Tier Technologies Inc. Reports Operating Results (10-K)
Tier Technologies Inc. has a market cap of $69.7 million; its shares were traded at around $4.19 with and P/S ratio of 0.5.
Highlight of Business Operations:Our revenues from our EPS operations were $128.6 million for the fiscal year ended September 30, 2011. Transaction volume grew 7.3% and total dollars processed grew 5.7% when compared to the fiscal year ended September 30, 2010. Due to fluctuations in the percentage of payments obtained from our various vertical markets and the impact of current economic conditions, our average payment size decreased 1.4%. The combined result of these factors was marginal growth in our reported revenues in fiscal year 2011. Given the nature of our transaction-based business, increases in our revenue also result in increases in our direct costs, although not always at the same rate. Our direct costs increased 3.6% in fiscal year 2011 over fiscal year 2010, which is driven by the processing costs associated with the aforementioned transaction volume growth, partially offset by the benefit of negotiations of more competitive pricing related to our co-location and telephony expenses recognized during fiscal year 2011.
During the fiscal year ended September 30, 2011, our utility vertical incurred an 11.8% decrease in transactions processed, primarily because many of the large utilities that became Tier clients when we acquired ChoicePay are no longer clients of Tier. Our other vertical markets experienced an increase in transactions processed during the fiscal year ended September 30, 2011 compared to the same period last year, ranging from 8.1% to 18.0%. Over the past two fiscal years, we have seen improvements in revenue, transactions and dollars processed in the businesses on which we have focused, such as our municipal utilities, government agencies and higher education clients.
VSA Revenues: Consistent with our plan to wind down our VSA operation, our revenue has decreased for the fiscal year ended September 30, 2011 when compared to the same period last year, as a result of contract completion. We expect to see continued revenue decreases during fiscal year 2012.
EPS Revenues: During fiscal year 2010, we processed 25.9% more transactions than we did in our prior fiscal year, representing 13.0% more dollars. The lower growth in dollars processed as compared with growth in transactions was due primarily to the success of our stated strategic intent to develop new verticals to diversify the business and lower average dollar transactions in our various tax verticals primarily related to current economic conditions. A significant amount of the new transactions were from verticals with lower average dollar size, which resulted in lower revenue per transaction. For example, average utility payments per transaction were lower than in our established property tax and income tax businesses and therefore produced lower average revenue per transaction. At the same time we introduced ACH and a fixed price debit card as a payment option in the utility vertical and several other verticals. In fiscal year 2010 we also saw that this shift in payment type reduced our average revenue per transaction and our average direct costs per transaction. For this reason, the shift in payment type increased our average “profit” per transaction, when profit is calculated on a percentage basis, even though the average “profit” per transaction may not have increased on an absolute dollar basis. During fiscal year 2010, all of our verticals experienced an increase in the transactions processed when compared to fiscal year 2009, ranging from 9.0% to 44.1%.
EPS General and Administrative: During fiscal year 2010 we incurred $1.0 million in additional legal expenses when compared to fiscal year 2009, primarily associated with various corporate governance issues. In addition, severance expense increased $0.6 million year-over-year as a result of the departure of two executives, partially offset by the absence of severance costs associated with our office consolidation during fiscal year 2009. We also incurred year-over-year increases as follows: $0.4 million in recruiting expenses as a result of executive searches during fiscal year 2010; $0.3 million in equipment and software expenses associated with enhancements to our IT infrastructure and data security; $0.3 million in tax expenses, which is the result of the reversal of over-accrued tax expenses during the fiscal year 2009 thereby reducing our tax expense during fiscal year 2009 as well as additional state tax responsibilities in fiscal year 2010; $0.2 million in bad debt expense as a result of longer payment cycles; $0.2 million in bank fees as a result of fee increases and lower earnings credits; $0.1 million in rent expense associated with the duplicate rent period during the build-out of our new Reston headquarters offset by reduction in office space in Georgia and Tulsa; and $0.1 million in telephone and related expenses.
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