Official Payments 8-K Results of Operations and Financial Condition

  Exhibit 99.1 Tier Technologies, Inc. 11130 Sunrise Valley Drive, Suite 300 Reston, VA  20191   CONTACT: John Guszak, Interim Chief Accounting Officer jguszak@tier.com (571) 382-1000

Tier Reports Fiscal 2011 Second Quarter Results

RESTON, VA, May 9, 2011 – Tier Technologies, Inc. (Nasdaq: TIER), a leading provider of electronic payment solutions for the biller direct market, today released results for the quarter ended March 31, 2011.

Results of Operations

Second Quarter Fiscal 2011 Results

For the quarter ended March 31, 2011, Tier reported revenues from Continuing Operations of $30.3 million, a 1.3% decrease over the same quarter last year.  Net loss from Continuing Operations was $1.4 million, or $0.08 per fully diluted share, compared to net loss from Continuing Operations of $0.8 million, or $0.04 per fully diluted share, for the same quarter last year.  Continuing Operations include Electronic Payment Solutions, or EPS, and certain wind-down businesses.  On a standalone basis, our EPS business reported quarterly revenues of $29.9 million, a 0.3% decrease over the same quarter last year.

Our general, administrative, selling and marketing expenses, which support our Continuing Operations, were $6.7 million, a decrease of $0.9 million, or 12.1%, from the same quarter last year.  The quarter benefited from the reversal of expense related to RSUs that would have been awarded to our former CEO if certain stock price targets and service conditions were met.  Offsetting the decrease was additional advertising costs due to expanded marketing campaigns to all verticals.   

In January, we completed our modified “Dutch Auction” tender offer.  We accepted for purchase 1,639,344 shares of our common stock at a price of $6.10 per share for a total cost of approximately $10.4 million, including expenses.

Management’s Comments

“We continued to make progress toward our strategic goals, but that progress is not yet reflected in our financial performance.  We’ve made a number of changes in both our business practices and our leadership team since our last call, and we believe that our renewed focus on the needs of our clients in the government, higher education, and municipal utility markets positions us to be one of the winners in the growth of the biller direct bill payment industry,” said Alex. P. Hart, President and Chief Executive Officer.  “One indication of progress was that our transaction growth as compared with the prior year quarter was 20% excluding large private sector utilities, which are no longer a core focus of our business.

“We’ve also made significant progress on the technology front,” Mr. Hart continued, “Sandip Mohapatra was promoted to Chief Technology Officer, and his leadership is already having a very positive effect.  We recently upgraded our core databases, improved our storage and server environments, and made it through the high volume tax season without a glitch.  We are also in the

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process of rolling out the first new product capabilities that the company has developed in more than three years, and we hired Mark Lavin, a seasoned sales leader that Atul Garg and I worked with at FleetCor, to create a more focused and aggressive sales organization.  The Chief Financial Officer search, which began in March, has yielded several excellent candidates and should conclude in the relatively near future.”

Liquidity

As of March 31, 2011, Tier had $43.0 million in cash and cash equivalents, and $6.0 million in restricted investments, for a total of $49.0 million.  Of the unrestricted cash of $43.0 million, $17.7 million is funds settled to us but not yet distributed to clients and accrued discount fees, offset by $10.8 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 March 31, 2011 $36.1 million.  The decrease in available cash from December 31, 2010 is attributable to the modified “Dutch Auction” in which we purchased approximately $10.0 million in our common stock.

Conference Call

Tier will host a conference call Tuesday, May 10, at 8:00 a.m. Eastern Time to discuss these results.  To access the conference call, please dial (888) 282-0365and provide pass code EBOWMAN.  The conference call is also available live via the Internet at www.tier.com.  Participants via the Web will need to provide conference ID # 7102650 and pass code EBOWMAN.  A replay will be available at 10:00 a.m. Eastern Time on Tuesday, May 10, 2011 at www.tier.com or by calling (866) 465-2111 and entering conference ID # 7102650.  The replay will be available until 11:45 p.m. Eastern Time on May 24, 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 4,600 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,

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but not limited to: general economic conditions, which affect Tier’s financial results in all our markets, which we refer to as “verticals,” particularly the federal vertical, the state and local tax vertical and the property tax vertical;  effectiveness and performance of our systems, payment processing platforms and operational infrastructure; our ability to grow EPS revenue while controlling costs; 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 the period ended March 31, 2011, filed with the Securities and Exchange Commission.

