Tier Reports Fiscal 2007 Third Quarter Results
RESTON, Va., August 9, 2007 – Tier Technologies, Inc. (Nasdaq: TIER) today announced results for its fiscal 2007 third quarter ended June 30, 2007.
Revenues for the fiscal 2007 third quarter were $57.7 million, an increase of 2% as compared to $56.3 million in the fiscal 2006 third quarter. Net loss was $5.7 million compared to a net loss of $1.6 million in the same period last year. Fully diluted loss per share was $0.29 as compared to fully diluted loss per share of $0.08 in the same period last year.
The fiscal 2007 third quarter included a non-cash charge of $8.6 million to record an impairment of goodwill and assets held-for-sale. The fiscal 2007 third quarter also included a non-cash benefit of $0.5 million recorded in the Company’s Consolidated Statements of Operations as “Income from discontinued operations” related to the liquidation of our Australian operations, which we disposed of in fiscal 2002.
As of June 30, 2007, Tier had $68.7 million in cash and cash equivalents, and investments in marketable securities, and $18.4 million in restricted investments. Tier generated $8.4 million of cash from operations in the fiscal 2007 third quarter. Tier has no short-term or long-term debt.
“We continue to execute on our strategy to focus the company on our electronic payment processing business (“EPP”), which we believe will create long-term sustainable value for our shareholders,” said Ronald L. Rossetti, Chairman and Chief Executive Officer of Tier.
“Revenue from electronic payment processing represented 58% of Tier’s overall revenue for the nine months ended June 30, 2007, and was up 26% year-to-date over prior year," Mr. Rossetti continued. "As we discussed previously, we have begun to redeploy assets from our other business segments into this business unit."
Mr. Rossetti concluded that “we are happy with the completion with the first step in this direction. On June 29, 2007 we sold our equity investment in CPAS Systems, Inc., or CPAS, a Canadian-based supplier of pension administration software systems, back to CPAS for $4.8 million (USD). We continue to make progress toward divesting our other non-core assets and look forward to updating you on our future progress.”
Segment Results
Electronic Payment Processing
Electronic Payment Processing (EPP) Segment revenues for the fiscal 2007 third quarter were $38.4 million, a 13% increase over the $33.9 million of EPP revenues reported in the fiscal 2006 third quarter.
Fiscal 2007 third quarter EPP revenue improvement was driven primarily by an increase in the number of transactions processed, partially offset by a decrease in the average dollar amount per transaction processed.
Government Business Process Outsourcing
Government Business Process Outsourcing (GBPO) Segment revenues were $11.1 million in the fiscal 2007 third quarter, down 12% as compared to $12.6 million in the fiscal 2006 third quarter.
Factors impacting fiscal 2007 third quarter GBPO revenues were a reduction of revenues due to completed contracts during the last 12 months and the introduction of lower-cost, state-mandated electronic payment processing alternatives at one of our payment processing centers.
Packaged Software and Systems Integration
Packaged Software and Systems Integration (PSSI) Segment revenues were $8.3 million in the fiscal 2007 third quarter, a decrease of 15% as compared to $9.8 million in the fiscal 2006 third quarter.
Fiscal 2007 third quarter PSSI revenue decline was attributable primarily to the completion, or near completion, of several client contracts.
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 (888) 335-3240 and provide conference ID # 11954742. 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 conference ID # 11954742 from approximately two hours after the end of the call until 11:59 p.m. Eastern Time on August 16, 2007.
About Tier
Tier Technologies, Inc. offers a diversified array of innovative business and financial transaction processing solutions. Headquartered in Reston, Virginia, Tier’s clients include over 3,100 federal, state, and local governments, educational institutions, utilities and commercial clients in the U.S. and abroad. Tier provides information technology solutions and, through its Official Payments Corp. subsidiary, delivers payment processing solutions for a wide range of markets. 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. 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: the impact of governmental investigations; 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; the Company’s ability to realize revenues from its business development opportunities; 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 quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2007 filed with the SEC.
TIER TECHNOLOGIES, INC.
