Exhibit 99.1
Tier Reports Fiscal Second Quarter Results;
Exceeds Revenue, GAAP and Core EPS Guidance
WALNUT CREEK, Calif.--(BUSINESS WIRE)--April 29, 2004--Tier
Technologies, Inc. (Nasdaq:TIER), a leading provider of financial
transaction processing and packaged software and systems integration
solutions for government clients, today announced results for its
fiscal second quarter ended March 31, 2004.
GAAP Results
Net revenues for the fiscal 2004 second quarter were $29.7
million, which exceeded the Company guidance of $29 million. This is
compared to $30.2 million in the fiscal 2003 second quarter, which
included revenue from the terminated CalPERS contract of $3.3 million.
U.S. Generally Accepted Accounting Principles, or GAAP, net income
per diluted share was $0.08 in the fiscal 2004 second quarter, as
compared to net income per diluted share of $0.08 in the same period a
year ago.
Non-GAAP Results
Core earnings per diluted share for the fiscal 2004 second quarter
were $0.07, which exceeded the Company guidance of $0.06, and as
compared to $0.08 for the same period a year ago. Core earnings are
defined as income from continuing operations before income taxes, net
of restructuring and other charges, tax affected.
Tier provides additional notes and information on the face of the
attached condensed consolidated statements of operations that describe
in detail the items affecting revenues and per share results reported
above and a detailed description of the calculation of the Non-GAAP
results.
Balance Sheet
Cash and cash equivalents and short and long-term investments on
March 31, 2004 totaled $82.1 million as compared to $64.3 million on
September 30, 2003. The total current portion of accounts and unbilled
receivables at March 31, 2004 was $18.2 million, which represented a
decrease of $9.7 million from $27.9 million at September 30, 2003.
Specifically, unbilled receivables at March 31, 2004 were $4.5
million, which represented a decrease of $3.4 million or 43% from $7.9
million at September 30, 2003.
Fiscal Second Quarter 2004
"I am very pleased with Tier's second fiscal quarter 2004
financial results which exceeded guidance on both top and bottom
lines," said James R. Weaver, Chairman and Chief Executive Officer.
"Each of our three business units performed at or better than
guidance, growing total revenue 12% over the fiscal first quarter of
2004. This improvement is a result of several factors. Our transaction
processing expertise enables us to win deals in this arena that
provide stable recurring revenue streams. Demand for our services is
generally improving. I was pleased to see that our Government Systems
Integration Strategic Business Unit had significant revenue growth in
our second fiscal quarter 2004 with 27% sequential growth and 19% year
over year growth, excluding revenue from the terminated CalPERS
contract of $3.3 million. Our new business model has made Tier a
stronger, more focused business than it was a year ago."
Jeffrey A. McCandless, Senior Vice President and Chief Financial
Officer commented, "In the fiscal second quarter of 2004, Tier had a
solid quarter and executed well against our plan. Key income
statement, cash flow, and balance sheet metrics improved. We were
pleased that during the second quarter, Tier's Core Operating Margin
was 50 basis points higher than guidance. Days Sales Outstanding,
including unbilled receivables, were 67 days, which is well below our
target of 90 days. This is the second consecutive quarter that this
metric has meaningfully improved. Tier experienced another quarter of
strong cash flow, reporting $5.9 million in cash from operations and
$17.2 million through the first six months of fiscal 2004, ending the
quarter with cash and cash equivalents and short and long-term
investments totaling $82.1 million."
Tier To Consolidate Corporate Offices
The Company will consolidate its Walnut Creek, California
Corporate office with the Corporate office in Reston, Virginia not
later than June 30, 2004. The Corporate office in Walnut Creek
includes Accounting, Financial Planning, Information Technology,
Legal, Human Resources and Facilities functions. The Company
anticipates that some employees will relocate, and the Company will
hire additional staff in the Reston office. In connection with the
office consolidation, the Company is estimating to incur restructuring
and other related pre-tax charges of approximately $3.5 million to
cover office lease, employee and other related costs.
Commenting on the office consolidation, Weaver stated, "This was a
particularly difficult decision as the Walnut Creek employees are
extremely dedicated, hard working, and knowledgeable. I am confident
that the administrative efficiencies, improved communication, and the
opportunity to strengthen Tier's corporate culture will benefit the
Company over the long-term."
Financial Outlook
For the fiscal third quarter of 2004, Tier expects to post a GAAP
after-tax loss from continuing operations per diluted share of
($0.04), which includes a $0.17 per diluted share charge for the
office consolidation, and reaffirms the previous guidance for core
earnings of $0.14 per diluted share. Tier expects revenue in the
fiscal third quarter of 2004 to be $40.5 million, which reflects the
completion of the April 2004 tax season for our Official Payments
Strategic Business Unit.
