Tier Reit Inc. (NYSE:TIER)
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Tier Technologies, Inc. (Nasdaq:TIER), a leading
provider of transaction processing and packaged software and systems
integration solutions for public sector clients, today announced
results for its fiscal third quarter ended June 30, 2005.
Net revenues for the fiscal 2005 third quarter were $49.6 million,
an increase of 22% as compared to $40.7 million in the fiscal 2004
third quarter, and represent the highest quarterly net revenues in
Tier's history.
Net income per diluted share was $0.09 in the fiscal 2005 third
quarter, an increase of 80% as compared to net income per diluted
share of $0.05 in the same period a year ago which included
restructuring and other charges of $1.8 million.
Cash, cash equivalents and investments on June 30, 2005 totaled
$56.9 million, and increased approximately $500,000 sequentially as
compared to $56.4 million on March 31, 2005.
James R. Weaver, Chairman and Chief Executive Officer stated,
"Tier's business is strong as evidenced by our 22% year over year
revenue growth. Our Electronic Payment Processing (EPP) business
performed particularly well, posting 40% year over year revenue
growth, of which 31% was organic growth, driven primarily by increased
adoption of our services during the very successful recently completed
federal tax payments processing season. We were very pleased to
announce in the quarter that the IRS has renewed our contract for
another year, as well as expanded our agreement to include several
types of business taxes."
Mr. Weaver continued, "Revenue in our Government Business Process
Outsourcing business grew 8% year over year (8% organic growth),
helped by our successful implementation of the Michigan Child Support
State Disbursement Unit, the largest contract in Tier's history. This
operation is now online and contributing as expected. Additionally,
we've received several contract renewals or extensions in this
business unit, and we were honored to again be recommended to provide
Financial Institution Data Match (FIDM) services to the Multi-State
FIDM Alliance. Tier has provided these services since the inception of
the Alliance."
"The Packaged Software and Systems Integration (PSSI) business
unit posted 11% year over year growth, but declined 11% on an organic
basis resulting primarily from the shift of a sales pipeline
opportunity. Despite this, we are seeing a return to IT spending in
our state government clients consistent with the recent research
suggesting states experienced the strongest first-quarter state tax
revenue growth since 1991. Our Unemployment Insurance Administration
Systems practice is a member of a team that recently received a notice
of intent to award a significant state unemployment insurance systems
modernization contract. And although we referenced the shift of PSSI
pipeline opportunities as a factor in our recently revised financial
outlook, the majority of the financial impact in the third quarter was
due to factors unrelated to business unit performance," stated Mr.
Weaver.
"In summary, I feel more confident and optimistic about Tier's
current business and future prospects than at any time since becoming
CEO. I believe the actions we've taken, and the initiatives we've put
in place over the last 18 months to reshape Tier, are beginning to
have a measurable positive impact that we expect to accelerate in our
next fiscal year. We've recently announced strategically important
wins and partnerships, and we expect to have additional good news to
share in the future. Our transaction processing business segments are
experiencing revenue growth, and we are seeing a return to IT spending
in state and local governments as tax revenues grow. We're attracting
high quality talent, and bringing the right people onboard to
strengthen our team. And finally, with $56.9 million in cash, cash
equivalents and investments, and almost no debt, we have the financial
strength to continue to grow Tier," Mr. Weaver concluded.
Financial Outlook
For the fiscal year 2005, Tier currently expects revenues of
between $147.0 million to $149.0 million, and earnings per diluted
share of $0.10 to $0.11.
These amounts represent management's current expectations about
the company's future financial performance based on information
available at this time.
Conference Call
Tier will host a conference call today at 5:30 p.m. Eastern Time
to discuss today's results and financial outlook. 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. A replay will
be available at www.Tier.com or by calling (800) 642-1687 and entering
7995322 from two hours after the end of the call until 11:59 p.m.
Eastern Time on August 11, 2005.
About Tier
Tier is a leading provider of transaction processing and packaged
software and systems integration services for public sector 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. More information about the Company is available at
www.Tier.com.
Statements made in this press release that are not historical
facts, including statements regarding expectations for future
revenues, earnings, and expenses, are forward-looking statements that
are made pursuant to the safe harbor provisions of the 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
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, 2004, our most recent quarterly report on Form 10-Q for the
quarter ended March 31, 2005, as well as other filings with the SEC.
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(Financial tables follow)
TIER TECHNOLOGIES, INC.
Consolidated Balance Sheets
June 30, September 30,
(in thousands) 2005 2004
----------------------------------------------------------------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 22,425 $ 30,993
Investments in marketable securities 34,469 35,225
Accounts receivable, net 18,690 16,091
Unbilled receivables 7,880 5,046
Short-term portion of notes and accrued
interest receivable from related
parties 484 405
Prepaid expenses and other current
assets 7,469 6,699
----------------------------------------------------------------------
Total current assets 91,417 95,459
Property, equipment and software (net of
$21,935 and $22,941 depreciation and
amortization at June 30, 2005 and September
30, 2004, respectively) 13,480 7,158
Long-term notes and accrued interest
receivable from related parties, less
current portion 2,255 2,001
Goodwill 40,594 37,824
Other acquired intangible assets, net 27,226 30,761
Restricted investments 3,329 3,329
Investment in unconsolidated affiliate 674 --
Other assets 1,738 1,937
----------------------------------------------------------------------
Total assets $ 180,713 $ 177,469
======================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,661 $ 2,626
Income taxes payable 7,252 7,007
Accrued compensation liabilities 5,480 4,623
Accrued subcontractor expenses 3,545 2,478
Other accrued liabilities 7,187 7,501
Deferred income 4,975 5,269
Other current liabilities 113 228
----------------------------------------------------------------------
Total current liabilities 30,213 29,732
Other liabilities 2,065 1,787
----------------------------------------------------------------------
Total liabilities 32,278 31,519
----------------------------------------------------------------------
Commitments and contingencies
Shareholders' equity:
Common stock, no par value (Class B
stock authorized: 42,600 shares; Class
B stock issued and outstanding: 20,373
and 20,324 shares at June 30, 2005 and
September 30, 2004, respectively) 172,510 172,136
Notes receivable from shareholders (1,773) (1,773)
Accumulated other comprehensive loss (43) (258)
Accumulated deficit (22,259) (24,155)
----------------------------------------------------------------------
Total shareholders' equity 148,435 145,950
----------------------------------------------------------------------
Total liabilities and shareholders'
equity $ 180,713 $ 177,469
======================================================================
TIER TECHNOLOGIES, INC.