Consolidated Balance Sheets
(in thousands) | | June 30, 2007 | | | September 30, 2006 | |
| | | (unaudited) | | | | |
ASSETS: | | | | | | |
| Current assets: | | | | | | |
| Cash and cash equivalents | | $ | 29,235 | | | $ | 18,486 | |
| Investments in marketable securities | | | 39,500 | | | | 36,950 | |
| Accounts receivable, net | | | 2,525 | | | | 3,857 | |
| Unbilled receivables | | | 560 | | | | 1,916 | |
| Prepaid expenses and other current assets | | | 1,641 | | | | 1,623 | |
| Current assets—held-for-sale | | | 29,668 | | | | 29,775 | |
| Total current assets | | | 103,129 | | | | 92,607 | |
| Property, equipment and software, net | | | 3,734 | | | | 3,781 | |
| Goodwill | | | 29,531 | | | | 37,567 | |
| Other intangible assets, net | | | 14,262 | | | | 16,395 | |
| Restricted investments | | | 18,361 | | | | 12,287 | |
| Investment in unconsolidated affiliate | | | — | | | | 3,978 | |
| Other assets | | | 874 | | | | 2,934 | |
Total assets | | $ | 169,891 | | | $ | 169,549 | |
LIABILITIES AND SHAREHOLDERS’ EQUITY: | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | $ | 634 | | | $ | 626 | |
| Income taxes payable | | | — | | | | 7,326 | |
| Accrued compensation liabilities | | | 4,313 | | | | 3,389 | |
| Accrued subcontractor expenses | | | 364 | | | | 457 | |
| Accrued discount fees | | | 4,738 | | | | 3,631 | |
| Other accrued liabilities and deferred income | | | 5,051 | | | | 6,523 | |
| Current liabilities—held-for-sale | | | 14,272 | | | | 12,054 | |
| Total current liabilities | | | 29,372 | | | | 34,006 | |
| Other liabilities | | | 213 | | | | 1,333 | |
Total liabilities | | | 29,585 | | | | 35,339 | |
| | | | | | | | | |
| 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: 20,402 and 20,383; shares outstanding: 19,518 and 19,499 | | | 186,053 | | | | 184,387 | |
| Treasury stock—at cost, 884 shares | | | (8,684 | ) | | | (8,684 | ) |
| Notes receivable from related parties | | | (106 | ) | | | (4,275 | ) |
| Accumulated other comprehensive loss | | | (5 | ) | | | (33 | ) |
| Accumulated deficit | | | (36,952 | ) | | | (37,185 | ) |
Total shareholders’ equity | | | 140,306 | | | | 134,210 | |
Total liabilities and shareholders’ equity | | $ | 169,891 | | | $ | 169,549 | |
TIER TECHNOLOGIES, INC.
Consolidated Statements of Operations
(unaudited)
| | | Three months ended June 30, | | | Nine months ended June 30, | |
(in thousands, except per share data) | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
| Revenues | | $ | 57,660 | | | $ | 56,269 | | | $ | 140,651 | | | $ | 133,625 | |
| Costs and expenses: | | | | | | | | | | | | | | | | |
| Direct costs | | | 42,246 | | | | 42,033 | | | | 102,584 | | | | 100,625 | |
| General and administrative | | | 8,953 | | | | 11,748 | | | | 27,508 | | | | 27,530 | |
| Selling and marketing | | | 3,737 | | | | 3,623 | | | | 9,163 | | | | 8,943 | |
| Depreciation and amortization | | | 971 | | | | 1,306 | | | | 3,693 | | | | 3,950 | |
| Impairment of assets held-for-sale | | | 8,585 | | | | — | | | | 8,585 | | | | — | |
| Total costs and expenses | | | 64,492 | | | | 58,710 | | | | 151,533 | | | | 141,048 | |
| Loss from continuing operations before other income and income taxes | | | (6,832 | ) | | | (2,441 | ) | | | (10,882 | ) | | | (7,423 | ) |
| Other income: | | | | | | | | | | | | | | | | |
| Income from investment: | | | | | | | | | | | | | | | | |
| Equity in net (loss) income in unconsolidated affiliate | | | (511 | ) | | | 35 | | | | 475 | | | | 556 | |
| Realized foreign currency gain | | | 239 | | | | — | | | | 239 | | | | — | |
| Gain on sale of unconsolidated affiliate | | | 80 | | | | — | | | | 80 | | | | — | |
| Interest income, net | | | 820 | | | | 859 | | | | 2,304 | | | | 2,133 | |
| Total other income | | | 628 | | | | 894 | | | | 3,098 | | | | 2,689 | |
| Loss from continuing operations before income taxes | | | (6,204 | ) | | | (1,547 | ) | | | (7,784 | ) | | | (4,734 | ) |
| Income tax (benefit) provision | | | (7 | ) | | | 40 | | | | 60 | | | | 45 | |
| Net loss from continuing operations | | | (6,197 | ) | | | (1,587 | ) | | | (7,844 | ) | | | (4,779 | ) |
| Income from discontinued operations, net | | | 478 | | | | — | | | | 8,077 | | | | — | |
| Net (loss) income | | $ | (5,719 | ) | | $ | (1,587 | ) | | $ | 233 | | | $ | (4,779 | ) |
| | | | | | | | | | | | | | | | | |
| (Loss) earnings per share—Basic: | | | | | | | | | | | | | | | | |
| From continuing operations | | $ | (0.32 | ) | | $ | (0.08 | ) | | $ | (0.40 | ) | | $ | (0.25 | ) |
| From discontinued operations | | $ | 0.03 | | | $ | — | | | $ | 0.41 | | | $ | — | |
(Loss) earnings per share—Basic | | $ | (0.29 | ) | | $ | (0.08 | ) | | $ | 0.01 | | | $ | (0.25 | ) |
| (Loss) earnings per share—Diluted: | | | | | | | | | | | | | | | | |
| From continuing operations | | $ | (0.32 | ) | | $ | (0.08 | ) | | $ | (0.40 | ) | | $ | (0.25 | ) |
| From discontinued operations | | $ | 0.03 | | | $ | — | | | $ | 0.41 | | | $ | — | |
(Loss) earnings per share—Diluted | | $ | (0.29 | ) | | $ | (0.08 | ) | | $ | 0.01 | | | $ | (0.25 | ) |
| | | | | | | | | | | | | | | | | |
| Weighted average common shares used in computing: | | | | | | | | | | | | | | | | |
| Basic earnings (loss) per share | | | 19,511 | | | | 19,499 | | | | 19,505 | | | | 19,494 | |
| Diluted earnings (loss) per share | | | 19,511 | | | | 19,499 | | | | 19,630 | | | | 19,494 | |
TIER TECHNOLOGIES, INC.
