exercise of employee stock options		472,923			1		—			8,141			—			—			8,142
Issuance of common stock upon vesting of restricted stock units		402,514			—		—			—			—			—			—
Tax benefit of share based payments		—			—		—			(646	)		—			—			(646	)
Purchase of treasury stock		—			—		(1,861	)		—			—			—			(1,861	)
Stock compensation expense		—			—		—			10,446			—			—			10,446
Foreign currency translation		—			—		—			—			—			4,503			4,503			4,503
Net loss		—			—		—			—			(2,059	)		—			(2,059	)		(2,059	)

Balance, December 31, 2009		25,957,444		$	26	$	(2,439	)	$	168,780		$	(42,859	)	$	(2,168	)	$	121,340

Total, December 31, 2009																					$	2,444

Issuance of common stock upon vesting of restricted stock units		452,440			1		—			(1	)		—			—			—
Exercise of employee stock options		132,613			—		—			1,949			—			—			1,949
Issuance of common stock		178,823			—		—			3,060			—			—			3,060
Purchase of treasury stock		—			—		(22,657	)		—			—			—			(22,657	)
Stock compensation expense		—			—		—			6,418			—			—			6,418
Foreign currency translation		—			—		—			—			—			(3,373	)		(3,373	)		(3,373	)
Retirement of treasury shares		(205,497	)		—		3,573			(3,573	)		—			—			—
Net income		—			—		—			—			8,544			—			8,544			8,544

Balance, December 31, 2010		26,515,823		$	27	$	(21,523	)	$	176,633		$	(34,315	)	$	(5,541	)	$	115,281

Total, December 31, 2010																					$	5,171

Issuance of common stock upon vesting of restricted stock units		296,038			—		—			—			—			—			—
Exercise of employee stock options		127,246			—		—			1,817			—			—			1,817
Purchase of treasury stock		—			—		(25,707	)		—			—			—			(25,707	)
Stock compensation expense		—			—		—			6,269			—			—			6,269
Foreign currency translation		—			—		—			—			—			(135	)		(135	)		(135	)
Retirement of treasury shares		(1,206,462	)		—		22,568			(22,568	)		—			—			—
Net income		—			—		—			—			17,072			—			17,072			17,072

Balance, December 31, 2011		25,732,645		$	27	$	(24,662	)	$	162,151		$	(17,243	)	$	(5,676	)	$	114,597

Total, December 31, 2011																					$	16,937

	Year ended December 31,

	2009			2010			2011
Cash flows from operating activities:
Net (loss) income	$	(2,059	)	$	8,544		$	17,072
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization of property and equipment		32,220			47,495			46,978
Amortization of intangible assets		32,346			39,540			40,124
Deferred income tax (benefit) provision		(12,685	)		8,734			764
Loss on disposal of property and equipment		25			160			—
Amortization of deferred financing costs and debt discount		7,126			2,021			1,991
Loss on debt extinguishment		26,944			—			—
Change in fair value of contingent consideration		—			1,794			(3,107	)
Equity in net loss of unconsolidated affiliates		115			288			—
Stock compensation		10,446			6,418			6,269
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable, net		8,888			11,153			(8,457	)
Other current and noncurrent assets		(11,344	)		10,573			(9,257	)
Accounts payable and accrued expenses		17,932			(16,762	)		(3,001	)
Deferred revenue		(3,533	)		(2,117	)		(430	)
Other current and noncurrent liabilities		(998	)		1,789			(1,382	)

Net cash provided by operating activities		105,423			119,630			87,564

Cash flows from investing activities:
Purchases of property and equipment		(40,604	)		(54,994	)		(53,408	)
Business combinations, net of cash acquired(1)		(230,656	)		(46,802	)		(224	)

Net cash used in investing activities		(271,260	)		(101,796	)		(53,632	)

Cash flows from financing activities:
Net proceeds from issuance of long-term debt		516,335			48,755			—
Net borrowings on revolving credit facility		48,522			14,377			—
Repayment of long-term debt		(408,500	)		(31,875	)		(34,375	)
Payment of long-term debt financing costs		(175	)		—			—
Proceeds from stock option exercises		8,142			1,949			1,817
Purchase of treasury stock		(1,861	)		(22,657	)		(25,707	)

Net cash provided by (used in) financing activities		162,463			10,549			(58,265	)

Effect of exchange rates on cash and cash equivalents		(2,997	)		(4,174	)		581

Net (decrease) increase in cash and cash equivalents		(6,371	)		24,209			(23,752	)
Cash and cash equivalents, beginning of year		38,851			32,480			56,689

Cash and cash equivalents, end of year	$	32,480		$	56,689		$	32,937

Supplemental disclosures of cash flow information:
Cash paid for interest	$	22,281		$	21,784		$	24,041

Cash paid for income taxes	$	2,192		$	8,356		$	7,556

TNS, Inc. (TNS or the Company) is one of the leading global providers of data communications and interoperability solutions. TNS's global secure network and innovative value added services enable transactions and the exchange of information to many of the world's leading retailers, banks, payment processors, financial institutions and telecommunication firms.

Founded in 1990 in the United States, TNS has grown steadily and now provides services to customers in over 60 countries across the Americas, Europe and the Asia Pacific region, with our reach extending to many more. TNS has designed and implemented a global data network that supports a variety of widely accepted communication protocols and is designed to be scalable and accessible by multiple methods.

The Company provides its services through its global data network, designed specifically for transaction applications. This network supports a variety of widely accepted communications protocols, and is designed to be scalable and accessible by multiple methods, including dial-up, dedicated, wireless and Internet connections.

The Company has three business divisions: (1) the payment services division (PSD), which provides data communications services to payment processors in North America, Europe and Asia Pacific, (2) the telecommunication services division (TSD), which provides call signaling services, database access services and roaming and clearing services primarily to the North American telecommunications industry, and (3) the financial services division (FSD), which provides data communications services to the financial services community in support of the Financial Information eXchange (FIX) messaging protocol and other transaction-oriented trading applications.

On September 1, 2010, the Company's Board of Directors authorized a share repurchase program of up to $50 million of the Company's common stock over the period ending March 31, 2012, subject to extension. The Company commenced repurchasing shares on October 1, 2010 and during the three month period ended December 31, 2010 repurchased 1,050,247 shares for a total cost of $19.1 million. The Company repurchased an additional 1,383,954 shares of its common stock during the year ended December 31, 2011 for a total cost of $24.0 million. In addition, the Company repurchased 88,903 and 150,141 shares during the years ended December 31, 2011 and 2010, respectively, for a total cost of $1.7 million and $3.6 million, respectively, to satisfy the minimum employee tax withholdings upon vesting of restricted stock units.

The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (GAAP) and in conjunction with the rules and regulations of the Securities and Exchange Commission (SEC).

The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions are eliminated upon consolidation. The Company consolidates investments where it has a controlling financial interest as defined by FASB ASC Topic 810, Consolidation. The usual condition for controlling financial interest is ownership of a majority of the voting interest and, therefore, as a general rule ownership, directly or indirectly, of over fifty percent of the outstanding voting shares is a condition pointing towards consolidation. For investments in variable interest entities the Company consolidates when it is determined to be the primary beneficiary of the variable interest entity. For those investments in entities where the Company has significant influence over operations, but where the Company neither has a controlling financial interest nor is the primary beneficiary of a variable interest entity, the Company follows the equity-method of accounting pursuant to FASB ASC 323, Investments—Equity Method and Joint Ventures.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. We consider the accounting policies related to revenue and related cost recognition, valuation of goodwill, other intangible assets and contingent consideration related to business combinations, stock based compensation and accounting for income taxes to be critical to the understanding of our results of operations. Critical accounting policies include the areas where we have made, what we consider, to be particularly subjective or complex judgments in making estimates and where these estimates can significantly affect our financial results under different assumptions and conditions. We prepare our financial statements in conformity with U.S. GAAP. As such, we are required to make certain estimates, judgments and assumptions that we believe are reasonable based upon the information available. These estimates, judgments and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. Actual results could be different from these estimates.

The Company recognizes revenue when persuasive evidence of an agreement exists, the terms are fixed and determinable, services are performed, and collection is probable. Cash received in advance of revenue recognition is recorded as deferred revenue.

PSD revenue is derived primarily from per transaction fees paid by the Company's customers for the transmission of transaction data, through the Company's network, between payment processors and Point of Sale (POS) or ATM terminals and monthly recurring fees for IP-based network services and wireless gateway offerings. TSD revenue is derived primarily from fixed monthly fees for call signaling and network connectivity services and per message fees charged for wireless switch and transport network services, identity and verification services, registry services, database access, call validation and roaming and clearing services. FSD revenue is derived primarily from monthly recurring fees based on the number of customer connections to and through the Company's network as well as dedicated bandwidth usage.

The Company considers the criteria established primarily by FASB ASC 605-45, Reporting Revenue Gross as a Principal versus Net as an Agent, in determining whether revenue should be recognized on a gross versus a net basis. Factors considered in determining if gross or net basis recognition is appropriate include whether the Company is primarily responsible to the client for the services, has discretion on vendor selection, or bears credit risk. The revenues for which there are gross vs. net considerations include regulatory network charges levied on our customers. Regulatory network charges include messaging signaling unit charges related to the Company's Signaling System No. 7 (SS7) network and Universal Service Fund charges applicable to interstate telecommunications services approved or imposed by the Federal Communications Commission. The Company believes that the indicators under ASC 605-45 support gross revenue presentation since the Company is the primary obligor in the arrangement and carries the underlying traffic over its data communications network and has sole discretion over whether to include such regulatory charges in the amounts invoiced to customers. Included in revenues and cost of network services for the years ended December 31, 2009,

2010 and 2011, are $10.5 million, $11.6 million and $12.2 million, respectively, related to these pass-through charges and cost of network services.

In certain of our international locations, the Company enters into revenue sharing arrangements with third parties related to data communications services it provides to the payment processing industry. Certain of the Company's international payment processing customers elect to configure end-user POS terminals with a caller-paid number. In this type of POS terminal configuration, the end-user is responsible for paying a regulated charge for each call to its underlying telecommunications carrier with which it contracts directly. The telecommunications carrier collects the regulated charge from the end-user and bears the credit risk in the transaction. The telecommunications carrier then remits the charge to the Company, withholding a fee for the use of its network in delivering the call to the Company. The Company then will pass these charges through to the payment processor, withholding a portion of the amount as a fee. Based on the Company's contractual arrangements with its payment processing customers, it has no obligation to remit cash until and unless the cash is remitted to the Company by the telecommunications carrier. The end-user looks to the telecommunications carrier for the provision of data communications access to the POS device and the payment processer for the processing of card-based payments. The Company believes that the indicators under ASC 605-45 support net revenue presentation since the telecommunications provider and payment processor, not the Company, are the primary obligors in the arrangement and the Company does not bear the credit risk. For the years ended 2009, 2010 and 2011, gross revenue was $68.3 million, $71.1 million and $78.2 million, revenue share was $32.1 million, $31.9 million and $35.4 million and net revenue recognized on the Company's consolidated financial statements was $36.2 million, $39.0 million and $42.8 million, respectively.

Incentives granted to new customers or upon contract renewals are deferred and recognized ratably as a reduction of revenue over the contract period to the extent that the incentives are recoverable against the customer's minimum purchase commitments under the contract. Deferred customer incentives were approximately $1.2 million and $5.2 million of which approximately $0.6 million and $2.5 million was classified in other current assets as of December 31, 2010 and 2011, respectively. The remaining balance was classified in other assets in the accompanying consolidated balance sheets. The Company performs periodic evaluations of its customer base and establishes allowances for estimated credit losses.

In addition, the Company receives installation fees related to the configuration of a customer's systems. Revenue from installation fees is deferred and recognized ratably over the customer's contractual service period, generally three years. Installation fees were approximately $3.9 million, $4.1 million, and $4.7 million for the years ended December 31, 2009, 2010 and 2011, respectively. Approximately $6.1 million and $5.9 million of installation fees are included in deferred revenue (current liabilities) and other liabilities (non-current liabilities) as of December 31, 2010 and 2011, respectively.

Cost of network services is comprised primarily of telecommunications charges, which include data transmission and database access charges, leased digital capacity charges, circuit installation charges, activation charges and compensation paid to the providers of calling name and line information

database records. The cost of data transmission is based on a contract or tariff rate per minute of usage in addition to a prescribed rate per transaction for certain vendors. The costs of database access, circuits, installation and activation charges are based on fixed fee contracts with local exchange carriers and interexchange carriers. The compensation charges paid to the providers of calling name and line information database records are based on a percentage of query revenue generated from the Company's customers accessing those records. The cost of network services also includes salaries, equipment maintenance and other costs related to the ongoing operation of the Company's data networks. These costs are expensed by the Company as incurred. The Company recognizes a liability for telecommunications charges based upon network services utilized at historical invoiced rates. Direct costs of installations are deferred and amortized over the customer's contracted service period, generally three years.

Deferred installation costs as of December 31, 2010 and 2011 were approximately $2.7 million and $2.5 million, respectively, and are classified as other current assets and other assets in the accompanying consolidated balance sheets. Depreciation expense on network equipment was approximately $23.6 million, $35.1 million, and $31.2 million for the years ended December 31, 2009, 2010, and 2011, respectively, and is included in depreciation and amortization of property and equipment in the accompanying consolidated statements of operations. Included in the 2010 and 2011 depreciation expense of $35.1 million and $31.2 million is accelerated depreciation expense of $5.5 million and $0.7 million, respectively, related to the phasing out of $6.2 million of surplus network assets and software as a result of the integration of the CSG and TNS networks. Amortization expense on internally developed software related to network services was approximately $3.8 million, $4.9 million, and $7.2 million for the years ended December 31, 2009, 2010, and 2011, respectively, and is included in depreciation and amortization expense of property and equipment in the accompanying consolidated statements of operations. Amortization expense on acquired developed technology, an intangible asset recorded in various acquisitions, was approximately $5.0 million, $5.8 million, and $7.3 million for the years ended December 31, 2009, 2010, and 2011, respectively, and is included in amortization of intangible assets in the accompanying consolidated statements of operations.