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TIER TECHNOLOGIES, INC.

Consolidated Balance Sheets

(in thousands)	March 31, 2011			September 30, 2010
	(unaudited)
ASSETS:
Current assets:
Cash and cash equivalents	$	43,043		$	45,757
Investments in marketable securities		—			8,249
Restricted investments		—			1,311
Accounts receivable, net		3,556			4,883
Settlements receivable, net		10,774			8,356
Prepaid expenses and other current assets		1,265			1,407
Total current assets		58,638			69,963
Property, equipment and software, net		12,409			12,032
Goodwill		17,416			17,381
Other intangible assets, net		5,758			7,477
Restricted investments		6,000			6,000
Other assets		165			172
Total assets	$	100,386		$	113,025
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities:
Accounts payable	$	286		$	1,059
Settlements payable		12,770			10,716
Accrued compensation liabilities		3,115			4,261
Accrued discount fees		4,940			4,624
Other accrued liabilities		2,553			2,718
Deferred income		489			558
Total current liabilities		24,153			23,936
Other liabilities:
Deferred rent		1,490			1,257
Other liabilities		708			596
Total other liabilities		2,198			1,853
Total liabilities		26,351			25,789
Contingencies and commitments
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: 20,772 and 20,706; shares outstanding: 16,597 and 18,170		192,948			193,620
Treasury stock—at cost, 4,175 and 2,536 shares		(31,383	)		(21,020	)
Accumulated other comprehensive loss		—			(1	)
Accumulated deficit		(87,530	)		(85,363	)
Total shareholders’ equity		74,035			87,236
Total liabilities and shareholders’ equity	$	100,386		$	113,025

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TIER TECHNOLOGIES, INC.

Consolidated Statements of Operations

	Three months ended March 31,						Six months ended March 31,
(in thousands, except per share data)	2011			2010			2011			2010
Revenues	$	30,266		$	30,674		$	63,236		$	63,442
Costs and expenses:
Direct costs		23,332			22,536			48,202			46,628
General and administrative		4,884			6,192			10,809			12,519
Selling and marketing		1,822			1,438			3,372			3,039
Depreciation and amortization		1,806			1,635			3,564			3,243
Total costs and expenses		31,844			31,801			65,947			65,429
Loss from continuing operations before other income and income taxes		(1,578	)		(1,127	)		(2,711	)		(1,987	)
Other income:
Interest income, net		20			171			57			298
Gain on investments		—			2			—			14
Total other income		20			173			57			312
Loss from continuing operations before income taxes		(1,558	)		(954	)		(2,654	)		(1,675	)
Income tax benefit		(186	)		(145	)		(185	)		(145	)
Loss from continuing operations		(1,372	)		(809	)		(2,469	)		(1,530	)
Gain from discontinued operations, net		300			295			302			241
Net loss	$	(1,072	)	$	(514	)	$	(2,167	)	$	(1,289	)
Loss per share—Basic and diluted:
From continuing operations	$	(0.08	)	$	(0.04	)	$	(0.14	)	$	(0.08	)
From discontinued operations		0.02			0.01			0.02			0.01
Loss per share—Basic and diluted	$	(0.06	)	$	(0.03	)	$	(0.12	)	$	(0.07	)
Weighted average common shares used in computing:
Basic and diluted loss per share		16,928			18,151			17,577			18,154

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TIER TECHNOLOGIES, INC.