Consolidated Statements of Cash Flows
(unaudited)
| | | Nine months ended June 30, | |
(in thousands) | | 2007 | | | 2006 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | |
| Net income (loss) | | $ | 233 | | | $ | (4,779 | ) |
| Less: Income from discontinued operations, net | | | 8,077 | | | | — | |
| Loss from continuing operations, net | | | (7,844 | ) | | | (4,779 | ) |
| Non-cash items included in net income from continuing operations: | | | | | | | | |
| Depreciation and amortization | | | 5,536 | | | | 6,725 | |
| Loss on retirement of equipment and software | | | 6 | | | | 283 | |
| Provision for doubtful accounts | | | (26 | ) | | | 957 | |
| Equity in net income of unconsolidated affiliate | | | (475 | ) | | | (556 | ) |
| Gain on sale of unconsolidated affiliate | | | (80 | ) | | | — | |
| Foreign currency translation gain realized on sale of unconsolidated affiliate | | | (239 | ) | | | — | |
| Share-based compensation | | | 1,451 | | | | 1,123 | |
| Accrued forward loss on contracts | | | (79 | ) | | | 1,478 | |
| Settlement of pension contract | | | 1,254 | | | | — | |
| Impairment of held-for-sale assets | | | 8,585 | | | | — | |
| Net effect of changes in assets and liabilities: | | | | | | | | |
| Accounts receivable and unbilled receivables | | | 4 | | | | 4,819 | |
| Prepaid expenses and other assets | | | 2,931 | | | | (2,345 | ) |
| Accounts payable and accrued liabilities | | | 2,658 | | | | 1,996 | |
| Income taxes payable | | | 311 | | | | (213 | ) |
| Deferred income | | | 148 | | | | (2,750 | ) |
| Cash provided by operating activities from continuing operations | | | 14,141 | | | | 6,738 | |
| Cash provided by discontinued operations: | | | | | | | | |
| Income from discontinued operations, net | | | 8,077 | | | | — | |
| Non-cash items included in income from discontinued operations, net: | | | | | | | | |
| Reversal of income tax reserve | | | (7,599 | ) | | | — | |
| Liquidation of Australian operations | | | (478 | ) | | | — | |
| Cash provided by operating activities from discontinued operations | | | — | | | | — | |
| Cash provided by operating activities | | | 14,141 | | | | 6,738 | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | |
| Purchases of marketable securities | | | (6,108 | ) | | | (45,950 | ) |
| Sales and maturities of marketable securities | | | 3,550 | | | | 37,164 | |
| Purchase of restricted investments | | | (19,272 | ) | | | (3,878 | ) |
| Sales and maturities of restricted investments | | | 13,398 | | | | 3,367 | |
| Purchase of equipment and software | | | (3,888 | ) | | | (3,688 | ) |
| Repayment of notes and accrued interest from related parties | | | 4,295 | | | | — | |
| Proceeds from sale of unconsolidated affiliate | | | 4,784 | | | | — | |
| Other investing activities | | | (232 | ) | | | — | |
| Cash used in investing activities | | | (3,473 | ) | | | (12,985 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | |
| Net proceeds from issuance of common stock | | | 89 | | | | 69 | |
| Capital lease obligations and other financing arrangements | | | 3 | | | | (80 | ) |
| Cash provided by (used in) financing activities | | | 92 | | | | (11 | ) |
| Effect of exchange rate changes on cash | | | (11 | ) | | | 36 | |
| Net increase (decrease) in cash and cash equivalents | | | 10,749 | | | | (6,222 | ) |
| Cash and cash equivalents at beginning of period | | | 18,486 | | | | 27,843 | |
| Cash and cash equivalents at end of period | | $ | 29,235 | | | $ | 21,621 | |
