Tier Technologies, Inc. (Nasdaq:TIER), a leading provider of
transaction processing and packaged software and systems
integration solutions for public sector clients, today announced
results for its fiscal second quarter ended March 31, 2005. Net
revenues for the fiscal 2005 second quarter were $35.3 million, an
increase of 19% as compared to $29.7 million in the fiscal 2004
second quarter, and the highest second quarter net revenues in
Tier's history. Year over year net revenue growth was driven
primarily by increased adoption of the transaction processing
services of Tier's Electronic Payment Processing segment, and by
increased revenues of the Packaged Software and Systems Integration
segment. Net income from continuing operations per diluted share
was $0.06 in the fiscal 2005 second quarter, as compared to net
income from continuing operations per diluted share of $0.07 in the
same period a year ago. Cash, cash equivalents and investments on
March 31, 2005 totaled $60.6 million as compared to $69.5 million
on September 30, 2004. This decrease is primarily attributable to
an increase in capital expenditures and start-up costs relating to
the Michigan Child Support State Disbursement Unit project, and to
Tier's first quarter strategic investment in CPAS Systems. "Tier
outperformed internal expectations on both the top and bottom line
in the second quarter," said James R. Weaver, Chairman and Chief
Executive Officer. "We are very pleased to report 19% year over
year revenue growth, leading to record second quarter revenues of
$35.3 million. Our Electronic Payment Processing segment generated
impressive second quarter annual revenue growth of 34%, and organic
revenue growth of 21% for the second consecutive quarter, as well
as double digit increases in dollars processed across all payment
types." Mr. Weaver continued, "The second quarter was a pivotal one
for our Government Business Process Outsourcing segment, and as of
the end of April, processing of transactions has begun at our
Michigan Child Support State Disbursement Unit project. The overall
start-up project costs were less than projected, which should
contribute to the bottom line in future periods." "Tier's balance
sheet remains strong with cash, cash equivalents and investments of
$60.6 million, and provides excellent flexibility to continue
growing the business both organically and through acquisitions,"
Weaver stated. "The kind of consistently strong financial results
reported today are enabled by Tier's transaction processing focused
business model. We believe that Tier's financial strength, and
broad transaction processing expertise position the company well
for future opportunities," added Weaver. Financial Outlook For the
fiscal third quarter of 2005, Tier currently expects revenues of
between $47.0 million to $48.0 million, and earnings per diluted
share of $0.17 to $0.18. For the full fiscal year 2005, Tier
currently expects revenues of between $147.0 million to $149.0
million, and earnings per diluted share of $0.28 to $0.30. These
amounts represent management's current expectations about Tier's
future financial performance, based on information available at
this time. Conference Call Tier will host a conference call today
at 5:00 p.m. Eastern Time to discuss these results. To access the
conference call, please dial (800) 399-0129. The conference call
will also be broadcast live via the Internet at www.Tier.com. A
replay will be available at www.Tier.com or by calling (800)
642-1687 and entering 5539560 from two hours after the end of the
call until 11:59 p.m. Eastern Time on May 12, 2005. About Tier Tier
is a leading provider of transaction processing and packaged
software and systems integration services for public sector
clients. We combine our understanding of enterprise-wide systems
with domain knowledge enabling our clients to rapidly channel
emerging technologies into their operations. We focus on sectors
that we believe are driven by forces that make demand for our
services less discretionary and are likely to provide us with
recurring long-term revenue streams. Tier is included in the
Russell 3000(R) Index. More information about the Company is
available at www.Tier.com. Statements made in this press release
that are not historical facts, including statements regarding
expectations for future revenues, earnings, and expenses, are
forward-looking statements that are made pursuant to the safe
harbor provisions of the Securities Litigation Reform Act of 1995.
Each of these statements is made as of the date hereof based only
on current information and expectations that are inherently subject
to change and involve a number of risks and uncertainties. Actual
events or results may differ materially from those projected in any
of such statements due to various factors, including but not
limited to the potential loss of funding by clients, including due
to government budget shortfalls or revisions to mandated statutes;
failure to achieve anticipated gross margin levels with respect to
individual projects, including due to unanticipated costs incurred
in fixed-price or transaction-based projects; the timing,
initiation, completion, renewal, extension or early termination of
client projects; the Company's ability to realize revenues from its
business development opportunities and achieve cost savings from
its restructuring activities; and unanticipated claims as a result
of project performance, including due to the failure of software
providers or subcontractors to satisfactorily complete engagements.
