Tier Technologies, Inc. (Nasdaq: TIER), a leading provider of
electronic payment solutions for the biller direct market, today
released results for the quarter and fiscal year ended
September 30, 2011.
Results of Operations
Fourth Quarter Fiscal 2011 Results
For the quarter ended September 30, 2011, Tier reported
revenues from Continuing Operations of $28.5 million, a 4.2%
increase over the same quarter last year. Net loss from Continuing
Operations was $3.6 million, or $0.21 per fully diluted share,
compared to net loss from Continuing Operations of
$4.2 million, or $0.23 per fully diluted share, for the same
quarter last year. Continuing Operations include Electronic Payment
Solutions, or EPS, and the VSA wind-down business. On a standalone
basis, our EPS business reported quarterly revenues of
$28.2 million, a 5.9% increase over the same quarter last
year.
Fiscal Year 2011 Results
For the fiscal year ended September 30, 2011, Tier reported
revenues from Continuing Operations of $130.2 million. Net
loss from Continuing Operations was $7.4 million, or $0.43 per
fully diluted share, compared to net loss from Continuing
Operations of $5.9 million, or $0.33 per fully diluted share,
for the same period last year. On a standalone basis, our EPS
business reported annual revenues of $128.6 million, a 1.1%
increase over fiscal year 2010. However, revenues for fiscal year
2011 for our VSA business showed a 49.2% decrease over fiscal year
2010, which resulted in flat revenues from Continuing Operations
year-over-year.
Management’s Comments
“Fiscal 2011 was a challenging year, marked by major overhauls
of our team, our technology direction, and our sales and marketing
strategy,” said Alex. P. Hart, President and Chief Executive
Officer, “but we now believe that we have the people, processes,
and systems in place to produce a significantly better result in
fiscal year 2012.”
“We see a long runway ahead of us,” Mr. Hart continued. “The
tailwinds of recent legal, regulatory, and technological
developments are beginning to counteract the ongoing headwinds of
reduced income tax and property tax payments that have accompanied
our current economic malaise. We are finally confident that we can
begin providing a better sense for how we think the company is
going to perform, and we understand that we cannot achieve our
goals for the business without establishing a track record of
performance that gives investors, clients, and our associates
confidence that we are headed in the right direction.”
Liquidity
As of September 30, 2011, Tier had $39.8 million in
cash and cash equivalents. Of the $39.8 million of cash,
$14.7 million is funds settled to us but not yet distributed
to clients and accrued discount fees, offset by $7.6 million
of cash which we expect to receive within one to two days after the
end of the quarter as settlements from credit card companies or
banks. This makes the cash available to Tier for business purposes
as of September 30, 2011 $32.7 million. The cash available to
Tier at June 30, 2011 for business purposes was
$33.8 million. Contributing to the decrease in available cash
from June 30, 2011 were primarily hardware and software costs
associated with our infrastructure and platform initiatives.
In July 2011, we entered into an $8.3 million contract to
upgrade our core infrastructure, which includes the purchase of
hardware, software and professional services. The project began in
August 2011 and is scheduled to be completed in October 2012. As of
November 30, 2011, we have purchased approximately
$6.6 million in software and hardware related to this
project.
Conference Call
Tier will host a conference call Tuesday, December 6, at 5:00
p.m. Eastern Time to discuss these results. To access the
conference call, please dial (888) 995-9709 and provide pass code
Q4FY2011. The conference call is also available live via the
Internet at www.tier.com. Participants via the Web will need to
provide conference ID # 9529539 and pass code Q4FY2011. A replay
will be available at 10:00 a.m. Eastern Time on Wednesday, December
7, 2011 at www.tier.com or by calling (800) 234-8715 and entering
conference ID # 9529539. The replay will be available until 11:45
p.m. Eastern Time on December 20, 2011.
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 enhanced electronic payment
services that include multiple payment choices, payment channels,
and bill payment products and services to over 4,700 clients in all
50 states and the District of Columbia. Tier serves clients in
multiple markets including federal, state, and local governments,
educational institutions, utilities and commercial clients through
its subsidiary, Official Payments Corporation. For more
information, see www.tier.com and www.OfficialPayments.com.
Forward looking statements
Statements made in this report 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 the Company’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. The Company 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 the Company’s
financial results in all our markets, which we refer to as
“verticals,” particularly the federal vertical, the state and local
vertical and property tax vertical; effectiveness and performance
of our systems, payment processing platforms and operational
infrastructure; our ability to grow EPS revenue while reducing our
costs, including processor and interchange related costs; the
timing, initiation, completion, renewal, extension or early
termination of client or partner contracts or projects; our ability
to execute on our sales and product strategy and realize revenues
from our business development opportunities; the impact of
regulatory requirements; and unanticipated claims as a result of
project performance, including due to the failure of software
providers, processors, vendors, partners, or subcontractors to
satisfactorily perform and 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 annual
report on Form 10-K for the period ended September 30, 2011,
filed with the Securities and Exchange Commission.