The Company considers all highly liquid investments with an original maturity of three months or less to be cash and cash equivalents.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company does not, as a matter of policy, require collateral on credit granted to customers. The Company performs periodic evaluations of its customer base and establishes allowances for estimated credit losses.

FASB ASC 820, Fair Value Measurments and Disclosures, defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. The Company's financial instruments consist primarily of cash and cash equivalents,

accounts receivable, accounts payable, and long-term debt. Due to their short-term nature, the carrying values for cash and cash equivalents, accounts receivable and accounts payable approximate fair value.

The fair value of the Company's long-term debt is based upon quoted market prices for the same and similar issues for the institutional Term B market giving consideration to quality, interest rates, maturity and other characteristics. As of December 31, 2011, the Company believes the carrying amount of its long-term debt approximates its fair value since the variable interest rate of the debt approximates a market rate.

The allowance for doubtful accounts reflects the company's estimate of credit exposure, determined principally on the basis of its collection experience, aging of its receivables and significant individual account credit risks.

Inventory is stated at the lower of cost or market, using the average cost method. Inventory consists primarily of network and computer parts and equipment. The Company's products are subject to technological change and changes in the Company's respective competitive markets. It is possible that new product launches or changes in customer demand could result in unforeseen changes in inventory requirements for which no write-down has been recorded.

In accordance with FASB ASC 360, Property, Plant and Equipment (ASC 360), the Company reviews long-lived assets including property and equipment, capitalized software development costs and definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. To determine the recoverability of long-lived assets, the Company evaluates the probability that future estimated undiscounted net cash flows will be less than the carrying amount of the assets. If the Company estimates that assets are impaired, the assets are written down to their fair value. For purposes of measuring and recognizing impairment of long-lived assets, the Company at the lowest level will assess whether separate cash flows can be attributed to the individual asset. The Company groups long-lived assets where separately identifiable cash flows are available. In the event that long-lived assets, including intangibles, are abandoned or otherwise disposed of, the Company recognizes an impairment charge upon disposition.

During the three months ended June 30, 2010, the Company made a decision to phase out $6.2 million of surplus network monitoring assets that would no longer be required following the integration of the CSG and TNS networks. The Company recorded accelerated depreciation expense related to these assets of $5.5 million and $0.7 million for the years ended December 31, 2010 and 2011, respectively. As of February 28, 2011, the net book value of these assets had been written down to nil.

The calculation of fair value in accordance with ASC 360 contains uncertainties due to judgment in estimates and assumptions, including projections of future income and cash flows, the identification of appropriate market multiples and the choice of an appropriate discount rate. The Company's estimates of anticipated future income and cash flows used in determining fair value contain uncertainties due to uncontrollable events that could positively or negatively affect anticipated future economic and operating conditions. Therefore, those estimates could be reduced significantly in the future due to changes in technologies, regulation, available financing, competition or other circumstances. As a result, the carrying amount of the Company's long-lived assets could be reduced through impairment charges in the future. Additionally, changes in the timing of estimated future cash flows could result in a shortening of estimated useful lives for long-lived assets.

Property and equipment is recorded at acquisition date cost or fair value, as appropriate, net of accumulated depreciation and amortization. Replacements and improvements that extend the useful life of property and equipment are capitalized. In accordance with FASB ASC 360, costs for internal use software that are incurred in the preliminary project stage and the post-implementation and operation stage are expensed as incurred. Costs incurred during the application development stage are capitalized and amortized over the estimated useful life of the software.

Depreciation and amortization of property and equipment is computed using the straight-line method over the estimated useful lives of the assets as follows:

The Company accounts for goodwill and identifiable intangible assets in accordance with FASB ASC 350, Intangibles—Goodwill and Other. Under this standard, goodwill and intangible assets deemed to have indefinite lives are not amortized and are subject to annual impairment tests or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company performs its annual impairment testing of its goodwill as of October 1 of each year. The Company is required to determine the fair value of each reporting unit and compare it to the carrying amount of the reporting unit. Fair value of the reporting unit is determined using a market based approach. If the carrying amount of the reporting unit exceeds the fair value of the reporting unit, the Company performs the second step of the impairment test, as this is an indication that the reporting unit goodwill may be impaired. In the second step of the impairment test, the Company determines the implied fair value of the reporting

unit's goodwill. If the carrying value of a reporting unit's goodwill exceeds its implied fair value, then an impairment of goodwill has occurred and the Company must recognize an impairment loss for the difference between the carrying amount and the implied fair value of goodwill. For the most recent goodwill impairment test, the Company's testing has indicated that there is no impairment of its goodwill.

Goodwill increased from December 31, 2009 to December 31, 2010 by $22.1 million due primarily to $21.9 million of goodwill acquired related to the acquisition of Cequint, Inc. with the remaining increase due to foreign currency exchange. The decrease in goodwill from December 31, 2010 to December 31, 2011 was due to the effect of foreign currency exchange. Cequint was acquired on October 1, 2010. See Note 3.

Amortization of definite-lived intangible assets is recorded on a straight-line or accelerated basis, as appropriate, over their expected useful lives. The Company evaluates the useful lives assigned to intangible assets on a regular basis. Amortization periods are as follows:

Developed technology represents the Company's proprietary knowledge, including processes and procedures, used to configure its networks. Network equipment and software, both purchased and internally developed, are components used to build the networks and systems, and are separately identified assets classified within property and equipment.

The Company evaluates impairment of the customer relationship intangible assets based upon the significant loss of revenue from a customer. The fair value measurement of a customer relationship intangible is primarily based on an income approach using significant inputs that are not observable in the market, therefore representing a Level 3 measurement as defined in FASB ASC 820, Fair Value Measurements and Disclosures. The income approach indicates value for a subject asset based on the present value of cash flows projected to be generated by the asset. Projected cash flow is discounted at a rate of return that reflects the relative risk of achieving the cash flow and the time value of money. Included in amortization of intangibles expense for the years ended December 31, 2009, 2010 and 2011 is approximately $0.4 million, $2.6 million and $0.5 million, respectively, of charges in connection with the impairment of certain customer relationships, primarily payments division customers, during those respective periods. As a result, these customer relationship intangible assets were written down to their fair values of nil, $1.3 million and nil during December 31, 2009, 2010 and 2011, respectively.

The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes. Under FASB ASC 740, deferred tax assets or liabilities are computed based upon the difference between financial statement and income tax bases of assets and liabilities using the enacted marginal tax rate. The Company provides a valuation allowance on its net deferred tax assets when it is more likely than

not that such assets will not be realized. Deferred income tax expense or benefits are based upon the changes in the underlying asset or liability from period to period.

The Company's effective tax rate for the years ended December 31, 2010 and 2011 of 57.5% and 28.9%, respectively, differs from the U.S. federal statutory rate primarily due to the application of a valuation allowance against certain U.S. tax attributes, the effect of foreign remitted earnings, and profits of our international subsidiaries being taxed at rates different than the U.S. federal statutory rate.

FASB ASC 260, Earnings Per Share, requires the presentation of basic and diluted earnings per share. Basic earnings (loss) per common share is computed by dividing income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. The diluted earnings (loss) per common share data is computed using the weighted average number of common shares outstanding plus the dilutive effect of common stock equivalents, unless the common stock equivalents are anti-dilutive. For the years ended December 31, 2009, 2010, and 2011, the Company had 1.4 million, 0.5 million, and 1.0 million, respectively, of weighted-average dilutive common shares outstanding that were not included in the computation of diluted earnings per share, as the effect would have been anti-dilutive.

The following details the computation of the net income (loss) per common share (dollars in thousands, except share and per share data):

	Year ended December 31,

	2009			2010			2011
(Loss) income from continuing operations	$	(2,387	)	$	9,223		$	18,097
Income (loss) from discontinued operations		328			(679	)		(1,025	)
Net (loss) income	$	(2,059	)	$	8,544		$	17,072
Weighted average common share calculation:
Basic weighted average common shares outstanding		25,402,506			25,949,139			25,110,513
Treasury stock effect of outstanding options to purchase		—			249,835			136,667
Treasury stock effect of unvested restricted stock units		—			272,498			149,938
Diluted weighted average common shares outstanding		25,402,506			26,471,472			25,397,118
Net (loss) income per common share:
Basic
Continuing operations	$	(0.09	)	$	0.36		$	0.72
Discontinued operations		0.01			(0.03	)		(0.04	)
Basic net (loss) income per common share	$	(0.08	)	$	0.33		$	0.68
Diluted
Continuing operations	$	(0.09	)	$	0.35		$	0.71
Discontinued operations		0.01			(0.03	)		(0.04	)
Diluted net (loss) income per common share	$	(0.08	)	$	0.32		$	0.67

The Company accounts for stock-based compensation under FASB ASC 718, Compensation—Stock Compensation. FASB ASC 718 requires all stock-based compensation to employees be measured at fair value and expensed over the requisite service period and also requires an estimate of forfeitures when calculating compensation expense. Refer to Note 7 for additional discussion regarding details of the Company's stock-based compensation plans.

The Company has operations in 24 countries outside the United States including the United Kingdom, Austria, Australia, Brazil, Canada, France, Germany, Hong Kong, India, Ireland, Italy, Japan, Malaysia, Mexico, New Zealand, Poland, Romania, Singapore, South Korea, Spain, Sweden, Thailand, Netherlands and Turkey. The Company has determined that the functional currency of its non-U.S. operations is the local currency. Assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates in effect at each balance sheet date. Operating results are translated into U.S. dollars using the average rates of exchange prevailing during the period. The Company's results of operations are affected by fluctuations in the value of the U.S. dollar as compared with foreign currencies, predominately the euro, the British pound and the Australian dollar. Gains or losses resulting from the translation of assets and liabilities are included as a component of accumulated other comprehensive income (loss) in stockholders' equity, except for the revaluation effect of intercompany balances that are anticipated to be settled in the foreseeable future, which are included in the statements of operations. For the years ended December 31, 2009, 2010 and 2011, the

Company recorded foreign exchange gains (losses) of $0.3 million, $4.1 million and $(0.3) million, respectively, which are included in other income (expense), net in the accompanying consolidated statements of operations.

On August 31, 2011, we divested our ATM processing assets in Canada for a sale price of $1. Upon closing of the transaction, we recorded a loss on the sale of this business of $27,000. In determining whether the group of assets disposed of should be presented as a discontinued operation, the Company made a determination of whether the group of assets being disposed of comprised a component of the entity; that is, whether it had historical operations and cash flows that could be clearly distinguished (both operationally and for financial reporting purposes). The Company also determined whether the cash flows associated with the group of assets had been significantly eliminated from the ongoing operations of the Company as a result of the disposal transaction and whether the Company has no significant continuing involvement in the operations of the group of assets after the disposal transaction. These determinations were made affirmatively, therefore, the results of operations of the group of assets being disposed of (as well as any gain or loss on the disposal transaction) are aggregated for separate presentation apart from continuing operating results of the Company in the consolidated financial statements. In accordance with FASB ASC 205 "Presentation of Financial Statements" we have reported the results of our ATM processing business in Canada as discontinued operations in the accompanying condensed consolidated statements of operations for all periods presented. See Note 4 for additional information.

Comprehensive income (loss) is the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Other comprehensive income (loss) refers to revenue, expenses, gains and losses that under accounting principles generally accepted in the United States are included in comprehensive income (loss), but excluded from the determination of net income (loss). The Company's other comprehensive income consists solely of foreign currency translation adjustments. The cumulative foreign currency translation adjustment as of December 31, 2010 and 2011 was a $5.5 million and $5.7 million decrease to equity, respectively.

The Company provides segment information in accordance with FASB ASC 280, Segment Reporting. The Company classifies its business as one reportable segment. In addition, the Company's management evaluates revenues for its three business divisions: PSD, TSD, and FSD. A significant portion of the Company's operating expenses are shared between PSD, TSD and FSD, and, therefore, management analyzes operating results for these three business divisions on a combined basis. FASB ASC 280 designates the internal information used by management for allocating resources and assessing performance as the source of the Company's reportable segments and requires disclosure about products and services, geographical areas and major customers.

On September 8, 2010, the Company entered into the Agreement and Plan of Merger (the Merger Agreement) which provided for the merger of Cequint, Inc. (Cequint) with and into Thunder Acquisition Corp., a wholly owned subsidiary of the Company formed for the purpose of the acquisition. Cequint provides carrier grade caller ID products and enhanced services to U.S. mobile operators and has been integrated into the Company's telecommunication services division. On October 1, 2010, the Company completed the merger in accordance with the terms and conditions of the Merger Agreement. The initial purchase price for the acquisition was $50.0 million consisting of $46.9 million in cash and $3.1 million in Company stock issued to certain management shareholders of Cequint. The stock consideration consisted of 178,823 shares at a fair value of $17.11 per share, which included restrictions on transfer that expire as follows: one third of total shares issued on the first anniversary of the date of acquisition; one third of total shares issued on the second anniversary of the date of acquisition; and one third of total shares issued on the third anniversary of the date of acquisition. The purchase price may be adjusted in the future by an additional $52.5 million in cash based upon the achievement of four specific profit-related milestones, during the period which commenced on June 1, 2011, and not to extend beyond May 31, 2014 (the Earn-Out Period), for a potential total purchase price of $102.5 million. In addition to the contingent consideration of up to $52.5 million, there are additional performance payments which may be payable to certain key personnel, based on the achievement of the same four profit-related milestones of up to $10.0 million. To the extent the additional $10.0 million is payable, it will be recorded as compensation expense as described below.

