 | Exhibit 99.1 Tier Technologies, Inc. 11130 Sunrise Valley Drive, Suite 300 Reston, VA 20191 CONTACT: Ronald W. Johnston, Chief Financial Officer rjohnston@tier.com (571) 382-1000 |
Tier Reports Fiscal 2010 Fourth Quarter and Year End Results;
Announces Intention to Repurchase up to $10 Million in Common Stock in Dutch Auction Tender Offer
RESTON, VA, November 22, 2010 – 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, 2010 and announced its intention to repurchase up to $10 million in common stock in a “Dutch Auction” cash self-tender offer.
Results of Operations
Fourth Quarter Fiscal 2010 Results
For the quarter ended September 30, 2010, Tier reported revenues from Continuing Operations of $27.3 million, a 6.4% increase over the same quarter last year. Net loss from Continuing Operations was $4.2 million, or $0.23 per fully diluted share, compared to net loss from Continuing Operations of $1.3 million, or $0.06 per fully diluted share for the same quarter last year. Our general, administrative, selling and marketing expenses, which support our Continuing Operations, were $8.7 million, an increase of $2.3 million, or 26.5%, from the same quarter last year. Both net income and adjusted EBITDA from Continuing Operations were negatively impacted by $0.6 million in additional advertising expenses as a result of expanding our advertising campaigns t o additional verticals as compared with the prior year as well as additional partnership expenses due to increased transaction volume. We also incurred $0.3 million in severance expense expected to be paid to our former COO and $0.3 million in recruiting costs for our CEO and CTO positions. The reversal of an accrual during fiscal year 2009 and some one-time legal expenses in fiscal year 2010 resulted in increased legal expenses quarter over quarter of $0.7 million.
Continuing Operations include Electronic Payment Solutions, or EPS, and certain wind-down businesses. On a standalone basis, our EPS business reported quarterly revenues of $26.6 million, or a 7.3% increase over the same quarter last year.
Fiscal Year 2010 Results
For the fiscal year ended September 30, 2010, Tier reported revenues from Continuing Operations of $130.2 million, a 1.5% increase over fiscal year 2009. Net loss from Continuing Operations was $5.9 million, or $0.33 per fully diluted share, compared to net loss from Continuing Operations of $5.5 million, or $0.28 per fully diluted share, for fiscal year 2009. Our general, administrative, selling and marketing expenses, which support our Continuing Operations, were $31.6 million for fiscal year 2010, a decrease of $0.7 million, or 2.2%, from fiscal year 2009.
On a standalone basis, our EPS business reported annual revenues of $127.2 million, or a 3.2% increase over the same period last year.
Dutch Auction Tender Offer
Tier’s Board of Directors has authorized the Company to conduct a cash tender offer to repurchase up to an aggregate of $10 million in value of Tier common stock in a modified “Dutch Auction”. The tender offer will be subject to terms and conditions to be described in an offer to purchase, letter of transmittal, and related materials that will be distributed to Tier’s stockholders and filed with the Securities and Exchange Commission. The Company will fund the purchase of shares from cash on hand. Tier expects to set the price range shortly before commencement of the tender offer. The Company expects to commence the tender offer as promptly as possible.
Management’s Comments
Alex P. Hart, President and Chief Executive Officer of Tier Technologies, Inc. stated, “The performance in the fourth quarter and the fiscal year is not satisfactory to me or any member of the management team. We have realigned the strategic plan of the business to recommit to serving our core markets, focused on investments to strengthen our core technology platforms, and reorganized our leadership team. The Board’s authorization to repurchase up to $10 million of the Company’s common stock in the tender offer demonstrates a clear commitment to improving shareholder value.”
Definition and Reconciliation
Tier defines adjusted EBITDA from Continuing Operations as net income from our Continuing Operations 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 net (loss)/income from Continuing Operations to adjusted EBITDA from Continuing Operations for the three months ended September 30, 2010 and 2009 (in thousands):
| | | Continuing Operations | |
| | | Fiscal Quarter 4 | |
| | | FY10 | | | FY09 | | | Change | |
| Net (Loss)/Income from Continuing Operations | | $ | (4,198 | ) | | $ | (1,265 | ) | | $ | (2,933 | ) |
| Adjustments: | | | | | | | | | | | | |
| Depreciation/Amortization | | | 1,798 | | | | 1,631 | | | | 167 | |
| Stock/Cash based Comp | | | 298 | | | | 806 | | | | (508 | ) |
| Taxes | | | 18 | | | | 37 | | | | (19 | ) |
| Less: | | | | | | | | | | | | |
| Other income | | | 22 | | | | 115 | | | | (93 | ) |
| Adjusted EBITDA from Continuing Operations | | $ | (2,106 | ) | | $ | 1,094 | | | $ | (3,200 | ) |
Adjusted EBITDA from Continuing Operations is a non-GAAP financial measure. Tier’s management believes this measure is useful for evaluating performance against peer companies within its industry, and provides 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 September 30, 2010, Tier had $54.0 million in cash, cash equivalents and marketable securities, and $7.3 million in restricted investments, for a total of $61.3 million. Tier has no short-term or long-term debt.