Consolidated Statements of Cash Flows

	Six months ended March 31,
(in thousands)	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net  loss	$	(2,167	)	$	(1,289	)
Less: Gain from discontinued operations, net		302			241
Loss from continuing operations, net		(2,469	)		(1,530	)
Non-cash items included in net loss:
Depreciation and amortization		3,564			3,243
Provision for doubtful accounts		192			511
Deferred rent		224			165
Share-based compensation		(846	)		1,079
Capitalized software impairment loss		246			—
Gain on trading securities		—			(14	)
Other		—			(6	)
Net effect of changes in assets and liabilities:
Accounts and settlements receivable, net		(1,283	)		(63	)
Prepaid expenses and other assets		171			(272	)
Accounts and settlements payable and accrued liabilities		290			6,175
Income taxes receivable		(22	)		49
Deferred income		(69	)		(283	)
Cash (used in) provided by operating activities from continuing operations		(2	)		9,054
Cash used in operating activities from discontinued operations		(7	)		(219	)
Cash (used in) provided by operating activities		(9	)		8,835
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale securities		(5,998	)		(6,897	)
Maturities of available-for-sale securities		14,576			5,998
Sales of trading securities		—			5,200
Maturities of restricted investments		983			—
Purchase of equipment and software		(2,450	)		(2,605	)
Additions to goodwill—ChoicePay acquisition		(35	)		(19	)
Collection on note receivable		—			261
Cash provided by investing activities from continuing operations		7,076			1,938
Cash provided by investing activities from discontinued operations		309			460
Cash provided by investing activities		7,385			2,398
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock		289			—
Purchase of company stock		(10,363	)		(749	)
Capital lease obligations and other financing arrangements		(16	)		(18	)
Cash used in financing activities		(10,090	)		(767	)
Net (decrease) increase in cash and cash equivalents		(2,714	)		10,466
Cash and cash equivalents at beginning of period		45,757			21,969
Cash and cash equivalents at end of period	$	43,043		$	32,435

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TIER TECHNOLOGIES, INC.

Consolidated Statement of Operations—Continuing Operations

(in thousands)	EPS			Wind- down		Total
Three months ended March 31, 2011:
Revenues	$	29,904		$	362	$	30,266
Costs and expenses:
Direct costs		23,266			66		23,332
General and administrative		4,871			13		4,884
Selling and marketing		1,822			—		1,822
Depreciation and amortization		1,806			—		1,806
Total costs and expenses		31,765			79		31,844
(Loss) income from continuing operations before other income and income taxes		(1,861	)		283		(1,578	)
Other income:
Interest income, net		20			—		20
Total other income		20			—		20
(Loss) income from continuing operations before taxes		(1,841	)		283		(1,558	)
Income tax benefit		(186	)		—		(186	)
(Loss) income from continuing operations	$	(1,655	)	$	283	$	(1,372	)

(in thousands)	EPS			Wind- down			Total
Three months ended March 31, 2010
Revenues	$	29,985		$	689		$	30,674
Costs and expenses:
Direct costs		22,223			313			22,536
General and administrative		6,092			100			6,192
Selling and marketing		1,438			—			1,438
Depreciation and amortization		1,329			306			1,635
Total costs and expenses		31,082			719			31,801
Loss from continuing operations before other income and income taxes		(1,097	)		(30	)		(1,127	)
Other income:
Interest income, net		171			—			171
Gain on investments		2			—			2
Total other income		173			—			173
Loss from continuing operations before taxes		(924	)		(30	)		(954	)
Income tax benefit		(145	)		—			(145	)
Loss from continuing operations	$	(779	)	$	(30	)	$	(809	)

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(in thousands)	EPS			Wind- down		Total
Six months ended March 31, 2011:
Revenues	$	62,381		$	855	$	63,236
Costs and expenses:
Direct costs		48,083			119		48,202
General and administrative		10,809			—		10,809
Selling and marketing		3,372			—		3,372
Depreciation and amortization		3,564			—		3,564
Total costs and expenses		65,828			119		65,947
(Loss) income from continuing operations before other income and income taxes		(3,447	)		736		(2,711	)
Other income:
Interest income, net		57			—		57
Total other income		57			—		57
(Loss) income from continuing operations before taxes		(3,390	)		736		(2,654	)
Income tax benefit		(185	)		—		(185	)
(Loss) income from continuing operations	$	(3,205	)	$	736	$	(2,469	)

(in thousands)	EPS			Wind- down		Total
Six months ended March 31, 2010:
Revenues	$	61,905		$	1,537	$	63,442
Costs and expenses:
Direct costs		46,055			573		46,628
General and administrative		12,313			206		12,519
Selling and marketing		3,039			—		3,039
Depreciation and amortization		2,664			579		3,243
Total costs and expenses		64,071			1,358		65,429
(Loss) income from continuing operations before other income and income taxes		(2,166	)		179		(1,987	)
Other income:
Interest income, net		298			—		298
Gain on investments		14			—		14
Total other income		312			—		312
(Loss) income from continuing operations before taxes		(1,854	)		179		(1,675	)
Income tax benefit		(145	)		—		(145	)
(Loss) income from continuing operations	$	(1,709	)	$	179	$	(1,530	)

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