The four profit-related milestones must be met for two consecutive months during the Earn-Out Period. These criteria are set out in the following table:

	Criteria		Shareholder Payment Contingent Consideration		Earnout Milestone Compensation		Total Potential Payouts

Milestone 1	(i)	Monthly Gross Margin(1) greater than $2.5 million;	$	12.6 million	$	2.4 million	$	15.0 million
	(ii)	Positive Net Income Contribution(2); and
	(iii)	Name ID product successfully launched with a tier-one carrier
Milestone 2	Monthly Gross Margin(1) greater than $5.0 million		$	14.7 million	$	2.8 million	$	17.5 million
Milestone 3	Monthly Gross Margin(1) greater than $7.5 million		$	12.6 million	$	2.4 million	$	15.0 million
Milestone 4	Monthly Gross Margin(1) greater than $10.0 million		$	12.6 million	$	2.4 million	$	15.0 million

			$	52.5 million	$	10.0 million	$	62.5 million

As of the acquisition date, the Company recorded a liability of $31.8 million representing the estimated fair value of the contingent purchase consideration of $52.5 million based on a probability weighted scenario approach to determine the likelihood and timing of the achievement of the relevant milestones. In calculating this liability, the Company applied a rate of probability to each scenario, as well as a risk-adjusted discount factor, to derive the estimated fair value of the consideration as of the acquisition date. This fair value is based on significant unobservable inputs, including management estimates and assumptions, and accordingly is classified as Level 3 within the fair value hierarchy prescribed by ASC Topic 820, Fair Value Measurements and Disclosures.

This liability is re-measured each reporting period and changes in the fair market value are recorded under the contingent consideration fair value adjustment item in the Company's consolidated statements of operations. Increases or decreases in the fair value of the contingent consideration liability can result from changes in discount periods and rates, as well as changes in the timing and likely achievement of the relevant milestones. During the year ended December 31, 2011, the Company recognized a $3.1 million decrease in the fair value of the contingent consideration related primarily to changes in the expected timing of the achievement of the performance milestone targets noted above. These timing changes are due to updates to projected dates which the wireless carriers are anticipated to release new handset devices with the caller ID product to the market.

The potential $10.0 million of performance payments are recognized in a systematic and rational manner over the Earn-Out Period to the extent it is probable the milestones will be met. These costs are treated as compensation expense and are included in operating expenses in the Company's consolidated statements of operations. In June 2011, the Earn-Out period commenced and $0.6 million of compensation expense has been included in selling, general, and administrative expense in the Company's consolidated statement of operations during the year ended December 31, 2011.

The Company funded the acquisition of Cequint through a new $50 million term loan facility using the accordion feature of the November 2009 Credit Facility (see Note 6). The consolidated statements of operations include the results of the Cequint acquisition from October 1, 2010. The acquisition of Cequint has been accounted for as a business combination under FASB ASC 805, Business Combinations.

The fair values of the assets acquired and liabilities assumed were determined using various valuation techniques, primarily based on significant inputs that are not observable in the market and therefore represent Level 3 measurements as defined in FASB ASC 820, Fair Value Measurements and Disclosures. Developed technology was valued using the relief from royalty method which values the subject technology by reference to the amount of royalty income that could be generated if the technology were licensed in an arm's length transaction to a third party. Customer relationship intangibles were valued using the multi-period excess earnings method which is based on the operating profit from existing customer relationships, less applicable charges for the use of assets such as working capital, fixed assets, identified intangible assets and the assembled workforce. Covenants not to compete were valued using the comparison of economic income approach under which the projected cash flows of the business with the covenants in place are compared to the projected cash flows presuming the active competition of the individuals against the Company.

The allocation of the purchase price for Cequint was finalized as of September 30, 2011. The purchase price allocation was adjusted by $1.8 million for additional deferred tax assets with a corresponding decrease in goodwill relating to net operating loss carryforwards and research and development tax credits upon filing Cequint's final income tax return. An additional $0.2 million was recorded for the final adjustments to working capital. These purchase accounting adjustments have been retrospectively applied to the consolidated balance sheet as of December 31, 2010.

	Preliminary allocation			Additional consideration paid		Measurement period adjustments			Final allocation

Purchase price allocation:
Cash	$	463			—		—		$	463
Accounts receivable		1,768			—		—			1,768
Prepaid expenses		257			—		—			257
Deferred tax asset		5,061			—		1,835			6,896
Property and Equipment		1,264			—		—			1,264
Goodwill		23,975			—		(1,835	)		22,140
Identifiable intangible assets
Developed technology		17,200			—		—			17,200
Customer relationships		48,600			—		—			48,600
Covenants not to compete		10,100			—		—			10,100

Total assets		108,688			—		—			108,688
Accounts payable, accrued expenses and other current liabilities		(1,471	)		224		—			(1,247	)
Deferred tax liability		(25,635	)		—		—			(25,635	)

Total purchase price	$	81,582		$	224	$	—		$	81,806

Reconciliation of Cequint purchase price to cash consideration, as follows (in thousands):

The amounts allocated to property and equipment are being depreciated on a straight line basis over their weighted average estimated useful lives of 2 to 4 years. The weighted average amortization period by each major class of intangible assets and in total is as follows (in years):

The intangible asset related to covenants not to compete is expected to be deductible for tax purposes. The intangible assets related to developed technology and customer relationships, and the goodwill, are not expected to be deductible for tax purposes.

During the year ended December 31, 2011, Cequint contributed revenue of $11.4 million and a net loss of $6.4 million. During the year ended December 31, 2010, Cequint contributed revenue of $2.3 million and a net loss of $2.6 million. The net loss for both periods does not include any allocation of shared operational or administrative costs. These amounts have been included in the Company's consolidated statements of operations for the year ended December 31, 2010 and 2011.

Unaudited pro forma results of operations assuming the Cequint acquisition had taken place at the beginning of the period are not provided because the historical operating results of Cequint were not significant and pro forma results would not be significantly different from reported results for the periods presented.

On March 2, 2009, the Company entered into an Asset Purchase Agreement (the Purchase Agreement), by and between the Company and VeriSign, Inc. (the Seller) pursuant to which the Company agreed to purchase certain assets and assume certain liabilities of the Seller's Communications Services Group (CSG). On May 1, 2009, the Company completed the acquisition in accordance with the terms and conditions of the Purchase Agreement. The initial purchase price was approximately $226.2 million in cash and subject to a post-closing working capital adjustment. During the third quarter of 2009 and fourth quarter of 2009, working capital and other adjustments were made resulting in a $4.5 million increase in the purchase price to $230.7 million. The purchase price was finalized in May 2010 resulting in an additional $0.5 million increase in the purchase price to $231.2 million. The Company funded the transaction through a new $230 million term loan facility as part of its May 2009 Credit Facility (see Note 6). CSG provides call signaling services and intelligent database services such as caller ID, toll-free call routing and local number portability to the U.S. telecommunications industry. In addition, CSG provides wireless roaming and clearing services to mobile phone operators. The Company integrated CSG into its telecommunication services division. In conjunction with the CSG acquisition, the Company incurred total acquisition related costs of $2.5 million. During the year ended December 31, 2009, acquisition related costs of $2.2 million were included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

The acquisition of CSG has been accounted for as a business combination under FASB ASC 805, Business Combinations. During the second quarter of 2010, the Company completed the appraisals necessary to assess the fair values of the tangible and intangible assets acquired and liabilities assumed and the amount of goodwill to be recognized as of the acquisition date. As a result of the purchase price finalization, $1.7 million was adjusted retrospectively to certain working capital amounts on the December 31, 2009 balance sheet with a corresponding decrease in goodwill. Such adjustment had no impact in our statements of operations.

The fair values of the assets acquired and liabilities assumed were determined using the income, cost and market approaches. The fair value measurements were primarily based on significant inputs

that are not observable in the market and therefore represent a Level 3 measurement as defined in FASB ASC 820, Fair Value Measurements and Disclosures. Developed technology and customer relationships were valued using the excess earnings method, a variation on the income method. The excess earnings method considers the use of other assets in the generation of the projected cash flows in order to determine the economic benefit generated by the subject intangible asset. Non competition agreements were valued using the income approach. The income approach indicates value for a subject asset based on the present value of cash flows projected to be generated by the asset. Projected cash flow is discounted at a rate of return that reflects the relative risk of achieving the cash flow and the time value of money. Fixed assets and real estate were valued using the market and cost approaches, as appropriate. The market approach indicates value for a subject asset based on available market pricing for comparable assets. The cost approach indicates value by determining the current cost of replacing an asset with another of equivalent economic utility. The cost to replace a given asset reflects the estimated reproduction or replacement cost for the property, less an allowance for loss in value due to depreciation.

	Preliminary allocation			Additional consideration paid		Measurement period adjustments			Final allocation

Purchase price allocation:
Accounts receivable	$	33,852		$	914	$	6		$	34,772
Prepaid expenses		2,963			—		—			2,963
Property and Equipment		43,633			1,198		—			44,831
Land and buildings		10,034			—		—			10,034
Goodwill		3,984			649		(1,737	)		2,896
Identifiable intangible assets
Customer relationships		141,500			—		—			141,500
Developed technology		4,800			—		—			4,800
Non competition agreements		600			—		—			600
Other intangible assets		300			—		—			300

Total assets		241,666			2,761		(1,731	)		242,696
Accounts payable, accrued expenses and other current liabilities		(15,469	)		2,242		1,731			(11,496	)

Total purchase price	$	226,197		$	5,003	$	—		$	231,200

The amounts allocated to property and equipment are being depreciated on a straight line basis over their weighted average estimated useful lives of 4 years. The amount allocated to buildings is

being depreciated on a straight line basis over their estimated useful lives of 39 years. The weighted average amortization period by each major class of assets and in total is as follows (in years):

The goodwill of $2.9 million is expected to be deductible for income tax purposes.

The unaudited pro forma information presents the combined operating results of TNS and CSG, with the results prior to the acquisition date adjusted to include the pro forma impact of: the elimination of transactions between TNS and CSG; the adjustment of amortization of intangibles assets and depreciation of fixed assets based on the preliminary purchase price allocation; and the adjustment of interest expense to reflect the incremental borrowings incurred by TNS to complete the acquisition of CSG.

The unaudited pro forma results are presented for illustrative purposes only and do not reflect the realization of potential cost savings, or any related integration costs.

The following unaudited pro forma consolidated results of operations assume that the acquisition of CSG was completed as of January 1, 2009 (dollars in thousands, except per share amounts):

The CSG historical operating results include the direct costs related to the business and certain allocated costs for services and support functions provided by Verisign, Inc. Included in net income for the year ended December 31, 2009 are allocated after tax costs of $4.8 million, or ($0.18) per share, related to those functions. Because the selected unaudited pro forma consolidated results of operations are based on CSG's operating results during the period when CSG was not under the control, influence or management of TNS, the information presented may not be representative of the results for the periods indicated that would have actually occurred had the acquisition been consummated as of January 1, 2009, nor is it indicative of the future financial or operating results of the combined entity.

The contribution of CSG to the Company's consolidated results was approximately $160.8 million in revenues and $74.5 million of network service costs for the year ended December 31, 2009. Due to the extent and nature of the integration of CSG's operations into the operations of TNS as well as the overlap with the Company's telecommunication services division, remaining amounts related to the contribution of CSG to the Company's consolidated results are not separately identifiable. Accordingly, the stand alone results of CSG for the year ended December 31, 2009 have not been disclosed.

In September 2004, the Company made an investment in AK Jensen Group, Limited (AKJ), a company that provides order routing systems and integrated electronic trading solutions to financial software companies and end clients. The Company purchased 94,429 common shares for $1.0 million and obtained representation on AKJ's board of directors. On August 8, 2007, the Company sold 9,443 shares for approximately $0.3 million. The Company is accounting for this investment under the equity method of accounting as the Company has significant influence over AKJ's operating and financing activities through its representation on the board of directors. Due to timing of the receipt of AKJ's financial statements, the Company is accounting for the income or loss in this equity method investment on a one month lag. For the years ended December 31, 2009, 2010 and 2011 the Company recognized a net loss in the equity of an unconsolidated affiliate of approximately, $115,000, $289,000 and $0 respectively. As of December 31, 2011, the carrying value of the Company's AKJ investment was nil.

On August 31, 2011, the Company divested its ATM processing assets in Canada for a sale price of $1. Upon closing of the transaction, the Company recorded a loss on the sale of this business of $27,000. Management made the decision to divest this business in order to focus the Company's resources more on its network services offerings in Canada and investments in its payment gateway initiatives. In accordance with FASB ASC 205 "Presentation of Financial Statements" the results of the ATM processing business in Canada are reported as discontinued operations in the accompanying consolidated statements of operations for all periods presented.

The key components of loss from discontinued operations related to the ATM processing business in Canada were as follows (in thousands):

The income (loss) from discontinued operations reflects direct operating expenses and does not include any allocation of shared operational or administrative costs.

During the three months ended December 31, 2011, the Company recorded a charge of $0.4 million related to certain capitalized software assets which were no longer intended to be utilized. This charge is included in depreciation and amortization of property and equipment in the accompanying consolidated statements of operations for the year ended December 31, 2011.

