Tier Technologies Inc. Reports Operating Results (10-Q)
Tier Technologies Inc. has a market cap of $104.83 million; its shares were traded at around $5.55 with and P/S ratio of 0.8. Hedge Fund Gurus that owns TIER: Jim Simons of Renaissance Technologies LLC. Mutual Fund and Other Gurus that owns TIER: Mario Gabelli of GAMCO Investors.
Highlight of Business Operations:Our Continuing Operations consists of our Electronic Payment Solutions, or EPS, operations, and certain operations we intend to wind down over the next two years. Revenues from EPS were $32.5 million for the period ended December 31, 2010. For the period ended December 31, 2010, transaction volume increased 11.0% and total dollars processed increased 4.2% over the same period last year. Our EPS operations reported a net loss of $1.6 million for the three months ended December 31, 2010. The seasonality of our business causes fluctuations from one quarter to the next within our revenues and direct costs. However, our general and administrative and selling and marketing expenses are more fixed in nature. This type of revenue and cost structure has resulted in a net loss for the first quarter of fiscal 2011. We have successfully streamlined our costs to support our Wind-down operations, while still
EPS generated $32.5 million of revenues during the three months ended December 31, 2010, a $0.6 million, or 1.7%, increase over the three months ended December 31, 2009. During the three months ended December 31, 2010, we processed 11.0% more transactions than we did in the same period last year, representing 4.2% more dollars. The lower growth in dollars processed, as compared with growth in transactions, is due primarily to the success of our stated strategic intent to develop new verticals to diversify the business. A significant amount of the new transactions were from verticals with lower average dollar size per transaction. For example, average utility payments per transaction are lower than average payments in our established property tax and income tax businesses. The economic environment has also caused average payment size to decline. Most of our verticals experienced an increase in transactions processed during the three months ended December 31, 2010 compared to the same period last year, ranging from 5.2% to 63.0%. During the three months ended December 31, 2010, we added 124 new payment types. We currently offer nearly 9,100 payment types.
EPS Direct Costs: Consistent with the growth of our EPS revenues, EPS direct costs increased $1.0 million, or 4.1%, during the three months ended December 31, 2010 compared to the same period last year. Discount fees increased $1.0 million, or 4.3%, over the same period last year. Discount fees are influenced by the number of transactions processed as well as the payment type selected. During the three months ended December 31, 2010, we processed more transactions, which contributed to the increase in discount fees. Further contributing to the increase in discount fees are the fluctuation of payment methods. We continue to explore and implement cost savings initiatives related to our processing fees. Finally, the three months ended December 31, 2009 benefited from a one-time cost benefit of $0.3 million in settlement funds received relating to our payment card processing fees.
Other direct costs increased $14,000, or 0.9%, during the three months ended December 31, 2010. We incurred $0.1 million associated with one-time integration costs within our Education vertical. This was offset by decreases in labor and labor-related expenses as well as reduced telephony costs attributable to efforts to improve efficiencies in our telephony structure and reduce pricing.
EPS General and Administrative: During the three months ended December 31, 2010, EPS incurred $5.9 million of general and administrative expenses, a $0.3 million, or 4.5%, decrease over the same period last year. During the three months ended December 31, 2010, we experienced decreases of $0.3 million in legal fees due to the absence of fees incurred last fiscal year relating to corporate governance issues. During fiscal year 2009 we completed our San Ramon, California and Auburn, Alabama office consolidation efforts which resulted in the absence of $0.2 million in restructuring expense during the three months ended December 31, 2010. Further contributing to the overall decrease in expense were: $0.1 million in reduced facilities expense as a result of our office consolidations and the relocation of our Reston, Virginia headquarters to a smaller facility; $0.1 million in reduced bad debt expense as we continue to benefit from collection efforts on accounts receivable; $0.1 million in reduced telephony costs as a result of efforts to improve telephony structure and price reductions; and $0.1 million in reduced travel and travel related costs due to changes in management staffing.
Offsetting the overall decrease in costs is an increase of $0.4 million in labor and labor-related expenses. The overall increase is primarily the result of $0.4 million of labor and labor-related costs expensed because of our decision not to complete some internally developed software projects, as well as additional costs required by outside consultants for software and platform maintenance efforts. We also incurred a $0.1 million increase in share-based payment expense, primarily related to the recognition of restricted stock unit awards to our board of directors, offset by the absence of expense for two executives in our performance stock unit program. These increases were offset by a decrease in cash incentive expense of $0.2 million during the three months ended December 31, 2010, which is based on the current fiscal years cash incentive target payout as determined during our fiscal year budgeting process. In addition, we incurred $0.1 million in additional software maintenance costs resulting from increased data security initiatives.
Read the The complete Report