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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarter ended June 30, 2004

Commission File Number: 001-32033

TNS, INC.
(Exact name of registrant as specified in its charter)

DELAWARE
(State or jurisdiction of incorporation or organization)

36-4430020
(I.R.S. Employer Identification Number)

11480 Commerce Park Drive, Suite 600
Reston, VA 20191
(Address of principal executive offices)

(703) 453-8300
(Registrant's telephone number, including area code)

        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 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. ýYes    oNo

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). oYes    ýNo

        Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date.

Shares Outstanding as of July 30, 2004
26,781,811 Shares of Common Stock, $0.001 par value

TNS, INC.

INDEX

PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

TNS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share and per share data)

See accompanying notes to condensed consolidated financial statements (unaudited).

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TNS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(dollars in thousands, except share and per share data)

See accompanying notes to condensed consolidated financial statements (unaudited).

3

TNS, INC.
CONDENDSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(dollars in thousands)

See accompanying notes to condensed consolidated financial statements (unaudited).

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.     Description of Business and Basis of Presentation

        TNS, Inc. (TNS or the Company, formerly TNS Holdings, Inc.) is a Delaware corporation. On October 30, 2003, the Company changed its name to TNS, Inc.

        TNS is a leading provider of business-critical data communications services to processors of credit card, debit card and automated teller machine (ATM) transactions. TNS is also a leading provider of call signaling and database access services to the domestic telecommunications industry and of secure data and voice network services to the global financial services industry. TNS' data communication services enable secure and reliable transmission of time-sensitive, transaction-related information critical to its customers' operations. The Company's customers outsource their data communication requirements to TNS because of the Company's expertise, comprehensive customer support, and cost-effective services. TNS provides services to customers in the United States and increasingly to international customers in 12 countries, including Canada and countries in Europe and the Asia-Pacific region.

        The Company provides its services through its multiple data networks, each designed specifically for transaction applications. These networks support a variety of widely accepted communications protocols and are designed to be scalable and accessible by multiple methods, including dial-up, dedicated, wireless and Internet connections.

        The Company has four business divisions: (1) the point-of-sale/point-of-service (POS) division, which provides data communications services to payment processors in the U.S. and Canada, (2) the telecommunication services division (TSD), which provides call signaling services and database access services targeting primarily the telecommunications industry, (3) the financial services division (FSD), which provides, primarily to the financial services community, data networking services in support of the Financial Information eXchange (FIX) messaging protocol and other transaction- oriented trading applications, and (4) the international services division (ISD), which markets the Company's POS and financial services in countries outside of the United States and Canada.

        On March 15, 2004, the Company declared a 1-for-7.84 reverse stock split. Accordingly, all share and per share amounts have been retroactively adjusted to give effect to this event.

        The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and note disclosures normally included in the annual financial statements, required by GAAP, have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading.

        In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all necessary adjustments (all of which are of a normal and recurring nature) that are necessary for fair presentation for the periods presented. The results of operations for the three and six months ended June 30, 2004 are not necessarily indicative of the results to be expected for any subsequent interim period or for the fiscal year. It is suggested that these unaudited condensed consolidated financial statements be read in conjunction with the Company's final initial public offering prospectus filed with the SEC on March 16, 2004 as part of Amendment No. 5 to its Registration Statement on Form S-1 (File No. 333-110188), which includes consolidated financial statements and the notes thereto for the year ended December 31, 2003.

Use of Estimates

        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

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disclosure of contingent assets and liabilities at the date of the financial statements. Significant estimates affecting the consolidated financial statements include management's judgments regarding the allowance for doubtful accounts, reserves for excess and obsolete inventories, future cash flows from long-lived assets, and accrued expenses for probable losses. Actual results could differ from those estimates.