2010 respectively. As of December 31, 2011, the net book value of these assets had been written down to zero.

The unamortized capitalized software development cost balance as of December 31, 2010 and 2011 is $23.8 million and $39.4 million, respectively. Amortization expense of capitalized software development costs for the years ending December 31, 2009, 2010, and 2011 is $4.8 million, $6.2 million, and $9.0 million, respectively.

	December 31,

	2010			2011
Customer relationships	$	365,744		$	365,744
Accumulated amortization		(140,179	)		(167,129	)

Customer relationships, net		225,565			198,615

Developed technology		108,142			108,142
Accumulated amortization		(72,133	)		(79,439	)

Developed technology, net		36,009			28,703

Trade names		68,644			68,644
Accumulated amortization		(34,011	)		(37,543	)

Trade names, net		34,633			31,101

Non-compete agreements		20,655			20,655
Accumulated amortization		(10,960	)		(13,080	)

Non-compete agreements, net		9,695			7,575

Other intangible assets		300			300
Accumulated amortization		(125	)		(200	)

Other intangible assets, net		175			100

Identifiable intangible assets, net	$	306,077		$	266,094

Future scheduled amortization of intangible assets is as follows as of December 31, 2011 (in thousands):

Accounts payable, accrued expenses and other current liabilities consist of the following (in thousands):

	December 31,

	2010		2011
Accounts payable and accrued network costs	$	41,771	$	39,787
Accrued sales and use tax		2,812		2,002
Income taxes payable		167		—
Legal and professional fees		1,482		1,331
Accrued compensation, severance and benefits		9,425		14,737
Accrued interest		3,479		3,104
Accrued customer credits		672		993
Other accrued expenses		6,447		4,439
Other current liabilities		5,226		1,441

Accounts payable, accrued expenses and other current liabilities	$	71,481	$	67,834

On May 1, 2009, the Company entered into a $423.5 million amended and restated senior secured credit facility (May 2009 Credit Facility) to finance the acquisition of the CSG assets from Verisign, Inc. and to refinance the 2007 Credit Facility. The May 2009 Credit Facility consisted of a fully funded term loan facility with an outstanding principal amount equal to $178.5 million, a new fully funded term loan facility with an outstanding principal amount equal to $230.0 million and a senior secured revolving credit facility in an aggregate principal amount of $15.0 million. Interest on the May 2009 Credit Facility was payable, at the Company's option, at the Base Rate plus a margin of 5.0%, or at LIBOR plus a margin of 6.0%. In no event was the Base Rate to be less than 4.5%, or the London Interbank Offered Rate ("LIBOR") Rate less than 3.5%.

On November 19, 2009 the Company entered into a new secured credit facility (the November 2009 Credit Facility) and refinanced the May 2009 Credit Facility primarily to take advantage of a more favorable interest rate environment. The November 2009 Credit Facility initially consisted of a senior secured term loan facility in an aggregate principal amount of $325 million (the "Term Facility") and a senior secured revolving credit facility in an aggregate principal amount of $75 million (the "Revolving Facility"). The November 2009 Credit Facility included the option to request additional Term Loan Commitment and Revolving Loan Commitment up to an aggregate amount of $100 million (the accordion feature) with the aggregate of any new Revolving Loan Commitment not exceeding $50 million.

On October 1, 2010 the Company entered into an amendment related to the November 2009 Credit Facility in connection with the closing of the acquisition of Cequint, Inc. (see Note 3). The amendment provided for a new term loan in an aggregate principal amount of $50 million (the "Incremental Term Loan"), an increase to the existing Revolving Facility by an aggregate principal amount of $25 million to a total of $100 million and amends certain debt covenants and restricted payments baskets including those related to share repurchases and acquisitions. The Incremental Term Loan was incurred to finance the purchase price for the acquisition, to pay fees, costs and expenses relating to the acquisition and for working capital purposes. In February 2012, the Company completed a refinancing of the November 2009 Credit Facility, as discussed below.

Payments on the Term Facility and Incremental Term Loan were due in quarterly installments over the term, with the remainder payable on November 18, 2015. Voluntary prepayments on the Term Facility and Incremental Term Loan were applied as directed by the Company. In February 2011, the Company paid $15 million on the revolver. At December 31, 2011, borrowing availability under the Revolving Facility was $65.2 million. Interest on the outstanding balances under the Revolving Facility was payable, at the Company's option, at a rate equal to the higher of the prime rate announced by SunTrust Bank, the federal funds rate plus 50 basis points, or the one-month LIBOR rate plus 100 basis points (the "Base Rate"), in each case, plus a margin of 3.0% or at LIBOR, plus a margin of 4.0%. Interest on the outstanding balances under the Term Facility and Incremental Term Loan was payable, at the Company's option, at the Base Rate plus a margin of 3.0%, or at LIBOR plus a margin of 4.0%. Additionally, in no event would the LIBOR rate be less than 2.0%. The applicable margins on the Revolving Facility, Term Facility and Incremental Term Loan were subject to step-downs based on the Company's leverage ratio. The Revolving Facility was subject to an annual commitment fee in an amount equal to between 0.375% and 0.50% (based on the Company's leverage ratio) per annum multiplied by the amount of funds available for borrowing under the Revolving Facility.

For purposes of compliance at December 31, 2011, the Company was bound by the terms of the November 2009 Credit Facility. The terms of the November 2009 Credit Facility require the Company to comply with financial and nonfinancial covenants, including maintaining a maximum specified leverage ratio at the end of each fiscal quarter and a minimum consolidated fixed charge coverage ratio and complying with specified annual limits on capital expenditures. As of December 31, 2011, the Company is required to maintain a leverage ratio of less than 3.00 to 1.0. The Company's leverage ratio as of December 31, 2011 was 2.7 to 1.0. The maximum leverage ratio declines over the term of the November 2009 Credit Facility. Also the Company is required to maintain a consolidated fixed charge

coverage ratio of not less than 1.2 to 1.0. The Company's consolidated fixed charge coverage ratio as of December 31, 2011 was 1.8 to 1.0. The November 2009 Credit Facility also contains nonfinancial covenants that restrict some of the Company's corporate activities, including its ability to dispose of assets, incur additional debt, pay dividends, create liens, make investments, make capital expenditures and engage in specified transactions with affiliates. Effective October 1, 2010, the restricted payments covenant was amended to permit stock repurchases of up to $50 million until 18 months after this date, with such repurchases exempt from the minimum consolidated fixed charge coverage ratio covenant. Thereafter, stock repurchases are subject to a minimum required excess cash flow availability of $40 million and if the Company has a pro forma maximum leverage ratio of greater than 2.50 to 1.00, the Company is permitted to purchase shares at an amount equal to 50% of cumulative reported excess cash flow. If the Company has a pro forma maximum leverage ratio of 2.50 to 1.00 or greater but less than 3.00 to 1.00, the Company is permitted to purchase shares at an amount equal to the lesser of $30 million and 50% of cumulative reported excess cash flow, or if the Company has a pro forma maximum leverage ratio of 3.00 to 1.00 or greater, the Company is permitted to purchase shares at an amount equal to the lesser of $20 million and 50% of cumulative reported excess cash flow. Non compliance with any of the financial or nonfinancial covenants without cure or waiver would constitute an event of default under the November 2009 Credit Facility. An event of default resulting from a breach of a financial or nonfinancial covenant may result, at the option of the lenders, in an acceleration of the principal and interest outstanding, and a termination of the Revolving Facility. The November 2009 Credit Facility also contains other customary events of default (subject to specified grace periods), including defaults based on events of bankruptcy and insolvency, nonpayment of principal, interest or fees when due, breach of specified covenants, change in control and material inaccuracy of representations and warranties. The Company was in compliance with the financial and non-financial covenants of the November 2009 Credit Facility as of December 31, 2011.

In connection with the May and November 2009 refinancings and in accordance with the modifications and extinguishments requirements of FASB ASC 470, Debt, the Company recorded pretax losses of approximately $26.9 million which are classified in interest expense in the accompanying consolidated statements of operations for the year ended December 31, 2009. These losses resulted from recording the new debt at fair value as of the time of the debt exchange and extinguishing the old term loans at their historical book values, and include the write off of unamortized deferred financing costs and debt discount of $23.6 million. Also included in these losses is a $3.3 million term loan call premium charge paid in November 2009 in connection with the refinancing of the May 2009 Credit Facility. Fair value of the November 2009 Credit Facility was based on quoted market prices for similar debt issuances. The discount created by recording the new debt at fair value is being amortized using the effective interest method over the life of the November 2009 Credit Facility.

In connection with the closing of the November 2009 Credit Facility, the Company incurred approximately $2.9 million in financing costs. In connection with the closing of the amendment to the November 2009 Credit Facility in October 2010, the Company incurred approximately $1.5 million in financing costs and $0.4 million in amendment fees. These financing costs and amendment fees were deferred and are being amortized using the effective interest method over the remaining life of the November 2009 Credit Facility.

The weighted average interest rates for the years ended December 31, 2009, 2010 and 2011 were 18.82%, 6.17% and 6.21%, respectively. Excluding the losses on the debt refinancings of $26.9 million, the weighted average interest rate for the year ended December 31, 2009 would have been 10.14%.

On February 3, 2012 the Company completed a refinancing of the November 2009 Credit Facility (the February 2012 Credit Facility), principally to take advantage of a more favorable interest rate environment. The February 2012 Credit Facility is comprised of a fully funded $350 million five-year term loan and a $100 million, five-year revolving credit facility, under which $25 million was drawn at closing. The Company used the proceeds from the February 2012 Credit Facility and cash of $4.7 million to repay the balance of all amounts outstanding under the November 2009 Credit Facility, including the term debt and revolver balance at date of refinancing of $373.1 million and $0.4 million of accrued interest, as well as to pay associated fees and expenses of approximately $6.3 million.

The total scheduled remaining payments, which includes the Incremental Term Loan and additional amounts borrowed from the Revolving Facility under the February 2012 Credit Facility are as follows (in thousands):

Interest on the outstanding balances under the February 2012 Credit Facility will initially be payable at the Company's option at the Base Rate plus a margin of 2.0% or at LIBOR plus a margin of 3.0%. There is no LIBOR floor in the February 2012 Credit Facility. The applicable margins on the February 2012 Credit Facility are subject to step downs based on the Company's leverage ratio.

The terms of the February 2012 Credit Facility require the Company to make an annual prepayment in an amount that may range from 0% to 50% of the Company's "excess cash flow" (as such term is defined in the Credit Agreement) depending on the Company's Leverage Ratio for any fiscal year. Prepayments are also required to be made in other circumstances, including upon asset sales and sale-leaseback transaction in excess of $2 million. The Company is permitted to repay borrowings under the February 2012 Credit Facility at any time in whole or in part without premium or penalty.

The obligations under the February 2012 Credit Facility are unconditionally and irrevocably guaranteed, subject to certain exceptions, by the Company and each existing and future direct and indirect domestic subsidiary of the Company. In addition, the February 2012 Credit Facility is secured, subject to certain exceptions, by a first priority perfected security interest in substantially all of the present and future property and assets (real and personal) of the Company and a pledge of 100% of

the Company's capital stock of its respective domestic subsidiaries and 65% of the Company's capital stock of its respective first-tier foreign subsidiaries.

The terms of the February 2012 Credit Facility are substantially similar to those of the November 2009 Credit Facility and require the Company to comply with financial and nonfinancial covenants, as included above for the November 2009 Credit Facility. Non compliance with any of the financial or nonfinancial covenants without cure or waiver would constitute an event of default under the February 2012 Credit Facility. An event of default resulting from a breach of a financial or nonfinancial covenant may result, at the option of the lenders, in an acceleration of the principal and interest outstanding, and a termination of the Revolving Facility. The February 2012 Credit Facility also contains other customary events of default (subject to specified grace periods), including defaults based on events of bankruptcy and insolvency, nonpayment of principal, interest or fees when due, breach of specified covenants, change in control and material inaccuracy of representations and warranties.

During 2001, the Board of Directors of the Company adopted the TNS Holdings, Inc. 2001 Founders' Stock Option Plan (the 2001 Plan) whereby employees, nonemployee directors, and certain other individuals were granted the opportunity to acquire an equity interest in the Company. Either incentive stock options or nonqualified options could be granted under the 2001 Plan. Options granted under the 2001 Plan have an exercise price equal to or greater than the market price of the underlying common stock at the date of grant and become exercisable based on a vesting schedule determined at the date of grant, generally over four years. The options expire 10 years from the date of grant.

In February 2004, the Board of Directors of the Company adopted the TNS, Inc. 2004 Long-Term Incentive Plan (the Plan) and the Company's stockholders approved the Plan in March 2004 and the Board of Directors and stockholders approved an amendment to the Plan in May 2011. The Plan, as amended, reserves 6,147,384 shares of common stock for grants of incentive stock options, nonqualified stock options, restricted stock awards and performance shares to employees, non-employee directors and consultants performing services for the Company. Options granted under the Plan have an exercise price equal to or greater than the market price of the underlying common stock at the date of grant and become exercisable based on a vesting schedule determined at the date of grant, generally in equal monthly installments over three or four years. The options expire 10 years from the date of grant. Restricted stock awards and performance shares granted under the Plan are subject to a vesting period determined at the date of grant, generally in equal annual installments over three or four years. As of December 31, 2011, there was a total of $11.8 million of unrecognized compensation cost related to stock-based awards, which is expected to be recognized over a weighted average period of approximately two years. The Plan expires in May 2015.