Conference Call
Tier will host a conference call Tuesday, November 23, 2010 at 8:00 a.m. Eastern Time to discuss these results. To access the conference call, please dial (888) 445-7818 and provide pass code TIERQ4. The conference call is also available live via the Internet at www.tier.com. Participants via the Web will need to provide conference ID# 9206454 and pass code TIERQ4. A replay will be available at 10:00 a.m. Eastern Time on Tuesday, November 23, 2010 at www.tier.com or by calling (866) 445-8304 and entering conference ID # 9206454. The replay will be available until 11:59 p.m. Eastern Time on December 7, 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 enhanced electronic payment services that include multiple payment choices, payment channels, and bill payment products and services to over 4,600 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 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,” particularly federal, state and local income tax and property tax verticals; effectiveness and performance of our systems, payment processing platforms and operational infrastructure; our ability to grow EPS revenue while keeping costs relatively fixed; the potential loss of funding by clients, including due to government budget shortfalls or revisions to mandated statutes; t he 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 annual report on Form 10-K for our fiscal year ended September 30, 2010, filed with the SEC.
Additional information and where to find it
This press release is for informational purposes only and does not constitute an offer to buy or the solicitation of an offer to sell shares of Tier common stock. The tender offer will be made only pursuant to the offer to purchase, letter of transmittal, and related materials that Tier will distribute to its stockholders and file with the Securities and Exchange Commission. Stockholders and investors should read carefully the offer to purchase, letter of transmittal, and related materials before making any decision with respect to the tender offer, because these materials will contain important information, including the various terms of, and conditions to, the tender offer. Stockholders and investors may obtain a free copy of the tender offer statement on Schedule TO, the offer to purchase, letter of transmittal, and other documents that Tier will file with the Securities and Exchange Commission at the Commission’s website at www.sec.gov when these documents become available. Stockholders may also request a copy of these documents, when they become available, from Tier at no cost by writing or telephoning Tier at: Tier Technologies, Inc., Attention: Keith S. Omsberg, 11130 Sunrise Valley Drive, Suite 300, Reston, Virginia, 20191, Telephone: 571-382-1000.
TIER TECHNOLOGIES, INC.
Consolidated Balance Sheets
| (in thousands) | | September 30, 2010 | | | September 30, 2009 | |
| ASSETS: | | | | | | |
| Current assets: | | | | | | |
| Cash and cash equivalents | | $ | 45,757 | | | $ | 21,969 | |
| Investments in marketable securities | | | 8,249 | | | | 4,499 | |
| Restricted investments | | | 1,311 | | | | 1,361 | |
| Accounts receivable, net | | | 4,883 | | | | 4,790 | |
| Settlements receivable, net | | | 8,356 | | | | 10,592 | |
| Prepaid expenses and other current assets | | | 1,407 | | | | 2,239 | |
| Total current assets | | | 69,963 | | | | 45,450 | |
| | | | | | | | | |
| Property, equipment and software, net | | | 12,032 | | | | 7,990 | |
| Goodwill | | | 17,381 | | | | 17,329 | |
| Other intangible assets, net | | | 7,477 | | | | 12,038 | |
| Investments in marketable securities | | | — | | | | 31,169 | |
| Restricted investments | | | 6,000 | | | | 6,000 | |
| Other assets | | | 172 | | | | 571 | |
| Total assets | | $ | 113,025 | | | $ | 120,547 | |
| | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY: | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | $ | 1,059 | | | $ | 84 | |
| Settlements payable | | | 10,716 | | | | 13,911 | |
| Accrued compensation liabilities | | | 4,261 | | | | 3,213 | |
| Accrued discount fees | | | 4,624 | | | | 5,343 | |
| Other accrued liabilities | | | 2,718 | | | | 3,425 | |
| Deferred income | | | 558 | | | | 861 | |
| Total current liabilities | | | 23,936 | | | | 26,837 | |
| Other liabilities: | | | | | | | | |
| Deferred rent | | | 1,257 | | | | — | |
| Other liabilities | | | 596 | | | | 1,121 | |
| Total other liabilities | | | 1,853 | | | | 1,121 | |
| Total liabilities | | | 25,789 | | | | 27,958 | |
| | | | | | | | | |
| 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: 20,706 and 20,687; shares outstanding: 18,170 and 18,238 | | | 193,620 | | | | 192,030 | |
| Treasury stock—at cost, 2,536 and 2,449 shares | | | (21,020 | ) | | | (20,271 | ) |
| Accumulated other comprehensive loss | | | (1 | ) | | | — | |
| Accumulated deficit | | | (85,363 | ) | | | (79,170 | ) |
| Total shareholders’ equity | | | 87,236 | | | | 92,589 | |
| Total liabilities and shareholders’ equity | | $ | 113,025 | | | $ | 120,547 | |
TIER TECHNOLOGIES, INC.