Revenue Recognition

        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. POS services revenue is derived primarily from per transaction fees paid by the Company's customers for the transmission of transaction data, through the Company's networks, between payment processors and POS or ATM terminals. TSD revenue is derived primarily from fixed monthly fees for call signaling services and per query fees charged for database access and validation services. FSD revenue is derived primarily from monthly recurring fees based on the number of customer connections to and through the Company's networks. 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. In addition, the Company receives installation fees related to the configuration of the customers' systems. Revenue from installation fees is deferred and recognized ratably over the customer's contractual service period, generally three years.

Cost of Network Services

        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 and activation charges. 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 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. Direct costs of installations are deferred and amortized over three years. The Company records its accrual for telecommunication charges based upon network services utilized at historical invoiced rates. Depreciation expense on our network equipment and amortization of developed technology are excluded from our cost of network services and included in depreciation and amortization of property and equipment and amortization of intangible assets in our condensed consolidated statement of operations.

2.     Initial Public Offering

        In March 2004, the Company completed its initial public offering (IPO) of common stock issuing 4,420,000 shares of common stock at $18.00 per share, which generated proceeds, net of offering costs, of approximately $71.5 million. The net proceeds of the IPO were used to repay a portion of the Company's long-term debt outstanding under its previous senior secured credit facility.

        Upon the completion of the IPO, all of the outstanding shares of the Company's Class A redeemable convertible preferred stock (Class A Preferred Stock), including accrued and unpaid dividends, was converted into 9,984,711 shares of common stock.

3.     Acquisitions and Long-term Investment

Acquisitions of Synapse and Vending Assets

        On May 21, 2004, the Company purchased two groups of tangible and intangible assets from the bankrupt U.S. Wireless Data, Inc. (USWD). Pursuant to two separate asset purchase agreements, the

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Company, with the approval of the bankruptcy court, (a) paid approximately $6.1 million, including direct acquisition costs of approximately $0.1 million for certain assets related to USWD's Synapse platform, which enables wireless POS terminals to initiate transactions for mobile and other merchants and (b) paid approximately $3.7 million, including direct acquisition costs of approximately $47,000 for USWD's vending assets, which support cashless transactions at vending machines. The Company purchased these assets to advance the Company's wireless capability to service existing customers as well as to penetrate new vertical markets.

        The purchase price for the Synapse assets was allocated as follows (in thousands):

        The purchase price for the vending assets was allocated as follows (in thousands):

        The amounts allocated to the Synapse and vending intangible assets are being amortized over their estimated useful lives of five years. Unaudited pro forma results of operations are not provided because the historical operating results were not significant and pro forma results would not be significantly different from reported results for the periods presented. The Company's results of operations for the six months ended June 30, 2004 include the operating results of these acquisitions from May 21, 2004 through June 30, 2004.

Long-term Investment

        In April 2003, TNS made an investment in a company that provides wireless Internet access to recreational vehicle parks. TNS purchased 3.2 percent of the company's common shares for $0.1 million and obtained representation on the company's board of directors. In July 2003, TNS entered into an agreement to provide services to the company and, as consideration, received stock valued at $0.3 million for an additional 7.9 percent of the company's common shares. In May 2004, TNS' investment in common shares was converted into 13.1 percent of the company's Series A preferred shares. In May 2004, TNS also made an additional $0.1 million investment to purchase 3.7 percent of the company's Series A preferred shares and the company exercised its right under the existing services agreement to receive additional services from TNS valued at $0.3 million in exchange for 9.4 percent of the company's Series A preferred shares. As of June 30, 2004, TNS owns 26.2 percent of the company's Series A preferred shares and 20.9 percent of the company's total outstanding shares. The Company is accounting for its investment under the equity method of accounting. For the three and six months ended June 30, 2004, the Company recognized a net loss in the equity of an unconsolidated affiliate of approximately $61,000 and $98,000, respectively.