For a discussion of these and other factors which may cause our
actual events or results to differ from those projected, please
refer to the Company's annual report on Form 10-K for the year
ended Sept. 30, 2004, our most recent quarterly report on Form 10-Q
for the quarter ended December 31, 2004, as well as other filings
with the SEC. -0- *T (Financial tables follow) TIER TECHNOLOGIES,
INC. Condensed Consolidated Balance Sheets March 31, September 30,
(in thousands) 2005 2004
----------------------------------------------------------------------
(unaudited) ASSETS Current assets: Cash and cash equivalents $
40,052 $ 35,174 Short-term investments 16,347 20,909 Accounts
receivable, net 20,285 16,091 Unbilled receivables 6,343 5,046
Short-term portion of notes and accrued interest receivable from
related parties 488 405 Prepaid expenses and other current assets
7,424 6,699
----------------------------------------------------------------------
Total current assets 90,939 84,324 Property, equipment and software
(net of $21,171 and $22,941 depreciation and amortization at March
31, 2005 and September 30, 2004, respectively) 12,143 7,158
Long-term notes and accrued interest receivable from related
parties, less current portion 2,182 2,001 Goodwill 40,594 37,824
Other acquired intangible assets, net 28,454 30,761 Long-term
investments 797 10,135 Restricted investments 3,391 3,329 Other
assets 1,912 1,937
----------------------------------------------------------------------
Total assets $180,412 $177,469
======================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accrued
liabilities $ 7,913 $ 7,501 Income taxes payable 7,139 7,007
Deferred income 5,587 5,269 Accrued compensation liabilities 5,088
4,623 Accounts payable 3,158 2,626 Accrued subcontractor expenses
3,065 2,478 Other current liabilities 145 228
----------------------------------------------------------------------
Total current liabilities 32,095 29,732 Other liabilities 1,935
1,787
----------------------------------------------------------------------
Total liabilities 34,030 31,519
----------------------------------------------------------------------
Commitments and contingencies Shareholders' equity: Common stock,
no par value (Class B stock authorized: 42,600 shares; Class B
stock issued and outstanding 20,356 and 20,324 shares at March 31,
2005 and September 30, 2004, respectively) 172,387 172,136 Notes
receivable from shareholders (1,773) (1,773) Accumulated other
comprehensive loss (252) (258) Accumulated deficit (23,980)
(24,155)
----------------------------------------------------------------------
Total shareholders' equity 146,382 145,950
----------------------------------------------------------------------
Total liabilities and shareholders' equity $180,412 $177,469
======================================================================
TIER TECHNOLOGIES, INC. Condensed Consolidated Statements of
Operations (unaudited) Three Months Ended Six Months Ended March
31, March 31, ----------------- ----------------- (in thousands,
except per share data) 2005 2004 2005 2004
----------------------------------------------------------------------
Net revenues $35,277 $29,659 $66,956 $56,169 Costs and expenses:
Direct costs 23,061 19,399 44,944 37,367 General and administrative
6,871 6,293 13,751 12,593 Selling and marketing 3,013 1,756 5,592
3,133 Depreciation and amortization 1,570 1,107 3,120 2,238
Restructuring and other charges -- 5 -- 1,261
----------------------------------------------------------------------
Total costs and expenses 34,515 28,560 67,407 56,592
----------------------------------------------------------------------
Income (loss) before other income (loss), income taxes and
discontinued operations 762 1,099 (451) (423)
----------------------------------------------------------------------
Other income (loss): Equity in net loss of unconsolidated affiliate
(152) -- (252) -- Net interest income 519 293 898 570
----------------------------------------------------------------------
Total other income 367 293 646 570
----------------------------------------------------------------------
Income before income taxes and discontinued operations 1,129 1,392
195 147 Provision for income taxes 20 35 20 70
----------------------------------------------------------------------
Net income from continuing operations 1,109 1,357 175 77 Income
(loss) from discontinued operations, net of income taxes -- 164 --
(1,401)
----------------------------------------------------------------------
Net income (loss) $ 1,109 $ 1,521 $ 175 $(1,324)
======================================================================
Income from continuing operations, net of income taxes: Per basic
share $ 0.06 $ 0.07 $ 0.01 $ -- Per diluted share $ 0.06 $ 0.07 $
0.01 $ -- Income (loss) from discontinued operations, net of income
taxes: Per basic share $ -- $ 0.01 $ -- $ (0.07) Per diluted share
$ -- $ 0.01 $ -- $ (0.07) Net income (loss): Per basic share $ 0.06
$ 0.08 $ 0.01 $ (0.07) Per diluted share $ 0.06 $ 0.08 $ 0.01 $
(0.07) Shares used in computing: Basic income (loss) per share
19,464 18,808 19,448 18,755 Diluted income (loss) per share 19,539
19,217 19,573 19,083 TIER TECHNOLOGIES, INC. Condensed Consolidated
Statements of Cash Flows (unaudited) Six Months Ended March 31,
----------------- (in thousands) 2005 2004
----------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: Net income from continuing
operations $ 175 $ 77 Non-cash items included in net income:
Depreciation and amortization 4,190 3,287 Recognized loss on
impairment of investments -- 135 Provision for doubtful accounts
469 272 Recognized loss from forgiveness of employees' notes -- 8
Equity loss in 45%-owned unconsolidated affiliate 252 -- Net effect
of changes in assets and liabilities: Accounts receivable (4,663)
8,581 Prepaid expenses and other assets (2,262) (347) Accounts
payable and accrued liabilities 2,298 5,040 Deferred revenue 318 51
----------------------------------------------------------------------
Net cash provided by operating activities from continuing
operations 777 17,104
----------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES: Maturities and sales of
available-for-sale securities 18,377 15,515 Purchases of
available-for-sale securities (3,715) (11,841) Purchase of
equipment and software (6,593) (908) Investment in subsidiaries and
unconsolidated affiliate (4,093) -- Restricted investments (62) --
Other 41 (31)
----------------------------------------------------------------------
Net cash from continuing operations provided by investing
activities 3,955 2,735
----------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of
Class B common stock 251 1,177 Capital lease obligations and other
financing arrangements (44) (87)
----------------------------------------------------------------------
Net cash from continuing operations provided by financing
activities 207 1,090
----------------------------------------------------------------------
Net cash provided by continuing operations 4,939 20,929 Net cash
(used in) provided by discontinued operations (61) 542
----------------------------------------------------------------------
Net increase in cash and cash equivalents 4,878 21,471 Cash and
cash equivalents at beginning of period 35,174 13,928
----------------------------------------------------------------------
Cash and cash equivalents at end of period $40,052 $35,399
======================================================================
Supplemental disclosures of cash flow information: Cash paid during
the period for: Interest $ 14 $ 28 Income taxes paid (refunded),
net $ 126 $(6,939) Supplemental disclosures of non-cash
transactions: Equipment acquired under capital lease obligations
and other financing arrangements $ 40 $ -- *T
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