As discussed in Note 2, the Company accounts for stock-based compensation under FASB ASC 718, Compensation—Stock Compensation. FASB ASC 718 requires all stock-based compensation to employees be measured at fair value and expensed over the requisite service period and also requires an estimate of forfeitures when calculating compensation expense.

During the years ended December 2009, 2010 and 2011, the Company capitalized $0.3 million, $0.3 million and $0.4 million of stock based compensation costs for employees working on software developed for internal use during the application and development stage.

The Company's stock-based compensation expense is included in the following areas in the consolidated statements of operations for the periods indicated (in thousands):

The tax benefit related to the Company's stock-based compensation expense was approximately $3.1 million, $2.1 million, and $1.6 million for the years ended December 31, 2009, 2010 and 2011, respectively. The Company has not realized excess tax benefits from stock option exercises or RSU vesting due to the U.S. net operating losses.

The fair value for stock options granted during the periods were estimated at the grant date using a Black-Scholes option pricing model with the following weighted average assumptions:

Expected term. For most awards granted, the Company determines the expected term based on historical exercise patterns of the Company's stock options. During the current year, the Company utilized the simplified method to determine the expected term for certain awards that were granted to executives for which there was limited historical exercise information. These grants met criteria required by the simplified method and the expected term was based on the midpoint of the vesting date and contractual life of the granted options.

The Company accounts for stock options with graded vesting as a single award with the expected term equal to the average of the expected term of the component vesting tranches. The related compensation cost is recognized on a straight-line basis over the vesting period for awards with only time-vesting requirements and on an accelerated basis for awards with performance vesting requirements.

Risk-free interest rate. The risk-free rate for stock options granted during the period is determined by using U.S. treasury rates of the same period as the expected option term of each option.

Expected volatility. The expected volatility is based on the historical volatility of the Company's stock.

Expected dividend yield. The dividend yield is based on actual dividends expected to be paid over the expected term of the option. The Company has no plans to issue regular dividends.

A summary of time-vested option activity under the Plan as of December 31, 2011, and changes during the year then ended, is presented below:

				Weighted average exercise price		Aggregate Intrinsic Value

Outstanding, January 1, 2011	680,332		$ 7.00 – $39.20	$	19.23
Granted	635,479		$16.69 – $18.87		16.72
Exercised	(49,339	)	$16.06 – $20.83		19.81
Canceled	(53,532	)	$ 7.00 – $39.20		19.49

Outstanding, December 31, 2011	1,212,940		$ 7.00 – $39.20		17.99	$	1,079,637	6.82

Exercisable, December 31, 2011	594,063		$ 7.00 – $39.20	$	19.32	$	448,004	3.96

Expected to vest after December 31, 2011	1,147,889			$	17.99	$	1,031,469	6.99

The following table summarizes the weighted-average option information as of December 31, 2011:

Range of Exercise Prices			Weighted Average Exercise Price			Weighted Average Exercise Price

$7.00 – $11.87	734	7.16	$	7.00	686	$	7.00
$11.88 – $15.68	76,051	5.45		12.42	76,051		12.42
$15.69 – $19.60	799,277	8.22		17.02	180,928		18.08
$19.61 – $23.52	322,470	3.77		21.03	321,990		21.03
$23.53 – $27.44	4,599	4.44		24.39	4,599		24.39
$27.45 – $39.20	9,809	1.00		39.20	9,809		39.20

$7.00 – $39.20	1,212,940	6.79	$	17.99	594,063	$	19.32

The weighted average grant date fair value of options granted during the years ended December 31, 2009, 2010 and 2011 was $8.70, $9.25, and $8.66, respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2009, 2010 and 2011 was approximately $2.7 million, $0.6 million and $0.1 million, respectively. As of December 31, 2011, there was a total of

$3.8 million of unrecognized compensation cost related to time-vested stock options, which is included in the $11.8 million of total unrecognized compensation cost above and is expected to be recognized over a weighted average period of approximately three years.

Performance-based stock options are tied to the Company's annual performance against pre-established internal targets. Under the Company's long-term incentive program, the actual payout under these awards may vary from zero to 150% of an employee's target payout, based upon the Company's actual performance during the fiscal year. The performance-based stock options are also subject to vesting requirements, and generally vest in equal annual installments over three years. The fair value for stock options granted during the period was estimated at the grant date using the Black-Scholes option pricing model, as described above. Compensation cost is based on the expected payout level that will be achieved and is adjusted in subsequent periods as changes in the estimates occur until the performance criteria have been satisfied.

A summary of performance-based stock options outstanding as of December 31, 2011, and changes during the year then ended is presented below:

The following table summarizes the weighted-average option information as of December 31, 2011:

The Company expects all of the outstanding performance-based options as of December 31, 2011 to ultimately vest. The total intrinsic value of stock options exercised during the year ended December 31, 2011 was approximately $0.6 million.

As of December 31, 2011, there was no unrecognized compensation cost related to performance-based stock options.

The fair value of restricted stock units is determined based on the closing price of the Company's shares at the date of grant. A summary of the status of the Company's time-vested restricted stock units as of December 31, 2011, and changes during the year then ended is presented below:

The Company expects 437,860 of the 458,013 restricted stock units outstanding as of December 31, 2011 to ultimately vest. The total fair value of shares vested (measured as of the vesting date) during the years ended December 31, 2009, 2010 and 2011 was $4.8 million, $5.0 million and $2.7 million, respectively. As of December 31, 2011, there was $6.6 million of unrecognized compensation expense related to these awards, which is included in the $11.8 million of total unrecognized compensation cost mentioned above. This expense is expected to be recognized over a weighted average period of approximately two years.

Performance-based awards are generally tied to the Company's performance against pre-established internal targets over a specified period of time. Under the Company's long-term incentive program, the actual payout of performance-based awards may vary from 0% to 150% of an employee's target payout, based upon the Company's performance under the program. The Company uses the market price of the Company's stock on the date of grant to determine the fair value of any performance-based restricted stock units. Performance-based awards are also subject to vesting requirements, and generally vest in installments over three or four years. Compensation cost is based on the expected payout level that will be achieved and is adjusted in subsequent periods as changes in the estimates occur until the performance criteria have been satisfied. The Company recognizes compensation cost on these performance based awards using an accelerated attribution method.

In April 2009, the Company made certain long-term performance-based stock compensation awards (the 2009 Equity Performance Awards). The 2009 Equity Performance Awards were granted under the Company's 2004 Long Term Incentive Plan. Based upon the Company's performance in 2009,

the results of which were approved by the Company's board of directors in February 2010, the plan participants earned 100% of the potential payout under the Company's 2009 Equity Performance Awards. The total number of awards issued under the Company's 2009 Equity Performance Awards was 311,500 restricted stock units which represented 100% of an employee's target payout. The weighted average grant date fair value of restricted stock units granted was $16.85. As of December 31, 2011, there was no unrecognized compensation expense related to these performance based awards.

In February 2010, the Company made certain long-term performance-based stock compensation awards (the 2010 Equity Performance Awards). The 2010 Equity Performance Awards were granted under the Company's 2004 Long Term Incentive Plan. The total number of awards that would be issued under the Company's 2010 Equity Performance Awards, assuming that the target payout level was achieved, would have been 235,086 restricted stock units. Based on the achievement levels, the Company awarded no restricted stock units. As of December 31, 2011, there was no unrecognized compensation expense related to these performance based awards.

In July 2011, the Company made certain long-term performance-based stock compensation awards (the 2011 Equity Performance Awards). The 2011 Equity Performance Awards were granted under the Company's 2004 Long Term Incentive Plan. The total number of awards that will be issued under the Company's 2011 Equity Performance Awards, assuming that the target payout level is achieved, is 129,537 restricted stock units. The weighted average grant date fair value of restricted stock units was $15.24. The performance criteria for the 2011 Equity Performance Awards will be measured through the end of 2013.

A summary of performance-based restricted stock units outstanding as of December 31, 2011, and changes during the year then ended is presented below:

The Company expects 219,242 of the outstanding performance-based restricted stock units as of December 31, 2011 to ultimately vest based on expected achievement of performance targets. The total value of shares vested (measured as of the vesting date) during the years ended December 31, 2009, 2010 and 2011 was $1.0 million, $5.5 million and $2.9 million, respectively. As of December 31, 2011, there was a total of $1.4 million of unrecognized compensation cost related to performance-based restricted stock units, which is included in the total unrecognized compensation cost of $11.8 million above and is expected to be recognized over a weighted average period of two years.

During 2001, the Company established a 401(k) and profit-sharing plan (the 401(k) Plan). Employees are eligible for the 401(k) Plan on the first payroll of the month following their date of hire. Participants may elect to defer up to 80.0 percent of their salary, and the Company may match up to a maximum of the amount contributed by the employee during the 401(k) Plan year. Profit- sharing contributions are entirely discretionary. Participants are 100 percent vested in all contributions made to the 401(k) Plan. For the year ended December 31, 2009, 2010 and 2011, the Board of Directors approved contributions of approximately $0.7 million, $0.9 million and $1.1 million, respectively, to the 401(k) Plan.

The components of income (loss) from continuing operations before income tax (provision) benefit and equity in net loss of unconsolidated affiliate are as follows (in thousands):

The components of the Company's income tax provision (benefit) consisted of the following (in thousands):

The components of the Company's net deferred tax assets (liabilities) as of December 31, 2010 consisted of the following (in thousands):

	U.S.			Non-U.S.			Total

Deferred tax assets:
Allowance for doubtful accounts	$	926		$	96		$	1,022
Accrued expenses		1,478			231			1,709
Deferred revenue		2,319			527			2,846
Intangible assets		5,579			78			5,657
Depreciation and amortization of property and equipment		11,164			900			12,064
Stock-based compensation		2,414			—			2,414
Equity in net loss of unconsolidated affiliates		1,432			—			1,432
Foreign tax credits		2,554			—			2,554
Research and Development tax credits		2,192			—			2,192
Other assets		177			—			177
Net operating loss carryforwards		28,546			6,965			35,511
Capital loss carryforwards		1,753			—			1,753

		60,534			8,797			69,331
Less—valuation allowance		(14,074	)		(2,683	)		(16,757	)

		46,460			6,114			52,574

Deferred tax liabilities:
Prepaid expenses		(1,879	)		(115	)		(1,994	)
Unrealized foreign exchange gains/losses		(3	)		(837	)		(840	)
Capitalized software development costs		(18,225	)		(1,333	)		(19,558	)
Intangible assets		(26,430	)		(2,093	)		(28,523	)
Other liabilities		—			(537	)		(537	)

		(46,537	)		(4,915	)		(51,452	)

Net deferred tax (liability) asset	$	(77	)	$	1,199		$	(1,122	)

The components of the Company's net deferred tax assets (liabilities) as of December 31, 2011, consisted of the following (in thousands):

	U.S.			Non-U.S.			Total

Deferred tax assets:
Allowance for doubtful accounts	$	1,195		$	112		$	1,307
Accrued expenses		1,870			89			1,959
Deferred revenue		1,985			63			2,048
Intangible assets		6,056			138			6,194
Depreciation and amortization of property and equipment		1,578			779			2,357
Stock-based compensation		1,610			—			1,610
Equity in net loss of unconsolidated affiliates		1,419			—			1,419
Foreign tax credits		7,874			—			7,874
Research and Development tax credits		2,796			—			2,796
Other assets		220			—			220
Net operating loss carryforwards		33,900			8,157			42,057
Capital loss carryforwards		1,737			—			1,737

		62,240			9,338			71,578
Less—valuation allowance		(11,608	)		(3,406	)		(15,014	)

		50,632			5,932			56,564

Deferred tax liabilities:
Prepaid expenses		(2,605	)		(143	)		(2,748	)
Unrealized foreign exchange gains/losses		—			(556	)		(556	)
Capitalized software development costs		(25,555	)		(2,291	)		(27,846	)
Intangible assets		(24,034	)		(805	)		(24,839	)
Other liabilities		—			(104	)		(104	)

		(52,194	)		(3,899	)		(56,093	)

Net deferred tax (liability) asset	$	(1,562	)	$	2,033		$	471

The Company has foreign net operating loss carryforwards for tax purposes in jurisdictions outside the U.S. amounting to $32.1 million as of December 31, 2011. The majority of the non-U.S. loss carryforwards will never expire under local country tax rules, however, some of the non-U.S. loss carryforwards will expire in varying amounts in five to ten years. In addition, the Company has a U.S. loss carryforward of approximately $109.6 million, which will begin to expire in 2025. Approximately $7.3 million of the net operating loss relates to the exercise of stock options and vesting of restricted stock, the benefits of which will be credited to equity when realized. The Company also has a foreign tax credit carryforward of $7.9 million, which will begin to expire in 2015, a research and development tax credit carryforward of $3.8 million which will begin to expire in 2023, and a capital loss carryforward of $4.5 million, which will expire in 2012.

The Company records a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets

depends on the ability to generate sufficient taxable income of the requisite character in the appropriate taxing jurisdictions. Although the Company began to utilize net operating losses in the U.S. during 2011, the income generation was primarily driven by the repatriation of foreign earnings resulting from the Company's change in indefinite reinvestment assertion for certain current and future earnings of its subsidiaries. Based on a current evaluation of expected future taxable income and the absence of an established history for repatriating foreign earnings at the present time, the Company determined it is not more likely than not that certain domestic deferred tax assets will be realized. Therefore, the Company continues to maintain a full valuation allowance on its net domestic deferred tax assets. The net decrease in the US valuation allowance was $2.4 million for the year ended December 31, 2011. In addition, the Company increased the valuation allowance on the net deferred tax assets of its Australian subsidiary by $0.7 million in the fourth quarter of 2011 after determining it was not more likely than not these foreign deferred tax assets were realizable. This represents a full valuation allowance on these net foreign deferred tax assets.