For the fiscal fourth quarter of 2004, Tier expects to post GAAP
after-tax earnings from continuing operations of $0.07 per diluted
share, which includes a $0.01 per diluted share charge for the office
consolidation, and is raising its estimated core earnings from $0.07
to $0.08 per diluted share. Tier expects revenue in the fiscal fourth
quarter of $29.0 million, which is consistent with previous guidance.
For the full fiscal year 2004, the Company now projects total
revenue of approximately $125.6 million, GAAP after-tax income from
continuing operations of approximately $0.7 million and GAAP after-tax
earnings from continuing operations per diluted share of approximately
$0.04, both of which include the $0.18 per diluted share charge for
the office consolidation, and core earnings of $0.31 per diluted
share. Core earnings excludes pre-tax charges of $7.6 million for the
full fiscal year 2004 relating to exited business units, office
consolidations, severance, purchase price earn-outs, and goodwill
write-off, costs in connection with our compliance with the document
production pursuant to the Department of Justice subpoena and
projected CalPERS legal costs, and the results of discontinued
operations.
Weaver Appointed Chairman
Tier's Board of Directors also announced today that it has
appointed James R. Weaver as Chairman of the Board. Tier's former
Chairman, James Bildner, remains on Tier's Board as a Director. Mr.
Weaver is Tier's President and Chief Executive Officer. He was
appointed CEO on August 31, 2003, and was appointed President of Tier
in January 2002. He held the title of Chief Operating Officer from
November 2002 through August 31, 2003. Mr. Weaver joined Tier as
President, Government Services Division in May 1998 and became
President, U.S. Operations in August 2000. Prior to joining Tier Mr.
Weaver held senior management positions at BDM International, Inc.,
Unisys Corporation, and Lockheed Information Management Services.
Plaintiff's Claims Dismissed
Tier also announced today that the shareholder class action filed
against the Company and various former and current officers and
directors in the U.S. District Court for the Northern District of
California, and the derivative action filed against various former and
current officers and directors of the Company in the California
Superior Court for Contra Costa County have been dismissed without
prejudice.
Conference Call
Tier will host a conference call at 8:30 a.m. EDT on Friday, April
30, 2004 to discuss its quarterly results. To access the conference
call, please dial (800) 399-0129. The conference call will also be
broadcast live via the Internet at www.Tier.com. Please go to the
website at least fifteen minutes prior to the call to register,
download and install any necessary audio software. A replay will be
available at www.Tier.com or by calling (800) 642-1687 and entering
6817195 from two hours after the end of the call until 11:59 p.m. EDT
on May 7, 2004.
Non-GAAP Financial Information
To supplement its consolidated financial statements presented in
accordance with GAAP, Tier uses certain non-GAAP measures, which are
adjusted to exclude certain items. These non-GAAP measures, including
those referred to as "core" in this release, are not in accordance
with, nor are they a substitute for, GAAP measures and may not be
consistent with the presentation used by other companies. Tier uses
these non-GAAP financial measures to evaluate and manage the Company's
operations. Tier is providing this information to investors to allow
for the performance of additional financial analysis and because it is
consistent with the financial models and estimates published by
analysts who follow the Company. Since Tier has historically reported
non-GAAP results to the investment community, the Company also
believes the inclusion of non-GAAP measures provides consistency in
its financial reporting. Each non-GAAP financial measure included in
this press release is reconciled to the most comparable GAAP financial
measure.
About Tier
Tier is a provider of financial transaction processing and
packaged software and systems integration services primarily for
federal, state and local government clients. We combine our
understanding of enterprise-wide systems with domain knowledge
enabling our clients to rapidly channel emerging technologies into
their operations. We focus on sectors that we believe are driven by
forces that make demand for our services less discretionary and are
likely to provide us with recurring long-term revenue streams. Tier is
included in the Russell 3000(R) Index. More information about the
Company is available at www.Tier.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 Securities Litigation Reform Act of
1995.
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
potential loss of funding by clients, including due to government
budget shortfalls or revisions to mandated statutes; failure to
achieve anticipated gross margin levels with respect to individual
projects, including due to unanticipated costs incurred in fixed-price
or transaction-based projects; 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 achieve cost savings from its restructuring
activities; 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 annual report on Form 10-K for the year ended Sept.
30, 2003, Form 10-Q for the quarter ended December 31, 2003, as well
as other filings with the SEC.