Consolidated Statements of Operations
(unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------- ------------------
(in thousands, except per share
data) 2005 2004 2005 2004
----------------------------------------------------------------------
Net revenues $ 49,649 $ 40,733 $116,605 $96,902
Costs and expenses:
Direct costs 35,521 28,111 80,465 65,479
General and administrative 7,445 6,951 21,196 19,543
Selling and marketing 3,161 2,003 8,753 5,136
Depreciation and amortization 1,504 1,160 4,624 3,398
Restructuring and other
charges -- 1,847 -- 3,108
----------------------------------------------------------------------
Total costs and expenses 47,631 40,072 115,038 96,664
----------------------------------------------------------------------
Income before other income
(loss), income taxes and loss
from discontinued operations 2,018 661 1,567 238
----------------------------------------------------------------------
Other income (loss):
Equity in net loss of
unconsolidated affiliate (110) -- (362) --
Realized loss on impairment
of investments (494) -- (494) --
Net interest income 479 305 1,377 875
----------------------------------------------------------------------
Total other income (125) 305 521 875
----------------------------------------------------------------------
Income before income taxes and
discontinued operations 1,893 966 2,088 1,113
Provision for income taxes 172 35 192 105
----------------------------------------------------------------------
Net income from continuing
operations 1,721 931 1,896 1,008
Loss from discontinued
operations, net of income
taxes -- (17) -- (1,418)
----------------------------------------------------------------------
Net income (loss) $ 1,721 $ 914 $ 1,896 $ (410)
----------------------------------------------------------------------
Income from continuing
operations, net of income
taxes:
Per basic share $ 0.09 $ 0.05 $ 0.10 $ 0.05
Per diluted share $ 0.09 $ 0.05 $ 0.10 $ 0.05
Income (loss) from discontinued
operations, net of income
taxes:
Per basic share $ -- $ -- $ -- $ (0.08)
Per diluted share $ -- $ -- $ -- $ (0.07)
Net income (loss):
Per basic share $ 0.09 $ 0.05 $ 0.10 $ (0.02)
Per diluted share $ 0.09 $ 0.05 $ 0.10 $ (0.02)
Shares used in computing:
Basic income (loss) per share 19,477 19,030 19,463 18,846
Diluted income (loss) per
share 19,578 19,513 19,580 19,229
TIER TECHNOLOGIES, INC.
Consolidated Statements of Cash Flows
(unaudited)
Nine Months Ended
June 30,
-------------------
(in thousands) 2005 2004
----------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income from continuing operations $ 1,896 $ 1,008
Non-cash items included in net income:
Depreciation and amortization 6,579 5,081
Recognized loss on impairment of investments 494 --
Goodwill and other assets impairment charge -- 571
Stock options revision charge -- 552
Provision for doubtful accounts 689 482
Recognized loss from forgiveness of employees'
notes 34 8
Equity loss in 45%-owned unconsolidated
affiliate 362 --
Net effect of changes in assets and liabilities:
Accounts receivable (3,288) 4,891
Prepaid expenses and other assets (3,774) (1,003)
Accounts payable and accrued liabilities 952 8,692
Deferred revenue (294) (906)
----------------------------------------------------------------------
Net cash from continuing operations provided
by operating activities 3,650 19,376
----------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities and sales of available-for-sale
securities 32,013 84,120
Purchases of available-for-sale securities (31,671) (103,638)
Business combinations, net of cash acquired -- (15,613)
Purchase of equipment and software (8,832) (2,605)
Investment in subsidiaries and unconsolidated
affiliate (4,000) --
Other 135 27
----------------------------------------------------------------------
Net cash from continuing operations used in
investing activities (12,355) (37,709)
----------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under bank line of credit -- 2,200
Repayments under bank line of credit -- (2,200)
Net proceeds from issuance of Class B common
stock 295 1,826
Capital lease obligations and other financing
arrangements (64) (113)
----------------------------------------------------------------------
Net cash from continuing operations provided
by financing activities 231 1,713
----------------------------------------------------------------------
Net cash used in continuing operations (8,474) (16,620)
Net cash (used in) provided by discontinued
operations (94) 248
----------------------------------------------------------------------
Net decrease in cash and cash equivalents (8,568) (16,372)
Cash and cash equivalents at beginning of
period 30,993 26,178
----------------------------------------------------------------------
Cash and cash equivalents at end of period $ 22,425 $ 9,806
======================================================================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 43 $ 37
Income taxes refunded, net $ (41) $ (7,022)
Supplemental disclosures of non-cash transactions:
Equipment acquired under capital lease
obligations and other financing arrangements $ 40 $ --
Common Stock issued in lieu of acquisition
cost for investment $ 79 $ --
Conversion of Class A common stock to Class B
Common stock $ -- $ 761
Class B common stock issued in business
combination $ -- $ 4,447
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