The following table summarizes the changes in the Company's valuation allowance on deferred tax assets for the period indicated:

The income tax benefit (provision) computed at the U.S. federal income tax rate of 34.0% is reconciled to the Company's effective income tax rate as follows:

	Year ended December 31,

	2009			2010			2011
U.S. federal taxes at statutory rate		(34.0	)%		34.0	%		34.0	%
U.S. state taxes (net of federal tax benefit)		(4.0	)		(4.1	)		0.9
Taxation of Non-U.S. earnings		(28.0	)		(31.2	)		(28.0	)
Repatriation of foreign earnings		—			—			55.7
Valuation allowance		(6.0	)		36.6			(30.6	)
Changes in uncertain tax positions		(5.8	)		17.7			0.2
Stock based compensation expense		9.3			0.6			2.4
Research and development credit		(15.4	)		(2.3	)		(0.8	)
Nondeductible items		9.4			6.2			(6.1	)
Other		—			—			1.2

Effective tax rate		(74.4	)%		57.5	%		28.9	%

The taxation of foreign earnings is at a lower statutory tax rate since the majority of the Company's foreign profits were earned in Ireland (approximately $32 million) which has an effective rate of 12.5%.

During 2011, the company changed its indefinite reinvestment assertion with respect to the current and future earnings of its UK and Irish subsidiaries and as of December 31, 2011, repatriated approximately $36.6 million of those earnings. The income generated by this repatriation was offset by the utilization of net operating losses in the U.S. The Company has made no provision for U.S. income taxes or additional foreign taxes on the historical earnings of its U.K. and Irish subsidiaries or on the cumulative unremitted earnings of its other non-U.S. subsidiaries (approximately $121.7 million as of December 31, 2011) because the Company considers these earnings to be indefinitely reinvested in these foreign locations. These earnings could become subject to additional taxes if remitted as dividends, loaned to the Company or a U.S. affiliate, or if the Company sold its interests in its foreign affiliates. Determination of the amount of any unrecognized deferred U.S. income tax liability associated with these foreign earnings is not practicable due to complexities associated with this hypothetical calculation.

A reconciliation of the beginning and ending balance for unrecognized tax benefits is as follows (in thousands):

The liability for unrecognized tax benefits increased in 2011 primarily due to uncertain tax positions with respect to domestic research and development credits. The Company recognizes interest and penalties accrued related to unrecognized tax benefits as income tax expense. During the years ended December 31, 2009, 2010 and 2011 the Company recognized approximately, $(86,000), $374,000, and $150,000 respectively in interest and penalties relating to its unrecognized income tax benefits. The Company had approximately $708,000 and $858,000 accrued for the payment of interest and penalties at December 31, 2010 and 2011, respectively. The entire balance of unrecognized tax benefits as of December 31, 2011, would impact the effective tax rate if recognized. The Company and its subsidiaries are subject to taxation in the U.S. and in various state, local and foreign jurisdictions. The Company remains subject to examination by U.S. Federal, state, local and foreign tax authorities for tax years 2003 through 2011.

It is reasonably possible that the Company's unrecognized tax benefits will decrease in the next 12 months by $1.3 million as a result of the expiration of certain statutes of limitation.

The Company operates as one reportable segment since the chief operating decision maker allocates resources on a consolidated basis. The Company's management evaluates revenues for three business divisions: payments, telecommunication services and financial services.

Management evaluates the Company's performance on EBITDA before stock compensation expense. The Company defines EBITDA before stock compensation expense as net income before discontinued operations, depreciation, amortization, stock compensation expense, interest expense, other income (expense), equity in net loss of unconsolidated affiliate, the change in fair value of contingent consideration, milestone compensation expense, and provision for income taxes. EBITDA before stock compensation expense is not a generally accepted accounting principle measure, but rather a measure employed by management to view operating results. The Company believes that this measure, viewed in addition to and not in lieu of the Company's reported GAAP results, provides additional useful information to the investors regarding the Company's performance and overall operating results exclusive of selected significant non-cash items. This metric is frequently requested by investors and are also an integral part of the Company's internal reporting to measure the performance of senior management. The Company's definition of EBITDA before stock compensation expense may not be comparable to similarly titled measures used by other entities.

EBITDA before stock compensation expense was approximately $123.4 million, $136.8 million and $141.8 million for the years ended December 31, 2009, 2010 and 2011, respectively. Management evaluates performance before consideration of certain intercompany transactions. Accordingly, these transactions are not reflected in EBITDA. In addition, certain corporate expenses are reflected consistent with information reviewed by our chief operating decision maker.

Revenue for the Company's three business divisions is presented below (in thousands):

EBITDA before stock compensation expense differs from net income reported in the consolidated statements of operations as follows (in thousands):

	Year ended December 31,

	2009			2010			2011
EBITDA before stock compensation expense	$	123,429		$	136,794		$	141,775
Reconciling items:
Loss (income) on discontinued operations		328			(679	)		(1,025	)
Stock compensation expense		(10,446	)		(6,418	)		(6,269	)
Depreciation and amortization of property and equipment		(32,220	)		(47,495	)		(46,978	)
Amortization of intangible assets		(32,346	)		(39,540	)		(40,124	)
Interest expense		(58,553	)		(24,556	)		(25,658	)
Interest income		497			307			246
Other income (expense), net		437			4,492			(80	)
Milestone compensation expense		—			—			(568	)
Contingent Consideration fair value adjustments		—			(1,794	)		3,107
Equity in net loss of unconsolidated affiliate		(115	)		(288	)		—
Income tax benefit (provision)		6,930			(12,279	)		(7,354	)

Net (loss) income	$	(2,059	)	$	8,544		$	17,072

The Company sells its services through foreign subsidiaries in Australia, Austria, Brazil, Canada, France, Germany, Hong Kong, India, Ireland, Italy, Japan, Malaysia, Mexico, the Netherlands, New Zealand, Poland, Romania, Singapore, South Korea, Spain, Sweden, Thailand, Turkey and the United Kingdom. Information regarding revenues and long-lived tangible assets attributable to each geographic region is stated below. The North American revenues and long-lived tangible assets are primarily in the U.S.

The Company's revenues were generated in the following geographic regions (in thousands):

	Year ended December 31,

	2009		2010		2011
Payments Division
North America	$	72,658	$	65,865	$	58,836
Europe		97,286		101,538		110,615
Asia-Pacific		23,465		28,142		34,118

	$	193,409	$	195,545	$	203,569

Financial Services Division
North America	$	47,749	$	45,616	$	43,103
Europe		11,200		12,439		13,574
Asia-Pacific		6,316		8,175		10,317

	$	65,265	$	66,230	$	66,994

Telecommunication Services Division
North America	$	212,744	$	260,715	$	287,160

Total
North America	$	333,151	$	372,196	$	389,099
Europe(1)		108,486		113,977		124,189
Asia-Pacific		29,781		36,317		44,435

	$	471,418	$	522,490	$	557,723

The Company's long-lived assets, including goodwill and intangible assets, were located as follows (in thousands):

The Company leases office space and certain office equipment under various non-cancelable operating leases that expire through February 2019. Rental expense is recognized on a straight-line

basis over the term of the lease, regardless of when payments are due. Rental expense was approximately $10.8 million, $12.5 million and $14.0 million for the years ended December 31, 2009, 2010 and 2011, respectively.

Future minimum commitments under the Company's operating leases are as follows for each of the years ended December 31 (in thousands):

On September 21, 2005, the Company entered into a lease to rent office space in the United Kingdom with a company that is majority owned by a Company executive. Prior to entering into this lease, the Company obtained an independent evaluation confirming that the terms of the lease were consistent with market standards. The lease provides for quarterly payments in equal installments of approximately £26,350 and expires on September 20, 2017. During the years ended December 31, 2009, 2010 and 2011, the Company made payments of £105,400, £105,400 and £105,700, respectively, related to this operating lease.

The following is a schedule by year of future minimum rental payments due under this operating lease agreement (in thousands):

The Company is periodically involved in disputes arising from normal business activities. Certain states in which we operate assess sales taxes on certain services provided by us. Our customer contracts generally contain terms that stipulate the customer is responsible for any sales tax liability. In jurisdictions where the customer may be liable for sales taxes, we either include sales tax on our invoice or have obtained an exemption certificate from the customer. The Company is periodically involved in sales tax audits as part of its normal course of business. In the opinion of management, resolution of these matters will not have a material adverse effect upon the financial position or future operating

results of the Company, and adequate provision for any potential losses has been made in the accompanying consolidated financial statements.

A substantial portion of the revenues recognized by the Company is related to a limited number of customers. For the years ended December 31, 2009, 2010 and 2011, there were no customers that accounted for more than 10 percent of the Company's consolidated revenues. For the years ended December 31, 2009, 2010 and 2011, the Company derived approximately 15.7%, 18.9% and 19.6% respectively, of its consolidated revenues from its five largest customers.

Certain key components used in the Company's network are currently available only from limited sources. The Company has entered into long term contracts with certain vendors for the provision of network equipment and the maintenance of hardware and software utilized on our network. The future minimum commitment relating to these contracts is as follows (in thousands):

11. Unaudited Quarterly Financial Data (in thousands, except per share amounts):

	March 31, 2010		June 30, 2010			September 30, 2010			December 31, 2010

Revenues	$	128,570	$	128,673		$	130,577		$	134,670
Cost of network services		63,817		64,254			65,071			65,436
Income (loss) from continuing operations		1,179		6,347			4,308			(2,610	)
Loss (income) from discontinued operations		70		(145	)		287			467
Net income (loss)	$	1,109	$	6,492		$	4,021		$	(3,078	)
Basic
Continuing Operations	$	0.05	$	0.24		$	0.16		$	(0.10	)
Discontinued Operations	$	0.00	$	0.01		$	(0.01	)	$	(0.02	)
Diluted
Continuing Operations	$	0.04	$	0.24		$	0.16		$	(0.10	)
Discontinued Operations	$	0.00	$	0.01		$	(0.01	)	$	(0.02	)

11. Unaudited Quarterly Financial Data (in thousands, except per share amounts): (Continued)

	March 31, 2011			June 30, 2011			September 30, 2011			December 31, 2011

Revenues	$	133,040		$	141,636		$	142,731		$	140,316
Cost of network services		66,728			70,336			69,746			69,013
Income from continuing operations		1,179			1,526			2,136			13,256
(Loss) income from discontinued operations		(473	)		(380	)		(538	)		366
Net income (loss)	$	706		$	1,146		$	1,598		$	13,622
Basic
Continuing Operations	$	0.05		$	0.06		$	0.08		$	0.55
Discontinued Operations	$	(0.02	)	$	(0.01	)		(0.02	)		0.01
Diluted
Continuing Operations	$	0.05		$	0.06		$	0.08		$	0.54
Discontinued Operations	$	(0.02	)	$	(0.01	)		(0.02	)		0.01

Included in net income for the three months ended March 31, 2010 is a $0.5 million charge, or $0.02 per share, related to severance expense. Included in net income for the three months ended June 30, 2010 is a $0.5 million charge, or $0.02 per share, related to severance expense and a $3.2 million charge, or $0.13 per share, related to accelerated depreciation of certain network equipment. Included in net income for the three months ended September 30, 2010 is a $0.3 million charge, or $0.01 per share, related to severance expense, $0.7 million, or $0.03 per share in acquisition costs that were expensed in accordance with FASB ASC 805, Business Combinations and $1.1 million charge, or $0.04 per share, related to accelerated depreciation of certain network equipment. Included in net income for the three months ended December 31, 2010 is a $1.8 million charge, or $0.07 per share, related to the change in the fair value of a contingent consideration related to the Cequint acquisition, a $1.1 million charge, or $0.04 per share, of accelerated depreciation related of certain network equipment, $2.6 million, or $0.11 per share, of accelerated amortization in connection with the impairment of certain customer relationships and a tax charge related to an increase in the valuation allowance on certain deferred tax assets of $8.6 million, or $0.34 per share, which was recorded in accordance with FASB ASC 740, Income Taxes.

Included in net income for the three months ended March 31, 2011 is a pre-tax charge of $0.7 million, or $0.03 per share, resulting from accelerated depreciation of certain network assets associated with the CSG integration and a pre-tax charge of $0.3 million, or $0.01 per share, for severance. Included in net income for the three months ended December 31, 2011 is a $4.8 million gain, or $0.19 per share, due to the change in the fair value of the contingent consideration related to the acquisition of Cequint, a charge of $0.4 million, or $0.02 per share, related to the impairment of certain capitalized software assets which were identified no longer intended to be utilized for internal development projects, and a charge of $0.5 million, or $0.02 per share, in connection with the impairment of certain customer relationships.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting. The Company's internal control system over financial reporting is a process designed under the supervision of the Company's chief executive officer and chief financial officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements in accordance with U.S. generally accepted accounting principles.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions.

In connection with the preparation of the Company's annual consolidated financial statements, management has undertaken an assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO Framework). Management's assessment included an evaluation of the design of the Company's internal control over financial reporting and testing of the operational effectiveness of those controls.

Based on this assessment, management has concluded that as of December 31, 2011, the Company's internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Ernst & Young LLP, the independent registered public accounting firm that audited the Company's consolidated financial statements included in this report, has issued its report on the effectiveness of the Company's internal control over financial reporting, a copy of which appears on page 62 of this annual report.

There have been no changes during the most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.

