Tier Technologies, Inc. (Nasdaq: TIER), a leading provider of
electronic payment solutions for the biller direct market, today
announced results for the quarter ended December 31, 2009 and
provided updates on continuing strategic growth initiatives.
Results of Operations
First Quarter Fiscal 2010 Results
For the quarter ended December 31, 2009, Tier reported
revenues from Continuing Operations of $32.8 million, a 10.2%
increase over the same quarter last year. Net loss from Continuing
Operations was $(0.7) million, or $(0.04) per fully diluted
share.
Continuing Operations include Electronic Payment Solutions, or
EPS, and certain wind-down businesses. On a standalone basis, our
EPS business reported quarterly revenues of $31.9 million, or
a 13.0% increase over the same quarter last year. Our general,
administrative, selling and marketing expenses, which support our
Continuing Operations, were $7.9 million, consistent with the
same quarter last year.
Management’s Comments
Ronald L. Rossetti, Chairman and Chief Executive Officer of Tier
Technologies stated, “I am pleased to report adjusted EBITDA from
EPS Operations for the first quarter of FY2010 of $0.8 million
as compared with a loss in adjusted EBITDA from EPS Operations of
($1.0) million in the first quarter of FY2009.”
“Our concentration today in our EPS “biller direct” business is
to continue increasing EPS Net Revenue growth over a fixed cost
platform,” said Rossetti. “What is very encouraging to me and
should be to our stockholders is that despite the fact that over
60% of our current EPS business is tied directly to the collection
of tax revenue, which depending on the taxing authority has
experienced 10-30% decreases in revenue, we were able to improve
our financial performance. In fact, we increased our EPS Net
Revenue in the quarter by 29%, or $2.2 million, and increased
adjusted EBITDA from EPS Operations by $1.8 million. Stated
differently, we delivered 82% of our increase in EPS Net Revenues
through to adjusted EBITDA from EPS Operations. This improvement
was the result of increasing our profitability per transaction and
driving substantial transaction growth, while reducing overhead and
holding platform costs relatively flat. For the quarter ended
December 31, 2009 our EPS transactions grew by 65% and our EPS
gross margin (gross sales less direct and other costs) increased by
270 basis points, as compared with the prior year quarter.”
Tier defines EPS Net Revenue as revenue less wind-down revenue,
discount fees, processing and interchange costs and adjusted EBITDA
from EPS Operations as net income from our EPS business before
interest expense net of interest income, income taxes, depreciation
and amortization and stock-based compensation in both equity and
cash.
The following table shows a reconciliation of revenue to EPS Net
Revenue for the three months ended December 31, 2009 and 2008 (in
thousands):
Three months ended December 31, 2009
2008 Change
Revenue $ 32,768 $ 29,740 $ 3,028
Less Wind-down
Revenue 848 1,499 (651 )
EPS Gross Revenue 31,920 28,241 3,679
Discount
Fees, Interchange & Processing Costs 22,348
20,835 1,513
EPS Net
Revenue $ 9,572 $ 7,406 $ 2,166
Net Revenue Percentage Increase 29.2 %
The following table shows a reconciliation of net income/(loss)
from Continuing Operations to adjusted EBITDA from EPS Operations
and adjusted EBITDA from Continuing Operations for the three months
ended December 31, 2009 and 2008 (in thousands):
EPS Wind-down
Continuing Operations Quarter 1 Quarter
1 Quarter 1 FY10 FY09
Change FY10 FY09
Change FY10 FY09
Change Net Income/(Loss) $ (930 ) $
(2,266 ) $ 1,336 $ 209 $ 374 $ (165 ) $ (721 )
$ (1,892 ) $ 1,171
Adjustments:
Depreciation/Amortization 1,335 979 356 273 504 (231 ) 1,608
1,483 125
Stock/Cash based Comp 507 468 39 ― ― ― 507 468 39
Taxes ― 1 (1 ) ― ― ― ― 1 (1 )
Less: Interest
Income, net 139 192
(53 ) ― ― ― 139
192 (53 )
Adjusted
EBITDA $ 773 $ (1,010
) $ 1,783 $
482 $ 878 $ (396
) $ 1,255 $
(132 ) $ 1,387
EPS revenues, EPS Net Revenues, adjusted EBITDA from EPS
Operations and adjusted EBITDA from Continuing Operations are
non-GAAP financial measures. Tier’s management believes these
measures are useful for evaluating performance against peer
companies within its industry, and provide investors with
additional transparency with respect to financial measures used by
management in its financial and operational decision-making.
Non-GAAP financial measures should not be considered a substitute
for the reported results prepared in accordance with US GAAP.
Tier’s definition used to calculate non-GAAP financial measures may
differ from those used by other companies.