TIER TECHNOLOGIES, INC.
Consolidated Balance Sheets
(unaudited)
September 30, September 30,
(in thousands)
2011 2010 ASSETS: Current
assets: Cash and cash equivalents $ 39,760 $ 45,757 Investments in
marketable securities — 8,249 Restricted investments — 1,311
Accounts receivable, net 4,467 4,883 Settlements receivable, net
7,648 8,356 Prepaid expenses and other current assets
2,368 1,407 Total current assets 54,243
69,963 Property, equipment and software, net 18,189 12,032
Goodwill 17,460 17,381 Other intangible assets, net 4,037 7,477
Restricted investments — 6,000 Other assets 238
172
Total assets $
94,167 $ 113,025
LIABILITIES AND SHAREHOLDERS’ EQUITY: Current liabilities:
Accounts payable $ 1,057 $ 1,059 Settlements payable 9,812 10,716
Accrued compensation liabilities 2,721 4,261 Accrued discount fees
4,900 4,624 Other accrued liabilities 3,881 2,718 Deferred income
439 558 Total current
liabilities 22,810 23,936
Other liabilities: Deferred rent 1,556 1,257 Other liabilities
28 596 Total other
liabilities 1,584 1,853
Total liabilities 24,394
25,789 Commitments and contingencies
Shareholders’ equity:
Preferred stock, no par value; authorized
shares: 4,579; no shares issued and outstanding
— —
Common stock, $0.01 par value, and paid-in
capital; shares authorized: 44,260; shares issued: 20,817 and
20,706; shares outstanding: 16,642 and 18,170
193,732 193,620 Treasury stock—at cost, 4,175 and 2,536 shares
(31,383 ) (21,020 ) Accumulated other comprehensive loss — (1 )
Accumulated deficit (92,576 ) (85,363 )
Total shareholders’ equity 69,773
87,236 Total liabilities and
shareholders’ equity $ 94,167
$ 113,025 TIER TECHNOLOGIES,
INC. Consolidated Statements of Operations
(unaudited)
Year ended September 30, (in thousands, except per
share data)
2011 2010
2009 Revenues $ 130,170 $
130,224 $ 128,246 Costs and expenses:
Direct costs 100,764 98,328 95,594 General and administrative
22,766 25,199 25,529 Selling and marketing 6,940 6,355 6,708
Depreciation and amortization 7,314
6,711 6,569 Total costs and
expenses 137,784 136,593
134,400 Loss from continuing operations
before other income and income taxes (7,614 )
(6,369 ) (6,154 ) Other income:
Interest income, net 82 414 754 Gain (loss) on investment — 31 (31
) Gain on sale of assets — 6
— Total other income 82
451 723
Loss from continuing operations before income taxes (7,532 ) (5,918
) (5,431 ) Income tax (benefit) provision (100 )
30 40 Loss from
continuing operations (7,432 ) (5,948 ) (5,471 ) Income (loss) from
discontinued operations, net 219
(245 ) (6,035 ) Net loss $ (7,213 )
$ (6,193 ) $ (11,506 ) (Loss) earnings per
share—Basic and diluted: From continuing operations $ (0.43 ) $
(0.33 ) $ (0.28 ) From discontinued operations $ 0.01
$ (0.01 ) $ (0.31 )
Loss per share—Basic and
diluted $ (0.42 ) $
(0.34 ) $ (0.59 )
Weighted average common shares used in computing: Basic and diluted
loss per share 17,112 18,153 19,438
TIER TECHNOLOGIES,
INC. Consolidated Statements of Cash Flows
(unaudited)
Year ended September 30, (In thousands)
2011 2010 2009 CASH FLOWS
FROM OPERATING ACTIVITIES: Net loss $ (7,213 ) $
(6,193 ) $ (11,506 ) Less: Income (loss) from discontinued
operations, net 219 (245 )
(6,035 ) Loss from continuing operations, net (7,432
) (5,948 ) (5,471 ) Non-cash items included in net loss:
Depreciation and amortization 7,314 6,712 6,642 Provision for
doubtful accounts 363 1,304 417 Deferred rent 204 388 — Share-based
compensation (217 ) 1,012 2,522 Capitalized software impairment
loss 268 — — (Gain) loss on trading investments — (31 ) 31 Gain on
sale of equipment — (10 ) — Other — 1 (19 ) Net effect of changes
in assets and liabilities: Accounts and settlements receivable, net
761 839 (6,510 ) Prepaid expenses and other assets (1,034 ) 629 (89
) Accounts and settlements payable and accrued liabilities (1,617 )
(2,681 ) 5,399 Income taxes receivable 7 84 1 Deferred income
(119 ) (303 ) (929 ) Cash
(used in) provided by operating activities from continuing