(Financial tables to follow)
TIER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
---------------------- ----------------------
2004 2003 2004 2003
-------- ------------ -------- ------------
Reclassified Reclassified
(1) (1)
Net revenues (2) $29,659 $30,165 $56,169 $59,252
Costs and expenses:
Direct costs (2) 19,399 19,750 37,367 38,315
Selling and marketing 1,756 1,413 3,133 2,854
General and
administrative (3) 6,293 5,431 12,593 11,210
Restructuring charges 5 - 1,261 -
Depreciation and
amortization 1,107 1,388 2,238 2,765
-------- ------------ -------- ------------
Total costs and expenses 28,560 27,982 56,592 55,144
-------- ------------ -------- ------------
Income (loss) from
continuing operations 1,099 2,183 (423) 4,108
Interest income
(expense), net 293 296 570 674
-------- ------------ -------- ------------
Income from continuing
operations before
income taxes (5) 1,392 2,479 147 4,782
Provision for income
taxes 35 955 70 1,793
-------- ------------ -------- ------------
Income from continuing
operations, net of
income taxes 1,357 1,524 77 2,989
-------- ------------ -------- ------------
Discontinued operations:
Income (loss) from
operations of
discontinued
operations, adjusted
for applicable
provision for income
taxes of $0 and $58
for the three months
ended March 31, 2004
and 2003,
respectively, and $0
and $232 for the six
months ended March
31, 2004 and 2003,
respectively (4) 164 57 (1,401) 316
-------- ------------ -------- ------------
Net income (loss) $1,521 $1,581 $(1,324) $3,305
======== ============ ======== ============
Income from continuing
operations, net of
income taxes:
Per common share $0.07 $0.08 $- $0.16
======== ============ ======== ============
Per diluted share (5) $0.07 $0.08 $- $0.15
======== ============ ======== ============
Income (loss) from
discontinued
operations, net of
income taxes:
Per common share $0.01 $- $(0.07) $0.02
======== ============ ======== ============
Per diluted share $0.01 $- $(0.07) $0.02
======== ============ ======== ============
Net income (loss)
Per common share $0.08 $0.08 $(0.07) $0.17
======== ============ ======== ============
Per diluted share $0.08 $0.08 $(0.07) $0.17
======== ============ ======== ============
Shares used in computing
basic income (loss) per
share 18,808 18,834 18,755 18,944
======== ============ ======== ============
Shares used in computing
diluted income (loss)
per share 19,217 19,355 19,083 19,580
======== ============ ======== ============
Footnote (1) The financial statements have been reclassified to
reflect the results of the discontinued operations separately.
Footnote (2) Net revenues includes revenues from the CalPERS
terminated contract for the three months ended March 31, 2004 and 2003
of $0 and $3,344, respectively, and for the six months ended March 31,
2004 and 2003 of $0 and 6,579, respectively. Direct costs include
direct costs from the CalPERS terminated contract for the three months
ended March 31, 2004 and 2003 of $0 and $2,371, respectively, and six
months ended March 31, 2004 and 2003 of $0 and $4,534, respectively.
Footnote (3) General and administrative includes the following:
Indirect costs
associated with
terminated contracts $416 $- $716 $-
Legal and other costs
(credits) associated
with the DOJ
subpoena, net (195) - 321 -
Legal and other costs
associated with
dismissed
shareholder lawsuits 150 - 198 -
Other charges 27 - 27 -
Other general and
administrative 5,895 5,431 11,331 11,210
-------- ------------ -------- ------------
$6,293 $5,431 $12,593 $11,210
======== ============ ======== ============
Footnote (4) Includes the results of operations and charges in
connection with discontinuing the U.S. Commercial Services and United
Kingdom Segments.