The Company also maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO), Chief Operating Officer (COO), Chief Financial Officer (CFO), and Chief Accounting Officer (CAO), as appropriate, to allow timely decisions regarding required financial disclosure.

Our management, under the supervision and with the participation of our CEO, COO, CFO and CAO, has completed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the

fiscal year ended December 31, 2011. Based on our evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, our management, including our CEO, COO, CFO and CAO, concluded that as of December 31, 2011, the Company's disclosure controls and procedures were effective.

Our audit committee has resolved to pre-approve all audit and non-audit services to be performed for us by our independent registered public accounting firm, Ernst & Young LLP. Non-audit services that have received pre-approval include tax preparation and related tax consultation and advice, review and support for securities issuances and acquisition assistance.

Certain information required by Part III is omitted from this report in that we will file a definitive proxy statement pursuant to Regulation 14A with respect to our 2012 Annual Meeting (the "Proxy Statement") no later than 120 days after the end of the fiscal year covered by this report, and certain information included therein is incorporated herein by reference. Only those sections of the Proxy Statement which specifically address the items set forth herein are incorporated by reference.

Except as set forth below, the information required by this Item is hereby incorporated herein by reference to the Proxy Statement.

Name		Title

Henry H. Graham, Jr.	61	Chief Executive Officer and Director
Michael Q. Keegan	45	President and Chief Operating Officer
Dennis L. Randolph, Jr.	32	Executive Vice President, Chief Financial Officer and Treasurer
Mark G. Cole	46	Chief Network Officer
Craig E. Conway	47	Chief Technology Officer
Daniel P. Dooley III	46	Executive Vice President & President, Telecommunication Services Division, Transaction Network Services, Inc.
Raymond Low	55	Executive Vice President & President, Payments Division, Transaction Network Services, Inc.
James T. McLaughlin	45	Executive Vice President, General Counsel and Secretary
Alan R. Schwartz	50	Executive Vice President & President, Financial Services Division, Transaction Network Services, Inc.
David A. Neal	39	Chief Accounting Officer & Corporate Controller
Christopher F. Penny	44	Chief Strategy Officer

Henry H. Graham, Jr. has served as our Chief Executive Officer and been a director since October 2006. From April 2001 to September 2006, Mr. Graham was our Executive Vice President, Chief Financial Officer and Treasurer. From January 2000 to September 2000, Mr. Graham was Senior Vice President, Chief Financial Officer and Treasurer of PaylinX Corporation. From April 1999 to January 2000, Mr. Graham was Senior Vice President, Chief Financial Officer and Treasurer of Transaction Network Services, Inc. From July 1998 to April 1999, Mr. Graham was Senior Vice President and General Manager of the OmniLink Communications division of Transaction Network Services, Inc. after the acquisition of substantially all of the assets of OmniLink Communications Corporation. Before that, Mr. Graham served as OmniLink's Chief Financial Officer and Vice President of Administration from December 1996 to July 1998. Mr. Graham has a B.S. in Business Administration from The Citadel.

Michael Q. Keegan has served as our Chief Operating Officer since January 2007 and was appointed President in 2012. Mr. Keegan was our Chief Administrative Officer, General Counsel and Secretary from October 2006 to December 2006. From September 2003 to September 2006, Mr. Keegan was our Executive Vice President, General Counsel and Secretary. From April 2001 to September 2003, Mr. Keegan was our Senior Vice President, General Counsel and Secretary. Prior to joining TNS, Mr. Keegan was the Executive Vice President, General Counsel and Secretary of Internet Partnership Group (US), Inc. Mr. Keegan began his career in New York as a corporate associate at the

law firm of LeBoeuf, Lamb, Greene and MacRae, L.L.P. Mr. Keegan has a B.A. from the University of Notre Dame and a J.D. from the University of Virginia School of Law.

Dennis L. Randolph, Jr. has served as our Executive Vice President, Chief Financial Officer and Treasurer since March 2007. From September 2006 to February 2007, Mr. Randolph was our Senior Vice President and Corporate Controller. From October 2005 to August 2006, Mr. Randolph was our Vice President and Assistant Corporate Controller. From July 2003 to September 2005, Mr. Randolph was our Director of Accounting and Assistant Controller. Prior to that, Mr. Randolph worked for Ernst & Young, LLP and Arthur Andersen, LLP. Mr. Randolph is a certified public accountant in the state of Virginia. Mr. Randolph has a B.S. in Accounting from Virginia Polytechnic Institute and State University.

Mark G. Cole has served as our Chief Network Officer since November 2009. Mr. Cole was our Executive Vice President, Network Operations from October 2006 to September 2009. Mr. Cole was previously our Senior Vice President of Network Operations from April 2001 to October 2006. From March 2000 to April 2001, Mr. Cole was the Senior Vice President—Operations of Transaction Network Services, Inc. From July 1999 to March 2000, Mr. Cole was the Vice President, Network Control Center of Transaction Network Services, Inc. From February 1999 to July 1999, Mr. Cole was the Senior Director, Network Control Center of Transaction Network Services, Inc. From March 1996 to February 1999, Mr. Cole was the Director, Network Control Center of Transaction Network Services, Inc. Before that, Mr. Cole served Transaction Network Services, Inc. in various positions since April 1992. Mr. Cole's communication training originated with the U.S. Army, where he held several supervisory and technical positions.

Craig E. Conway has served as our Chief Technology Officer since October 2009. Mr. Conway was a principal of CTC, Inc. from April 2009 to October 2009. From October 2007 to April 2009, Mr. Conway was Chief Technology Officer of the Financial Services business of First Data Corporation. From September 2006 to September 2007, Mr. Conway was Senior Vice President and General Manager of Prepaid Services of First Data Corporation. From 2004 to September 2006, Mr. Conway held various positions with First Data Corporation. From 2000 to 2004, Mr. Conway was Senior Vice President of Technology and Operations for Concord EFS, Inc. Mr. Conway has a B.B.A. and M.B.A from Temple University.

Daniel P. Dooley III has served as our Executive Vice President and President of TSD since November 2010. Mr. Dooley was the President of Wholesale Business Unit Sprint Nextel Corporation from July 2009 to November 2010. From April 2008 to July 2009, Mr. Dooley was the President of Sprint's Wireline Business Unit. Mr. Dooley was the Vice President and General Manager of Sprint's International and Wholesale Market form September 2004 to April 2008. From August 1996 to September 2004, Mr. Dooley held various roles within Sprint. Before joining Sprint, Mr. Dooley worked at AT&T Corporation where he held various positions, including Managing Director of AT&T's International Traffic Management Business in Europe, Middle East and Africa. Mr. Dooley has a M.B.A. in Marketing from Fairleigh Dickson University and a B.S. in Marketing from Indiana University—Kelley School of Business.

Raymond Low has served as our Executive Vice President and President of PSD since October 2009. Mr. Low was our President from October 2006 to September 2009 and President of the International Services Division from January 2006 to September 2006. From April 2001 to December 2005, Mr. Low was Senior Vice President and Managing Director of Transaction Network Services (UK) Ltd. From March 2000 to March 2001, Mr. Low was Senior Vice President and Managing Director of eBusiness International Operations of PSINet, Inc. From September 1998 to February 2000, Mr. Low was Managing Director of Transaction Network Services (UK) Ltd. Before that Mr. Low held several management positions with Imminus Ltd. and HSBC (formerly Midland Bank).

James T. McLaughlin has served as our Executive Vice President, General Counsel and Secretary since January 2007. Mr. McLaughlin was the Senior Vice President, General Counsel of Motricity, Inc. from July 2005 to January 2007. From February 2002 to June 2005, Mr. McLaughlin was our Senior Vice President, Associate General Counsel and Assistant Secretary. Prior to that, Mr. McLaughlin was Senior Counsel to the Chairman of the U.S. International Trade Commission from August 2001 to February 2002. From February 2000 to July 2001, Mr. McLaughlin was Senior Vice President, General Counsel and Secretary of Media Centers, Inc. Mr. McLaughlin was Vice President and Assistant General Counsel to Transaction Network Services, Inc. from April 1997 to February 2000. Mr. McLaughlin has a B.A. from the University of Pennsylvania and a J.D. from the University of Virginia School of Law.

Alan R. Schwartz has served as our Executive Vice President and President of FSD since November 2007. From December 2005 to October 2007, Mr. Schwartz was our Executive Vice President and General Manager of the Financial Services Division. From April 2001 to November 2005, Mr. Schwartz was our Senior Vice President of the Financial Services Division. From November 1999 to April 2001, Mr. Schwartz was the Senior Vice President and General Manager of the Financial Services Division of Transaction Network Services, Inc. From July 1998 to November 1999, Mr. Schwartz was Director of Sales of the Financial Services Division of Transaction Network Services, Inc. Before that, Mr. Schwartz worked in various positions at Datastream International where he was the Vice President and Country Manager (North America) when he left in July 1998. Mr. Schwartz has a M.B.A. from the Leonard N. Stern School of Business at New York University and a B.S. in Business Administration from Boston University.

David A. Neal has served as our Chief Accounting Officer since March 2007. From February 2005 to February 2007 Mr. Neal was our Financial Controller for the International Services Division. From October 2000 to January 2005, Mr. Neal was a Director with KPMG, Chartered Accountants in Dublin, Ireland. Mr. Neal qualified as a Chartered Accountant in Australia and has a business degree from the University of Technology, Sydney and a Master of Taxation degree from the University of New South Wales, Australia.

Christopher F. Penny has served as our Chief Strategy Officer since January 2010. Prior to that role, Mr. Penny was our Senior Vice President, Corporate Development form November 2007 to December 2009. Mr. Penny was a Managing Director, Senior Analyst at Friedman, Billings, Ramsey, Inc in Arlington, VA from March 1998 to November 2007. From June 1997 to March 1998, Mr. Penny was a consultant with Electronic Data Systems in Herndon, VA. From June 1989 to June 1995, Mr. Penny was a commissioned officer in the United States Navy within the submarine community. Mr. Penny has a B.S. and an MBA from the University of Notre Dame.

The information required by this Item is hereby incorporated herein by reference to the Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Managers and Related Stockholder Matters

The information required by this Item is hereby incorporated herein by reference to the Proxy Statement.

Item 13. Certain Relationships and Related Transactions and Director Independence.

The information required by this Item is hereby incorporated herein by reference to the Proxy Statement.


	2.1		Asset Purchase Agreement, dated March 2, 2009, by and between Transaction Network Services, Inc. and VeriSign, Inc.(14)
	2.2		Agreement and Plan of Merger, dated September 8, 2010, by and among TNS, Inc., Thunder Acquisition Corp., Cequint, Inc. and Project Thunder Shareholder Liquidity Trust.(16)
	3.1		Form of Amended and Restated Certificate of Incorporation of the Registrant.(1)
	3.2		Form of Amended and Restated Bylaws of the Registrant.(2)
	4.2		Form of Amended and Restated Registration Rights Agreement.(1)
	4.10		Credit Agreement, dated November 19, 2009, by and among Transaction Network Services, Inc., as borrower, TNS, Inc., as a credit party, and SunTrust Bank, as agent, swing line lender, L/C issuer and a lender, the other financial institutions party thereto, as lenders, SunTrust Robinson Humphrey, Inc., as sole lead arranger and bookrunner.(15)
	4.11		First Amendment to Credit Agreement, dated October 1, 2010 by and among Transaction Network Services, Inc., TNS, Inc., the lenders party thereto, and SunTrust Bank.(17)
	4.12		Credit Agreement, dated as of February 3, 2012, by and among Transaction Network Services, Inc., as borrower, the Registrant as a credit party, and SunTrust Bank as agent, swing line lender, L/C issuer and a lender, Bank of America, N.A., as syndication agent, JP Morgan Chase Bank, N.A. as documentation agent, the other financial institutions party thereto as lenders, SunTrust Robinson Humphrey, Inc. as joint lead arranger and joint bookrunner, and Merrill Lynch, Pierce Fenner & Smith Incorporated as joint lead arranger and joint borrower.(21)
			We are a party to a number of other instruments defining the rights of holders of long-term debt. No such instrument authorizes an amount of securities in excess of 10 percent of the total assets of TNS, Inc. and its subsidiaries on a consolidated basis. We agree to furnish a copy of each such instrument to the Commission on request.