Consolidated Statements of Operations
| | | Year ended September 30, | |
| (in thousands, except per share data) | | 2010 | | | 2009 | | | 2008 | |
| | | | | | | | | | |
| Revenues | | $ | 130,224 | | | $ | 128,246 | | | $ | 122,571 | |
| | | | | | | | | | | | | |
| Costs and expenses: | | | | | | | | | | | | |
| Direct costs | | | 98,328 | | | | 95,594 | | | | 95,234 | |
| General and administrative | | | 25,199 | | | | 25,529 | | | | 28,020 | |
| Selling and marketing | | | 6,355 | | | | 6,708 | | | | 8,677 | |
| Depreciation and amortization | | | 6,711 | | | | 6,569 | | | | 5,328 | |
| Total costs and expenses | | | 136,593 | | | | 134,400 | | | | 137,259 | |
| | | | | | | | | | | | | |
| Loss from continuing operations before other income and income taxes | | | (6,369 | ) | | | (6,154 | ) | | | (14,688 | ) |
| | | | | | | | | | | | | |
| Other income: | | | | | | | | | | | | |
| Interest income, net | | | 414 | | | | 754 | | | | 2,731 | |
| Gain (loss) on investment | | | 31 | | | | (31 | ) | | | — | |
| Gain on sale of assets | | | 6 | | | | — | | | | — | |
| Total other income | | | 451 | | | | 723 | | | | 2,731 | |
| | | | | | | | | | | | | |
| Loss from continuing operations before income taxes | | | (5,918 | ) | | | (5,431 | ) | | | (11,957 | ) |
| Income tax provision | | | 30 | | | | 40 | | | | 87 | |
| | | | | | | | | | | | | |
| Loss from continuing operations | | | (5,948 | ) | | | (5,471 | ) | | | (12,044 | ) |
| Loss from discontinued operations, net | | | (245 | ) | | | (6,035 | ) | | | (15,401 | ) |
| | | | | | | | | | | | | |
| Net loss | | $ | (6,193 | ) | | $ | (11,506 | ) | | $ | (27,445 | ) |
| | | | | | | | | | | | | |
| Loss per share—Basic and diluted: | | | | | | | | | | | | |
| From continuing operations | | $ | (0.33 | ) | | $ | (0.28 | ) | | $ | (0.61 | ) |
| From discontinued operations | | $ | (0.01 | ) | | $ | (0.31 | ) | | $ | (0.79 | ) |
| Loss per share—Basic and diluted | | $ | (0.34 | ) | | $ | (0.59 | ) | | $ | (1.40 | ) |
| | | | | | | | | | | | | |
| Weighted average common shares used in computing: | | | | | | | | | | | | |
| Basic and diluted loss per share | | | 18,153 | | | | 19,438 | | | | 19,616 | |
TIER TECHNOLOGIES, INC.
Consolidated Statements of Cash Flows
| | | Year ended September 30, | |
| (In thousands) | | 2010 | | | 2009 | | | 2008 | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | | |
| Net loss | | $ | (6,193 | ) | | $ | (11,506 | ) | | $ | (27,445 | ) |
| Less: Loss from discontinued operations, net | | | (245 | ) | | | (6,035 | ) | | | (15,401 | ) |
| Loss from continuing operations, net | | | (5,948 | ) | | | (5,471 | ) | | | (12,044 | ) |
| Non-cash items included in net loss from continuing operations: | | | | | | | | | | | | |
| Depreciation and amortization | | | 6,712 | | | | 6,642 | | | | 5,497 | |
| Provision for doubtful accounts | | | 1,304 | | | | 417 | | | | 239 | |
| Deferred rent | | | 388 | | | | — | | | | — | |
| Share-based compensation | | | 1,012 | | | | 2,522 | | | | 2,224 | |
| (Gain) loss on trading investments | | | (31 | ) | | | 31 | | | | — | |
| Gain on sale of equipment | | | (10 | ) | | | — | | | | — | |
| Other | | | 1 | | | | (19 | ) | | | 453 | |
| Net effect of changes in assets and liabilities: | | | | | | | | | | | | |
| Accounts and settlements receivable, net | | | 839 | | | | (6,510 | ) | | | 473 | |
| Prepaid expenses and other assets | | | 629 | | | | (89 | ) | | | 261 | |
| Accounts payable and accrued liabilities | | | (2,681 | ) | | | 5,399 | | | | 311 | |
| Income taxes receivable | | | 84 | | | | 1 | | | | 19 | |
| Deferred income | | | (303 | ) | | | (929 | ) | | | (859 | ) |
| Cash provided by (used in) operating activities from continuing operations | | | 1,996 | | | | 1,994 | | | | (3,426 | ) |