Footnote (5) Non-GAAP after tax income from continuing operations per
diluted share excluding the impact of certain items is calculated as
follows:
Three Months Ended Six Months Ended
March 31, March 31,
---------------------- ----------------------
2004 2003 2004 2003
-------- ------------- -------- -------------
U.S. GAAP income from
continuing operations
before income taxes $1,392 $2,479 $147 $4,782
Indirect costs
associated with
terminated contracts 416 - 716 -
Legal and other costs
(credits) associated
with the DOJ
subpoena, net (195) - 321 -
Legal and other costs
associated with
dismissed
shareholder lawsuits 150 - 198 -
Other charges 27 - 27 -
Restructuring charges 5 - 1,261 -
-------- ------------ -------- ------------
Adjusted income from
continuing operations
before income taxes 1,795 2,479 2,670 4,782
Provision for income
taxes for the three
months ended March 31,
2004 and 2003
computed at an
effective income tax
rate of 30.0% and 38.5%,
respectively, and for
the six months ended
March 31, 2004 and 2003
computed at an
effective income tax
rate of 30.0% and
37.5%, respectively 539 954 801 1,793
-------- ------------- -------- -------------
Non-GAAP after tax
income from continuing
operations (Core
Earnings) $1,256 $1,525 $1,869 $2,989
======== ============= ======== =============
Non-GAAP after tax
income from continuing
operations per diluted
share (Core Earnings
Per Share) $0.07 $0.08 $0.10 $0.15
======== ============= ======== =============
Shares used in computing
income per diluted
share 19,217 19,355 19,083 19,580
======== ============= ======== =============
TIER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
March 31, Sept. 30,
2004 2003
--------- ---------
ASSETS
------
Current assets:
Cash and cash equivalents $49,706 $26,178
Short-term investments 1,000 5,492
Accounts receivable, net 13,718 20,024
Unbilled receivables 4,500 7,872
Other current assets 2,616 4,602
Assets of discontinued operations 689 3,550
--------- ---------
Total current assets 72,229 67,718
Long-term investments 31,350 32,590
Equipment and software, net 4,459 5,422
Goodwill and other acquired intangibles, net 52,954 54,457
Other assets 4,807 4,027
Non-current assets of discontinued operations - 760
--------- ---------
Total assets $165,799 $164,974
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Borrowings $120 $150
Accounts payable and accrued expenses 17,436 19,711
Other current liabilities 7,896 3,299
Liabilities of discontinued operations 529 2,043
--------- ---------
Total current liabilities 25,981 25,203
Long-term debt, less current portion 138 195
Other liabilities 1,388 994
Non-current liabilities of discontinued
operations 62 432
Total shareholders' equity 138,230 138,150
--------- ---------
Total liabilities and shareholders' equity $165,799 $164,974
========= =========
TIER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
----------------- -----------------
2004 2003 2004 2003
-------- -------- -------- --------
Operating activities
Income from continuing operations,
net of income taxes $1,357 $1,524 $77 $2,989
Adjustments to reconcile income
from continuing operations, net of
income taxes to net cash from
continuing operations provided
by operating activities:
Asset impairment charge - - 135 -
Depreciation and amortization 1,625 1,956 3,287 3,847
Provision for doubtful accounts 246 70 272 366
Tax benefit of stock options
exercised - 61 - 196
Forgiveness of notes receivable
from employees - 13 8 27
Change in operating assets and
liabilities, net of effects of
business combinations:
Accounts receivable 3,048 (503) 8,581 (5,926)
Prepaid expenses and other
assets (78) 1,596 (210) 565
Accounts payable and accrued
liabilities 79 (308) 5,040 (1,932)
Deferred revenue (414) (206) 51 521
-------- -------- -------- --------
Net cash from continuing operations
provided by operating activities 5,863 4,203 17,241 653
-------- -------- -------- --------
Investing activities
Purchase of equipment and software (499) (207) (908) (995)
Notes and accrued interest
receivable from related parties (101) (71) (171) (135)
Repayments on notes and accrued
interest receivable from related
parties 23 - 34 14
Business combinations, net of cash
acquired - 182 - 151
Purchases of available-for-sale
securities (5,158) (2,001) (10,358) (19,298)
Sales of available-for-sale
securities - 5,989 - 5,989
Maturities of available-for-sale
securities 13,315 3,444 16,032 15,533
Other assets 26 - 26 -
-------- -------- -------- --------
Net cash from continuing operations
provided by investing activities 7,606 7,336 4,655 1,259
-------- -------- -------- --------
Financing activities
Net proceeds from issuance of
common stock 536 436 1,177 1,028
Repurchase of common stock - (6,665) - (6,665)
Payments on capital lease
obligations and other financing
arrangements (35) (179) (87) (344)
-------- -------- -------- --------
Net cash from continuing operations
provided by (used in) financing
activities 501 (6,408) 1,090 (5,981)
-------- -------- -------- --------
Net cash provided by (used in)
continuing operations 13,970 5,131 22,986 (4,069)
Net cash provided by (used in)
discontinued operations (488) (1,007) 542 142
-------- -------- -------- --------
Net increase (decrease) in cash and
cash equivalents 13,482 4,124 23,528 (3,927)
Cash and cash equivalents at
beginning of period 36,224 32,558 26,178 40,609
-------- -------- -------- --------
Cash and cash equivalents at end of
period $49,706 $36,682 $49,706 $36,682
======== ======== ======== ========
Supplemental disclosures of cash
flow information
Cash paid during the period for:
Interest $13 $12 $28 $31
======== ======== ======== ========
Income taxes paid (refunded),
net $(457) $535 $(6,939) $2,393
======== ======== ======== ========
Supplemental disclosures of non-
cash transactions
Equipment acquired under capital
lease obligations and other
financing arrangements $- $10 $- $68
======== ======== ======== ========
CONTACT: Tier Technologies, Inc.
Jeffrey A. McCandless, 925-941-2806
or
Matt Brusch, 571-382-1048