	Materials Contracts
	10.1		Deed of Lease dated September 21, 1995 between Transaction Network Services, Inc. and Pond Building, L.L.C., as amended.(1)
	10.2		Gross Lease dated December 31, 2002 by and between The Multi-Employer Property Trust and Transaction Network Services, Inc.(1)
	10.3		Lease dated April 17, 2000 by and between Tinsley Park Limited, Transaction Network Services, Inc. and Transaction Network Services (UK) Ltd.(1)
	10.4		Lease dated September 21, 2005 by and between AJ Bell (PP) Trustees Limited, Raymond Low, Martin Peter Milner, Carolyn Joy MacMillan and Transaction Network Services (UK) Limited.(6)
	Management Contracts and Compensatory Plans
	10.8		TNS Holdings, Inc. 2001 Founders' Stock Option Plan.(1)
	10.9		Form of TNS, Inc. Amended and Restated 2004 Long-Term Incentive Plan.(7)
	10.10		2006 Annual Incentive Plan.(8)
	10.11		2006 Executive Long-Term Incentive Plan.(8)
	10.15		Management Agreement between Transaction Network Services, Inc. and Alan R. Schwartz.(1)
	10.18		Form of Indemnification Agreement between the Registrant and its directors and executive officers.(1)
	10.21		Employment Agreement, dated as of March 10, 2006, by and among the Registrant, Transaction Network Services, Inc. and Henry H. Graham, Jr.(9)
	10.22		Amendment No. 1 to Employment Agreement, dated effective as of January 1, 2010, by and among the Registrant, Transaction Network Services, Inc. and Henry H. Graham, Jr.(18)
	10.23		Employment Agreement, dated as of November 29, 2010, by and among the Registrant, Transaction Network Services, Inc. and Daniel P. Dooley III.(20)
	10.25		Employment Agreement, dated as of March 10, 2006, by and among the Registrant, Transaction Network Services, Inc. and Michael Q. Keegan.(9)
	10.26		Amendment No. 1 to Employment Agreement, dated effective as of January 1, 2010, by and among the Registrant, Transaction Network Services, Inc. and Michael Q. Keegan.(19)
	10.26		Service Agreement, dated May 9, 2006, by and between Transaction Network Services (UK) Limited and Raymond Low.(9)
	10.28		Employment Agreement, dated as of August 2, 2007, by and among the Registrant, Transaction Network Services, Inc. and Dennis L. Randolph, Jr.(10)
	10.29		Employment Agreement, dated as of January 8, 2007, by and among the Registrant, Transaction Network Services, Inc., and James McLaughlin(11)
	10.31		Employment Agreement, dated as of August 2, 2007, by and among the Registrant, Transaction Network Services, Inc. and Mark G. Cole(12)
	10.32		2007 Annual Incentive Plan(13)
	10.33		2007 Executive Long-Term Incentive Plan(13)
	21.1		Subsidiaries of the Registrant.
	23.1		Consent of Independent Registered Public Accounting Firm.

(1): Incorporated by reference to the exhibit of the same designation in the Registrant's registration statement on Form S-1 filed November 3, 2003, as amended (file no. 333-110188).
(2): Incorporated by reference to exhibit 3.1 to the Registrant's current report on Form 8-K filed August 15, 2006.
(4): Incorporated by reference to exhibit 99.1 to the Registrant's current report on Form 8-K filed March 29, 2007.
(5): Incorporated by reference to exhibit 99.1 to the Registrant's current report on Form 8-K filed June 8, 2007.
(6): Incorporated by reference to corresponding exhibit 10.4 to the Registrant's annual report on Form 10-K filed March 16, 2007.
(7): Incorporated by reference to Appendix B to the Registrant's annual meeting proxy statement filed April 18, 2005.
(8): Incorporated by reference to corresponding exhibit to the Registrant's quarterly report on Form 10-Q filed August 9, 2006.
(9): Incorporated by reference to corresponding exhibit to the Registrant's quarterly report on Form 10-Q filed May 10, 2006.
(10): Incorporated by reference to Exhibit 99.3 to Registrant's current report on Form 8-K filed August 8, 2007.
(11): Incorporated by reference to corresponding Exhibit 10.29 to the Registrant's quarterly report on Form 10-Q filed May 10, 2007.
(12): Incorporated by reference to corresponding Exhibit 10.31 to the Registrant's quarterly report on Form 10-Q filed August 9, 2007.
(13): Incorporated by reference to corresponding exhibit to the Registrant's current report on Form 8-K filed August 8, 2007.
(14): Incorporated by reference to corresponding exhibit to the Registrant's current report on Form 8-K filed March 4, 2009.
(15): Incorporated by reference to Exhibit 10.1 to Registrant's current report on Form 8-K filed November 23, 2009.
(16): Incorporated by reference to Exhibit 2.1 to Registrant's current report on Form 8-K filed September 14, 2010.
(17): Incorporated by reference to Exhibit 10.1 to Registrant's current report on Form 8-K filed October 5, 2010.
(18): Incorporated by reference to Exhibit 10.1 to Registrant's current report on Form 8-K filed May 20, 2010.
(19): Incorporated by reference to Exhibit 10.2 to Registrant's current report on Form 8-K filed May 20, 2010.
(20): Incorporated by reference to corresponding Exhibit 10.23 to Registrant's quarterly report on Form 10-Q filed May 6, 2011.
(21): Incorporated by reference to Exhibit 10.1 to Registrant's current report on Form 8-K filed February 6, 2012.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Form 10-K to be signed on its behalf by the undersigned thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 13, 2012:

The Company has included as Exhibits 31.1 and 31.2 to its Annual Report on Form 10-K for fiscal year 2011 filed with the Securities and Exchange Commission certificates of the Chief Executive Officer and Chief Financial Officer of the Company certifying the quality of the Company's public disclosure, and the Company has submitted to the New York Stock Exchange a certificate of the Chief Executive Officer of the Company certifying that he is not aware of any violation by the Company of New York Stock Exchange corporate governance listing standards.


(Mark One)
ý		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2011
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to


DELAWARE (State or Other Jurisdiction of Incorporation or Organization)		36-4430020 (IRS Employer Identification No.)
11480 COMMERCE PARK DRIVE, SUITE 600, RESTON, VIRGINIA (Address of Principal Executive Offices)		20191 (Zip Code)


Large accelerated filer o		Accelerated filer ý		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o


PART I
Item 1.	Business	3
Item 1A.	Risk Factors	20
Item 1B.	Unresolved Staff Comments	31
Item 2.	Properties	32
Item 3.	Legal Proceedings	32
Item 4.	Mine Safety Disclosures	32
PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	33
Item 6.	Selected Consolidated Financial Data	34
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	35
Item 7A.	Qualitative and Quantitative Disclosures About Market Risk	58
Item 8.	Financial Statements and Supplementary Data	60
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	109
Item 9A.	Controls and Procedures	109
Item 9B.	Other Information	110
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	111
Item 11.	Executive Compensation	113
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	113
Item 13.	Certain Relationships and Related Transactions and Director Independence	113
Item 14.	Principal Accountant Fees and Services	113
PART IV
Item 15.	Exhibits and Financial Statement Schedules	114
SIGNATURES		118

Fiscal Year Ended December 31, 2010	HIGH		LOW

First quarter ended March 31, 2010	$	26.57	$	21.74
Second quarter ended June 30, 2010	$	27.50	$	17.44
Third quarter ended September 30, 2010	$	19.95	$	14.43
Fourth quarter ended December 31, 2010	$	21.20	$	16.79

Fiscal Year Ended December 31, 2011	HIGH		LOW

First quarter ended March 31, 2011	$	20.82	$	14.85
Second quarter ended June 30, 2011	$	16.81	$	14.61
Third quarter ended September 30, 2011	$	19.29	$	14.08
Fourth quarter ended December 31, 2011	$	20.80	$	16.80

	2011					2010

	% of Revenue			Weighted Average Exchange Rates		% of Revenue			Weighted Average Exchange Rates
U.S. Dollar		70	%	$	1.00		71	%	$	1.00
British Pound		12	%		1.60		12	%		1.55
Euro		9	%		1.39		9	%		1.33
Australian Dollar		6	%		1.04		5	%		0.92
Other		3	%		—		3	%		—

Total		100	%				100	%

			Year ending December 31,

	Total		2012		2013		2014		2015		2016		Thereafter
Contractual Cash Obligations by Period:
Long-term debt under the February 2012 Credit Facility	$	375,000	$	6,563	$	17,500	$	17,500	$	26,250	$	26,250	$	280,937
Supplier commitments		72,176		30,624		25,602		13,439		1,773		738		—
Operating lease obligations		38,367		12,908		7,550		5,247		4,533		3,737		4,392

	$	485,543	$	50,095	$	50,652	$	36,186	$	32,556	$	30,725	$	285,329

	2011								2010

	% of Revenue			% of operating expenses			Weighted Average Exchange Rates		% of Revenue			% of operating expenses			Weighted Average Exchange Rates
U.S. Dollar		70	%		77	%	$	1.00		71	%		78	%	$	1.00
British Pound		12	%		5	%		1.60		12	%		6	%		1.55
Euro		9	%		4	%		1.39		9	%		4	%		1.33
Australian Dollar		6	%		6	%		1.04		5	%		5	%		0.92
Other		3	%		8	%		—		3	%		7	%		—

Total		100	%		100	%				100	%		100	%


REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		61
CONSOLIDATED BALANCE SHEETS As of December 31, 2010 and 2011		63
CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended December 31, 2009, 2010 and 2011		64
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For the years ended December 31, 2009, 2010 and 2011		65
CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 2009, 2010 and 2011		66
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS		67
FINANCIAL STATEMENT SCHEDULE:
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS For the years ended December 31, 2009, 2010 and 2011		117


Network equipment and purchased software		3 – 7 years
Office furniture and equipment		3 – 5 years
Leasehold improvements		Shorter of the useful life or the lease term, generally 5 – 15 years
Capitalized software development		3 – 5 years
Buildings		39 years
Land		Not depreciated


Developed technology		4 – 15 years
Trade names		20 years
Customer relationships		3 – 20 years
Non-compete agreements		2 – 5 years


Total purchase price	$	81,806
Less non cash items:
Company Stock issued		(3,060	)
Contingent consideration		(31,800	)

		46,946
Less cash received		(463	)

Cash consideration	$	46,483

	Year ended December 31, 2009

Operating revenues	$	556,607
Net income (loss)		(2,248	)
Earnings (loss) per common share:
Basic	$	(0.09	)
Diluted	$	(0.09	)

	December 31,

	2010			2011
Network equipment and software	$	208,813		$	232,055
Office furniture and equipment		31,277			32,245
Capitalized software development costs		64,163			88,708
Leasehold improvements		18,285			20,551
Land and buildings		10,390			10,391

Total cost		332,928			383,950
Accumulated depreciation and amortization		(197,510	)		(242,288	)

Property and equipment, net	$	135,418		$	141,662


2012	$	37,515
2013		36,665
2014		35,134
2015		33,765
2016		30,341
Thereafter		92,674

	$	266,094

	December 31,

	2010			2011
Revolving credit facility	$	49,370		$	34,370
Term Loan		358,125			338,750

Total credit facility outstanding		407,495			373,120
Unamortized discount		(3,871	)		(2,891	)

		403,624			370,229
Less: Current portion, net of discount		(18,488	)		(17,871	)

Long-term portion	$	385,136		$	352,358

			Weighted- average exercise price

Outstanding, January 1, 2011	542,646		$	13.21
Granted	—			—
Exercised	(77,907	)		19.63
Cancelled	—			—

Outstanding at December 31, 2011	464,739			13.55	1,999,666	5.49

Exercisable at December 31, 2011	464,739		$	13.55	1,999,666	5.49

Range of Exercise Prices			Weighted Average Exercise Price			Weighted Average Exercise Price

$12.39	347,080	1.9	$	12.39	347,080	$	12.39
$16.15	95,369	6.1		16.15	95,369		16.15
$20.56	22,290	5.1		20.56	22,290		20.56

$12.39 – $20.56	464,739	5.5	$	13.55	464,739	$	13.55

			Weighted-average grant-date fair value

Unvested at January 1, 2011	327,731		$	23.99
Granted	299,611			17.74
Vested	(156,396	)		23.11
Forfeited	(12,933	)		19.92

Unvested at December 31, 2011	458,013		$	20.32

			Weighted-average grant-date fair value

Unvested at January 1, 2011	251,578		$	16.97
Granted	129,537			15.24
Vested	(139,642	)		21.73
Cancelled	(8,104	)		16.15

Unvested at December 31, 2011	233,369		$	15.96

	Year ended December 31,

	2010			2011
Balance as of January 1	$	4,294		$	8,852
Additions for tax positions related to the current year		4,800			407
Lapses of applicable statutes of limitation		(197	)		(490	)
Effects of foreign currency translation		(45	)		(27	)

Balance as of December 31	$	8,852		$	8,742


	31.1		Certification—Chief Executive Officer.
	31.2		Certification—Chief Financial Officer.
	32.1		Written Statement of Chief Executive Officer and Chief Financial Officer.
	101		The following materials from our Annual Report on Form 10-K for the year ended December 31, 2011 formatted in extensible Business Reporting Language ("XBRL"): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations (iii) the Consolidated Statements of Stockholders' Equity (iv) the Consolidated Statements of Cash Flows, and (v) notes to these consolidated financial statements, tagged as blocks of text

	Additions

	Balance at beginning of period		Charged to costs and expenses			Reserves related to purchased entities		Deductions			Balance at end of period
						(in thousands)
For the year ended December 31, 2011:
Allowance for doubtful accounts	$	3,977	$	726		$	—	$	(421	)	$	4,282
For the year ended December 31, 2010:
Allowance for doubtful accounts	$	6,013	$	(213	)	$	—	$	(1,823	)	$	3,977
For the year ended December 31, 2009:
Allowance for doubtful accounts	$	3,631	$	2,278		$	2,309	$	(2,205	)	$	6,013


	TNS, Inc. (Registrant)
Date: March 13, 2012	By:	/s/ HENRY H. GRAHAM, JR. Henry H. Graham, Jr. Chief Executive Officer

Signature		Title


/s/ HENRY H. GRAHAM, JR. Henry H. Graham, Jr.		Chief Executive Officer and Director
/s/ JOHN B. BENTON John B. Benton		Director
/s/ STEPHEN X. GRAHAM Stephen X. Graham		Director
/s/ JAY E. RICKS Jay E. Ricks		Director
/s/ JOHN V. SPONYOE John V. Sponyoe		Director
/s/ THOMAS E. WHEELER Thomas E. Wheeler		Director
/s/ DENNIS L. RANDOLPH, JR. Dennis L. Randolph, Jr.		Chief Financial Officer (Principal Financial Officer)
/s/ DAVID A. NEAL David A. Neal		Controller (Principal Accounting Officer)