| Cash (used in) provided by operating activities from discontinued operations | | | (855 | ) | | | (5,187 | ) | | | 3,955 | |
| Cash provided by (used in) by operating activities | | | 1,141 | | | | (3,193 | ) | | | 529 | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | | | | | |
| Purchases of available-for-sale securities | | | (23,587 | ) | | | (38,455 | ) | | | (7,325 | ) |
| Sales and maturities of available-for-sale securities | | | 19,886 | | | | 36,371 | | | | 33,815 | |
| Sales of trading securities | | | 31,200 | | | | 125 | | | | — | |
| Sales and maturities of restricted investments | | | — | | | | 500 | | | | 1,250 | |
| Purchase of equipment and software | | | (5,244 | ) | | | (3,889 | ) | | | (1,951 | ) |
| ChoicePay asset purchase net of cash acquired | | | — | | | | (6,927 | ) | | | — | |
| Additions to goodwill—ChoicePay | | | (52 | ) | | | — | | | | — | |
| Collection of note receivable | | | 527 | | | | 71 | | | | — | |
| Proceeds from sale of equipment | | | 10 | | | | — | | | | — | |
| Cash provided by (used in) investing activities from continuing operations | | | 22,740 | | | | (12,204 | ) | | | 25,789 | |
| Cash provided by investing activities from discontinued operations | | | 610 | | | | 818 | | | | 3,678 | |
| Cash provided by (used in) investing activities | | | 23,350 | | | | (11,386 | ) | | | 29,467 | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | | | | | |
| Net proceeds from issuance of common stock | | | 82 | | | | 421 | | | | 1,283 | |
| Purchase of company stock | | | (749 | ) | | | (11,587 | ) | | | — | |
| Capital lease obligations and other financing arrangements | | | (36 | ) | | | (21 | ) | | | (56 | ) |
| Cash (used in) provided by financing activities from continuing operations | | | (703 | ) | | | (11,187 | ) | | | 1,227 | |
| Cash used in financing activities from discontinued operations | | | — | | | | — | | | | (4 | ) |
| Cash (used in) provided by financing activities | | | (703 | ) | | | (11,187 | ) | | | 1,223 | |
| Net increase (decrease) in cash and cash equivalents | | | 23,788 | | | | (25,766 | ) | | | 31,219 | |
| Cash and cash equivalents at beginning of period | | | 21,969 | | | | 47,735 | | | | 16,516 | |
| Cash and cash equivalents at end of period | | $ | 45,757 | | | $ | 21,969 | | | $ | 47,735 | |
TIER TECHNOLOGIES, INC.
Consolidated Statement of Operations—Continuing Operations
| (in thousands) | | EPS | | | Wind- down | | | 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 | ) |
| (in thousands) | | EPS | | | Wind- down | | | 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 | ) |
TIER TECHNOLOGIES, INC.
Consolidated Statement of Operations—Continuing Operations
| (in thousands) | | EPS | | | Wind- down | | | Total | |
| Fiscal year ended September 30, 2008: | | | | | | | | | |
| Revenues | | $ | 116,641 | | | $ | 5,930 | | | $ | 122,571 | |
| Costs and expenses: | | | | | | | | | | | | |
| Direct costs | | | 91,290 | | | | 3,944 | | | | 95,234 | |
| General and administrative | | | 26,932 | | | | 1,088 | | | | 28,020 | |
| Selling and marketing | | | 8,486 | | | | 191 | | | | 8,677 | |
| Depreciation and amortization | | | 3,900 | | | | 1,428 | | | | 5,328 | |
| Total costs and expenses | | | 130,608 | | | | 6,651 | | | | 137,259 | |
Loss from continuing operations before other income and income taxes | | | (13,967 | ) | | | (721 | ) | | | (14,688 | ) |
| Other income (expense): | | | | | | | | | | | | |
| Interest income (expense) | | | 2,733 | | | | (2 | ) | | | 2,731 | |
| Total other income (expense) | | | 2,733 | | | | (2 | ) | | | 2,731 | |
| Loss from continuing operations before taxes | | | (11,234 | ) | | | (723 | ) | | | (11,957 | ) |
| Income tax provision | | | 87 | | | | — | | | | 87 | |
| Loss from continuing operations | | $ | (11,321 | ) | | $ | (723 | ) | | $ | (12,044 | ) |