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4.     Long-term Debt

        Debt consists of the following (in thousands):

        On March 19, 2004, the Company entered into a senior secured credit facility (the Credit Facility) to replace its prior credit facility. The Credit Facility consists of a $65.0 million term loan (Term Loan) and a revolving credit facility of $30.0 million (Revolving Credit Facility). The Credit Facility matures March 19, 2009. Payments on the Term Loan are due in quarterly installments over the five-year term, beginning on March 31, 2004. Total payments for each year are as follows (in thousands):

        For the period through June 30, 2004, borrowings on the Revolving Credit Facility and the Term Loan bore interest at a rate of 2.50 percent over the LIBOR rate (3.78 percent as of June 30, 2004). Thereafter, if the Company achieves a leverage ratio of less than one, the borrowings on the Revolving Credit Facility and the Term Loan generally will bear interest at a rate, at the Company's option, of either 0.75 percent over the lender's base rate or 2.0 percent over the LIBOR rate. If the Company achieves a leverage ratio of less than 1.5 but more than or equal to one, the borrowings on the Revolving Credit Facility and the Term Loan generally will bear interest at a rate, at the Company's option, of either 1.0 percent over the lender's base rate or 2.25 percent over the LIBOR rate. If the Company achieves a leverage ratio of less than 2.2 but more than or equal to 1.5, the borrowings on the Revolving Credit Facility and the Term Loan generally will bear interest at a rate, at the Company's option, of either 1.25 percent over the lender's base rate or 2.5 percent over the LIBOR rate. The Company's leverage ratio as of June 30, 2004 was 1.3 to 1.0. The Revolving Credit Facility is subject to an annual commitment fee in an amount equal to 0.5 percent per annum multiplied by the amount of funds available for borrowing under the Revolving Credit Facility. Interest payments on the Credit Facility are due monthly, bimonthly, or quarterly at the Company's option.

        The terms of the Credit Facility require the Company to comply with financial and nonfinancial covenants, including maintaining certain leverage, interest and fixed charge coverage ratios at the end of each fiscal quarter. As of June 30, 2004, the Company is required to maintain a leverage ratio of less than 2.2 to 1.0, an interest coverage ratio of greater than 5.0 to 1.0 and a fixed charge ratio of greater than 1.5 to 1.0. Certain of the financial covenants will become more restrictive over the term of the Credit Facility. The Credit Facility also contains nonfinancial covenants that restrict some of the Company's corporate activities, including the Company's ability to dispose of assets, incur additional debt, pay dividends, create liens, make investments, make capital expenditures and engage in specified transactions with affiliates. The Company's future results of operations and its ability to comply with

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the covenants could be adversely impacted by increases in the general level of interest rates since the interest on a majority of the Company's debt is variable. Noncompliance with any of the financial or nonfinancial covenants without cure or waiver would constitute an event of default under the 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 Credit Facility. The 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 nonfinancial covenants of the Credit Facility as of June 30, 2004.

        In connection with the closing of the Credit Facility, the Company incurred approximately $2.0 million in financing costs. These financing costs were deferred and are being amortized using the effective interest method over the life of the Credit Facility. In connection with the termination of the prior credit facility in March 2004, the Company wrote-off approximately $2.0 million in unamortized deferred financing costs related to the prior credit facility. Such write-off has been included in interest expense in the accompanying condensed consolidated statement of operations for the six months ended June 30, 2004.

5.     Comprehensive Income (Loss)

        The components of comprehensive income (loss), net of tax effect are as follows (in thousands):

6.     Net Income (Loss) Per Common Share

        Statement of Financial Accounting Standards (SFAS) No. 128, 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 period prior to the IPO, the effect of the Class A Preferred Stock converting into shares of common stock was not included in the computation of diluted net loss per common share as the effect would be anti-dilutive. In addition, options to purchase 316,721 and 1,145,597 shares of common stock that were outstanding as of June 30, 2003 and 2004, respectively, were excluded from the computation of diluted net loss per common share for the six months ended June 30, 2003 and 2004 and the three months ended June 30, 2003 as their effect would be anti-dilutive. The treasury stock effect of 304,000 shares of unvested common stock held by executives and employees as of June 30, 2004 was not included in the computation of diluted net loss per common share for the six months ended June 30, 2004 as the effect would be anti-dilutive.

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