Liquidity
As of December 31, 2009, Tier had $57.7 million in
cash and marketable securities, and $7.4 million in restricted
investments, for a total of $65.1 million. Tier currently
holds $30.1 million in auction rate securities as long-term
investments. These investments are revenue bonds and asset-backed
notes issued by state agencies. The investments are AAA-rated and
collateralized with student loans and guaranteed under the Federal
Family Education Loan Program. Tier has no short-term or long-term
debt.
Conference Call
Tier will host a conference call Tuesday, February 9, 2010 at
5:00 p.m. Eastern Time to discuss these results. To access the
conference call, please dial (888)335-3240 and provide conference
ID # 54925076. The conference call is also available live via the
Internet at www.tier.com. A
replay will be available at 5:00 p.m. Eastern Time on Wednesday,
February 10, 2010 at www.tier.com or by calling (800) 642-1687
and entering conference ID # 54925076. The replay will be available
until 11:45 p.m. Eastern Time on February 23, 2010.
About Tier Technologies, Inc.
Tier Technologies, Inc. is a leading provider of electronic
payment solutions in the biller direct market. Headquartered in
Reston, Virginia, the company provides over 3,900 electronic
payment clients in all 50 states and the District of Columbia with
enhanced payment services that include multiple payment choices,
payment channels, and bill payment products and services. Tier
serves clients in multiple markets including federal, state, and
local governments, educational institutions, utilities and
commercial clients primarily through its wholly-owned subsidiary,
Official Payments Corporation. For more information, see
www.tier.com and www.officialpayments.com.
Statements made in this press release that are not historical
facts are forward-looking statements that are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. These forward-looking statements relate to future
events or Tier’s future financial and/or operating performance and
generally can be identified as such because the context of the
statement includes words such as “may,” “will,” “intends,” “plans,”
“believes,” “anticipates,” “expects,” “estimates,” “shows,”
“predicts,” “potential,” “continue,” or “opportunity,” the negative
of these words or words of similar import. Tier undertakes no
obligation to update any such forward-looking statements. 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: general economic conditions, which affect Tier’s
financial results in all our markets, which we refer to as
“verticals,” including our property tax vertical; the timing and
the cost of consolidating our payment processing platforms; our
ability to grow EPS Net Revenue while keeping costs relatively
fixed; the potential loss of funding by clients, including due to
government budget shortfalls or revisions to mandated statutes; the
timing, initiation, completion, renewal, extension or early
termination of client projects; our ability to realize revenues
from our business development opportunities; the impact of
governmental investigations or litigation; 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 our quarterly report on Form 10-Q for our fiscal
quarter ended December 31, 2009, filed with the SEC.
TIER TECHNOLOGIES, INC. Consolidated
Balance Sheets (in thousands)
December 31,2009
September 30,2009
(unaudited)
ASSETS: Current assets: Cash and cash
equivalents $ 26,577 $ 21,969 Investments in marketable securities
1,000 4,499 Restricted investments 1,361 1,361 Accounts receivable,
net 4,780 4,790 Settlements receivable, net 7,994 6,272 Prepaid
expenses and other current assets 2,659
2,239 Total current assets 44,371 41,130
Property, equipment and software, net 8,470 7,990 Goodwill 17,345
17,329 Other intangible assets, net 10,906 12,038 Investments in
marketable securities 30,081 31,169 Restricted investments 6,000
6,000 Other assets 709 571
Total assets $ 117,882
$ 116,227 LIABILITIES AND
SHAREHOLDERS’ EQUITY: Current liabilities: Accounts payable $
373 $ 84 Settlements payable 9,808 9,591 Accrued compensation
liabilities 2,037 3,213 Accrued discount fees 9,697 5,343 Other
accrued liabilities 2,465 3,425 Deferred income 778
861 Total current liabilities 25,158
22,517 Other liabilities 1,266
1,121
Total liabilities
26,424 23,638
Commitments and contingencies Shareholders’ equity:
Preferred stock, no par value;
authorized shares: 4,579; no shares issued and outstanding
— —
Common stock and paid-in capital;
shares authorized: 44,260; shares issued: 20,687 and 20,687; shares
outstanding: 18,151 and 18,238
192,423 192,030 Treasury stock—at cost, 2,536 and 2,449 shares
(21,020 ) (20,271 ) Accumulated deficit (79,945 )
(79,170 )
Total shareholders’ equity