operations (1,502 ) 1,996 1,994 Cash used in operating activities
from discontinued operations (149 )
(855 ) (5,187 ) Cash (used in) provided by operating
activities (1,651 ) 1,141
(3,193 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale securities (13,248 ) (23,587 )
(38,455 ) Sales and maturities of available-for-sale securities
21,826 19,886 36,371 Sales of trading securities — 31,200 125
Restricted investments matured, sold and released from restriction
6,983 — 500 Purchase of equipment and software (7,532 ) (1,681 )
(299 ) Investment in internally developed software (2,749 ) (3,563
) (3,590 ) ChoicePay asset purchase net of cash acquired — — (6,927
) Additions to goodwill—ChoicePay (79 ) (52 ) — Collection of note
receivable — 527 71 Proceeds from sale of equipment —
10 — Cash provided
by (used in) investing activities from continuing operations 5,201
22,740 (12,204 ) Cash provided by investing activities from
discontinued operations 368 610
818 Cash provided by (used in)
investing activities 5,569
23,350 (11,386 )
CASH FLOWS FROM FINANCING
ACTIVITIES: Purchase of company stock (10,363 ) (749 ) (11,587
) Net proceeds from issuance of common stock 482 82 422 Capital
lease obligations and other financing arrangements
(34 ) (36 ) (22 ) Cash used in
financing activities (9,915 ) (703 )
(11,187 ) Net (decrease) increase in cash and cash
equivalents (5,997 ) 23,788 (25,766 ) Cash and cash equivalents at
beginning of period 45,757
21,969 47,735 Cash and cash equivalents
at end of period $ 39,760 $ 45,757
$ 21,969
TIER TECHNOLOGIES, INC.
Consolidated Statement of Operations—Continuing Operations
(unaudited)
(in thousands)
EPS
VSA Total Fiscal year ended September 30,
2011: Revenues $ 128,644 $ 1,526 $
130,170 Costs and expenses: Direct costs 100,508 256 100,764
General and administrative 22,761 5 22,766 Selling and marketing
6,940 — 6,940 Depreciation and amortization 7,314
— 7,314 Total costs and
expenses 137,523 261
137,784
(Loss) income from continuing operations
before other income and income taxes
(8,879 ) 1,265 (7,614 )
Other income: Interest income, net 82
— 82 Total other income
82 — 82 (Loss) income
from continuing operations before taxes (8,797 ) 1,265 (7,532 )
Income tax benefit (100 ) —
(100 )
(Loss) income from continuing operations
$ (8,697 ) $ 1,265
$ (7,432 ) (in thousands)
EPS VSA Total Fiscal year
ended September 30, 2010: Revenues
$ 127,223 $ 3,001 $ 130,224 Costs and
expenses: Direct costs 97,050 1,278 98,328 General and
administrative 24,821 378 25,199 Selling and marketing 6,355 —
6,355 Depreciation and amortization 5,625
1,086 6,711 Total costs and
expenses 133,851 2,742
136,593
(Loss) income from continuing operations
before other income and income taxes
(6,628 ) 259 (6,369 )
Other income: Interest income (expense) 414 — 414 Gain on
investment 31 — 31 Gain on sale of asset 6
— 6 Total other income
451 — 451 (Loss)
income from continuing operations before taxes (6,177 ) 259 (5,918
) Income tax provision 30 —
30
(Loss) income from continuing
operations $ (6,207 )
$ 259 $ (5,948 )
TIER TECHNOLOGIES, INC. Consolidated Statement of
Operations—Continuing Operations
(unaudited)
(in thousands)
EPS
VSA Total Fiscal year ended September 30,
2009: Revenues $ 123,233 $ 5,013 $
128,246 Costs and expenses: Direct costs 93,434 2,160 95,594
General and administrative 24,509 1,020 25,529 Selling and
marketing 6,697 11 6,708 Depreciation and amortization
4,885 1,684 6,569
Total costs and expenses 129,525
4,875 134,400
(Loss) income from continuing operations
before other income and income taxes
(6,292 ) 138 (6,154 )
Other income (expense): Interest income (expense) 754 — 754 Loss on
investment (31 ) — (31 )
Total other income 723 —
723 (Loss) income from continuing operations before
taxes (5,569 ) 138 (5,431 ) Income tax provision 40
— 40
(Loss) income
from continuing operations $ (5,609
) $ 138 $ (5,471
)
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