91,458 92,589
Total liabilities and shareholders’ equity $
117,882 $ 116,227
TIER TECHNOLOGIES, INC. Consolidated Statements of
Operations Three months endedDecember 31,
(in thousands, except per share data)
2009
2008 Revenues $ 32,768
$ 29,740 Costs and expenses: Direct
costs 24,092 22,418 General and administrative 6,327 6,630 Selling
and marketing 1,601 1,316 Depreciation and amortization
1,608 1,459 Total costs and
expenses 33,628 31,823
Loss from continuing operations before other income/(loss) and
income taxes (860 ) (2,083 )
Other income/(loss): Gain/(loss) on investments 12 (112 ) Interest
income, net 127 304 Total
other income 139 192
Loss from continuing operations before income taxes (721 )
(1,891 ) Income tax provision —
1 Loss from continuing operations (721 ) (1,892 )
Loss from discontinued operations, net (54 )
(3,262 ) Net loss $ (775 ) $ (5,154 )
Loss per share—Basic and diluted: From continuing operations
$ (0.04 ) $ (0.10 ) From discontinued operations —
(0.16 ) Loss per share—Basic and diluted
$ (0.04 ) $ (0.26 ) Weighted average common
shares used in computing: Basic and diluted loss per share 18,156
19,735
TIER TECHNOLOGIES, INC. Consolidated
Statements of Cash Flows Three months ended
December 31,
(in thousands) 2009 2008
CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (775 ) $
(5,154 ) Less: Loss from discontinued operations, net
(54 ) (3,262 ) Loss from continuing operations, net
(721 ) (1,892 ) Non-cash items included in net loss: Depreciation
and amortization 1,608 1,483 Provision for doubtful accounts 299 39
Deferred rent 26 — Share-based compensation 507 468 (Gain)/loss on
trading securities (12 ) 112 Other (4 ) 25 Net effect of changes in
assets and liabilities: Accounts and settlements receivable, net
(2,011 ) (1,727 ) Prepaid expenses and other assets (737 ) (602 )
Accounts and settlements payable and accrued liabilities 2,737
1,308 Income taxes receivable (77 ) (61 ) Deferred income
(83 ) — Cash provided by (used in)
operating activities from continuing operations 1,532 (847 ) Cash
used in operating activities from discontinued operations
(54 ) (3,209 ) Cash provided by (used in)
operating activities 1,478
(4,056 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of
available-for-sale securities (1,000 ) (11,470 ) Maturities of
available-for-sale securities 4,499 2,401 Sales of trading
securities 1,100 — Maturities of restricted investments — 500
Purchase of equipment and software (956 ) (480 ) Additions to
goodwill—ChoicePay acquisition (16 ) — Collection on note
receivable 261 — Proceeds from sale of discontinued operations
— 205
Cash provided by (used in)
investing activities from continuing operations
3,888 (8,844 ) Cash used in investing activities from discontinued
operations — (437 ) Cash
provided by (used in) investing activities 3,888
(9,281 ) CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of company stock (749 ) — Capital lease obligations and
other financing arrangements (9 ) (5 )
Cash used in financing activities (758 )
(5 ) Net increase (decrease) in cash and cash equivalents
4,608 (13,342 ) Cash and cash equivalents at beginning of period
21,969 47,735 Cash and
cash equivalents at end of period $ 26,577 $
34,393
TIER TECHNOLOGIES, INC.
Consolidated Statement of Operations—Continuing Operations
(in thousands)
EPS
Wind-down Total Three months ended
December 31, 2009: Revenues $ 31,920 $ 848
$ 32,768 Costs and expenses: Direct costs 23,832 260
24,092 General and administrative 6,221 106 6,327 Selling and
marketing 1,601 — 1,601 Depreciation and amortization
1,335 273 1,608 Total
costs and expenses 32,989 639
33,628 (Loss)/income from continuing
operations before other income and income taxes
(1,069 ) 209 (860 ) Other
income/(expense): Interest income 127 — 127 Gain on investments
12 — 12
Total other income 139 —
139 (Loss)/income from continuing operations before
taxes (930 ) 209 (721 ) Income tax provision —
— —
(Loss)/income from
continuing operations $ (930 )
$ 209 $ (721 )
(in thousands)
EPS
Wind-down Total Three months ended
December 31, 2008: Revenues $ 28,241 $
1,499 $ 29,740 Costs and expenses: Direct costs
21,838 580 22,418 General and administrative 6,568 62 6,630 Selling
and marketing 1,313 3 1,316 Depreciation and amortization
979 480 1,459
Total costs and expenses 30,698
1,125 31,823 (Loss)/income from continuing
operations before other income/(loss) and income taxes
(2,457 ) 374 (2,083 ) Other
income/(loss): Interest income, net 304 — 304 Loss on investment
(112 ) — (112 ) Total
other income 192 —
192 (Loss)/income from continuing operations before taxes
(2,265 ) 374 (1,891 ) Income tax provision 1
— 1
(Loss)/income from
continuing operations $ (2,266 )
$ 374 $ (1,892 )
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